Tegal Completes Acquisition of Sputtered Films; Company Extends Market Leadership in to Two, Adjacent Markets.

Business Editors/High-Tech Writers

PETALUMA, Calif.--(BUSINESS WIRE)--Sept. 3, 2002

Tegal Corp. (Nasdaq:TGAL), a leading designer and manufacturer of plasma etch systems used in the production of integrated circuits, smart-card, wireless, opto-telecom and other advanced technology applications, today announced that the acquisition of Sputtered Films, Inc., was completed on Aug. 30, 2002. The transaction was approved earlier in August by shareholders of both companies.

Under terms of the acquisition, Tegal has issued 1.5 million shares of common stock, plus a performance-based future cash earn out, in exchange for Sputtered Films, which recorded revenues of approximately $5 million over the past 12 months. Sputtered Films, founded more than 35 years ago, is a privately held, leading manufacturer of high-performance sputtering equipment for thin film deposition. The agreement to acquire Sputtered Films was announced on Aug. 13.

"This transaction is a critical strategic achievement for Tegal, its employees and its stockholders," said Michael Parodi, Tegal's president and chief executive officer. "The acquisition of Sputtered Films creates a company that is unsurpassed in the breadth and depth of offerings in both etch and deposition solutions for the new materials that are essential to advanced semiconductor fabrication.

"Linking these two leaders' capabilities extends our incumbency to two complementary steps in a highly complex process," Parodi added. "It also enables Tegal to extend our award-winning customer service capability to a new product line and to expand our portfolio to address additional opportunities within our industry."

The acquisition includes Sputtered Films' patented Endeavor(TM) product lines, which are used to deposit some of the industry's most critical thin films. Parodi noted that Sputtered's market and technology leadership includes the design and manufacture of sputtering equipment for semiconductor, photomask, advanced packaging (including flip chip) and compound semiconductor applications.

Carole Anne Clarke Demachkie, a senior executive at Sputtered, will be named a Tegal vice president and general manager of the subsidiary, reporting to Parodi. Demachkie is the daughter of the company's late founder, Peter Clarke, the inventor of the world's first magnetron sputtering device. Demachkie and approximately 18 additional Sputtered employees will continue to be based at the company's former Santa Barbara, Calif., headquarters.

The acquisition brings Tegal's worldwide employee count to approximately 140, its level prior to the acquisition. Independently, Tegal recently reduced its operating expenses by an amount roughly equal to that of the Sputtered Films operation.

Tegal believes that the acquisition will be accretive within its current fiscal year (ending March 31, 2003) and that the combined company will reach break-even during its fiscal fourth quarter (the first quarter of calendar 2003), provided that capital spending in the sector recovers. Tegal expects to provide further guidance on its financial outlook at that time.

About Tegal

Tegal Corp., headquartered in Petaluma, Calif., is a leading designer and manufacturer of plasma etch and deposition systems used in the production of smart cards, opto-telecom devices, integrated circuits (ICs), and other related microelectronics devices. Both etching and deposition are key process steps and must be repeated multiple times in the production of these devices. Tegal markets and services its systems in all major IC-producing regions of the world. More information is available on the Internet at www.tegal.com.

Safe Harbor Statement

The statements in this news release, including the expected effects of the transaction on Tegal's operating results, and the statements made by Michael Parodi and Carole Anne Clarke Demachkie, are forward-looking statements that involve a number of risks and uncertainties. As discussed in Tegal's annual report on Form 10-K for the fiscal year ended March 31, 2002, assumptions relating to the foregoing involve judgments with respect to, among other things, the ability of Tegal to successfully complete the acquisition of Sputtered Films, Inc., to integrate Sputtered Films with Tegal's operations; the contributions of Sputtered Films to Tegal's business strategy; future economic, competitive and market conditions, including those in Europe and Asia and those related to Tegal's and Sputtered Films' strategic markets; whether the products offered by Tegal and Sputtered Films will continue to achieve customer acceptance, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Tegal.

Although Tegal believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by Tegal or any other person that Tegal's objectives or plans will be realized. Tegal undertakes no obligation to revise the forward-looking statements contained herein to reflect such events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.