-----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, J2Fk6bN3FMsgvo91lBztIvaNEexGGP4P0ZMnHRi7yENI5cS/iFQH5SRLCEb3L/fb vTjbGHCovreJH5NSyn0ApA== 0000898430-97-004920.txt : 19971117 0000898430-97-004920.hdr.sgml : 19971117 ACCESSION NUMBER: 0000898430-97-004920 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIKON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000868326 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 954054321 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26482 FILM NUMBER: 97722106 BUSINESS ADDRESS: STREET 1: 9255 DEERING AVE STREET 2: 222 W. ORANGE GROVE AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 MAIL ADDRESS: STREET 1: 9255 DEERING AVENUE STREET 2: 9255 DEERING AVENUE CITY: SACHATSWORTH STATE: CA ZIP: 91311 FORMER COMPANY: FORMER CONFORMED NAME: PLASMA & MATERIALS TECHNOLOGIES INC DATE OF NAME CHANGE: 19950713 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1997 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [Mark one] [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1997 OR [ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to _________ _________ Commission File Number: 0-26482 TRIKON TECHNOLOGIES, INC. ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-4054321 ------------------- ----------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) number) 9255 Deering Avenue, Chatsworth, California 91311 ------------------------------------------------------ (Address of principle executive offices) (Zip Code) (818) 886-8000 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Indicated by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- As of September 30, 1997, the total number of outstanding shares of the Registrant's common stock was 15,118,168. Trikon Technologies, Inc.
INDEX Page ----- Number - ---------------------------------------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets at September 30, 1997 (unaudited) and December 31, 1996 3 Unaudited Condensed Consolidated Statements of Operations for the Three Months ended September 30, 1997 and 1996 and for the Nine Months ended September 30, 1997 and 1996 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1997 and 1996 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION 18 Item 3. Defaults upon Senior Securities 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURE PAGE 19 EXHIBITS 20
2 Trikon Technologies, Inc. ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1997 1996 (1) ------------------ ------------------ (UNAUDITED) Assets Current assets: Cash and cash equivalents............................. $ 7,730,233 $ 20,187,662 Short-term investments................................ 6,353,292 1,464,165 Accounts receivable, net of reserves.................. 19,209,704 27,229,806 Inventories, net of reserves.......................... 45,041,241 53,837,131 Other current assets.................................. 3,552,765 4,723,449 ------------- ------------- Total current assets........................... 81,887,235 107,442,213 Property, equipment and leasehold improvements, net of accumulated depreciation and amortization...... 32,672,026 28,743,886 Demonstration systems, net of accumulated depreciation.......................................... 6,395,910 6,080,431 Intangible assets, net of accumulated amortization...... 37,097,234 40,484,079 Other assets............................................ 1,217,147 429,596 ------------- ------------- Total assets............................................ $ 159,269,552 $ 183,180,205 ============= ============= Liabilities and shareholders' equity Current liabilities: Accounts payable and accrued expenses................. $ 16,646,184 $ 24,114,756 Bank credit line...................................... 14,567,366 14,151,000 Other current liabilities............................. 9,924,987 12,661,580 ------------- ------------- Total current liabilities...................... 41,138,537 50,927,336 Convertible subordinated notes.......................... 86,250,000 86,250,000 Other non-current liabilities........................... 12,995,773 14,754,721 Commitments and contingencies Shareholders' equity: Preferred Stock Authorized shares -- 20,000,000, 3,125,000 designated as Series G Preferred Stock -- $6.75 per share liquidation preference Series G Preferred issued and outstanding -- 2,962,032 at September 30, 1997.................. 19,547,592 -- Common Stock, no par value: Authorized shares -- 50,000,000 Issued and outstanding -- 15,118,168 at September 30, 1997 and 14,310,410 at December 31, 1996................................ 137,766,446 131,873,023 Cumulative translation................................ (351,103) 1,412,200 Accumulated deficit................................... (138,077,693) (102,037,075) ------------- ------------- Total shareholders' equity.............................. 18,885,242 31,248,148 ------------- ------------- Total liabilities and shareholders' equity.............. $ 159,269,552 $ 183,180,205 ============= =============
(1) The Balance Sheet at December 31, 1996 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Condensed Consolidated Financial Statements. 3 Trikon Technologies, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------------------- -------------------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1997 (1) 1996 1997 (1) 1996 ------------------ ----------------- ------------------ ----------------- Revenues: Product revenues.................... $ 12,656,560 $7,904,906 $ 43,719,799 $25,851,165 Contract revenues................... -- 918,449 -- 1,767,127 ---------- ---------- ----------- 12,656,560 8,823,355 43,719,799 27,618,292 Costs and expenses: Cost of goods sold.................. 9,159,222 3,863,568 31,626,066 12,991,004 Research and development............ 4,259,185 1,992,661 13,413,880 5,449,346 Selling, general and administrative. 9,823,355 2,755,340 25,203,296 7,125,153 Purchased in-process technology..... -- -- 2,974,410 -- Amortization of intangibles......... 903,950 -- 2,711,848 -- ------------ ---------- ------------ ----------- 24,145,712 8,611,569 75,929,500 25,565,503 ------------ ---------- ------------ ----------- Income (loss) from operations.......... (11,489,152) 211,786 (32,209,701) 2,052,789 Other: Interest income (expense), net (2,812,824) 293,880 (7,578,695) 1,086,698 ------------ ---------- ------------ ----------- Income (loss) before income tax provision (benefit)................... (14,301,976) 505,666 (39,788,396) 3,139,487 Income tax provision (benefit)......... (841,475) 4,495 (3,747,778) 16,977 ------------ ---------- ------------ ----------- Net income (loss)...................... $(13,460,501) $ 501,171 $(36,040,618) $ 3,122,510 ============ ========== ============ =========== Net income (loss) per share: Primary....................... ($0.75) $0.06 ($2.32) $0.34 ============ ========== ============ =========== Average common shares and equivalents..................... 17,902,391 9,103,103 15,565,784 9,120,709 ============ ========== ============ ===========
(1) Includes the results of operations of Trikon Equipments Limited and Trikon Limited (collectively, "Trikon Limited"), which was acquired on November 15, 1996 (see Note A of Notes to Condensed Consolidated Financial Statements). See Notes to Condensed Consolidated Financial Statements. 4 Trikon Technologies, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED --------------------------------------------- SEPTEMBER 30, SEPTEMBER 30, 1997 (1) 1996 -------------------- ------------------- OPERATING ACTIVITIES Net income (loss)................................. $(36,040,618) $ 3,122,510 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization of plant, equipment, leasehold improvements and demonstration systems...................... 5,177,973 1,199,912 Amortization of intangible assets............. 2,772,094 - Amortization of financing costs............... 614,751 - Purchased in-process technology............... 2,974,410 - Deferred income taxes......................... (3,420,093) - Changes in operating assets and liabilities: Accounts receivable......................... 7,818,961 (8,096,151) Inventories................................. 8,394,774 (10,311,960) Demonstration systems....................... (1,326,587) (3,110,975) Other current assets........................ 1,095,166 (270,949) Accounts payable, accrued expenses and other current liabilities........... (10,439,454) 7,965,165 Other liabilities........................... 1,883,137 - ------------ ------------ Net cash used in operating activities............. (20,495,486) (9,502,448) INVESTING ACTIVITIES Purchases of property, equipment and leasehold improvements..................................... (8,571,543) (6,548,355) Proceeds from sales of short-term investments..... 1,216,156 19,914,800 Purchases of short-term investments............... (6,113,072) (18,481,907) Other assets...................................... (381,847) (2,476,735) ------------ ------------ Net cash used in investing activities............. (13,850,306) (7,592,197) FINANCING ACTIVITIES Net borrowings (repayments) under bank credit line................................... 416,366 - Proceeds from sale of Series G Preferred Stock, net.............................................. 19,547,592 - Proceeds from sale of common stock and warrants... 2,328,570 132,902 Payments on capital lease obligations............. (404,165) (358,977) ------------ ------------ Net cash provided by (used in) financing 21,888,363 (226,075) activities....................................... ------------ ------------ Net decrease in cash and cash equivalents......... (12,457,429) (17,320,720) Cash and cash equivalents at beginning of period.......................................... 20,187,662 24,770,363 ------------ ------------ Cash and cash equivalents at end of period........ $ 7,730,233 $ 7,449,643 ============ ============
(1) Includes the cash flows of Trikon Limited, which was acquired on November 15, 1996 (see Note A of Notes to Condensed Consolidated Financial Statements). See Notes to Condensed Consolidated Financial Statements. 5 Trikon Technologies, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1997 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in Trikon Technologies, Inc.'s (the "Company") Annual Report on Form 10-K for the year ended December 31, 1996. On November 15, 1996, the Company acquired all the issued and outstanding shares of Electrotech Limited and Electrotech Equipments Limited. During the second quarter of 1997, Electrotech Limited and Electrotech Equipments Limited changed their names to Trikon Limited and Trikon Equipments Limited (collectively "Trikon Limited"). Trikon Limited develops, manufactures, markets and services semiconductor fabrication equipment for the worldwide semiconductor manufacturing industry. The aggregate purchase price paid by the Company, excluding approximately $7,976,000 in acquisition costs, was $145,700,000 consisting of $75,000,000 paid in cash and the issuance of 5,600,000 shares of Common Stock of the Company with an estimated fair market value of $70,700,000, based on the quoted market price on the last day prior to the public announcement of the parties' agreement to the acquisition terms. The acquisition was accounted for as a purchase and, accordingly, the acquired assets and liabilities were recorded at their estimated fair market values at the date of acquisition. The Company's consolidated assets, liabilities and results of operations include the assets, liabilities, and operating results of Trikon Limited after, but not prior to, the November 15, 1996 acquisition date. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. A number of factors, including the Company's history of significant losses, negative cash flows, the termination of the company's Working Capital Facility (as defined below) and the debt service costs associated with the Company's historically high level of debt, raise substantial doubts about the Company's ability to continue as a going concern. (See Note J) On November 12, 1997, the Company announced plans to reorganize the Company's U.S. etch operations, with the goal of reducing costs, helping the Company to return to profitability and to generate future postive cash flow. (See Note J) NOTE B - INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market. The components of inventory consist of the following:
SEPTEMBER 30, December 31, 1997 1996 ------------- ------------ Components........................... $22,114,737 $17,754,456 Work in process...................... 20,536,410 32,993,125 Finished goods....................... 2,390,094 3,089,550 ----------- ----------- $45,041,241 $53,837,131 =========== ===========
NOTE C - DEMONSTRATION SYSTEMS Demonstration Systems represent completed systems at certain strategic customer sites, "Beta Sites". The Company provides these demonstration systems at no charge for a specified evaluation period. All operating costs incurred during the evaluation period are paid by the customer. At the conclusion of the agreed upon evaluation period, provided that the equipment performs to specifications, management expects that the customer will purchase the system, though they are not obligated to do so. If the system is returned, it is refurbished for resale or used for research and development. Demonstration systems are 6 Trikon Technologies, Inc. NOTE C - DEMONSTRATION SYSTEMS (CONTINUED) stated at the lower of cost or estimated net realizable value and are depreciated on a straight line method over four years, if they are not sold after one year. NOTE D - PMT CVD PARTNERS, L.P. AGREEMENT In the first quarter of fiscal 1997, the Company determined that certain characteristics of the CVD technology of Trikon Limited, known as "Flowfill", were superior to the high density plasma CVD processes then being pursued by a limited partnership sponsored by the Company (the "Limited Partnership") pursuant to an R&D Agreement (the "R&D Agreement") entered into as of March 29, 1996 between the Limited Partnership and the Company (under which the Company performed all research and development work for the Limited Partnership). The Company decided to discontinue further research and development work under the R&D Agreement and instead focus its consolidated efforts, on its own behalf and not on behalf of the Limited Partnership, upon the Flowfill CVD technology used in the Trikon Limited equipment. Accordingly, a settlement of any and all rights and claims by the limited partners of the Limited Partnership was made on June 30, 1997 to terminate the R&D Agreement and all related agreements, and purchase all of the outstanding interests in the Limited Partnership for 679,680 shares of common stock (the "LP Shares"). The assets acquired included approximately $2.2 million of cash and approximately $3.0 million of in-process research and development which was recorded as a one-time charge as purchased in-process technology expense in the quarter ended June 30, 1997. In connection with the purchase of all of the outstanding interests in the Limited Partnership, the Company agreed to cause a registration statement covering the LP Shares filed under the Securities Act of 1933, as amended (the "Securities Act"), to become effective on or prior to September 1, 1997. As of the date hereof, the Company has not filed such a registration statement, and as a result, the Company must pay the holders of the LP Shares liquidated damages in the amount of a one-time fee of $75,000, and an amount equal to $2,500 per day for each day after September 1, 1997 that such a registration statement has not become effective. NOTE E - IMPACT ON FINANCIAL STATEMENTS OF RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted as of December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded and the calculation will be referred to as basic earnings per share. Basic earnings (loss) per share under Statement 128 would have been $0.06 and $0.36 per share for the three and nine months ending September 30, 1996 and would be the same as primary loss per share for the three and nine months ending September 30, 1997. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. NOTE F - INCOME TAXES The tax benefit represents the combination of a foreign tax benefit associated with Trikon Limited's operating loss and the reversal of deferred tax credits established at November 15, 1996 for the difference in the tax basis and financial reporting basis of the Trikon Limited assets acquired. The effective tax rate differs from the statutory Federal tax rate due to certain one-time nondeductible charges and losses for which no benefit has been provided. The Company's ability to use its domestic and foreign net operating losses and credit carryforwards will depend upon future income and will be subject to an annual limitation, required by the Internal Revenue Code of 1986 and similar state provisions. 7 Trikon Technologies, Inc. NOTE F - INCOME TAXES (CONTINUED) The Company has operating subsidiaries in several countries, and each subsidiary is taxed based on the laws of the jurisdiction in which it operates. Because taxes are incurred at the subsidiary level, and one subsidiary's tax losses cannot be used to offset the taxable income of subsidiaries in other jurisdictions, the Company's consolidated effective tax rate may increase to the extent it reports tax losses in some subsidiaries and taxable income in others. The subsidiaries are subject to taxation in countries where they operate, and such operations generally are taxed at rates similar to or higher than tax rates in the United States. The payment of dividends or distributions by the subsidiaries to the United States would be subject to withholding taxes in the country of domicile and may be mitigated under the terms of relevant double tax treaties. NOTE G - NET INCOME (LOSS) PER SHARE Net income (loss) per share is computed using the weighted average number of shares of Common Stock outstanding. Common equivalent shares from stock options and warrants (using the treasury stock method) have been included in the computation when dilutive. The weighted average number of shares used in the computation for the three and nine months ended September 30, 1997 excludes common equivalent shares from options and warrants because they would be antidilutive. NOTE H - LINE OF CREDIT AND LONG-TERM DEBT On November 15, 1996 the Company entered into a three-year senior secured credit facility with certain domestic and U.K. lenders (the "Working Capital Facility") that permitted the Company and its subsidiaries to borrow an aggregate of up to $35.0 million, subject to borrowing base limitations, based upon eligible accounts receivable. As of September 30, 1997, the Company had approximately $14.6 million in outstanding borrowings under the Working Capital Facility. The Working Capital Facility placed certain restrictions on the Company, which, among other things, prohibited the Company from paying cash dividends, limited the amount of capital expenditures and required the Company to comply with certain financial ratios and covenants. In connection with the acquisition of Trikon Limited, the Company issued $86,250,000 of Convertible Subordinated Notes (the "Convertible Notes"). The Convertible Notes bear interest at 7 1/8% which is payable in semi-annual installments beginning on April 15, 1997. Since January 1997, the Convertible Notes have borne an additional 0.5% interest per annum due to the Company's noncompliance with certain registration rights of the Convertible Notes. The Convertible Notes contain certain provisions which, upon the occurrence of an "Event of Default" (as defined in the Convertible Notes) could cause the Convertible Notes to become due and payable immediately. Such an Event of Default would occur if, among other things, the Company were to default on the Working Capital Facility or any other secured indebtedness, as defined in the Convertible Notes, caused by the failure to pay principal and interest payments when due or resulting from the acceleration of any such indebtedness prior to its express maturity in excess of $10.0 million. At December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997, the Company was out of compliance with certain financial ratios and covenants established under the Working Capital Facility. The lenders had granted the Company a waiver of such covenant violations as of December 31, 1996 and March 31, 1997 and for the year and quarter, respectively, then ended, which waivers expired June 30, 1997. Concurrent with the June 30, 1997 first closing of the Private Placement (as defined below), the Company entered into an amendment agreement with its lending banks (the "Amendment") to amend its Working Capital Facility. The Amendment, among other things, revised certain financial ratios and covenants as to which the Company had previously been in default. In connection with and as consideration for the Amendment, the Company issued to the lending banks and their administrative agent, warrants to purchase an aggregate of 178,182 shares of Common Stock at an exercise price of $6.75 per share. As a result of the substantial loss incurred during the June 30, 1997 and September 30, 1997 quarters, the Company violated the financial ratio and covenants requirements set forth in the Amendment. The Company received waivers from its lending banks with regard to the June 30, 1997 covenant violations which extended the Working Capital Facility through September 30, 1997. Under the terms of one June 30, 1997 waiver, the lending banks suspended their obligation to advance any further funds under the Working Capital Facility. 8 Trikon Technologies, Inc. NOTE H - LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED) As a result of the Company being in default under the Working Capital Facility, the lenders issued on October 7, 1997 a payment blockage notice to the holders of the Convertible Notes (the "Payment Blockage Notice"). The Payment Blockage Notice would have prevented the payment of any principal or interest due and payable under the Convertible Notes until the earlier of the curing of any event of default under the Working Capital Agreement or 180 days. On November 12, 1997, the Company entered into a pay-off agreement with its domestic and U.K. lenders under the Working Capital Facility (the "Pay-off Agreement"). Under the Pay-off Agreement, among other things, the Company made payments in the aggregate of approximately $12.5 million (which includes all outstanding principal and interest due at November 12, 1997) to its lenders under the Working Capital Facility, the lenders under the Working Capital Facility released all of their liens on the assets of the Company, the Working Capital Facility was terminated, and the Payment Blockage Notice was cancelled. In addition, in order to collateralize certain obligations of Trikon Limited relating to bankers guarantees and a credit facility with the Company's U.K. lender, the Company provided cash collateral of approximately $1.4 million to the U.K. lender. On November 12, 1997, the Company made an interest payment of approximately $3.1 to the holders of the Convertible Notes, which payment was originally due on October 15, 1997. Having made this payment, the Company remains in compliance with the terms of the Convertible Notes. NOTE I - PREFERRED STOCK During the quarter ended June 30, 1997, the Company commenced a private offering (the "Private Placement") of shares of its newly-authorized Series G Preferred Stock together with three-year warrants to purchase Common Stock at an exercise price of $8.00 per share (the "Warrants"). The Company sold an aggregate of 2,962,032 shares of Series G Preferred Stock (together with Warrants to purchase an aggregate of 733,332 shares of Common Stock) with net proceeds to the Company of approximately $19,500,000. Investors in the Private Placement received Warrants exercisable for a number of shares of Common Stock equal to 30% of the number of shares of Series G Preferred Stock purchased, at a total price of $6.75 per share of Series G Preferred Stock. The Series G Preferred Stock has a liquidation preference of $6.75 per share which is generally applicable to any liquidation or acquisition of the Company, such that the Series G Preferred Stock receives the first $6.75 per share of available proceeds, the shares of Common Stock then receive the next $6.75 per share, and thereafter the Series G Preferred Stock and the Common Stock share any remaining proceeds pro rata (on an as converted basis assuming conversion of all of the Series G Preferred Stock into Common Stock). The Series G Preferred Stock is convertible at the option of the holders on a share-for-share basis into Common Stock commencing September 30, 1997 (subject to antidilution adjustments), bears no dividend (except as may be paid on the Common Stock into which it is convertible) and will be automatically converted into Common Stock on June 30, 2000. The Articles of Incorporation of the Company provide that, except for any amendment, alteration or repeal of the preferences, privileges, special rights or other powers of the Series G Preferred Stock or the authorization of any other preferred stock (all of which require the approval of a majority of the Series G Preferred Stock voting as a separate class), the Series G Preferred Stock and the Common Stock vote together as a single class, with each share of Series G Preferred Stock being entitled to that number of votes equal to the number of shares of Common Stock into which it is then convertible (presently, one vote per share). Additionally, the purchasers of the Series G Preferred Stock have entered into a ten-year Voting Agreement with the Company pursuant to which they have agreed that, if a separate class vote of the Series 9 Trikon Technologies, Inc. NOTE I - PREFERRED STOCK (CONTINUED) G Preferred Stock is required by law (rather than by the Articles of Incorporation of the Company), and if the proposal being presented to the shareholders has been approved by the Board of Directors and approved by the vote of the holders of the Common Stock and Series G Preferred Stock voting as a single class as described above, they will vote their shares of Series G Preferred Stock in favor of such proposal when voting the Series G Preferred Stock as a separate class. NOTE J - SUBSEQUENT EVENTS In October 1997, the Company announced a 20% reduction in its workforce, which was completed during the month. In November 1997, the Company announced plans to reorganize the Company's U.S. etch operations during the fourth quarter. As a result of the reduction in its workforce and the reorganization, the Company expects to incur a substantial charge to earnings in the fourth quarter of 1997. On November 12, 1997, the Company granted non-exclusive, worldwide, paid-up licenses of its MORI etch and Forcefill PVD technologies to Applied Materials, Inc. Under the terms of the license agreements and related technology transfer agreements, Applied Materials, Inc. will pay the Company $30 million, $27 million of which has been paid and an additional $3 million of which will be paid upon completion of the technology transfer. On November 12, 1997, the Company also entered into the Pay-off Agreement with its domestic and U.K. lenders. Under the terms of the Pay-off agreement, among other things, the Company made payments in the aggregate of approximately $12.5 million to its lenders under the Working Capital Facility, the lenders under the Working Capital Facility released all of their liens on the assets of the Company and the Working Capital Facility was terminated. In addition, in order to collateralize certain obligations of Trikon Limited related to bankers guarantees and a credit facility with the Company's U.K. lender, the Company provided cash collateral of approximately $1.4 million to the U.K. lender. On November 12, 1997, the Company made the approximately $3.1 million interest payment, originally due on October 15, 1997, to the holders of the Convertible Notes. 10 Trikon Technologies, Inc. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations set forth below contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to the financial condition, results of operations and business of the Company. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially and adversely from those set forth in the forward-looking statements, including, without limitation, the availability of financial resources adequate for the Company's short-, medium- and long-term needs, the Company's ability to successfully implement its strategy of reorganizing its product lines and overall business, varying customer demand for the Company's products, including potential material adverse effects on such demand resulting from the Company's licensing of its MORI etch and Forcefill physical vapor deposition ("PVD") technologies to Applied Materials, Inc., supply and manufacturing constraints and costs, dependence on outside suppliers, the various effects on revenue, margins, inventories and operating expenses of reorganizing in the Company's product lines and overall business, the Company's ability to build and maintain adequate staff infrastructure in the area of PVD and chemical vapor deposition ("CVD") design, product engineering and development, sales and marketing, and administrations, customer warranty claims, slowing growth in the demand for semiconductors, challenges from the Company's competition, general economic conditions, and the other risks and uncertainties described from time to time in the Company's public announcements and SEC filings, including without limitation the Company's Quarterly and Annual Reports on Form 10-Q and 10-K, respectively. The Company cautions that the foregoing list of important factors is not exclusive. In addition, such list of important factors speaks only as of the date hereof and the Company does not undertake to update any written or oral forward-looking statement that may be made from time to time by or on behalf of the Company. OVERVIEW The Company develops, manufactures, markets and services semiconductor equipment for the worldwide semiconductor manufacturing industry. These products are used for etch, chemical vapor deposition (CVD), and physical vapor deposition (PVD) applications. The etch systems consist of the PINNACLE 8000R and PINNACLE 8000R(TM) systems (selling price between $1,800,000 for a standard two-module system to $3,400,000 for a four-module system), the Omega(TM) 201-2 system (selling price between $700,000 and $1,400,000, depending on the configuration of the system), and a stand-alone MORI(TM) plasma source process module which lists for approximately $500,000. The Company's CVD products consist of the Delta 201 (selling price approximately $600,000), and the Planar 200 Flowfill(TM) system, selling price ranging between $1,400,000 and $2,500,000, depending on the configuration of the system. The Company's PVD products are the Sigma system (selling price ranges from $1,500,000 to $2,500,000) and the Sigma Forcefill(TM) whose selling price ranges from $3,500,000 to $4,000,000, depending on the configuration of the system. The Omega(TM) 201-2 system, the Delta 201, the Planar 200 Flowfill(TM) and the Sigma and Sigma Forcefill(TM) products were obtained with the acquisition of Trikon Limited on November 15, 1996. ELECTROTECH ACQUISITION. On November 15, 1996, the Company acquired (the "Acquisition") Electrotech Limited and Electrotech Equipments Limited, privately-owned United Kingdom companies founded in 1968, for an aggregate consideration of $75.0 million in cash and 5,600,000 shares of Common Stock, with an estimated fair market value of $70.7 million, based on the closing sale price of a share of Common Stock on the Nasdaq National Market on the last day prior to the public announcement of the parties' agreement to the terms of the Acquisition. During the second quarter of 1997, Electrotech Limited and Electrotech Equipments Limited changed their names to Trikon Limited and Trikon Equipments Limited (collectively "Trikon Limited"). Trikon Limited develops, manufactures, markets and services semiconductor fabrication equipment with products and technologies for etch, CVD and PVD applications. The Acquisition expanded the Company's product lines and its sales and service organization which has enabled the Company to have a greater presence throughout the United States, Europe and Asia. 11 Trikon Technologies, Inc. RESULTS OF OPERATIONS The following table sets forth certain operating data as a percentage of total revenue for the periods indicated:
Three months ended Nine months ended --------------------------------------- --------------------------------------- September 30, September 30, September 30, September 30, 1997 1996 1997 1996 -------------- -------------- -------------- -------------- Product revenues.................... 100.0% 89.6% 100.0% 93.6% Contract revenues................... --% 10.4% --% 6.4% -------------- -------------- -------------- -------------- Total revenues...................... 100.0% 100.0% 100.0% 100.0% Cost of sales....................... 72.4% 43.8% 72.3% 47.0% -------------- -------------- -------------- -------------- Gross profit...................... 27.6% 56.2% 27.7% 53.0% Operating expenses: Research and development.......... 33.7% 22.6% 30.7% 19.7% Selling, general and adminsitrative 77.6% 31.2% 57.6% 25.8% Purchased in-process technology --% --% 6.8% --% Amortization of intangibles....... 7.1% --% 6.2% --% -------------- -------------- -------------- -------------- Total operating expenses.......... 118.4% 53.8% 101.3% 45.5% -------------- -------------- -------------- -------------- Income (loss) from operations....... (90.8)% 2.4% (73.7)% 7.5% Interest income (expense), net...... (22.2)% 3.3% (17.3)% 3.9% -------------- -------------- -------------- -------------- Income (loss) before income tax provision (benefit)................ (113.0)% 5.7% (91.0)% 11.4% Income tax provision (benefit)...... (6.6)% (8.6)% 0.1% -------------- -------------- -------------- -------------- Net income (loss)................... (106.4)% 5.7% (82.4)% 11.3% ============== ============== ============== ==============
PRODUCT REVENUES. Product revenues for the third quarter of fiscal 1997 increased 60% to $12.7 million compared to $7.9 million for the third quarter of fiscal 1996. Product revenues for the nine months ending September 30, 1997 increased 69% to $43.7 million as compared to $25.9 million for the same period in 1996. These increases were attributable primarily to revenues derived from products acquired in connection with the Company's acquisition of Trikon Limited. During the third quarter of fiscal 1997, the Company shipped eight systems as compared to two systems during the third quarter of fiscal 1996. Included in product revenues for the third quarter of fiscal 1997 was a $1.0 million reserve for the return of a MORI system shipped and recognized as revenue in fiscal 1995. Product revenues increased as a result of the shipment of twenty-two systems for the nine months ended September 30, 1997 as compared to eleven systems for the nine months ended September 30, 1996. Sales outside of the United States accounted for approximately 88% and 94% of total revenue in the third quarters of fiscal years 1997 and 1996, respectively. Sales outside of the United States accounted for 48% and 82% of total revenue for the nine months ended September 30, 1997 and 1996, respectively. The quantity of product shipped will fluctuate significantly from quarter to quarter and the individual customers to which these products are sold can also change from quarter to quarter. Given the significance of each individual sale, the percentage of sales made outside of the United States will also fluctuate significantly from quarter to quarter. 12 Trikon Technologies, Inc. CONTRACT REVENUES. The Company did not receive any contract revenues during the third quarter or nine months ended September 30, 1997 as compared to $0.9 million and $1.8 million for the comparable third quarter and nine month period of fiscal 1996, respectively. The contract revenue received in fiscal 1996 was due to an R&D agreement entered into in March 1996 between Trikon and PMT CVD Partners, L.P. which the Company terminated in the first quarter of 1997. (See Note D to Notes to Condensed Consolidated Financial Statements (Unaudited)). As a result of the termination of this R&D agreement, the Company will not receive any additional contract revenue associated with this R&D agreement. GROSS MARGIN ON PRODUCT REVENUES. The Company's gross margin on product revenues for the third quarter of fiscal 1997 was 28% as compared to 51% for the third quarter of fiscal 1996. For the nine months ended September 30, 1997, gross margin on product revenues was 28% as compared to 50% for the same period in 1996. The decrease in gross margin was due in part to the relatively low gross margin on the products of Trikon Limited shipped in the first three quarters of fiscal 1997. The relatively low gross margin on the products of Trikon Limited results from the write-up of its inventory on hand as of November 15, 1996, to the fair market value of such inventory resulting from the allocation of the purchase price of Trikon Limited as required under Accounting Principles Board Opinion No. 16 ("APB No. 16"). The write-up increased cost of goods sold by approximately $0.6 million in the third quarter of fiscal 1997 and $4.4 million in the nine months ended September 30, 1997 as the related products were shipped. Excluding the charge to cost of goods sold relating to the APB No. 16 adjustment, gross profit margins on product sales for the three months and nine months ended September 30, 1997 would have been 32% and 38%, respectively. There is approximately $2.1 million in inventory that, as of September 30, 1997, relates to the write-up of inventory to its fair market value at the date of the Acquisition based on APB No. 16. The $2.1 million write-up will increase cost of goods sold and continue to adversely affect gross margins as products are shipped from Trikon Limited in fiscal year 1997. In addition, gross margins were negatively impacted in the third quarter of fiscal 1997 by the return of one of the Company's MORI systems that was shipped in fiscal 1995. Gross margins have also been negatively impacted due to issues related to the weakened product demand such as unabsorbed manufacturing overhead associated with the reduced units sold, and will continue to be adversely affected in 1997. RESEARCH & DEVELOPMENT EXPENSES. Research and development expenses for the third quarter of fiscal 1997 were $4.3 million, or 34% of total revenues compared to $2.0 million, or 23% of total revenues for the third quarter of fiscal 1996. Included in research and development expenses during the third quarter of fiscal 1997 is $2.2 million related to Trikon Limited. For the nine months ended September 30, 1997, research and development expenses were $13.4 million, or 31% of total revenues as compared to $5.4 million, or 20% of total revenues for the nine months ended September 30, 1996. The major focus of the Company's research and development efforts during the nine months of ended September 30, 1997 was on the development of new processes in further advancing its proprietary PVD, CVD and etch technologies as well as adding enhancements to its existing products. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the third quarter of fiscal 1997 were $9.8 million or 78% of total revenues, compared to $2.8 million, or 31% of total revenues in the third quarter of fiscal 1996. Included in the fiscal 1997 third quarter expenses is $3.6 million in selling, general and administrative expenses related to Trikon Limited. The dollar increases were primarily due to the continued expansion of the Company's foreign operations, expenses incurred in the construction of a new facility in Newport, South Wales, and marketing support related charges directed at communicating the organizations' developments to the marketplace. In addition to the reduction in revenue due to the return of a unit shipped in a prior period, $1.1 was recognized as a bad debt expense with this customer. For the nine months ended September 30, 1997, selling, general and administrative expenses were $25.2 million, or 58% of total revenues as compared to $7.1 million, or 26% of total revenues for the same period in 1996. 13 Trikon Technologies, Inc. Income (Loss) From Operations. The Company realized a $11.5 million loss from operations, or 91% of total revenues in the third quarter of fiscal 1997, as compared with a $0.2 million gain from operations, or 2% of total revenues in the third quarter of fiscal 1996. The loss from operations in the third quarter of fiscal 1997 was due primarily to reduced sales, in addition to the allocated cost of inventory charged through cost of goods sold during the third quarter of fiscal 1997 of $0.6 million related to the write-up of the inventory of Trikon Limited. In addition, a loss of $2.1 million was incurred for the return of a MORI etch system shipped in a prior year, as discussed above, and lower margins on shipments and bad debt write-offs related to this customer during the quarter. For the nine months ended September 30, 1997, the Company realized a $32.2 million loss from operations, or 74% of total revenue as compared with a $2.1 million gain from operations, or 8% of total revenue for the same period in 1996. The Company anticipates that operating results will continue to be unfavorably impacted during the remaining quarter of fiscal 1997 and the first two quarters of fiscal 1998 due to continued weak product demand and the write- up of Trikon Limited's inventory required by APB No. 16 as discussed above. INTEREST INCOME. Interest income decreased to $0.1 million in the third quarter of fiscal 1997 from $0.3 million in the third quarter of fiscal 1996. For the nine months ended September 30, 1997 interest income was $0.6 million as compared to $1.2 million for the nine months ended September 30, 1996. This was due to lower cash balances during the 1997 periods. INTEREST EXPENSE increased to $3.1 million in the third quarter of fiscal 1997 from $0.1 million in the third quarter of fiscal 1996. For the nine months ended September 30, 1997 interest expense increased to $8.2 million as compared to $0.1 million for the nine months ended September 30, 1996. This was due to the accrual of interest payable to the holders of the $86.3 million of convertible debt raised to fund part of the Acquisition and interest associated with borrowings under the Working Capital Facility (as defined below). In addition, interest expense was recognized for the amortization of the costs associated with obtaining the Working Capital Facility. INCOME TAXES. The Company recorded a $0.8 million tax benefit in the third quarter of fiscal 1997 compared to the recording of a nominal income tax provision in the third quarter of fiscal 1996. For the nine months ended September 30, 1997, the Company has recorded a $3.7 million tax benefit as compared to the recording of a nominal income tax provision for the nine months ended September 30, 1996. The tax benefit represents the combination of a foreign tax benefit associated with Trikon Limited's operating loss and the reversal of deferred tax credits established at November 15, 1996 for the difference in the tax basis and financial reporting basis of the Trikon Limited assets acquired. The effective tax rate differs from the statutory Federal tax rate due to certain one-time nondeductible charges and losses for which no benefit has been provided. The Company's ability to use its domestic and foreign net operating losses and credit carryforwards will depend upon future income and will be subject to an annual limitation, required by the Internal Revenue Code of 1986 and similar state provisions. The Company has operating subsidiaries in several countries, and each subsidiary is taxed based on the laws of the jurisdiction in which it operates. Because taxes are incurred at the subsidiary level, and one subsidiary's tax losses cannot be used to offset the taxable income of subsidiaries in other jurisdictions, the Company's consolidated effective tax rate may increase to the extent it reports tax losses in some subsidiaries and taxable income in others. The subsidiaries are subject to taxation in countries where they operate, and such operations generally are taxed at rates similar to or higher than tax rates in the United States. The payment of dividends or distributions by the subsidiaries to the United States would be subject to withholding taxes in the country of domicile and may be mitigated under the terms of relevant double tax treaties. 14 Trikon Technologies, Inc. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997 the Company had $14.1 million in cash, cash equivalents and short-term investments, compared to $21.7 million at December 31, 1996. The decrease in cash, cash equivalents and short-term investments resulted from the use of cash in operating activities of $20.5 million and $13.9 million of cash used in investing activities, offset by $21.9 million of cash provided from financing activities, including the Private Placement (as defined below) of $19.5 million of Series G Preferred Stock and Warrants. (See Note I to Notes to Unaudited Condensed Consolidated Financial Statements). On November 12, 1997, the Company granted non-exclusive, worldwide, paid-up licenses of its MORI etch and Forcefill technologies to Applied Materials, Inc. Under the terms of the license agreements and related technology transfer agreements, Applied Materials, Inc. will pay the Company $30 million, $27 million of which has been paid and an additional $3 million of which will be paid upon completion of the technology transfer. On November 12, 1997, the Company also entered into a pay-off agreement (the "Pay-off" Agreement) with its domestic and U.K. lenders under the Working Capital Facility (as defined below). Under the terms of the Pay-off Agreement, the Company made payments in the aggregate of approximately $12.5 million (including all outstanding principal and interest due at November 12, 1997) to its lenders under the Working Capital Facility, the lenders under the Working Capital Facility released all of their liens on the assets of the Company, the Working Capital Facility and all of the Company's obligations under the Working Capital Agreement were terminated, and the Payment Blockage Notice (as defined below) was cancelled. In order to collateralize certain obligations of Trikon Limited relating to bankers guarantees and a credit facility with the Company's U.K. lender, the Company provided cash collateral of approximately $1.4 million to the U.K. lender. On November 12, 1997, the Company made an interest payment of approximately $3.1 million, originally due on October 15, 1997, to the holders of the Convertible Notes. Having made the interest payment the Company remains in compliance with the terms of the Conertible Notes. On November 15, 1996 the Company entered into a three-year senior secured credit facility with certain domestic and U.K. lenders (the "Working Capital Facility") that permitted the Company and its subsidiaries to borrow an aggregate of up to $35.0 million, subject to borrowing base limitations, based upon eligible accounts receivable. As of September 30, 1997, the Company had approximately $14.6 million in outstanding borrowings under the Working Capital Facility. The Working Capital Facility placed certain restrictions on the Company, which, among other things, prohibited the Company from paying cash dividends, limited the amount of capital expenditures and required the Company to comply with certain financial ratios and covenants. In connection with the Acquisition of Trikon Limited, the Company issued $86,250,000 of 7 1/8% Convertible Subordinated Notes due 2001 (the "Convertible Notes"). The Convertible Notes contain certain provisions which provide that the occurrence of an "Event of Default" (as defined therein) could cause the Convertible Notes to become due and payable immediately. Such an Event of Default would occur if, among other things, the Company were to default on the Working Capital Facility or any other secured indebtedness (as defined therein) caused by the failure to pay principal and interest payments when due or resulting in the acceleration of such indebtedness prior to its express maturity in excess of $10.0 million. An interest payment was due under the Convertible Notes on October 15, 1997, but not paid by the Company because the Payment Blockage Notice (as defined below) prevented the making of such payment. As described above, the Company made this overdue payment on November 12, 1997, and thus cured its Event of Default under the Convertible Notes. The next interest payment under the Convertible Notes is due on April 15, 1998. At December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997, the Company was out of compliance with certain financial ratios and covenants established under the Working Capital Facility. The lenders had granted the Company a waiver of such covenant violations as of December 31, 1996 and March 31, 1997 and for the year and quarter, respectively, then ended, which waivers expired June 30, 1997. Concurrent with the first closing of the Private Placement on June 30, 1997, the Company entered into an amendment agreement with its lending banks (the "Amendment") to amend its secured bank credit facility which, among other things, revised certain financial ratios and covenants as to which the Company had previously been in default. In connection with and as consideration for the Amendment, the Company issued to the lending banks and their administrative agent, warrants to purchase an aggregate of 178,182 shares of Common Stock at an exercise price of $6.75 per share. As a result of the substantial losses incurred during the quarters ended June 30, 1997 and September 30, 1997, the Company was out of compliance with the amended financial ratio and covenants requirements set forth in the Amendment. The Company received waivers from its lending banks with regard to the June 30, 1997 covenant violations which extended the Working Capital Facility through September 30, 1997. Under the terms of the June 30, 1997 waiver, the lending banks suspended their obligation to advance any further funds under the Working Capital Facility. As a result of the Company being in default of its Working Capital Facility, the banks issued a payment blockage notice to the holders of the Convertible Notes on October 7, 1997 (the "Payment Blockage Notice"). The Payment Blockage Notice prevented the payment of any principal or interest due and payable under the Convertible Notes until the earlier of the curing of any event of default under the Working Capital Agreement or 180 days. As previously disclosed, in early 1997 the Company determined that certain characteristics of the chemical vapor deposition ("CVD") technology of Trikon Limited known as "Flowfill" are superior to the high density plasma CVD processes which were being pursued by PMT CVD Partners, L.P. (the "Limited Partnership"), a limited partnership sponsored by the Company for MORI CVD development pursuant to an R&D agreement (the "R&D Agreement") entered into as of March 29, 1996 between the Limited Partnership and the Company (under which the Company agreed to perform all research and development work for the Limited Partnership). Accordingly, during the first quarter of 1997, the Company decided to 15 Trikon Technologies, Inc. discontinue further research and development work under the R&D Agreement and instead focus its consolidated efforts, on its own behalf and not on behalf of the Limited Partnership, upon the FlowFill CVD technology used in the Trikon Limited equipment. Certain of the limited partners of the Limited Partnership asserted that this decision was inconsistent with the R&D Agreement and representations made by the Company in connection with the Limited Partnership and that, accordingly, a settlement of any and all claims that the limited partners of the Limited Partnership might have in connection with such discontinuation was appropriate. Effective June 30, 1997, the Company acquired all of the outstanding limited partnership interests of the Limited Partnership and all of the shares of the Limited Partnership's corporate general partner, in exchange for the Company's issuance of an aggregate of 679,680 shares of Common Stock of the Company (the "LP Shares") pro rata to the limited partners of the Limited Partnership (excluding the Company). Pursuant to this transaction, all CVD technology which had been developed by the Limited Partnership prior to such discontinuation, together with approximately $2.2 million of unspent funds of the Limited Partnership, are now owned solely by the Company, and any and all claims that the limited partners of the Limited Partnership may have had in connection with the termination of the research and development project thereunder or otherwise relating to the Limited Partnership have been resolved. In connection with the purchase of all of the outstanding interests in the Limited Partnership and its corporate general partner, the Company agreed to cause a registration statement covering the LP Shares filed under the Securities Act of 1933, as amended (the "Securities Act"), to become effective on or prior to September 1, 1997. As of the date hereof, the Company has not filed such a registration statement, and as a result, the Company must pay the holders of LP Shares liquidated damages in the amount of a one-time fee of $75,000, and an amount equal to $2,500 per day for each day after September 1, 1997 that such registration statement has not become effective. During the quarter ended June 30, 1997, the Company commenced a private offering (the "Private Placement") of shares of its newly-authorized Series G Preferred Stock together with three-year warrant to purchase Common Stock at an exercise price of $8.00 per share (the "Warrants"). Investors in the Private Placement received Warrants exercisable for a number of shares of Common Stock equal to 30% of the number of shares of Series G Preferred Stock purchased, at a total price of $6.75 per share of Series G Preferred Stock. The Series G Preferred Stock has a liquidation preference of $6.75 per share which is generally applicable to any liquidation or acquisition of the Company, such that the Series G Preferred Stock receives the first $6.75 per share of available proceeds, the shares of Common Stock then receive the next $6.75 per share, and thereafter the Series G Preferred Stock and the Common Stock share any remaining proceeds pro rata (on an as-converted basis assuming conversion of all of the Series G Preferred Stock into Common Stock). The Series G Preferred Stock is convertible at the option of the holders on a share-for-share basis into Common Stock commencing September 30, 1997 (subject to customary anti-dilution adjustments), bears no dividend, and will be automatically converted into Common Stock on June 30, 2000. The Company received net proceeds of approximately $19.5 million during and after the second quarter of 1997 from the Private Placement. The Company anticipates that it will spend between $2.0 to $4.0 million for capital expenditures for the months remaining in fiscal 1997. This is expected to include investments in demonstration and test equipment, information systems, leasehold improvements and other capital items that should enable the Company to expand its ability to support and develop new products and services. In addition, the Company expects to increase its investment in inventory of evaluation systems at customer sites. 16 Trikon Technologies, Inc. On October 1997, the Company announced a 20% reduction in its workforce, which was completed during the month. On November 12, 1997, the Company announced that it intends to reorganize its U.S. etch operations during the fourth quarter of 1997. The Company expects the reorganization to result in a substantial one-time charge to earnings in the fourth quarter of 1997. As discussed in Note A to the Notes to the Company's Condensed Consolidated Financial Statement (Unaudited), there is substantial doubt with respect to the Company's ability to continue as a going concern. There can be no assurance that Company will operate profitably in the future and that the Company will not continue to sustain losses. Absent outside debt or equity financing, and even assuming that the Company is successful in reorganizing its business, there is significant doubt that the Company has adequate resources to fund its operations in the ordinary course through the remainder of 1997 and during 1998. At this time, the Company does not have a credit facility with any lenders or any other readily available source of debt financing. Any significant increase in planned capital expenditures or other costs or any decrease in, or elimination of, anticipated sources of revenue or the inability of the Company to negotiate a new credit facility, among other factors, may cause the Company to further restrict its business. 17 Trikon Technologies, Inc. PART II - OTHER INFORMATION --------------------------- ITEM 3 DEFAULTS UPON SENIOR SECURITIES At September 30, 1997, the Company was out of compliance with certain financial ratios and covenants established under its amended three-year senior secured credit facility with certain domestic and U.K. lenders entered into on November 15, 1996 (the "Working Capital Facility") and amended June 30, 1997. The Company had obtained from its lending banks waivers of such covenant violations only through September 30, 1997. In addition, as a result of the Company being in default under the Working Capital Facility, the lenders issued a payment blockage notice to the holders of the Company's 7 1/8% Convertible Subordinated Notes due 2001. On November 12, 1997, the Company entered into a pay-off agreement with its domestic and U.K. lenders (the "Pay-off Agreement"). Under the Pay-off Agreement, the Company made payments in the aggregate of approximately $12.5 million to its domestic and U.K. lenders and the Working Credit Facility was terminated. As of the date of the filing of this report, the Company is not in material default in the payment of principal or interest with respect to any of its indebtedness. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein:
Number Description - ------ ----------- 10.27+ M0RI(TM) Source Technology License Agreement dated November 12, 1997 by and between the Company and Applied Materials, Inc., a Delaware corporation ("Applied"). 10.28+ FORCEFILL(TM) Technology License Agreement dated November 12, 1997 by and between Applied and Trikon Equipments Limited, a company incorporated under the laws of England and Wales under registered number 939289 10.29+ FORCEFILL(TM) Technology License Agreement dated November 12, 1997 by and between Applied and Trikon Technologies Limited, a company incorporated under the laws of England and Wales under registered number 1373344 11.1 Computation of Per Share Earnings 27.1 Financial Statement Data
- ------------------------------- + Certain portions of this exhibit have been omitted from the copies filed as part of this Form 10-Q and are the subject of an application for confidential treatment. (b) Reports on Form 8-K: None. 18 Trikon Technologies, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIKON TECHNOLOGIES, INC. Date November 14, 1997 /s/ Dr. Gregor A. Campbell ----------------- -------------------------- Dr. Gregor A. Campbell Chief Executive Officer Vice President and Principal Financial Officer 19 Trikon Technologies, Inc.
EXHIBIT INDEX Exhibit Page Number Description Number - ------ ----------- ------ 10.27 M0RI(TM) Source Technology License Agreement............................... 10.28 FORCEFILL(TM) Technology License Agreement................................. 10.29 FORCEFILL(TM) Technology License Agreement................................. 11.1 Computation of Per Share Earnings.......................................... 27.1 Financial Statement Data...................................................
20 EX-10.27 2 LICENSE AGREEMENT DATED 11-12-97 (MORI) EXHIBIT 10.27 ------------- MORI(TM) SOURCE TECHNOLOGY LICENSE AGREEMENT This LICENSE AGREEMENT ("Agreement") is made and entered into as of November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation ("Applied") and Trikon Technologies, Inc., a California corporation formerly known as "Plasma & Materials Technologies, Inc." ("Trikon"), with respect to the following facts: A. Trikon represents and warrants to Applied that its rights in and to the Licensed Technology and the Trademarks (as defined below) are as set forth in this Agreement; and B. Trikon desires to grant to Applied, and Applied desires to acquire from Trikon, subject to the terms and conditions of this Agreement, an unrestricted license to manufacture, use and sell Applied Licensed Products (as defined below), and to otherwise develop and use the Licensed Technology and to use the Trademarks. THE PARTIES AGREE AS FOLLOWS: 1. CERTAIN DEFINITIONS As used in this Agreement: 1.1 "Affiliate" means with respect to any person: any company, partnership, entity or other person that directly controls or is controlled by, or is under common control with, the specified person; and "Affiliated Entity" means any Affiliate other than an individual. For purposes of this Agreement, Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of Applied. 1.2 "Applied Licensed Products" means products and software made by or for Applied or any of its Affiliated Entities that in whole or in part incorporate, use or are made using the Licensed Technology. 1.3 "Copyright(s)" means all copyright, unregistered design rights, semiconductor topography and mask work interests, including, without limitation, all rights of authorship, use, publication, reproduction, performance, transformation, moral rights and ownership of copyrightable works, designs (other than registered designs), semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions. 1.4 "Improvements" means [ ] 1.5 "Licensed Technology" means: all (a) Patent Rights, (b) Technical Information, (c) Improvements, and (d) Copyrights, in each case relating to Plasma Sources, including without limitation, Trikon's entire right, title and interest in the foregoing, and all hardware, software and processes, conceived, developed, reduced to practice, discovered, owned, licensed and/or acquired by Trikon or any of its Affiliates or agents prior to or as of the date of this Agreement. 1.6 "Patents" means any and all issued patents, reissue or reexamination patents, patents of importation, revivals of patents, revalidation patents, utility models, certificates of invention, registrations of patents, or extensions thereof, regardless of country or formal name. 1.7 "Patent Rights" means all United States and foreign utility and design Patents, and published or unpublished regular patent and provisional applications (including without limitation any and all applications of addition, divisionals, continuations, continuations-in-part ("CIPs"), reexaminations, substitutions, extensions, renewals, utility models, certificates of invention or reissues thereof or therefor, invention disclosures and records of invention, and any license to practice any of the foregoing, including without limitation the Patents and patent applications listed on Exhibit 1.7. 1.8 "Plasma Sources" means [ ] 1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical Information and trademarks (including, without limitation, the Trademarks). 1.10 "Technical Information" means any and all ideas, inventions, disclosures, design rights, unpublished research and development information, manufacturing and operating information, know-how, trade secrets and technical data. 1.11 "Trademarks" means the trademarks listed on the attached Exhibit 1.11. 1.12 "Forcefill(TM) Agreements" means the respective Forcefill(TM) License Agreements and Forcefill(TM) Technology Transfer Agreements between Applied and Trikon Equipments Limited and Applied and Trikon Technologies Limited, all of even date with this Agreement. 2. LICENSE GRANT 2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this Agreement, Trikon hereby grants to Applied and its Affiliated Entities (a) a non-exclusive, worldwide, perpetual, fully paid, unrestricted, irrevocable license (the "License") to use, develop, reproduce, publish, display, perform, distribute, modify and transform the Licensed Technology and otherwise exercise all rights therein, and to make, have made, use, dispose of, offer to dispose of, sell, offer for sale, service, repair, reconstruct, have sold, import and have imported Applied Licensed Products, together with (b) the rights to sublicense others to use the Licensed Technology in connection with Applied Licensed Products and the Purchased Units (as such term is defined in Section 4 below). 2.2 TRADEMARKS. Trikon hereby grants to Applied and its Affiliated Entities a nonexclusive, worldwide, perpetual, fully paid, irrevocable license to use the Trademarks, at Applied's election, in connection with sales of Applied Licensed Products. 2.3 TERM. The term of this Agreement is from the date hereof to the date of expiration of the last of the Patents to expire, or the date that the last of the Technical Information enters the public domain, whichever is later. 3. COMPENSATION 3.1 CONSIDERATION. Applied shall pay Trikon non-refundable consideration in the amount of U.S. $17,500,000 (the "License Fee") for all licenses and rights granted hereunder and as full payment for the Purchased Units, exclusive of all sales and use taxes (which shall be the responsibility of 2 Applied). The License Fee shall be payable by wire transfer in immediately available funds upon receipt by Applied of counterparts of this Agreement and the Technology Transfer Agreement executed by Trikon. 3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution of this Agreement, Trikon is delivering to Applied (a) evidence reasonably satisfactory to Applied that Trikon has obtained (i) all appropriate consents and waivers of lenders, other contract parties and governmental entities and (ii) waivers of all contractual provisions that would restrict or prohibit enforceability of this Agreement or the Technology Transfer Agreement, including without limitation with clauses (i) and (ii) all consents and waivers listed on Schedule 7.4 and (b) an opinion of counsel to the effect set forth in Exhibit 3.2 and in a form acceptable to Applied in its sole discretion. 4. PURCHASED UNITS Applied shall purchase four Trikon MORI(TM) sources (the "Purchased Units") as further identified in an Applied purchase order substantially in the form attached hereto as Exhibit 4 (the "Purchase Order"), subject to the delivery and other terms and conditions specified in the Purchase Order. 5. TECHNOLOGY TRANSFER AGREEMENT Concurrently with their entering into this Agreement, the parties hereto will enter into a MORI(TM) Source Technology Transfer Agreement in the form attached hereto as Exhibit 5 (the "Technology Transfer Agreement"), and for the separate consideration stated therein, Trikon will effect transfer to Applied of Technical Information included in the Licensed Technology on the terms and conditions stated therein. 6. THIRD PARTY CLAIMS 6.1 INDEMNITY. Trikon agrees to indemnify, defend and hold Applied and its Affiliates harmless from and against any and all liabilities, losses, costs, fines, demands, actions, claims, suits, proceedings, investigations, damages, judgments and settlements including without limitation reasonable attorneys' fees, resulting from or arising out of: (a) any alleged, threatened or actual infringement, misappropriation, or violation of any proprietary rights of a third party in connection with the exercise by Applied and/or its Affiliates of its rights hereunder, or (b) breach by Trikon of any of its obligations, covenants, representations or warranties (collectively, "Claims"). Notwithstanding the above, Trikon shall have no liability for any claim of infringement, misappropriation or violation of any proprietary right of a third party based on modification of the Licensed Technology by Applied, if the infringement would have been avoided without such modification. 6.2 TRIKON'S OBLIGATIONS. Trikon shall have control of the defense, litigation and, subject to the conditions set forth below, settlement of any Claim. Applied shall have the right (subject to the conditions set forth below), but not the obligation, to select counsel of its choice, at its expense, to participate in the defense. Trikon shall not accept a settlement of any Claim without the prior written consent of Applied, which consent shall not be unreasonably withheld. In the event that any claim of infringement, misappropriation or violation of any proprietary rights of a third party is substantiated, or in Trikon's judgment is likely to be substantiated, Trikon shall have the right, in its sole discretion and at its own expense, to either: (a) procure for Applied such fully paid rights as are coextensive with the rights granted Applied hereunder; or (b) replace or modify the Licensed Technology in a manner 3 reasonably satisfactory to Applied to make it non-infringing without materially impairing performance of the Licensed Technology. 6.3 APPLIED COOPERATION. In the event any third party Claim is made against Applied or its Affiliates within the scope of the indemnity set forth in Section 6.1, Applied shall (a) provide prompt written notice of such third party Claim to Trikon, (b) provide Trikon with such assistance as Trikon may reasonably request in connection with the defense and/or settlement of such third-party claim, provided that all costs and expenses incurred by either party shall be borne by Trikon, and (c) promptly comply with all terms of any resolution or settlement of such third-party Claim at Trikon's expense. 7. TRIKON REPRESENTATIONS AND WARRANTIES Trikon represents and warrants to Applied and its Affiliates as follows: 7.1 ORGANIZATION. Trikon: (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of California; and (b) has all necessary corporate power to own, license and transfer the Purchased Units and the Licensed Technology without restriction or encumbrance, to carry on its business as now being conducted, and to enter into and deliver this Agreement, the Technology Transfer Agreement and the Purchase Order and to consummate the transactions contemplated by each of them. 7.2 AUTHORITY. The execution and delivery of this Agreement, the Technology Transfer Agreement and the Purchase Order, and the performance of each of them by Trikon, have been duly authorized by all necessary corporate action on the part of Trikon. Each of this Agreement, the Technology Transfer Agreement and the Purchase Order constitutes a legal, valid and binding obligation of Trikon, enforceable against Trikon in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 7.3 NO CONFLICTS. Neither the execution and delivery of this Agreement, the Technology Transfer Agreement or the Purchase Order, nor the performance of any of them by Trikon will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Trikon, any of its Affiliates, the Licensed Technology, the Purchased Units, or the Trademarks; (b) conflict with, or result in, with or without the passage of time or the giving of notice, any breach of any of the terms, conditions and provisions of, or constitute a default under, or result in the creation of any lien, charge, easement, security interest, mortgage, conditional sale contract, equity, right of way, covenant, restriction, title defect, objection, claim or other encumbrances upon any of the Licensed Technology, Purchased Units or Trademarks pursuant to, any indenture, mortgage, lease, agreement or other instrument to which Trikon or any of its Affiliates is a party or by which Trikon, any of its Affiliates, the Licensed Technology, Purchased Units or Trademarks are bound; (c) permit the acceleration of the maturity of any indebtedness of Trikon or of any other person secured by the Licensed Technology, Purchased Units or Trademarks; or (d) violate or conflict with any provision of Trikon's charter documents. 7.4 CONSENTS. Except as set forth on Schedule 7.4, no consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority, is required to be obtained or made by Trikon or any of its 4 Affiliates in order to permit the execution and delivery of this Agreement, the Technology Transfer Agreement, and the Purchase Order by Trikon, and the consummation of the transactions contemplated by each of them. All consents, waivers and approvals identified on Schedule 7.4 have been obtained in writing and copies thereof have been provided to Applied. 7.5 LICENSED TECHNOLOGY. Trikon represents and warrants that: (a) the Licensed Technology includes all of its technology and Proprietary Rights relating to Plasma Sources, and no technology or Proprietary Rights relating to Plasma Sources are owned or otherwise held by any Affiliate of Trikon; (b) except as set forth on Schedule 7.5 as to Improvements only, the Licensed Technology does not infringe upon or violate any Proprietary Rights of any other person; (c) except as set forth on Schedule 7.5 as to Improvements only, no claim has been asserted or threatened by any other person that the use of the Licensed Technology constitutes an infringement or misappropriation of any Proprietary Rights of another or constitutes unfair competition; (d) Trikon is the true, lawful and sole legal and beneficial owner of the Licensed Technology, free and clear of any claims, liens or encumbrances and Trikon's ownership is more than a shop right; (e) except as set forth on Schedule 7.5 as to Improvements only, all Patents, Copyrights and Trademarks included in the Licensed Technology are valid and in full force and effect, and all maintenance and annuity fees have been fully paid and all fees paid during prosecution and after issuance of the Patents have been paid in the correct entity status amounts; (f) the License granted by Trikon does not and will not conflict with any rights granted to other persons or violate any previous agreement between Trikon or any of its Affiliates and any other person; (g) except as set forth on Schedule 7.5 with respect to prosecution of Improvements only, no fraud or misrepresentation has been made during the prosecution of the Patent Rights, Copyrights or Trademarks, or has been included in the documentation for or other disclosure of the Licensed Technology; and (h) Trikon has or can obtain all consents to exclusion of all inventors deleted from or not included in all applications of the Patent Rights. 7.6 TRADEMARKS. Trikon represents and warrants that it is the true, lawful and sole owner of the Trademarks, and has the exclusive right to use such Trademarks, and has the right to permit Applied to use such Trademarks as contemplated by this Agreement, in each case, free of infringement of or unfair competition with any trademark or service mark rights of any other person, and free of any other claims, liens or encumbrances. 7.7 WARRANTY. Except as set forth in this Section 7, Trikon makes no warranties, express or implied, regarding the Licensed Technology, the Proprietary Rights, the Purchased Units or the Trademarks, their performance, or the results which can be achieved with them. EXCEPT AS SET FORTH IN THIS SECTION 7, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE PURCHASED UNITS AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE CASE MAY BE, ON AN "AS IS" BASIS AND TRIKON HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. 8. APPLIED REPRESENTATIONS AND WARRANTIES Applied represents and warrants to Trikon and its Affiliates as follows: 8.1 ORGANIZATION. Applied: (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware; and (b) has all necessary corporate power to enter into and deliver this Agreement, the Technology Transfer Agreement and the Purchase Order, and to consummate the transactions contemplated by each of them. 5 8.2 AUTHORITY. The execution and delivery of this Agreement, the Technology Transfer Agreement and the Purchase Order, and the performance by Applied of each of them, have been duly authorized by all necessary corporate action on the part of Applied. Each of this Agreement, the Technology Transfer Agreement and the Purchase Order constitutes a legal, valid and binding obligation of Applied, enforceable against Applied in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 8.3 NO CONFLICTS. Neither the execution and delivery of this Agreement, the Technology Transfer Agreement or the Purchase Order, nor performance of any of them by Applied, will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Applied or any of its Affiliates; or (b) violate or conflict with any provision of Applied's charter documents or of any agreement or instrument to which Applied or any of its Affiliates is a party. 8.4 CONSENTS. No consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority, is required to be made or obtained by Applied or any of its Affiliates in order to permit the execution, delivery or performance of this Agreement by Applied, or the consummation of the transactions contemplated by this Agreement. 9. COVENANTS OF TRIKON Trikon covenants and agrees with Applied as follows: 9.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Trikon receives written notice expressly stating that a third party (a "Potential Infringer") has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Trikon shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Applied. 9.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has not done so, Trikon through patent attorneys of its choosing and at its own expense and cost shall cause to be filed and/or prosecuted the patent applications listed in Exhibit 1.7, and all patent application(s), if any, relating to Improvements included in the Licensed Technology. Trikon agrees to exercise all commercially reasonable efforts to cause all patent applications to be prosecuted in such manner that the best possible patent protection may be obtained thereon. Trikon shall have no liability to Applied respecting the results of such prosecution. Trikon agrees, from time to time and on a reasonable and prompt basis, to inform Applied about the status of the prosecution of said patent applications. During the life of any patents, Trikon shall timely pay all applicable fees, including but not limited to issue and maintenance fees related to Patent Rights included in the Licensed Technology at the appropriate entity status rates. 9.3 PROTECTION OF TRADEMARKS. Trikon shall take all reasonable steps to maintain, and shall take no steps that derogate from, the force or validity of, the Trademarks; shall pay such fees in a timely manner as are necessary to maintain the registrations of the Trademarks in all countries of such registration; and shall have the exclusive right to institute and prosecute in its sole discretion with all reasonable effort actions against any suspected infringers or misusers of the Trademarks. 6 9.4 REGISTERED USER AGREEMENTS. Trikon, at its sole election, may undertake recordation of a registered user agreement or trademark license with respect to Applied in any country where Applied uses the Trademarks and where such recordation is required or permitted. 10. COVENANTS OF APPLIED Applied covenants and agrees with Trikon as follows: 10.1 TECHNOLOGY. Applied understands and agrees that, with the exception of the rights expressly licensed or otherwise granted under this Agreement, Applied shall not acquire any right, title, or interest in the Licensed Technology or the Trademarks, which right, title and interest is and shall remain with Trikon. 10.2 TRADEMARKS. Applied is familiar with the quality standards of Trikon. In the event Applied elects to use the Trademarks, Applied shall use the Trademarks only in accordance with those same reasonable standards of quality currently used by Applied, which standards shall at least be equal to, but which shall not be required to exceed, the standards of quality currently used by Trikon. Trikon shall have the right once per year, upon reasonable advance written notice (at least 10 business days in advance), to receive from Applied a reasonably representative selection of specimens of Applied's use of the Trademarks, as may be reasonably necessary in order to confirm that such quality control standards are being observed. Applied hereby consents to being named as a registered user of the Trademarks where the recordation of a registered user agreement or trademark license is required or permitted, and Applied agrees to execute any documents reasonably necessary or desirable to enable and assist Trikon in the exclusive registration and protection of the Trademarks, all at no expense to Applied. 10.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts to include reproductions of the patent and trademark notices of Trikon as Trikon may reasonably designate on each Applied Licensed Product and all packaging and documentation used for or with its distribution. Applied shall not remove, efface or obscure any patent or trademark notices from any Trikon materials provided hereunder. 10.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Applied receives written notice expressly stating that a Potential Infringer has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Applied shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Trikon. 11. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS 11.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF TRIKON AND ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY TRANSFER AGREEMENT AND THE FORCEFILL(TM) AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID TO TRIKON AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT, THE TECHNOLOGY TRANSFER AGREEMENT AND THE FORCEFILL(TM) AGREEMENTS. TRIKON SHALL NOT HAVE ANY LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFITS, EVEN IF TRIKON HAS BEEN ADVISED OF THE POSSIBILITY OF 7 SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE LIMITATIONS OF LIABILITY SHALL NOT APPLY IN THE EVENT OF FRAUD. 11.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a) obligate Applied to use the Licensed Technology or Trademarks, or (b) to restrict or prohibit Applied from developing, making, using, marketing or otherwise distributing or promoting products and/or processes using, embodying, or competing with the Licensed Technology. No rights are granted to Trikon by this Agreement in any Applied technology or in any Applied tangible, intangible or intellectual property, whether now in existence or hereafter conceived, developed, reduced to practice, discovered, owned, licensed, leased, sold and/or acquired by or for Applied relative to any products or property of Applied, regardless of nature or technical subject. 12. BANKRUPTCY All rights and licenses granted under or pursuant to this Agreement by each party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The parties agree that Applied shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. Trikon agrees, during the term of this Agreement, to create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, of all such intellectual property, all to ISO 9000 et seq. and other applicable standards. Trikon further agrees that in the event of the commencement of a bankruptcy proceeding by or against it under the Bankruptcy Code, Applied shall be entitled to a complete duplicate of or complete non-exclusive access to, as appropriate solely for the purposes contemplated by this Agreement and the Technology Transfer Agreement, any such intellectual property and all embodiments of such intellectual property, and same, if not already in its possession, shall be promptly delivered to Applied or made available to Applied for reproduction (i) upon such commencement of a bankruptcy proceeding upon written request therefor by Applied, unless Trikon elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Trikon upon written request therefor by Applied. 13. RELEASE Each party, for itself and for its Affiliates, representatives, successors and assigns, hereby releases the other party and its Affiliates, representatives, successors and assigns, from any and all claims, actions and liabilities of every kind and nature arising from matters, acts, omissions or dealings prior to the date of this Agreement, whether or not asserted, and whether known or unknown. Notwithstanding the foregoing, this release does not extend to claims of infringement of (a) the Patents listed in Exhibit 13, part 1, relating to Flowfill(TM) technology, or (b) Patents that issue (if, as and when any such shall issue) under the patent applications relating to Flowfill(TM) technology listed on Exhibit 13, part 2, provided that such applications are pending as of the date hereof and have been previously disclosed to Applied. Except to the extent expressly set forth above, this release is a full and final release covering all known and unknown, suspected and unsuspected, claims, actions and liabilities. Each party expressly waives any and all rights or benefits which it may have under Section 1542 of the California Civil Code and any similar law of any other jurisdiction. Said section provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS 8 FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Each party represents and warrants that it has been advised by competent counsel of its own choosing as to the meaning and effect of the release granted in this Section 13. 14. NO PUBLICITY Except as required by court order, Trikon agrees not to disclose the existence or terms of this Agreement without the prior written consent of Applied, which consent shall not be unreasonably withheld. Applied agrees to review any disclosure proposed by Trikon on a prompt basis, provided Applied is given at least two business days' advance written notice. 15. MISCELLANEOUS 15.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of California without reference to principles of conflicts of laws and without regard to the UN Convention on the International Sale of Goods. 15.2 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.3 HEADINGS. The headings of the Sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement. 15.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice). Any such notice shall be effective upon receipt, if personally delivered, or on the next business day following transmittal if sent by facsimile. Notices shall be delivered as follows: To Applied: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Joseph Sweeney, Esq. Vice President, Legal Affairs and Intellectual Property with a copy to: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Alexander Meyer Director, New Business Development 9 To Trikon: Trikon Technologies, Inc. Ringland Way Newport, Gwent NP6 2TA Attention: Nigel Wheeler with a copy to: Brobeck, Phleger & Harrison LLP One Market Spear Street Tower San Francisco, CA 94105 Attention: Michael J. Kennedy, Esq. 15.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may be amended only by a written instrument signed by Trikon and Applied. 15.6 SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against either party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 15.7 ENTIRE AGREEMENT. This Agreement, together with its Exhibits, constitute the entire agreement between Trikon and Applied regarding the subject matter hereof, and supersedes any and all prior negotiations, correspondence, understandings and agreements regarding such subject matter. 15.8 IMPORT/EXPORT. Each party shall comply with all applicable import and export control laws and regulations. 15.9 TAXES. Applied will not withhold taxes for the transactions contemplated hereunder except as required by law. 15.10 RULES OF CONSTRUCTION. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement. 15.11 FURTHER ASSURANCES. Each party agrees to cooperate with the other in executing, delivering, and filing such further documentation and taking any such other further actions as may be necessary or appropriate to effectuate the transfer of rights granted in this Agreement, or to evidence the satisfaction or accuracy of any condition, representation or warranty of this Agreement. 15.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are and shall remain independent contractors, and nothing herein shall be construed to create a partnership or joint venture between Trikon and Applied. Each party shall be responsible for wages, hours, and condition of employment of its personnel during the term of and under this Agreement. Nothing herein shall be construed as implying that employees of either party are employees of the other party. IN WITNESS WHEREOF, the parties, by their duly authorized officers, have executed this Agreement as of the date first above written. 10 Applied Materials, Inc. Trikon Technologies, Inc. By:/s/Kalman Kaufman By:/s/Gregor Campbell -------------------------------- --------------------------------- Name: Kalman Kaufman Name: Gregor Campbell ------------------------------ ------------------------------- Title: Corporate Vice President Title: Chief Executive Officer ----------------------------- ------------------------------ 11 EX-10.28 3 LICENSE AGREEMENT DATED 11-12-97 (FORCEFILL) EXHIBIT 10.28 FORCEFILL(TM) TECHNOLOGY LICENSE AGREEMENT This LICENSE AGREEMENT ("Agreement") is made and entered into as of November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation ("Applied") and Trikon Equipments Limited, a company incorporated under the laws of England and Wales under registered number 939289 and formerly known as "Electrotech Equipments Limited" ("Equipments Limited"), with respect to the following facts: A. Equipments Limited represents and warrants to Applied that its rights in and to the Licensed Technology and the Trademarks (as defined below) are as set forth in this Agreement; and B. Equipments Limited desires to grant to Applied, and Applied desires to acquire from Equipments Limited, subject to the terms and conditions of this Agreement, an unrestricted license to manufacture, use and sell Applied Licensed Products (as defined below), and to otherwise develop and use the Licensed Technology and to use the Trademarks. THE PARTIES AGREE AS FOLLOWS: 1. CERTAIN DEFINITIONS As used in this Agreement: 1.1 "Affiliate" means with respect to any person: any company, partnership, entity or other person that directly controls or is controlled by, or is under common control with, the specified person; and "Affiliated Entity" means any Affiliate other than an individual. For purposes of this Agreement, Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of Applied. 1.2 "Applied Licensed Products" means products and software made by or for Applied or any of its Affiliated Entities that in whole or in part incorporate, use or are made using the Licensed Technology. 1.3 "Copyright(s)" means all copyright, unregistered design rights, semiconductor topography and mask work interests, including, without limitation, all rights of authorship, use, publication, reproduction, performance, transformation, moral rights and ownership of copyrightable works, designs (other than registered designs), semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions. 1.4 "Forcefill Technology" means [ ] 1.5 "Improvements" means [ ] 1.6 "Licensed Technology" means: all (a) Patent Rights, (b) Technical Information, (c) Improvements, and (d) Copyrights, in each case relating to Forcefill Technology, including without limitation, Equipments Limited's entire right, title and interest in the foregoing, and all hardware, software and processes, conceived, developed, reduced to practice, discovered, owned, licensed and/or acquired by Equipments Limited or any of its Affiliates or agents prior to or as of the date of this Agreement. 1.7 "Patents" means any and all issued patents, reissue or reexamination patents, patents of importation, revivals of patents, revalidation patents, utility models, certificates of invention, registrations of patents, or extensions thereof, regardless of country or formal name. 1.8 "Patent Rights" means all United Kingdom, United States and other foreign utility and design Patents, and published or unpublished regular patent and provisional applications (including without limitation any and all applications of addition, divisionals, continuations, continuations-in-part ("CIPs"), reexaminations, substitutions, extensions, renewals, utility models, certificates of invention or reissues thereof or therefor, invention disclosures and records of invention, and any license to practice any of the foregoing, including without limitation the Patents and patent applications listed on Exhibit 1.8. 1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical Information and trademarks (including, without limitation, the Trademarks). 1.10 "Technical Information" means any and all ideas, inventions, disclosures, design rights, unpublished research and development information, manufacturing and operating information, know-how, trade secrets and technical data. 1.11 "Trademarks" means the trademarks listed on the attached Exhibit 1.11. 1.12 "Related Agreements" means the MORI(TM) Source License Agreement and MORI(TM) Source Technology Transfer Agreement between Applied and Trikon Technologies, Inc. and the Forcefill(TM) License Agreement and Forcefill(TM) Technology Transfer Agreement between Applied and Trikon Technologies Limited, all of even date with this Agreement. 2. LICENSE GRANT 2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this Agreement, Equipments Limited hereby grants to Applied and its Affiliated Entities (a) a non-exclusive, worldwide, perpetual, fully paid, unrestricted, irrevocable license (the "License") to use, develop, reproduce, publish, display, perform, distribute, modify and transform the Licensed Technology and otherwise exercise all rights therein, and to make, have made, use, dispose of, offer to dispose of, sell, offer for sale, service, repair, reconstruct, have sold, import and have imported Applied Licensed Products, together with (b) the rights to sublicense others to use the Licensed Technology in connection with Applied Licensed Products and the Purchased Units (as such term is defined in Section 4 below). 2.2 TRADEMARKS. Equipments Limited hereby grants to Applied and its Affiliated Entities a nonexclusive, worldwide, perpetual, fully paid, irrevocable license to use the Trademarks, at Applied's election, in connection with sales of Applied Licensed Products. 2 2.3 TERM. The term of this Agreement is from the date hereof to the date of expiration of the last of the Patents to expire, or the date that the last of the Technical Information enters the public domain, whichever is later. 3. COMPENSATION 3.1 CONSIDERATION. Applied shall pay Equipments Limited non- refundable consideration in the amount of U.S. $4,250,000 (the "License Fee") for all licenses and rights granted hereunder. The License Fee shall be payable by wire transfer in immediately available funds upon receipt by Applied of counterparts of this Agreement and the Technology Transfer Agreement executed by Equipments Limited. 3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution of this Agreement, Equipments Limited is delivering to Applied (a) evidence reasonably satisfactory to Applied that Equipments Limited has obtained (i) all appropriate consents and waivers of lenders, other contract parties and governmental entities and (ii) waivers of all contractual provisions that would restrict or prohibit enforceability of this Agreement or the Technology Transfer Agreement, including without limitation with clauses (i) and (ii) all consents and waivers listed on Schedule 6.4 and (b) an opinion of counsel to the effect set forth in Exhibit 3.2 and in a form acceptable to Applied in its sole discretion. 4. TECHNOLOGY TRANSFER AGREEMENT Concurrently with their entering into this Agreement, the parties hereto will enter into a Forcefill Technology Transfer Agreement in the form attached hereto as Exhibit 4 (the "Technology Transfer Agreement"), and for the separate consideration stated therein, Equipments Limited will effect the transfer to Applied of Technical Information included in the Licensed Technology on the terms and conditions stated therein. 5. THIRD PARTY CLAIMS 5.1 INDEMNITY. Equipments Limited agrees to indemnify, defend and hold Applied and its Affiliates harmless from and against any and all liabilities, losses, costs, fines, demands, actions, claims, suits, proceedings, investigations, damages, judgments and settlements including without limitation reasonable attorneys' fees, resulting from or arising out of: (a) any alleged, threatened or actual infringement, misappropriation, or violation of any proprietary rights of a third party in connection with the exercise by Applied and/or its Affiliates of its rights hereunder, or (b) breach by Equipments Limited of any of its obligations, covenants, representations or warranties (collectively, "Claims"). Notwithstanding the above, Equipments Limited shall have no liability for any claim of infringement, misappropriation or violation of any proprietary right of a third party based on modification of the Licensed Technology by Applied, if the infringement would have been avoided without such modification. 5.2 EQUIPMENTS LIMITED'S OBLIGATIONS. Equipments Limited shall have control of the defense, litigation and, subject to the conditions set forth below, settlement of any Claim. Applied shall have the right (subject to the conditions set forth below), but not the obligation, to select counsel of its choice, at its expense, to participate in the defense. Equipments Limited shall not accept a settlement of any Claim without the prior written consent of Applied, which consent shall not be unreasonably withheld. In the event that any claim of infringement, misappropriation or violation of any proprietary rights of a third party is substantiated, or in Equipments Limited's judgment is likely to be substantiated, 3 Equipments Limited shall have the right, in its sole discretion and at its own expense, to either: (a) procure for Applied such fully paid rights as are coextensive with the rights granted Applied hereunder; or (b) replace or modify the Licensed Technology in a manner reasonably satisfactory to Applied to make it non-infringing without materially impairing performance of the Licensed Technology. 5.3 APPLIED COOPERATION. In the event any third party Claim is made against Applied or its Affiliates within the scope of the indemnity set forth in Section 5.1, Applied shall (a) provide prompt written notice of such third party Claim to Equipments Limited, (b) provide Equipments Limited with such assistance as Equipments Limited may reasonably request in connection with the defense and/or settlement of such third-party claim, provided that all costs and expenses incurred by either party shall be borne by Equipments Limited, and (c) promptly comply with all terms of any resolution or settlement of such third- party Claim at Equipments Limited's expense. 6. EQUIPMENTS LIMITED REPRESENTATIONS AND WARRANTIES Equipments Limited represents and warrants to Applied and its Affiliates as follows: 6.1 ORGANIZATION. Equipments Limited: (a) is a corporation duly organized, validly existing and in good standing under the laws of England and Wales; and (b) has all necessary corporate power to own, license and transfer the Licensed Technology without restriction or encumbrance, to carry on its business as now being conducted, and to enter into and deliver this Agreement and the Technology Transfer Agreement and to consummate the transactions contemplated by each of them. 6.2 AUTHORITY. The execution and delivery of this Agreement and the Technology Transfer Agreement, and the performance of each of them by Equipments Limited, have been duly authorized by all necessary corporate action on the part of Equipments Limited. Each of this Agreement and the Technology Transfer Agreement constitutes a legal, valid and binding obligation of Equipments Limited, enforceable against Equipments Limited in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 6.3 NO CONFLICTS. Neither the execution and delivery of this Agreement or the Technology Transfer Agreement, nor the performance of either of them by Equipments Limited, will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Equipments Limited, any of its Affiliates, the Licensed Technology or the Trademarks; (b) conflict with, or result in, with or without the passage of time or the giving of notice, any breach of any of the terms, conditions and provisions of, or constitute a default under, or result in the creation of any lien, charge, easement, security interest, mortgage, conditional sale contract, equity, right of way, covenant, restriction, title defect, objection, claim or other encumbrances upon any of the Licensed Technology or the Trademarks pursuant to, any indenture, mortgage, lease, agreement or other instrument to which Equipments Limited or any of its Affiliates is a party or by which Equipments Limited, any of its Affiliates, the Licensed Technology or the Trademarks are bound; (c) permit the acceleration of the maturity of any indebtedness of Equipments Limited or of any other person secured by the Licensed Technology or the Trademarks; or (d) violate or conflict with any provision of Equipments Limited's charter documents. 6.4 CONSENTS. Except as set forth on Schedule 6.4, no consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any 4 government or regulatory authority, is required to be obtained or made by Equipments Limited or any of its Affiliates in order to permit the execution and delivery of this Agreement and the Technology Transfer Agreement by Equipments Limited and the consummation of the transactions contemplated by each of them. All consents, waivers and approvals identified on Schedule 6.4 have been obtained in writing and copies thereof have been provided to Applied. 6.5 LICENSED TECHNOLOGY. Equipments Limited represents and warrants that: (a) the Licensed Technology includes all of its technology and Proprietary Rights relating to Forcefill Technology, and no technology or Proprietary Rights relating to Forcefill Technology are owned or otherwise held by any Affiliate of Equipments Limited other than Trikon Technologies Limited; (b) except as set forth on Schedule 6.5, the Licensed Technology does not infringe upon or violate any Proprietary Rights of any other person; (c) except as set forth on Schedule 6.5, no claim has been asserted or threatened by any other person that the use of the Licensed Technology constitutes an infringement or misappropriation of any Proprietary Rights of another or constitutes unfair competition; (d) Equipments Limited is the true, lawful and sole legal and beneficial owner of the Licensed Technology, free and clear of any claims, liens or encumbrances and Equipments Limited's ownership is more than a shop right; (e) except as set forth on Schedule 6.5 as to Improvements only, all Patents, Copyrights and Trademarks included in the Licensed Technology are valid and in full force and effect, and all maintenance and annuity fees have been fully paid and all fees paid during prosecution and after issuance of the Patents have been paid in the correct entity status amounts; (f) the License granted by Equipments Limited does not and will not conflict with any rights granted to other persons or violate any previous agreement between Equipments Limited or any of its Affiliates and any other person; (g) except as set forth on Schedule 6.5 with respect to prosecution of Improvements only, no fraud or misrepresentation has been made during the prosecution of the Patent Rights, Copyrights or Trademarks, or has been included in the documentation for or other disclosure of the Licensed Technology; and (h) Equipments Limited has or can obtain all consents to exclusion of all inventors deleted from or not included in all applications of the Patent Rights. 6.6 TRADEMARKS. Equipments Limited represents and warrants that it is the true, lawful and sole owner of the Trademarks, and has the exclusive right to use such Trademarks, and has the right to permit Applied to use such Trademarks as contemplated by this Agreement, in each case, free of infringement of or unfair competition with any trademark or service mark rights of any other person, and free of any other claims, liens or encumbrances. 6.7 WARRANTY. Except as set forth in this Section 6, Equipments Limited makes no warranties, express or implied, regarding the Licensed Technology, the Proprietary Rights, the Purchased Units or the Trademarks, their performance, or the results which can be achieved with them. EXCEPT AS SET FORTH IN THIS SECTION 6, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE PURCHASED UNITS AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE CASE MAY BE, ON AN "AS IS" BASIS AND EQUIPMENTS LIMITED HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. 5 7. APPLIED REPRESENTATIONS AND WARRANTIES Applied represents and warrants to Equipments Limited and its Affiliates as follows: 7.1 ORGANIZATION. Applied: (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware; and (b) has all necessary corporate power to enter into and deliver this Agreement and the Technology Transfer Agreement, and to consummate the transactions contemplated by each of them. 7.2 AUTHORITY. The execution and delivery of this Agreement and the Technology Transfer Agreement, and the performance by Applied of each of them, have been duly authorized by all necessary corporate action on the part of Applied. Each of this Agreement and the Technology Transfer Agreement constitutes a legal, valid and binding obligation of Applied, enforceable against Applied in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 7.3 NO CONFLICTS. Neither the execution and delivery of this Agreement or the Technology Transfer Agreement, nor the performance of either of them by Applied, will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Applied or any of its Affiliates; or (b) violate or conflict with any provision of Applied's charter documents or of any agreement or instrument to which Applied or any of its Affiliates is a party. 7.4 CONSENTS. No consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority, is required to be made or obtained by Applied or any of its Affiliates in order to permit the execution and delivery of this Agreement and the Technology Transfer Agreement by Applied, and the consummation of the transactions contemplated by each of them. 8. COVENANTS OF EQUIPMENTS LIMITED Equipments Limited covenants and agrees with Applied as follows: 8.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Equipments Limited receives written notice expressly stating that a third party (a "Potential Infringer") has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Equipments Limited shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Applied. 8.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has not done so, Equipments Limited through patent attorneys of its choosing and at its own expense and cost shall cause to be filed and/or prosecuted the patent applications listed in Exhibit 1.7, and all patent application(s), if any, relating to Improvements included in the Licensed Technology. Equipments Limited agrees to exercise all commercially reasonable efforts to cause all patent applications to be prosecuted in such manner that the best possible patent protection may be obtained thereon. Equipments Limited shall have no liability to Applied respecting the results of such prosecution. Equipments Limited agrees, from time to time and on a reasonable and prompt basis, to inform Applied about the status of the prosecution of 6 said patent applications. During the life of any patents, Equipments Limited shall timely pay all applicable fees, including but not limited to issue and maintenance fees related to Patent Rights included in the Licensed Technology at the appropriate entity status rates. 8.3 PROTECTION OF TRADEMARKS. Equipments Limited shall take all reasonable steps to maintain, and shall take no steps that derogate from, the force or validity of, the Trademarks; shall pay such fees in a timely manner as are necessary to maintain the registrations of the Trademarks in all countries of such registration; and shall have the exclusive right to institute and prosecute in its sole discretion with all reasonable effort actions against any suspected infringers or misusers of the Trademarks. 8.4 REGISTERED USER AGREEMENTS. Equipments Limited, at its sole election, may undertake recordation of a registered user agreement or trademark license with respect to Applied in any country where Applied uses the Trademarks and where such recordation is required or permitted. 9. COVENANTS OF APPLIED Applied covenants and agrees with Equipments Limited as follows: 9.1 TECHNOLOGY. Applied understands and agrees that, with the exception of the rights expressly licensed or otherwise granted under this Agreement, Applied shall not acquire any right, title, or interest in the Licensed Technology or the Trademarks, which right, title and interest is and shall remain with Equipments Limited. 9.2 TRADEMARKS. Applied is familiar with the quality standards of Equipments Limited. In the event Applied elects to use the Trademarks, Applied shall use the Trademarks only in accordance with those same reasonable standards of quality currently used by Applied, which standards shall at least be equal to, but which shall not be required to exceed, the standards of quality currently used by Equipments Limited. Equipments Limited shall have the right once per year, upon reasonable advance written notice (at least 10 business days in advance), to receive from Applied a reasonably representative selection of specimens of Applied's use of the Trademarks, as may be reasonably necessary in order to confirm that such quality control standards are being observed. Applied hereby consents to being named as a registered user of the Trademarks where the recordation of a registered user agreement or trademark license is required or permitted, and Applied agrees to execute any documents reasonably necessary or desirable to enable and assist Equipments Limited in the exclusive registration and protection of the Trademarks, all at no expense to Applied. 9.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts to include reproductions of the patent and trademark notices of Equipments Limited as Equipments Limited may reasonably designate on each Applied Licensed Product and all packaging and documentation used for or with its distribution. Applied shall not remove, efface or obscure any patent or trademark notices from any Equipments Limited materials provided hereunder. 9.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Applied receives written notice expressly stating that a Potential Infringer has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Applied shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Equipments Limited. 7 10. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS 10.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF EQUIPMENTS LIMITED AND ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY AGREEMENT AND THE RELATED AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID TO EQUIPMENTS LIMITED AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT, THE TECHNOLOGY TRANSFER AGREEMENT AND THE RELATED AGREEMENTS. EQUIPMENTS LIMITED SHALL NOT HAVE ANY LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFITS, EVEN IF EQUIPMENTS LIMITED HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE LIMITATIONS OF LIABILITY SHALL NOT APPLY IN THE EVENT OF FRAUD. 10.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a) obligate Applied to use the Licensed Technology or Trademarks, or (b) to restrict or prohibit Applied from developing, making, using, marketing or otherwise distributing or promoting products and/or processes using, embodying, or competing with the Licensed Technology. No rights are granted to Equipments Limited by this Agreement in any Applied technology or in any Applied tangible, intangible or intellectual property, whether now in existence or hereafter conceived, developed, reduced to practice, discovered, owned, licensed, leased, sold and/or acquired by or for Applied relative to any products or property of Applied, regardless of nature or technical subject. 11. BANKRUPTCY All rights and licenses granted under or pursuant to this Agreement by each party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The parties agree that Applied shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code to the extent that the Bankruptcy Code applies to Equipments Limited. Equipments Limited agrees, during the term of this Agreement, to create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, of all such intellectual property, all to ISO 9000 et seq. and other applicable standards. Equipments Limited further agrees that in the event of the commencement of a bankruptcy proceeding by or against it, Applied shall be entitled to a complete non-exclusive duplicate of or complete access to, as appropriate, solely for the purposes contemplated by this Agreement and the Technology Transfer Agreement, any such intellectual property and all embodiments of such intellectual property, and same, if not already in its possession, shall be promptly delivered to Applied or made available to Applied for reproduction (i) upon such commencement of a bankruptcy proceeding upon written request therefor by Applied, unless Equipments Limited elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Equipments Limited upon written request therefor by Applied. 12. NO PUBLICITY Except as required by court order, Equipments Limited agrees not to disclose the existence or terms of this Agreement without the prior written consent of Applied, which consent shall 8 not be unreasonably withheld. Applied agrees to review any disclosure proposed by Equipments Limited on a prompt basis, provided Applied is given at least two business days' advance written notice. 13. MISCELLANEOUS 13.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of California without reference to principles of conflicts of laws and without regard to the UN Convention on the International Sale of Goods. 13.2 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.3 HEADINGS. The headings of the Sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement. 13.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice). Any such notice shall be effective upon receipt, if personally delivered, or on the next business day following transmittal if sent by facsimile. Notices shall be delivered as follows: To Applied: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Joseph Sweeney, Esq. Vice President, Legal Affairs and Intellectual Property with a copy to: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Alexander Meyer Director, New Business Development To Equipments Limited: Trikon Equipments Limited Ringland Way Newport, Gwent NP6 2TA Attention: Nigel Wheeler with a copy to: Brobeck, Phleger & Harrison LLP One Market Spear Street Tower San Francisco, CA 94105 Attention: Michael J. Kennedy, Esq. 13.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may be amended only by a written instrument signed by Equipments Limited and Applied. 9 13.6 SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against either party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 13.7 ENTIRE AGREEMENT. This Agreement, together with its Exhibits, constitute the entire agreement between Equipments Limited and Applied regarding the subject matter hereof, and supersedes any and all prior negotiations, correspondence, understandings and agreements regarding such subject matter. 13.8 IMPORT/EXPORT. Each party shall comply with all applicable import and export control laws and regulations. 13.9 TAXES. Applied will not withhold taxes for the transactions contemplated hereunder except as required by law. 13.10 RULES OF CONSTRUCTION. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement. 13.11 FURTHER ASSURANCES. Each party agrees to cooperate with the other in executing, delivering, and filing such further documentation and taking any such other further actions as may be necessary or appropriate to effectuate the transfer of rights granted in this Agreement, or to evidence the satisfaction or accuracy of any condition, representation or warranty of this Agreement. 13.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are and shall remain independent contractors, and nothing herein shall be construed to create a partnership or joint venture between Equipments Limited and Applied. Each party shall be responsible for wages, hours, and condition of employment of its personnel during the term of and under this Agreement. Nothing herein shall be construed as implying that employees of either party are employees of the other party. IN WITNESS WHEREOF, the parties, by their duly authorized officers, have executed this Agreement as of the date first above written. APPLIED MATERIALS, INC. TRIKON EQUIPMENTS LIMITED By: /s/ Kalman Kaufman By: /s/ Gregor Campbell ---------------------------- -------------------------------- Name: Kalman Kaufman Name: Gregor Campbell ------------------------- ------------------------------ Title: Corporate Vice President Title: Director ------------------------- ------------------------------ 10 EX-10.29 4 LICENSE AGREEMENT DATED 11-12-97 (FORCEFILL) EXHIBIT 10.29 ------------- FORCEFILL/TM/ TECHNOLOGY LICENSE AGREEMENT This LICENSE AGREEMENT ("Agreement") is made and entered into as of November 12, 1997 by and between Applied Materials, Inc., a Delaware corporation ("Applied") and Trikon Technologies Limited, a company incorporated under the laws of England and Wales under registered number 1373344 and formerly known as "Electrotech Limited" ("Technologies Limited"), with respect to the following facts: A. Technologies Limited represents and warrants to Applied that its rights in and to the Licensed Technology and the Trademarks (as defined below) are as set forth in this Agreement; and B. Technologies Limited desires to grant to Applied, and Applied desires to acquire from Technologies Limited, subject to the terms and conditions of this Agreement, an unrestricted license to manufacture, use and sell Applied Licensed Products (as defined below), and to otherwise develop and use the Licensed Technology and to use the Trademarks. THE PARTIES AGREE AS FOLLOWS: 1. CERTAIN DEFINITIONS As used in this Agreement: 1.1 "Affiliate" means with respect to any person: any company, partnership, entity or other person that directly controls or is controlled by, or is under common control with, the specified person; and "Affiliated Entity" means any Affiliate other than an individual. For purposes of this Agreement, Applied Komatsu Technology, Inc. shall be deemed an Affiliated Entity of Applied. 1.2 "Applied Licensed Products" means products and software made by or for Applied or any of its Affiliated Entities that in whole or in part incorporate, use or are made using the Licensed Technology. 1.3 "Copyright(s)" means all copyright, unregistered design rights, semiconductor topography and mask work interests, including, without limitation, all rights of authorship, use, publication, reproduction, performance, transformation, moral rights and ownership of copyrightable works, designs (other than registered designs), semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions. 1.4 "Forcefill Technology" means [ ] 1.5 "Improvements" means [ ] 1.6 "Licensed Technology" means: all (a) Patent Rights, (b) Technical Information, (c) Improvements, and (d) Copyrights, in each case relating to Forcefill Technology, including without limitation, Technologies Limited's entire right, title and interest in the foregoing, and all hardware, software and processes, conceived, developed, reduced to practice, discovered, owned, licensed and/or acquired by Technologies Limited or any of its Affiliates or agents prior to or as of the date of this Agreement. 1.7 "Patents" means any and all issued patents, reissue or reexamination patents, patents of importation, revivals of patents, revalidation patents, utility models, certificates of invention, registrations of patents, or extensions thereof, regardless of country or formal name. 1.8 "Patent Rights" means all United Kingdom, United States and other foreign utility and design Patents, and published or unpublished regular patent and provisional applications (including without limitation any and all applications of addition, divisionals, continuations, continuations-in-part ("CIPs"), reexaminations, substitutions, extensions, renewals, utility models, certificates of invention or reissues thereof or therefor, invention disclosures and records of invention, and any license to practice any of the foregoing, including without limitation the Patents and patent applications listed on Exhibit 1.8. 1.9 "Proprietary Rights" means Copyrights, Patent Rights, Technical Information and trademarks (including, without limitation, the Trademarks). 1.10 "Technical Information" means any and all ideas, inventions, disclosures, design rights, unpublished research and development information, manufacturing and operating information, know-how, trade secrets and technical data. 1.11 "Trademarks" means the trademarks listed on the attached Exhibit 1.11. 1.12 "Related Agreements" means the MORI/TM/ Source License Agreement and MORI/TM/ Source Technology Transfer Agreement between Applied and Trikon Technologies, Inc. and the Forcefill/TM/ License Agreement and Forcefill/TM/ Technology Transfer Agreement between Applied and Trikon Equipments Limited, all of even date with this Agreement. 2. LICENSE GRANT 2.1 LICENSED TECHNOLOGY. Subject to the terms and conditions of this Agreement, Technologies Limited hereby grants to Applied and its Affiliated Entities (a) a non-exclusive, worldwide, perpetual, fully paid, unrestricted, irrevocable license (the "License") to use, develop, reproduce, publish, display, perform, distribute, modify and transform the Licensed Technology and otherwise exercise all rights therein, and to make, have made, use, dispose of, offer to dispose of, sell, offer for sale, service, repair, reconstruct, have sold, import and have imported Applied Licensed Products, together with (b) the rights to sublicense others to use the Licensed Technology in connection with Applied Licensed Products and the Purchased Units (as such term is defined in Section 4 below). 2.2 TRADEMARKS. Technologies Limited hereby grants to Applied and its Affiliated Entities a nonexclusive, worldwide, perpetual, fully paid, irrevocable license to use the Trademarks, at Applied's election, in connection with sales of Applied Licensed Products. 2 2.3 TERM. The term of this Agreement is from the date hereof to the date of expiration of the last of the Patents to expire, or the date that the last of the Technical Information enters the public domain, whichever is later. 3. COMPENSATION 3.1 CONSIDERATION. Applied shall pay Technologies Limited non- refundable consideration in the amount of U.S. $4,250,000 (the "License Fee") for all licenses and rights granted hereunder. The License Fee shall be payable by wire transfer in immediately available funds upon receipt by Applied of counterparts of this Agreement and the Technology Transfer Agreement executed by Technologies Limited. 3.2 CERTAIN DELIVERIES. Prior to or concurrently with the execution of this Agreement, Technologies Limited is delivering to Applied (a) evidence reasonably satisfactory to Applied that Technologies Limited has obtained (i) all appropriate consents and waivers of lenders, other contract parties and governmental entities and (ii) waivers of all contractual provisions that would restrict or prohibit enforceability of this Agreement or the Technology Transfer Agreement, including without limitation with clauses (i) and (ii) all consents and waivers listed on Schedule 6.4 and (b) an opinion of counsel to the effect set forth in Exhibit 3.2 and in a form acceptable to Applied in its sole discretion. 4. TECHNOLOGY TRANSFER AGREEMENT Concurrently with their entering into this Agreement, the parties hereto will enter into a Forcefill Technology Transfer Agreement in the form attached hereto as Exhibit 4 (the "Technology Transfer Agreement"), and for the separate consideration stated therein, Technologies Limited will effect the transfer to Applied of Technical Information included in the Licensed Technology on the terms and conditions stated therein. 5. THIRD PARTY CLAIMS 5.1 INDEMNITY. Technologies Limited agrees to indemnify, defend and hold Applied and its Affiliates harmless from and against any and all liabilities, losses, costs, fines, demands, actions, claims, suits, proceedings, investigations, damages, judgments and settlements including without limitation reasonable attorneys' fees, resulting from or arising out of: (a) any alleged, threatened or actual infringement, misappropriation, or violation of any proprietary rights of a third party in connection with the exercise by Applied and/or its Affiliates of its rights hereunder, or (b) breach by Technologies Limited of any of its obligations, covenants, representations or warranties (collectively, "Claims"). Notwithstanding the above, Technologies Limited shall have no liability for any claim of infringement, misappropriation or violation of any proprietary right of a third party based on modification of the Licensed Technology by Applied, if the infringement would have been avoided without such modification. 5.2 TECHNOLOGIES LIMITED'S OBLIGATIONS. Technologies Limited shall have control of the defense, litigation and, subject to the conditions set forth below, settlement of any Claim. Applied shall have the right (subject to the conditions set forth below), but not the obligation, to select counsel of its choice, at its expense, to participate in the defense. Technologies Limited shall not accept a settlement of any Claim without the prior written consent of Applied, which consent shall not be unreasonably withheld. In the event that any claim of infringement, misappropriation or violation of any proprietary rights of a third party is substantiated, or in Technologies Limited's judgment is likely to be 3 substantiated, Technologies Limited shall have the right, in its sole discretion and at its own expense, to either: (a) procure for Applied such fully paid rights as are coextensive with the rights granted Applied hereunder; or (b) replace or modify the Licensed Technology in a manner reasonably satisfactory to Applied to make it non-infringing without materially impairing performance of the Licensed Technology. 5.3 APPLIED COOPERATION. In the event any third party Claim is made against Applied or its Affiliates within the scope of the indemnity set forth in Section 5.1, Applied shall (a) provide prompt written notice of such third party Claim to Technologies Limited, (b) provide Technologies Limited with such assistance as Technologies Limited may reasonably request in connection with the defense and/or settlement of such third-party claim, provided that all costs and expenses incurred by either party shall be borne by Technologies Limited, and (c) promptly comply with all terms of any resolution or settlement of such third-party Claim at Technologies Limited's expense. 6. TECHNOLOGIES LIMITED REPRESENTATIONS AND WARRANTIES Technologies Limited represents and warrants to Applied and its Affiliates as follows: 6.1 ORGANIZATION. Technologies Limited: (a) is a corporation duly organized, validly existing and in good standing under the laws of England and Wales; and (b) has all necessary corporate power to own, license and transfer the Licensed Technology without restriction or encumbrance, to carry on its business as now being conducted, and to enter into and deliver this Agreement and the Technology Transfer Agreement and to consummate the transactions contemplated by each of them. 6.2 AUTHORITY. The execution and delivery of this Agreement and the Technology Transfer Agreement, and the performance of each of them by Technologies Limited, have been duly authorized by all necessary corporate action on the part of Technologies Limited. Each of this Agreement and the Technology Transfer Agreement constitutes a legal, valid and binding obligation of Technologies Limited, enforceable against Technologies Limited in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 6.3 NO CONFLICTS. Neither the execution and delivery of this Agreement or the Technology Transfer Agreement, nor the performance of either of them by Technologies Limited, will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Technologies Limited, any of its Affiliates, the Licensed Technology or the Trademarks; (b) conflict with, or result in, with or without the passage of time or the giving of notice, any breach of any of the terms, conditions and provisions of, or constitute a default under, or result in the creation of any lien, charge, easement, security interest, mortgage, conditional sale contract, equity, right of way, covenant, restriction, title defect, objection, claim or other encumbrances upon any of the Licensed Technology or the Trademarks pursuant to, any indenture, mortgage, lease, agreement or other instrument to which Technologies Limited or any of its Affiliates is a party or by which Technologies Limited, any of its Affiliates, the Licensed Technology or the Trademarks are bound; (c) permit the acceleration of the maturity of any indebtedness of Technologies Limited or of any other person secured by the Licensed Technology or the Trademarks; or (d) violate or conflict with any provision of Technologies Limited's charter documents. 4 6.4 CONSENTS. Except as set forth on Schedule 6.4, no consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority, is required to be obtained or made by Technologies Limited or any of its Affiliates in order to permit the execution and delivery of this Agreement and the Technology Transfer Agreement by Technologies Limited and the consummation of the transactions contemplated by each of them. All consents, waivers and approvals identified on Schedule 6.4 have been obtained in writing and copies thereof have been provided to Applied. 6.5 LICENSED TECHNOLOGY. Technologies Limited represents and warrants that: (a) the Licensed Technology includes all of its technology and Proprietary Rights relating to Forcefill Technology, and no technology or Proprietary Rights relating to Forcefill Technology are owned or otherwise held by any Affiliate of Technologies Limited other than Trikon Equipments Limited; (b) except as set forth on Schedule 6.5, the Licensed Technology does not infringe upon or violate any Proprietary Rights of any other person; (c) except as set forth on Schedule 6.5, no claim has been asserted or threatened by any other person that the use of the Licensed Technology constitutes an infringement or misappropriation of any Proprietary Rights of another or constitutes unfair competition; (d) Technologies Limited is the true, lawful and sole legal and beneficial owner of the Licensed Technology, free and clear of any claims, liens or encumbrances and Technologies Limited's ownership is more than a shop right; (e) except as set forth on Schedule 6.5 as to Improvements only, all Patents, Copyrights and Trademarks included in the Licensed Technology are valid and in full force and effect, and all maintenance and annuity fees have been fully paid and all fees paid during prosecution and after issuance of the Patents have been paid in the correct entity status amounts; (f) the License granted by Technologies Limited does not and will not conflict with any rights granted to other persons or violate any previous agreement between Technologies Limited or any of its Affiliates and any other person; (g) except as set forth on Schedule 6.5 with respect to prosecution of Improvements only, no fraud or misrepresentation has been made during the prosecution of the Patent Rights, Copyrights or Trademarks, or has been included in the documentation for or other disclosure of the Licensed Technology; and (h) Technologies Limited has or can obtain all consents to exclusion of all inventors deleted from or not included in all applications of the Patent Rights. 6.6 TRADEMARKS. Technologies Limited represents and warrants that it is the true, lawful and sole owner of the Trademarks, and has the exclusive right to use such Trademarks, and has the right to permit Applied to use such Trademarks as contemplated by this Agreement, in each case, free of infringement of or unfair competition with any trademark or service mark rights of any other person, and free of any other claims, liens or encumbrances. 6.7 WARRANTY. Except as set forth in this Section 6, Technologies Limited makes no warranties, express or implied, regarding the Licensed Technology, the Proprietary Rights, the Purchased Units or the Trademarks, their performance, or the results which can be achieved with them. EXCEPT AS SET FORTH IN THIS SECTION 6, THE LICENSED TECHNOLOGY, THE PROPRIETARY RIGHTS, THE PURCHASED UNITS AND THE TRADEMARKS ARE LICENSED OR PROVIDED TO APPLIED, AS THE CASE MAY BE, ON AN "AS IS" BASIS AND TRIKON LIMITED HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. 5 7. APPLIED REPRESENTATIONS AND WARRANTIES Applied represents and warrants to Technologies Limited and its Affiliates as follows: 7.1 ORGANIZATION. Applied: (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware; and (b) has all necessary corporate power to enter into and deliver this Agreement and the Technology Transfer Agreement, and to consummate the transactions contemplated by each of them. 7.2 AUTHORITY. The execution and delivery of this Agreement and the Technology Transfer Agreement, and the performance by Applied of each of them, have been duly authorized by all necessary corporate action on the part of Applied. Each of this Agreement and the Technology Transfer Agreement constitutes a legal, valid and binding obligation of Applied, enforceable against Applied in accordance with its terms, subject as to enforcement: (a) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (b) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 7.3 NO CONFLICTS. Neither the execution and delivery of this Agreement or the Technology Transfer Agreement, nor the performance of either of them by Applied, will: (a) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to Applied or any of its Affiliates; or (b) violate or conflict with any provision of Applied's charter documents or of any agreement or instrument to which Applied or any of its Affiliates is a party. 7.4 CONSENTS. No consent, approval or waiver from any third party, and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority, is required to be made or obtained by Applied or any of its Affiliates in order to permit the execution and delivery of this Agreement and the Technology Transfer Agreement by Applied, and the consummation of the transactions contemplated by each of them. 8. COVENANTS OF TRIKON LIMITED Technologies Limited covenants and agrees with Applied as follows: 8.1 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Technologies Limited receives written notice expressly stating that a third party (a "Potential Infringer") has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Technologies Limited shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Applied. 8.2 PATENT PROSECUTION AND MAINTENANCE FEES. To the extent it has not done so, Technologies Limited through patent attorneys of its choosing and at its own expense and cost shall cause to be filed and/or prosecuted the patent applications listed in Exhibit 1.7, and all patent application(s), if any, relating to Improvements included in the Licensed Technology. Technologies Limited agrees to exercise all commercially reasonable efforts to cause all patent applications to be prosecuted in such manner that the best possible patent protection may be obtained thereon. Technologies Limited shall have no liability to Applied respecting the results of such prosecution. Technologies Limited agrees, from time to time and on a reasonable and prompt basis, to inform Applied 6 about the status of the prosecution of said patent applications. During the life of any patents, Technologies Limited shall timely pay all applicable fees, including but not limited to issue and maintenance fees related to Patent Rights included in the Licensed Technology at the appropriate entity status rates. 8.3 PROTECTION OF TRADEMARKS. Technologies Limited shall take all reasonable steps to maintain, and shall take no steps that derogate from, the force or validity of, the Trademarks; shall pay such fees in a timely manner as are necessary to maintain the registrations of the Trademarks in all countries of such registration; and shall have the exclusive right to institute and prosecute in its sole discretion with all reasonable effort actions against any suspected infringers or misusers of the Trademarks. 8.4 REGISTERED USER AGREEMENTS. Technologies Limited, at its sole election, may undertake recordation of a registered user agreement or trademark license with respect to Applied in any country where Applied uses the Trademarks and where such recordation is required or permitted. 9. COVENANTS OF APPLIED Applied covenants and agrees with Technologies Limited as follows: 9.1 TECHNOLOGY. Applied understands and agrees that, with the exception of the rights expressly licensed or otherwise granted under this Agreement, Applied shall not acquire any right, title, or interest in the Licensed Technology or the Trademarks, which right, title and interest is and shall remain with Technologies Limited. 9.2 TRADEMARKS. Applied is familiar with the quality standards of Technologies Limited. In the event Applied elects to use the Trademarks, Applied shall use the Trademarks only in accordance with those same reasonable standards of quality currently used by Applied, which standards shall at least be equal to, but which shall not be required to exceed, the standards of quality currently used by Technologies Limited. Technologies Limited shall have the right once per year, upon reasonable advance written notice (at least 10 business days in advance), to receive from Applied a reasonably representative selection of specimens of Applied's use of the Trademarks, as may be reasonably necessary in order to confirm that such quality control standards are being observed. Applied hereby consents to being named as a registered user of the Trademarks where the recordation of a registered user agreement or trademark license is required or permitted, and Applied agrees to execute any documents reasonably necessary or desirable to enable and assist Technologies Limited in the exclusive registration and protection of the Trademarks, all at no expense to Applied. 9.3 PROPRIETARY NOTICES. Applied agrees to use reasonable efforts to include reproductions of the patent and trademark notices of Technologies Limited as Technologies Limited may reasonably designate on each Applied Licensed Product and all packaging and documentation used for or with its distribution. Applied shall not remove, efface or obscure any patent or trademark notices from any Technologies Limited materials provided hereunder. 9.4 NOTICE OF INFRINGEMENT. If, during the term of this Agreement, Applied receives written notice expressly stating that a Potential Infringer has directly or contributorily infringed, has induced another to infringe, or has engaged in unfair competition with respect to, any of the Licensed Technology, Applied shall promptly identify the affected aspect(s) or item(s) of the Licensed Technology and the Potential Infringer in a written notice to Technologies Limited. 7 10. LIMITATIONS OF LIABILITY; CERTAIN DISCLAIMERS 10.1 LIMITATIONS OF LIABILITY. THE AGGREGATE LIABILITY OF TRIKON LIMITED AND ITS AFFILIATES ARISING OUT OF THIS AGREEMENT, THE TECHNOLOGY AGREEMENT AND THE RELATED AGREEMENTS SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID TO TRIKON LIMITED AND ITS AFFILIATES BY APPLIED PURSUANT TO THIS AGREEMENT, THE TECHNOLOGY TRANSFER AGREEMENT AND THE RELATED AGREEMENTS. TRIKON LIMITED SHALL NOT HAVE ANY LIABILITY TO APPLIED FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT AND THE TECHNOLOGY TRANSFER AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFITS, EVEN IF TRIKON LIMITED HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THESE LIMITATIONS OF LIABILITY SHALL NOT APPLY IN THE EVENT OF FRAUD. 10.2 CERTAIN DISCLAIMERS. Nothing in this Agreement shall (a) obligate Applied to use the Licensed Technology or Trademarks, or (b) to restrict or prohibit Applied from developing, making, using, marketing or otherwise distributing or promoting products and/or processes using, embodying, or competing with the Licensed Technology. No rights are granted to Technologies Limited by this Agreement in any Applied technology or in any Applied tangible, intangible or intellectual property, whether now in existence or hereafter conceived, developed, reduced to practice, discovered, owned, licensed, leased, sold and/or acquired by or for Applied relative to any products or property of Applied, regardless of nature or technical subject. 11. BANKRUPTCY All rights and licenses granted under or pursuant to this Agreement by each party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The parties agree that Applied shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code to the extent that the Bankruptcy Code applies to Technologies Limited. Technologies Limited agrees, during the term of this Agreement, to create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, of all such intellectual property, all to ISO 9000 et seq. and other applicable standards. Technologies Limited further agrees that in the event of the commencement of a bankruptcy proceeding by or against it, Applied shall be entitled to a complete non-exclusive duplicate of or complete access to, as appropriate, solely for the purposes contemplated by this Agreement and the Technology Transfer Agreement, any such intellectual property and all embodiments of such intellectual property, and same, if not already in its possession, shall be promptly delivered to Applied or made available to Applied for reproduction (i) upon such commencement of a bankruptcy proceeding upon written request therefor by Applied, unless Technologies Limited elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Technologies Limited upon written request therefor by Applied. 12. NO PUBLICITY Except as required by court order, Technologies Limited agrees not to disclose the existence or terms of this Agreement without the prior written consent of Applied, which consent shall 8 not be unreasonably withheld. Applied agrees to review any disclosure proposed by Technologies Limited on a prompt basis, provided Applied is given at least two business days' advance written notice. 13. MISCELLANEOUS 13.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of California without reference to principles of conflicts of laws and without regard to the UN Convention on the International Sale of Goods. 13.2 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.3 HEADINGS. The headings of the Sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement. 13.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice). Any such notice shall be effective upon receipt, if personally delivered, or on the next business day following transmittal if sent by facsimile. Notices shall be delivered as follows: To Applied: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Joseph Sweeney, Esq. Vice President, Legal Affairs and Intellectual Property with a copy to: Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, CA 95054 Attention: Alexander Meyer Director, New Business Development To Technologies Limited: Trikon Technologies Limited Ringland Way Newport, Gwent NP6 2TA Attention: Nigel Wheeler with a copy to: Brobeck, Phleger & Harrison LLP One Market Spear Street Tower San Francisco, CA 94105 Attention: Michael J. Kennedy, Esq. 13.5 AMENDMENT OF AGREEMENT. Any provision of this Agreement may be amended only by a written instrument signed by Technologies Limited and Applied. 9 13.6 SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against either party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 13.7 ENTIRE AGREEMENT. This Agreement, together with its Exhibits, constitute the entire agreement between Technologies Limited and Applied regarding the subject matter hereof, and supersedes any and all prior negotiations, correspondence, understandings and agreements regarding such subject matter. 13.8 IMPORT/EXPORT. Each party shall comply with all applicable import and export control laws and regulations. 13.9 TAXES. Applied will not withhold taxes for the transactions contemplated hereunder except as required by law. 13.10 RULES OF CONSTRUCTION. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement. 13.11 FURTHER ASSURANCES. Each party agrees to cooperate with the other in executing, delivering, and filing such further documentation and taking any such other further actions as may be necessary or appropriate to effectuate the transfer of rights granted in this Agreement, or to evidence the satisfaction or accuracy of any condition, representation or warranty of this Agreement. 13.12 INDEPENDENT CONTRACTORS. The parties to this Agreement are and shall remain independent contractors, and nothing herein shall be construed to create a partnership or joint venture between Technologies Limited and Applied. Each party shall be responsible for wages, hours, and condition of employment of its personnel during the term of and under this Agreement. Nothing herein shall be construed as implying that employees of either party are employees of the other party. IN WITNESS WHEREOF, the parties, by their duly authorized officers, have executed this Agreement as of the date first above written. APPLIED MATERIALS, INC. TRIKON TECHNOLOGIES LIMITED /s/ Kalman Kaufman /s/ Gregor Campbell By: _____________________________ By: _______________________________ Name: Kalman Kaufman Name: Gregor Campbell Title: Corporate Vice President Title: Director 10 EX-11.1 5 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three months ended Nine months ended -------------------------------------------- -------------------------------------------- September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ----------------------- ------------------ ----------------------- ------------------ Primary: Average Common shares outstanding........ 17,902,391 8,691,862 15,565,784 8,681,339 Net effect of dilutive stock options- based on the treasury stock method using average fair market price...... --- 360,529 --- 386,275 Net effect of dilutive warrants - based on the treasury stock method using average fair market price............ --- 50,712 --- 53,095 ------------ ---------- ------------ ----------- Total shares............................. 17,902,391 9,103,103 15,565,784 9,120,709 ============ ========== ============ ========== Net income (loss)........................ $(13,460,501) $ 501,171 $(36,040,618) $3,122,510 ============ ========== ============ ========== Per share amount......................... $ (0.75) $ 0.06 $ (2.32) $ 0.34 ============ ========== ============ ========== Fully diluted: Average Common shares outstanding........ 17,902,391 8,691,862 15,565,784 8,681,339 Net effect of dilutive stock options- based on the treasury stock method using average fair market price at the end of the period.................. --- 403,091 --- 407,745 Net effect of dilutive warrants - based on the treasury stock method using average fair market price at the end of the period.................. --- 55,385 --- 55,385 ------------ ---------- ------------ ----------- Total shares............................. 17,902,391 9,150,338 15,565,784 9,144,469 ============ ========== ============ ========== Net income (loss)........................ $(13,460,501) $ 501,171 $(36,040,618) $3,122,510 ============ ========== ============ ========== Per share amount......................... $ (0.75) $ 0.05 $ (2.32) $ 0.34 ============ ========== ============ ==========
EX-27.1 6 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 7,730 6,353 22,853 (3,643) 45,041 81,887 44,139 (11,467) 159,270 41,139 86,250 0 19,548 137,766 (138,429) 159,270 43,720 43,720 31,626 75,930 0 0 7,579 (39,788) (3,748) 0 0 0 0 (36,041) (2.32) (2.32)
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