Exhibit 10.16   PDF Solutions, Inc. 333 West San Carlos Street, Suite 700, San Jose, CA 95110 USA Telephone: 408 280 7900, Fax: 408
280 7915 www.pdf.com  December 29,
2008  Keith Jones  Dear Keith:  You
and PDF Solutions, Inc. (PDF or the Company),
signed an offer letter, dated October 10,
2005 (the Offer Letter).  This letter
agreement amends the Offer Letter in order for the cash severance payments
under the Offer Letter to be exempt from or comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the Code).  Except as otherwise amended in this letter
agreement, the Offer Letter remains in full force and effect.  This letter agreement amends and restates Section 5
of the Offer Letter to read in its entirety as follows:  5.           Termination.  In the
event that you experience an
involuntary separation, as defined in Treasury Regulation 1.409A-1(h) (Separation),
by the Company for a reason that is other than for (i) cause, (ii) death
or (iii) Permanent Disability (as defined below), provided that you
satisfy the Conditions (as defined below) within the Deadline (as defined
below), then the Company will provide you with the following severance:  (i) your base salary for a period of six
(6) months following your Separation (the Salary Continuation Period),
which will be payable at the then regular payroll rates over the Salary
Continuation Period in accordance with the Companys standard payroll schedule,
commencing on the Companys first regular payroll date that is at least five (5) days
after the Conditions have been satisfied and the Releases effective date; (ii) monthly
premiums to continue your (and, if applicable, your eligible spouse and
dependents) Company health insurance under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) for the period equal in length to the Salary
Continuation Period, commencing on the first day that you (and your dependents)
lose health care coverage under the Companys health plans; provided that you
(or, if applicable, your eligible spouse and dependents) timely elect to
continue your health insurance under COBRA and are, and continue to be,
eligible for such benefits; and, (iii) acceleration of the vesting of all
of your stock options outstanding as of the date of your Separation such that you
vest, effective as of the date of your Separation, in the number of shares you
would have vested in had you continued to provide services to the Company for
an additional six (6) months


following your Separation.  As a
condition to receiving the benefits stated in this paragraph, you hereby agree
to release the Company from potential claims through the date of Separation and
to return all Company property within
thirty (30) days following the Separation (collectively, the Conditions),
and you will be required, and you hereby agree, to sign a standard general
release of claims in a form prescribed by the Company (the Release) within thirty (30) days following the
Separation (the Deadline).  For purposes of Code Section 409A, each
payment that is paid under the preceding paragraph is hereby designated as a
separate payment.  Notwithstanding
anything to the contrary, each ofthe payments provided
in connection with your Separation is intended to be exempt from Code Section 409A
pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) and to
the extent it is exempt pursuant to such section, it will in any event be paid no later than the last day of your
second taxable year following the taxable year in which your Separation has
occurred; provided that, to the extent that any
of such payments and any other payments paid to you in connection with your Separation does not
qualify to be exempt from Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) or
otherwise exceeds the limit set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A) or
any similar limit promulgated by the Treasury or the IRS, the portion of the
payments that does not qualify or otherwise exceeds such limit, as determined
by the Company in its sole discretion, will be paid by no later than the
fifteenth (15th) day of the third (3rd) month following the end of your first
(1st) tax year in which your Separation occurs, or, if later, the fifteenth
(15th) day of the third (3rd) month following the end of the Companys first
(1st) tax year in which your Separation occurs, as provided in Treasury
Regulation Section 1.409A-1(b)(4).  Notwithstanding
the above, if any of the paymentsprovided in connection with your Separation
does not qualify for any reason to be exempt from Code Section 409A pursuant to
Treasury Regulation Section 1.409A-1(b)(9)(iii) or Treasury
Regulation Section 1.409A-1(b)(4) and you are deemed by the
Company at the time of your Separation to be a specified employee, as defined
in Code Section 409A, each such payment will not be made or commence until
the date which is the first (1st) business day of the seventh (7th) month after
your Separation and the installments that otherwise would have been paid during
the first six (6) months after your Separation will be paid in a lump sum
on the first (1st) business day of the seventh (7th) month after your
Separation. Such deferral will only be effected to the extent required to avoid
adverse tax treatment to you, including (without limitation) the additional
twenty percent (20%) federal tax for which you would otherwise be liable under Section 409A(a)(1)(B) of
the Code in the absence of such deferral.  For purposes of
this letter agreement, Permanent 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.  2


This amendment to the Offer Letter may be
executed by fax copies and scanned images (exchanged via electronic mail) in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.  To indicate your acceptance of this amendment
to the Offer Letter, please sign and date this letter in the space provided
below and return it to me.  Very truly yours,PDF SOLUTIONS, INC.John K. KibarianChief Executive
  Officer & PresidentTHE FOREGOING TERMS AND CONDITIONSARE HEREBY AGREED TO AND ACCEPTED:Signed:Print Name: Keith A. JonesDate:
  December         , 2008  3