<PAGE>
                                                                   Exhibit 10.12


                              EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated March 10, 2000 ("Employment Agreement") by and
between MKS Instruments, Inc., a Massachusetts corporation (the "Corporation"),
and Donald Smith of Belmont, MA (the "Employee").

WHEREAS, the Corporation and the Employee desire to provide for the employment
of the Employee by the Corporation:

NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the Corporation and the Employee hereby agree as follows:

     (1) TERM OF EMPLOYMENT: The Corporation hereby employs the Employee, and
the Employee hereby accepts employment with the Corporation, for a period
commencing as of March 10, 2000 and continuing from month to month thereafter
until terminated as provided in this Section (1). The Corporation may terminate
the employment of the Employee under this Employment Agreement at any time after
September 10, 2000 by giving written notice to the Employee stating its election
to terminate the employment of the Employee under this Employment Agreement. The
employment of the Employee under this Employment Agreement shall terminate six
(6) months after the date of receipt by the Employee of such notice; provided,
however, that the employment of the Employee under this Employment Agreement is
subject to prior termination as hereinafter provided in Section (5). The
Employee may terminate his employment with the Corporation under this Employment
Agreement at any time after September 10, 2000 by giving written notice to the
Corporation stating his election to terminate his employment under this
Employment Agreement, provided, however, that the employment of the Employee
under this Employment Agreement is subject to prior termination as hereinafter
provided in Section (5).

The employment of the employee under this Employment Agreement shall terminate
between twelve (12) and six (6) months after the date of receipt by the
Corporation of such notice as set forth below:

IF NOTICE IS RECEIVED BY THE            DATE OF TERMINATION OF
CORPORATION:                            EMPLOYMENT OF EMPLOYEE:
--------------------------------        --------------------------------------
Between September 10, 2000              Twelve (12) months after date of receipt
and October 9, 2000                     of written notice by Corporation

<PAGE>


Between October 10, 2000 and           Eleven (11) months after date of receipt
November 9, 2000                       of written notice by Corporation.

Between November 10, 2000 and          Ten (10) months after date of receipt of
December 9, 2000                       written notice by Corporation

Between December 10, 2000 and          Nine (9) months after date of receipt of
January 9, 2001                        written notice by Corporation

Between January 10, 2001 and           Eight (8) months after date of receipt of
February 9, 2001                       written notice by Corporation

Between February 10, 200l and          Seven (7) months after date of receipt of
March 9, 2001                          written notice by Corporation

                                       Six (6) months after date of receipt of
Anytime on or after March 10, 2001     written notice by Corporation


     (2) CAPACITY: The Employee shall be employed by the Corporation in the
position of Vice President and Chief Technical Officer and shall perform such
duties as shall be assigned to Employee by the President and Chief Operating
Officer of the Corporation, or his designee.

     (3) EXTENT OF SERVICES: During the term of employment of the Employee under
this Employment Agreement, the Employee shall devote his full time to, and use
his best efforts in the furtherance of, the business of the Corporation and
shall not engage in any other business activity which interferes in any way with
the Employee's performance of his duties to the Corporation, whether or not such
business activity is pursued for gain or any other pecuniary advantage, without
the prior written consent of the Corporation.

     (4) COMPENSATION: In consideration of the services to be rendered by the
Employee under this Employment Agreement, the Corporation agrees to pay, and the
Employee agrees to accept, the following compensation:

          (a) BASE SALARY: A base salary at the rate of $150,000 per year for
the term of employment of the Employee under this Employment Agreement. The base
salary shall be payable in equal biweekly installments subject to usual
withholding requirements. This salary will be reviewed annually according to the
established practices of the company. No overtime pay will be paid to the
Employee by the Corporation.


                                                                          Page 2

<PAGE>


          (b) INCENTIVE: For each calendar year of the corporation during the
term of employment of the Employee under this Employment Agreement, the Employee
shall be entitled to participate in a Management Incentive Program pursuant to
the terms of which the Employee may receive compensation in addition to his base
salary if the Corporation attains its consolidated financial goals during such
calendar year of the Corporation. The "targeted" additional compensation goal
for the Employee shall be 40% of his earnings. The Management Incentive Program,
including the consolidated financial goals established by the Corporation for
the calendar year and the formula to be used to determine the payment of amounts
under the Management Incentive Program, will be communicated to the Employee in
writing prior to the beginning of each calendar year of the Corporation.

          If there shall be any disagreement between the Corporation and the
Employee as to the calculation of the Management Incentive Bonus in any calendar
year of the Corporation during the term of employment of the Employee under this
Employment Agreement, the decision of the independent Public Accounting firm of
the corporation as to the amount of the Management Incentive Bonus of the
Corporation shall be conclusive and binding on the corporation and the Employee.
The Employee shall be entitled to inspect any certificate of such independent
public accounting firm as to the calculation of the Management Incentive Bonus
of the Corporation in any calendar year of the Corporation during the term of
employment of the Employee under this Employment Agreement.

          Incentive payments shall be payable to the Employee on or before March
31 after the end of each calendar year of the Corporation during the term of
employment of the Employee under this Employment Agreement.

          The Employee will not receive any payment under the Management
Incentive Program for any calendar year in which the Employee is not actively
employed on the last day of that calendar year, but the Employee need not be
actively employed at the time the payment is actually made.

          (c) MKS INSTRUMENTS PROFIT SHARING AND RETIREMENT SAVINGS PLAN:
The Employee shall be eligible to become a participant under the profit sharing
plan of the Corporation on fulfilling the conditions set forth in the MKS
Instruments Profit Sharing and Retirement Savings Plan of the Corporation.

          (d) VACATION: The Employee shall be entitled to an annual vacation
leave of 20 days at full pay during each year of this Employment Agreement,
subject to the Employee arranging such vacation so as not to affect adversely
the ability of the Corporation to transact its necessary business. Vacation
shall accrue at the rate of 13.33 hours per month.


                                                                          Page 3

<PAGE>

          (e) LIFE INSURANCE: The Corporation shall provide, and pay all of the
premiums for, term life insurance in the amount of $250,000 for the Employee
during the term of employment of the Employee under this Employment Agreement in
accordance with the term life insurance plan of the Corporation.

          (f) MEDICAL/DENTAL INSURANCE: The Corporation shall provide group
medical/dental insurance for the Employee and his eligible family members under
the Plans of the Corporation applicable to the Employee during the term of
employment of the Employee under this Employment Agreement. In addition, the
Corporation shall provide to the Employee a supplemental medical/dental plan
that will reimburse the Employee for the cost of any medically necessary
services not paid under the primary medical/dental insurance plans, subject to
an annual limit of $2,500.

          (g) OTHER BENEFITS: The Corporation shall provide other benefits for
the employee under the Plans of the Corporation applicable to the Employee
during the term of employment of the Employee under this Employment Agreement.

     (5) TERMINATION: The employment of the Employee under this Employment
Agreement shall terminate:

          (a) On the expiration of the period of employment as provided in
Section (1).

          (b) Upon the death of the Employee.

          (c) At the election of the Corporation (i) if the Employee shall fail,
or refuse, to perform the services required of him under this Employment
Agreement, or (ii) if the Employee shall fail, or refuse, to perform the other
covenants and agreements required of him under this Employment Agreement, or
(iii) "for cause", which term shall mean acts or actions detrimental to the best
interests of the Corporation.

     (6) PAYMENT UPON TERMINATION:

          (a) If the employment of the Employee is terminated on the expiration
of the period of employment as provided in Section (1), the Employee shall not
be entitled to any compensation, and the Corporation shall have no obligation to
pay the employee any compensation, except as is provided in this Employment
Agreement.

                                                                          Page 4

<PAGE>


          (b) If the employment of the Employee is terminated by death, the
Corporation shall pay to the estate of the Employee the compensation which would
otherwise be payable to the Employee at the end of the month in which his death
occurs.

          (c) In the event the employment of the Employee is terminated at the
election of the Corporation pursuant to Section (5) (c) hereof, the Employee
shall only be entitled to his base salary through the last day of actual
employment or the date of termination, whichever is earlier..

     (7) TRADE SECRETS: The Employee covenants and agrees that he will
communicate to the Corporation, and will not divulge or communicate to any
other person, partnership, corporation or other entity without the prior written
consent of the Corporation, any trade secrets of the Corporation or confidential
information relating to the business of the Corporation or any one connected
with the Corporation, and that such trade secrets and confidential information
shall not be used by the Employee either on his own behalf or for the benefit of
others or disclosed by the Employee to any one, except to the Corporation,
during or after the term of employment of the Employee under this Employment
Agreement.

     (8) INVENTIONS AND PATENTS:

          (a) The Employee shall make prompt full disclosure in writing to the
Corporation of all inventions, improvements and discoveries, whether or not
patentable, which the Employee conceives, devises, makes, discovers, develops,
perfects or first reduces to practice, either alone or jointly with others,
during the term of employment of the Employee under this Employment Agreement,
which relate in any way to the fields, products or business of the Corporation,
including development and research, whether during or out of the usual hours of
work or on or off the premises of the Corporation or by use of the facilities of
the Corporation or otherwise and whether at the request or suggestion of the
Corporation or otherwise (all such inventions, improvements and discoveries
being hereinafter called the "Inventions"), including any Inventions, whether or
not patentable, conceived, devised, made, discovered, developed, perfected or
first reduced to practice by the Employee after the employment of the Employee
under this Employment Agreement is terminated if the Inventions were conceived
by the Employee during the term of employment of the Employee under this
Employment Agreement. Any Inventions, whether or not patentable which relate in
any way to the fields, products or business of the Corporation, conceived,
devised, made, discovered, developed, perfected or first reduced to practice by
the Employee within six (6) months of the date termination of the


                                                                          Page 5

<PAGE>


employment of the Employee under this Employment Agreement shall be conclusively
presumed to have been conceived during the term of employment of the Employee
under this Employment Agreement.

          (b) The Employee agrees that the Inventions shall be the sole and
exclusive property of the Corporation.

          (c) The Employee agrees to assist the Corporation and its nominees in
every reasonable way (entirely at its or their expense) to obtain for the
benefit of the Corporation letters patent for the Inventions and trademarks,
trade names and copyrights relating to the Inventions, and any renewals,
extensions or reissues thereof, in any and all countries, and agrees to make,
execute, acknowledge and deliver, at the request of the Corporation, all written
applications for letters patent, trademarks, trade names and copyrights relating
to the Inventions and any renewals, extensions or reissues thereof, in any and
all countries, and all documents with respect thereto, and all powers of
attorney relating thereto and, without further compensation, to assign to the
Corporation or its nominee all the right, title and interest of the Employee in
and to such applications and to any patents, trademarks, trade names or
copyrights which shall thereafter issue on any such applications, and to
execute, acknowledge and deliver all other documents deemed necessary by the
Corporation to transfer to or vest in the Corporation all of the right, title
and interest of the Employee in and to the Inventions, and to such trademarks,
trade names, patents and copyrights together with exclusive rights to make, use,
license and sell them throughout the world.

          (d) The Employee agrees that even though his employment is terminated
under this Employment Agreement he will, at any time after such termination of
employment, carry out and perform all of the agreements of Subsections (8) (a)
and (8) (c) above, and will at any time and at all times cooperate with the
Corporation in the prosecution and/or defense of any litigation which may arise
in connection with the Inventions, provided, however, that should such services
be rendered after termination of employment of the Employee under this
Employment Agreement, the Employee shall be paid reasonable compensation on a
per diem basis.

          (e) The Employee agrees to make and maintain adequate and current
written records of all Inventions in the form of notes, sketches, drawings, or
reports relating thereto, which records shall be and remain the property of, and
available to, the Corporation at all times.

                                                                          page 6

<PAGE>


          (f) The Employee agrees that he will, upon leaving the employment of
the Corporation, promptly deliver to the Corporation all originals and copies of
disclosures, drawings, prints, letters, notes, and reports either typed,
handwritten or otherwise memorialized, belonging to the Corporation which are
in his possession or under his control and the Employee agrees that he will not
retain or give away or make copies of the originals or copies of any such
disclosures, drawings, prints, letters, notes or reports.

     (9) PROPERTY OF CORPORATION: All files, records, reports, documents,
drawings, specifications, equipment, and similar items relating to the business
of the Corporation, whether prepared by the Employee or otherwise coming into
his possession, shall remain the exclusive property of the Corporation and
shall not be removed by the Employee from the premises of the Corporation under
any circumstances whatsoever without the prior written consent of the
Corporation. Provided, however, the Employee may remove such files and other
items from the premises of the Corporation if required to do so during the
course of his duties or if required to work at home.

     (10) NON-COMPETITION:

          (a) During the term of employment of the Employee under this
Employment Agreement, and during a period of one (1) year after termination of
employment of the Employee under this Employment Agreement without regard to the
cause of termination of employment and whether or not such termination of
employment was caused by the Employee or by the Corporation, (i) the Employee
shall not engage, either directly or indirectly, in any manner or capacity, in
any business or activity which is competitive with any business or activity
conducted by the Corporation; (ii) the Employee shall not work for or employ,
directly or indirectly, or cause to be employed by another, any person who was
an employee, officer or agent of the Corporation or of any of its subsidiaries
at any time during a period of twelve (12) months prior to the termination of
the employment of the Employee under this Employment Agreement nor shall the
Employee form any partnership with, or establish any business venture in
cooperation with, any such person which is competitive with any business or
activity of the Corporation; (iii) the Employee shall not give, sell or lease
any goods or services competitive with the goods or services of the Corporation
or its subsidiaries to any person, partnership, corporation or other entity who
purchased goods or services from the Corporation or its subsidiaries within one
(1) year before the termination of the employment of the Employee under this
Employment Agreement; (iv) the Employee shall not have any financial interest,
or participate as a director, officer, stockholder, partner, employee,
consultant or otherwise, in any

                                                                          Page 7


<PAGE>


corporation, partnership or other entity which is competitive with any business
or activity conducted by the Corporation.

          (b) The Corporation and the Employee agree that the services of the
Employee are of a personal, special, unique and extraordinary character, and
cannot be replaced by the Corporation without great difficulty, and that the
violation by the Employee of any of his agreements under this Section (10) would
damage the goodwill of the Corporation and cause the Corporation irreparable
harm which could not reasonably or adequately be compensated in damages in an
action at law, and that the agreements of the Employee under this Section (10)
may be enforced by the Corporation in equity by an injunction or restraining
order in addition to being enforced by the Corporation at law.

          (c) In the event that this Section (10) shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too long a period of time or over too great a range of activities, it shall
be interpreted to extend only over the maximum period of time or range of
activities as to which it may be enforceable.

     (11) NOTICE: Any and all notices under this Employment Agreement shall be
in writing and, if to the Corporation, shall be duly given if sent to the
Corporation by registered or certified mail, postage prepaid, return receipt
requested, at the address of the Corporation set forth under its name below or
at such other address as the Corporation may hereafter designate to the Employee
in writing for the purpose, and if to the Employee, shall be duly given if
delivered to the Employee by hand or if sent to the Employee by registered or
certified mail, postage prepaid, return receipt requested, at the address of the
Employee set forth under his name below or at such other address as the Employee
may hereafter designate to the Corporation in writing for the purpose.

     (12) ASSIGNMENT: The rights and obligations of the Corporation under this
Employment Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Corporation. The rights and obligations of the
Employee under this Employment Agreement shall inure to the benefit of, and
shall be binding upon, the heirs, executors and legal representatives of the
Employee.

     (13) ENTIRE AGREEMENT AND SEVERABILITY

          (a) This Employment Agreement and the MKS offer of employment letter
dated

                                                                          Page 8

<PAGE>


March 10, 2000 (and the documents referenced herein) supersede any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of the Employee by the Corporation and contain all of the
covenants and agreements between the parties with respect to such employment.
Each party to this Employment Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or any one acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Employment Agreement or referenced herein, or as amended, shall be valid and
binding. Any modification of this Employment Agreement will be effective only if
it is in writing signed by both parties to this Employment Agreement.

          (b) If any provision in this Employment Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way.

          (c) All pronouns used herein shall include the masculine, feminine,
and neuter gender as the context requires.

     (14) GOVERNING LAW: This Employment Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of The Commonwealth
of Massachusetts without reference to conflict of laws principles.

IN WITNESS WHEREOF, the parties hereto have executed, in the Commonwealth of
Massachusetts, this Employment Agreement as a sealed instrument, all as of the
day, month and year first written above.

MKS INSTRUMENTS, INC.

By: /s/ Peter Younger
    ---------------------------------------
    Peter Younger
    President and Chief Operating Officer
    6 Shattuck Road, Andover, MA 01810



    /s/ Donald Smith
    ---------------------------------------
    Donald Smith


Address: 10 Village Hill Road
         ----------------------------------
         Belmont, MA 02478
         ----------------------------------

                                                                          Page 9


<PAGE>
                        AMENDMENT TO EMPLOYMENT AGREEMENT

         This Amendment (the "Amendment") to Employment Agreement is made this
21st day of February, 2004 by and between MKS Instruments, Inc., a Massachusetts
corporation ("MKS") and Donald Smith of Belmont, Massachusetts (the "Employee").

                                    RECITALS

         WHEREAS, MKS and the Employee have previously entered into an
Employment Agreement dated March 10, 2000 (the "Employment Agreement");

         WHEREAS, MKS and the Employee desire to provide for the Employee's
continuing services while the Employee establishes a business unrelated to the
business activities carried on or currently under development by MKS; and

         WHEREAS, MKS and the Employee wish to modify certain limited provisions
of the Employment Agreement;

         NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt whereof are hereby acknowledged, the parties hereby agree as follows:

         1. Ratification of Employment Agreement. Except as specifically set
forth in this Amendment, the parties hereby ratify and confirm in all respects
all of the provisions of the Employment Agreement.

         2. Employment and Extent of Services. Notwithstanding the provisions of
Section 3 of the Employment Agreement, the parties acknowledge that beginning
the date of this Amendment, the Employee may devote up to 20 hours per week in
connection with the establishment of the New Business (as defined below) and the
development of technologies, business opportunities, and other development plans
associated with the New Business. For the purposes of this Amendment, the term
"New Business" shall mean the development of lithography technologies for use in
the semiconductor industry and any other businesses that do not compete with the
MKS Current Business (as defined below). For purposes of this Amendment, the
"MKS Current Business" shall mean the business of MKS relating to products and
technologies now or previously sold, demonstrably under development by MKS as of
the date of this Amendment or included on the latest respective versions of the
MKS Technology Roadmaps for each of the MKS product groups and the Advanced
Technology group prior to the date of this Amendment. The Employee may terminate
his employment with MKS by providing MKS with thirty (30) days notice, which
notice may be provided at any time on or after March 31, 2004, and MKS may
terminate the Employee's employment at any time with thirty (30) days notice,
provided that such employment may be terminated with less notice upon the mutual
agreement of the parties. During his employment in accordance with the
Employment Agreement as amended hereby (including any termination notice
period), (1) the Employee shall be eligible for all benefits then provided to
full-time MKS employees and all options held by the Employee shall continue to
vest in the normal
<PAGE>
course as if the Employee were employed on a full-time basis by MKS and (2) the
Employee will be paid a rate of one-half of his current base salary.

         3. Access following termination. Following termination of employment,
the Employee agrees to be available (1) without charge to MKS for a maximum of
eight hours per month for a period of six months to allow for the continuity of
MKS' business, and (2) with reasonable compensation and reimbursement of
expenses for any services provided by the Employee to MKS pursuant to Section
8(d) of the Employment Agreement.

         4. Trade Secrets and Inventions. The provisions of Sections 7 and 8 of
the Employment Agreement shall continue to apply solely as they relate to the
MKS Current Business.

         5. Non-Competition. The provisions of Section 10(a) of the Employment
Agreement are hereby modified as follows:

         (a)      The restrictions set forth in Section 10(a)(i) as they relate
                  to the MKS Current Business are hereby extended from one (1)
                  year to two (2) years after termination of employment;

         (b)      The restrictions set forth in Section 10(a)(ii) are hereby
                  extended from one (1) year to three (3) years after
                  termination of employment, provided that MKS may, at its sole
                  discretion, waive such restrictions on a case-by-case basis
                  with its prior written consent.

         (c)      The restrictions set forth in Section 10(a)(iii) and (iv)
                  continue to apply as they relate to the MKS Current Business.

         In witness whereof, the parties have executed this Amendment as of the
date first mentioned above.

MKS INSTRUMENTS, INC.                              EMPLOYEE


/s/ John R. Bertucci                               /s/ Donald K. Smith
--------------------                               -----------------------------
By:  John R. Bertucci                              Donald Smith
     President