Hampshire technology may reemerge?

Electronic News, June 7, 1993 by Peter Dunn

Feds In Learning Mode; Creditors Claim Rights

ROCHESTER, N.Y. -- X-ray lithography technology developed at defunct wafer stepper supplier Hampshire Instruments may escape a legal limbo in the next few weeks, if former Hampshire president Moshe Lubin is successful in striking a deal with creditors including a New York State agency.

Even as those talks continue, federal officials are "asking hard questions" about the demise of Hampshire and optical stepper producer GCA in an effort to learn from the experience and develop new guidelines for future projects. "It's a primary topic of concern at all levels," said Marty Peckerar, Navy technical manager of the Defense Advanced Lithography Program. "There's no textbook on how to save industrial infrastructure, and mistakes will be made. We'll learn from those mistakes, and start to (determine) the limits of what's possible in the government context."

When it shut down in April, Hampshire owed a reported $68 million to venture capitalists, banks, government agencies and suppliers. Most of that debt was unsecured and has been or will be written off. But some debt, including loan guarantees provided by the New York State Job Development Authority, was secured by Hampshire's assets; the JDA has a "first lien on technology," according to a spokeswoman.

Dr. Lubin, who has already formed a new company in Rochester called Advanced X-ray Systems (AXS), said he had been involved in negotiations with several parties and added, "We should be in a position to say something in the next few days. It's been a very interesting few weeks; it's coming to a head very quickly." He declined to say who he is negotiating with, and would not comment on the amount of debt carried by Hampshire at the time of its failure.

Although AXS may end up with rights to Hampshire-developed processes and techniques, it will not have rights to the laser-pulsed X-ray source that enabled its steppers to operate without use of a complex synchrotron. "The basic point source technology is a Naval Research Laboratory license to Hampshire," said Dr. Peckerar. "Now that Hampshire is gone, the exclusive license goes back to the Navy. I'm not a lawyer, but the license was issued on the grounds that Hampshre would develop the technology, and if they're no longer in business, they can't develop it."

Dr. Peckerar said the NRL would seek to issue a new license for the point source technology, and added his agency would like to see Hampshire's own technology made available to the X-ray community. "They did some innovative and clever things with debris management and laser design; it would be nice of those things could be incorporated into newer generations of tooling."

On a broader scale, Dr. Peckerar said "the right questions are being asked" within the government's technology development arms. He pointed out that the Hampshire and GCA cases are quite distinct. "With Hampshire, look, these are hard times and some companies, especially those developing new technology, are going to go under. GCA was kind of different. It had a commercial product and was a going business at some point. GCA did meet its (Sematech) milestones and produced a competitive tool, but a lot of orders are based on perception and not solely on technical performance. Maybe that went unnoticed in the early phases of Sematech funding; maybe something more was needed. The questions come down to, what was that something? I believe there will be some good answers that will come out of the process."

Among those damaged by Hampshire's shutdown was Dover Instrument Corp., a Westboro, Mass., manufacturing firm that built stages for Hampshire's steppers. "You better believe it," said treasurer Eric McGourty. "There was about $450,000 that they owed us. We've already written it off. We looked into driving them into bankruptcy; we had all the other people we needed, but it wasn't worth the legal fees. We might have gotten a few cents on the dollar. It's too bad. Hampshire had some really good people who gave their blood to the company. It was just misdirected. And this makes suppliers like us more callous, and causes us to be less lenient with the next startup that comes along."

Sources said Harvard Management, one of Hampshire's major investors, has written off about $20 million and that McDonnell Douglas (which developed a solid state laser) and Eastman Kodak (which provided laser manufacturing expertise) were owed several million dollars each. The New York State Science and Technology Foundation will write off a $1 million equity investment, said program manager John Cinnamea.

Some former Hampshire employees also claim they are owed money, such as vacation pay, plus complained the company made no provision for maintaining health insurance and other benefits when it shut down. "I'm still waiting for my severance pay," added another former worker.

Additional details have emerged about Hampshire's last-gasp effort to purchase GCA and establish a combined domestic lithography company. Sources say that AT&T, a customer of both stepper firms, was to have financed the buyout with a combination of cash and loan guarantees, with the State of New York also providing loan guarantees. A combined company would have faced "an awesome amount of work, but we were prepared," said one former executive. "The short term would have been taken care of, and people might have started ordering from GCA if they saw backing from AT&T and ARPA."