Exhibit 10.12
KLA-TENCOR CORPORATION
GARY E. DICKERSON MANAGEMENT RETENTION AGREEMENT
This Agreement is made by and between KLA-Tencor Corporation (the "Company") and
Gary E. Dickerson ("Executive").
1. Duties and Scope of Employment.
(a) Position; Agreement Commencement Date; Duties. Executive's coverage under
this Agreement shall commence upon the date this Agreement has been signed by
both parties hereto (the "Agreement Commencement Date"). Following the Agreement
Commencement Date, Executive shall continue to serve as Chief Operating Officer
of the Company, reporting to the Chief Executive Officer. The period of
Executive's employment hereunder is referred to herein as the "Employment Term."
During the Employment Term, Executive shall render such business and
professional services in the performance of his duties, consistent with
Executive's position within the Company, as shall reasonably be assigned to him
by the Chief Executive Officer.
(b) Obligations. During the Employment Term, Executive shall devote his full
business efforts and time to the Company. Executive agrees, during the
Employment Term, 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 of Directors of the Company (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, without the approval of the Board, unless such service
involves a conflict of interest with the Company's business.
(c) Employee Benefits. During the Employment Term, Executive shall be eligible
to participate in the employee benefit plans maintained by the Company that are
applicable to other senior management to the full extent provided for under
those plans.
2. At-Will Employment. Executive and the Company understand and acknowledge that
Executive's employment with the Company constitutes "at-will" employment.
Subject to the Company's obligation to provide severance benefits as specified
herein, Executive and the Company acknowledge that this employment relationship
may be terminated at any time, upon written notice to the other party, with or
without good cause or for any or no cause, at the option either of the Company
or Executive.
3. Compensation.
(a) Base Salary. While employed by the Company, the Company shall pay the
Executive as compensation for his services a base salary at the annualized rate
of $454,922, subject to temporary revision under the Company's Policy No. 30.01
(the "Base Salary"). Such salary shall be paid periodically in accordance with
normal Company payroll practices and subject to the usual, required withholding.
Executive's Base Salary shall be reviewed annually by the Compensation Committee
of the Board for possible adjustments in light of Executive's performance,
market conditions and competitive data.
(b) Bonuses. Executive shall be eligible to earn a target bonus under the
Company's 1996 Senior Executive Bonus Plan as specified annually by the
Compensation Committee of the Board (the "Target Bonus").
(c) Severance on or Within Two Years Following a Change of Control. If, on or
within two years after a Change of Control (as defined herein), Executive's
employment with the Company terminates due to (i) a voluntary termination for
"Good Reason" (as defined herein), or (ii) an involuntary termination by the
Company other than for "Cause" (as defined herein), then, subject to Executive
executing and not revoking a standard form of mutual release of claims with the
Company and not breaching the terms of Section 11 hereof, (i) all of Executive's
Company stock options shall immediately accelerate vesting as to 100% of the
then unvested shares, (ii) Executive shall receive continued payments over two
years of Executive's Base Salary plus 100% of his Target Bonus, less applicable
withholding, in accordance with the Company's standard payroll practices; i.e.,
the total payout over the two-year period shall be 200% of Base Salary and 200%
of Target Bonus (the "Severance Payment"), and (iii) the Company shall pay the
group health, dental and vision plan continuation coverage premiums for
Executive and his covered dependents under Title X of the Consolidated Budget
Reconciliation Act of 1985, as amended ("COBRA"), or shall provide comparable
coverage, if COBRA is not available, for the lesser of (A) twenty-four (24)
months from the date of Executive's termination of employment, or (B) the date
upon which Executive and his covered dependents are covered by similar plans of
Executive's new employer (the "COBRA Coverage").
For purposes of this Agreement, "Cause" shall mean
(i) an act of personal dishonesty taken by Executive in connection with his
responsibilities as an employee and intended to result in substantial personal
enrichment of Executive,
(ii) Executive being convicted of, or plea of nolo contendere to, a felony,
(iii) a willful act by Executive which constitutes gross misconduct and which is
injurious to the Company, (iv) following delivery to Executive of a written
demand for performance from the Company which describes the basis for the
Company's reasonable belief that Executive has not substantially performed his
duties, continued violations by Executive of Executive's obligations to the
Company which are demonstrably willful and deliberate on Executive's part.
For purposes of this Agreement, "Good Reason" means, without Executive's express
consent,
(i) a material reduction of Executive's duties, title, authority or
responsibilities, relative to Executive's duties, title, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Employee of such reduced duties, title, authority or
responsibilities
(ii) a reduction by the Company in the Base Salary of Executive as in effect
immediately prior to such reduction;
(iii) a material reduction by the Company in the aggregate level of employee
benefits or overall compensation, including Target Bonuses, to which Executive
was entitled immediately prior to such reduction with the result that
Executive's aggregate benefits package is materially reduced (other than a
reduction that generally applies to Company employees);
(iv) the relocation of Executive to a facility or a location more than
thirty-five (35) miles from Executive's then present location; or (v) any act or
set of facts or circumstances which would, under California case law or statute
constitute a constructive termination of Executive.
For purposes of this Agreement, "Change of Control" shall mean the occurrence of
any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) The consummation of the sale or disposition by the Company of all or
substantially all the Company's assets; or
(iii) The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iv) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date upon which this Agreement was
entered into, or (B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of those directors whose election
or nomination was not in connection with any transaction described in
subsections (i), (ii), or (iii) above, or in connection with an actual or
threatened proxy contest relating to the election of directors to the Company.
The Executive shall not be required to mitigate the value of any severance
benefits contemplated by this Agreement, nor shall any such benefits be reduced
by any earnings or benefits that the Executive may receive from any other
source; provided, however, that Executive if Executive receives severance
benefits hereunder, he expressly waives the right to receive severance benefits
under any other severance plan or policy of the Company.
(d) Voluntary Termination Other than for Good Reason; Involuntary Termination
for Cause Following a Change of Control; Employment Termination Prior to a
Change of Control. In the event, (i) following a Change of Control, that
Executive terminates his employment voluntarily other than for Good Reason or is
involuntarily terminated by the Company for Cause, or (ii) Executive's
employment terminates for any or no reason prior to a Change of Control, then
all vesting of Executive's stock options and restricted stock shall terminate
immediately and all payments of compensation by the Company to Executive
hereunder shall immediately terminate (except as to amounts already earned).
4. Death or Total Disability of Executive. Upon Executive's death or becoming
permanently and totally disabled (as defined in accordance with Internal Revenue
Code Section 22(e)(3) or its successor provision) while Executive is an employee
or consultant of the Company, then (i) employment hereunder shall automatically
terminate and all payments of compensation by the Company to Executive hereunder
shall immediately terminate (except as to amounts already earned), and all
vesting of Executive's stock options and restricted stock shall terminate
immediately.
5. Golden Parachute Excise Taxes.
(a) Parachute Payments of Less than 3x Base Amount Plus Fifty Thousand Dollars.
In the event that the benefits provided for in this agreement or otherwise
payable to Employee (a) constitute "parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), (b)
would be subject to the excise tax imposed by Section 4999 of the Code, and (c)
the aggregate value of such parachute payments, as determined in accordance with
Section 280G of the Code and the proposed Treasury Regulations thereunder (or
the final Treasury Regulations, if they have then been adopted) is less than the
product obtained by multiplying three by Employee's "base amount" within the
meaning of Code Section 280G(b)(3) and adding to such product fifty thousand
dollars, then such benefits shall be reduced to the extent necessary (but only
to that extent) so that no portion of such benefits will be subject to excise
tax under Section 4999 of the Code.
(b) Parachute Payments Equal to or Greater than 3x Base Amount Plus Fifty
Thousand Dollars. In the event that the benefits provided for in this agreement
or otherwise payable to Employee (a) constitute "parachute payments" within the
meaning of Section 280G of the Code, (b) would be subject to the excise tax
imposed by Section 4999 of the Code, and (c) the aggregate value of such
parachute payments, as determined in accordance with Section 280G of the Code
and the proposed Treasury Regulations thereunder (or the final Treasury
Regulations, if they have then been adopted) is equal to or greater than the
product obtained by multiplying three by Employee's "base amount" within the
meaning of Code Section 280G(b)(3) and adding to such product fifty thousand
dollars, then the benefits shall be delivered in full.
(c) 280G Determinations. Unless the Company and the Employee otherwise agree in
writing, the determination of Employee's excise tax liability and the amount
required to be paid or reduced under this Section 5 shall be made in writing by
the Company's independent auditors who are primarily used by the Company
immediately prior to the Change of Control (the "Accountants"). For purposes of
making the calculations required by this Section 5, 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 Employee 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 5.
6. Assignment. This Agreement shall be binding upon and inure to the benefit of
(a) the heirs, beneficiaries, executors and legal representatives of Executive
upon Executive's death and
(b) any successor of the Company. Any such successor of the Company shall be
deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or substantially all of
the assets or business of the Company. None of the rights of Executive to
receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by the
laws of descent and distribution upon the death of Executive. Any attempted
assignment, transfer, conveyance or other disposition (other than as aforesaid)
of any interest in the rights of Executive to receive any form of compensation
hereunder shall be null and void.
7. Notices. All notices, requests, demands and other communications called for
hereunder shall be in writing and shall be deemed given if (i) delivered
personally or by facsimile, (ii) one (1) day after being sent by Federal Express
or a similar commercial overnight service, or (iii) three (3) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors in interest at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
If to the Company: KLA-Tencor Corporation
160 Rio Robles
San Jose, CA 95134
Attn: General Counsel
If to Executive: Gary E. Dickerson
at the last residential address known
by the Company.
8. Severability. In the event that any provision hereof becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision.
9. Entire Agreement. This Agreement, the Employee Proprietary Information and
Inventions Agreement previously entered into by and between the Company and
Executive and the indemnification agreement previously entered into by and
between the Company and Executive represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersede and replace any and all
prior agreements and understandings concerning Executive's employment
relationship with the Company.
10. Dispute Resolution.
(a) The parties shall first meet to settle any dispute through good faith
negotiation or non-binding mediation. If not settled by good faith negotiation
or non-binding mediation between the parties within 30 days from the date one
party requests in writing to meet the other party, then to the extent permitted
by law, 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 Clara County, California, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the "Rules"). The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be confidential, final, conclusive and binding on the parties to the
arbitration. Judgment may be entered under a protective order on the
arbitrator's decision in any court having jurisdiction. The Company shall pay
all costs of any mediation or arbitration; provided, however, that each party
shall pay its own attorney and advisor fees.
(b) The arbitrator shall apply California law to the merits of any dispute or
claim, without reference to rules of conflict of law. The arbitration
proceedings shall be governed by federal arbitration law and by the Rules,
without reference to state arbitration law. Executive hereby expressly consents
to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement and/or relating to any arbitration in which the parties are
participants.
(c) Executive understands that nothing in Section 10 modifies Executive's
at-will status. Either the Company or Executive can terminate the employment
relationship at any time, with or without cause.
(d) EXECUTIVE HAS READ AND UNDERSTANDS SECTION 10, WHICH DISCUSSES ARBITRATION.
EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES, TO THE
EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE 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 ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP.
11. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. Executive agrees that, if he is receiving severance
benefits pursuant to Section 3(c) hereof, then until the end of the twenty four
month period following the date of his termination of employment with the
Company for any reason or no reason, Executive will not directly engage in
(whether as an employee, consultant, proprietor, partner, director or
otherwise), or have any ownership interest in, or participate in the financing,
operation, management or control of, any person, firm, corporation or business
that engages or participates anywhere in the world in providing goods and
services similar to those provided by the Company upon the date of Executive's
termination of employment. Ownership of less than 3% of the outstanding voting
stock of a corporation or other entity will not constitute a violation of this
provision. The Company agrees not to unreasonably withhold consent from
Executive to engage in any activity that is not competitive with the Company.
(b) Covenant Not to Solicit. Executive agrees that, if he is receiving severance
benefits pursuant to Section 3(c) hereof, he will not, at any time during the
twelve month period following his termination date, directly or indirectly
solicit any individuals to leave the Company's employ for any reason or
interfere in any other manner with the employment relationships at the time
existing between the Company and its current or prospective employees.
(c) Representations. The parties intend that the covenants contained in Section
11(a) and (b) shall be construed as a series of separate covenants, one for each
county, city and state (or analogous entity) and country of the world. If, in
any judicial proceeding, a court shall refuse to enforce any of the separate
covenants, or any part thereof, then such unenforceable covenant, or such part
thereof, shall be deemed eliminated from this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants,
or portions thereof, to be enforced.
(d) Reformation. In the event that the provisions of this Section 11 should ever
be deemed to exceed the time or geographic limitations, or scope of this
covenant, permitted by applicable law, then such provisions shall be reformed to
the maximum time or geographic limitations, as the case may be, permitted by
applicable laws.
(e) Reasonableness of Covenants. Employee represents that he (i) is familiar
with the covenants not to compete and solicit, and (ii) is fully aware of his
obligations hereunder, including, without limitation, the reasonableness of the
length of time, scope and geographic coverage of these covenants.
12. No Oral Modification, Cancellation or Discharge. This Agreement may only be
amended, canceled or discharged in writing signed by Executive and the Chairman
of the Board.
13. 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.
14. Governing Law. This Agreement shall be governed by the laws of the State of
California.
15. Effective Date. This Agreement is effective upon the date it has been
executed by both parties.
16. Acknowledgment. Executive acknowledges that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement:
KLA-TENCOR CORPORATION
/s/ KENNETH L. SCHROEDER
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Kenneth L. Schroeder
EXECUTIVE
/s/ GARY E. DICKERSON
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Gary E. Dickerson
Date: November 26, 2001