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EXHIBIT 3
CONSULTING AND NONCOMPETITION AGREEMENT
This Consulting and Noncompetition Agreement ("Agreement") is made and
entered into as of the 31st day of August, 2001 by and between KLA-Tencor
Corporation (the "Company") and Xxxx X. Xxxxx (the "Consultant").
WHEREAS, pursuant to a certain Agreement and Plan of Merger dated as of
the date of this Agreement (the "Merger Agreement"), by and among the Company,
Katmandu Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of the Company ("Acquisition"), and QC Optics, Inc., a Delaware corporation ("QC
Optics"), the Company has agreed to acquire QC Optics through a merger
transaction (the "Merger") involving the merger of Acquisition into QC Optics;
and
WHEREAS, the Consultant shall resign as President of QC Optics
effective upon the consummation of the Merger;
WHEREAS, the Company desires to retain the Consultant as an independent
contractor to perform consulting services for the Company and the Consultant is
willing to perform such services following the consummation of the Merger;
WHEREAS, the Company desires to preclude the Consultant from competing
with the Company in certain fields of business for a period of two years
following the consummation of the Merger;
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the obligation of the Company to consummate the Merger; and
WHEREAS, capitalized terms used in the Agreement without definition
shall have such meanings as ascribed to them under the Merger Agreement;
NOW, THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
1. SERVICES AND COMPENSATION
Subject to the consummation of the Merger and commencing on
the Effective Date, the Consultant agrees to perform for the Company the
services described in EXHIBIT A to this Agreement (the "Services"), and the
Company shall compensate the Consultant for the performance of such Services in
such amounts and on such dates as described in EXHIBIT A, subject to the terms
of this Agreement.
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2. TERM AND TERMINATION
(a) TERM. This Agreement will commence on the Effective Date and will
continue in effect for a period of two years after the Effective Date unless
terminated prior thereto as provided below.
(b) TERMINATION.
(i) This Agreement will terminate automatically and
without notice to or from either party if the Merger Agreement is terminated in
accordance with its terms.
(ii) In the event that, after the Effective Date,
the Company (A) shall discover that (I) on the Effective Date, the Merger
Agreement (including the exhibits to the Merger Agreement and any documents
delivered pursuant to the Merger Agreement) contained any untrue statement of a
material fact or omitted any material fact required to be stated therein or
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading; or (II) QC Optics
failed to perform all material obligations and to comply with all material
covenants required to be performed or to be complied with by it under the Merger
Agreement prior to the Effective Date, and (B) any such misrepresentation(s) or
failure(s) to perform resulted, individually or in the aggregate, in the Company
incurring damages in excess of $90,000, then the Company may terminate this
Agreement upon written notice to the Consultant; provided, however, that the
Company may not terminate this Agreement pursuant to this Section 2(b)(ii) in
the event the Consultant agrees to reduce any payments owed to the Consultant
hereunder by the amount of any such damages incurred by the Company in excess of
$90,000.
(iii) In the event that the Company fails to pay the
Consultant, when due, the compensation specified in EXHIBIT A or materially
breaches any other provision of this Agreement, the Consultant may (i) give
written notice to the Company of its intent to terminate this Agreement for
breach and (ii) terminate this Agreement upon further written notice to the
Company if such breach has not been cured within 30 days of the initial notice
related to the breach.
(iv) In the event that the Consultant fails to
perform the Services specified in EXHIBIT A or materially breaches any other
provision of this Agreement, the Company may (i) give written notice to the
Consultant, referring to this Section (b)(iv), of its intent to terminate this
Agreement for breach and (ii) terminate this Agreement upon further written
notice to the Consultant if such breach has not been cured within 30 days of the
initial notice related to the breach.
(c) SURVIVAL. Upon such termination all rights and duties of the
parties toward each other shall cease except that:
(i) in the event that this Agreement is terminated
by the Company pursuant to Section 2(b)(ii) or (iv), the Company shall pay to
the Consultant, within 30 days of the effective date of termination, only those
amounts owing to the Consultant for Services completed prior to the termination
date, in accordance with the provisions of EXHIBIT A, and the Company shall
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have no further obligation to compensate the Consultant with respect to any
period, or for any Services performed, after such termination date;
(ii) in the event that this Agreement is terminated
by the Consultant pursuant to Section 2(b)(iii), the Company shall pay to the
Consultant, within 30 days of the effective date of termination, all remaining
amounts which would have become due to Consultant for Services had this
Agreement not be terminated and the Consultant had performed all Services
hereunder; and
(iii) the Consultant's obligations under Section 8
and 9 of this Agreement shall survive any termination of this Agreement pursuant
to Section 2(b)(iv), but shall not survive any termination pursuant to Section
2(b)(i),(ii) or (iii); and
(iv) in any event, Sections 3, 6 and 7 and Sections
10 through 15 shall survive the termination of this Agreement.
3. ASSIGNMENT
Neither this Agreement nor any right hereunder or interest
herein may be assigned or transferred by either party without the express
written consent of the other, and the obligations of the Company to make
payments hereunder may not be assigned to any entity (except to any successor to
all or substantially all of the Company's assets or business, whether by merger
or otherwise) without the express written consent of the Consultant.
4. INDEPENDENT CONTRACTOR
It is the express intention of the parties that the Consultant
is an independent contractor. Nothing in this Agreement shall in any way be
construed to constitute the Consultant as an agent, employee or representative
of the Company, but the Consultant shall perform the Services hereunder as an
independent contractor. The Consultant acknowledges and agrees that the
Consultant is obligated to report as income all compensation received by the
Consultant pursuant to this Agreement, and the Consultant agrees to and
acknowledges the obligation to pay all self-employment and other taxes thereon.
The Consultant further agrees to indemnify and hold harmless the Company and its
directors, officers, and employees from and against all taxes, losses, damages,
liabilities, costs and expenses, including reasonable attorney's fees and other
legal expenses, arising directly or indirectly from (i) any grossly negligent,
reckless or intentionally wrongful act of the Consultant and/or (ii) any
material breach by the Consultant of any of the covenants contained in this
Agreement. Subject to compliance with the provisions of Sections 7, 8 and 9,
nothing in this Agreement shall preclude the Consultant from accepting
consulting positions or other employment with third parties.
5. NO BENEFITS
The Consultant acknowledges and agrees and it is the intent of
the parties hereto that the Consultant receive no Company-sponsored benefits
either as an independent contractor or as an employee. Such benefits include,
but are not limited to, paid vacation, sick leave, medical insurance and 401(k)
participation. If the Consultant is reclassified by a state or federal agency or
court as an
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employee, the Consultant will receive no Company-sponsored benefits except those
mandated by state or federal law, even if by the terms of the Company's benefit
plans, in effect at the time of such reclassification, the Consultant would
otherwise be eligible for such benefits.
6. CONFIDENTIALITY
(a) DEFINITION. "Confidential Information" means any
proprietary information, technical data, trade secrets or know-how, including,
but not limited to, research, product plans, products, services, customers,
customer lists, markets, software, developments, inventions, processes,
formulas, technology, designs, drawings, engineering, hardware configuration
information, marketing, finances or other business information belonging to the
Company, QC Optics and/or their respective affiliates, and known by or disclosed
to Consultant, whether directly or indirectly and whether in writing, orally or
by drawings or inspection of parts or equipment.
(b) NON-USE AND NON-DISCLOSURE. The Consultant will not,
during the term of this Agreement and for a period of five years after its
termination or expiration, use any Confidential Information for any purpose
whatsoever other than the performance of the Services on behalf of the Company
or disclose any Confidential Information to any third party. It is understood
that said Confidential Information shall remain the sole property of the
Company, Katmandu or their respective affiliates. The Consultant further agrees
to take all reasonable precautions to prevent any unauthorized disclosure of
such Confidential Information by him or his assistants, employees or agents.
Notwithstanding the foregoing, Confidential Information does not include
information which (i) has become publicly known and made generally available
through no wrongful act of the Consultant, (ii) has been rightfully received by
the Consultant from a third party who is authorized to make such disclosure,
(iii) is required to be disclosed by the Consultant to comply with applicable
laws or governmental regulations, or (iv) has been independently developed by
the Consultant after the termination or expiration of this Agreement without
reference to or reliance upon the Confidential Information.
7. OWNERSHIP OF INVENTIONS AND INTELLECTUAL PROPERTY
It is the parties' intention that the Company shall own
exclusively all rights and economic interests in the tangible and intangible
results of the Consultant's Services hereunder ("Work Product") and all
intellectual property of every kind and description embodied therein or related
thereto. Accordingly, the Consultant agrees as follows:
(i) All tangible Work Product which is a
copyrightable work of authorship will be deemed a work made for hire
owned by the Company under United States copyright laws; if an
invention, Work Product is deemed to be owned by the Company upon
creation.
(ii) The Consultant will maintain adequate and
current written records of all Work Product which shall be available to
and remain the property of the Company at all times.
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(iii) The Consultant shall promptly and fully
disclose in writing to the Company all trade secrets embodied in or
associated with the Work Product which are related to the business
activities of the Company and are authored, conceived, created or
reduced to practice by the Consultant (whether alone or jointly with
others) during the term of this Agreement or within the five-year
period after its termination or expiration and which result from
Confidential Information whether or not patentable or copyrightable or
within any particular definition of trade secret.
(iv) The Consultant hereby assigns irrevocably and
unconditionally, to the fullest extent permitted by law under any
interpretation of the relationship between the parties, all right,
title and interest (including without limitation all intellectual
property rights) embodied in or associated with the Work Product which
are related to the business activities of the Company and are authored,
conceived, created or reduced to practice by the Consultant during the
term of this Agreement or which result thereafter from Confidential
Information.
(v) Promptly upon request by the Company and at the
Company's expense, the Consultant shall execute and deliver to the
Company all applications, assignments, agreements and other instruments
reasonably requested and take such reasonable actions as the Company
may deem necessary to fully vest the foregoing rights in the Company or
to evidence such vesting. If the Company is unable, after reasonable
effort, to secure the Consultant's signature on any patent application,
copyright registration or other similar document, the Consultant hereby
irrevocably designates and appoints the Company and its duly authorized
representatives as the Consultant's agent and attorney-in-fact to
execute and file any such application or registration and to do all
other lawfully permitted acts to further the prosecution and issuance
of letters patent, copyright registration and other forms of
intellectual property protection with the same legal force and effect
as if executed by the Consultant.
(vi) The Consultant hereby waives in favor of the
Company and its assigns and licensees any and all artist's or moral
rights he may have pursuant to any state, provincial or federal laws or
statutes of the United States in respect of any Work Product, and all
similar rights under the laws of all jurisdictions.
8. NON-COMPETITION
For a period of two years after the Effective Date, the Consultant will
not directly or indirectly (i) as an individual proprietor, partner, officer,
employee, director, joint venturer, consultant, or in any similar capacity
develop, design, produce, market, sell, license or render (or assist any other
person in developing, designing, producing, marketing, selling, licensing or
rendering) products, computer software or services (A) in the areas of
laser-based defect detection systems for computer hard disk, flat panel display,
semiconductor or other markets or (B) competitive with those being produced,
marketed, sold, licensed or rendered by, or, to the knowledge of Consultant,
those being developed or designed or under development by, the Company or QC
Optics on the Effective Date, provided, however, that notwithstanding the
foregoing, nothing contained herein shall preclude the Consultant from
purchasing or owning securities of any such
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business provided that the Consultant's holdings do not exceed 5% of the issued
and outstanding securities of any class of securities of such business, or (ii)
solicit, divert or take away, or attempt to divert or to take away, the business
or patronage of any of the clients, customers or accounts, or prospective
clients, customers or accounts, of the Company which were contacted, solicited
or served by the Company while the Consultant was engaged by the Company.
9. SOLICITATION OF EMPLOYEES
The Consultant agrees that, for a period of two years after
the date of this Agreement (regardless of its earlier termination, if any,
except as provided in Section 2(c)(iii)), he shall not, either directly or
indirectly, solicit, induce, recruit or encourage any of the employees of the
Company or its affiliates to leave their employment, or take away such
employees, or attempt to solicit, induce, recruit, encourage or take away such
employees, either for the Consultant or for any other person or entity;
provided, however, that this shall not limit solicitations published or posted
generally, not specifically targeted to employees of the Company, QC Optics
and/or their respective affiliates.
10. RETURN OF COMPANY DOCUMENTS
The Consultant agrees that, at the time of completion of the
Services, and at any other time upon the request of the Company, the Consultant
will deliver to the Company (and will not keep in the Consultant's possession,
recreate or deliver to anyone else) any and all devices, records, data, notes,
reports, proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, other documents or property, or reproductions of
any aforementioned items developed by the Consultant pursuant to the performance
of this Agreement or otherwise belonging to the Company, QC Optics and/or their
respective affiliates, successors or assigns.
11. GOVERNING LAW
This Agreement shall be governed by the law of the
Commonwealth of Massachusetts applicable to agreements made and to be performed
wholly within such jurisdiction, without regard to the conflicts of law
provisions thereof.
12. ARBITRATION; RELIEF
(a) Except as set forth in Section 12(b), any controversy,
dispute or claim arising out of or in connection with this Agreement, or the
breach, termination or validity hereof, shall be settled by final and binding
arbitration to be conducted by an arbitration tribunal in City of Boston,
Massachusetts, pursuant to the rules of the American Arbitration Association.
The arbitration tribunal shall consist of three arbitrators. The party
initiating arbitration shall nominate one arbitrator in the request for
arbitration and the other party shall nominate a second in the answer thereto
within 30 days of receipt of the request. The two arbitrators so named will then
jointly appoint the third arbitrator. If the answering party fails to nominate
its arbitrator within the thirty 30-day period, or if the arbitrators named by
the parties fail to agree on the third arbitrator within 60 days, the office of
the American Arbitration Association in City of Boston, Massachusetts shall make
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the necessary appointments of such arbitrator(s). The decision or award of the
arbitration tribunal (by a majority determination, or if there is no majority,
then by the determination of the third arbitrator, if any), including any award
of fees and/or expenses, shall be final, and judgment upon such decision or
award may be entered in any competent court or application may be made to any
competent court for judicial acceptance of such decision or award and an order
of enforcement. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of the Commonwealth of Massachusetts shall
govern.
(b) Notwithstanding the provisions of, and in addition to the
rights set forth in, Section 12(a), in the event of a breach of the provisions
of this Agreement by a party to this Agreement, the non-breaching party shall
have the right to specific performance and injunctive relief, without the
necessity of posting any bond or other security, it being acknowledged and
agreed that money damages will not provide an adequate remedy.
(c) In the event litigation is maintained by a party to this
Agreement against any other party to enforce an arbitration award rendered under
Section 12(a) or to seek specific performance of injunctive relief under Section
12(b), then the party prevailing in such litigation shall be entitled to recover
from the non-prevailing party reasonable attorneys' fees and costs of suit.
13. ENTIRE AGREEMENT
This Agreement and its exhibit constitute the entire agreement
of the parties and supersedes any prior agreements between them, whether written
or oral, with respect to the subject matter hereof. No waiver, alteration, or
modification of any of the provisions of this Agreement shall be binding unless
in writing and signed by duly authorized representatives of the parties hereto.
14. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement, or any terms thereof, shall not affect the validity of this Agreement
as a whole, which shall at all times remain in full force and effect.
15. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE CONSULTANT
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx, individually
Address:
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KLA-TENCOR CORPORATION
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
Chief Financial Officer
Address: 000 Xxx Xxxxxx
Xxx Xxxx, XX 00000
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EXHIBIT A
SERVICES AND COMPENSATION
1. CONTACT. The Consultant's principal Company contact:
Name: Xxxxxxx X. Xxxx
Title: Vice President, Mergers & Acquisitions
2. SERVICES AND COMPENSATION.
The Consultant shall render the following Services to the
Company as requested from time to time by the Company:
a. Assist the Company with the integration and reorganization
of QC Optics in accordance with plans to be developed by
the Company;
b. Act as a senior technical advisor to the Company's
research and development organization, spending not more
than 36 days in any year and not more than four days per
month on site at the Company's headquarters or at other
locations reasonably requested by the Company;
c. Act as a representative (but not to provide field
services) to interact with QC Optics customers on behalf
of the Company; and
d. Perform such other Services as may be reasonably requested
by the Company and agreed to by the Consultant.
During the term of this Agreement, but only if the Consultant
is not then and has not been in breach of Sections 8 or 9 of the
Agreement, the Company shall pay to the Consultant $8,333 per month in
arrears in consideration of the Services. In addition, the Company
shall reimburse the Consultant for reasonable travel and other business
expenses incurred by him with the prior written approval of the Company
in the performance of the Services, including the costs to travel to
the Company's facilities as set forth in Section 2(b), subject to such
reasonable requirements with respect to substantiation and
documentation as may be specified from time to time by the Company or
its auditors.
3. NON-COMPETITION.
a. Without limiting any provision of the Agreement, for
a period of two years after the Effective Date, the
Consultant shall comply in all respects with
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Sections 8 and 9 of the Agreement.
b. In consideration of the obligations of the Consultant
set forth in Sections 8 and 9 of this Consulting
Agreement, the Company shall pay the Consultant an
amount equal to $25,000 per quarter for a period not
to exceed eight (8) quarters. Such quarterly payments
will be paid as follows: (i) the first payment shall
be paid on January 1, 2002 provided that the
Consultant has been in compliance with the
restrictions set forth in Sections 8 and 9 of this
Consulting Agreement, and (ii) subsequent payments
shall be paid on each of March 31, 2002, June 30,
2002, September 30, 2002, December 31, 2002, March
31, 2003, June 30, 2003 and September 30, 2003 if
during any such quarter the Consultant has been in
compliance with the restrictions set forth in
Sections 8 and 9 of this Consulting Agreement.
4. DEATH, DISABILITY, ETC.
In the event that the Consultant, through death, disability or
similar impairment, becomes unable to perform the Services and any
other gainful employment, and if the Consultant is not and has not been
in breach of Sections 8 or 9 of the Agreement, the Company shall pay to
the Consultant, or the Consultant's estate or legal representative, as
the case may be, (a) all of the amounts to which the Consultant may be
entitled pursuant to Section 2 for such Services performed and
completed prior to such death or disability event but which have not
previously been paid and (b) all of the amounts provided in Section 3
which have not previously been paid.
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