-----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, TeYnNKD7ojrVfULzlzUFn2qHsrj2APmbvuyJ8Uisw6y7P0ePZcBpMsT9ofQhPr4p ENkZYxaNhru6Z4HaSkPaWg== 0000929624-98-001857.txt : 19981116 0000929624-98-001857.hdr.sgml : 19981116 ACCESSION NUMBER: 0000929624-98-001857 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98748419 BUSINESS ADDRESS: STREET 1: RINGLAND WAY STREET 2: 222 W. ORANGE GROVE AVE CITY: NEWPORT, GWENT STATE: X0 ZIP: NP6 2TA BUSINESS PHONE: 011-44-1-633-414-000 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 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, 1998 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 (I.R.S. Employer of incorporation or organization) Identification No.) Ringland Way, Newport, Gwent NP62TA, United Kingdom - --------------------------------------------------- ------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 441-633-414-000 ----------------------------- Not Applicable - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- As of November 9, 1998, the total number of outstanding shares of the Registrant's common stock was 94,023,835. 1 TRIKON TECHNOLOGIES, INC. INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets at September 30, 1998 (unaudited) and December 31, 1997.......................... 3 Unaudited Condensed Consolidated Statements of Operations for the Three Months ended September 30, 1998 and 1997 and for Nine Months ended September 30, 1998 and 1997............... 5 Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1998 and 1997..................................................................... 7 Notes to Condensed Consolidated Financial Statements............................................ 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................................................... 23 Item 2. Changes in Securities and Use of Proceeds....................................................... 23 Item 5. Other Information............................................................................... 23 Item 6. Exhibits and Reports on Form 8-K................................................................ 23 SIGNATURE PAGE........................................................................................... 24 EXHIBITS................................................................................................. 25
2 TRIKON TECHNOLOGIES, INC. ITEM I CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
September 30, December 31, 1998 1997 (1) ------------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents............................ $ 8,338 $ 9,260 Accounts receivable, net of reserves................. 7,506 18,842 Inventories.......................................... 19,199 23,870 Other current assets................................. 2,013 1,622 ------- -------- Total current assets ................................ 37,056 53,594 Property, equipment and leasehold improvements, net of 20,374 22,140 accumulated depreciation and amortization............ Demonstration systems, net of accumulated depreciation.... 3,542 1,227 Bond financing costs, net of accumulated amortization. 90 2,313 Other assets.............................................. 300 416 ------- -------- Total assets.............................................. $61,362 $ 79,690 ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Convertible subordinated notes....................... $ -- $ 86,250 Accounts payable and accrued expenses................ 5,747 9,765 Sales returns payable................................ 10,718 11,468 Restructuring costs.................................. 1,487 3,952 Other current liabilities............................ 4,152 7,953 ------- -------- Total current liabilities............................ 22,104 119,388 Convertible subordinated notes............................ 4,147 -- Other non-current liabilities............................. 5,782 5,245 ------- -------- Total liabilities........................................ 32,033 124,633
See notes to Condensed Consolidated Financial Statements 3 CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) CONTINUED
September 30, December 31, 1998 1997 (1) ------------- ------------ (unaudited) SHAREHOLDERS' EQUITY (DEFICIENCY): Preferred Stock Authorized shares--20,000,000 Series G Preferred Stock, no par value, stated at $6.75 per share liquidation preference Designated shares - None at September 30, 1998 and 3,125,000 at December 31, 1997 Issued and outstanding--None at September 30, 1998 and 2,962,032 at December 31, 1997............... -- 19,349 Series H Preferred Stock, no par value, $10 per share liquidation preference..................... Designated shares - 3,000,000 at September 30, 1998 and none at December 31, 1997............... Issued and outstanding 2,855,754 at September 30, 1998 and none at December 31, 1997............... 28,558 -- Common Stock, no par value Authorized shares -- 110,000,000 Issued and outstanding-- 94,023,835 at September 30, 1998 and 15,147,115 at December 31, 1997................................ 199,019 137,767 Cumulative translation adjustment......................... 252 (745) Deferred compensation..................................... (7,030) -- Accumulated deficit....................................... (191,470) (201,314) --------- --------- Total shareholders' equity (deficiency)................... 29,329 (44,943) --------- --------- Total liabilities and shareholders' equity................ $ 61,362 $ 79,690 ========= =========
(1) The Balance Sheet at December 31, 1997 has been derived from the audited financial statements at that date, but does not include all of information and footnotes required by generally accepted accounting for complete financial statements. See notes to Condensed Consolidated Financial Statements 4 TRIKON TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands)
Three Months Ended Nine Months Ended ---------------------------------- ------------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Revenues: Product sales....................... $ 4,477 $ 12,657 $ 19,972 $ 43,720 License revenues.................... -- -- 10,000 -- ------- -------- -------- -------- 4,477 12,657 29,972 43,720 Costs and expenses: Cost of goods sold.................. 3,230 9,159 14,411 31,626 Research and development............ 2,056 4,259 6,429 13,414 Selling, general and administrative..................... 5,377 9,824 15,634 25,203 In-process technology............... -- -- -- 2,975 Restructuring costs................. -- -- 1,843 -- Amortization of intangibles..................... -- 904 -- 2,712 ------- -------- -------- -------- 10,663 24,146 38,317 75,930 ------- -------- -------- -------- Loss from operations................... (6,186) (11,489) (8,345) (32,210) Other: Interest income (expense), net............................. 569 (2,813) (2,320) (7,578) ------- -------- -------- -------- Loss before income tax provision and extraordinary item.......... (5,617) (14,302) (10,665) (39,788) Income tax benefit.................. -- (841) (217) (3,747) ------- -------- -------- -------- Net loss before extraordinary item.............................. (5,617) (13,461) (10,448) (36,041) Extraordinary item..................... -- -- 20,293 -- ------- -------- -------- -------- Net income (loss)...................... $(5,617) $(13,461) $ 9,845 $(36,041) Earnings (loss) per common share data: Basic: Loss applicable to common shares before extraordinary item....... $ (0.08) $ (0.89) $ (0.23) $ (2.47) Extraordinary gain.................. -- -- 0.41 -- ------- -------- -------- -------- Net income (loss) .................. $ (0.08) (0.89) 0.18 (2.47) ======= ======== ======== ======== Diluted: Loss applicable to common shares before extraordinary item ........ $ (0.08) (0.89) (0.23) (2.47)
5
Three Months Ended Nine Months Ended ---------------------------------- ------------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Extraordinary gain............. -- -- 0.41 -- ------- ------- ------- ------- Net income (loss).............. $ (0.08) (0.89) 0.18 (2.47) ======= ======= ======= ======= Average common shares used in the calculation - Basic....... 82,284 15,115 49,200 14,617 - Diluted..... 82,284 15,115 49,712 14,617
See notes to Condensed Consolidated Financial Statements 6 TRIKON TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine months ended ------------------------------- September 30, September 30, 1998 1997 -------------- ------------- OPERATING ACTIVITIES Net income (loss)........................................ $ 9,845 $(36,041) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary item.................................. 20,293) -- Depreciation and amortization of plant, equipment, 2,825 5,178 leasehold improvements and demonstration systems Amortization of intangibles......................... 14 2,772 Amortization of financing costs..................... 300 615 Amortization of deferred compensation............... 555 -- In-process technology............................... -- 2,974 Deferred income taxes............................... -- (3,420) Changes in operating assets and liabilities: Accounts receivable............................. 11,336 7,819 Inventories..................................... 4,671 8,395 Demonstration systems........................... (2,315) (1,327) Other assets.................................... (275) 1,095 Accounts payable, other accrued expenses and other current liabilities..................... (7,699) (10,439) Other liabilities............................... 356 1,883 Other........................................... 997 -- ------- -------- Net cash provided by (used in) operating activities. 317 (20,496)
See notes to Condensed Consolidated Financial Statements 7 TRIKON TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) CONTINUED
Nine months ended ----------------------------------- September 30, September 30, 1998 1997 ------------- ------------- Brought forward $ 317 $(20,496) INVESTING ACTIVITIES Purchases proceeds of sale of property, equipment and leasehold improvements............................................ (272) (8,572) Proceeds from sales of short-term investments........................ -- 1,216 Purchases of short-term investments.................................. -- (6,113) Other assets......................................................... -- (382) ------ -------- Net cash used in investing activities................................ (272) (13,851) FINANCING ACTIVITIES Net borrowing (repayments) under bank credit lines................... -- 416 Costs relating to Exchange Offer..................................... (700) -- Proceeds from sale of preferred stock................................ -- 19,548 Proceeds from sale of common stock and warrants...................... -- 2,329 Payments on capital lease obligations................................ (267) (404) ------ -------- Net cash provided by (used in) financing activities.................. (967) 21,889 ------ -------- Net increase (decrease) in cash and cash equivalents................. (922) (12,458) Cash and cash equivalents at beginning of period..................... 9,260 20,188 ------ -------- Cash and cash equivalents at end of period........................... $8,338 $ 7,730 ====== ========
See notes to Condensed Consolidated Financial Statements 8 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 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, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 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, 1997. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. During 1997, following significant losses from operations, negative cash flows from operating activities, and violations of debt covenants, the Company's working capital facility was terminated (see Note G). The Company does not currently have a credit facility with any lenders. In response to these conditions, the Company sold licenses of its technologies, as discussed in Note I, restructured its operations, as discussed in Note L, and consummated the Exchange Offer (as defined below), as discussed in Note J. Management believes that these actions and the cash flow from future operations will be sufficient to fund the Company's operations. However, any increase in costs or decrease or elimination of anticipated sources of revenues or the inability of the Company to successfully implement management's plans would raise significant doubt as to the Company's ability to fund its operations in the ordinary course. 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 (in thousands): September 30, December 31, 1998 1997 ------------ ------------ Components................................. $ 6,795 $ 7,864 Work in process............................ 11,664 13,680 Finished goods............................. 740 2,326 ------- ------- $19,199 $23,870 ======= ======= NOTE C: DEMONSTRATION SYSTEMS Demonstration systems represent completed systems at certain strategic customer 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 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 Technologies Limited and Trikon Equipments Limited (collectively, "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 a 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 9 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) 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(R) CVD technology used in the equipment developed and manufactured by Trikon Technologies Limited and Trikon Equipments Limited (collectively "Trikon Limited"). Accordingly, a settlement of any and all rights and claims by the limited partners of the Limited Partnership was made on June 30, 1997 ("CVD Purchase Agreement") 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 the Company's Common Stock (the "CVD Partnership 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 CVD Partnership Shares filed under the Securities Act of 1933, as amended (the "Securities Act"), to become effective on or prior to September 1, 1997. In the event that the Company did not cause a registration statement to become effective on or prior to September 1, 1997, the Company originally agreed to pay the holders of the CVD Partnership Shares liquidated damages comprising a one-time fee of $75,000 and an amount equal to $2,500 per day for each day after September 1, 1997, and prior to the effective date of the registration statement. The Company and the holders of the CVD Partnership Shares amended the CVD Purchase Agreement on December 12, 1997, to provide for (i) the immediate payment of liquidated damages accrued through November 1, 1997, of $225,000, (ii) no further incurrence of liquidated damages should the registration statement be effective by March 15, 1998, (iii) in the event that Trikon did not cause the registration statement to become effective by March 15, 1998, resumption of liquidated damages accruing at a rate of $2,500 for each day thereafter until the Registration Statement becomes effective, and (iv) should the registration statement not be effective by April 1, 1998, Trikon would become obligated to the holders of CVD Partnership Shares for the liquidated damages for the period between November 1, 1997, and March 15, 1998, of $335,000. On September 15, 1998, pursuant to a second amendment to the CVD Purchase Agreement, the Company issued 300,000 shares of Common Stock to the holders of CVD Partnership Shares in exchange for the termination of their registration rights, the relinquishment of any right to liquidated damages under the CVD Purchase Agreement, including those accrued to the date of the second amendment, and the release the Company from any liability or claim arising from or relating to the CVD Purchase Agreement. This has resulted in a $0.6 million and a $0.2 million gain which has been recorded in the statements of operations for the three and nine months ended September 30, 1998, respectively. NOTE E: INCOME TAXES The tax benefit in the nine months ended September 30, 1998 represents the combination of a foreign tax benefit associated with Trikon Limited's operating loss and no tax liability on domestic profits because they are fully absorbed by tax losses brought forward. In the third fiscal quarter of 1997, the tax benefit represents the combination of a foreign tax benefit associated with Trikon Limited's operating loss and no tax liability on domestic losses. For these reasons the effective tax rates differ from the statutory federal tax rate. 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. Upon closing of the Exchange Offer (see Note J), a change of ownership occurred under section 382 of the Internal Revenue Code, which will substantially limit the availability of the Company's net operating loss carryforward. Due to the limitation, a substantial amount of net operating loss carryforward may expire unused. 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 10 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) 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 F: NET INCOME (LOSS) PER SHARE On December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which changes the method previously used to compute earnings per share and requires restating all prior periods. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options are excluded from the calculation of basic earnings per share and included in the calculation of diluted earnings per share, when dilutive. Diluted earnings per share for the nine months ended September 30, 1998 excludes the effects of all outstanding stock options because the exercise price of such stock options exceeded the market price of the underlying stock and assumes the Series G Preferred Stock was converted into 2,962,032 shares of Common Stock as of January 1, 1998 under the if-converted method. Diluted earnings per share for the three months ended September 30, 1998 also excludes the effects of all options and convertible preferred stock because such securities were antidilutive for the periods. Net income and loss amounts used in the calculations of basic and diluted per share are adjusted by dividends on preferred stock. Basic and diluted earnings (loss) per share under SFAS 128 for the three and nine months ending September 30, 1997 were the same as previously reported as primary loss per share. NOTE G: LINE OF CREDIT AND LONG-TERM DEBT During the period from November 14, 1996 to November 12, 1997, the Company had a 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. The Company was out of compliance with certain financial ratios and covenants established under the Working Capital Facility at December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997. On November 12, 1997, in connection with the sale of licenses to Applied Materials, the Company entered into a pay-off agreement with its domestic and U.K. lenders relating to 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 included 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 and the Working Capital Facility was terminated. 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. As of September 30, 1998, the cash collateral provided was $1.1 million. In connection with the acquisition of Trikon Limited, the Company issued $86,250,000 principal amount 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. From January 1997 to May 14, 1998, the Convertible Notes bore an additional 0.5% interest per annum due to the Company's noncompliance with certain registration rights of the Convertible Notes. Until May 14, 1998, the Convertible Notes contained 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. 11 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) On May 14, 1998, the Company accepted for exchange approximately $82.1 million principal amount of Convertible Notes duly tendered in the Exchange Offer described in Note J below. As outlined in the offering document disseminated in connection with the Exchange Offer, the Company did not pay interest of $3.3 million accrued to and due on April 15, 1998. Interest was paid to the holders of the Convertible Notes which did not accept the Exchange Offer on May 15, 1998. In accordance with the terms of the Exchange Offer, any accrued and unpaid interest on Convertible Notes accepted in the Exchange Offer was not paid and was included in the calculation of the extraordinary gain arising on the exchange of the Convertible Notes. NOTE H: SERIES G 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 888,610 shares of Common Stock) with net proceeds to the Company of approximately $19,349,000. 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. On May 14, 1998, following the expiration of the Exchange Offer (see Note J), the Company accepted for conversion 2,873,143 shares of G Preferred Stock, or approximately 97% of the outstanding shares, duly tendered in the Exchange Offer. In accordance with the terms of the Certificate of Determination of the Company that sets forth the rights, preferences and privileges of the Series G Preferred Stock, the conversion of more than two- thirds of the outstanding shares of Series G Preferred Stock has caused the automatic conversion of all the outstanding shares of Series G Preferred Stock. NOTE I: LICENSE AGREEMENTS On November 12, 1997, the Company granted non-exclusive, worldwide, paid-up licenses of its MORI(TM) source and Forcefill(R) PVD technologies to Applied Materials. Under the terms of the license agreements and related technology transfer agreements, Applied Materials paid the Company $29.5 million, $26.5 million of which was paid in 1997 and an additional $3 million of which was paid in the first quarter of 1998 upon completion of the technology transfer. Under one of the license agreements, Applied Materials also purchased four MORI(TM) sources for $0.5 million prior to December 31, 1997. On March 18, 1998, the Company granted a nonexclusive, worldwide license of its MORI(TM) source technology to Lam Research. Under the terms of the license agreement, Lam Research will pay up to $20.0 million, $10.0 million of which was paid in the first half of 1998 and $10.0 million of which consists of contingent payments and royalties. License revenue of $10 million has been recognized in the consolidated income statement for the three months ended March 31, 1998. The license agreements with Applied Materials and Lam Research do not preclude Trikon from utilizing, or licensing to other third parties, the licensed technology. NOTE J: EXCHANGE OFFER On April 14, 1998, the Company commenced an exchange offer (the "Exchange Offer") for all of the outstanding Convertible Notes, Series G Preferred Stock and Warrants and filed a Schedule 13E-4 with the Securities and Exchange Commission. The Exchange Offer expired at 5:00 p.m., New York City time, on May 14, 1998, and immediately thereafter, the Company accepted for exchange or conversion all validly tendered Convertible Notes, Series G Preferred Stock and Warrants. $82,103,000 principal amount of Convertible Notes (approximately 95% of the aggregate principal amount outstanding), 2,873,143 shares of Series G Preferred Stock (approximately 97% of 12 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) the total shares outstanding) and 866,388 Warrants (approximately 97% of the Warrants outstanding) had been validly tendered for exchange. Because more than two-thirds of the outstanding shares of Series G Preferred Stock tendered, in accordance with the terms of the Certificate of Determination of the Company establishing the rights, preferences and privileges of the Series G Preferred Stock, all other outstanding shares of Series G Preferred Stock automatically converted into shares of Common Stock. The $82,103,000 principal amount of Convertible Notes tendered have been exchanged for 22,660,798 new shares of Common Stock, 2,855,754 new shares of Series H Preferred Stock, $10 stated amount per share, and 29,264.625 new shares of Series I Junior Participating Preferred Stock. The shares of Series G Preferred Stock and warrants were exchanged for 7,161,002 new shares of Common Stock and 7,997.489 new shares of Series I Junior Participating Preferred Stock. In the quarter ended September 30, 1998, the Company exchanged the remaining 22,222 Warrants on the same terms as those already tendered. The Series H Preferred Stock will be redeemable at the option of the Company for cash on June 30, 2001, at a redemption price equal to the stated amount and the holders of the Series H Preferred Stock shall be entitled to receive dividends at an annual rate of 8-1/8% of the stated amount payable annually, at the option of the Company, in cash or additional shares of preferred stock or any combination thereof. The Series H Preferred Stock will be subject to automatic conversion if the Company's Common Stock price reaches certain levels and accelerated redemption if certain cash flow levels are achieved. Dividends amounting to $973,238 due on October 14, 1998 on the Series H Preferred Stock were paid with 97,320 new shares of Preferred Stock. In connection with the consummation of the Exchange Offer, the Company has agreed to issue 5,015,811 shares of restricted Common Stock and 6,476.995 shares of restricted Series I Preferred Stock to the Company's Chairman of the Board. Subject to certain conditions, the restricted stock will vest one hundred percent (100%) upon the earlier of (i) May 14, 2003, or (ii) the sale of all or substantially all of the assets of the Company. The restricted stock was valued at $7.6 million based upon average traded prices immediately after the grant. This amount has been accounted for as an addition to Common Stock and as deferred compensation within the Statement of Shareholders Equity. The deferred compensation is being amortized on a straight line basis over a five year period resulting in a charge of $0.4 million and $0.6 million which is included in selling, general and administrative expenses during the three and nine months ended September 30, 1998, respectively. Upon conversion of all Series I Preferred Stock into Common Stock, the stock issued to the Chairman of the Board represented approximately 11,500,000 shares or 12% of the outstanding Common Stock (after giving effect to the elimination of the restrictions on the Chairman of the Board's stock). On July 28, 1998, at the Company's Annual Meeting of Shareholders, the Shareholders approved, among other things, an amendment (the "Charter Amendment") to the Articles of Incorporation of the Company to provide for an increase in the number of authorized shares of Common Stock. Upon approval of the Charter Amendment, each share of Series I Preferred Stock automatically converted into 1,000 shares of Common Stock. As outlined in the Exchange Offer documents, the Company did not pay interest of $3.3 million accrued to and due on April 15, 1998. Interest was paid to the holders of Convertible Notes which did not accept the Exchange Offer on May 15, 1998. In accordance with the terms of the Exchange Offer, any accrued and unpaid interest on Convertible Notes accepted in the Exchange Offer will not be paid and has been included in the calculation of the extraordinary gain arising on the exchange of the Convertible Notes. The Exchange Offer has been accounted for under SFAS No. 15, "Troubled Debt Restructuring." NOTE K: EMPLOYMENT AGREEMENTS In connection with the negotiation of the Applied Materials and Lam Research licenses, restructuring the Company and future licensing efforts, the Board of Directors authorized a $1,500,000 bonus payable to the Chairman of the Board. The bonus is not payable prior to June 30, 1999 and is conditional amongst other matters upon the Company having at least $8,000,000 of earnings before the deduction of interest, taxes, depreciation and amortization, computed in accordance with generally accepted accounting principles, during and for its two most recently 13 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) completed fiscal quarters taken as one period. This bonus has not been reflected in the financial statements to and at September 30, 1998 and will be charged to future earnings when it is probable that the financial and other conditions relating to the bonus will be met. NOTE L: RESTRUCTURING At December 31, 1997 the Company recorded a liability for certain restructuring costs related to the closure of its Chatsworth operations. For the three and nine months ended September 30, 1998, the restructuring liability has been reduced by actual payments as anticipated by the Company. At June 30, 1998, the Company set up an additional reserve of $1.8 million for future support costs relating to MORI(TM) equipment supplied to customers prior to the commencement of the restructuring. During the quarter ended September 30, 1998, support costs of $0.7 million relating to MORI equipment have been charged against this reserve, in line with Company estimates. As a result of the Company's decision to substantially exit the MORI(TM) Etch business, the Company anticipates certain MORI(TM) Etch related product returns. Although the Company is not required to accept all such returns, the Company believes accepting returns may be necessary to maintain certain customer relationships. Accordingly, the sales return reserve recorded as of September 30, 1998 is management's estimate of the liability for MORI(TM) Etch products that may be returned due to the Company's decision to substantially exit the MORI(TM) Etch business. There have been payments made for sales returns of $0.75 million in the three and nine months ended September 30, 1998. Dallas Semiconductor Corporation ("Dallas Semiconductor") filed on April 9, 1998 an action against the Company in state court in Dallas County, Texas. The complaint alleges breech of warranty, fraud, negligent misrepresentation, and breech of contract regarding the purchase of two PMT Pinnacle Polysilicon Etch Systems from the Company. Dallas Semiconductor seeks damages of $8.0 million and exemplary damages of $16.0 million. The lawsuit was removed to federal court on May 7, 1998. In response, Dallas Semiconductor decided not to oppose the merits of the motion but instead exercise its "one time" right to amend its pleading under applicable law. On June 26, 1998, Dallas Semiconductor filed a first amended complaint setting forth its claims with greater specificity. The Company filed a motion to dismiss the amended claims on July 30, 1998. The Company believes that the claims are without merit and intends to vigorously defend them. At this early stage, the Company cannot determine the total expense or the ultimate outcome of the lawsuit. Although the Management does not believe the claim will have a material adverse effect on the Company's financial position, results of its operations or cash flow, there can be no assurance to that effect. In the ordinary course of business and in connection with the Company's restructuring, the Company is involved in various types of claims and legal proceedings which will result in litigation or other legal proceedings. The Company does not anticipate that any of the proceedings will have a material adverse effect on the Company's financial position, results of operations or cash flow. NOTE M: EXTRAORDINARY GAIN On May 14, 1998, the Company accepted for exchange $82.1 million principal amount of Convertible Notes tendered in the Exchange Offer (See Note J). The Convertible Notes were exchanged for 22,660,798 shares of Common Stock, 29,264.625 Series I Junior participating Preferred Stock and 2,855,754 Series H preferred Stock. The shares of Common Stock and equivalents had an average value of $0.66 each following the exchange. The extraordinary gain arising on the exchange is as follows (in thousands): Principal amount of Convertible Notes exchanged..... $82,103 Interest waived...................................... 3,635 ------- Value of Common Stock and equivalents issued......... 85,738 (34,271) 14 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) Series H Preferred Stock issued - principal amount... (28,558) Convertible Note issuance costs written off.......... (1,916) Costs relating to the exchange offer................. (700) -------- Gain on exchange..................................... $ 20,293 -------- NOTE N: COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted SFAS 130, Reporting Comprehensive Income. SFAS 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement has no impact on the Company's net income or shareholders' equity. SFAS 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. During the nine months of 1998 and 1997, total comprehensive income (loss) amounted to $10.8 million and ($37.8) million, respectively. During the three months ended September 30, 1998 and 1997, total comprehensive loss amounted to ($5.1) million and ($13.6) million, respectively. 15 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) 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 new products and system products, potential material adverse effects on such demand resulting from the Company's licensing of its MORI(TM) source and Forcefill(R) physical vapor deposition ("PVD") technologies to Applied Materials, and its MORI(TM) source technology to Lam Research, 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, including the economic downturn in Asia, year 2000 problems, 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. 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 5.6 million 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 Technologies Limited and Trikon Equipments Limited (collectively, "Trikon Limited"). Trikon Limited develops, manufactures, markets and services semiconductor fabrication equipment with products and technologies for CVD, PVD and etch 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. In the second half of 1997, in response to continuing losses, violations of debt covenants and the limited availability of financing, the Company began a restructuring effort that included exploring various strategic alternatives as to the future of the business. In October 1997, the Company announced a 20% reduction in its workforce. In November 1997, the Company sold worldwide, non-exclusive, paid up licenses of its MORI(TM) source and Forcefill(R) PVD technologies to Applied Materials for $29.5 million. With the sale of the MORI(TM) source license, the Company began executing a plan to close its Etch Division located in Chatsworth, California, resulting in the termination of an additional 13% of its work force. In connection with the closure of the Chatsworth Etch operations and the sale of the licenses, the Company incurred during the fourth quarter of 1997, non-cash related charges of approximately $32.5 million for the write-off of certain accounts receivable, inventories and long-lived assets which due to the sale of the licenses and the decision to close the Etch Division had become impaired. In addition, due to the continuing losses, reduced sales and changes in the Company's business, since the acquisition of Trikon Limited, the Company wrote off, during the fourth quarter of 1997, approximately $32.3 million of intangible assets established in the allocation of the purchase price of Trikon Limited. The Company incurred certain cash related charges of approximately $18.3 million associated with the termination of employees of the 16 TRIKON TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (C0NTINUED) Etch Division and of the Company's worldwide operations, closing of the Chatsworth Etch operations and anticipated product returns. During the three and nine months ended September 30, 1998, the Company settled approximately $1.1 million and $4.4 million, respectively, of the accrued restructuring costs. At June 30, 1998, the Company reserved a further $1.8 million to meet future customer support costs associated with MORI(TM) equipment supplied to customers prior to closure of the MORI(TM) etch division. Approximately $0.7 million of these costs have been charged to this reserve in the quarter ended September 30, 1998. The Company anticipates approximately $1.5 million of the remaining restructuring liabilities at September 30, 1998 will be paid in 1998, $3.0 million in 1999, and the balance thereafter. Actual payments of remaining restructuring liabilities could vary significantly depending on the Company's cash flows and continuing negotiations with its customers. As a result of the closure of the Chatsworth Etch operations, operating costs for the first three quarters of 1998 are significantly reduced by comparison with the same periods of 1997. Costs of $97.6 million relating to the restructuring of the Company were charged in the consolidated Statement of Operations for the year ended December 31, 1997. The above-described charges to earnings and reserves reflect the estimates and assumptions of management, and there can be no assurance that the provisions and allowances are adequate. If actual costs are greater than the provisions and allowances, then it will materially and adversely affect its results of operations. Severance costs of $0.5 million in respect of 63 redundancies announced in the quarter have been charged to operations in the third quarter of 1998. As a result of the restructuring, the remaining business consists of the worldwide operations of Trikon Limited, the Company acquired by Trikon on November 15, 1996, with headquarters located in the United Kingdom. 17 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, 1998 1997 1998 1997 ---------------- ---------------- ---------------- ----------------- Product revenues............................... 100.0% 100.0% 66.6% 100.0% License revenues............................... -- -- 33.4 -- ------ ------ ------ ------ Total revenues................................. 100.0 100.0 100.0 100.0 Cost of goods sold............................. 72.2 72.4 48.1 72.3 ------ ------ ------ ------ Gross margin................................... 27.8 27.6 51.9 27.7 Operating expenses: Research and development.................. 45.9 33.6 21.4 30.7 Selling, general and administrative....... 120.1 77.6 52.1 57.6 In-process technology..................... -- -- -- -- Restructuring costs....................... -- -- 6.2 -- Amortization of intangibles............... -- 7.2 -- -- ------ ------ ------ ------ Total operating expenses....................... 166.0 118.4 79.7 101.3 ------ ------ ------ ------ Loss from operations........................... (138.2) (90.8) (27.8) (73.7) Interest income (expense), net................. 12.7 (22.2) (7.7) (17.3) ------ ------ ------ ------ Loss before income tax benefit and extraordinary item........................ (125.5) (113.0) (35.5) (91.0) Income tax benefit............................. -- (6.6) (0.7) (8.6) ------ ------ ------ ------ Net loss before extraordinary item............. (125.5)% (106.4)% (34.8)% (82.4)% ====== ====== ====== ======
PRODUCT REVENUES. Product revenues for the third quarter of fiscal 1998 decreased 65% to $4.5 million compared to $12.7 million for the third quarter of fiscal 1997. During the third quarter of fiscal 1998, the Company shipped one Omega etch system and two MORI modules as compared to one Sigma PVD, one ND and three Flowfill CVD, two Omega(TM) etch, and one MORI system during the third quarter of fiscal 1997. Revenues from product sales for the nine month period ended September 30, 1998 decreased by 54% to $20.0 million as compared to $43.7 million for the nine months ended September 30, 1997. Product sales decreased as a result of the shipment of eight systems, including one MORI etch system in the nine months ended September 30, 1998 as compared to twenty-two systems, including five MORI etch systems in the nine months ended September 30, 1997. Sales outside of the United States accounted for approximately 77% of total revenues in the third quarter of 1998 and 88% of total revenues in the third quarter of 1997. Sales outside of the United States accounted for approximately 48% of total revenues in both the nine months ended September 30, 1998 and 1997. Excluding the license revenues, sales outside the United States accounted for 73% and 48% of product revenues for the nine months ended September 30, 1998 and 1997, 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. LICENSE REVENUES. License revenues in the nine months ended September 30, 1998, comprise the sale of a non-exclusive worldwide license of MORI(TM) source technology to Lam Research Corporation (see Note I to Notes to Condensed Consolidated Financial Statements). 18 GROSS MARGIN ON PRODUCT REVENUES. The Company's gross margin on product revenues for the three and nine months ended September 30, 1998 and the three and nine months ended September 30, 1997 was 28%. The relatively low gross margin for the third quarter of fiscal 1998 was due to the low level of production and product sales which has resulted in under-recovery of manufacturing overhead. The gross margin for the nine months ended September 30, 1998 has also been adversely affected by a $0.6 million write-down of inventory considered redundant. Excluding this write-down the gross margin for the nine months would have been 31%. The gross margin for the three and nine months ended September 30, 1997 was adversely affected by charges of $0.6 million and $4.4 million respectively arising from the application of a write-up of Trikon Limited inventory on hand as of November 15, 1996 and sold during those periods as required by Accounting Principles Board Opinion No. 16 ("APB No. 16"). The gross margin for the three and nine months ended September 30, 1997, excluding the APB No. 16 write-ups was 32% and 38% respectively. Gross margins will continue to be adversely impacted by issues related to weakened product demand such as unabsorbed manufacturing overhead associated with reduced units sold in the remainder of 1998. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the third quarter of fiscal 1998 were $2.1 million, or 46% of total revenues, compared to $4.3 million, or 34% of total revenues, for the third quarter of fiscal 1997. Included in research and development expenses during the third quarter of fiscal 1997 is $2.0 million related to the Chatsworth Etch division. For the nine months ended September 30, 1998, research and development expenses were $6.4 million, or 21% of total revenues, as compared to $13.4 million, or 31% of total revenues, for the nine months ended September 30, 1997. During the nine months ended September 30, 1998 research and development expenses were 32% of product revenues. The major focus of the Company's research and development efforts during the first nine months of fiscal 1998, 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 1998 were $5.4 million, or 120% of total revenues, compared to $9.8 million, or 78% of total revenues, in the third quarter of fiscal 1997. In the nine months to September 30, 1998, selling, general and administrative expenses were $15.6 million or 52% of total revenues, compared to $25.2 million or 58% of total revenues in the nine months ended September 30, 1997. Selling, general and administrative costs for the quarter ended September 30, 1998 included severance costs of $0.5 million and deferred compensation costs of $0.4 million relating to the issue of restricted Common Stock to the Company Chairman. The dollar decreases were primarily due to the reduced overhead resulting from the closure of the Chatsworth Etch operations. INCOME (LOSS) FROM OPERATIONS. The Company realized a $6.2 million loss from operations in the third quarter of fiscal 1998, as compared with a $11.5 million loss from operations in the third quarter of fiscal 1997. The loss from operations in the third quarter of fiscal 1998 was due primarily to weak product demand resulting in reduced product revenues and lowered gross margins and to a charge for severance costs of $0.5 million. For the nine months ended September 30, 1998 the Company realized a $8.3 million loss from operations, compared with a $32.2 million loss from operations for the nine months ended September 30, 1997. The Company anticipates that operating results will continue to be unfavorably impacted by weak product demand during the remainder of fiscal 1998. INTEREST INCOME (EXPENSE), NET. Interest income, net amounted to $0.6 million in the third quarter of fiscal 1998 compared with interest expense, net of $2.8 million in the third quarter of fiscal 1997. Interest income, net in the third quarter of 1998 includes a credit of $0.6 million being the amount of penalties waived by the holders of shares in the CVD Partnership less the value of shares of Common Stock issued to them calculated at the closing share price on the date of the agreement. The reduction in interest expense between the third quarter of 1997 and the third quarter of 1998 arises from the repayment and non-utilization of the Working Capital Facility since November 1997 and the exchange for equity of approximately $82.1 million of convertible unsecured loan notes on May 14, 1998. Interest expense for the three months and nine months ended September 30, 1998 is net of interest income of $0.1 million and $0.5 million, respectively. Interest expense for the three and nine months ended September 30, 1997 is net of interest income of $0.1 million and $0.6 million, respectively. INCOME TAXES. The Company recorded no tax benefit or charge in the three months ended September 30, 1998 and a tax benefit of $0.2 million in the nine months ended September 30, 1998 compared to a $0.8 million tax benefit in the third quarter of fiscal 1997 and a $3.7 million benefit for the nine months ended September 30, 1997. 19 The tax benefit in the nine months ended September 30, 1998 represents the combination of a foreign tax benefit associated with Trikon Limited's operating loss and no tax liability on domestic profits which are fully absorbed by tax losses brought forward. In the second fiscal quarter of 1997, 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 Electrotech assets acquired. 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, as amended (the "Internal Revenue Code"), and similar state provisions. Upon closing of the Exchange Offer (defined in Note J of Notes to Unaudited Condensed Consolidated Financial Statements), a change of ownership occurred under section 382 of the Internal Revenue Code, which will substantially limit the availability of the Company's net operating loss carryforward. Due to the limitation, a substantial amount of net operating loss carryforward may expire unused. 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. EXTRAORDINARY GAIN On May 14, 1998, the Company accepted for exchange approximately $82.1 million principal amount of Convertible Notes tendered in the Exchange Offer (see Note J of Notes to Unaudited Condensed Consolidated Financial Statements). The Convertible Notes were exchanged for 22,660,798 shares of Common Stock, 29,264.625 shares of Series I Junior participating Preferred Stock and 2,855,754 shares of Series H preferred Stock. The shares of Common Stock and equivalents had an average value of $0.66 each following the exchange. The extraordinary gain arising on the exchange is as follows (in thousands): Principal amount of Convertible Notes exchanged..... $ 82,103 Interest waived...................................... 3,635 -------- 85,738 Value of Common Stock and equivalents issued......... (34,271) Series H Preferred Stock issued - principal amount... (28,558) Convertible Note issuance costs written off.......... (1,916) Costs relating to the exchange offer................. (700) -------- Gain on exchange..................................... $ 20,293 -------- LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Company had $8.3 million in cash and cash equivalents, compared to $9.3 million at December 31, 1997. The decrease in cash and cash equivalents resulted from cash generated from operating activities of $0.3 million, less cash used in investing activities of $0.3 million and cash used in financing activities of $1.0 million. 20 On March 18, 1998, the Company granted a non-exclusive, worldwide license of its MORI(TM) source technology to Lam Research. Under the terms of the license agreement, Lam Research will pay up to $20.0 million, $10.0 million of which was paid in the first half of 1998, and $10.0 million of which consists of contingent payments and royalties. On November 12, 1997, the Company granted nonexclusive, worldwide, paid-up licenses of its MORI(TM) source and Forcefill(R) PVD technologies to Applied Materials. Under the terms of the license agreements and related technology transfer agreements, Applied Materials paid the Company $29.5 million, $26.5 million of which was paid in 1997 and an additional $3 million of which was paid in the first quarter of 1998 upon completion of the technology transfer. Under one of the license agreements, Applied Materials also purchased four MORI(TM) sources for $0.5 million prior to December 31, 1997. The license agreements with Applied Materials and Lam Research do not preclude Trikon from utilizing, or licensing to other third parties, the licensed technology. During the period from November 14, 1996 to November 12, 1997, the Company had a 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. The Company was out of compliance with certain financial ratios and covenants established under the Working Capital Facility at December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997. On November 12, 1997, in connection with the sale of licenses to Applied Materials, the Company entered into a pay-off agreement (the "Pay-off" Agreement) with its domestic and U.K. lenders relating to the Working Capital Facility. 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 and the Working Capital Facility and all of the Company's obligations under the Working Capital Agreement were terminated. 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. As of September 30, 1998, the cash collateral provided was $1.1 million. The $29.5 million in proceeds from the sale of the license agreements to Applied Materials was used to pay off the $12.5 million balance on the Working Capital Facility and $3.1 million in interest due on the Convertible Notes. The Company is using the remainder to fund the closure of the Chatsworth, California, Etch operations, including the employee termination cost and debt service requirements. During the nine months ended September 30, 1998, Trikon Limited made the final repayment on a term-loan from Lloyd's Bank PLC which was secured by property in Bristol, United Kingdom. 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"). On April 14, 1998, the Company commenced an exchange offer (the "Exchange Offer") for all of the outstanding Convertible Notes, Series G Preferred Stock and warrants to purchase its Common Stock issued in connection with the placement of the Series G Preferred Stock (the "Warrants"). The Exchange Offer expired on May 14, 1998, and immediately thereafter, the Company accepted for conversion $82,103,000 principal amount of Notes (approximately 95% of the aggregate principal amount outstanding). The holders of $4,147,000 principal amount of Notes did not accept the Exchange Offer and those Notes remain outstanding. The holders of more than two-thirds of the Series G Preferred Stock accepted the Exchange Offer and in accordance with the terms of the Exchange Offer all 2,962,032 outstanding of Series G Preferred Stock were exchanged for shares of Common Stock. The Company has also accepted for exchange all 888,610 Warrants outstanding. As outlined in the offering document issued in connection with the Exchange Offer, the Company did not pay interest of $3.3 million accrued to and due on April 15, 1998. Interest was paid to the holders of the Convertible Notes which did not accept the Exchange Offer on May 15, 1998. In accordance with the terms of the Exchange Offer, accrued and unpaid interest on Convertible Notes accepted in the Exchange Offer has not been paid and was included in the calculation of the profit or loss arising on the exchange of the Convertible Notes. 21 The Company anticipates that it will spend up to $0.2 million for capital expenditures for the months remaining in fiscal 1998. This is expected to comprise routine replacement of capital items. During 1997, following significant losses from operations, negative cash flows from operating activities, and violations of debt covenants, the Company's working capital facility was terminated (see Note G to Unaudited Condensed Consolidated Financial Statements above). The Company does not currently have a credit facility with any lenders. In response to these conditions the Company sold licenses of its technologies, restructured its operations, and consummated the exchange offer discussed in Note J to the Notes to the Unaudited Condensed Consolidated Financial Statements. Management believes that these actions and the cash flow from future operations will be sufficient to fund the Company's operations. However, any increase in costs or decrease or elimination of anticipated sources of revenues or the inability of the Company to successfully implement management's plans would raise significant doubt as to the Company's ability to fund its operations in the ordinary course. YEAR 2000 The Company has carried out a review of computer hardware and software used by the Company for information purposes. The Company believes that all critical hardware used by the Company is year 2000 compliant. Certain of the proprietary software used by the Company is not year 2000 compliant and in those cases the Company has received assurances from the suppliers that compliance upgrades will be provided in a timely manner. Non-information technology hardware and software used in factory and office management systems have been reviewed and are compliant where appropriate. Many of the Company's products include hardware/software which has either been produced by the Company or supplied by outside vendors. The Company does not consider that the year 2000 issue is relevant to the continued safe operation of these products. The Company is carrying out Sematech year 2000 readiness tests on these products to ensure compliance. To date the Omega etch product has achieved compliance, the Sigma product has passed approximately 80% of the tests and the Planar product has yet to commence testing. The Company believes that all products will have been fully tested before March 31, 1999. The Company has circulated compliance questionnaires to relevant suppliers, which address continuity of supply and compliance of past and present product. Non-compliant responses are being investigated. The Company expects to implement successfully the systems and programming changes necessary to address year 2000 issues and, based on the information currently available, does not believe that the cost of such actions will have a material effect on the Company's results of operations or financial condition. There can be no assurance, however, that there will not be a delay in, or increased costs associated with, the implementation of such changes, and the Company's inability to implement such changes could have an adverse effect on future results of operations. 22 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the period covered by this Report, there have been no material developments in the legal proceeding initiated by Dallas Semiconductor Corporation against the Company. Reference is made to the report regarding such legal proceeding in Item 1 of Part II of the Company's Form 10-Q for the quarterly period ended June 30, 1998. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) On September 15, 1998, pursuant to Amendment No. 2 to Partnership Interest and Share Purchase Agreement, dated the same date, among the Company and SBIC Partners, Norwest Equity Partners and R&M Partners/CVD, G.P. (collectively, the "Holders of CVD Partnership Shares"), the Company issued 300,000 shares of Common Stock to the Holders of CVD Partnership Shares in exchange for the termination of certain registration rights, the relinquishment of any right to liquidated damages under the Partnership Interest and Share Purchase Agreement, dated June 30, 1997, as amended, among the Company and the Holders of CVD Partnership Shares (the "CVD Purchase Agreement") and the release of the Company from any liability or claim arising from or relating to the CVD Purchase Agreement. (See Note D to Notes to Condensed Consolidated Financial Statements.) Such shares were issued pursuant to the exemption from registration under the Securities Act of 1933, as amended, afforded by Section 4(2) thereof. ITEM 5: OTHER INFORMATION On November 11, 1998, the Company was notified that the Nasdaq Listing Qualifications Panel had denied its request for continued listing on the Nasdaq National Market. After the close of business on November 11, 1998, the Company's common stock was delisted from the NASDAQ National Market due to a failure to meet quantitative continued listing requirements with respect to bid price and market value of public float. Effective November 12, 1998, the Company's common stock is traded on the OTC Bulletin Board under the trading symbol "TRKN." ITEM 6. EXHIBITS (a) The following exhibits are included herein: Number Description ------ ----------- 10.1 Amendment No. 2 to Partnership Interest and Share Purchase Agreement, dated September 15, 1998, among the Company, SBIC Partners, Norwest Equity Partners and R&M Partners/CVD, G.P. 27.1 Financial Statement Data 23 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 12, 1998 /s/ Nigel Wheeler -------------------------------- Nigel Wheeler President and Director 24 TRIKON TECHNOLOGIES, INC. EXHIBIT INDEX Exhibit No. Page No. Description ---------- ------- ----------- 10.1 Amendment No. 2 to Partnership Interest and Share Purchase Agreement, dated September 15, 1998, among the Company, SBIC Partners, Norwest Equity Partners and R&M Partners/CVD, G.P. 27.1 Financial Statement Data 25 EX-10.1 2 AMEND TO PARTNER INTEREST & SHARE PURCHASE AGRMT EXHIBIT 10.1 AMENDMENT NO. 2 TO PARTNERSHIP INTEREST AND SHARE PURCHASE AGREEMENT THIS AMENDMENT NO. 2 TO PARTNERSHIP INTEREST AND SHARE PURCHASE AGREEMENT (this "Amendment") is entered into as of September 15, 1998 by and among Trikon Technologies, Inc., a California corporation (the "Company"), SBIC Partners, L.P., a Texas limited partnership ("SBIC"), Norwest Equity Partners, a Minnesota Limited Partnership ("Norwest"), and R&M Partners/CVD, G.P., a California general partnership ("R&M") (collectively, the "Buyers"). RECITALS: A. WHEREAS, the Company and the Buyers entered into a Partnership Interest and Share Purchase Agreement, dated as of June 20, 1997, and amended such agreement pursuant to Amendment No. 1 to Partnership Interest and Share Purchase Agreement, dated as of December 12, 1997 (as amended, the "Purchase Agreement"). B. WHEREAS, the Company and the Buyers desire to terminate certain provisions of the Purchase Agreement in exchange for shares of common stock of the Company. C. WHEREAS, the Purchase Agreement provides that no amendment, modification, termination or waiver of any provision of the Purchase Agreement shall be effective unless the same shall be in writing and signed by each party thereto. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree to amend the Purchase Agreement pursuant to Section 7.7 of the Purchase Agreement as follows: ARTICLE 1 AMENDMENTS TO PURCHASE AGREEMENT Effective as of the Closing (as defined below), Articles 1 through 6 of the Purchase Agreement shall be deleted in their entirety. ARTICLE 2 RELEASE AND SALE OF THE INTERESTS 2.1 Purchase and Sale of Shares of Common Stock. In consideration of ------------------------------------------- the amendments to the Purchase Agreement in Article 1 and the releases in Article 6, upon the terms and subject to the conditions contained herein and in reliance on the representations and warranties set forth below, at the Closing, the Company agrees to issue to each Buyer the following number of shares of Common Stock, no par value ("Common Stock"), of the Company (collectively, the "Shares"):
Buyer Shares of Common Stock ----- ---------------------- SBIC 141,247 Norwest 141,247 R&M 17,505
1.2 Closing. Following satisfaction of the conditions set forth in ------- Article 5, the closing of the sale of the Shares (the "Closing") shall occur at the offices of Brobeck, Phleger & Phleger LLP in San Francisco at 10:00 a.m. Pacific Daylight Time on the fifth business day following the date of this Amendment or at such other place or on such other date as the parties hereto may designate (the "Closing Date"). At the Closing, the Company shall deliver to each Buyer a certificate or certificates registered to such Buyer, representing the number of shares of Common Stock set forth opposite such Buyer's name in Section 2.1 hereof. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents, warrants and covenants to each Buyer that, except as set forth in Schedule 3 attached hereto: 3.1 Organization. The Company is a corporation duly organized, ------------ validly existing and in good standing under the laws of the State of California. 3.2 Authority, Authorization and Enforceability. The Company has all ------------------------------------------- requisite corporate power and authority to enter into this Amendment and to consummate the transactions contemplated by this Amendment. The execution and delivery of this Amendment and the consummation of the transactions contemplated by this Amendment have been duly authorized by all necessary corporate action on the part of the Company. This Amendment has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 3.3 Shares Validly Issues. Upon issuance pursuant to the terms --------------------- hereof, the Shares will be duly authorized and validly issued, fully paid and nonassessable. 3.4 Company SEC Filings. The Company has furnished, or made ------------------- available through the EDGAR internet web site of the Securities and Exchange Commission (the "Commission") to the Buyers true and complete copies of its Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and its quarterly report[s] on Form 10-Q for the quarter[s] ended March 31, 1998 [and June 30, 1998], in each case as filed with the Commission (such documents are hereinafter collectively referred to as the "SEC Filings"). As of their 2. respective filing dates, the SEC Filings complied in all material respects with the applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and none of the SEC Filings contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF EACH BUYER Each Buyer, severally and not jointly, represents and warrants to the Company on its own behalf as follows: 4.1 Investment Intent. Such Buyer is acquiring its portion of the ----------------- Shares for investment purposes only, for its own account, and not as nominee or agent for any other person, firm or corporation and not for resale in connection with any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). 4.2 Unregistered Securities. Such Buyer understands that the Shares ----------------------- have not been registered under the Securities Act, and that, accordingly, such securities will not be transferable except pursuant to an exemption from the registration and prospectus delivery requirement of the Securities Act or upon satisfaction of such requirement. Such Buyer further acknowledges and agrees that the certificates evidencing such Shares and each certificate issues in exchange thereof shall bear substantially the following legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE BLUE SKY LAWS, AND ARE SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT, AND SUCH APPLICABLE BLUE SKY LAWS, OR AN EXEMPTION THEREFROM." 4.3 Sophistication and Knowledge. Such Buyer represents to the ---------------------------- Company that it is an "accredited investor" (as such term is defined in Rule 501 of Regulation D under the Securities Act) and that, by reason of its business and financial experience, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Shares and is able to bear the economic risk of such investment. Such Buyer acknowledges that it has been given the reasonable opportunity to ask questions and receive answers from the Company concerning the terms and conditions of the transactions contemplated hereby and the accuracy of the information contained in any document provided to such Buyer by the Company. 4.4 Authorization and Enforceability. All action on the part of such -------------------------------- Buyer necessary for the performance of such Buyer's obligations hereunder has been taken or will be taken prior to the Closing Date. This Amendment has been duly executed and delivered by such Buyer and constitutes a legal, valid and binding obligation thereof, enforceable against it in accordance with its terms, except to the extent that such enforceability may be limited by 3. applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 4.5 Transfer. Such Buyer has not transferred Registrable Shares (as -------- defined in the Purchase Agreement) to any other person (other than any subsequently holder who acquires such securities in a public sale, such that such securities are no longer deemed "restricted securities" within the meaning of Rule 144 under the Securities Act). ARTICLE 5 CONDITIONS PRECEDENT 5.1 Conditions to Each Party's Obligations. The respective -------------------------------------- obligations of each party to effect the transactions contemplated by this Amendment shall be subject to the conditions that no federal or state governmental authority or other agency or commission or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, injunction or other order (whether temporary, preliminary, or permanent) which is in effect and has the effect of prohibiting consummation of the transactions contemplated by this Amendment. 5.2 Conditions to the Obligations of the Company. The obligation of -------------------------------------------- the Company to effect the transactions contemplated by this Amendment shall be subject to the fulfillment at or prior to the Closing Date of the additional condition that the representations and warranties of the Buyers contained in this Amendment shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct in all material respects as of such date. 5.3 Conditions to the Obligations of the Buyers. The obligations of ------------------------------------------- the Buyers to effect the transactions contemplated by this Amendment shall be subject to the fulfillment at or prior to the Closing Date of the additional condition that the representations and warranties of the Company contained in this Amendment shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct in all material respects as of such date. ARTICLE 6 RELEASE 6.1 Mutual Release. Effective as of the Closing, in consideration of -------------- the issuance of the Shares hereunder and the agreements herein, each Buyer, on behalf of such Buyer and all of its owners, partners, officers, directors, employees, shareholders, affiliates, related entities, assigns and successors, and each and every agent, insurer and attorney of any of the foregoing, and all persons acting by, through, under or in concert with any of them (collectively, the "Buyer Parties"), hereby irrevocably, finally and unconditionally releases, relieves, acquits and forever discharges each of the Company and the Company's subsidiaries (direct and 4. indirect), officers, directors, employees, shareholders, affiliates, related entities, assigns and successors, and each and every agent, insurer and attorney of any of the foregoing, and all persons acting by, through, under or in concert with any of them (collectively, the "Company Parties"), and each of the Company Parties hereby irrevocably, finally and unconditionally releases, relieves, acquits and forever discharges each of the Buyer Parties from and against any and all liabilities, claims, demands, obligations, damages, expenses (including attorneys' fees and costs actually incurred) and causes of action at law or in equity, of any nature, known or unknown, which such Buyer Party or Company Party, as applicable, now owns or holds, has at any time heretofore owned or held, or may any time hereafter own or hold, by reason of any agreement, representation, warranty, statement, act, event or omission which existed or occurred, or failed to occur, prior to the date of this Amendment, arising from or relating in any way whatsoever to the Purchase Agreement. 6.2 Waiver of Unknown Claims. Effective as of the Closing, each ------------------------ Buyer and the Company expressly waives and relinquishes all rights and benefits afforded by Section 1542 of the Civil Code of the State of California ("Section 1542"), and any statute, rule or regulation of any other relevant jurisdiction similar in nature to Section 1542, and do so understanding and acknowledging the significance of such specific waiver of Section 1542 and such other statute, rule or regulation. Section 1542 of the Civil Code of the State of California states as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Thus, notwithstanding the provisions of Section 1542 and any statute, rule or regulation of any other relevant jurisdiction similar in nature to Section 1542, and for the purpose of implementing a full and complete release and discharge of all those released by this Amendment, each of the Buyers and the Company expressly acknowledges that this Amendment is intended to include in its effect, without limitation, all claims which such party does not know or suspect to exist in its favor at the time of execution hereof, and that this Amendment contemplates the extinguishment of any such claims. Each of the parties hereto acknowledge that they have expressly bargained for the foregoing waiver of the provisions of Section 1542 and any statute, rule or regulation of any other relevant jurisdiction similar in nature to Section 1542. 6.3 Waiver. Effective as of the Closing, pursuant to Section 7.7 of ------ the Agreement, Buyers hereby expressly waive any breach of Article 6 of the Purchase Agreement occurring prior to the effectiveness hereof. 5. ARTICLE 7 MISCELLANEOUS 7.1 Reference to and Effect on the Purchase Agreement. ------------------------------------------------- (a) Upon the effectiveness of Article 1 hereof, on and after the date hereof each reference in the Purchase Agreement to "this Agreement," "the Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Purchase Agreement as amended by Article 1 hereof. (b) Except as specifically amended above, the Purchase Agreement shall remain in full force and effect and is hereby ratified and confirmed. 7.2 Expenses. Each party shall pay all costs and expenses that it -------- incurs with respect to the negotiation, execution, delivery and performance of this Amendment and any related agreements. 7.3 Survival. The representations and warranties set forth herein -------- shall survive the Closing for one year. 7.4 Parties in Interest. All of the terms and provisions of this ------------------- Amendment shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. 7.5 Governing Law. This Amendment shall be governed by and construed ------------- in accordance with the laws of the State of California. 7.6 Counterparts. This Amendment may be executed in one or more ------------ counterparts with the same effect as if all parties hereto had signed the same document. All counterparts so executed shall be deemed to be an original, shall be construed together and shall constitute one agreement. 6. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. COMPANY: TRIKON TECHNOLOGIES, INC. Ringland Way Newport, Gwent NP6 2TA United Kingdom Fax: 011 441 633 414 040 By: ___________________________________________ Name: Title: BUYERS: SBIC PARTNERS, L.P. 201 Main Street, Suite 2302 Fort Worth, TX 76102 Fax: (817) 338-2047 By: Forrest Binkley & Brown L.P., General partner By: Forrest Binkley & Brown Venture Co., General Partner By: __________________________________ Jeffrey J. Brown Office of the President [Signatures continued on following page] 7. [Signatures continued from previous page] NORWEST EQUITY PARTNERS, V 245 Lytton Avenue, Suite 250 Palo Alto, CA 94301-1426 Fax: (650) 321-8010 By: Itasca Partners V, L.L.P. General Partner By: _______________________________________ Kevin G. Hall Partner R&M PARTNERS/CVD, G.P. 300 South Grand Avenue, Suite 2900 Los Angeles, CA 90071 Fax: (213) 229-8550 By: ____________________________________________ Name: Title: 8. EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE PERIOD ENDING SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 8,338 0 10,202 (2,696) 19,199 37,056 26,431 (6,057) 61,362 22,104 4,147 0 28,558 199,019 (198,248) 61,362 4,477 4,477 3,230 10,663 0 0 569 (5,617) 0 0 0 0 0 (5,617) (0.08) (0.08)
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