Exhibit 10.2


 


[FormFactor Letterhead]


 


May 19,
2010


 


Richard
DeLateur


[ADDRESS]


 


Dear
Rich,


 


By this Letter Agreement, we welcome the opportunity to offer you a
salaried, exempt position with FormFactor, Inc. (the “Company”) as the
Company’s Chief Financial Officer.  Your
employment shall begin on May 19, 2010 (the “Start Date”).


 


In your capacity as Chief Financial Officer, you will report to the
Company’s Chief Executive Officer and Board of Directors (the “Board”), and you
will receive an annual salary of $355,000, which will be paid bi-weekly in
accordance with, and subject to, the Company’s normal payroll procedures.  The annual compensation specified in this
paragraph, together with any increases in such compensation that the Company
may grant from time to time, is referred to in this Letter Agreement as “Base
Compensation.”  Your primary work place
shall be at the Company’s corporate headquarters in Livermore, California.


 


You shall be eligible to participate in the Company’s Employee
Incentive Plan.  Your target bonus is 80%
of base salary with the opportunity to earn 200% of base salary based on
extraordinary achievement of objectives, which percentages may be changed by the
Company from time to time.  You will be
allowed to participate in the establishment of performance objectives under the
Employee Incentive Plan.  However, the
Company shall retain final discretion on such objectives.  Your bonus for the first half of fiscal year
2010, if any, will be prorated based upon your start date through the end of June 2010.  Payment for each year’s bonus actually earned
shall be made to you within forty-five (45) days following the Company’s fiscal
year end, but in any event no later than the fifteenth day of the third month
after the end of the applicable fiscal year.


 


During your employment, you shall be authorized to incur necessary and
reasonable travel, entertainment and other business expenses in connection with
your duties hereunder.  The Company shall
promptly reimburse you for such expenses upon presentation of appropriate
supporting documentation, all in accordance with the Company’s generally
applicable policies.


 


As long as you remain a regular full-time employee of the Company, you
are eligible to receive certain employee benefits that are offered to our
regular full-time employees, which may from time to time change at the Company’s
discretion. These currently include:


 


·   Medical, Dental and Vision Insurance
Benefits


 


·   Short-Term and Long-Term Disability
Insurance Coverage


 

















 


·   Group Life Insurance


 


·   Paid Time-Off


 


·   401k Plan


 


·   Section 125 Flex Spending Plan


 


·   Employee Assistance Program


 


·   Employee Stock Purchase Plan


 


Coverage for the above-mentioned medical, dental, vision, disability
and life insurance benefits begin on your Start Date.  Dependent coverage is also available through
these plans.  Employee and dependent
contributions to the plans are outlined in our employee benefits guide.  Further, you and, to the extent applicable,
your dependents, will be allowed to participate in all benefits, plans and
programs, including improvements or modifications thereof, that are now, or may
hereafter be, offered to other executive employees of the Company.  You will be entitled to 15 days of paid
vacation annually.


 


On the Start Date, the Compensation Committee of the Board shall grant
to you, pursuant to the Company’s 2002 Equity Incentive Plan, as amended, an
equity award equal to $1,200,000.  This
equity award shall be granted in 50% nonqualified stock options (“NSOs”) and
50% restricted stock units (“RSUs”).  The
number of NSOs and RSUs shall be determined by first determining the number of
NSOs equal to $1,200,000 utilizing a Black-Sholes value on the date of grant
and utilizing a ratio of 2.5 NSOs to 1 RSU. 
For example, assuming a stock price of $14.00 and a Black-Scholes value
of $6.3081 on the date of grant, you would be entitled to a grant of 95,116
NSOs and 38,046 RSUs ($1,200,000/$6.3081 = 190,232/2 = 95,116 NSOs and
95,116/2.5 = 38,046 RSUs).  The per share
exercise price of the NSOs shall be equal to the fair market value of a share
of Company common stock on the date of grant which will be awarded in
compliance with the Company’s standard policy for new hires.  The NSOs shall vest monthly in equal
installments over a two (2)year period subject to your continued employment
with the Company.  The RSUs shall vest
annually in equal installments over a two (2) year period subject to your
continued employment with the Company.  The
other terms and conditions of the NSOs and RSUs shall be subject to the Company’s
standard forms utilized under the 2002 Equity Incentive Plan.  You will be eligible for subsequent annual
equity grants at such times and in such amounts as determined by the
Compensation Committee of the Board in its sole discretion.


 


You should be aware that your employment with the Company is for no
specified period and constitutes at will employment.  As a result, you are free to resign at any
time, for any reason or for no reason.  Similarly,
the Company is free to conclude its employment relationship with you at any
time and for any reason, subject to the terms of this Letter Agreement.


 


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If there is an Involuntary Termination (as defined below) of your
employment with the Company, subject to your execution, delivery and
non-revocation of the release substantially in the form of Exhibit A (the “Release”)
within forty-five (45) days from your “separation from service” (within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”)), the Company shall pay you cash in an amount equal to one (1) times
your then annual Base Compensation.  In
addition, you shall receive a cash payment equal to a pro-rata portion of the
annual bonus for the fiscal year of your termination of employment, with the
pro-rata amount based on your then annual Base Compensation, your then target
bonus percentage and the number of calendar days that you were an employee
during such fiscal year divided by 365.  Subject
to the terms of the Release, all amounts payable under this paragraph shall be
made in a single lump sum payment to you within sixty (60) days after your
separation from service.  You shall also
receive the benefits provided in the paragraphs below, if applicable, and all
such payments and benefits shall not be subject to mitigation or offset (except
as specified below).


 


If you are entitled to receive the payments above, and if you elect to
continue your (and your dependents) health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)
following your separation from service, then the Company shall pay your monthly
premium under COBRA until the earliest of (i) twelve (12) months after
your separation from service date, (ii) the expiration of your
continuation coverage under COBRA or (iii) the date when you commence
receiving substantially equivalent health insurance coverage in connection with
new employment or other source.


 


If you are entitled to receive the payments above, then you will become
immediately vested in an additional number of shares of Company common stock
under all of your outstanding compensatory equity as if you had continued in
employment for twelve (12) additional months following your separation from
service.  Further, you will have twelve (12)
months following your separation from service to exercise any vested stock
options not to exceed the expiration date of such options.


 


In the event that the Company determines that any of the benefits
payable hereunder would violate Section 409A of the Code (“Section 409A”),
then the Company and you shall agree to implement adjustments needed to comply
with Section 409A (to the minimum extent necessary to avoid the imposition
of any excise taxes and without reducing the absolute value of such benefits);
provided, however, that if the payment of any amount or benefit hereunder would
be subject to additional taxes and interest under Section 409A because the
timing of such payment is not delayed as provided in Section 409A(a)(2)(B)(i) and
the regulations thereunder, then any such payment or benefit that you would
otherwise be entitled to during the first six (6) months following the
date of your severance from service shall be accumulated and paid or provided,
as applicable, on the date that is six (6) months after the date of your
termination of employment (or if such date does not fall on a business day of
Company, the next following business day of Company), or such earlier date upon
which such amount can


 


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be
paid or provided under Section 409A without being subject to such additional
taxes and interest.  If the provisions of
the preceding sentence become applicable such that the payment of any amount is
delayed, any payments that are so delayed shall accrue interest on a
non-compounded basis, from the date of your severance from service to the
actual date of payment, at the prime or base rate of interest announced by
Wells Fargo & Company (or any successor thereto) at its principal
office in San Francisco on the date of such severance (or the first business
day following such date if such severance does not occur on a business day) and
shall be paid in a lump sum on the actual date of payment of the delayed
payment amount.  You hereby agree to be
bound by Company’s determination of its “specified employees” (as such term is
defined in Section 409A) in accordance with any of the methods permitted
under the regulations issued under Section 409A.


 


For all purposes under this Letter Agreement, “Cause” shall mean any of
the following committed by you:


 


(i)            Repeated failure to
follow the reasonable and lawful directions of the Chief Executive Officer
and/or the Board; or


 


(ii)           Conviction of a
felony (or a plea of guilty or nolo contendere by you to a felony); or


 


(iii)          Acts of fraud,
dishonesty or misappropriation committed by you and intended to result in
personal enrichment at the expense of the Company; or


 


(iv)          Willful misconduct
by you in the performance of your material duties required by this Letter
Agreement which is likely to damage the Company’s financial position or
reputation; or


 


(v)           A material breach of
this Letter Agreement.


 


The foregoing is an exclusive list of the acts or omissions that shall
be considered “Cause” for the termination of your employment by the
Company.  With respect to the acts or
omissions set forth in clauses (i), (iii), (iv) and (v) above, (x) the
Board shall provide you with thirty (30) days advance written notice detailing
the basis for the termination of employment for Cause, (y) during the thirty
(30) day period after you have received such notice, you shall have an
opportunity to cure such alleged Cause events and to present your case to the
full Board (with the assistance of your own counsel) before any termination for
Cause is finalized by a vote of a majority of the Board and (z) you shall
continue to receive the compensation and benefits provided by this Letter
Agreement during the thirty (30) day cure period.  In addition, no act or failure to act by you
shall be treated as willful or intentional for purposes under this Letter
Agreement if performed in good faith with the reasonable belief that the action
or inaction was in the best interest of the Company.


 


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For all purposes under this Letter Agreement, “Involuntary Termination”
shall mean any of the following:


 


(i)            termination of your
employment by the Company without Cause (including death or permanent
disability); or


 


(ii)           your resignation of
employment for Good Reason (as defined below).


 


For all purposes under this Letter Agreement, “Good Reason” shall mean
any of the following that occur without your prior written consent:


 


(i)            the relocation of
your primary work location by the Company by more than fifty (50) miles from
your primary work location as specified above; or


 


(ii)           any material reduction
of your Base Compensation and “material” shall mean more than 10%; or


 


(iii)          any material
reduction or diminution of your duties, authority or responsibilities by the
Company of your employment; or


 


(iv)          the Company’s
material breach of this Letter Agreement; or


 


(v)           the failure of any
successor of the Company to expressly in writing assume the Company’s
obligations under this Letter Agreement at Employee’s written request (except
where such assumption occurs by operation of law).


 


provided, in each case, that you shall have provided the
Company with written notice within ninety (90) days of the initial existence of
the condition that would be Good Reason and an opportunity to cure such breach
during a thirty (30) day period.


 


The Company will enter in to a change of control agreement with you
after you begin employment  with the Company.  The terms and conditions of such change of
control agreement shall be consistent with the change of control agreements
entered into with the Company’s other key management personnel.


 


I have enclosed our standard Agreement Regarding Employment,
Confidential Information, Invention Assignment, and Arbitration as a condition
of your employment. If you accept this offer, please return a signed copy to me
prior to your Start Date.  That Agreement
requires, among other things, that in the event of any dispute or claim
relating to or arising out of our employment relationship, you and the Company
agree that all such disputes shall be fully and finally resolved by final and
binding arbitration conducted by the American Arbitration Association in
Alameda County, California.  However, the
Company and you shall continue to have the right to seek judicial relief in the
form of injunctive and/or equitable relief, including but not limited to relief
for threatened or actual misappropriation of trade secrets or other unfair
competition.


 


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Additionally, you will be required to comply at all times with the
Company’s various rules, policies and procedures, including those set forth in
our Employee Handbook, our Statement of Corporate Code of Business Conduct (“Corporate
Code”), and our Statement of Policy regarding Insider Trading (“Insider Trading
Policy”).  Copies of these three
documents, and all our policies and procedures will be available in hard copy
and on inForm - our internal intranet site.  Within thirty (30) days of the Start Date, you
will be required to provide the Company with signed acknowledgements relating
to the Employee Handbook, the Corporate Code and the Insider Trading Policy.  You should understand that, while referenced
in this Letter Agreement, the Company rules, policies and procedures are not
incorporated by reference into this Letter Agreement, and they can be changed,
replaced or withdrawn at any time at the discretion of the Company upon notice
to you.  Further, the Company will enter
into an indemnification agreement with you in substantially the same the form
as has been used for other Company directors and/or officers.


 


To indicate your acceptance of the Company’s offer, please sign and
date this Letter Agreement in the space provided below and return it to me.  A duplicate original is enclosed for your
records.  This Letter Agreement, along
with the agreement relating to proprietary rights between you and the Company,
set forth the terms of your employment with the Company and supersede any prior
representations or agreements, whether written or oral.  This Letter Agreement may not be modified or
amended except by a written agreement, signed by an officer of the Company and
by you.


 


Rich, we look forward to your favorable reply and to a productive and
exciting working relationship.


 


 


Sincerely,


FormFactor, Inc.


 


	
  /s/
  G. Carl Everett, Jr.

  	
   

  
	
  G.
  Carl Everett, Jr.

  	
   

  
	
  Chief
  Executive Officer

  	
   

  



 


 


ACCEPTED AND AGREED TO this
19th day of May, 2010


 


 


	
  /s/ Richard DeLateur

  	
   

  
	
  Richard DeLateur

  	
   

  



 


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