Exhibit 10.4

 

     Verigy US, Inc      10100 North Tantau Avenue      Cupertino     
California, 95014-2540      LOGO [g120950verigylogo.jpg]

November 17, 2010

Mr. David G. Tacelli

LTX-Credence Corporation

825 University Avenue

Norwood, MA 02062

Dear David:

As you are aware, Verigy Ltd. (“Verigy”), LTX-Credence Corporation
(“LTX-Credence”), Alisier Limited (“HoldCo”) and certain other signatories
entered into an Agreement and Plan of Merger dated as of November 17, 2010 (the
“Merger Agreement”), pursuant to which the businesses of LTX-Credence and Verigy
will be combined (the “Transaction”). The parties of the Merger Agreement intend
that the Transaction will result in Verigy and LTX-Credence both surviving as
wholly-owned subsidiaries of HoldCo (the “Combined Transaction”). In the
alternative, if certain requisite legal approvals can not be obtained, then the
Transaction will be consummated with LTX-Credence surviving as a wholly-owned
subsidiary of Verigy (the “Merger”). In either case, this letter agreement
offers you employment with the ultimate parent entity following the Transaction,
either HoldCo or Verigy (in either case, the “Company”).

Subject to the effectiveness of the Combined Transaction or the Merger, as
applicable, we are pleased to offer you the opportunity to join the Company team
as our Co-Chief Executive Officer, working out of LTX-Credence’s offices in
Massachusetts, starting on the effective date of the Combined Transaction or the
Merger, as applicable (the “Start Date”). In your position, you will report to
the Company’s Board of Directors (the “Board”). On the Start Date, you will also
be appointed as a member of the Board. We look forward to welcoming you to
Company.

The details of your offer are as follows:

Compensation

Your compensation includes participation in Company’s Total Rewards program
including base salary, eligibility for bonus, equity and a comprehensive
benefits plan.

 

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Salary

You will receive a monthly base salary of $47,916.67 (equivalent to $575,000 per
annum), subject to standard payroll deductions and withholdings.

Pay for Results

Your compensation package includes our Pay for Results (PfR) bonus program. As a
participant in the PfR program, your target variable pay opportunity will
initially be set at 80% of your salary. The PfR bonus is based on specific
performance metrics set for the fiscal half year. These performance metrics may
vary from period to period. PfR participation is prorated to reflect employment
with Company and you must be actively employed by Company on the last day of the
fiscal half year to be eligible to receive the bonus. This bonus is paid within
60 days of the end of each fiscal half year. You will be eligible to receive a
pro-rated PfR bonus for your first partial fiscal half year.

Equity Awards

On October 27, 2010, LTX-Credence granted you, for LTX-Credence’s 2011 fiscal
year, a restricted stock unit grant of 160,000 LTX-Credence shares (the
“LTX-Credence RSU”) pursuant to an LTX-Credence equity compensation plan. To the
extent that the aggregate fair market value of the shares subject to the
LTX-Credence RSU is, in the reasonable determination of Verigy’s compensation
committee (or Holdco’s Board of Directors or compensation committee, as
applicable), less than the target long-term incentive value of $1,250,000
determined for you for Verigy’s 2011 fiscal year (as set forth in the Frederic
W. Cook & Co., Inc. presentation to Verigy’s Compensation Committee dated
October 22, 2010) (the “Target Value”), then the Company will approve additional
equity awards effective as of the consummation of the Transaction such that the
aggregate value of the LTX-Credence RSU and such new Company equity grants is at
least equal in value to the Target Value. Any new Company equity grants will be
subject to the terms of the Company’s 2006 Equity Incentive Plan and consistent
with Verigy’s historical granting practices.

Severance Outside of the Change of Control Period

You have entered into a Change-of-Control Employment Agreement with LTX-Credence
(or its predecessor) dated as of March 2, 1998, as amended October 8, 2008, and
subject to the letter agreements dated June 20, 2008 and July 29, 2008
(collectively, the “Change of Control Agreement”). Your Change of Control
Agreement will remain outstanding by its own terms, except as expressly amended
hereby. In addition to the benefits available to you under the Change of Control
Agreement, the Company will provide you with the following severance benefits:

(A) Termination without Cause or for Good Reason. In the event (i) your
employment with Company and its subsidiaries is involuntarily terminated at any
time by the Company without Cause (as defined in your Change of Control

 

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Agreement) or (ii) you voluntarily terminate your employment within three months
of the occurrence of an event constituting Good Reason (as defined in
sub-section (I)) and on account of an event constituting Good Reason and, in
each case, the benefits under your Change of Control Agreement do not apply,
then such termination of employment will be a Termination Event (as defined
below) and Company shall pay you the compensation and benefits described in this
“Severance Outside the Change of Control Period” section (the “Non-CoC
Section”), subject to your complying with your obligations described in
sub-sections (H)(4) and (H)(5).

(B) Disability. In the event your employment with Company and its subsidiaries
terminates as a result of your Disability (as defined below), then you shall be
entitled to the pro rated final period bonus described in sub-section (E), the
stock award acceleration described in sub-section (F) and the Company-reimbursed
health insurance coverage described in sub-section (G) (but none of the other
compensation and benefits described in this section).

(C) Death. In the event your employment with Company and its subsidiaries
terminates as a result of your death, then your survivors shall be entitled to
the pro rated final period bonus described in sub-section (E) and the stock
award acceleration described in sub-section (F) (but none of the other
compensation and benefits described in this section).

(D) Lump Sum Payment upon Termination Outside of Change of Control Period. If a
Termination Event described in sub-section (A) occurs, you shall receive a
single lump sum amount equal to the sum of your Base Salary (as defined below)
and Target Bonus (as defined below), less any applicable withholding of federal,
state, local or foreign taxes. Subject to the prior effectiveness of the general
waiver and release of claims entered between you, the Company and its affiliates
(the “Release”), Payment under this sub-section (D) will be paid to you on the
later of the date that is 30 days after the Date of Termination (as defined in
the Change of Control Agreement), or at the end of the delay period required by
sub-section (H)(6).

(E) Bonus for Final Period. If a Termination Event described in sub-section
(A) occurs, you shall receive a pro rated bonus for the performance period in
which the Termination Event occurs (in addition to the amount described in
sub-section (D)). The amount of the bonus shall be equal to the Target Bonus for
the period in which the Termination Event occurred multiplied by a fraction in
which (i) the numerator is the number of days from and including the first day
of the performance period until and including the date of the Termination Event
and (ii) the denominator is the number of days in the performance period.
Subject to the effectiveness of the Release, such bonus shall be delivered to
you at the time prescribed in sub-section (D). The payment provided in this
paragraph shall not be subject to satisfying sub-section (H)(4).

(F) Stock Award Acceleration upon Termination Outside of Change of Control
Period.

 

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Stock Options. Your stock options and stock appreciation rights (the “Stock
Options”) that are outstanding as of the date of a Termination Event described
in this Non-CoC Section shall become fully vested upon the occurrence of such
Termination Event and exercisable so long as you comply with the restrictions
set forth in sub-section (H). The Stock Options shall remain exercisable until
the earlier of (i) the fifteen month anniversary of the date of the Termination
Event or (ii) the expiration of each option in accordance with its original
terms provided, in either case, that you comply with your obligations under
sub-section (H). The term “Stock Options” shall not include any rights under the
Company’s 2006 Employee Shares Purchase Plan or similar employee stock purchase
plans.

Restricted Stock. Your restricted stock awards (“Restricted Stock”) that are
outstanding as of the date of a Termination Event described in this Non-CoC
Section shall become fully vested and free from any contractual rights of the
Company to repurchase or otherwise reacquire the Restricted Stock as a result of
your termination of employment. All shares of Restricted Stock that have not yet
been delivered to you or your designee (whether because subject to joint escrow
instructions or otherwise) shall be promptly delivered to you or your designee
upon the occurrence of a Termination Event described in this Non-CoC Section.

Stock Units. Your stock units (“Stock Units”) that are outstanding as of the
date of a Termination Event described in this Non-CoC Section shall become fully
vested as a result of your termination of employment. All Stock Units that vest
in accordance with this sub-section (F) shall be delivered to you at the time
prescribed in sub-section (D), subject to the terms provided in sub-section
(H)(5) below.

(G) Health & Welfare Benefits Coverage. Following the occurrence of a
Termination Event described in sub-section (A), to the extent permitted by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and codified
in Section 4980B of the Code and the regulations thereunder (“COBRA”) and by
Company’s group health insurance policies, you and/or your covered dependents
will be eligible to continue your health insurance benefits at your own expense.
However, if you and/or your covered dependents timely elect COBRA continuation
for you and/or your covered dependents, Company shall reimburse you and/or your
covered dependents’ COBRA continuation premiums for group health coverage for 12
months, provided that Company’s obligation to make such reimbursements shall
cease immediately to the extent that you and/or your covered dependents are no
longer entitled by law to receive COBRA continuation coverage. You agree to
notify a duly authorized officer of Company in writing immediately upon you
and/or a covered dependent’s beginning to receive health benefits from another
source, or as otherwise required by COBRA. This sub-section (G) provides only
for Company’s reimbursement of COBRA continuation premiums for the periods
specified above, and does not affect the rights of you and/or your covered
dependents under any applicable law with respect to health insurance
continuation coverage. Such reimbursements shall be made as soon as
administratively feasible following Company’s receipt of appropriate
documentation. Notwithstanding the foregoing, if Company determines in its sole
discretion that it cannot provide the foregoing benefit

 

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without potentially violating, or being subject to an excise tax under,
applicable law (including, without limitation, Section 2716 of the Public Health
Service Act), Company shall in lieu thereof provide to you a taxable payment in
an amount equal to two times the aggregate of COBRA premiums that you would be
required to pay to continue your group health coverage in effect on the date of
the Termination Event for 12 months (which amount shall be based on the premium
for the first month of COBRA coverage) (the “Taxable Payment”), which Taxable
Payment shall be made regardless of whether you elect COBRA continuation
coverage and shall be made in lump sum, less any applicable withholding of
federal, state, local or foreign taxes. The Taxable Payment will be deemed a
taxable benefit to you as prescribed in sub-section (D) and delivered to you at
the time prescribed by sub-section (D), subject to the terms provided in
sub-section (H)(5) below; provided, however, that the timing of such Taxable
Payments shall be subject to any delay period required by sub-section (H)(6).
For the avoidance of doubt, the Taxable Payment may be used for any purpose,
including, but not limited to continuation coverage under COBRA.

(H) Limitations and Conditions on Severance Outside of the Change of Control
Period.

(1) Rights to Benefits. If a Termination Event does not occur, you shall not be
entitled to receive any benefits described in this Non-COC Section, except as
otherwise specifically set forth herein. If a Termination Event occurs, you
shall be entitled to receive the benefits described in this Non-COC Section only
if you comply with the restrictions and limitations set forth in this
sub-section (H).

(2) No Mitigation. Except as otherwise specifically provided herein, you shall
not be required to mitigate damages or the amount of any payment provided under
this Non-COC Section by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Non-COC Section be reduced by any
compensation earned by you as a result of employment by another employer or by
retirement benefits after the date of the Termination Event, or otherwise.

(3) Withholding Taxes. Company shall withhold appropriate federal, state, local
or foreign income, employment and other applicable taxes from any payments
hereunder.

 

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(4) Obligations.

 

  •  

Non-Solicitation. For two years following a Termination Event, you agree not to
personally and knowingly (i) solicit any of the employees either of Company or
of any entity in which Company directly or indirectly possesses the ability to
determine the voting of 50% or more of the voting securities of such entity
(including two-party joint ventures in which each party possesses 50% of the
total voting power of the entity) to become employed elsewhere, or (ii) provide
the names of such employees to any other company that you have reason to believe
will solicit such employees.

 

  •  

Confidentiality. Following the occurrence of a Termination Event, you agree to
continue to satisfy your obligations under the terms of Company’s standard form
of Agreement Regarding Confidential Information and Proprietary Development
previously executed by you (or any comparable agreement subsequently executed by
you in substitution or supplement thereto).

 

  •  

Breach. You acknowledge and agree that Company’s remedies at law for a breach or
threatened breach of any of the provisions of the previous two bullet points
would be inadequate and, in recognition of this fact, you agree that, in the
event of such a breach or threatened breach, in addition to any remedies at law
Company, without posting any bond, shall be entitled to cease making any
payments or providing any benefit otherwise required by this Non-COC Section
and, with respect to a breach or threatened breach of the previous two bullet
points only, obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction, or any other
equitable remedy that may then be available.

(5) Release Prior to Receipt of Benefits. Upon the occurrence of a Termination
Event, and prior to the receipt of any benefits arising from this letter
agreement on account of the occurrence of the Termination Event, you shall
execute and not revoke an employee release substantially in the form attached
hereto and such employee release must be irrevocably effective within
twenty-nine (29) days following the occurrence of the Termination Event (the
“Release Deadline”). Such employee release shall specifically relate to all of
your rights and claims in existence at the time of such execution relating to
your employment with Company, but shall not include (i) your rights under this
letter agreement, (ii) your rights under any employee benefit plan sponsored by
Company, (iii) your rights to indemnification or advancement of expenses under
applicable law, Company’s bylaws or other governing instruments or any agreement
addressing such subject matter between you and Company, (iv) your rights under
Section 9 of the Change of Control Agreement or (v) any claims that cannot be
released as a matter of law. It is understood that you have 21 days to consider
whether to execute such employee release and you may revoke such employee
release within seven days after execution of such employee release. In the event
you do not execute such employee release within the 21-day period or if you
revoke such employee release within the seven-day period, or the employee
release is not irrevocably effective by the Release Deadline, no benefits shall
be payable under this Non-COC Section and the benefits

 

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under this Non-COC Section shall be null and void. Nothing in this Non-COC
Section shall limit the scope or time of applicability of such employee release
once it is executed and not timely revoked.

(6) Section 409A. Notwithstanding anything to the contrary, in no event will any
severance that is deferred compensation within the meaning of Section 409A be
provided under the Non-CoC Section unless and until you have a “separation from
service” within the meaning of Section 409A. In the event that (i) one or more
payments of compensation or benefits (and any other severance payments or
benefits which may be considered deferred compensation under Section 409A)
received or to be received by you pursuant to this letter or otherwise
(collectively, “Agreement Payment”) would constitute deferred compensation
subject to Section 409A of the Code and the regulations or other authority
promulgated thereunder, as amended from time to time (“Section 409A”), and
(ii) you are deemed at the time of such termination of employment to be a
“specified employee” under Section 409A(a)(2)(B)(i), then such Agreement Payment
shall not be paid before the day that is six months plus one day after the date
of the “separation from service” (as determined under Section 409A) (the “New
Payment Date”), except as Section 409A may then permit; provided, however, that
such deferral shall only be effected to the extent required to avoid adverse tax
treatment to you under Section 409A, including (without limitation) the
additional 20% tax for which you would otherwise be liable under
Section 409A(a)(1)(B) or any state law equivalent of Section 409A in the absence
of such deferral. During any period in which an Agreement Payment to you is
deferred pursuant to the foregoing, you shall be entitled to interest on the
deferred Agreement Payment at a per annum rate equal to the highest rate of
interest applicable to six-month non-callable certificates of deposit with daily
compounding offered by Citibank N.A., Wells Fargo Bank, N.A. or Bank of America
on the date of such separation from service. Upon the expiration of the
applicable delay period, any Agreement Payment that would have otherwise been
made during that period (whether in a single sum or in installments) in the
absence of this sub-section (H)(6) shall be paid to you or your beneficiary in
one lump sum, including all accrued interest, and all remaining Agreement
Payments, if any, will be payable in lump sum on the New Payment Date.

Each payment and benefit payable under this letter is intended to constitute a
separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury
Regulations. The foregoing provisions are intended to comply with or be exempt
from 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 or ambiguous terms herein will be
interpreted to so comply or be exempt. You and Company agree to work together in
good faith to consider amendments to this letter and to take such reasonable
actions which are necessary, appropriate or desirable to avoid imposition of any
additional tax or income recognition prior to actual payment to you under
Section 409A.

(I) Definitions. For purposes of this letter, the following terms shall have the
meaning set forth below.

 

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“Acquiror” means either a person or a member of a group of related persons
representing such group that in either case obtains effective control of Company
in the transaction or a group of related transactions constituting the Change of
Control.

“Base Salary” means your annual salary (excluding bonus, any other incentive or
other payments and stock option exercises) from Company at the time of the
occurrence of the Change of Control (if applicable) or the Termination Event,
whichever is greater.

“Change of Control” means:

(a) The consummation of a merger or consolidation of Company with or into
another entity or any other corporate reorganization, if persons who were not
shareholders of Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (i) the continuing or surviving entity and (ii) any direct or indirect
parent corporation of such continuing or surviving entity;

(b) The sale, transfer or other disposition of all or substantially all of
Company’s assets;

(c) A change in the composition of the Board, as a result of which fewer than
50% of the incumbent directors are directors who either:

(i) Had been directors of Company on the date 24 months prior to the date of
such change in the composition of the Board (the “Original Directors”); or

(ii) Were appointed to the Board, or nominated for election to the Board, with
the affirmative votes of at least a majority of the aggregate of (A) the
Original Directors who were in office at the time of their appointment or
nomination and (B) the directors whose appointment or nomination was previously
approved in a manner consistent with this paragraph (ii); or

(d) Any transaction as a result of which any person is the “beneficial owner”
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), directly or indirectly, of securities of Company
representing at least 30% of the total voting power represented by Company’s
then outstanding voting securities. For purposes of this sub-section (d), the
term “person” shall have the same meaning as when used in Sections 13(d) and
14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of Company or of a parent or
subsidiary and (ii) a corporation owned directly or indirectly by the
shareholders of Company in substantially the same proportions as their ownership
of shares.

 

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“Change of Control Period” means the period either (i) at the time of or within
24 months following the occurrence of a Change of Control, (ii) within three
months prior to a Change of Control, whether or not such termination is at the
request of an Acquiror, or (iii) at any time more than three months prior to a
Change of Control that constitutes a “change in control” within the meaning of
Section 409A if such termination or Good Reason triggering event is at the
request of an Acquiror.

“Disability” means that you are unable to perform the duties of your office with
Company or any subsidiary, and are unable to perform substantially equivalent
duties, by reason of any medically determinable physical or mental impairment,
and such condition has lasted or can be expected to last for a continuous period
of not less than 12 months.

“Good Reason” means: (i) a reduction of your rate of compensation as in effect
on the effective date of this letter or, if a Change of Control has occurred, as
in effect immediately prior to the occurrence of a Change of Control, other than
reductions in Base Salary that apply broadly to employees of Company or
reductions due to varying metrics and achievement of performance goals for
different periods under variable-pay programs; (ii) either (A) failure to
provide a package of benefits that, taken as a whole, provides substantially
similar benefits to those in which you are entitled to participate as of the
effective date of this letter (except that employee contributions may be raised
to the extent of any cost increases related to such benefits where such
increases in employee contributions are broadly applicable to employees of
Company) or (B) any action by Company that would significantly and adversely
affect your participation or reduce your benefits under any of Company’s benefit
plans, other than changes that apply broadly to employees of Company; (iii) a
change in your duties, responsibilities, authority, job title or reporting
relationships resulting in a significant diminution of position, excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith that is remedied by Company promptly after notice thereof is given by you;
(iv) a request that you relocate to a worksite that is more than 25 miles from
your prior worksite, unless you accept such relocation opportunity; (v) a
failure or refusal of a successor to Company to assume Company’s obligations
under this letter; (vi) a material breach by Company or any successor to Company
of any of the material provisions of this letter or (vii) your resignation at
the request of  2/3rds of the Board. For purposes of clause (iii) of the
immediately preceding sentence, your duties, responsibilities, authority, job
title or reporting relationships shall be considered to be significantly
diminished (and therefore shall constitute “Good Reason”) if (1) you no longer
perform substantially the same functional role for Company as you performed
immediately prior to the occurrence of the Change of Control of an entity whose
equity securities are publicly traded, (2) the Company hires, appoints, or
promotes any person other than you to the role of sole Chief Executive Officer,
or (3) your position is changed such that you no longer report directly to the
Board; provided, however, that prior to terminating your employment for Good
Reason under clause (iii) of the immediately preceding sentence solely as a
result of the entity for which you are providing services not being an entity
whose securities are publicly traded, you shall notify the successor entity of
your intention to so terminate your employment and shall provide the successor
entity with a reasonable period of time,

 

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not to exceed 90 days, to negotiate terms of employment which meet your
requirements. If, at the end of the notice and negotiation period, the parties
are unable to arrive at mutually satisfactory terms and conditions of
employment, then you may exercise your right to termination for Good Reason as a
result of no longer serving in a comparable role with a company whose securities
are publicly traded.

“Target Bonus” means an amount equal to an average of the annualized bonus
compensation paid to you with respect to the two fiscal years of the Company (or
LTX-Credence, as applicable) most recently preceding the date of the Termination
Event; provided, however, that if your target bonus in the year in which the
Termination Event occurs, expressed as a percent of your Base Salary, is higher
than the percentage target bonus levels in the years used for purposes of the
average, then an equitable adjustment will be made to the prior year amounts so
as to treat you as if you were at the higher target bonus percentage for the
years used to determine the average.

“Termination Event” means an involuntary termination of employment described in
sub-section (A). No other event shall be a Termination Event for purposes of
this letter.

Change of Control Agreement

As noted above, your Change of Control Agreement with your predecessor employer
shall remain outstanding by its own terms (except as expressly amended below)
until the Change of Control Agreement expires in accordance with Section 3 of
such agreement, as expressly amended hereby. Notwithstanding the foregoing and
in consideration of the benefits provided hereby, by signing this letter, you
acknowledge and agree to the following:

(A) You confirm that, for all purposes of the Change of Control Agreement,
references to the “Company” shall be deemed references to Company.

(B) You confirm that, in connection with the execution and delivery of the
Merger Agreement and this letter agreement, you hereby acknowledge and agree
that neither the execution of the Merger Agreement nor the consummation of the
transactions contemplated thereby (including, without limitation, the Combined
Transaction and the Merger, as applicable) shall constitute a Change of Control
under Section 2 of the Change of Control Agreement.

(C) You confirm your acknowledgement and agreement that neither the execution
and delivery of the Merger Agreement nor the consummation of the transactions
contemplated thereby (including, without limitation, the Combined Transaction
and the Merger, as applicable) shall constitute a Change of Control, Change in
Control, Change in Control Event or similar event under any agreement or plan
governing any stock option, restricted stock, restricted stock unit or other
equity award granted to you by LTX-Credence (or any predecessor thereto).

 

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(D) You agree that the Change of Control Agreement is hereby amended as follows:

(1) Section 1 of the Change of Control Agreement is hereby amended and replaced
in its entirety as follows:

“1. Certain Definitions.

(a) “Acquiror” has the same meaning as the defined term “Acquiror” in
Executive’s letter agreement with the Company entered into in connection with
the Agreement and Plan of Merger dated November 17, 2010 (the “Company Letter”).

(b) “Change of Control Period” has the same meaning as the defined term “Change
of Control Period” in the Company Letter.

(c) “Effective Date” shall mean the first date during the Change of Control
Period (as defined in Section 1(b)).”

(2) Section 2 of the Change of Control Agreement is hereby amended and replaced
in its entirety as follows:

“2. Change of Control. For the purposes of this Agreement, a “Change of Control”
shall mean a Change of Control as defined in the Company Letter.”

(3) Section 3 of the Change of Control Agreement is hereby amended and replaced
in its entirety as follows:

“3. Employment Period. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the last day of the Change of
Control Period (the “Employment Period”); provided, however, that in the event
of Executive’s termination of employment during the Employment Period,
Executive’s sole remedy for breach of this Section 3 shall be the severance
benefits provided hereunder or under the Company Letter.”

(4) The definition of “Good Reason” set forth in Section 5(c) of the Change of
Control Agreement is hereby amended so that the final sentence thereof is
deleted. For the avoidance of the doubt, as amended, the final clause of the
“Good Reason” definition shall read, as amended: “For purposes of this
Section 5(c), any good faith determination of “Good Reason” made by the
Executive shall be conclusive.” In addition, clauses (iv) and (v) are hereby
amended and replaced as follows:

“(iv) any purported termination by the Company of the Executive’s employment
otherwise than as expressly permitted by this Agreement;

 

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(v) any failure by the Company to comply with and satisfy Section 11(c) of this
Agreement; or

(vi) Executive’s resignation at the request of  2/3rds of the Board.”

(5) The first clause of Section 6(a)(i) is hereby amended and replaced in its
entirety as follows:

“(i) the Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination, except as otherwise provided below, the aggregate
of the following amounts:”

(6) Section 6(a)(i)(A) of the Change of Control Agreement is hereby amended and
replaced in its entirety as follows:

“A. the sum of (1) the Executive’s then-current base salary through the Date of
Termination to the extent not theretofore paid, (2) Executive’s prorated bonus
for the performance period in which the Date of Termination occurs, which shall
be equal to the Target Bonus (as defined in the Company Letter) and assuming for
purposes of the calculation that a Termination Event (as defined in the Company
Letter) occurs on the Date of Termination) for the performance period in which
the Date of Termination occurred multiplied by a fraction in which (i) the
numerator is the number of days from and including the first day of the
performance period until and including the date of the Date of Termination and
(ii) the denominator is the number of days in the performance period, and
(3) any accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations
described in clauses (1) and (3) shall be paid on the Date of Termination. The
prorated bonus described in clause (2) shall be paid in lump sum on the 30th day
following the Date of Termination, subject to Section 13(d) and any delay period
required under Section 12(d) of this Agreement.”

(7) Section 6(a)(i)(B) of the Change of Control Agreement is hereby amended and
replaced as follows:

“B. the amount equal to an amount equal to two times the sum of Executive’s Base
Salary (as defined in the Company Letter) and Target Bonus (as defined in the
Company Letter), assuming for purposes of the calculation that a Termination
Event (as defined in the Company Letter) occurs on the Date of Termination.
Amounts under this Section 6(a)(i)(B) shall be paid in lump sum on the 30th day
following the Date of Termination, subject to Section 13(d) and any delay period
required under Section 12(d) of this Agreement.”

 

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Employment Offer Letter

 

(8) Section 6(a)(ii) of the Change of Control Agreement is hereby amended and
replaced as follows:

“to the extent permitted by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended and codified in Section 4980B of the Code and the
regulations thereunder (“COBRA”) and by the Company’s group health insurance
policies, Executive and/or Executive’s covered dependents will be eligible to
continue their health insurance benefits at Executive’s own expense. However, if
Executive and/or Executive’s covered dependents timely elect COBRA continuation
for Executive and/or Executive’s covered dependents, the Company shall reimburse
Executive and/or Executive’s covered dependents’ COBRA continuation premiums for
group health coverage for 24 months, provided that the Company’s obligation to
make such reimbursements shall cease immediately to the extent that Executive
and/or Executive’s covered dependents are no longer entitled by law to receive
COBRA continuation coverage. Executive agrees to notify a duly authorized
officer of the Company in writing immediately upon Executive and/or Executive’s
covered dependent’s beginning to receive health benefits from another source, or
as otherwise required by COBRA. This paragraph provides only for the Company’s
reimbursement of COBRA continuation premiums for the periods specified above,
and does not affect the rights of Executive and/or Executive’s covered
dependents under any applicable law with respect to health insurance
continuation coverage. Such reimbursements shall be made as soon as
administratively feasible following the Company’s receipt of appropriate
documentation. Notwithstanding the foregoing, if the Company determines in its
sole discretion that it cannot provide the foregoing benefit without potentially
violating, or being subject to an excise tax under, applicable law (including,
without limitation, Section 2716 of the Public Health Service Act), the Company
shall in lieu thereof provide to Executive a taxable payment in an amount equal
to two times the aggregate of COBRA premiums that Executive would be required to
pay to continue Executive’s group health coverage in effect on the Date of
Termination for 24 months (which amount shall be based on the premium for the
first month of COBRA coverage) (the “Taxable Payment”), which Taxable Payment
shall be made regardless of whether Executive elect COBRA continuation coverage
and shall be made in lump sum on the date 30 days following the Date of
Termination, less any applicable withholding of federal, state, local or foreign
taxes. Notwithstanding the foregoing, the Taxable Payment shall be subject to
Section 13(d) and any delay period required under Section 12(d) of this
Agreement. For the avoidance of doubt, the Taxable Payment may be used for any
purpose, including, but not limited to continuation coverage under COBRA.”

(9) Section 6(a)(iii) of the Change of Control Agreement is hereby amended and
replaced as follows: “[DELETED]”

(10) A new Section 6(a)(v) is hereby inserted into the Change of Control
Agreement as follows:

“(v)

A. Executive’s stock options and stock appreciation rights that are outstanding
as of the Date of Termination (“Stock Options”) shall become fully vested upon
the occurrence of such Date of Termination and exercisable so long as

 

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November 17, 2010

David G. Tacelli

Employment Offer Letter

 

Executive complies with the restrictions and limitations set forth in
Section 13. The Stock Options shall remain exercisable until the earlier of
(i) the second anniversary of the Date of Termination or (ii) the expiration of
each option in accordance with its original terms provided, in either case, that
Executive complies with the obligations under Section 13. The term “Stock
Options” shall not include any rights of Executive under any “employee stock
purchase plan” or similar plans.

B. Executive’s restricted stock awards that are outstanding as of the Date of
Termination (“Restricted Stock”) shall become fully vested and free from any
contractual rights of the Company to repurchase or otherwise reacquire the
Restricted Stock as a result of Executive’s termination of employment. All
shares of Restricted Stock that have not yet been delivered to Executive or
his/her designee (whether because subject to joint escrow instructions or
otherwise) shall be promptly delivered to Executive or his/her designee upon the
occurrence of the Date of Termination.

C. Executive’s stock units that are outstanding as of the date of Date of
Termination (“Stock Units”) shall become fully vested as a result of Executive’s
termination of employment. All Stock Units that have not yet been settled shall
be promptly settled, in the form specified in the relevant Stock Unit agreements
and relevant stock plans under which the Stock Units were granted on the date 30
days following the Date of Termination. Notwithstanding the foregoing, such
settlement shall be subject to any delay period required under Section 12(d) of
this Agreement.”

(11) A new Section 13 is hereby inserted into the Change of Control Agreement as
follows:

“13. Obligations of Executive. If a Date of Termination occurs, Executive shall
be entitled to receive, and/or retain, the benefits described in this Agreement
only if Executive complies with the restrictions and limitations set forth in
this Section 13.

(a) For two years following the Date of Termination, Executive agrees not to
personally and knowingly (i) solicit any of the employees either of Company or
of any entity in which Company directly or indirectly possesses the ability to
determine the voting of 50% or more of the voting securities of such entity
(including two-party joint ventures in which each party possesses 50% of the
total voting power of the entity) to become employed elsewhere or, (ii) provide
the names of such employees to any other company that Executive has reason to
believe will solicit such employees.

(b) Following the occurrence of a Date of Termination, Executive agrees to
continue to satisfy Executive’s obligations under the terms of Company’s
standard form of Agreement Regarding Confidential Information and Proprietary
Development previously executed by Executive (or any comparable agreement
subsequently executed by you in substitution or supplement thereto).

 

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November 17, 2010

David G. Tacelli

Employment Offer Letter

 

(c) Executive acknowledges and agrees that Company’s remedies at law for a
breach or threatened breach of any of the provisions of the previous two bullet
points would be inadequate and, in recognition of this fact, Executive agrees
that, in the event of such a breach or threatened breach, in addition to any
remedies at law Company, without posting any bond, shall be entitled to cease
making any payments or providing any benefit otherwise required by this
Section 13 and, with respect to a breach or threatened breach of the previous
two bullet points only, obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction, or
any other equitable remedy that may then be available.

(d) Prior to the receipt of any benefits arising from this Agreement, Executive
shall execute and not revoke an employee release substantially in the form
attached to the Company Letter and such employee release must be irrevocably
effective within twenty-nine (29) days following the occurrence of the Date of
Termination (the “Release Deadline”). Such employee release shall specifically
relate to all of Executive’s rights and claims in existence at the time of such
execution relating to Executive’s employment with Company, but shall not include
(i) Executive’s rights under this Agreement, including, but not limited to,
Section 9, (ii) Executive’s rights under any employee benefit plan sponsored by
Company, (iii) Executive’s rights to indemnification or advancement of expenses
under applicable law, Company’s bylaws or other governing instruments or any
agreement addressing such subject matter between Executive and the Company or
(iv) any claims that cannot be released as a matter of law. It is understood
that Executive has 21 days to consider whether to execute such employee release
and Executive may revoke such employee release within seven days after execution
of such employee release. In the event Executive does not execute such employee
release within the 21-day period or if Executive revokes such employee release
within the seven-day period, or the employee release is not irrevocably
effective by the Release Deadline, no benefits shall be payable under this
Agreement and the benefits under this Agreement shall be null and void. Nothing
in this Agreement shall limit the scope or time of applicability of such
employee release once it is executed and not timely revoked.

(e) Notwithstanding anything to the contrary, in no event will any severance
that is deferred compensation within the meaning of Section 409A be provided
under this Agreement unless and until Executive has a “separation from service”
within the meaning of Section 409A.”

(12) You agree that this letter agreement satisfies the conditions under
Section 11(c) of the Change of Control Agreement with respect to the assumption
of such agreement by successors of LTX-Credence (or any predecessor thereto).

Benefits

You will receive all the employment and fringe benefits generally available to
full-time, regular employees of Company, and any employment benefits and fringe

 

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November 17, 2010

David G. Tacelli

Employment Offer Letter

 

benefits generally available to peer executives. These benefits include a 401(k)
plan with a partial company match; and medical, dental, vision and life
insurance plans. In addition, you will be eligible to accrue flexible time off
(FTO) based on Company’s FTO policy and 11 paid holidays each calendar year.
Your years of service with LTX-Credence and its predecessors shall be considered
to be years of service with the Company for purposes of any equity incentive
plan awards that provide for vesting upon retirement.

Conditions

 

  1) In accordance with the Immigration Reform & Control Act of 1986, employment
in the United States is conditional upon proof of eligibility to legally work in
the United States. On your first day of employment, you will need to present
documents providing proof of your identity and eligibility to work in the United
States. If you do not have these documents, please contact me prior to your
first day of employment.

 

  2) As an employee of Company you will have access to confidential information
and you may, during the course of your employment, develop information or
inventions that will be the property of Company. To protect the interests of
Company, you will be required to sign Company’s Confidential Information &
Proprietary Development Agreement as a condition of you starting employment. A
copy of this document is enclosed with this offer. Please do not bring any
confidential or proprietary material of any former employer with you or violate
any other obligations you may have to your former employer(s).

 

  3) This written offer is contingent upon the receipt of acceptable results
from the completion of background and reference checks. The background check is
a standard verification of social security number, criminal history, education,
work history with former employers, validation against the Department of
Homeland Security’s Restricted Parties List, and restrictions on employment
under U.S. Deemed Export regulations. In some positions, a credit and a driver’s
license check will also be conducted.

 

  4) You will need to acknowledge and agree that Company’s policies and
procedures, including policies covering Equal Employment Opportunity, Sexual
Harassment, Standards of Business Conduct, Global Personnel Privacy, Customer
Data Privacy, and Drug-Free Workplace apply to you as an employee and you agree
to comply with each policy or procedure, except to the extent that they are
inconsistent with the terms of this letter agreement.

This offer letter is not a contract of employment for any specific or minimum
term and employment with Company is terminable at will. This means that our
employment relationship is voluntary and based on mutual consent. You may resign
your employment, and Company likewise may terminate your employment, at any
time, for any reason or no reason, with or without cause or notice.

 

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November 17, 2010

David G. Tacelli

Employment Offer Letter

 

In order to expeditiously deal with any disputes relating to or arising out of
our employment relationship, you and Company agree that, except as set forth in
the Agreement Regarding Confidential Information and Proprietary Developments by
and between Company and you, all such disputes including but not limited to
claims of harassment, discrimination, breach of contract, and wrongful
termination, shall be fully and finally resolved by binding arbitration
conducted by the Judicial Arbitration and Mediation Services, Inc. (“JAMS”),
pursuant to the Employment Arbitration Rules and Procedures set forth in
California Code of Civil Procedure Section 1280, et eq., including
Section 12830.05 and pursuant to California Law. ACCORDINGLY, THE PARTIES HEREBY
AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTES BETWEEN THEM UNDER THIS
AGREEMENT RESOLVED IN A COURT BY A JUDGE OR JURY.

All questions concerning the construction, validity and interpretation of this
Agreement will be governed by the laws of the State of California (without
regard to its conflicts of law provisions).

This written offer constitutes all conditions and agreements made on behalf of
Company and supersedes any previous verbal or written commitments regarding your
employment offer, except that your Change of Control Agreement, your
confidentiality and invention assignment agreement with LTX-Credence (or its
predecessor), and any outstanding equity awards assumed in the Combined
Transaction or the Merger, as applicable, shall continue to remain in full force
and effect except as expressly amended hereby. No representative other than me
has authority to modify any of the terms and conditions herein.

Next Steps

Upon your acceptance of the terms of this offer letter, please review,
complete/sign and return a copy of this offer letter, the Confidential
Information and Proprietary Development Agreement, the Background Check Release,
Employee Information, and Policy Acknowledgment Form.

David, we are excited about the opportunity to have you join Company as its
Co-Chief Executive Officer. We look forward to your offer acceptance.

 

Sincerely,

VERIGY LTD.

/s/ Keith L. Barnes

Keith L. Barnes, Chairman & CEO

 

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November 17, 2010

David G. Tacelli

Employment Offer Letter

 

Acceptance & Acknowledgment:

I agree to and accept employment with Company on the terms and conditions set
forth in this letter.

 

Accepted:     Date:

/s/ David G. Tacelli

    November 17, 2010 David G. Tacelli    

Enclosures:

 

  •  

Confidential Information and Proprietary Development Agreement

 

  •  

Background Check Release Form

 

  •  

Employee Information Form

 

  •  

Policy Acknowledgment Form with related policies

 

  •  

Voluntary Self Declaration Form A & B

 

  •  

Form of Release of Claims

 

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