Notice of Stock Option Award and Stock Option Agreement - Pat Brady



 Exhibit 10.5 
 CREDENCE SYSTEMS CORPORATION 
 Notice of Stand-Alone Inducement Non-Qualified Stock Option Award

 GRANTEE: 
 PATRICK J.
BRADY 
 Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of the Common Stock of
Credence Systems Corporation (the “Company”) pursuant to and in accordance with the Non-Qualified Stock Option Award Agreement (the “Option Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms
defined in the Option Agreement shall have the same defined meanings in this Notice: 
  

			
	GRANT DATE:	  	April 16, 2007
		
	GRANT NUMBER:	  	00014625
		
	EXERCISE PRICE:	  	$ 3.47 per share
		
	NUMBER OF OPTION SHARES:	  	200,000 shares
		
	EXPIRATION DATE:	  	April 16, 2014
		
	TYPE OF OPTION:	  	Non-Qualified Option
		
	POST-TERMINATION EXERCISE PERIOD:	  	Three (3) Months

 EXERCISE SCHEDULE: The Option shall become exercisable for 12.5% of
the Option Shares upon the Grantee’s completion of six (6) months of Continuous Service measured from April 16, 2007 (the “Vesting Commencement Date”) and shall become exercisable for the balance of the Option Shares in a
series of 14 equal and successive quarterly installments upon the Grantee’s completion of each additional three (3) month period of Continuous Service thereafter. In no event shall the Option become exercisable for any additional Option
Shares following the Grantee’s termination of Continuous Service. 
 The Grantee agrees to be bound by the terms and conditions of the
Option as set forth in the Option Agreement attached hereto. 
 No Employment or Service Contract. The Grantee acknowledges and agrees
that nothing in this Notice or the Option Agreement shall confer upon the Grantee any right with respect to future awards or continuation of the Grantee’s Continuous Service, nor shall it interfere in any way with the Grantee’s right or
the right of the Company or Related Entity to which the grantee provides services to terminate the Grantee’s Continuous Service, with or without Cause, and with or without notice. The Grantee acknowledges that unless the Grantee has a written
employment agreement with the Company to the contrary, the Grantee’s status is at will. 
  

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	 CREDENCE SYSTEMS CORPORATION
	 		 	GRANTEE
				
	By:	 	 /s/ LAVI LEV
	 		 	 /s/ PATRICK J. BRADY

		 	Lavi Lev	 		 	PATRICK J. BRADY
	Title:	 	President and Chief Executive Officer	 	Address:	 	 As appearing in the Human Resources record.

	Dated:	 	April 16, 2007	 		 	

  

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 CREDENCE SYSTEMS CORPORATION 
 NON-QUALIFIED STOCK OPTION AWARD AGREEMENT 
 1. Grant of Option.
Credence Systems Corporation, a Delaware corporation (the “Company”), hereby grants to the Grantee (the “Grantee”) named in the Notice of Stand-Alone Inducement Non-Qualified Stock Option Award (the “Notice”), an option
(the “Option”) to purchase the Number of Option Shares subject to the Option (the “Shares”) set forth in the Notice, at the Exercise Price set forth in the Notice (the “Exercise Price”) subject to the terms and
provisions of this Non-Qualified Stock Option Award Agreement (the “Option Agreement”) and the Notice which are incorporated herein by reference. 
 2. Exercise of Option. 
 (a) Right to Exercise. The Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice and with the applicable provisions of this Option Agreement. The Option shall be subject to the provisions of Section 17 of this Option Agreement relating to the exercisability or
termination of the Option in the event of a Corporate Transaction. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Board. In no event shall the
Company issue fractional Shares. 
 (b) Method of Exercise. The Option shall be exercisable by delivery of an exercise notice in a
form designated by the Board, whether in hard copy or in electronic form, or by such other procedure as specified from time to time by the Board which shall state the election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, and such other provisions as may be required by the Board. The exercise notice shall be delivered in person, by certified mail, or by such other method (including electronic transmission) as determined from time to
time by the Board to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to
be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) below. 
 (c)
Taxes. No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Board for the satisfaction of applicable income tax and
employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise of the Option, the Company or the Grantee’s employer may offset or withhold (from any amount owed by the Company
or the Grantee’s employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax withholding obligations. 
 3. Method of Payment. Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then
violate any Applicable Law and, provided further, that the portion of the Exercise Price equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law: 
 (a) cash; 
  

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 (b) check; 
 (c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Board may require which have a Fair Market Value on the date of surrender or attestation equal to the
aggregate Exercise Price of the Shares as to which the Option is being exercised; or 
 (d) payment through a broker-dealer sale and
remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company-designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to
cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale
transaction. 
 4. Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares subject to the Option upon
such exercise would constitute a violation of any Applicable Laws. If the exercise of the Option within the applicable time periods set forth in Section 5, 6 and 7 of this Option Agreement is prevented by the provisions of this Section 4,
the Option shall remain exercisable until one (1) month after the date the Grantee is notified by the Company that the Option is exercisable, but in any event no later than the Expiration Date set forth in the Notice. 
 5. Termination or Change of Continuous Service. Subject to Section 17, in the event the Grantee’s Continuous Service terminates, other
than for Cause, the Grantee may, but only during the Post-Termination Exercise Period (as set forth in the Notice), exercise the portion of the Option that was vested at the date of such termination (the “Termination Date”). The
Post-Termination Exercise Period shall commence on the Termination Date. In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall, except as otherwise determined by the
Board, terminate concurrently with the termination of the Grantee’s Continuous Service (also the “Termination Date”). In no event shall the Option be exercised later than the Expiration Date set forth in the Notice. In the event of
the Grantee’s change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and the Option shall continue to vest in accordance with the Exercise Schedule set
forth in the Notice. Except as provided in Sections 6 and 7 below, to the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the Post-Termination
Exercise Period, the Option shall terminate. 
 6. Disability of Grantee. Subject to Section 17, in the event the Grantee’s
Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months commencing on the Termination Date (but in no event later than the Expiration Date), exercise the portion of the Option that
was vested on the Termination Date. To 

  

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the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the time
specified herein, the Option shall terminate. 
 7. Death of Grantee. Subject to Section 17, in the event of the termination of
the Grantee’s Continuous Service as a result of his or her death, or in the event of the Grantee’s death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s termination of
Continuous Service as a result of his or her Disability, the person who acquired the right to exercise the Option pursuant to Section 9 may exercise the portion of the Option that was vested at the date of termination within twelve
(12) months commencing on the date of death (but in no event later than the Expiration Date). To the extent that the Option was unvested on the date of death, or if the vested portion of the Option is not exercised within the time specified
herein, the Option shall terminate. 
 8. Transferability of Option. The Option may not be transferred in any manner other than by
will or by the laws of descent and distribution, provided, however, that the Option may be transferred during the lifetime of the Grantee to the extent and in the manner authorized by the Board. Notwithstanding the foregoing, the Grantee may
designate one or more beneficiaries of the Grantee’s Option in the event of the Grantee’s death on a beneficiary designation form provided by the Board. Following the death of the Grantee, the Option, to the extent provided in
Section 7, may be exercised (a) by the person or persons designated under the deceased Grantee’s beneficiary designation or (b) in the absence of an effectively designated beneficiary, by the Grantee’s legal representative
or by any person empowered to do so under the deceased Grantee’s will or under the then applicable laws of descent and distribution. The terms of the Option shall be binding upon the executors, administrators, heirs and successors of the
Grantee. 
 9. Term of Option. The Option must be exercised no later than the Expiration Date set forth in the Notice or such earlier
date as otherwise provided herein. After the Expiration Date or such earlier date, the Option shall be of no further force or effect and may not be exercised. 
 10. Tax Consequences. 
 (a) The Grantee may incur tax liability as a result of the Grantee’s
purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES. 
 (b) Notwithstanding the Company’s good faith determination of the Fair Market Value of the Company’s Common Stock for purposes of determining the Exercise Price of the Option as set forth in the Notice, the taxing authorities may
assert that the Fair Market Value of the Common Stock on the Grant Date was greater than the Exercise Price. In addition, under Section 409A of the Code, if the Exercise Price of the Option is less than the Fair Market Value of the Common Stock
on the Grant Date, the Option may be treated as a form of deferred compensation and the Grantee may be subject to acceleration of income recognition, an additional 20% tax, plus interest and possible penalties. The Grantee is encouraged to consult a
tax adviser regarding the potential impact of Section 409A of the Code. 
  

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 11. Entire Agreement: Governing Law. The Notice and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to
the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other
than the parties. The Notice and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws
of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of the Notice or this Option Agreement be determined to be illegal or unenforceable, such provision shall be
enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 
 12. Construction. The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation. Except when otherwise indicated by the context,
the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. 
 13. Administration and Interpretation. Any question or dispute regarding the administration or interpretation of the Notice or this Option
Agreement shall be submitted by the Grantee or by the Company to the Board. The resolution of such question or dispute by the Board shall be final and binding on all persons. 
 14. Venue. The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8 (the “parties”) agree that any suit,
action, or proceeding arising out of or relating to the Notice or this Option Agreement shall be brought in the United States District Court for the Northern District of California (or should such court lack jurisdiction to hear such action, suit or
proceeding, in a California state court in the County of Santa Clara) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the
laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this Section 15 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions
shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 
 15. Notices. Any notice
required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail
by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to
time to the other party. 
 16. Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the
Company, the number of Shares covered by the Option, the exercise price 

  

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of the Option, as well as any other terms that the Board determines require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Board may determine in its discretion, any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities
of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board and its determination shall be final, binding and conclusive. Except as the Board determines, no
issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to the
Option. 
 17. Corporate Transactions. 
 (a) Termination of the Option to Extent Not Assumed in a Corporate Transaction. Effective upon the consummation of a Corporate Transaction, the Option shall terminate. However, the Option shall not terminate to
the extent it is Assumed in connection with the Corporate Transaction. 
 (b) Acceleration of the Option Upon Corporate Transaction.
In the event of a Corporate Transaction, for the portion of the Option that is neither Assumed nor Replaced, such portion of the Option shall automatically become fully vested and exercisable for all of the Shares at the time represented by such
portion of the Option, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date. 
 18. Definitions. As used herein, the following definitions shall apply: 
 (a) Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under
the Exchange Act. 
 (b) “Applicable Laws” means the legal requirements applicable to the Option under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Options granted to residents therein.

 (c) “Assumed” means that pursuant to a Corporate Transaction either (i) the Option is expressly affirmed by the
Company or (ii) the contractual obligations represented by the Option are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to
the number and type of securities of the successor entity or its Parent subject to the Option and the exercise or purchase price thereof which at least preserves the compensation element of the Option existing at the time of the Corporate
Transaction as determined in accordance with the instruments evidencing the agreement to assume the Option. 
  

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 (d) “Board” means the Board of Directors of the Company and shall include any committee
of the Board or Officer of the Company to which the Board has delegated its authority under this Agreement. 
 (e) “Cause”
means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Board, the Grantee’s: (i) performance of any act or
failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “Cause” on the occurrence of or in connection with a Corporate Transaction, such
definition of “Cause” shall not apply until a Corporate Transaction actually occurs. 
 (f) “Code” means the
Internal Revenue Code of 1986, as amended. 
 (g) “Common Stock” means the common stock of the Company. 
 (h) “Company” means Credence Systems Corporation, a Delaware corporation. 
 (i) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s
capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity. 
 (j) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions
requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any
required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. The Grantee’s Continuous Service shall be deemed to have terminated either upon an actual
termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity
in any capacity of Employee, Director or Consultant (except as otherwise provided in the Option Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. 
  

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 (k) “Corporate Transaction” means any of the following transactions, provided, however,
that the Board shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive: 
 (i) a merger or consolidation in which the Company is not the $surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; 
 (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s
subsidiary corporations); 
 (iii) the complete liquidation or dissolution of the Company; 
 (iv) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a
reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Board determines shall not be a Corporate Transaction; or

 (v) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding
securities but excluding any such transaction or series of related transactions that the Board determines shall not be a Corporate Transaction. 
 (l) “Director” means a member of the Board or the board of directors of any Related Entity. 
 (m)
“Disability” shall have the same meaning as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If
the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that the Grantee is unable to carry out the responsibilities and functions of the position held
by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. The Grantee will not be considered to have incurred a Disability unless he or she furnishes proof
of such impairment sufficient to satisfy the Board in its discretion. 
 (n) “Employee” means any person, including an
Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a
director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company. 
  

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 (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (p) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: 
 (i) If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global
Select Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal
exchange or system on which the Common Stock is listed (as determined by the Board) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales
price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Board deems reliable; 
 (ii) If the
Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such
securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination
(or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Board deems reliable; or 
 (iii) In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof
shall be determined by the Board in good faith. 
 (q) “Non-Qualified Stock Option” means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code. 
 (r) “Officer” means a person who is an
officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
 (s) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
 (t) “Related Entity” means any Parent or Subsidiary of the Company. 
 (u) “Replaced” means that pursuant to a Corporate Transaction the Option is replaced with a comparable stock award or a cash
incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Option existing at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same (or a more favorable) exercise schedule applicable to such Option. The determination of Option comparability shall be made by the Board and its determination shall be final, binding and conclusive. 
  

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 (v) “Share” means a share of the Common Stock. 
 (w) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the
Code. 
 END OF AGREEMENT 
  

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