Exhibit 10.3
EXECUTIVE SEVERANCE AGREEMENT
BETWEEN
TIMOTHY STULTZ
AND
NANOMETRICS INCORPORATED
This Executive Severance Agreement (the “Severance
Agreement”) is made and entered into this
th day of July 2007 by and between Timothy Stultz (“Mr. Stultz”) and Nanometrics Incorporated (the “Company”), a Delaware corporation.
WHEREAS, Mr. Stultz has been hired by the Company as its new President and Chief Executive Officer effective August
, 2007, and
WHEREAS, the Company wishes to allow Mr. Stultz to focus his attention upon his new duties
by providing him with a degree of financial security and income protection in the event of an involuntary termination without Cause (as defined herein) or a resignation for Good Reason (as defined herein), including in connection with a Change of
Control (as defined herein) of the Company.
NOW, THEREFORE, the parties hereby agree as follows:
1. This Severance Agreement is intended solely to set out the parties’ understanding with respect to the involuntary separation without Cause or the
resignation for Good Reason, including in connection with a Change of Control, of Mr. Stultz and is not intended to constitute a contract of employment for any period of time. Mr. Stultz understands that he is, and following the execution
of this Severance Agreement, remains an, at-will employee of the Company and may be terminated at any time with or without cause or notice.
2. In the event Mr. Stultz’s employment with the Company terminates for any reason, Mr. Stultz will be entitled to any (a) unpaid base salary accrued up to the effective date of termination; (b) pay for accrued but
unused vacation; (c) benefits or compensation as provided under the terms of any employee benefit and compensation agreements or plans applicable to Mr. Stultz (d) unreimbursed business expenses required to be reimbursed to
Mr. Stultz; and (e) rights to indemnification Mr. Stultz may have under the Company’s Certificate of Incorporation, Bylaws or separate indemnification agreement, as applicable In addition, depending on the reason for termination,
Mr. Stultz may be entitled to the amounts and benefits specified in Sections 3, 4, 5 or 6 of this Severance Agreement. Upon the termination of Mr. Stultz’s employment with the Company for any reason, unless otherwise
requested by the Company’s Board of Directors, Mr. Stultz will be deemed to have resigned from the Board (and all other positions held at the Company and its
affiliates, including, without limitation, any boards of subsidiaries) voluntarily, without any further required action by Mr. Stultz, as of the end of
the Mr. Stultz’s employment and Mr. Stultz, at the Board’s request, will execute any documents necessary to reflect his resignation.
3. In the event that Mr. Stultz’s employment with the Company is terminated by the Company without Cause or Mr. Stultz resigns for Good Reason during the period beginning on Mr. Stultz’s hire
date and concluding one year later, the Company agrees, subject to Sections 7 through 11 of this Severance Agreement, as a separation payment, (i) to pay to Mr. Stultz his annual salary (as in effect immediately prior to such
separation from employment), bonuses that have been earned or accrued, on the Company’s normal paydays and (ii) to reimburse Mr. Stultz for his premium payments under the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”), in each case for a period of one (1) year from date of separation from employment. If Mr. Stultz’s separation is for Cause, he shall be due no separation payment.
4. In the event that Mr. Stultz’s employment with the Company is terminated by the Company without Cause or Mr. Stultz resigns for Good
Reason during the period beginning one year and one day after Mr. Stultz’s hire date until two years from Mr. Stultz’ hire date, the Company agrees, subject to Sections 7 through 11 of this Severance Agreement, as a
separation payment, (i) to pay to Mr. Stultz his annual salary (as in effect immediately prior to such separation from employment), bonuses that have been earned or accrued, on the Company’s normal paydays and (ii) to reimburse
Mr. Stultz for his premium payments under COBRA, in each case for a period of nine (9) months from the date of his separation from employment. If Mr. Stultz’s separation is for Cause, he shall be due no separation payment.
5. In the event that Mr. Stultz’s employment with the Company is terminated by the Company without Cause or Mr. Stultz
resigns for Good Reason during the period beginning two years and one day from Mr. Stultz’ hire date or thereafter, the Company agrees, subject to Sections 7 through 11 of this Severance Agreement, as a separation payment, (i) to
pay to Mr. Stultz his annual salary (as in effect immediately prior to such separation from employment), bonuses that have been earned or accrued, on the Company’s normal paydays and (ii) to reimburse Mr. Stultz for his premium
payments under COBRA, in each case for a period of six (6) months from the date of his separation from employment. If Mr. Stultz’s separation is for Cause, he shall be due no separation payment.
6. In the event that Mr. Stultz’s employment with the Company is terminated by the Company without Cause or Mr. Stultz resigns for Good
Reason from all of his employment positions with the Company and its subsidiaries, in each case within twelve (12) months following a Change of Control, the Company agrees, subject to Sections 7 through 11 of this Severance Agreement, as a
separation payment and in lieu of any payments and benefits that otherwise might be due him pursuant to Sections 3, 4 or 5 of this Severance Agreement, (i) to pay to Mr. Stultz his annual salary (as in effect immediately prior to such
separation from employment), bonuses that have been earned or accrued, on the Company’s normal paydays; (ii) to reimburse Mr. Stultz for his premium payments under COBRA, in each case for a period of one (1) year from the date of
his separation from employment; and (iii) one hundred percent (100%) of the unvested shares subject to Mr. Stultz’s then outstanding equity awards will immediately vest and, if applicable, become exercisable. If
Mr. Stultz’s separation is for Cause or he relinquishes his positions voluntarily without Good Reason, he shall be due no separation payment.
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7. Notwithstanding anything in this Severance Agreement to the contrary, reimbursement for premiums paid
under COBRA pursuant to this Severance Agreement shall be paid only if Mr. Stultz validly elects to continue coverage under COBRA and shall be reimbursed only until the earlier of (i) the termination date set forth in Section 3, 4, 5
or 6 of this Severance Agreement, as applicable; (ii) the date upon which Mr. Stultz and Mr. Stultz’s eligible dependents become otherwise covered under similar plans; (iii) the date upon which Mr. Stultz and
Mr. Stultz’s eligible dependents cease to be eligible for coverage under COBRA.
8. Notwithstanding anything to the contrary in
this Severance Agreement, if Mr. Stultz is a “specified employee” within the meaning of Section 409A of the Code and any final regulations and guidance promulgated thereunder (“Section 409A”) at the time of
Mr. Stultz’s separation from employment, then any severance payments payable pursuant to this Severance Agreement and any other severance payments or separation benefits which may be considered deferred compensation under Section 409A
(together, the “Deferred Compensation Separation Benefits”) otherwise due to Mr. Stultz on or within the six (6) month period following Mr. Stultz’s separation from employment will accrue during such six (6) month
period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of Mr. Stultz’s separation from employment. All subsequent payments, if any, will be payable in accordance with
the payment schedule applicable to each payment or benefit. It is the intent of this Severance Agreement to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be
subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.
9. The
severance payments and benefits provided herein shall be conditioned on the following:
(a) The receipt of any severance or other benefits
pursuant to this Severance Agreement will be subject to (i) Mr. Stultz signing and not revoking a release of claims in a form acceptable to the Company; (ii) Mr. Stultz’s promptly resigning from all positions with the
Company as requested; and (iii) Mr. Stultz continuing to comply with the terms of any Confidential Information Agreement by which he is then bound. No severance or other benefits will be paid or provided until the release agreement becomes
effective.
(b) During the period of Mr. Stultz’s employment with the Company and the Continuance Period (as defined herein),
Mr. Stultz will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding the Company or any officer, director or agent of the Company nor will the Company knowingly and materially disparage,
criticize, or otherwise make any derogatory statements regarding Mr. Stultz. Notwithstanding the foregoing, nothing contained in this Severance Agreement will be deemed to restrict Mr. Stultz, the Company or any of the Company’s
current or former officers and/or directors from providing information to any governmental or regulatory agency (or in any way limit the content of any such information) to the extent they are requested or required to provide such information
pursuant to applicable law or regulation.
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(c) Mr. Stultz acknowledges that the nature of the Company’s business is such that if
Mr. Stultz were to become employed by, or substantially involved in, the business of a competitor of the Company during the twelve (12) months following the termination of Mr. Stultz’s employment with the Company, it would be
very difficult for Mr. Stultz not to rely on or use the Company’s trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company’s trade secrets and confidential information, Mr. Stultz agrees
and acknowledges that Mr. Stultz’s right to receive the separation payments set forth in Sections 3, 4 and 5 of this Severance Agreement (to the extent Mr. Stultz is otherwise entitled to such payments) shall be conditioned upon
Mr. Stultz not directly or indirectly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), nor having any ownership interested in or participating in the
financing, operation, management or control of, any person, firm, corporation or business that competes with Company or is a customer of the Company. Upon any breach of this section, all severance payments pursuant to this Severance Agreement shall
immediately cease.
(d) Until the date one (1) year after the termination of Mr. Stultz’s employment with the Company for
any reason, Mr. Stultz agrees and acknowledges that Mr. Stultz’s right to receive the separation payments set forth in Sections 3, 4 and 5 of this Severance Agreement (to the extent Mr. Stultz is otherwise entitled to such
payments) shall be conditioned upon Mr. Stultz not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave his or her
employment either for Mr. Stultz or for any other entity or person.
10. All payments made pursuant to this Severance Agreement will
be subject to standard deductions and the withholding of applicable taxes.
11. In the event that the severance and other benefits provided
for in this Severance Agreement or otherwise payable to Mr. Stultz (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section, would be subject to the excise tax
imposed by Section 4999 of the Code, then Mr. Stultz’s separation payments under this Severance Agreement will be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which 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 of the Code, results in the receipt by Mr. Stultz on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and Mr. Stultz otherwise agree in writing, any determination required under this Section will be made in writing by the independent public accountants who are
primarily used by the Company (the “Accountants”), whose determination will be conclusive and binding upon Mr. Stultz and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants
may make reasonable assumptions and approximations concerning
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applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
Mr. Stultz will 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 will bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section.
12. The following capitalized terms shall the meanings set forth herein:
(a)
Cause
. For purposes of this Severance Agreement, “Cause” means (i) Mr. Stultz’s willful gross
misconduct; (ii) Mr. Stultz’s unjustifiable neglect of his duties (as determined in the good faith judgment of the Board); (iii) Mr. Stultz’s acting in any manner that has a direct, substantial and adverse effect on the
Company or its reputation, (iv) Mr. Stultz’s repeated material failure or repeated refusal to comply with reasonable written policies, standards and regulations established by the Company from time to time which failure, if curable,
is not cured to the reasonable satisfaction of the Board during the thirty (30) day period following written notice of such failure from the Company; (v) any tortious act, unlawful act or malfeasance which causes or reasonably could cause
(for example, if it became publicly known) material harm to the Company’s standing, condition or reputation; (vi) any material breach by Mr. Stultz of the provisions of any confidential information agreement with the Company or other
material improper disclosure of the Company’s confidential or proprietary information, (vii) Mr. Stultz’s theft, dishonesty, or falsification of any Company records; (viii) Mr. Stultz being found liable in any Securities and
Exchange Commission or other civil or criminal securities law action or entering any cease and desist order with respect to such action (regardless of whether or not Mr. Stultz admits or denies liability); or (ix) Mr. Stultz
(A) obstructing or impeding; (B) endeavoring to influence, obstruct or impede, or (C) failing to materially cooperate with, any investigation authorized by the Board or any governmental or self-regulatory entity (an
“Investigation”). However, Mr. Stultz’s failure to waive attorney-client privilege relating to communications with Mr. Stultz’s own attorney in connection with an Investigation will not constitute “Cause
(b)
Change of Control
. For purposes of this Severance Agreement, “Change of Control” means the occurrence of any of the
following:
(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 50% or more of the total voting power represented by, or 50% or more of the fair value of,
the Company’s then outstanding voting securities; or
(ii) Any action or event occurring within a two-year period, as a result of
which less than a majority of the directors are Incumbent Directors. “Incumbent Directors” will mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company); or
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(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 or
resulting entity, including any parent holding company) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving or resulting entity outstanding immediately after such merger
or consolidation; or
(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the
Company’s assets.
(c)
Code
. For purposes of this Severance Agreement, “Code” means the Internal Revenue Code of
1986, as amended.
(d)
Continuance Period
. For purposes of this Severance Agreement, “Continuance Period” will mean the
period of time beginning on the date of the termination of Mr. Stultz’s employment and ending on the date on which Mr. Stultz is no longer entitled to receive severance payments under this Severance Agreement.
(e)
Good Reason
. For purposes of this Severance Agreement, “Good Reason” means the occurrence of one or more of the following events
without his written consent: (i) a reduction of Mr. Stultz’ base salary in any one year; (ii) the relocation of Mr. Stultz to a facility that is more than fifty (50) miles from his current location; (iii) the
failure of the Company to obtain assumption of this Severance Agreement by any successor; and (iv) the willful breach by the Company of any material element of the then current employment agreement or a material provision of this Severance
Agreement
13. This Severance Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal
representatives of Mr. Stultz upon Mr. Stultz’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Severance Agreement for all
purposes. For this purpose, “successor” means 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 Mr. Stultz to receive any form of compensation payable pursuant to this Severance Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other
attempted assignment, transfer, conveyance or other disposition of Mr. Stultz’s right to compensation or other benefits will be null and void.
14. This Severance Agreement constitutes the entire agreement between the parties pertaining to the separation of Mr. Stultz from employment with the Company and its subsidiaries, is intended to apply to the
exclusion of all other remedies in the event of such separation and supersedes all prior or contemporaneous agreements whether written or oral. The Company and Mr. Stultz agree to work together in good faith to consider amendments to this
Severance Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition under Section 409A prior to actual payment to Mr. Stultz. No waiver,
alteration, or modification of any of the provisions of this Severance Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.
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15. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Severance Agreement will continue in full force and effect without said provision.
16. This
Severance Agreement shall be governed by and construed in accordance with the laws of the State of California (with the exception of its conflict of laws provisions).
17. In the event of disagreement, the parties agree to attempt to work out their differences in good faith. In the event the parties are unable to so work out their differences, any controversy or claim arising out of
or relating to this Severance Agreement, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The parties agree that such arbitration shall be held in Santa Clara County, California and that the Company shall reimburse Mr. Stultz’s reasonable costs and attorneys’ fees.
18. Mr. Stultz acknowledges and agrees that Mr. Stultz is executing this Severance Agreement voluntarily and without any duress
or undue influence by the Company or anyone else. Mr. Stultz further acknowledges and agrees that he has carefully read this Severance Agreement and that he has asked any questions needed for him to understand the terms, consequences and
binding effect of this Severance Agreement and fully understand it, including that he is waiving his right to a jury trial. Finally, Mr. Stultz agrees that he has been provided an opportunity to seek the advice of an attorney of his choice
before signing this Severance Agreement.
19. This Severance Agreement may be executed in counterparts, and each counterpart will have the
same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.
20. All
notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent overnight by a well established
commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other
addresses as the parties may later designate in writing:
If to the Company:
Attn
: Chairman of the Compensation Committee
c/o Corporate Secretary
Nanometrics Incorporated
1550 Buckeye Drive
Milpitas, CA 95035
If to Executive:
at the last residential
address known by the Company.
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Executed as of the date first above written.
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NANOMETRICS INCORPORATED
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By:
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Bruce C. Rhine
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Chief Executive Officer
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AGREED TO AND ACCEPTED:
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Timothy J. Stultz
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Exhibit 99.1
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Nanometrics Incorporated
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Tel: 408.545.6000
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1550 Buckeye Drive
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Fax: 408.232.5910
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Milpitas, CA 95035
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www.nanometrics.com
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News Release
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Investor Relations Contact:
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Company Contact:
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Claire McAdams
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Dan Choy
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Headgate Partners LLC
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Nanometrics Incorporated
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530.274.0551, 530.274.0531 fax
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408.545.6000, 408.232.5910 fax
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email: claire@headgatepartners.com
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email: dchoy@nanometrics.com
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Nanometrics Names Timothy J. Stultz Chief Executive Officer
Bruce C. Rhine Becomes Chairman of the Board
MILPITAS, California, August 6, 2007 — Nanometrics Incorporated (Nasdaq: NANO), a leading supplier of advanced metrology equipment to the semiconductor industry, announced today that Timothy J. Stultz, Ph.D. will join the company
as its president and chief executive officer (CEO), succeeding Bruce C. Rhine, who will become chairman of the Board of Directors. Founder Vincent J. Coates will become vice chairman of the Board. Dr. Stultz will also be appointed to the
company’s Board, effective as of his start date, which is expected to be late August 2007.
This announcement follows Nanometrics’ March 2007
announcement that it had initiated a CEO search. Dr. Stultz brings to Nanometrics twenty-four years of experience in the semiconductor manufacturing industry.
Dr. Stultz, 59, will join Nanometrics from Imago Scientific Instruments, where he has served as president, CEO and a director since June 2003. During his tenure, Dr. Stultz transitioned Imago from a development stage company into
a world-class commercial supplier of its proprietary 3-D atom probe technology. Prior to Imago, Dr. Stultz served as president and chief executive officer for ThauMDx, a leading developer of diagnostic systems and technologies for the analysis
of biomolecules, drugs and chemicals. From 1994 to 1999, Dr. Stultz served as a vice president and general manager with Veeco Instruments, during which time he led the growth of Veeco’s metrology business. Dr. Stultz also was the
founder and CEO of Peak Systems, Inc., a pioneer in the rapid thermal processing segment of the semiconductor capital equipment industry.
“Tim brings
to Nanometrics a wealth of experience in building growth companies within the semiconductor capital equipment industry, and in the metrology sector in particular,” commented Mr. Rhine. “We are thrilled that Tim has decided to join the
Nanometrics team and lead the company into its next phase of growth. Tim understands how to implement business processes to focus on profitability, cash flow and predictability.”
Mr. Rhine, who has served as a member of Nanometrics’ Board of Directors since July 2006, assumed the CEO role in March of 2007. A significant stockholder of the company, Mr. Rhine brings twenty-three
years of experience in the semiconductor equipment industry to his role as chairman of the Board of Directors.
“Bruce has provided strong leadership
for Nanometrics in the last several months, turning the company in the right direction,” added founder Vincent J. Coates. “I couldn’t be more pleased with the work Bruce has done and the selection of Tim Stultz as our new CEO. Bruce
has guided Nanometrics through some of the most challenging tasks we have faced as a company, turning around a troubled business integration and finding the right CEO to lead Nanometrics into the future. I look forward to working with Tim as CEO,
and continuing working closely with Bruce as he assumes the role of chairman.”
“I am honored and excited to have the opportunity to lead one of the industry’s most respected and innovative
metrology companies,” said Dr. Stultz. “Nanometrics has faced a number of challenges in integrating and consolidating its operations worldwide, but the company has the promise to become a true leader in this industry. I look forward
to working with this team as we focus on growth and profitability. We have made it our collective goal to deliver value to our customers, our stockholders and our employees.”
About Nanometrics
Nanometrics is a leader in the design, manufacture and marketing of high-performance process
control metrology systems used in semiconductor manufacturing. Nanometrics standalone and integrated metrology systems measure various thin film properties, critical dimensions, overlay control and optical, electrical and material properties,
including the structural composition of silicon and compound semiconductor devices, during various steps of the manufacturing process. These systems enable semiconductor manufacturers to improve yields, increase productivity and lower their
manufacturing costs. The Company maintains its headquarters in Milpitas, California, with sales and service offices worldwide. Nanometrics is traded on NASDAQ Global Market under the symbol NANO. Nanometrics’ website is
http://www.nanometrics.com
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