Exhibit 10.03
(LOGO 02) [f42858f4285802.gif]
PDF Solutions, Inc.
333 West San Carlos Street, Suite 700 • San Jose, California 95110 USA
Telephone: 408 280 7900 • Fax: 408 280 7915
Website: http://www.pdf.com
Ms. Joy Leo
Dear Joy,
On behalf of PDF Solutions, Inc., (“PDF” or the “Company”), I am pleased to
extend to you this offer of a new position. Your new position will be Executive
Vice President and Chief Administration Officer, effective July 9th, 2008,
reporting to me. You will be based in PDF’s San Jose office at 333 West San
Carlos Street, Suite 700, San Jose, CA 95110. This offer of a new position with
PDF is conditioned upon your acceptance, in writing, of the terms and conditions
as enumerated below.

  1.   Compensation. Commencing on your Start Date, you shall be paid a base
salary of $270,000, paid to you semi-monthly at a rate of $11,250.00. Your
salary shall be paid in accordance with the Company’s standard payroll policies
(subject to applicable withholding taxes as required by law).     2.   Stock
Options. Upon commencement of your employment, and subject to the approval of
the Company’s Board of Directors, you will be granted an option to purchase
300,000 shares (the “Total Option Shares”) of the Company’s Common Stock with an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Such option shall vest over a four year period commencing on your Start
Date, according to the following vesting schedule: 1/4 of the Total Option
Shares shall be exercisable on the twelve (12) month anniversary of your Start
Date and 1/48th of the Total Option Shares shall be exercisable on a monthly
basis thereafter. Vesting of the options shall be contingent upon your continued
employment with the Company. The options will be non-qualified to the maximum
extent permitted by the tax code and will be subject to the terms of the
Company’s 2001 Stock Plan and execution of an applicable Stock Option Agreement
to be entered into between you and the Company.     3.   Change of Control. In
the event that during your employment with the Company, the Company is subject
to a Change of Control event, defined as a change in ownership or control of the
Company effected through a merger, consolidation or acquisition by any person or
related group of persons (other than an acquisition by the Company or by a
Company-sponsored employee benefit plan or by a person or persons that directly
or indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934) of securities possessing more than fifty
percent (50%) of the total combined voting power of the outstanding securities
of the Company, you will be entitled to accelerated vesting as to 100% of your
outstanding and unvested stock

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    options and/or restricted stock such that all such stock options and/or
restricted stock shall be fully vested as of the date of such Change of Control
event. In addition, the terms set forth herein will be binding upon and inure to
the benefit of any successor person, firm, corporation or other business entity
of the Company in the event of any Change of Control, and any such successor
will be deemed automatically substituted for the Company under the terms of this
offer letter for all purposes.     4.   Termination without Cause:
Notwithstanding any other provision of this letter agreement or anything to the
contrary in the event (a) the Company terminates your employment at any time
without Cause or Disability or (b) you resign for Good Reason and (c) a
Separation occurs, with each capitalized term as defined in this Section 4
below, you will be entitled to all of the following: (i) vesting acceleration
with respect to your outstanding and unvested stock options and/or restricted
stock, as if you provided service to the Company for an additional twelve
(12) months after the effective date of the Separation; (ii) twelve (12) months
of your then-current annual base salary, paid in accordance with the Company’s
standard payroll procedures over a twelve-month period, commencing on the
Company’s first regular payroll date following the effective date of the
Separation and your execution of the mutual release described below, and subject
to all applicable withholdings; (iii) a percentage of your Target Bonus (as
defined below), which is determined by pro rating the percentage of the Target
Bonus that the Company, in its reasonable discretion, has determined that you
have earned as of the effective date of the Separation, had such Target Bonus
been payable at such time, (for purposes of clarification, if the Separation
occurs during the first year of your employment, you will be paid the Guaranteed
Bonus prorated from your Start Date through the effective date of the
Separation), which will be paid on the Company’s first regular payroll date
following the effective date of the Separation and your execution of the mutual
release described below; and (iv) the Company’s payment of the premiums for your
COBRA coverage from the last date on which you receive health care coverage as a
Company employee until the earlier of: (1) the date that is twelve (12) months
following the effective date of the Separation; or (2) the date you become
covered under another employer’s health coverage plan, , with the first of such
premium payments made when due immediately following the date on which you’ve
made your COBRA election, which you will elect within sixty (60) days following
the effective date of the Separation.         For all purposes under this letter
agreement, “Cause” means: (a) your unauthorized use or disclosure of the
Company’s confidential information or trade secrets, which use or disclosure
causes material harm to the Company, (b) your material breach of any agreement
between you and the Company, which remains uncured by you more than thirty
(30) days from the date of your receipt of written notice of such material
breach from the Company, (c) your material failure to comply with the Company’s
written policies or rules, (d) your conviction of, or your plea of “guilty” or
“no contest” to, a felony under the laws of the United States or any State,
(e) your gross negligence or willful misconduct, (f) your continuing failure to
perform or initiating performance of assigned duties for which there is no
reasonable basis for you disputing and/or failing to so perform for ten (10)
days after receiving written notification of the failure from the Company’s
Board of Directors or (g) your failure to cooperate in good faith with a
governmental or internal investigation of the Company or its directors, officers
or employees, if the Company has requested your cooperation.

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      For all purposes under this letter agreement, “Good Reason” means that you
resign within 120 days after one of the following conditions has come into
existence without your written consent: (i) any material adverse change or
material reduction of your position, duties, authority or responsibilities as an
employee, or your removal from your position or responsibilities, (ii) a
material reduction in your annual base salary and/or your Target Bonus in effect
immediately prior to such reduction except in the case where there is a general
reduction in compensation across all employees or a broad class of employees
(e.g., senior executives) due to financial hardship of the business; or
(iii) your relocation to a facility or a location more than fifty (50) miles
from the Company’s offices immediately prior to such a relocation. A condition
will not be considered “Good Reason” unless you give the Company written notice
of the condition within thirty (30) days after the condition comes into
existence and the Company fails to remedy (as such failure or remedy is
determined in your reasonable discretion) the condition within thirty (30) days
after receiving your written notice.         You agree that prior to
commencement of your severance payments described in subsections (ii) and
(iii) of the first paragraph of this Section 4, you will meet the following
conditions: you (i) will have promptly, upon the Separation returned all Company
property in your possession, and (ii) will have executed and not revoked the
Company’s standard general mutual release of all claims that you may have
against the Company or persons affiliated with the Company and that the Company
may have against you (collectively, the “Conditions”). The Company will deliver
the form of release to you within two (2) days after your Separation (defined
below), and the parties agree to negotiate such release in good faith and
execute such release within sixty (60) days after the effective date of the
Separation (the “Deadline”). “Separation” means a “separation from service,” as
defined in the regulations under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”). “Disability” means your inability to perform the
essential functions of your position with or without reasonable accommodation
for a period of one hundred and twenty (120) consecutive days because of your
physical or mental impairment. For the avoidance of doubt, the vesting
acceleration described in Section 3 of this Agreement is not affected by any of
the requirements in Section 4 of this Agreement.         For purposes of Code
Section 409A, each salary continuation payment under this Section 4 is hereby
designated as a separate payment. Notwithstanding anything stated herein to the
contrary, the severance pay provided in connection with your termination under
this severance section is intended to be exempt from Code Section 409A pursuant
to Treasury Regulation Section 1.409A-1(b)(9)(iii); provided that, to the extent
that such severance and any other payments paid to you in connection with your
involuntary separation from service does not qualify or otherwise exceeds the
limit set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A) or any
similar limit promulgated by Treasury or the IRS, the portion of the severance
that does not qualify or otherwise exceeds such limit, as determined by the
Company in its sole discretion, shall be paid by no later than the fifteenth
(15th) day of the third (3rd) month following the end of your first tax year in
which your termination date occurs, or, if later, the fifteenth (15th) day of
the third (3rd) month following the end of the Company’s first tax year in which
your termination date occurs, as provided in Treasury Regulation
Section 1.409A-1(b)(4).

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      In the event that the severance payments and benefits under this Section 4
do not qualify for one of the exemptions under Code Section 409A, as described
in the previous paragraph and as reasonably determined by the Company, and the
Company determines that you are a “specified employee” under
Section 409A(a)(2)(B)(i) of the Code at the time of the Separation, then (i) the
salary continuation payments under the first paragraph of this Section 4, to the
extent that they are subject to Section 409A of the Code, will commence on the
earliest practicable date that occurs more than six (6) months after the
effective date of the Separation and (ii) the installments that otherwise would
have been paid during the first six (6) months after the effective date of the
Separation will be paid in a lump sum on the first day of the seventh month
after the Separation.         You are encouraged to obtain your own tax advice
regarding your compensation from the Company. You agree that the Company does
not have a duty to design its compensation policies in a manner that minimizes
your tax liabilities, and you will not make any claim against the Company or its
Board of Directors related to tax liabilities arising from your compensation.  
  5.   Start Date. Subject to fulfillment of any conditions imposed by this
letter agreement, you will commence your new position with the Company on a date
to be determined and agreed upon with the Company within one week of acceptance
of this offer. The date you actually start working at the Company is referred to
as the “Start Date”.     6.   Benefits. Effective on your Start Date, the
Company will make available to you the regular health insurance program,
disability, life insurance, and other benefits as established by the Company for
its executives from time to time, as well as executive indemnification
agreement. A summary of those benefits, including Paid Time Off and Sabbatical
is attached. The Company will also reimburse you for reasonable travel, or other
expenses incurred by you in the furtherance of or in connection with the
performance of your employment duties, in accordance with the Company’s expense
reimbursement policy in effect from time to time.     7.   General Duties.
During the term of your employment, you agree that at all times and to the best
of your ability you will loyally and conscientiously perform all of the duties
and obligations required of you in your job and by the Company. You further
agree that you will not render commercial or professional services of any nature
to any person or organization, whether or not for compensation, without the
prior written consent of the Company, and that you will not directly or
indirectly engage in or participate in any business that is competitive in any
manner with the business of the Company. You also agree to comply with any and
all policies of the Company as in effect from time to time.     8.   Proof of
Right to Work. In compliance with federal immigration laws, you will be required
to provide to the Company documentary evidence of your identity and eligibility
for employment in the United States. Such documentation must be provided within
three (3) business days of your date of hire. Your failure to meet this
condition could result in termination of your employment with the Company.

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  9.   Performance Bonus. You shall be eligible to receive an annual target
incentive bonus equal to eighty percent (80%) of your then-current annual base
salary (“Target Bonus”), based on your achievement of performance objectives
determined by the Company; provided, however, for the first twelve (12) months
of your employment with the Company, you will be entitled to a guaranteed
minimum Target Bonus payout equal to $165,000.00 (the “Guaranteed Bonus”). A pro
rata portion of the Guaranteed Bonus, plus any amount in excess of the pro rata
portion of the Guaranteed Bonus that the Company has determined that you have
earned by the end of 2008, collectively up to the Target Bonus amount, will be
paid to you in accordance with the Company’s regular executive incentive bonus
program payout practices but no later than two and one-half (2.5) months
following the end of 2008, provided that you remain in employment with the
Company through the end of 2008. The remaining portion of the Guaranteed Bonus,
plus any amount in excess of the remaining portion of the Guaranteed Bonus that
the Company has determined that you have earned by the end of 2009, collectively
up to the Target Bonus amount, will be paid to you in accordance with the
Company’s regular executive incentive bonus program payout practices but no
later than two and one-half (2.5) months following the end of 2009, provided
that you remain in employment with the Company through the end of 2009. For each
subsequent year of employment, the portion of the Target Bonus that the Company
has determined that you have earned by the end of each such year of employment
with the Company will be paid to you in accordance with the Company’s regular
executive incentive bonus program payout practices but no later than two and
one-half (2.5) months following the end of each such year of employment,
provided that you remain in employment with the Company through the end of each
such year. For the avoidance of doubt, in no event will the amount of the target
incentive bonus in any calendar year that may be payable to you exceed the
Target Bonus amount. Any bonus payment made under this Section 9 will be subject
to applicable withholding and deductions. With respect to the Target Bonus
described in this Section 9 and notwithstanding anything to contrary, in the
event that your employment is terminated by the Company for Cause or you
voluntarily resign before the end of any calendar year during your employment,
you will not be eligible to receive any portion of the Target Bonus for that
calendar year unless you remain in employment with the Company through the end
of such calendar year; provided, however, in the event that your employment is
terminated by the Company in any calendar year without Cause or Disability, or
you resign for Good Reason, you will receive a portion of the Target Bonus for
that calendar year from the Company as set forth in Section 4 above. The
Company, in its reasonable discretion, will determine the amount of the bonus
payable under this Section 9 and its determination will be final and binding.  
  10.   Confidential Information and Invention Assignment Agreement. Your
acceptance of this offer and commencement of employment with the Company is
contingent upon your execution of the Company’s Confidential Information and
Invention Assignment Agreement (the “Confidentiality Agreement”), a copy of
which is enclosed for your review. An executed copy

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    of the Confidentiality Agreement must be delivered to the PDF Human
Resources Department on or before your Start Date. The Confidentiality Agreement
relates to confidential information received in regards to the Company’s
business, technology, and intellectual property, as well as information about
the Company’s customers. The Confidentiality Agreement also addresses the
Company’s ownership of intellectual property generated during your employment at
the Company. You are required to the best of your ability, to hold such
information as confidential even after an event terminating your employment with
the Company.     11.   Confidentiality of Terms. You agree to follow the
Company’s strict policy that employees must not disclose, either directly or
indirectly, any information, including any of the terms if this agreement,
regarding salary, bonuses, or stock purchase or option allocations to any
person, including other employees of the Company; provided, however that you may
discuss such terms with members of your immediate family and any legal, tax, or
accounting specialists who provide you with individual, legal, tax or accounting
advice.

I am delighted to be able to extend you this offer and look forward to working
with you. To indicate your acceptance of this offer, please sign and date this
letter in the space provided below and return it to me.

          Very truly yours,

PDF SOLUTIONS, INC.
    /s/ John K. Kibarian     JOHN K. KIBARIAN    Chief Executive Officer and
President     

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ACKNOWLEDGMENTS & ACCEPTANCE
I accept this employment offer with the understanding that it is not a contract
for a fixed term or specified period of time. I understand that my employment is
voluntary, (“At Will”), and can be terminated either by me or by the company at
any time, with or without notice and with or without cause. The provisions
stated above supersede all prior representations or agreements, whether written
or oral. This offer letter may not be modified or amended except by a written
agreement, signed by the company and me.
THE FOREGOING TERMS AND CONDITIONS ARE HEREBY AGREED TO AND ACCEPTED:

                 
Signed:
  /s/ Joy Leo       Date:   7/14/08
 
               
 
               
Print Name:
  Joy Leo            
 
               

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