<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1998
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
TEGAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 68-0370244
(State or other jurisdiction of 2201 S. McDowell Boulevard (I.R.S. Employer
incorporation or organization) P.O. Box 6020 Identification Number)
Petaluma, CA 94955-6020
(Address of principal executive offices) (Zip)
</TABLE>
--------------------
TEGAL CORPORATION
1998 EQUITY PARTICIPATION PLAN
(Full title of the plan)
--------------------
MICHAEL L. PARODI
President and Chief Executive Officer
TEGAL CORPORATION
2201 S. McDowell Boulevard
P.O. Box 6020
Petaluma, CA 94955-6020
(707) 763-5600
(Name, address and telephone number, including area code, of agent for service)
Copies to:
Christopher L. Kaufman, Esq.
Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
(650) 328-4600
--------------------
Calculation of Registration Fee
<TABLE>
=====================================================================================================================
<CAPTION>
Proposed
Proposed Maximum
Title of Amount Maximum Aggregate Amount of
Securities to to be Offering Price Offering Registration
be Registered Registered Per Share (1) Price (1) Fee(1)
=====================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, 600,000 $2.16 $1,296,000 $382.32
$0.01 par value
=====================================================================================================================
</TABLE>
(1) Estimated for the purpose of calculating the registration fee pursuant
to Rule 457(c) for the 600,000 shares registered hereunder (the average
($2.16) of the high ($2.38) and low ($1.94) prices for the Company's
Common Stock quoted on the Nasdaq National Market on November 3,
1998).
<PAGE> 2
PART I.
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
This Registration Statement on Form S-8 of Tegal Corporation, a
Delaware corporation (the "Registrant" or the "Company"), covers 600,000 shares
of common stock, par value $0.01 per share, of the Registrant (the "Common
Stock") reserved for issuance under the Tegal Corporation 1998 Equity
Participation Plan, adopted effective as of July 16, 1998.
The information called for in Part I of Form S-8 is not being filed
with or included in this Form S-8 (by incorporation by reference or otherwise)
in accordance with the rules and regulations of the Securities and Exchange
Commission (the "Commission").
PART II.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Commission are incorporated
herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended March
31, 1998;
(b) Quarterly Reports on Form 10-Q for the periods ended June
30, 1998 and September 30, 1998;
(c) Current Report on Form 8-K dated May 11, 1998; and
(d) The description of the Company's Common Stock contained in
the Form 8-A Registration Statement used to register the Common Stock
and filed with the Commission (File No. 01-26824), which was declared
effective by the Commission on October 18, 1995, including any
subsequently filed amendments and reports updating such description.
In addition to the foregoing documents, all documents subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of the filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
2
<PAGE> 3
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the Delaware General Corporation Law ("Delaware Law"), a
director of the Company shall not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director. Under current
Delaware Law, liability of a director may not be limited (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) in respect of certain unlawful dividend payments
or stock redemptions or repurchases, and (iv) for any transaction from which the
director derives an improper personal benefit. The effect of the provision of
the Company's Certificate of Incorporation is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek nonmonetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
In addition, the Company's Certificate of Incorporation provides that the
Company shall indemnify its directors, officers, employees and agents against
losses incurred by any such person by reason of the fact that such person was
acting in such capacity.
In addition, pursuant to an agreement with holders of securities
providing for registration rights, such holders are entitled to be indemnified
by the Company for certain liabilities under federal securities laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
4.1 1998 Equity Participation Plan.
5 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins (included in Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included on page 5 of this Registration
Statement).
- ---------------
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
3
<PAGE> 4
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;"
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included
in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Section 13 or 15(d) of the
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Petaluma, State of California on this 30th day of
October 1998.
TEGAL CORPORATION
By: /s/ MICHAEL L. PARODI
---------------------------
Michael L. Parodi
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Michael L. Parodi and David
Curtis with full power of substitution and full power to act without the other,
his true and lawful attorney-in-fact and agent to act for him in his name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement on Form S-8, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully, to all intents
and purposes, as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 30, 1998.
Signature Title
/s/ MICHAEL L. PARODI President, Chief Executive Officer and
- ---------------------------- Director (Principal Executive Officer)
Michael L. Parodi
/s/ DAVID CURTIS Vice President, Finance and Administration
- ---------------------------- and Chief Financial Officer
David Curtis (Principal Financial Officer)
/s/ WILLIAM O'SHEA Corporate Controller
- ---------------------------- (Principal Accounting Officer)
William O'Shea
/s/ ROBERT V. HERY Chairman of the Board
- ----------------------------
Robert V. Hery
/s/ JEFFREY M. KRAUSS Director
- ----------------------------
Jeffrey M. Krauss
5
<PAGE> 6
/s/ THOMAS R. MIKA Director
- ----------------------------
Thomas R. Mika
/s/ FRED NAZEM Director
- ----------------------------
Fred Nazem
/s/ EDWARD A. DOHRING Director
- ----------------------------
Edward A. Dohring
6
<PAGE> 7
INDEX TO EXHIBITS
Exhibit
4.1 1998 Equity Participation Plan.
5 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins (included in Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included on page 5 of this
Registration Statement).
- ---------------
7
<PAGE> 1
EXHIBIT 4.1
THE 1998 EQUITY PARTICIPATION PLAN
OF
TEGAL CORPORATION
Tegal Corporation, a Delaware corporation, has adopted The 1998 Equity
Participation Plan of Tegal Corporation (the "Plan"), effective July 16, 1998,
for the benefit of its eligible employees and consultants.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for key Employees and
Consultants (as such terms are defined below) to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.
(2) To enable the Company to obtain and retain the services of key
Employees and Consultants considered essential to the long range success of the
Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.
ARTICLE I.
DEFINITIONS
1.1. General. Wherever the following terms are used in the Plan, they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. Administrator. "Administrator" shall mean the entity that conducts
the general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to any Award granted under the Plan, the
term "Administrator" shall refer to the Committee unless the Board has assumed
the authority for administration of the Plan generally as provided in Section
9.1.
1.3. Award. "Award" shall mean an Option, a Restricted Stock award or a
Stock Appreciation Right which may be awarded or granted under the Plan
(collectively, "Awards").
1.4. Award Agreement. "Award Agreement" shall mean a written agreement
executed by an authorized officer of the Company and the Holder which shall
contain such terms and conditions with respect to an Award as the Administrator
shall determine, consistent with the Plan.
<PAGE> 2
1.5. Award Limit. "Award Limit" shall mean 600,000 shares of Common
Stock, as adjusted pursuant to Section 10.3 of the Plan.
1.6. Board. "Board" shall mean the Board of Directors of the Company.
1.7. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:
(i) any person or related group of persons (other than the Company or a
person that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of the Company (or a successor of the Company)
possessing more than twenty-five percent (25%) of the total combined voting
power of the then outstanding securities of the Company or such successor; or
(ii) at any time that the Company has registered shares under the
Exchange Act, at least 40% of the directors of the Company constitute persons
who were not at the time of their first election to the Board, candidates
proposed by a majority of the Board in office prior to the time of such first
election; or
(iii) (w) the dissolution of the Company or liquidation of more than
75% in value of the Company or a sale of assets involving 75% or more in value
of the assets of the Company, (x) any merger or reorganization of the Company
whether or not another entity is the survivor, (y) a transaction pursuant to
which the holders, as a group, of all of the shares of the Company outstanding
prior to the transaction hold, as a group, less than 50% of the combined voting
power of the Company or any successor company outstanding after the transaction,
or (z) any other event which the Board determines, in its discretion, would
materially alter the structure of the Company or its ownership.
1.8. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.9. Committee. "Committee" shall mean the Compensation Committee of
the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 9.1.
1.10. Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock.
1.11. Company. "Company" shall mean Tegal Corporation, a Delaware
corporation.
2
<PAGE> 3
1.12. Consultant. "Consultant" shall mean any consultant or adviser if:
(a) the consultant or adviser renders bona fide services to
the Company;
(b) the services rendered by the consultant or adviser are not
in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a
market for the Company's securities; and
(c) the consultant or adviser is a natural person who has
contracted directly with the Company to render such services.
1.13. Director. "Director" shall mean a member of the Board.
1.14. DRO. "DRO" shall mean a domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
1.15. Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.16. Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.17. Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (a) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, if any
(or as reported on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Administrator acting in good faith.
1.18. Holder. "Holder" shall mean a person who has been granted or
awarded an Award.
1.19. Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Administrator.
3
<PAGE> 4
1.20. Independent Director. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.21. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Administrator.
1.22. Option. "Option" shall mean a stock option granted under Article
IV of the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Consultants shall be
Non-Qualified Stock Options.
1.23. Performance Criteria. "Performance Criteria" shall mean the
following business criteria with respect to the Company, any Subsidiary or any
division or operating unit: (a) net income, (b) pre-tax income, (c) operating
income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return
on invested capital or assets, (h) cost reductions or savings, (i) funds from
operations, (j) appreciation in the fair market value of Common Stock and (k)
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization.
1.24. Plan. "Plan" shall mean The 1998 Equity Participation Plan of
Tegal Corporation.
1.25. Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VII of the Plan.
1.26. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.27. Section 162(m) Participant. "Section 162(m) Participant" shall
mean any key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.28. Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.29. Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of the Plan.
1.30. Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
1.31. Substitute Award. "Substitute Award" shall mean an Option granted
under
4
<PAGE> 5
this Plan upon the assumption of, or in substitution for, outstanding
equity awards previously granted by a company or other entity in connection with
a corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock.
1.32. Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of a Holder as a Consultant to the Company or
a Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Consultancy. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a Consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.33. Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between a Holder and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (a) terminations where
there is a simultaneous reemployment or continuing employment of a Holder by the
Company or any Subsidiary, (b) at the discretion of the Administrator,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Administrator, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided, however, that, with respect
to Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate an Employee's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
5
<PAGE> 6
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Awards shall be Common
Stock, initially shares of the Company's Common Stock, par value $.01
per share. The aggregate number of such shares which may be issued upon
exercise of such Options or rights or upon any such awards under the
Plan shall not exceed 600,000. The shares of Common Stock issuable upon
exercise of such Options or rights or upon any such awards may be
either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to
Awards, granted under the Plan to any individual in any fiscal year
shall not exceed the Award Limit. To the extent required by Section
162(m) of the Code, shares subject to Options which are canceled
continue to be counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other Award under the Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash as permitted by the Plan, the number of shares subject
to such Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to
Section 10.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof
or tax withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and
6
<PAGE> 7
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
3.2. Provisions Applicable to Section 162(m) Participants.
(a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant,
including Restricted Stock the restrictions with respect to which lapse
upon the attainment of performance goals which are related to one or
more of the Performance Criteria.
(c) To the extent necessary to comply with the
performance-based compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Article VII which may
be granted to one or more Section 162(m) Participants, no later than
ninety (90) days following the commencement of any fiscal year in
question or any other designated fiscal period or period of service (or
such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (i) designate one or more
Section 162(m) Participants, (ii) select the Performance Criteria
applicable to the fiscal year or other designated fiscal period or
period of service, (iii) establish the various performance targets, in
terms of an objective formula or standard, and amounts of such Awards,
as applicable, which may be earned for such fiscal year or other
designated fiscal period or period of service and (iv) specify the
relationship between Performance Criteria and the performance targets
and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated
fiscal period or period of service. Following the completion of each
fiscal year or other designated fiscal period or period of service, the
Committee shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other designated
fiscal period or period of service. In determining the amount earned by
a Section 162(m) Participant, the Committee shall have the right to
reduce (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Committee
may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or
period of service.
(d) Furthermore, notwithstanding any other provision of the
Plan or any Award which is granted to a Section 162(m) Participant and
is intended to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings
issued
7
<PAGE> 8
thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the
Plan shall be deemed amended to the extent necessary to conform to such
requirements.
3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
3.4. At-Will Employment. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or shall interfere with
or restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Holder at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in a written employment agreement between the Holder and the Company
and any Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES AND
CONSULTANTS
4.1. Eligibility. Any Employee or Consultant selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option.
4.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
4.3. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.
4.4. Granting of Options to Employees and Consultants.
8
<PAGE> 9
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Determine which Employees are key Employees and
select from among the key Employees or Consultants (including
Employees or Consultants who have previously received Awards
under the Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the
selected key Employees or Consultants;
(iii) Subject to Section 4.3, determine whether such
Options are to be Incentive Stock Options or Non-Qualified
Stock Options and whether such Options are to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with the Plan; provided, however, that the
terms and conditions of Options intended to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited to,
such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or Consultant to be
granted an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant
of the Option as it deems appropriate.
(c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to
disqualify such Option from treatment as an "incentive stock option"
under Section 422 of the Code.
ARTICLE V.
TERMS OF OPTIONS
5.1. Option Price. The price per share of the shares subject to each
Option granted to Employees and Consultants shall be set by the Committee;
provided, however, that such price shall be no less than 85% of the Fair Market
Value of a share of Common Stock on the date the Option is granted and:
(a) in the case of Options intended to qualify as
performance-based
9
<PAGE> 10
compensation as described in Section 162(m)(4)(C) of the Code, such
price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is granted;
(b) in the case of Incentive Stock Options such price shall
not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the
Code); and
(c) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code), such price shall not
be less than 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code).
5.2. Option Term. The term of an Option granted to an Employee or
consultant shall be set by the Committee in its discretion; provided, however,
that, in the case of Incentive Stock Options, the term shall not be more than
ten (10) years from the date the Incentive Stock Option is granted, or five (5)
years from the date the Incentive Stock Option is granted if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Holder, or amend any other term or condition
of such Option relating to such a termination.
5.3. Option Vesting
(a) The period during which the right to exercise, in whole or
in part, an Option granted to an Employee or a Consultant vests in the
Holder shall be set by the Committee and the Committee may determine
that an Option may not be exercised in whole or in part for a specified
period after it is granted ; provided, however, that, unless the
Committee otherwise provides in the terms of the Award Agreement or
otherwise, no Option shall be exercisable by any Holder who is then
subject to Section 16 of the Exchange Act within the period ending six
months and one day after the date the Option is granted. At any time
after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option granted to an Employee or
Consultant vests.
10
<PAGE> 11
(b) No portion of an Option granted to an Employee or
Consultant which is unexercisable at Termination of Employment or
Termination of Consultancy, as applicable, shall thereafter become
exercisable, except as may be otherwise provided by the Committee
either in the Award Agreement or by action of the Committee following
the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by a Holder
during any calendar year (under the Plan and all other incentive stock
option plans of the Company and any parent or subsidiary corporation,
within the meaning of Section 422 of the Code) of the Company, exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in
the order in which they were granted. For purposes of this Section
5.3(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.
5.4. Substitute Awards. Notwithstanding the foregoing provisions of
this Article V to the contrary, in the case of an Option that is a Substitute
Award, the price per share of the shares subject to such Option may be less than
the Fair Market Value per share on the date of grant, provided, that the excess
of:
(a) the aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the Substitute
Award; over
(b) the aggregate exercise price thereof; does not exceed the
excess of;
(c) the aggregate fair market value (as of the time
immediately preceding the transaction giving rise to the Substitute
Award, such fair market value to be determined by the Committee) of the
shares of the predecessor entity that were subject to the grant assumed
or substituted for by the Company; over
(d) the aggregate exercise price of such shares.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
11
<PAGE> 12
6.2. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Holder or
other person then entitled to exercise the Option or such portion of
the Option;
(b) Such representations and documents as the Administrator,
in its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and any
other federal or state securities laws or regulations. The
Administrator may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant
to Section 10.1 by any person or persons other than the Holder,
appropriate proof of the right of such person or persons to exercise
the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is
exercised. However, the Administrator, may in its discretion (i) allow
a delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in part,
through the delivery of shares of Common Stock which have been owned by
the Holder for at least six months, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof;
(iii) allow payment, in whole or in part, through the surrender of
shares of Common Stock then issuable upon exercise of the Option having
a Fair Market Value on the date of Option exercise equal to the
aggregate exercise price of the Option or exercised portion thereof;
(iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration;
(v) allow payment, in whole or in part, through the delivery of a full
recourse promissory note bearing interest (at no less than such rate as
shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Administrator; (vi)
allow payment, in whole or in part, through the delivery of a notice
that the Holder has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction
of the Option exercise price, provided that payment of such proceeds is
then made to the Company upon settlement of such sale; or (vii) allow
payment through any combination of the consideration provided in the
foregoing subparagraphs (ii), (iii), (iv),
12
<PAGE> 13
(v) and (vi). In the case of a promissory note, the Administrator may
also prescribe the form of such note and the security to be given for
such note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law.
6.3. Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Administrator shall, in its
absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in
its absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to
time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax, which in
the discretion of the Administrator may be in the form of consideration
used by the Holder to pay for such shares under Section 6.2(d).
6.4. Rights as Stockholders. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.
6.5. Ownership and Transfer Restrictions. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such
13
<PAGE> 14
shares to such Holder.
6.6. Additional Limitations on Exercise of Options. Holders may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee who the Committee determines is a key Employee or any
Consultant who the Committee determines should receive such an Award.
7.2. Award of Restricted Stock
(a) The Committee may from time to time, in its absolute
discretion:
(i) Determine which Employees are key Employees and
select from among the key Employees or Consultants (including
Employees or Consultants who have previously received other
awards under the Plan) such of them as in its opinion should
be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other
terms and conditions applicable to such Restricted Stock,
consistent with the Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; provided, however, that such
purchase price shall be no less than the par value of the Common Stock
to be purchased, unless otherwise permitted by applicable state law. In
all cases, legal consideration shall be required for each issuance of
Restricted Stock.
(c) Upon the selection of a key Employee or Consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of
the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems
appropriate.
7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of
the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Committee, all the rights of
a stockholder with respect to said shares, subject to the restrictions in his
Award Agreement, including the right to receive all
14
<PAGE> 15
dividends and other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 7.4.
7.4. Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person subject
to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Award Agreement. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.
If no consideration was paid by the Holder upon issuance, a Holder's rights in
unvested Restricted Stock shall lapse, and such Restricted Stock shall be
surrendered to the Company without consideration, upon Termination of Employment
or, if applicable, upon Termination of Consultancy with the Company; provided,
however, that the Committee in its sole and absolute discretion may provide that
such rights shall not lapse in the event of a Termination of Employment
following a "change of ownership or control" (within the meaning of Treasury
Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the
Company or because of the Holder's death or disability; provided, further,
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants, the Committee in its sole and absolute discretion may provide that
no such lapse or surrender shall occur in the event of a Termination of
Employment, or a Termination of Consultancy, without cause or following any
Change in Control of the Company or because of the Holder's retirement, or
otherwise.
7.5. Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or, if
applicable, upon a Termination of Consultancy between the Holder and the
Company, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Committee in its sole and
absolute discretion may provide that no such right of repurchase shall exist in
the event of a Termination of Employment following a "change of ownership or
control" (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or
any successor regulation thereto) of the Company or because of the Holder's
death or disability; provided, further, that, except with
15
<PAGE> 16
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that no such right
of repurchase shall exist in the event of a Termination of Employment or a
Termination of Consultancy without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.
7.6. Escrow. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
7.7. Legend. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
7.8. Section 83(b) Election. If a Holder makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.
ARTICLE VIII.
STOCK APPRECIATION RIGHTS
8.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right may
be granted to any key Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.
8.2. Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and
to the extent the related Option is exercisable.
(b) A CSAR may be granted to the Holder for no more than the
number of shares subject to the simultaneously or previously granted
Option to which it is coupled.
16
<PAGE> 17
(c) A CSAR shall entitle the Holder (or other person entitled
to exercise the Option pursuant to the Plan) to surrender to the
Company unexercised a portion of the Option to which the CSAR relates
(to the extent then exercisable pursuant to its terms) and to receive
from the Company in exchange therefor an amount determined by
multiplying the difference obtained by subtracting the Option exercise
price from the Fair Market Value of a share of Common Stock on the date
of exercise of the CSAR by the number of shares of Common Stock with
respect to which the CSAR shall have been exercised, subject to any
limitations the Committee may impose.
8.3. Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An
ISAR shall be exercisable in such installments as the Committee may
determine. An ISAR shall cover such number of shares of Common Stock as
the Committee may determine; provided, however, that unless the
Committee otherwise provides in the terms of the ISAR or otherwise, no
ISAR granted to a person subject to Section 16 of the Exchange Act
shall be exercisable until at least six months have elapsed from (but
excluding) the date on which the Option was granted. The exercise price
per share of Common Stock subject to each ISAR shall be set by the
Committee. An ISAR is exercisable only while the Holder is an Employee
or Consultant; provided that the Committee may determine that the ISAR
may be exercised subsequent to Termination of Employment or Termination
of Consultancy without cause, or following a Change in Control, or
because of the Holder's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Holder (or other person entitled
to exercise the ISAR pursuant to the Plan) to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant
to its terms) and to receive from the Company an amount determined by
multiplying the difference obtained by subtracting the exercise price
per share of the ISAR from the Fair Market Value of a share of Common
Stock on the date of exercise of the ISAR by the number of shares of
Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.
8.4. Payment and Limitations on Exercise.
(a) Payment of the amounts determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised)
or a combination of both, as determined by the Committee. To the extent
such payment is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3 above pertaining to
Options.
(b) Holders of Stock Appreciation Rights may be required to
comply
17
<PAGE> 18
with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of the
Committee.
ARTICLE IX.
ADMINISTRATION
9.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under the Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
9.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee.
9.3. Majority Rule; Unanimous Written Consent. The Committee shall act
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
9.4. Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of the Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board
18
<PAGE> 19
in good faith shall be final and binding upon all Holders, the Company and all
other interested persons. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or Awards, and all members of the Committee and
the Board shall be fully protected by the Company with respect to any such
action, determination or interpretation.
9.5. Delegation of Authority to Grant Awards. The Committee may, but
need not, delegate from time to time some or all of its authority to grant
Awards under the Plan to a committee consisting of one or more members of the
Committee or of one or more officers of the Company; provided, however, that the
Committee may not delegate its authority to grant Awards to individuals (i) who
are subject on the date of the grant to the reporting rules under Section 16(a)
of the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are
officers of the Company who are delegated authority by the Committee hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 9.5 shall serve in such capacity at the pleasure of the
Committee.
ARTICLE X.
MISCELLANEOUS PROVISIONS
10.1. Not Transferable. No Award under the Plan may be sold, pledged,
assigned or transferred in any manner unless and until such Award has been
exercised, or the shares underlying such Award have been issued, and all
restrictions applicable to such shares have lapsed; provided, however, that the
restrictions set forth in the foregoing clause shall not apply to transfers (i)
by will or the laws of descent and distribution, (ii) subject to the consent of
the Administrator, pursuant to a DRO or (iii) subject to the consent of the
Administrator, by gift of an Option by an Employee to a Permitted Transferee (as
defined below) subject to the following terms and conditions: (a) an Option
transferred to a Permitted Transferee shall not be assignable or transferable by
the Permitted Transferee other than by DRO or by will or the laws of descent and
distribution; (b) any Option which is transferred to a Permitted Transferee
shall continue to be subject to all the terms and considerations of the Option
as applicable to the original holder (other than the ability to further transfer
the Option); (c) the Employee and the Permitted Transferee shall execute any and
all documents reasonably requested by the Administrator, including, without
limitation, documents to (A) confirm the status of the transferee as a Permitted
Transferee, (B) satisfy any requirements for an exemption for the transfer under
applicable federal and state securities laws and (C) provide evidence of the
transfer; (d) the shares of Common Stock acquired by a Permitted Transferee
through exercise of an Option have not been registered under the Securities Act,
or any state securities act and may not be transferred, nor will any assignee or
transferee thereof be recognized as an owner of such shares of Common Stock for
any purpose, unless a registration statement under the Securities
19
<PAGE> 20
Act and any applicable state securities act with respect to such shares shall
then be in effect or unless the availability of an exemption from registration
with respect to any proposed transfer or disposition of such shares shall be
established to the satisfaction of counsel for the Company. As used in this
Section 10.1, "Permitted Transferee" shall mean (i) one or more of the following
family members of an Employee: spouse, former spouse, child (whether natural or
adopted), stepchild, any other lineal descendant of the Employee, (ii) a trust,
partnership or other entity established and existing for the sole benefit of, or
under the sole control of, one or more of the above family members of the
Employee, or (iii) any other transferee specifically approved by the
Administrator after taking into account any state or federal tax or securities
laws applicable to transferable Options.
No Award or interest or right therein shall be liable for the debts,
contracts or engagements of the Holder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by the preceding
sentence.
Unless an Option has been transferred in accordance with this Section
10.1, (i) during the lifetime of the Holder, only he may exercise an Option or
other Award (or any portion thereof) granted to him under the Plan and (ii)
after the death of the Holder, any exercisable portion of an Option or other
Award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Holder's
will or under the then applicable laws of descent and distribution.
10.2. Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 10.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company's
stockholders given within twelve months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
10.3, increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan. No amendment, suspension or termination of
the Plan shall, without the consent of the Holder, alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be granted or awarded
during any period of suspension or after termination of the Plan, and in no
event may any Incentive Stock Option be granted under the Plan after the first
to occur of the following events:
(a) The expiration of ten years from the date the Plan is
adopted by the Board; or
20
<PAGE> 21
(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 10.4.
10.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 10.3 (d), in the event that the
Administrator determines that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets
of the Company, or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company, or other similar corporate
transaction or event, in the Administrator's sole discretion, affects
the Common Stock such that an adjustment is determined by the
Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to an Award, then the
Administrator shall, in such manner as it may deem equitable, adjust
any or all of
(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Awards may
be granted or awarded (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued and adjustments
of the Award Limit),
(ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding
Awards, and
(iii) the grant or exercise price with respect to any
Award.
(b) Subject to Sections 10.3(b)(vii) and 10.3(d), in the event
of any transaction or event described in Section 10.3(a) or of changes
in applicable laws, regulations, or accounting principles, the
Administrator, in its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, either by the terms of the
Award or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the Holder's request, is hereby
authorized to take any one or more of the following actions whenever
the Administrator determines that such action is appropriate in order
to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect
to any Award under the Plan, to facilitate such transactions or events
or to give effect to such changes in laws, regulations or principles:
21
<PAGE> 22
(i) To provide for either the purchase of any such
Award for an amount of cash equal to the amount that could
have been attained upon the exercise of such Award or
realization of the Holder's rights had such Award been
currently exercisable or payable or fully vested or the
replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;
(ii) To provide that the Award cannot vest, be
exercised or become payable after such event;
(iii) To provide that such Award shall be exercisable
as to all shares covered thereby, notwithstanding anything to
the contrary in Section 5.3 or the provisions of such Award;
(iv) To provide that such Award be assumed by the
successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares
and prices; and
(v) To make adjustments in the number and type of
shares of Common Stock (or other securities or property)
subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock and/or in the terms and
conditions of, and the criteria included in, outstanding
options, rights and awards and options, rights and awards
which may be granted in the future.
(vi) To provide that, for a specified period of time
prior to such event, the restrictions imposed under an Award
Agreement upon some or all shares of Restricted Stock may be
terminated, and some or all shares of such Restricted Stock
may cease to be subject to repurchase under Section 7.5 or
forfeiture under Section 7.4 after such event.
(vii) Notwithstanding any other provision of the
Plan, in the event of a Change in Control, each outstanding
Award shall, immediately prior to the effective date of the
Change in Control, automatically become fully exercisable for
all of the shares of Common Stock at the time subject to such
rights and may be exercised for any or all of those shares as
fully-vested shares of Common Stock.
(c) Subject to Sections 10.3(d), 3.2 and 3.3, the
Administrator may, in its discretion, include such further provisions
and limitations in any Award, agreement or
22
<PAGE> 23
certificate, as it may deem equitable and in the best interests of the
Company.
(d) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based
compensation under Section 162(m)(4)(C), no adjustment or action
described in this Section 10.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would
cause such Award to fail to so qualify under Section 162(m)(4)(C), or
any successor provisions thereto. No adjustment or action described in
this Section 10.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the
Plan to violate Section 422(b)(1) of the Code. Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment
or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of Rule 16b-3 unless the
Administrator determines that the Award is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to
any Award shall always be rounded to the next whole number.
(e) Notwithstanding the foregoing, in the event that the
Company becomes a party to a transaction that is intended to qualify
for "pooling of interests" accounting treatment and, but for one or
more of the provisions of this Plan or any Award Agreement would so
qualify, then this Plan and any Award Agreement shall be interpreted so
as to preserve such accounting treatment, and to the extent that any
provision of the Plan or any Award Agreement would disqualify the
transaction from pooling of interests accounting treatment (including,
if applicable, an entire Award Agreement), then such provision shall be
null and void. All determinations to be made in connection with the
preceding sentence shall be made by the independent accounting firm
whose opinion with respect to "pooling of interests" treatment is
required as a condition to the Company's consummation of such
transaction.
(f) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way the
right or power of the Company or the shareholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any
merger or consolidation of the Company, any issue of stock or of
options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible
into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
10.4. Approval of Plan by Stockholders. The Plan will be submitted for
the approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of the Plan. Awards may be granted or awarded
prior to such stockholder
23
<PAGE> 24
approval, provided that such Awards shall not be exercisable nor shall such
Awards vest prior to the time when the Plan is approved by the stockholders, and
provided further that if such approval has not been obtained at the end of said
twelve-month period, all Awards previously granted or awarded under the Plan
shall thereupon be canceled and become null and void. In addition, if the Board
determines that Awards other than Options or Stock Appreciation Rights which may
be granted to Section 162(m) Participants should continue to be eligible to
qualify as performance-based compensation under Section 162(m)(4)(C) of the
Code, the Performance Criteria must be disclosed to and approved by the
Company's stockholders no later than the first stockholder meeting that occurs
in the fifth year following the year in which the Company's stockholders
previously approved the Performance Criteria.
10.5. Tax Withholding. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Award. The Administrator may in
its discretion and in satisfaction of the foregoing requirement allow such
Holder to elect to have the Company withhold shares of Common Stock otherwise
issuable under such Award (or allow the return of shares of Common Stock) having
a Fair Market Value equal to the sums required to be withheld.
10.6. Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Award
granted or awarded under the Plan, or the issuance of Restricted Stock awarded
under the Plan. The terms and conditions of any such loan shall be set by the
Committee.
10.7. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right to provide, in the terms of Awards made under
the Plan, or to require a Holder to agree by separate written instrument, that
(a) (i) any proceeds, gains or other economic benefit actually or constructively
received by the Holder upon any receipt or exercise of the Award, or upon the
receipt or resale of any Common Stock underlying the Award, must be paid to the
Company, and (ii) the Award shall terminate and any unexercised portion of the
Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of
Employment or Termination of Consultancy occurs prior to a specified date, or
within a specified time period following receipt or exercise of the Award, or
(ii) the Holder at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Administrator
or (iii) the Holder incurs a Termination of Employment or Termination of
Consultancy for cause.
10.8. Effect of Plan Upon Options and Compensation Plans. The adoption
of the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives or
compensation for Employees or Consultants of the Company or any Subsidiary or
(b) to grant or assume options or other rights or awards otherwise
24
<PAGE> 25
than under the Plan in connection with any proper corporate purpose including
but not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
10.9. Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
10.10. Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.
10.11. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
25
<PAGE> 26
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Tegal Corporation on July 16, 1998.
Executed on this 28th day of July, 1998.
/s/ David Curtis
------------------------
David Curtis
Secretary
26
<PAGE> 1
EXHIBIT 5
[LATHAM & WATKINS LETTERHEAD]
November 4, 1998
Tegal Corporation
2201 S. McDowell Boulevard
P.O. Box 6020
Petaluma, CA 94955-6020
Re: Tegal Corporation
600,000 shares of Common Stock, par value $0.01 per share
---------------------------------------------------------
Ladies/Gentlemen:
In connection with the registration under the Securities Act
of 1933, as amended (the "Act"), of an aggregate of 600,000 shares (the
"Shares") of common stock, par value $0.01 per share, of Tegal Corporation (the
"Company") issuable under the Tegal Corporation 1998 Equity Participation Plan
(the "1998 Equity Plan") by the Company on Form S-8 filed with the Securities
and Exchange Commission (the "Commission") on November 4, 1998 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your special counsel in connection with
such registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Shares. In addition, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
<PAGE> 2
Tegal Corporation
November 4, 1998
Page 2
We are opining herein as to the effect on the subject
transaction only of the General Corporation Law of the State of Delaware, and we
express no opinion with respect to the applicability thereto, or the effect
thereon, of any other laws, or as to any matters of municipal law or the laws of
any other local agencies within the state.
Subject to the foregoing, it is our opinion that the Shares to
be issued under the 1998 Equity Plan have been duly authorized, and upon the
issuance and delivery of the Shares in the manner contemplated by the 1998
Equity Plan, and assuming the Company completes all actions and proceedings
required on its part to be taken prior to the issuance and delivery of the
Shares pursuant to the terms of the 1998 Equity Plan, including, without
limitation, collection of required payment for the Shares, the Shares will be
validly issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Latham & Watkins
<PAGE> 1
Exhibit 23.2
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated April 24, 1998 appearing on page 40 of
Tegal Corporation's Annual Report on Form 10-K for the year ended March 31,
1998. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule which appears on page S-2 of such Annual Report on
Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
San Jose, California
October 29, 1998
<PAGE> 1
Exhibit 23.3
The Board of Directors
Tegal Corporation:
We consent to incorporation by reference herein of our reports dated April 23,
1996, relating to the consolidated statements of operations, stockholders'
equity (deficit) and cash flows of Tegal Corporation and Subsidiaries for the
year ended March 31, 1996, and the related schedule, which reports appear in the
March 31, 1998, annual report on Form 10-K of Tegal Corporation.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Mountain View, California
October 30, 1998
