Exhibit 10.4
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
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as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and Xxx X. Xxxxx ("Executive").
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The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
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will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, between
Executive and the Company (the "Prior Agreement").
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In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
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hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
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2. Position and Duties.
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(a) During the Employment Period, Executive shall serve as the Vice
President, Research and Development, of the Company and shall have the normal
duties, responsibilities and authority of the Vice President, Research and
Development, subject to the overall direction and authority of the Company's
board of directors (the "Board") and the Company's President and/or Chief
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Executive Officer.
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(b) Executive shall report to the Company's President and/or Chief
Executive Officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
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corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
3. Base Salary and Benefits.
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(a) During the Employment Period, Executive's base salary shall be
at least $197,077 per annum, subject to review by the Board and the President
and/or Chief Executive Officer (who shall consider the Xxxxxxx Survey in such
review) on an annual basis (the "Base Salary"), which salary shall be payable in
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regular installments in accordance with the Company's general payroll practices
and shall be subject to customary withholding. In addition, during the
Employment Period, Executive shall be entitled to participate in all of the
Company's employee benefit programs for which senior executive employees of the
Company and its Subsidiaries are generally eligible (collectively, the
"Benefits").
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(b) Executive shall be entitled to personal time off ("PTO") on
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substantially the same terms and conditions as Executive is entitled to
pursuant to the Therma-Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's fiscal
years beginning with the 1998 fiscal year, Executive will be eligible to earn a
bonus (the "Bonus") based on the Company achieving certain corporate performance
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goals and Executive achieving certain individual goals. The target amount of
the Bonus, the corporate performance goals and the individual goals each shall
be set annually by the Board and the Company's President and/or Chief Executive
Officer. The amount of the Bonus shall be determined in accordance with the
procedures set forth on Exhibit A attached hereto.
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4. Deferred Signing Bonus.
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(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
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continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
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cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
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EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
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less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
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Bonus equal to $1,585,745.94 (the "Maximum Bonus") will be paid, and (iii)
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between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid
within five days after the determination of Actual EBITDA (the date of such
payment, the "Bonus Payment
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Date"); provided that if (i) Executive has exercised any Management Options (as
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defined in the Stock Agreement) prior to such date and issued to the Company a
promissory note or notes as payment of the exercise price therefor and (ii) any
of such promissory notes are outstanding on the Fifth Anniversary, then the
"Bonus Payment Date" shall be the date all of such notes are paid in full (it
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being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth
Anniversary, a Sale of the Company occurs (as defined in the Stock Agreement),
then Actual EBITDA shall mean the sum of (i) cumulative actual EBITDA of the
Company for the period from May 16, 1997 through the end of the last completed
calendar month prior to such sale (determined as set forth in Section 4(a)
above) and (ii) projected EBITDA utilized to sell the Company for the remaining
portion of the period through the Fifth Anniversary (which will not be greater
than the EBITDA planned for such period as reflected in a performance plan for
the Company attached hereto as Exhibit B).
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5. Term.
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(a) The Employment Period (i) shall terminate upon Executive's
resignation (other than for Good Reason) or death, (ii) shall terminate upon
Executive's Disability, (iii) may be terminated by the Company at any time for
Cause (as defined below) or without Cause and (iv) may be terminated by
Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 30% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
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Payment"), in each case until the date which is fifteen months after the date of
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such termination (the "Severance Period"); provided that the portion of the
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Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced proportionately by the
ratio of the number of days of such fiscal year not included in the Severance
Period to the total number of days in such fiscal year. The Severance Payment
will be payable at such times as such payments would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to pay any part or all of the
Severance Payment if at any time during the Severance Period Executive is in
breach of Section 6 hereof or Section 11 of the Stock Agreement. The Severance
Payment shall be reduced by fifty percent (50%) of the amount of any
compensation Executive receives in respect of any other employment during the
Severance Period. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. As a condition to the Company's obligations (if any)
to make the Severance Payment pursuant to this Section 5(b), Executive will
execute and deliver a general release in form and substance satisfactory to the
Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 5(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
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(d) Except as specifically provided herein, all of Executive's
rights to Benefits and bonuses which accrue or become payable after the
termination of the Employment Period shall cease upon such termination.
(e) For purposes of this Agreement, "Disability" shall mean any
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physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
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commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries, or (v) any other material breach of this Agreement
or the Stock Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean the
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occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as a senior executive officer of the Company, except in
the event Executive is unable to or fails to perform his normal full-time duties
and responsibility with the Company as a result of incapacity due to physical or
mental illness or incapacity; (ii) a reduction in the Base Salary as in effect
on the date hereof; (iii) the relocation of the Company's principal executive
offices to a location outside the San Francisco Bay Area (which includes the
counties of San Francisco, Alameda, Santa Xxxxx, Contra Costa, San Mateo and
Marin) or the Company's requiring Executive to be based anywhere other than the
Company's principal executive offices (but not including required travel on the
Company's business); or (iv) the wrongful failure by the Company to pay to
Executive any portion of the Base Salary, Bonus or Benefits, or to pay to
Executive any portion of an installment of deferred compensation or Benefits
under any deferred compensation or benefits program of the Company, within 45
days of the date such Base Salary, Bonus, compensation or Benefit is due.
6. Noncompetition; Confidentiality; Nonsolicitation.
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(a) Noncompetition. Executive agrees that while he is employed by
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the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean, directly or
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indirectly, without the prior written consent of the Company, providing
consultive service with or without pay, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or Related
Entity (as defined in Section 6(d) below) to the extent its products are similar
or materially related to those of the Company or any Subsidiary or Related
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Entity (including products under development by the Company, or to Executive's
knowledge, by any Subsidiary or Related Entity) or (ii) otherwise engages in any
business in which the Company or any Subsidiary or Related Entity is engaged or
proposes to engage, in either case as of the date of the termination of
Executive's employment; provided that "Compete" and "Competing" shall not mean
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being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that he will not at
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any time, during and/or after the term of this Agreement, directly or
indirectly, divulge, furnish or make accessible to any party or otherwise use or
exploit any of the proprietary or confidential information or knowledge,
including without limitation, any financial information, marketing plans,
strategies, trade secrets (as defined by California Civil Code Section 3426),
data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 6(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
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designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
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available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof.
(d) Antisolicitation. Executive promises and agrees that while he
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is employed by the Company, during the Severance Period, and for a period of two
(2) years thereafter (the "Antisolicitation Period"), he will not induce or
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attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
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either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
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period of five years following the date of termination of employment hereunder,
he will not directly or indirectly (i) solicit any employee of the Company to
work for any business, individual, partnership, firm, corporation, or other
entity in competition with the business of the Company or any subsidiary of
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the Company or Related Entity at any time during such period or (ii) hire any
person who was an employee of the Company or any Subsidiary or Related Entity at
any time during the last year of the Employment Period.
(f) Disclosure to Company; Inventions as Sole Property of the
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Company.
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(i) Executive agrees promptly to disclose to the Company any and
all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to date hereof), either alone or jointly with
others, which relate to or result from the actual or anticipated business,
work, research or investigations of the Company or any subsidiary or
affiliate of the Company, or which result, to any extent, from its use of
the Company's premises or property (the work being hereinafter collectively
referred to as the "Inventions").
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(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue beyond the termination of his employment with
the Company, but the Company shall compensate Executive at a reasonable
rate after such termination for the time actually spent by Executive at the
Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit C is a
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complete list of all inventions, discoveries or improvements relating to the
Company's business (or the business of any Subsidiary or affiliate of the
Company) which have been made by Executive prior to the date of the Prior
Agreement and which are not owned by the Company (or any Subsidiary or affiliate
thereof). Executive represents and warrants that such list is complete and
accurate in all respects and acknowledges and agrees that the Company owns the
entire right and interest to each of the inventions, discoveries or improvements
relating to the Company's or any Subsidiary's or affiliate's business that have
been made by Executive and not listed in Exhibit C.
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(h) Injunction. Executive agrees that it would be difficult to
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measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 6, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a) through (g) of this Section 6 or any of them, the Company shall
be entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Executive without
showing or proving any actual damage sustained by the Company.
7. Other Businesses. As long as Executive is employed by the Company
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or any of its Subsidiaries, Executive agrees that he will not, except with the
express written consent of the Board, become engaged in, or render services for,
any business other than the business of the Company, any of its Subsidiaries or
any corporation or partnership in which the Company or any of its Subsidiaries
have an equity interest.
8. Executive's Representations. Executive hereby represents and
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warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Survival. Section 6 and the Company's obligation to make
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Severance Payments, if any, shall survive and continue in full force in
accordance with its terms notwithstanding any termination of the Employment
Period.
10. Notices. Any notice provided for in this Agreement shall be in
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writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
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Notices to Executive:
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Xxx X. Xxxxx
0000 Xxxxxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Notices to the Company:
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Therma-Wave, Inc.
0000 Xxxxxxxx Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
With a copy to:
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Xxxx Capital, Inc.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Xxxxx Xxxxxxx
and
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this Agreement
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shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
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referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
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or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way including, without limitation,
the Prior Agreement.
13. No Strict Construction. The language used in this Agreement shall
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be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
14. Counterparts. This Agreement may be executed in separate
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counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
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inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the
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construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
17. Amendment and Waiver. The provisions of this Agreement may be
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amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THERMA-WAVE, INC.
By:
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Its:
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Xxx X. Xxxxx
[Signature page to Xxx X. Xxxxx Employment Agreement]
EXHIBIT "C"
None
