TEGAL CORPORATION
 

2007 INCENTIVE AWARD PLAN
 

STOCK OPTION GRANT NOTICE AND
 
STOCK OPTION AGREEMENT
 
 
Tegal Corporation, a Delaware corporation (the “Company”), pursuant to its 2007
Incentive Award Plan (the “Plan”), hereby grants to the holder listed below
(“Participant”), an option to purchase the number of shares of the Company’s
common stock, par value $0.01 (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in the
Stock Option Agreement attached hereto as Exhibit A (the “Stock Option
Agreement”) and the Plan, which are incorporated herein by reference.  Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Grant Notice and the Stock Option Agreement.
 
Participant:
  
Grant Date:
  
Vesting Commencement Date:
  
Exercise Price per Share:
$                                                                       
Total Exercise Price:
$                                                                         
Total Number of Shares Subject to the Option:
  
Expiration Date:
  

 
Type of
Option:                                                                         
o Incentive Stock
Option                                                                      x 
Non-Qualified Stock Option

 
 
 
Vesting Schedule: [The Option shall vest with respect to twenty-five percent
(25%) of the total number of Shares subject to the Option on each of the first
and second anniversaries of the Vesting Commencement Date, and with respect to
an additional 1/48th of the total number of Shares subject to the Option on the
last day of each month thereafter, subject to Participant’s continued status as
a service provider as an Employee, Director or Consultant on each applicable
vesting date, such that all Shares subject to the Option shall be fully vested
on the fourth anniversary of the Vesting Commencement Date.]

 
 
By his or her signature, the Participant agrees to be bound by the terms and
conditions of the Plan, the Stock Option Agreement and this Grant Notice.  The
Participant has reviewed the Stock Option Agreement, the Plan and this Grant
Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Stock Option Agreement and the Plan.  Participant hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Plan or
relating to the Option.
 
TEGAL CORPORATION
 
PARTICIPANT
By:
  
 
By:
 
Print Name:
   
Print Name:
 
Title:
       
Address:
   
Address:
           

      
        
      
      
      
    

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EXHIBIT A
 

 
TO STOCK OPTION GRANT NOTICE
 

 
STOCK OPTION AGREEMENT
 
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this
Stock Option Agreement (this “Agreement”) is attached, Tegal Corporation, a
Delaware corporation (the “Company”), has granted to the Participant an option
under the Company’s 2007 Incentive Award Plan (the “Plan”) to purchase the
number of shares of Stock indicated in the Grant Notice.
 
ARTICLE I.
GENERAL
1.1  Defined Terms.  Wherever the following terms are used in this Agreement
they shall have the meanings specified below, unless the context clearly
indicates otherwise.  Capitalized terms not specifically defined herein shall
have the meanings specified in the Plan and the Grant Notice.
 
(a)  “Administrator” shall mean the Board or the Committee responsible for
conducting the general administration of the Plan in accordance with Article 13
of the Plan; provided that if the Participant is an Independent Director,
“Administrator” shall mean the Board.
 
(b)  “Termination of Consultancy” shall mean the time when the engagement of the
Participant as a Consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding:  (a) terminations
where there is a simultaneous employment or continuing employment of the
Participant by the Company or any Subsidiary, and (b) terminations where there
is a simultaneous re-establishment of a consulting relationship or continuing
consulting relationship between the Participant and 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 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.
 
(c)  “Termination of Directorship” shall mean the time when the Participant, if
he or she is or becomes an Independent Director, ceases to be a Director for any
reason, including, but not by way of limitation, a termination by resignation,
failure to be elected, death or retirement.  The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
 
(d)  “Termination of Employment” shall mean the time when the employee-employer
relationship between the Participant 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 the Participant by the Company or any
Subsidiary, and (b) terminations where there is a simultaneous establishment of
a consulting relationship or continuing consulting relationship between the
Participant and the Company or any Subsidiary.  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 particular leave of absence constitutes a Termination
of Employment.
 
(e)  “Termination of Services” shall mean the last to occur of a Participant’s
Termination of Consultancy, Termination of Directorship or Termination of
Employment, as applicable.  A Participant shall not be deemed to have a
Termination of Services merely because of a change in the capacity in which the
Participant renders service to the Company or any Subsidiary (i.e., a
Participant who is an Employee becomes a Consultant) or a change in the entity
for which the Participant renders such service (i.e., an Employee of the Company
becomes an Employee of a Subsidiary), unless following such change in capacity
or service the Participant is no longer serving as an Employee, Director or
Consultant of the Company or any Subsidiary.
 
1.2  Incorporation of Terms of Plan.  The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference.  In the event
of any inconsistency between the Plan and this Agreement, the terms of the Plan
shall control.
 

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ARTICLE II.
GRANT OF OPTION
2.1  Grant of Option.  In consideration of the Participant’s past and/or
continued employment with or service to the Company or a Subsidiary and for
other good and valuable consideration, effective as of the Grant Date set forth
in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the
Participant the Option to purchase any part or all of an aggregate of the number
of shares of Stock set forth in the Grant Notice, upon the terms and conditions
set forth in the Plan and this Agreement.  Unless designated as a Non-Qualified
Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option
to the maximum extent permitted by law.
 
2.2  Exercise Price.  The exercise price of the shares of Stock subject to the
Option shall be as set forth in the Grant Notice, without commission or other
charge; provided, however, that the price per share of the shares of Stock
subject to the Option shall not be less than 100% of the Fair Market Value of a
share of Stock on the Grant Date.  Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (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
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.
 
2.3  Consideration to the Company.  In consideration of the grant of the Option
by the Company, the Participant agrees to render faithful and efficient services
to the Company or any Subsidiary.  Nothing in the Plan or this Agreement shall
confer upon the Participant any right to continue in the employ or service of
the Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and its Subsidiaries, which rights are hereby expressly
reserved, to discharge or terminate the services of the Participant at any time
for any reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in a written agreement between the Company or a Subsidiary
and the Participant.
 
ARTICLE III.
PERIOD OF EXERCISABILITY
3.1  Commencement of Exercisability.
 
(a)  Subject to Sections 3.2, 3.3, 5.8 and 5.10 hereof, the Option shall become
vested and exercisable in such amounts and at such times as are set forth in the
Grant Notice.
 
(b)  No portion of the Option which has not become vested and exercisable at the
date of the Participant’s Termination of Service shall thereafter become vested
and exercisable, except as may be otherwise provided in this Agreement, by the
Administrator or as set forth in a written agreement between the Company and the
Participant.
 
(c)  Notwithstanding anything in this Sections 3.1, pursuant to Section 12.2 of
the Plan, the Option shall become fully vested and exercisable in the event of a
Change in Control, in connection with which the successor corporation does not
assume the Option or substitute an equivalent right for the Option.  Should the
successor corporation assume the Option or substitute an equivalent right, then
no such acceleration shall apply.
 
3.2  Duration of Exercisability.  The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative.  Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth
in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3 hereof.
 
3.3  Expiration of Option.  The Option may not be exercised to any extent by
anyone after the first to occur of the following events:
 
(a)  The expiration of ten years from the Grant Date;
 
(b)  If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code), at the
time the Option was granted, more than 10% of the total combined voting power of
all classes of stock of the Company or any “subsidiary corporation” of the
Company or any “parent corporation” of the Company (each within the meaning of
Section 424 of the Code), the expiration of five years from the Grant Date;
 
(c)  The expiration of three months from the date of the Participant’s
Termination of Services, unless such termination occurs by reason of the
Participant’s death or Disability; or
 
(d)  The expiration of one year from the date of the Participant’s Termination
of Services by reason of the Participant’s death or Disability.
 
The Participant acknowledges that an Incentive Stock Option exercised more that
three months after the Participant’s Termination of Employment, other than by
reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
 
3.4  Special Tax Consequences.  The Participant acknowledges that, to the extent
that 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,
including the Option, are exercisable for the first time by the Participant in
any calendar year exceeds $100,000, the Option and such other options shall be
Non-Qualified Stock Options to the extent necessary to comply with the
limitations imposed by Section 422(d) of the Code.  The Participant further
acknowledges that the rule set forth in the preceding sentence shall be applied
by taking the Option and other “incentive stock options” into account in the
order in which they were granted, as determined under Section 422(d) of the Code
and the Treasury Regulations thereunder.
 

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ARTICLE IV.
EXERCISE OF OPTION
4.1  Person Eligible to Exercise.  Except as provided in Sections 5.2(b) and
5.2(c) hereof, during the lifetime of the Participant, only the Participant may
exercise the Option or any portion thereof.  After the death of the Participant,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3 hereof, be exercised by the
Participant’s personal representative or by any person empowered to do so under
the deceased the Participant’s will or under the then applicable laws of descent
and distribution.
 
4.2  Partial Exercise.  Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any
time prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3 hereof.
 
4.3  Manner of Exercise.  The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company (or any third party
administrator or other person or entity designated by the Company) of all of the
following prior to the time when the Option or such portion thereof becomes
unexercisable under Section 3.3 hereof:
 
(a)  An Exercise Notice in a form specified by the Administrator, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator;
 
(b)  The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4 hereof;
 
(c)  Any other written representations as may be required in the Administrator’s
reasonable discretion to evidence compliance with the Securities Act or any
other applicable law rule, or regulation; and
 
(d)  In the event the Option or portion thereof shall be exercised pursuant to
Section 4.1 hereof by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the Option.
 
Notwithstanding any of the foregoing, the Company shall have the right to
specify all conditions of the manner of exercise, which conditions may vary by
country and which may be subject to change from time to time.
 
4.4  Method of Payment.  Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Participant:
 
(a)  Cash;
 
(b)  Check;
 
(c)  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 aggregate
exercise price; provided, that payment of such proceeds is then made to the
Company upon settlement of such sale;
 
(d)  With the consent of the Administrator, surrender of other shares of Stock
which (A) in the case of shares of Stock acquired from the Company, have been
owned by the Participant for more than six (6) months on the date of surrender,
and (B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the shares of Stock with respect to which the Option or
portion thereof is being exercised;
 
(e)  With the consent of the Administrator, surrendered shares of Stock issuable
upon the exercise of the Option having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of the shares of Stock with
respect to which the Option or portion thereof is being exercised; or
 
(f)  With the consent of the Administrator, property of any kind which
constitutes good and valuable consideration.
 
4.5  Conditions to Issuance of Stock Certificates.  The shares of Stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares of Stock or issued shares of
Stock which have then been reacquired by the Company.  Such shares of Stock
shall be fully paid and nonassessable.  The Company shall not be required to
issue or deliver any shares of Stock purchased upon the exercise of the Option
or portion thereof prior to fulfillment of all of the following conditions:
 
(a)  The admission of such shares of Stock to listing on all stock exchanges on
which such Stock is then listed;
 
(b)  The completion of any registration or other qualification of such shares of
Stock under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of 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 receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or more
of the forms of consideration permitted under Section 4.4 hereof; and
 
(e)  The lapse of such reasonable period of time following the exercise of the
Option as the Administrator may from time to time establish for reasons of
administrative convenience.
 
4.6  Rights as Stockholder.  The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any
shares of Stock purchasable upon the exercise of any part of the Option unless
and until such shares of Stock shall have been issued by the Company to such
holder (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company).  No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
shares of Stock are issued, except as provided in Section 12.1 of the Plan.
 

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ARTICLE V.
OTHER PROVISIONS
5.1  Administration.  The Administrator shall have the power to interpret the
Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules.  All actions taken and all
interpretations and determinations made by the Administrator in good faith shall
be final and binding upon Participant, the Company and all other interested
persons.  No member of the Committee or the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan, this Agreement or the Option.
 
5.2  Option Not Transferable.
 
(a)  Subject to Section 5.2(b) hereof, the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution, unless and until the shares of Stock underlying the Option
have been issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any interest or right therein shall be liable
for the debts, contracts or engagements of Participant or his or her 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.
 
(b)  Notwithstanding any other provision in this Agreement, with the consent of
the Administrator and to the extent the Option is not intended to qualify as an
Incentive Stock Option, the Participant may transfer the Option (or any portion
thereof) to any one or more Permitted Transferees (as defined below), subject to
the following terms and conditions:  (i) any portion of the Option transferred
to a Permitted Transferee shall not be assignable or transferable by the
Permitted Transferee other than by will or the laws of descent and distribution
or to another Permitted Transferee; (ii) any portion of the Option which is
transferred to a Permitted Transferee shall continue to be subject to all the
terms and conditions of the Option as applicable to the Participant (other than
the ability to further transfer the Option); and (iii) the Participant and the
Permitted Transferee shall execute any and all documents 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) evidence the transfer.  For purposes of this Section 5.2(b), “Permitted
Transferee” shall mean, with respect to a Participant, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Participant’s household (other than a tenant or employee), a trust
in which these persons (or the Participant) control the management of assets,
and any other entity in which these persons (or the Participant) own more than
fifty percent of the voting interests, or any other transferee specifically
approved by the Administrator after taking into account any state or federal tax
or securities laws applicable to transferable Options.
 
(c)  Unless transferred to a Permitted Transferee in accordance with Section
5.2(b) hereof, during the lifetime of Participant, only Participant may exercise
the Option or any portion thereof.  Subject to such conditions and procedures as
the Administrator may require, a Permitted Transferee may exercise the Option or
any portion thereof during Participant’s lifetime.  After the death of
Participant, any exercisable portion of the Option may, prior to the time when
the Option becomes unexercisable under Section 3.3 hereof, be exercised by
Participant’s personal representative or by any person empowered to do so under
the deceased Participant’s will or under the then applicable laws of descent and
distribution.
 
5.3  Adjustments.  The Participant acknowledges that the Option is subject to
modification and termination in certain events as provided in this Agreement and
Article 12 of the Plan.
 
5.4  Notices.  Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the
Company at the address given beneath the signature of the Company’s authorized
officer on the Grant Notice, and any notice to be given to Participant shall be
addressed to Participant at the address given beneath Participant’s signature on
the Grant Notice.  By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to that
party.  Any notice which is required to be given to Participant shall, if
Participant is then deceased, be given to the person entitled to exercise his or
her Option pursuant to Section 4.1 hereof by written notice under this Section
5.4.  Any notice shall be deemed duly given when sent via email or when sent by
certified mail (return receipt requested) and deposited (with postage prepaid)
in a post office or branch post office regularly maintained by the United States
Postal Service.
 
5.5  Titles.  Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
 
5.6  Governing Law; Severability.  The laws of the State of Delaware shall
govern the interpretation, validity, administration, enforcement and performance
of the terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.
 
5.7  Conformity to Securities Laws.  The Participant acknowledges that the Plan
and this Agreement are 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, and state securities laws and regulations.  Notwithstanding anything
herein to the contrary, the Plan shall be administered, and the Option is
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 Plan and
this Agreement shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
 
5.8  Amendments, Suspension and Termination.  To the extent permitted by the
Plan, this Agreement may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee or the
Board, provided, that, except as may otherwise be provided by the Plan, no
amendment, modification, suspension or termination of this Agreement shall
adversely effect the Option in any material way without the prior written
consent of the Participant.  
 
5.9  Successors and Assigns.  The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company.  Subject to the
restrictions on transfer herein set forth in Section 5.2 hereof, this Agreement
shall be binding upon Participant and his or her heirs, executors,
administrators, successors and assigns.
 
5.10  Notification of Disposition.  If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any
disposition or other transfer of any shares of Stock acquired under this
Agreement if such disposition or transfer is made (a) within two years from the
Grant Date with respect to such shares of Stock or (b) within one year after the
transfer of such shares of Stock to the Participant.  Such notice shall specify
the date of such disposition or other transfer and the amount realized, in cash,
other property, assumption of indebtedness or other consideration, by
Participant in such disposition or other transfer.
 
5.11  Limitations Applicable to Section 16 Persons.  Notwithstanding any other
provision of the Plan or this Agreement, if Participant is subject to Section 16
of the Exchange Act, the Plan, the Option and this Agreement shall be subject to
any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such exemptive
rule.  To the extent permitted by applicable law, this Agreement shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.
 
5.12  Not a Contract of Employment.  Nothing in this Agreement or in the Plan
shall confer upon the Participant any right to continue to serve as an employee
or other service provider of the Company or any of its Subsidiaries.
 
5.13  Entire Agreement.  The Plan, the Grant Notice and this Agreement
(including all Exhibits thereto) constitute the entire agreement of the parties
and supersede in their entirety all prior undertakings and agreements of the
Company and Participant with respect to the subject matter hereof.
 
5.14  Section 409A.  Notwithstanding any other provision of the Plan, this
Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice
shall be interpreted in accordance with, and incorporate the terms and
conditions required by, Section 409A of the U.S. Internal Revenue Code of 1986,
as amended (together with any 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 date hereof, “Section
409A”).  The Committee may, in its discretion, adopt such amendments to the
Plan, this Agreement or the Grant Notice or adopt other policies and procedures
(including amendments, policies and procedures with retroactive effect), or take
any other actions, as the Committee determines are necessary or appropriate to
comply with the requirements of Section 409A.
 

      
       
      
      
    

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