As filed with the Securities and Exchange Commission on September 18, 2003
Registration No. 333-________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Tegal Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 2201 South McDowell Boulevard 68-0370244
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(State or Other Jurisdiction of Petaluma, California 94954 (I.R.S. Employer
Incorporation or Organization) (707) 763-5600 Identification Number)
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Michael L. Parodi
Chairman of the Board, President & Chief Executive Officer
Tegal Corporation
2201 South McDowell Boulevard
Petaluma, California 94954
(707) 763-5600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
Copy To:
Christopher L. Kaufman, Esq.
Latham & Watkins LLP
135 Commonwealth Drive
Menlo Park, California 94025
(650) 328-4600
Fax: (650) 463-2600
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
================================= =================== ====================== ======================== ================
Proposed Proposed Maximum Amount Of
Title Of Each Class Of Amount To Maximum Offering Aggregate Offering Registration
Securities To Be Registered Be Registered Price Per Unit Price Fee
- --------------------------------- ------------------- ---------------------- ------------------------ ----------------
Common Stock, par value $0.01 26,409,432 shares $1.22 $32,219,507 $2,606.56
per share (1) (2)
- --------------------------------- ------------------- ---------------------- ------------------------ ----------------
(1) Includes 17,815,886 shares issuable upon conversion of convertible
debentures, 3,563,112 shares issuable upon exercise of warrants, advisor
warrants convertible into 1,756,127 shares and 3,274,307 shares representing
interest.
(2) Estimated solely for the purpose of computing the registration fee required
by Section 6(b) of the Securities Act and computed pursuant to Rule 457(c)
under the Securities Act based upon the average ($1.22) of the high ($1.29)
and low ($1.15) prices of the common stock on September 16, 2003, as quoted
on the Nasdaq SmallCap Market. It is not known how may shares will be
purchased under this registration statement or at what price shares will be
purchased.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and the selling
securityholders are not soliciting offers to buy these securities in any state
where the offer or sale is not permitted.
Subject to Completion, dated September 18, 2003
PROSPECTUS
TEGAL CORPORATION
26,409,432
Shares of Common Stock
------------------
These shares of common stock are being offered by the selling securityholders
identified in this prospectus. The selling securityholders may sell their shares
of common stock in a number of different ways and at varying prices. We provide
more information about how the selling securityholders may sell their shares in
the section entitled "Plan of Distribution" beginning on page 13.
We are not selling any shares of our common stock under this prospectus and will
not receive any proceeds from the sale of these shares.
---------------
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol
"TGAL." On September 17, 2003, the last reported sale price for our common stock
on the Nasdaq SmallCap Market was $1.30 per share.
---------------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __, 2003
TABLE OF CONTENTS
Summary......................................................................1
Risk Factors.................................................................2
Forward-Looking Statements...................................................9
Use of Proceeds..............................................................9
Selling Securityholders.....................................................10
Plan of Distribution........................................................13
Legal Matters...............................................................15
Experts.....................................................................15
Where You Can Find More Information.........................................15
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You should rely only on the information we have provided or incorporated by
reference in this prospectus. Neither we nor the selling securityholders have
authorized anyone to provide you with additional or different information. The
selling securityholders are not making an offer of these securities in any
jurisdiction where the offer is not
permitted. You should assume that the information in this prospectus is
accurate only as of the date on the front of the document and that any
information we have incorporated by reference is accurate only as of the date
of the document incorporated by reference. In this prospectus, unless
otherwise indicated, "Tegal," "we," "us" or "our"
refer to Tegal and its subsidiaries.
i
SUMMARY
References in this prospectus to "us," "we," the "Company" or "Tegal" shall
mean Tegal Corporation and our consolidated subsidiaries, unless the context
indicates otherwise.
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, the selling securityholders may from time to time sell
their shares of our common stock in one or more offerings. This prospectus
provides you with a general description of the common stock being offered. You
should read this prospectus, including any documents incorporated herein by
reference, together with additional information described under the heading
"Where You Can Find More Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement, contains additional information about us
and the securities offered under this prospectus. That registration statement
can be read at the Securities and Exchange Commission's offices mentioned under
the heading "Where You Can Find More Information."
Tegal Corporation
We design, manufacture, market and service plasma etch and deposition
systems that enable the production of integrated circuits ("ICs"), memory and
related microelectronics devices used in personal computers, wireless voice and
data telecommunications, contact-less transaction devices, radio frequency
identification devices ("RFID's"), smart cards, data storage and micro-level
actuators. Etching and deposition constitute two of the principal IC and related
device production process steps and each must be performed numerous times in the
production of such devices.
We were formed in December 1989 to acquire the operations of the former
Tegal Corporation, a division of Motorola, Inc. ("Motorola"). Our predecessor
company was founded in 1972 and acquired by Motorola in 1978. We completed our
initial public offering in October 1995.
On August 30, 2002, we acquired all of the outstanding common stock of
Sputtered Films, Incorporated ("SFI"), a privately held California corporation
pursuant to an Agreement and Plan of Merger dated August 13, 2002. Sputtered
Films is a leader in the design, manufacture and service of high performance
physical vapor deposition sputtering systems for the semiconductor and
semiconductor packaging industry. SFI was founded in 1967 with the development
of the S-Gun, core technology of the acquired company.
Our executive offices are located at 2201 South McDowell Boulevard,
Petaluma, California 94954, and our telephone number is (707) 763-5600. All
service marks, brand names or trademarks appearing in this prospectus that do
not belong to us are the property of their respective holders.
Shares Offered
On June 30, 2003, we entered into agreements with investors to raise up to
$7.2 million in a private placement of convertible debt financing to be
completed in two tranches. The first tranche, completed June 30, 2003, involved
the financing of $0.9 million. The second tranche, completed September 9, 2003
after receiving stockholder approval on September 8, 2003, involved the receipt
of an additional $6.2 million.
In connection with the second tranche, we are registering for resale by the
selling securityholders an aggregate of 26,409,432 shares of common stock,
consisting of: (i) up to 17,815,886 shares of common stock issued upon the
conversion of outstanding 2.0% Convertible Secured Debentures Due 2011 (the
"Debentures") sold to the selling securityholders on June 30, 2003; (ii) up to
3,563,112 shares of common stock issuable upon the exercise of common stock
purchase warrants of the Company held by the selling securityholders; (iii)
advisor warrants convertible for up to 1,756,127 shares of common stock; and
(iv) 3,274,307 shares representing interest payable in kind under the terms of
the Debentures by issuance of additional Debentures convertible into common
stock in the amount of such interest. In addition, we are also registering for
resale any additional shares of common stock which may become issuable with
respect to the shares of common stock issued upon conversion of the Debentures
or upon exercise of the common stock purchase warrants by reason of any stock
dividend, stock split, recapitalization or other similar transaction effected
without the receipt of consideration which results in an increase in the number
of outstanding shares of common stock.
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RISK FACTORS
Investing in our common stock involves a significant amount of risk. You
should carefully consider the following risk factors, in addition to the other
information set forth in this prospectus and incorporated in this prospectus by
reference to our Annual Report on Form 10-K for the fiscal year ended March 31,
2003 and our other filings with the SEC before deciding to purchase our common
stock.
We have incurred operating losses and may not be profitable in the future; Our
plans to maintain and increase liquidity may not be successful; Our auditors'
report includes a going concern uncertainty explanatory paragraph; The
accounting for the Debentures would result in significant expense amounts.
We incurred net losses of $12.6 million and $8.7 million for the years
ended March 31, 2003 and 2002, respectively, and generated negative cash flows
from operations of $6.0 million and $3.6 million in these respective years. We
also incurred a net loss of $1.3 million and generated negative cash flows from
operations of $0.2 million during the quarter ended June 30, 2003. In addition,
we continue to generate losses and negative cash flows from operations during
the months of July and August 2003. These factors raise substantial doubt as to
our ability to continue as a going concern, and our auditors have included a
going concern uncertainty explanatory paragraph in their latest auditors' report
dated June 10, 2003 which is included in our 10-K for the year ended March 31,
2003. Our plans to maintain and increase liquidity include the restructuring
executed during fiscal 2002 and 2003, which reduced headcount from 155 employees
to 81 employees and has reduced our cost structure entering fiscal 2004. We
believe the cost reduction and a projected increase in sales during fiscal 2004
will generate sufficient cash flows to fund our operations through March 31,
2004. However, these projected sales are to a limited number of new and existing
customers and are based, for the most part, on internal and customer provided
estimates of future demand, not firm customer orders. If the projected sales do
not materialize, we will need to reduce expenses further and raise additional
capital through the issuance of debt or equity securities. If additional funds
are raised through the issuance of preferred stock or debt, these securities
could have rights, privileges or preferences senior to those of our common
stock, and debt covenants could impose restrictions on our operations. The sale
of equity or debt could result in additional dilution to current stockholders,
and such financing may not be available to us on acceptable terms, if at all.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets or the amount or
classification of liabilities or any other adjustments that might be necessary
should we be unable to continue as a going concern.
Our Debentures are convertible at a conversion rate of $0.35 per share,
which was lower than the common stock's prices at June 30, 2003, the commitment
date for the first tranche and September 8, 2003, the stockholder approval date
for the second tranche. Additionally, we granted a 20% warrant coverage to our
Debenture holders. The value of both the beneficial conversion feature and
warrants resulted in a significant debt discount which will be accreted as
interest expense over the eight-year life of the Debentures. This will result in
substantial interest expense during fiscal 2004 and through fiscal 2011 or until
the Debentures are converted.
Our Debentures include a material adverse change clause.
As disclosed in our Current Report on Form 8-K filed with the SEC on June
2, 2003, our 2% Convertible Secured Debentures Due 2011 that we sold on June 30,
2003 and September 9, 2003 include a material adverse change clause. This
material adverse change clause allows the Debenture holders to demand the
immediate payment of all outstanding balances upon the Debenture holders'
determination of the occurrence of deemed material adverse changes to our
financial condition, business or operations as determined by the Debenture
holders based on required financial reporting and other criteria. Potential
material adverse changes causing us to default on the Debentures may include any
significant adverse effect on our financial condition arising from an event not
previously disclosed in our SEC filings such as a significant litigation
judgment against Tegal, bankruptcy or termination of the majority of our
customer relationships. As of July 31, 2003, $0.9 million principal amount, and
as of October 9, 2003, $6.2 million principal amount of our 2% Convertible
Secured Debentures Due 2011 plus accrued interest payable in kind by issuance of
additional Debentures convertible into common stock in the amount of such
interest could be demanded for immediate payment by the Debenture holders upon
such an event of default. In the event of such a demand, Tegal would need to
pursue additional funding for repayment of such amount, or risk insolvency.
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The conversion of our convertible securities, the exercise of outstanding
warrants, options and other rights to obtain additional shares will dilute the
value of the shares.
On June 30, 2003, we entered into agreements with investors to raise up
to $7.2 million in a private placement of convertible debt financing to be
completed in two tranches, the first of which was completed on June 30, 2003 for
$0.9 million and the second of which was completed on September 9, 2003 for $6.2
million following stockholder approval on September 8, 2003. As of September 10,
2003, there are Debentures convertible into 20,471,440 shares of our common
stock (2,655,554 from the first tranche and 17,815,886 from the second tranche,
all of which are based on a conversion price of $0.35 per share and a cash
payment in lieu of any fractional share), warrants exercisable for approximately
5,792,765 shares of our common stock (2,229,653 from the first tranche and
3,563,112 from the second tranche), advisor warrants convertible into 1,756,127
shares, 3,274,307 shares issuable as interest payment in lieu of cash and
options exercisable for approximately 1,474,725 shares of our common stock.
The conversion of these convertible securities and the exercise of
these warrants will result in dilution in the value of the shares of our
outstanding common stock and the voting power represented thereby. In addition,
the conversion price of the Debentures or the exercise price of the warrants may
be lowered under the price adjustment provisions in the event of a "dilutive
issuance," that is, if we issue common stock at any time prior to their maturity
at a per share price below such conversion or exercise price, either directly or
in connection with the issuance of securities that are convertible into, or
exercisable for, shares of our common stock. A reduction in the exercise price
may result in the issuance of a significant number of additional shares upon the
exercise of the warrants.
Neither the Debentures nor the warrants establish a "floor" that would
limit reductions in such conversion price or exercise price. The downward
adjustment of the conversion price of these Debentures and of the exercise price
of these warrants could result in further dilution in the value of the shares of
our outstanding common stock and the voting power represented thereby.
We are registering 3,274,307 shares which can be issued as interest
payments to the Debenture holders in lieu of cash. The number of shares issuable
as interest payments is calculated by dividing total interest due over the life
of the Debentures at 2% per annum by a price per share of $0.35. If we elect to
use such shares to pay interest, such issuance will result in dilution to our
stockholders.
Sales of substantial amounts of our shares of common stock could cause the price
of our common stock to go down.
To the extent the holders of our convertible securities and warrants
convert or exercise such securities and then sell the shares of our common stock
they receive upon conversion or exercise, our stock price may decrease due to
the additional amount of shares available in the market. The subsequent sales of
these shares could encourage short sales by our stockholders and others which
could place further downward pressure on our stock price. Moreover, holders of
these convertible securities and warrants may hedge their positions in our
common stock by shorting our common stock, which could further adversely affect
our stock price. The effect of these activities on our stock price could
increase the number of shares issuable upon future conversions of our
convertible securities or exercises of our warrants.
We received stockholder approval to increase the number of authorized
shares of common stock to 100 million shares and to effect a reverse stock
split. We may also issue additional capital stock, convertible securities and/or
warrants to raise capital in the future. In addition, we may elect to pay any
accrued interest on the outstanding $7.2 million principal amount of Debentures
with shares of our common stock. Interest on the Debentures is calculated
quarter-annually, based on 2% per annum on the principal amount outstanding. In
addition, to attract and retain key personnel, we may issue additional
securities, including stock options. All of the above could result in additional
dilution of the value of our common stock and the voting power represented
thereby. No prediction can be made as to the effect, if any, that future sales
of shares of our common stock, or the availability of shares for future sale,
will have on the market price of our common stock prevailing from time to time.
Sales of substantial amounts of shares of our common stock in the public market,
or the perception that such sales could occur, may adversely affect the market
price of our common stock and may make it more difficult for us to sell our
equity securities in the future at a time and price which we deem appropriate.
Public or private sales of substantial amounts of shares of
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our common stock by persons or entities that have exercised options and/or
warrants could adversely affect the prevailing market price of the shares of our
common stock.
The semiconductor industry is cyclical and may experience periodic downturns
that may negatively affect customer demand for our products and result in losses
such as those experienced in the past.
Our business depends upon the capital expenditures of semiconductor
manufacturers, which in turn depend on the current and anticipated market demand
for integrated circuits. The semiconductor industry is highly cyclical and
historically has experienced periodic downturns, which often have had a
detrimental effect on the semiconductor industry's demand for semiconductor
capital equipment, including etch and deposition systems manufactured by us. In
response to the current prolonged industry slow-down, we have initiated a
substantial cost containment program and a corporate-wide restructuring to
preserve our cash. However, the need for continued investment in research and
development, possible capital equipment requirements and extensive ongoing
customer service and support requirements worldwide will continue to limit our
ability to reduce expenses in response to the current downturn.
Our competitors have greater financial resources and greater name recognition
than we do and therefore may compete more successfully in the semiconductor
capital equipment industry than we can.
We believe that to be competitive, we will require significant
financial resources in order to offer a broad range of systems, to maintain
customer service and support centers worldwide and to invest in research and
development. Many of our existing and potential competitors, including, among
others, Applied Materials, Inc., Lam Research Corporation, Novellus and Tokyo
Electron Limited, have substantially greater financial resources, more extensive
engineering, manufacturing, marketing and customer service and support
capabilities, larger installed bases of current generation etch, deposition and
other production equipment and broader process equipment offerings, as well as
greater name recognition than we do. We cannot assure you that we will be able
to compete successfully against these companies in the United States of America
or worldwide.
If we fail to meet the continued listing requirements of the Nasdaq Stock
Market, our stock could be delisted.
Our stock is currently listed on The Nasdaq SmallCap Market. The Nasdaq
Stock Market's Marketplace Rules impose certain minimum financial requirements
on us for the continued listing of our stock. One such requirement is the
minimum bid price on our stock of $1.00 per share. Beginning in 2002, there have
been periods of time during which we have been out of compliance with the $1.00
minimum bid requirements of the Nasdaq SmallCap Market.
On September 6, 2002, we received notification from Nasdaq that for the 30
days prior to the notice, the price of our common stock had closed below the
minimum $1.00 per share bid price requirement for continued inclusion under
Marketplace Rule 4450(a)(5) (the "Rule"), and were provided 90 calendar days, or
until December 5, 2002, to regain compliance. Our bid price did not close above
the minimum during that period. On December 6, 2002, we received notification
from Nasdaq that our securities would be delisted from The Nasdaq National
Market, the exchange on which our stock was listed prior to May 6, 2003, on
December 16, 2002 unless we either (i) applied to transfer our securities to The
Nasdaq SmallCap Market, in which case we would be afforded additional time to
come into compliance with the minimum $1.00 bid price requirement; or (ii)
appealed the Nasdaq staff's determination to the Nasdaq's Listing Qualifications
Panel (the "Panel"). On December 12, 2002 we requested an oral hearing before
the Panel and such hearing took place on January 16, 2003 in Washington, D.C.
Our appeal was based, among other things, on our intention to seek stockholder
approval for a reverse split of our outstanding common stock. On April 28, 2003
at a special meeting of our stockholders, our board of directors was granted the
authority to effect a reverse split of our common stock within a range of
two-for-one to fifteen-for-one. This authority was reaffirmed by our
stockholders at the Annual Meeting on September 8, 2003. The timing and ratio of
a reverse split, if any, is at the sole discretion of our board of directors,
but it must be completed on or before December 2, 2003. On May 6, 2003, we
transferred the listing of our common stock to the Nasdaq SmallCap Market. In
connection with this transfer, and by additional notice, Nasdaq granted us an
extension until December 31, 2003, to regain compliance with the Rule's minimum
$1.00 per share bid price requirement for continued inclusion on the Nasdaq
SmallCap Market.
4
On September 16, 2003, the bid price for our stock had closed at $1.00 or above
for ten consecutive days. On September 17, 2003, we received a letter from
Nasdaq confirming that Tegal had regained compliance with the minimum bid price
requirement and that the question of its continued listing on the SmallCap
Market was now closed.
If we are out of compliance in the future with Nasdaq listing
requirements, we may take actions in order to achieve compliance, which actions
may include a reverse split of our common stock. If an initial delisting
decision is made by the Nasdaq's staff, we may appeal the decision as permitted
by Nasdaq rules. If we are delisted and cannot obtain listing on another major
market or exchange, our stock's liquidity would suffer, and we would likely
experience reduced investor interest. Such factors may result in a decrease in
our stock's trading price. Delisting also may restrict us from issuing
additional securities or securing additional financing.
We depend on sales of our advanced products to customers that may not fully
adopt our product for production use.
We have designed our advanced etch and deposition products for customer
applications in emerging new films, polysilicon and metal which we believe to be
the leading edge of critical applications for the production of advanced
semiconductor and other microelectronic devices. Revenues from the sale of our
advanced etch and deposition systems accounted for 25% and 36% of total revenues
in fiscal 2003 and 2002, respectively. Our advanced systems are currently being
used primarily for research and development activities or low volume production.
For our advanced systems to achieve full market adoption, our customers must
utilize these systems for volume production. There can be no assurance that the
market for devices incorporating emerging films, polysilicon or metal will
develop as quickly or to the degree we expect.
If our advanced systems do not achieve significant sales or volume
production due to a lack of full customer adoption, our business, financial
condition, results of operations and cash flows will be materially adversely
affected.
Our potential customers may not adopt our products because of their significant
cost or because our potential customers are already using a competitor's tool.
A substantial investment is required to install and integrate capital
equipment into a semiconductor production line. Additionally, we believe that
once a device manufacturer has selected a particular vendor's capital equipment,
that manufacturer generally relies upon that vendor's equipment for that
specific production line application and, to the extent possible, subsequent
generations of that vendor's systems. Accordingly, it may be extremely difficult
to achieve significant sales to a particular customer once that customer has
selected another vendor's capital equipment unless there are compelling reasons
to do so, such as significant performance or cost advantages. Any failure to
gain access and achieve sales to new customers will adversely affect the
successful commercial adoption of our products and could have a detrimental
effect on us.
Our quarterly operating results may continue to fluctuate.
Our revenue and operating results have fluctuated and are likely to
continue to fluctuate significantly from quarter to quarter, and there can be no
assurance as to future profitability.
Our 900 series etch systems typically sell for prices ranging between
$250,000 and $600,000, while prices of our 6500 series critical etch systems and
our Endeavor deposition system typically range between $1.8 million and $3.0
million. To the extent we are successful in selling our 6500 and Endeavor series
systems, the sale of a small number of these systems will probably account for a
substantial portion of revenue in future quarters, and a transaction for a
single system could have a substantial impact on revenue and gross margin for a
given quarter.
Other factors that could affect our quarterly operating results
include:
o our timing of new systems and technology announcements and
releases and ability to transition between product versions;
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o seasonal fluctuations in sales;
o changes in the mix of our revenues represented by our various
products and customers;
o adverse changes in the level of economic activity in the
United States or other major economies in which we do
business;
o foreign currency exchange rate fluctuations;
o expenses related to, and the financial impact of, possible
acquisitions of other businesses; and
o changes in the timing of product orders due to unexpected
delays in the introduction of our customers' products, due to
lifecycles of our customers' products ending earlier than
expected or due to market acceptance of our customers'
products.
Because technology changes rapidly, we may not be able to introduce our products
in a timely enough fashion.
The semiconductor manufacturing industry is subject to rapid
technological change and new system introductions and enhancements. We believe
that our future success depends on our ability to continue to enhance our
existing systems and their process capabilities, and to develop and manufacture
in a timely manner new systems with improved process capabilities. We may incur
substantial unanticipated costs to ensure product functionality and reliability
early in our products' life cycles. There can be no assurance that we will be
successful in the introduction and volume manufacture of new systems or that we
will be able to develop and introduce, in a timely manner, new systems or
enhancements to our existing systems and processes which satisfy customer needs
or achieve market adoption.
Some of our sales cycles are lengthy, exposing us to the risks of inventory
obsolescence and fluctuations in operating results.
Sales of our systems depend, in significant part, upon the decision of
a prospective customer to add new manufacturing capacity or to expand existing
manufacturing capacity, both of which typically involve a significant capital
commitment. We often experience delays in finalizing system sales following
initial system qualification while the customer evaluates and receives approvals
for the purchase of our systems and completes a new or expanded facility. Due to
these and other factors, our systems typically have a lengthy sales cycle (often
12 to 18 months in the case of critical etch and deposition systems) during
which we may expend substantial funds and management effort. Lengthy sales
cycles subject us to a number of significant risks, including inventory
obsolescence and fluctuations in operating results over which we have little or
no control.
We may not be able to protect our intellectual property or obtain licenses for
third parties' intellectual property and therefore we may be exposed to
liability for infringement or the risk that our operations may be adversely
affected.
Although we attempt to protect our intellectual property rights through
patents, copyrights, trade secrets and other measures, we may not be able to
protect our technology adequately and competitors may be able to develop similar
technology independently. Additionally, patent applications that we may file may
not be issued and foreign intellectual property laws may not protect our
intellectual property rights. There is also a risk that patents licensed by or
issued to us will be challenged, invalidated or circumvented and that the rights
granted thereunder will not provide competitive advantages to us. Furthermore,
others may independently develop similar systems, duplicate our systems or
design around the patents licensed by or issued to us.
Existing litigation and any future litigation could result in
substantial cost and diversion of effort by us, which by itself could have a
detrimental effect on our financial condition, operating results and cash flows.
Further, adverse determinations in such litigation could result in our loss of
proprietary rights, subject us to significant liabilities to third parties,
require us to seek licenses from third parties or prevent us from manufacturing
or selling
6
our systems. In addition, licenses under third parties' intellectual property
rights may not be available on reasonable terms, if at all.
Our customers are concentrated and therefore the loss of a significant customer
may harm our business.
Our top five customers accounted for 88.2%, 54.4% and 42.0% of our
systems revenues in fiscal 2003, 2002 and 2001, respectively. Four customers
each accounted for more than 10% of net systems sales in fiscal 2003. Although
the composition of the group comprising our largest customers may vary from year
to year, the loss of a significant customer or any reduction in orders by any
significant customer, including reductions due to market, economic or
competitive conditions in the semiconductor manufacturing industry, may have a
detrimental effect on our business, financial condition, results of operations
and cash flows. Our ability to increase our sales in the future will depend, in
part, upon our ability to obtain orders from new customers, as well as the
financial condition and success of our existing customers and the general
economy, which is largely beyond our ability to control.
We are exposed to additional risks associated with international sales and
operations.
International sales accounted for 66%, 67% and 61% of total revenue for
fiscal 2003, 2002 and 2001, respectively. International sales are subject to
certain risks, including the imposition of government controls, fluctuations in
the U.S. dollar (which could increase the sales price in local currencies of our
systems in foreign markets), changes in export license and other regulatory
requirements, tariffs and other market barriers, political and economic
instability, potential hostilities, restrictions on the export or import of
technology, difficulties in accounts receivable collection, difficulties in
managing representatives, difficulties in staffing and managing international
operations and potentially adverse tax consequences. There can be no assurance
that any of these factors will not have a detrimental effect on our operations,
financial results and cash flows.
Sales of our systems in certain countries are billed in local currency,
and we have a line of credit denominated in Japanese Yen. We generally attempt
to offset a portion of our U.S. dollar denominated balance sheet exposures
subject to foreign exchange rate remeasurement by purchasing forward currency
contracts for future delivery. There can be no assurance that our future results
of operations and cash flows will not be adversely affected by foreign currency
fluctuations. In addition, the laws of certain countries in which our products
are sold may not provide our products and intellectual property rights with the
same degree of protection as the laws of the United States of America.
We must integrate our acquisition of Sputtered Films and we may need to make
additional future acquisitions to remain competitive. The process of
identifying, acquiring and integrating future acquisitions may constrain
valuable management resources, and our failure to effectively integrate future
acquisitions may result in the loss of key employees and the dilution of
stockholder value and have an adverse effect on our operating results.
We acquired Sputtered Films, Inc. in August 2002. We may in the future
seek to acquire or invest in additional businesses, products or technologies
that we believe could complement or expand our business, augment our market
coverage, enhance our technical capabilities or that may otherwise offer growth
opportunities. We may encounter problems with the assimilation of Sputtered
Films or businesses, products or technologies acquired in the future including:
o difficulties in assimilation of acquired personnel,
operations, technologies or products;
o unanticipated costs associated with acquisitions;
o diversion of management's attention from other business
concerns and potential disruption of our ongoing business;
o adverse effects on our existing business relationships with
our customers;
o potential patent or trademark infringement from acquired
technologies;
7
o adverse effects on our current employees and the inability to
retain employees of acquired companies;
o use of substantial portions of our available cash as all or a
portion of the purchase price; and
o dilution of our current stockholders due to issuances of
additional securities as consideration for acquisitions.
If we are unable to successfully integrate our acquired companies or to
create new or enhanced products and services, we may not achieve the anticipated
benefits from our acquisitions. If we fail to achieve the anticipated benefits
from the acquisitions, we may incur increased expenses and experience a
shortfall in our anticipated revenues and we may not obtain a satisfactory
return on our investment. In addition, if a significant number of employees of
acquired companies fail to remain employed with us, we may experience
difficulties in achieving the expected benefits of the acquisitions.
Completing any potential future acquisitions could cause significant
diversions of management time and resources. Financing for future acquisitions
may not be available on favorable terms, or at all. If we identify an
appropriate acquisition candidate for any of our businesses, we may not be able
to negotiate the terms of the acquisition successfully, finance the acquisition
or integrate the acquired business, products, technologies or employees into our
existing business and operations. Future acquisitions may not be well-received
by the investment community, which may cause our stock price to fall. We have
not entered into any agreements or understanding regarding any future
acquisitions and cannot ensure that we will be able to identify or complete any
acquisition in the future.
If we acquire businesses, new products or technologies in the future,
we may be required to amortize significant amounts of identifiable intangible
assets and we may record significant amounts of goodwill that will be subject to
annual testing for impairment. If we consummate one or more significant future
acquisitions in which the consideration consists of stock or other securities,
our existing stockholders' ownership could be significantly diluted. If we were
to proceed with one or more significant future acquisitions in which the
consideration included cash, we could be required to use a substantial portion
of our available cash.
Our workforce reductions and financial performance may adversely affect the
morale and performance of our personnel and our ability to hire new personnel.
We have made reductions in our workforce in order to reduce costs and
bring staffing in line with our anticipated requirements. There were costs
associated with the workforce reductions related to severance and other
employee-related costs, and our restructuring may yield unanticipated costs and
consequences, such as attrition beyond our planned reduction in staff. In
addition, our common stock has declined in value below the exercise price of
many options granted to employees pursuant to our stock option plans. Thus, the
intended benefits of the stock options granted to our employees, the creation of
performance and retention incentives, may not be realized. In addition,
workforce reductions and management changes create anxiety and uncertainty and
may adversely affect employee morale. As a result, we may lose employees whom we
would prefer to retain. As a result of these factors, our remaining personnel
may seek employment with larger, more established companies or companies
perceived as having less volatile stock prices.
Provisions in our agreements, charter documents, stockholder rights plan and
Delaware law may deter takeover attempts, which could decrease the value of your
shares.
Our certificate of incorporation and bylaws and Delaware law contain
provisions that could make it more difficult for a third party to acquire us
without the consent of our board of directors. Our board of directors has the
right to issue preferred stock without stockholder approval, which could be used
to dilute the stock ownership of a potential hostile acquirer. Delaware law
imposes some restrictions on mergers and other business combinations between us
and any holder of 15% or more of our outstanding common stock. In addition, we
have adopted a stockholder rights plan that makes it more difficult for a third
party to acquire us without the approval of our board of directors. These
provisions apply even if the offer may be considered beneficial by some
stockholders.
8
Our stock price is volatile and could result in a material decline in the value
of your investment in Tegal.
We believe that factors such as announcements of developments related
to our business, fluctuations in our operating results, sales of our common
stock into the marketplace, failure to meet or changes in analysts'
expectations, general conditions in the semiconductor industry or the worldwide
economy, announcements of technological innovations or new products or
enhancements by us or our competitors, developments in patents or other
intellectual property rights, developments in our relationships with our
customers and suppliers, natural disasters and outbreaks of hostilities could
cause the price of our common stock to fluctuate substantially. In addition, in
recent years the stock market in general, and the market for shares of small
capitalization stocks in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. There can be no assurance that the market price of our
common stock will not experience significant fluctuations in the future,
including fluctuations that are unrelated to our performance.
Potential disruption of our supply of materials required to build our systems
could have a negative effect on our operations and damage our customer
relationships.
Materials delays have not been significant in recent years.
Nevertheless, we procure certain components and sub-assemblies included in our
systems from a limited group of suppliers, and occasionally from a single source
supplier. For example, we depend on MECS Corporation, a robotic equipment
supplier, as the sole source for the robotic arm used in all of our 6500 series
systems. We currently have no existing supply contract with MECS Corporation,
and we currently purchase all robotic assemblies from MECS Corporation on a
purchase order basis. Disruption or termination of certain of these sources,
including our robotic sub-assembly source, could have an adverse effect on our
operations and damage our relationship with our customers.
Any failure by us to comply with environmental regulations imposed on us could
subject us to future liabilities.
We are subject to a variety of governmental regulations related to the
use, storage, handling, discharge or disposal of toxic, volatile or otherwise
hazardous chemicals used in our manufacturing process. We believe that we are
currently in compliance in all material respects with these regulations and that
we have obtained all necessary environmental permits generally relating to the
discharge of hazardous wastes to conduct our business. Nevertheless, our failure
to comply with present or future regulations could result in additional or
corrective operating costs, suspension of production, alteration of our
manufacturing processes or cessation of our operations.
FORWARD-LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements, which are based on
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by the use of the words "anticipate," "believe,"
"estimate," "expect," "intend," "project," or similar expressions. These
forward-looking statements are subject to risks, uncertainties and assumptions
about us. Important factors that could cause actual results to differ materially
from the forward-looking statements we make in this prospectus are set forth
under the caption "Risk Factors" and elsewhere in this prospectus and the
documents incorporated by reference in this prospectus. If one or more of these
risks or uncertainties materialize, or if any underlying assumptions prove
incorrect, our actual results, performance or achievements may vary materially
from any future results, performance or achievements expressed or implied by
these forward-looking statements. All forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirely by
the cautionary statements in this paragraph.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale
under this prospectus of the common stock. We will not receive any proceeds from
these sales.
9
SELLING SECURITYHOLDERS
The shares of common stock offered by the selling securityholders were
originally issued pursuant to either the exercise of warrants to purchase our
common stock, the conversion of convertible Debentures or private placement
transactions exempt from the registration requirements of the Securities Act.
The shares are being registered to permit public secondary trading of the
shares, and the selling securityholders, including their transferees, pledges,
donees or their successors, may offer the shares for resale from time to time.
See "Plan of Distribution." In accordance with registration rights granted to
the selling securityholders, we have filed with the Securities and Exchange
Commission, under the Securities Act, a registration statement on Form S-3, of
which this prospectus forms a part, with respect to the resales of the shares
from time to time on the Nasdaq SmallCap Market, in privately-negotiated
transactions, or otherwise, and have agreed to prepare and file such amendments
and supplements to the registration statement as may be necessary to keep such
registration statement effective until the shares are no longer required to be
registered for the sale thereof by the selling securityholders.
The following table sets forth information as of September 10, 2003 the
shares of common stock beneficially owned by each selling securityholder that
may be offered pursuant to this prospectus. The information is based on
information provided by or on behalf of the selling securityholders. The selling
securityholders may offer all, some or none of the common stock. Because the
selling securityholders may offer all or some portion of the common stock, we
cannot estimate the amount of the common stock that will be held by the selling
securityholders upon termination of any of these sales. In addition, the selling
securityholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their common stock since the date on which they
provided the information regarding their common stock in transactions exempt
from the registration requirements of the Securities Act. The number of shares
of common stock owned prior to the offering includes shares of common stock
issuable upon conversion of convertible Debentures. The number of shares of
common stock issuable upon conversion of the Debentures offered hereby is based
on a conversion price of $0.35 per share and a cash payment in lieu of any
fractional share.
Information concerning other selling securityholders will be set forth
in post-effective amendments to this prospectus from time to time, if required.
Information concerning the securityholders may change from time to time and any
changed information will be set forth in post-effective amendments to this
prospectus if and when necessary. In addition, the conversion price, and
therefore, the number of shares of common stock issuable upon conversion of the
Debentures, is subject to adjustment under certain circumstances. Accordingly,
the number of shares of common stock into which the Debentures are convertible
may increase or decrease. Except as disclosed in the footnotes to the selling
securityholder table, Tegal has no relationship with the selling securityholders
prior to the issuance of the convertible Debentures.
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Shares of Shares of Shares of Shares Total Shares Aggregate
Name of Selling Common Stock Common Stock Common Stock Issuable as of Common Shares of
Securityholder Owned Prior Issuable upon Issuable Upon Interest Stock Offered Common Stock
to the Conversion of Exercise of Payment in by this Owned (2)
Offering (1) Convertible Warrants Lieu of Cash Prospectus
Debentures
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Hershel Berkowitz 48,923 273,517 54,702 50,268 378,487 427,410
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Orin Hirschman(3) 217,929 1,218,392 243,674 223,923 1,685,989 1,903,918
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Steven Spira 66,713 372,978 74,594 68,548 516,120 582,833
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
CAM Co.(4) 177,901 994,606 198,918 182,795 1,376,319 1,554,220
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Ganot 177,901 994,606 198,918 182,795 1,376,319 1,554,220
Corporation(5)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
10
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Anfel Trading 88,950 497,303 99,459 91,397 688,159 777,109
Limited(6)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Dr. Jack Dodick 177,901 994,606 198,918 182,795 1,376,319 1,554,220
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Globis Capital 155,664 870,280 174,053 159,945 1,204,278 1,359,942
Partners L.P.(7)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Paul Packer 22,237 124,326 24,864 22,849 172,039 194,276
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Richard Grossman 44,474 248,652 49,729 45,699 344,080 388,554
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Mazel D&K, Inc.(8) 44,474 248,652 49,729 45,699 344,080 388,554
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
James Kardon 6,671 37,298 7,459 6,855 51,612 58,283
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Neal I. Goldman 155,664 870,280 174,053 159,945 1,204,278 1,359,942
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
A. Alexander 67,237 124,326 24,864 22,849 172,039 239,276
Arnold III(9)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Trust U/W Kenneth
R. Berol FBO John 44,474 248,652 49,729 45,699 344,080 388,554
A. Berol(10)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Trust U/W Kenneth
R. Berol FBO David 44,474 248,652 49,729 45,699 344,080 388,554
N. Berol(10)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Berol Family Trust
FBO Margaret 44,474 248,652 49,729 45,699 344,080 388,554
Beattie(10)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Laddcap Value 88,950 497,303 99,459 91,397 688,159 777,109
Partners LP
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Schottenfeld
Qualified 222,376 1,243,258 248,647 228,493 1,720,398 1,942,774
Associates, LP
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
CSL Associates LP 44,474 248,652 49,729 45,699 344,080 388,554
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Performance 44,474 248,652 49,729 45,699 344,080 388,554
Capital Group, LLC
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Hilary Shane 88,950 497,303 99,459 91,397 688,159 777,109
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Kinderhook Capital 22,237 124,326 24,864 22,849 172,039 194,276
Partners LLC(11)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Karl Niehoff 52,792 124,326 24,864 22,849 172,039 224,831
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
11
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Special Situations
Private Equity 667,129 3,729,772 745,944 685,479 5,161,195 5,828,324
Fund,. L.P.(12)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Special Situations
Technology Fund, 371,968 406,925 81,384 382,199 870,508 1,242,476
L.P.(12)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
Special Situations
Technology Fund 72,785 2,079,591 415,912 74,787 2,570,290 2,643,075
II, L.P.(12)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
TSD Trading, 0 0 1,756,127 0 1,756,127 1,756,127
LLC(11)
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
TOTAL 3,262,196 17,815,886 5,319,239 3,274,307 26,409,432 29,671,628
========= ========== ========= ========= ========== ==========
- -------------------- --------------- ---------------- ---------------- --------------- --------------- ---------------
(1) Includes shares of common stock issuable upon conversion of the Debentures
and warrants issued in the first tranche, assuming a Debenture conversion price
of $0.35 per share, warrant exercise price of $0.50 per share and a cash payment
in lieu of any fractional share interest. The conversion price is subject to
adjustment.
(2) Based on Rule 13d-3(d)(i) under the Securities Exchange Act of 1934 using
16,091,762 shares of common stock outstanding on July 25, 2003, the following
securityholders hold over 1% of our outstanding common stock: Hershel Berkowitz
(2.59%), Orin Hirschman (10.58%), Steven Spira (3.50%), CAM Co. (8.81%); Ganot
Corporation (8.81%), Anfel Trading Limited (4.61%), Dr. Jack Dodick (8.81%),
Globis Capital Partners L.P. (7.79%), Paul Packer (1.19%), Richard Grossman
(2.36%), Mazel D&K, Inc. (2.36), Neal I. Golman (7.79%), A. Alexander Arnold III
(1.47%), Trust U/W Kenneth R. Berol FBO John A. Berol (2.36%), Trust U/W Kenneth
R. Berol FBO David N. Berol (2.36%), Berol Family Trust FBO Margaret Beattie
(2.36%), Laddcap Value Partners,LP (4.61%), Schottenfeld Qualified Associates,
LP (10.77%), CSL Associates LP (2.36%), Performance Capital Group, LLC (2.36%),
Hilary Shane (4.61%), Kinderhook Capital Partners LLC (1.19%), Karl Niehoff
(1.38%), Special Situations Private Equity Fund,. L.P. (26.59%), Special
Situations Technology Fund, L.P. (7.17%), Special Situations Technology Fund II,
L.P. (14.11%), and TSD Trading, LLC (9.84%). In calculating this amount, we
treated as outstanding the number of shares of common stock issuable upon
conversion of all of that particular holder's Debentures and upon exercise of
all of such holder's warrants. However, we did not assume the conversion of any
other holder's Debentures or the exercise of any other holder's warrants.
(3) We have entered into a financial advisory agreement with Orin Hirschman.
(4) Charles Alpert is the beneficial owner or control person for CAM Co.
(5) Sisel Klurman is the beneficial owner or control person for Ganot
Corporation.
(6) Andre Zolty is the beneficial owner or control person for Anfel Trading
Limited.
(7) Paul Packer is the beneficial owner or control person for Globis Capital
Partners, L.P.
(8) Reuvan Dessler is the control person for Mazel D&K, Inc.
(9) A. Alexander Arnold, III is an investment manager for and Managing Director
of Trainer Wortham.
(10) Voting rests with the trustees of the six trusts, all of whom are the same.
A. Alexander Arnold, III is a trustee. In addition, the shares held in trust are
held at Trainer Wortham.
(11) Kinderhook Capital Partners, LLC ("Kinderhook") and TSD Trading, LLC
("TSD") share the same principal. Simon Rose is the registered representative at
TSD and the sole member of Kinderhook.
(12) MG Advisers, L.L.C. ("MG") is the general partner of and investment adviser
to the Special Situations Private Equity Fund, L.P. SST Advisers, L.L.C.
("SSTA") is the general partner of and investment adviser to the Special
Situations Technology Fund, L.P. and Special Situations Technology Fund II, L.P.
Austin W. Marxe and David M. Greenhouse are the principal owners of MG and SSTA
and are principally responsible for the selection, acquisition and disposition
of the portfolio securities by each investment advisor on behalf of its funds.
12
PLAN OF DISTRIBUTION
The selling securityholders, which term includes their transferees,
pledgees or donees or their successors, may sell the common stock directly to
purchasers or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling securityholders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
The common stock may be sold in one or more transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o prices related to the prevailing market prices;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in transactions:
o on any national securities exchange or quotation service on
which our common stock may be listed or quoted at the time
of sale, including the Nasdaq SmallCap Market;
o in the over-the-counter market;
o otherwise than on such exchanges or services or in the
over-the-counter market;
o through the writing of options, whether the options are
listed on an options exchange or otherwise; or
o through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the common stock or otherwise, the
selling securityholders may enter into hedging transactions with broker-dealers
or other financial institutions. These broker-dealers or financial institutions
may in turn engage in short sales of the common stock in the course of hedging
the positions they assume with selling securityholders. The selling
securityholders may also sell the common stock short and deliver these
securities to close out such short positions, or loan or pledge the common stock
to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of
the common stock offered by them hereby will be the purchase price of the common
stock less discounts and commissions, if any. Each of the selling
securityholders reserves the right to accept and, together with their agents
from time to time, to reject, in whole or in part, any proposed purchase of
common stock to be made directly or through agents. We will not receive any of
the proceeds from this offering.
Our outstanding common stock is listed for trading on the Nasdaq
SmallCap Market.
In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the
13
common stock may not be offered or sold unless they have been registered or
qualified for sale or an exemption is available and complied with.
Broker-dealers or agents that participate in the sale of the common
stock may be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act. Selling securityholders that participate in the sale of the
common stock may also be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Profits on the sale of the common stock by
selling securityholders and any discounts, commissions or concessions received
by any broker-dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. Selling securityholders who are deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act. To the
extent the selling securityholders may be deemed to be "underwriters," they may
be subject to statutory liabilities, including, but not limited to, Sections 11,
12 and 17 of the Securities Act.
The selling securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder. Regulation M of the Exchange Act may limit
the timing of purchases and sales of any of the securities by the selling
securityholders and any other person. In addition, Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
The selling securityholders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules
thereunder relating to stock manipulation, particularly Regulation M, and have
agreed that they will not engage in any transaction in violation of such
provisions.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholder and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
securityholders.
A selling securityholder may decide not to sell any common stock
described in this prospectus. We cannot assure holders that any selling
securityholder will use this prospectus to sell any or all of the common stock.
Any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule
144A rather than pursuant to this prospectus. In addition, a selling
securityholder may transfer, devise or gift the common stock by other means not
described in this prospectus.
With respect to a particular offering of the common stock, to the
extent required, an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part will be prepared and will set forth the following information:
o the specific common stock to be offered and sold;
o the names of the selling securityholders;
o the respective purchase prices and public offering prices
and other material terms of the offering;
o the names of any participating agents, broker-dealers or
underwriters; and
o any applicable commissions, discounts, concessions and other
items constituting, compensation from the selling
securityholders.
We entered into several registration rights agreement for the benefit
of holders of our common stock, Debentures convertible into our common stock and
warrants to purchase our common stock to register their common stock under
applicable federal and state securities laws under certain circumstances and at
certain times. The registration rights agreements provide that the selling
securityholders and Tegal will indemnify each other and their respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act, or will be entitled to contribution in
14
connection with those liabilities. We will pay all of our expenses and specified
expenses incurred by the selling securityholders incidental to the registration,
offering and sale of the common stock to the public, but each selling
securityholder will be responsible for payment of commissions, concessions, fees
and discounts of underwriters, broker-dealers and agents.
LEGAL MATTERS
Certain legal matters relating to the offering will be passed upon for
Tegal by Latham & Watkins LLP, Menlo Park, California. Certain legal matters
will be passed upon for any agents or underwriters by counsel for such agents or
underwriters identified in the applicable prospectus supplement.
EXPERTS
The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended March 31, 2003 have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the ability of Tegal Corporation to continue as a going concern, as
described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, we file annual, quarterly and periodic
reports, proxy statements and other information with the SEC relating to our
business, financial statements and other matters. You may read and copy any
documents we have filed with the SEC at prescribed rates at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. You can obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to you free of charge at the
SEC's web site at http://www.sec.gov and at our web site at
http://www.tegal.com. Information contained in our web site is not part of this
prospectus.
This prospectus is only part of a registration statement on Form S-3 that
we have filed with the SEC under the Securities Act, and therefore omits certain
information contained in the registration statement. We have also filed exhibits
with the registration statement that are not included in this prospectus, and
you should refer to the applicable exhibit for a compete description of any
statement referring to any contract or other document. A copy of the
registration statement, including the exhibits thereto, may be inspected without
charge at the Public Reference Room of the SEC described above, and copies of
such material may be obtained from such office upon payment of the fees
prescribed by the SEC.
We have elected to "incorporate by reference" certain information into this
prospectus. By incorporating by reference, we can disclose important information
to you by referring you to another document we have filed with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for information incorporated by reference that is superseded by
information contained in this prospectus. This prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC:
Tegal Corporation SEC Filings Period Ended
------------------------------ ------------
Annual Report on Form 10-K (including information specifically incorporated by
reference into our Form 10-K from our 2003 Annual Report to Stockholders and
Proxy Statement for our 2003 Annual Meeting of Stockholders)..................... March 31, 2003
Quarterly Report on Form 10-Q....................................................... June 30, 2003
Current Report on Form 8-K.......................................................... filed on July 2, 2003
The description of our common stock as set forth in our Registration Statement on
Form 8-A......................................................................... filed on September 21, 1995
All documents that we file with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act from the date of this prospectus to the end of
the offering of the common stock under this prospectus shall also be deemed to
be incorporated in this prospectus by reference.
15
You may obtain copies of these documents from us without charge (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents) by writing to us at Tegal
Corporation, 2201 South McDowell Boulevard, Petaluma, California 94954 or
calling us at (707) 763-5600.
16
26,409,432 SHARES OF COMMON STOCK
TEGAL CORPORATION
PROSPECTUS
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and any applicable supplement to
this prospectus. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or any applicable
supplement to this prospectus. Neither this prospectus nor any applicable
supplement to this prospectus constitutes an offer to sell or the solicitation
of an offer to buy any securities other than the registered common stock to
which it relates, nor does this prospectus or any supplement to this prospectus
constitute an offer to sell or the solicitation of an offer to buy securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. You should not assume that the information
contained in this prospectus or any supplement to this prospectus is accurate on
any date subsequent to the date set forth on the front of this prospectus or any
supplement to this prospectus or that any information we have incorporated by
reference is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus and any applicable
supplement to this prospectus is delivered or securities issued on a later date.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
registrant in connection with the registration for resale of our common stock.
All of the amounts shown are estimates except the Securities and Exchange
Commission (the "Commission") registration fee.
Amount
-------------
Commission Registration Fee............................... $ 2,606.56
*Costs of Printing........................................ 10,000.00
*Legal Fees and Expenses.................................. 50,000.00
*Accounting Fees and Expenses............................. 30,000.00
*Miscellaneous Expenses................................... 10,000.00
-------------
*Total............................................... $ 102,606.56
*Estimated
ITEM 15. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are a Delaware corporation. Subsection (b)(7) of Section 102 of the
Delaware General Corporation Law (the "DGCL"), enables a corporation in its
original certificate of incorporation or an amendment thereto to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of the director's fiduciary duty,
except (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any present or former director, officer, employee or agent of the
corporation, or any individual serving at the corporation's request as a
director, officer, employee or agent of another organization, who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding provided that such director, officer, employee
or agent acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, provided further that such director, officer,
employee or agent had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
present or former director, officer, employee or agent who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit provided that such director, officer, employee or agent acted in
good faith and in a manner reasonably believed to be in, or not opposed to, the
best interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such director, officer,
employee or agent shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such director or officer is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall deem
proper.
II-1
Section 145 further provides that to the extent a director, officer,
employee or agent has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification and advancement of expenses provided
for, by, or granted pursuant to, Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and empowers
the corporation to purchase and maintain insurance on behalf of a present or
former director, officer, employee or agent of the corporation, or any
individual serving at the corporation's request as a director, officer or
employee of another organization, against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Our Certificate of Incorporation provides that to the fullest extent
permitted by the Delaware General Corporation Law ("DGCL"), a director of Tegal
shall not be liable to Tegal or its stockholders for monetary damages for breach
of fiduciary duty as a director.
We have in effect directors' and officers' liability policies in the
aggregate amount of $10 million covering all of its directors and officers.
ITEM 16. INDEX TO EXHIBITS.
Number Exhibit
------ -------
4.1 Tegal's Certificate of Incorporation, as amended, filed as
Exhibits 3(i)1 and 3(i)2 to Tegal's Registration Statement on Form
S-1 (SEC File No. 033-84702) filed on October 3, 1994 and
incorporated herein by reference.
4.2 Tegal's Certificate of Amendment to the Certificate of
Incorporation, filed with the Delaware Secretary of State on
September 9, 2003.*
4.3 Tegal's By-Laws, as amended, filed as Exhibit 3(ii) to Tegal's
Registration Statement on Form S-1 (SEC File No. 033-84702) filed
on October 3, 1994 and incorporated herein by reference.
4.4 Rights Agreement between Tegal and ChaseMellon Shareholder
Services, LLC, as Rights Agent, dated as of June 11, 1996, filed
as Exhibit 4.1 to Tegal's Current Report on Form 8-K (SEC File No.
000-26824) filed on June 28, 1996 and incorporated herein by
reference.
4.5 First Amendment to Rights Agreement between Tegal and ChaseMellon
Shareholder Services, LLC, as Rights Agent, dated as of January
15, 1999, filed as Exhibit 99.1 to Tegal's Current Report on Form
8-K (SEC File No. 000-26824) filed on January 15, 1999 and
incorporated herein by reference.
4.6 Form of Certificate for Common Stock filed as Exhibit 4.1 to
Tegal's Registration Statement on Form S-1 (SEC File No.
033-84702), filed on October 3, 1994 and incorporated herein by
reference.
5.1 Opinion of Latham & Watkins LLP.*
23.1 Consent of Latham & Watkins LLP (included in Exhibit 5.1).*
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.*
24.1 Power of Attorney (included on signature page).*
- -------------
* Filed herewith.
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ITEM 17. 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;
(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 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
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 Securities
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; and
(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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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 Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of 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 Act and will
be governed by the final adjudication of such issue.
II-3
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-3 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 18th day of
September, 2003.
TEGAL CORPORATION
By /s/ Michael L.. Parodi
-------------------------------
Michael L. Parodi
Chairman of the Board,
President & Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael L. Parodi, and Thomas R. Mika,
and each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, 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 connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, 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 below by the following persons in the
capacities and on the 18th day of September, 2003.
SIGNATURE TITLE
--------- -----
/s/ Michael L. Parodi Chairman of the Board, President & Chief Executive Officer
- ---------------------------------------- (Principal Executive Officer)
Michael L. Parodi
/s/ Thomas R. Mika Executive Vice President & Chief Executive Officer
- ---------------------------------------- (Principal Financial and Accounting Officer)
Thomas R. Mika
/s/ Jeffrey M. Krauss Director
- ----------------------------------------
Jeffrey M. Krauss
/s/ H. Duane Wadsworth Director
- ----------------------------------------
H. Duane Wadsworth
II-4
EXHIBIT INDEX
Number Exhibit
------ -------
4.1 Tegal's Certificate of Incorporation, as amended, filed as
Exhibits 3(i)1 and 3(i)2 to Tegal's Registration Statement on Form
S-1 (SEC File No. 033-84702) filed on October 3, 1994 and
incorporated herein by reference.
4.2 Tegal's Certificate of Amendment to the Certificate of
Incorporation, filed with the Delaware Secretary of State on
September 9, 2003.*
4.3 Tegal's By-Laws, as amended, filed as Exhibit 3(ii) to Tegal's
Registration Statement on Form S-1 (SEC File No. 033-84702) filed
on October 3, 1994 and incorporated herein by reference.
4.4 Rights Agreement between Tegal and ChaseMellon Shareholder
Services, LLC, as Rights Agent, dated as of June 11, 1996, filed
as Exhibit 4.1 to Tegal's Current Report on Form 8-K (SEC File No.
000-26824) filed on June 28, 1996 and incorporated herein by
reference.
4.5 First Amendment to Rights Agreement between Tegal and ChaseMellon
Shareholder Services, LLC, as Rights Agent, dated as of January
15, 1999, filed as Exhibit 99.1 to Tegal's Current Report on Form
8-K (SEC File No. 000-26824) filed on January 15, 1999 and
incorporated herein by reference.
4.6 Form of Certificate for Common Stock filed as Exhibit 4.1 to
Tegal's Registration Statement on Form S-1 (SEC File No.
033-84702), filed on October 3, 1994 and incorporated herein by
reference.
5.1 Opinion of Latham & Watkins LLP.*
23.1 Consent of Latham & Watkins LLP (included in Exhibit 5.1).*
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.*
24.1 Power of Attorney (included on signature page).*
- ----------
* Filed herewith.
E-1