Document:

ex10_4.htm

EXHIBIT 10.4

 

STOCKHOLDERS AGREEMENT

 

THIS STOCKHOLDERS AGREEMENT is made as of the 12th day of July, 2012, by and among Tegal Corporation, a Delaware corporation (the "Company"), and the stockholders of the Company listed on Schedule A hereto (the "Stockholders").

 

RECITALS

 

WHEREAS, concurrently with the execution of this Agreement, the Company is acquiring CollabRx, Inc., a Delaware corporation ("CollabRx"), pursuant to an Agreement and Plan of Merger, dated June 29, 2012 (the "Merger Agreement"), by and among the Company, CLBR Acquisition Corp., CollabRx and CommerceNet, as Stockholders' Representative;

 

WHEREAS, the transactions contemplated by the Merger Agreement are referred to herein as the "Transactions";

 

WHEREAS, in connection with the Transactions, (a) the Company has agreed to provide certain registration rights to the Stockholders with respect to the shares of Common Stock received by the Stockholders in connection with the Transactions (the "Shares") and (b) the Stockholders have agreed to certain transfer restrictions with respect to the Shares for a period of two (2) years;

 

WHEREAS, this Agreement is a material inducement to the Company's entering into the Merger Agreement, and the Company has relied upon this Agreement in acquiring CollabRx.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.         Definitions. For purposes of this Agreement:

 

1.1.          "Affiliate" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person.

 

1.2.          "Change in Control" means (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation or stock transfer, but excluding any such transaction effected primarily for the purpose of changing the domicile of the Company), unless the Company's stockholders of record immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or acquiring entity (provided that the sale by the Company of its securities for the purposes of raising additional funds shall not constitute a Change of Control hereunder); or (b) a sale of all or substantially all of the assets of the Company.

 

  

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1.3.          "Common Stock" means shares of the Company's common stock, par value $0.01 per share.

 

1.4.          "Damages" means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.5.          "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

1.6.          "Excluded Registration" means: (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase or similar plan; (ii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the resale of the Registrable Securities; or (iii) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.7.          "Holder" means any holder of Registrable Securities who is a party to this Agreement.

 

1.8.          "Immediate Family Member" means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in- law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

 

1.9.          "Initiating Holders" means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.10.        "Person" means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

1.11.        "Registrable Securities" means the Shares and any Common Stock issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Shares, excluding in all cases, however, any Registrable Securities (i) sold by a Stockholder or (ii) for which registration rights have terminated pursuant to Section 2.9 of this Agreement.

 

1.12.        "SEC" means the Securities and Exchange Commission.

 

  

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1.13.        "SEC Rule 144" means Rule 144 promulgated by the SEC under the Securities Act.

 

1.14.        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.15.        "Selling Expenses" means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.5.

 

1.16.        "Voting Shares" means and includes any securities of the Company the holders of which are entitled to vote for members of the Board of Directors of the Company (including, without limitation, all shares of Common Stock) now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise.

 

2.         Registration Rights. The Company covenants and agrees as follows:

 

2.1.          Demand Registration.

 

(a)           Demand. If at any time after the twelve (12)-month anniversary of the date of this Agreement, the Company receives a request from Holders of a majority of the Registrable Securities then outstanding that the Company file a registration statement with respect to the Registrable Securities then outstanding, then the Company shall: (i) within ten (10) days after the date such request is given, give notice thereof (the "Demand Notice") to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a registration statement under the Securities Act covering the resale of all Registrable Securities held by the Initiating Holders and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(b) and Section 2.1(c). Such registration statement shall permit the participating Holders to offer and sell such Registrable Securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

 

(b)           Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to Section 2.1(a) a certificate signed by the Company's chief executive officer stating that in the good faith judgment of the Company's Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would: (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period; provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period, other than an Excluded Registration.

 

  

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(c)           The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) during the period that is thirty (30) days before the Company's good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective.

 

(d)           The offer and sale of the Registrable Securities pursuant to the registration statement filed pursuant to this Section 2.1 shall not be underwritten.

 

(e)           The Company shall not be obligated to effect more than one registration under this Section 2.1.

 

2.2.          Company Registration.

 

(a)           If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.2(b), cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2(a) before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.5.

 

(b)           In connection with any offering involving an underwriting of shares of the Company's capital stock pursuant to Section 2.2(a), the Company shall not be required to include any of the Holders' Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering. For purposes of this Section 2.2(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single "selling Holder," and any pro rata reduction with respect to such "selling Holder" shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such "selling Holder," as defined in this sentence.

 

  

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2.3.          Obligations of the Company. Whenever required under Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)           prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective until such date that is the earlier of (i) the date as of which all participating Holders may sell all of their Registrable Securities within a ninety (90) day period pursuant to Rule 144, (ii) the date when all of the Registrable Securities registered thereunder shall have been sold or (iii) the date that is two years from the effective date of such registration statement, at which time the Company shall be entitled to withdraw the registration statement and the Stockholders shall have no further right to offer or sell any of the Registrable Securities pursuant to such registration statement (or any prospectus relating thereto);

 

(b)           prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)           furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)           use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

  

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(e)           use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(f)            provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(g)           notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed;

 

(h)           notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing, and following such notification promptly prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing;

 

(i)            Otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and

 

(j)            after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

2.4.          Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder's Registrable Securities.

 

  

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2.5.          Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings or qualifications pursuant to Section 2, including: all registration, filing and qualification fees; printers' and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $20,000, of one counsel for the selling Holders ("Selling Holder Counsel"), shall be borne and paid by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.6.          Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.7.          Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)           To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.7(b) and 2.7(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

  

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(c)           Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section2.7, to the extent that such failure materially prejudices the indemnifying party's ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section2.7.

 

(d)          To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.72.7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.72.7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.72.7, then, and in each such case such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder's liability pursuant to this Section 2.7(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.7(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

  

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(e)           The obligations of the Company and Holders under this Section 2.7 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

2.8.          Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration:

 

(a)           make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;

 

(b)           use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange Act and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration.

 

2.9.          Termination of Registration Rights. The right of any Holder to request registration pursuant to Section 2.1 shall terminate upon the earliest to occur of:

 

(a)           the liquidation, dissolution or winding-up of the Company;

 

(b)           such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder's shares without limitation during a three-month period without registration; and

 

(c)           the fifth anniversary of the date of this Agreement.

 

3.         Restrictions on Transfer.

 

3.1.          The Registrable Securities shall not be sold, pledged or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge or transfer, except upon the conditions specified in this Agreement, which conditions are intended, among other things, to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee or transferee of the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

  

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3.2.          Each Holder hereby agrees that such Holder will not, without the prior written consent of the Company, during the period commencing on the date of this Agreement and ending on the two (2) year anniversary of the date of this Agreement (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Registrable Securities or (ii) enter into any swap or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership of any Registrable Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 3.2 shall not apply to the transfer of any shares to (x) any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, (y) a parent, subsidiary or other affiliate of a Holder that is a corporation, limited liability company or partnership or (z) any partners, members or other equity owners, retired partners, retired members or other equity owners of a Holder; provided that any such transferee agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value.

 

3.3.          The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 3. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder's intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder's expense by either: (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a "no action" letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company and subject to the other provisions of this Agreement (including, without limitation, Section 3.2). The Company will not require such a legal opinion or "no action" letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration, provided that each transferee agrees in writing to be subject to the terms of this Section 3. Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 3.4.

 

  

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3.4.          Each certificate or instrument representing the Registrable Securities shall be stamped or otherwise imprinted with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A STOCKHOLDERS AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 3.4.

 

3.5.          Termination. This Section 3 shall terminate upon a Change in Control of the Company.

 

4.         Voting Provisions Regarding Board of Directors.

 

4.1           Size of the Board. Each Stockholder agrees to vote, or cause to be voted, all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be set and remain at six (6) directors.

 

4.2           Board Composition. Each Stockholder agrees to vote, or cause to be voted, all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the nominees to the Board of Directors of the Company proposed by the Board of Directors of the Company be elected to the Board of Directors of the Company.

 

4.3           Irrevocable Proxy and Power of Attorney. Each Stockholder hereby constitutes and appoints as the proxies of such Stockholder and hereby grants a power of attorney to the Chief Executive Officer of the Company and the Chief Financial Officer of the Company, and each of them, with full power of substitution, with respect to the matters set forth herein (including without limitation, election of persons as members of the Board in accordance with Section 4.2), and hereby authorizes each of them to represent and to vote, if and only if such Stockholder fails to vote or attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such Stockholder's Voting Shares in favor of the election of persons as members of the Board of Directors of the Company determined pursuant to and in accordance with the terms and provisions of this Section 4. Each of the proxy and power of attorney granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and the Merger Agreement and, as such, each is coupled with an interest and shall be irrevocable unless and until this Section 4 or this Agreement terminates. Each party hereto hereby revokes any and all previous proxies or powers of attorney with respect to the Voting Shares and shall not hereafter, unless and until this Section 4 or this Agreement terminates, purport to grant any other proxy or power of attorney with respect to any of the Voting Shares, deposit any of the Voting Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Voting Shares, in each case, with respect to any of the matters set forth herein.

 

  

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4.4           Termination. This Section 4 shall terminate on the earlier to occur of (i) the two (2) year anniversary of the date of this Agreement, or (ii) a Change in Control of the Company.

 

5.         Standstill Agreement. Each Stockholder agrees that, for the period beginning on the date of this Agreement and ending at the close of business on the two (2) year anniversary of the date of this Agreement, unless such Stockholder shall have been specifically invited in writing by the Board of Directors of the Company (or an independent committee thereof), neither such Stockholder nor any of its Affiliates will in any manner, directly or indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in or in any way assist any other person to effect, offer or propose (whether publicly or otherwise) to effect or participate in: (i) any acquisition of any securities (or beneficial ownership thereof) or assets of the Company; (ii) any tender or exchange offer, merger, consolidation or other business combination involving the Company; (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any material portion of the Company's business; or (iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules of the SEC) or consents to vote any voting securities of the Company; (b) form, join or in any way participate in a "group" (as defined under the Exchange Act) with respect to the securities of the Company; (c) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors (or any committee thereof) or policies of the Company or propose any matter for submission to a vote of stockholders of the Company; (d) take any action which to the knowledge of such Stockholder requires the Company to make a public announcement regarding any of the types of matters set forth in (a) above; or (e) enter into any discussions or arrangements with any third party with respect to any of the foregoing or advise, assist, encourage, finance or seek to persuade others to take any action with respect to the foregoing. Such Stockholder also agrees during such period not to request the Company (or its directors, officers, employees or agents), directly or indirectly, to amend or waive any provision of this Section 5 (including this sentence), provided however, that this Section 5 shall terminate upon a Change in Control of the Company.

 

  

12

  

 

6.         Miscellaneous.

 

6.1           Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities with the written consent of the Company. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2           Governing Law. This Agreement shall be governed by the internal law of the State of Delaware.

 

6.3           Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.4           Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.5           Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient's normal business hours, and if not sent during normal business hours, then on the recipient's next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 0. If notice is given to the Company, a copy shall also be sent to Goodwin Procter LLP, 135 Commonwealth Drive, Menlo Park, CA 94025, Attention: William Davisson.

 

6.6           Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided, however, that any provision hereof may be waived by any waiving party on such party's own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Stockholder without the written consent of such Stockholder, unless such amendment, termination or waiver applies to all Stockholders in the same fashion. Any amendment, termination, or waiver effected in accordance with this Section 0 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition or provision.

 

  

13

  

 

6.7           Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal or unenforceable provision shall be reformed and construed so that it will be valid, legal and enforceable to the maximum extent permitted by law.

 

6.8           Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.9           Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above- named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL

 

6.10         Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

[Remainder of Page Intentionally Left Blank]

 

  

14

  

 

IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement as of the date first written above.

	  	  	
TEGAL CORPORATION

	  	  	  
	By:	 	/s/ Thomas R.Mika
	Name:	 	
Thomas R.Mika

	Title:	 	
President and Chief Executive Officer

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

	  	  	
STOCKHOLDER:

	 	 	 
	 	 	
CN VENTURES, LLC

	  	  	  
	By:	 	/s/ ALLAN M SCHIFFMAN
	Name:	 	
ALLAN M SCHIFFMAN

	Title:	 	
PRESIDENT

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

	  	 	
STOCKHOLDER:

	 	 	 
	 	 	
COLLABORATIVE SEED AND GROWTH PARTNERS LLC

	  	 	  
	
By:

	 	
/s/ Walter a. Winshall

	
Name:

	 	
WALTER A. WINSHALL

	
Title:

	 	
MEMBER / MANAGER

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

	  	 	
STOCKHOLDER:

	 	 	 
	 	 	
COMMERCENET

	  	 	  
	
By:

	 	/s/ ALLAN M SCHIFFMAN
	
Name:

	 	
ALLAN M SCHIFFMAN

	
Title:

	 	
PRESIDENT

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

	  	 	
STOCKHOLDER:

	 	 	 
	
By:

	 	
 
Deming 2002 Family Partnership No. 3, LP

	
Name:

	 	Catherine D. Pierson
	
Title:

	 	
Pres. Deming Corp.

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

 

	  	 	
STOCKHOLDER:

	 	 	 
	
By:

	 	 
/s/ NEIL HUNT

	
Name:

	 	
NEIL HUNT

	
Title:

	 	  

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

 

	  	  	
STOCKHOLDER:

	 	 	 
	  	 	JAY AND ARLENE TENENBAUM LIVING UAD
	 	 	 
	  	
By:

	/s/ JAY TENENBAUM
	 	 	 
	  	
By:

	/s/ ARLENE TENENBAUM

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

	  	 	
STOCKHOLDER:

	 	 	 
	
By:

	 	 /s/ Gerard Sarnat
	
Name:

	 	 
Gerard Sarnat

	
Title:

	 	SARNAT DESCENDENT TRUST

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

 

	  	 	
STOCKHOLDER:

	 	 	 
	
By:

	 	/s/ Charles L. Cooney
	
Name:

	 	
Charles L. Cooney

	
Title:

	 	  

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

 

	  	  	
STOCKHOLDER:

	 	 	 
	
By:

	 	/s/ Joshua Rassen
	
Name:

	 	
Joshua Rassen

	
Title:

	 	North Castle Investors Inc.

 

SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

 

  

  

  

 

SCHEDULE A 

 

Stockholders

 

 

CN Ventures, LLC

 

Collaborative Seed and Growth Partners, LLC

 

CommerceNet

 

The Deming 2002 Family Partnership No. 3, LP

 

Neil Hunt

 

Jay and Arlene Tenenbaum Living UAD

 

Sarnat Descendent Trust

 

Charles L. Cooney

 

North Castle Investors Inc.ex10_7.htm

EXHIBIT 10.7

 

TEGAL CORPORATION

 

RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

Tegal Corporation, a Delaware corporation (the “Company”), hereby grants to the holder listed below (“Participant”), an award of restricted stock units (“Restricted Stock Units” or “RSUs”) with respect to the number of shares of the Company’s common stock, par value $0.01 per share, set forth below (the “Shares”).  This award for Restricted Stock Units (this “RSU Award”) is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “Restricted Stock Unit Agreement”).

 

	
Participant:

	
James M. Karis

	 	 
	
Grant Date:

	
July 12, 2012

	 	 
	
Vesting Commencement Date:

	
July 12, 2012

	 	 
	
Total Number of RSUs Subject to Award:

	
239,417 shares

	 	 
	
Vesting Schedule:

	
23,921 RSUs shall vest on the Vesting Commencement Date.  17,970 RSUs shall vest on each of the 9-month anniversary and the 12-month anniversary of the Vesting Commencement Date, subject to Participant’s continued status as a service provider as an Employee, Director or Consultant on each applicable vesting date.  Thereafter, 14,963 RSUs shall vest each quarter, such that all of the RSUs shall be vested on the 4-year anniversary of the Vesting Commencement Date, subject to Participant’s continued status as a service provider as an Employee, Director or Consultant on each applicable vesting date.  Notwithstanding the foregoing, if the Participant’s employment with the Company is terminated by the Company other than for Cause or by the Participant for Good Reason on or after the second anniversary of the Vesting Commencement Date, 29,926 additional RSUs shall immediately vest.  Furthermore, if the Participant’s employment with the Company is terminated by the Company other than for Cause or by the Participant for Good Reason within 3 months before or 12 months after a Change of Control, all of the Participant’s then unvested RSUs shall immediately vest.

	 	 
	
Distribution Schedule:

	
The RSUs shall be distributable in accordance with Section 2.1(c) of the Restricted Stock Unit Agreement.

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Restricted Stock Unit Agreement and this Grant Notice.  The Participant has reviewed the Restricted Stock Unit Agreement 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 and the Restricted Stock Unit Agreement.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Grant Notice or the Restricted Stock Unit Agreement.

 

  

  

  

 

	
TEGAL CORPORATION

 

	  	
PARTICIPANT

	 
	
By:

	
/s/Christine Hergenrother 

	  	
/s/James Karis                                                       

	 
	
Print Name:

	  	  	
Print Name:

	
James M. Karis

	 
	
Title:

	  	  	  	  	 

 

  

2

  

 

EXHIBIT A TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Award Agreement (this “Agreement”) is attached, Tegal Corporation, a Delaware corporation (the “Company”), has granted to Participant the right to receive the number of Restricted Stock Units with respect to the number of shares of the Company’s common stock, par value $0.01 per share (the “Stock”), indicated in the Grant Notice.

 

ARTICLE I.

 

GENERAL

 

1.1           Definitions.  All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Grant Notice.

 

(a)         “Administrator” shall mean the Board or the Committee responsible for conducting the general administration of the RSU Award.

 

(b)         “Board” shall mean the Board of Directors of the Company.

 

(c)         “Cause” shall have the meaning set forth in the Employment Agreement.

 

(d)         “Change of Control” shall have the meaning set forth in the Employment Agreement.

 

(e)         “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(f)         “Committee” shall mean the committee of the board described in Section 3.12.

 

(g)         “Consultant” shall mean 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.

 

(h)         “Director” shall mean a member of the Board, or as applicable, a member of the board of directors of a Subsidiary.

 

(i)         “Employee” shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

 

(j)         “Employment Agreement” shall mean the Employment Agreement, dated as of June 29, 2012, by and between the Participant and the Company.

 

(k)         “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 the RSUs.

 

(l)         “Exchange Act” shall mean Securities Exchange Act of 1934, as amended.

 

  

A-1

  

 

(m)         “Fair Market Value” shall mean as of any given date, (a) if Stock is traded on any established stock exchange, the closing price of a share of Stock as reported in the 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 publicly traded, the fair market value established by the Administrator acting in good faith.

 

(n)         “Good Reason” shall have the meaning set forth in the Employment Agreement.

 

(o)         “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.

 

(p)         “Termination of Directorship” shall mean the time when the Participant 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.

 

(q)         “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.

 

(r)         “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.

 

(s)         “Securities Act” shall mean Securities Act of 1933, as amended.

 

(t)         “Subsidiary” shall mean 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.

 

  

A-2

  

 

ARTICLE II.

 

AWARD OF RESTRICTED STOCK UNITS

 

2.1           Award of Restricted Stock Units.

 

(a)           Award.  As an inducement to accept the Company’s offer of employment, effective as of the Grant Date set forth in the Grant Notice, the Company hereby grants to Participant the right to receive the number of RSUs set forth in the Grant Notice, subject to all of the terms and conditions set forth in this Agreement and the Grant Notice (the “RSU Award”).  Each RSU represents the right to receive one Share.  Prior to actual issuance of any Shares, the RSUs and the RSU Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.

 

(b)           Vesting.  The RSUs subject to the RSU Award shall vest in accordance with the Vesting Schedule set forth in the Grant Notice.  Unless and until the RSUs have vested in accordance with the vesting schedule set forth in the Grant Notice, Participant will have no right to any distribution with respect to such RSUs.  Except as otherwise provided in the vesting schedule set forth in the Grant Notice, in the event of Participant’s Termination of Services prior to the vesting of all of the RSUs, any unvested RSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company.

 

(c)           Distribution of Stock.

 

(i)           Stock shall be distributed to Participant (or in the event of Participant’s death, to his estate) with respect to Participant’s vested Restricted Stock Units granted to Participant pursuant to this Agreement, subject to the terms and provisions of this Agreement, commencing following the earliest to occur of the following events (each, a “Distribution Event”):

 

(1)           Participant’s “separation from service” within the meaning of Section 409A(2)(A)(i) of the Code and the Treasury  Regulations thereunder; provided, however, that if Participant is a “specified employee” at the time of Participant’s “separation from service,” the “Distribution Event” for purposes of this Section 2.3(c)(i) shall be the date that is six months after Participant’s “separation from service” (or, if earlier, the date of Participant’s death).  For purposes of this Section 2.3(c)(i), Participant shall be a “specified employee” if Participant is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of the Company and any stock of the Company is publicly-traded on an established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations thereunder;

 

(2)           The date Participant becomes “disabled” within the meaning of Section 409A(2)(C) of the Code and the Treasury  Regulations thereunder;

 

(3)           Participant’s death;

 

(4)           The date immediately prior to a Change of Control, so long as such transaction constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A(2)(A)(v) of the Code and the Treasury  Regulations thereunder; or

 

(5)           [Specify fixed date, if any].

 

  

A-3

  

 

(ii)           Subject to Sections 2.1(c)(i) and 2.2, following a Distribution Event, the Stock issuable with respect to Participant’s vested Restricted Stock Units shall be distributed to him in a lump sum within ten (10) days.

 

(iii)          All distributions shall be made by the Company in the form of whole shares of Common Stock.

 

(iv)          Notwithstanding the foregoing, shares of Common Stock shall be issuable pursuant to a Restricted Stock Unit at such times and upon such events as are specified in this Agreement only to the extent issuance under such terms will not cause the Restricted Stock Units or the shares of Common Stock issuable pursuant to the Restricted Stock Units to be includible in the gross income of Participant under Section 409A of the Code prior to such times or the occurrence of such events, as permitted by the Code and the regulations and other guidance thereunder.

 

(d)           General. Stock issued under the RSU Award shall be issued to Participant or Participant’s beneficiaries, as the case may be, at the sole discretion of the Administrator, in either (A) uncertificated form, with the Shares recorded in the name of Participant in the books and records of the Company’s transfer agent with appropriate notations regarding the restrictions on transfer imposed pursuant to this Agreement or (B) certificate form.

 

2.2           Unforeseeable Emergency.                                                      

 

(a)           If Participant experiences an Unforeseeable Emergency (as defined below), Participant may petition the Administrator for the right to receive a partial or full distribution of the shares of Common Stock distributable with respect to his vested Restricted Stock Units under this Agreement.  If, in the sole discretion of the Administrator, Participant’s petition is approved, the Unforeseeable Emergency shall be deemed a “Distribution Event” with respect to the number of shares of Common Stock distributable with respect to Participant’s vested Restricted Stock Units as are approved for distribution by the Administrator.  Participant shall then be entitled to receive such Stock pursuant to Section 2.1(c)(ii).

 

(b)           For purposes of this Section 2.2, an “Unforeseeable Emergency” shall mean a severe financial hardship to Participant resulting from an illness or accident of Participant, Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of Participant, loss of Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of Participant.  The Fair Market Value of the Stock distributed to Participant with respect to the Unforeseeable Emergency may not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of Participant’s assets (to the extent liquidation of such assets would not itself cause severe financial hardship), as determined under the Treasury Regulations under Section 409A(a)(2)(B)(ii) of the Code.

 

2.3           Changes to Form or Time of Distribution.  Except as provided in Section 2.2, neither the time nor form of distribution of Stock with respect to the Restricted Stock Units under this Restricted Stock Unit Agreement may be changed, except as may be permitted by the Administrator in accordance with Section 3.9 and Section 409A of the Code and the Treasury Regulations thereunder.

 

2.4           Tax Withholding; Conditions to Issuance of Certificates.  Notwithstanding any other provision of this Agreement (including, without limitation, Section 2.1(b) hereof):

 

(a)           No new certificate shall be delivered to Participant or his legal representative unless and until Participant or his legal representative shall have paid to the Company the full amount of all federal and state withholding or other taxes applicable to the taxable income of Participant resulting from the vesting of the RSUs or the distribution of Shares issuable thereunder, or other taxable event related to the Restricted Stock Units.  The Administrator may permit Participant to satisfy the tax withholding obligations as determined in the sole discretion of the Administrator.

 

  

A-4

  

 

(b)           The Company shall not be required to issue or deliver any certificate or certificates for any Shares prior to the fulfillment of all of the following conditions:  (A) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the U.S. Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its sole and absolute discretion, deem necessary and advisable, (C) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable and (D) the lapse of any such reasonable period of time following the date the RSUs vest as the Administrator may from time to time establish for reasons of administrative convenience.

 

ARTICLE III.

 

OTHER PROVISIONS

 

3.1           RSU Award and Interests Not Transferable.  This RSU Award and the rights and privileges conferred hereby, including the RSUs awarded hereunder, shall not be liable for the debts, contracts or engagements of Participant 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.

 

3.2           Rights as Shareholder.  Neither the Participant nor any person claiming under or through the Participant shall have any of the rights or privileges of a shareholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to the Participant (including through electronic delivery to a brokerage account).   After such issuance, recordation and delivery, the Participant shall have all the rights of a shareholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares; provided, however, that at the discretion of the Company, and prior to the delivery of Shares, Participant may be required to execute a shareholders agreement in such form as shall be determined by the Company.

 

3.3           Not a Contract of Employment or other Service Relationship.  Nothing in this Agreement shall confer upon Participant any right to continue to serve as an Employee, Director, Consultant or other service provider of the Company or any of its affiliates.

 

3.4           Governing Law.   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.

 

3.5           Conformity to Securities Laws.  Participant acknowledges that this Agreement 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 thereunder by the U.S. Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act.  Notwithstanding anything herein to the contrary, this Agreement shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

  

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3.6           Amendment, Suspension and Termination.  This Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board of Directors, provided, that, except as may otherwise be provided by this Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely effect the Award in any material way without the prior written consent of Participant.

 

3.7           Notices.  Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to Participant to his address shown in the Company records, and to the Company at its principal executive office.

 

3.8           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, this Agreement shall be binding upon Participant and his heirs, executors, administrators, successors and assigns.

 

3.9           Section 409A.  Notwithstanding any other provision of this Agreement or the Grant Notice, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code (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 Administrator may, in its discretion, adopt such amendments to 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 Administrator determines are necessary or appropriate to comply with the requirements of Section 409A.

 

3.10         Inducement Grant.  The RSUs are intended to qualify as an “inducement grant” under the rules of the Nasdaq Stock Market.  Notwithstanding any other provision of this Agreement or the Grant Notice, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, such Nasdaq Stock Market rules.  The Administrator may, in its discretion, adopt such amendments to 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 Administrator determines are necessary or appropriate to comply with such Nasdaq Stock Market rules.

 

3.11         Change in Capital Structure.

 

(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 Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such change with respect to the terms and conditions of the RSU Award, including, without limitation, the number of Shares.

 

(b)  In the event of any transaction or event described in Section 3.11 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 Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the RSU Award, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

  

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(i)  to provide for either (A) termination of the RSU Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the realization of the Participant’s rights or (B) the replacement of the RSU Award with other rights or property selected by the Administrator in its sole discretion;

 

(ii)  to provide that the RSU 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 the RSU Award and/or in the terms and conditions of (including the grant or exercise price) the RSU Award;

 

(iv)  to provide that the RSU Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in this Agreement; and

 

(v)  to provide that the RSU 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 3.11(a) and (b), the number and type of securities subject to the RSU will be equitably adjusted.  The adjustments provided under this Section 3.11(c) shall be nondiscretionary and shall be final and binding on the Participant and the Company.

 

(d)           Except as expressly provided in this Section 3.11, the Participant shall have no 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 this Section 3.11 or pursuant to action of the Administrator, 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 the RSU Award.

 

3.12         Administration.

 

(a)  Unless and until the Board delegates administration of the RSU Award to a Committee as set forth below, the RSU Award shall be administered by the full Board, and for such purposes the term “Committee” as used in this Agreement shall be deemed to refer to the Board.  The Board, at its discretion, may delegate administration of the RSU Award to a Committee consisting of two or more members of the Board (other than the Participant).  In its sole discretion, the Board may at any time and from time to time rescind such delegation and/or exercise any and all rights and duties of the Committee under the RSU Award.  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 RSU Award.

 

  

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(b)  The Administrator shall have the power to interpret this Agreement and to adopt such rules for the administration, interpretation and application of this Agreement as are consistent herewith 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 this Agreement or the RSU Award.  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 RSU Award 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.

 

3.13         Entire Agreement.  The Grant Notice and this Agreement 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.

 

 

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