<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[Mark one]
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
_________ _________
Commission File Number: 0-26482
TRIKON TECHNOLOGIES, INC.
------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4054321
------------------- -----------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) number)
9255 Deering Avenue, Chatsworth, California 91311
------------------------------------------------------
(Address of principle executive offices) (Zip Code)
(818) 886-8000
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicated 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 periods 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
-- --
As of September 30, 1997, the total number of outstanding shares of the
Registrant's common stock was 15,118,168.
<PAGE>
Trikon Technologies, Inc.
<TABLE>
<CAPTION>
INDEX Page
----- Number
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 1997 (unaudited)
and December 31, 1996 3
Unaudited Condensed Consolidated Statements of Operations for the
Three Months ended September 30, 1997 and 1996 and for the Nine
Months ended September 30, 1997 and 1996 4
Unaudited Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1997 and 1996 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II. OTHER INFORMATION 18
Item 3. Defaults upon Senior Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE PAGE 19
EXHIBITS 20
</TABLE>
2
<PAGE>
Trikon Technologies, Inc.
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996 (1)
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................. $ 7,730,233 $ 20,187,662
Short-term investments................................ 6,353,292 1,464,165
Accounts receivable, net of reserves.................. 19,209,704 27,229,806
Inventories, net of reserves.......................... 45,041,241 53,837,131
Other current assets.................................. 3,552,765 4,723,449
------------- -------------
Total current assets........................... 81,887,235 107,442,213
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization...... 32,672,026 28,743,886
Demonstration systems, net of accumulated
depreciation.......................................... 6,395,910 6,080,431
Intangible assets, net of accumulated amortization...... 37,097,234 40,484,079
Other assets............................................ 1,217,147 429,596
------------- -------------
Total assets............................................ $ 159,269,552 $ 183,180,205
============= =============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses................. $ 16,646,184 $ 24,114,756
Bank credit line...................................... 14,567,366 14,151,000
Other current liabilities............................. 9,924,987 12,661,580
------------- -------------
Total current liabilities...................... 41,138,537 50,927,336
Convertible subordinated notes.......................... 86,250,000 86,250,000
Other non-current liabilities........................... 12,995,773 14,754,721
Commitments and contingencies
Shareholders' equity:
Preferred Stock
Authorized shares -- 20,000,000,
3,125,000 designated as Series G Preferred
Stock -- $6.75 per share liquidation
preference
Series G Preferred issued and outstanding --
2,962,032 at September 30, 1997.................. 19,547,592 --
Common Stock, no par value:
Authorized shares -- 50,000,000
Issued and outstanding -- 15,118,168 at
September 30, 1997 and 14,310,410 at
December 31, 1996................................ 137,766,446 131,873,023
Cumulative translation................................ (351,103) 1,412,200
Accumulated deficit................................... (138,077,693) (102,037,075)
------------- -------------
Total shareholders' equity.............................. 18,885,242 31,248,148
------------- -------------
Total liabilities and shareholders' equity.............. $ 159,269,552 $ 183,180,205
============= =============
</TABLE>
(1) The Balance Sheet at December 31, 1996 has been derived from the audited
consolidated financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- --------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 (1) 1996 1997 (1) 1996
------------------ ----------------- ------------------ -----------------
Revenues:
<S> <C> <C> <C> <C>
Product revenues.................... $ 12,656,560 $7,904,906 $ 43,719,799 $25,851,165
Contract revenues................... -- 918,449 -- 1,767,127
---------- ---------- -----------
12,656,560 8,823,355 43,719,799 27,618,292
Costs and expenses:
Cost of goods sold.................. 9,159,222 3,863,568 31,626,066 12,991,004
Research and development............ 4,259,185 1,992,661 13,413,880 5,449,346
Selling, general and administrative. 9,823,355 2,755,340 25,203,296 7,125,153
Purchased in-process technology..... -- -- 2,974,410 --
Amortization of intangibles......... 903,950 -- 2,711,848 --
------------ ---------- ------------ -----------
24,145,712 8,611,569 75,929,500 25,565,503
------------ ---------- ------------ -----------
Income (loss) from operations.......... (11,489,152) 211,786 (32,209,701) 2,052,789
Other:
Interest income (expense), net (2,812,824) 293,880 (7,578,695) 1,086,698
------------ ---------- ------------ -----------
Income (loss) before income tax
provision (benefit)................... (14,301,976) 505,666 (39,788,396) 3,139,487
Income tax provision (benefit)......... (841,475) 4,495 (3,747,778) 16,977
------------ ---------- ------------ -----------
Net income (loss)...................... $(13,460,501) $ 501,171 $(36,040,618) $ 3,122,510
============ ========== ============ ===========
Net income (loss) per share:
Primary....................... ($0.75) $0.06 ($2.32) $0.34
============ ========== ============ ===========
Average common shares and
equivalents..................... 17,902,391 9,103,103 15,565,784 9,120,709
============ ========== ============ ===========
</TABLE>
(1) Includes the results of operations of Trikon Equipments Limited and Trikon
Limited (collectively, "Trikon Limited"), which was acquired on November 15,
1996 (see Note A of Notes to Condensed Consolidated Financial Statements).
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 (1) 1996
-------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................. $(36,040,618) $ 3,122,510
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization of plant,
equipment, leasehold improvements and
demonstration systems...................... 5,177,973 1,199,912
Amortization of intangible assets............. 2,772,094 -
Amortization of financing costs............... 614,751 -
Purchased in-process technology............... 2,974,410 -
Deferred income taxes......................... (3,420,093) -
Changes in operating assets and liabilities:
Accounts receivable......................... 7,818,961 (8,096,151)
Inventories................................. 8,394,774 (10,311,960)
Demonstration systems....................... (1,326,587) (3,110,975)
Other current assets........................ 1,095,166 (270,949)
Accounts payable, accrued expenses
and other current liabilities........... (10,439,454) 7,965,165
Other liabilities........................... 1,883,137 -
------------ ------------
Net cash used in operating activities............. (20,495,486) (9,502,448)
INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements..................................... (8,571,543) (6,548,355)
Proceeds from sales of short-term investments..... 1,216,156 19,914,800
Purchases of short-term investments............... (6,113,072) (18,481,907)
Other assets...................................... (381,847) (2,476,735)
------------ ------------
Net cash used in investing activities............. (13,850,306) (7,592,197)
FINANCING ACTIVITIES
Net borrowings (repayments) under bank
credit line................................... 416,366 -
Proceeds from sale of Series G Preferred Stock,
net.............................................. 19,547,592 -
Proceeds from sale of common stock and warrants... 2,328,570 132,902
Payments on capital lease obligations............. (404,165) (358,977)
------------ ------------
Net cash provided by (used in) financing 21,888,363 (226,075)
activities....................................... ------------ ------------
Net decrease in cash and cash equivalents......... (12,457,429) (17,320,720)
Cash and cash equivalents at beginning of
period.......................................... 20,187,662 24,770,363
------------ ------------
Cash and cash equivalents at end of period........ $ 7,730,233 $ 7,449,643
============ ============
</TABLE>
(1) Includes the cash flows of Trikon Limited, which was acquired on November
15, 1996 (see Note A of Notes to Condensed Consolidated Financial
Statements).
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
Trikon Technologies, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The operating results for the nine months ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in Trikon
Technologies, Inc.'s (the "Company") Annual Report on Form 10-K for the year
ended December 31, 1996.
On November 15, 1996, the Company acquired all the issued and outstanding shares
of Electrotech Limited and Electrotech Equipments Limited. During the second
quarter of 1997, Electrotech Limited and Electrotech Equipments Limited changed
their names to Trikon Limited and Trikon Equipments Limited (collectively
"Trikon Limited"). Trikon Limited develops, manufactures, markets and services
semiconductor fabrication equipment for the worldwide semiconductor
manufacturing industry. The aggregate purchase price paid by the Company,
excluding approximately $7,976,000 in acquisition costs, was $145,700,000
consisting of $75,000,000 paid in cash and the issuance of 5,600,000 shares of
Common Stock of the Company with an estimated fair market value of $70,700,000,
based on the quoted market price on the last day prior to the public
announcement of the parties' agreement to the acquisition terms. The acquisition
was accounted for as a purchase and, accordingly, the acquired assets and
liabilities were recorded at their estimated fair market values at the date of
acquisition. The Company's consolidated assets, liabilities and results of
operations include the assets, liabilities, and operating results of Trikon
Limited after, but not prior to, the November 15, 1996 acquisition date.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. A number of factors, including the Company's
history of significant losses, negative cash flows, the termination of the
company's Working Capital Facility (as defined below) and the debt service costs
associated with the Company's historically high level of debt, raise substantial
doubts about the Company's ability to continue as a going concern. (See Note J)
On November 12, 1997, the Company announced plans to reorganize the Company's
U.S. etch operations, with the goal of reducing costs, helping the Company to
return to profitability and to generate future postive cash flow. (See Note J)
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The components of inventory consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Components........................... $22,114,737 $17,754,456
Work in process...................... 20,536,410 32,993,125
Finished goods....................... 2,390,094 3,089,550
----------- -----------
$45,041,241 $53,837,131
=========== ===========
</TABLE>
NOTE C - DEMONSTRATION SYSTEMS
Demonstration Systems represent completed systems at certain strategic customer
sites, "Beta Sites". The Company provides these demonstration systems at no
charge for a specified evaluation period. All operating costs incurred during
the evaluation period are paid by the customer. At the conclusion of the agreed
upon evaluation period, provided that the equipment performs to specifications,
management expects that the customer will purchase the system, though they are
not obligated to do so. If the system is returned, it is refurbished for resale
or used for research and development. Demonstration systems are
6
<PAGE>
Trikon Technologies, Inc.
NOTE C - DEMONSTRATION SYSTEMS (CONTINUED)
stated at the lower of cost or estimated net realizable value and are
depreciated on a straight line method over four years, if they are not sold
after one year.
NOTE D - PMT CVD PARTNERS, L.P. AGREEMENT
In the first quarter of fiscal 1997, the Company determined that certain
characteristics of the CVD technology of Trikon Limited, known as "Flowfill",
were superior to the high density plasma CVD processes then being pursued by a
limited partnership sponsored by the Company (the "Limited Partnership")
pursuant to an R&D Agreement (the "R&D Agreement") entered into as of March 29,
1996 between the Limited Partnership and the Company (under which the Company
performed all research and development work for the Limited Partnership). The
Company decided to discontinue further research and development work under the
R&D Agreement and instead focus its consolidated efforts, on its own behalf and
not on behalf of the Limited Partnership, upon the Flowfill CVD technology used
in the Trikon Limited equipment. Accordingly, a settlement of any and all rights
and claims by the limited partners of the Limited Partnership was made on June
30, 1997 to terminate the R&D Agreement and all related agreements, and purchase
all of the outstanding interests in the Limited Partnership for 679,680 shares
of common stock (the "LP Shares"). The assets acquired included approximately
$2.2 million of cash and approximately $3.0 million of in-process research and
development which was recorded as a one-time charge as purchased in-process
technology expense in the quarter ended June 30, 1997. In connection with the
purchase of all of the outstanding interests in the Limited Partnership, the
Company agreed to cause a registration statement covering the LP Shares filed
under the Securities Act of 1933, as amended (the "Securities Act"), to become
effective on or prior to September 1, 1997. As of the date hereof, the Company
has not filed such a registration statement, and as a result, the Company must
pay the holders of the LP Shares liquidated damages in the amount of a one-time
fee of $75,000, and an amount equal to $2,500 per day for each day after
September 1, 1997 that such a registration statement has not become effective.
NOTE E - IMPACT ON FINANCIAL STATEMENTS OF RECENTLY ISSUED ACCOUNTING
STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted as of December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded and the calculation will be referred to as
basic earnings per share. Basic earnings (loss) per share under Statement 128
would have been $0.06 and $0.36 per share for the three and nine months ending
September 30, 1996 and would be the same as primary loss per share for the three
and nine months ending September 30, 1997. The impact of Statement 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
NOTE F - INCOME TAXES
The tax benefit represents the combination of a foreign tax benefit associated
with Trikon Limited's operating loss and the reversal of deferred tax credits
established at November 15, 1996 for the difference in the tax basis and
financial reporting basis of the Trikon Limited assets acquired. The effective
tax rate differs from the statutory Federal tax rate due to certain one-time
nondeductible charges and losses for which no benefit has been provided. The
Company's ability to use its domestic and foreign net operating losses and
credit carryforwards will depend upon future income and will be subject to an
annual limitation, required by the Internal Revenue Code of 1986 and similar
state provisions.
7
<PAGE>
Trikon Technologies, Inc.
NOTE F - INCOME TAXES (CONTINUED)
The Company has operating subsidiaries in several countries, and each subsidiary
is taxed based on the laws of the jurisdiction in which it operates. Because
taxes are incurred at the subsidiary level, and one subsidiary's tax losses
cannot be used to offset the taxable income of subsidiaries in other
jurisdictions, the Company's consolidated effective tax rate may increase to the
extent it reports tax losses in some subsidiaries and taxable income in others.
The subsidiaries are subject to taxation in countries where they operate, and
such operations generally are taxed at rates similar to or higher than tax rates
in the United States. The payment of dividends or distributions by the
subsidiaries to the United States would be subject to withholding taxes in the
country of domicile and may be mitigated under the terms of relevant double tax
treaties.
NOTE G - NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
shares of Common Stock outstanding. Common equivalent shares from stock options
and warrants (using the treasury stock method) have been included in the
computation when dilutive. The weighted average number of shares used in the
computation for the three and nine months ended September 30, 1997 excludes
common equivalent shares from options and warrants because they would be
antidilutive.
NOTE H - LINE OF CREDIT AND LONG-TERM DEBT
On November 15, 1996 the Company entered into a three-year senior secured credit
facility with certain domestic and U.K. lenders (the "Working Capital Facility")
that permitted the Company and its subsidiaries to borrow an aggregate of up to
$35.0 million, subject to borrowing base limitations, based upon eligible
accounts receivable. As of September 30, 1997, the Company had approximately
$14.6 million in outstanding borrowings under the Working Capital Facility. The
Working Capital Facility placed certain restrictions on the Company, which,
among other things, prohibited the Company from paying cash dividends, limited
the amount of capital expenditures and required the Company to comply with
certain financial ratios and covenants.
In connection with the acquisition of Trikon Limited, the Company issued
$86,250,000 of Convertible Subordinated Notes (the "Convertible Notes"). The
Convertible Notes bear interest at 7 1/8% which is payable in semi-annual
installments beginning on April 15, 1997. Since January 1997, the Convertible
Notes have borne an additional 0.5% interest per annum due to the Company's
noncompliance with certain registration rights of the Convertible Notes.
The Convertible Notes contain certain provisions which, upon the occurrence of
an "Event of Default" (as defined in the Convertible Notes) could cause the
Convertible Notes to become due and payable immediately. Such an Event of
Default would occur if, among other things, the Company were to default on the
Working Capital Facility or any other secured indebtedness, as defined in the
Convertible Notes, caused by the failure to pay principal and interest payments
when due or resulting from the acceleration of any such indebtedness prior to
its express maturity in excess of $10.0 million.
At December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997, the
Company was out of compliance with certain financial ratios and covenants
established under the Working Capital Facility. The lenders had granted the
Company a waiver of such covenant violations as of December 31, 1996 and March
31, 1997 and for the year and quarter, respectively, then ended, which waivers
expired June 30, 1997. Concurrent with the June 30, 1997 first closing of the
Private Placement (as defined below), the Company entered into an amendment
agreement with its lending banks (the "Amendment") to amend its Working Capital
Facility. The Amendment, among other things, revised certain financial ratios
and covenants as to which the Company had previously been in default. In
connection with and as consideration for the Amendment, the Company issued to
the lending banks and their administrative agent, warrants to purchase an
aggregate of 178,182 shares of Common Stock at an exercise price of $6.75 per
share.
As a result of the substantial loss incurred during the June 30, 1997 and
September 30, 1997 quarters, the Company violated the financial ratio and
covenants requirements set forth in the Amendment. The Company received waivers
from its lending banks with regard to the June 30, 1997 covenant violations
which extended the Working Capital Facility through September 30, 1997. Under
the terms of one June 30, 1997 waiver, the lending banks suspended their
obligation to advance any further funds under the Working Capital Facility.
8
<PAGE>
Trikon Technologies, Inc.
NOTE H - LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
As a result of the Company being in default under the Working Capital Facility,
the lenders issued on October 7, 1997 a payment blockage notice to the holders
of the Convertible Notes (the "Payment Blockage Notice"). The Payment Blockage
Notice would have prevented the payment of any principal or interest due and
payable under the Convertible Notes until the earlier of the curing of any event
of default under the Working Capital Agreement or 180 days.
On November 12, 1997, the Company entered into a pay-off agreement with its
domestic and U.K. lenders under the Working Capital Facility (the "Pay-off
Agreement"). Under the Pay-off Agreement, among other things, the Company made
payments in the aggregate of approximately $12.5 million (which includes all
outstanding principal and interest due at November 12, 1997) to its lenders
under the Working Capital Facility, the lenders under the Working Capital
Facility released all of their liens on the assets of the Company, the Working
Capital Facility was terminated, and the Payment Blockage Notice was cancelled.
In addition, in order to collateralize certain obligations of Trikon Limited
relating to bankers guarantees and a credit facility with the Company's U.K.
lender, the Company provided cash collateral of approximately $1.4 million to
the U.K. lender.
On November 12, 1997, the Company made an interest payment of approximately $3.1
to the holders of the Convertible Notes, which payment was originally due on
October 15, 1997. Having made this payment, the Company remains in compliance
with the terms of the Convertible Notes.
NOTE I - PREFERRED STOCK
During the quarter ended June 30, 1997, the Company commenced a private offering
(the "Private Placement") of shares of its newly-authorized Series G Preferred
Stock together with three-year warrants to purchase Common Stock at an exercise
price of $8.00 per share (the "Warrants"). The Company sold an aggregate of
2,962,032 shares of Series G Preferred Stock (together with Warrants to purchase
an aggregate of 733,332 shares of Common Stock) with net proceeds to the Company
of approximately $19,500,000. Investors in the Private Placement received
Warrants exercisable for a number of shares of Common Stock equal to 30% of the
number of shares of Series G Preferred Stock purchased, at a total price of
$6.75 per share of Series G Preferred Stock. The Series G Preferred Stock has a
liquidation preference of $6.75 per share which is generally applicable to any
liquidation or acquisition of the Company, such that the Series G Preferred
Stock receives the first $6.75 per share of available proceeds, the shares of
Common Stock then receive the next $6.75 per share, and thereafter the Series G
Preferred Stock and the Common Stock share any remaining proceeds pro rata (on
an as converted basis assuming conversion of all of the Series G Preferred Stock
into Common Stock). The Series G Preferred Stock is convertible at the option of
the holders on a share-for-share basis into Common Stock commencing September
30, 1997 (subject to antidilution adjustments), bears no dividend (except as may
be paid on the Common Stock into which it is convertible) and will be
automatically converted into Common Stock on June 30, 2000.
The Articles of Incorporation of the Company provide that, except for any
amendment, alteration or repeal of the preferences, privileges, special rights
or other powers of the Series G Preferred Stock or the authorization of any
other preferred stock (all of which require the approval of a majority of the
Series G Preferred Stock voting as a separate class), the Series G Preferred
Stock and the Common Stock vote together as a single class, with each share of
Series G Preferred Stock being entitled to that number of votes equal to the
number of shares of Common Stock into which it is then convertible (presently,
one vote per share). Additionally, the purchasers of the Series G Preferred
Stock have entered into a ten-year Voting Agreement with the Company pursuant to
which they have agreed that, if a separate class vote of the Series
9
<PAGE>
Trikon Technologies, Inc.
NOTE I - PREFERRED STOCK (CONTINUED)
G Preferred Stock is required by law (rather than by the Articles of
Incorporation of the Company), and if the proposal being presented to the
shareholders has been approved by the Board of Directors and approved by the
vote of the holders of the Common Stock and Series G Preferred Stock voting as a
single class as described above, they will vote their shares of Series G
Preferred Stock in favor of such proposal when voting the Series G Preferred
Stock as a separate class.
NOTE J - SUBSEQUENT EVENTS
In October 1997, the Company announced a 20% reduction in its workforce, which
was completed during the month. In November 1997, the Company announced plans to
reorganize the Company's U.S. etch operations during the fourth quarter. As a
result of the reduction in its workforce and the reorganization, the Company
expects to incur a substantial charge to earnings in the fourth quarter of 1997.
On November 12, 1997, the Company granted non-exclusive, worldwide, paid-up
licenses of its MORI etch and Forcefill PVD technologies to Applied Materials,
Inc. Under the terms of the license agreements and related technology transfer
agreements, Applied Materials, Inc. will pay the Company $30 million, $27
million of which has been paid and an additional $3 million of which will be
paid upon completion of the technology transfer.
On November 12, 1997, the Company also entered into the Pay-off Agreement with
its domestic and U.K. lenders. Under the terms of the Pay-off agreement, among
other things, the Company made payments in the aggregate of approximately $12.5
million to its lenders under the Working Capital Facility, the lenders under the
Working Capital Facility released all of their liens on the assets of the
Company and the Working Capital Facility was terminated. In addition, in order
to collateralize certain obligations of Trikon Limited related to bankers
guarantees and a credit facility with the Company's U.K. lender, the Company
provided cash collateral of approximately $1.4 million to the U.K. lender.
On November 12, 1997, the Company made the approximately $3.1 million interest
payment, originally due on October 15, 1997, to the holders of the Convertible
Notes.
10
<PAGE>
Trikon Technologies, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth below contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 with respect to the financial condition, results
of operations and business of the Company. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially and adversely from those set forth in the forward-looking
statements, including, without limitation, the availability of financial
resources adequate for the Company's short-, medium- and long-term needs, the
Company's ability to successfully implement its strategy of reorganizing its
product lines and overall business, varying customer demand for the Company's
products, including potential material adverse effects on such demand resulting
from the Company's licensing of its MORI etch and Forcefill physical vapor
deposition ("PVD") technologies to Applied Materials, Inc., supply and
manufacturing constraints and costs, dependence on outside suppliers, the
various effects on revenue, margins, inventories and operating expenses of
reorganizing in the Company's product lines and overall business, the Company's
ability to build and maintain adequate staff infrastructure in the area of PVD
and chemical vapor deposition ("CVD") design, product engineering and
development, sales and marketing, and administrations, customer warranty claims,
slowing growth in the demand for semiconductors, challenges from the Company's
competition, general economic conditions, and the other risks and uncertainties
described from time to time in the Company's public announcements and SEC
filings, including without limitation the Company's Quarterly and Annual Reports
on Form 10-Q and 10-K, respectively. The Company cautions that the foregoing
list of important factors is not exclusive. In addition, such list of important
factors speaks only as of the date hereof and the Company does not undertake to
update any written or oral forward-looking statement that may be made from time
to time by or on behalf of the Company.
OVERVIEW
The Company develops, manufactures, markets and services semiconductor
equipment for the worldwide semiconductor manufacturing industry. These products
are used for etch, chemical vapor deposition (CVD), and physical vapor
deposition (PVD) applications. The etch systems consist of the PINNACLE 8000R
and PINNACLE 8000R(TM) systems (selling price between $1,800,000 for a standard
two-module system to $3,400,000 for a four-module system), the Omega(TM) 201-2
system (selling price between $700,000 and $1,400,000, depending on the
configuration of the system), and a stand-alone MORI(TM) plasma source process
module which lists for approximately $500,000. The Company's CVD products
consist of the Delta 201 (selling price approximately $600,000), and the Planar
200 Flowfill(TM) system, selling price ranging between $1,400,000 and
$2,500,000, depending on the configuration of the system. The Company's PVD
products are the Sigma system (selling price ranges from $1,500,000 to
$2,500,000) and the Sigma Forcefill(TM) whose selling price ranges from
$3,500,000 to $4,000,000, depending on the configuration of the system.
The Omega(TM) 201-2 system, the Delta 201, the Planar 200 Flowfill(TM) and the
Sigma and Sigma Forcefill(TM) products were obtained with the acquisition of
Trikon Limited on November 15, 1996.
ELECTROTECH ACQUISITION. On November 15, 1996, the Company acquired (the
"Acquisition") Electrotech Limited and Electrotech Equipments Limited,
privately-owned United Kingdom companies founded in 1968, for an aggregate
consideration of $75.0 million in cash and 5,600,000 shares of Common Stock,
with an estimated fair market value of $70.7 million, based on the closing sale
price of a share of Common Stock on the Nasdaq National Market on the last day
prior to the public announcement of the parties' agreement to the terms of the
Acquisition. During the second quarter of 1997, Electrotech Limited and
Electrotech Equipments Limited changed their names to Trikon Limited and Trikon
Equipments Limited (collectively "Trikon Limited"). Trikon Limited develops,
manufactures, markets and services semiconductor fabrication equipment with
products and technologies for etch, CVD and PVD applications. The Acquisition
expanded the Company's product lines and its sales and service organization
which has enabled the Company to have a greater presence throughout the United
States, Europe and Asia.
11
<PAGE>
Trikon Technologies, Inc.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of total
revenue for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Nine months ended
--------------------------------------- ---------------------------------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Product revenues.................... 100.0% 89.6% 100.0% 93.6%
Contract revenues................... --% 10.4% --% 6.4%
-------------- -------------- -------------- --------------
Total revenues...................... 100.0% 100.0% 100.0% 100.0%
Cost of sales....................... 72.4% 43.8% 72.3% 47.0%
-------------- -------------- -------------- --------------
Gross profit...................... 27.6% 56.2% 27.7% 53.0%
Operating expenses:
Research and development.......... 33.7% 22.6% 30.7% 19.7%
Selling, general and adminsitrative 77.6% 31.2% 57.6% 25.8%
Purchased in-process technology --% --% 6.8% --%
Amortization of intangibles....... 7.1% --% 6.2% --%
-------------- -------------- -------------- --------------
Total operating expenses.......... 118.4% 53.8% 101.3% 45.5%
-------------- -------------- -------------- --------------
Income (loss) from operations....... (90.8)% 2.4% (73.7)% 7.5%
Interest income (expense), net...... (22.2)% 3.3% (17.3)% 3.9%
-------------- -------------- -------------- --------------
Income (loss) before income tax
provision (benefit)................ (113.0)% 5.7% (91.0)% 11.4%
Income tax provision (benefit)...... (6.6)% (8.6)% 0.1%
-------------- -------------- -------------- --------------
Net income (loss)................... (106.4)% 5.7% (82.4)% 11.3%
============== ============== ============== ==============
</TABLE>
PRODUCT REVENUES. Product revenues for the third quarter of fiscal 1997
increased 60% to $12.7 million compared to $7.9 million for the third quarter of
fiscal 1996. Product revenues for the nine months ending September 30, 1997
increased 69% to $43.7 million as compared to $25.9 million for the same period
in 1996. These increases were attributable primarily to revenues derived from
products acquired in connection with the Company's acquisition of Trikon
Limited. During the third quarter of fiscal 1997, the Company shipped eight
systems as compared to two systems during the third quarter of fiscal 1996.
Included in product revenues for the third quarter of fiscal 1997 was a $1.0
million reserve for the return of a MORI system shipped and recognized as
revenue in fiscal 1995. Product revenues increased as a result of the shipment
of twenty-two systems for the nine months ended September 30, 1997 as compared
to eleven systems for the nine months ended September 30, 1996.
Sales outside of the United States accounted for approximately 88% and 94% of
total revenue in the third quarters of fiscal years 1997 and 1996, respectively.
Sales outside of the United States accounted for 48% and 82% of total revenue
for the nine months ended September 30, 1997 and 1996, respectively. The
quantity of product shipped will fluctuate significantly from quarter to quarter
and the individual customers to which these products are sold can also change
from quarter to quarter. Given the significance of each individual sale, the
percentage of sales made outside of the United States will also fluctuate
significantly from quarter to quarter.
12
<PAGE>
Trikon Technologies, Inc.
CONTRACT REVENUES. The Company did not receive any contract revenues during the
third quarter or nine months ended September 30, 1997 as compared to $0.9
million and $1.8 million for the comparable third quarter and nine month period
of fiscal 1996, respectively. The contract revenue received in fiscal 1996 was
due to an R&D agreement entered into in March 1996 between Trikon and PMT CVD
Partners, L.P. which the Company terminated in the first quarter of 1997. (See
Note D to Notes to Condensed Consolidated Financial Statements (Unaudited)). As
a result of the termination of this R&D agreement, the Company will not receive
any additional contract revenue associated with this R&D agreement.
GROSS MARGIN ON PRODUCT REVENUES. The Company's gross margin on product revenues
for the third quarter of fiscal 1997 was 28% as compared to 51% for the third
quarter of fiscal 1996. For the nine months ended September 30, 1997, gross
margin on product revenues was 28% as compared to 50% for the same period in
1996. The decrease in gross margin was due in part to the relatively low gross
margin on the products of Trikon Limited shipped in the first three quarters of
fiscal 1997. The relatively low gross margin on the products of Trikon Limited
results from the write-up of its inventory on hand as of November 15, 1996,
to the fair market value of such inventory resulting from the allocation of the
purchase price of Trikon Limited as required under Accounting Principles Board
Opinion No. 16 ("APB No. 16"). The write-up increased cost of goods sold by
approximately $0.6 million in the third quarter of fiscal 1997 and $4.4 million
in the nine months ended September 30, 1997 as the related products were
shipped. Excluding the charge to cost of goods sold relating to the APB No. 16
adjustment, gross profit margins on product sales for the three months and nine
months ended September 30, 1997 would have been 32% and 38%, respectively. There
is approximately $2.1 million in inventory that, as of September 30, 1997,
relates to the write-up of inventory to its fair market value at the date of the
Acquisition based on APB No. 16. The $2.1 million write-up will increase cost of
goods sold and continue to adversely affect gross margins as products are
shipped from Trikon Limited in fiscal year 1997. In addition, gross margins were
negatively impacted in the third quarter of fiscal 1997 by the return of one of
the Company's MORI systems that was shipped in fiscal 1995. Gross margins
have also been negatively impacted due to issues related to the weakened product
demand such as unabsorbed manufacturing overhead associated with the reduced
units sold, and will continue to be adversely affected in 1997.
RESEARCH & DEVELOPMENT EXPENSES. Research and development expenses for the third
quarter of fiscal 1997 were $4.3 million, or 34% of total revenues compared to
$2.0 million, or 23% of total revenues for the third quarter of fiscal 1996.
Included in research and development expenses during the third quarter of fiscal
1997 is $2.2 million related to Trikon Limited. For the nine months ended
September 30, 1997, research and development expenses were $13.4 million, or 31%
of total revenues as compared to $5.4 million, or 20% of total revenues for the
nine months ended September 30, 1996. The major focus of the Company's research
and development efforts during the nine months of ended September 30, 1997 was
on the development of new processes in further advancing its proprietary PVD,
CVD and etch technologies as well as adding enhancements to its existing
products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the third quarter of fiscal 1997 were $9.8 million
or 78% of total revenues, compared to $2.8 million, or 31% of total revenues in
the third quarter of fiscal 1996. Included in the fiscal 1997 third quarter
expenses is $3.6 million in selling, general and administrative expenses related
to Trikon Limited. The dollar increases were primarily due to the continued
expansion of the Company's foreign operations, expenses incurred in the
construction of a new facility in Newport, South Wales, and marketing support
related charges directed at communicating the organizations' developments to the
marketplace. In addition to the reduction in revenue due to the return of a unit
shipped in a prior period, $1.1 was recognized as a bad debt expense with this
customer. For the nine months ended September 30, 1997, selling, general and
administrative expenses were $25.2 million, or 58% of total revenues as compared
to $7.1 million, or 26% of total revenues for the same period in 1996.
13
<PAGE>
Trikon Technologies, Inc.
Income (Loss) From Operations. The Company realized a $11.5 million loss from
operations, or 91% of total revenues in the third quarter of fiscal 1997, as
compared with a $0.2 million gain from operations, or 2% of total revenues in
the third quarter of fiscal 1996. The loss from operations in the third quarter
of fiscal 1997 was due primarily to reduced sales, in addition to the allocated
cost of inventory charged through cost of goods sold during the third quarter of
fiscal 1997 of $0.6 million related to the write-up of the inventory of Trikon
Limited. In addition, a loss of $2.1 million was incurred for the return of a
MORI etch system shipped in a prior year, as discussed above, and lower margins
on shipments and bad debt write-offs related to this customer during the
quarter. For the nine months ended September 30, 1997, the Company realized a
$32.2 million loss from operations, or 74% of total revenue as compared with a
$2.1 million gain from operations, or 8% of total revenue for the same period in
1996. The Company anticipates that operating results will continue to be
unfavorably impacted during the remaining quarter of fiscal 1997 and the first
two quarters of fiscal 1998 due to continued weak product demand and the write-
up of Trikon Limited's inventory required by APB No. 16 as discussed above.
INTEREST INCOME. Interest income decreased to $0.1 million in the third quarter
of fiscal 1997 from $0.3 million in the third quarter of fiscal 1996. For the
nine months ended September 30, 1997 interest income was $0.6 million as
compared to $1.2 million for the nine months ended September 30, 1996. This was
due to lower cash balances during the 1997 periods.
INTEREST EXPENSE increased to $3.1 million in the third quarter of fiscal 1997
from $0.1 million in the third quarter of fiscal 1996. For the nine months ended
September 30, 1997 interest expense increased to $8.2 million as compared to
$0.1 million for the nine months ended September 30, 1996. This was due to the
accrual of interest payable to the holders of the $86.3 million of convertible
debt raised to fund part of the Acquisition and interest associated with
borrowings under the Working Capital Facility (as defined below). In addition,
interest expense was recognized for the amortization of the costs associated
with obtaining the Working Capital Facility.
INCOME TAXES. The Company recorded a $0.8 million tax benefit in the third
quarter of fiscal 1997 compared to the recording of a nominal income tax
provision in the third quarter of fiscal 1996. For the nine months ended
September 30, 1997, the Company has recorded a $3.7 million tax benefit as
compared to the recording of a nominal income tax provision for the nine months
ended September 30, 1996. The tax benefit represents the combination of a
foreign tax benefit associated with Trikon Limited's operating loss and the
reversal of deferred tax credits established at November 15, 1996 for the
difference in the tax basis and financial reporting basis of the Trikon Limited
assets acquired. The effective tax rate differs from the statutory Federal tax
rate due to certain one-time nondeductible charges and losses for which no
benefit has been provided. The Company's ability to use its domestic and foreign
net operating losses and credit carryforwards will depend upon future income and
will be subject to an annual limitation, required by the Internal Revenue Code
of 1986 and similar state provisions.
The Company has operating subsidiaries in several countries, and each subsidiary
is taxed based on the laws of the jurisdiction in which it operates. Because
taxes are incurred at the subsidiary level, and one subsidiary's tax losses
cannot be used to offset the taxable income of subsidiaries in other
jurisdictions, the Company's consolidated effective tax rate may increase to the
extent it reports tax losses in some subsidiaries and taxable income in others.
The subsidiaries are subject to taxation in countries where they operate, and
such operations generally are taxed at rates similar to or higher than tax rates
in the United States. The payment of dividends or distributions by the
subsidiaries to the United States would be subject to withholding taxes in the
country of domicile and may be mitigated under the terms of relevant double tax
treaties.
14
<PAGE>
Trikon Technologies, Inc.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997 the Company had $14.1 million in cash, cash equivalents
and short-term investments, compared to $21.7 million at December 31, 1996. The
decrease in cash, cash equivalents and short-term investments resulted from the
use of cash in operating activities of $20.5 million and $13.9 million of cash
used in investing activities, offset by $21.9 million of cash provided from
financing activities, including the Private Placement (as defined below) of
$19.5 million of Series G Preferred Stock and Warrants. (See Note I to Notes to
Unaudited Condensed Consolidated Financial Statements).
On November 12, 1997, the Company granted non-exclusive, worldwide, paid-up
licenses of its MORI etch and Forcefill technologies to Applied Materials, Inc.
Under the terms of the license agreements and related technology transfer
agreements, Applied Materials, Inc. will pay the Company $30 million, $27
million of which has been paid and an additional $3 million of which will be
paid upon completion of the technology transfer.
On November 12, 1997, the Company also entered into a pay-off agreement (the
"Pay-off" Agreement) with its domestic and U.K. lenders under the Working
Capital Facility (as defined below). Under the terms of the Pay-off Agreement,
the Company made payments in the aggregate of approximately $12.5 million
(including all outstanding principal and interest due at November 12, 1997) to
its lenders under the Working Capital Facility, the lenders under the Working
Capital Facility released all of their liens on the assets of the Company, the
Working Capital Facility and all of the Company's obligations under the Working
Capital Agreement were terminated, and the Payment Blockage Notice (as defined
below) was cancelled. In order to collateralize certain obligations
of Trikon Limited relating to bankers guarantees and a credit facility with the
Company's U.K. lender, the Company provided cash collateral of approximately
$1.4 million to the U.K. lender.
On November 12, 1997, the Company made an interest payment of approximately $3.1
million, originally due on October 15, 1997, to the holders of the Convertible
Notes. Having made the interest payment the Company remains in compliance with
the terms of the Conertible Notes.
On November 15, 1996 the Company entered into a three-year senior secured credit
facility with certain domestic and U.K. lenders (the "Working Capital Facility")
that permitted the Company and its subsidiaries to borrow an aggregate of up to
$35.0 million, subject to borrowing base limitations, based upon eligible
accounts receivable. As of September 30, 1997, the Company had approximately
$14.6 million in outstanding borrowings under the Working Capital Facility. The
Working Capital Facility placed certain restrictions on the Company, which,
among other things, prohibited the Company from paying cash dividends, limited
the amount of capital expenditures and required the Company to comply with
certain financial ratios and covenants.
In connection with the Acquisition of Trikon Limited, the Company issued
$86,250,000 of 7 1/8% Convertible Subordinated Notes due 2001 (the "Convertible
Notes"). The Convertible Notes contain certain provisions which provide that
the occurrence of an "Event of Default" (as defined therein) could cause the
Convertible Notes to become due and payable immediately. Such an Event of
Default would occur if, among other things, the Company were to default on the
Working Capital Facility or any other secured indebtedness (as defined therein)
caused by the failure to pay principal and interest payments when due or
resulting in the acceleration of such indebtedness prior to its express maturity
in excess of $10.0 million. An interest payment was due under the Convertible
Notes on October 15, 1997, but not paid by the Company because the Payment
Blockage Notice (as defined below) prevented the making of such payment. As
described above, the Company made this overdue payment on November 12, 1997, and
thus cured its Event of Default under the Convertible Notes. The next interest
payment under the Convertible Notes is due on April 15, 1998.
At December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997, the
Company was out of compliance with certain financial ratios and covenants
established under the Working Capital Facility. The lenders had granted the
Company a waiver of such covenant violations as of December 31, 1996 and March
31, 1997 and for the year and quarter, respectively, then ended, which waivers
expired June 30, 1997. Concurrent with the first closing of the Private
Placement on June 30, 1997, the Company entered into an amendment agreement with
its lending banks (the "Amendment") to amend its secured bank credit facility
which, among other things, revised certain financial ratios and covenants as to
which the Company had previously been in default. In connection with and as
consideration for the Amendment, the Company issued to the lending banks and
their administrative agent, warrants to purchase an aggregate of 178,182 shares
of Common Stock at an exercise price of $6.75 per share.
As a result of the substantial losses incurred during the quarters ended June
30, 1997 and September 30, 1997, the Company was out of compliance with the
amended financial ratio and covenants requirements set forth in the Amendment.
The Company received waivers from its lending banks with regard to the June 30,
1997 covenant violations which extended the Working Capital Facility through
September 30, 1997. Under the terms of the June 30, 1997 waiver, the lending
banks suspended their obligation to advance any further funds under the Working
Capital Facility.
As a result of the Company being in default of its Working Capital Facility, the
banks issued a payment blockage notice to the holders of the Convertible
Notes on October 7, 1997 (the "Payment Blockage Notice"). The Payment Blockage
Notice prevented the payment of any principal or interest due and payable under
the Convertible Notes until the earlier of the curing of any event of default
under the Working Capital Agreement or 180 days.
As previously disclosed, in early 1997 the Company determined that certain
characteristics of the chemical vapor deposition ("CVD") technology of Trikon
Limited known as "Flowfill" are superior to the high density plasma CVD
processes which were being pursued by PMT CVD Partners, L.P. (the "Limited
Partnership"), a limited partnership sponsored by the Company for MORI CVD
development pursuant to an R&D agreement (the "R&D Agreement") entered into as
of March 29, 1996 between the Limited Partnership and the Company (under which
the Company agreed to perform all research and development work for the Limited
Partnership). Accordingly, during the first quarter of 1997, the Company decided
to
15
<PAGE>
Trikon Technologies, Inc.
discontinue further research and development work under the R&D Agreement and
instead focus its consolidated efforts, on its own behalf and not on behalf of
the Limited Partnership, upon the FlowFill CVD technology used in the Trikon
Limited equipment. Certain of the limited partners of the Limited Partnership
asserted that this decision was inconsistent with the R&D Agreement and
representations made by the Company in connection with the Limited Partnership
and that, accordingly, a settlement of any and all claims that the limited
partners of the Limited Partnership might have in connection with such
discontinuation was appropriate.
Effective June 30, 1997, the Company acquired all of the outstanding limited
partnership interests of the Limited Partnership and all of the shares of the
Limited Partnership's corporate general partner, in exchange for the Company's
issuance of an aggregate of 679,680 shares of Common Stock of the Company (the
"LP Shares") pro rata to the limited partners of the Limited Partnership
(excluding the Company). Pursuant to this transaction, all CVD technology which
had been developed by the Limited Partnership prior to such discontinuation,
together with approximately $2.2 million of unspent funds of the Limited
Partnership, are now owned solely by the Company, and any and all claims that
the limited partners of the Limited Partnership may have had in connection with
the termination of the research and development project thereunder or otherwise
relating to the Limited Partnership have been resolved. In connection with the
purchase of all of the outstanding interests in the Limited Partnership and its
corporate general partner, the Company agreed to cause a registration statement
covering the LP Shares filed under the Securities Act of 1933, as amended (the
"Securities Act"), to become effective on or prior to September 1, 1997. As of
the date hereof, the Company has not filed such a registration statement, and
as a result, the Company must pay the holders of LP Shares liquidated damages in
the amount of a one-time fee of $75,000, and an amount equal to $2,500 per day
for each day after September 1, 1997 that such registration statement has not
become effective.
During the quarter ended June 30, 1997, the Company commenced a private offering
(the "Private Placement") of shares of its newly-authorized Series G Preferred
Stock together with three-year warrant to purchase Common Stock at an exercise
price of $8.00 per share (the "Warrants"). Investors in the Private Placement
received Warrants exercisable for a number of shares of Common Stock equal to
30% of the number of shares of Series G Preferred Stock purchased, at a total
price of $6.75 per share of Series G Preferred Stock. The Series G Preferred
Stock has a liquidation preference of $6.75 per share which is generally
applicable to any liquidation or acquisition of the Company, such that the
Series G Preferred Stock receives the first $6.75 per share of available
proceeds, the shares of Common Stock then receive the next $6.75 per share, and
thereafter the Series G Preferred Stock and the Common Stock share any remaining
proceeds pro rata (on an as-converted basis assuming conversion of all of the
Series G Preferred Stock into Common Stock). The Series G Preferred Stock is
convertible at the option of the holders on a share-for-share basis into Common
Stock commencing September 30, 1997 (subject to customary anti-dilution
adjustments), bears no dividend, and will be automatically converted into Common
Stock on June 30, 2000. The Company received net proceeds of approximately $19.5
million during and after the second quarter of 1997 from the Private Placement.
The Company anticipates that it will spend between $2.0 to $4.0 million for
capital expenditures for the months remaining in fiscal 1997. This is expected
to include investments in demonstration and test equipment, information systems,
leasehold improvements and other capital items that should enable the Company to
expand its ability to support and develop new products and services. In
addition, the Company expects to increase its investment in inventory of
evaluation systems at customer sites.
16
<PAGE>
Trikon Technologies, Inc.
On October 1997, the Company announced a 20% reduction in its workforce,
which was completed during the month.
On November 12, 1997, the Company announced that it intends to reorganize its
U.S. etch operations during the fourth quarter of 1997. The Company expects the
reorganization to result in a substantial one-time charge to earnings in the
fourth quarter of 1997.
As discussed in Note A to the Notes to the Company's Condensed Consolidated
Financial Statement (Unaudited), there is substantial doubt with respect to the
Company's ability to continue as a going concern. There can be no assurance that
Company will operate profitably in the future and that the Company will not
continue to sustain losses. Absent outside debt or equity financing, and even
assuming that the Company is successful in reorganizing its business, there is
significant doubt that the Company has adequate resources to fund its operations
in the ordinary course through the remainder of 1997 and during 1998. At this
time, the Company does not have a credit facility with any lenders or any other
readily available source of debt financing. Any significant increase in planned
capital expenditures or other costs or any decrease in, or elimination of,
anticipated sources of revenue or the inability of the Company to negotiate a
new credit facility, among other factors, may cause the Company to further
restrict its business.
17
<PAGE>
Trikon Technologies, Inc.
PART II - OTHER INFORMATION
---------------------------
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
At September 30, 1997, the Company was out of compliance with certain
financial ratios and covenants established under its amended three-year senior
secured credit facility with certain domestic and U.K. lenders entered into on
November 15, 1996 (the "Working Capital Facility") and amended June 30, 1997.
The Company had obtained from its lending banks waivers of such covenant
violations only through September 30, 1997.
In addition, as a result of the Company being in default under the Working
Capital Facility, the lenders issued a payment blockage notice to the holders of
the Company's 7 1/8% Convertible Subordinated Notes due 2001.
On November 12, 1997, the Company entered into a pay-off agreement with its
domestic and U.K. lenders (the "Pay-off Agreement"). Under the Pay-off
Agreement, the Company made payments in the aggregate of approximately $12.5
million to its domestic and U.K. lenders and the Working Credit Facility was
terminated. As of the date of the filing of this report, the Company is not in
material default in the payment of principal or interest with respect to any of
its indebtedness.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.27+ M0RI(TM) Source Technology License Agreement dated November 12,
1997 by and between the Company and Applied Materials, Inc., a
Delaware corporation ("Applied").
10.28+ FORCEFILL(TM) Technology License Agreement dated November 12, 1997
by and between Applied and Trikon Equipments Limited, a company
incorporated under the laws of England and Wales under registered
number 939289
10.29+ FORCEFILL(TM) Technology License Agreement dated November 12, 1997
by and between Applied and Trikon Technologies Limited, a company
incorporated under the laws of England and Wales under registered
number 1373344
11.1 Computation of Per Share Earnings
27.1 Financial Statement Data
</TABLE>
- -------------------------------
+ Certain portions of this exhibit have been omitted from the copies
filed as part of this Form 10-Q and are the subject of an application
for confidential treatment.
(b) Reports on Form 8-K:
None.
18
<PAGE>
Trikon Technologies, Inc.
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.
TRIKON TECHNOLOGIES, INC.
Date November 14, 1997 /s/ Dr. Gregor A. Campbell
----------------- --------------------------
Dr. Gregor A. Campbell
Chief Executive Officer
Vice President and Principal Financial Officer
19
<PAGE>
Trikon Technologies, Inc.
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.27 M0RI(TM) Source Technology License Agreement...............................
10.28 FORCEFILL(TM) Technology License Agreement.................................
10.29 FORCEFILL(TM) Technology License Agreement.................................
11.1 Computation of Per Share Earnings..........................................
27.1 Financial Statement Data...................................................
</TABLE>
20
<PAGE>
EXHIBIT 10.27
-------------
MORI(TM) SOURCE TECHNOLOGY
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and entered into as of
November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation
("Applied") and Trikon Technologies, Inc., a California corporation formerly
known as "Plasma & Materials Technologies, Inc." ("Trikon"), with respect to the
following facts:
A. Trikon represents and warrants to Applied that its rights in and
to the Licensed Technology and the Trademarks (as defined below) are as set
forth in this Agreement; and
B. Trikon desires to grant to Applied, and Applied desires to acquire
from Trikon, subject to the terms and conditions of this Agreement, an
unrestricted license to manufacture, use and sell Applied Licensed Products (as
defined below), and to otherwise develop and use the Licensed Technology and to
use the Trademarks.
THE PARTIES AGREE AS FOLLOWS:
1. CERTAIN DEFINITIONS
As used in this Agreement:
1.1 "Affiliate" means with respect to any person: any company,
partnership, entity or other person that directly controls or is controlled by,
or is under common control with, the specified person; and "Affiliated Entity"
means any Affiliate other than an individual. For purposes of this Agreement,
Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of
Applied.
1.2 "Applied Licensed Products" means products and software made by
or for Applied or any of its Affiliated Entities that in whole or in part
incorporate, use or are made using the Licensed Technology.
1.3 "Copyright(s)" means all copyright, unregistered design rights,
semiconductor topography and mask work interests, including, without limitation,
all rights of authorship, use, publication, reproduction, performance,
transformation, moral rights and ownership of copyrightable works, designs
(other than registered designs), semiconductor topography works and mask works,
and all rights to register and obtain renewals and extensions of registrations,
together with all other interests accruing by reason of international copyright,
semiconductor topography and mask work conventions.
1.4 "Improvements" means [ ]
1.5 "Licensed Technology" means: all (a) Patent Rights, (b)
Technical Information, (c) Improvements, and (d) Copyrights, in each case
relating to Plasma Sources, including without limitation, Trikon's entire right,
title and interest in the foregoing, and all hardware, software and processes,
conceived, developed, reduced to practice, discovered, owned, licensed and/or
acquired by Trikon or any of its Affiliates or agents prior to or as of the date
of this Agreement.
<PAGE>
1.6 "Patents" means any and all issued patents, reissue or
reexamination patents, patents of importation, revivals of patents, revalidation
patents, utility models, certificates of invention, registrations of patents, or
extensions thereof, regardless of country or formal name.
1.7 "Patent Rights" means all United States and foreign utility and
design Patents, and published or unpublished regular patent and provisional
applications (including without limitation any and all applications of addition,
divisionals, continuations, continuations-in-part ("CIPs"), reexaminations,
substitutions, extensions, renewals, utility models, certificates of invention
or reissues thereof or therefor, invention disclosures and records of invention,
and any license to practice any of the foregoing, including without limitation
the Patents and patent applications listed on Exhibit 1.7.
1.8 "Plasma Sources" means [ ]
1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical
Information and trademarks (including, without limitation, the Trademarks).
1.10 "Technical Information" means any and all ideas, inventions,
disclosures, design rights, unpublished research and development information,
manufacturing and operating information, know-how, trade secrets and technical
data.
1.11 "Trademarks" means the trademarks listed on the attached Exhibit
1.11.
1.12 "Forcefill(TM) Agreements" means the respective Forcefill(TM)
License Agreements and Forcefill(TM) Technology Transfer Agreements between
Applied and Trikon Equipments Limited and Applied and Trikon Technologies
Limited, all of even date with this Agreement.
2. LICENSE GRANT
2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this
Agreement, Trikon hereby grants to Applied and its Affiliated Entities (a) a
non-exclusive, worldwide, perpetual, fully paid, unrestricted, irrevocable
license (the "License") to use, develop, reproduce, publish, display, perform,
distribute, modify and transform the Licensed Technology and otherwise exercise
all rights therein, and to make, have made, use, dispose of, offer to dispose
of, sell, offer for sale, service, repair, reconstruct, have sold, import and
have imported Applied Licensed Products, together with (b) the rights to
sublicense others to use the Licensed Technology in connection with Applied
Licensed Products and the Purchased Units (as such term is defined in Section 4
below).
2.2 TRADEMARKS. Trikon hereby grants to Applied and its Affiliated
Entities a nonexclusive, worldwide, perpetual, fully paid, irrevocable license
to use the Trademarks, at Applied's election, in connection with sales of
Applied Licensed Products.
2.3 TERM. The term of this Agreement is from the date hereof to the
date of expiration of the last of the Patents to expire, or the date that the
last of the Technical Information enters the public domain, whichever is later.
3. COMPENSATION
3.1 CONSIDERATION. Applied shall pay Trikon non-refundable
consideration in the amount of U.S. $17,500,000 (the "License Fee") for all
licenses and rights granted hereunder and as full payment for the Purchased
Units, exclusive of all sales and use taxes (which shall be the responsibility
of
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Applied). The License Fee shall be payable by wire transfer in immediately
available funds upon receipt by Applied of counterparts of this Agreement and
the Technology Transfer Agreement executed by Trikon.
3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution
of this Agreement, Trikon is delivering to Applied (a) evidence reasonably
satisfactory to Applied that Trikon has obtained (i) all appropriate consents
and waivers of lenders, other contract parties and governmental entities and
(ii) waivers of all contractual provisions that would restrict or prohibit
enforceability of this Agreement or the Technology Transfer Agreement, including
without limitation with clauses (i) and (ii) all consents and waivers listed on
Schedule 7.4 and (b) an opinion of counsel to the effect set forth in Exhibit
3.2 and in a form acceptable to Applied in its sole discretion.
4. PURCHASED UNITS
Applied shall purchase four Trikon MORI(TM) sources (the "Purchased
Units") as further identified in an Applied purchase order substantially in the
form attached hereto as Exhibit 4 (the "Purchase Order"), subject to the
delivery and other terms and conditions specified in the Purchase Order.
5. TECHNOLOGY TRANSFER AGREEMENT
Concurrently with their entering into this Agreement, the parties
hereto will enter into a MORI(TM) Source Technology Transfer Agreement in the
form attached hereto as Exhibit 5 (the "Technology Transfer Agreement"), and for
the separate consideration stated therein, Trikon will effect transfer to
Applied of Technical Information included in the Licensed Technology on the
terms and conditions stated therein.
6. THIRD PARTY CLAIMS
6.1 INDEMNITY. Trikon agrees to indemnify, defend and hold Applied
and its Affiliates harmless from and against any and all liabilities, losses,
costs, fines, demands, actions, claims, suits, proceedings, investigations,
damages, judgments and settlements including without limitation reasonable
attorneys' fees, resulting from or arising out of: (a) any alleged, threatened
or actual infringement, misappropriation, or violation of any proprietary rights
of a third party in connection with the exercise by Applied and/or its
Affiliates of its rights hereunder, or (b) breach by Trikon of any of its
obligations, covenants, representations or warranties (collectively, "Claims").
Notwithstanding the above, Trikon shall have no liability for any claim of
infringement, misappropriation or violation of any proprietary right of a third
party based on modification of the Licensed Technology by Applied, if the
infringement would have been avoided without such modification.
6.2 TRIKON'S OBLIGATIONS. Trikon shall have control of the defense,
litigation and, subject to the conditions set forth below, settlement of any
Claim. Applied shall have the right (subject to the conditions set forth
below), but not the obligation, to select counsel of its choice, at its expense,
to participate in the defense. Trikon shall not accept a settlement of any
Claim without the prior written consent of Applied, which consent shall not be
unreasonably withheld. In the event that any claim of infringement,
misappropriation or violation of any proprietary rights of a third party is
substantiated, or in Trikon's judgment is likely to be substantiated, Trikon
shall have the right, in its sole discretion and at its own expense, to either:
(a) procure for Applied such fully paid rights as are coextensive with the
rights granted Applied hereunder; or (b) replace or modify the Licensed
Technology in a manner
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reasonably satisfactory to Applied to make it non-infringing without materially
impairing performance of the Licensed Technology.
6.3 APPLIED COOPERATION. In the event any third party Claim is made
against Applied or its Affiliates within the scope of the indemnity set forth in
Section 6.1, Applied shall (a) provide prompt written notice of such third party
Claim to Trikon, (b) provide Trikon with such assistance as Trikon may
reasonably request in connection with the defense and/or settlement of such
third-party claim, provided that all costs and expenses incurred by either party
shall be borne by Trikon, and (c) promptly comply with all terms of any
resolution or settlement of such third-party Claim at Trikon's expense.
7. TRIKON REPRESENTATIONS AND WARRANTIES
Trikon represents and warrants to Applied and its Affiliates as follows:
7.1 ORGANIZATION. Trikon: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state of California;
and (b) has all necessary corporate power to own, license and transfer the
Purchased Units and the Licensed Technology without restriction or encumbrance,
to carry on its business as now being conducted, and to enter into and deliver
this Agreement, the Technology Transfer Agreement and the Purchase Order and to
consummate the transactions contemplated by each of them.
7.2 AUTHORITY. The execution and delivery of this Agreement, the
Technology Transfer Agreement and the Purchase Order, and the performance of
each of them by Trikon, have been duly authorized by all necessary corporate
action on the part of Trikon. Each of this Agreement, the Technology Transfer
Agreement and the Purchase Order constitutes a legal, valid and binding
obligation of Trikon, enforceable against Trikon in accordance with its terms,
subject as to enforcement: (a) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability relating to or
affecting creditors' rights; and (b) to general principles of equity, whether
such enforcement is considered in a proceeding in equity or at law.
7.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement, the Technology Transfer Agreement or the Purchase Order, nor the
performance of any of them by Trikon will: (a) conflict with or result in any
breach or violation of the terms of any decree, judgment, order, law or
regulation of any court or other governmental body now in effect applicable to
Trikon, any of its Affiliates, the Licensed Technology, the Purchased Units, or
the Trademarks; (b) conflict with, or result in, with or without the passage of
time or the giving of notice, any breach of any of the terms, conditions and
provisions of, or constitute a default under, or result in the creation of any
lien, charge, easement, security interest, mortgage, conditional sale contract,
equity, right of way, covenant, restriction, title defect, objection, claim or
other encumbrances upon any of the Licensed Technology, Purchased Units or
Trademarks pursuant to, any indenture, mortgage, lease, agreement or other
instrument to which Trikon or any of its Affiliates is a party or by which
Trikon, any of its Affiliates, the Licensed Technology, Purchased Units or
Trademarks are bound; (c) permit the acceleration of the maturity of any
indebtedness of Trikon or of any other person secured by the Licensed
Technology, Purchased Units or Trademarks; or (d) violate or conflict with any
provision of Trikon's charter documents.
7.4 CONSENTS. Except as set forth on Schedule 7.4, no consent,
approval or waiver from any third party, and no consent, approval or
authorization of, or declaration, filing or registration with, any government or
regulatory authority, is required to be obtained or made by Trikon or any of its
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Affiliates in order to permit the execution and delivery of this Agreement, the
Technology Transfer Agreement, and the Purchase Order by Trikon, and the
consummation of the transactions contemplated by each of them. All consents,
waivers and approvals identified on Schedule 7.4 have been obtained in writing
and copies thereof have been provided to Applied.
7.5 LICENSED TECHNOLOGY. Trikon represents and warrants that: (a)
the Licensed Technology includes all of its technology and Proprietary Rights
relating to Plasma Sources, and no technology or Proprietary Rights relating to
Plasma Sources are owned or otherwise held by any Affiliate of Trikon; (b)
except as set forth on Schedule 7.5 as to Improvements only, the Licensed
Technology does not infringe upon or violate any Proprietary Rights of any other
person; (c) except as set forth on Schedule 7.5 as to Improvements only, no
claim has been asserted or threatened by any other person that the use of the
Licensed Technology constitutes an infringement or misappropriation of any
Proprietary Rights of another or constitutes unfair competition; (d) Trikon is
the true, lawful and sole legal and beneficial owner of the Licensed Technology,
free and clear of any claims, liens or encumbrances and Trikon's ownership is
more than a shop right; (e) except as set forth on Schedule 7.5 as to
Improvements only, all Patents, Copyrights and Trademarks included in the
Licensed Technology are valid and in full force and effect, and all maintenance
and annuity fees have been fully paid and all fees paid during prosecution and
after issuance of the Patents have been paid in the correct entity status
amounts; (f) the License granted by Trikon does not and will not conflict with
any rights granted to other persons or violate any previous agreement between
Trikon or any of its Affiliates and any other person; (g) except as set forth on
Schedule 7.5 with respect to prosecution of Improvements only, no fraud or
misrepresentation has been made during the prosecution of the Patent Rights,
Copyrights or Trademarks, or has been included in the documentation for or other
disclosure of the Licensed Technology; and (h) Trikon has or can obtain all
consents to exclusion of all inventors deleted from or not included in all
applications of the Patent Rights.
7.6 TRADEMARKS. Trikon represents and warrants that it is the true,
lawful and sole owner of the Trademarks, and has the exclusive right to use such
Trademarks, and has the right to permit Applied to use such Trademarks as
contemplated by this Agreement, in each case, free of infringement of or unfair
competition with any trademark or service mark rights of any other person, and
free of any other claims, liens or encumbrances.
7.7 WARRANTY. Except as set forth in this Section 7, Trikon makes no
warranties, express or implied, regarding the Licensed Technology, the
Proprietary Rights, the Purchased Units or the Trademarks, their performance, or
the results which can be achieved with them. EXCEPT AS SET FORTH IN THIS
SECTION 7, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE PURCHASED UNITS
AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE CASE MAY BE, ON
AN "AS IS" BASIS AND TRIKON HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
8. APPLIED REPRESENTATIONS AND WARRANTIES
Applied represents and warrants to Trikon and its Affiliates as follows:
8.1 ORGANIZATION. Applied: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware;
and (b) has all necessary corporate power to enter into and deliver this
Agreement, the Technology Transfer Agreement and the Purchase Order, and to
consummate the transactions contemplated by each of them.
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8.2 AUTHORITY. The execution and delivery of this Agreement, the
Technology Transfer Agreement and the Purchase Order, and the performance by
Applied of each of them, have been duly authorized by all necessary corporate
action on the part of Applied. Each of this Agreement, the Technology Transfer
Agreement and the Purchase Order constitutes a legal, valid and binding
obligation of Applied, enforceable against Applied in accordance with its terms,
subject as to enforcement: (a) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability relating to or
affecting creditors' rights; and (b) to general principles of equity, whether
such enforcement is considered in a proceeding in equity or at law.
8.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement, the Technology Transfer Agreement or the Purchase Order, nor
performance of any of them by Applied, will: (a) conflict with or result in any
breach or violation of the terms of any decree, judgment, order, law or
regulation of any court or other governmental body now in effect applicable to
Applied or any of its Affiliates; or (b) violate or conflict with any provision
of Applied's charter documents or of any agreement or instrument to which
Applied or any of its Affiliates is a party.
8.4 CONSENTS. No consent, approval or waiver from any third party,
and no consent, approval or authorization of, or declaration, filing or
registration with, any government or regulatory authority, is required to be
made or obtained by Applied or any of its Affiliates in order to permit the
execution, delivery or performance of this Agreement by Applied, or the
consummation of the transactions contemplated by this Agreement.
9. COVENANTS OF TRIKON
Trikon covenants and agrees with Applied as follows:
9.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Trikon receives written notice expressly stating that a third party (a
"Potential Infringer") has directly or contributorily infringed, has induced
another to infringe, or has engaged in unfair competition with respect to, any
of the Licensed Technology, Trikon shall promptly identify the affected
aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a
written notice to Applied.
9.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has
not done so, Trikon through patent attorneys of its choosing and at its own
expense and cost shall cause to be filed and/or prosecuted the patent
applications listed in Exhibit 1.7, and all patent application(s), if any,
relating to Improvements included in the Licensed Technology. Trikon agrees to
exercise all commercially reasonable efforts to cause all patent applications to
be prosecuted in such manner that the best possible patent protection may be
obtained thereon. Trikon shall have no liability to Applied respecting the
results of such prosecution. Trikon agrees, from time to time and on a
reasonable and prompt basis, to inform Applied about the status of the
prosecution of said patent applications. During the life of any patents, Trikon
shall timely pay all applicable fees, including but not limited to issue and
maintenance fees related to Patent Rights included in the Licensed Technology at
the appropriate entity status rates.
9.3 PROTECTION OF TRADEMARKS. Trikon shall take all reasonable steps
to maintain, and shall take no steps that derogate from, the force or validity
of, the Trademarks; shall pay such fees in a timely manner as are necessary to
maintain the registrations of the Trademarks in all countries of such
registration; and shall have the exclusive right to institute and prosecute in
its sole discretion with all reasonable effort actions against any suspected
infringers or misusers of the Trademarks.
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9.4 REGISTERED USER AGREEMENTS. Trikon, at its sole election, may
undertake recordation of a registered user agreement or trademark license with
respect to Applied in any country where Applied uses the Trademarks and where
such recordation is required or permitted.
10. COVENANTS OF APPLIED
Applied covenants and agrees with Trikon as follows:
10.1 TECHNOLOGY. Applied understands and agrees that, with the
exception of the rights expressly licensed or otherwise granted under this
Agreement, Applied shall not acquire any right, title, or interest in the
Licensed Technology or the Trademarks, which right, title and interest is and
shall remain with Trikon.
10.2 TRADEMARKS. Applied is familiar with the quality standards of
Trikon. In the event Applied elects to use the Trademarks, Applied shall use
the Trademarks only in accordance with those same reasonable standards of
quality currently used by Applied, which standards shall at least be equal to,
but which shall not be required to exceed, the standards of quality currently
used by Trikon. Trikon shall have the right once per year, upon reasonable
advance written notice (at least 10 business days in advance), to receive from
Applied a reasonably representative selection of specimens of Applied's use of
the Trademarks, as may be reasonably necessary in order to confirm that such
quality control standards are being observed. Applied hereby consents to being
named as a registered user of the Trademarks where the recordation of a
registered user agreement or trademark license is required or permitted, and
Applied agrees to execute any documents reasonably necessary or desirable to
enable and assist Trikon in the exclusive registration and protection of the
Trademarks, all at no expense to Applied.
10.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts
to include reproductions of the patent and trademark notices of Trikon as Trikon
may reasonably designate on each Applied Licensed Product and all packaging and
documentation used for or with its distribution. Applied shall not remove,
efface or obscure any patent or trademark notices from any Trikon materials
provided hereunder.
10.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Applied receives written notice expressly stating that a Potential Infringer has
directly or contributorily infringed, has induced another to infringe, or has
engaged in unfair competition with respect to, any of the Licensed Technology,
Applied shall promptly identify the affected aspect(s) or item(s) of the
Licensed Technology and the Potential Infringer in a written notice to Trikon.
11. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS
11.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF TRIKON AND
ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY TRANSFER AGREEMENT
AND THE FORCEFILL(TM) AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID TO
TRIKON AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT, THE TECHNOLOGY
TRANSFER AGREEMENT AND THE FORCEFILL(TM) AGREEMENTS. TRIKON SHALL NOT HAVE ANY
LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING BUT NOT LIMITED TO
LOSS OF ANTICIPATED PROFITS, EVEN IF TRIKON HAS BEEN ADVISED OF THE POSSIBILITY
OF
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SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE LIMITATIONS OF LIABILITY SHALL
NOT APPLY IN THE EVENT OF FRAUD.
11.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a)
obligate Applied to use the Licensed Technology or Trademarks, or (b) to
restrict or prohibit Applied from developing, making, using, marketing or
otherwise distributing or promoting products and/or processes using, embodying,
or competing with the Licensed Technology. No rights are granted to Trikon by
this Agreement in any Applied technology or in any Applied tangible, intangible
or intellectual property, whether now in existence or hereafter conceived,
developed, reduced to practice, discovered, owned, licensed, leased, sold and/or
acquired by or for Applied relative to any products or property of Applied,
regardless of nature or technical subject.
12. BANKRUPTCY
All rights and licenses granted under or pursuant to this Agreement by
each party are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to
"intellectual property" as defined under Section 101(35A) of the Bankruptcy
Code. The parties agree that Applied shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code. Trikon agrees, during the
term of this Agreement, to create and maintain current copies or, if not
amenable to copying, detailed descriptions or other appropriate embodiments, of
all such intellectual property, all to ISO 9000 et seq. and other applicable
standards. Trikon further agrees that in the event of the commencement of a
bankruptcy proceeding by or against it under the Bankruptcy Code, Applied shall
be entitled to a complete duplicate of or complete non-exclusive access to, as
appropriate solely for the purposes contemplated by this Agreement and the
Technology Transfer Agreement, any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to Applied or made available to Applied
for reproduction (i) upon such commencement of a bankruptcy proceeding upon
written request therefor by Applied, unless Trikon elects to continue to perform
all of its obligations under this Agreement or (ii) if not delivered under (i)
above, upon the rejection of this Agreement by or on behalf of Trikon upon
written request therefor by Applied.
13. RELEASE
Each party, for itself and for its Affiliates, representatives,
successors and assigns, hereby releases the other party and its Affiliates,
representatives, successors and assigns, from any and all claims, actions and
liabilities of every kind and nature arising from matters, acts, omissions or
dealings prior to the date of this Agreement, whether or not asserted, and
whether known or unknown. Notwithstanding the foregoing, this release does not
extend to claims of infringement of (a) the Patents listed in Exhibit 13, part
1, relating to Flowfill(TM) technology, or (b) Patents that issue (if, as and
when any such shall issue) under the patent applications relating to
Flowfill(TM) technology listed on Exhibit 13, part 2, provided that such
applications are pending as of the date hereof and have been previously
disclosed to Applied. Except to the extent expressly set forth above, this
release is a full and final release covering all known and unknown, suspected
and unsuspected, claims, actions and liabilities. Each party expressly waives
any and all rights or benefits which it may have under Section 1542 of the
California Civil Code and any similar law of any other jurisdiction. Said
section provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS
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FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Each party represents and warrants that it has been advised by
competent counsel of its own choosing as to the meaning and effect of the
release granted in this Section 13.
14. NO PUBLICITY
Except as required by court order, Trikon agrees not to disclose the
existence or terms of this Agreement without the prior written consent of
Applied, which consent shall not be unreasonably withheld. Applied agrees to
review any disclosure proposed by Trikon on a prompt basis, provided Applied is
given at least two business days' advance written notice.
15. MISCELLANEOUS
15.1 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California without reference to principles of conflicts of laws and
without regard to the UN Convention on the International Sale of Goods.
15.2 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
15.3 HEADINGS. The headings of the Sections of this Agreement are
for convenience and shall not by themselves determine the interpretation of this
Agreement.
15.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be delivered personally by overnight courier or similar
means or sent by facsimile with written confirmation of receipt, to the parties
at the addresses specified below (or at such other address for a party as shall
be specified by like notice). Any such notice shall be effective upon receipt,
if personally delivered, or on the next business day following transmittal if
sent by facsimile. Notices shall be delivered as follows:
To Applied: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Joseph Sweeney, Esq.
Vice President, Legal Affairs
and Intellectual Property
with a copy to: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Alexander Meyer
Director, New
Business Development
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To Trikon: Trikon Technologies, Inc.
Ringland Way
Newport, Gwent NP6 2TA
Attention: Nigel Wheeler
with a copy to: Brobeck, Phleger & Harrison LLP
One Market
Spear Street Tower
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
15.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may be
amended only by a written instrument signed by Trikon and Applied.
15.6 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be finally determined to be invalid, illegal
or unenforceable in any respect against either party hereto, it shall be
adjusted if possible to effect the intent of the parties. In any event, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability shall only apply as to such party in
the specific jurisdiction where such final determination shall have been made.
15.7 ENTIRE AGREEMENT. This Agreement, together with its Exhibits,
constitute the entire agreement between Trikon and Applied regarding the subject
matter hereof, and supersedes any and all prior negotiations, correspondence,
understandings and agreements regarding such subject matter.
15.8 IMPORT/EXPORT. Each party shall comply with all applicable
import and export control laws and regulations.
15.9 TAXES. Applied will not withhold taxes for the transactions
contemplated hereunder except as required by law.
15.10 RULES OF CONSTRUCTION. Each party to this Agreement has been
represented by counsel during the preparation and execution of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting the agreement.
15.11 FURTHER ASSURANCES. Each party agrees to cooperate with the
other in executing, delivering, and filing such further documentation and taking
any such other further actions as may be necessary or appropriate to effectuate
the transfer of rights granted in this Agreement, or to evidence the
satisfaction or accuracy of any condition, representation or warranty of this
Agreement.
15.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are and
shall remain independent contractors, and nothing herein shall be construed to
create a partnership or joint venture between Trikon and Applied. Each party
shall be responsible for wages, hours, and condition of employment of its
personnel during the term of and under this Agreement. Nothing herein shall be
construed as implying that employees of either party are employees of the other
party.
IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have executed this Agreement as of the date first above written.
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Applied Materials, Inc. Trikon Technologies, Inc.
By:/s/Kalman Kaufman By:/s/Gregor Campbell
-------------------------------- ---------------------------------
Name: Kalman Kaufman Name: Gregor Campbell
------------------------------ -------------------------------
Title: Corporate Vice President Title: Chief Executive Officer
----------------------------- ------------------------------
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EXHIBIT 10.28
FORCEFILL(TM) TECHNOLOGY
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and entered into as of
November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation
("Applied") and Trikon Equipments Limited, a company incorporated under the laws
of England and Wales under registered number 939289 and formerly known as
"Electrotech Equipments Limited" ("Equipments Limited"), with respect to the
following facts:
A. Equipments Limited represents and warrants to Applied that its
rights in and to the Licensed Technology and the Trademarks (as defined below)
are as set forth in this Agreement; and
B. Equipments Limited desires to grant to Applied, and Applied
desires to acquire from Equipments Limited, subject to the terms and conditions
of this Agreement, an unrestricted license to manufacture, use and sell Applied
Licensed Products (as defined below), and to otherwise develop and use the
Licensed Technology and to use the Trademarks.
THE PARTIES AGREE AS FOLLOWS:
1. CERTAIN DEFINITIONS
As used in this Agreement:
1.1 "Affiliate" means with respect to any person: any company,
partnership, entity or other person that directly controls or is controlled by,
or is under common control with, the specified person; and "Affiliated Entity"
means any Affiliate other than an individual. For purposes of this Agreement,
Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of
Applied.
1.2 "Applied Licensed Products" means products and software made by
or for Applied or any of its Affiliated Entities that in whole or in part
incorporate, use or are made using the Licensed Technology.
1.3 "Copyright(s)" means all copyright, unregistered design rights,
semiconductor topography and mask work interests, including, without limitation,
all rights of authorship, use, publication, reproduction, performance,
transformation, moral rights and ownership of copyrightable works, designs
(other than registered designs), semiconductor topography works and mask works,
and all rights to register and obtain renewals and extensions of registrations,
together with all other interests accruing by reason of international copyright,
semiconductor topography and mask work conventions.
1.4 "Forcefill Technology" means [ ]
1.5 "Improvements" means [ ]
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1.6 "Licensed Technology" means: all (a) Patent Rights, (b)
Technical Information, (c) Improvements, and (d) Copyrights, in each case
relating to Forcefill Technology, including without limitation, Equipments
Limited's entire right, title and interest in the foregoing, and all hardware,
software and processes, conceived, developed, reduced to practice, discovered,
owned, licensed and/or acquired by Equipments Limited or any of its Affiliates
or agents prior to or as of the date of this Agreement.
1.7 "Patents" means any and all issued patents, reissue or
reexamination patents, patents of importation, revivals of patents, revalidation
patents, utility models, certificates of invention, registrations of patents, or
extensions thereof, regardless of country or formal name.
1.8 "Patent Rights" means all United Kingdom, United States and other
foreign utility and design Patents, and published or unpublished regular patent
and provisional applications (including without limitation any and all
applications of addition, divisionals, continuations, continuations-in-part
("CIPs"), reexaminations, substitutions, extensions, renewals, utility models,
certificates of invention or reissues thereof or therefor, invention disclosures
and records of invention, and any license to practice any of the foregoing,
including without limitation the Patents and patent applications listed on
Exhibit 1.8.
1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical
Information and trademarks (including, without limitation, the Trademarks).
1.10 "Technical Information" means any and all ideas, inventions,
disclosures, design rights, unpublished research and development information,
manufacturing and operating information, know-how, trade secrets and technical
data.
1.11 "Trademarks" means the trademarks listed on the attached Exhibit
1.11.
1.12 "Related Agreements" means the MORI(TM) Source License Agreement
and MORI(TM) Source Technology Transfer Agreement between Applied and Trikon
Technologies, Inc. and the Forcefill(TM) License Agreement and Forcefill(TM)
Technology Transfer Agreement between Applied and Trikon Technologies Limited,
all of even date with this Agreement.
2. LICENSE GRANT
2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this
Agreement, Equipments Limited hereby grants to Applied and its Affiliated
Entities (a) a non-exclusive, worldwide, perpetual, fully paid, unrestricted,
irrevocable license (the "License") to use, develop, reproduce, publish,
display, perform, distribute, modify and transform the Licensed Technology and
otherwise exercise all rights therein, and to make, have made, use, dispose of,
offer to dispose of, sell, offer for sale, service, repair, reconstruct, have
sold, import and have imported Applied Licensed Products, together with (b) the
rights to sublicense others to use the Licensed Technology in connection with
Applied Licensed Products and the Purchased Units (as such term is defined in
Section 4 below).
2.2 TRADEMARKS. Equipments Limited hereby grants to Applied and its
Affiliated Entities a nonexclusive, worldwide, perpetual, fully paid,
irrevocable license to use the Trademarks, at Applied's election, in connection
with sales of Applied Licensed Products.
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2.3 TERM. The term of this Agreement is from the date hereof to the
date of expiration of the last of the Patents to expire, or the date that the
last of the Technical Information enters the public domain, whichever is later.
3. COMPENSATION
3.1 CONSIDERATION. Applied shall pay Equipments Limited non-
refundable consideration in the amount of U.S. $4,250,000 (the "License Fee")
for all licenses and rights granted hereunder. The License Fee shall be payable
by wire transfer in immediately available funds upon receipt by Applied of
counterparts of this Agreement and the Technology Transfer Agreement executed by
Equipments Limited.
3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution
of this Agreement, Equipments Limited is delivering to Applied (a) evidence
reasonably satisfactory to Applied that Equipments Limited has obtained (i) all
appropriate consents and waivers of lenders, other contract parties and
governmental entities and (ii) waivers of all contractual provisions that would
restrict or prohibit enforceability of this Agreement or the Technology Transfer
Agreement, including without limitation with clauses (i) and (ii) all consents
and waivers listed on Schedule 6.4 and (b) an opinion of counsel to the effect
set forth in Exhibit 3.2 and in a form acceptable to Applied in its sole
discretion.
4. TECHNOLOGY TRANSFER AGREEMENT
Concurrently with their entering into this Agreement, the parties
hereto will enter into a Forcefill Technology Transfer Agreement in the form
attached hereto as Exhibit 4 (the "Technology Transfer Agreement"), and for the
separate consideration stated therein, Equipments Limited will effect the
transfer to Applied of Technical Information included in the Licensed Technology
on the terms and conditions stated therein.
5. THIRD PARTY CLAIMS
5.1 INDEMNITY. Equipments Limited agrees to indemnify, defend and
hold Applied and its Affiliates harmless from and against any and all
liabilities, losses, costs, fines, demands, actions, claims, suits, proceedings,
investigations, damages, judgments and settlements including without limitation
reasonable attorneys' fees, resulting from or arising out of: (a) any alleged,
threatened or actual infringement, misappropriation, or violation of any
proprietary rights of a third party in connection with the exercise by Applied
and/or its Affiliates of its rights hereunder, or (b) breach by Equipments
Limited of any of its obligations, covenants, representations or warranties
(collectively, "Claims"). Notwithstanding the above, Equipments Limited shall
have no liability for any claim of infringement, misappropriation or violation
of any proprietary right of a third party based on modification of the Licensed
Technology by Applied, if the infringement would have been avoided without such
modification.
5.2 EQUIPMENTS LIMITED'S OBLIGATIONS. Equipments Limited shall have
control of the defense, litigation and, subject to the conditions set forth
below, settlement of any Claim. Applied shall have the right (subject to the
conditions set forth below), but not the obligation, to select counsel of its
choice, at its expense, to participate in the defense. Equipments Limited shall
not accept a settlement of any Claim without the prior written consent of
Applied, which consent shall not be unreasonably withheld. In the event that
any claim of infringement, misappropriation or violation of any proprietary
rights of a third party is substantiated, or in Equipments Limited's judgment is
likely to be substantiated,
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Equipments Limited shall have the right, in its sole discretion and at its own
expense, to either: (a) procure for Applied such fully paid rights as are
coextensive with the rights granted Applied hereunder; or (b) replace or modify
the Licensed Technology in a manner reasonably satisfactory to Applied to make
it non-infringing without materially impairing performance of the Licensed
Technology.
5.3 APPLIED COOPERATION. In the event any third party Claim is made
against Applied or its Affiliates within the scope of the indemnity set forth in
Section 5.1, Applied shall (a) provide prompt written notice of such third party
Claim to Equipments Limited, (b) provide Equipments Limited with such assistance
as Equipments Limited may reasonably request in connection with the defense
and/or settlement of such third-party claim, provided that all costs and
expenses incurred by either party shall be borne by Equipments Limited, and (c)
promptly comply with all terms of any resolution or settlement of such third-
party Claim at Equipments Limited's expense.
6. EQUIPMENTS LIMITED REPRESENTATIONS AND WARRANTIES
Equipments Limited represents and warrants to Applied and its
Affiliates as follows:
6.1 ORGANIZATION. Equipments Limited: (a) is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales; and (b) has all necessary corporate power to own, license and transfer
the Licensed Technology without restriction or encumbrance, to carry on its
business as now being conducted, and to enter into and deliver this Agreement
and the Technology Transfer Agreement and to consummate the transactions
contemplated by each of them.
6.2 AUTHORITY. The execution and delivery of this Agreement and the
Technology Transfer Agreement, and the performance of each of them by Equipments
Limited, have been duly authorized by all necessary corporate action on the part
of Equipments Limited. Each of this Agreement and the Technology Transfer
Agreement constitutes a legal, valid and binding obligation of Equipments
Limited, enforceable against Equipments Limited in accordance with its terms,
subject as to enforcement: (a) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability relating to or
affecting creditors' rights; and (b) to general principles of equity, whether
such enforcement is considered in a proceeding in equity or at law.
6.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement or the Technology Transfer Agreement, nor the performance of either of
them by Equipments Limited, will: (a) conflict with or result in any breach or
violation of the terms of any decree, judgment, order, law or regulation of any
court or other governmental body now in effect applicable to Equipments Limited,
any of its Affiliates, the Licensed Technology or the Trademarks; (b) conflict
with, or result in, with or without the passage of time or the giving of notice,
any breach of any of the terms, conditions and provisions of, or constitute a
default under, or result in the creation of any lien, charge, easement, security
interest, mortgage, conditional sale contract, equity, right of way, covenant,
restriction, title defect, objection, claim or other encumbrances upon any of
the Licensed Technology or the Trademarks pursuant to, any indenture, mortgage,
lease, agreement or other instrument to which Equipments Limited or any of its
Affiliates is a party or by which Equipments Limited, any of its Affiliates, the
Licensed Technology or the Trademarks are bound; (c) permit the acceleration of
the maturity of any indebtedness of Equipments Limited or of any other person
secured by the Licensed Technology or the Trademarks; or (d) violate or conflict
with any provision of Equipments Limited's charter documents.
6.4 CONSENTS. Except as set forth on Schedule 6.4, no consent,
approval or waiver from any third party, and no consent, approval or
authorization of, or declaration, filing or registration with, any
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government or regulatory authority, is required to be obtained or made by
Equipments Limited or any of its Affiliates in order to permit the execution and
delivery of this Agreement and the Technology Transfer Agreement by Equipments
Limited and the consummation of the transactions contemplated by each of them.
All consents, waivers and approvals identified on Schedule 6.4 have been
obtained in writing and copies thereof have been provided to Applied.
6.5 LICENSED TECHNOLOGY. Equipments Limited represents and warrants
that: (a) the Licensed Technology includes all of its technology and Proprietary
Rights relating to Forcefill Technology, and no technology or Proprietary Rights
relating to Forcefill Technology are owned or otherwise held by any Affiliate of
Equipments Limited other than Trikon Technologies Limited; (b) except as set
forth on Schedule 6.5, the Licensed Technology does not infringe upon or violate
any Proprietary Rights of any other person; (c) except as set forth on Schedule
6.5, no claim has been asserted or threatened by any other person that the use
of the Licensed Technology constitutes an infringement or misappropriation of
any Proprietary Rights of another or constitutes unfair competition; (d)
Equipments Limited is the true, lawful and sole legal and beneficial owner of
the Licensed Technology, free and clear of any claims, liens or encumbrances and
Equipments Limited's ownership is more than a shop right; (e) except as set
forth on Schedule 6.5 as to Improvements only, all Patents, Copyrights and
Trademarks included in the Licensed Technology are valid and in full force and
effect, and all maintenance and annuity fees have been fully paid and all fees
paid during prosecution and after issuance of the Patents have been paid in the
correct entity status amounts; (f) the License granted by Equipments Limited
does not and will not conflict with any rights granted to other persons or
violate any previous agreement between Equipments Limited or any of its
Affiliates and any other person; (g) except as set forth on Schedule 6.5 with
respect to prosecution of Improvements only, no fraud or misrepresentation has
been made during the prosecution of the Patent Rights, Copyrights or Trademarks,
or has been included in the documentation for or other disclosure of the
Licensed Technology; and (h) Equipments Limited has or can obtain all consents
to exclusion of all inventors deleted from or not included in all applications
of the Patent Rights.
6.6 TRADEMARKS. Equipments Limited represents and warrants that it
is the true, lawful and sole owner of the Trademarks, and has the exclusive
right to use such Trademarks, and has the right to permit Applied to use such
Trademarks as contemplated by this Agreement, in each case, free of infringement
of or unfair competition with any trademark or service mark rights of any other
person, and free of any other claims, liens or encumbrances.
6.7 WARRANTY. Except as set forth in this Section 6, Equipments
Limited makes no warranties, express or implied, regarding the Licensed
Technology, the Proprietary Rights, the Purchased Units or the Trademarks, their
performance, or the results which can be achieved with them. EXCEPT AS SET
FORTH IN THIS SECTION 6, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE
PURCHASED UNITS AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE
CASE MAY BE, ON AN "AS IS" BASIS AND EQUIPMENTS LIMITED HEREBY DISCLAIMS ANY AND
ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
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7. APPLIED REPRESENTATIONS AND WARRANTIES
Applied represents and warrants to Equipments Limited and its
Affiliates as follows:
7.1 ORGANIZATION. Applied: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware;
and (b) has all necessary corporate power to enter into and deliver this
Agreement and the Technology Transfer Agreement, and to consummate the
transactions contemplated by each of them.
7.2 AUTHORITY. The execution and delivery of this Agreement and the
Technology Transfer Agreement, and the performance by Applied of each of them,
have been duly authorized by all necessary corporate action on the part of
Applied. Each of this Agreement and the Technology Transfer Agreement
constitutes a legal, valid and binding obligation of Applied, enforceable
against Applied in accordance with its terms, subject as to enforcement: (a) to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws
of general applicability relating to or affecting creditors' rights; and (b) to
general principles of equity, whether such enforcement is considered in a
proceeding in equity or at law.
7.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement or the Technology Transfer Agreement, nor the performance of either of
them by Applied, will: (a) conflict with or result in any breach or violation
of the terms of any decree, judgment, order, law or regulation of any court or
other governmental body now in effect applicable to Applied or any of its
Affiliates; or (b) violate or conflict with any provision of Applied's charter
documents or of any agreement or instrument to which Applied or any of its
Affiliates is a party.
7.4 CONSENTS. No consent, approval or waiver from any third party,
and no consent, approval or authorization of, or declaration, filing or
registration with, any government or regulatory authority, is required to be
made or obtained by Applied or any of its Affiliates in order to permit the
execution and delivery of this Agreement and the Technology Transfer Agreement
by Applied, and the consummation of the transactions contemplated by each of
them.
8. COVENANTS OF EQUIPMENTS LIMITED
Equipments Limited covenants and agrees with Applied as follows:
8.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Equipments Limited receives written notice expressly stating that a third party
(a "Potential Infringer") has directly or contributorily infringed, has induced
another to infringe, or has engaged in unfair competition with respect to, any
of the Licensed Technology, Equipments Limited shall promptly identify the
affected aspect(s) or item(s) of the Licensed Technology and the Potential
Infringer in a written notice to Applied.
8.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has
not done so, Equipments Limited through patent attorneys of its choosing and at
its own expense and cost shall cause to be filed and/or prosecuted the patent
applications listed in Exhibit 1.7, and all patent application(s), if any,
relating to Improvements included in the Licensed Technology. Equipments
Limited agrees to exercise all commercially reasonable efforts to cause all
patent applications to be prosecuted in such manner that the best possible
patent protection may be obtained thereon. Equipments Limited shall have no
liability to Applied respecting the results of such prosecution. Equipments
Limited agrees, from time to time and on a reasonable and prompt basis, to
inform Applied about the status of the prosecution of
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said patent applications. During the life of any patents, Equipments Limited
shall timely pay all applicable fees, including but not limited to issue and
maintenance fees related to Patent Rights included in the Licensed Technology at
the appropriate entity status rates.
8.3 PROTECTION OF TRADEMARKS. Equipments Limited shall take all
reasonable steps to maintain, and shall take no steps that derogate from, the
force or validity of, the Trademarks; shall pay such fees in a timely manner as
are necessary to maintain the registrations of the Trademarks in all countries
of such registration; and shall have the exclusive right to institute and
prosecute in its sole discretion with all reasonable effort actions against any
suspected infringers or misusers of the Trademarks.
8.4 REGISTERED USER AGREEMENTS. Equipments Limited, at its sole
election, may undertake recordation of a registered user agreement or trademark
license with respect to Applied in any country where Applied uses the Trademarks
and where such recordation is required or permitted.
9. COVENANTS OF APPLIED
Applied covenants and agrees with Equipments Limited as follows:
9.1 TECHNOLOGY. Applied understands and agrees that, with the
exception of the rights expressly licensed or otherwise granted under this
Agreement, Applied shall not acquire any right, title, or interest in the
Licensed Technology or the Trademarks, which right, title and interest is and
shall remain with Equipments Limited.
9.2 TRADEMARKS. Applied is familiar with the quality standards of
Equipments Limited. In the event Applied elects to use the Trademarks, Applied
shall use the Trademarks only in accordance with those same reasonable standards
of quality currently used by Applied, which standards shall at least be equal
to, but which shall not be required to exceed, the standards of quality
currently used by Equipments Limited. Equipments Limited shall have the right
once per year, upon reasonable advance written notice (at least 10 business days
in advance), to receive from Applied a reasonably representative selection of
specimens of Applied's use of the Trademarks, as may be reasonably necessary in
order to confirm that such quality control standards are being observed.
Applied hereby consents to being named as a registered user of the Trademarks
where the recordation of a registered user agreement or trademark license is
required or permitted, and Applied agrees to execute any documents reasonably
necessary or desirable to enable and assist Equipments Limited in the exclusive
registration and protection of the Trademarks, all at no expense to Applied.
9.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts to
include reproductions of the patent and trademark notices of Equipments Limited
as Equipments Limited may reasonably designate on each Applied Licensed Product
and all packaging and documentation used for or with its distribution. Applied
shall not remove, efface or obscure any patent or trademark notices from any
Equipments Limited materials provided hereunder.
9.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Applied receives written notice expressly stating that a Potential Infringer has
directly or contributorily infringed, has induced another to infringe, or has
engaged in unfair competition with respect to, any of the Licensed Technology,
Applied shall promptly identify the affected aspect(s) or item(s) of the
Licensed Technology and the Potential Infringer in a written notice to
Equipments Limited.
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10. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS
10.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF EQUIPMENTS
LIMITED AND ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY
AGREEMENT AND THE RELATED AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID
TO EQUIPMENTS LIMITED AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT,
THE TECHNOLOGY TRANSFER AGREEMENT AND THE RELATED AGREEMENTS. EQUIPMENTS
LIMITED SHALL NOT HAVE ANY LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY,
ARISING OUT OF THIS AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING
BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFITS, EVEN IF EQUIPMENTS LIMITED HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE
LIMITATIONS OF LIABILITY SHALL NOT APPLY IN THE EVENT OF FRAUD.
10.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a)
obligate Applied to use the Licensed Technology or Trademarks, or (b) to
restrict or prohibit Applied from developing, making, using, marketing or
otherwise distributing or promoting products and/or processes using, embodying,
or competing with the Licensed Technology. No rights are granted to Equipments
Limited by this Agreement in any Applied technology or in any Applied tangible,
intangible or intellectual property, whether now in existence or hereafter
conceived, developed, reduced to practice, discovered, owned, licensed, leased,
sold and/or acquired by or for Applied relative to any products or property of
Applied, regardless of nature or technical subject.
11. BANKRUPTCY
All rights and licenses granted under or pursuant to this Agreement by
each party are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to
"intellectual property" as defined under Section 101(35A) of the Bankruptcy
Code. The parties agree that Applied shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code to the extent that the
Bankruptcy Code applies to Equipments Limited. Equipments Limited agrees,
during the term of this Agreement, to create and maintain current copies or, if
not amenable to copying, detailed descriptions or other appropriate embodiments,
of all such intellectual property, all to ISO 9000 et seq. and other applicable
standards. Equipments Limited further agrees that in the event of the
commencement of a bankruptcy proceeding by or against it, Applied shall be
entitled to a complete non-exclusive duplicate of or complete access to, as
appropriate, solely for the purposes contemplated by this Agreement and the
Technology Transfer Agreement, any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to Applied or made available to Applied
for reproduction (i) upon such commencement of a bankruptcy proceeding upon
written request therefor by Applied, unless Equipments Limited elects to
continue to perform all of its obligations under this Agreement or (ii) if not
delivered under (i) above, upon the rejection of this Agreement by or on behalf
of Equipments Limited upon written request therefor by Applied.
12. NO PUBLICITY
Except as required by court order, Equipments Limited agrees not to
disclose the existence or terms of this Agreement without the prior written
consent of Applied, which consent shall
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not be unreasonably withheld. Applied agrees to review any disclosure proposed
by Equipments Limited on a prompt basis, provided Applied is given at least two
business days' advance written notice.
13. MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of California without reference to principles of conflicts of
laws and without regard to the UN Convention on the International Sale of Goods.
13.2 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.3 HEADINGS. The headings of the Sections of this Agreement
are for convenience and shall not by themselves determine the interpretation of
this Agreement.
13.4 NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered personally by overnight courier or
similar means or sent by facsimile with written confirmation of receipt, to the
parties at the addresses specified below (or at such other address for a party
as shall be specified by like notice). Any such notice shall be effective upon
receipt, if personally delivered, or on the next business day following
transmittal if sent by facsimile. Notices shall be delivered as follows:
To Applied: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Joseph Sweeney, Esq.
Vice President, Legal Affairs
and Intellectual Property
with a copy to: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Alexander Meyer
Director, New
Business Development
To Equipments Limited: Trikon Equipments Limited
Ringland Way
Newport, Gwent NP6 2TA
Attention: Nigel Wheeler
with a copy to: Brobeck, Phleger & Harrison LLP
One Market
Spear Street Tower
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
13.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may
be amended only by a written instrument signed by Equipments Limited and
Applied.
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13.6 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be finally determined to be invalid, illegal
or unenforceable in any respect against either party hereto, it shall be
adjusted if possible to effect the intent of the parties. In any event, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability shall only apply as to such party in
the specific jurisdiction where such final determination shall have been made.
13.7 ENTIRE AGREEMENT. This Agreement, together with its
Exhibits, constitute the entire agreement between Equipments Limited and Applied
regarding the subject matter hereof, and supersedes any and all prior
negotiations, correspondence, understandings and agreements regarding such
subject matter.
13.8 IMPORT/EXPORT. Each party shall comply with all applicable
import and export control laws and regulations.
13.9 TAXES. Applied will not withhold taxes for the
transactions contemplated hereunder except as required by law.
13.10 RULES OF CONSTRUCTION. Each party to this Agreement has
been represented by counsel during the preparation and execution of this
Agreement, and therefore waives any rule of construction that would construe
ambiguities against the party drafting the agreement.
13.11 FURTHER ASSURANCES. Each party agrees to cooperate with
the other in executing, delivering, and filing such further documentation and
taking any such other further actions as may be necessary or appropriate to
effectuate the transfer of rights granted in this Agreement, or to evidence the
satisfaction or accuracy of any condition, representation or warranty of this
Agreement.
13.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are
and shall remain independent contractors, and nothing herein shall be construed
to create a partnership or joint venture between Equipments Limited and Applied.
Each party shall be responsible for wages, hours, and condition of employment of
its personnel during the term of and under this Agreement. Nothing herein shall
be construed as implying that employees of either party are employees of the
other party.
IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have executed this Agreement as of the date first above written.
APPLIED MATERIALS, INC. TRIKON EQUIPMENTS LIMITED
By: /s/ Kalman Kaufman By: /s/ Gregor Campbell
---------------------------- --------------------------------
Name: Kalman Kaufman Name: Gregor Campbell
------------------------- ------------------------------
Title: Corporate Vice President Title: Director
------------------------- ------------------------------
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EXHIBIT 10.29
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FORCEFILL/TM/ TECHNOLOGY
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and entered into as of
November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation
("Applied") and Trikon Technologies Limited, a company incorporated under the
laws of England and Wales under registered number 1373344 and formerly known as
"Electrotech Limited" ("Technologies Limited"), with respect to the following
facts:
A. Technologies Limited represents and warrants to Applied that its
rights in and to the Licensed Technology and the Trademarks (as defined below)
are as set forth in this Agreement; and
B. Technologies Limited desires to grant to Applied, and Applied
desires to acquire from Technologies Limited, subject to the terms and
conditions of this Agreement, an unrestricted license to manufacture, use and
sell Applied Licensed Products (as defined below), and to otherwise develop and
use the Licensed Technology and to use the Trademarks.
THE PARTIES AGREE AS FOLLOWS:
1. CERTAIN DEFINITIONS
As used in this Agreement:
1.1 "Affiliate" means with respect to any person: any company,
partnership, entity or other person that directly controls or is controlled by,
or is under common control with, the specified person; and "Affiliated Entity"
means any Affiliate other than an individual. For purposes of this Agreement,
Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of
Applied.
1.2 "Applied Licensed Products" means products and software made by
or for Applied or any of its Affiliated Entities that in whole or in part
incorporate, use or are made using the Licensed Technology.
1.3 "Copyright(s)" means all copyright, unregistered design rights,
semiconductor topography and mask work interests, including, without limitation,
all rights of authorship, use, publication, reproduction, performance,
transformation, moral rights and ownership of copyrightable works, designs
(other than registered designs), semiconductor topography works and mask works,
and all rights to register and obtain renewals and extensions of registrations,
together with all other interests accruing by reason of international copyright,
semiconductor topography and mask work conventions.
1.4 "Forcefill Technology" means [ ]
1.5 "Improvements" means [ ]
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1.6 "Licensed Technology" means: all (a) Patent Rights, (b)
Technical Information, (c) Improvements, and (d) Copyrights, in each case
relating to Forcefill Technology, including without limitation, Technologies
Limited's entire right, title and interest in the foregoing, and all hardware,
software and processes, conceived, developed, reduced to practice, discovered,
owned, licensed and/or acquired by Technologies Limited or any of its Affiliates
or agents prior to or as of the date of this Agreement.
1.7 "Patents" means any and all issued patents, reissue or
reexamination patents, patents of importation, revivals of patents, revalidation
patents, utility models, certificates of invention, registrations of patents, or
extensions thereof, regardless of country or formal name.
1.8 "Patent Rights" means all United Kingdom, United States and other
foreign utility and design Patents, and published or unpublished regular patent
and provisional applications (including without limitation any and all
applications of addition, divisionals, continuations, continuations-in-part
("CIPs"), reexaminations, substitutions, extensions, renewals, utility models,
certificates of invention or reissues thereof or therefor, invention disclosures
and records of invention, and any license to practice any of the foregoing,
including without limitation the Patents and patent applications listed on
Exhibit 1.8.
1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical
Information and trademarks (including, without limitation, the Trademarks).
1.10 "Technical Information" means any and all ideas, inventions,
disclosures, design rights, unpublished research and development information,
manufacturing and operating information, know-how, trade secrets and technical
data.
1.11 "Trademarks" means the trademarks listed on the attached Exhibit
1.11.
1.12 "Related Agreements" means the MORI/TM/ Source License Agreement
and MORI/TM/ Source Technology Transfer Agreement between Applied and Trikon
Technologies, Inc. and the Forcefill/TM/ License Agreement and Forcefill/TM/
Technology Transfer Agreement between Applied and Trikon Equipments Limited, all
of even date with this Agreement.
2. LICENSE GRANT
2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this
Agreement, Technologies Limited hereby grants to Applied and its Affiliated
Entities (a) a non-exclusive, worldwide, perpetual, fully paid, unrestricted,
irrevocable license (the "License") to use, develop, reproduce, publish,
display, perform, distribute, modify and transform the Licensed Technology and
otherwise exercise all rights therein, and to make, have made, use, dispose of,
offer to dispose of, sell, offer for sale, service, repair, reconstruct, have
sold, import and have imported Applied Licensed Products, together with (b) the
rights to sublicense others to use the Licensed Technology in connection with
Applied Licensed Products and the Purchased Units (as such term is defined in
Section 4 below).
2.2 TRADEMARKS. Technologies Limited hereby grants to Applied and
its Affiliated Entities a nonexclusive, worldwide, perpetual, fully paid,
irrevocable license to use the Trademarks, at Applied's election, in connection
with sales of Applied Licensed Products.
2
<PAGE>
2.3 TERM. The term of this Agreement is from the date hereof to the
date of expiration of the last of the Patents to expire, or the date that the
last of the Technical Information enters the public domain, whichever is later.
3. COMPENSATION
3.1 CONSIDERATION. Applied shall pay Technologies Limited non-
refundable consideration in the amount of U.S. $4,250,000 (the "License Fee")
for all licenses and rights granted hereunder. The License Fee shall be payable
by wire transfer in immediately available funds upon receipt by Applied of
counterparts of this Agreement and the Technology Transfer Agreement executed by
Technologies Limited.
3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution
of this Agreement, Technologies Limited is delivering to Applied (a) evidence
reasonably satisfactory to Applied that Technologies Limited has obtained (i)
all appropriate consents and waivers of lenders, other contract parties and
governmental entities and (ii) waivers of all contractual provisions that would
restrict or prohibit enforceability of this Agreement or the Technology Transfer
Agreement, including without limitation with clauses (i) and (ii) all consents
and waivers listed on Schedule 6.4 and (b) an opinion of counsel to the effect
set forth in Exhibit 3.2 and in a form acceptable to Applied in its sole
discretion.
4. TECHNOLOGY TRANSFER AGREEMENT
Concurrently with their entering into this Agreement, the parties
hereto will enter into a Forcefill Technology Transfer Agreement in the form
attached hereto as Exhibit 4 (the "Technology Transfer Agreement"), and for the
separate consideration stated therein, Technologies Limited will effect the
transfer to Applied of Technical Information included in the Licensed Technology
on the terms and conditions stated therein.
5. THIRD PARTY CLAIMS
5.1 INDEMNITY. Technologies Limited agrees to indemnify, defend and
hold Applied and its Affiliates harmless from and against any and all
liabilities, losses, costs, fines, demands, actions, claims, suits, proceedings,
investigations, damages, judgments and settlements including without limitation
reasonable attorneys' fees, resulting from or arising out of: (a) any alleged,
threatened or actual infringement, misappropriation, or violation of any
proprietary rights of a third party in connection with the exercise by Applied
and/or its Affiliates of its rights hereunder, or (b) breach by Technologies
Limited of any of its obligations, covenants, representations or warranties
(collectively, "Claims"). Notwithstanding the above, Technologies Limited shall
have no liability for any claim of infringement, misappropriation or violation
of any proprietary right of a third party based on modification of the Licensed
Technology by Applied, if the infringement would have been avoided without such
modification.
5.2 TECHNOLOGIES LIMITED'S OBLIGATIONS. Technologies Limited shall
have control of the defense, litigation and, subject to the conditions set forth
below, settlement of any Claim. Applied shall have the right (subject to the
conditions set forth below), but not the obligation, to select counsel of its
choice, at its expense, to participate in the defense. Technologies Limited
shall not accept a settlement of any Claim without the prior written consent of
Applied, which consent shall not be unreasonably withheld. In the event that
any claim of infringement, misappropriation or violation of any proprietary
rights of a third party is substantiated, or in Technologies Limited's judgment
is likely to be
3
<PAGE>
substantiated, Technologies Limited shall have the right, in its sole discretion
and at its own expense, to either: (a) procure for Applied such fully paid
rights as are coextensive with the rights granted Applied hereunder; or (b)
replace or modify the Licensed Technology in a manner reasonably satisfactory to
Applied to make it non-infringing without materially impairing performance of
the Licensed Technology.
5.3 APPLIED COOPERATION. In the event any third party Claim is made
against Applied or its Affiliates within the scope of the indemnity set forth in
Section 5.1, Applied shall (a) provide prompt written notice of such third party
Claim to Technologies Limited, (b) provide Technologies Limited with such
assistance as Technologies Limited may reasonably request in connection with the
defense and/or settlement of such third-party claim, provided that all costs and
expenses incurred by either party shall be borne by Technologies Limited, and
(c) promptly comply with all terms of any resolution or settlement of such
third-party Claim at Technologies Limited's expense.
6. TECHNOLOGIES LIMITED REPRESENTATIONS AND WARRANTIES
Technologies Limited represents and warrants to Applied and its
Affiliates as follows:
6.1 ORGANIZATION. Technologies Limited: (a) is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales; and (b) has all necessary corporate power to own, license and transfer
the Licensed Technology without restriction or encumbrance, to carry on its
business as now being conducted, and to enter into and deliver this Agreement
and the Technology Transfer Agreement and to consummate the transactions
contemplated by each of them.
6.2 AUTHORITY. The execution and delivery of this Agreement and the
Technology Transfer Agreement, and the performance of each of them by
Technologies Limited, have been duly authorized by all necessary corporate
action on the part of Technologies Limited. Each of this Agreement and the
Technology Transfer Agreement constitutes a legal, valid and binding obligation
of Technologies Limited, enforceable against Technologies Limited in accordance
with its terms, subject as to enforcement: (a) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general applicability
relating to or affecting creditors' rights; and (b) to general principles of
equity, whether such enforcement is considered in a proceeding in equity or at
law.
6.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement or the Technology Transfer Agreement, nor the performance of either of
them by Technologies Limited, will: (a) conflict with or result in any breach or
violation of the terms of any decree, judgment, order, law or regulation of any
court or other governmental body now in effect applicable to Technologies
Limited, any of its Affiliates, the Licensed Technology or the Trademarks; (b)
conflict with, or result in, with or without the passage of time or the giving
of notice, any breach of any of the terms, conditions and provisions of, or
constitute a default under, or result in the creation of any lien, charge,
easement, security interest, mortgage, conditional sale contract, equity, right
of way, covenant, restriction, title defect, objection, claim or other
encumbrances upon any of the Licensed Technology or the Trademarks pursuant to,
any indenture, mortgage, lease, agreement or other instrument to which
Technologies Limited or any of its Affiliates is a party or by which
Technologies Limited, any of its Affiliates, the Licensed Technology or the
Trademarks are bound; (c) permit the acceleration of the maturity of any
indebtedness of Technologies Limited or of any other person secured by the
Licensed Technology or the Trademarks; or (d) violate or conflict with any
provision of Technologies Limited's charter documents.
4
<PAGE>
6.4 CONSENTS. Except as set forth on Schedule 6.4, no consent,
approval or waiver from any third party, and no consent, approval or
authorization of, or declaration, filing or registration with, any government or
regulatory authority, is required to be obtained or made by Technologies Limited
or any of its Affiliates in order to permit the execution and delivery of this
Agreement and the Technology Transfer Agreement by Technologies Limited and the
consummation of the transactions contemplated by each of them. All consents,
waivers and approvals identified on Schedule 6.4 have been obtained in writing
and copies thereof have been provided to Applied.
6.5 LICENSED TECHNOLOGY. Technologies Limited represents and
warrants that: (a) the Licensed Technology includes all of its technology and
Proprietary Rights relating to Forcefill Technology, and no technology or
Proprietary Rights relating to Forcefill Technology are owned or otherwise held
by any Affiliate of Technologies Limited other than Trikon Equipments Limited;
(b) except as set forth on Schedule 6.5, the Licensed Technology does not
infringe upon or violate any Proprietary Rights of any other person; (c) except
as set forth on Schedule 6.5, no claim has been asserted or threatened by any
other person that the use of the Licensed Technology constitutes an infringement
or misappropriation of any Proprietary Rights of another or constitutes unfair
competition; (d) Technologies Limited is the true, lawful and sole legal and
beneficial owner of the Licensed Technology, free and clear of any claims, liens
or encumbrances and Technologies Limited's ownership is more than a shop right;
(e) except as set forth on Schedule 6.5 as to Improvements only, all Patents,
Copyrights and Trademarks included in the Licensed Technology are valid and in
full force and effect, and all maintenance and annuity fees have been fully paid
and all fees paid during prosecution and after issuance of the Patents have been
paid in the correct entity status amounts; (f) the License granted by
Technologies Limited does not and will not conflict with any rights granted to
other persons or violate any previous agreement between Technologies Limited or
any of its Affiliates and any other person; (g) except as set forth on Schedule
6.5 with respect to prosecution of Improvements only, no fraud or
misrepresentation has been made during the prosecution of the Patent Rights,
Copyrights or Trademarks, or has been included in the documentation for or other
disclosure of the Licensed Technology; and (h) Technologies Limited has or can
obtain all consents to exclusion of all inventors deleted from or not included
in all applications of the Patent Rights.
6.6 TRADEMARKS. Technologies Limited represents and warrants that it
is the true, lawful and sole owner of the Trademarks, and has the exclusive
right to use such Trademarks, and has the right to permit Applied to use such
Trademarks as contemplated by this Agreement, in each case, free of infringement
of or unfair competition with any trademark or service mark rights of any other
person, and free of any other claims, liens or encumbrances.
6.7 WARRANTY. Except as set forth in this Section 6, Technologies
Limited makes no warranties, express or implied, regarding the Licensed
Technology, the Proprietary Rights, the Purchased Units or the Trademarks, their
performance, or the results which can be achieved with them. EXCEPT AS SET
FORTH IN THIS SECTION 6, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE
PURCHASED UNITS AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE
CASE MAY BE, ON AN "AS IS" BASIS AND TRIKON LIMITED HEREBY DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
5
<PAGE>
7. APPLIED REPRESENTATIONS AND WARRANTIES
Applied represents and warrants to Technologies Limited and its
Affiliates as follows:
7.1 ORGANIZATION. Applied: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware;
and (b) has all necessary corporate power to enter into and deliver this
Agreement and the Technology Transfer Agreement, and to consummate the
transactions contemplated by each of them.
7.2 AUTHORITY. The execution and delivery of this Agreement and the
Technology Transfer Agreement, and the performance by Applied of each of them,
have been duly authorized by all necessary corporate action on the part of
Applied. Each of this Agreement and the Technology Transfer Agreement
constitutes a legal, valid and binding obligation of Applied, enforceable
against Applied in accordance with its terms, subject as to enforcement: (a) to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws
of general applicability relating to or affecting creditors' rights; and (b) to
general principles of equity, whether such enforcement is considered in a
proceeding in equity or at law.
7.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement or the Technology Transfer Agreement, nor the performance of either of
them by Applied, will: (a) conflict with or result in any breach or violation
of the terms of any decree, judgment, order, law or regulation of any court or
other governmental body now in effect applicable to Applied or any of its
Affiliates; or (b) violate or conflict with any provision of Applied's charter
documents or of any agreement or instrument to which Applied or any of its
Affiliates is a party.
7.4 CONSENTS. No consent, approval or waiver from any third party,
and no consent, approval or authorization of, or declaration, filing or
registration with, any government or regulatory authority, is required to be
made or obtained by Applied or any of its Affiliates in order to permit the
execution and delivery of this Agreement and the Technology Transfer Agreement
by Applied, and the consummation of the transactions contemplated by each of
them.
8. COVENANTS OF TRIKON LIMITED
Technologies Limited covenants and agrees with Applied as follows:
8.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Technologies Limited receives written notice expressly stating that a third
party (a "Potential Infringer") has directly or contributorily infringed, has
induced another to infringe, or has engaged in unfair competition with respect
to, any of the Licensed Technology, Technologies Limited shall promptly identify
the affected aspect(s) or item(s) of the Licensed Technology and the Potential
Infringer in a written notice to Applied.
8.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has
not done so, Technologies Limited through patent attorneys of its choosing and
at its own expense and cost shall cause to be filed and/or prosecuted the patent
applications listed in Exhibit 1.7, and all patent application(s), if any,
relating to Improvements included in the Licensed Technology. Technologies
Limited agrees to exercise all commercially reasonable efforts to cause all
patent applications to be prosecuted in such manner that the best possible
patent protection may be obtained thereon. Technologies Limited shall have no
liability to Applied respecting the results of such prosecution. Technologies
Limited agrees, from time to time and on a reasonable and prompt basis, to
inform Applied
6
<PAGE>
about the status of the prosecution of said patent applications. During the life
of any patents, Technologies Limited shall timely pay all applicable fees,
including but not limited to issue and maintenance fees related to Patent Rights
included in the Licensed Technology at the appropriate entity status rates.
8.3 PROTECTION OF TRADEMARKS. Technologies Limited shall take all
reasonable steps to maintain, and shall take no steps that derogate from, the
force or validity of, the Trademarks; shall pay such fees in a timely manner as
are necessary to maintain the registrations of the Trademarks in all countries
of such registration; and shall have the exclusive right to institute and
prosecute in its sole discretion with all reasonable effort actions against any
suspected infringers or misusers of the Trademarks.
8.4 REGISTERED USER AGREEMENTS. Technologies Limited, at its sole
election, may undertake recordation of a registered user agreement or trademark
license with respect to Applied in any country where Applied uses the Trademarks
and where such recordation is required or permitted.
9. COVENANTS OF APPLIED
Applied covenants and agrees with Technologies Limited as follows:
9.1 TECHNOLOGY. Applied understands and agrees that, with the
exception of the rights expressly licensed or otherwise granted under this
Agreement, Applied shall not acquire any right, title, or interest in the
Licensed Technology or the Trademarks, which right, title and interest is and
shall remain with Technologies Limited.
9.2 TRADEMARKS. Applied is familiar with the quality standards of
Technologies Limited. In the event Applied elects to use the Trademarks,
Applied shall use the Trademarks only in accordance with those same reasonable
standards of quality currently used by Applied, which standards shall at least
be equal to, but which shall not be required to exceed, the standards of quality
currently used by Technologies Limited. Technologies Limited shall have the
right once per year, upon reasonable advance written notice (at least 10
business days in advance), to receive from Applied a reasonably representative
selection of specimens of Applied's use of the Trademarks, as may be reasonably
necessary in order to confirm that such quality control standards are being
observed. Applied hereby consents to being named as a registered user of the
Trademarks where the recordation of a registered user agreement or trademark
license is required or permitted, and Applied agrees to execute any documents
reasonably necessary or desirable to enable and assist Technologies Limited in
the exclusive registration and protection of the Trademarks, all at no expense
to Applied.
9.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts to
include reproductions of the patent and trademark notices of Technologies
Limited as Technologies Limited may reasonably designate on each Applied
Licensed Product and all packaging and documentation used for or with its
distribution. Applied shall not remove, efface or obscure any patent or
trademark notices from any Technologies Limited materials provided hereunder.
9.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement,
Applied receives written notice expressly stating that a Potential Infringer has
directly or contributorily infringed, has induced another to infringe, or has
engaged in unfair competition with respect to, any of the Licensed Technology,
Applied shall promptly identify the affected aspect(s) or item(s) of the
Licensed Technology and the Potential Infringer in a written notice to
Technologies Limited.
7
<PAGE>
10. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS
10.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF TRIKON
LIMITED AND ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY
AGREEMENT AND THE RELATED AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID
TO TRIKON LIMITED AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT, THE
TECHNOLOGY TRANSFER AGREEMENT AND THE RELATED AGREEMENTS. TRIKON LIMITED SHALL
NOT HAVE ANY LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING
OUT OF THIS AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING BUT NOT
LIMITED TO LOSS OF ANTICIPATED PROFITS, EVEN IF TRIKON LIMITED HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE
LIMITATIONS OF LIABILITY SHALL NOT APPLY IN THE EVENT OF FRAUD.
10.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a)
obligate Applied to use the Licensed Technology or Trademarks, or (b) to
restrict or prohibit Applied from developing, making, using, marketing or
otherwise distributing or promoting products and/or processes using, embodying,
or competing with the Licensed Technology. No rights are granted to
Technologies Limited by this Agreement in any Applied technology or in any
Applied tangible, intangible or intellectual property, whether now in existence
or hereafter conceived, developed, reduced to practice, discovered, owned,
licensed, leased, sold and/or acquired by or for Applied relative to any
products or property of Applied, regardless of nature or technical subject.
11. BANKRUPTCY
All rights and licenses granted under or pursuant to this Agreement by
each party are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to
"intellectual property" as defined under Section 101(35A) of the Bankruptcy
Code. The parties agree that Applied shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code to the extent that the
Bankruptcy Code applies to Technologies Limited. Technologies Limited agrees,
during the term of this Agreement, to create and maintain current copies or, if
not amenable to copying, detailed descriptions or other appropriate embodiments,
of all such intellectual property, all to ISO 9000 et seq. and other applicable
standards. Technologies Limited further agrees that in the event of the
commencement of a bankruptcy proceeding by or against it, Applied shall be
entitled to a complete non-exclusive duplicate of or complete access to, as
appropriate, solely for the purposes contemplated by this Agreement and the
Technology Transfer Agreement, any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to Applied or made available to Applied
for reproduction (i) upon such commencement of a bankruptcy proceeding upon
written request therefor by Applied, unless Technologies Limited elects to
continue to perform all of its obligations under this Agreement or (ii) if not
delivered under (i) above, upon the rejection of this Agreement by or on behalf
of Technologies Limited upon written request therefor by Applied.
12. NO PUBLICITY
Except as required by court order, Technologies Limited agrees not to
disclose the existence or terms of this Agreement without the prior written
consent of Applied, which consent shall
8
<PAGE>
not be unreasonably withheld. Applied agrees to review any disclosure proposed
by Technologies Limited on a prompt basis, provided Applied is given at least
two business days' advance written notice.
13. MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California without reference to principles of conflicts of laws and
without regard to the UN Convention on the International Sale of Goods.
13.2 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.3 HEADINGS. The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
13.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered personally by overnight courier or similar
means or sent by facsimile with written confirmation of receipt, to the parties
at the addresses specified below (or at such other address for a party as shall
be specified by like notice). Any such notice shall be effective upon receipt,
if personally delivered, or on the next business day following transmittal if
sent by facsimile. Notices shall be delivered as follows:
To Applied: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Joseph Sweeney, Esq.
Vice President, Legal Affairs
and Intellectual Property
with a copy to: Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Attention: Alexander Meyer
Director, New
Business Development
To Technologies Limited: Trikon Technologies Limited
Ringland Way
Newport, Gwent NP6 2TA
Attention: Nigel Wheeler
with a copy to: Brobeck, Phleger & Harrison LLP
One Market
Spear Street Tower
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
13.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may be
amended only by a written instrument signed by Technologies Limited and Applied.
9
<PAGE>
13.6 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be finally determined to be invalid, illegal or
unenforceable in any respect against either party hereto, it shall be adjusted
if possible to effect the intent of the parties. In any event, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and such invalidity, illegality
or unenforceability shall only apply as to such party in the specific
jurisdiction where such final determination shall have been made.
13.7 ENTIRE AGREEMENT. This Agreement, together with its Exhibits,
constitute the entire agreement between Technologies Limited and Applied
regarding the subject matter hereof, and supersedes any and all prior
negotiations, correspondence, understandings and agreements regarding such
subject matter.
13.8 IMPORT/EXPORT. Each party shall comply with all applicable import
and export control laws and regulations.
13.9 TAXES. Applied will not withhold taxes for the transactions
contemplated hereunder except as required by law.
13.10 RULES OF CONSTRUCTION. Each party to this Agreement has been
represented by counsel during the preparation and execution of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting the agreement.
13.11 FURTHER ASSURANCES. Each party agrees to cooperate with the other
in executing, delivering, and filing such further documentation and taking any
such other further actions as may be necessary or appropriate to effectuate the
transfer of rights granted in this Agreement, or to evidence the satisfaction or
accuracy of any condition, representation or warranty of this Agreement.
13.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are and
shall remain independent contractors, and nothing herein shall be construed to
create a partnership or joint venture between Technologies Limited and Applied.
Each party shall be responsible for wages, hours, and condition of employment of
its personnel during the term of and under this Agreement. Nothing herein shall
be construed as implying that employees of either party are employees of the
other party.
IN WITNESS WHEREOF, the parties, by their duly authorized
officers, have executed this Agreement as of the date first above written.
APPLIED MATERIALS, INC. TRIKON TECHNOLOGIES LIMITED
/s/ Kalman Kaufman /s/ Gregor Campbell
By: _____________________________ By: _______________________________
Name: Kalman Kaufman Name: Gregor Campbell
Title: Corporate Vice President Title: Director
10
<PAGE>
EXHIBIT 11.1 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------------------------------- --------------------------------------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
----------------------- ------------------ ----------------------- ------------------
<S> <C> <C> <C> <C>
Primary:
Average Common shares outstanding........ 17,902,391 8,691,862 15,565,784 8,681,339
Net effect of dilutive stock options-
based on the treasury stock method
using average fair market price...... --- 360,529 --- 386,275
Net effect of dilutive warrants - based
on the treasury stock method using
average fair market price............ --- 50,712 --- 53,095
------------ ---------- ------------ -----------
Total shares............................. 17,902,391 9,103,103 15,565,784 9,120,709
============ ========== ============ ==========
Net income (loss)........................ $(13,460,501) $ 501,171 $(36,040,618) $3,122,510
============ ========== ============ ==========
Per share amount......................... $ (0.75) $ 0.06 $ (2.32) $ 0.34
============ ========== ============ ==========
Fully diluted:
Average Common shares outstanding........ 17,902,391 8,691,862 15,565,784 8,681,339
Net effect of dilutive stock options-
based on the treasury stock method
using average fair market price at
the end of the period.................. --- 403,091 --- 407,745
Net effect of dilutive warrants - based
on the treasury stock method
using average fair market price at
the end of the period.................. --- 55,385 --- 55,385
------------ ---------- ------------ -----------
Total shares............................. 17,902,391 9,150,338 15,565,784 9,144,469
============ ========== ============ ==========
Net income (loss)........................ $(13,460,501) $ 501,171 $(36,040,618) $3,122,510
============ ========== ============ ==========
Per share amount......................... $ (0.75) $ 0.05 $ (2.32) $ 0.34
============ ========== ============ ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,730
<SECURITIES> 6,353
<RECEIVABLES> 22,853
<ALLOWANCES> (3,643)
<INVENTORY> 45,041
<CURRENT-ASSETS> 81,887
<PP&E> 44,139
<DEPRECIATION> (11,467)
<TOTAL-ASSETS> 159,270
<CURRENT-LIABILITIES> 41,139
<BONDS> 86,250
0
19,548
<COMMON> 137,766
<OTHER-SE> (138,429)
<TOTAL-LIABILITY-AND-EQUITY> 159,270
<SALES> 43,720
<TOTAL-REVENUES> 43,720
<CGS> 31,626
<TOTAL-COSTS> 75,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,579
<INCOME-PRETAX> (39,788)
<INCOME-TAX> (3,748)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,041)
<EPS-PRIMARY> (2.32)
<EPS-DILUTED> (2.32)
</TABLE>
