<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20569
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998 Commission file number 0-23150
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Ibis Technology Corporation
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2987600
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
32 Cherry Hill Drive, Danvers, MA 01923
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(Address of principal executive offices) (Zip Code)
(978) 777-4247
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
6,764,760 shares of Common Stock, par value $.008, were outstanding on August 7,
1998.
Total Number of Pages 65
Exhibit Index at Page 19
<PAGE>
IBIS TECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
PART 1 - FINANCIAL INFORMATION Number
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<S> <C>
Item 1 - Financial Statements:
Balance Sheets
December 31, 1997 and June 30, 1998 (unaudited)............... 3
Statements of Operations
Three Months Ended June 30, 1997 and 1998 (unaudited)
and Six Months Ended June 30, 1997 and 1998 (unaudited)....... 4
Statements of Cash Flows
Six Months Ended June 30, 1997 and 1998 (unaudited)........... 5
Notes to Financial Statements (unaudited) ...................... 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 8
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings ....................................... 16
Item 2 - Changes in Securities ................................... 16
Item 3 - Defaults upon Senior Securities ......................... 16
Item 4 - Submission of Matters to a Vote of Security Holders ..... 16
Item 5 - Other Information ....................................... 17
Item 6 - Exhibits and Reports on Form 8-K ........................ 17
Signatures ....................................................... 18
Exhibit Index .................................................... 19
</TABLE>
2
<PAGE>
IBIS TECHNOLOGY CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................................. $ 13,309,823 $ 13,763,817
Accounts receivable, trade, net ....................................... 1,064,607 2,034,689
Unbilled revenue ...................................................... 230,490 1,948,564
Inventories (note 3) .................................................. 487,031 4,965,604
Prepaid expenses and other current assets ............................. 124,711 153,873
------------ -----------
Total current assets ............................................ 15,216,662 22,866,547
------------ -----------
Property and equipment ................................................... 17,695,312 14,647,326
Less: Accumulated depreciation and amortization ...................... (8,250,372) (9,180,907)
------------ -----------
Net property and equipment ...................................... 9,444,940 5,466,419
Patents and other assets, net ............................................ 256,638 168,217
------------ -----------
Total assets .................................................... $ 24,918,240 $ 28,501,183
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Capital lease obligation, current..................................... $ 474,539 $ 509,641
Accounts payable ...................................................... 691,325 2,811,053
Accrued liabilities ................................................... 1,193,504 2,961,244
------------ -----------
Total current liabilities ....................................... 2,359,368 6,281,938
------------ -----------
------------ -----------
Capital lease obligation, noncurrent ..................................... 498,685 234,776
Other accrued liabilities ................................................ 1,303,187 1,275,231
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Total liabilities ............................................... 4,161,240 7,791,945
------------ ----------
Stockholders' equity:
Undesignated preferred stock, $.01 par value
Authorized 2,000,000 shares; none issued ............................. -- --
Common stock, $.008 par value
Authorized 20,000,000 shares; issued 6,628,728 and
6,759,769 shares in 1997 and 1998, respectively ................... 53,030 54,051
Additional paid-in capital ........................................... 35,593,999 36,368,429
Accumulated deficit .................................................. (14,890,029) (15,713,242)
------------ -----------
Total stockholders' equity ...................................... 20,757,000 20,709,238
------------ -----------
Total liabilities and stockholders' equity ...................... $ 24,918,240 $ 28,501,183
------------ -----------
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</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------- --------------------------
1997 1998 1997 1998
------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and revenue:
Product sales ................................. $ 512,580 $ 1,011,010 $ 1,626,528 $ 2,017,708
Contract and other revenue .................... 899,153 292,852 1,423,906 783,055
Equipment revenue ............................. -- 4,000,000 -- 4,200,000
----------- ----------- ----------- -----------
Total sales and revenue (note 2) .......... 1,411,733 5,303,862 3,050,434 7,000,763
Cost of sales and revenue:
Cost of product sales ......................... 997,511 1,259,056 1,977,965 2,571,594
Cost of contract and other revenue ............ 507,238 272,057 850,867 637,970
Cost of equipment revenue ..................... -- 2,688,811 -- 2,814,009
----------- ----------- ----------- -----------
Total cost of sales and revenue ........... 1,504,749 4,219,924 2,828,832 6,023,573
----------- ----------- ----------- -----------
Gross profit (loss) ....................... (93,016) 1,083,938 221,602 977,190
----------- ----------- ----------- -----------
Operating expenses:
General and administrative .................... 388,078 503,140 725,661 947,640
Marketing and selling ......................... 135,208 102,814 245,257 217,399
Research and development ...................... 316,432 545,997 664,126 927,952
----------- ----------- ----------- -----------
Total operating expenses .................. 839,718 1,151,951 1,635,044 2,092,991
----------- ----------- ----------- -----------
Loss from operations ...................... (932,734) (68,013) (1,413,442) (1,115,801)
----------- ----------- ----------- -----------
Other income (expense):
Interest income ............................... 74,875 183,921 178,163 358,611
Interest expense .............................. (49,012) (30,048) (107,715) (64,768)
Other ......................................... 240 -- 256 --
----------- ----------- ----------- -----------
Total other income ........................ 26,103 153,873 70,704 293,843
----------- ----------- ----------- -----------
Profit (loss) before income taxes ......... (906,631) 85,860 (1,342,738) (821,958)
Income tax expense .............................. -- -- 1,256 1,256
----------- ----------- ----------- -----------
Net profit (loss) ......................... $ (906,631) $ 85,860 $(1,343,994) $ (823,214)
=========== =========== =========== ===========
Net profit (loss) per common share:
Basic.......................................... $ (0.17) $ 0.01 $ (0.26) $ (0.12)
=========== =========== =========== ===========
Diluted ....................................... $ (0.17) $ 0.01 $ (0.26) $ (0.12)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding:
Basic .......................................... 5,221,257 6,738,536 5,207,301 6,704,814
=========== =========== =========== ===========
Diluted ........................................ 5,221,257 7,071,017 5,207,301 6,704,814
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
IBIS TECHNOLOGY CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1997 1998
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................... $ (1,343,994) $ (823,214)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization ............................................. 1,044,525 955,203
Changes in operating assets and liabilities ............................... (1,144,025) 1,133,353
-------------- ------------
Net cash provided by (used in)
operating activities .............................................. (1,443,494) 1,265,342
-------------- ------------
Cash flows from investing activities:
Additions to property and equipment ......................................... (2,907,287) (1,421,748)
Increase in other assets .................................................... 49,920 63,756
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Net cash used in investing activities ................................. (2,857,367) (1,357,992)
-------------- ------------
Cash flows from financing activities:
Payments of capital lease obligations ....................................... (391,717) (228,807)
Exercise of stock options ................................................... 50,230 775,451
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Net cash provided by (used in) financing activities ................... (341,487) 546,644
------------ ------------
Net increase (decrease) in cash and cash equivalents .................. (4,642,348) 453,994
Cash and cash equivalents, beginning of period ................................. 9,201,016 13,309,823
------------ ------------
Cash and cash equivalents, end of period ....................................... $ 4,558,668 $ 13,763,817
-------------- ------------
-------------- ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .................................... $ 103,484 $ 64,768
-------------- ------------
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</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Interim Financial Statements
The accompanying financial statements are unaudited, except for the
Balance Sheet as of December 31, 1997, and have been prepared by the Company in
accordance with generally accepted accounting principles.
In the opinion of management, the interim financial statements include
all adjustments which consist only of normal and recurring adjustments,
necessary for a fair presentation of the Company's financial position and
results of operations. Results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the financial statements
of the Company as of and for the year ended December 31, 1997 which are included
in the Annual Report on Form 10-K.
(2) Revenue Recognition
Product sales are recognized upon shipment. Revenue derived from
consulting services is recognized upon performance. Contract and equipment
revenue is recognized on the percentage-of-completion method. Provisions for
anticipated losses are made in the period in which such losses become
determinable. Unbilled revenue represents equipment and contract revenue earned
but not yet billable based on the terms of the contract which include shipment
of the product, achievement of milestones or completion of the contract.
(3) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
----------- ----------
<S> <C> <C>
Raw materials .................. $ 221,378 $ 256,271
Work in process .......... 105,607 61,036
Finished goods ........... 160,046 177,774
---------- ----------
Subtotal wafer inventory $ 487,031 $ 495,081
Equipment inventory -- $4,470,523
---------- ----------
Total inventories $ 487,031 $4,965,604
========== ==========
</TABLE>
Equipment inventory at June 30, 1998 was classified as property and
equipment in prior financial statements.
6
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(4) Earnings Per Share Reconciliation
The reconciliation of the numerators and denominators of the basic and
diluted net income (loss) per common share computations for the Company's
reported net income (loss) is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------ ---------------------------
1997 1998 1997 1998
--------------- -------------- ---------------------------
<S> <C> <C> <C> <C>
Basic net income (loss) ................. $ (906,631) $ 85,860 $ (1,343,994) $ (823,214)
=================== ================= ==================== ===========
Weighted average common
shares outstanding-basic ............. 5,221,257 6,738,536 5,207,301 6,704,814
=================== ================= ==================== ===========
Net additional common shares upon assumed
exercise of stock options and warrants -- 332,481 -- --
------------------- ----------------- -------------------- -----------
Weighted average common
shares outstanding-diluted ........... 5,221,257 7,071,017 5,207,301 6,704,814
=================== ================= ==================== ===========
Net income (loss) per common share
Basic .......................... $ (0.17) $ 0.01 $ (0.26) $ (0.12)
=================== ================= ==================== ===========
Diluted ........................ $ (0.17) $ 0.01 $ (0.26) $ (0.12)
=================== ================= ==================== ===========
</TABLE>
7
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Ibis Technology Corporation ("Ibis" or the "Company") was formed in
October 1987 and commenced operations in January 1988. The Company's initial
activities consisted of producing and selling SIMOX-SOI wafers and conducting
funded and unfunded research and development activities. This research led to
the Company's development of a proprietary second generation implanter, the
Ibis 1000, and to other proprietary process technology.
Until 1993, much of the Company's revenue was derived from research
and development contracts and sales of SIMOX-SOI wafers for military
applications. Since 1993, there has been a shift in revenue to sales of
SIMOX-SOI wafers for commercial applications. For the six months ended June
30, 1998 and for the fiscal year ended December 31, 1997, commercial product
sales (measured in dollar volume) represented 78% and 83%, respectively, of
total product sales compared with 48% of total product sales for the fiscal
year ended December 31, 1993. To date, most customers of the Company that
have purchased wafers for what the Company believes are commercial
applications have done so solely for the purpose of characterizing and
evaluating the wafers. Thus, historical sales are not necessarily indicative
of future operations because such sales would not be considered of a
recurring nature. In the second quarter of 1997, however, the Company
announced that two of its customers had indicated their intentions to adopt
SIMOX-SOI technology in commercial products.
During the second quarter of 1998, the Company recognized revenue
from the sale of two Ibis 1000 implanters to a major semiconductor
manufacturer. The Company also received a confirming purchase order and a
deposit for one Ibis 1000 implanter from another customer during this
quarter. There were no equipment sales in 1997. During 1997, the Company
experienced quarterly fluctuations in wafer sales due to reduced wafer
requirements from one of the Company's customers. In addition, repair and
maintenance on the first Ibis 1000, use of the second Ibis 1000 for SIMOX-SOI
development, a mismatch of capacity and wafer size requirements of customer
orders and dependence on a limited number of customers all contributed to the
quarterly fluctuation in wafer sales. The Company may continue to see
fluctuations in revenue due to equipment sales, shifts in customer demands
during various stages of the SIMOX-SOI sales cycle and until the Company has
a sufficient number of Ibis 1000's on-line such that specific implanters can
be dedicated to the various products, sizes and continued research and
development efforts.
The Company currently has two Ibis 1000 oxygen implanters, one of
which was funded by Motorola Corporation and must first be used to serve
Motorola's production requirements. One Ibis 1000 implanter is currently
undergoing customer acceptance and three implanters are under construction
and are at various stages of completion. During the second quarter ended June
30, 1998, the Company recognized revenue on two of these implanters using the
percentage-of-completion method. The Company anticipates that the remaining
revenue on these two implanters and one additional implanter will be
recognized during the next three quarters as construction and/or milestones
are completed. The remaining implanter is anticipated to be completed in the
first half of 1999 and will be used for research and development and to
increase the Company's internal production capacity. During the year ended
December 31, 1997, the Company
8
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
phased the two NV-200 implanters out of production. Consequently, all
SIMOX-SOI wafers are being produced on the Ibis 1000's. As the Company
operates below capacity or expands its production capacity in anticipation of
expected increases in demand, its gross margins on product sales will
initially be adversely affected until the implanters operate at or near full
capacity. There can be no assurance, however, that the Company will succeed
in attracting a sufficient number of customers and/or orders for SIMOX-SOI
wafers to offset such production costs or that the Company will prevail over
its competition.
Results of Operations
Second Quarter Ended June 30, 1998 Compared to Second Quarter Ended June 30,
1997
Product Sales. Product sales increased $498,430, or 97%, to
$1,011,010 for the second quarter ended June 30, 1998 from $512,580 for the
second quarter ended June 30, 1997. The increase in product sales is
attributable to increased wafer sales to Japan and a new government program
that was entered into in the first quarter of 1998. In addition, wafer
production related issues contributed to the decreased level of product sales
during the second quarter of 1997. The first event was a component failure
and subsequent upgrade on the first Ibis 1000 implanter which resulted in a
ten-week production loss. The other matter was the dedication of the second
Ibis 1000 to process development for a specific customer. This decision
resulted in a six-week loss of production.
Contract and Other Revenue. Contract and other revenue decreased for
the second quarter ended June 30, 1998 to $292,852 from $899,153 for the
second quarter ended June 30, 1997, a decrease of $606,301 or 67%. The
decrease in contract and other revenue is attributable to decreased revenues
derived from a contract for consulting services for Orion Equipment, Inc.
("Orion"). Revenue from the Orion contract amounted to approximately $305,000
and $21,000 in the second quarter of 1997 and 1998, respectively. Revenues
under the Orion contract have decreased substantially since the beginning of
1998 and primarily all of the work under the Orion contract was completed by
the end of the second quarter of 1998. During 1997, the Company began selling
spare parts to the purchaser of the Ibis 1000 implanter sold in 1996. For the
second quarter ended June 30, 1998 the sale of spare parts decreased to
$36,245 from $314,190, a decrease of $277,945 or 88%. These sales accounted
for 12% of contract and other revenue for the second quarter ended June 30,
1998 as compared to 35% for the second quarter ended June 30, 1997.
Equipment Revenue. Equipment revenue of $4,000,000 for the second
quarter ended June 30, 1998 represents revenue recognized using the
percentage-of-completion method in connection with the sale of two Ibis 1000
implanters. The Company anticipates that the remaining revenue on these two
implanters and one additional implanter will be recognized during the next
three quarters as construction and/or milestones are completed. There were no
equipment sales in 1997.
Total Sales and Revenue. Total sales and revenue for the second
quarter ended June 30, 1998 was $5,303,862, an increase of $3,892,129, or
276%, from total revenue of $1,411,733 for the second quarter ended June 30,
1997. This increase resulted from the equipment revenue and an increase in
product sales which was partially offset by decreased contract and other
revenue.
9
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Total Cost of Revenue. Cost of product sales for the second quarter
ended June 30, 1998 was $1,259,056, as compared to $997,511 for the second
quarter ended June 30, 1997, an increase of $261,545 or 26%. Cost of contract
revenue for the second quarter ended June 30, 1998 was $272,057, as compared
to $507,238 for the second quarter ended June 30, 1997, a decrease of
$235,181, or 46%. Cost of equipment revenue for the second quarter ended June
30, 1998 was $2,688,811. The gross margin for all sales was 20% for the
second quarter ended June 30, 1998 as compared to negative 7% for the second
quarter ended June 30, 1997. The increase in gross margin is primarily
attributable to the profit recognized from equipment revenue in the quarter.
The improvement in gross margin is also the result of the fundamental fixed
cost nature of product sales which were absorbed by more wafers during the
second quarter of 1998 compared to the same quarter in the previous year. The
product mix during this year's second quarter consisted of a greater
concentration of larger wafer sizes which resulted in a higher average sales
price per wafer. Cost of sales for contract and other revenue consists of
labor and materials expended during the quarter. Contract margins can vary
from year to year based on the mix of cost-type, firm fixed price and cost
share arrangements. Additionally, different fee arrangements and indirect
cost absorption can contribute to margin variability.
General and Administrative Expenses. General and administrative
expenses for the second quarter ended June 30, 1998 were $503,140 (or 9% of
total revenue) as compared to $388,078 (or 27% of total revenue) for the
second quarter ended June 30, 1997, an increase of $115,062, or 30%. The
increase is due to increases in payroll and payroll related expenses. Also
contributing to the increase were higher professional service fees incurred
in the quarter.
Marketing and Selling Expenses. Marketing and selling expenses for
the second quarter ended June 30, 1998 were $102,814 (or 2% of total revenue)
as compared to $135,208 (or 10% of total revenue) for the second quarter
ended June 30, 1997, a decrease of $32,394, or 24%.
Research and Development Expenses. Internally funded research and
development expenses increased by $229,565, or 73%, to $545,997 (or 10% of
total revenue) for the second quarter ended June 30, 1998, as compared to
$316,432 (or 22% of total revenue) for the second quarter ended June 30,
1997. The increase is primarily due to an increase in materials along with
increases in payroll expenses. In the prior year quarter a greater percentage
of personnel was devoted to funded projects, including the Orion contract,
and thus payroll and payroll related expenses for these personnel were
included in cost of contract and other revenue.
Loss from Operations. The loss from operations for the second
quarter ended June 30, 1998 was $68,013 as compared to a loss of $932,734 for
the second quarter ended June 30, 1997, a decrease of $864,721, or 93%. The
decrease in the loss from operations is the result of equipment revenue and
increase in product sales revenue which were partially offset by the increase
in operating expenses.
Other Income (Expense). Total other income for the second quarter
ended June 30, 1998 was $153,873 as compared to $26,103 for the second
quarter ended June 30, 1997, an increase of $127,770, or 489%. The increase
in total other income is attributable to interest income earned on the
proceeds from the August, 1997 exercise of its Public Warrants as well as
reduced interest expense on capitalized leases.
10
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Profit Before Income Taxes. The profit before income taxes was $85,860
for the second quarter ended June 30, 1998, as compared to a loss of $906,631
for the second quarter ended June 30, 1997. The improvement of $992,491, or
110%, is due to equipment revenue recognized in the quarter ended June 30, 1998
and the increased product sales and was partially offset by decreased contract
and other revenue.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Product Sales. Product sales increased $391,180, or 24%, to $2,017,708
for the six months ended June 30, 1998 from $1,626,528 for six months ended
June 30, 1997. The increase in product sales is attributable to increased
wafer sales to Europe, Japan and government programs. Sales in the United
States remained constant. Also contributing to the increase in product sales
compared to the prior year period were wafer production related issues
arising during the second quarter of 1997 which had a negative impact on
wafer sales during that period.
Contract and Other Revenue. Contract and other revenue decreased for
the six months ended June 30, 1998 to $783,055 from $1,423,906 for the six
months ended June 30, 1997, a decrease of $640,851, or 45%. This decrease is
attributable to decreased revenues derived from a contract for consulting
services related to implementation of the magnetic scanning technology
previously licensed to this customer, Orion. Revenue from the Orion contract
amounted to approximately $627,000 and $157,000 in the first half of 1997 and
1998 respectively. Revenues under the Orion contract have decreased
substantially since the beginning of 1998 and primarily all of the work under
the Orion contract was completed by the end of the second quarter of 1998.
During 1997 the Company began selling spare parts to the purchaser of the Ibis
1000 implanter, a major semiconductor manufacturer. These sales accounted for
28% of contract and other revenue for the six months ended June 30, 1997 but
were only 15% of the contract and other revenue for the six months ended
June 30, 1998.
Equipment Revenue. Equipment revenue of $4,200,000 was recognized using
the percentage of completion method for the six months ended June 30, 1998 for
the sale of two Ibis 1000 implanters to a major semiconductor manufacturer.
There was no equipment revenue recognized in 1997. There was also a commitment
and deposit received from another customer for the purchase of one Ibis 1000
implanter. The Company anticipates that the remaining revenue on the two
implanters and the additional implanter will be recognized during the next three
quarters as construction and/or milestones are completed.
Total Sales and Revenue. Total sales and revenue for the six months
ended June 30, 1998 was $7,000,763, an increase of $3,950,329, or 130%, from
total revenue of $3,050,434 for the six months ended June 30, 1997. This
increase resulted from the recognition of equipment revenue and the increase in
product sales and was partially offset by decreased contract and other revenue.
Total Cost of Revenue. Cost of product sales for the six months ended
June 30, 1998 was $2,571,594, as compared to $1,977,965 for the six months ended
June 30, 1997, an increase of $593,629 or 30%. Cost of contract revenue for the
six months ended June 30, 1998 was $637,970, as compared to $850,867 for the six
months ended
11
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
June 30, 1997, a decrease of $212,897, or 25%. Cost of equipment revenue for
the six months ended June 30, 1998 was $2,814,009. The gross margin for all
sales was 14% for the six months June 30, 1998 as compared to 7% for the six
months ended June 30, 1997. The increase in gross margin is attributable to
the profit recognized from equipment revenue in the first six months ended
June 30, 1998. Cost of sales for contract and other revenue consists of labor
and materials expended during the period. Contract margins can vary from year
to year based on the mix of cost type, firm fixed price and cost share
arrangements. Additionally, different fee arrangements and indirect cost
absorption can contribute to margin variability.
General and Administrative Expenses. General and administrative
expenses for the six months ended June 30, 1998 were $947,640 (or 14% of
total revenue) as compared to $725,661 (or 24% of total revenue) for the six
months ended June 30, 1997, an increase of $221,979, or 31%. The increase is
due to increases in payroll, payroll related expenses and professional
service fees.
Marketing and Selling Expenses. Marketing and selling expenses for
the six months ended June 30, 1998 were $217,399 (or 3% of total revenue) as
compared to $245,257 (or 8% of total revenue) for the six months ended June
30, 1997, a decrease of $27,858 or 11%.
Research and Development Expenses. Internally funded research and
development expenses increased by $263,826, or 40%, to $927,952 (or 13% of
total revenue) for the six months ended June 30, 1998, as compared to
$664,126 (or 22% of total revenue) for the six months ended June 30, 1997.
The increase is primarily due to increases in payroll along with materials.
In the prior year six-month period, a greater percentage of personnel was
devoted to funded projects, including the Orion contract, and thus payroll
and payroll related expenses for these personnel were included in the cost of
contact and other revenue.
Loss from Operations. The loss from operations for the six months
ended June 30, 1998 was $1,115,801 as compared to a loss of $1,413,442 for
the six months ended June 30, 1997, a decrease of $297,641 or 21%. The
decrease in loss from operations is the result of recognition of equipment
revenue and increased product sales which were partially offset by the
increase in operating expenses.
Other Income (Expense). Total other income for the six months ended
June 30, 1998 was $293,843 as compared to $70,704 for the six months ended
June 30, 1997. The increase in total other income is attributable to interest
income earned on the proceeds from the August 1997 exercise of its Public
Warrants as well as reduced interest expense on capital leases.
Loss Before Income Taxes. The loss before income taxes was $821,958
for the six months ended June 30, 1998, as compared to $1,342,738 for the six
months ended June 30, 1997, a decrease of $520,780 or 39%. The decrease in
loss before income taxes is the result of equipment revenue recognized under
the percentage-of-completion method in the first six months of 1998 and the
increased product sales offset by the increase in operating expenses.
12
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Impact of the Year 2000 Issue
The Year 2000 Issue refers to potential problems with computer systems
or any equipment with computer chips or software that use dates where the date
has been stored as just two digits (e.g., 98 for 1998). On January 1, 2000, any
clock or date recording mechanism incorporating date sensitive software which
uses only two digits to represent the year may recognize a date using 00 as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
similar business activities.
The Company is in the process of conducting a review of its internal
information systems to determine the extent of any Year 2000 problem. The
Company is still gathering information, but based on such review to date, the
Company does not believe that the impact of any Year 2000 problem will be
material, because its principal information systems appear to correctly define
the year 2000. Although there exists the possibility that Year 2000 issues will
be identified, based on such review to date, the Company does not currently
expect that any such problems will have a material adverse effect on the
Company's future operating results or financial condition.
The Company is in the process of contacting its major suppliers and
customers in an effort to determine the extent to which the Company may be
vulnerable to those parties' failure to timely correct their own Year 2000
problems. To date, the Company is unaware of any situations of noncompliance
that would materially adversely affect its operations or financial condition.
There can be no assurance, however, that instances of noncompliance which could
have a material adverse effect on the Company's operations or financial
condition will be identified; that the systems of other companies with which the
Company transacts business will be corrected on a timely basis; or that a
failure by such entities to correct a year 2000 problem or a correction which is
incompatible with the Company's information systems would not have a material
adverse effect on the Company's operations or financial condition.
Liquidity and Capital Resources
As of June 30, 1998, the Company had cash and cash equivalents of
$13,763,817. During the six months ended June 30, 1998, the Company generated
$1,265,342 in cash from operating activities as compared to cash consumed by
operating activities in the amount of $1,443,494 for the same period in 1997.
Depreciation and amortization expense for the six months ended June 30, 1998 and
1997 was $955,203 and $1,044,525, representing 14% and 34% of total revenue,
respectively. Due to the capital intensive nature of the Company's business and
the anticipated expansion of its facilities and production capacity, management
expects that depreciation and amortization will continue to be a significant
portion of its expenses. To date, the Company's working capital requirements
have been funded through debt and equity financings, warrant conversions,
equipment lines of credit, a working capital line of credit, a term loan, sale
leaseback arrangements, collaborative relationships and government contracts. At
June 30, 1998, the Company had commitments to purchase approximately $749,000 in
material or subassemblies to be used to manufacture the additional Ibis 1000
implanters and approximately $142,000 in capital equipment. During the six month
period ending June 30, 1998, the Company received deposits on the sale of two
implanters in the amount of $3 million.
13
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
On July 24, 1997, the Company notified the holders of its 1,380,000
publicly traded Redeemable Common Stock Purchase Warrants (the "Public
Warrants") and its 120,000 privately held Underwriter Redeemable Common Stock
Purchase Warrants (the "Underwriter Warrants") that it would redeem these
Warrants on August 26, 1997 at the redemption price of $.20 per Warrant. Prior
to August 26, 1997, the holder of a Public Warrant had the right to exercise
such Warrant to acquire 1.044 shares of the Company's Common Stock at a price of
$8.05 per share and the holder of an Underwriter Warrant had the right to
exercise such Warrant to acquire 1.09 shares of Common Stock at a price of $9.26
per share. The Company received net proceeds of approximately $10.1 million
through the exercise of its Public Warrants. The holders of approximately 92% of
these Warrants elected to exercise the Warrants rather than have them redeemed.
Approximately 1,327,000 shares of Common Stock were issued upon exercise of the
Public Warrants. None of the Underwriter Warrants were exercised.
The Company anticipates that it may be required to raise substantial
additional capital in the future in order to finance further expansion of its
manufacturing capacity and its research and development programs. The Company's
existing cash resources together with funds generated from operations are
believed to be sufficient to support the Company's operations on their
anticipated scale for at least the next twelve months. Management of the Company
currently believes that this anticipated scale of operations will include
additional Ibis 1000 oxygen implanters (in addition to its two oxygen implanters
currently on-line), the purchase of support equipment and expansion of the
Company's facilities.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Under this concept, all revenues,
expenses, gains and losses recognized during the period are included in income,
regardless of whether they are considered to be results of operations of the
period. Effective January 1, 1998 the Company adopted SFAS 130, which had no
impact on the financial statements of the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
selected information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS 131, which becomes effective for the Company in its
year ending December 31, 1998, is currently not expected to have a material
impact on the Company's financial statements and footnote disclosures.
14
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Effective January 1, 1998, the Company adopted American Institute of
Certified Public Accountants' Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1)
which establishes guidelines for the accounting for the costs of all computer
software developed or obtained for internal use. SOP 98-1 must be applied on a
prospective basis as of the adoption date. Under SOP 98-1, certain consulting,
payroll and related costs for company consultants or employees working on the
application of development stage projects as defined in the SOP for internal use
computer software must be capitalized and amortized over the expected useful
life of the software. Previously, the Company had expensed these costs as
incurred. The adoption of SOP 98-1 did not have a material impact on the
Company's results of operations in the first six months of 1998 or financial
position at June 30, 1998.
Effects of Inflation
The Company believes that over the past three years inflation has not
had a significant impact on the Company's sales or operating results.
Business Outlook
The Form 10-Q contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements. Such factors and uncertainties include, but are not limited to, the
uncertainty that the performance advantages of SIMOX-SOI wafers will continue to
be realized commercially or that a commercial market for SIMOX-SOI wafers will
continue to develop; the dependence by the Company on key customers (during
1995, 1996 and 1997, revenues from four customers averaged in the aggregate
between 25% and 68% of the Company's revenues, so that the loss of one or more
of these major customers and the failure of the Company to obtain other sources
of revenue could have a material adverse impact on the Company); the dependence
by the Company on revenues from its consulting arrangement with Orion (during
1995, 1996, and 1997, consulting revenues were approximately 0%, 2%, and 26%,
respectively, of the Company's revenues, so that the loss of Orion as a source
of consulting fees by the end of the second quarter of 1998 and the failure of
the Company to obtain other sources of consulting revenue could have a material
impact on the Company); the loss of the services of one or more of the Company's
key individuals, which could have a material adverse impact on the Company; the
dependence by the Company on key suppliers, so that the loss of services of one
or more suppliers could have a material adverse impact on the Company; the
development of competing or superior technologies and products from
manufacturers, many of which have substantially greater financial, technical and
other resources than the Company; the Company's lack of experience in producing
commercial quantities of its products at acceptable costs; the Company's ability
to develop and maintain strategic alliances for the manufacturing, marketing and
distribution of its products; the cyclical nature of the semiconductor industry,
which has negatively affected the Company's sales of SIMOX-SOI wafers during
industry downturns and which could continue to do so in the future; the limited
availability of critical materials and components for wafer products and
implanters, as a shortage of such materials and components or a significant
increase in the price thereof could have a material adverse effect on the
Company's business and results of operations; the availability of additional
capital to fund expansion on acceptable terms, if at all; and general economic
conditions.
15
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on May 14,
1998. The following matters were voted on at the meeting:
(1) Three persons were elected to the Board of Directors of the
Company to serve for a term ending in the Year 2001 and until
their successors are duly elected and qualified. The following is
a table setting forth the number of votes cast for and withheld
for each nominee for Director:
<TABLE>
<CAPTION>
Name Vote For Vote Withheld
---- --------- -------------
<S> <C> <C>
Dimitri Antoniadis 5,689,175 163,566
Robert L. Gable 5,689,175 163,566
Martin J. Reid 5,690,175 162,566
</TABLE>
Donald F. McGuinness and Peter H. Rose continue to serve as Directors
for terms which expire in 1999 and Richard Hodgson and Geoffrey Ryding
continue to serve as Directors for terms which expire in 2000.
(2) The Stockholders of the Company approved the adoption of the
Company's 1997 Employee, Director and Consultant Stock Option Plan
and the reservation of 750,000 shares of Common Stock for stock
options which may be granted under the 1997 Plan. This proposal
was approved with 2,255,632 votes for, 402,938 votes against,
42,992 abstentions and 3,151,179 broker non-votes.
(3) The Stockholders of the Company ratified the appointment of KPMG
Peat Marwick LLP as the Company's independent public accountants
for the fiscal year ending December 31, 1998. This proposal was
approved with 5,767,490 votes for, 63,471votes against and 21,780
abstentions.
(4) The Stockholders of the Company approved an amendment to the
Company's Articles of Organization to increase the number of
authorized shares of Common Stock from 10,000,000 shares to
20,000,000 shares. This proposal was approved with 5,700,999 votes
for, 118,594 against and 33,148 abstentions.
16
<PAGE>
IBIS TECHNOLOGY CORPORATION
PART II
OTHER INFORMATION
Item 5 - Other Information
To be considered for inclusion in the proxy statement relating to the
Annual Meeting of stockholders to be held in 1999, stockholder
proposals must be received no later than December 1, 1998. To be
considered for presentation at the Annual Meeting, although not
included in the proxy statement, proposals must be received no later
than March 15, 1999 and no earlier than February 13, 1999. All
stockholder proposals should be marked for the attention of Clerk, Ibis
Technology Corporation, 32 Cherry Hill Drive, Danvers, MA 01923.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits furnished as Exhibits hereto:
+10.39 Purchase Order, dated April 14, 1998, from Mitsubishi
Materials Silicon Corporation.
+10.40 Task Order, dated April 10, 1998, between the
Registrant and International Business Machines
Corporation ("IBM").
+10.41 Licensing and Development Agreement, dated June 9,
1998, between the Registrant and IBM.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed with the Securities and Exchange Commission
(the "Commission") on April 3, 1998 a Current Report on Form
8-K for the April 2, 1998 event reporting that Dr. Julian
Blake had joined the Company as its Director of Technology.
The Company filed with the Commission on May 13, 1998 a
Current Report on Form 8-K for the May 11, 1998 event
reporting the financial results for the first quarter ended
March 31, 1998. The company also announced that it has
received a confirming purchase order for an Ibis 1000
implanter from Mitsubishi Materials Corporation through its
Mitsubishi Materials Silicon Corporation Subsidiary. A letter
of intent for this purchase was previously disclosed in the
Company's March 5, 1998 press release.
The Company filed with the Commission on June 10, 1998 a
Current Report on Form 8-K for the June 9, 1998 event
reporting that it had completed the sale of two Ibis 1000
implanters to IBM Corporation in a transaction valued at
approximately $8 million. The sale to IBM includes an
equipment licensing and development agreement which gives IBM
the right to a royalty-bearing, non-exclusive license to
supplement Ibis equipment manufacturing capacity. The purchase
orders for the two implanters were previously disclosed in
Ibis press released dated March 5, 1998.
---------------
+ Confidential treatment requested as to certain portions,
which portions are omitted and filed separately with the
Commission.
17
<PAGE>
IBIS TECHNOLOGY CORPORATION
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, thereunto duly authorized.
Ibis Technology Corporation
Date: August 13, 1998 By: /s/Debra L. Nelson
-----------------------
Debra L. Nelson
Chief Financial Officer, Treasurer and Clerk
(principal financial and accounting officer)
Date: August 13, 1998 By: /s/Thomas F. Lacey
----------------------
Thomas F. Lacey
Controller and Assistant Treasurer
18
<PAGE>
IBIS TECHNOLOGY CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
+10.39 Purchase Order, dated April 14, 1998, from Mitsubishi Materials Silicon Corporation. 20
+10.40 Task Order, dated April 10, 1998, between the Registrant and International Business 23
Machines Corporation ("IBM").
+10.41 Licensing and Development Agreement, dated June 9, 1998, between the Registrant
and IBM. 41
27 Financial Data Schedule 65
</TABLE>
---------------
+ Confidential treatment requested as to certain portions,
which portions are omitted and filed separately with the
Commission.
19
<PAGE>
Exhibit 10.39
IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.39 PORTIONS OF
THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE
SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
[LETTERHEAD]
April 14, 1998
IBIS TECHNOLOGY CORPORATION
32A Cherry Hill Drive
Danvers, MA 01923
U.S.A.
Attention: Mr. Al Alioto, Vice President, Sales & Marketing
Re: Purchase Order for This 1000 Implanter
Dear Sirs:
This letter serves as our formal purchase order for the Ibis 1000 Implanter, the
specifications of which are summarized in the Appendix A attached, according to
the following terms and conditions.
(1) Purchase Price: [ ]
(2) Payment Terms:
- [ ] within [ ] days after Ibis' acceptance of this purchase order
- [ ] upon completion of assembly, test and demonstration of the
designed capability to produce good quality SIMOX wafers at Ibis to the
specifications agreed between MSIL and Ibis
- Balance upon installation test run and acceptance by MSIL in Japan,
such tests and acceptance criteria to be agreed between MSIL and Ibis prior to
shipment.
MITSUBISHI MATERIALS SILICON CORPORATION
314 NISHISANGAO NODA-SHI CHIBA-KEN 278 JAPAN
20
<PAGE>
[LETTERHEAD]
(3) Spares and Services
Separate purchase orders will be placed for spare parts and services.
We will look forward to receiving your acceptance of this order. We would also
like to receive your latest delivery schedule for the equipment.
With. best regards.
Sincerely yours,
/s/ Yunchi Furukawa
Yunchi Furukawa
Managing Director
Attachment
21
<PAGE>
Exhibit 10.40
APPENDIX A
Ibis 1000 Implanter Specification
Summary
[ ]
22
<PAGE>
Exhibit 10.40
IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.40 PORTIONS OF
THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE
SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
Task Order #1
to
Equipment Purchase Master Agreement
No. 07482
This Task Order Agreement sets forth the terms and conditions of an individual
Equipment Purchase. All of the terms and conditions of the Equipment Purchase
Master Agreement No. 07482 between the parties ("EPMA") shall apply unless
superseded herein.
1.0 STATEMENT OF WORK
IBIS shall build, test, deliver, install and sell to IBM, and IBM shall buy,
two (2) IBIS-1000 oxygen implantation systems (hereinafter referred to as
"Equipment" arid "System #1" (with respect to the first system purchased and
sold) and "System #2" (with respect to the second system purchased and sold).
System #1 will initially be put into service at IBIS' facility in Danvers, MA
as specified below. System #2 will be delivered to IBM'S East Fishkill, New
York facility as specified below or other IBM facility as specified by IBM.
The term "Equipment" shall also include all Deliverables specified in the
Section entitled DELIVERABLES in the Equipment Purchase Master Agreement. IBM
may, from time to time and in its sole discretion, order additional IBIS-1000
or other model oxygen implantation systems under the terms of this Task
Order. Nothing in this Agreement shall obligate IBM to purchase additional
systems from IBIS.
23
<PAGE>
The Equipment is to be provided in accordance with the provisions of the
Equipment Purchase Master Agreement, this Task Order Agreement, Attachments
and Appendices, as well as any IBM Purchase Orders issued hereunder.
IBIS agrees that the price for the Equipment is that specified in the Section
entitled PRICING below.
2.0 PRICING
- Price for System #1 - [ ]
- Price for System #2 [ ]
2.1 IBM shall pay IBIS a transfer fee of [ ] in the event that IBM moves
System #1 from IBIS' facility to IBM's facility or accepts a replacement
system pursuant to Section 11.2.
3.0 IBIS SYSTEMS DELIVERY DATES
System #1 will be tested and put into service at IBIS' facility in Danvers, MA
as specified in Section 4 below.
IBIS will use best efforts to meet the schedule in Section 4.2 below, but in no
event shall System #2 be delivered to IBM later than [ ]. Time is of the
essence.
4.0 COMPLETION SCHEDULE
24
<PAGE>
Major milestones for performing this Agreement and corresponding completion
dates are set out in the following schedule.
A technical review shall be conducted at each scheduled Milestone unless
otherwise agreed to by IBM and IBIS. Additional reviews may be conducted if
deemed necessary by IBM and IBIS. The agenda for the reviews shall include a
status of the work specified to be performed to date, significant problems
encountered, proposed and actual solution, as well as anticipated problems.
4.1 Schedule for System #1
Preliminary Test [ ]
Final Test [ ]
4.2 Schedule for System #2
Design Review [ ]
Equipment assembly [ ]
Preliminary Test (IBIS M1000 Specification) [ ]
Equipment Shipment to IBM [ ]
Equipment Installation at IBM [ ]
Final Test (Test to meet specifications as agreed upon between
IBIS & IBM) [ ]
25
<PAGE>
5.0 PURCHASE ORDERS/INVOICES
5.1 Upon execution of this Task Order for Equipment, Purchase Order Nos. 990NU3K
and 990NV7C will be delivered to IBIS authorizing the work on System #1 and
System #2, respectively. Each Purchase Order shall reference the Equipment
Purchase Master Agreement, this Task Order Agreement, and General Procurement
specifications for Process Equipment.
5.2 IBIS hereby grants to IBM the options to purchase up to [ ] additional new
fully functional SIMOX systems from IBIS' then-current product line (the
model(s) to be selected by IBM) under this Task Order Agreement and the
Equipment Purchase Master Agreement during the period beginning with the
Effective Date and ending on [ ]; such Option to be exercised by the sending of
IBM purchase order(s) to IBIS for such system(s); each such system to be
delivered no later than [ ]after delivery of the applicable purchase order by
IBM; and at a price that is the lower of (a) [ ] and (b) a price determined by
Section 10.2 of the EPMA. IBM and IBIS will negotiate if more than [ ]identical
SIMOX systems are required in a twelve (12) month period.
5.3 IBIS hereby agrees that IBM and/or its AFFILIATES shall have no obligation
whatsoever (i) to purchase any goods (other than Systems #1 and #2) or services
from IBIS or (ii) to exercise the option in Section 5.2.
5.4 IBIS shall send all invoices to the following address:
26
<PAGE>
IBM Corporation
Accounts Payable Dept.
P.O. Box 8098
Endicott, NY 13761-8098
6.0 EXECUTION
This Task Order shall commence as of the Date of Execution below and shall
expire on December 31, 2003, unless extended by a formally executed written
amendment or unless terminated pursuant to Section entitled TERMINATION of the
Equipment Purchase Master Agreement.
7.0 COORDINATORS
7.1 All communications and notices between the parties shall be made or given to
the party's Purchasing Coordinator assigned as stated below:
In the case of IBM:
Vic Cole
In the case of the IBIS:
Al Alioto
7.2 The Technical Coordinator's assigned by each party are:
For IBM: Devendra Sedana, Scott Price
For IBIS: Al Alioto
27
<PAGE>
8.0 Deliberately left blank
9.0 INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION
- See License Agreement/EPMA
10.0 INTELLECTUAL PROPERTY RIGHTS
10.1.1 - IBIS agrees to deliver all of the data specified for delivery to IBM in
Section 5.0 entitled "DELIVERABLES" of the Equipment Purchase Master Agreement
and any additional data agreed by the parties to be delivered to IBM.
11.0 CONSIGNMENT
11.1 System #1 is hereby consigned by IBM to IBIS, subject to the terms of this
Agreement, including Appendix A.
11.2 IBIS grants IBM the option, to be exercised, if at all, in IBM's sole
discretion: i) to have IBIS transfer SIMOX System #1 to IBM's facility upon one
hundred and fifty (150) days' notice to IBIS; or ii) to transfer title to SIMOX
System #1 to IBIS and in exchange to receive and have delivered to IBM's
facility a new SIMOX system of a model then-offered by IBIS (to be selected by
IBM) upon payment of the amount set forth in Section 2.1, as the total
consideration) by giving five
28
<PAGE>
(5) months notice of its election to IBIS. The terms of such transfer of title
of IBM'S consigned SIMOX System #1 to IBIS shall be as specified in Appendix B.
12.0 SURVIVAL
To extent a particular right or obligation herein does not have a specifically
identified survival period, all rights and obligations which by their nature
survive the expiration or termination of this Task Order will remain in effect
beyond any expiration or termination for the period reasonably necessary to
accomplish their purpose and shall bind and inure to the benefit of the parties,
their legal representatives, successors and assigns.
13.0 CHANGES OR AMENDMENTS
The Task Order may not be changed or amended except by the signed written
agreement of the authorized representatives of both parties.
Accepted and Agreed to:
INTERNATIONAL BUSINESS IBIS TECHNOLOGY
MACHINES CORPORATION CORPORATION
By: /s/ Michael J. Flaherty By: /s/ Al Alioto
---------------------------------- ------------------------------
Print Name: Michael J. Flaherty Print Name: Al Alioto
-------------------------- -----------------------
29
<PAGE>
Title: Mgr. Capital Equipment Procurement Title: Vice President of Sales and
Marketing
Date: 5/14/98 Date: April 11, 1998
30
<PAGE>
APPENDIX A
SUPPLEMENTAL TERMS AND CONDITIONS FOR
CONSIGNMENT OF IBM'S SYSTEM #1
The following provisions of this Appendix A to Task Order #1 supersede the
terms in Appendix C of Equipment Purchase Master Agreement No. 07482 only for
the SIMOX System #1 consigned to IBIS by IBM and activities performed under
the terms of Task Order #1.
Pursuant to Section 11.1 of Task Order #1, IBM shall consign IBM's System
#1 to IBIS subject to the following terms and conditions:
1.0 - System #1 shall remain the property of IBM. IBIS shall not pledge,
mortgage, encumber, or assign System #1 in any manner, or transfer System #1
to a third party, or exercise any right of ownership in System #1 or perform
any act inconsistent with IBM'S ownership thereof, without IBM'S written
approval.
2.0 - IBIS may use System #1 for the performance of implantation for other
customers, provided that orders issued by IBM for implantation of wafers
shall have absolute priority over orders from other customers of IBIS, and
IBIS shall immediately process such IBM wafers.
31
<PAGE>
3.0 - IBM shall have the right to inspect periodically System #1. Such
inspections shall be conducted during normal business hours, subject to
reasonable notice.
4.0 IBIS shall maintain records of all transactions involving the System #1
and keep these records on 51. for a minimum of three (3) years from the date
the work or services being performed have Inn completed. During such three
(3) year period, IBM may audit these records during reasonable business
hours, subject to reasonable notice.
5.0 - IBIS shall transfer System #1 to IBM's facility in accordance with 11.2
of Task Order or within 60 days of termination of EPMA.
6.0 IBIS shall be responsible for any damage to System #1 while it is
consigned to IBIS. System #1 shall be delivered to IBM in working order and
in as good condition as when first put into service at IBIS facility
(pursuant to Section 5.0) reasonable wear and tear accepted, and IBIS shall
make any repairs or refurbishing required. The warranty period for System #1
shall extend for the entire period during which System #1 remains at IBIS'
facility and for an additional period of six (6) months after System #1 is
installed at IBM's facility and accepted by IBM.
6.1 Delivery of System #1 to IBM hereunder shall be to IBM'S dock at East
Fishkill, New York or to any other location IBM may direct. Crating,
transportation, and insurance shall be at IBIS' expense.
32
<PAGE>
7.0 IBIS agrees to indemnify, defend, and hold harmless, IBM, its officers,
directors, agents, and employees, from any and all liability, losses, damages
or expenses associated with claims, suits, or actions brought by or on behalf
of any third party of any nature, including, but not limited to, personal
injury (including death), environmental liability, or property damage arising
from, or alleged to arise from IBIS' negligence or other wrongful acts or
omissions resulting from or in any way related to this Agreement. For the
avoidance of doubt, the obligations of this paragraph also apply to all
claims, suits or actions based on the design or operation of System #1.
7.1 IBIS agrees to indemnify, defend, and hold harmless, IBM, its officers,
directors, agents, and employees, from any and all liability, losses, damages
or expenses associated with claims, suits, or actions brought by or on behalf
of any third party of any nature, including, but not limited to, personal
injury (including death), environmental liability, or property damage arising
from, or alleged to arise from, IBIS' negligence or other wrongful acts or
omissions and/or IBM's negligence or other wrongful acts or omissions
resulting from or in any way related to work performed by IBIS on System #1
for any person or entity other than IBM. For the avoidance of doubt, the
obligations of this paragraph also apply to all claims, suits, or actions
based on the design or operation of System #1.
33
<PAGE>
8.0 INSURANCE
8.1 IBIS shall purchase, at its own expense, and during the term of this
Agreement (unless a longer term is specified) maintain in full force and effect
at least the following kinds and minimum amounts of insurance with reputable
insurance carriers:
a. Workers' compensation insurance in accordance with statutory
requirements.
b. Comprehensive General Liability insurance, covering any liability
for bodily injury, personal injury (including death), and property
damage arising from IBIS' operations, its products and services
provided hereunder, its assumed liabilities under this Agreement
(including contractual indemnities), and its use and operation of its
facilities, for limits of not less than $2,000,000.00 per occurrence
combined single limit bodily injury and property damage. IBM shall be
listed as an additional insured on the policy.
IBIS shall maintain the foregoing coverage in full force and effect for
at least three years following the expiration of this Agreement.
c. Property Damage Insurance covering the IBM SIMOX System #1 located
at IBIS' facilities. Such insurance shall be written on an "all risk"
of physical loss or damage basis, for the full replacement cost of the
covered items and in amounts that meet any coinsurance clause of the
policies of insurance. IBM shall be listed as an additional insured and
loss payee on the policy.
d. Comprehensive Automobile Liability Insurance - third party, bodily
injury, property damage with limits of $2,000,000.00 per occurrence for
owned, non-owned, and hired vehicles used by IBIS while performing
services in connection with this Agreement. IBM shall be listed as an
additional insured on the policy.
e. Employers Liability coverage with a limit of $1,000,000.00 per
occurrence. IBIS shall not commence work until it has furnished IBM
with certificates of insurance evidencing the coverage required by this
Section. Such certificates must provide that the insurer will give IBM
at least thirty (30) days prior written notice of material change in or
cancellation of such insurance. IBIS shall indemnify, defend, and hold
harmless IBM for all damages sustained by IBM resulting from IBIS'
failure to have and maintain the insurance required in this Section.
f. Maintenance of the Insurance required in this Section shall in no
way be interpreted as relieving IBIS of any responsibility whatsoever
under this Agreement. IBIS may secure, at its own expense, such
additional insurance as it deems necessary.
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9.0 If IBIS is unable to deliver System #1 to IBM when requested due to loss or
theft, IBIS shall pay IBM the actual cash value of System #1 and explain in
detail the circumstances surrounding such failure to deliver. If IBIS is able
but, for any reason, fails to deliver upon IBM's request, IBM shall have the
right to enter IBIS' premises to remove System #1, and IBIS expressly waives any
rights or remedies IBIS has with regard to System #1 including, but not limited
to, any right IBIS has to notice and a hearing or to a bond, undertaking, or
surely before a writ of replevin, order of seizure, or similar writ or order.
IBM shall have all other remedies, at law or in equity.
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APPENDIX B
The following terms and conditions shall govern the exercise of the option in
Section 11.2(ii) of Task Order #1.
PROPERTY - Any reference to "Property" or "property" herein shall be construed
to mean the used SIMOX System #1 located at IBIS' facility.
ACCEPTANCE -- The terms and conditions contained herein are the complete and
exclusive statement of the terms of any sale to IBIS. IBIS' signature below
confirms IBIS' assent to these terms and conditions. No addition to or
modification of any of these terms and conditions will be effective unless
agreed to in writing by IBM. Any terms and conditions submitted on documents
supplied by IBIS shall be deemed non-conforming.
WARRANTIES -- ALL PROPERTY IS SOLD ON AN "AS IS" BASIS WITH ALL FAULTS, LATENT
AND PATENTS. IBM MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO THE NATURE,
QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, OR OTHERWISE. IBM shall have no responsibility for shipping,
installation, warranty, maintenance, engineering changes or technical support of
the property purchased hereunder.
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PERMITS AND AUTHORIZATIONS REQUIRED BY LAW -- IBIS represent that IBIS possess
all the necessary permits and authorizations required to disassemble, remove,
transport, resell or otherwise properly dispose of the property being acquired.
IBIS agree to comply with all applicable Federal, State and local laws,
regulations and ordinances, including but not limited to the regulations of
ordinances, including but not limited to the regulations of the United States
Department of Commerce relating to the Export of Technical Data, insofar as they
relate to IBIS' performance.
INDEMNIFICATION -- IBIS agree to indemnify IBM against any and all claims for
damages, including costs and attorney's fees, for personal injury (including
death), and loss of or destruction or damage to real or tangible personal
property arising from IBIS' acts, omissions or misrepresentation, regardless of
the form of action brought against IBM.
INFRINGEMENT OF PATENTS -- The purchase of property does not convey by
implication or otherwise any licenses under any patent, domestic or foreign. IBM
makes no representation or warranty that the use of any material, equipment or
technical information furnished hereunder will not infringe any patent,
trademark, copyright, trade secret, or other proprietary interests of any third
party, and it shall be IBIS' sole responsibility to make such determination as
is necessary with respect to other rights of third parties. IBM shall not be
held to any liability with respect to any claim made by any third party on
account of, or arising from, the use of such material, equipment, or technical
information. IBIS agree to indemnify and save harmless IBM from any and all
costs, expenses, liabilities, and claims for infringement of any patents or
similar instruments or any
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trademarks, copyrights, trade secrets, or other proprietary interests in any
foreign country or in the U.S.A. (subject to maximum cap as specified in the
license and development Section 11.1)
LIMITATION OF IBM'S LIABILITY -- IBM'S entire liability and IBIS' exclusive
remedy are set forth in this section. Under no circumstances shall IBM be liable
to IBIS for any lost revenue, consequential damages, incidental damages, lost
profits or possibility of such damages. In addition, in no event will IBM be
liable on any third party claim or for damages caused by IBIS' failure to
perform IBIS' responsibilities. In no event, except for claims by IBIS for
bodily injury or damage to real property or tangible personal property for which
IBM is legally liable, will IBM be liable to IBIS for actual damages in excess
of the amount paid by IBIS for property under this Agreement. These limitations
apply, regardless of the form of action, whether in contract or in tort,
including negligence.
GENERAL -- This Agreement shall be governed by the laws of the State of New
York, without regard to die conflict of laws principles thereof. The parties
hereto expressly waive any right they may have to a jury trial and agree that
any proceeding under this Agreement shall be tried by a judge without a jury.
If any section or subsection of this Agreement is found by competent judicial
authority to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of any such section or subsection in every other
respect and the remainder of this Agreement shall continue in effect so long
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<PAGE>
as the redacted contract still expresses the Intent of the parties. If the
intent of the parties cannot be preserved, this Agreement shall be either
renegotiated or terminated.
All obligations and duties which by their nature survive the expiration or
termination of this Agreement shall remain in effect beyond any expiration or
termination.
No actions, regardless of form, arising out of this Agreement, may be brought by
either party more than two years alter the cause of action has arisen, or, in
the case of nonpayment, more than two years from the date payment was due.
Neither party shall assign this Agreement or any rights hereunder without the
prior written consent of the other party.
The waiver by either party of any instance of the other party's noncompliance
with any obligation or responsibility herein shall not be deemed a waiver of
subsequent instances or of either party's remedies for such noncompliance.
CONFIDENTIAL INFORMATION -- If any confidential information is to be disclosed
by IBM or IBIS, such disclosure shall be under the terms of the EPMA.
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CHEMICAL -- IBIS agree to indemnify IBM against any and all claims or actions
for damage or other relief that may arise due to the property containing
chemical residue. IBIS agree to meet all applicable government safety standards
and environmental regulations and laws for the removal and transportation of
this property
EXPORT -- Some material(s) included in this sale may be a controlled commodity
and require a validated export license issued by the U.S. Department of Commerce
prior to the export of such commodities from the U.S. As a condition of sale,
Buyer will abide by all U.S. Export/Re-export Administration regulations,
including export license whenever applicable. IBIS acknowledge awareness of such
regulations and agree to become familiar with them prior to exporting any
property from the U.S.
SOLE AGREEMENT - THIS AGREEMENT embodies the understanding of the parties with
respect to the sale of the property and supersedes all previous communications,
representations or understandings, either written or oral, between the parties.
INTERNATIONAL BUSINESS IBIS TECHNOLOGY
MACHINES CORPORATION CORPORATION
BY: /s/ Michael J. Flaherty BY: /s/ Al Alioto
-------------------------------------- ------------------------------
TITLE: Mgr. Capital Equipment Procurement TITLE: VP of Sales and Marketing
----------------------------------- --------------------------
DATE: 5/14/98 DATE: April 11, 1998
----------------------------------- --------------------------
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EXHIBIT 10-41
IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.41 PORTIONS OF
THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE
SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
LICENSING AND DEVELOPMENT
AGREEMENT
between
INTERNATIONAL BUSINESS MACHINES CORPORATION
and
IBIS TECHNOLOGY CORPORATION
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. DEFINITIONS....................................................... Page 1
2. PROGRAM........................................................... Page 4
3. LICENSES.......................................................... Page 4
4. CONFIDENTIAL INFORMATION.......................................... Page 7
5. OWNERSHIP OF INTELLECTUAL PROPERTY AND TOOLS...................... Page 10
6. PAYMENT........................................................... Page 11
7. TERM AND TERMINATION.............................................. Page 12
8. REPRESENTATIONS AND DISCLAIMERS................................... Page 13
9. TECHNOLOGY TRANSFER AND TECHNICAL ASSISTANCE...................... Page 15
10. APPLICABLE LAW................................................... Page 16
11. MISCELLANEOUS.................................................... Page 17
APPENDIX A SCHEDULE.................................................. Page 22
APPENDIX B DELVERABLES............................................... Page 23
</TABLE>
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This Licensing and Development Agreement ("Agreement") is made effective as of
March 1, 1998 ("Effective Date") by and between International Business Machines
Corporation (IBM), a New York corporation, having an office at 1580 Route 52,
Hopewell Junction, New York, United States of America and Ibis Technology
Corporation (IBIS), a Massachusetts corporation, having an office at 32 Cherry
Hill Drive, Danvers Massachusetts, United States of America, said named parties
being referred to hereinafter individually as a "Party" and collectively as the
"Parties".
WHEREAS, the Parties have developed expertise in the development and manufacture
of ion beam systems for implanting semiconductor wafers;
WHEREAS, IBM wishes to obtain a license to make and have made ion implanting
tools designed by IBIS;
WHEREAS, IBIS agrees to train IBM personnel in the design, manufacture,
operation and use of such tools;
WHEREAS, IBM wishes to obtain a license to make and have made improvements made
by IBIS in ion-implantation systems;
NOW, THEREFORE in consideration of the contributions of knowledge and skill in
the areas of their respective expertise, in the cooperative undertaking
specified hereunder, and in view of the mutual promises, commitments, and
efforts relating thereto, it hereby is agreed between the Parties hereto as
follows:
1 DEFINITIONS
Words shall have their normally accepted meanings as employed in this
Agreement. The terms "herein", "hereunder" and "hereof", unless specifically
limited, shall have reference to the entire Agreement. The words "shall" and
"will" are mandatory, the word "may" is permissive, the word "or" is not
exclusive, the words "includes" and "including" are not limiting and the
singular includes the plural. The following terms shall have the described
meanings:
1.1 "Affiliate" shall mean a corporation, company or other entity:
1) more than twenty-five percent (25%) of whose
outstanding shares or securities (representing the
right to vote for the election of directors or other
managing authority) are, now or hereafter, owned or
controlled, directly or indirectly, by a Party
hereto, but such corporation, company or other entity
shall be deemed to be an Affiliate only so long as
such ownership or control exists; or
2) which does not have outstanding shares or securities,
as may be the case in a partnership, joint venture or
unincorporated association, but more than twenty-five
percent (25%) of whose ownership interest
representing the right to make the decisions for such
corporation, company or other entity is, now or
hereafter, owned or controlled, directly or
indirectly, by a Party hereto, but such corporation,
company or other entity shall be deemed to be an
Affiliate
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only so long as such ownership or control exists; or
[ ]
1.2 "Background Intellectual Property Rights" shall mean
Intellectual Property Rights that are owned by a Party or
Parties and are created outside the course and scope of the
Program.
1.3 "Change of Control" shall mean one (1) transaction or a series
of related transactions which results in a third Party
obtaining, directly or indirectly, (a) thirty (30) percent or
more of the ownership of the outstanding voting shares or
other ownership interest of, or (b) the right to manage the
business or control the disposition of assets of, or (c)
Control of a Party.
1.4 "Confidential Information" shall mean technical and business
information disclosed within the course and scope of the
Program by or on behalf of a Party that is embodied in
tangible form and marked as specified in Section 4.6 of this
Agreement.
1.5 "Control" shall mean the power to direct the affairs of a
Person by reason of ownership of voting stock, by asset
acquisition, contract or otherwise.
1.6 "Deliverables" shall mean drawings, data, algorithms, computer
source and object code, reports, documentation and the like
pertaining to SIMOX systems (e.g. the IBIS 1000), as specified
in Appendix B.
1.7 "Escrow Agent" shall mean Fort Knox Escrow Services, Inc.,
3539A Church Street, Clarkston, Georgia, 30021-1717, or such
other escrow agent as the Parties may later agree to use.
1.8 "Improvement" shall mean any change, upgrade, modification or
revision to the Licensed Technology and/or in the field of
SIMOX put into commercial use by a Party during the Term, or
which such Party acquires the right to license during the
Term. Improvements shall not include any change, upgrade,
modification or revision to the Licensed Technology that a
Party is contractually prohibited by a Prior Agreement from
providing to a third Party. In the case of information
disclosed by IBM, Improvements shall exclude information on
the operation of ion-implanting systems or other processing of
integrated circuit wafers, e.g. annealing, which IBM shall
have no obligation to provide or to disclose hereunder. For
the avoidance of doubt, Improvements shall include know-how or
other information contained in a new model SIMOX system sold
by IBIS during the Term.
1.9 "Intellectual Property Rights" shall mean patent rights,
rights under copyright, and other rights in Inventions and
confidential information.
1.10 "Licensed Patents" shall mean all patents, including utility
models and design patents, issued or issuing on patent
applications worldwide that claim inventions having an
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effective filing date prior to the expiration of the Term,
under which patents or the applications therefor a Party has
the right, at any time during the Program, to grant licenses
to the other Party of the scope granted herein and any
continuation, continuation-in-part, divisional, reissue,
reexamination and any equivalents thereof. The term "Licensed
Patents" shall also include any patent reissuing on any of the
aforesaid patents. The term "Licensed Patents" shall include
patents which such grant or the exercise of rights thereunder
would result in the payment of royalties or other
consideration by a Party to third parties, provided that such
Party shall have notified the other Party of the requirement
of compensation and the other Party shall have consented to
compensate such Party for such consideration.
1.11 "Licensed Product" shall mean a SIMOX system that
substantially conforms to the Licensed Technology (including
Improvements).
1.12 "Licensed Technology" shall mean: a) know-how or other
information (e.g. computer software) contained in the
materials specified in Appendix B relating to the technology
to be transferred to IBM; and b) additional know-how or other
information transferred or otherwise disclosed in writing by
IBIS to IBM in providing technical assistance pursuant to
Section 9.
1.13 "Material Default" shall mean the violation of or failure to
perform any material term or material covenant of this
Agreement by a Party.
1.14 "Person" shall mean any individual, corporation, partnership,
joint venture, trust, business association, governmental
entity or other entity.
1.15 "Prior Agreement" shall mean an agreement between a Party and
a third Party having a date of execution prior to the
Effective Date of this Agreement.
1.16 "Program" shall mean the cooperative undertaking by the
Parties, in which IBIS discloses to IBM and trains IBM's
employees in the Licensed Technology including, at IBM's
option, IBM's making or having made and testing a Licensed
Product.
1.17 "SIMOX" shall mean the implanting of oxygen ions into a
silicon wafer to form a layer of insulator underneath a device
layer of silicon and SIMOX system shall mean a system for
SIMOX.
1.18 "Subsidiary" shall mean an Affiliate more than fifty percent
(50%) of whose outstanding shares, securities or ownership
interest are, now or hereafter, owned or controlled, directly
or indirectly, by a Party hereto, but such corporation,
company, or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists.
1.19 "Term" shall mean the period of time this Agreement is in
effect, which shall commence on the Effective Date and
continue until December 31, 2005, unless
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<PAGE>
sooner terminated pursuant to the provisions of Section 7.
2 PROGRAM
2.1 Each Party shall perform its tasks in the course of the
Program as specified in Appendix A.
2.1.1 IBIS and IBM will make commercially reasonable efforts
to meet the schedule specified in Appendix A.
2.1.2 Upon exercise by IBM of either Option A or Option B as
set forth in Section 3.5, IBIS will give technical assistance
to IBM as specified in Section 9.
2.2 Each Party shall have a Program Manager and a Technical
Coordinator as follows:
For IBIS: Program Manager: Al Alioto
Technical Coordinator: Al Alioto
For IBM: Program Manager: H. C. Calhoun
Technical Coordinator: Devendra Sadana
Each Party may change its Program Manager and/or Technical
Coordinator by giving written notice to the other Party.
2.3 Each of the Program Managers shall be responsible for the
representation of his Party's interest in the Program. The
Program Managers shall meet on a regular basis to review
progress.
2.4 The Technical Coordinators or their designees shall supervise
the exchange of information during the Program.
2.5 Each Party shall bear its own expenses in performing its tasks
in the course of the Program.
3 LICENSES
3.1 IBIS hereby grants to IBM an irrevocable, worldwide,
royalty-bearing, nonexclusive license, exercisable as
specified below, under IBIS's applicable patent and trade
secret rights in Licensed Patents, Licensed Technology [ ] to:
(a) make, have made, use and practice any process in the use
of SIMOX systems and components thereof; (b) lease, sell, or
otherwise transfer SIMOX systems and components thereof to
Affiliates; and (c) sublicense such Affiliates to use and
practice any process in the use of such SIMOX systems and
components thereof. For the avoidance of doubt, IBM agrees
that the foregoing right to sublicense Affiliates does not
include the right to license Affiliates to make or have made a
SIMOX system. For the further avoidance of doubt, IBM agrees
that it is not permitted to act under the foregoing license
until it has elected one of the options set forth in Section
3.5.
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<PAGE>
3.2 IBIS hereby grants to IBM an irrevocable, worldwide,
nonexclusive, license, exercisable as specified below, under
IBIS's copyrights in computer software or other works of
authorship disclosed by IBIS hereunder or delivered by IBIS to
IBM in connection with the sale of a SIMOX system to IBM to
copy and make derivative works of such software or other works
of authorship and to distribute such copies and derivative
works within IBM and to Affiliates, subject to the following
condition:
IBM may grant sublicenses under IBIS's copyrights in software
in object code format necessary for the operation of a SIMOX
system to its Affiliates' purchasing systems licensed
hereunder. Each license, agreement form, when executed with
customers, shall contain terms that are legally sufficient to:
(a) authorize the customer to use software sublicensed from
IBIS and supplied to it by or for IBM for operating a SIMOX
system sold hereunder for SIMOX and for no other purpose;
(b) authorize the customer to make copies of each authorized
product copy for backup purposes only; and
(c) prohibit further copying and/or transfer of the product;
and
(d) prohibit reverse assembly, reverse compilation, or other
translation of product code or any portion thereof.
For the avoidance of doubt, IBM agrees that it is not
permitted to act under the foregoing license until it has
elected one of the options set forth in Section 3.5.
3.3 No license or immunity is extended by a Party either directly
or by implication, estoppel, or otherwise except as explicitly
set forth herein.
3.4 IBM hereby grants to IBIS an irrevocable, royalty-free,
worldwide, nonexclusive license, exercisable as specified
below, under IBM's Intellectual Property Rights in [ ] that
pertain to the structure of a SIMOX system to: (a) make and
have made and (b) use, lease, sell, or otherwise transfer
SIMOX systems and components thereof. This license shall be
for the sale or other transfer of SIMOX systems only to IBM
and Affiliates for an initial period of [ ] after disclosure
of such [ ], after which initial period, IBIS may incorporate
such [ ] in a system sold to any customer. For the avoidance
of doubt, this license granted by IBM does not cover
Intellectual Property Rights pertaining to methods of
operation of an ion-implanting system or to processes used in
making or treating wafers and/or integrated circuits.
3.5 IBM shall have the option, to be exercised in its sole
discretion and at any time, to elect either License Option A
or License Option B by delivery of a written notice to IBIS.
Exercise of Option A or Option B shall be subject to the
conditions of Section 3.5.1 or Section 3.5.2, as the case may
be.
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3.5.1 License Option A
IBM may exercise its license under License Option A by
delivery of written notice to IBIS and to the Escrow Agent.
The Escrow Agent shall immediately deliver the escrow
documentation to IBM upon receipt of notice. The consent of
IBIS is not required for delivery of the documentation under
this License Option A and IBIS hereby waives any right it may
have to object to such transfer. The royalty payments under
this License Option A shall be as specified in Section 6. Upon
receipt of notification, IBIS shall provide the training and
Technical Assistance specified in Appendix A at times mutually
agreed on but no later than the times specified in Appendix A.
3.5.2 License Option B
IBM may, in its sole discretion, exercise its license under
License Option B by delivery of written notice to the Escrow
Agent stating: a) [ ]; or b) that IBIS has failed to satisfy
one or more of the following conditions and IBIS has not cured
such failure within [ ] days after notification by IBM of the
failure.
3.5.2.1 The conditions are that IBIS:
(a) [ ]
(b) [ ]
(c) [ ]
(d) [ ]
The Escrow Agent shall immediately deliver the escrow
documentation to IBM upon receipt of notice. The consent of
IBIS is not required for delivery of the documentation under
this License Option B. IBIS hereby waives any right it may
have to object to or otherwise prevent the Escrow Agent from
completing such transfer and agrees that its only recourse
against IBM in the event of a dispute concerning such transfer
shall be a claim against IBM for monetary damages. The royalty
payments shall be as specified in Section 6. IBIS shall
deliver the training and Technical Assistance specified in
Appendix A at times mutually agreed on but no later than the
times specified in Appendix A.
3.6 IBIS agrees, within [ ] days after the last signature date of
this Agreement, to review with IBM at IBIS' place of business
the documentation and updates thereof listed in Appendix B.
After such review, IBIS shall transmit such documentation to
an Escrow Agent chosen by mutual agreement of the Parties.
Such Escrow Agent shall hold such documentation pursuant to an
escrow agreement to be executed concurrently herewith. The
parties shall share the cost of the escrow equally. For
convenience in administration, IBIS shall pay the escrow Agent
and invoice IBM for its share of the
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payment. The Parties agree that such escrow agreement shall
permit IBM to inspect (but not copy) the documentation at the
Escrow Agent's premises.
3.7 IBIS represents and agrees that it will not initiate any work
(or otherwise take any steps in reliance) on a SIMOX system
for sale to IBM unless and until IBIS has received an
applicable written purchase order from IBM. IBM shall have no
obligation to exercise any of the options granted to it under
this Agreement.
4 CONFIDENTIAL INFORMATION
4.1 The prior Confidential Disclosure agreement between the
Parties concerning confidential information is terminated as
of the Effective Date and any information disclosed thereunder
shall be deemed to be disclosed under this Agreement as of the
Effective Date. The confidentiality provisions of the
Equipment Procurement Master Agreement between the Parties
having an effective date in May, 1996 are superseded only with
respect to Confidential Information disclosed under and marked
in accordance with this Agreement.
4.2 Subject to the provisions of Section 3, for a confidentiality
period as set forth below, the receiving Party agrees to use
the same care and discretion to safeguard Confidential
Information of the disclosing Party and to avoid release of
such Confidential Information outside of the receiving Party
as it employs with similar embodiments of information of its
own which it does not desire to publish, disclose, or
disseminate, but in no event less than reasonable care.
4.3 Obligations of confidentiality and restricted use set forth
herein shall extend until December 31, 2008.
4.4 The obligations of confidentiality herein shall not apply to
information that:
(a) Is already in the possession of the receiving Party
r any of its Subsidiaries without obligation of confidence;
(b) Is independently developed by the receiving Party
r any of its Subsidiaries;
(c) Is or becomes publicly available without breach of
his Agreement;
(d) Is rightfully received by the receiving Party from
third Party;
(e) Is released for disclosure by the disclosing Party
ith its written consent;
(f) Is required to be disclosed in a patent
pplication; or
(g) Is inherently disclosed in the use, lease, sale, or
ther distribution of any present or future product or
service by or for the receiving Party or any of its
Affiliates.
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4.5 All disclosures of Confidential Information by IBIS or IBM, as
the disclosing Party, shall be made by or under the
supervision of its Technical Coordinator, or his designee, to
the receiving Party's Technical Coordinator, or his designee.
In the event of inadvertent disclosure, either Party may give
notice to the other Party that such inadvertently disclosed
information was confidential and the receiving Party
thereafter shall treat in good faith such information as
Confidential Information.
4.6 All disclosures of information will be deemed to be
non-confidential unless specifically designated at the time of
disclosure (as provided in Section 4.7 below) as including the
Confidential Information of a Party.
4.6.1 Notwithstanding the foregoing, Inventions created and
Confidential Information disclosed in the course of joint work
or discussions between the Parties shall be deemed to be the
Confidential Information of the employer(s) of the individuals
creating them, whether or not the pertinent information is
marked or summarized in a resume. The Parties agree to make
reasonable efforts to document and mark such joint work or
discussions.
4.7 Information, including Confidential Information, of a Party
shall be disclosed in writing in English (including such
information recorded in a medium such as a tape or disk),
which writing shall state the date of disclosure, that the
information contained therein is confidential and that it is
being disclosed pursuant to this Agreement, and shall contain
an appropriate legend, such as "IBIS Confidential
Information". If such disclosure is orally and/or visually
made, then it shall be confirmed in a written resume within
twenty (20) days following such disclosure. The resume will
specifically recite that information which is confidential.
Such resume will have such information that is confidential
identified as "IBIS Confidential (or IBM Confidential)
Information". The receiving Party may make a reasonable number
of copies of such writings or resumes.
4.8 A receiving Party possessing Confidential Information of the
other Party may disclose it to a vendor or to a subcontractor
(or to a sublicensee that in turn may disclose to a vendor or
subcontractor), for the purpose of exercising the license
specified in Section 3. under restrictions on disclosure at
least as stringent as those set forth herein. The receiving
Party may only authorize such vendor, subcontractor or
sublicensee to use such Confidential Information only for the
benefit of such receiving Party. If disclosure is compelled as
testimony or evidence in a judicial or legislative proceeding,
the Party under compulsion to disclose shall immediately
notify the owner Party and shall avail itself of all
reasonable protection at the reasonable expense and with the
express prior concurrence in writing of the Party owning the
applicable Confidential Information, such as protective orders
or exemptions from Freedom of Information Act availability, as
may be reasonably available and effective to protect the
Confidential Information in question.
4.9 It is understood that receipt of Confidential Information
under this Agreement will not create any obligation in any way
limiting or restricting the assignment and/or
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reassignment of IBIS employees within IBIS or IBM employees
within IBM.
4.10 Each Party represents that it has, and agrees to maintain, an
appropriate agreement with each of its employees who may have
access to any Confidential Information sufficient to enable
each Party to comply with all the terms of this Agreement.
4.11 All disclosures of information under this Agreement shall be
governed by the applicable statutes and regulations of the
United States Government regarding the export of technical
information. Each Party agrees to comply, and do all things
reasonably necessary for the other Party to comply, with all
applicable laws, regulations and ordinances of any country
having jurisdiction over the subject matter hereof, including
but not limited to the regulations of the United States
Department of Commerce and Department of State relating to the
export or re-export of technical data or the direct product
thereof, insofar as they relate to the activities to be
performed under this Agreement. Each Party agrees to obtain
any required government documents and approvals prior to the
export or re-export by it of any technical data disclosed to
it or the direct product related thereto.
4.12 IBIS shall make available an initial data package [ ], as
specified in Section 3.6, Appendix A, and Appendix B, for
inspection and evaluation by IBM at IBIS' place of business
and subsequent transmission to the Escrow Agent. IBIS shall
promptly correct deficiencies in the data on IBM's request.
When IBM is satisfied that the data are adequate, IBIS shall
forward the data to the Escrow Agent.
4.12.1 In the event that IBM exercises its license under Section
3.5.1 or 3.5.2, IBIS shall continue to deliver data updates,
which IBM may immediately use under the terms hereof.
4.13 The conditions for release of data hereunder by the Escrow
Agent shall be as set forth herein and shall not be affected
by the existence of different conditions in, or by the status
of the escrow (i.e. whether released or not) under, the
Equipment Purchase Master Agreement. For the avoidance of
doubt, the data may be released under the Equipment Purchase
Master Agreement before or after the release of data
hereunder.
5 OWNERSHIP OF INTELLECTUAL PROPERTY
5.1 Each Party shall have and retain the sole and exclusive
ownership of all Intellectual Property Rights that are made or
created solely by it or its employees or agents in the course
of the Program.
5.2 Any Intellectual Property Rights made or created jointly by
the Parties or employees or agents of the Parties in the
course of the Program shall be owned jointly. Joint Inventions
shall be jointly owned, title to all patents issued thereon
shall be joint, all expense incurred in obtaining and
maintaining such patents, except as provided herein, shall be
jointly shared. Each Party shall have the unrestricted right
to license third parties under such jointly owned Intellectual
Property Rights without
51
<PAGE>
accounting.
5.2.1 Unless otherwise agreed, joint owners of Intellectual Property
Rights shall engage outside counsel to perform tasks
associated with securing the legal protection of such
Intellectual Property Rights and shall share the costs thereof
equally. In the event that one Party elects not to seek patent
protection for any joint Invention in any particular country
or not to share equally in the expense thereof with the other
Party, the other Party shall have the right to seek or
maintain such protection at its own expense in such country
and shall have full control over the prosecution and
maintenance thereof even though title to any patent issuing
therefrom shall be jointly owned. Such one Party shall have no
obligation to pay expenses of securing and maintaining such
Intellectual Property Rights in any country unless it has so
agreed in writing.
5.3 Each Party shall give the other Party all reasonable
assistance in obtaining patent protection and in preparing and
prosecuting any patent application filed by the other Party,
and shall cause to be executed assignments and all other
instruments and documents as the other Party may consider
necessary or appropriate to carry out the intent of this
Section 5.
6. PAYMENT
6.1 From and after the Effective Date, IBM shall pay to IBIS a
royalty comprising the amount listed in the appropriate column
of Table I for each Licensed Product made by or for IBM and/or
sold, leased or otherwise transferred or disposed of by or for
IBM.
TABLE I
<TABLE>
<CAPTION>
Number of
Machines Option A Option B
<S> <C> <C>
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
</TABLE>
6.2 The royalty of Section 6.1 shall accrue when a Licensed
Product is first put into service by IBM or is first sold,
leased or otherwise transferred or disposed of by or for IBM.
For the purpose of determining such royalty, Licensed Products
shall be considered sold, leased or otherwise transferred or
disposed of when invoiced. If not invoiced, then Licensed
Products are to be considered sold, leased or otherwise
transferred or disposed of when delivered or when paid for, if
paid for before delivery. If not invoiced, delivered or paid
for before delivery, Licensed Products are to be considered
sold, leased or otherwise transferred or disposed of at the
earlier of when put into use or when possession is transferred
to a third Party. When Licensed
52
<PAGE>
Products are sold, leased or otherwise transferred or disposed
of in conjunction with other products or services provided,
sold, leased or otherwise transferred or disposed of by IBM,
IBM agrees to separately invoice such Licensed Products from
such other products or services.
6.3 Accrued royalties shall be calculated and paid on a calendar
quarterly basis. Any royalties due IBIS for any calendar
quarter shall be paid to IBIS by [ ] days after the end of
each calendar quarter. IBM may deduct from the accrued
royalties calculation in this Section 6.3 those royalties
accrued on Licensed Products which have been returned to IBM
or for which credit allowances have been made.
6.4 Within [ ] days of each calendar quarter, IBM shall furnish to
IBIS a written statement showing the Licensed Products that
were made, used, sold, leased and/or transferred or otherwise
disposed of during the immediately preceding calendar year and
the royalties payable thereon. If no royalties are payable,
that fact shall be shown on such statement.
6.5 IBIS shall have the right, at its expense, to have an
independent accountant acceptable to IBM inspect relevant
records of IBM during normal business hours and on reasonable
notice, to verify that the number of SIMOX systems made by or
for IBM is as reported to IBIS, and for no other purpose. IBIS
shall require such accountant to execute an agreement
permitting disclosure of such number only to IBIS and its
counsel and prohibiting any other disclosure or use of any
information learned during such inspection, except in
connection of enforcing its rights under this Agreement. If
such audit reveals that IBM has underpaid the royalty due, IBM
shall pay the reasonable cost of the audit.
7. TERM AND TERMINATION
Either Party may terminate this Agreement for a Material Default as
provided herein:
7.1 For a Material Default specified in Sections 7.1.1, the
non-defaulting Party may give written notice of such default
("Notice of Default") to the defaulting Party. If a Notice of
Default is given and the defaulting Party should fail to cure
such default within [ ] days after the date of receipt of the
Notice of Default, the non-defaulting Party may terminate this
Agreement by a second written notice ("Notice of Termination")
to the defaulting Party.
7.1.1 The parties agree that some of the grounds of Material
Default, for which a Party shall have the right to terminate
this Agreement per Section 7.1 are:
(a) the other Party breaches its obligation to deliver
Licensed Technology, training and/or Improvements.
(b) the other Party breaches its payment obligations under
Section 6.
53
<PAGE>
7.2 For a Material Default specified in Sections 7.2.1, the non-
defaulting Party may give to the defaulting Party a Notice of
Termination immediately terminating this Agreement.
7.2.1 The parties agree that some of the grounds of Material
Default, for which a Party shall have the right to terminate
this Agreement immediately per Section 7.2 are:
(a) the other Party engages in or suffers a Change of
Control.
(b) the other Party breaches its obligation of
confidentiality under Section 4.
(c) the other Party breaches the terms of its license
under Section 3.
7.3 If this Agreement is terminated for Material Default;
(a) the obligations of the Parties to deliver Improvements
shall terminate; and
(b) the licenses granted in Section 3 and corresponding
payment obligations shall survive.
7.4 In the event of termination by either Party for any reason,
all royalties, fees, and other payments due or accrued
hereunder as of the date of termination shall remain payable.
7.5 Except as stated in Sections 7.3 and 7.4, to the extent a
particular right or obligation herein does not have a
specifically identified survival period, all rights and
obligations in this Section or in any other Section in this
Agreement which by their nature survive the termination of
this Agreement will remain in effect beyond any termination
for the time period reasonably necessary to accomplish their
purpose and shall bind and inure to the benefit of the
parties, their legal representatives and successors.
8. REPRESENTATIONS AND DISCLAIMERS
8.1 This Agreement is non-exclusive. IBIS and IBM recognize and
agree that each has been and may continue to be active in the
development of technology, and/or manufacture and sale of
products indirectly or directly relating to the technologies,
processes and products contemplated by this Agreement, and IBM
acknowledges and agrees that IBIS will be free in all respects
and not precluded by this Agreement to pursue such activities
independent of IBM, including with third parties, and further,
IBIS acknowledges and agrees that IBM will be free in all
respects and not precluded by this Agreement to pursue such
activities independent of IBIS, including with third parties.
Nothing in this Section 8.1 shall grant a Party any license
under the other Party's Intellectual Property Rights. Such
licenses are granted only as set forth explicitly elsewhere in
this Agreement.
8.2 Nothing contained in this Agreement shall be construed as:
54
<PAGE>
8.2.1 conferring any rights to use in advertising, publicity, or
other marketing activities any name, trade name, trademark, or
other designation of either Party hereto, including any
contraction, abbreviation, or simulation of any of the
foregoing without prior mutual written agreement; or
8.2.2 conferring by implication, estoppel, or otherwise
upon either Party hereunder any license or other
right except the licenses and rights expressly
granted hereunder to a Party hereto or third parties;
or
8.2.3 a warranty that the recipient Party will successfully
manufacture products, or a particular volume of
products, based upon the Licensed Technology
transferred hereunder including transfer and
technical assistance; or
8.2.4 an obligation to bring or prosecute actions or suits
against third parties for infringement, or to defend
actions or suits from third parties for infringement,
or to secure and/or maintain any of its intellectual
property rights; or
8.2.5 in any way limiting the rights which a Party has
outside the scope of this Agreement.
8.3 IBIS warrants that the data delivered hereunder and the
manufacture and operation of SIMOX systems made according to
such data does not infringe the Intellectual Property Rights
of third Parties.
8.4 IBIS warrants that the initial data package disclosed to IBM
is the same as (or an improvement on) the information used in
the design assembly and test of tools currently used by IBIS
in production.
8.5 WITH THE EXCEPTION OF THE FOREGOING WARRANTIES IN SECTIONS 8.3
AND 8.4, AND THE PROVISIONS OF SECTION 11, ALL INFORMATION,
TECHNOLOGY, IMPROVEMENTS, INVENTIONS, ASSISTANCE, AND SERVICES
PROVIDED BY EITHER PARTY HEREUNDER ARE PROVIDED "AS IS"
WITHOUT ANY WARRANTY OF ANY KIND INCLUDING THAT NEITHER PARTY
MAKES ANY WARRANTY AS TO THE CONFIDENTIAL ACCURACY,
SUFFICIENCY, OR SUITABILITY FOR THE OTHER PARTY'S USE OF ANY
INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY
PROVIDED HEREUNDER FOR THE MANUFACTURE OF PRODUCTS OR DELIVERY
OF SERVICES USING THE INFORMATION, IMPROVEMENTS, INVENTIONS,
OR LICENSED TECHNOLOGY, OR THE YIELD FROM THE MANUFACTURE OF
PRODUCTS OR DELIVERY OF SERVICES USING THE INFORMATION,
IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY, OR FOR THE
QUALITY OF SUCH PRODUCTS MADE OR SERVICES DELIVERED USING THE
INFORMATION, `IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY
OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. NEITHER PARTY ASSUMES ANY
55
<PAGE>
RESPONSIBILITY OR LIABILITY FOR LOSSES OR DAMAGES, WHETHER
DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE,
WHICH MIGHT ARISE OUT OF THE OTHER PARTY'S USE OF THE
INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY,
WHICH SHALL BE ENTIRELY AT THE OTHER PARTY'S RISK AND PERIL.
8.6 Each Party acknowledges its responsibility to make its own
evaluation of the risks of bringing any product based on
information provided under this Agreement to market, or
otherwise to use such information.
8.7 Although the Parties will use all reasonable efforts in
performing the Program, the Parties acknowledge that the
results of the work to be performed hereunder are uncertain
and cannot be guaranteed by any Party.
8.8 Each Party disclaims any warranty that the recipient will be
able to reproduce the results of the disclosing Party and each
Party acknowledges that it may be not be able to use disclosed
information without further research and development.
9. TECHNOLOGY TRANSFER AND TECHNICAL ASSISTANCE
9.1 IBIS shall deliver, at [ ] cost to IBM, a portion of the
technical training specified in Section 9.2, prior to the
review specified in Section 3.6 and sufficient to enable IBM
personnel to perform the evaluation specified in Section 4.12.
Such technical training shall be limited to a maximum of [ ]
hours.
9.2 IBIS shall provide detailed training to IBM in IBIS's
facilities in the United States the following technical
assistance, according to the schedule in Appendix A:
[ ]
In addition to the scheduled training listed above, IBM may make site
visits to IBIS's facilities upon reasonable notice to IBIS and upon
mutual agreement of the parties. A maximum of [ ] IBM employees may
visit either of IBIS's facilities at any one time. The travel and
living expenses of such visiting IBM employees shall be at the expense
of IBM.
9.3 During the period beginning on the date that IBM elects one of
the options specified in Section 3.5 and continuing for [ ]
years thereafter, IBIS agrees to provide, at [ ] cost to IBM,
assistance in the transfer of the Licensed Technology to IBM
as provided in Section 9.2, up to a total limit of [ ]
person-hours.
9.4 After the [ ] person-hours of the transfer assistance and
technical assistance specified in Section 9.2 are exhausted,
IBIS agrees to provide, up to an additional [ ] person-hours
of transfer assistance and technical assistance to IBM for a
period ending [ ] years after the date on which the last
transfer assistance is provided under Section 9.2, IBM agrees
to pay IBIS for such limited additional transfer and technical
56
<PAGE>
assistance provided to IBM at the rate of [ ].
9.5 IBIS shall invoice charges monthly for the limited additional
transfer assistance and technical assistance provided for in
Section 9.3.
9.6 The Parties shall disclose Improvements in accordance with the
following:
9.6.1 Beginning with the first calendar quarter after
notification under Section 3.5.1 or 3.5.2, if any,
the Technical Coordinators of the Parties shall meet
within forty-five (45) days following the end of each
calendar quarter to discuss whether any Improvements
have been made, and to disclose such Improvements to
the other Party.
10. APPLICABLE LAW
10.1 This Agreement shall be trued and the legal relations between
the Parties shall be determined in accordance the law of the
State of New York without regard to the conflict of law
provisions thereof. Any proceedings to enforce this Agreement,
or to resolve disputes relating to this Agreement, shall be
brought in the United States District Court for the Southern
District of New York, Westchester County Division. IBIS and
IBM waive the right to trial by jury in any matter which
arises between the Parties pursuant or related to this
Agreement and agree that any proceeding hereunder shall be
tried by a judge without a jury.
10.1.1 No action, regardless of form, arising out of this Agreement
may be brought by a Party more than two (2) years after the
cause of action has accrued.
10.2 Each Party agrees to pay the other Party's attorney's fees and
costs of litigation, up to a maximum of [ ] if such Party, for
any reason whatever, brings suit against the other Party and
the other Party is finally adjudicated not to have liability.
10.3 If any sentence, paragraph, clause or combination of the same
in this Agreement is held by a court of competent jurisdiction
to be unenforceable in any jurisdiction, such sentence,
paragraph, clause or combination of same shall be
unenforceable in the jurisdiction in which it is invalid and
the remainder of this Agreement shall remain binding on the
Parties in such jurisdiction as if such unenforceable
provision had not been contained herein. The enforceability of
such sentence, paragraph, clause or combination of same in
this Agreement, shall be otherwise unaffected and shall remain
enforceable in all other jurisdictions.
11. MISCELLANEOUS
11.1 IBIS agrees to indemnify, defend, and hold harmless, IBM, its
Subsidiaries and Affiliates and their officers, directors,
agents, and employees, from any and all liability, losses,
damages, reasonable attorney's fees and expenses associated
with claims, suits, or actions brought by or on behalf of any
third party of any nature
57
<PAGE>
arising from, or alleged to arise from, infringement of the
Intellectual Property Rights of third parties, resulting from
or in any way related to the use of the Licensed Technology by
IBM or the performance of this Agreement. IBIS's total
obligation to pay under this Section 11.1 shall not exceed the
lesser of: (a) the amount of royalties paid by IBM to IBIS
hereunder; or (b) [ ].
11.2 Each Party shall be solely responsible for determining its
prices and other terms and conditions for its products sold to
its customers. Each marketing Party shall be solely
responsible for marketing products to its customers, and the
other Party shall have no obligation to provide any support of
any kind to such marketing Party's customers.
11.3 If any Party is rendered wholly or partially unable by force
majeure to carry out its obligations under this Agreement, and
if that Party gives prompt written notice and full particulars
of such force majeure to the other Party, the notifying Party
shall be excused from performance of its obligations hereunder
during the continuance of any inability so caused, but for no
longer period; provided that if payment cannot be made due to
the existence of a banking crisis or international payment
embargo, such amount may be paid within the following thirty
(30) days. Such cause shall be remedied by the notifying Party
as far as possible with reasonable speed and effort. For the
purposes of this Agreement, force majeure shall mean Acts of
God, acts of public enemies or terrorists, wars, other
military conflicts, blockades, insurrections, riots,
epidemics, quarantine restrictions, landslides, lightning,
earthquake, floods, washouts, civil disturbances, restraints
by or actions of any governmental body (including export or
security restrictions on information, material, personnel,
equipment or otherwise), and any other acts or events
whatsoever, whether or not similar to the foregoing, not
within the control of the Party claiming excuse from
performance, which by the exercise of due diligence and best
reasonable effort that Party shall not have been able to
overcome or avoid. If the notifying Party cannot remedy the
force majeure situation and resume satisfactory performance
within [ ] of the notice, the other Party may at its option
immediately terminate this Agreement pursuant to Section 7.
11.4 Each Party agrees to comply with all applicable country,
Federal, State, and Local laws, rules, regulations, and
ordinances, including those of any other duly constituted
governmental authority having jurisdiction, and including
without limitation, all rules and regulations of the
Occupational Health and Safety Administration, Environmental
Protection Agency, U.S. Department of Commerce, and U.S.
Department of Transportation, as applicable. Each Party shall
do all things necessary (a) to obtain in a timely manner all
required licenses and approvals and (b) to comply with all
applicable laws, rules and regulations, including, but not
limited to, the Regulations of the United States Government
relating to the export and re-export of technical data,
commodities, and products produced as a result of the use of
such data. Each Party hereto agrees that it will not export or
re-export, directly or indirectly, any technology, software,
and/or commodities furnished under this Agreement, or the
direct product thereof, to any country, or the nationals
thereof, specified in such laws, rules,
58
<PAGE>
regulations, and ordinances referred to above as an
unauthorized destination without IBIS or IBM first obtaining
U.S. Government approval.
11.5 The captions used in this Agreement are for convenience of
reference only and are not to be used in interpreting the
obligations of the Parties under this Agreement.
11.6 Nothing contained herein, or done in pursuance of this
Agreement, shall constitute the Parties as entering upon a
joint venture or partnership or shall constitute either Party
hereto the agent for the other Party for any purpose or in any
sense whatsoever.
11.7 Either Party may disapprove the assignment of any of its
former employees to perform work under this Agreement on its
premises by the other Party and such personnel will not be so
assigned. Each Party will take appropriate preventive steps,
before the assignment of any of its employees to perform work
under this Agreement, that that Party reasonably believes will
ensure that its employees will not engage in inappropriate
conduct while on the other Party's premises. Inappropriate
conduct shall include, but not be limited to: 1) being under
the influence of, or affected by, alcohol, illegal drugs or
controlled substances or engaging in their use, distribution
or sale; 2) the possession of a weapon of any sort; and 3)
harassment, threats or violent behavior.
11.8 Representatives and personnel of each Party, during the time
they are present on the premises of the other Party shall be
subject to all rules and regulations prevailing on such
premises. Each Party shall be responsible for the payment of
all compensation and expense of its respective representatives
and personnel. None of the representatives or personnel of
either Party shall be considered, for any reason, to be an
employee or agent of the other.
11.9 Each Party represents that it has, or will have in place,
established procedures and agreements with its Subsidiaries,
employees or others, including subcontractors and vendors,
whose services the Party may require, sufficient to enable the
Party to comply with all the provisions of this Agreement.
11.10 In the event of any inconsistency between the terms and
conditions of this Agreement and language set forth in the
Appendices, the inconsistency shall be resolved by giving
precedence to the terms and conditions of this Agreement.
11.11 Any written notice or communication required to be made or
given to either Party hereto, pursuant to this Agreement,
shall be deemed to have been sufficiently given on the date of
mailing if sent by registered or certified mail, postage
prepaid, and addressed as set forth below, or to such other
address as is designated by written notice given to the other
Party:
11.11.1 In the case of IBM:
Director of Licensing
International Business Machines Corporation
500 Columbus Avenue
59
<PAGE>
Thornwood, NY, 10594
11.11.2 In the case of IBIS:
Al Alioto
Vice President of Sales and Marketing
Ibis Technology Corporation
32 Cherry Hill Drive
Danvers, MA 01923
11.12 The rights and obligations of Sections 3, 4, 5, 7, 8, 10, and
11 and the obligations of nondisclosure and restricted use of
this Agreement shall survive and continue after any expiration
or termination of this Agreement and shall bind the Parties
and their successors and assigns.
11.13 No failure on the part of any Party to exercise, and no delay
in exercising, any right, power, or remedy hereunder shall
operate as a waiver thereof or as a waiver of any other right,
power, or remedy hereunder or to the performance of any Party;
and no single or partial exercise by a Party of any right,
power, or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power, or
remedy.
11.14 Nothing contained in this Agreement shall be construed as
conferring any right to use in advertising, publicity or other
promotional activities any name, trade name, trademark or
other designation of either Party (including any contraction,
abbreviation or simulation of any of the foregoing); and each
Party agrees not to disclose the terms and conditions of this
Agreement except as may be required by law or government rule
or regulation, without the express written consent of the
other Party. Notwithstanding the foregoing, the Parties shall
be permitted to disclose a summary of pertinent Sections of
this Agreement that are reasonably necessary for disclosing
and/or licensing under this Agreement, provided, however, that
such disclosure is under a written agreement containing
restrictions of confidentiality at least as stringent as those
contained herein.
11.15 Except for the provisions of Section 11.1, in no event will a
Party be liable to the other Party for incidental damages,
lost profits, lost savings special damages, or consequential
damages, regardless of whether the claim is for breach of
contract, breach of warranty, tort (including negligence),
failure of a remedy to accomplish its purpose or otherwise,
even if such Party has been advised of the possibility of such
damages.
11.16 Each Party shall be liable to the other Party up to a maximum
of the greater of (a) [ ], or (b) the amount of unpaid
royalties owed by such Party to the other Party hereunder plus
[ ], for all actual direct losses or damages sustained by the
other Party (other than those arising under Section 11.1) that
are proximately caused by the acts or omissions of such Party
under this Agreement.
60
<PAGE>
11.17 Except as explicitly stated herein, a Party shall not assign
any of its rights, privileges or obligations under this
Agreement without the prior written consent of the other
Party. Any attempted assignment in derogation of the foregoing
shall be void.
11.18 The Equipment Purchase Master Agreement, any task orders
thereunder, and the Wafer Purchase Agreement between the
Parties are not superseded by this Agreement, except as
explicitly stated herein. By way of example and not as a
limitation, the license to make up to two tools granted to IBM
in Section 13 of EPMA 07482 between the Parties is not
superseded and that license may be exercised by IBM, in its
sole discretion, in addition to the license granted hereunder.
11.19 This Agreement shall not be binding upon the Parties until it
has been signed below by or on behalf of each Party, in which
event it shall be effective as of the date first above
written. Except as provided in Section 11.18, this Agreement
constitutes the entire agreement between the Parties with
respect to the subject matter hereof and shall supersede all
previous communications, understandings and agreements,
whether oral or written, between the Parties relating to the
subject matter hereof. No amendment or modification of this
Agreement shall be valid or binding upon the Parties unless
made in writing and signed on behalf of such Parties by their
respective authorized representatives. The requirement of
written form may only be waived in writing.
61
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives, who by their signature
represent that they are so authorized, to be effective as of the day and year
first above written.
By: /s/ H.C. Calhoun
----------------------------------------
H. C. Calhoun
Vice President of Semiconductor
Research and Development Center
Date: 6/3/98
----------------------------------------
By: /s/ Al Alioto
----------------------------------------
Al Alioto
Vice President of Sales and Marketing
Date: 6/9/98
----------------------------------------
62
<PAGE>
APPENDIX A
Data Transfer Schedule
Initial data package for evaluation and delivery to the Escrow Agent
-- [ ] days after the last signature date
Update data for evaluation and delivery to the Escrow Agent
-- [ ] days after each calendar quarter
Technical Training
Initial training -- [ ] days after the last signature date.
Detailed training session pursuant to Section 9.2
-- [ ] days after option notification under Section 3.5.
63
<PAGE>
APPENDIX B
DELIVERABLES
[ ]
64
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,763,817
<SECURITIES> 0
<RECEIVABLES> 2,034,689
<ALLOWANCES> 56,951
<INVENTORY> 4,965,604
<CURRENT-ASSETS> 22,866,547
<PP&E> 14,647,326
<DEPRECIATION> 9,180,907
<TOTAL-ASSETS> 28,501,183
<CURRENT-LIABILITIES> 6,281,938
<BONDS> 0
0
0
<COMMON> 54,051
<OTHER-SE> 20,655,187
<TOTAL-LIABILITY-AND-EQUITY> 28,501,183
<SALES> 6,217,708
<TOTAL-REVENUES> 7,000,763
<CGS> 5,385,603
<TOTAL-COSTS> 6,023,573
<OTHER-EXPENSES> 1,799,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,768
<INCOME-PRETAX> (821,958)
<INCOME-TAX> 1,256
<INCOME-CONTINUING> (823,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (823,214)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
