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RETENTION AND NON-COMPETITION AGREEMENT Exhibit 10.1
THIS RETENTION AND NON-COMPETITION AGREEMENT (the "Agreement") is entered
into by and between KLA-Tencor Corporation (the "Company") and ________________
("Executive"), as of the "Effective Time," as defined below.
WHEREAS, the Company desires to retain the services of Executive as set
forth in this Retention and Non-Competition Agreement (the "Agreement"), and
Executive desires to provide services to the Company, upon the terms and
conditions set forth herein; and
WHEREAS, the Company desires to ensure that Executive does not compete
with and is available to provide services to the Company for the period of time
set forth herein;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Effectiveness of Agreement. This Agreement shall become effective only
upon the "Effective Time" as such term is defined in the Agreement and Plan of
Reorganization (the "Merger Agreement") by and among Tencor Instruments
("Tencor"), Tiger Acquisition Corp. and KLA Instruments Corporation ("KLA") (the
"Effective Time"). The Company and Executive agree that this Agreement shall
govern the terms and conditions of Executive's provision of services to the
Company from and after the Effective Time.
2. Term of Agreement. This Agreement shall commence on the Effective Time
and shall end on the earlier of (i) the five-year anniversary of the Effective
Time, or (ii) the date that all obligations hereunder have been fully
discharged.
3. Duties.
(a) Title and Responsibilities. From and after the Effective Time
until the commencement of any Part-Time Employment Term (as defined in Section 7
of this Agreement) (the "Full-Time Employment Period"), the Company shall employ
the Executive as the of the Company reporting to . As of the
Company, Executive shall have the duties and responsibilities customarily
associated with such position and as determined from time to time by the Board
of Directors of the Company (the "Board"). It is understood and agreed that
Executive will be considered an employee of the Company for tax withholding
purposes for the duration of both the Full-Time Employment Period and the
Part-Time Employment Term. Executive acknowledges that as a part-time Employee
he shall not have the power to bind the Company.
(b) Board Membership. If Executive is serving as a member of the
Board on the date of termination of the Full-Time Employment Period, he shall
tender to the Board his resignation from the Board effective as of such date.
The Board shall not be obligated to accept such resignation.
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4. Obligations. Executive agrees, during the Full-Time Employment Period,
not to actively engage in any other employment, occupation or consulting
activity for any direct or indirect remuneration without the prior approval of
the Board; provided, however, that Executive may serve in any capacity with any
civic, educational or charitable organization, or as a member of corporate
Boards of Directors or committees thereof, including, without limitation, those
upon which Executive currently serves as listed on Exhibit A hereto, without the
approval of the Board.
5. Employee Benefits. During the Full-Time Employment Period, Executive
shall be eligible to participate in (i) all employee benefit plans currently and
hereafter maintained by the Company for senior management according to their
terms, and (ii) such other employee benefits as are set forth in this Agreement.
During any Part-Time Employment Term, Executive shall only be eligible to
participate in the Company's group health, vision and dental plans and shall not
be eligible to participate in the Company's other employee benefit plans and
arrangements.
6. Full-Time Employment Period Compensation.
(a) Base Salary. During the Full-Time Employment Period, and during
certain Part-Time Employment Terms as specified in Section 7 hereof, the Company
shall pay the Executive as compensation for his services a base salary at an
initial annualized rate (which initial rate shall in no event be less than the
Executive's current base salary with KLA or Tencor) recommended by the
Compensation Committee of the Board and approved by the Board as soon as
possible following the Effective Time, as adjusted from time to time by the
Board or its Compensation Committee (the "Base Salary"). The Base Salary shall
be paid periodically in accordance with normal Company payroll practices and
subject to the usual, required withholding. During the Full-Time Employment
Period, Executive's Base Salary shall be reviewed annually for possible
adjustments in light of Executive's performance of his duties, as determined by
the Board or its Compensation Committee.
(b) Bonus. During the Full-Time Employment Period and during certain
Part- Time Employment Terms as specified in Section 7 hereof, Executive shall be
eligible to receive bonuses as determined by the Board or its Compensation
Committee. The Company shall have the obligation to pay any and all bonuses
referred to in this Agreement only at the same time as bonuses are normally paid
to senior management of the Company and contingent in each case upon the
Company's payment of bonuses to the senior officers of the Company in such
fiscal year.
7. Termination of Employment; Transition to Part-Time Employment.
(a) Part-Time Employment Term Definition; Obligations. The periods
of part-time employment specified in this Section 7 shall be defined as the
"Part-Time Employment Term" for the purposes of this Agreement. During any
Part-Time Employment Term, Executive shall be required to devote such time in
rendering services to the Company as shall be mutually agreed upon and
acceptable to the Executive and the Company. During the Part-Time Employment
Term, Executive shall be free to serve as a director, employee, consultant or
advisor to any other corporation or other business enterprise without the prior
written consent of the Company so long as
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such activities do not interfere with his duties and obligations under this
Agreement, including, without limitation, Executive's obligations under Section
10 hereof. In consideration of Executive's not working for a Non-Competing
Company or a Competing Company and being available to provide the mutually
agreed upon services required hereunder during the Part-Time Employment Term,
the Executive shall receive the compensation specified in this Section 7.
(b) Termination of Full-Time Employment for Cause. The Company may
at any time terminate Executive's full-time employment hereunder for "Cause."
For the purposes of this Agreement "Cause" shall mean (i) Executive's gross
negligence or willful misconduct in connection with the performance of his
duties, (ii) Executive's conviction of or plea of nolo contendere to, any felony
in a court of competent jurisdiction, or (iii) Executive's embezzlement or
misappropriation of Company property. If the Executive's full-time employment is
terminated by the Company for Cause, then, subject to Executive entering into a
release of claims agreement with the Company in a form reasonably approved by
the Company (the "Release"), the Executive will receive a lump-sum payment equal
to twenty-five percent of Base Salary and Executive shall not be entitled to any
other benefits hereunder.
(c) Voluntary Termination of Full-Time Employment by Executive Other
Than For Good Reason. If the Executive desires to voluntarily terminate his
full-time employment with the Company other than for "Good Reason" (as defined
below), then Executive shall provide the Company with written notice of such
termination. Subject to Executive entering into the Release, the Executive shall
remain employed by the Company as a part-time employee for a period commencing
with the date upon which the Company is given (or deemed given) such written
notice from Executive and terminating at the end of the following (i) twelve
months, if such notice is given (or deemed given) to the Company prior to the
one-year anniversary of the Effective Time (a "First Year Voluntary
Termination"), (ii) thirty-six months, if such notice is given (or deemed given)
to the Company on or after the one-year anniversary but prior to the second
anniversary of the Effective Time (a "Second Year Voluntary Termination"), or
(iii) twelve months, if such notice is given (or deemed given) to the Company on
or after the second anniversary of the Effective Time but prior to the fifth
anniversary of the Effective Time (a "Post-Second Year Voluntary Termination"),
in each case after which period Executive's employment with the Company shall
terminate.
In connection with the Part-Time Employment Term arising in connection
with a First Year Voluntary Termination, Executive shall be paid (i) Base
Salary, paid in accordance with the Company's normal payroll practices, (ii) an
annual bonus equal to the amount that would otherwise have been payable to
Executive upon Executive's achievement of 100% of his individual bonus
objectives (in distinction to Company bonus objectives, which shall be based
upon actual Company performance for such fiscal year) for the Company's fiscal
year in which Executive's transition to part-time employment occurs (the "Target
Bonus"), and (iii) a pro-rated bonus for the Company's fiscal year in which
Executive's part-time employment terminates (the "Part-Time Employment
Termination Fiscal Year") determined by multiplying the amount that would
otherwise have been payable to Executive upon Executive's achievement of 100% of
his individual bonus objectives (in distinction to Company bonus objectives,
which shall be based upon actual Company performance
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for such fiscal year) for the Part-Time Employment Termination Fiscal Year by a
fraction, the numerator of which is the number of days in the Part-Time
Employment Termination Fiscal Year covered by the Part-Time Employment Term and
the denominator of which is three hundred and sixty-five (the "Pro-Rated
Bonus").
In connection with the Part-Time Employment Term arising in connection
with a Second Year Voluntary Termination, Executive shall be paid (i) Base
Salary for the first twenty-four months of such Part-Time Employment Term, paid
in accordance with the Company's normal payroll practices, (ii) a mutually
agreeable level of compensation per month (determined based on the level of
services expected to be rendered) for the final twelve months of such Part-Time
Employment Term, paid monthly, (iii) the Target Bonus, (iv) for the Company's
fiscal year ending in the period between the first anniversary of the date of
termination of Executive's full-time employment with the Company and the second
anniversary of the of the date of termination of Executive's full-time
employment with the Company, an amount equal to the amount that would otherwise
have been payable to Executive upon Executive's achievement of 100% of his
individual bonus objectives (in distinction to Company bonus objectives, which
shall be based upon actual Company performance for such fiscal year) under the
Company's bonus plan for such fiscal year (the "Second Year Bonus"), and (v) the
Pro-Rated Bonus.
In connection with the Part-Time Employment Term arising in connection
with a Post-Second Year Voluntary Termination, Executive shall be paid (i) Base
Salary, paid in accordance with the Company's normal payroll practices, (ii) the
Target Bonus, and (iii) the Pro-Rated Bonus.
(d) Voluntary Termination of Full-Time Employment by Executive for
Good Reason. If the Executive desires to voluntarily terminate his full-time
employment with the Company for Good Reason, then Executive shall provide the
Company with written notice of his such termination. Subject to Executive
entering into the Release, the Executive shall remain employed by the Company as
a part-time employee for a period of twenty-four months from the date upon which
the Company is given (or deemed given) such written notice from Executive, after
which period Executive's employment with the Company shall terminate. For the
purposes of this Agreement, "Good Reason" shall mean, during the Full-Time
Employment Period, (i) a reduction in Executive's authority or responsibility
which (a) is inconsistent with his position and/or title with the Company, or
(b) diminishes or changes the Executive's substantive authority or
responsibility relative to Executive's authority and responsibility immediately
prior to such reduction, (ii) a reduction in Base Salary or in the amount that
may be earned if 100% "on target" annual bonus milestones are achieved which
reduction is not approved by Executive (unless, in either case, such reductions
apply to all executive officers of the Company), or (iii) Executive's
notification in writing from the Company that his principal place of work will
be relocated by a distance of 100 miles or more from the Company's headquarters.
In connection with the Part-Time Employment Term arising in connection
with Executive's voluntary termination for Good Reason, Executive shall be paid
(i) Base Salary, paid in accordance
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with the Company's normal payroll practices, (ii) the Target Bonus, (iii) the
Second Year Bonus, and (iv) the Pro-Rated Bonus.
(e) Termination of Full-Time Employment by Company Other than for
Cause. If the Company desires to terminate Executive's full-time employment with
the Company other than for Cause, then the Company shall provide Executive with
written notice of such termination. If the Executive's full-time employment is
terminated by the Company other than for Cause, then, subject to Executive
entering into a Release, the Executive shall remain employed by the Company as a
part-time employee for a period of twenty-four months from the date upon which
the Executive is given (or deemed given) such written notice from the Company,
after which period Executive's employment with the Company shall terminate.
In connection with the Part-Time Employment Term arising in connection
with a termination of employment by the Company other than for Cause, Executive
shall be paid (i) Base Salary, paid in accordance with the Company's normal
payroll practices, (ii) the Target Bonus, (iii) the Second Year Bonus, and (iv)
the Pro-Rated Bonus.
(f) Reduction of Part-Time Employment Term Compensation and Benefits
in the Event that Executive Becomes Employed by a Non-Competing Company. In the
event that, during the Part-Time Employment Term, Executive becomes employed by
an entity that is not a "Competing Company" (as defined in Section 10 hereof),
Executive (i) shall have his Base Salary reduced to a mutually agreeable amount
per month (determined based on the level of services expected to be rendered) in
exchange for Executive providing mutually agreed upon services to the Company,
(ii) shall not be eligible to receive any Target Bonus, Second Year Bonus or
Pro-Rated Bonus to the extent not already earned by Executive (for this purpose,
the Target Bonus and Second Year Bonus shall be deemed earned, to the extent
otherwise payable, if Executive is a part-time Employee of the Company and is
not employed by a non-Competing Company through the last day of the fiscal year
to which such bonuses relate, and the Pro-Rated Bonus shall be deemed earned, to
the extent otherwise payable, on the last day of the Part-Time Employment Term
if Executive is not employed by a non-Competing Company through the last day of
the Part-Time Employment Term), and (iii) shall not be eligible to participate
or receive benefits under any other employee benefit plans, policies, practices
or arrangements of the Company or its predecessors.
(g) Stock Option Vesting and Post-Termination Exercisability During
Part-Time Employment Term.
(i) Vesting. During any Part-Time Employment Term provided for
in this Agreement, stock options that were granted to Executive by Tencor or KLA
(the "Prior Companies") on or prior to January 15, 1997 ("Old Options") shall
continue to vest in accordance with the terms and conditions of the original
option agreements relating to such Old Options, but any stock options granted to
Executive by the Prior Companies or by the Company after January 15, 1997 ("New
Options") shall not vest during the Part-Time Employment Term; provided,
however, that notwithstanding the foregoing, in the event of (A) Executive's
Post-Second Year Voluntary
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Termination, (B) voluntary termination of Executive's full-time employment with
the Company for Good Reason, or (C) termination of Executive's full-time
employment with the Company other than for Cause, then the New Options shall
also continue to vest during the Part-Time Employment Term, in accordance with
the terms and conditions of the original option agreements relating to such New
Options. The term "stock option" as used herein does not include any right to
participate in the employee stock purchase plans of the Company or the Prior
Companies, which right shall terminate immediately upon the commencement of any
Part-Time Employment Period.
(ii) Post-Termination Exercisability. When New Options or Old
Options cease vesting pursuant to clause (i) above, a termination of employment
and provision of services to the Company shall be deemed to have recurred for
purposes of determining the commencement of the post-termination period during
which such New Options or Old Options shall remain exercisable in accordance
with the terms and conditions of the original option agreements relating to such
options.
8. Termination of Employment Relationship. Executive's part-time
employment relationship with the Company may not be terminated by the Company
prior to the end of the Part-Time Employment Term, except (i) upon the death or
permanent disability of Executive, (ii) by written agreement between both of the
parties hereto; provided, however, that Executive's employment with the Company,
whether full-time or part-time, shall immediately and automatically terminate
upon Executive's breach of Section 10 hereof. No additional benefits or payments
will become payable to Executive hereunder upon a termination of Executive's
Part-Time Employment Term.
9. Death or Disability. In the event of Executive's death or permanent
disability, this Agreement shall terminate, unless otherwise decided by the
Board.
10. Covenant Not to Compete.
(a) Covenant Not to Compete. During the Full-Time Employment Period
and the Part-Time Employment Term, Executive will not render services as an
employee, consultant, director, partner, owner to, or participate as more than a
2% shareholder in, any Competing Company in a Restricted Territory, as such
terms are defined immediately below.
(b) Competing Company. "Competing Company" shall mean another
semiconductor capital equipment company, partnership, limited liability
corporation or other entity any portion of whose business, including, without
limitation, development, manufacturing, marketing, sales or technical or sales
support, competes with the Company's business at that time.
(c) Restricted Territory. "Restricted Territory" means any county in
the State of California, each state in the United States and each country in the
world.
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11. Limitation on Payments. In the event that the benefits provided for in
this Agreement or otherwise payable to the Executive (i) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section 11, would be subject
to the excise tax imposed by Section 4999 of the Code, then the Executive's
benefits hereunder shall be either
(i) delivered in full, or
(ii) delivered as to such lesser extent which, or at such later
time as, would result in no portion of such severance benefits
being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Executive on an after tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such benefits
may (or might otherwise) be taxable under Section 4999 of the Code. Unless the
Company and the Executive otherwise agree in writing, any determination required
under this Section 11 shall be made in writing by the Company's independent
public accountants (the "Accountants"), whose determination shall be conclusive
and binding upon the Executive and the Company for all purposes; provided that
if benefits are reduced or deferred, the Executive shall choose the order in
which such benefits are reduced or deferred. For purposes of making the
calculations required by this Section 11, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and the Executive shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 11.
12. Assignment. Executive's rights and obligations under this Agreement
shall not be assignable by Executive. The Company's rights and obligations under
this Agreement shall not be assignable by the Company except as incident to the
transfer, by merger, liquidation, or otherwise, of all or substantially all of
the business of the Company.
13. Notices. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed to have been effectively made or given
if personally delivered, or if sent by facsimile, or mailed or sent via Federal
Express to the other party at its address set forth below in this Section 13, or
at such other address as such party may designate by written notice to the other
party hereto. Any effective notice hereunder shall be deemed given on the date
personally delivered or on the date sent by facsimile or deposited in the United
States mail (sent by certified mail, return receipt requested), as the case may
be, at the following addresses:
(i) If to the Company:
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KLA-Tencor Corporation
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Attn: General Counsel
(ii) If to Executive:
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14. Arbitration. The parties hereto agree that any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be finally settled by binding arbitration to be held in Santa
Xxxxx County, California under the Employment Dispute Resolution Rules of the
American Arbitration Association as then in effect (the "Rules"). The
arbitrator(s) may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator(s) shall be final, conclusive and
binding on the parties to the arbitration, and judgment may be entered on the
decision of the arbitrator(s) in any court having jurisdiction.
The arbitrator(s) shall apply California law to the merits of any dispute
or claim, without reference to rules of conflicts of law, and the arbitration
proceedings shall be governed by federal arbitration law and by the Rules,
without reference to state arbitration law.
The parties shall each pay one-half of the costs and expenses of such
arbitration, and each party shall pay its own counsel fees and expenses.
EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 14, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO EXECUTIVE'S RELATIONSHIP WITH THE
COMPANY.
15. Withholding. The Company shall be entitled to withhold, or cause to be
withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
16. Severability. If any term or provision of this Agreement shall to any
extent be declared illegal or unenforceable by arbitrator(s) or by a duly
authorized court of competent
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jurisdiction, then the remainder of this Agreement or the application of such
term or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law and the illegal or unenforceable. term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
of provision.
17. Entire Agreement. This Agreement and the agreements relating to the
New Options and Old Options represent the entire agreement of the parties with
respect to the matters set forth herein, and to the extent inconsistent with
other prior contracts, arrangements or understandings between the parties,
supersedes all such previous contracts, arrangements or understandings between
the Company and Executive. The Agreement may be amended at any time only by
mutual written agreement signed by the parties hereto.
18. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of the State of California without
reference to rules relating to conflict of law (other than any such rules
directing application of California law).
19. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
20. Counterparts. This Agreement may be executed by either of the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EXECUTIVE ----------------------------
[NAME OF EXECUTIVE]
KLA-TENCOR CORPORATION -----------------------------
[NAME & TITLE]
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