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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 01-26824
TEGAL CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Delaware 68-0370244
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2201 S. McDowell Blvd., P.O. Box 6020, Petaluma, CA 94955-6020
--------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (707) 763-5600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on the Nasdaq
National Market on June 14, 1996, was $27,750,451. Solely for the purposes of
this calculation, each officer and director of the registrant is deemed to be
an affiliate.
The number of shares of Common Stock outstanding as of June 14, 1996, was
10,076,791.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Document Form 10-K Part
- -------- --------------
<S> <C>
None
</TABLE>
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The first paragraph of Item 10 is hereby amended and restated in its entirety
as follows:
The following information regarding directors is provided as of June 30, and
supersedes, in its entirety, the information regarding the Company's directors
previously provided by the Company in Part III of its Form 10-K for the fiscal
year ended March 31, 1996.
The Board of Directors of the Company is currently comprised of five
members. Directors are elected at each Annual Meeting and hold office until
their successors are duly elected and qualified at the next Annual Meeting.
Pursuant to the Company's Bylaws, and a resolution adopted by the Board of
Directors, the authorized number of members of the Board of Directors has been
set at five. The Company's Bylaws require that there be a minimum of two and
maximum of eight members of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE
--------------------------------------------------------- ---
<C> <C>
Robert V. Hery........................................... 54
Jeffrey M. Krauss........................................ 39
Thomas R. Mika........................................... 45
Fred Nazem............................................... 55
Edward A. Dohring........................................ 63
</TABLE>
Robert V. Hery has been a Director of the Company since 1990 and assumed
the additional roles of President and Chief Executive Officer of the Company in
January 1991 and the Chairman of the Board in March 1995. From 1987 to 1990, Mr.
Hery was President and Chief Executive Officer of AMOT Controls Corporation, an
international manufacturer of machinery control components used in explosive and
hazardous areas. From 1985 to 1987, Mr. Hery served as Vice President and
General Manager of KLA Instruments Corporation ("KLA"), a manufacturer of
semiconductor capital equipment, where he started the Wafer Inspection Systems
Division. From 1984 to 1985, Mr. Hery was a consultant to high-technology
start-ups as Acting Chief Executive Officer and marketing troubleshooter. From
1983 to 1984, he served as Vice President of Marketing and New Business
Development, and prior to that, from 1979 to 1983, he served as Vice President
of Operations, responsible for product development, manufacturing, quality and
cost control functions of MAI Basic Four, a manufacturer of minicomputer
equipment. From 1975 to 1979, Mr. Hery was Vice President of Research and
Product Development for Dataproducts Corporation, a manufacturer of computer
peripherals equipment. From 1965 to 1975, Mr. Hery held various management
positions in product development with NCR Corporation and the communications
division of Motorola, Inc.
Jeffrey M. Krauss has served as a director of the Company since June 1992.
Mr. Krauss is also a General Partner of the general partner of Nazem and Company
III, L.P. and Nazem and Company IV, L.P., a venture capital firm, having joined
that firm in 1990. Prior to joining Nazem and Company, Mr. Krauss was a
corporate associate with the law firm of Simpson Thacher & Bartlett, where he
specialized in leveraged buyout transactions. Mr. Krauss is a director of The
Park Lane Group. He is also a general partner of The Transatlantic Fund, a joint
venture between Nazem & Company and Banque Nationale de Paris of France.
Thomas R. Mika has served as a director of the Company since June 1992.
Since January 1982, he has been a Vice President of International Management and
Technology Corporation ("IMTEC"), a consulting and investment banking firm that
specializes in facilitating strategic alliances between U.S. and Japanese
technology-based companies.
Fred Nazem has served as a director of the Company since March 1995. Since
1981, he has been President of Nazem Inc. and Managing General Partner of the
general partner of, respectively, Nazem & Company, L.P., Nazem & Company II,
L.P., Nazem & Company III, L.P. and Nazem & Company IV, L.P., which are all
affiliated venture capital funds. He is also a general partner of The
Transatlantic Fund, a joint venture between Nazem & Company and Banque Nationale
de Paris of France.
Edward A. Dohring has been the President of SVG Lithography Systems, Inc.,
a subsidiary of Silicon Valley Group, Inc. since October 1994. From July 1992 to
October 1994 he was President of the Track Division of Silicon Valley Group,
Inc. Prior to joining Silicon Valley Group, Inc., Mr. Dohring was the President
of Advantage Production Technology, Inc. from 1991 to 1992, when it was sold to
Genus. Mr. Dohring was a member of the Semiconductor Equipment and Materials
International Board of Directors from 1977 to 1989.
All directors hold office until the next annual meeting of the stockholders
of the Company or until their successors have been duly elected or qualified.
There are no family relationships between any of the directors or executive
officers of the Company.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
In fiscal year 1996, the Board of Directors held eight meetings (including
four written consents in lieu of meetings). Each director attended at least 75%
of the total number of Board meetings and meetings of Board committees on which
the director served during the time he served on the Board or committees.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, consisting of Messrs. Robert A.
Anderson, Krauss and Mika, reviews the adequacy of internal controls and the
results and scope of the audit and other services provided by the Company's
independent auditors. The Audit Committee meets periodically with management and
the independent auditors. The Audit Committee held one meeting in fiscal 1996.
The Compensation Committee is comprised of Messrs. Anderson, Mika and
Nazem. The Compensation Committee held eight meetings in fiscal 1996, which were
held as part of the meetings of the Board of Directors of the Company. The
functions of the Compensation Committee include establishing salaries,
incentives and other forms of compensation for officers and other employees of
the Company and administering the incentive compensation and benefit plans of
the Company.
DIRECTOR COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board of Directors or any committee thereof, but directors may be
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. In addition, the Company implemented a Directors Stock
Option Plan pursuant to which non-employee directors receive stock options for
serving on the Company's Board of Directors.
The third paragraph of Item 10 is hereby amended and restated in its entirety
as follows:
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act, requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership (Forms 3, 4 and 5) with the Securities and Exchange Commission.
Officers, directors and greater-than-ten-percent holders are required to furnish
the Company with copies of all such forms which they file.
To the Company's knowledge, based solely on the Company's review of such
reports or written representations from certain reporting persons, the Company
believes that during fiscal 1996 all filing requirements applicable to its
officers, directors, greater-than-ten-percent beneficial owners and other
persons subject to Section 16 of the Exchange Act were complied with.
Item 11 is hereby amended and restated in its entirety as follows:
ITEM 11. EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended March 31, 1994, 1995
and 1996, the cash compensation paid by the Company and its subsidiaries as well
as certain other compensation paid or accrued for those years for services in
all capacities to the person serving as the Chief Executive Officer of the
Company during fiscal 1996 and the other four most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 in fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS ($)(1)
- ------------------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert V. Hery....................... 1996 199,992 60,000 75,000 924
Chairman of the Board, President 1995 209,222 -- -- 86
and Chief Executive Officer 1994 159,994 60,000 133,375 246
David Curtis......................... 1996 144,744 -- 20,000 579
Vice President, Finance and 1995 130,237 -- -- 267
Administration, Chief Financial 1994 119,995 -- 80,225 240
Officer,
Secretary and Treasurer
Charles Desmond...................... 1996 159,994 57,044 30,000 6,614
Vice President, Worldwide Sales 1995 159,994 45,081 -- 6,592
1994 159,994 35,268 46,072 6,621
Barry Gottlieb(2).................... 1996 119,995 27,997 30,000 5,665
Vice President, Metal Sales 1995 114,614 18,667 -- 20,673
1994 100,006 39,862 32,372 15,000
Haresh C. Patnaik.................... 1996 154,006 -- 20,000 616
Vice President, Engineering........ 1995 134,326 -- -- 589
1994 134,078 -- -- 536
</TABLE>
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(1) For Messrs. Hery, Curtis and Patnaik, amounts represent contributions made
by the Company under its 401(k) plan. Other compensation for Mr. Desmond
consists of $6,180 in car allowance paid by the Company for each of 1996,
1995 and 1994 and $434, $412 and $441 401(k) plan contributions made by the
Company for 1996, 1995 and 1994, respectively. Other compensation for Mr.
Gottlieb consists of $5,665 and $4,635 in car allowance paid by the Company
in 1996 and 1995, respectively, and $16,038 and $15,000 in overseas housing
allowance paid by the Company in 1995 and 1994, respectively.
(2) Effective June 12, 1996, Mr. Gottlieb resigned as Vice President, Metal
Sales of the Company.
OPTION GRANTS IN 1996 FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during fiscal 1996 to each of the individuals identified in
the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED IN EXERCISE OPTION TERM(2)
OPTIONS FISCAL PRICE ---------------------
NAME GRANTED(#)(1) 1996 ($/SHARE) EXPIRATION DATE 5%($) 10%($)
- ------------------------ ------------- ---------- --------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert V. Hery.......... 75,000 12.69% 12.00 10/18/05 566,005 1,434,368
David Curtis............ 20,000 3.39% 12.00 10/18/05 150,935 382,498
Charles Desmond......... 30,000 5.08% 12.00 10/18/05 226,402 573,747
Barry Gottlieb.......... 30,000 5.08% 12.00 10/18/05 226,402 573,747
Haresh C. Patnaik....... 20,000 3.39% 12.00 10/18/05 150,935 382,498
</TABLE>
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(1) Stock acquired pursuant to the exercise of options may be subject to right
of repurchase by the Company upon termination of employment or consulting at
the original exercise price for up to four years from the date the options
were granted, with the Company's right of repurchase partially expiring over
that period of time.
(2) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable requirements. Actual
values realized on stock options are dependent on actual future performance
of the Company's stock, among other factors. Accordingly, the amounts shown
may not necessarily be realized.
AGGREGATED OPTION EXERCISES DURING 1996
FISCAL YEAR AND 1996 FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning exercise of stock
options during fiscal 1996 by each of the individuals identified in the Summary
Compensation Table and the value of options at the end of fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON REALIZED OPTIONS AT IN-THE-MONEY OPTIONS
NAME EXERCISE(#) ($) 1996 YEAR-END(#) AT 1996 YEAR-END($)(A)
- ----------------------------- ----------- -------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Robert V. Hery............... -- -- 357,284 2,081,488
David Curtis................. 109,759 838,764 20,000 --
Charles Desmond.............. 77,844 610,483 50,156 145,627
Barry Gottlieb............... 48,684 379,245 674 4,870
Haresh C. Patnaik............ 35,976 307,499 93,784 533,927
</TABLE>
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(a) Potential unrealized value is (i) the fair market value at fiscal 1996
year-end ($7.75 per share) less the exercise price of "in-the-money,"
unexercised options times (ii) the number of shares represented by such
options.
EMPLOYMENT AGREEMENT
Pursuant to an offer letter between the Company and Mr. DeOrnellas, if the
Company terminates Mr. DeOrnellas' employment without cause, the Company will be
obligated to continue to pay Mr. DeOrnellas' base salary and certain benefits
for a period of six months.
Pursuant to an offer letter between the Company and Mark Siegel, if the
Company terminates Mr. Siegel's employment without cause during the first 24
months from his start date June 3, 1996, the Company will be obligated to
continue to pay Mr. Siegel's base salary and certain benefits for a period of
twelve months or until Mr. Siegel obtains employment elsewhere, whichever occurs
earlier.
Pursuant to an offer letter between the Company and James D. McKibben, if
the Company terminates Mr. McKibben's employment without cause during the first
18 months from his start date June 26, 1996, the Company will be obligated to
continue to pay Mr. McKibben's base salary and certain benefits for a period of
six months.
On June 11, 1996, the Board of Directors approved a severance arrangement
in the event of a change of control of the Company. If an executive officer is
terminated as a result of a change of control, the Company shall continue to pay
such executive officer's base salary and certain benefits for a period of twelve
months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of three directors: Messrs.
Anderson, Mika and Nazem. For a description of the background of Messrs. Mika
and Nazem, see Item 10 above.
Robert R. Anderson has served as a director of the Company since September
1994. Since January 1994, Mr. Anderson has been the Chairman of the Board of
Silicon Valley Research ("SVR"), a computer aided engineering software company.
In April 1994, Mr. Anderson was named Chief Executive Officer of SVR. Mr.
Anderson co-founded KLA in 1975. He served as Vice-Chairman of the Board of KLA
from November 1991 to March 1994 and served as Chairman of the Board of KLA from
May 1985 to November 1991. Mr. Anderson also served as Chief Operating Officer
and Chief Financial Officer of KLA.
Mr. Nazem is a General Partner of Nazem and Associates III, L.P., a venture
capital firm, which is the general partner of Nazem and Company III, L.P.,
("Nazem"). In December 1989, the Company sold 2,057,141 shares of Series A
Preferred Stock to Nazem at a price of $2.43 per share and in November 1991, the
Company sold 1,234,258 shares of Series A Preferred Stock to Nazem at the same
price per share. All shares of Series A Preferred Stock sold to Nazem converted
into Common Stock on a 1-for-1 basis effective upon the closing of the Company's
initial public offering (the "IPO").
Mr. Mika is a Vice President of IMTEC. Pursuant to a consulting agreement
between the Company and IMTEC, the Company paid IMTEC $30,000 upon the closing
of the IPO for services rendered relating to the Company's financing activities.
As payment for certain services provided by IMTEC pursuant to a prior consulting
arrangement, which has been terminated, the Company issued IMTEC an aggregate of
83,971 shares of Common Stock in fiscal 1993, fiscal 1994 and fiscal 1995.
Item 12 is hereby amended and restated in its entirety as follows:
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 30, 1996 with respect
to shares of the Company's Common Stock which are held by persons known to the
Company to be beneficial owners of more than 5% of such stock based upon
information received from such persons. For purposes of this Proxy Statement,
beneficial ownership of securities is defined in accordance with the rules of
the Securities and Exchange Commission and means generally the power to vote or
dispose of securities, regardless of any economic interest therein.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
-----------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Nazem and Company, L.P. III................................... 3,291,399 32.8%
600 Madison Avenue
New York, New York 10022
Benefit Capital Management Corporation(1)..................... 1,745,813 17.3%
39 Old Ridgebury Road
Danbury, Connecticut 06817
The Prudential Insurance Company of America................... 633,000 6.3%
751 Broad Street(2)
Newark, New Jersey 07102
</TABLE>
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(1) Benefit Capital Management Corporation, as investment manager for an account
held by The Prudential Insurance Company of America ("Prudential") Separate
Account No. VCA-GA-5298 on behalf of the Union Carbide Retirement Plan (the
"Plan"), has voting power as to the shares of Common Stock held by it.
Benefit Capital is a wholly-owned subsidiary of Union Carbide Corporation, a
New York corporation ("UCC"). The Plan was established by UCC to provide
retirement benefits for employees of UCC and its participating subsidiaries.
In connection with the purchase of certain annuities by the Plan, Prudential
has established a separate insurance account with respect to the Plan.
Prudential disclaims beneficial ownership of the shares of Common Stock held
by Benefit Capital on behalf of the Plan. Excludes 1,028,891 shares held of
record by Nazem which are attributable to Benefit Capital's limited
partnership interest in Nazem; Benefit Capital disclaims beneficial interest
of such shares as it has no voting or dispositive power over any of such
shares.
(2) Information obtained from Schedule 13G filed on February 13, 1996 by The
Prudential Insurance Company of America ("Prudential"). Of the 633,000
shares of Common Stock beneficially owned by Prudential, it retains sole
voting power and sole dispositive power as to 608,500 shares of Common Stock
and shared voting power and shared dispositive power as to 24,500 shares of
Common Stock.
OWNERSHIP OF STOCK BY MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of Common Stock by the Company's directors, the individuals
named in the Summary Compensation Table, and all directors and executive
officers as a group as of June 30, 1996. An asterisk denotes beneficial
ownership of less than 1%.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER POSITION OWNED(1) CLASS(1)
- ---------------------------------- -------------------------------------------- ------------ --------
<S> <C> <C> <C>
Fred Nazem(2)..................... Director 3,301,399 32.8%
Jeffrey M. Krauss(3).............. Director 3,291,399 32.7
Thomas R. Mika(4)................. Director 85,574 *
Robert R. Anderson(4)............. Director 40,000 *
Robert V. Hery(5)................. Chairman of the Board, President and 507,284 4.9
Chief Executive Officer
David Curtis(6)................... Vice President, Finance and Administration, 118,783 1.2
Chief Financial Officer, Secretary
and Treasurer
Charles Desmond(7)................ Vice President, Worldwide Sales 118,200 1.2
Barry Gottlieb(8)................. Vice President, Metal Sales 43,478 *
Haresh C. Patnaik(9).............. Vice President, Engineering 118,784 1.2
Directors and Executive Officers
as a group (16 persons)(10)..... 4,735,824 42.7%
</TABLE>
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(1) Applicable percentage of ownership is based on 10,076,879 shares of Common
Stock outstanding as of June 30, 1996. The number of shares of Common Stock
beneficially owned and calculation of percent ownership, in each case,
takes into account those shares underlying stock options that are currently
exercisable, but which may or may not be subject to repurchase rights of
the Company.
(2) Includes 3,291,399 shares held by Nazem and Company III, L.P. ("Nazem").
Mr. Nazem is a general partner of Nazem and Associates III, L.P., the
general partner of Nazem. Mr. Nazem disclaims beneficial ownership of
shares held by Nazem, except to the extent of his ownership interest in
Nazem. Includes options to purchase 10,000 shares of Common Stock which are
exercisable within 60 days and excludes options to purchase 20,000 shares
which are not so exercisable.
(3) Represents shares held by Nazem. Mr. Krauss is a general partner of Nazem
and Associates III, L.P., the general partner of Nazem. Mr. Krauss
disclaims beneficial ownership of shares held by Nazem, except to the
extent of his ownership interest in Nazem.
(4) Includes options to purchase 10,000 shares of Common Stock which are
exercisable within 60 days and excludes options to purchase 20,000 shares
which are not so exercisable.
(5) Includes 357,284 shares issuable pursuant to stock options which are
currently exercisable, 113,901 of which were subject to repurchase rights
as of June 30, 1996.
(6) Includes 20,000 shares issuable pursuant to stock options which are
currently exercisable, all of of which were subject to repurchase rights as
of June 30, 1996 and 23,622 outstanding shares of Common Stock which were
subject to repurchase rights as of June 30, 1996.
(7) Includes 50,156 shares issuable pursuant to stock options which are
currently exercisable, 43,438 of which were subject to repurchase rights as
of June 30, 1996.
(8) Includes 674 shares issuable pursuant to stock options which are currently
exercisable, none of which is subject to repurchase rights as of June 30,
1996.
(9) Includes 93,784 shares issuable pursuant to stock options which are
currently exercisable, 40,654 of which were subject to repurchase rights as
of June 30, 1996.
(10) Includes (i) 1,014,220 shares issuable pursuant to stock options which are
currently exercisable, 563,892 of which were subject to repurchase rights
as of June 30, 1996, and (ii) 23,622 outstanding shares of Common Stock,
all of which were subject to repurchase rights as of June 30, 1996.
Excludes options to purchase 60,000 shares of Common Stock which are not
exercisable within 60 days.
Item 13 is hereby amended and restated in its entirety as follows:
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was formed in December 1989 to acquire substantially all of the
assets of the former Tegal Corporation (the "Predecessor Company"), then a
wholly-owned subsidiary of Motorola, in a private investor acquisition (the
"Acquisition") primarily funded by Nazem and Company III, L.P. ("Nazem"). In
December 1989, in connection with the Acquisition, the Company sold 2,057,141
shares of Series A Preferred Stock to Nazem at a price of $2.43 per share and in
November 1991, the Company sold 1,234,258 shares of Series A Preferred Stock to
Nazem at the same price per share. Nazem converted all such shares of Series A
Preferred Stock into Common Stock on a 1-for-1 basis upon the closing of the IPO
in October 1995.
In December 1989, in connection with the Acquisition, Benefit Capital
Management Corporation ("Benefit Capital"), as an investment manager for a
separate account, provided the Company a term loan in the aggregate principal
amount of $8.0 million, and in partial consideration for such loan, the Company
granted Benefit Capital, through the investment manager, a warrant to purchase
228,571 shares of Series A Preferred Stock at an exercise price of $2.43 per
share (the "Series A Warrant"). In November 1991, the Company issued Benefit
Capital, on behalf of such account, 822,838 shares of Series A Preferred Stock
for $2.0 million, or $2.43 per share. In March 1993, the Company and Benefit
Capital, on behalf of such account, converted the $8.0 million term loan and
approximately $1.2 million of accrued and unpaid interest thereon into 876,190
shares of Series C Preferred Stock and 876,190 shares of Series D Preferred
Stock. Benefit Capital converted all shares of Series A, Series C and Series D
Preferred Stock held by it on behalf of such account into shares of Common Stock
on a 1-for-1 basis upon the closing of the IPO in October 1995. In December
1994, the Company and Benefit Capital agreed that the Company would issue to
Benefit Capital, on behalf of such account, 154,285 shares of Common Stock in
exchange for the cancellation of the Series A Warrant.
In connection with his employment, the Company provided Stephen P.
DeOrnellas with certain special compensation relating to Mr. DeOrnellas'
relocation. In fiscal 1992, the Company paid Mr. DeOrnellas $116,518 related to
losses suffered by Mr. DeOrnellas in selling his home, $2,950 for tax return
preparation fees, and $71,406 to cover federal income taxes due on these payment
amounts. In fiscal 1994, the Company forgave a $97,502 bridge loan to Mr.
DeOrnellas made in connection with his relocation and paid Mr. DeOrnellas
$78,816 to cover the federal income taxes due on this payment. No further
reimbursable relocation expenses are owed to Mr. DeOrnellas by the Company.
Mr. Thomas R. Mika, a director of the Company, was retained by the Company
as a consultant to assist the Company in his capacity as a Vice President of
International Management Technology Corporation (IMTEC), a consulting and
investment banking firm that specializes in facilitating strategic alliances
between U.S. and Japanese technology-based companies. Pursuant to a consulting
agreement between the Company and IMTEC, the Company paid IMTEC $30,000 upon the
closing of the IPO for services rendered relating to the Company's financing
activities. As payment for certain services provided by IMTEC pursuant to a
prior consulting arrangement, which has been terminated, the Company issued
IMTEC an aggregate of 83,971 shares of Common Stock in fiscal 1993, fiscal 1994
and fiscal 1995.
The Company believes that the foregoing transactions were in its best
interests. It is the Company's policy that all transactions by the Company with
officers, directors, 5% stockholders and their affiliates will in the future be
entered into only if such transactions are approved by a majority of the
disinterested independent directors, are on terms no less favorable to the
Company than could be obtained from unaffiliated parties, and are reasonably
expected to benefit the Company.
For further information regarding certain additional transactions with
directors, see "Director Compensation" and "Compensation Committee Interlocks
and Insider in Item 10."
2
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: July 29, 1996 TEGAL CORPORATION
By: /s/ David Curtis
--------------------
David Curtis*
Chief Financial Officer
*In his capacity as Chief Financial Officer and as attorney in fact on behalf
of Messrs. Robert V. Hery, William F. O'Shea, Fred Nazem, Jeffrey Krauss,
Thomas Mika and Robert Anderson.
3
