Exhibit 10.1
Stephen G. Newberry Employment
Agreement
EMPLOYMENT
AGREEMENT
Effective July 1,
2009
This Employment Agreement (the
“Agreement”) is made and entered into between Stephen
G. Newberry (the “Executive”) and Lam Research
Corporation, a Delaware corporation (the
“Company”).
R E C I T A L S
A. The Company and Executive desire
to enter into this Agreement with respect to the Executive’s
employment with the Company, which supersedes the Employment
Agreement between the parties dated January 1, 2003 as amended
December 17, 2008 (the “Original
Agreement”).
In consideration of the mutual
covenants herein contained, and in consideration of the employment
of Executive by the Company, the parties agree as
follows:
1. Duties and Scope of
Employment .
(a) Position . During the
Employment Period (as defined in Section 2(a) below), the
Executive shall serve as the President and Chief Executive Officer
of the Company, and in such capacity the Executive shall perform
the duties and responsibilities as the Board of Directors of the
Company (the “Board”) may, from time to time,
reasonably assign to Executive, in all cases to be consistent with
Executive’s offices and positions.
(b) Executive’s
Obligations . Executive shall comply with all of the
Company’s policies and procedures governing employment.
During the Employment Period, the Executive shall devote his full
business efforts and time to the Company. The foregoing, however,
shall not preclude the Executive from engaging in such activities
and services as do not interfere or conflict with his
responsibilities to the Company.
2. Employment Period
.
(a) Term . The Company shall
employ the Executive for the period commencing on July 1,
2009, and ending on June 30, 2012 (such period, the
“Employment Period”) on the terms and subject to the
conditions set forth in this Agreement.
(b) Termination . This
Agreement will terminate at the conclusion of the Employment Period
unless the parties agree to extend it. The Board will provide
notice of its intent whether to renew or enter into a new
employment agreement with the Executive twelve (12) months
prior to the end of the Employment Period. If the Board provides
notice of its intent to renew or enter into a new employment
agreement with the Executive, the Company and the Executive will
enter into good faith negotiations. Neither (i) providing a
notice of intent not to renew or enter into a new employment
agreement nor (ii) the failure to renew or enter into a new
employment agreement will be considered an Involuntary Termination
as defined in Section 7(c). Nothing contained in this
Agreement alters the “at will” nature of the
Executive’s employment with the Company. In addition, this
Agreement may be terminated prior to expiration of the Employment
Period as follows:
(i) By the Company . The
Company may terminate the Executive’s employment for Cause
(as defined in Section 7(a) below), by giving the Executive
thirty (30) days’ advance written notice, subject,
however, to the cure provisions of such Section. The Company may
terminate the Executive’s employment with the Company for any
reason (other than due to the Executive’s death or
Disability, which are addressed in Sections 2(c) and 2(d) below) by
giving the Executive ninety (90) days’ advance notice in
writing, although the Company may pay to the Executive the
compensation Executive would have otherwise received during such
period in lieu of such notice. Unless such termination by the
Company is a termination for Cause or due to the Executive’s
death or Disability, it shall be regarded as an Involuntary
Termination of the Executive. Any waiver of notice shall be valid
only if it is made in writing and expressly refers to the
applicable notice requirement of this Section 2(b).
(ii) By the Executive . The
Executive may terminate his employment with the Company by reason
of Involuntary Termination (as defined in Section 7(c) below)
by giving the Company thirty (30) days’ advance written
notice, subject, however, to the cure provisions of such Section.
The Executive may tender his Voluntary Resignation (as defined in
this Agreement) by giving the Company ninety (90) days’
advance written notice, which period may be waived or reduced at
the Company’s option, although the Company may choose to pay
the Executive, in lieu of such notice period the amounts that would
otherwise be due to the Executive during such period. Any waiver or
reduction of notice shall be valid only if it is made in writing
and expressly refers to the applicable notice requirement of this
Section 2(b).
(c) Death . The
Executive’s employment shall terminate immediately in the
event of his death.
(d) Disability . The
Executive’s employment shall terminate in the event of his
Disability (as defined in Section 7(b) below).
(e) Priority of Rights and
Obligations upon Termination . If any event leading to or
permitting termination of this Agreement, or providing notice
thereof, occurs at approximately the same time as any other
termination event or during any termination notice period, and
those events invoke different notice periods or different severance
or other benefit arrangements, the deadlines, obligations, rights
and benefits applicable to the termination event having the highest
priority shall control. The priority of termination events (from
highest to lowest priority) is as follows: (1) termination for
Cause; (2) Voluntary Resignation; (3) Involuntary
Termination; (4) Disability; and (5) death. For example,
if Executive gives notice of his Voluntary Resignation and, before
the 90 day notice period has expired, he is subject to an
Involuntary Termination, only the rights and benefits available to
him for Voluntary Resignation apply since the provisions governing
Voluntary Resignation have a higher priority than those applicable
to Involuntary Termination. Similarly, if the Executive has been
subject to an Involuntary Termination and dies during the notice
period, he shall have the rights and benefits available to his
estate as one subject to an Involuntary Termination. Expiration of
this Agreement prevails over all termination events.
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3. Compensation and Benefits
.
(a) Base Compensation .
During the term of this Agreement, the Company shall pay the
Executive as compensation for services a base salary at the annual
rate of $800,000 ($660,000 while the executive salary reduction
program in effect as of the date of this Agreement remains in
effect). The independent members of the Board, at least annually,
will review, and potentially adjust, such base salary on a
prospective basis, reasonably taking into account Executive’s
performance and prevailing compensation for executives at similar
levels in similar sized companies in the industry. Such salary
shall be paid periodically in accordance with normal Company
payroll. The annual compensation specified in this
Section 3(a) is referred to in this Agreement as “Base
Compensation.”
(b) Variable Compensation .
Executive shall be entitled to participate in any short-term or
long-term variable compensation plans offered by the Company to its
executive officers generally (collectively, such plans are referred
to in this Agreement as the “Combined Plans” and which
are currently the Annual Incentive Plan and the Long-Term Incentive
Plan, which includes the Multi-Year Incentive Plan and the equity
components of the Long-Term Incentive Plan), subject to the
generally applicable terms and conditions of the plan in question
and to the determination of the independent members of the
Board.
(c) Deferred Compensation .
The Executive shall be entitled to participate in the
Company’s Elective Deferred Compensation Plan pursuant to the
terms thereof.
(d) Benefits . During the
Employment Period, the Executive shall be eligible to participate
in the benefit plans and compensation programs maintained by the
Company of general applicability to other executive officers of the
Company, including (without limitation) retirement plans, savings
or profit-sharing plans, deferred compensation plans, supplemental
retirement or excess-benefit plans, stock option, life, disability,
health, accident and other insurance programs, paid vacations (but
accruing at not less than three weeks per year), and similar plans
or programs, subject in each case to the generally applicable terms
and conditions of the plan or program in question and to the
determination of the independent members of the Board or the
Compensation Committee or any committee administering such plan or
program, as appropriate.
(e) Reimbursement of Business
Expenses . The Company shall reimburse the Executive for all
reasonable and necessary business expenses incurred by the
Executive in the performance of his duties hereunder upon proper
submission of expense reports in accordance with Company policies
regarding such reimbursement.
4. Section 162(m) .
Executive and the Company agree to use reasonable good faith
efforts, to the extent reasonably practicable and not materially
adverse to Executive, to structure payment of all amounts of
Executive’s compensation from the Company so as to avoid
non-deductibility of any such amounts under Section 162(m) of
the Internal Revenue Code (the “Code”) or any successor
provision.
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5. Benefits Upon a Change in
Control .
(a) If a Change in Control (as
defined in this Agreement) occurs during the Employment Period, and
an Involuntary Termination of Executive’s employment occurs
either in contemplation of such Change in Control
1 or within twelve (12) months following a
Change in Control 2 ,
then:
(i) Within ten (10) days
following the Termination Date, the Company shall pay Executive a
lump sum equal to (A) eighteen (18) months of Base
Compensation (without giving effect to any salary reduction program
currently in effect), plus (B) an amount equal to the average
of the short-term variable compensation plan (currently the Annual
Incentive Plan, and for prior years the annual variable
compensation plan called the “MBO”, and together with
any future short-term variable compensation plan, collectively
hereinafter referred to as the “Short Term Plan”)
payments earned by the Executive over the last five (5) years
in which the Executive was employed with the Company on
December 31 st of
such year (the “Five Year Average Amount”), plus
(C) a pro-rata amount (based on the number of full months
worked during the calendar year during which the Termination Date
occurs) of the Five Year Average Amount.
(ii) If at the Termination Date,
payment has not been made under the Short Term Plan that was in
effect during the calendar year prior to the year in which the
Termination Date occurs, the Company shall pay the Executive, not
later than March 15th of the year in which the Termination
Date occurs, the full amount he would have earned under such
prior-year plan (based on the performance results achieved under
such plan), as if his employment had not been
terminated.
(iii) The Executive will receive the
benefits he qualifies for under the Executive Retiree Medical
Benefit Plan, or if such plan has been terminated prior to the
Termination Date, within ten (10) days following the
Termination Date the Company shall pay the Executive a lump sum
amount (the “Medical Plan Payment”) equal to the
present value of the benefits for which the Executive qualified
prior to the termination of such plan. The present value of such
benefits shall be determined actuarially based on the actual cost
of replacing the benefits as of the Termination Date.
(iv) The unvested portion(s) of any
stock options/Restricted Stock Units (“RSUs”) that were
granted to Executive prior to the Change in Control shall
automatically be accelerated in full so as to become completely
vested as of the Termination Date; the stock options shall remain
exercisable for two years following the Termination Date unless
they are earlier exercised or expire pursuant to their original
terms, or unless they are exchanged for cash in connection with any
Change in Control. The Company will issue the shares underlying the
RSUs within ten (10) days of the Termination Date.
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For purposes of this Agreement,
“occurring in contemplation of a Change in Control”
means an Involuntary Termination occurring within one
(1) month prior to an actual Change in Control. It shall also
include any termination if the termination was a condition of a
party other than the Company to entry into an agreement, the
consummation of which would cause a Change in Control (an
“Acquisition Agreement”), whether or not such person
actually enters into such agreement. Finally, it shall also include
any Involuntary Termination if the actions constituting grounds for
Involuntary Termination were taken at the request or direction of a
person who has entered into an Acquisition Agreement.
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For purposes of clarity,
(1) the Termination Date (as defined in Section 7(d))
applicable to the Involuntary Termination must occur in
contemplation of a Change in Control or (2) notice of the
Involuntary Termination, in accordance with Section 9, must be
given or received by the Company, as applicable, within twelve
(12) months following the Change in Control.
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(b) In the event of a Change in
Control, for any long-term cash-based variable compensation plan
(currently the Multi-Year Incentive Plan, and together with any
future long-term cash-based variable compensation plan, hereinafter
the “Long Term Cash Plan”) awards outstanding (which
currently would include two Long Term Cash Plan performance cycles)
at the time of the Change in Control, performance cycles under such
plans shall cease as of the date of the Change in Control. The
Company shall pay Executive, subject to the payout dates and
restrictions below, all accrued amounts as of the last full
completed quarter as of the date of the Change in Control, under
each performance cycle of such plan, plus the Remaining Target
Amount for each performance cycle under each such plan (together,
the “Payment Amounts”). The Remaining Target Amount
shall equal, for each performance cycle under each plan, the target
amount multiplied by the number of quarters in the performance
cycle that end after the time of the Change in Control, divided by
the total number of quarters in the full performance cycle. Payment
shall be made at the times specified below, and pending payment,
the Company shall hold such amount in a book account for the
Executive.
(i) Change in Control,
Involuntary Termination . In the case of a Change in Control
where the Executive’s employment terminates due to an
Involuntary Termination prior to twelve (12) months following
the Change in Control or in contemplation of a Change in Control,
the Payment Amounts shall be paid out to the Executive within ten
(10) days following the Termination Date.
(ii) Change in Control, No
Termination . In the case of a Change in Control where the
Executive’s employment does not terminate within twelve
(12) months following the Change in Control or in
contemplation of a Change in Control, the Executive shall receive
the Payment Amounts when it is ordinarily paid out. For avoidance
of doubt, if there are multiple Long Term Cash Plan performance
cycles, portions of the Payment Amounts may be paid in different
years, each in accordance with the terms of the relevant
performance cycle.
(c) No Change in Control benefits
under Sections 5(a) or 5(b) will apply if the Change in Control or
Involuntary Termination occurs after the Executive has
(i) given notice of Voluntary Resignation or (ii) been
given notice of termination for Cause by the Company, unless that
notice of termination for Cause is subsequently withdrawn (in
writing) by the Company and Executive’s employment does not
terminate as a result of such notice.
(d) If the Company is acquired by
another entity in connection with a Change in Control and there is
or will be no market for the Common Stock of the Company, the
vesting of all Executive’s stock options/RSUs, granted prior
to the Change in Control, will accelerate immediately prior to the
Change in Control (and, for stock options, be immediately
exercisable) if the acquiring company does not provide Executive
with stock options/RSUs comparable to the unvested stock
options/RSUs granted Executive by the Company, regardless of
whether the Executive’s employment is terminated.
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(e) These Section 5 benefits
upon a Change in Control shall be the sole benefits that the
Executive is entitled to under this Agreement ( i.e. , the
Executive is not also entitled to any additional benefits provided
in Section 6(b), below).
6. Severance Benefits other than
in a Change in Control .
(a) Benefits; Miscellaneous .
In the event of any termination of Executive’s employment at
any time during the term of this Agreement, (1) the Company
shall pay the Executive any unpaid Base Compensation due for
periods prior to the Termination Date; (2) the Company shall
pay the Executive all of the Executive’s accrued and unused
vacation through the Termination Date; and (3) following
submission of proper expense reports by the Executive (or his
estate), the Company shall reimburse the Executive for all expenses
reasonably and necessarily incurred by the Executive in connection
with the business of the Company. These payments shall be made
promptly at the Company’s next scheduled payroll
date.
(b) In the event of a termination
other than one described in Section 5, Executive shall be
entitled to severance benefits that vary depending upon the reason
for termination. Such benefits shall be as follows (and no
others):
(i) Voluntary Resignation
Severance Benefits .
(A) Base Compensation shall cease on
the Termination Date. Executive shall not be entitled to any
further payment pursuant to the Short Term Plan or the Long Term
Cash Plan following termination.
(B) All medical and health benefits
shall cease on the Termination Date, except as specified in any
then existing Executive Retiree Medical Benefit Plan for which
Executive qualifies. All Company 401(k) Plan benefits, Elective
Deferred Compensation Plan benefits and other benefits not
specifically addressed in this Agreement shall be treated in
accordance with the terms of such plans and benefits.
(C) Stock options will cease to vest
on the Termination Date and will be cancelled ninety (90) days
after the Termination Date (unless they are exercised or expire
pursuant to their terms before cancellation). RSUs will be
cancelled on the Termination Date.
(ii) Involuntary Termination
Severance Benefits .
(A) Within ten (10) days
following the Termination Date, the Company shall pay Executive a
lump sum equal to (x) eighteen (18) months of Base
Compensation (without giving effect to any salary reduction program
currently in effect), plus (y) an amount equal to the Five
Year Average Amount (as defined in Section 5).
(B) At the time that the Company
makes payments to other executive officers under the Short Term
Plan that is in effect during the calendar year in which the
Termination Date occurs, the Company shall pay the Executive a
pro-rata portion of the amount he would have earned under such plan
had his employment continued until the end of such calendar year,
such pro-rata portion to be calculated based on the performance
results achieved under such plan and the number of full months
elapsed prior to the Termination Date.
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(C) If at the Termination Date,
payment has not been made under the Short Term Plan that was in
effect during the calendar year prior to the year in which the
Termination Date occurs, the Company shall pay the Executive, not
later than March 15 th of the year in which the Termination Date
occurs, the full amount he would have earned under such prior-year
plan (based on the performance results achieved under such plan),
as if his employment had not been terminated.
(D) The Executive will receive the
benefits he qualifies for under the Executive Retiree Medical
Benefit Plan, or if such plan has been terminated prior to the
Termination Date within ten (10) days following the
Termination Date the Company shall pay the Executive the Medical
Plan Payment.
(E) For any stock options/RSUs
granted to the Executive twelve (12) months or more before the
Termination Date, a number of shares shall vest (and for stock
options, become exercisable as of the Termination Date) such that
the total number of shares vested on the Termination Date shall
equal a pro-rata percentage of the total number of shares subject
to such grant (based on the number of full months worked during the
vesting schedule) 3 .
The stock options shall remain exercisable for two years following
the Termination Date unless they are earlier exercised or expire
pursuant to their original terms, or unless they are exchanged for
cash in connection with any Change in Control. The Company will
issue the shares underlying the RSUs to the Executive within ten
(10) days following the Termination Date. In addition, the
independent members of the Board may, in their discretion,
accelerate the vesting of additional stock options or RSUs held by
the Executive.
(F) Any Long Term Cash Plan
awards, which are accrued as of the last full completed quarter
prior to the Termination Date, shall be paid to the Executive
within ten (10) days following the Termination
Date.
(iii) Severance Benefits
following a termination for Cause .
(A) Base Compensation shall cease on
the Termination Date. Executive shall not be entitled to any
further payment pursuant to the Short Term Plan or the Long Term
Cash Plan following termination.
(B) All medical and health benefits
shall cease on the Termination Date, except as specified in any
then existing Executive Retiree Medical Benefit Plan for which
Executive qualifies.
(C) Stock options will cease to vest
on the Termination Date and will be cancelled thirty (30) days
after the Termination Date (unless they are exercised or expire
pursuant to their terms before cancellation). RSUs will be
cancelled on the Termination Date.
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For example, if a stock option
has a four (4) year vesting schedule where 25% of the options
vest on each anniversary of the grant date, an Executive whose
Termination Date is twenty seven (27) months and a day after
grant will already have vested in 50% of the total option, and will
vest in an additional 6.25% (3/48) of the total option by
virtue of this section. No additional vesting shall occur beyond
this additional amount.
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(iv) Death Severance Benefits
. Executive’s employment shall terminate immediately in the
event of his death.
(A) Within sixty (60) days
following the Termination Date, the Company shall pay to
Executive’s estate a lump sum in an amount equal to
Executive’s Base Compensation (without giving effect to any
salary reduction program currently in effect) for a period of
twelve (12) months as of the Termination Date, minus any
amount payable from an insurance company to the Executive or his
beneficiaries pursuant to a Company provided death
benefit.
(B) At the time that the Company
makes payments to other executive officers under the Short Term
Plan that is in effect during the calendar year in which the
Termination Date occurs, the Company shall pay the
Executive’s estate a pro-rata portion of the amount he would
have earned under such plan had his employment continued until the
end of such calendar year, such pro-rata portion to be calculated
based on the performance results achieved under such plan and the
number of full months elapsed prior to the Termination
Date.
(C) If at the Termination Date,
payments have not been made under the Short Term Plan that was in
effect during the calendar year prior to the year in which the
Termination Date occurs, the Company shall pay the
Executive’s estate, not later than March 15
th of the year in which the Termination Date
occurs, the full amount he would have earned under such prior-year
plan (based on the performance results achieved under such plan),
as if his employment had not been terminated.
(D) The Executive’s eligible
dependents will receive the benefits they qualify for under the
Executive Retiree Medical Benefit Plan, or if such plan has been
terminated prior to the Termination Date, within sixty
(60) days following the Termination Date the Company shall pay
the eligible dependents the Medical Plan Payment.
(E) For any stock options/RSUs
granted to the Executive before the Termination Date, a number of
shares shall vest so that the greater of (x) 50% of the shares
in each grant are immediately vested (and, for stock options,
become exercisable) or (y) the total number of shares vested
(and for stock options, become exercisable) on the Termination Date
shall equal a pro-rata percentage of the total number of shares
subject to such grant (based on the number of full months worked
during the vesting schedule). The stock options shall remain
exercisable for two years following the Termination Date unless
they are earlier exercised or expire pursuant to their original
terms, or unless they are exchanged for cash in connection with any
Change in Control. The Company will issue the shares underlying the
RSUs to the Executive’s estate within ten (10) days
following the Termination Date. In addition, the independent
members of the Board may, in their discretion, accelerate the
vesting of additional stock options or RSUs held by the
Executive.
(F) Any Long Term Cash Plan awards,
which are accrued as of the last full completed quarter prior to
the Termination Date, shall be paid to Executive’s estate
within sixty (60) days following the Termination
Date.
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(v) Disability Severance
Benefits .
(A) Within sixty (60) days of
the Termination Date, the Company shall pay to the Executive a lump
sum in an amount equal to his Base Compensation (without giving
effect to any salary reduction program currently in effect) for a
period of twelve (12) months as of the Termination Date, minus
any payment due to Executive from an insurance company pursuant to
a Company provided disability benefit.
(B) At the time that the Company
makes payments to other executive officers under the Short Term
Plan that is in effect during the calendar year in which the
Termination Date occurs, the Company shall pay the Executive a
pro-rata portion of the amount he would have earned under such plan
had his employment continued until the end of such calendar year,
such pro-rata portion to be calculated based on the performance
results achieved under such plan and the number of full months
elapsed prior to the Termination Date.
(C) If at the Termination Date,
payments have not been made under the Short Term Plan that was in
effect during the calendar year prior to the year in which the
Termination Date occurs, the Company shall pay Executive, not later
than March 15 th of
the year in which the Termination Date occurs, the full amount he
would have earned under such prior-year plan (based on the
performance results achieved under such plan), as if his employment
had not been terminated.
(D) The Executive will receive the
benefits he qualifies for under the Executive Retiree Medical
Benefit Plan, or if such plan has been terminated prior to the
Termination Date, within sixty (60) days following the
Termination Date the Company shall pay the Executive the Medical
Plan Payment.
(E) For any stock options/RSUs
granted to the Executive before the Termination Date, a number of
shares shall vest so that the greater of (x) 50% of the shares
in each grant are immediately vested (and, for stock options,
become exercisable) or (y) the total number of shares vested
(and for stock options, become exercisable) on the Termination Date
shall equal a pro-rata percentage of the total number of shares
subject to such grant (based on the number of full months worked
during the vesting schedule). The stock options shall remain
exercisable for two years following the Termination Date unless
they are earlier exercised or expire pursuant to their original
terms, or unless they are exchanged for cash in connection with any
Change in Control. The Company will issue the shares underlying the
RSUs to the Executive within ten (10) days following the
Termination Date. In addition, the independent members of the Board
may, in their discretion, accelerate the vesting of additional
stock options or RSUs held by the Executive.
(F) Any Long Term Cash Plan awards
which are accrued as of the last full completed quarter prior to
the Termination Date, shall be paid to Executive within sixty
(60) days following the Termination Date.
7. Definition of Terms . The
following terms referred to in this Agreement shall have the
following meanings:
(a) Cause .
“Cause” shall mean: (1) Executive’s willful
and continued failure to perform the duties and responsibilities of
his position after there has been delivered to
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Executive a written demand for performance from
the Board which describes the basis for the Board’s belief
that Executive has not substantially performed his duties and
responsibilities and provides Executive with thirty (30) days
to take corrective action; (2) Any act of personal dishonesty
knowingly taken by Executive in connection with his
responsibilities as an employee of the Company with the intention
or reasonable expectation that such action may result in
substantial financial enrichment of Executive;
(3) Executive’s conviction of, or plea of guilty or nolo
contendere to, a felony; (4) a willful and knowing act by the
execut
