-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BjBuyHuJD9BQfL20eDcP0PshEDdcZ70Xm4QgdaINjZnMJFmaH/IT4rsqovKOyHuL rea895260OmPLnOHascfSw== 0001047469-98-030949.txt : 19980814 0001047469-98-030949.hdr.sgml : 19980814 ACCESSION NUMBER: 0001047469-98-030949 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBIS TECHNOLOGY CORP CENTRAL INDEX KEY: 0000855182 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 042987600 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23150 FILM NUMBER: 98684738 BUSINESS ADDRESS: STREET 1: 32 CHERRY HILL DR CITY: DANVERS STATE: MA ZIP: 01923 BUSINESS PHONE: 5087774247 MAIL ADDRESS: STREET 1: 32 CHERRY HILL DR STREET 2: 32 CHERRY HILL DR CITY: DANVERS STATE: MA ZIP: 01923 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20569 Form 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 1998 Commission file number 0-23150 ------------- ------- Ibis Technology Corporation - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2987600 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 32 Cherry Hill Drive, Danvers, MA 01923 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (978) 777-4247 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ 6,764,760 shares of Common Stock, par value $.008, were outstanding on August 7, 1998. Total Number of Pages 65 Exhibit Index at Page 19 IBIS TECHNOLOGY CORPORATION INDEX
Page PART 1 - FINANCIAL INFORMATION Number - ------------------------------- ------ Item 1 - Financial Statements: Balance Sheets December 31, 1997 and June 30, 1998 (unaudited)............... 3 Statements of Operations Three Months Ended June 30, 1997 and 1998 (unaudited) and Six Months Ended June 30, 1997 and 1998 (unaudited)....... 4 Statements of Cash Flows Six Months Ended June 30, 1997 and 1998 (unaudited)........... 5 Notes to Financial Statements (unaudited) ...................... 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 8 PART II - OTHER INFORMATION - --------------------------- Item 1 - Legal Proceedings ....................................... 16 Item 2 - Changes in Securities ................................... 16 Item 3 - Defaults upon Senior Securities ......................... 16 Item 4 - Submission of Matters to a Vote of Security Holders ..... 16 Item 5 - Other Information ....................................... 17 Item 6 - Exhibits and Reports on Form 8-K ........................ 17 Signatures ....................................................... 18 Exhibit Index .................................................... 19
2 IBIS TECHNOLOGY CORPORATION BALANCE SHEETS (Unaudited)
December 31, June 30, 1997 1998 ------------ -------- Assets Current assets: Cash and cash equivalents ............................................. $ 13,309,823 $ 13,763,817 Accounts receivable, trade, net ....................................... 1,064,607 2,034,689 Unbilled revenue ...................................................... 230,490 1,948,564 Inventories (note 3) .................................................. 487,031 4,965,604 Prepaid expenses and other current assets ............................. 124,711 153,873 ------------ ----------- Total current assets ............................................ 15,216,662 22,866,547 ------------ ----------- Property and equipment ................................................... 17,695,312 14,647,326 Less: Accumulated depreciation and amortization ...................... (8,250,372) (9,180,907) ------------ ----------- Net property and equipment ...................................... 9,444,940 5,466,419 Patents and other assets, net ............................................ 256,638 168,217 ------------ ----------- Total assets .................................................... $ 24,918,240 $ 28,501,183 ------------ ------------ ------------ ------------ Liabilities and Stockholders' Equity Current liabilities: Capital lease obligation, current..................................... $ 474,539 $ 509,641 Accounts payable ...................................................... 691,325 2,811,053 Accrued liabilities ................................................... 1,193,504 2,961,244 ------------ ----------- Total current liabilities ....................................... 2,359,368 6,281,938 ------------ ----------- ------------ ----------- Capital lease obligation, noncurrent ..................................... 498,685 234,776 Other accrued liabilities ................................................ 1,303,187 1,275,231 ------------ ---------- Total liabilities ............................................... 4,161,240 7,791,945 ------------ ---------- Stockholders' equity: Undesignated preferred stock, $.01 par value Authorized 2,000,000 shares; none issued ............................. -- -- Common stock, $.008 par value Authorized 20,000,000 shares; issued 6,628,728 and 6,759,769 shares in 1997 and 1998, respectively ................... 53,030 54,051 Additional paid-in capital ........................................... 35,593,999 36,368,429 Accumulated deficit .................................................. (14,890,029) (15,713,242) ------------ ----------- Total stockholders' equity ...................................... 20,757,000 20,709,238 ------------ ----------- Total liabilities and stockholders' equity ...................... $ 24,918,240 $ 28,501,183 ------------ ----------- ------------ -----------
See accompanying notes to financial statements. 3 IBIS TECHNOLOGY CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended June 30, June 30, ------------------------------- -------------------------- 1997 1998 1997 1998 ------------- --------------- ------------ ------------ Sales and revenue: Product sales ................................. $ 512,580 $ 1,011,010 $ 1,626,528 $ 2,017,708 Contract and other revenue .................... 899,153 292,852 1,423,906 783,055 Equipment revenue ............................. -- 4,000,000 -- 4,200,000 ----------- ----------- ----------- ----------- Total sales and revenue (note 2) .......... 1,411,733 5,303,862 3,050,434 7,000,763 Cost of sales and revenue: Cost of product sales ......................... 997,511 1,259,056 1,977,965 2,571,594 Cost of contract and other revenue ............ 507,238 272,057 850,867 637,970 Cost of equipment revenue ..................... -- 2,688,811 -- 2,814,009 ----------- ----------- ----------- ----------- Total cost of sales and revenue ........... 1,504,749 4,219,924 2,828,832 6,023,573 ----------- ----------- ----------- ----------- Gross profit (loss) ....................... (93,016) 1,083,938 221,602 977,190 ----------- ----------- ----------- ----------- Operating expenses: General and administrative .................... 388,078 503,140 725,661 947,640 Marketing and selling ......................... 135,208 102,814 245,257 217,399 Research and development ...................... 316,432 545,997 664,126 927,952 ----------- ----------- ----------- ----------- Total operating expenses .................. 839,718 1,151,951 1,635,044 2,092,991 ----------- ----------- ----------- ----------- Loss from operations ...................... (932,734) (68,013) (1,413,442) (1,115,801) ----------- ----------- ----------- ----------- Other income (expense): Interest income ............................... 74,875 183,921 178,163 358,611 Interest expense .............................. (49,012) (30,048) (107,715) (64,768) Other ......................................... 240 -- 256 -- ----------- ----------- ----------- ----------- Total other income ........................ 26,103 153,873 70,704 293,843 ----------- ----------- ----------- ----------- Profit (loss) before income taxes ......... (906,631) 85,860 (1,342,738) (821,958) Income tax expense .............................. -- -- 1,256 1,256 ----------- ----------- ----------- ----------- Net profit (loss) ......................... $ (906,631) $ 85,860 $(1,343,994) $ (823,214) =========== =========== =========== =========== Net profit (loss) per common share: Basic.......................................... $ (0.17) $ 0.01 $ (0.26) $ (0.12) =========== =========== =========== =========== Diluted ....................................... $ (0.17) $ 0.01 $ (0.26) $ (0.12) =========== =========== =========== =========== Weighted average number of common shares outstanding: Basic .......................................... 5,221,257 6,738,536 5,207,301 6,704,814 =========== =========== =========== =========== Diluted ........................................ 5,221,257 7,071,017 5,207,301 6,704,814 =========== =========== =========== ===========
See accompanying notes to financial statements. 4 IBIS TECHNOLOGY CORPORATION STATEMENT OF CASH FLOWS (Unaudited)
Six months ended June 30, ----------------------------- 1997 1998 -------------- ------------ Cash flows from operating activities: Net loss .................................................................... $ (1,343,994) $ (823,214) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization ............................................. 1,044,525 955,203 Changes in operating assets and liabilities ............................... (1,144,025) 1,133,353 -------------- ------------ Net cash provided by (used in) operating activities .............................................. (1,443,494) 1,265,342 -------------- ------------ Cash flows from investing activities: Additions to property and equipment ......................................... (2,907,287) (1,421,748) Increase in other assets .................................................... 49,920 63,756 -------------- ------------ Net cash used in investing activities ................................. (2,857,367) (1,357,992) -------------- ------------ Cash flows from financing activities: Payments of capital lease obligations ....................................... (391,717) (228,807) Exercise of stock options ................................................... 50,230 775,451 -------------- ------------ Net cash provided by (used in) financing activities ................... (341,487) 546,644 ------------ ------------ Net increase (decrease) in cash and cash equivalents .................. (4,642,348) 453,994 Cash and cash equivalents, beginning of period ................................. 9,201,016 13,309,823 ------------ ------------ Cash and cash equivalents, end of period ....................................... $ 4,558,668 $ 13,763,817 -------------- ------------ -------------- ------------ Supplemental disclosure of cash flow information: Cash paid during the period for interest .................................... $ 103,484 $ 64,768 -------------- ------------ -------------- ------------
See accompanying notes to financial statements. 5 IBIS TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) (1) Interim Financial Statements The accompanying financial statements are unaudited, except for the Balance Sheet as of December 31, 1997, and have been prepared by the Company in accordance with generally accepted accounting principles. In the opinion of management, the interim financial statements include all adjustments which consist only of normal and recurring adjustments, necessary for a fair presentation of the Company's financial position and results of operations. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company as of and for the year ended December 31, 1997 which are included in the Annual Report on Form 10-K. (2) Revenue Recognition Product sales are recognized upon shipment. Revenue derived from consulting services is recognized upon performance. Contract and equipment revenue is recognized on the percentage-of-completion method. Provisions for anticipated losses are made in the period in which such losses become determinable. Unbilled revenue represents equipment and contract revenue earned but not yet billable based on the terms of the contract which include shipment of the product, achievement of milestones or completion of the contract. (3) Inventories Inventories consist of the following:
December 31, June 30, 1997 1998 ----------- ---------- Raw materials .................. $ 221,378 $ 256,271 Work in process .......... 105,607 61,036 Finished goods ........... 160,046 177,774 ---------- ---------- Subtotal wafer inventory $ 487,031 $ 495,081 Equipment inventory -- $4,470,523 ---------- ---------- Total inventories $ 487,031 $4,965,604 ========== ==========
Equipment inventory at June 30, 1998 was classified as property and equipment in prior financial statements. 6 IBIS TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) (4) Earnings Per Share Reconciliation The reconciliation of the numerators and denominators of the basic and diluted net income (loss) per common share computations for the Company's reported net income (loss) is as follows:
Three months ended Six months ended June 30, June 30, ------------------------------------ --------------------------- 1997 1998 1997 1998 --------------- -------------- --------------------------- Basic net income (loss) ................. $ (906,631) $ 85,860 $ (1,343,994) $ (823,214) =================== ================= ==================== =========== Weighted average common shares outstanding-basic ............. 5,221,257 6,738,536 5,207,301 6,704,814 =================== ================= ==================== =========== Net additional common shares upon assumed exercise of stock options and warrants -- 332,481 -- -- ------------------- ----------------- -------------------- ----------- Weighted average common shares outstanding-diluted ........... 5,221,257 7,071,017 5,207,301 6,704,814 =================== ================= ==================== =========== Net income (loss) per common share Basic .......................... $ (0.17) $ 0.01 $ (0.26) $ (0.12) =================== ================= ==================== =========== Diluted ........................ $ (0.17) $ 0.01 $ (0.26) $ (0.12) =================== ================= ==================== ===========
7 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Ibis Technology Corporation ("Ibis" or the "Company") was formed in October 1987 and commenced operations in January 1988. The Company's initial activities consisted of producing and selling SIMOX-SOI wafers and conducting funded and unfunded research and development activities. This research led to the Company's development of a proprietary second generation implanter, the Ibis 1000, and to other proprietary process technology. Until 1993, much of the Company's revenue was derived from research and development contracts and sales of SIMOX-SOI wafers for military applications. Since 1993, there has been a shift in revenue to sales of SIMOX-SOI wafers for commercial applications. For the six months ended June 30, 1998 and for the fiscal year ended December 31, 1997, commercial product sales (measured in dollar volume) represented 78% and 83%, respectively, of total product sales compared with 48% of total product sales for the fiscal year ended December 31, 1993. To date, most customers of the Company that have purchased wafers for what the Company believes are commercial applications have done so solely for the purpose of characterizing and evaluating the wafers. Thus, historical sales are not necessarily indicative of future operations because such sales would not be considered of a recurring nature. In the second quarter of 1997, however, the Company announced that two of its customers had indicated their intentions to adopt SIMOX-SOI technology in commercial products. During the second quarter of 1998, the Company recognized revenue from the sale of two Ibis 1000 implanters to a major semiconductor manufacturer. The Company also received a confirming purchase order and a deposit for one Ibis 1000 implanter from another customer during this quarter. There were no equipment sales in 1997. During 1997, the Company experienced quarterly fluctuations in wafer sales due to reduced wafer requirements from one of the Company's customers. In addition, repair and maintenance on the first Ibis 1000, use of the second Ibis 1000 for SIMOX-SOI development, a mismatch of capacity and wafer size requirements of customer orders and dependence on a limited number of customers all contributed to the quarterly fluctuation in wafer sales. The Company may continue to see fluctuations in revenue due to equipment sales, shifts in customer demands during various stages of the SIMOX-SOI sales cycle and until the Company has a sufficient number of Ibis 1000's on-line such that specific implanters can be dedicated to the various products, sizes and continued research and development efforts. The Company currently has two Ibis 1000 oxygen implanters, one of which was funded by Motorola Corporation and must first be used to serve Motorola's production requirements. One Ibis 1000 implanter is currently undergoing customer acceptance and three implanters are under construction and are at various stages of completion. During the second quarter ended June 30, 1998, the Company recognized revenue on two of these implanters using the percentage-of-completion method. The Company anticipates that the remaining revenue on these two implanters and one additional implanter will be recognized during the next three quarters as construction and/or milestones are completed. The remaining implanter is anticipated to be completed in the first half of 1999 and will be used for research and development and to increase the Company's internal production capacity. During the year ended December 31, 1997, the Company 8 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) phased the two NV-200 implanters out of production. Consequently, all SIMOX-SOI wafers are being produced on the Ibis 1000's. As the Company operates below capacity or expands its production capacity in anticipation of expected increases in demand, its gross margins on product sales will initially be adversely affected until the implanters operate at or near full capacity. There can be no assurance, however, that the Company will succeed in attracting a sufficient number of customers and/or orders for SIMOX-SOI wafers to offset such production costs or that the Company will prevail over its competition. Results of Operations Second Quarter Ended June 30, 1998 Compared to Second Quarter Ended June 30, 1997 Product Sales. Product sales increased $498,430, or 97%, to $1,011,010 for the second quarter ended June 30, 1998 from $512,580 for the second quarter ended June 30, 1997. The increase in product sales is attributable to increased wafer sales to Japan and a new government program that was entered into in the first quarter of 1998. In addition, wafer production related issues contributed to the decreased level of product sales during the second quarter of 1997. The first event was a component failure and subsequent upgrade on the first Ibis 1000 implanter which resulted in a ten-week production loss. The other matter was the dedication of the second Ibis 1000 to process development for a specific customer. This decision resulted in a six-week loss of production. Contract and Other Revenue. Contract and other revenue decreased for the second quarter ended June 30, 1998 to $292,852 from $899,153 for the second quarter ended June 30, 1997, a decrease of $606,301 or 67%. The decrease in contract and other revenue is attributable to decreased revenues derived from a contract for consulting services for Orion Equipment, Inc. ("Orion"). Revenue from the Orion contract amounted to approximately $305,000 and $21,000 in the second quarter of 1997 and 1998, respectively. Revenues under the Orion contract have decreased substantially since the beginning of 1998 and primarily all of the work under the Orion contract was completed by the end of the second quarter of 1998. During 1997, the Company began selling spare parts to the purchaser of the Ibis 1000 implanter sold in 1996. For the second quarter ended June 30, 1998 the sale of spare parts decreased to $36,245 from $314,190, a decrease of $277,945 or 88%. These sales accounted for 12% of contract and other revenue for the second quarter ended June 30, 1998 as compared to 35% for the second quarter ended June 30, 1997. Equipment Revenue. Equipment revenue of $4,000,000 for the second quarter ended June 30, 1998 represents revenue recognized using the percentage-of-completion method in connection with the sale of two Ibis 1000 implanters. The Company anticipates that the remaining revenue on these two implanters and one additional implanter will be recognized during the next three quarters as construction and/or milestones are completed. There were no equipment sales in 1997. Total Sales and Revenue. Total sales and revenue for the second quarter ended June 30, 1998 was $5,303,862, an increase of $3,892,129, or 276%, from total revenue of $1,411,733 for the second quarter ended June 30, 1997. This increase resulted from the equipment revenue and an increase in product sales which was partially offset by decreased contract and other revenue. 9 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Total Cost of Revenue. Cost of product sales for the second quarter ended June 30, 1998 was $1,259,056, as compared to $997,511 for the second quarter ended June 30, 1997, an increase of $261,545 or 26%. Cost of contract revenue for the second quarter ended June 30, 1998 was $272,057, as compared to $507,238 for the second quarter ended June 30, 1997, a decrease of $235,181, or 46%. Cost of equipment revenue for the second quarter ended June 30, 1998 was $2,688,811. The gross margin for all sales was 20% for the second quarter ended June 30, 1998 as compared to negative 7% for the second quarter ended June 30, 1997. The increase in gross margin is primarily attributable to the profit recognized from equipment revenue in the quarter. The improvement in gross margin is also the result of the fundamental fixed cost nature of product sales which were absorbed by more wafers during the second quarter of 1998 compared to the same quarter in the previous year. The product mix during this year's second quarter consisted of a greater concentration of larger wafer sizes which resulted in a higher average sales price per wafer. Cost of sales for contract and other revenue consists of labor and materials expended during the quarter. Contract margins can vary from year to year based on the mix of cost-type, firm fixed price and cost share arrangements. Additionally, different fee arrangements and indirect cost absorption can contribute to margin variability. General and Administrative Expenses. General and administrative expenses for the second quarter ended June 30, 1998 were $503,140 (or 9% of total revenue) as compared to $388,078 (or 27% of total revenue) for the second quarter ended June 30, 1997, an increase of $115,062, or 30%. The increase is due to increases in payroll and payroll related expenses. Also contributing to the increase were higher professional service fees incurred in the quarter. Marketing and Selling Expenses. Marketing and selling expenses for the second quarter ended June 30, 1998 were $102,814 (or 2% of total revenue) as compared to $135,208 (or 10% of total revenue) for the second quarter ended June 30, 1997, a decrease of $32,394, or 24%. Research and Development Expenses. Internally funded research and development expenses increased by $229,565, or 73%, to $545,997 (or 10% of total revenue) for the second quarter ended June 30, 1998, as compared to $316,432 (or 22% of total revenue) for the second quarter ended June 30, 1997. The increase is primarily due to an increase in materials along with increases in payroll expenses. In the prior year quarter a greater percentage of personnel was devoted to funded projects, including the Orion contract, and thus payroll and payroll related expenses for these personnel were included in cost of contract and other revenue. Loss from Operations. The loss from operations for the second quarter ended June 30, 1998 was $68,013 as compared to a loss of $932,734 for the second quarter ended June 30, 1997, a decrease of $864,721, or 93%. The decrease in the loss from operations is the result of equipment revenue and increase in product sales revenue which were partially offset by the increase in operating expenses. Other Income (Expense). Total other income for the second quarter ended June 30, 1998 was $153,873 as compared to $26,103 for the second quarter ended June 30, 1997, an increase of $127,770, or 489%. The increase in total other income is attributable to interest income earned on the proceeds from the August, 1997 exercise of its Public Warrants as well as reduced interest expense on capitalized leases. 10 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Profit Before Income Taxes. The profit before income taxes was $85,860 for the second quarter ended June 30, 1998, as compared to a loss of $906,631 for the second quarter ended June 30, 1997. The improvement of $992,491, or 110%, is due to equipment revenue recognized in the quarter ended June 30, 1998 and the increased product sales and was partially offset by decreased contract and other revenue. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 Product Sales. Product sales increased $391,180, or 24%, to $2,017,708 for the six months ended June 30, 1998 from $1,626,528 for six months ended June 30, 1997. The increase in product sales is attributable to increased wafer sales to Europe, Japan and government programs. Sales in the United States remained constant. Also contributing to the increase in product sales compared to the prior year period were wafer production related issues arising during the second quarter of 1997 which had a negative impact on wafer sales during that period. Contract and Other Revenue. Contract and other revenue decreased for the six months ended June 30, 1998 to $783,055 from $1,423,906 for the six months ended June 30, 1997, a decrease of $640,851, or 45%. This decrease is attributable to decreased revenues derived from a contract for consulting services related to implementation of the magnetic scanning technology previously licensed to this customer, Orion. Revenue from the Orion contract amounted to approximately $627,000 and $157,000 in the first half of 1997 and 1998 respectively. Revenues under the Orion contract have decreased substantially since the beginning of 1998 and primarily all of the work under the Orion contract was completed by the end of the second quarter of 1998. During 1997 the Company began selling spare parts to the purchaser of the Ibis 1000 implanter, a major semiconductor manufacturer. These sales accounted for 28% of contract and other revenue for the six months ended June 30, 1997 but were only 15% of the contract and other revenue for the six months ended June 30, 1998. Equipment Revenue. Equipment revenue of $4,200,000 was recognized using the percentage of completion method for the six months ended June 30, 1998 for the sale of two Ibis 1000 implanters to a major semiconductor manufacturer. There was no equipment revenue recognized in 1997. There was also a commitment and deposit received from another customer for the purchase of one Ibis 1000 implanter. The Company anticipates that the remaining revenue on the two implanters and the additional implanter will be recognized during the next three quarters as construction and/or milestones are completed. Total Sales and Revenue. Total sales and revenue for the six months ended June 30, 1998 was $7,000,763, an increase of $3,950,329, or 130%, from total revenue of $3,050,434 for the six months ended June 30, 1997. This increase resulted from the recognition of equipment revenue and the increase in product sales and was partially offset by decreased contract and other revenue. Total Cost of Revenue. Cost of product sales for the six months ended June 30, 1998 was $2,571,594, as compared to $1,977,965 for the six months ended June 30, 1997, an increase of $593,629 or 30%. Cost of contract revenue for the six months ended June 30, 1998 was $637,970, as compared to $850,867 for the six months ended 11 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) June 30, 1997, a decrease of $212,897, or 25%. Cost of equipment revenue for the six months ended June 30, 1998 was $2,814,009. The gross margin for all sales was 14% for the six months June 30, 1998 as compared to 7% for the six months ended June 30, 1997. The increase in gross margin is attributable to the profit recognized from equipment revenue in the first six months ended June 30, 1998. Cost of sales for contract and other revenue consists of labor and materials expended during the period. Contract margins can vary from year to year based on the mix of cost type, firm fixed price and cost share arrangements. Additionally, different fee arrangements and indirect cost absorption can contribute to margin variability. General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 1998 were $947,640 (or 14% of total revenue) as compared to $725,661 (or 24% of total revenue) for the six months ended June 30, 1997, an increase of $221,979, or 31%. The increase is due to increases in payroll, payroll related expenses and professional service fees. Marketing and Selling Expenses. Marketing and selling expenses for the six months ended June 30, 1998 were $217,399 (or 3% of total revenue) as compared to $245,257 (or 8% of total revenue) for the six months ended June 30, 1997, a decrease of $27,858 or 11%. Research and Development Expenses. Internally funded research and development expenses increased by $263,826, or 40%, to $927,952 (or 13% of total revenue) for the six months ended June 30, 1998, as compared to $664,126 (or 22% of total revenue) for the six months ended June 30, 1997. The increase is primarily due to increases in payroll along with materials. In the prior year six-month period, a greater percentage of personnel was devoted to funded projects, including the Orion contract, and thus payroll and payroll related expenses for these personnel were included in the cost of contact and other revenue. Loss from Operations. The loss from operations for the six months ended June 30, 1998 was $1,115,801 as compared to a loss of $1,413,442 for the six months ended June 30, 1997, a decrease of $297,641 or 21%. The decrease in loss from operations is the result of recognition of equipment revenue and increased product sales which were partially offset by the increase in operating expenses. Other Income (Expense). Total other income for the six months ended June 30, 1998 was $293,843 as compared to $70,704 for the six months ended June 30, 1997. The increase in total other income is attributable to interest income earned on the proceeds from the August 1997 exercise of its Public Warrants as well as reduced interest expense on capital leases. Loss Before Income Taxes. The loss before income taxes was $821,958 for the six months ended June 30, 1998, as compared to $1,342,738 for the six months ended June 30, 1997, a decrease of $520,780 or 39%. The decrease in loss before income taxes is the result of equipment revenue recognized under the percentage-of-completion method in the first six months of 1998 and the increased product sales offset by the increase in operating expenses. 12 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Impact of the Year 2000 Issue The Year 2000 Issue refers to potential problems with computer systems or any equipment with computer chips or software that use dates where the date has been stored as just two digits (e.g., 98 for 1998). On January 1, 2000, any clock or date recording mechanism incorporating date sensitive software which uses only two digits to represent the year may recognize a date using 00 as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruption of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar business activities. The Company is in the process of conducting a review of its internal information systems to determine the extent of any Year 2000 problem. The Company is still gathering information, but based on such review to date, the Company does not believe that the impact of any Year 2000 problem will be material, because its principal information systems appear to correctly define the year 2000. Although there exists the possibility that Year 2000 issues will be identified, based on such review to date, the Company does not currently expect that any such problems will have a material adverse effect on the Company's future operating results or financial condition. The Company is in the process of contacting its major suppliers and customers in an effort to determine the extent to which the Company may be vulnerable to those parties' failure to timely correct their own Year 2000 problems. To date, the Company is unaware of any situations of noncompliance that would materially adversely affect its operations or financial condition. There can be no assurance, however, that instances of noncompliance which could have a material adverse effect on the Company's operations or financial condition will be identified; that the systems of other companies with which the Company transacts business will be corrected on a timely basis; or that a failure by such entities to correct a year 2000 problem or a correction which is incompatible with the Company's information systems would not have a material adverse effect on the Company's operations or financial condition. Liquidity and Capital Resources As of June 30, 1998, the Company had cash and cash equivalents of $13,763,817. During the six months ended June 30, 1998, the Company generated $1,265,342 in cash from operating activities as compared to cash consumed by operating activities in the amount of $1,443,494 for the same period in 1997. Depreciation and amortization expense for the six months ended June 30, 1998 and 1997 was $955,203 and $1,044,525, representing 14% and 34% of total revenue, respectively. Due to the capital intensive nature of the Company's business and the anticipated expansion of its facilities and production capacity, management expects that depreciation and amortization will continue to be a significant portion of its expenses. To date, the Company's working capital requirements have been funded through debt and equity financings, warrant conversions, equipment lines of credit, a working capital line of credit, a term loan, sale leaseback arrangements, collaborative relationships and government contracts. At June 30, 1998, the Company had commitments to purchase approximately $749,000 in material or subassemblies to be used to manufacture the additional Ibis 1000 implanters and approximately $142,000 in capital equipment. During the six month period ending June 30, 1998, the Company received deposits on the sale of two implanters in the amount of $3 million. 13 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) On July 24, 1997, the Company notified the holders of its 1,380,000 publicly traded Redeemable Common Stock Purchase Warrants (the "Public Warrants") and its 120,000 privately held Underwriter Redeemable Common Stock Purchase Warrants (the "Underwriter Warrants") that it would redeem these Warrants on August 26, 1997 at the redemption price of $.20 per Warrant. Prior to August 26, 1997, the holder of a Public Warrant had the right to exercise such Warrant to acquire 1.044 shares of the Company's Common Stock at a price of $8.05 per share and the holder of an Underwriter Warrant had the right to exercise such Warrant to acquire 1.09 shares of Common Stock at a price of $9.26 per share. The Company received net proceeds of approximately $10.1 million through the exercise of its Public Warrants. The holders of approximately 92% of these Warrants elected to exercise the Warrants rather than have them redeemed. Approximately 1,327,000 shares of Common Stock were issued upon exercise of the Public Warrants. None of the Underwriter Warrants were exercised. The Company anticipates that it may be required to raise substantial additional capital in the future in order to finance further expansion of its manufacturing capacity and its research and development programs. The Company's existing cash resources together with funds generated from operations are believed to be sufficient to support the Company's operations on their anticipated scale for at least the next twelve months. Management of the Company currently believes that this anticipated scale of operations will include additional Ibis 1000 oxygen implanters (in addition to its two oxygen implanters currently on-line), the purchase of support equipment and expansion of the Company's facilities. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Under this concept, all revenues, expenses, gains and losses recognized during the period are included in income, regardless of whether they are considered to be results of operations of the period. Effective January 1, 1998 the Company adopted SFAS 130, which had no impact on the financial statements of the Company. In June 1997, the Financial Accounting Standards Board issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the way that public business enterprises report selected information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131, which becomes effective for the Company in its year ending December 31, 1998, is currently not expected to have a material impact on the Company's financial statements and footnote disclosures. 14 IBIS TECHNOLOGY CORPORATION PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Effective January 1, 1998, the Company adopted American Institute of Certified Public Accountants' Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1) which establishes guidelines for the accounting for the costs of all computer software developed or obtained for internal use. SOP 98-1 must be applied on a prospective basis as of the adoption date. Under SOP 98-1, certain consulting, payroll and related costs for company consultants or employees working on the application of development stage projects as defined in the SOP for internal use computer software must be capitalized and amortized over the expected useful life of the software. Previously, the Company had expensed these costs as incurred. The adoption of SOP 98-1 did not have a material impact on the Company's results of operations in the first six months of 1998 or financial position at June 30, 1998. Effects of Inflation The Company believes that over the past three years inflation has not had a significant impact on the Company's sales or operating results. Business Outlook The Form 10-Q contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. Such factors and uncertainties include, but are not limited to, the uncertainty that the performance advantages of SIMOX-SOI wafers will continue to be realized commercially or that a commercial market for SIMOX-SOI wafers will continue to develop; the dependence by the Company on key customers (during 1995, 1996 and 1997, revenues from four customers averaged in the aggregate between 25% and 68% of the Company's revenues, so that the loss of one or more of these major customers and the failure of the Company to obtain other sources of revenue could have a material adverse impact on the Company); the dependence by the Company on revenues from its consulting arrangement with Orion (during 1995, 1996, and 1997, consulting revenues were approximately 0%, 2%, and 26%, respectively, of the Company's revenues, so that the loss of Orion as a source of consulting fees by the end of the second quarter of 1998 and the failure of the Company to obtain other sources of consulting revenue could have a material impact on the Company); the loss of the services of one or more of the Company's key individuals, which could have a material adverse impact on the Company; the dependence by the Company on key suppliers, so that the loss of services of one or more suppliers could have a material adverse impact on the Company; the development of competing or superior technologies and products from manufacturers, many of which have substantially greater financial, technical and other resources than the Company; the Company's lack of experience in producing commercial quantities of its products at acceptable costs; the Company's ability to develop and maintain strategic alliances for the manufacturing, marketing and distribution of its products; the cyclical nature of the semiconductor industry, which has negatively affected the Company's sales of SIMOX-SOI wafers during industry downturns and which could continue to do so in the future; the limited availability of critical materials and components for wafer products and implanters, as a shortage of such materials and components or a significant increase in the price thereof could have a material adverse effect on the Company's business and results of operations; the availability of additional capital to fund expansion on acceptable terms, if at all; and general economic conditions. 15 IBIS TECHNOLOGY CORPORATION PART II OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities None Item 3 - Defaults upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of the Company was held on May 14, 1998. The following matters were voted on at the meeting: (1) Three persons were elected to the Board of Directors of the Company to serve for a term ending in the Year 2001 and until their successors are duly elected and qualified. The following is a table setting forth the number of votes cast for and withheld for each nominee for Director:
Name Vote For Vote Withheld ---- --------- ------------- Dimitri Antoniadis 5,689,175 163,566 Robert L. Gable 5,689,175 163,566 Martin J. Reid 5,690,175 162,566
Donald F. McGuinness and Peter H. Rose continue to serve as Directors for terms which expire in 1999 and Richard Hodgson and Geoffrey Ryding continue to serve as Directors for terms which expire in 2000. (2) The Stockholders of the Company approved the adoption of the Company's 1997 Employee, Director and Consultant Stock Option Plan and the reservation of 750,000 shares of Common Stock for stock options which may be granted under the 1997 Plan. This proposal was approved with 2,255,632 votes for, 402,938 votes against, 42,992 abstentions and 3,151,179 broker non-votes. (3) The Stockholders of the Company ratified the appointment of KPMG Peat Marwick LLP as the Company's independent public accountants for the fiscal year ending December 31, 1998. This proposal was approved with 5,767,490 votes for, 63,471votes against and 21,780 abstentions. (4) The Stockholders of the Company approved an amendment to the Company's Articles of Organization to increase the number of authorized shares of Common Stock from 10,000,000 shares to 20,000,000 shares. This proposal was approved with 5,700,999 votes for, 118,594 against and 33,148 abstentions. 16 IBIS TECHNOLOGY CORPORATION PART II OTHER INFORMATION Item 5 - Other Information To be considered for inclusion in the proxy statement relating to the Annual Meeting of stockholders to be held in 1999, stockholder proposals must be received no later than December 1, 1998. To be considered for presentation at the Annual Meeting, although not included in the proxy statement, proposals must be received no later than March 15, 1999 and no earlier than February 13, 1999. All stockholder proposals should be marked for the attention of Clerk, Ibis Technology Corporation, 32 Cherry Hill Drive, Danvers, MA 01923. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits furnished as Exhibits hereto: +10.39 Purchase Order, dated April 14, 1998, from Mitsubishi Materials Silicon Corporation. +10.40 Task Order, dated April 10, 1998, between the Registrant and International Business Machines Corporation ("IBM"). +10.41 Licensing and Development Agreement, dated June 9, 1998, between the Registrant and IBM. 27 Financial Data Schedule. (b) Reports on Form 8-K The Company filed with the Securities and Exchange Commission (the "Commission") on April 3, 1998 a Current Report on Form 8-K for the April 2, 1998 event reporting that Dr. Julian Blake had joined the Company as its Director of Technology. The Company filed with the Commission on May 13, 1998 a Current Report on Form 8-K for the May 11, 1998 event reporting the financial results for the first quarter ended March 31, 1998. The company also announced that it has received a confirming purchase order for an Ibis 1000 implanter from Mitsubishi Materials Corporation through its Mitsubishi Materials Silicon Corporation Subsidiary. A letter of intent for this purchase was previously disclosed in the Company's March 5, 1998 press release. The Company filed with the Commission on June 10, 1998 a Current Report on Form 8-K for the June 9, 1998 event reporting that it had completed the sale of two Ibis 1000 implanters to IBM Corporation in a transaction valued at approximately $8 million. The sale to IBM includes an equipment licensing and development agreement which gives IBM the right to a royalty-bearing, non-exclusive license to supplement Ibis equipment manufacturing capacity. The purchase orders for the two implanters were previously disclosed in Ibis press released dated March 5, 1998. --------------- + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 17 IBIS TECHNOLOGY CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Ibis Technology Corporation Date: August 13, 1998 By: /s/Debra L. Nelson ----------------------- Debra L. Nelson Chief Financial Officer, Treasurer and Clerk (principal financial and accounting officer) Date: August 13, 1998 By: /s/Thomas F. Lacey ---------------------- Thomas F. Lacey Controller and Assistant Treasurer 18 IBIS TECHNOLOGY CORPORATION EXHIBIT INDEX
Exhibit No. Description Page - ----------- ----------- ---- +10.39 Purchase Order, dated April 14, 1998, from Mitsubishi Materials Silicon Corporation. 20 +10.40 Task Order, dated April 10, 1998, between the Registrant and International Business 23 Machines Corporation ("IBM"). +10.41 Licensing and Development Agreement, dated June 9, 1998, between the Registrant and IBM. 41 27 Financial Data Schedule 65
--------------- + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 19 EX-10.39 2 EXHIBIT 10.39 Exhibit 10.39 IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.39 PORTIONS OF THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. [LETTERHEAD] April 14, 1998 IBIS TECHNOLOGY CORPORATION 32A Cherry Hill Drive Danvers, MA 01923 U.S.A. Attention: Mr. Al Alioto, Vice President, Sales & Marketing Re: Purchase Order for This 1000 Implanter Dear Sirs: This letter serves as our formal purchase order for the Ibis 1000 Implanter, the specifications of which are summarized in the Appendix A attached, according to the following terms and conditions. (1) Purchase Price: [ ] (2) Payment Terms: - [ ] within [ ] days after Ibis' acceptance of this purchase order - [ ] upon completion of assembly, test and demonstration of the designed capability to produce good quality SIMOX wafers at Ibis to the specifications agreed between MSIL and Ibis - Balance upon installation test run and acceptance by MSIL in Japan, such tests and acceptance criteria to be agreed between MSIL and Ibis prior to shipment. MITSUBISHI MATERIALS SILICON CORPORATION 314 NISHISANGAO NODA-SHI CHIBA-KEN 278 JAPAN 20 [LETTERHEAD] (3) Spares and Services Separate purchase orders will be placed for spare parts and services. We will look forward to receiving your acceptance of this order. We would also like to receive your latest delivery schedule for the equipment. With. best regards. Sincerely yours, /s/ Yunchi Furukawa Yunchi Furukawa Managing Director Attachment 21 Exhibit 10.40 APPENDIX A Ibis 1000 Implanter Specification Summary [ ] 22 EX-10.40 3 EXHIBIT 10.40 Exhibit 10.40 IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.40 PORTIONS OF THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Task Order #1 to Equipment Purchase Master Agreement No. 07482 This Task Order Agreement sets forth the terms and conditions of an individual Equipment Purchase. All of the terms and conditions of the Equipment Purchase Master Agreement No. 07482 between the parties ("EPMA") shall apply unless superseded herein. 1.0 STATEMENT OF WORK IBIS shall build, test, deliver, install and sell to IBM, and IBM shall buy, two (2) IBIS-1000 oxygen implantation systems (hereinafter referred to as "Equipment" arid "System #1" (with respect to the first system purchased and sold) and "System #2" (with respect to the second system purchased and sold). System #1 will initially be put into service at IBIS' facility in Danvers, MA as specified below. System #2 will be delivered to IBM'S East Fishkill, New York facility as specified below or other IBM facility as specified by IBM. The term "Equipment" shall also include all Deliverables specified in the Section entitled DELIVERABLES in the Equipment Purchase Master Agreement. IBM may, from time to time and in its sole discretion, order additional IBIS-1000 or other model oxygen implantation systems under the terms of this Task Order. Nothing in this Agreement shall obligate IBM to purchase additional systems from IBIS. 23 The Equipment is to be provided in accordance with the provisions of the Equipment Purchase Master Agreement, this Task Order Agreement, Attachments and Appendices, as well as any IBM Purchase Orders issued hereunder. IBIS agrees that the price for the Equipment is that specified in the Section entitled PRICING below. 2.0 PRICING - Price for System #1 - [ ] - Price for System #2 [ ] 2.1 IBM shall pay IBIS a transfer fee of [ ] in the event that IBM moves System #1 from IBIS' facility to IBM's facility or accepts a replacement system pursuant to Section 11.2. 3.0 IBIS SYSTEMS DELIVERY DATES System #1 will be tested and put into service at IBIS' facility in Danvers, MA as specified in Section 4 below. IBIS will use best efforts to meet the schedule in Section 4.2 below, but in no event shall System #2 be delivered to IBM later than [ ]. Time is of the essence. 4.0 COMPLETION SCHEDULE 24 Major milestones for performing this Agreement and corresponding completion dates are set out in the following schedule. A technical review shall be conducted at each scheduled Milestone unless otherwise agreed to by IBM and IBIS. Additional reviews may be conducted if deemed necessary by IBM and IBIS. The agenda for the reviews shall include a status of the work specified to be performed to date, significant problems encountered, proposed and actual solution, as well as anticipated problems. 4.1 Schedule for System #1 Preliminary Test [ ] Final Test [ ] 4.2 Schedule for System #2 Design Review [ ] Equipment assembly [ ] Preliminary Test (IBIS M1000 Specification) [ ] Equipment Shipment to IBM [ ] Equipment Installation at IBM [ ] Final Test (Test to meet specifications as agreed upon between IBIS & IBM) [ ] 25 5.0 PURCHASE ORDERS/INVOICES 5.1 Upon execution of this Task Order for Equipment, Purchase Order Nos. 990NU3K and 990NV7C will be delivered to IBIS authorizing the work on System #1 and System #2, respectively. Each Purchase Order shall reference the Equipment Purchase Master Agreement, this Task Order Agreement, and General Procurement specifications for Process Equipment. 5.2 IBIS hereby grants to IBM the options to purchase up to [ ] additional new fully functional SIMOX systems from IBIS' then-current product line (the model(s) to be selected by IBM) under this Task Order Agreement and the Equipment Purchase Master Agreement during the period beginning with the Effective Date and ending on [ ]; such Option to be exercised by the sending of IBM purchase order(s) to IBIS for such system(s); each such system to be delivered no later than [ ]after delivery of the applicable purchase order by IBM; and at a price that is the lower of (a) [ ] and (b) a price determined by Section 10.2 of the EPMA. IBM and IBIS will negotiate if more than [ ]identical SIMOX systems are required in a twelve (12) month period. 5.3 IBIS hereby agrees that IBM and/or its AFFILIATES shall have no obligation whatsoever (i) to purchase any goods (other than Systems #1 and #2) or services from IBIS or (ii) to exercise the option in Section 5.2. 5.4 IBIS shall send all invoices to the following address: 26 IBM Corporation Accounts Payable Dept. P.O. Box 8098 Endicott, NY 13761-8098 6.0 EXECUTION This Task Order shall commence as of the Date of Execution below and shall expire on December 31, 2003, unless extended by a formally executed written amendment or unless terminated pursuant to Section entitled TERMINATION of the Equipment Purchase Master Agreement. 7.0 COORDINATORS 7.1 All communications and notices between the parties shall be made or given to the party's Purchasing Coordinator assigned as stated below: In the case of IBM: Vic Cole In the case of the IBIS: Al Alioto 7.2 The Technical Coordinator's assigned by each party are: For IBM: Devendra Sedana, Scott Price For IBIS: Al Alioto 27 8.0 Deliberately left blank 9.0 INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION - See License Agreement/EPMA 10.0 INTELLECTUAL PROPERTY RIGHTS 10.1.1 - IBIS agrees to deliver all of the data specified for delivery to IBM in Section 5.0 entitled "DELIVERABLES" of the Equipment Purchase Master Agreement and any additional data agreed by the parties to be delivered to IBM. 11.0 CONSIGNMENT 11.1 System #1 is hereby consigned by IBM to IBIS, subject to the terms of this Agreement, including Appendix A. 11.2 IBIS grants IBM the option, to be exercised, if at all, in IBM's sole discretion: i) to have IBIS transfer SIMOX System #1 to IBM's facility upon one hundred and fifty (150) days' notice to IBIS; or ii) to transfer title to SIMOX System #1 to IBIS and in exchange to receive and have delivered to IBM's facility a new SIMOX system of a model then-offered by IBIS (to be selected by IBM) upon payment of the amount set forth in Section 2.1, as the total consideration) by giving five 28 (5) months notice of its election to IBIS. The terms of such transfer of title of IBM'S consigned SIMOX System #1 to IBIS shall be as specified in Appendix B. 12.0 SURVIVAL To extent a particular right or obligation herein does not have a specifically identified survival period, all rights and obligations which by their nature survive the expiration or termination of this Task Order will remain in effect beyond any expiration or termination for the period reasonably necessary to accomplish their purpose and shall bind and inure to the benefit of the parties, their legal representatives, successors and assigns. 13.0 CHANGES OR AMENDMENTS The Task Order may not be changed or amended except by the signed written agreement of the authorized representatives of both parties. Accepted and Agreed to: INTERNATIONAL BUSINESS IBIS TECHNOLOGY MACHINES CORPORATION CORPORATION By: /s/ Michael J. Flaherty By: /s/ Al Alioto ---------------------------------- ------------------------------ Print Name: Michael J. Flaherty Print Name: Al Alioto -------------------------- ----------------------- 29 Title: Mgr. Capital Equipment Procurement Title: Vice President of Sales and Marketing Date: 5/14/98 Date: April 11, 1998 30 APPENDIX A SUPPLEMENTAL TERMS AND CONDITIONS FOR CONSIGNMENT OF IBM'S SYSTEM #1 The following provisions of this Appendix A to Task Order #1 supersede the terms in Appendix C of Equipment Purchase Master Agreement No. 07482 only for the SIMOX System #1 consigned to IBIS by IBM and activities performed under the terms of Task Order #1. Pursuant to Section 11.1 of Task Order #1, IBM shall consign IBM's System #1 to IBIS subject to the following terms and conditions: 1.0 - System #1 shall remain the property of IBM. IBIS shall not pledge, mortgage, encumber, or assign System #1 in any manner, or transfer System #1 to a third party, or exercise any right of ownership in System #1 or perform any act inconsistent with IBM'S ownership thereof, without IBM'S written approval. 2.0 - IBIS may use System #1 for the performance of implantation for other customers, provided that orders issued by IBM for implantation of wafers shall have absolute priority over orders from other customers of IBIS, and IBIS shall immediately process such IBM wafers. 31 3.0 - IBM shall have the right to inspect periodically System #1. Such inspections shall be conducted during normal business hours, subject to reasonable notice. 4.0 IBIS shall maintain records of all transactions involving the System #1 and keep these records on 51. for a minimum of three (3) years from the date the work or services being performed have Inn completed. During such three (3) year period, IBM may audit these records during reasonable business hours, subject to reasonable notice. 5.0 - IBIS shall transfer System #1 to IBM's facility in accordance with 11.2 of Task Order or within 60 days of termination of EPMA. 6.0 IBIS shall be responsible for any damage to System #1 while it is consigned to IBIS. System #1 shall be delivered to IBM in working order and in as good condition as when first put into service at IBIS facility (pursuant to Section 5.0) reasonable wear and tear accepted, and IBIS shall make any repairs or refurbishing required. The warranty period for System #1 shall extend for the entire period during which System #1 remains at IBIS' facility and for an additional period of six (6) months after System #1 is installed at IBM's facility and accepted by IBM. 6.1 Delivery of System #1 to IBM hereunder shall be to IBM'S dock at East Fishkill, New York or to any other location IBM may direct. Crating, transportation, and insurance shall be at IBIS' expense. 32 7.0 IBIS agrees to indemnify, defend, and hold harmless, IBM, its officers, directors, agents, and employees, from any and all liability, losses, damages or expenses associated with claims, suits, or actions brought by or on behalf of any third party of any nature, including, but not limited to, personal injury (including death), environmental liability, or property damage arising from, or alleged to arise from IBIS' negligence or other wrongful acts or omissions resulting from or in any way related to this Agreement. For the avoidance of doubt, the obligations of this paragraph also apply to all claims, suits or actions based on the design or operation of System #1. 7.1 IBIS agrees to indemnify, defend, and hold harmless, IBM, its officers, directors, agents, and employees, from any and all liability, losses, damages or expenses associated with claims, suits, or actions brought by or on behalf of any third party of any nature, including, but not limited to, personal injury (including death), environmental liability, or property damage arising from, or alleged to arise from, IBIS' negligence or other wrongful acts or omissions and/or IBM's negligence or other wrongful acts or omissions resulting from or in any way related to work performed by IBIS on System #1 for any person or entity other than IBM. For the avoidance of doubt, the obligations of this paragraph also apply to all claims, suits, or actions based on the design or operation of System #1. 33 8.0 INSURANCE 8.1 IBIS shall purchase, at its own expense, and during the term of this Agreement (unless a longer term is specified) maintain in full force and effect at least the following kinds and minimum amounts of insurance with reputable insurance carriers: a. Workers' compensation insurance in accordance with statutory requirements. b. Comprehensive General Liability insurance, covering any liability for bodily injury, personal injury (including death), and property damage arising from IBIS' operations, its products and services provided hereunder, its assumed liabilities under this Agreement (including contractual indemnities), and its use and operation of its facilities, for limits of not less than $2,000,000.00 per occurrence combined single limit bodily injury and property damage. IBM shall be listed as an additional insured on the policy. IBIS shall maintain the foregoing coverage in full force and effect for at least three years following the expiration of this Agreement. c. Property Damage Insurance covering the IBM SIMOX System #1 located at IBIS' facilities. Such insurance shall be written on an "all risk" of physical loss or damage basis, for the full replacement cost of the covered items and in amounts that meet any coinsurance clause of the policies of insurance. IBM shall be listed as an additional insured and loss payee on the policy. d. Comprehensive Automobile Liability Insurance - third party, bodily injury, property damage with limits of $2,000,000.00 per occurrence for owned, non-owned, and hired vehicles used by IBIS while performing services in connection with this Agreement. IBM shall be listed as an additional insured on the policy. e. Employers Liability coverage with a limit of $1,000,000.00 per occurrence. IBIS shall not commence work until it has furnished IBM with certificates of insurance evidencing the coverage required by this Section. Such certificates must provide that the insurer will give IBM at least thirty (30) days prior written notice of material change in or cancellation of such insurance. IBIS shall indemnify, defend, and hold harmless IBM for all damages sustained by IBM resulting from IBIS' failure to have and maintain the insurance required in this Section. f. Maintenance of the Insurance required in this Section shall in no way be interpreted as relieving IBIS of any responsibility whatsoever under this Agreement. IBIS may secure, at its own expense, such additional insurance as it deems necessary. 34 9.0 If IBIS is unable to deliver System #1 to IBM when requested due to loss or theft, IBIS shall pay IBM the actual cash value of System #1 and explain in detail the circumstances surrounding such failure to deliver. If IBIS is able but, for any reason, fails to deliver upon IBM's request, IBM shall have the right to enter IBIS' premises to remove System #1, and IBIS expressly waives any rights or remedies IBIS has with regard to System #1 including, but not limited to, any right IBIS has to notice and a hearing or to a bond, undertaking, or surely before a writ of replevin, order of seizure, or similar writ or order. IBM shall have all other remedies, at law or in equity. 35 APPENDIX B The following terms and conditions shall govern the exercise of the option in Section 11.2(ii) of Task Order #1. PROPERTY - Any reference to "Property" or "property" herein shall be construed to mean the used SIMOX System #1 located at IBIS' facility. ACCEPTANCE -- The terms and conditions contained herein are the complete and exclusive statement of the terms of any sale to IBIS. IBIS' signature below confirms IBIS' assent to these terms and conditions. No addition to or modification of any of these terms and conditions will be effective unless agreed to in writing by IBM. Any terms and conditions submitted on documents supplied by IBIS shall be deemed non-conforming. WARRANTIES -- ALL PROPERTY IS SOLD ON AN "AS IS" BASIS WITH ALL FAULTS, LATENT AND PATENTS. IBM MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO THE NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT, OR OTHERWISE. IBM shall have no responsibility for shipping, installation, warranty, maintenance, engineering changes or technical support of the property purchased hereunder. 36 PERMITS AND AUTHORIZATIONS REQUIRED BY LAW -- IBIS represent that IBIS possess all the necessary permits and authorizations required to disassemble, remove, transport, resell or otherwise properly dispose of the property being acquired. IBIS agree to comply with all applicable Federal, State and local laws, regulations and ordinances, including but not limited to the regulations of ordinances, including but not limited to the regulations of the United States Department of Commerce relating to the Export of Technical Data, insofar as they relate to IBIS' performance. INDEMNIFICATION -- IBIS agree to indemnify IBM against any and all claims for damages, including costs and attorney's fees, for personal injury (including death), and loss of or destruction or damage to real or tangible personal property arising from IBIS' acts, omissions or misrepresentation, regardless of the form of action brought against IBM. INFRINGEMENT OF PATENTS -- The purchase of property does not convey by implication or otherwise any licenses under any patent, domestic or foreign. IBM makes no representation or warranty that the use of any material, equipment or technical information furnished hereunder will not infringe any patent, trademark, copyright, trade secret, or other proprietary interests of any third party, and it shall be IBIS' sole responsibility to make such determination as is necessary with respect to other rights of third parties. IBM shall not be held to any liability with respect to any claim made by any third party on account of, or arising from, the use of such material, equipment, or technical information. IBIS agree to indemnify and save harmless IBM from any and all costs, expenses, liabilities, and claims for infringement of any patents or similar instruments or any 37 trademarks, copyrights, trade secrets, or other proprietary interests in any foreign country or in the U.S.A. (subject to maximum cap as specified in the license and development Section 11.1) LIMITATION OF IBM'S LIABILITY -- IBM'S entire liability and IBIS' exclusive remedy are set forth in this section. Under no circumstances shall IBM be liable to IBIS for any lost revenue, consequential damages, incidental damages, lost profits or possibility of such damages. In addition, in no event will IBM be liable on any third party claim or for damages caused by IBIS' failure to perform IBIS' responsibilities. In no event, except for claims by IBIS for bodily injury or damage to real property or tangible personal property for which IBM is legally liable, will IBM be liable to IBIS for actual damages in excess of the amount paid by IBIS for property under this Agreement. These limitations apply, regardless of the form of action, whether in contract or in tort, including negligence. GENERAL -- This Agreement shall be governed by the laws of the State of New York, without regard to die conflict of laws principles thereof. The parties hereto expressly waive any right they may have to a jury trial and agree that any proceeding under this Agreement shall be tried by a judge without a jury. If any section or subsection of this Agreement is found by competent judicial authority to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of any such section or subsection in every other respect and the remainder of this Agreement shall continue in effect so long 38 as the redacted contract still expresses the Intent of the parties. If the intent of the parties cannot be preserved, this Agreement shall be either renegotiated or terminated. All obligations and duties which by their nature survive the expiration or termination of this Agreement shall remain in effect beyond any expiration or termination. No actions, regardless of form, arising out of this Agreement, may be brought by either party more than two years alter the cause of action has arisen, or, in the case of nonpayment, more than two years from the date payment was due. Neither party shall assign this Agreement or any rights hereunder without the prior written consent of the other party. The waiver by either party of any instance of the other party's noncompliance with any obligation or responsibility herein shall not be deemed a waiver of subsequent instances or of either party's remedies for such noncompliance. CONFIDENTIAL INFORMATION -- If any confidential information is to be disclosed by IBM or IBIS, such disclosure shall be under the terms of the EPMA. 39 CHEMICAL -- IBIS agree to indemnify IBM against any and all claims or actions for damage or other relief that may arise due to the property containing chemical residue. IBIS agree to meet all applicable government safety standards and environmental regulations and laws for the removal and transportation of this property EXPORT -- Some material(s) included in this sale may be a controlled commodity and require a validated export license issued by the U.S. Department of Commerce prior to the export of such commodities from the U.S. As a condition of sale, Buyer will abide by all U.S. Export/Re-export Administration regulations, including export license whenever applicable. IBIS acknowledge awareness of such regulations and agree to become familiar with them prior to exporting any property from the U.S. SOLE AGREEMENT - THIS AGREEMENT embodies the understanding of the parties with respect to the sale of the property and supersedes all previous communications, representations or understandings, either written or oral, between the parties. INTERNATIONAL BUSINESS IBIS TECHNOLOGY MACHINES CORPORATION CORPORATION BY: /s/ Michael J. Flaherty BY: /s/ Al Alioto -------------------------------------- ------------------------------ TITLE: Mgr. Capital Equipment Procurement TITLE: VP of Sales and Marketing ----------------------------------- -------------------------- DATE: 5/14/98 DATE: April 11, 1998 ----------------------------------- -------------------------- 40 EX-10.41 4 EXHIBIT 10.41 EXHIBIT 10-41 IBIS TECHNOLOGY CORPORATION HAS OMITTED FROM THIS EXHIBIT 10.41 PORTIONS OF THE EXHIBIT FOR WHICH IT HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED [ ] AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. LICENSING AND DEVELOPMENT AGREEMENT between INTERNATIONAL BUSINESS MACHINES CORPORATION and IBIS TECHNOLOGY CORPORATION 41 TABLE OF CONTENTS
Section Page 1. DEFINITIONS....................................................... Page 1 2. PROGRAM........................................................... Page 4 3. LICENSES.......................................................... Page 4 4. CONFIDENTIAL INFORMATION.......................................... Page 7 5. OWNERSHIP OF INTELLECTUAL PROPERTY AND TOOLS...................... Page 10 6. PAYMENT........................................................... Page 11 7. TERM AND TERMINATION.............................................. Page 12 8. REPRESENTATIONS AND DISCLAIMERS................................... Page 13 9. TECHNOLOGY TRANSFER AND TECHNICAL ASSISTANCE...................... Page 15 10. APPLICABLE LAW................................................... Page 16 11. MISCELLANEOUS.................................................... Page 17 APPENDIX A SCHEDULE.................................................. Page 22 APPENDIX B DELVERABLES............................................... Page 23
42 This Licensing and Development Agreement ("Agreement") is made effective as of March 1, 1998 ("Effective Date") by and between International Business Machines Corporation (IBM), a New York corporation, having an office at 1580 Route 52, Hopewell Junction, New York, United States of America and Ibis Technology Corporation (IBIS), a Massachusetts corporation, having an office at 32 Cherry Hill Drive, Danvers Massachusetts, United States of America, said named parties being referred to hereinafter individually as a "Party" and collectively as the "Parties". WHEREAS, the Parties have developed expertise in the development and manufacture of ion beam systems for implanting semiconductor wafers; WHEREAS, IBM wishes to obtain a license to make and have made ion implanting tools designed by IBIS; WHEREAS, IBIS agrees to train IBM personnel in the design, manufacture, operation and use of such tools; WHEREAS, IBM wishes to obtain a license to make and have made improvements made by IBIS in ion-implantation systems; NOW, THEREFORE in consideration of the contributions of knowledge and skill in the areas of their respective expertise, in the cooperative undertaking specified hereunder, and in view of the mutual promises, commitments, and efforts relating thereto, it hereby is agreed between the Parties hereto as follows: 1 DEFINITIONS Words shall have their normally accepted meanings as employed in this Agreement. The terms "herein", "hereunder" and "hereof", unless specifically limited, shall have reference to the entire Agreement. The words "shall" and "will" are mandatory, the word "may" is permissive, the word "or" is not exclusive, the words "includes" and "including" are not limiting and the singular includes the plural. The following terms shall have the described meanings: 1.1 "Affiliate" shall mean a corporation, company or other entity: 1) more than twenty-five percent (25%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a Party hereto, but such corporation, company or other entity shall be deemed to be an Affiliate only so long as such ownership or control exists; or 2) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than twenty-five percent (25%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is, now or hereafter, owned or controlled, directly or indirectly, by a Party hereto, but such corporation, company or other entity shall be deemed to be an Affiliate 43 only so long as such ownership or control exists; or [ ] 1.2 "Background Intellectual Property Rights" shall mean Intellectual Property Rights that are owned by a Party or Parties and are created outside the course and scope of the Program. 1.3 "Change of Control" shall mean one (1) transaction or a series of related transactions which results in a third Party obtaining, directly or indirectly, (a) thirty (30) percent or more of the ownership of the outstanding voting shares or other ownership interest of, or (b) the right to manage the business or control the disposition of assets of, or (c) Control of a Party. 1.4 "Confidential Information" shall mean technical and business information disclosed within the course and scope of the Program by or on behalf of a Party that is embodied in tangible form and marked as specified in Section 4.6 of this Agreement. 1.5 "Control" shall mean the power to direct the affairs of a Person by reason of ownership of voting stock, by asset acquisition, contract or otherwise. 1.6 "Deliverables" shall mean drawings, data, algorithms, computer source and object code, reports, documentation and the like pertaining to SIMOX systems (e.g. the IBIS 1000), as specified in Appendix B. 1.7 "Escrow Agent" shall mean Fort Knox Escrow Services, Inc., 3539A Church Street, Clarkston, Georgia, 30021-1717, or such other escrow agent as the Parties may later agree to use. 1.8 "Improvement" shall mean any change, upgrade, modification or revision to the Licensed Technology and/or in the field of SIMOX put into commercial use by a Party during the Term, or which such Party acquires the right to license during the Term. Improvements shall not include any change, upgrade, modification or revision to the Licensed Technology that a Party is contractually prohibited by a Prior Agreement from providing to a third Party. In the case of information disclosed by IBM, Improvements shall exclude information on the operation of ion-implanting systems or other processing of integrated circuit wafers, e.g. annealing, which IBM shall have no obligation to provide or to disclose hereunder. For the avoidance of doubt, Improvements shall include know-how or other information contained in a new model SIMOX system sold by IBIS during the Term. 1.9 "Intellectual Property Rights" shall mean patent rights, rights under copyright, and other rights in Inventions and confidential information. 1.10 "Licensed Patents" shall mean all patents, including utility models and design patents, issued or issuing on patent applications worldwide that claim inventions having an 44 effective filing date prior to the expiration of the Term, under which patents or the applications therefor a Party has the right, at any time during the Program, to grant licenses to the other Party of the scope granted herein and any continuation, continuation-in-part, divisional, reissue, reexamination and any equivalents thereof. The term "Licensed Patents" shall also include any patent reissuing on any of the aforesaid patents. The term "Licensed Patents" shall include patents which such grant or the exercise of rights thereunder would result in the payment of royalties or other consideration by a Party to third parties, provided that such Party shall have notified the other Party of the requirement of compensation and the other Party shall have consented to compensate such Party for such consideration. 1.11 "Licensed Product" shall mean a SIMOX system that substantially conforms to the Licensed Technology (including Improvements). 1.12 "Licensed Technology" shall mean: a) know-how or other information (e.g. computer software) contained in the materials specified in Appendix B relating to the technology to be transferred to IBM; and b) additional know-how or other information transferred or otherwise disclosed in writing by IBIS to IBM in providing technical assistance pursuant to Section 9. 1.13 "Material Default" shall mean the violation of or failure to perform any material term or material covenant of this Agreement by a Party. 1.14 "Person" shall mean any individual, corporation, partnership, joint venture, trust, business association, governmental entity or other entity. 1.15 "Prior Agreement" shall mean an agreement between a Party and a third Party having a date of execution prior to the Effective Date of this Agreement. 1.16 "Program" shall mean the cooperative undertaking by the Parties, in which IBIS discloses to IBM and trains IBM's employees in the Licensed Technology including, at IBM's option, IBM's making or having made and testing a Licensed Product. 1.17 "SIMOX" shall mean the implanting of oxygen ions into a silicon wafer to form a layer of insulator underneath a device layer of silicon and SIMOX system shall mean a system for SIMOX. 1.18 "Subsidiary" shall mean an Affiliate more than fifty percent (50%) of whose outstanding shares, securities or ownership interest are, now or hereafter, owned or controlled, directly or indirectly, by a Party hereto, but such corporation, company, or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists. 1.19 "Term" shall mean the period of time this Agreement is in effect, which shall commence on the Effective Date and continue until December 31, 2005, unless 45 sooner terminated pursuant to the provisions of Section 7. 2 PROGRAM 2.1 Each Party shall perform its tasks in the course of the Program as specified in Appendix A. 2.1.1 IBIS and IBM will make commercially reasonable efforts to meet the schedule specified in Appendix A. 2.1.2 Upon exercise by IBM of either Option A or Option B as set forth in Section 3.5, IBIS will give technical assistance to IBM as specified in Section 9. 2.2 Each Party shall have a Program Manager and a Technical Coordinator as follows: For IBIS: Program Manager: Al Alioto Technical Coordinator: Al Alioto For IBM: Program Manager: H. C. Calhoun Technical Coordinator: Devendra Sadana Each Party may change its Program Manager and/or Technical Coordinator by giving written notice to the other Party. 2.3 Each of the Program Managers shall be responsible for the representation of his Party's interest in the Program. The Program Managers shall meet on a regular basis to review progress. 2.4 The Technical Coordinators or their designees shall supervise the exchange of information during the Program. 2.5 Each Party shall bear its own expenses in performing its tasks in the course of the Program. 3 LICENSES 3.1 IBIS hereby grants to IBM an irrevocable, worldwide, royalty-bearing, nonexclusive license, exercisable as specified below, under IBIS's applicable patent and trade secret rights in Licensed Patents, Licensed Technology [ ] to: (a) make, have made, use and practice any process in the use of SIMOX systems and components thereof; (b) lease, sell, or otherwise transfer SIMOX systems and components thereof to Affiliates; and (c) sublicense such Affiliates to use and practice any process in the use of such SIMOX systems and components thereof. For the avoidance of doubt, IBM agrees that the foregoing right to sublicense Affiliates does not include the right to license Affiliates to make or have made a SIMOX system. For the further avoidance of doubt, IBM agrees that it is not permitted to act under the foregoing license until it has elected one of the options set forth in Section 3.5. 46 3.2 IBIS hereby grants to IBM an irrevocable, worldwide, nonexclusive, license, exercisable as specified below, under IBIS's copyrights in computer software or other works of authorship disclosed by IBIS hereunder or delivered by IBIS to IBM in connection with the sale of a SIMOX system to IBM to copy and make derivative works of such software or other works of authorship and to distribute such copies and derivative works within IBM and to Affiliates, subject to the following condition: IBM may grant sublicenses under IBIS's copyrights in software in object code format necessary for the operation of a SIMOX system to its Affiliates' purchasing systems licensed hereunder. Each license, agreement form, when executed with customers, shall contain terms that are legally sufficient to: (a) authorize the customer to use software sublicensed from IBIS and supplied to it by or for IBM for operating a SIMOX system sold hereunder for SIMOX and for no other purpose; (b) authorize the customer to make copies of each authorized product copy for backup purposes only; and (c) prohibit further copying and/or transfer of the product; and (d) prohibit reverse assembly, reverse compilation, or other translation of product code or any portion thereof. For the avoidance of doubt, IBM agrees that it is not permitted to act under the foregoing license until it has elected one of the options set forth in Section 3.5. 3.3 No license or immunity is extended by a Party either directly or by implication, estoppel, or otherwise except as explicitly set forth herein. 3.4 IBM hereby grants to IBIS an irrevocable, royalty-free, worldwide, nonexclusive license, exercisable as specified below, under IBM's Intellectual Property Rights in [ ] that pertain to the structure of a SIMOX system to: (a) make and have made and (b) use, lease, sell, or otherwise transfer SIMOX systems and components thereof. This license shall be for the sale or other transfer of SIMOX systems only to IBM and Affiliates for an initial period of [ ] after disclosure of such [ ], after which initial period, IBIS may incorporate such [ ] in a system sold to any customer. For the avoidance of doubt, this license granted by IBM does not cover Intellectual Property Rights pertaining to methods of operation of an ion-implanting system or to processes used in making or treating wafers and/or integrated circuits. 3.5 IBM shall have the option, to be exercised in its sole discretion and at any time, to elect either License Option A or License Option B by delivery of a written notice to IBIS. Exercise of Option A or Option B shall be subject to the conditions of Section 3.5.1 or Section 3.5.2, as the case may be. 47 3.5.1 License Option A IBM may exercise its license under License Option A by delivery of written notice to IBIS and to the Escrow Agent. The Escrow Agent shall immediately deliver the escrow documentation to IBM upon receipt of notice. The consent of IBIS is not required for delivery of the documentation under this License Option A and IBIS hereby waives any right it may have to object to such transfer. The royalty payments under this License Option A shall be as specified in Section 6. Upon receipt of notification, IBIS shall provide the training and Technical Assistance specified in Appendix A at times mutually agreed on but no later than the times specified in Appendix A. 3.5.2 License Option B IBM may, in its sole discretion, exercise its license under License Option B by delivery of written notice to the Escrow Agent stating: a) [ ]; or b) that IBIS has failed to satisfy one or more of the following conditions and IBIS has not cured such failure within [ ] days after notification by IBM of the failure. 3.5.2.1 The conditions are that IBIS: (a) [ ] (b) [ ] (c) [ ] (d) [ ] The Escrow Agent shall immediately deliver the escrow documentation to IBM upon receipt of notice. The consent of IBIS is not required for delivery of the documentation under this License Option B. IBIS hereby waives any right it may have to object to or otherwise prevent the Escrow Agent from completing such transfer and agrees that its only recourse against IBM in the event of a dispute concerning such transfer shall be a claim against IBM for monetary damages. The royalty payments shall be as specified in Section 6. IBIS shall deliver the training and Technical Assistance specified in Appendix A at times mutually agreed on but no later than the times specified in Appendix A. 3.6 IBIS agrees, within [ ] days after the last signature date of this Agreement, to review with IBM at IBIS' place of business the documentation and updates thereof listed in Appendix B. After such review, IBIS shall transmit such documentation to an Escrow Agent chosen by mutual agreement of the Parties. Such Escrow Agent shall hold such documentation pursuant to an escrow agreement to be executed concurrently herewith. The parties shall share the cost of the escrow equally. For convenience in administration, IBIS shall pay the escrow Agent and invoice IBM for its share of the 48 payment. The Parties agree that such escrow agreement shall permit IBM to inspect (but not copy) the documentation at the Escrow Agent's premises. 3.7 IBIS represents and agrees that it will not initiate any work (or otherwise take any steps in reliance) on a SIMOX system for sale to IBM unless and until IBIS has received an applicable written purchase order from IBM. IBM shall have no obligation to exercise any of the options granted to it under this Agreement. 4 CONFIDENTIAL INFORMATION 4.1 The prior Confidential Disclosure agreement between the Parties concerning confidential information is terminated as of the Effective Date and any information disclosed thereunder shall be deemed to be disclosed under this Agreement as of the Effective Date. The confidentiality provisions of the Equipment Procurement Master Agreement between the Parties having an effective date in May, 1996 are superseded only with respect to Confidential Information disclosed under and marked in accordance with this Agreement. 4.2 Subject to the provisions of Section 3, for a confidentiality period as set forth below, the receiving Party agrees to use the same care and discretion to safeguard Confidential Information of the disclosing Party and to avoid release of such Confidential Information outside of the receiving Party as it employs with similar embodiments of information of its own which it does not desire to publish, disclose, or disseminate, but in no event less than reasonable care. 4.3 Obligations of confidentiality and restricted use set forth herein shall extend until December 31, 2008. 4.4 The obligations of confidentiality herein shall not apply to information that: (a) Is already in the possession of the receiving Party r any of its Subsidiaries without obligation of confidence; (b) Is independently developed by the receiving Party r any of its Subsidiaries; (c) Is or becomes publicly available without breach of his Agreement; (d) Is rightfully received by the receiving Party from third Party; (e) Is released for disclosure by the disclosing Party ith its written consent; (f) Is required to be disclosed in a patent pplication; or (g) Is inherently disclosed in the use, lease, sale, or ther distribution of any present or future product or service by or for the receiving Party or any of its Affiliates. 49 4.5 All disclosures of Confidential Information by IBIS or IBM, as the disclosing Party, shall be made by or under the supervision of its Technical Coordinator, or his designee, to the receiving Party's Technical Coordinator, or his designee. In the event of inadvertent disclosure, either Party may give notice to the other Party that such inadvertently disclosed information was confidential and the receiving Party thereafter shall treat in good faith such information as Confidential Information. 4.6 All disclosures of information will be deemed to be non-confidential unless specifically designated at the time of disclosure (as provided in Section 4.7 below) as including the Confidential Information of a Party. 4.6.1 Notwithstanding the foregoing, Inventions created and Confidential Information disclosed in the course of joint work or discussions between the Parties shall be deemed to be the Confidential Information of the employer(s) of the individuals creating them, whether or not the pertinent information is marked or summarized in a resume. The Parties agree to make reasonable efforts to document and mark such joint work or discussions. 4.7 Information, including Confidential Information, of a Party shall be disclosed in writing in English (including such information recorded in a medium such as a tape or disk), which writing shall state the date of disclosure, that the information contained therein is confidential and that it is being disclosed pursuant to this Agreement, and shall contain an appropriate legend, such as "IBIS Confidential Information". If such disclosure is orally and/or visually made, then it shall be confirmed in a written resume within twenty (20) days following such disclosure. The resume will specifically recite that information which is confidential. Such resume will have such information that is confidential identified as "IBIS Confidential (or IBM Confidential) Information". The receiving Party may make a reasonable number of copies of such writings or resumes. 4.8 A receiving Party possessing Confidential Information of the other Party may disclose it to a vendor or to a subcontractor (or to a sublicensee that in turn may disclose to a vendor or subcontractor), for the purpose of exercising the license specified in Section 3. under restrictions on disclosure at least as stringent as those set forth herein. The receiving Party may only authorize such vendor, subcontractor or sublicensee to use such Confidential Information only for the benefit of such receiving Party. If disclosure is compelled as testimony or evidence in a judicial or legislative proceeding, the Party under compulsion to disclose shall immediately notify the owner Party and shall avail itself of all reasonable protection at the reasonable expense and with the express prior concurrence in writing of the Party owning the applicable Confidential Information, such as protective orders or exemptions from Freedom of Information Act availability, as may be reasonably available and effective to protect the Confidential Information in question. 4.9 It is understood that receipt of Confidential Information under this Agreement will not create any obligation in any way limiting or restricting the assignment and/or 50 reassignment of IBIS employees within IBIS or IBM employees within IBM. 4.10 Each Party represents that it has, and agrees to maintain, an appropriate agreement with each of its employees who may have access to any Confidential Information sufficient to enable each Party to comply with all the terms of this Agreement. 4.11 All disclosures of information under this Agreement shall be governed by the applicable statutes and regulations of the United States Government regarding the export of technical information. Each Party agrees to comply, and do all things reasonably necessary for the other Party to comply, with all applicable laws, regulations and ordinances of any country having jurisdiction over the subject matter hereof, including but not limited to the regulations of the United States Department of Commerce and Department of State relating to the export or re-export of technical data or the direct product thereof, insofar as they relate to the activities to be performed under this Agreement. Each Party agrees to obtain any required government documents and approvals prior to the export or re-export by it of any technical data disclosed to it or the direct product related thereto. 4.12 IBIS shall make available an initial data package [ ], as specified in Section 3.6, Appendix A, and Appendix B, for inspection and evaluation by IBM at IBIS' place of business and subsequent transmission to the Escrow Agent. IBIS shall promptly correct deficiencies in the data on IBM's request. When IBM is satisfied that the data are adequate, IBIS shall forward the data to the Escrow Agent. 4.12.1 In the event that IBM exercises its license under Section 3.5.1 or 3.5.2, IBIS shall continue to deliver data updates, which IBM may immediately use under the terms hereof. 4.13 The conditions for release of data hereunder by the Escrow Agent shall be as set forth herein and shall not be affected by the existence of different conditions in, or by the status of the escrow (i.e. whether released or not) under, the Equipment Purchase Master Agreement. For the avoidance of doubt, the data may be released under the Equipment Purchase Master Agreement before or after the release of data hereunder. 5 OWNERSHIP OF INTELLECTUAL PROPERTY 5.1 Each Party shall have and retain the sole and exclusive ownership of all Intellectual Property Rights that are made or created solely by it or its employees or agents in the course of the Program. 5.2 Any Intellectual Property Rights made or created jointly by the Parties or employees or agents of the Parties in the course of the Program shall be owned jointly. Joint Inventions shall be jointly owned, title to all patents issued thereon shall be joint, all expense incurred in obtaining and maintaining such patents, except as provided herein, shall be jointly shared. Each Party shall have the unrestricted right to license third parties under such jointly owned Intellectual Property Rights without 51 accounting. 5.2.1 Unless otherwise agreed, joint owners of Intellectual Property Rights shall engage outside counsel to perform tasks associated with securing the legal protection of such Intellectual Property Rights and shall share the costs thereof equally. In the event that one Party elects not to seek patent protection for any joint Invention in any particular country or not to share equally in the expense thereof with the other Party, the other Party shall have the right to seek or maintain such protection at its own expense in such country and shall have full control over the prosecution and maintenance thereof even though title to any patent issuing therefrom shall be jointly owned. Such one Party shall have no obligation to pay expenses of securing and maintaining such Intellectual Property Rights in any country unless it has so agreed in writing. 5.3 Each Party shall give the other Party all reasonable assistance in obtaining patent protection and in preparing and prosecuting any patent application filed by the other Party, and shall cause to be executed assignments and all other instruments and documents as the other Party may consider necessary or appropriate to carry out the intent of this Section 5. 6. PAYMENT 6.1 From and after the Effective Date, IBM shall pay to IBIS a royalty comprising the amount listed in the appropriate column of Table I for each Licensed Product made by or for IBM and/or sold, leased or otherwise transferred or disposed of by or for IBM. TABLE I
Number of Machines Option A Option B [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
6.2 The royalty of Section 6.1 shall accrue when a Licensed Product is first put into service by IBM or is first sold, leased or otherwise transferred or disposed of by or for IBM. For the purpose of determining such royalty, Licensed Products shall be considered sold, leased or otherwise transferred or disposed of when invoiced. If not invoiced, then Licensed Products are to be considered sold, leased or otherwise transferred or disposed of when delivered or when paid for, if paid for before delivery. If not invoiced, delivered or paid for before delivery, Licensed Products are to be considered sold, leased or otherwise transferred or disposed of at the earlier of when put into use or when possession is transferred to a third Party. When Licensed 52 Products are sold, leased or otherwise transferred or disposed of in conjunction with other products or services provided, sold, leased or otherwise transferred or disposed of by IBM, IBM agrees to separately invoice such Licensed Products from such other products or services. 6.3 Accrued royalties shall be calculated and paid on a calendar quarterly basis. Any royalties due IBIS for any calendar quarter shall be paid to IBIS by [ ] days after the end of each calendar quarter. IBM may deduct from the accrued royalties calculation in this Section 6.3 those royalties accrued on Licensed Products which have been returned to IBM or for which credit allowances have been made. 6.4 Within [ ] days of each calendar quarter, IBM shall furnish to IBIS a written statement showing the Licensed Products that were made, used, sold, leased and/or transferred or otherwise disposed of during the immediately preceding calendar year and the royalties payable thereon. If no royalties are payable, that fact shall be shown on such statement. 6.5 IBIS shall have the right, at its expense, to have an independent accountant acceptable to IBM inspect relevant records of IBM during normal business hours and on reasonable notice, to verify that the number of SIMOX systems made by or for IBM is as reported to IBIS, and for no other purpose. IBIS shall require such accountant to execute an agreement permitting disclosure of such number only to IBIS and its counsel and prohibiting any other disclosure or use of any information learned during such inspection, except in connection of enforcing its rights under this Agreement. If such audit reveals that IBM has underpaid the royalty due, IBM shall pay the reasonable cost of the audit. 7. TERM AND TERMINATION Either Party may terminate this Agreement for a Material Default as provided herein: 7.1 For a Material Default specified in Sections 7.1.1, the non-defaulting Party may give written notice of such default ("Notice of Default") to the defaulting Party. If a Notice of Default is given and the defaulting Party should fail to cure such default within [ ] days after the date of receipt of the Notice of Default, the non-defaulting Party may terminate this Agreement by a second written notice ("Notice of Termination") to the defaulting Party. 7.1.1 The parties agree that some of the grounds of Material Default, for which a Party shall have the right to terminate this Agreement per Section 7.1 are: (a) the other Party breaches its obligation to deliver Licensed Technology, training and/or Improvements. (b) the other Party breaches its payment obligations under Section 6. 53 7.2 For a Material Default specified in Sections 7.2.1, the non- defaulting Party may give to the defaulting Party a Notice of Termination immediately terminating this Agreement. 7.2.1 The parties agree that some of the grounds of Material Default, for which a Party shall have the right to terminate this Agreement immediately per Section 7.2 are: (a) the other Party engages in or suffers a Change of Control. (b) the other Party breaches its obligation of confidentiality under Section 4. (c) the other Party breaches the terms of its license under Section 3. 7.3 If this Agreement is terminated for Material Default; (a) the obligations of the Parties to deliver Improvements shall terminate; and (b) the licenses granted in Section 3 and corresponding payment obligations shall survive. 7.4 In the event of termination by either Party for any reason, all royalties, fees, and other payments due or accrued hereunder as of the date of termination shall remain payable. 7.5 Except as stated in Sections 7.3 and 7.4, to the extent a particular right or obligation herein does not have a specifically identified survival period, all rights and obligations in this Section or in any other Section in this Agreement which by their nature survive the termination of this Agreement will remain in effect beyond any termination for the time period reasonably necessary to accomplish their purpose and shall bind and inure to the benefit of the parties, their legal representatives and successors. 8. REPRESENTATIONS AND DISCLAIMERS 8.1 This Agreement is non-exclusive. IBIS and IBM recognize and agree that each has been and may continue to be active in the development of technology, and/or manufacture and sale of products indirectly or directly relating to the technologies, processes and products contemplated by this Agreement, and IBM acknowledges and agrees that IBIS will be free in all respects and not precluded by this Agreement to pursue such activities independent of IBM, including with third parties, and further, IBIS acknowledges and agrees that IBM will be free in all respects and not precluded by this Agreement to pursue such activities independent of IBIS, including with third parties. Nothing in this Section 8.1 shall grant a Party any license under the other Party's Intellectual Property Rights. Such licenses are granted only as set forth explicitly elsewhere in this Agreement. 8.2 Nothing contained in this Agreement shall be construed as: 54 8.2.1 conferring any rights to use in advertising, publicity, or other marketing activities any name, trade name, trademark, or other designation of either Party hereto, including any contraction, abbreviation, or simulation of any of the foregoing without prior mutual written agreement; or 8.2.2 conferring by implication, estoppel, or otherwise upon either Party hereunder any license or other right except the licenses and rights expressly granted hereunder to a Party hereto or third parties; or 8.2.3 a warranty that the recipient Party will successfully manufacture products, or a particular volume of products, based upon the Licensed Technology transferred hereunder including transfer and technical assistance; or 8.2.4 an obligation to bring or prosecute actions or suits against third parties for infringement, or to defend actions or suits from third parties for infringement, or to secure and/or maintain any of its intellectual property rights; or 8.2.5 in any way limiting the rights which a Party has outside the scope of this Agreement. 8.3 IBIS warrants that the data delivered hereunder and the manufacture and operation of SIMOX systems made according to such data does not infringe the Intellectual Property Rights of third Parties. 8.4 IBIS warrants that the initial data package disclosed to IBM is the same as (or an improvement on) the information used in the design assembly and test of tools currently used by IBIS in production. 8.5 WITH THE EXCEPTION OF THE FOREGOING WARRANTIES IN SECTIONS 8.3 AND 8.4, AND THE PROVISIONS OF SECTION 11, ALL INFORMATION, TECHNOLOGY, IMPROVEMENTS, INVENTIONS, ASSISTANCE, AND SERVICES PROVIDED BY EITHER PARTY HEREUNDER ARE PROVIDED "AS IS" WITHOUT ANY WARRANTY OF ANY KIND INCLUDING THAT NEITHER PARTY MAKES ANY WARRANTY AS TO THE CONFIDENTIAL ACCURACY, SUFFICIENCY, OR SUITABILITY FOR THE OTHER PARTY'S USE OF ANY INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY PROVIDED HEREUNDER FOR THE MANUFACTURE OF PRODUCTS OR DELIVERY OF SERVICES USING THE INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY, OR THE YIELD FROM THE MANUFACTURE OF PRODUCTS OR DELIVERY OF SERVICES USING THE INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY, OR FOR THE QUALITY OF SUCH PRODUCTS MADE OR SERVICES DELIVERED USING THE INFORMATION, `IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NEITHER PARTY ASSUMES ANY 55 RESPONSIBILITY OR LIABILITY FOR LOSSES OR DAMAGES, WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE, WHICH MIGHT ARISE OUT OF THE OTHER PARTY'S USE OF THE INFORMATION, IMPROVEMENTS, INVENTIONS, OR LICENSED TECHNOLOGY, WHICH SHALL BE ENTIRELY AT THE OTHER PARTY'S RISK AND PERIL. 8.6 Each Party acknowledges its responsibility to make its own evaluation of the risks of bringing any product based on information provided under this Agreement to market, or otherwise to use such information. 8.7 Although the Parties will use all reasonable efforts in performing the Program, the Parties acknowledge that the results of the work to be performed hereunder are uncertain and cannot be guaranteed by any Party. 8.8 Each Party disclaims any warranty that the recipient will be able to reproduce the results of the disclosing Party and each Party acknowledges that it may be not be able to use disclosed information without further research and development. 9. TECHNOLOGY TRANSFER AND TECHNICAL ASSISTANCE 9.1 IBIS shall deliver, at [ ] cost to IBM, a portion of the technical training specified in Section 9.2, prior to the review specified in Section 3.6 and sufficient to enable IBM personnel to perform the evaluation specified in Section 4.12. Such technical training shall be limited to a maximum of [ ] hours. 9.2 IBIS shall provide detailed training to IBM in IBIS's facilities in the United States the following technical assistance, according to the schedule in Appendix A: [ ] In addition to the scheduled training listed above, IBM may make site visits to IBIS's facilities upon reasonable notice to IBIS and upon mutual agreement of the parties. A maximum of [ ] IBM employees may visit either of IBIS's facilities at any one time. The travel and living expenses of such visiting IBM employees shall be at the expense of IBM. 9.3 During the period beginning on the date that IBM elects one of the options specified in Section 3.5 and continuing for [ ] years thereafter, IBIS agrees to provide, at [ ] cost to IBM, assistance in the transfer of the Licensed Technology to IBM as provided in Section 9.2, up to a total limit of [ ] person-hours. 9.4 After the [ ] person-hours of the transfer assistance and technical assistance specified in Section 9.2 are exhausted, IBIS agrees to provide, up to an additional [ ] person-hours of transfer assistance and technical assistance to IBM for a period ending [ ] years after the date on which the last transfer assistance is provided under Section 9.2, IBM agrees to pay IBIS for such limited additional transfer and technical 56 assistance provided to IBM at the rate of [ ]. 9.5 IBIS shall invoice charges monthly for the limited additional transfer assistance and technical assistance provided for in Section 9.3. 9.6 The Parties shall disclose Improvements in accordance with the following: 9.6.1 Beginning with the first calendar quarter after notification under Section 3.5.1 or 3.5.2, if any, the Technical Coordinators of the Parties shall meet within forty-five (45) days following the end of each calendar quarter to discuss whether any Improvements have been made, and to disclose such Improvements to the other Party. 10. APPLICABLE LAW 10.1 This Agreement shall be trued and the legal relations between the Parties shall be determined in accordance the law of the State of New York without regard to the conflict of law provisions thereof. Any proceedings to enforce this Agreement, or to resolve disputes relating to this Agreement, shall be brought in the United States District Court for the Southern District of New York, Westchester County Division. IBIS and IBM waive the right to trial by jury in any matter which arises between the Parties pursuant or related to this Agreement and agree that any proceeding hereunder shall be tried by a judge without a jury. 10.1.1 No action, regardless of form, arising out of this Agreement may be brought by a Party more than two (2) years after the cause of action has accrued. 10.2 Each Party agrees to pay the other Party's attorney's fees and costs of litigation, up to a maximum of [ ] if such Party, for any reason whatever, brings suit against the other Party and the other Party is finally adjudicated not to have liability. 10.3 If any sentence, paragraph, clause or combination of the same in this Agreement is held by a court of competent jurisdiction to be unenforceable in any jurisdiction, such sentence, paragraph, clause or combination of same shall be unenforceable in the jurisdiction in which it is invalid and the remainder of this Agreement shall remain binding on the Parties in such jurisdiction as if such unenforceable provision had not been contained herein. The enforceability of such sentence, paragraph, clause or combination of same in this Agreement, shall be otherwise unaffected and shall remain enforceable in all other jurisdictions. 11. MISCELLANEOUS 11.1 IBIS agrees to indemnify, defend, and hold harmless, IBM, its Subsidiaries and Affiliates and their officers, directors, agents, and employees, from any and all liability, losses, damages, reasonable attorney's fees and expenses associated with claims, suits, or actions brought by or on behalf of any third party of any nature 57 arising from, or alleged to arise from, infringement of the Intellectual Property Rights of third parties, resulting from or in any way related to the use of the Licensed Technology by IBM or the performance of this Agreement. IBIS's total obligation to pay under this Section 11.1 shall not exceed the lesser of: (a) the amount of royalties paid by IBM to IBIS hereunder; or (b) [ ]. 11.2 Each Party shall be solely responsible for determining its prices and other terms and conditions for its products sold to its customers. Each marketing Party shall be solely responsible for marketing products to its customers, and the other Party shall have no obligation to provide any support of any kind to such marketing Party's customers. 11.3 If any Party is rendered wholly or partially unable by force majeure to carry out its obligations under this Agreement, and if that Party gives prompt written notice and full particulars of such force majeure to the other Party, the notifying Party shall be excused from performance of its obligations hereunder during the continuance of any inability so caused, but for no longer period; provided that if payment cannot be made due to the existence of a banking crisis or international payment embargo, such amount may be paid within the following thirty (30) days. Such cause shall be remedied by the notifying Party as far as possible with reasonable speed and effort. For the purposes of this Agreement, force majeure shall mean Acts of God, acts of public enemies or terrorists, wars, other military conflicts, blockades, insurrections, riots, epidemics, quarantine restrictions, landslides, lightning, earthquake, floods, washouts, civil disturbances, restraints by or actions of any governmental body (including export or security restrictions on information, material, personnel, equipment or otherwise), and any other acts or events whatsoever, whether or not similar to the foregoing, not within the control of the Party claiming excuse from performance, which by the exercise of due diligence and best reasonable effort that Party shall not have been able to overcome or avoid. If the notifying Party cannot remedy the force majeure situation and resume satisfactory performance within [ ] of the notice, the other Party may at its option immediately terminate this Agreement pursuant to Section 7. 11.4 Each Party agrees to comply with all applicable country, Federal, State, and Local laws, rules, regulations, and ordinances, including those of any other duly constituted governmental authority having jurisdiction, and including without limitation, all rules and regulations of the Occupational Health and Safety Administration, Environmental Protection Agency, U.S. Department of Commerce, and U.S. Department of Transportation, as applicable. Each Party shall do all things necessary (a) to obtain in a timely manner all required licenses and approvals and (b) to comply with all applicable laws, rules and regulations, including, but not limited to, the Regulations of the United States Government relating to the export and re-export of technical data, commodities, and products produced as a result of the use of such data. Each Party hereto agrees that it will not export or re-export, directly or indirectly, any technology, software, and/or commodities furnished under this Agreement, or the direct product thereof, to any country, or the nationals thereof, specified in such laws, rules, 58 regulations, and ordinances referred to above as an unauthorized destination without IBIS or IBM first obtaining U.S. Government approval. 11.5 The captions used in this Agreement are for convenience of reference only and are not to be used in interpreting the obligations of the Parties under this Agreement. 11.6 Nothing contained herein, or done in pursuance of this Agreement, shall constitute the Parties as entering upon a joint venture or partnership or shall constitute either Party hereto the agent for the other Party for any purpose or in any sense whatsoever. 11.7 Either Party may disapprove the assignment of any of its former employees to perform work under this Agreement on its premises by the other Party and such personnel will not be so assigned. Each Party will take appropriate preventive steps, before the assignment of any of its employees to perform work under this Agreement, that that Party reasonably believes will ensure that its employees will not engage in inappropriate conduct while on the other Party's premises. Inappropriate conduct shall include, but not be limited to: 1) being under the influence of, or affected by, alcohol, illegal drugs or controlled substances or engaging in their use, distribution or sale; 2) the possession of a weapon of any sort; and 3) harassment, threats or violent behavior. 11.8 Representatives and personnel of each Party, during the time they are present on the premises of the other Party shall be subject to all rules and regulations prevailing on such premises. Each Party shall be responsible for the payment of all compensation and expense of its respective representatives and personnel. None of the representatives or personnel of either Party shall be considered, for any reason, to be an employee or agent of the other. 11.9 Each Party represents that it has, or will have in place, established procedures and agreements with its Subsidiaries, employees or others, including subcontractors and vendors, whose services the Party may require, sufficient to enable the Party to comply with all the provisions of this Agreement. 11.10 In the event of any inconsistency between the terms and conditions of this Agreement and language set forth in the Appendices, the inconsistency shall be resolved by giving precedence to the terms and conditions of this Agreement. 11.11 Any written notice or communication required to be made or given to either Party hereto, pursuant to this Agreement, shall be deemed to have been sufficiently given on the date of mailing if sent by registered or certified mail, postage prepaid, and addressed as set forth below, or to such other address as is designated by written notice given to the other Party: 11.11.1 In the case of IBM: Director of Licensing International Business Machines Corporation 500 Columbus Avenue 59 Thornwood, NY, 10594 11.11.2 In the case of IBIS: Al Alioto Vice President of Sales and Marketing Ibis Technology Corporation 32 Cherry Hill Drive Danvers, MA 01923 11.12 The rights and obligations of Sections 3, 4, 5, 7, 8, 10, and 11 and the obligations of nondisclosure and restricted use of this Agreement shall survive and continue after any expiration or termination of this Agreement and shall bind the Parties and their successors and assigns. 11.13 No failure on the part of any Party to exercise, and no delay in exercising, any right, power, or remedy hereunder shall operate as a waiver thereof or as a waiver of any other right, power, or remedy hereunder or to the performance of any Party; and no single or partial exercise by a Party of any right, power, or remedy hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. 11.14 Nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of either Party (including any contraction, abbreviation or simulation of any of the foregoing); and each Party agrees not to disclose the terms and conditions of this Agreement except as may be required by law or government rule or regulation, without the express written consent of the other Party. Notwithstanding the foregoing, the Parties shall be permitted to disclose a summary of pertinent Sections of this Agreement that are reasonably necessary for disclosing and/or licensing under this Agreement, provided, however, that such disclosure is under a written agreement containing restrictions of confidentiality at least as stringent as those contained herein. 11.15 Except for the provisions of Section 11.1, in no event will a Party be liable to the other Party for incidental damages, lost profits, lost savings special damages, or consequential damages, regardless of whether the claim is for breach of contract, breach of warranty, tort (including negligence), failure of a remedy to accomplish its purpose or otherwise, even if such Party has been advised of the possibility of such damages. 11.16 Each Party shall be liable to the other Party up to a maximum of the greater of (a) [ ], or (b) the amount of unpaid royalties owed by such Party to the other Party hereunder plus [ ], for all actual direct losses or damages sustained by the other Party (other than those arising under Section 11.1) that are proximately caused by the acts or omissions of such Party under this Agreement. 60 11.17 Except as explicitly stated herein, a Party shall not assign any of its rights, privileges or obligations under this Agreement without the prior written consent of the other Party. Any attempted assignment in derogation of the foregoing shall be void. 11.18 The Equipment Purchase Master Agreement, any task orders thereunder, and the Wafer Purchase Agreement between the Parties are not superseded by this Agreement, except as explicitly stated herein. By way of example and not as a limitation, the license to make up to two tools granted to IBM in Section 13 of EPMA 07482 between the Parties is not superseded and that license may be exercised by IBM, in its sole discretion, in addition to the license granted hereunder. 11.19 This Agreement shall not be binding upon the Parties until it has been signed below by or on behalf of each Party, in which event it shall be effective as of the date first above written. Except as provided in Section 11.18, this Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous communications, understandings and agreements, whether oral or written, between the Parties relating to the subject matter hereof. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless made in writing and signed on behalf of such Parties by their respective authorized representatives. The requirement of written form may only be waived in writing. 61 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives, who by their signature represent that they are so authorized, to be effective as of the day and year first above written. By: /s/ H.C. Calhoun ---------------------------------------- H. C. Calhoun Vice President of Semiconductor Research and Development Center Date: 6/3/98 ---------------------------------------- By: /s/ Al Alioto ---------------------------------------- Al Alioto Vice President of Sales and Marketing Date: 6/9/98 ---------------------------------------- 62 APPENDIX A Data Transfer Schedule Initial data package for evaluation and delivery to the Escrow Agent -- [ ] days after the last signature date Update data for evaluation and delivery to the Escrow Agent -- [ ] days after each calendar quarter Technical Training Initial training -- [ ] days after the last signature date. Detailed training session pursuant to Section 9.2 -- [ ] days after option notification under Section 3.5. 63 APPENDIX B DELIVERABLES [ ] 64 EX-27 5 EX-27
5 1 U.S. DOLLARS 6-MOS 1 DEC-31-1998 JAN-01-1998 JUN-30-1998 13,763,817 0 2,034,689 56,951 4,965,604 22,866,547 14,647,326 9,180,907 28,501,183 6,281,938 0 0 0 54,051 20,655,187 28,501,183 6,217,708 7,000,763 5,385,603 6,023,573 1,799,148 0 64,768 (821,958) 1,256 (823,214) 0 0 0 (823,214) (0.12) (0.12)
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