AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 2004
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
(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. [ ]
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 (1) PRICE PER UNIT PRICE FEE
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Common Stock, par value $0.01 9,151,661 shares $1.725 $15,786,615 $2,000.17(3)
per share (2)
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(1) In the event of a stock split, stock dividend or similar transaction
involving the Common Stock, in order to prevent dilution, the number of
shares registered shall be automatically increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act of 1933.
(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 ($1.725) of
the high ($1.82) and low ($1.63) prices of the common stock on June 23,
2004, 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.
(3) The registration fee has bee satisfied using a fee offset from
Registration Statement No. 333-113147 filed on February 27, 2004 and
withdrawn on June 30, 2004.
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.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDER 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 STOCKHOLDER
IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION, DATED JUNE 30, 2004
PROSPECTUS
TEGAL CORPORATION
9,151,661
SHARES OF COMMON STOCK
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This prospectus may be used only for the resale of up to 9,151,661 shares of
common stock by Kingsbridge Capital Limited ("Kingsbridge"). Kingsbridge may
acquire these shares from us pursuant to a Amended and Restated Common Stock
Purchase Agreement (the "Purchase Agreement"), or structured secondary offering
facility (the "Structured Secondary"), and a Warrant that we issued to
Kingsbridge in connection with entering into such Structured Secondary.
Kingsbridge will receive all of the proceeds from the sale of shares of common
stock hereunder and will pay all underwriting discounts and selling commissions,
if any, applicable to the sale of such shares. We will pay the expenses incurred
in registering the shares, including legal and accounting fees. However, we will
receive the proceeds from the sale of shares of common stock to Kingsbridge
under the Purchase Agreement, which provides for the sale of up to $25 million
of shares of our common stock.
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Kingsbridge is an "underwriter" within the meaning of the Securities Act of 1933
with respect to this offering.
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OUR COMMON STOCK IS QUOTED ON THE NASDAQ SMALLCAP MARKET UNDER THE SYMBOL
"TGAL." ON JUNE 29, 2004, THE LAST REPORTED SALE PRICE FOR OUR COMMON STOCK ON
THE NASDAQ SMALLCAP MARKET WAS $1.90 PER SHARE.
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THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 2 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU SHOULD
CONSIDER BEFORE BUYING ANY SHARES OF OUR COMMON STOCK.
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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 , 2004
TABLE OF CONTENTS
Summary......................................................................1
The Company..................................................................1
Risk Factors.................................................................6
Forward-Looking Statements..................................................14
The Structured Secondary Offering Facility..................................15
Use of Proceeds.............................................................18
Selling Stockholder.........................................................18
Plan of Distribution........................................................19
Legal Matters...............................................................22
Experts.....................................................................22
Where You Can Find More Information.........................................22
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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 stockholder have
authorized anyone to provide you with additional or different information. The
selling stockholder is 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.
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 stockholder may from time to time sell its
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."
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 in any accompanying supplement
to this prospectus. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or any accompanying
prospectus supplement as if we had authorized it. This prospectus and any
accompanying supplement to this prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the registered
securities to which they relate, nor do this prospectus and any accompanying
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 and any accompanying
supplement to this prospectus is correct on any date after their respective
dates, even though this prospectus or any accompanying supplement is delivered
or securities are sold on a later date.
THE COMPANY
Tegal Corporation, a Delaware corporation ("Tegal" or the "Company"),
designs, manufactures, markets and services 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.
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.
1
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,
2004 and our other filings with the SEC before deciding to purchase our common
stock.
RISK FACTORS
WE HAVE INCURRED OPERATING LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE;
OUR PLANS TO MAINTAIN AND INCREASE LIQUIDITY MAY NOT BE SUCCESSFUL; THE REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM INCLUDES A GOING CONCERN
UNCERTAINTY EXPLANATORY PARAGRAPH; THE ACCOUNTING FOR THE 2% CONVERTIBLE
DEBENTURES RESULTED IN SIGNIFICANT EXPENSE AMOUNTS.
We incurred net losses of $12,602, $12,625 and $8,730 for the years ended
March 31, 2004, 2003 and 2002, respectively, and generated negative cash flows
from operations of $3,179, $5,984 and $3,603 in these respective years. These
factors raise substantial doubt as to our ability to continue as a going
concern, and our independent registered public accounting firm has included a
going concern uncertainty explanatory paragraph in their report dated June 25,
2004 which is included elsewhere in this Form 10-K. Our plans to maintain and
increase liquidity include the restructuring executed during fiscal 2002 and
2003, which reduced headcount from 155 employees to 89 employees and has reduced
our cost structure entering fiscal 2005. We believe the cost reduction and a
projected increase in sales during fiscal 2005 will generate sufficient cash
flows to fund our operations through the end of fiscal 2005. 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. Failure to
raise additional funds may adversely affect the Company's ability to achieve its
intended business objectives. 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 2% convertible debentures due 2011 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 has resulted in substantial interest expense during fiscal 2004 of $5,251
and will continue to result in substantial interest expense through fiscal 2011
or until the debentures are converted. Approximately 22% of the debentures were
not yet converted into shares of our common stock as of March 31, 2004; however
as of June 15, 2004 all of these outstanding debentures had been converted into
shares of our common stock.
THE EXERCISE OF OUTSTANDING WARRANTS, OPTIONS AND OTHER RIGHTS TO OBTAIN
ADDITIONAL SHARES WILL DILUTE THE VALUE OF THE SHARES.
As of March 31, 2004, there were warrants exercisable for approximately
3,199,942 shares of our common stock, advisor warrants convertible into 196,129
shares, 23,900 shares issuable as interest payment on previously issued
debentures in lieu of cash and options exercisable for approximately 7,390,328
shares of our common stock. In addition, we have warrants outstanding from
previous offerings for approximately 1,610,480 shares of our common stock.
The exercise of these warrants and the issuance of the common stock will
result in dilution in the value of the shares of our outstanding common stock
and the voting power represented thereby. In addition, 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.
2
The warrants do not establish a "floor" that would limit reductions in
such conversion price or exercise price. The downward adjustment 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.
On October 14, 2003, we registered 3,542,436 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 100,000,000 shares. We may 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 $1,673
principal amount of debentures as of March 31, 2004 with shares of our common
stock. Interest on the debentures is compounded 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 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 completed 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 or worldwide.
3
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. 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 40%, 25% and 36% of total
revenues in fiscal 2004, 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.
4
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;
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.
5
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 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 84.8%, 88.2% and 54.4% of our systems
revenues in fiscal 2004, 2003 and 2002, respectively. Three customers each
accounted for more than 10% of net systems sales in fiscal 2004. 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 67%, 66% and 67% of total revenue for
fiscal 2004, 2003 and 2002, 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.
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.
EVOLVING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY RESULT IN
ADDITIONAL EXPENSES AND CONTINUING UNCERTAINTY.
Changing laws, regulations and standard relating to corporate governance
and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC
regulations and Nasdaq National Market rules are creating uncertainty for public
companies. We continually evaluate and monitor developments with respect to new
and proposed rules and cannot predict or estimate the amount of the additional
costs we may incur or the timing of such costs. These new or changed laws,
regulations and standards are subject to varying interpretations, in many cases
due to their lack of specificity, and as a result, their application in practice
may evolve over time as new guidance is provided by regulatory and governing
bodies. This could result in continuing uncertainty regarding compliance matters
and higher costs necessitated by ongoing revisions to disclosure and governance
practices. We are committed to maintaining high standards of corporate
governance and public disclosure. As a result, we have invested resources to
comply with evolving laws, regulations and standards, and this investment may
result in increased general and administrative expenses and a diversion of
management time and attention from revenue-generating activities to compliance
activities. If our efforts comply with new or changed laws, regulations and
standards differ from the activities intended by regulatory or governing bodies
due to ambiguities related to practice, regulatory authorities may initiate
legal proceedings against us and we may be harmed.
WE MUST INTEGRATE OUR ACQUISITION OF SIMPLUS SYSTEMS CORPORATION 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.
On November 11, 2003, we acquired substantially all of the assets of
Simplus Systems Corporation. 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 Simplus or businesses, products or
technologies acquired in the future including:
6
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;
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;
o dilution of our current stockholders due to the issuance of
additional securities as consideration for acquisitions; and
o inability to complete acquired research and development projects.
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 FINANCIAL PERFORMANCE MAY ADVERSELY AFFECT THE MORALE AND PERFORMANCE OF OUR
PERSONNEL AND OUR ABILITY TO HIRE NEW PERSONNEL.
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. 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.
7
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.
THE STRUCTURED SECONDARY OFFERING FACILITY WE ENTERED INTO IN FEBRUARY 2004 AND
AMENDED IN MAY 2004 MAY HAVE A DILUTIVE IMPACT ON OUR STOCKHOLDERS, AND THE
POTENTIAL UNAVAILABILITY OF THIS FACILITY WOULD NEGATIVELY IMPACT OUR FINANCING
ACTIVITIES.
On February 11, 2004, we entered into a structured secondary offering
facility (the "Structured Secondary") with Kingsbridge Capital Limited
("Kingsbridge"), which was amended on May 19, 2004. Under the terms of an
Amended and Restated Common Stock Purchase Agreement (the "Purchase Agreement")
entered into by the Company and Kingsbridge on May 19, 2004 with respect to the
Structured Secondary, we may, at our sole discretion, sell to Kingsbridge, and
Kingsbridge would be obligated to purchase, up to $25 million of shares of our
common stock, par value $0.01 per share. The price at which we may sell shares
of common stock under the Purchase Agreement is based on a discount to the
volume weighted average market price of the common stock for a specified number
of trading days following each of our respective elections to sell shares
thereunder. The lowest threshold price at which our stock may be sold is at the
sole discretion of the Company, but in no case may be lower than $1.00 per
share, and in the event the price of our common stock falls below this $1.00
threshold, the Structured Secondary will not be an available source of
financing. We may utilize the Structured Secondary through February 11, 2004
from time to time in our sole discretion, subject to various conditions and
terms contained in the Purchase Agreement. Among the terms of the Purchase
Agreement is a "Material Adverse Effect" clause which permits Kingsbridge to
terminate the Structured Secondary if Kingsbridge determines that an event has
occurred that results in any effect on the business, operations, properties or
financial condition of the Company and its subsidiaries that is material and
adverse to the Company and such subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with our ability to perform any of our obligations under the Purchase Agreement.
In connection with our entering into the Structured Secondary, we issued
to Kingsbridge a warrant (the "Warrant") to purchase 300,000 shares of common
stock at an exercise price of $4.11 per share. The Warrant will not be
exercisable until August 11, 2004, and will expire on August 11, 2009.
8
There are 9,151,661 shares of our common stock that are reserved for
issuance under the Structured Secondary with Kingsbridge, 300,000 of which are
issuable under the Warrant we granted to Kingsbridge. The issuance of shares
under the Structured Secondary and upon exercise of the Warrant will have a
dilutive impact on other stockholders and the issuance or even potential
issuance of such shares could have a negative effect on the market price of our
common stock. In addition, if we draw down the Structured Secondary, we will
issue shares to Kingsbridge at a discount of 10% of the daily volume weighted
average prices of our common stock during a specified period of trading days
after initiation of each respective draw down. Issuing shares at such a discount
will further dilute the interests of other stockholders.
To the extent that Kingsbridge sells shares of our common stock issued
under the Structured Secondary to third parties, our stock price may decrease
due to the additional selling pressure in the market. The perceived risk of
dilution from sales of stock to or by Kingsbridge may cause holders of our
common stock to sell their shares, or it may encourage short sales. This could
contribute to a decline in our stock price.
THE STRUCTURED SECONDARY IMPOSES CERTAIN LIMITATIONS ON OUR ABILITY TO ISSUE
EQUITY OR EQUITY-LINKED SECURITIES.
During the two-year term of the Structured Secondary, we may not engage in
certain equity or equity-linked financings without the prior written consent of
Kingsbridge, which consent will not be unreasonably withheld, conditioned or
delayed. However, we may engage in the following capital raising transactions
without Kingsbridge's consent: (1) establish stock option or award plans or
agreements (for directors, employees, consultants and/or advisors) and amend
such plans or agreements, including increasing the number of shares available
thereunder, (2) use equity securities to finance the acquisition of other
companies, equipment, technologies or lines of business, (3) issue shares of
common stock and/or preferred stock in connection with our option or award
plans, stock purchase plans, rights plans, warrants or options, (4) issue shares
of common stock and/or preferred stock in connection with the acquisition of
products, licenses, equipment or other assets and strategic partnerships or
joint ventures (the primary purpose of which is not to raise equity capital);
(5) issue shares of common and/or preferred stock to consultants and/or advisors
as consideration for services rendered, (6) issue and sell shares in an
underwritten public offering of common stock, and (7) issue shares of common
stock to Kingsbridge under any other agreement entered into between our company
and Kingsbridge.
In addition, we may not issue securities that are, or may become,
convertible or exchangeable into shares of common stock where the purchase,
conversion or exchange price for such common stock is determined using a
floating or otherwise adjustable discount to the market price of the common
stock (including pursuant to an equity line or other financing that is
substantially similar to an equity line with an investor other than Kingsbridge)
during the two-year term of our agreement with Kingsbridge.
WE MAY ISSUE ADDITIONAL SHARES AND DILUTE YOUR OWNERSHIP PERCENTAGE.
Certain events over which you have no control could result in the issuance
of additional shares of our common stock, which would dilute your ownership
percentage in our company. As of March 31, 2004, there were 36,583,850 shares of
our common stock issued and outstanding and there were 533,521 shares of common
stock reserved for issuance under our equity incentive and stock purchase plans.
In addition, as of March 31, 2004, there were outstanding options, warrants and
other rights to acquire up to approximately 7,390,000 shares of common stock. We
may also issue additional shares of common stock or preferred stock:
o to raise additional funds for working capital, commercialization,
production and marketing activities;
o upon the exercise or conversion of additional outstanding options
and warrants; and
o in lieu of cash payment of dividends.
Moreover, although the issuance of our common stock under the Structured
Secondary will have no effect on the rights or privileges of existing holders of
common stock, the economic and voting interests of each stockholder will be
diluted as a result of such issuance. Although the number of shares of common
stock that stockholders presently own will not decrease, such shares will
represent a smaller percentage of our total shares that will be outstanding
after such events. If we satisfy the conditions that allow us to draw down the
entire $25 million available under the Structured Secondary, and we choose to do
so, then generally, as the market price of our common stock decreases, the
number of shares we will have to issue upon each draw down on the Structured
Secondary increases, to a maximum of 8,851,661 shares. Therefore drawing down
upon the Structured Secondary when the price of our common stock is decreasing
will have an additional dilutive effect to your ownership percentage and may
result in additional downward pressure on the price of our common stock.
9
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.
THE STRUCTURED SECONDARY OFFERING FACILITY
On May 19, 2004, we entered into an Amended and Restated Common Stock
Purchase Agreement (the "Purchase Agreement") with Kingsbridge Capital Limited,
pursuant to which we may issue and sell, from time to time, shares of our common
stock for cash consideration up to an aggregate of $25 million.
Until February 11, 2006, we may, from time to time, at our sole discretion,
and subject to certain conditions that we must satisfy, sell or "draw down,"
shares of our common stock to Kingsbridge at a purchase price having a discount
of 10% off of the volume weighted average of the price of our common stock for
each of the 15 trading days following our election to sell shares. This
transaction is known as a "Structured Secondary." Such discount will be
determined as follows:
VWAP* PERCENT OF VWAP
(APPLICABLE
DISCOUNT)
- --------------------------------------------------------------------------------
At or greater than $1.00 per share 90% (10)%
- --------------
* As set forth in the Purchase Agreement, "VWAP" means the volume weighted
average price of our common stock during a trading day as reported by Bloomberg,
L.P. using the AQR function.
As of June 15, 2004, the maximum number of shares that we are permitted
to issue pursuant to the Structured Secondary is 8,851,661. An additional
300,000 shares are registered hereunder with respect to a Warrant that we issued
to Kingsbridge in connection with our entering into the Structured Secondary. We
will exercise our right to draw down the Structured Secondary, if and to the
extent available, at such times as there is a need for additional capital and
when sales of stock under the Structured Secondary provide the most effective
means of raising capital.
10
We can make draw downs in amounts up to a maximum of 4.5% of our market
capitalization at the time of the draw down, provided that in no event can a
single draw down exceed $7,500,000. The lowest threshold price at which our
stock may be sold is determined at the sole discretion of the Company at each
draw down, but in no case may be lower than $1.00 per share. If we fail to draw
$3 million during the term of the Structured Secondary, a fee of $300,000 will
become due to Kingsbridge upon termination of the contract. In no event may we
sell to Kingsbridge under the Structured Secondary a number of shares exceeding
the applicable percentage under the rules of NASD which would require
stockholder approval, generally 20% of our issued and outstanding stock.
Dahlman Rose Weiss, LLC ("Dahlman") served as placement agent for the
Structured Secondary. As compensation for its services, at each draw down,
Dahlman will receive a fee of 6% of the proceeds of each draw down as it is paid
to the Company, plus a warrant to purchase a number of shares equal to 1% of the
number of shares issued to Kingsbridge at each draw down. The exercise price of
such warrant shall be determined at a mutually agreeable price.
The issuance of our common stock under the Structured Secondary will have
no effect on the rights or privileges of existing holders of common stock except
that the economic and voting interests of each stockholder will be diluted as a
result of such issuance. Although the number of shares of common stock that
stockholders presently own will not decrease, such shares will represent a
smaller percentage of our total shares that will be outstanding after such
events. If we satisfy the conditions that allow us to draw down the entire $25
million available under the Structured Secondary, and we choose to do so, then
generally, as the market price of our common stock decreases, the number of
shares we will have to issue upon each draw down on the Structured Secondary
increases, to a maximum of 8,851,661 shares. Drawing down upon the Structured
Secondary when the price of our common stock is decreasing will have an
additional dilutive effect to the ownership percentage of current stockholders
and may result in additional downward pressure on the price of our common stock.
The following are the material conditions that must be met before
Kingsbridge is obligated to buy any shares of our common stock pursuant to a
draw down:
o Each of our representations and warranties in the Purchase Agreement
shall be true and correct in all material respects as of the date
when made and as of the draw down exercise date as though made at
that time, except for representations and warranties that are
expressly made as of a particular date. One of the representations
provides that no event or series of events has or have occurred that
would individually or in the aggregate have a "Material Adverse
Effect" on the Company, defined as any effect on the business,
operations, properties or financial condition of the Company and its
consolidated subsidiaries that is material and adverse to the
Company and such subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to perform any
of its obligations under the Purchase Agreement, the Registration
Rights Agreement or the Warrant in any material respect.
o We shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the Purchase Agreement, the Registration Rights Agreement and the
Warrant to be performed, satisfied or complied with by us.
o We shall have complied in all material respects with all applicable
federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and
performance of the Purchase Agreement and the consummation of the
transactions contemplated by such agreement.
o The registration statement, of which this prospectus is part, shall
have previously become effective and shall remain effective. Neither
the Company nor Kingsbridge shall have received notice that the
Securities and Exchange Commission (the "Commission") has issued or
intends to issue a stop order with respect to the registration
statement or that the Commission otherwise has suspended or
withdrawn effectiveness of the registration statement, either
temporarily or permanently, or intends or has threatened to do so
(unless the Commission's concerns have been addressed and
Kingsbridge is reasonably satisfied that the Commission no longer is
considering or intends to take such action). No other suspension of
the use or withdrawal of the effectiveness of the registration
statement or prospectus shall exist.
11
o We shall not have knowledge of any event more likely than not to
have the effect of causing the registration statement applicable to
the resale of shares of our common stock by the investor issued
under the Structured Secondary arrangement to be suspended or
otherwise ineffective.
o Trading in our common stock shall not have been suspended by the
Commission, the Nasdaq SmallCap Market or the National Association
of Securities Dealers and trading in securities generally on the
Nasdaq SmallCap Market shall not have been suspended or limited.
o We shall have no knowledge of any event more likely than not to have
the effect of causing the registration statement registering the
offer and sale of the shares to be suspended or otherwise
ineffective (which event is more likely than not to occur within
fifteen trading days following the trading day on which a draw down
notice is delivered).
o The number of shares of our common stock beneficially owned by
Kingsbridge, together with those shares that we propose to sell to
Kingsbridge in connection with a draw down, cannot exceed 9.9% of
the total amount of our common stock that would be outstanding upon
completion of the draw down.
o No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions
contemplated by the Purchase Agreement.
o No action, suit or proceedings before any arbitrator or any
governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been
threatened, against the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary
seeking to enjoin, prevent or change the transactions contemplated
by the Purchase Agreement.
There is no guarantee that we will be able to meet these or any other
conditions under the Purchase Agreement or that we will be able to draw down any
portion of the $25 million Structured Secondary.
In connection with the Purchase Agreement, we issued to Kingsbridge a
Warrant to purchase 300,000 shares of common stock at an exercise price of $4.11
per share. Such warrant will not be exercisable until August 11, 2004, and will
expire on August 11, 2009.
We also entered into a Registration Rights Agreement with Kingsbridge in
connection with the Structured Secondary. As contemplated by the Registration
Rights Agreement, we have filed a registration statement, of which this
prospectus is part, with the Securities and Exchange Commission relating to the
resale by Kingsbridge of 9,151,661 shares of common stock purchased by
Kingsbridge under the Purchase Agreement or issued to Kingsbridge as a result of
the exercise of the Warrant. The effectiveness of such registration statement is
a condition precedent to our ability to sell common stock to Kingsbridge under
the Purchase Agreement.
If we determine, in consultation with our legal counsel, that resales by
Kingsbridge of our shares of our common stock under an effective registration
statement would be detrimental to us due to either (i) the existence of a
material development or potential material development involving us that we
would be obligated to disclose in the registration statement, which disclosure
would be premature or otherwise inadvisable at such time or would have a
Material Adverse Effect on us or our stockholders, or (ii) a filing of a
Company-initiated registration of our common stock, which, in our good faith
judgment, would adversely effect or require premature disclosure of the filing
of such Company-initiated registration, we may declare, not more than twice in
any twelve-month period, a "Blackout Period" and suspend the use of the
registration statement by Kingsbridge for a period of not more than thirty days.
If the Company declares a Blackout Period within sixty days after the settlement
date of any purchase of our common stock by Kingsbridge where the VWAP on the
trading day immediately preceding such Blackout Period ("Old VWAP") is greater
than the VWAP on the first trading day following such Blackout Period that the
Kingsbridge may sell its shares pursuant to the registration statement ("New
VWAP"), then the Company is required to either (i) issue to Kingsbridge the
number of additional shares of common stock, known as Blackout Shares, equal to
one hundred twenty percent (120%) of the difference between (1) the product of
the number of shares purchased by the Investor during the preceding sixty (60)
calendar days under the Purchase Agreement and actually held by Kingsbridge
immediately prior to the Blackout Period multiplied by the Old VWAP, divided by
the New VWAP, and (2) the number of shares of common stock purchased by the
Investor under the Purchase Agreement during the preceding sixty (60) calendar
days and actually held by Kingsbridge immediately prior to the Blackout Period
or (ii) pay to Kingsbridge an amount equal to the product of (1) the number of
shares purchased by Kingsbridge under the Purchase Agreement during the
preceding sixty (60) calendar days and actually held by Kingsbridge immediately
prior to the Blackout Period and (2) the result obtained by subtracting the New
VWAP from the Old VWAP.
12
If on any date on which we are required to deliver shares of common stock
to Kingsbridge following a draw down on the Structured Secondary, we fail to
deliver the shares to be purchased by Kingsbridge within ten trading days
following the date on which Kingsbridge delivers payment for such shares, we are
required to pay to Kingsbridge a "Make Whole Amount" equal to the sum of the
draw down amount actually paid by Kingsbridge in respect of such shares plus an
amount equal to actual loss suffered by Kingsbridge in respect of sales of such
shares to subsequent purchasers, which is generally the difference between (A)
the price per share paid by Kingsbridge to purchase such number of shares of
common stock minus the average draw down price during the applicable draw down
pricing period. In the event that the Make Whole Amount is not paid within two
trading days, the Make Whole Amount accrues interest compounded daily at a rate
of five percent (5%) annually until the Make Whole Amount is paid.
The foregoing summary of the Structured Secondary does not purport to be
complete and is qualified in its entirety by reference to the Amended and
Restated Common Stock Purchase Agreement, filed as Exhibit 10.3 to the
registration statement on Form S-3 (SEC File No. 333- ) of which this prospectus
is part, the Registration Rights Agreement and the Warrant, filed as exhibits to
our Current Report on Form 8-K (SEC File No. 000-26824), filed on February 13,
2004, and are incorporated by reference herein.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by Kingsbridge pursuant to this prospectus. Any proceeds from the
sale of the shares by us to Kingsbridge under the Purchase Agreement or received
in connection with the exercise of the Warrant will be used for support of
recent and future acquisitions and other corporate development activities.
Pending the application of the proceeds from the sale of the shares by us to
Kingsbridge, we expect to invest such proceeds in short-term, interest-bearing
instruments or other investment-grade securities.
SELLING STOCKHOLDER
The following table sets forth certain information regarding beneficial
ownership of our common stock by Kingsbridge as of June 15, 2004. Kingsbridge
has not had a material relationship with our company within the past three
years, except as a result of entering into the Structured Secondary described
herein.
COMMON STOCK BENEFICIALLY COMMON STOCK BENEFICIALLY
OWNED PRIOR TO OFFERING (1) OWNED AFTER OFFERING (2)
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK TO
NUMBER PERCENT BE SOLD NUMBER PERCENT
- ----------------------------------------------------------------------------------------------------------------------
Kingsbridge Capital Limited(3) 9,151,661 17.13%(4) 9,151,661 0 0
- -----------
(1) The number of shares of common stock beneficially owned by Kingsbridge
prior to the offering is deemed to include 8,851,661 shares of common stock
registered hereunder and issuable in connection with the Purchase Agreement
(16.57% of our common stock) and 300,000 shares of common stock that may be
acquired by Kingsbridge pursuant to the Warrant (0.56% of our common
stock).
13
(2) Assumes that all shares registered hereunder are sold pursuant to this
prospectus and that Kingsbridge does not acquire any additional shares of
common stock.
(3) We have been advised that Kingsbridge is controlled by Valentine O'Donoghue
and does not accept third party investments. Accordingly, Mr. O'Donoghue
beneficially owns the shares of common stock acquired by Kingsbridge.
(4) Based on the 44,258,309 issued and outstanding shares of common stock as of
June 15, 2004, plus the 8,851,661 shares of common stock issuable in
connection with the Purchase Agreement and the 300,000 shares of common
stock that may be acquired by Kingsbridge pursuant to the Warrant.
14
PLAN OF DISTRIBUTION
We are registering 9,151,661 shares of common stock under this prospectus
on behalf of Kingsbridge. All or a portion of the shares offered hereby by
Kingsbridge may be delivered and/or sold in transactions from time to time on
the Nasdaq SmallCap Market, on the over-the-counter market, in
privately-negotiated transactions, or a combination of such methods of sale, at
market prices prevailing at the time, at prices related to such prevailing
prices or at negotiated prices. Kingsbridge may effect such transactions by
selling to or through one or more broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from Kingsbridge. Kingsbridge is an "underwriter" within the meaning
of the Securities Act. Kingsbridge has advised us that it will effect resales of
our common stock through any one or more of the following registered broker
dealers: Brean Murray & Co., Inc. and Dahlman Rose Weiss LLC. Dahlman Rose Weiss
LLC served as the placement agent for the Structured Secondary. Each such broker
dealer is an underwriter in respect of such shares sold by it on behalf of
Kingsbridge. We have agreed to indemnify Kingsbridge with respect to the shares
offered hereby against certain liabilities, including, without limitation,
certain liabilities under the Securities Act, or, if such indemnity is
unavailable, to contribute toward amounts required to be paid in respect of such
liabilities.
Any broker-dealer participating in such transactions as agent may receive
commissions from Kingsbridge (and, if they act as agent for the purchaser of
such shares, from such purchaser). Broker-dealers may agree with Kingsbridge to
sell a specified number of shares at a stipulated price per share, and, to the
extent such a broker-dealer is unable to do so acting as agent for Kingsbridge,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to Kingsbridge. Broker-dealers who acquire shares as
principal may thereafter resell such shares from time to time in transactions
(which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described
above) on the Nasdaq SmallCap Market, on the over-the-counter market, in
privately-negotiated transactions or otherwise at market prices prevailing at
the time of sale or at negotiated prices, and in connection with such resales
may pay to or receive from the purchasers of such shares commissions computed as
described above. To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing:
o the name of any such broker-dealers;
o the number of shares involved;
o the price at which such shares are to be sold;
o the commissions paid or discounts or concessions allowed to
such broker-dealers, where applicable;
o that such broker-dealers did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus, as supplemented; and
o other facts material to the transaction.
Kingsbridge and any other persons participating in the sale or
distribution of the shares will be subject to the applicable provisions of the
Securities Exchange Act of 1934 and the rules and regulations under such Act,
including, without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of, purchases by the selling
stockholder or other persons or entities. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited from
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.
Kingsbridge will pay all commissions, transfer taxes, and certain other
expenses associated with the sale of securities. The shares offered hereby are
being registered pursuant to contractual obligations and we have paid the
expenses of the preparation of this prospectus.
15
We have also agreed to reimburse the selling stockholder for certain costs
and expenses incurred in connection with this offering. These may include the
fees, expenses and disbursements of counsel for the selling stockholder incurred
in the preparation of the Purchase Agreement and associated documentation and
the registration statement of which this prospectus forms a part.
The selling stockholder 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
stockholder 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
stockholder 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 the selling stockholder. The selling stockholder 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 stockholder 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. The selling stockholder 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.
16
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 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. Profits on the sale of the common stock by the selling
stockholder 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. The selling stockholder will be subject to
the prospectus delivery requirements of the Securities Act. To the extent the
selling stockholder may be deemed to be an "underwriter," it may be subject to
statutory liabilities, including, but not limited to, Sections 11, 12 and 17 of
the Securities Act.
The selling stockholder 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
stockholder 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 stockholder has acknowledged that it understands its obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M, and has agreed that it will
not engage in any transaction in violation of such provisions.
To our knowledge, there are currently no plans, arrangements or
understandings between the selling stockholder and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
stockholder.
The selling stockholder may decide not to sell any common stock described
in this prospectus. We cannot assure holders that the selling stockholder 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, the selling stockholder 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 stockholder;
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 stockholder.
We entered into a registration rights agreement for the benefit of the
selling stockholder to register its common stock under applicable federal and
state securities laws under certain circumstances and at certain times. The
registration rights agreement provides that the selling stockholder 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 connection with those liabilities. We will
pay all of our expenses and specified expenses incurred by the selling
stockholder incidental to the registration, offering and sale of the common
stock to the public, but the selling stockholder will be responsible for payment
of commissions, concessions, fees and discounts of underwriters, broker-dealers
and agents.
17
LEGAL MATTERS
Certain legal matters relating to the offering will be passed upon for
Tegal by Latham & Watkins LLP, San Francisco, 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, 2004 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 registered public accounting firm, 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...................... March 31, 2004
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.
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.
18
9,151,661 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.................................... $ 2,000.00
*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.................................................... $ 102,000.00
*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.
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 as Exhibit 4.2 to Tegal's Registration
Statement on Form S-3 (SEC File. No. 333-108921), filed on
September 18, 2003 and incorporated herein by reference.
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 Registration Rights Agreement by and between Tegal Corporation and
Kingsbridge Capital Limited, dated as of February 11, 2004, filed
as Exhibit 10.2 to Tegal's Current Report on Form 8-K (SEC File
No. 000-26824) filed on February 13, 2004 and incorporated herein
by reference.
4.7 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.
10.1 Common Stock Purchase Agreement by and between Kingsbridge Capital
Limited and Tegal Corporation, dated as of February 11, 2004,
filed as Exhibit 10.1 to Tegal's Current Report on Form 8-K (SEC
File No. 000-26824) filed on February 13, 2004 and incorporated
herein by reference.
10.2 Warrant to purchase 300,000 shares of common stock of Tegal
Corporation, issued to Kingsbridge Capital Limited, dated February
11, 2004, filed as Exhibit 10.3 to Tegal's Current Report on Form
8-K (SEC File No. 000-26824) filed on February 13, 2004 and
incorporated herein by reference.
10.3 Amended and Restated Common Stock Purchase Agreement by and
between Kingsbridge Capital Limited and Tegal Corporation, dated
as of May 19, 2004.
II-2
23.1 Consent of Latham & Watkins LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm.
24.1 Power of Attorney (included on signature page).
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. The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period for any subscription
rights, to set forth the results of the subscription offer, the transactions by
the underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any subsequent
reoffering thereof. If any public offering by the underwriters is to be made on
terms differing from those set forth on the cover page of the prospectus with
respect to a subscription rights offering, a post-effective amendment will be
filed to set forth the terms of such offering.
II-3
D. 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.
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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 30th day of
June, 2004.
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 30th day of June, 2004.
SIGNATURE TITLE
--------- -----
Chairman of the Board, President & Chief Executive Officer
/s/ Michael L. Parodi (Principal Executive Officer)
- ----------------------------------------
Michael L. Parodi
Executive Vice President & Chief Financial Officer
/s/ Thomas R. Mika (Principal Financial and Accounting Officer)
- ----------------------------------------
Thomas R. Mika
/s/ Edward A. Dohring
- ----------------------------------------
Edward A. Dohring Director
/s/ Jeffrey M. Krauss
- ----------------------------------------
Jeffrey M. Krauss Director
/s/ H. Duane Wadsworth
- ----------------------------------------
H. Duane Wadsworth Director
II-5
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 as Exhibit 4.2 to Tegal's Registration
Statement on Form S-3 (SEC File. No. 333-108921), filed on
September 18, 2003 and incorporated herein by reference.
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 Registration Rights Agreement by and between Tegal Corporation and
Kingsbridge Capital Limited, dated as of February 11, 2004, filed
as Exhibit 10.2 to Tegal's Current Report on Form 8-K (SEC File
No. 000-26824) filed on February 13, 2004 and incorporated herein
by reference.
4.7 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.
10.1 Common Stock Purchase Agreement by and between Kingsbridge Capital
Limited and Tegal Corporation, dated as of February 11, 2004,
filed as Exhibit 10.1 to Tegal's Current Report on Form 8-K (SEC
File No. 000-26824) filed on February 13, 2004 and incorporated
herein by reference.
10.2 Warrant to purchase 300,000 shares of common stock of Tegal
Corporation, issued to Kingsbridge Capital Limited, dated February
11, 2004, filed as Exhibit 10.3 to Tegal's Current Report on Form
8-K (SEC File No. 000-26824) filed on February 13, 2004 and
incorporated herein by reference.
10.3 Amended and Restated Common Stock Purchase Agreement by and
between Kingsbridge Capital Limited and Tegal Corporation, dated
as of May 19, 2004.
23.1 Consent of Latham & Watkins LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm.
24.1 Power of Attorney (included on signature page).
E-1