person.)UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
SCHEDULE 14A
(RULE 14A-101)(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(AMENDMENT NO. )Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 TEGAL CORPORATION - -------------------------------------------------------------------------------- (Name
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to §240.14a-12 Rennova Health, Inc.
(Name of Registrant as Specified
Inin Its Charter)- -------------------------------------------------------------------------------- (Name(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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RENNOVA HEALTH, INC.
400 South Australian Avenue, Suite 800
West Palm Beach, Florida 33401
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
_______________, 2018
TO THE STOCKHOLDERS OF RENNOVA HEALTH, INC.
Notice is hereby given that a special meeting of the
fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed:Tegal Corporation 2201 South McDowell Boulevard Petaluma, California 94954 Dear fellow stockholders: I am pleased to report that after many months of effort, your board of directors and management have successfully negotiated a proposed $7,165,000 convertible debt financing with a group of private investors. The attached proxy statement and notice of our annual meeting of stockholders describe in detail a number of proposals that require your support to enable us to complete this vital financing. Your board of directors and management believe that receipt of these funds is essential if Tegal is to continue as an independent company and to focus our skills and capabilities on exploiting our technical leadership in the areas of etch and deposition of new materials. We believe that our markets, as well as the semiconductor capital equipment market overall, are beginning to show signs of recovery. Therefore, we have explored many financing alternatives over the past year, including the sale of Tegal to strategic investors, the sale or licensing of our intellectual property and securing traditional equity investments, and your board of directors and management believe that this proposed financing represents the best opportunity available to us to enable existing stockholders to have a continuing financial interest in our future. We regret that this financing will significantly dilute your stockholding. However, your board of directors and management think that there are few alternatives available to the Company and that additional financing is urgently needed. In addition, you should take into account the amount of stock that will be owned by the new investors. We believe that such a substantial ownership position is consistent only with a long-term investor and that their diligence confirms our view of the future potential for Tegal as we build on our current prospects and expand into new market areas. All of the stockholder resolutions being considered require a majority (50% plus one vote) of all common shares to vote in favor of those proposals. Therefore, it is essential that each and every stockholder take the time to review the attached proxy statement and to complete and return the enclosed proxy card. YOUR VOTE IS CRITICAL, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. Please help us to reduce the expenses associated with this solicitation by returning the enclosed proxy promptly. You may also vote your shares by attending the Annual Meeting of Stockholders of Tegal Corporation, which will be held at our headquarters located at 2201 South McDowell Boulevard, Petaluma, California 94954 on the 26th day of August 2003, at 10:00 a.m. local time, and thereafter as it may from time to time be adjourned. Thank you very much for your prompt attention to this important matter. PLEASE VOTE TODAY. Sincerely, /s/ Michael L. Parodi ----------------------------------- MICHAEL L. PARODI President and CEOTEGAL CORPORATION 2201 South McDowell Boulevard Petaluma, California 94954 --------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS August 26, 2003 --------------- The annual meeting ofstockholders ofTegal Corporation,Rennova Health, Inc., a Delaware corporation("we," "us" and the "Company"(the “Company”), will be held onTuesday, August 26, 2003,____________________. 2018, at10:00 a.m._______________, local time, atour headquarters at 2201 South McDowell Boulevard, Petaluma, California 94954_________________________________________________________, for the followingpurposes: 1. To elect four directors to serve for one year and until their successors are duly elected and qualified. The names of the nominees to the board of directors are set forthpurposes, as described in theaccompanying proxy statement which is part of this notice; 2. To approve an amendment to our 1998 Equity Participation Plan to increase the number of shares available for issuance from 2,400,000 to 6,400,000 and to increase the Award Limit from 600,000 shares to 1,600,000 shares; 3. To approve a financing transaction in which we may sell and issue, to a group of private investors, units consisting of (a) up to $7,165,000 aggregate principal amount of our 2.0% Convertible Secured Debentures Due 2011, convertible into our common stock at an initial conversion price of $0.35 per share and (b) eight-year warrants to purchase up to 4,094,286 shares of common stock with an exercise price of $0.50. Under Nasdaq rules, this financing transaction requires stockholder approval because it may result in the issuance of a number of shares of common stock equal to or greater than 20% of the number of shares of common stock currently outstanding; 4.attached Proxy Statement:1. To approve an amendment to our Certificate of Incorporation, as amended, to effect a reverse stock split of all of the outstanding shares of our common stock, par value $0.01 per share, at a specific ratio within a range from 1-for-____ to 1-for-____, and to grant authorization to our Board of Directors to determine, in its discretion, the specific ratio and timing of the reverse stock split any time before ______________, subject to the Board of Directors’ discretion to abandon such amendment;
2. To approve an amendment to our Certificate of Incorporation, as amended, to increase the number of authorized shares of
common stock to 100,000,000; 5. To approve a series of amendments to our Certificate of Incorporation to effect a reverse stock split ofour common stockwhereby each outstandingfrom 500,000,000 to 2,000,000,000 shares;3. To approve the Company’s new 2018 Incentive Award Plan;
4. To authorize an adjournment of the Special Meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favour of Proposals 1, 2
3, 5, 10 or 15 shares would be combined, convertedandchanged into one share of common stock, provided that our board of directors will retain discretion as to which amendment will be filed3; andas to when and whether any amendment is filed; and 6.5. To transact such other business as may properly come before the
annual meeting andSpecial Meeting or anyadjournmentsadjournment or postponement thereof.The Board of Directors unanimously recommends that you vote FOR the
annual meeting.above Proposals. The
boardBoard ofdirectorsDirectors has fixed the close of business onJuly 10, 2003March __, 2018 as the record date for the determination of stockholders entitled to notice of and to vote at theannualSpecial Meeting. We hope that you will attend the meeting,or at any adjournments of the annual meeting. In order to ensure your representation at the annual meeting,but if youare requested tocannot do so, please complete and signand datethe enclosed proxy,as promptly as possibleand return it in the accompanying envelope or vote electronically as promptly as possible.Your vote is very important, regardless of the number of shares you own. Whether or not you plan to be present at the Special Meeting, we urge you to submit your proxy as soon as possible so that your shares may be voted in accordance with your wishes and in order that the presence of a quorum may be assured.
You may submit your proxy by completing, signing, dating and returning the enclosed
envelope (to which no postage need be affixedproxy card by mail, or you may submit your proxy electronically through the internet, as further described on the proxy card. Please do not return the enclosed paper ballot ifmailedyou are voting over the internet. The giving of such proxy will not affect your right to vote in person, should you later decide to attend theUnited States).Special Meeting. If youattendhold your shares through an account with a brokerage firm, bank or other nominee, please follow theannualinstructions you receive from them to provide voting instructions for your shares.Your proxy, given through the return of the enclosed proxy card or by use of the internet voting system, may be revoked prior to its exercise by filing with our Secretary prior to the meeting,
and file with the Secretarya written notice ofTegal Corporation an instrument revoking your proxyrevocation or a duly executed proxy bearing a later date,your proxy will not be used. All stockholders are cordially invited to attendor by attending theannual meeting.meeting and voting in person.By Order of the Board of Directors
TEGAL CORPORATION /s/ Michael L. Parodi MICHAEL L. PARODI President
Seamus Lagan, Chief Executive Officer West Palm Beach, Florida March _, 2018 Important notice regarding the availability of proxy materials for the Special Meeting to be held on ______________, 2018. This Proxy Statement, the proxy card and
CEO Petaluma, California August ___, 2003TEGAL CORPORATION ----------------a copy of our Annual Report on Form 10-K for the year ended December 31, 2016 are available athttp://www.rennovahealth.com/proxy-materials
Page 2 RENNOVA HEALTH, INC.
400 South Australian Avenue, Suite 800
West Palm Beach, Florida 33401
PROXY STATEMENT
FOR ANNUALSPECIAL MEETING OF STOCKHOLDERS
August 26, 2003 ---------------- INTRODUCTION ThisTO BE HELD __________________________, 2018
General
The enclosed proxy
statementisfurnished in connection withsolicited on behalf of thesolicitationBoard ofproxies in the form enclosedDirectors of Rennova Health, Inc., a Delaware corporation (the “Company”), for use atthe annuala special meeting of stockholdersof Tegal Corporation, a Delaware corporation,to be held on _________________, 2018, at10:00 a.m.___________, local timeon Tuesday, August 26, 2003 and(the “Special Meeting”), or at anyadjournments of the annual meetingadjournment or postponement thereof, for the purposesof (1) electing four directors, (2) approving an amendment to our 1998 Equity Participation Plan to increase the number of authorized shares available for issuance from 2,400,000 to 6,400,000 and to increase the Award Limit from 600,000 shares to 1,600,000 shares, (3) approve a financing transactionset forth inwhich we sell and issue, to a group of private investors, units consisting of (a) up to $7,165,000 aggregate principal amount of our 2.0% Convertible Secured Debentures Due 2011, convertible into our common stock at an initial conversion price of $0.35 per share and (b) eight-year warrants to purchase up to 4,094,224 shares of common stock with an exercise price of $0.50, (4) approving an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 35,000,000 to 100,000,000, (5) approving a series of amendments to our Certificate of Incorporation to effect a reverse stock split of our common stock, whereby each outstanding 2, 3, 5, 10 or 15 shares would be combined, converted and changed into one share of common stock, provided that our board of directors will retain, for one year following approval, discretion as to which amendment will be filed and as to when and whether any amendment is filed and (6) transacting such other business as may properly come before the annual meeting and any adjournments of the annual meeting. The approximate date whenthis proxy statement and in the accompanying Notice of Special Meeting. The Special Meeting will be held at _____________________________________________. The approximate date that this Proxy Statement, the accompanying Notice of Special Meeting and the enclosed form ofproxyProxy are first being sent to stockholders isAugust ___, 2003. This solicitationon or about ________, 2018. The Company’s Annual Report on Form 10-K (the “Annual Report”) will be mailed or delivered concurrently with this Proxy Statement. The Annual Report ismade on behalf of our board of directors. Costsnot to be regarded as proxy soliciting materials.Purpose of the
solicitation will be borne by us. Our directors, officersSpecial MeetingThe Special Meeting is being called to consider the following matters:
● To approve an amendment to our Certificate of Incorporation, as amended, to effect a reverse stock split of all of the outstanding shares of our common stock, par value $0.01 per share, at a specific ratio within a range from 1-for-____ to 1-for-____, and to grant authorization to our Board of Directors to determine, in its discretion, the specific ratio and timing of the reverse stock split any time before ____________, subject to the Board of Directors’ discretion to abandon such amendment; ● To approve an amendment to our Certificate of Incorporation, as amended, to increase the number of authorized shares of our common stock from 500,000,000 to 2,000,000,000 shares; ● To approve the Company’s new 2018 Incentive Award Plan; ● To authorize an adjournment of the Special Meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposals 1, 2 and 3; and ● To transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. Voting Rights and
employees and our subsidiaries may also solicit proxies by telephone, telegraph, fax or personal interview. We will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to stockholders. HoldersOutstanding SharesOnly holders of record of
our common stock, par value $0.01 per share, as ofCommon Stock and Series F Convertible Preferred Stock (the “Series F Preferred Stock”) at the close of business onJuly 10, 2003 areMarch ____, 2018 (the “Record Date”) will be entitled toreceivenotice of and to vote at theannual meeting. Theoutstanding common stock constitutes the only class of our securities entitled to vote at the annual meeting,Special Meeting andeach share of common stock entitles the holder to one vote.any adjournments or postponements thereof. At the close of business onJuly 10, 2003, there were 16,099,949the Record Date, the Company had outstanding and entitled to vote _____________ shares ofcommon stock issuedCommon Stock andoutstanding. Two or more stockholders representing1,750,000 shares of Series F Preferred Stock. The Common Stock and the Series F Preferred Stock vote together as amajoritysingle class. The Company’s Common Stock and Series F Preferred Stock are the only classes of securities of theoutstanding shares must be present in person or by proxyCompany entitled toconstitute a quorum for the transaction of businessvote at theannual meeting. Unless contrary instructions areSpecial Meeting.A list of stockholders entitled to vote at the Special Meeting will be available at our principal executive offices, 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, for a period of 10 days prior to the Special Meeting for examination by any stockholder.
Each holder of record of Common Stock or Series F Preferred Stock on the Record Date will be entitled to one vote for each share, voting together as a class, held on all matters to be voted upon. If no choice is indicated on the proxy,
allthe sharesrepresentedwill be voted in favor of Proposal 1, Proposal 2, Proposal 3 and Proposal 4.
Page 3 All votes will be tabulated by
valid proxiesthe inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.Broker Non-Votes
Stockholders that own their shares in “street name” through a stock brokerage account or through a bank or nomine may attend the Special Meeting but may not grant a proxy or vote at the Special Meeting. Instead, the broker, bank or nominee is considered the record holder of those shares and those stockholders must instruct the record holder how they wish their shares to be voted.
A broker non-vote occurs when a broker submits a proxy card with respect to shares of Common Stock or Series F Preferred Stock held in a fiduciary capacity (typically referred to as being held in “street name”), but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the election of directors, increases in authorized Common Stock for general corporate purposes and ratification of auditors. Non-routine matters include Proposal 1 and amendments to stock plans and issuance of additional securities.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation
(and not revoked before they are voted) will be voted FOR ohas theelection of all of the directors nominated below; o the approval of an amendmentpower toour 1998 Equity Participation Plan to increase the number of authorized shares available for issuance from 2,400,000 to 6,400,000 and to increase the Award Limit from 600,000 shares to 1,600,000 shares; o the approval of a financing transaction in which we may sell and issue, to a group of private investors, units consisting of (a) up to $7,165,000 aggregate principal amount of our 2.0% Convertible Secured Debentures Due 2011, convertible into our common stock at an initial conversion price of $0.35 per share and (b) eight-year warrants to purchase up to 4,094,224 shares of common stock with an exercise price of $0.50; o the approval of an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock for issuance from 35,000,000 to 100,000,000; and o the re-approval of a series of amendments to our Certificate of Incorporation to effect a reverse stock split of our common stock, whereby each outstanding 2, 3, 5, 10 or 15 shares would be combined, converted and changed into one share of common stock, provided that our board of directors will retain, for one year following approval, discretion as to which amendment will be filed and as to when and whether any amendment is filed. With respect to any other business which may properly come before the annual meeting and be submitted to a vote of stockholders, proxies received by the board of directors will be voted in accordance with the best judgment of the designated proxy holders. Any proxy may be revokedrevoke it at any time before it isexercisedvoted. It may be revoked by filing with the Corporate Secretaryan instrument revoking it or by submitting prior to the timeof theannual meetingCompany at the Company’s principal executive offices, 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, a written notice of revocation or a duly executed proxy bearing a laterdate. Stockholders who have executed and returned a proxy and who then attenddate, or it may be revoked by attending theannualmeeting anddesirevoting in person. Attendance at the meeting will not, by itself, revoke a proxy.Solicitation
The enclosed proxy is solicited on behalf of our Board of Directors. The Company will bear the entire cost of solicitation of proxies including preparation, assembly, printing and mailing of this Proxy Statement, the proxy card and any additional information furnished to
votestockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding inperson are requestedtheir names shares of Common Stock or Series F Preferred Stock beneficially owned by others toso notify the Secretary priorforward tothe timesuch beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock or Series F Preferred Stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone or personal solicitation by directors, officers or other regular employees of theannual meeting. Shares represented by proxies that reflect abstentionsCompany. No additional compensation will be paid to directors, officers or"broker non-votes" (i.e., shares held by a broker or nominee which are representedother regular employees for such services.Required Vote
No business can be conducted at the
annual meeting, but with respect to which such broker or nominee is not empowered to vote onSpecial Meeting unless aparticular proposal or proposals) will be counted asmajority of all outstanding sharesthat are present andentitled to votefor purposesare either present in person or represented by proxy at the meeting. If a quorum is present the affirmative vote ofdetermining the presence ofaquorum. In voting for the election of directors each share has one vote for each position to be filled, and there is no cumulative voting, which means that a simplemajority of the outstanding shares of common stock and Series F Preferred Stock, votingmaytogether as a class, is required for approval of Proposal 1 and Proposal 2elect all ofat thedirectors. In voting with respect to the financing transaction described in Proposal No. 3, the approvalSpecial Meeting. The affirmative vote of a majority of the sharesof common stock present and entitled to votevoting at theannual meeting, excluding the shares of common stock currently heldSpecial Meeting, in person or bythe proposed investors in the financing transaction,proxy, is required for approval of Proposal 3. For this purpose, abstentions and broker non-votes have the same effect as votes cast against a particular proposal.In voting with respect to the amendment to our certificate of incorporation described in Proposal No. 4,If less than a majority of the shares ofoutstanding common stockour Common Stock and Series F Preferred Stock entitled to voteis required for approval ofare represented at theproposal. All other proposals require the approval ofSpecial Meeting, a majority of the shares so represented may adjourn the Special Meeting to another date, time or place, and notice need not be given ofcommon stock present and entitled to votethe new date, time or place if the new date, time or place is announced at theannual meeting. Our principal executive offices are located at 2201 South McDowell Boulevard, Petaluma, California 94954. Our telephone numberSpecial Meeting before an adjournment is(707) 763-5600. GENERAL INFORMATION We were formed in December 1989 to acquire the operationstaken.
Page 4 Security Ownership of
the former Tegal Corporation, a division of Motorola, Inc. The predecessor company was founded in 1972 and acquired by Motorola in 1978. ELECTION OF DIRECTORS (PROPOSAL NO. 1) Our board of directors is currently comprised of four members. Directors are elected at each annual meeting and hold office until their successors are duly elected and qualified at the next annual meeting. Our bylaws require that there be a minimum of two and maximum of eight members of the board of directors. Pursuant to our bylaws and a resolution adopted by the board of directors, the authorized number of members of the board of directors has been set at six. In the absence of instructions to the contrary, the persons named as proxy holders in the accompanying proxy intend to vote in favor of the election of the four nominees designated below to serve until the 2004 annual meeting of stockholders and until their respective successors shall have been duly elected and qualified. Messrs. Dohring, Krauss, Wadsworth and Parodi are current directors. The board of directors expects that each of the nominees will be available to serve as a director, but if any such nominee should become unavailable or unwilling to stand for election, it is intended that the shares represented by the proxy will be voted for such substitute nominee as may be designated by the board of directors. Because the board of directors remains in the process of seeking candidates for two vacant positions on the board, we have fewer nominees named than the number fixed by our bylaws. If the financing transaction discussed below in Proposal No. 3 is approved by the stockholders, one of the investors, Special Situations Fund, will have the right to designate one individual reasonably acceptable to us as a member of our board of directors. Stockholders may not vote for a greater number of persons than the number of nominees named. Nominees for Election as Director Director New Term Name Age Since Will Expire ---- ---------------------------- Edward A. Dohring......... 70 1996 2004 Jeffrey M. Krauss......... 46 1992 2004 Michael L. Parodi......... 55 1997 2004 H. Duane Wadsworth........ 66 2002 2004 3Edward A. Dohring has served as a director of Tegal since September 1996. From October 1994 through December 1998, he was the President of SVG Lithography Systems, Inc., a subsidiary of Silicon Valley Group, Inc. From July 1992 to October 1994 he was President of the Track Division of Silicon Valley Group, Inc. Prior to joining Silicon Valley Group, Inc., Mr. Dohring was the President of Advantage Production Technology, Inc. from 1991 to 1992, when it was sold to Genus. Mr. Dohring was a member of the Semiconductor Equipment and Materials International Board of Directors from 1977 to 1989. He currently serves on the Board of Directors of MTI. Jeffrey M. Krauss has served as a director of Tegal since June 1992. Since April 2000, Mr. Krauss has been a Managing Member of Psilos Group Managers, LLC, a New York based venture capital firm, and a Managing Member of the general partner of Psilos Group Partners I, LP, Psilos Group Partners II, LP, and Psilos Group Partners II SBIC, LP, each a venture capital partnership. From 1990 until April 2000, Mr. Krauss was a general partner of the general partner of Nazem & Company III, L.P. and Nazem & Company IV, L.P., both venture capital funds. He was also a general partner of The Transatlantic Fund, a joint venture between Nazem & Company and Banque Nationale de Paris of France. Prior to joining Nazem & Company, Mr. Krauss was a corporate attorney with the law firm of Simpson Thacher & Bartlett, where he specialized in leveraged buyout transactions. He currently serves as Chairman of the Board of Quovadx, Inc and as a director of APS Healthcare, Inc., One Shield, Inc., Cohesive Technologies, Inc., Royal Healthcare, ICS, Inc. and Miavita, Inc. Michael L. Parodi joined Tegal as director, President and Chief Executive Officer in December 1997. He was elected to the additional post of Chairman of the Board in March 1999. From 1991 to 1996, Mr. Parodi was Chairman of the Board, President and Chief Executive Officer of Semiconductor Systems, Inc., a manufacturer of photolithography processing equipment sold to the semiconductor and thin film head markets until Semiconductor Systems, Inc. was merged with FSI International. Mr. Parodi remained with FSI International as Executive Vice President and General Manager of Semiconductor Systems, Inc. from the time of the merger to December 1997, integrating Semiconductor Systems, Inc. into FSI International. In 1990, Mr. Parodi led the acquisition of Semiconductor Systems, Inc. from General Signal Corporation. Prior to 1990, Mr. Parodi held various senior engineering and operations management positions with General Signal Corporation, Signetics Corporation, Raytheon Company, Fairchild Semiconductor Corporation and National Semiconductor Corporation. Mr. Parodi currently is a member of the Semiconductor Equipment and Materials International Board of Directors. H. Duane Wadsworth was appointed to the board of directors in November 2002. He has served as President of Wadsworth-Pacific Manufacturing Associates, a supplier of electronics to semiconductor manufacturers, since 1963. He also serves as a director of Eclipse Technology, Inc., Micro-Mechanics Ltd. (Holding), Singapore and the Semiconductor Equipment and Material International Board of Directors. 4All directors hold office until our next annual meeting of the stockholders and until their successors have been duly elected or qualified. There are no family relationships between any of our directors or executive officers. Board of Directors and Committees of the Board In fiscal year 2003, the board of directors held four meetings. All directors attended at least 75% of the total number of board meetings and meetings of board committees on which the director served during the time he served on the board or committees. The board of directors has established a standing audit committee and a standing compensation committee. The board does not have a standing nomination committee. The audit committee, consisting of Messrs. Dohring, Krauss and Wadsworth for fiscal 2003, reviews the adequacy of internal controls and the results and scope of the audit and other services provided by our independent accountants. The audit committee meets periodically with management and the independent accountants. The audit committee held four meetings in fiscal 2003. In June 2000, the audit committee adopted an audit committee charter, a copy of which was filed with the SEC as an appendix to our proxy statement for our 2001 annual meeting. For fiscal 2003, the compensation committee was comprised of Messrs. Dohring, Krauss and Wadsworth. The compensation committee held two meetings in fiscal 2003. The functions of the compensation committee include establishing salaries, incentives and other forms of compensation for our officers and other employees and administering our incentive compensation and benefit plans. Director Compensation Our outside directors currently receive an annual $12,000 retainer for service on the board of directors, meeting fees of $1,500 per board meeting ($750 per meeting for special meetings held telephonically) and $1,125 per committee meeting not held in conjunction with a full board meeting ($500 per meeting for committee meetings held telephonically). Furthermore, directors may be reimbursed for certain expenses in connection with attendance at board and committee meetings. In addition, we provide the Stock Option Plan for Outside Directors, pursuant to which non-employee directors receive stock options for serving on our board of directors. Compensation Committee Interlocks and Insider Participation For fiscal 2003, the compensation committee was comprised of three directors: Messrs. Dohring, Krauss and Wadsworth. For a detailed description of each of these individuals' backgrounds, please see their biographies above. 5EXECUTIVE OFFICERSCertain Beneficial OwnersThe following
chart sets forthtable summarizes certain information regardingour executive officers as of March 31, 2003. For a detailed description of each of these individuals' backgrounds, please consult our annual report on Form 10-K for fiscal year 2003, filed withtheSEC on June 27, 2003.
NAME AGE POSITION - ---- --- --------Michael L. Parodi...........55 Chairman of the Board of Directors, President and Chief Executive Officer Thomas R. Mika..............52 Executive Vice President and Chief Financial Officer Stephen P. DeOrnellas.......49 Vice President and Chief Technical Officer George B. Landreth..........48 Vice President, Product Development James D. McKibben...........52 Vice President, Worldwide Sales and Marketing Carole Anne Demachkie.......40 Vice President and General Manager, Sputtered Films, Inc.COMPENSATION COMMITTEE REPORT The information set forth below shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (the "Securities Act"), orbeneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the"Exchange Act"“Exchange Act”), except) of our outstanding Common Stock as of November 17, 2017 by (i) each person known by us to be theextent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. The compensation committeebeneficial owner of more than 5% of theboardoutstanding Common Stock, (ii) each of our directors,has furnished the following report on executive compensation. Overall Policy In formulating the executive compensation program, the compensation committee's objectives were (1) to attract and retain competent executive talent and motivate executive officers to perform to the full extent of their abilities, (2) to tie a significant portion of executive compensation to the achievement of specified performance goals for Tegal, and (3) to link executive and stockholder interests through equity based plans. The key elements(iii) each of our executivecompensation program consist of base salary, cash bonusesofficers, andstock options. 6Base Salary Each executive's base salary is reviewed annually, but(iv) all executive officers and directors as ageneral rule, significant base salary increases are limited to promotions, while lesser adjustments are madegroup. Except asappropriate after taking into account such factors as internal equity, comparable market salaries paid to individuals of comparable responsibility and company size and increases in levels of responsibility. All salaries are based on sustained individual performance toward our goals and objectives. On June 11, 1996, the board of directors approved a severance arrangement for our executive officersindicated in theeventfootnotes below, the stockholders listed below possess sole voting and investment power with respect to their shares. None of the following owns any Series F Preferred Stock.
Name of Beneficial Owner No. of Shares of Common Stock Owned Percentage of
Ownership(1)Seamus Lagan 27,158 (2) * Dr. Kamran Ajami 8,567 (3) * John Beach - - Gary L. Blum - - Christopher E. Diamantis 100,843 (4) 1.76 % Trevor Langley 6,666 – Michael Pollack – (5) – Epizon Ltd. 8,638 (6) * All Directors and Executive Officers as a Group (6 persons) 143,234 (7) 2.50 % Sabby Healthcare Master Fund, Ltd. (8) 563,403 9.99 % Sabby Volatility Warrant Master Fund, Ltd. (8) 563,403 9.99 %
* Less than one percent.
(1) Based on 5,639,669 shares of Common Stock issued and outstanding as of November 17, 2017, and additional shares deemed to be outstanding as to a particular person, in accordance with applicable rules of the Securities and Exchange Commission (the “SEC”). Beneficial ownership is determined in accordance with SEC rules to generally include shares of Common Stock subject to options or issuable upon conversion of convertible securities, and such shares are deemed outstanding for computing the percentage of the person holding such options or securities, but are not deemed outstanding for computing the percentage of any other person. (2) Includes 13,431 shares of Common Stock and 9,445 stock options to purchase a like number of shares of Common Stock, owned of record by Mr. Lagan. Also includes 4,282 shares of Common Stock owned of record by Alcimede LLC, of which Mr. Lagan is the sole manager. (3) Includes 7,948 shares of Common Stock and 619 options to purchase a like number of shares of Common Stock owned of record by Dr. Ajami. (4) Includes 10,699 shares of Common Stock, 670 stock options to purchase a like number of shares of Common Stock, and 89,474 warrants to purchase a like number of shares of Common Stock, owned of record by Mr. Diamantis. (5) Mr. Pollack was appointed Interim Chief Financial Officer of the Company on May 24, 2017 and he served through his resignation effective October 13, 2017.
(6) All of the outstanding capital stock of Epizon Ltd. is owned by The Shanoven Trust, of which P. Wilhelm F. Toothe serves as trustee. Mr. Lagan is the settlor and Mr. Lagan and his family are the beneficiaries of The Shanoven Trust. Epizon Ltd. owns of record 8,638 shares of Common Stock. The address of Epizon Ltd. is Suite 104a, Saffrey Square, Bank Lane, P.O. Box N-9306, Nassau, Bahamas. (7) Includes Messrs. Lagan, Diamantis, Beach, Blum and Langley and Dr. Ajami. Includes 43,026 shares of Common Stock, 10,734 stock options to purchase a like number of shares of Common Stock, and 89,474 warrants to purchase a like number of shares of Common Stock, owned by Messrs. Lagan, Diamantis, Beach, Blum and Langley and Dr. Ajami, as described in the above footnotes. (8) Based on Amendment No. 1 to Schedule 13G filed with the Securities and Exchange Commission on January 9, 2018. The address of each of Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd. is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KY1-9007, Cayman Islands. This stockholder has indicated that Hal Mintz has voting and investment power over the shares held by it. This stockholder has indicated that Sabby Management, LLC serves as its investment manager, that Hal Mintz is the manager of Sabby Management, LLC and that each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over these shares except to the extent of any pecuniary interest therein. The conversion of the Debentures and Series I-1 Preferred Stock and the exercise of the Warrants held by these entities are subject to ownership blockers of 9.99% and 4.99%, respectively.
Page 5 PROPOSAL 1
TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE SPLIT OF OUR OUTSTANDING COMMON STOCK AT THEIR DISCRETION
Introduction
Our Board of Directors has unanimously authorized and approved, and is submitting for stockholder approval, a
changeproposal to amend our certificate ofcontrol of Tegal. If an executive officer is terminatedincorporation, as amended, to effect aresult of a change of control, we shall continue to pay such executive officer's base salary and certain benefits for a period of 12 months. Bonus Programs In order to motivate executives and managers in the attainmentreverse stock split of ourannual goalsissued and outstanding common stock at a ratio to be established by our Board of Directors in its discretion, within the range of 1-for-___ and 1-for-___ (the “Reverse Split”), and toenhance our abilitygrant the Board of Directors discretionary authority, until _____________, toattractdetermine whether or not to effect the Reverse Split andretain key managerial employees through a competitive compensation package, we have adopted an annual performance bonus planthe exact whole number ratio within the range at which to effect the Reverse Split. In setting the ratio forexecutives and managers designated bytheChief Executive Officer and approved byReverse Split, theboard of directors. Each designated position has an annual bonus incentive target expressed as a percentage of that executive's or manager's base salary. The attainment of the target bonus is determined by the degree to which an individual achieves specific annual objectives determined annually and reviewed and approved by the board of directors for all executives who report directly to the Chief Executive Officer, and by the degree to which we achieve our annual financial plan. No bonuses are to be paid unless we realize a minimum of five percent profit before taxes as a percent of revenue. Incentives are prorated if we exceed or fall shortintention of ourannual financial plan goals, withBoard of Directors would be to increase theincentive maximums capped at 250% of target bonus amounts. Stock Options We provide long-term incentive compensation through our equity plan that generally gives the board of directors authority to grant stock options as well as other types of awards. Stock options are designed to align the interests of executives and key personnel with those of the stockholders. The board of directors believes that significant equity interests in Tegal held by our management serve to retain and motivate management. The board of directors' decision whether to grant options and the number of options is based primarily on the individual executive's responsibility, performance and existing stock ownership. In fiscal 2003, the board of directors considered awards based on the board of directors' assessment of the individual executive's contribution to our success in meeting our financial goals. This assessment was based primarily on our earnings and the level of the executive's responsibility. The awards also were based on non-financial performance measures such as individual performance, the recommendations of the Chief Executive Officer of Tegal and the success in implementing our long-term strategic plan. We expect that most awards under our 1998 Equity Participation Plan will be stock options that will generally be granted with an exercise price equal to the market price of the common stock on the date of grant. 7Chief Executive Officer Compensation The compensation committee is charged with establishing the objectives and compensation of Michael L. Parodi, the Chief Executive Officer of Tegal, who is responsible for our strategic and financial performance. Mr. Parodi became the Chief Executive Officer of Tegal in December 1997. The compensation committee determines our Chief Executive Officer's compensation package based upon the general factors discussed above and upon an evaluation of compensation paid to chief executive officers at comparable public companies and other companies in our industry. Mr. Parodi's current annual salary is $200,000. In addition, Mr. Parodi is eligible to receive a maximum bonus of 50% of his base salary upon the achievement of certain goals established by the board of directors at the beginning of each fiscal year. For fiscal 2003, Mr. Parodi did not receive a bonus. The board of directors determines the actual bonus payable based upon the recommendation of the compensation committee. Such recommendation by the compensation committee is based on our overall performance against specific strategic and financial goals that are determined at the beginning of the fiscal year. Pursuant to his initial employment agreement, Mr. Parodi was granted in 1997 (1) an option to purchase 260,000 shares of common stock, subject to our repurchase rights expiring over a four year period and (2) an option to purchase 240,000 shares of common stock, subject to our right of repurchase expiring in installments of 60,000 when the closingtrading price of our commonstock reaches certain prices for ten or more consecutive trading days. In fiscal 2003, the board granted Mr. Parodi no additional options.stock.The
compensation committee and Mr. Parodi believe that currently he is adequately incentivized to enhance profitability and stockholder value through his compensation package and his ownership of options. The compensation committee continues to retain the discretion to change the amount and form of compensation payable to Mr. Parodi. Conclusion Through the programs described above, a significant portion of the each executive's compensation is now linked directly to our financial performance. The policy of these programs is to award bonuses based on our success as well as to provide incentives to executives to enhance our financial performance and long-term stockholder value. Edward A. Dohring Jeffrey M. Krauss H. Duane Wadsworth 8EXECUTIVE COMPENSATION The following table shows, for the fiscal years ended March 31, 2001, 2002 and 2003, the cash compensation paid by us and our subsidiaries as well as certain other compensation paid or accrued for those years for services in all capacities to the person serving as the Chief Executive Officer of Tegal during fiscal 2003 and the other three most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 in fiscal 2003. Summary Compensation Table
LONG TERM COMPENSATION SECURITIES ANNUAL COMPENSATION UNDERLYING ALL OTHER(1) NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($) --------------------------- ---- --------- -------- ------- ---------------Michael L. Parodi .................... 2003 199,607 0 -- 17,146 Chairman of the Board, President and 2002 208,938 -- -- 17,885 Chief Executive Officer 2001 249,034 -- -- 17,104 James D. McKibben .................... 2003 124,465 0 -- 21,093 Vice President, Worldwide 2002 137,601 -- -- 26,968 Marketing and Sales 2001 159,378 41,210 -- 6,806 George Landreth ...................... 2003 111,019 0 -- 444 Vice President, Product Development 2002 120,108 -- -- 388 2001 140,625 -- -- 447- ---------- (1) Other compensation in fiscal 2003 consists of 401(k) contributions made by us, commissions paid to Mr. McKibben in the amount of $14,649, and, for Messrs. Parodi and McKibben, $16,800 and $6,180, respectively, in car allowance paid by us. Other compensation in fiscal 2002 consists of 401(k) contributions made by us and, for Messrs. Parodi and McKibben, $16,800 and $6,180, respectively, in car allowance paid by us. Other compensation in fiscal 2001 consists of 401(k) contributions made by us, and, for Messrs. Parodi and McKibben, $16,800 and $6,180, respectively, in car allowance paid by us. 9AGGREGATED OPTION EXERCISES DURING 2003 FISCAL YEAR AND 2003 FISCAL YEAR-END OPTION VALUES The following table sets forth information concerning exercise of stock options during fiscal 2003 by each of the individuals identified in the Summary Compensation Table and the value of options at the end of fiscal 2003.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED SHARES VALUE OPTIONS AT IN-THE-MONEY OPTIONS ACQUIRED ON REALIZED 2003 YEAR-END(#)(A) AT 2003 YEAR-END($)(A) NAME EXERCISE(#) ($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE) ---- ----------- --- --------------------------- ---------------------------Michael L. Parodi..................... -- -- 695,156/2,344 -- James D. McKibben..................... -- -- 326,100/-- -- George Landreth....................... 457 $117.43 290,743/-- --- ---------- (a) Potential unrealized value is (1) the fair market value at fiscal 2003 year-end ($0.38 per share) less the exercise price of "in-the-money" unexercised options times (2) the number of shares represented by such options. MANAGEMENT CONTRACTS Mr. Parodi serves as our Chief Executive Officer pursuant to an employment agreement with us in which he is guaranteed, in the event of his termination by us for any reason, 12 months salary and benefits following the effective date of the termination. If he remains unemployed after 12 months he is entitled to receive benefits for up to an additional six months on a monthly basis until he finds employment. If Mr. Parodi voluntarily leaves the company under certain defined "adverse" circumstances, Mr. Parodi is entitled to receive up to 24 months of salary and benefits. In addition, on June 11, 1996, the board of directors approved a severance arrangement for executive officers in the event of a change of control of Tegal. If an executive officer is terminated as a result of a change of control, we shall continue to pay such executive officer's base salary and certain benefits for a period of 12 months. 10APPROVAL OF THE AMENDMENT TO THE FOURTH AMENDED AND RESTATED 1998 EQUITY PARTICIPATION PLAN (PROPOSAL NO. 2) The Fourth Amended and Restated 1998 Equity Participation Plan On June 30, 2003, our board of directors, subject to stockholder approval, unanimously adopted the fifth amendment to our 1998 Equity Participation Plan of Tegal Corporation to increase the number of shares available for issuance under the 1998 Equity Participation Plan from 2,400,000 to 6,400,000 and to increase the Award Limit from 600,000 shares to 1,600,000 shares. The board of directors believes that the 1998 Equity Participation Plan, as amended, is desirable: o to enable Tegal to retain the services of consultants while preserving Tegal's cash reserves by granting options in lieu of cash payments; o to provide an incentive for key employees and consultants of Tegal to further the growth, development and financial success of Tegal by personally benefiting through the ownership of Tegal's stock and/or rights which recognize such growth, development and financial success; and o to enable Tegal to obtain and retain the services of key employees considered essential in the long-range success of Tegal by offering them an opportunity to own stock in Tegal and/or rights which will reflect the growth, development and financial success of Tegal. Through August __, 2003, 2,400,000 shares of common stock were reserved for issuance upon exercise of options under the 1998 Equity Participation Plan. As of August 1, 2003, 925,275 shares remained available for issuance under the 1998 Equity Participation Plan, and 1,474,725 shares were subject to outstanding options. The principal features of the 1998 Equity Participation Plan, as amended, are summarized below, but the summary is qualified in its entirety by reference to the 1998 Equity Participation Plan, as amended, which is attached as Appendix A to this proxy statement. The 1998 Equity Participation Plan provides for the award of non-qualified and incentive stock options, restricted stock and stock appreciation rights ("SARs"). The 1998 Equity Participation Plan provides that the maximum number of shares that may be subject to any award granted under the 1998 Equity Participation Plan to any individual in any calendar year cannot currently exceed 600,000. If Proposal No. 2 is approved by 11the stockholders, the maximum number of shares that may be subject to any such award would be increased to 1,600,000. The shares available under the 1998 Equity Participation Plan upon exercise of options and SARs and for issuance as restricted stock may be either previously authorized but unissued shares or treasury shares, and may be equity securities other than common stock. The 1998 Equity Participation Plan provides for appropriate adjustments in the number and kind of shares subject to the plan and to outstanding grants thereunder (including acceleration of vesting in some instances) in the event of a change in control or a recapitalization such as a stock split or stock dividend. If any portion of an option, SAR or restricted stock award terminates or lapses unexercised, or is canceled upon grant of a new option, SAR or restricted stock award (which may be at a higher or lower exercise price than the option, SAR or restricted stock award so canceled), the shares which were subject to the unexercised portion of such option, SAR or restricted stock award, will continue to be available for issuance under the 1998 Equity Participation Plan. The compensation committee or another committee or a subcommittee of the board assuming the functions of the compensation committee under the 1998 Equity Participation Plan administers the 1998 Equity Participation Plan. The committee consists of two or more independent directors appointed by and holding office at the pleasure of the board, each of whom is both a "non-employee director" for purposes of Rule 16b-3 ("Rule 16b-3") under the Exchange Act and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code. Appointment of committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the board. Vacancies in the committee may be filled by the board. The committee will have the power to interpret the 1998 Equity Participation Plan and to adopt such rules for the administration, interpretation, and application of the 1998 Equity Participation Plan as are consistent therewith, to interpret, amend or revoke any such rules. The board will have discretion to exercise any and all rights and duties of the committee under the 1998 Equity Participation Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Internal Revenue Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the committee. Options, restricted stock awards and SARs under the 1998 Equity Participation Plan may be granted to committee-selected individuals who are then our employees or consultants. Incentive stock options may only be granted to employees. The 1998 Equity Participation Plan provides that we may grant or issue stock options, restricted stock and SARs or any combination of stock options, restricted stock and SARs. The terms and conditions of each award will be set forth in a separate award agreement between the holder of the award and us. Nonqualified Stock Options ("NQSOs") will provide for the right to purchase common stock at a specified price which, except with respect to NQSOs intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, may be less than fair market value on the date of grant (but not less than 85% of fair market value), and usually will become exercisable, in the discretion of the committee in one or more installments after the grant date, subject to the participant's continued provision of services to us and/or subject to the satisfaction of individual or company performance targets established by the committee. NQSOs may be granted for any term specified by the committee. 12Incentive Stock Options ("ISOs") will be designed to comply with the provisions of the Internal Revenue Code and will be subject to certain restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs must have an exercise price not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, must expire within a specified period of time following the optionee's termination of employment, and must be exercised within the ten years after the date of grant, but may be subsequently modified to disqualify them from treatment as ISOs. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our stock, the 1998 Equity Participation Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant, and the ISO must expire upon the fifth anniversary of the date of its grant. Restricted Stock may be sold to participants at various prices (but not below par value) and made subject to such restrictions as may be determined by the board or committee. Restricted stock, typically, may be repurchased by us at the original purchase price if the conditions or restrictions are not met. In general, restricted stock may not be sold, or otherwise transferred or pledged, until restrictions are removed or expire. Purchasers of restricted stock will have all the rights of a stockholder with respect to such restricted stock, including the right to receive all dividends and other distributions paid or made with respect to the shares prior to the time when the restrictions lapse. Stock Appreciation Rights ("SARs") may be granted in connection with stock options, or separately. SARs granted by the committee in connection with stock options typically will provide for payments to the holder based upon increases in the price of our common stock over the exercise price of the related option. SARs granted by the committee independent of a stock option typically will provide for payments to the holder based upon increases in the price of our common stock over the exercise price of such independent SAR. Except as required by Section 162(m) of the Internal Revenue Code with respect to a SAR which is intended to qualify as performance-based compensation as described in Section 162(m) of the Internal Revenue Code, there are no restrictions specified in the 1998 Equity Participation Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the committee in the SAR agreements. The committee may elect to pay SARs in cash or in common stock or in a combination of both. The administrator of the 1998 Equity Participation Plan may at any time suspend or terminate the 1998 Equity Participation Plan. However, no such amendment or revision may, unless appropriate stockholder approval of such amendment or revision is obtained, (1) increase the maximum number of shares which may be acquired pursuant to awards granted under the 1998 Equity Participation Plan (except for adjustments described above) or (2) increase the maximum number of shares of common stock for which awards may be issued during any fiscal year to any participant. No amendment of the 1998 Equity Participation Plan may alter or impair any rights or obligations under any awards already granted unless the holder of the award consents or the award otherwise provides. Securities Laws and Federal Income Taxes The following discussion is a general summary of the material federal income tax consequences to participants in the 1998 Equity Participation Plan. The discussion is based on 13the Internal Revenue Code, regulations thereunder, rulings and decisions now in effect, all of which are subject to change. The summary does not discuss all aspects of federal income taxation that may be relevant to a particular participant in light of such participant's personal investment circumstances. Also, state and local income taxes are not discussed and may vary from locality to locality. Accordingly, holders should not rely thereon for individual tax advice, as each taxpayer's situation and the consequences of any particular transaction will vary depending upon the specific facts and circumstances involved. Each taxpayer is advised to consult with his or her own tax advisor for particular federal, as well as state and local, income and any other tax advice. Securities Laws. The 1998 Equity Participation Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, Rule 16b-3. The 1998 Equity Participation Plan will be administered, and awards will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the 1998 Equity Participation Plan and awards granted thereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Nonqualified Stock Options. Nonqualified stock options are not intended to be incentive stock options under Section 422 of the Code. The grant of a nonqualified stock option is generally not a taxable event either for the optionee or for Tegal. Upon the exercise of a nonqualified stock option, the optionee generally will recognize ordinary income in an amount equal to the excess of the fair market value of the shares acquired upon exercise, determined at the date of exercise, over the exercise price of such option. Subject to Section 162(m) of the Code, Tegal will be entitled to a business expense deduction equal to such amount in the fiscal year of Tegal in which the optionee exercises the nonqualified stock option. The ordinary income recognized by the optionee is subject to income and employment tax withholding. The optionee's tax basis in the shares acquired pursuant to the exercise of a nonqualified stock option will be equal to the option price paid plus the amount of ordinary income recognized upon exercise. Any gain or loss on a disposition of the common stock acquired upon the exercise of a nonqualified stock option will be treated as short-term or long-term capital gain or loss, subject to income taxation at short-term or long-term capital gains rates depending on the holding period of the optionee measured from the date of the exercise of such option. There are generally no federal income tax consequences to Tegal by reason of the disposition by an optionee of common stock acquired upon the exercise of a nonqualified stock option. If an optionee delivers previously acquired shares of the common stock of Tegal to pay the option price upon exercise of a non-qualified option, the shares of common stock so acquired that are equal in fair market value to the shares surrendered, measured at the date of exercise, generally will qualify for nonrecognition of gain. The tax basis of such shares will be equal to the optionee's basis in the shares surrendered and the holding period for purposes of determining capital gain or loss treatment with respect to subsequent appreciation or depreciation will be measured to include the optionee's holding period with respect to the surrendered shares. Shares of common stock of Tegal so acquired that exceed the fair market value of the shares surrendered will be taxable as 14ordinary income to the optionee. Tegal will be subject to a withholding obligation for income and employment taxes with respect to the amount of ordinary income recognized by the optionee and will be entitled to a deduction equal to the amount of such ordinary income. The optionee's basis in such shares is equal to the amount of ordinary income so recognized and the holding period for subsequent capital gain (or loss) will be measured from the exercise date. Incentive Stock Options. Generally, an optionee recognizes no taxable income upon the grant or exercise of an incentive stock option that meets the requirements of Code Section 422. However, the amount by which the fair market value of the common stock acquired at the time of exercise exceeds the option exercise price (the "spread") is taken into the account in determining the amount, if any, of the alternative minimum tax due from the optionee in the year in which the option is exercised. In addition, if the optionee exercises the option by paying the option price with shares of common stock, the transfer of such common stock may result in taxable income to the optionee even though the transfer itself will not affect the favorable tax treatment of the common stock received as a result of exercising the option. If an optionee holds the common stock acquired through the exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year from the date on which the option was exercised, and if the optionee is an employee of Tegal at all times from the date of the grant of the incentive stock option through the date that is three months before the date of exercise, any gain or loss on the subsequent disposition of such common stock will be taxed to such optionee as long-term capital gain or loss equal to the difference between consideration received upon such disposition and the option exercise price. Generally, if an optionee disposes of the common stock received on exercise of an incentive stock option less than two years after the date the option was granted or less than one year after the date the option was exercised, it is considered to be a "disqualifying disposition." At the time of such disqualifying disposition, the optionee will recognize ordinary income in the amount equal to the lesser of (i) the fair market value of the common stock on the date of exercise over the option exercise price; or (ii) the amount received for the common stock over the option exercise price. Any gain in excess of this amount will be taxed as capital gain. To the extent that an optionee recognizes ordinary income by reason of a disqualifying disposition of common stock acquired upon the exercise of any incentive stock option, Tegal generally will be entitled to a corresponding business expense deduction in the fiscal year of Tegal in which the disqualifying disposition occurs, subject to Section 162(m) of the Code. Restricted Stock. A holder of restricted stock generally will recognize ordinary income an amount equal to the excess of the fair market value of the common stock (determined without regard to any restrictions other than those that by their terms never lapse) over the amount, if any, paid for the common stock on the earlier of the date on which: (i) the common stock is no longer subject to a substantial risk of forfeiture or (ii) is transferable (without the transferee being subject to a substantial risk of forfeiture). If, as of such date, the holder cannot sell the common stock without incurring liability under Section 16(b) of the Exchange Act, the holder generally will not recognize ordinary income with respect to the receipt of the common stock until such time as the holder can sell the common stock without incurring liability under Section 16(b) of the Exchange Act. For purposes of determining the holder's income resulting from the receipt of the common stock, the fair market value will be determined as of that date. 15In the alternative, if the holder files an election with the Internal Revenue Service pursuant to Section 83(b) of the Code within 30 days of the receipt of the common stock pursuant to an award of restricted stock, the holder will be taxed in the year the common stock is received on the difference between the fair market value of the common stock at the time of receipt and the amount paid for the common stock, if any. This amount will be taxed as ordinary income. If shares with respect to which a Section 83(b) election has been made are later forfeited, the holder generally will be entitled to a capital loss only in an amount equal to the amount, if any, that the holder had paid for the forfeited shares, not the amount that the holder had recognized as income as a result of the Section 83(b) election. Subject to Section 162(m) of the Code, Tegal is entitled to a business expense deduction that corresponds to the amount of ordinary income recognized by the holder in the fiscal year of Tegal in which such ordinary income is recognized by the holder. Stock Appreciation Rights. Generally, the holder of a stock appreciation right recognizes no income upon the grant of a stock appreciation right. Upon exercise, the holder will recognize as ordinary income the excess of the value of the stock appreciation right on the date of exercise over the value as of the date of grant. If the stock appreciation right is paid in cash, the appreciation is taxable under Section 61 of the Code. If the committee determines to transfer shares of common stock to the holder infullor partial payment of the appreciation, the fair market value of the common stock so received over the amount paid therefor by the holder, if any, is taxable as ordinary income under Section 83 of the Code as of the date the stock appreciation right is exercised. Subject to Section 162(m) of the Code, Tegal is entitled to a business expense deduction that corresponds to the amount of ordinary income recognized by the holder in the fiscal year of Tegal in which the stock appreciation right is exercised. Section 162(m) Limitation. In general, under Section 162(m) of the Internal Revenue Code, income tax deductions of publicly-held corporations may be limited to the extent total compensation (including base salary, annual bonus, stock option exercises, transfers of property and benefits paid under non-qualified plans) for certain executive officers exceeds $1 million (less the amount of any "excess parachute payments" as defined in Section 280G of the Internal Revenue Code) in any one year. However, under Section 162(m), the deduction limit does not apply to certain "performance-based compensation." Under Section 162(m), stock options and SARs will satisfy the "performance-based compensation" exception if the award of the options or SARs are made by a board of directors committee consisting solely of two or more "outside directors," the plan sets the maximum number of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date (i.e. the option or SAR exercise price is equal to or greater than the fair market value of the stock subject to the award on the grant date). Other types of awards such as restricted stock may only qualify as "performance-based compensation" if such awards are only granted or payable to the recipients based upon the attainment of objectively determinable and pre-established performance goals which are established by a qualifying committee and which relate to performance targets which are approved by the corporation's stockholders. The 1998 Equity Participation Plan has been designed to permit a committee of outside directors, within the meaning of Section 162(m), to grant stock options, restricted stock and SARs that will qualify as "performance-based compensation." In addition, in order to permit 16awards other than stock options and SARs to qualify as "performance-based compensation", the 1998 Equity Participation Plan provides that the committee may designate as "Section 162(m) Participants" certain employees whose compensation for a given fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Internal Revenue Code. The committee may grant awards to Section 162(m) Participants that vest or become exercisable upon the attainment of performance targets established by the committee. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT TO THE 1998 EQUITY PARTICIPATION PLAN. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information as of March 31, 2003 for all of our equity compensation plans, including our 1998 Equity Participation Plan, Employee Stock Purchase Plan, 1990 Stock Option Plan, Amended and Restated Equity Incentive Plan and Third Amended and Restated Stock Option Plan for Outside Directors.
NUMBER OF SECURITIES REMAINING AVAILABLE FOR NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A)) ------------- ------------------------- ----------------------------------------------- (A) (B) (C)Equity compensation plans approved by security holders......................... 4,952,008 $ 3.17 1,132,475(1) Equity compensation plans not approved by security holders......................... -- -- -- Total.................................... 4,952,008 $ 3.17 1,132,475(1)- ---------- (1) Includes 91,260 shares remaining available for future issuance under our Employee Stock Purchase Plan and 90,000 shares remaining available for future issuance under our Directors Stock Option Plan and excludes the proposed increase of 4,000,000 shares to the 1998 Equity Participation Plan described above. APPROVAL OF FINANCING TRANSACTION (PROPOSAL NO. 3) On June 30, 2003, we entered into a financing transaction subject to stockholder approval in which the agreement provided that we may sell and issue, to a group of private investors, units consisting of up to (a) $7,165,000 aggregate principal amount of our 2.0% Convertible Secured Debentures Due 2011, convertible into our common stock at an initial conversion price of $0.35 17per share and (b) eight-year warrants to purchase 4,094,286 shares of common stock with an exercise price of $0.50. As part of the first closing of this financing transaction, on June 30, 2003, we sold $929,444 principal amount of our 2.0% Convertible Secured Debentures Due 2011 and warrants initially exercisable for 531,111 shares of common stock to a group of private investors. The closing sales price of our common stock on June 30, 2003 was $0.55 per share. Under Nasdaq rules, the sale of additional units to these private investors requires stockholder approval because it may result in the issuance of a number of shares of common stock equal to or greater than 20% of the number of shares of common stock currently outstanding. If stockholders approve this financing transaction, we intend to sell additional units to the group of private investors up to the total amount authorized by the board of directors (the "Second Closing"). Details of the Transaction We have sold $929,444 principal amount of our 2.0% Convertible Secured Debentures Due 2011, and upon stockholder approval will sell additional units, to a group of private investors for total consideration of up to $7,165,000. These investors are "accredited investors" under the federal securities laws, and therefore the sale constitutes a private placement exempt from registration under the federal securities laws. Each unit consists of our 2% Convertible Secured Debentures plus common stock warrants. Interest on our 2% Convertible Secured Debentures of 2% per annum is to be paid by us on each debenture on a quarterly basis. Each debenture matures on June 30, 2011, at which time the principal on each debenture must be paid by us to each holder. If we default on payment of any Debentures, the interest on such Debentures automatically increases to 12% per annum. Debentures and accrued interest thereon are convertible into shares of our common stock at a price of $0.35 per share. This conversion price is subject to adjustment in the event of a stock split or stock dividends or the issuance of common stock or securities convertible into common stock by us, excluding issuances to employees, consultants, strategic partners or major lenders or in connection with an acquisition. Our obligations under the Debentures are secured by all our intellectual property, subject to release upon conversion of all the Debentures. The Debentures provide for standard events of default and payment of expenses of collection by us and are not permitted to be subordinated to any other creditors of us. We are required to deliver to each investor our annual and quarterly financial statements filed with the SEC. If the financing transaction is approved by the stockholders, one of the investors, Special Situations Fund, will have the right to designate one individual reasonably acceptable to us as a member of our board of directors. The common stock warrants sold with the Debentures as part of each unit are exercisable to purchase a number of shares of our common stock equal to 20% of the shares issuable upon conversion of each Debenture. The exercise price is $0.50 per share of common stock purchased, subject to adjustment in the following instances: o if holders of common stock receive, without payment therefor, cash, additional stock, securities or property by way of dividend, spin-off or other corporate arrangement, then warrantholders, upon exercise of their warrants, are entitled to receive the amount of cash, stock, other securities or property which such holders would hold on the date of such exercise if such holders had been the holder of record of the number of shares of common stock issuable pursuant to the warrants from the time of the issuance of the warrants to and including the date of exercise; 18o if the number of shares of common stock outstanding at any time after the issuance of the warrants is decreased by a combination or reverse stock split, the exercise price per share of common stock purchased shall be increased, and the number of shares of common stock purchasable under the warrants shall be decreased in proportion to such decrease in outstanding shares of common stock; o if we effect a reorganization, consolidate with or merge into any other person or transfer all or substantially all of our properties or assets to any other person under any plan or arrangement contemplating our dissolution, then warrantholders, upon exercise of their warrants at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, shall be entitled to receive, in lieu of the underlying common stock issuable upon such exercise, the stock and other securities and property, including cash, to which such holders would have been entitled upon such consummation or in connection with such dissolution, if such holder had so exercised their warrants immediately prior thereto; o if we issue any common stock, excluding common stock issued or reserved for employees, consultants, leasing companies, strategic partners, major lenders or upon conversion or exercise of the Debentures or the warrants or in connection with acquisitions ("excluded stock"), for a consideration per share less than the purchase price per share in effect immediately prior to the issuance of such common stock, the exercise price shall be reduced accordingly and the number of shares of common stock for which the warrants are exercisable shall be increased accordingly; o if we issue or sell any securities convertible into our common stock, there shall be determined the price per share for which the common stock is issuable upon the conversion or exchange thereof, and if the price per share so determined shall be less than the exercise price, then such issue shall be deemed to be an issue or sale for cash of such maximum number of shares of common stock at the price per share so determined, and the exercise price shall be adjusted accordingly; o if we grant any rights or options to subscribe for, purchase or otherwise acquire common stock, other than the "excluded stock" described above, for a price that is determined to be less than the exercise price, then the exercise price shall be readjusted accordingly; and o if any other event occurs and the foregoing provisions would not adequately protect the rights of warrantholders, then we shall make such adjustments as necessary to protect such rights. Each warrant is exerciseable in whole or in part any time for eight years after its date of issuance, at which time it expires. The warrants can be exercised via a "cashless" exercise, which means that holders of the warrants shall have the right to exercise the warrants in full or in part by surrendering shares of common stock or warrants as payment of the aggregate purchase price per share for the warrants to be exercised. For example, if the exercise price for exercising a warrant to purchase 100 shares of common stock is $50.00, the holder may pay the exercise price by surrendering 70 shares of common stock or a warrant representing that number of shares of common stock, assuming a market price of $0.72 per share. 19In connection with the sale of units on June 30, 2003, we are obligated to file by July 30, 2003 a registration statement relating to the resale of common stock issuable upon conversion of the Debentures or exercise of the warrants which we must keep effective for up to two years. On July 29, 2003, we filed a registration statement on Form S-3 to register for resale the shares of common stock issuable upon conversion of the Debentures and exercise of the warrants issued on June 30, 2003. If we had failed, or in the future fail, to comply with our registration obligations, we would be subject to liquidated damages in an amount equal to 1.5% of the aggregate amount invested by the Debenture holders for each 30-day period or pro rata for any portion thereof following the date by which a registration statement should have been filed. If stockholders approve this proposal and we subsequently sell additional units, we will file a new registration statement relating to the resale of common stock issuable upon conversion of the Debentures or exercise of the warrants issued in that transaction. Under the terms of the financing transaction, (i) Bentley Securities Corporation, one of our financial advisors, is entitled to a cash fee of up to 5% of the gross proceeds of the financing (approximately $358,250 assuming stockholder approval of the transaction), and (ii) TSD Trading, LLC, one of our financial advisors, shall be entitled to a cash fee of up to 1.65% of the gross proceeds of the financing (approximately $118,223 assuming stockholder approval of the transaction), plus cash or warrants with an exercise price of $0.35 representing up to 3.75% of the gross proceeds of the financing and actual expenses plus $75,000 (not to exceed $100,000 in the aggregate); provided that we shall not be obliged to make any payment of any fees or expenses to any investment banker, broker or finder in connection with the financing (including the fees mentioned above) unless and until the stockholders approve the financing and the Second Closing has been consummated. In connection with the financing transaction, on June 30, 2003, we entered into a financial advisory agreement with Orin Hirschman. Mr. Hirschman manages investments for private investment firms and has no prior affiliation with Bentley Securities Corporation, TSD Trading, LLC or any affiliates of Tegal. The agreement specifies compensation to Mr. Hirschman for services to be performed by him for us in the future in connection with the introduction of potential acquisitions, strategic partners, merger partners or investors. Such compensation, consisting of cash equal to 4% of the value of the transaction, is to be paid only upon completion of a transaction involving an entity or person introduced by Mr. Hirschman to us. The agreement does not include the proposed financing transaction and expires, unless extended by us, on June 30, 2006. In the first stage of the financing, the $929,444 principal amount of our 2.0% Convertible Secured Debentures Due 2011 and warrants sold on June 30, 2003 to a group of private investors consisted of Debentures which are convertible into 2,655,554 shares of common stock and warrants which are exercisable for 531,111 shares of common stock. Upon such conversion and exercise, the percentage of our common stock that will be held by those investors will be 16.6%. Upon stockholder approval, we will complete the Second Closing by selling an additional $6,235,500 principal amount of our Debentures and warrants to the same investors. These additional Debentures will be initially convertible into 17,815,714 shares of common stock, and the additional warrants will be exercisable for 3,563,143 shares of our common stock. Assuming that all the Debentures are converted and exercised and no additional shares are issued following the Second Closing, the private investors will own approximately 60.4% of our outstanding shares. Except for Neil I. Goldman, A. Alexander Arnold, III, Karl Niehoff and Trainer Wortham, each of whom is an existing stockholder of Tegal, Tegal has no prior affiliation with anytext of the proposedinvestors. 20Proposed Investors The following table sets forthamendment is attached hereto as Exhibit A (the “Amendment”).If the
names of the proposed investors, the number of shares of our common stock issuable upon conversion and exercise of the Debentures and warrants purchased by such investors in June 30, 2003 and the aggregate number of shares to be held by such investors following the Second Closing. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Percentage ownership is based on 16,099,949 shares of common stock outstanding as of July 10, 2003.
Shares Beneficially Owned Shares Beneficially Owned Name of Investors Prior to the Second Closing Subsequent to the Second Closing (1) ----------------- --------------------------- ------------------------------------ Shares Percent Shares Percent ------ ------- ------ -------Hershel Berkowitz 48,923 0.3% 377,142 1.0% Orin Hirshman 217,929 1.1% 1,679,996 4.1% Steven Spira 66,713 0.4% 514,284 1.3% CAM Co.(2) 177,901 0.9% 1,371,425 3.4% Ganot Corporation(3) 177,901 0.9% 1,371,425 3.4% Anfel Trading Limited(4) 88,951 0.5% 685,713 1.7% Dr. Jack Dodick 177,901 0.9% 1,371,425 3.4% Globis Capital Partners, L.P.(5) 155,664 0.8% 1,199,997 3.0% Paul Packer 22,237 0.1% 171,428 0.4% Richard Grossman 44,475 0.2% 342,856 0.8% Mazel D&K, Inc.(6) 44,475 0.2% 342,856 0.8% James Kardon 6,671 0.0% 51,428 0.1% Neal I. Goldman 155,644 0.8% 1,199,997 3.0% A. Alexander Arnold, III 22,237 0.1% 171,428 0.4% Trust U/W Kenneth R. Berol 44,475 0.2% 342,856 0.8%21
FBO John A. Berol(7) Trust U/W Kenneth R. Berol 44,475 0.2% 342,856 0.8% FBNO David A. Berol(7) Berol Family Trust 44,475 0.2% 342,856 0.8% FBO Margaret Beattie(7) Laddcap Value Partners, LP 88,951 0.5% 685,713 1.7% Schottenfeld Qualified Associates, LP 222,376 1.2% 1,714,281 4.2% CSL Associates LP 44,475 0.2% 342,856 0.8% Performance Capital Group, LLC 44,475 0.2% 342,856 0.8% Hilary Shane 88,951 0.5% 688,713 1.7% Kinderhook Capital Partners, LLC 22,237 0.1% 171,428 0.4% Karl Niehoff 22,237 0.1% 171,428 0.4% Special Situations Private Equity Fund, L.P.(8) 667,130 3.5% 5,142,844 12.6% Special Situations Technology Fund, L.P.(8) 371,968 1.9% 2,867,470 7.1% Special Situations Technology Fund II, L.P.(8) 72,785 0.4% 561,091 1.4% TOTAL 3,186,632 16.4% 24,568,648 60.3%- -------------------------------- (1) Assumes the conversion and exercise of all Debentures and warrants to be held by such investors. (2) Charles Alpert is the beneficial owner or control person for CAM Co. (3) Sisel Klurman is the beneficial owner or control person for Ganot Corporation. (4) Andre Zolty is the beneficial owner or control person for Anfel Trading Limited. (5) Paul Packer is the beneficial owner or control person for Globis Capital Partners, L.P. (6) Reuven Dessler is the control person for Mazel D&K, Inc. (7) Voting rests with the trustees of the three trusts, all of whom are the same. A. Alexander Arnold, III is a trustee. (8) MG Advisers, L.L.C. ("MG") is the general partner of and investment adviser to the Special Situations Private Equity Fund, L.P. SST Advisers, L.L.C. ("SSTA") is the general partner of and investment adviser to the Special Situations Technology Fund, L.P. and Special Situations Technology Fund II, L.P. Austin W. Marxe and David M. Greenhouse are the principal owners of MG and SSTA and are principally responsible for the selection, acquisition and disposition of the portfolio securities by each investment advisor on behalf of its funds. 22Use of Proceeds We intend to use the proceeds from the sale of units in this financing transaction for general corporate purposes and working capital. TheBoard of DirectorsRecommends Approvalimplements the Reverse Split, the exact ratio for the Reverse Split will be fixed by the Board ofthis Financing Transaction Few companies in our industry, if any, predicted that the current downturn would last as long and be as severe as we have experienced. Between 2000 and 2002, overall capital spending in semiconductors declined by more than 60 percent. At best, spending stabilized between 2002 and 2003, as we entered the third full year of an historic downturn. In the past two years, we have taken decisive actions to ensure that we would survive this unprecedented downturn. The first step that we took was to implement a major cost reduction program, which has resulted in a savings going forward of more than $20 million annually, compared to our expense levels only two years ago. We closed some operations, reduced the number of staff worldwide, lowered overhead costs, and implemented across-the-board pay cuts among out staff and management. Next, we moved to strengthen our leadership in our target markets and to expand our market and technology leadership into a band of adjacent markets central to certain etch and deposition processes related to new materials. This strategy was behind our acquisition of Sputtered Films, Inc., which was completed in August 2002 and which has been successful in providing new sources of revenue for us. As a result of our operating losses, however, our cash balance at the end of the fiscal year has declined. Beginning last year, in addition to pursuing cost reductions, we began to explore options for strategic relationships with larger companies in our industry, along with efforts to raise additional capital. We found both efforts challenging. At a time when many companies in our industry are contracting, we found it difficult to engage the imagination of managements of those companies, despite the potential value of the intellectual property and know-how inherent in our company. Furthermore, following the demise of many venture-backed companies and the lack of liquidity for small companies in the stock market, we found capital to be extremely scarce. However, we are pleased to have found a group of private investors willing to look at our future potential.Directors. We believe that this discretion is essential because it provides theproposed financing isBoard of Directors with the maximum flexibility to react to changing market conditions and to therefore act inourthe best interestsand may be the only option available to allow Tegal to continue as a going concern. This financing will significantly dilute your stockholding. However,of ourhistory of net losses and negative cash flows from operations have raised substantial doubt as to our ability to continue as a going concern,Company and ourauditors have included a going concern uncertainty explanatory paragraph in their latest auditors' report dated June 10, 2003 which is included in our 10-K for the fiscal year ended March 31, 2003. Therefore, if our stockholders do not approve the proposals necessary to secure the proposed investment, Tegal may be compelled to cease operations and we could be forced to liquidate with most, if not all,stockholders.One principal effect of the
proceeds goingReverse Split would be tothe current holder of the Debentures. 23The Company's directors, executive officers and certain stockholders (who currently hold common stock representing approximately 24% of our outstanding common stock) have indicated that they intend to vote all shares of common stock over which they exercise voting power as of the close of business on the record date in favor of approval of Proposal 3. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THIS FINANCING TRANSACTION. APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION (PROPOSAL NO. 4) On June 3, 2003, the board of directors approved an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock for issuance from 35,000,000 to 100,000,000. The board of directors recommends that the Company's stockholders approve this amendment. As of July 29, 2003,decrease the number of outstanding shares of our common stock. Except for minimal adjustments that may result from the treatment of fractional shares as described below, the Reverse Split will not have any dilutive effect on our stockholders since each stockholder would hold the same percentage of common stockwas 16,099,949,outstanding immediately following the Reverse Split as such stockholder held immediately prior to the Reverse Split. The relative voting and other rights that accompany thenumber of authorizedshares of common stockreservedwould not be affected by the Reverse Split.Although the Reverse Split will not have any dilutive effect on our stockholders, the proportion of shares owned by our stockholders relative to the number of shares authorized for issuance
pursuant to options, warrants, contractual commitments (assuming approval of Proposal No. 3) or other arrangements was 9,771,216. The number of authorized shares of common stock reserved for issuance pursuant to options, warrants, contractual commitments or other arrangements after the second tranchewillbe 40,406,109. The Company anticipates that approximately 27,000,000 ofdecrease. As a result, the additional authorized shares of common stock will beused for the issuance of common stock upon conversion of Debentures and warrants to the group of private investors as discussed above in Proposal No. 3. If the amendment to our certificate of incorporation is not approved, we will be unable to complete the financing transaction described in Proposal No. 3 and we may be unable to continue as a going concern. The additional authorized shares for which stockholder approval is sought may be used by the Company for other purposes, including, without limitation, the issuance of stock to obtain additional capital or the issuance of stock in connection with stock dividends, stock splits or other equity compensation and employee benefit plans that may be adopted in the future. The added flexibility of having additional authorized shares available for the purposes described in the preceding paragraphs without the expense and delay of obtaining stockholder approval at the time of the issuance of additional shares is now considered by the board of directors to far outweigh the dilution to our outstanding common stock noted in Proposal No. 5 below and the cost savings of maintaining fewer authorized shares. As of July 29, 2003, 6,328,733 authorized and unissued shares are not reserved for any specific use and are available for future issuances. Assuming this Proposal No. 4 is approved, the number of authorized and unissued shares not reserved for any specific use and available for future issuances would be 43,493,942. Note that there may be additional potential dilution to you if the reverse stock split in Proposal No. 5 is approved by the stockholders and if Tegal's board of directors effects such 24a reverse stock split, as Tegal would then have far fewer shares outstanding. For example, if Proposal No. 3, Proposal No. 4 and Proposal No. 5 are approved and consummated and the board of directors effects a 1:10 reverse stock split, we would haveavailable for issuanceapproximately 95,959,389 shares, which if issued, would result in substantial dilutionat such times and for such purposes as the Board of Directors may deem advisable without further action by our stockholders, except as required by applicable laws and regulations. We do not have any present plan or intention toyou. Assuming that the proposed amendment is approved at the annual meeting, the board of directors will be entitled to authorize the issuance ofissue the additional shares of authorized but unissued common stockwithout further approvalthat would become available as a result of theCompany's stockholders,proposed Reverse Split.The Reverse Split is not intended as, and will not have the effect of, a “going private transaction” subject to
any applicable laws or Nasdaq rules which require stockholder approval for certain stock issuances such asRule 13e-3 under theissuanceSecurities Exchange Act ofshares equal to or greater than 20% of the number of shares of common stock currently outstanding or shares issued in connection with the sale or other change of control of Tegal. Currently, we do not anticipate that the additional shares will be used for any significant transactions. Possible Existing Anti-Takeover Effect of Our Articles, By-laws and Agreements Under certain circumstances, an increase in the authorized number of shares of common stock could have an anti-takeover effect by making it more difficult for a person or group to obtain control of the Company (and thereby remove incumbent management) by means of a tender offer, merger or other transaction. For example, the Company's issuance of additional shares in a public or private sale, merger or other transaction or pursuant to the exercise of rights pursuant to our stockholder rights plan would increase the number of outstanding shares and thereby dilute the equity interest and voting power of a person who is attempting to obtain control of the Company. By potentially discouraging initiation of an attempt by a third party to gain control of the Company, the proposed increase in the authorized number of shares could, under certain circumstances, limit the ability of stockholders to dispose of their shares at the higher prices that are sometimes available in takeover attempts or similar transactions. Each holder of our common stock is entitled to one vote per share held of record on all matters submitted to a vote of the stockholders. There are no cumulative voting or preemptive rights applicable to any shares of common stock. All shares of common stock are entitled to participate pro rata in distributions and in such dividends as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividend rights of outstanding shares of preferred stock. Subject to the prior rights of creditors, all shares of common stock are entitled in the event of liquidation, dissolution or winding up of Tegal to participate ratably in the distribution of all the remaining assets of Tegal after distribution in full of preferential amounts, if any, to be distributed to holders of preferred stock. However, the rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of any series of preferred stock which we may designate and issue in the future. Our common stock is also subject to the Rights Agreement dated June 11, 1996,1934, as amendedbetween us and Mellon Investor Services LLC, as rights agent, in which each share of our common stock includes one common share purchase right. Additional details regarding our rights plan can be found on our most recent Form 10-K, which has been previously filed with(the “Exchange Act”).
Page 6 Reasons for the
SEC.Reverse SplitThe Board of
Directors hasDirectors’ primary objective in proposing theauthority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting 25any series or the designation of such series, without any further vote or action by stockholders. We believe that the Board of Directors' ability to issue preferred stock on such a wide variety of terms will enable the preferred stock to be used for important corporate purposes, such as financing acquisitions or raising additional capital. However, were it inclined to do so, the Board of Directors could issue all or part of the preferred stock with (among other things) substantial voting power or advantageous conversion rights. Such stock could be issued to persons deemed by the Board of Directors likely to support current management in a contest for control of Tegal, either as a precautionary measure or in response to a specific takeover threat. We have no current plans to issue preferred stock. The voting provisions of the common stock and the broad discretion conferred upon the Board of Directors with respect to the issuance of preferred stock (including the power to confer preferential voting rights) could substantially impede the ability of one or more stockholders (acting in concert) to acquire sufficient influence over the election of directors and other matters to effect a change in control or management of Tegal, and the Board of Directors' ability to issue preferred stock could also be utilized to change the economic and control structure of Tegal. As a result, such provisions, together with certain other provisions of the By-laws, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a particular stockholder might consider in such stockholders' best interest, including attempts that might result in a premium over the market price for the shares of common stock held by such stockholder. Notwithstanding the foregoing, the proposal by the board of directorsReverse Split is to increase thenumber of authorized shares of stock is not being made in response to any effort known by the board of directors to acquire control of the Company by means of a merger, accumulation of stock, tender offer, solicitation in opposition to management or otherwise, and the board of directors does not presently intend to adopt or propose other anti-takeover provisions not described in this Proxy Statement. The text of the form of amendment to our Certificate of Incorporation that would be filed with the Secretary of State of the State of Delaware to effect the increase in authorized shares is set forth in Appendix B to this proxy statement; provided, however, that such text is subject to amendment to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the board of directors deems necessary and advisable to effect the increase in authorized shares. If the increase in authorized shares is approved by the stockholders, our Certificate of Incorporation would be amended accordingly. The Company's directors, executive officers and certain stockholders (who currently hold common stock representing approximately 24% of our outstanding common stock) have indicated that they intend to vote all shares of common stock over which they exercise voting power as of the close of business on the record date in favor of approval of Proposal No. 4. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT TO THE ARTICLES OF INCORPORATION. 26RE-APPROVAL OF THE AUTHORIZATION OF THE REVERSE STOCK SPLIT (PROPOSAL NO. 5) The board of directors recommends that the stockholders re-approve the authorization of a reverse stock split that was approved by the stockholders (the "Prior Approval") in a Special Meeting of Stockholders on Monday, April 28, 2003 (the "Special Meeting"). We are asking stockholders to re-approve the reverse stock split in light of the developments that have occurred to the Company since the Special Meeting. General The board of directors has considered, deemed advisable, adopted a resolution approving and recommends to the stockholders for their approval a series of proposed amendments to our Certificate of Incorporation to authorize the board to effect a reverse stock split for the purpose of increasing the per-share market price of our common stock in order to maintain its listing on The Nasdaq Stock Market's SmallCap Market (the "SmallCap Market") and for other purposes as described below in this proxy statement. Under these proposed amendments, each outstanding 2, 3, 5, 10 or 15 shares of common stock would be combined, converted and changed into oneper shareof common stock (the "Reverse Stock Splits"), with the effectiveness of one such amendment (the "Effective Reverse Stock Split") and the abandonment of the other amendments, or the abandonment of all such amendments, to be determined at the discretion of the board pursuant to Section 242(c) of the Delaware General Corporation Law following the special meeting. If approved by the stockholders, the Prior Approval would be deemed superseded and withdrawn by the stockholders and the board would have discretion to implement the Effective Reverse Stock Split for one time only in any of the following ratios: 1:2, 1:3, 1:5, 1:10 or 1:15. The board believes that stockholder approval of selected exchange ratios within an exchange ratio range (as opposed to approval of a specified exchange ratio) would provide the board with maximum flexibility to achieve the purposes of the Effective Reverse Stock Split and, therefore, is in the best interests of Tegal and its stockholders. The actual timing for implementation of the Effective Reverse Stock Split would be determined by the board based upon its evaluation as to when such action would be most advantageous to Tegal and its stockholders. Furthermore, notwithstanding stockholder approval, the board also would have the discretion not to implement an Effective Reverse Stock Split. If the board were to elect to implement an Effective Reverse Stock Split, the board will set the exchange ratio using one of the ratios approved by the stockholders. The board would base such a determination upon the then currenttrading price of our common stockandon theadviceOTCQB. The Board ofour financial advisers, among other things. If Proposal No. 4 is not approved by the stockholders, Tegal may face delisting from the Nasdaq SmallCap Market, as more fully described below under the heading "Nasdaq Listing." The text of the form of amendment to our Certificate of Incorporation that would be filed with the Secretary of State of the State of Delaware to effect the Effective Reverse Stock Split is set forth in Appendix C to this proxy statement; provided, however, that such text is subject to amendment to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the board deems necessary and advisable to effect the Effective Reverse Stock Split. If the Reverse Stock Splits are approved by the stockholders and following such approval the board determines that an Effective Reverse Stock Split is in the best interest of Tegal and its stockholders, our Certificate of Incorporation would be amended accordingly. 27Purpose of the Effective Reverse Stock Split The board recommends the Effective Reverse Stock Split for the following reasons: |X| The boardDirectors believes that theEffectiveReverseStockSplitisand any resulting increase in themost effective means of increasing the per-share marketper share price of our common stockin order to maintain our listing onshould enhance theSmallCap Market;acceptability and|X| The board believes that a higher per-share market price of our common stock could encourage investor interest in Tegal and promote greater liquidity for our stockholders. Nasdaq Listing. Our stock is currently listed on The Nasdaq SmallCap Market under the symbol "TGAL." 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 May 6, 2003, we transferred the listingmarketability of our common stock to theNasdaq SmallCap Market. In connection with this transfer, Nasdaq granted us an extension until September 2, 2003, to regain compliance withfinancial community and investing public. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces theRule's minimum $1.00 per share bid price requirement for continued inclusion on the Nasdaq SmallCap Market (which may be further extended to December 1, 2003 so long as Tegal continues to meet other continued listing requirements). Alternatives to trading on the SmallCap Market include being listed for trading the OTC Bulletin board or in the "pink sheets" maintained by the National Quotation Bureau, Inc. However, the alternativesnumber ofthe OTC Bulletin board and the "pink sheets" are generally considered to be less efficient and less broad-based than the SmallCap Market, and therefore less desirable. 28We believe that delisting from the SmallCap Market could adversely affect (i) the liquidity and marketability of shares of our common stock; (ii) the trading price of our common stock; and (iii) our relationships with vendors and customers. We also believe that the SmallCap Market provides a broader market for our common stock than would the OTC Bulletin board or the "pink sheets" and is, therefore, preferable to those alternatives. We believe that a reverse stock split may have the effect of increasing the trading price of our common stock to a level high enough to satisfy the Nasdaq minimum bid price requirement for continued listing of our common stock on the SmallCap Market, and that a reverse stock split would be the most effective means available to avoid a delistingpotential buyers of our common stock.DuringAdditionally, analysts at many brokerage firms are reluctant to recommend lower-priced stocks to their clients or monitor theperiodactivity of lower-priced stocks. Brokerage houses also frequently have internal practices and policies that discourage individual brokers fromJanuary 1, 2002 to July 1, 2003, the closing sales price per share of our common stock ranged from a high of $2.00 to a low of $0.13. The closing sales price on July 2, 2003 was $0.57. Increased Investor Interest. We also believe that an increasedealing inthe per-share price of our common stock could encourage increased investor interest in our common stock and possibly promote greater liquidity for our stockholders. We believe that the current low per-share price of our common stock, which we believe is due in part to the overall weakness in the market for stocks, has had a negative effect on the marketability of our common stock. We believe there are several reasons for this effect. First, many institutional investors view stocks trading at low prices as unduly speculative in nature and, as a result, avoid investing in suchlower-priced stocks.Second,Further, becausethe brokers'brokers’ commissions on lower-pricedstocksstock generally represent a higher percentage of the stock price than commissions on higher priced stock, investors in lower-priced stocksthe current per-share price of our common stock can result in individual stockholders payingpay transaction costs(commissions, markups or markdowns) that constitutewhich are a higher percentage of their total share value,than would bewhich may limit thecase ifwillingness of individual investors and institutions to purchase our common stock.If effected, we cannot assure you that the
shareReverse Split will have any of the desired effects described above. More specifically, we cannot assure you that after the Reverse Split the trading price of our common stockwere substantially higher. This factor may also limitwill increase proportionately to reflect thewillingness of institutional investors to purchase our common stock. Third, a variety of policies and practices of brokerage firms discourage individual brokers within those firms from dealing in low-priced stocks. These policies and practices pertain toratio for thepayment of brokers' commissions and to time-consuming proceduresReverse Split, thatmake the handling of low-priced stocks unattractive to brokers from an economic standpoint. Fourth, many brokerage firms are reluctant to recommend low-priced stocks to their customers. Finally, the analysts at many brokerage firms do not monitorthe tradingactivity or otherwise provide coverage of low-priced stocks. Although any increase in the marketprice of our common stockresulting fromwill not decrease to its pre-Reverse Split level or that our market capitalization will be equal to theEffectivemarket capitalization before the Reverse Split. The Company effected reverse splits on February 22, 2017 and October 5, 2017 and the price of our common stock has decreased since then to a price lower than it was before such splits.Potential Disadvantages of a Reverse Stock Split
As noted above, the principal purpose of the Reverse Split would be to help increase the trading price per share of our common stock by a factor of between ___ and ___. We cannot assure you, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While we expect that the reduction in the number of outstanding shares of common stock will increase the trading price of our common stock, we cannot assure you that the Reverse Split will increase the trading price of our common stock by a multiple equal to the Reverse Split ratio to be determined by the Board of Directors, or result in any permanent increase in the trading price of our common stock, which is dependent upon many factors, including our business and financial performance, general market conditions, and prospects for future success. The Company effected reverse splits on February 22, 2017 and October 5, 2017, and the price of our common stock has decreased since then to a price lower than it was before such splits. Should the trading price decline after the Reverse Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the Reverse Split. In some cases, as in our February 2017 and October 2017 reverse splits, the per share stock price of companies that have effected reverse stock splits has subsequently declined back to pre-reverse split levels. In addition, a reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in our overall market capitalization. If the per share trading price does not increase proportionately as a result of the Reverse Split, then the value of the Company as measured by our stock capitalization will be reduced, perhaps significantly.
The number of shares held by each individual stockholder would be reduced if the Reverse Split is implemented. This will increase the number of stockholders who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to stockholders selling “odd lots” are higher on a per share basis. Consequently, the Reverse Split could increase the transaction costs to existing stockholders in the event they wish to sell all or a portion of their position.
Although the Board of Directors believes that the decrease in the number of
outstanding shares, we anticipate that the Effective Reverse Stock Split will result in an increase in the bid price for our common stock that will be large enough to avoid delisting from the SmallCap Market and possibly to reduce the effect of some of the policies, practices and circumstances referred to above. Possibility that the Effective Reverse Stock Split Will Fail to Achieve the Desired Effects; Other Possible Consequences Stockholders should note that the effect of the Effective Reverse Stock Split upon the market price for our common stock cannot be accurately predicted. In particular, we cannot assure you that prices forshares of our common stockafteroutstanding as a consequence of theEffectiveReverseStockSplitwill be two, three, five, ten or fifteen times, as applicable,and theprices for shares of our common stock immediately prior toanticipated increase in theEffective Reverse Stock Split. Furthermore, we cannot assure you 29that the markettrading price of our common stockimmediately after the proposed Effective Reverse Stock Split will be maintained for any period of time. Even if an increased per-share price can be maintained, the Effective Reverse Stock Split may not achieve the desired results that have been outlined above. Moreover, because some investors may view the Effective Reverse Stock Split negatively, we cannot assure you that the Effective Reverse Stock Split will not adversely impact the market price ofcould encourage interest in our common stockor, alternatively, that the market price following the Effective Reverse Stock Split will either exceed or remain in excess of the current market price. While we expect the Effective Reverse Stock Split to be sufficient to prevent Nasdaq from delisting our common stock, it is possible that, even if the Effective Reverse Stock Split results in a bid price for our common stock that exceeds $1.00 per share, we may not be able to continue to satisfy the additional criteria for continued listing of our common stock on the National Market. We would also need to satisfy additional criteria to continue to have our common stock eligible for continued listing on the SmallCap Market. These criteria require that: |X| we have stockholders' equity of at least $2.5 million; |X| the market value of the public float of our common stock be at least $1.0 million (public float defined under Nasdaq's rules as the shares held by persons other than officers, directorsandbeneficial owners of greater than 10% of our total outstanding shares); |X| there be at least 300 round lot holders (defined as persons who own at least 100 shares of our common stock); |X| there be at least two market makers for our common stock; and |X| we comply with certain corporate governance requirements. We believe that we satisfy all of these other maintenance criteria as of the mailing date of these proxy materials. However, we cannot assure you that we will be successful in continuing to meet all requisite maintenance criteria. If the Effective Reverse Stock Split is implemented, some stockholders may consequently own less than 100 shares of common stock. A purchase or sale of less than 100 shares (an "odd lot" transaction) may result in incrementally higher trading costs through certain brokers, particularly "full service" brokers. Therefore, those stockholders who own less than 100 shares following the Effective Reverse Stock Split may be required to pay higher transaction costs if they sell their shares in us. We believe that the Effective Reverse Stock Split may result inpossibly promote greater liquidity for ourstockholders. However, it is also possible thatstockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after theEffectiveReverseStockSplit.Effecting the Reverse Split; Board Discretion to Implement
EffectiveReverseStockSplit30If
the Reverse Stock Splits areapproved byourstockholders at thespecial meeting, the Effective Reverse Stock Split will be effected, if at all, only upon a determination by the boardSpecial Meeting and our Board of Directors decides thatone of the Reverse Stock Splits (with an exchange ratio determined by the board as described above)it is in the best interests ofTegalthe Company andits stockholders. Such determination shall be made within one yearour stockholders to effect the Reverse Split, the Board ofstockholder approvalDirectors will establish an appropriate ratio for the Reverse Split based on several factors existing at such time andbe based upontheadviceCompany will subsequently file the Amendment. Our Board of Directors will consider, among other factors, prevailing market conditions, the likely effect of the Reverse Split on the trading price of ourfinancial advisorscommon stock, andcertain other factors, including meeting and responding to changes in Nasdaq's listing requirements fortheSmallCap Market such as the $1.00 trading price requirement, Tegal's growth, existing and expectedmarketability and liquidity of our commonstock, prevailing market conditions, analyst coveragestock. The Board ofour common stock andDirectors will determine thelikely effect on the market price of our common stock. Notwithstanding approvaltiming of the filing of the Amendment with the Secretary of State of the State of Delaware to effect the ReverseStock Splits bySplit. If, for any reason, thestockholders,Board of Directors deems it advisable, theboard may,Board of Directors, in its sole discretion, may abandonall oftheproposed amendments and determineReverse Split at any time prior to the effectiveness of any filing of the Amendment, without further action by our stockholders. The Reverse Split will be effective as of the date and time set forth in the Amendment (the “Effective Time”).
Page 7 Upon the filing of the Amendment, without further action on the part of the Company or the stockholders, the outstanding shares of common stock held by stockholders of record as of the Effective Time would be converted into a lesser number of shares of common stock calculated in accordance with the
Delaware Secretaryterms ofState not to effectthe Amendment, based on a reverse split ratio within the range of 1-for-___ and 1-for-___. In the event of a Reverse Split at a ratio of 1-for-___, for example, if a stockholder holds _____ shares of common stock as of the Effective Time, such stockholder would hold ________ shares of common stock following such Reverse Split.Effect on Outstanding Shares, Options, and Certain Other Securities
If the Reverse Split is implemented, the number of shares of our common stock owned by each stockholder will be reduced in the same proportion as the reduction in the total number of shares outstanding, such that the percentage of our common stock owned by each stockholder will remain unchanged, except for any de minimis change resulting from the treatment of any fractional shares that such stockholder would have received as a result of the Reverse
Stock Splits,Split. The number of shares of common stock that may be received upon conversion, exercise or exchange, aspermitted under Section 242(c)the case may be, of outstanding options or other securities convertible into, or exercisable or exchangeable for, shares of our common stock, and theDelaware General Corporation Law. Effectexercise or conversion prices for these securities, will also be adjusted in accordance with their terms, as of the Effective Time.No Effect on Par Value
If we file the Amendment and implement the proposed Reverse
StockSplit, the par value of our common stock will not be affected.Effect on Registration and
Voting RightsStock TradingOur common stock is currently registered under Section
12(g)12(b) of theSecuritiesExchange Actof 1934, as amended (the "Exchange Act"),and we are subject to the periodic reporting and other requirements of the Exchange Act. TheEffectiveproposed ReverseStockSplitwouldwill not affect the registration of our common stockor our reporting obligationsunder the Exchange Act.AfterIf we implement the
Effectiveproposed ReverseStockSplit, our common stockwouldwill continue tobe reportedtrade on theSmallCap MarketOTCQB under the symbol"TGAL" (although Nasdaq would likely add the letter "D" to the end of the trading symbol for a period of 20 trading days to indicate that the Effective Reverse Stock Split has occurred)“RNVA”.Proportionate voting rights and other rights of the holders ofHowever, our common stock wouldnot be affectedhave a new CUSIP number, which is a number used to identify our common stock.Mechanics of Reverse Split
If this Proposal 1 is approved by the
Effective Reverse Stock Split (other than as a resultstockholders at the Special Meeting and our Board of Directors decides that it is in the best interests of thepayment of cash in lieu of fractional shares as described below). For example, a holder of 2%Company and our stockholders to effectuate the Reverse Split, our stockholders will be notified that the Reverse Split has been effected. The mechanics of thevoting power of the outstandingReverse Split will differ depending upon whether a stockholder holds its shares of common stockimmediately prior toin brokerage accounts or “street name” or whether theeffective timeshares are registered directly in a stockholder’s name and held in book-entry form or certificate form.
● Our stockholders who hold shares of common stock in “street name” through a nominee (such as a bank or broker) will be treated in the same manner as stockholders whose shares are registered in their names, and nominees will be instructed to effect the Reverse Split for their beneficial holders. However, nominees may have different procedures for processing the Reverse Split and stockholders holding shares in “street name” are encouraged to contact their nominees.
Page 8
● Our registered stockholders may hold some or all of their shares of common stock electronically in book-entry form under the direct registration system for securities. These stockholders will not have stock certificates evidencing their ownership of our common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts. Stockholders holding registered shares of our common stock in book-entry form need not take any action to receive post-Reverse Split shares as a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares held. ● Some of our registered stockholders hold all their shares of common stock in certificate form or a combination of certificate and book-entry form. Stockholders holding shares of common stock in certificate form will receive a transmittal letter from Computershare Trust Company, N.A. (the “Transfer Agent”) as soon as practicable after the Effective Date of the Reverse Split for use in transmitting the existing certificates representing shares of our common stock (the “Old Certificates”) to our Transfer Agent. The letter of transmittal will contain instructions for the surrender of the Old Certificates to our Transfer Agent in exchange for new certificates representing the appropriate number of whole shares of new common stock giving effect to the Reverse Split. No new stock certificates will be issued to any stockholder until such stockholder has surrendered all certificates, together with a properly completed and executed Letter of Transmittal, to our Transfer Agent. The stockholders will then receive, at their option, either a new certificate or certificates or book-entry shares representing the number of whole shares of common stock into which their pre-Reverse Split shares have been converted as a result of the Reverse Split. Until surrendered, the Company will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of post-Reverse Split common stock to which the stockholders are entitled. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO. Treatment of
the Effective Reverse Stock Split would continue to hold 2% of the voting power of the outstanding shares of common stock after the Effective Reverse Stock Split. Although the Effective Reverse Stock Split would not affect the rights of stockholders or any stockholder's proportionate equity interest in Tegal (subject to the treatment of fractional shares), the number of authorized shares of common stock would not be reduced and would increase significantly the ability of the board to issue such authorized and unissued shares without further stockholder action. The number of stockholders of record would not be affected by the Effective Reverse Stock Split (except to the extent that any stockholder holds only a fractional share interest and receives cash for such interest after the Effective Reverse Stock Split). Effect of the Effective Reverse Stock Split on the Authorized but UnissuedFractional Sharesof Common Stock The number of authorized but unissued shares of common stock effectively will be increased significantly by the Effective Reverse Stock Split. The following table illustrates the effect as of July 10, 2003 of each of the proposed ratios on our (i) 16,099,949 shares of common stock outstanding, (ii) authorized but unissued common stock, (iii) authorized but unissued common stock assuming stockholder approval of the increase to our authorized shares in Proposal No. 4 and (iv) authorized common stock reserved for issuance pursuant to options, warrants, contractual commitments (including the assumption of stockholder approval of Proposal No. 3) or other arrangements: 31
- ------------ ------------------- ------------------- --------------------------- --------------------------- Ratio (i) Outstanding (ii) Authorized (iii) Authorized (iv) Authorized Shares of Common but Unissued but Unissued Shares Common Stock Reserved for Stock Shares Assuming Approval of Issuance Assuming Proposal No. 4 Approval of Proposal No. 3 - ------------ ------------------- ------------------- --------------------------- ---------------------------1:1 16,099,949 18,900,051 83,900,051 40,406,109 - ------------ ------------------- ------------------- --------------------------- --------------------------- 1:2 8,049,975 26,950,025 91,950,025 20,203,054 - ------------ ------------------- ------------------- --------------------------- --------------------------- 1:3 5,366,650 29,633,350 94,633,350 13,468,703 - ------------ ------------------- ------------------- --------------------------- --------------------------- 1:5 3,219,990 31,780,010 96,780,010 8,081,227 - ------------ ------------------- ------------------- --------------------------- --------------------------- 1:10 1,609,995 33,390,005 98,390,005 4,040,610 - ------------ ------------------- ------------------- --------------------------- --------------------------- 1:15 1,073,330 33,926,670 98,926,670 2,693,740 - ------------ ------------------- ------------------- --------------------------- ---------------------------The issuance in the future of such additional authorized shares may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership and voting rights, of the currently outstanding shares of common stock. In addition, the effective increase in the number of authorized but unissued shares of common stock may be construed as having an anti-takeover effect. Although we are not proposing the Reverse Stock Splits for this purpose, we could, subject to the board's fiduciary duties and applicable law, issue such additional authorized shares to purchasers who might oppose a hostile takeover bid or any efforts to amend or repeal certain provisions of our Certificate of Incorporation or bylaws. Such a use of these additional authorized shares could render more difficult, or discourage, an attempt to acquire control of us through a transaction opposed by the board. Effect of the Effective Reverse Stock Split on Stock Options, Warrants and Par Value The Effective Reverse Stock Split would reduce the number of shares of common stock available for issuance under our 1998 Equity Participation Plan, Employee Stock Purchase Plan, 1990 Stock Option Plan, Amended and Restated Equity Incentive Plan and Third Amended and Restated Stock Option Plan for Outside Directors in proportion to the exchange ratio of the Effective Reverse Stock Split. The total number of shares of common stock currently authorized for issuance but unissued at June 30, 2003 under these plans is 2,400,00 (prior to giving effect to the Effective Reverse Stock Split). 32We also have outstanding certain stock options and warrants to purchase shares of common stock. Under the terms of the outstanding stock options and warrants, the Effective Reverse Stock Split will effect a reduction in the number of shares of common stock issuable upon exercise of such stock options and warrants in proportion to the exchange ratio of the Effective Reverse Stock Split and will effect a proportionate increase in the exercise price of such outstanding stock options and warrants. In connection with the Effective Reverse Stock Split, the number of shares of common stock issuable upon exercise or conversion of outstanding stock options and warrants will be rounded to the nearest whole share and no cash payment will be made in respect of such rounding.No fractional shares of common stock will be issued
in connection with the proposed Effective Reverse Stock Split. Holders of common stock who would otherwise receive a fractional share of common stock pursuant to the Effective Reverse Stock Split will receive cash in lieu of the fractional share as explained more fully below. The par value of our common stock and preferred stock would remain at $0.01 per share following the effective time of the Effective Reverse Stock Split. Effective Date If the proposed Reverse Stock Splits are approved at the special meeting and the board elects to proceed with the Effective Reserve Stock Split in one of the approved ratios, the Effective Reverse Stock Split would become effective as of 5:00 p.m. Eastern time on the date of filing (the "Effective Date") of the applicable certificate of amendment to the Certificate of Incorporation with the office of the Secretary of State of the State of Delaware. Except as explained below with respect to fractional shares, on the Effective Date, shares of common stock issued and outstanding immediately prior thereto will be, automatically and without any action on the part of the stockholders, combined, converted and changed into new shares of common stock in accordance with the Effective Reverse Stock Split ratio determined by the board within the limits set forth in this proposal. Exchange of Stock Certificates Shortly after the Effective Date, each holder of an outstanding certificate theretofore representing shares of common stock will receive from Mellon Investor Services, as our exchange agent (the "Exchange Agent") for the Effective Reverse Stock Split, instructions for the surrender of such certificate to the Exchange Agent. Such instructions will include a form of transmittal letter to be completed and returned to the Exchange Agent. As soon as practicable after the surrender to the Exchange Agent of any certificate that prior to the Effective Reverse Stock Split represented shares of common stock, together with a duly executed transmittal letter and any other documents the Exchange Agent may specify, the Exchange Agent shall deliver to the person in whose name such certificate had been issued certificates registered in the name of such person representing the number of full shares of common stock into which the shares of common stock previously represented by the surrendered certificate shall have been reclassified and a check for any amounts to be paid in cash in lieu of any fractional share. Until surrendered as contemplated herein, each certificate that immediately prior to the Effective Reverse 33Stock Split represented any shares of common stock shall be deemed at and after the Effective Reverse Stock Split to represent the number of full shares of common stock contemplated by the preceding sentence. Each certificate representing shares of common stock issued in connection with the Effective Reverse Stock Split will continue to bear any legends restricting the transfer of such shares that were borne by the surrendered certificates representing the shares of common stock. No service charges, brokerage commissions or transfer taxes shall be payable by any holder of any certificate that prior to approval of the Effective Reverse Stock Split represented any shares of common stock, except that if any certificates of common stock are to be issued in a name other than that in which the certificates for shares of common stock surrendered are registered, it shall be a condition of such issuance that: |X| The person requesting such issuance pay to us any transfer taxes payable by reason of such issuance or any prior transfer of such certificate, or establish to our satisfaction that such taxes have been paid or are not payable; |X| Such transfer comply with all applicable federal and state securities laws; and |X| Such surrendered certificate be properly endorsed and otherwise be in proper form for transfer. No Appraisal Rights Under Delaware law, our stockholders would not be entitled to dissenter's or appraisal rights with respect to the Effective Reverse Stock Split. Cash Payment in Lieu of Fractional Shares In lieu of any fractional shares to which a holder of common stock would otherwise be entitledas a result of theEffectiveproposed ReverseStockSplit. Instead, in the event the Reverse Splitwe shall payresults in any stockholder being entitled to receive fractional shares that, when aggregated, equal less than a whole share of common stock, in lieu of such fractional shares, stockholders will receive a cash payment equal to such fraction multiplied by the average of the high and low trading prices ofourthe Company’s common stock on theNational MarketOTCQB during regular trading hours for the fivetrading daytrading-day period ending on the last business dayimmediatelypreceding the effective day of the Reverse Split (as adjusted to give effect to the Reverse Split).For example, if the Board of Directors determines to effect the Reverse Split at a ratio of l-for-___, then a stockholder who holds one hundred (100) shares of common stock on a pre-split basis would hold ______ (__) whole shares on a post-split basis and receive cash in lieu of the fractional share. Also, if the ratio of the Reverse Split is 1-for-____, all stockholders who hold less than ______ shares will only receive cash for their fractional shares in the Reverse Split.
Page 9 Accounting Consequences
The Reverse Split will not affect the common stock capital account on our balance sheet. However, because the par value of our common stock will remain unchanged as of the Effective
Date.Time, the components that comprise the common stock capital account will change by offsetting amounts. Specifically, on our balance sheet, the common stock value would be adjusted downward commensurate with the ratio of the Reverse Split, such that the common stock value would become an amount equal to the aggregate par value of the shares of post-Reverse Split common stock. The additional paid-in capital amount recorded on our balance sheet would be increased by an amount equal to the amount by which the common stock was decreased. Additionally, net loss per share would increase proportionately as a result of the Reverse Split since there would be fewer shares outstanding.No Dissenter’s Rights
Under the Delaware General Corporation Law, stockholders will not be entitled to dissenter’s rights with respect to the proposed Amendment to effect the Reverse Split, and the Company does not intend to independently provide stockholders with any such right.
Federal Income Tax Consequences
The following
descriptionis a summary ofthecertain material United States federal income tax consequences of theEffectiveReverseStockSplit that we anticipate would affect our stockholders. This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (the"Code"“Code”),applicablefinal, temporary and proposed U.S. Treasury regulations promulgated thereunderjudicial authorityand current administrative rulings andpracticesjudicial decisions, all as in effectonas of the date hereof. This summary is provided for your general information only and does not address all aspects ofthis proxy statement. Changes tothelaws could alter the tax consequences described below, possibly with retroactive effect. We have not sought and will not seek an opinion of counsel or a ruling from the Internal Revenue Service regarding thepossible federal income tax consequences of theEffectiveReverseStock Split. This discussion is for general information onlySplit and IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. In particular, this summary does not consider the federal income tax consequences to our stockholders in light of their individual investment circumstances or to holders subject to special treatment under the federal income tax laws, and does notdiscussaddress any consequences of the Reverse Split under any state, local or foreign taxconsequences that may apply to special classes of taxpayers (e.g., non-resident aliens, broker/dealerslaws. Moreover, this description does not address the U.S. federal estate and gift tax, alternative minimum tax, orinsurance companies). The state and localother tax consequences of theEffectiveReverseStock SplitSplit.ACCORDINGLY, YOU MUST CONSULT WITH YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE REVERSE SPLIT TO YOU, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
Additionally, there can be no assurance that the Internal Revenue Service (“IRS”) will not take a contrary position to the tax consequences described herein or that such position will be sustained by a court. In addition, U.S. tax laws are subject to change, possibly with retroactive effect, which may
vary 34significantly asresult in U.S. federal income tax considerations different from those summarized below. No ruling from the IRS has been obtained with respect toeach stockholder, depending uponthejurisdiction in which such stockholder resides. Stockholders are urged to consult their own tax advisors to determine the particular consequences to them. In general, theU.S. federal income tax consequences of theEffectiveReverseStock Split will vary among stockholders depending upon whether they receive cash for fractional shares or solely a reduced number of shares of common stock in exchange for their old shares of common stock.Split.We believe that
becausetheEffective Reverse Stock Split is not part ofreverse stock split should qualify as aplan to increase periodically a stockholder's proportionate interest in our assets or earnings and profits, the Effective Reverse Stock Split will likely have the following“recapitalization” for U.S. federal income taxeffects: A stockholder who receives solely a reduced number of shares of common stock will not recognize gain or loss. In the aggregate, such a stockholder's basis in the reduced number of shares of common stock will equal the stockholder's basis in its old shares of common stock. A stockholder who receives cash in lieu of a fractional share as a result of the Effective Reverse Stock Split will generally be treated as having received the payment as a distribution in redemption of the fractional share, as provided in Section 302(a) of the Code, which distribution will be taxed as either a distribution under Section 301 of the Code or an exchange to such stockholder, depending on that stockholder's particular facts and circumstances. Generally,purposes. Accordingly, a stockholderreceiving such a paymentshouldrecognize gain or loss equal to the difference, if any, between the amount of cash received and the stockholder's basis in the fractional share. In the aggregate, such a stockholder's basis in the reduced number of shares of common stock will equal the stockholder's basis in its old shares of common stock decreased by the basis allocated to the fractional share for which such stockholder is entitled to receive cash, and the holding period of the post-Effective Reverse Stock Split shares received will include the holding period of the pre-Effective Reverse Stock Split shares exchanged. We willnot recognize any gain or loss as a result of theEffectiveReverseStockSplit.The Company's directors, executive officers and certain stockholders (who currently hold common stock representing approximately 24% of our outstanding common stock) have indicated that they intend to vote allA stockholder’s aggregate tax basis in its post-Reverse Split shares of common stockoverto be received should be the same as the aggregate tax basis in the pre-Reverse Split shares of common stock to be exchanged therefor. The holding period for the post-Reverse Split shares of common stock received should include the period during whichthey exercise voting powersuch stockholder held the pre-Reverse Split shares of common stock surrendered therefor, provided all such common stock was held as a capital asset at the Effective Time. Stockholders should consult their tax advisors as to application of theclose of business on the record date in favor of approval of Proposal No. 5. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE REAUTHORIZATION OF THE REVERSE STOCK SPLIT. PRINCIPAL STOCKHOLDERS The following table sets forth information as of July 10, 2003 with respect toforegoing rules where shares of our common stockwhichwere acquired at different times or at different prices.The Company will not recognize any gain or loss for accounting or tax purposes as a result of the Reverse Split.
Our beliefs regarding the tax consequences of the Reverse Split are
held by persons known by us tonot binding upon the IRS, or federal, state or local courts, and there can bebeneficial owners of more than 5% of such stock based upon information received from such personsno assurance that the IRS orcontained in filings madethe courts will concur with theSEC. For purposespositions expressed above. The state and local tax consequences of the Reverse Split may vary significantly as to each stockholder, depending on where he or she resides.
Page 10 Required Vote
The Reverse Split Proposal requires the favorable vote of the holders of a majority of the outstanding shares of our common stock and the Series F Preferred Stock, voting together as a class. Abstentions and broker non-votes will have the same effect as votes against this
schedule, beneficial ownershipproposal.Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO APPROVE THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT, IN ITS DISCRETION IN THE RANGE BETWEEN 1-FOR-____ AND 1-FOR-____, SUBJECT TO THE BOARD OF DIRECTORS’ DISCRETION TO ABANDON SUCH AMENDMENT.
PROPOSAL 2
TO APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS
AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON
STOCK FROM 500,000,000 TO 2,000,000,000 SHARESOur Board of
securities is definedDirectors has unanimously approved an amendment to our Certificate of Incorporation, as amended, to increase the number of authorized shares of our common stock from 500,000,000 to 2,000,000,000 shares. The amendment will be effected, if approved at the Special Meeting, by the filing of an amendment to our Certificate of Incorporation inaccordancethe form set forth in Exhibit B with therulesSecretary of State of theSECState of Delaware (the “Authorized Stock Amendment”).Purpose and
means generallyEffect of thepowerAuthorized Stock Amendment.The Company is currently authorized to
voteissue an aggregate of 500,000,000 shares of common stock. As of _______, 2018, there were outstanding ____ shares of common stock. The number of shares outstanding does not include:
● ______ shares of common stock issuable upon the conversion of outstanding convertible debt, with a weighted average conversion price of $_____ per share; ● ______ shares of common stock issuable upon the exercise of outstanding stock options, with a weighted average exercise price of $______ per share; ● ______ shares of common stock issuable upon the exercise of outstanding warrants, with a weighted average exercise price of $______ per share; ● ______ shares of common stock issuable upon the conversion of outstanding shares of our Series I-1 Convertible Preferred Stock at a conversion price of $______ per share; ● ______ shares of common stock issuable upon the conversion of outstanding shares of our Series I-2 Convertible Preferred Stock at a conversion price of $______ per share; and ● ______ shares of common stock issuable upon the conversion of outstanding shares of our Series F Preferred Stock at a conversion price of $______ per share. If all of the above outstanding securities were exercised or
dispose of securities, regardless of any economic interest therein. 35
COMMON STOCK BENEFICIALLY OWNED ---------------------------------- AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS ------------------------------------ ----------------------------------Carole L. Clarke 1,454,885 9.04% 320 Nopals Street Santa Barbara, CA 93103 Polar Global Technology Fund 1,075,000 6.68%OWNERSHIP OF STOCK BY MANAGEMENT The following table sets forth information with respect toconverted, thebeneficial ownershipnumber of shares of our common stockby our directors,outstanding plus theindividuals namedshares to be issued would be in excess of the 500,000,000 shares currently authorized. As a result, the Company would not be able to issue all of the necessary shares. The agreements under which many of the above securities were issued require the Company to seek an increase in theSummary Compensation Table, and all directors and executive officers as a group asnumber ofJuly 10, 2003. An asterisk denotes beneficial ownership of less than 1%.
SHARES BENEFICIALLY PERCENT NAME OF BENEFICIAL OWNER POSITION OWNED(1) OF CLASS(1) ------------------------ -------- ----------- -----------Michael L. Parodi(2)..................... Chairman of the Board, President 705,500 4.38% and Chief Executive Officer James D. McKibben(3)..................... Vice President, Worldwide 331,720 2.06% Marketing and Sales George Landreth(4)....................... Vice President, Product 295,560 1.84% Development Jeffrey M. Krauss(5)..................... Director 171,500 1.07% Edward A. Dohring(6)..................... Director 170,000 1.06% H. Duane Wadsworth(7).................... Director 30,000 0.19% Directors and Executive Officers as a group (9 persons)(8)................... 2,031,380 12.62%36- ---------- (1) Applicable percentage of ownership is based on 16,099,949authorized shares of common stockoutstanding asto accommodate all ofJuly 10, 2003. The numberthe possible issuance in the event all of the possible issuances of shares of common stockbeneficially owned and calculation of percent ownership of each person or group of persons named above, in each case, takes into account those shares underlying stock options that are currently exercisable, but which may ormay not besubjectauthorized by the terms of our Certificate of Incorporation, as amended.The proposed increase in the number of authorized shares of Common Stock is also necessary to provide flexibility to issue shares for general corporate purposes that may be identified in the future including, but not limited to, raising additional equity capital through the issuance of shares of Common Stock, preferred stock or debt or equity securities convertible or exercisable into shares of Common Stock, or in the case of Common Stock, adopting additional employee benefit plans or reserving additional shares for issuance under existing plans and funding the acquisition of other companies. No additional action or authorization by stockholders would be necessary prior to the issuance of such additional shares, unless required by applicable law or the rules of any stock exchange or national securities association trading system on which our Common Stock is then listed or quoted. Examples of circumstances in which further stockholder authorization generally would be required for issuance of such additional shares include (a) transactions that would result in a change of control of the Company, and (b) adoption of, increases in shares available under, or material changes to equity compensation plans.
Page 11 The additional authorized shares would become part of the existing class of Common Stock, and the Authorized Stock Amendment would not affect the terms of the outstanding Common Stock or the rights of the holders of the Common Stock. The Company stockholders do not have preemptive rights with respect to our
repurchaseCommon Stock. Should the Board of Directors elect to issue additional shares of Common Stock, existing stockholders would not have any preferential rightsheldto purchase such shares. Therefore, additional issuances of Common Stock could have a dilutive effect on the earnings per share, voting power and share holdings of current stockholders.Anti−takeover Provisions
We are not introducing this proposal with the intent that it be utilized as a type of anti−takeover device. However, this action could, under certain circumstances, have an anti−takeover effect. For example, in the event of a hostile attempt to acquire control of the Company, we could seek to impede the attempt by
such personissuing shares of Common Stock, which would effectively dilute the voting power of the other outstanding shares and increase the potential cost to acquire control of the Company. Further, we could issue additional shares in a manner that would impede the efforts of stockholders to elect directors other than those nominated by the then current Board of Directors. These potential effects of the proposed increase in the number of authorized shares could limit the opportunity for the Company stockholders to dispose of their shares at the higher price generally available in takeover attempts orpersons but not forto elect directors of their choice. The following is a description of other anti−takeover provisions in our charter documents and other agreements. We have no current plans or proposals to enter into any otherperson.arrangement that could have material anti−takeover consequences.If this amendment is approved, any subsequent issuance of additional Company shares would increase the number of outstanding Company shares and would dilute the percentage ownership of existing stockholders. The increase in authorized but unissued number of shares could also have possible anti-takeover effects. These authorized but unissued Company shares could (within the limits imposed by applicable law): (1) be issued in a transaction that the stockholders believe to be not desirable; or (2)
Includes optionsbe issued in one or more transactions that could make a change of control of the Company more difficult or costly, and therefore more unlikely. The additional authorized Company shares could be used topurchase 697,500discourage persons from attempting to gain control of the Company by diluting the voting power of shares then outstanding or increasing the voting power ofcommon stockpersons that would support the Company’s Board of Directors in a potential takeover situation, including by preventing or delaying a proposed business combination that is opposed by the Board of Directors although perceived to be desirable by some stockholders. The Board of Directors is not aware of any effort by a third party to accumulate our securities or obtain control of the Company by means of a merger, tender offer, solicitation in opposition to management or otherwise nor does the Company’s Board of Directors have any intention of using additional authorized Company shares to deter a change of control.
Page 12 Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Certain provisions of Delaware law, our Certificate of Incorporation and our Bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are
exercisable within 60 dayssummarized below, may have the effect of discouraging coercive takeover practices andexcludes optionsinadequate takeover bids. These provisions are also designed, in part, topurchase 938 shares which are not so exercisable. (3) Includes optionsencourage persons seeking topurchase 326,100 sharesacquire control ofcommon stock which are exercisable within 60 days. (4) Includes optionsus topurchase 290,743 sharesfirst negotiate with our Board ofcommon stock which are exercisable within 60 days. (5) Includes optionsDirectors. We believe that the benefits of increased protection of our potential ability topurchase 150,000 sharesnegotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages ofcommon stock which are exercisable within 60 daysdiscouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.Board Composition and
excludes options to purchase 20,000 shares which are not so exercisable. (6) Includes options to purchase 150,000 sharesFilling VacanciesOur Bylaws provide that any director or the entire Board of
common stock which are exercisable within 60 days and excludes options to purchase 20,000 shares which are not so exercisable. (7) Includes options to purchase 20,000 sharesDirectors may be removed at any time, with or without cause, by the holders ofcommon stock which are not exercisable within 60 days. (8) Includes options to purchase 2,225,838 shares of common stock which are exercisable within 60 days and excludes options to purchase 163,438 shares which are not so exercisable. 37PERFORMANCE GRAPH [LINE GRAPH]
3/98 3/99 3/00 3/01 3/02 3/03 ------- ------- ------- ------- ------- ------Tegal Corporation............................. 100.00 42.48 93.81 42.48 16.99 5.38 NASDAQ Stock Market (U.S.).................... 100.00 135.08 250.99 100.60 101.32 74.37 Peer Group.................................... 100.00 158.16 504.64 242.94 319.16 152.06* $100 Invested on 3/31/98 in stock or index, including investment of dividends. Fiscal year ending March 31. + Peer group consistsa majority of thefollowing companies: Applied Material Inc., Genus Inc., KLA-Tencor Corp., Lam Research Corp., Mattson Technology, Inc., Novellus Systems, Inc. and Trikon Technologies, Inc. 38AUDIT COMMITTEE REPORT Notwithstanding anythingshares then entitled tothe contrary set forth in any of the Company's filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the following Audit Committee Report shall not be incorporated by reference into any such filings and shall not otherwise be deemed to be filed under such Acts. The Audit Committee of our board of directors is comprised of independent directors as required by the listing standards of the Nasdaq National Market. The Audit Committee operates pursuant to a written charter adopted by our board of directors, a copy of which has been filed with the SEC. The role of the Audit Committee is to oversee our financial reporting process on behalf of the boardvote at an election of directors.Our management has the primary responsibility for our financial statements as well as our financial reporting process, principles and internal controls. The independent accountants are responsible for performing an audit of our financial statements and expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles. In this context, the Audit Committee has reviewed and discussed our audited financial statements as of and for the year ended March 31, 2003 with management and the independent accountants. The Audit Committee has discussed with the independent accountants the matters required toDirectors shall bediscussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect. In addition, the Audit Committee has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as currently in effect, and it has discussed with the accountants their independence from us. The Audit Committee has also considered whether the independent accountant's provision of information technology services and other non-audit services to us is compatible with maintaining the accountant's independence. Based on the reports and discussions described above, the Audit Committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended March 31, 2003, for filing with the Securities and Exchange Commission. Submitted on June 26, 2003 by the members of the Audit Committee of the board of directors. Edward A. Dohring Jeffrey M. Krauss H. Duane Wadsworth 39INDEPENDENT PUBLIC ACCOUNTANTS Presence at Annual Meeting Our board of directors appointed the firm of PricewaterhouseCoopers LLP, independent accountants, to audit our financial statements for the fiscal year ending March 31, 2003. We expect representatives of PricewaterhouseCoopers LLP to be presentelected at the annual meeting of the stockholders andwill haveeach director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by theopportunityCertificate of Incorporation or by law, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled torespond to appropriate questionsvote thereat. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, andto makenewly created directorships resulting from any increase in the authorized number of directors may be filled by astatement if they desire. Audit Feesmajority of the directors then in office, although less than a quorum, or by a sole remaining director. Theaggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP fordirectors so chosen shall hold office until theauditnext annual election of directors and until their successors are duly elected and shall qualify, unless sooner displaced.Meetings of Stockholders
Our Certificate of Incorporation and Bylaws provide that only a majority of the members of our
annual financial statements forBoard of Directors then in office may call special meetings of stockholders and only those matters set forth in thefiscal year ended March 31, 2002, the reviewsnotice of thefinancial statements included in our quarterly reports on Form 10-Q forspecial meeting may be considered or acted upon at a special meeting of stockholders. Our Bylaws limit thefiscal year ending March 31, 2002, and servicesbusiness thatare normally provided by PricewaterhouseCoopers LLP in connectionmay be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.Advance Notice Requirements
Our Bylaws establish advance notice procedures with
statutory and regulatory filings and engagements for that fiscal year were $125,000. The aggregate fees for the services listed above for the fiscal year ending March 31, 2003 were $145,000. Financial Information Systems Design and Implementation Fees PricewaterhouseCoopers LLP did not render any professional servicesregard tous of the type described in Rule 2-01(c)(4)(ii) of Regulation S-X during the fiscal years ended March 31, 2002 and March 31, 2003. Audit-Related Fees The aggregate fees billed by PricewaterhouseCoopers LLP for assurance and related services that were reasonably relatedstockholder proposals relating to theperformancenomination ofthe auditcandidates for election as directors orreviewnew business to be brought before meetings ofTegal's financial statements and are not reported above under "Audit Fees" were $28,000 during the fiscal year ending March 31, 2002 and there were no fees for such services during the fiscal year ending March 31, 2003. The services for the fees disclosed under this category were work doneour stockholders. These procedures provide that notice of stockholder proposals must be timely given inrelationwriting to our corporate secretary prior to theCompany's acquisition of Sputtered Films, Inc. Tax Fees The aggregate fees billed by PricewaterhouseCoopers LLP for professional services rendered for tax compliance, tax advice, and tax planning were $90,000 duringmeeting at which thefiscal year ending March 31, 2002 and $75,000 during the fiscal year ending March 31, 2003. The services for the fees disclosed under this category were for tax compliance and the preparation of tax returns. All Other Fees There were no fees billed for services rendered by PricewaterhouseCoopers LLP, other than fees for the services referenced under the captions "Audit Fees" and "Financial Information Systems Design and Implementation Fees", during the fiscal years ending March 31, 2002 and March 31, 2003. 40SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act, requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership (Forms 3, 4 and 5) with the SEC. Officers, directors and greater-than-ten-percent holders are required to furnish us with copies of all such forms which they file. To our knowledge, based solely on our review of such reports or written representations from certain reporting persons, we believe that all of the filing requirements applicable to our officers, directors, greater- than-ten-percent beneficial owners and other persons subject to Section 16 of the Exchange Act during fiscal 2003 were complied with. DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING Stockholder proposalsaction is to bepresented at the 2004 annual meetingtaken. Generally, to be timely, notice must be received at our principal executive officesno laternot less thanMarch __, 2004 in order to be considered for inclusion in the proxy materials to be disseminated by the board of directors for such annual meeting. To be eligible for inclusion in such proxy materials, such proposals must conform90 days nor more than 120 days prior to therequirements set forth in Regulation 14A underfirst anniversary date of theExchange Act as well as in our bylaws. Stockholder proposals to be presented at the 2004annual meetingmust be received at our principal executive offices no later than June __, 2004 in order to be consideredforinclusion onthe2004 annual meeting agenda. To be eligible for inclusion on the agenda, such proposals must conform topreceding year. Our Bylaws specify the requirementsset forth in Regulation 14A underas to form and content of all stockholders’ notices. These requirements may preclude stockholders from bringing matters before theExchange Act as well as in our bylaws. INCORPORATION BY REFERENCEstockholders at an annual or special meeting.Amendment to Bylaws
The
following information has been incorporatedBoard of Directors may from time to time make, amend, supplement or repeal the Company’s Bylaws byreference in this Proxy Statement: the biographiesvote of a majority of the Board of Directors, and theCompany's financial information requestedstockholders may change or amend or repeal these Bylaws by the affirmative vote of the majority of holders of the Common Stock. In addition to and not inItem 13(a)limitation ofSchedule 14A, boththe foregoing, the Company’s Bylaws or any ofwhich canthem may befoundamended or supplemented inour 2003 Annual Report. OTHER MATTERS We are not awareany respect at any time, either: (i) at any meeting of stockholders, provided that anymatters that may come before theamendment or supplement proposed to be acted upon at any such meetingother than thoseshall have been described or referred to in the notice ofannualsuch meeting; or (ii) at any meetingof stockholders. If any other matter shall properly come before the annual meeting, however, the persons named in the accompanying proxy intend to vote all proxies in accordance with their best judgment. Our 2003 Annual Report for the fiscal year ended March 31, 2003 has been mailed with this proxy statement. By Orderof the Board of Directors,TEGAL CORPORATION /s/ Michael L. Parodi ---------------------------- MICHAEL L. PARODI Presidentprovided that any amendment or supplement proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting or an announcement with respect thereto shall have been made at the last previous Board of Directors meeting, andCEO Petaluma, California August ___, 2003 STOCKHOLDERS OF RECORD ON JULY 10, 2003 MAY OBTAIN COPIES OF TEGAL'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) AND ALL AMENDMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY WRITING TO INVESTOR RELATIONS, TEGAL CORPORATION, 2201 SOUTH MCDOWELL BOULEVARD, PETALUMA, CALIFORNIA 94954. 41APPENDIX A THE FIFTH AMENDED AND RESTATED 1998 EQUITY PARTICIPATION PLAN OF TEGAL CORPORATION Tegal Corporation, a Delaware corporation (the "Company"), hereby amends and restates the Fourth Amended and Restated 1998 Equity Participation Plan of Tegal Corporation (as so amended, the "Plan"), incorporating certain amendmentsprovided further that no amendment or supplement adopted by the Board of Directorson June 30, 2003 (the "Effective Date"). The Plan was initiallyshall vary or conflict with any amendment or supplement adopted by the stockholders.
Page 13 Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
● before the stockholder became interested, our Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; ● upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or ● at or after the time the stockholder became interested, the business combination was approved by our Board of Directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. Section 203 defines a business combination to include:
● any merger or consolidation involving the corporation and the interested stockholder; ● any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; ● subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; ● subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and ● the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Required Vote
The Authorized Stock Amendment requires the favorable vote of the holders of a majority of the outstanding shares of our common stock and Series F Preferred Stock, voting together as a class. Abstentions and broker non-votes will have the same effect as votes against the proposal.
Page 14 Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK FROM 500,000,000 TO 2,000,000,000 SHARES.
PROPOSAL 3
TO APPROVE THE COMPANY’S NEW 2018 INCENTIVE AWARD PLAN
General
On __________, 2018, our Board of Directors
on July 16, 1998(the “Board”) unanimously adopted, subject to stockholder approval, the Rennova Health, Inc. 2018 Incentive Award Plan (the “2018 Plan”) for members of the Board, employees andthe stockholdersconsultants of the Companyon September 15, 1998, with an initialand its subsidiaries. The 2018 Plan will become effectivedate of July 16, 1998. Thewhen the 2018 Planwas amended and restated by the Board of Directors on July 21, 1999 and such amendment wasis approved by thestockholders on September 21, 1999. The Plan was again amended and restated on July 8, 2000 by the Board of Directors and such amendment was approved by the stockholders on September 19, 2000. The Plan was amended and restated a third time on September 25, 2001 by the Board of Directors and such amendment did not require stockholder approval. The plan was amended and restated a fourth time on September 9, 2002 and was approved by our stockholders on October 22, 2002. The purposesaffirmative vote of the holders of the majority of our Common Stock and Series F Preferred Stock, voting together as a class, present, or represented, and entitled to vote thereon at the Special Meeting.The Board believes that the 2018 Plan
are as follows: (1) To provide an additional incentive for key Employeeswill promote the success andConsultants (as such terms are defined below) to furtherenhance thegrowth, development and financial successvalue of the Company bypersonally benefiting throughlinking theownershippersonal interest of participants to those of Company stockholders and by providing participants with an incentive for outstanding performance.The 2018 Plan provides for the grant of stock
and/oroptions, both incentive stock options and nonqualified stock options, restricted stock, stock appreciation rights,which recognize such growth, developmentperformance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, andfinancial success. (2) To enableperformance-based awards to eligible individuals. A summary of theCompany to obtain and retainprincipal provisions of theservices of key Employees and Consultants considered essential2018 Plan is set forth below. The summary is qualified by reference to thelong range successfull text of the 2018 Plan, which is attached as Exhibit C to this Proxy Statement.Administration
The 2018 Plan will be administered by the Board. The Board may delegate to a committee of one or more members of the Board or one or more officers of the Company
by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. ARTICLE I. DEFINITIONS 1.1 General. Wherever the following terms are used in the Plan, they shall have the meanings specified below, unless the context clearly indicates otherwise. 1.2 Administrator. "Administrator" shall mean the entity that conducts the general administration of the Plan as provided herein. With reference to the administration of the Plan with respect to any Award granted under the Plan, the term "Administrator" shall refer to the Committee unless the Board has assumedthe authorityfor administration of the Plan generally as provided in Section 9.1. A-11.3 Award. "Award" shall mean an Option, a Restricted Stock awardto grant ora Stock Appreciation Right which may be awarded or granted under the Plan (collectively, "Awards"). 1.4 Award Agreement. "Award Agreement" shall mean a written agreement executed by an authorized officeramend awards to participants other than senior executives of the Companyand the Holder which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. 1.5 Award Limit. "Award Limit" shall mean 1,600,000 shares of Common Stock, as adjusted pursuantwho are subject to Section10.316 of thePlan. 1.6 Board. "Board" shall mean the BoardSecurities Exchange Act ofDirectors of the Company. 1.7 Change in Control. "Change in Control" shall mean a change in ownership1934, as amended (the “Exchange Act”) orcontrol of the Company effected through any of the following transactions: (i) any person or related group of persons (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (withinemployees who are “covered employees” within the meaning ofRule 13d-3 under the Exchange Act)Section 162(m) ofsecurities of the Company (or a successor of the Company) possessing more than twenty-five percent (25%) of the total combined voting power of the then outstanding securities of the Company or such successor; or (ii) at any time that the Company has registered shares under the Exchange Act, at least 40% of the directors of the Company constitute persons who were not at the time of their first election to the Board, candidates proposed by a majority of the Board in office prior to the time of such first election; or (iii) the dissolution of the Company or liquidation of more than 75% in value of the Company or a sale of assets involving 75% or more in value of the assets of the Company, (x) any merger or reorganization of the Company whether or not another entity is the survivor, (y) a transaction pursuant to which the holders, as a group, of all of the shares of the Company outstanding prior to the transaction hold, as a group, less than 50% of the combined voting power of the Company or any successor company outstanding after the transaction, or (z) any other event which the Board determines, in its discretion, would materially alter the structure of the Company or its ownership. 1.8 Code. "Code" shall meanthe Internal Revenue Code of 1986, asamended. 1.9 Committee. "Committee" shall meanamended, and theCompensation Committeeregulations thereunder (the “Code”).The Board will have the exclusive authority to administer the 2018 Plan, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction.
Eligibility
Persons eligible to participate in the 2018 Plan include all members of the Board,
or another committee or subcommittee oftheBoard, appointed as provided in Section 9.1. 1.10 Common Stock. "Common Stock" shall mean the common stockemployees, and consultants of the Companypar value $.01 per share,andany equity security of the Company issued or authorized to be issued in the future, but excluding any preferred stock and any warrants, options or other rights to purchase Common Stock. 1.11 Company. "Company" shall mean Tegal Corporation, a Delaware corporation. 1.12 Consultant. "Consultant" shall mean any consultant or adviser if: A-2(a) the consultant or adviser renders bona fide services to the Company; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities; and (c) the consultant or adviser is a natural person who has contracted directly with the Company to render such services. 1.13 Director. "Director" shall mean a member of the Board. 1.14 DRO. "DRO" shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. 1.15 Employee. "Employee" shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a Subsidiary. 1.16 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1.17 Fair Market Value. "Fair Market Value" of a share of Common Stock as of a given date shall be (a) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on the trading day previous to such date, or if shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred, or (b) if Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by NASDAQ or such successor quotation system; or (c) if Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a share of Common Stock as established by the Administrator acting in good faith. 1.18 Holder. "Holder" shall mean a person who has been granted or awarded an Award. 1.19 Incentive Stock Option. "Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. 1.20 Independent Director. "Independent Director" shall mean a member of the Board who is not an Employee of the Company. 1.21 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean an Option which is not designated as an Incentive Stock Option by the Administrator. 1.22 Option. "Option" shall mean a stock option granted under Article IV of the Plan. An Option granted under the Plan shall,its subsidiaries, as determined by theAdministrator, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Consultants shall be Non-Qualified Stock Options. A-31.23 Performance Criteria. "Performance Criteria" shall mean the following business criteria with respect to the Company, any Subsidiary or any division or operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share, (f) returnBoard.Limitation on
equity, (g) return on invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j) appreciation in the fair market valueAwards and Shares AvailableAn aggregate of ___________shares of Common Stock
and (k) earnings before any one or more of the following items: interest, taxes, depreciation or amortization. 1.24 Plan. "Plan" shall mean The Fourth Amended and Restated 1998 Equity Participation Plan of Tegal Corporation. 1.25 Restricted Stock. "Restricted Stock" shall mean Common Stock awarded under Article VII of the Plan. 1.26 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. 1.27 Section 162(m) Participant. "Section 162(m) Participant" shall mean any key Employee designated by the Administrator as a key Employee whose compensationis available forthe fiscal year in which the key Employee is so designated or a future fiscal year may be subjectgrant pursuant to thelimit on deductible compensation imposed by Section 162(m) of the Code. 1.28 Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. 1.29 Stock Appreciation Right. "Stock Appreciation Right" shall mean a stock appreciation right granted under Article VIII of the2018 Plan.1.30 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 1.31 Substitute Award. "Substitute Award" shall mean an Option granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock. 1.32 Termination of Consultancy. "Termination of Consultancy" shall mean the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death, disability or retirement; but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. A-41.33 Termination of Employment. "Termination of Employment" shall mean the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (a) terminations where there is a simultaneous reemployment or continuing employment of a Holder by the Company or any Subsidiary, (b) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Employee's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. ARTICLE II. SHARES SUBJECT TO PLAN 2.1 Shares Subject to Plan. (a) The shares of stock subject to Awards shall be Common Stock, initially shares of the Company's Common Stock, par value $.01 per share. The aggregate number of such shares which may be issued upon exercise of such Options or rights or upon any such awards under the Plan shall not exceed 6,400,000.The shares of Common Stockissuable upon exercise of such Options or rights or upon any such awardscovered by the 2018 Plan may beeither previouslytreasury shares, authorized but unissued shares, ortreasury shares. (b) The maximum number ofshareswhich may be subject to Awards, granted underpurchased in thePlan to any individual in any fiscal year shall not exceed the Award Limit.open market. To the extentrequired by Section 162(m) of the Code, shares subject to Options which are canceled continue to be counted against the Award Limit. 2.2 Add-back of Options and Other Rights. If any Option, or other right to acquire shares of Common Stock under any other Award under the Plan,that an award terminates, expires oris canceled without having been fully exercised, or is exercised in whole or in partlapses forcash as permitted by the Plan, the number of shares subject to such Option or other right but as to which such Option or other right was not exercised prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Furthermore,any reason, any shares subject toAwards which are adjusted pursuant to Section 10.3 and become exercisable with respect to A-5the award may be used again for new grants under the 2018 Plan. In addition, shares of stock of another corporation shall be considered cancelled and may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Shares of Common Stock which are delivered by the Holdertendered or withheldbyto satisfy theCompany upon thegrant or exerciseof any Award under the Plan, in payment of the exercisepricethereofor tax withholdingthereon, may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. If any shares of Restricted Stock are surrendered by the Holder or repurchased by the Company pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. ARTICLE III. GRANTING OF AWARDS 3.1 Award Agreement. Each Award shall be evidenced by an Award Agreement. Award Agreements evidencing Awards intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions asobligation may benecessary to meetused for grants under theapplicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 3.2 Provisions Applicable to Section 162(m) Participants. (a) The Committee, in its discretion, may determine whether an Award is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code. (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Section 162(m) Participant, including Restricted Stock the restrictions with respect to which lapse upon the attainment of performance goals which are related to one or more of the Performance Criteria. (c) To the extent necessary to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Article VII which may be granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) designate one or more Section 162(m) Participants, (ii) select the Performance Criteria applicable to the fiscal year or other designated fiscal period or period of service, (iii) establish the various performance targets, in terms of an objective formula or standard, and amounts of such Awards, as applicable, which may be earned for such fiscal year or other designated A-6fiscal period or period of service and (iv) specify the relationship between Performance Criteria and the performance targets and the amounts of such Awards, as applicable, to be earned by each Section 162(m) Participant for such fiscal year or other designated fiscal period or period of service. Following the completion of each fiscal year or other designated fiscal period or period of service, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period or period of service. In determining the amount earned by a Section 162(m) Participant, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period or period of service. (d) Furthermore, notwithstanding any other provision of the Plan, any Award which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 3.3 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.2018 Plan. To the extent permitted by applicable lawthe Plan and Awards grantedorawarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 3.4 At-Will Employment. Nothingany exchange rule, shares issued inthe Planassumption of, or in substitution for, anyAward Agreement hereunder shall confer uponoutstanding awards of anyHolderentity acquired in anyright to continue in the employform ofor as a Consultant for,combination by the Company or anySubsidiary,of its subsidiaries will not be counted against the shares available for issuance under the 2018 Plan.
Page 15 The maximum number of shares of Common Stock that may be subject to one or
shall interfere with or restrict inmore awards granted to anyway the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, exceptone participant pursuant to theextent expressly provided otherwise in a written employment agreement between the Holder2018 Plan during any calendar year is _________ and theCompany and any Subsidiary. ARTICLE IV. GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS 4.1 Eligibility. Any Employee or Consultant selected by the Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. 4.2 Disqualification for Stock Ownership. No personmaximum $________ amount that may begranted an Incentive Stock Option underpaid in cash during any calendar year with respect to any performance-based award is $_______________.Awards
The 2018 Plan provides for the
Plan if such person, at the time the Incentive Stock Option is granted, ownsgrant of incentive stockpossessing more than ten percent (10%) of the total combined voting power of all classes ofoptions, nonqualified stockof the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conformsoptions, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards. No determination has been made as to theapplicable provisionstypes or amounts ofSection 422 of the Code. 4.3 Qualification of Incentive Stock Options. No Incentive Stock Option shallawards that will be granted toany person who is not an Employee. A-74.4 Granting of Options to Employees and Consultants. (a) The Committee shall from time to time, in its absolute discretion, and subject to applicable limitations of the Plan: (i) Determine which Employees are key Employees and select from among the key Employees or Consultants (including Employees or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be granted Options; (ii) Subjectspecific individuals pursuant to theAward Limit, determine the number of shares to be subject to such Options granted to the selected key Employees or Consultants; (iii) Subject to Section 4.3, determine whether such Options are to be Incentive2018 Plan.Stock
Options or Non-Qualified Stock Options and whether such Options are to qualifyoptions, including incentive stock options, asperformance-based compensation as described in Section 162(m)(4)(C) of the Code; and (iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. (b) Upon the selection of a key Employee or Consultant to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. (c) Any Incentive Stock Option granted under the Plan may be modified by the Committee, with the consent of the Holder, to disqualify such Option from treatment as an "incentive stock option"defined under Section 422 of theCode. ARTICLE V. TERMS OF OPTIONS 5.1 Option Price.Code, and nonqualified stock options may be granted pursuant to the 2018 Plan. The option exercise priceper shareof all stock options granted pursuant to theshares subject to each Option granted to Employees and Consultants shall be set by the Committee; provided, however, that such price shall be no less than 85% of the Fair Market Value of a share of Common Stock on the date the Option is granted and: (a) in the case of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, such price shall2018 Plan will not be less than 100% of theFair Market Valuefair market value ofa share of Commonthe Stock on the date of grant. Stock options may be exercised as determined by theOption is granted; (b)Board, but in no event after thecasetenth anniversary date ofIncentive Stock Options such price shall notgrant, provided that a vested nonqualified stock option may beless than 100%exercised up to 12 months after the optionee’s death. The aggregate fair market value of theFair Market Value of a share of Common Stock onshares with respect to which options intended to be incentive stock options are exercisable for thedate the Option is granted (or the date the Option is modified, extendedfirst time by an employee in any calendar year may not exceed $_______________, orrenewed for purposes of Section 424(h) of the Code); and (c) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of A-8all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code),suchprice shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). 5.2 Option Term. The term of an Option granted to an Employee or consultant shall be set by the Committee in its discretion; provided, however, that, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from the date the Incentive Stock Option is granted if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Exceptother amount aslimited by requirements of Section 422 ofthe Codeand regulations and rulings thereunder applicable to Incentive Stock Options, the Committeeprovides. No stock option mayextend the term of any outstanding Option in connection with any Termination of Employment or Termination of Consultancy of the Holder, or amend any other term or condition of such Option relating to such a termination. 5.3 Option Vesting (a) The period during which the right to exercise, in whole or in part, an Option granted to an Employee or a Consultant vests in the Holder shall be set by the Committee and the Committee may determine that an Option may notbe exercised in whole or in partfor a specified period after it is granted; provided, however, that, unless the Committee otherwise provides in the termsfollowing an employee’s termination ofthe Award Agreement or otherwise, no Option shall be exercisableemployment byany Holder who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date the Option is granted. At any time after grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option granted to an Employee or Consultant vests. (b) No portion of an Option granted to an Employee or Consultant which is unexercisable at Termination of Employment or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Award Agreement or by action of the Committee following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year (under the Plan and all other incentive stock option plans of the Company and any parent or subsidiary corporation, within the meaning of Section 422 of the Code) of the Company, exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 5.3(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. 5.4 Substitute Awards. Notwithstanding the foregoing provisions of this Article V to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares A-9subject to such Option may be less than the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award; over (b) the aggregate exercise price thereof; does not exceed the excess of; (c) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company; over (d) the aggregate exercise price of such shares. 5.5 Termination. In the event of a Holder's Termination of Employment or Termination of Consultancy, such Holder may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the shares covered by the unvested portion of the Option shall immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within the time period specified herein, the Option shall terminate, and the shares covered by such Option shall again become available for issuance under the Plan. ARTICLE VI. EXERCISE OF OPTIONS 6.1 Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 6.2 Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; (b) Such representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Administrator may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; A-10(c) In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option; and (d) Full cash payment to the Secretary ofthe Company for “cause,” as defined in theshares with respect to which2018 Plan.Upon the
Option, or portion thereof, is exercised. However, the Administrator, may in its discretion (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Common Stock which have been owned by the Holder for at least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of Common Stock then issuable uponexercise of a stock option, theOption havingpurchase price must be paid in full in either cash or its equivalent, by delivering aFair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a full recoursepromissory note bearing interest(atat no less than such rate as shall then preclude the imputation of interest under theCode) and payable uponCode, or by tendering previously acquired shares of Common Stock with a fair market value at the time of exercise equal to the exercise price (provided suchtermsshares have been held for such period of time as may beprescribedrequired by theAdministrator; (vi) allow payment,Board inwholeorder to avoid adverse accounting consequences and have a fair market value on the date of delivery equal to the aggregate exercise price of the option orin part,exercised portion thereof) or other property acceptable to the Board (including through the delivery of a notice that theHolderparticipant has placed a market sell order with a broker with respect to sharesof Common Stockthen issuable upon exercise of theOption,option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of theOptionoption exercise price, provided that payment of such proceeds is then made to the Company upon settlement of suchsale; or (vii) allow payment through any combinationsale). However, no participant who is a member of theconsideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the Administrator may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory noteBoard orby a loan from the Company when or where such loan or other extension of credit is prohibited by law. 6.3 Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its absolute discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; (d) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and A-11(e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which in the discretion of the Administrator may be in the form of consideration used by the Holder to pay for such shares under Section 6.2(d). 6.4 Rights as Stockholders. Holders shall not be, nor have any of the rights or privileges of, stockholdersan “executive officer” of the Companyin respectwithin the meaning ofany shares purchasable uponSection 13(k) of the Exchange Act will be permitted to pay the exerciseof any partprice of anOption unless and until certificates representing suchoption in any method which would violate Section 13(k) of the Exchange Act.Restricted stock may be granted pursuant to the 2018 Plan. A restricted stock award is the grant of shares
have been issuedof Stock at a price determined by theCompany to such Holders. 6.5 Ownership and Transfer Restrictions. The Administrator, in its absolute discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Award AgreementBoard (including zero), that is nontransferable and may bereferredsubject to substantial risk of forfeiture until specific conditions are met. Conditions may be based on continuing employment or achieving performance goals. During thecertificates evidencingperiod of restriction, participants holding shares of restricted stock may have full voting and dividend rights with respect to such shares. TheHolder shall give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder or (b) one year after the transfer of such shares to such Holder. 6.6 Additional Limitations on Exercise of Options. Holders may be required to complyrestrictions will lapse in accordance withany timinga schedule or otherrestrictions with respect to the settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. ARTICLE VII. AWARD OF RESTRICTED STOCK 7.1 Eligibility. Subject to the Award Limit, Restricted Stock may be awarded to any Employee who the Committee determines is a key Employee or any Consultant who the Committee determines should receive such an Award. 7.2 Award of Restricted Stock. (a) The Committee may from time to time, in its absolute discretion: (i) Determine which Employees are key Employees and select from among the key Employees or Consultants (including Employees or Consultants who have previously received other awards under the Plan) such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms andconditionsapplicable to such Restricted Stock, consistent with the Plan. (b) The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of the Common Stock to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock. A-12(c) Upon the selection of a key Employee or Consultant to be awarded Restricted Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 7.3 Rights as Stockholders. Subject to Section 7.4, upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder shall have, unless otherwise provideddetermined by theCommittee, all the rights of a stockholder with respect to said shares, subject to the restrictions in his Award Agreement, includingBoard.A stock appreciation right (a “SAR”) is the right to receive
all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretionpayment ofthe Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 7.4. 7.4 Restriction. All shares of Restricted Stock issued under the Plan (including any shares received by holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that, unless the Committee otherwise provides in the terms of the Award Agreement or otherwise, no share of Restricted Stock granted to a person subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise transferred until at least six months and one day have elapsed from the date on which the Restricted Stock was issued, and provided, further, that, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, by action taken after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. If no consideration was paid by the Holder upon issuance, a Holder's rights in unvested Restricted Stock shall lapse, and such Restricted Stock shall be surrendered to the Company without consideration, upon Termination of Employment or, if applicable, upon Termination of Consultancy with the Company; provided, however, that the Committee in its sole and absolute discretion may provide that such rights shall not lapse in the event of a Termination of Employment following a "change of ownership or control" (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because of the Holder's death or disability; provided, further, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that no such lapse or surrender shall occur in the event of a Termination of Employment, or a Termination of Consultancy, without cause or following any Change in Control of the Company or because of the Holder's retirement, or otherwise. 7.5 Repurchase of Restricted Stock. The Committee shall provide in the terms of each individual Award Agreement that the Company shall have the right to repurchase from the Holder the Restricted Stock then subject to restrictions under the Award Agreement immediately upon a Termination of Employment or, if applicable, upon a Termination of Consultancy between the Holder and the Company, at a cash price per sharean amount equal to theprice paid by the Holder for such Restricted Stock; provided, however, that the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment following a "change of ownership or control" (within the meaning of Treasury A-13Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto)excess of theCompany or because of the Holder's death or disability; provided, further, that, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment or a Termination of Consultancy without cause or following any Change in Control of the Company or because of the Holder's retirement, or otherwise. 7.6 Escrow. The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Award Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. 7.7 Legend. In order to enforce the restrictions imposed upon shares of Restricted Stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Award Agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby. 7.8 Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. ARTICLE VIII. STOCK APPRECIATION RIGHTS 8.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any key Employee or Consultant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement. 8.2 Coupled Stock Appreciation Rights. (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable. (b) A CSAR may be granted to the Holder for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled. (c) A CSAR shall entitle the Holder (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange ~herefore an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Valuefair market value of a share of Common Stock on the date of exercise of theCSAR bySAR over thenumber of shares of Common Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose. A-148.3 Independent Stock Appreciation Rights. (a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Common Stock as the Committee may determine; provided, however, that unless the Committee otherwise provides in the terms of the ISAR or otherwise, no ISAR granted to a person subject to Section 16 of the Exchange Act shall be exercisable until at least six months have elapsed from (but excluding) the date on which the Option was granted. The exercise price per share of Common Stock subject to each ISAR shall be set by the Committee. An ISAR is exercisable only while the Holder is an Employee or Consultant; provided that the Committee may determine that the ISAR may be exercised subsequent to Termination of Employment or Termination of Consultancy without cause, or following a Change in Control, or because of the Holder's retirement, death or disability, or otherwise. (b) An ISAR shall entitle the Holder (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Valuefair market value of a share of Common Stock on the date ofexercisegrant of theISAR bySAR.The other types of awards that may be granted under the
number of2018 Plan include performance shares,of Common Stock with respectperformance stock units, dividend equivalents, deferred stock, restricted stock units, and other stock-based awards.
Page 16 The Board may grant awards to
which the ISAR shall have been exercised, subject to any limitations the Committeeemployees who are or mayimpose. 8.4 Payment and Limitations on Exercise. (a) Paymentbe “covered employees,” as defined in Section 162(m) of theamounts determined under Section 8.2(c) and 8.3(b) above shallCode, that are intended to bein cash, in Common Stock (based on its Fair Market Value as ofperformance-based awards within thedate the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee. To the extent such payment is effected in Common Stock, it shall be made subject to satisfaction of all provisions of Section 6.3 above pertaining to Options. (b) Holders of Stock Appreciation Rights may be required to comply with any timing or other restrictions with respect to the settlement or exercise of a Stock Appreciation Right, including a window-period limitation, as may be imposed in the discretion of the Committee. ARTICLE IX. ADMINISTRATION 9.1 Compensation Committee. The Compensation Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside director" for purposesmeaning of Section 162(m) of theCode. AppointmentCode in order to preserve the deductibility ofCommittee members shall be effective upon acceptance of appointment. Committee members may resign atthese awards for federal income tax. Participants are only entitled to receive payment for a performance-based award for anytime by delivering written noticegiven performance period to theBoard. Vacancies in the Committee may be filledextent that pre-established performance goals set by theBoard. A-159.2 Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Award Agreements, and to adopt such rulesBoard for theadministration, interpretation, and application of the Plan asperiod areconsistent therewith, to interpret, amend or revoke any such rules and to amend any Award Agreement provided that the rights or obligations of the Holder of the Award that is the subject of any such Award Agreement are not affected adversely. Any such grant or award under the Plan need notsatisfied. These pre-established performance goals must bethe same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. 9.3 Majority Rule; Unanimous Written Consent. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 9.4 Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation, if any, for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Holders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company with respect to any such action, determination or interpretation. 9.5 Delegation of Authority to Grant Awards. The Committee may, but need not, delegate from time to time some or all of its authority to grant Awards under the Plan to a committee consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority to grant Awards to individuals (i) who are subjectbased onthe date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 9.5 shall serve in such capacity at the pleasure of the Committee. A-16ARTICLE X. MISCELLANEOUS PROVISIONS 10.1 Not Transferable. No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed; provided, however, that the restrictions set forth in the foregoing clause shall not apply to transfers of Non-Qualified Stock Options, Restricted Stock or Stock Appreciation Rights, subject to the consent of the Administrator, by gift of an Option by an Employee to a Permitted Transferee (as defined below) subject to the following terms and conditions: (i) an Option transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by DRO or by will or the laws of descent and distribution; (ii) any Option which is transferred to a Permitted Transferee shall continue to be subject to all the terms and considerations of the Option as applicable to the original holder (other than the ability to further transfer the Option); (iii) the Employee and the Permitted Transferee shall execute any and all documents reasonably requested by the Administrator, including, without limitation, documents to (a) confirm the status of the transferee as a Permitted Transferee, (b) satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws and (c) provide evidence of the transfer; (iv) the shares of Common Stock acquired by a Permitted Transferee through exercise of an Option have not been registered under the Securities Act, or any state securities act and may not be transferred, nor will any assignee or transferee thereof be recognized as an owner of such shares of Common Stock for any purpose, unless a registration statement under the Securities Act and any applicable state securities act with respect to such shares shall then be in effect or unless the availability of an exemption from registration with respect to any proposed transfer or disposition of such shares shall be established to the satisfaction of counsel for the Company. As used in this Section 10.1, "Permitted Transferee" shall mean (i)one or more of the followingfamily members of an Employee: spouse, former spouse, child (whether natural or adopted), stepchild, any other lineal descendant of the Employee, (ii) a trust, partnership or other entity established and existing for the sole benefit of, or under the sole control of, one or more of the above family members of the Employee, or (iii) any other transferee specifically approved by the Administrator after taking into account any state or federal tax or securities laws applicable to transferable Options. No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Unless an Option has been transferred in accordance with this Section 10.1, (i) during the lifetime of the Holder, only he may exercise an Option or other Award (or any portion thereof) granted to him under the Plan unless it has been disposed of pursuant to a DRO, and (ii) after the death of the Holder, any exercisable portion of an Option or other Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Holder's will or under the then applicable laws of descent and distribution. A-1710.2 Amendment, Suspension or Termination of the Plan. Except as otherwise provided in this Section 10.2, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator. However, without approval of the Company's stockholders given within twelve months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 10.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under the Plan. No amendment, suspension or termination of the Plan shall, without the consent of the Holder, alter or impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and in no event may any Incentive Stock Option be granted under the Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 10.4. 10.3 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events. (a) Subject to Section 10.3 (d), in the event that the Administrator determines that any dividend or other distribution (whether in the form ofperformance criteria: net income, pre-tax income, operating income, cashCommon Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Administrator's sole discretion, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted or awardedflow (including, but not limited to,adjustments of the limitations in Section 2.1operating cash flow and free cash flow), earnings per share, return onthe maximum number and kind of shares which may be issued and adjustments of the Award Limit), (ii) the number and kind of shares of Common Stock (or other securitiesequity, return on invested capital orproperty) subject to outstanding Awards, and (iii) the grantassets, cost reductions orexercise price with respect to any Award. A-18(b) Subject to Sections 10.3(b)(vii) and 10.3(d),savings, funds from operations, appreciation in theeventFair Market Value ofany transaction or event described in Section 10.3(a) or of changes in applicable laws, regulations, or accounting principles, the Administrator, in its soleStock andabsolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder's request, is hereby authorized to takeearnings before any one or more of the followingactions wheneveritems: interest, taxes, depreciation or amortization. The Board shall define in an objective fashion theAdministrator determines thatmanner of calculating the performance criteria it selects to use for suchaction is appropriateawards. These performance criteria may be measured inorderabsolute terms or as compared toprevent dilutionany incremental increase orenlargementas compared to results of a peer group. With regard to a particular performance period, the Board shall have the discretion to select the length of thebenefits or potential benefits intendedperformance period, the type of performance-based awards to bemadegranted, and the goals that will be used to measure the performance for the period. In determining the actual size of an individual performance-based award for a performance period, the Board may reduce or eliminate (but not increase) the award. Generally, a participant will have to be employed on the date the performance-based award is paid to be eligible for a performance-based award for any period.Amendment and Termination
The Board, subject to approval of the Board, may terminate, amend, or modify the 2018 Plan at any time;provided, however, that stockholder approval will be obtained for any amendment to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, to increase the number of shares available under the 2018 Plan, to permit the Board to grant options with a price below fair market value on the date of grant, or to extend the exercise period for an option beyond ten years from the date of grant. In addition, absent stockholder approval, no option may be amended to reduce the per share exercise price of the shares subject to such option below the per share exercise price as of the date the option was granted and, except to the extent permitted by the 2018 Plan in connection with certain changes in capital structure, no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.
In no event may an award be granted pursuant to the 2018 Plan on or after the tenth anniversary of the date the stockholders approve the 2007 Plan.
Federal Income Tax Consequences
With respect to nonqualified stock options, the Company is generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. A participant receiving incentive stock options will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the Common Stock received over the option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will be treated as one which does not meet the requirements of the Code for incentive stock options and the tax consequences described for nonqualified stock options will apply.
The current federal income tax consequences of other awards authorized under the 2018 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); and stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income, subject to Code Section 162(m) with respect to covered employees.
Page 17 New Plan Benefits
No awards will be granted pursuant to the 2018 Plan until it is approved by the Company’s stockholders. In addition, awards are subject to the discretion of the Board. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the 2018 Plan or the benefits that would have been received by such participants if the 2018 Plan had been in effect in the year ended December 31, 2016.
Executive Compensation The following table sets forth all of the compensation awarded to, earned by or paid to each individual that served as our principal executive officer or principal financial officer during the fiscal year ended December 31, 2017. The Company did not have any
Award underother executive officers during thePlan,fiscal year ended December 31, 2017.SUMMARY COMPENSATION TABLE
Name and
Principal Position
Fiscal
YearSalary Bonus Stock
Awards (3)Option
Awards (3)Nonequity
Incentive Plan
CompensationNonqualified
Deferred
Compensation
EarningsAll Other
Compensation (4)Total Seamus Lagan 2017 (1) $ — $ — $ 52,000 $ — $ — $ — $ 293,250 $ 345,250 President, CEO, Interim 2016 (1) $ — $ 200,000 $ 100,000 $ 374,118 $ — $ — $ 387,000 $ 1,061,118 CFO and Director Michael Pollack 2017 (2) $ — $ — $ — $ — $ — $ – $ 30,475 $ 30,475 Interim Chief Financial Officer
(1) Mr. Lagan was Interim Chief Financial Officer of the Company from September 30, 2016 through May 24, 2017. He was again appointed Interim Chief Financial Officer after the resignation of Michael Pollack effective October 13, 2017. (2) Mr. Pollack was appointed Interim Chief Financial Officer of the Company on May 24, 2017 and he served through his resignation effective October 13, 2017. (3) Reflects the aggregate grant date fair value of stock and option awards computed in accordance with FASB ASC Topic 718. In determining the grant date fair value of stock awards, the Company used the closing price of the Company’s common stock on the grant date. The grant date fair value of option awards was determined using a binomial model. The assumptions made in the valuation of the option awards are included in note 10 to our consolidated financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K for the year ended December 31, 2016. (4) All other compensation for the year ended December 31, 2017 includes, for Mr. Lagan, consulting fees of $271,250 and an automobile allowance of $12,000 described below, and, for Mr. Pollack, consulting fees of $30,475. All other compensation for the year ended December 31, 2016 includes, for Mr. Lagan, consulting fees of $375,000 and an automobile allowance of $12,000 described below.
Page 18 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information regarding outstanding equity awards held by the named executive officers at December 31, 2017:
Name Number of shares underlying unexercised options exercisable Number of shares underlying unexercised options unexercisable Equity Incentive Plan Awards; Number of shares underlying unexercised unearned options Option exercise price Option Expiration date Number of shares or units of stock that have not vested Market value of shares or units of stock that have not vested $ Equity Incentive Plan Awards: Number of unearned shares, units or other rights that have not vested Equity Incentive Plan Awards: Market or payout value of unearned shares, units or other rights that have not vested $ Seamus Lagan 2,223 - - $ 4,500.00 12/31/2022 - - - - 1,112 1,112 2,223 $ 450.00 5/2/2026 - - - - 1,112 1,112 2,223 $ 135.00 7/17/2026 - - - - Michael Pollack - - - $ - - - - - - AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Seamus Lagan
On October 1, 2012, Medytox Solutions, Inc. (“Medytox”) entered into a consulting agreement with Alcimede LLC, which is controlled by Mr. Lagan. This agreement replaced and superseded a previous Alcimede consulting agreement. This agreement was originally for three years, and is now subject to
facilitateannual renewals thereafter, unless either party gives notice of non-renewal. The agreement provided for a retainer of $20,000 per month and reimbursement to Alcimede for its out of pocket expenses. The parties agreed to cancel the options issued pursuant to the prior agreement. Under the new agreement, Alcimede was issued 4,500,000 shares of common stock of Medytox and 1,000 shares of Series B Preferred Stock of Medytox. In addition, Alcimede received options to purchase (i) 1,000,000 shares of common stock of Medytox exercisable at $2.50 per share through December 31, 2017, (ii) 1,000,000 shares of common stock of Medytox exercisable at $5.00 per share through December 31, 2017 and (iii) 1,000,000 shares of common stock of Medytox exercisable at $10.00 a share through December 31, 2022. On June 29, 2015, Alcimede exercised the option to purchase 1,000,000 shares of common stock of Medytox at an exercise price of $2.50 per share. The parties agreed to cancel the remaining options to purchase 1,000,000 shares of common stock of Medytox at an exercise price of $5.00 per share and 1,000,000 shares of common stock at an exercise price of $10.00 per share in connection with the merger of Medytox with the Company on November 2, 2015. The share amounts and exercise prices in this paragraph are on a pre-split and pre-merger basis.Effective September 11, 2014 and in conjunction with the appointment of Mr. Lagan as our Chief Executive Officer, such
transactions or events orconsulting agreement with Alcimede was amended togive effect to such changes in laws, regulations or principles: (i) Toprovide foreithera monthly retainer of $31,250, and we agreed to provide Mr. Lagan with an automobile. During thepurchaseyear ended December 31, 2016, Alcimede received a cash bonus of $200,000. On April 1, 2017, Alcimede agreed to a voluntary reduction in the monthly retainer to $20,833 for one year.
Page 19 Director Compensation
Non-employee directors receive an annual cash retainer of $40,000 and may be granted stock options. We do not pay employee directors for Board service in addition to their regular employee compensation. The Board has the primary responsibility for considering and determining the amount of director compensation.
The following table shows amounts earned by each non-employee Director in the fiscal year ended December 31, 2017:
Director(1) Fees earned or paid in cash Stock Awards Option Awards Non-equity Incentive Plan Compensation All Other Compensation(2) Total Dr. Kamran Ajami $ 30,006 $ 26,000 $ - $ - $ 41,000 $ 97,006 John Beach $ 10,002 $ - $ - $ - $ - $ 10,002 Dr. Paul R. Billings $ 13,336 $ - $ - $ - $ 25,000 $ 38,336 Gary L. Blum $ 10,002 $ - $ - $ - $ - $ 10,002 Christopher E. Diamantis $ 40,000 $ 26,000 $ - $ - $ - $ 66,000 Michael L. Goldberg $ - $ - $ - $ - $ 132,917 $ 132,917 Trevor Langley $ 20,004 $ 26,000 $ - $ - $ 47,500 $ 93,504 Robert Lee $ 13,336 $ - $ - $ - $ 10,000 $ 23,336
(1) Dr. Ajami and Mr. Langley were appointed as directors on April 9, 2017. Dr. Billings and Mr. Lee resigned from the board of directors on April 9, 2017. Mr. Goldberg resigned from the Board of Directors effective April 24, 2017. Mr. Beach and Mr. Blum were appointed as directors on October 11, 2017. (2) For Dr. Ajami, includes $5,000 for his service on the Company’s Scientific Advisory Committee and $36,000 payable to American Cytopathology Associates, PA, of which Dr. Ajami is the owner and Chief Executive Officer, for medical director services to the Company’s laboratories. For Dr. Billings, includes $5,000 for his service on the Company’s Scientific Advisory Committee, $10,000 for consulting services provided to the Company and $10,000 in connection with his services as Chairman of the Company’s Compensation Committee. For Mr. Goldberg, includes consulting fees earned by Monarch Capital LLC (“Monarch”), of which Mr. Goldberg is the Managing Director. The agreement under which Monarch was paid for consulting services expired on August 31, 2017. For Mr. Langley, includes $47,500 for consulting services provided to the Company. For Mr. Lee, includes $10,000 in connection with his services as Chairman of the Company’s Audit Committee.
Page 20 Vote Required
Adoption of the 2018 Plan requires approval by holders of a majority of the outstanding shares of Company Common Stock and Series F Preferred Stock, voting together as a class, who are present, or represented, and entitled to vote thereon, at the Special Meeting.
Recommendation
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2018 EQUITY INCENTIVE AWARD PLAN.
PROPOSAL 4
ADJOURNMENT OF THE SPECIAL MEETING IF NECESSARY TO PERMIT FURTHER SOLICITATION OF PROXIES
Our stockholders are being asked to approve a proposal that will give us authority to adjourn the Special Meeting, if necessary for the purpose of soliciting additional proxies in favor of Proposals 1, 2 and 3, if there are not sufficient votes at the time of the Special Meeting to approve and adopt any such
AwardProposal. If this adjournment proposal is approved, our board of directors could adjourn the Special Meeting to any date it chooses. In addition, our board of directors could postpone the Special Meeting before it commences, whether foran amountthe purpose ofcash equalsoliciting additional proxies or for other reasons. If the Special Meeting is adjourned for the purpose of soliciting additional proxies, stockholders who have already submitted their proxies at any time before their use do not need tothe amount that couldsubmit new proxies unless they desire to change their voting instructions. The Company does not intend to call a vote on this proposal if Proposals 1, 2 and 3 have beenattained uponapproved at theexerciseSpecial Meeting.Approval of
such Award or realizationthis Proposal 4 requires the affirmative vote of a majority of theHolder's rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selectedvotes represented by theAdministrator in its sole discretion; (ii) To provide thatholders of our Common Stock and Series F Preferred Stock, voting together as a class, at theAward cannot vest, be exercised or become payable after such event; (iii) To provide that such Award shall be exercisable as to all shares covered thereby, notwithstanding anythingspecial meeting. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Unless instructions to the contrary are specified inSection 5.3a properly executed and returned proxy, the proxy holders will vote the proxies received by them “FOR” this Proposal 4.THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” PROPOSAL 4.
Interest of Certain Persons in Opposition to Matters to be Acted Upon
No officer or
the provisions of such Award; (iv) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stockdirector has any substantial interest in any of thesuccessorproposals scheduled to be considered at the Special Meeting other than in their roles as an officer orsurvivor corporation,director.Miscellaneous
Our management does not intend to present any other items of business and is not aware of any matters other than those set forth in this Proxy Statement that will be presented for action at the Special Meeting. However, if any other matters properly come before the Special Meeting, the persons named in the enclosed proxy intend to vote the shares of our common stock and Series F Preferred Stock that they represent in accordance with their best judgment.
Page 21 Householding
Regulations regarding the delivery of copies of proxy statements to stockholders permit us, banks, brokerage firms and other nominees to send one proxy statement to multiple stockholders who share the same address under certain circumstances. This practice is known as “householding.” Stockholders who hold their shares through a bank, broker or
a parent or subsidiary thereof, with appropriate adjustments asother nominee may have consented to reducing the number of copies of materials delivered to their address. In the event that a stockholder wishes to revoke a “householding” consent previously provided to a bank, broker or other nominee, the stockholder must contact the bank, broker or other nominee, as applicable, to revoke such consent. If a stockholder wishes to receive a separate proxy statement, we will promptly deliver a separate copy to such stockholder that contacts us by mail at Rennova Health, Inc., 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401 or by telephone at (561) 855-1626. Any stockholders of record sharing an address who now receive multiple copies of our annual reports, proxy statements andkindinformation statements, and who wish to receive only one copy ofshares and prices; and (v) To make adjustmentsthese materials per household in thenumber and type offuture should also contact Investor Relations by mail or telephone as instructed above. Any stockholders sharing an address whose shares of Common Stock(oror Series F Preferred Stock are held by a bank, broker or othersecuritiesnominee who now receive multiple copies of our annual reports, proxy statements and information statements, and who wish to receive only one copy of these materials per household, should contact the bank, broker orproperty) subjectother nominee tooutstanding Awards, andrequest that only one set of these materials be delivered in thenumberfuture.Where You Can Obtain Additional Information
We are required to file annual, quarterly and
kind of outstanding Restricted Stock and/or inspecial reports, proxy statements and other information with thetermsSEC. You may read andconditions of, andcopy any document we file at thecriteria included in, outstanding options, rights and awards and options, rights and awards whichSEC’s public reference rooms at 100 F Street, N.E., Washington, D.C. 20549. You maybe granted in the future; (vi) To provide that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of Restricted Stock may be terminated, and some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after such event; (vii) Notwithstanding any other provisionalso obtain copies of thePlan, in the event of a Change in Control, each outstanding Award shall, immediately priordocuments at prescribed rates by writing to theeffective datePublic Reference Section of theChange in Control, automatically become fully exercisableSEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 forallmore information on the operation of thesharespublic reference rooms. Copies ofCommon Stockour SEC filings are also available to the public from the SEC’s web site at www.sec.gov.We will provide, upon request and without charge, to each stockholder receiving this Proxy Statement a copy of our Annual Report on Form 10-K for the
time subjectyear ended December 31, 2016, including the financial statements and financial statement schedule information included therein, as filed with the SEC. You are encouraged tosuch rightsreview the Annual Report together with any subsequent information we have filed or will file with the SEC andmay be exercisedother publicly available information. A copy of any public filing is also available, at no charge, by contacting Rennova Health, Inc., 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, (561) 855-1626.Incorporation of Certain Information by Reference
The SEC allows us to “incorporate by reference” the information we file with it, which means that we can disclose important information to you by referring you to those documents. The information we incorporate by reference is an important part of this Proxy Statement, and later information that we file with the SEC will automatically update and supersede some of this information. The documents we incorporate by reference are:
● Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on April 11, 2017, as amended on Form 10-K/A, filed with the SEC on April 28, 2017; ● Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 22, 2017; ● Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 14, 2017, as amended on Form 10-Q/A, filed with the SEC on November 20, 2017; ● Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the SEC on November 20, 2017; ● Current Reports on Form 8-K, filed with the SEC on January 5, 2017, January 18, 2017, January 20, 2017, January 30, 2017, February 7, 2017, February 8, 2017, February 15, 2017, February 24, 2017, March 10, 2017, March 16, 2017, March 27, 2017, April 24, 2017, April 25, 2017, May 18, 2017, May 25, 2017, May 31, 2017, June 2, 2017, June 5, 2017, June 9, 2017, June 16, 2017, June 22, 2017, June 26, 2017, July 12, 2017, July 13, 2017, July 17, 2017, July 20, 2017, August 17, 2017, August 21, 2017, August 28, 2017, September 1, 2017, September 25, 2017, October 2, 2017, October 11, 2017, October 17, 2017, October 19, 2017, October 24, 2017, October 30, 2017, November 3, 2017, November 20, 2017, December 18, 2017, February 6, 2018 and February 15, 2018; and ● Description of Common Stock contained in the Company’s Registration Statement on Form S-4 (File No. 333-205733) deemed effective by the SEC on September 22, 2015.
Page 22 We will provide to each person, including any beneficial owner, to whom a Proxy Statement is delivered, a copy of any or all of the reports or documents that have been incorporated by reference into this Proxy Statement but not delivered with this Proxy Statement. We will provide these reports upon written or oral request at no cost to the requester. Please direct your request, either in writing or by telephone, to the Corporate Secretary, Rennova Health, Inc., 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, telephone number (561) 855-1626. We maintain a website at http://www.rennovahealth.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
sharesreports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, with the SEC free of charge at our website asfully-vested sharessoon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part ofCommon Stock. (c) Subjectthis Proxy Statement.Stockholder Proposals
Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to
Sections 10.3(d), 3.2present proposals for inclusion in our proxy statement in connection with our next annual meeting have to submit their proposals so that they were received by the Company’s Chief Executive Officer at our principal executive offices, 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, no later than _______, 2018. As the rules of the Securities and3.3, the Administrator may,Exchange Commission make clear, simply submitting a proposal does not guarantee that it will be included.For any proposal that is not submitted for inclusion in
its discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable andour next proxy statement (as described in thebest interests ofpreceding paragraph) but is instead sought to be presented directly at our next annual meeting (including director nominations or other proposals), theCompany. A-19(d) With respect to Awards which are granted to Section 162(m) Participants and are intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 10.3 or in any other provision of the Plan shallproposal must beauthorizedsubmitted to theextent that such adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this Section 10.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)Company’s Chief Executive Officer at our principal executive offices, 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, no later than __________, 2018, as required by Rule 14a-4(c)(1) of theCode. Furthermore, no such adjustmentExchange Act. Even if a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the SEC’s proxy rules. In addition, our bylaws provide that for directors to be nominated oraction shallother proposals to beauthorizedproperly presented at the 2018 Annual Meeting, an additional notice of any nomination or proposal must be received by us between 60 and 90 days prior to theextent such adjustment or action would result in short-swing profits liability under Section 16 or violateanniversary date of theexemptive conditionsimmediately preceding annual meeting ofRule 16b-3 unless the Administrator determines that the Awardstockholders. If our 2018 Annual Meeting is not held within 30 days of such anniversary date tocomply with such exemptive conditions. The numberbe timely, the notice by the stockholder must not be later than the close ofshares of Common Stock subject to any Award shall always be rounded tobusiness on thenext whole number. (e) Notwithstandingtenth day following theforegoing, in the event that the Company becomes a party to a transaction that is intended to qualify for "pooling of interests" accounting treatment and, but for one or moreearlier of theprovisionsday on which the first public announcement ofthis Plan or any Award Agreement would so qualify, then this Plan and any Award Agreement shall be interpreted so as to preserve such accounting treatment, and to the extent that any provision of the Plan or any Award Agreement would disqualify the transaction from pooling of interests accounting treatment (including, if applicable, an entire Award Agreement), then such provision shall be null and void. All determinations to be made in connection with the preceding sentence shall be made by the independent accounting firm whose opinion with respect to "pooling of interests" treatment is required as a condition to the Company's consummation of such transaction. (f) The existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 10.4 Approval of Plan by Stockholders. The Plan will be submitted for the approval of the Company's stockholders within twelve months afterthe date of theBoard's initial adoption2018 Annual Meeting was made or the notice of thePlan. Awards may be grantedmeeting was mailed. The public announcement of an adjournment orawarded prior to suchpostponement of the 2018 Annual Meeting will not trigger a new time period (or extend any time period) for the giving of a stockholderapproval, provided that such Awards shall not be exercisable nor shall such Awards vest prior tonotice as described in this proxy statement.
Rennova Health, Inc. By Order of the Board of Directors Date: _______________, 2018 By: Seamus Lagan Director, Chief Executive Officer and President
Page 23 EXHIBIT A
FORM OF
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
RENNOVA HEALTH, INC.
It is hereby certified that:
1. The name of the
time when the Plancorporation isapproved by the stockholders,Rennova Health, Inc. (the “Corporation”), a corporation duly organized andprovided further that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted or awardedexisting under thePlan shall thereupon be canceled and become null and void. In addition, if the Board determines that Awards other than Options or Stock Appreciation Rights which may be granted to Section 162(m) Participants should continue to be eligible to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and approved by the Company's stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the Company's stockholders previously approved the Performance Criteria. A-2010.5 Tax Withholding. The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Holder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or payment of any Award. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow such Holder to elect to have the Company withhold shares of Common Stock otherwise issuable under such Award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. 10.6 Loans. The Committee may, in its discretion, extend one or more loans to key Employees in connection with the exercise or receipt of an Award granted or awarded under the Plan, or the issuance of Restricted Stock awarded under the Plan. The terms and conditions of any such loan shall be set by the Committee. 10.7 Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Holder to agree by separate written instrument, that (a)(i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Common Stock underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of Employment or Termination of Consultancy occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (ii) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (iii) the Holder incurs a Termination of Employment or Termination of Consultancy for cause. 10.8 Effect of Plan Upon Options and Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or compensation for Employees or Consultants of the Company or any Subsidiary or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. 10.9 Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of shares of Common Stock and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. A-2110.10 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. 10.11 Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal lawsGeneral Corporation Law of the State of Delawarewithout regard to conflicts of laws thereof. A-22* * * * * * * * * * I hereby certify that the foregoing plan was duly adopted by the Board of Directors of Tegal Corporation as of June 30, 2003. /s/ THOMAS R. MIKA -------------------------- Thomas R. Mika Secretary A-23APPENDIX B FORM OF CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TEGAL CORPORATION It is hereby certified that: 1. The name of the Corporation (hereinafter called the "Corporation"(the “DGCL”)is Tegal Corporation..2. The Certificate of Incorporation of the Corporation, as amended, is hereby amended by
striking out the first sentence ofdeleting Article FOURTH, Paragraph A thereof andby substitutinginserting in lieu of saidsentenceParagraph the following newsentence: "FOURTH:Article FOURTH, Paragraph A:“The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is
One Hundred Five Millionfive hundred and five million (505,000,000) shares, comprised ofOne Hundred Million (100,000,000)five hundred million (500,000,000) shares of Common Stock,with apar valueof One Cent (U.S. $0.01)$0.01 per share, andFive Millionfive million (5,000,000) shares of Preferred Stock,with apar valueof One Cent (U.S. $0.01) per share. 3. The amendment of the Certificate of Incorporation herein certified was submitted to the stockholders of the Corporation and was duly approved by the required vote of stockholders of the Corporation in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware. The total number of outstanding shares entitled to vote or consent to this Amendment was 16,099,949 shares of Common Stock. A majority of the outstanding shares of Common Stock, voting together as a single class, voted in favor of this Certificate of Amendment. The vote required was a majority of the outstanding shares of Common Stock, voting together as a single class. IN WITNESS WHEREOF, Tegal Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer as of [ ], 2003. ------------------------- Michael L. Parodi Chief Executive Officer B-1APPENDIX C FORM OF CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TEGAL CORPORATION It is hereby certified that: 1. The name of the Corporation (hereinafter called the "Corporation") is Tegal Corporation. 2. The Certificate of Incorporation is hereby amended by striking out Article FOURTH thereof and by substituting in lieu of said Article the following new Article: "FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is [One Hundred Five Million shares, comprised of One Hundred Million (100,000,000) shares of Common Stock], with a par value of One Cent (U.S. $0.01) per share, and Five Million (5,000,000) shares of Preferred Stock, with a par value of One Cent (U.S. $0.01)$0.01 per share. Effective as of 5:00 p.m., Eastern time, on the date this Certificate of Amendment is filed with the Secretary of State of the State of Delawareeach [ Insert either two, three, five, ten or fifteen](the “Effective Time”), [●] shares of theCorporation'sCorporation’s Common Stock, par value $0.01 per share, issued and outstanding shall, automatically and without any action on the part of the respective holders thereof, be combined, converted and changed into one (1) share of Commonstock,Stock, par value $0.01 per share, of theCorporation;Corporation (the “Reverse Split”); provided, however, that the Corporation shall issue no fractional shares of Common Stock, but shall instead pay to any stockholder who would be entitled to receive a fractional share as a result of the actions set forth herein a sum in cash equal to such fraction multiplied by the average of the high and low prices of theCorporation'sCorporation’s Common Stock as reported on theNasdaq National MarketOTCQB for the five trading-day period ending on the last business day beforethe datethis Certificate of Amendment is filed with the Secretary of State of the State ofDelaware.Delaware (as adjusted to give effect to the Reverse Split). The designation, powers, preferences and relative, participating,optionaloption or other special rights, including voting rights, qualifications, limitations or restrictions of the Preferred Stock shall be established by resolution of the Board of Directors pursuant to Section 151 of the General Corporation Law of the State of Delaware."”3. The amendment of the Certificate of Incorporation herein certified
was submitted to the stockholders of the Corporation and washas been dulyapproved by the required vote of stockholders of the Corporationadopted in accordance with the provisions ofSections 222Section 242 of the DGCL.IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to Certificate of Incorporation to be executed by its duly authorized officer this ____ day of _________________, 2018.
RENNOVA HEALTH, INC. By: Name: Title:
Page 24 EXHIBIT B
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
RENNOVA HEALTH, INC.
It is hereby certified that:
1. The name of the corporation is Rennova Health, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”). 2. The Certificate of Incorporation of the Corporation, as amended, is hereby amended by deleting Article FOURTH, Paragraph A thereof and inserting in lieu of said Paragraph the following new Article FOURTH, Paragraph A: “The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is two billion and
242five million (2,005,000,000) shares, comprised of two billion (2,000,000,000) shares of Common Stock, par value $0.01 per share, and five million (5,000,000) shares of Preferred Stock, par value $0.01 per share. The designation, powers, preferences and relative, participating, option or other special rights, including voting rights, qualifications, limitations or restrictions of the Preferred Stock shall be established by resolution of the Board of Directors pursuant to Section 151 of the General Corporation Law of the State of Delaware.The total number of outstanding shares entitled to vote or consent to this Amendment was l shares of Common Stock. A majority of the outstanding shares of Common Stock, voting together as a single class, voted in favor of this Certificate of Amendment. The vote required was a majority of the outstanding shares of Common Stock, voting together as a single class. C-1”
3. The amendment of the Certificate of Incorporation herein certified has been duly adopted by the Board of Directors and the stockholders of the Corporation in accordance with the provisions of Section 242 of the DGCL. IN WITNESS WHEREOF,
Tegalthe Corporation has caused this Certificate of Amendment to Certificate of Incorporation to besignedexecuted by itsChief Executive Officer asduly authorized officer this ____ day of[ ], 2003. ----------------------- Michael L. Parodi Chief Executive Officer C-2____, 2018.
RENNOVA HEALTH, INC. By: Name: Seamus Lagan Title: Chief Executive Officer and President
Page 25 EXHIBIT C
RENNOVA HEALTH, INC.
2018 INCENTIVE AWARD PLAN
ARTICLE 1.
PURPOSE
The purpose of the Rennova Health, Inc. 2018 Incentive Award Plan (the “Plan”) is to promote the success and enhance the value of Rennova Health, Inc. (the “Company”) by linking the personal interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
Section 2.01 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Performance Bonus Award, or a Performance-Based Award granted to a Participant pursuant to the Plan. Section 2.02 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium. Section 2.03 “Board” means the Board of Directors of the Company. Section 2.04 “Change in Control” means and includes each of the following:
(a) A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or (b) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.4(a) or Section 2.4(c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
Page 26
(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and (ii) After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;provided, however,that no person or group shall be treated for purposes of this Section 2.4(c)(ii) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(d) The Company’s stockholders approve a liquidation or dissolution of the Company. The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.
Section 2.05 “Code” means the Internal Revenue Code of 1986, as amended.
Section 2.06 “Committee” means the committee of the Board described in Article 13. Section 2.07 “Consultant” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to the Company or any Subsidiary; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c) the consultant or adviser is a natural person. Section 2.08 “Covered Employee” means an Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code. Section 2.09 “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Section 8.5. Section 2.10 “Director” means a member of the Board, or as applicable, a member of the board of directors of a Subsidiary. Section 2.11 “Disability” means that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time. Section 2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to Section 8.3 to receive the equivalent value (in cash or Stock) of dividends paid on Stock. Section 2.13 “Effective Date” shall have the meaning set forth in Section 14.1.
Page 27
Section 2.14 “Eligible Individual” means any person who is an Employee, a Consultant or an Independent Director, as determined by the Committee. Section 2.15 “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary. Section 2.16 “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding Awards. Section 2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended. Section 2.18 “Fair Market Value” means, as of any given date, (a) if Stock is on any established stock exchange, the closing price of a share of Stock as reported inThe Wall Street Journal (or such other source as the Company may deem reliable for such purposes) for such date, or if no sale occurred on such date, the first trading date immediately prior to such date during which a sale occurred; or (b) if Stock is not traded on an exchange but is quoted on a national market or other quotation system, the last sales price on such date, or if no sales occurred on such date, then on the date immediately prior to such date on which sales prices are reported; or (c) if Stock is not publicly traded, the fair market value established by the Committee acting in good faith. Section 2.19 “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. Section 2.20 “Independent Director” means a Director of the Company who is not an Employee. Section 2.21 “Non-Employee Director” means a Director of the Company who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor rule. Section 2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option. Section 2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. Section 2.24 “Participant” means any Eligible Individual who, as a member of the Board, Consultant or Employee, has been granted an Award pursuant to the Plan. Section 2.25 “Performance-Based Award” means an Award granted to selected Covered Employees pursuant to Section 8.7, but which is subject to the terms and conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as Qualified Performance-Based Compensation. Section 2.26 “Performance Bonus Award” has the meaning set forth in Section 8.7. Section 2.27 “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added, sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.
Page 28
Section 2.28 “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. Section 2.29 “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award. Section 2.30 “Performance Share” means a right granted to a Participant pursuant to Section 8.1, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee. Section 2.31 “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.2, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee. Section 2.32 “Plan” means this Rennova Health, Inc. 2018 Incentive Award Plan, as it may be amended from time to time. Section 2.33 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code. Section 2.34 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture. Section 2.35 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6. Section 2.36 “Securities Act” shall mean the Securities Act of 1933, as amended. Section 2.37 “Stock” means the common stock of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 12. Section 2.38 “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement. Section 2.39 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Section 8.4. Section 2.40 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
Page 29 ARTICLE 3.
SHARES SUBJECT TO THE PLAN
Section 3.01 Number of Shares.
(a) Subject to Article 12 and Section 3.1(b) the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan is _____________. (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
Section 3.02 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market. Section 3.03 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Article 12, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during any calendar year shall be _______ and the maximum amount that may be paid in cash during any calendar year with respect to any Performance-Based Award (including, without limitation, any Performance Bonus Award) shall be $____________. ARTICLE 4.
ELIGIBILITY AND PARTICIPATION
Section 4.01 Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan. Section 4.02 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.
Page 30
Section 4.03 Foreign Participants. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to this Plan as appendices);provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan; and (v) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any securities law or governing statute or any other applicable law. -ARTICLE 5.
STOCK OPTIONS
Section 5.01 General. The Committee is authorized to grant Options to Eligible Individuals on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement;provided, that, subject to Section 5.2(d), the exercise price for any Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant. (b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part;provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. (c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of Stock held for such period of time as may be required by the Committee in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price;provided that payment of such proceeds is then made to the Company upon settlement of such sale). The Committee shall also determine the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. (d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.
Section 5.02 Incentive Stock Options. Incentive Stock Options shall be granted only to Employees and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to the requirements of Section 5.1, must comply with the provisions of this Section 5.2.
(a) Expiration. Subject to Section 5.2(c), an Incentive Stock Option shall expire and may not be exercised to any extent by anyone after the first to occur of the following events:
(i) Ten years from the date it is granted, unless an earlier time is set in the Award Agreement; (ii) Three months after the Participant’s termination of employment as an Employee; and
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(iii) One year after the date of the Participant’s termination of employment or service on account of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.
(b) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $_______ or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options. (c) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant. (d) Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant. (e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant. (f) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option. ARTICLE 6.
RESTRICTED STOCK AWARDS
Section 6.01 Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by an Award Agreement. Section 6.02 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Section 6.03 Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited;provided, however, that, the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
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Section 6.04
Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse. ARTICLE 7.
STOCK APPRECIATION RIGHTS
Section 7.01 Grant of Stock Appreciation Rights.
(a) A Stock Appreciation Right may be granted to any Eligible Individual selected by the Committee. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement. (b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market Value of the Stock on the date the Stock Appreciation Right is exercised over (B) the Fair Market Value of the Stock on the date the Stock Appreciation Right was granted and (ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any limitations the Committee may impose.
Section 7.02 Payment and Limitations on Exercise.
(a) Subject to Section 7.2(b) payment of the amounts determined under Section 7.1(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee in the Award Agreement. (b) To the extent any payment under Section 7.1(b) is effected in Stock, it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options. ARTICLE 8.
OTHER TYPES OF AWARDS
Section 8.01 Performance Share Awards. Any Eligible Individual selected by the Committee may be granted one or more Performance Share awards which shall be denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
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Section 8.02 Performance Stock Units. Any Eligible Individual selected by the Committee may be granted one or more Performance Stock Unit awards which shall be denominated in unit equivalent of shares of Stock and/or units of value including dollar value of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
Section 8.03 Dividend Equivalents.
(a) Any Eligible Individual selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. (b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.
Section 8.04 Stock Payments. Any Eligible Individual selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. Section 8.05 Deferred Stock. Any Eligible Individual selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued. Section 8.06 Restricted Stock Units. The Committee is authorized to make Awards of Restricted Stock Units to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall, subject to Section 11.5(b), transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited. Section 8.07 Performance Bonus Awards. Any Eligible Individual selected by the Committee may be granted one or more Performance-Based Awards in the form of a cash bonus (a “Performance Bonus Award”) payable upon the attainment of Performance Goals that are established by the Committee and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Any such Performance Bonus Award paid to a Covered Employee shall be based upon objectively determinable bonus formulas established in accordance with Article 9.
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Section 8.08 Term. Except as otherwise provided herein, the term of any Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units shall be set by the Committee in its discretion. Section 8.09 Exercise or PurchaseThe Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments or Restricted Stock Units;provided, however, that such price shall not be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law. Section 8.10 Exercise upon Termination of Employment or Service. An Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and Restricted Stock Units shall only be exercisable or payable while the Participant is an Employee, Consultant or Director, as applicable;provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise;provided, however, that any such provision with respect to Performance Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation. Section 8.11 Form of Payment. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Stock or a combination of both, as determined by the Committee. Section 8.12 Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by an Award Agreement. ARTICLE 9.
PERFORMANCE-BASED AWARDS
Section 9.01 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8;provided, however, that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals that do not satisfy the requirements of this Article 9. Section 9.02 Applicability. This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.
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Section 9.03
Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 or 8 which may be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period. Section 9.04 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the amount earned under a Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate. Section 9.05 Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. ARTICLE 10.
INDEPENDENT DIRECTOR AWARDS
Section 10.01 The Board may grant Awards to Independent Directors, subject to the limitations of the Plan, pursuant to a written non-discretionary formula established by the Committee, or any successor committee thereto carrying out its responsibilities on the date of grant of any such Award (the “Independent Director Equity Compensation Policy”). The Independent Director Equity Compensation Policy shall set forth the type of Award(s) to be granted to Independent Directors, the number of shares of Stock to be subject to Independent Director Awards, the conditions on which such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Committee (or such other successor committee as described above) shall determine in its discretion. ARTICLE 11.
PROVISIONS APPLICABLE TO AWARDS
Section 11.01 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
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Section 11.02 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. Section 11.03 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved from time to time by the Committee (or the Board in the case of Awards granted to Independent Directors). The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including but not limited to members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.
Section 11.04 Beneficiaries. Notwithstanding Section 11.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
Section 11.05 Stock Certificates; Book Entry Procedures.
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.
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(b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award and instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
Section 11.06 Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system. ARTICLE 12.
CHANGES IN CAPITAL STRUCTURE
Section 12.01 Adjustments.
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock other than an Equity Restructuring, the Committee shall make such equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code. (b) In the event of any transaction or event described in Section 12.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12.1 the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;
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(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (iii) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; (iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and (v) To provide that the Award cannot vest, be exercised or become payable after such event.
(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 12.1(a) and 12.1(b):
(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be equitably adjusted. The adjustments provided under this Section 12.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company. (ii) The Committee shall make such equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3).
Section 12.02 Acceleration Upon a Change in Control. Notwithstanding Section 12.1, and except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company and a Participant, if a Change in Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company or any Company subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 12.2, this Section 12.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect. Section 12.03 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.
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ADMINISTRATION
Section 13.01 Committee. Unless and until the Board delegates administration of the Plan to a Committee as set forth below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, may delegate administration of the Plan to a Committee consisting of two or more members of the Board. Unless otherwise determined by the Board, the Committee shall consist solely of two or more members of the Board each of whom is an “outside director,” within the meaning of Section 162(m) of the Code, a Non-Employee Director and an “independent director” under the rules of any securities market on which shares of Stock are traded; provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 13.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 13.5. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment; Committee members may resign at any time by delivering written notice to the Board; and vacancies in the Committee may only be filled by the Board. Section 13.02 Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. Section 13.03 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards; (b) Determine the type or types of Awards to be granted to each Participant; (c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate; (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;provided, however, that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;
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(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; (f) Prescribe the form of each Award Agreement, which need not be identical for each Participant; (g) Decide all other matters that must be determined in connection with an Award; (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and (j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.
Section 13.04 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Section 13.05 Delegation of Authority. To the extent permitted by applicable law, the Board may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) Employees who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 13.5 shall serve in such capacity at the pleasure of the Board. ARTICLE 14.
EFFECTIVE AND EXPIRATION DATE
Section 14.01 Effective Date. The Plan is effective as of the date the Plan is approved by the Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by the stockholders if it is approved either:
(a) By a majority of the votes cast at a duly held stockholder meeting at which a quorum representing a majority of outstanding voting stock is, either in person or by proxy, present and voting on the plan; or (b) By a method and in a degree that would be treated as adequate under Delaware law in the case of an action requiring stockholder approval.
Section 14.02 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after the tenth anniversary of the Effective Date, except that no Incentive Stock Options may be granted under the Plan after the earlier of the tenth anniversary of (a) the date the Plan is approved by the Board or (b) the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.
Page 41 ARTICLE 15.
AMENDMENT, MODIFICATION, AND TERMINATION
Section 15.01 Amendment, Modification, and Termination. Subject to Section 16.14, with the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan;provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 12), (ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant, or (iii) permits the Committee to extend the exercise period for an Option beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option may be amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Option is granted and, except as permitted by Article 12, no Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having a higher per share exercise price. Section 15.02 Awards Previously Granted. Except with respect to amendments made pursuant to Section 16.14, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant. ARTICLE 16.
GENERAL PROVISIONS
Section 16.01 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly. Section 16.02 No Stockholders Rights. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock. Section 16.03 Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.
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Section 16.04 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary. Section 16.05 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary. Section 16.06 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her;provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s `Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. Section 16.07 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder. Section 16.08 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries. Section 16.09 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. Section 16.10 Fractional Shares. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate. Section 16.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Section 16.12 Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.
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Section 16.13 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware. Section 16.14 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section. I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Rennova Health, Inc. on _______________, 2018.
*****
I hereby certify that the foregoing Plan was approved by the stockholders of Rennova Health, Inc. ____________ __, 2018.
Executed on this ____ day of _______________, 2018.
__________________
Corporate Secretary
Page 44 PRELIMINARY PROXY
TEGAL CORPORATION THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS ON AUGUST 26, 2003.RENNOVA HEALTH, INC.
Special Meeting of the Stockholders, __________, 2018
This Proxy is solicited on behalf of the Board of Directors
The undersigned stockholder of Rennova Health, Inc. (the “Company”) hereby appoints
Michael L. ParodiSeamus Lagan and Sebastien Sainsbury, or either of them, as Proxies, each withfullthe powerof substitution, as proxy,to appoint a substitute, and hereby authorizeshim to represent andthem to voteas designated below,all such shares ofcommon stock of Tegal Corporationthe Company as to which the undersignedmay beis entitled to vote at theannual meetingSpecial Meeting ofstockholdersthe Stockholders of the Company and at all adjournments or postponements thereof, to be heldon August 26, 2003, and any and all adjournments ofat ___________________, in accordance with theannual meeting. (CONTINUED AND TO BE SIGNED ONfollowing instructions.THE
REVERSE SIDE) - -------------------------------------------------------------------------------- -FOLD AND DETACH HERE -Please mark your votes as indicated in [X] this example THIS PROXYSHARES REPRESENTED HEREBY WILL BE VOTED ASDIRECTED.SPECIFIED. IF NOCONTRARY INSTRUCTIONDIRECTION ISINDICATED,MADE, THIS PROXY WILL BE VOTED FOR (I) APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT A REVERSE STOCK SPLIT OF ALL OF OUR OUTSTANDING SHARES OF OUR COMMON STOCK, PAR VALUE $0.01 PER SHARE, AT A SPECIFIC RATIO WITHIN A RANGE FROM 1-FOR __ TO 1-FOR-__, AND TO GRANT AUTHORIZATION TO OUR BOARD OF DIRECTORS TO DETERMINE, IN ITS DISCRETION, THEELECTIONSPECIFIC RATIO AND TIMING OF THETHREE NOMINEES LISTED BELOW. The board of directors recommends that you voteREVERSE STOCK SPLIT ANY TIME BEFORE __________________, SUBJECT TO THE BOARD OF DIRECTORS’ DISCRETION TO ABANDON SUCH AMENDMENT; (II) APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK FROM 500,000,000 TO 2,000,000,000 SHARES, (III) APPROVAL OF THE COMPANY’S NEW 2018 INCENTIVE AWARD PLAN, (IV) AUTHORIZATION TO ADJOURN THE SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE ABOVE PROPOSALS, AND (V) AUTHORIZATION TO ACT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING, AND ANY AND ALL ADJOURNMENTS OR POSTPONEMENTS THEREOF.(DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED)
RENNOVA HEALTH, INC.
SPECIAL MEETING OF STOCKHOLDERS
_______________, 2018
1. APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT A REVERSE STOCK SPLIT OF ALL OF THE OUTSTANDING SHARES OF OUR COMMON STOCK, PAR VALUE $0.01 PER SHARE, AT A SPECIFIC RATIO WITHIN A RANGE FROM 1-FOR-___ TO 1-FOR-___, AND TO GRANT AUTHORIZATION TO OUR BOARD OF DIRECTORS TO DETERMINE, IN ITS DISCRETION, THE SPECIFIC RATIO AND TIMING OF THE REVERSE STOCK SPLIT ANY TIME BEFORE __________________, SUBJECT TO THE BOARD OF DIRECTORS’ DISCRETION TO ABANDON SUCH AMENDMENT.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
2. APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK FROM 500,000,000 TO 2,000,000,000 SHARES.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. APPROVE THE COMPANY’S NEW 2018 INCENTIVE AWARD PLAN.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. AUTHORIZE AN ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE ABOVE PROPOSALS.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
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5. OTHER BUSINESS To act upon such other business as may properly come before the
nominees in Proposal No. 1, FOR adoption of Proposal No. 2, FOR adoption of Proposal No. 3, FOR adoption of Proposal No. 4,Special Meeting andFOR adoption of Proposal No. 5.any and all adjournments or postponements thereof.
1. Election of Directors:[ ]FOR WITHHOLD 01 Edward A. Dohring, 02 Jeffrey M. Krauss 03 Michael L. Parodi and all nominees AUTHORITY 04 H. Duane Wadsworth. listed (except to vote for as marked to all nominees the contrary) listed[ ]AGAINST [ ]ABSTAIN Check the appropriate box and indicate changes below:
[ ] Address Change? [ ] INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a line through the nominee's name in the list above. 2. Proposal to amend the 1998 Equity Participation Plan to increase the number FOR AGAINST ABSTAIN of shares available for issuance from 2,400,000 to 6,4000.000 and to [ ] [ ] [ ] increase the Award Limit from 600,000 shares to 1,600,000 shares.Name Change?
3. Proposal to approve the sale of 2% Convertible Secured Debentures and FOR AGAINST ABSTAIN warrants to purchase common stock to a group of private investors in a private placement. [ ] [ ] [ ] 4. Proposal to amend the Articles of Incorporation to increase the number FOR AGAINST ABSTAIN of authorized shared for issuance from 35,000,000 to 100,000,000. [ ] [ ] [ ] 5. Proposal to approve the reverse stock split. FOR AGAINST ABSTAIN [ ] [ ] [ ] 6. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the annual meeting and adjournments of the annual meeting.ANY PREVIOUS PROXY EXECUTED BY THE UNDERSIGNED IS HEREBY REVOKED. Receipt of the notice of the annual meeting and the proxy statement is hereby acknowledged. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE Signature of Stockholder ________________________________________________ Dated _____________________ , 2003 Note:
SIGNATURE(S) (Please sign exactly as
addressed hereon. Joint ownersyour name appears on your proxy card. When shares are held by joint tenants, both shouldeachsign.Executors, administrators, trustees, guardians and attorneys should so indicate when signing. Attorneys should submit powers of attorney. Corporations and partnerships shouldWhen signing as an attorney, executor, administrator, trustee or partner, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name byanauthorizedofficer. - -------------------------------------------------------------------------------- -FOLD AND DETACH HERE-
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