Document:

Exhibit 10.2

                     INVESTOR REGISTRATION RIGHTS AGREEMENT
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         THIS  REGISTRATION  RIGHTS  AGREEMENT (this  "AGREEMENT"),  dated as of
January 27,  2006,  by and among  NEWGOLD,  INC.,  a Delaware  corporation  (the
"COMPANY"),  and the undersigned  investors listed on Schedule I attached hereto
(each, an "INVESTOR" and collectively, the "INVESTORS").

         WHEREAS:

         A. In connection  with the Securities  Purchase  Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE  AGREEMENT"),
the  Company has agreed,  upon the terms and  subject to the  conditions  of the
Securities  Purchase  Agreement,  to  issue  and sell to the  Investors  secured
convertible debentures (the "CONVERTIBLE DEBENTURES") which shall be convertible
into that number of shares of the Company's  common stock,  par value $0.001 per
share (the "COMMON  STOCK"),  pursuant to the terms of the  Securities  Purchase
Agreement  for  an  aggregate  purchase  price  of up  to  One  Million  Dollars
($1,000,000).  Capitalized  terms not  defined  herein  shall  have the  meaning
ascribed to them in the Securities Purchase Agreement.

         B. To induce  the  Investors  to execute  and  deliver  the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  there under, or any similar successor  statute  (collectively,  the
"SECURITIES ACT"), and applicable state securities laws.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Investors hereby agree as follows:

         1. DEFINITIONS.

         As used in this Agreement, the following terms shall have the following
meanings:

                  (a) "PERSON" means a corporation, a limited liability company,
an association,  a partnership,  an organization,  a business, an individual,  a
governmental or political subdivision thereof or a governmental agency.

                  (b) "REGISTER,"  "REGISTERED," and  "REGISTRATION"  refer to a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415  under  the  Securities  Act or any  successor  rule  providing  for
offering  securities  on a continuous  or delayed  basis ("RULE  415"),  and the
declaration or ordering of  effectiveness of such  Registration  Statement(s) by
the United States Securities and Exchange Commission (the "SEC").

                  (c) "REGISTRABLE  SECURITIES" means the shares of Common Stock
issuable to the Investors upon conversion of the Convertible Debentures pursuant
to the Securities  Purchase  Agreement and the Warrant  Shares,  as this term is
defined in the Securities Purchase Agreement.

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                  (d)  "REGISTRATION  STATEMENT" means a registration  statement
under the Securities Act which covers the Registrable Securities.

2. REGISTRATION.

                  (a) Subject to the terms and conditions of this Agreement, the
Company  shall  prepare  and file,  no later than thirty (30) days from the date
hereof (the "SCHEDULED FILING DEADLINE"),  with the SEC a registration statement
on Form S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) under the
Securities  Act (the  "INITIAL  REGISTRATION  STATEMENT")  for the resale by the
Investors of the  Registrable  Securities,  which  includes at least  24,050,025
shares  of  Common  Stock  to be  issued  upon  conversion  of  the  Convertible
Debentures  and  2,500,000   Warrant   Shares.   The  Company  shall  cause  the
Registration  Statement  to  remain  effective  until  all  of  the  Registrable
Securities  have been sold.  Prior to the filing of the  Registration  Statement
with the SEC,  the  Company  shall  furnish a copy of the  Initial  Registration
Statement to the  Investors for their review and comment.  The  Investors  shall
furnish  comments on the Initial  Registration  Statement to the Company  within
twenty-four (24) hours of the receipt thereof from the Company.

                  (b) EFFECTIVENESS OF THE INITIAL REGISTRATION  STATEMENT.  The
Company  shall  use its  best  efforts  (i) to  have  the  Initial  Registration
Statement  declared  effective by the SEC no later than one hundred twenty (120)
days after the date  hereof (the  "SCHEDULED  EFFECTIVE  DEADLINE")  and (ii) to
insure that the Initial Registration  Statement and any subsequent  Registration
Statement  remains in effect until all of the  Registrable  Securities have been
sold,  subject to the terms and  conditions  of this  Agreement.  It shall be an
event of default hereunder if the Initial Registration Statement is not declared
effective by the SEC within one hundred twenty (120) days after filing  thereof.
Notwithstanding the foregoing it shall not be an event of default if the Initial
Registration  Statement is not declared  effective  by the  Scheduled  Effective
Deadline as a result of a delay caused by the SEC or the issuance of SEC comment
letters  provided  that the Company is  submitting  responses  to such  comments
letters  within ten (10) business days of receipt of such comment  letter by the
SEC or such review  provided such  comments are resolved  within forty five (45)
calendar days from receipt of such SEC comment letter or review notification;

                  (c)   FAILURE   TO  FILE  OR  OBTAIN   EFFECTIVENESS   OF  THE
REGISTRATION  STATEMENT. In the event the Registration Statement is not filed by
the  Scheduled  Filing  Deadline or is not  declared  effective by the SEC on or
before the Scheduled Effective Date, or if after the Registration  Statement has
been  declared  effective  by the SEC,  sales  cannot  be made  pursuant  to the
Registration  Statement  (whether  because of a failure to keep the Registration
Statement  effective,  failure to disclose such  information as is necessary for
sales to be made  pursuant to the  Registration  Statement,  failure to register
sufficient  shares of Common Stock or otherwise)  then as partial relief for the
damages to any holder of  Registrable  Securities by reason of any such delay in
or reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive  of any other  remedies at law or in equity),  the
Company will pay as liquidated damages (the "LIQUIDATED DAMAGES") to the holder,
at the holder's  option,  either a cash amount or shares of the Company's Common
Stock within  three (3) business  days,  after  demand  therefore,  equal to two
percent (2%) of the outstanding  principal amount of the Convertible  Debentures
as Liquidated Damages for each thirty (30) day period after the

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Scheduled  Filing  Deadline or the Scheduled  Effective Date as the case may be,
provided that such amount of Liquidated Damages shall not exceed fifteen percent
(15%) of the of the outstanding principal amount of the Convertible  Debentures.
Notwithstanding  the  foregoing,  Liquidated  Damages  shall  not  apply  if the
Registration  Statement  is not kept  effective as a result of a delay caused by
the  SEC or the  issuance  of  SEC  comment  letters  relating  to any  reports,
schedules,  forms,  statements  or other  documents  required to be filed by the
Company with the SEC under the  Securities  Exchange Act of 1934,  provided that
the Company is  submitting  responses  to such comment  letters  within ten (10)
business  days of  receipt  of such  comment  letter  by the SEC or such  review
provided  such  comments are resolved  within forty five (45) calendar days from
receipt of such SEC comment letter or review notification.

                  (d) LIQUIDATED  DAMAGES.  The Company and the Investor  hereto
acknowledge  and agree that the sums payable under  subsection  2(c) above shall
constitute liquidated damages and not penalties and are in addition to all other
rights of the  Investor,  including  the right to call a  default.  The  parties
further acknowledge that (i) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely  estimate,  (ii) the amounts specified
in such  subsections  bear a reasonable  relationship to, and are not plainly or
grossly  disproportionate  to,  the  probable  loss  likely  to be  incurred  in
connection   with  any  failure  by  the  Company  to  obtain  or  maintain  the
effectiveness  of a  Registration  Statement,  (iii) one of the  reasons for the
Company  and the  Investor  reaching  an  agreement  as to such  amounts was the
uncertainty and cost of litigation regarding the question of actual damages, and
(iv) the Company and the Investor are  sophisticated  business  parties and have
been  represented by  sophisticated  and able legal counsel and negotiated  this
Agreement at arm's length.

         3. RELATED OBLIGATIONS.

                  (a)  The  Company  shall  keep  the   Registration   Statement
effective pursuant to Rule 415 at all times until the date on which the Investor
shall have sold all the  Registrable  Securities  covered  by such  Registration
Statement (the "REGISTRATION  PERIOD"),  which Registration Statement (including
any amendments or supplements thereto and prospectuses  contained therein) shall
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.

                  (b) The  Company  shall  prepare  and  file  with the SEC such
amendments   (including   post-effective   amendments)   and  supplements  to  a
Registration   Statement  and  the  prospectus  used  in  connection  with  such
Registration  Statement,  which  prospectus is to be filed  pursuant to Rule 424
promulgated  under  the  Securities  Act,  as  may be  necessary  to  keep  such
Registration  Statement  effective at all times during the Registration  Period,
and,  during such period,  comply with the provisions of the Securities Act with
respect to the disposition of all Registrable  Securities of the Company covered
by such  Registration  Statement  until  such  time  as all of such  Registrable
Securities  shall have been disposed of in accordance with the intended  methods
of  disposition  by  the  seller  or  sellers  thereof  as  set  forth  in  such
Registration  Statement.  In  the  case  of  amendments  and  supplements  to  a
Registration Statement which are required to be filed pursuant to this Agreement
(including  pursuant to this Section 3(b)) by reason of the  Company's  filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities  Exchange Act of 1934, as amended (the "EXCHANGE  ACT"),

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the Company shall  incorporate  such report by reference  into the  Registration
Statement, if applicable,  or shall file such amendments or supplements with the
SEC on the same day on which the Exchange Act report is filed which  created the
requirement for the Company to amend or supplement the Registration Statement.

                  (c)  The  Company  shall   furnish  to  each  Investor   whose
Registrable  Securities  are  included in any  Registration  Statement,  without
charge,  (i) at least one (1) copy of such  Registration  Statement  as declared
effective  by  the  SEC  and  any  amendment(s)  thereto,   including  financial
statements and schedules,  all documents incorporated therein by reference,  all
exhibits  and each  preliminary  prospectus,  (ii) ten (10)  copies of the final
prospectus  included  in such  Registration  Statement  and all  amendments  and
supplements  thereto  (or such  other  number  of copies  as such  Investor  may
reasonably  request)  and  (iii)  such  other  documents  as such  Investor  may
reasonably  request from time to time in order to facilitate the  disposition of
the Registrable Securities owned by such Investor.

                  (d) The Company shall use its best efforts to (i) register and
qualify the  Registrable  Securities  covered by a Registration  Statement under
such  other  securities  or "blue sky" laws of two  jurisdictions  in the United
States requested by the Investor,  (ii) prepare and file in those jurisdictions,
such amendments  (including  post-effective  amendments) and supplements to such
registrations   and   qualifications   as  may  be  necessary  to  maintain  the
effectiveness  thereof  during the  Registration  Period,  (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times  during  the  Registration  Period,  and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable  Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required  in  connection  therewith  or as a  condition  thereto to (w) make any
change to its  certificate  of  incorporation  or  by-laws,  (x)  qualify  to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d),  (y) subject  itself to general  taxation in any such
jurisdiction,  or (z) file a general  consent  to service of process in any such
jurisdiction.  The costs  associated  with a request by the Investor to register
and qualify the Registrable Securities covered by a Registration Statement under
such other  securities  or "blue sky" laws in  additional  jurisdictions  in the
United States shall be borne by the Investor.  The Company shall promptly notify
each Investor who holds Registrable  Securities of the receipt by the Company of
any  notification  with  respect  to  the  suspension  of  the  registration  or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any  jurisdiction  in the United  States or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

                  (e) As promptly as  practicable  after  becoming aware of such
event or  development,  the Company shall notify each Investor in writing of the
happening  of any  event  as a result  of which  the  prospectus  included  in a
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were  made,  not  misleading  (provided  that in no event  shall such
notice  contain any material,  nonpublic  information),  and promptly  prepare a
supplement  or amendment to such  Registration  Statement to correct such untrue
statement  or  omission,  and  deliver  ten (10)  copies of such  supplement  or
amendment to each Investor. The Company shall also promptly notify each Investor
in writing (i) when a prospectus or any prospectus  supplement or post-effective
amendment   has  been  filed,   and  when  a   Registration   Statement  or  any
post-effective amendment

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has become effective  (notification of such effectiveness  shall be delivered to
each Investor by facsimile on the same day of such  effectiveness),  (ii) of any
request by the SEC for amendments or supplements to a Registration  Statement or
related prospectus or related  information,  and (iii) the Company's  reasonable
determination that a post-effective  amendment to a Registration Statement would
be appropriate.

                  (f) The  Company  shall use its best  efforts to  prevent  the
issuance  of  any  stop  order  or  other   suspension  of  effectiveness  of  a
Registration  Statement,  or the suspension of the  qualification  of any of the
Registrable  Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued,  to obtain the withdrawal
of such order or suspension at the earliest  possible  moment and to notify each
Investor  who holds  Registrable  Securities  being sold of the issuance of such
order  and the  resolution  thereof  or its  receipt  of  actual  notice  of the
initiation or threat of any proceeding for such purpose.

                  (g) The Company shall make available for inspection by (i) any
Investor and (ii) one (1) firm of  accountants  or other agents  retained by the
Investors  (collectively,  the "INSPECTORS")  all pertinent  financial and other
records,  and  pertinent  corporate  documents  and  properties  of the  Company
(collectively,  the "RECORDS"),  as shall be reasonably deemed necessary by each
Inspector,  and cause the Company's officers,  directors and employees to supply
all information which any Inspector may reasonably request;  provided,  however,
that each Inspector  shall agree,  and each Investor  hereby agrees,  to hold in
strict  confidence and shall not make any disclosure  (except to an Investor) or
use any Record or other information  which the Company  determines in good faith
to be confidential,  and of which  determination the Inspectors are so notified,
unless (a) the  disclosure  of such  Records is  necessary to avoid or correct a
misstatement or omission in any Registration  Statement or is otherwise required
under the Securities Act, (b) the release of such Records is ordered pursuant to
a final,  non-appealable  subpoena or order from a court or  government  body of
competent  jurisdiction,  or (c) the  information  in such Records has been made
generally  available to the public other than by disclosure in violation of this
or any other  agreement of which the Inspector  and the Investor has  knowledge.
Each  Investor  agrees that it shall,  upon  learning  that  disclosure  of such
Records  is  sought  in  or  by  a  court  or  governmental  body  of  competent
jurisdiction or through other means, give prompt notice to the Company and allow
the  Company,  at its  expense,  to  undertake  appropriate  action  to  prevent
disclosure  of,  or to  obtain  a  protective  order  for,  the  Records  deemed
confidential.

                  (h) The  Company  shall  hold in  confidence  and not make any
disclosure of information  concerning an Investor provided to the Company unless
(i) disclosure of such  information is necessary to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant to a subpoena or other final,
non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement.  The Company agrees that it shall,  upon learning that  disclosure of
such  information  concerning  an  Investor  is  sought  in  or  by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
written  notice to such  Investor  and allow such  Investor,  at the  Investor's
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

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                  (i) The Company shall use its best efforts either to cause all
the Registrable  Securities covered by a Registration Statement (i) to be listed
on each  securities  exchange  on which  securities  of the same class or series
issued  by the  Company  are  then  listed,  if  any,  if the  listing  of  such
Registrable  Securities  is then  permitted  under the rules of such exchange or
(ii) the  inclusion  for  quotation on the National  Association  of  Securities
Dealers,  Inc. OTC Bulletin Board for such Registrable  Securities.  The Company
shall pay all fees and expenses in connection  with  satisfying  its  obligation
under this Section 3(j).

                  (j) The  Company  shall uses its  reasonable  best  efforts to
cause its transfer  agent to cooperate  with the Investors who hold  Registrable
Securities being offered and, to the extent applicable, to facilitate the timely
preparation  and delivery of certificates  (not bearing any restrictive  legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such  certificates to be in such  denominations or amounts,
as the case may be, as the Investors may  reasonably  request and  registered in
such names as the Investors may request.

                  (k) The  Company  shall  use its best  efforts  to  cause  the
Registrable  Securities covered by the applicable  Registration  Statement to be
registered with or approved by such other  governmental  agencies or authorities
as  may  be  necessary  to  consummate  the  disposition  of  such   Registrable
Securities.

                  (l) The Company shall otherwise use its best efforts to comply
with all  applicable  rules and  regulations  of the SEC in connection  with any
registration hereunder.

                  (m)  Within  two  (2)  business  days  after  a   Registration
Statement which covers Registrable  Securities is declared effective by the SEC,
the Company  shall  deliver,  and shall  cause legal  counsel for the Company to
deliver,  to the transfer agent for such Registrable  Securities (with copies to
the Investors  whose  Registrable  Securities are included in such  Registration
Statement)  confirmation  that such  Registration  Statement  has been  declared
effective by the SEC in the form attached hereto as EXHIBIT A.

                  (n) The  Company  shall  take  all  other  reasonable  actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

         4. OBLIGATIONS OF THE INVESTORS.

         Each Investor  agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e),  such Investor will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  such  Investor's  receipt  of the  copies of the
supplemented  or amended  prospectus  contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required.  Notwithstanding anything to
the contrary,  the Company shall cause its transfer agent to deliver  unlegended
certificates  for  shares of Common  Stock to a  transferee  of an  Investor  in
accordance  with the terms of the  Securities  Purchase  Agreement in connection
with any sale of  Registrable  Securities  with respect to which an Investor has
entered  into a contract  for sale prior to the  Investor's  receipt of a notice
from the

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Company of the  happening of any event of the kind  described in Section 3(f) or
the first sentence of 3(e) and for which the Investor has not yet settled.

         5. EXPENSES OF REGISTRATION.

         All expenses  incurred in  connection  with  registrations,  filings or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualifications fees,  printers,  legal and accounting
fees shall be paid by the Company.

         6. INDEMNIFICATION.

         With  respect  to  Registrable  Securities  which  are  included  in  a
Registration Statement under this Agreement:

                  (a) To the fullest extent  permitted by law, the Company will,
and hereby  does,  indemnify,  hold  harmless  and  defend  each  Investor,  the
directors,  officers, partners, employees, agents,  representatives of, and each
Person,  if any, who controls any Investor  within the meaning of the Securities
Act or the Exchange Act (each,  an  "INDEMNIFIED  PERSON"),  against any losses,
claims,  damages,  liabilities,  judgments,  fines,  penalties,  charges, costs,
reasonable  attorneys'  fees,  amounts paid in settlement or expenses,  joint or
several  (collectively,   "Claims")  incurred  in  investigating,  preparing  or
defending any action, claim, suit, inquiry, proceeding,  investigation or appeal
taken from the foregoing by or before any court or governmental,  administrative
or other  regulatory  agency,  body or the SEC,  whether  pending or threatened,
whether or not an indemnified  party is or may be a party thereto  ("INDEMNIFIED
DAMAGES"),  to which any of them may become  subject  insofar as such Claims (or
actions or proceedings,  whether  commenced or threatened,  in respect  thereof)
arise out of or are based  upon:  (i) any untrue  statement  or  alleged  untrue
statement of a material fact in a Registration  Statement or any  post-effective
amendment  thereto or in any filing made in connection with the qualification of
the offering under the  securities or other "blue sky" laws of any  jurisdiction
in which Registrable Securities are offered ("BLUE SKY FILING"), or the omission
or alleged  omission to state a material fact  required to be stated  therein or
necessary  to make the  statements  therein  not  misleading;  (ii)  any  untrue
statement or alleged untrue  statement of a material fact contained in any final
prospectus  (as  amended or  supplemented,  if the Company  files any  amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the  Securities  Act, the Exchange  Act,  any other law,  including,  without
limitation,  any state  securities  law, or any rule or  regulation  there under
relating  to the  offer  or sale of the  Registrable  Securities  pursuant  to a
Registration  Statement (the matters in the foregoing  clauses (i) through (iii)
being,  collectively,  "VIOLATIONS").  The Company shall reimburse the Investors
and each such controlling  person promptly as such expenses are incurred and are
due and  payable,  for any  legal  fees or  disbursements  or  other  reasonable
expenses incurred by them in connection with investigating or defending any such
Claim.   Notwithstanding   anything  to  the  contrary   contained  herein,  the
indemnification agreement contained in this Section 6(a): (x) shall not apply to
a Claim by an Indemnified  Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information  furnished in writing
to the Company by such  Indemnified  Person expressly for use in connection with
the preparation of the Registration

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Statement or any such amendment thereof or supplement thereto;  (y) shall not be
available  to the extent  such Claim is based on a failure  of the  Investor  to
deliver  or to  cause to be  delivered  the  prospectus  made  available  by the
Company, if such prospectus was timely made available by the Company pursuant to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect  regardless of any  investigation  made by or on behalf of
the  Indemnified  Person  and shall  survive  the  transfer  of the  Registrable
Securities by the Investors pursuant to Section 9 hereof.

                  (b) In connection with a Registration Statement, each Investor
agrees to severally and not jointly indemnify,  hold harmless and defend, to the
same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its  directors,  each of its officers,  employees,  representatives,  or
agents and each Person,  if any, who controls the Company  within the meaning of
the Securities Act or the Exchange Act (each an  "INDEMNIFIED  PARTY"),  against
any Claim or Indemnified Damages to which any of them may become subject,  under
the  Securities  Act, the Exchange  Act or  otherwise,  insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each case to
the extent, and only to the extent,  that such Violation occurs in reliance upon
and in  conformity  with  written  information  furnished to the Company by such
Investor expressly for use in connection with such Registration Statement;  and,
subject to Section 6(d),  such Investor will reimburse the Company for any legal
or other expenses  reasonably  incurred by them in connection with investigating
or defending any such Claim;  provided,  however,  that the indemnity  agreement
contained in this Section 6(b) and the  agreement  with respect to  contribution
contained  in Section 7 shall not apply to  amounts  paid in  settlement  of any
Claim if such  settlement is effected  without the prior written consent of such
Investor, which consent shall not be unreasonably withheld;  provided,  further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified  Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration  Statement.  Such  indemnity  shall remain in full force and effect
regardless of any  investigation  made by or on behalf of such Indemnified Party
and shall  survive the transfer of the  Registrable  Securities by the Investors
pursuant  to Section  9.  Notwithstanding  anything  to the  contrary  contained
herein,  the  indemnification  agreement  contained  in this  Section  6(b) with
respect to any  prospectus  shall not inure to the  benefit  of any  Indemnified
Party if the untrue  statement  or omission of material  fact  contained  in the
prospectus  was corrected and such new prospectus was delivered to each Investor
prior to such Investor's use of the prospectus to which the Claim relates.

                  (c)  Promptly  after  receipt  by  an  Indemnified  Person  or
Indemnified  Party  under this  Section 6 of notice of the  commencement  of any
action or proceeding (including any governmental action or proceeding) involving
a Claim,  such  Indemnified  Person or  Indemnified  Party shall,  if a Claim in
respect thereof is to be made against any indemnifying  party under this Section
6,  deliver  to the  indemnifying  party a written  notice  of the  commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the  extent  the  indemnifying  party so  desires,  jointly  with  any  other
indemnifying party similarly  noticed,  to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided,  however, that an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees and  expenses  of not more than one (1)  counsel for such
Indemnified  Person or Indemnified

                                        8
<PAGE>
Party to be paid by the  indemnifying  party,  if, in the reasonable  opinion of
counsel retained by the indemnifying  party, the  representation by such counsel
of the Indemnified  Person or Indemnified Party and the indemnifying party would
be inappropriate  due to actual or potential  differing  interests  between such
Indemnified  Person or Indemnified Party and any other party represented by such
counsel in such proceeding.  The Indemnified  Party or Indemnified  Person shall
cooperate fully with the  indemnifying  party in connection with any negotiation
or  defense  of any such  action  or claim by the  indemnifying  party and shall
furnish to the indemnifying  party all information  reasonably  available to the
Indemnified  Party or Indemnified  Person which relates to such action or claim.
The indemnifying  party shall keep the Indemnified  Party or Indemnified  Person
fully  apprised at all times as to the status of the  defense or any  settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior written
consent;  provided,  however, that the indemnifying party shall not unreasonably
withhold,  delay or condition its consent. No indemnifying party shall,  without
the prior  written  consent  of the  Indemnified  Party or  Indemnified  Person,
consent  to  entry  of any  judgment  or  enter  into  any  settlement  or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified  Party or Indemnified  Person of a
release  from all  liability in respect to such claim or  litigation.  Following
indemnification  as provided  for  hereunder,  the  indemnifying  party shall be
subrogated to all rights of the  Indemnified  Party or  Indemnified  Person with
respect to all third parties,  firms or corporations  relating to the matter for
which  indemnification  has been made. The failure to deliver  written notice to
the indemnifying  party within a reasonable time of the commencement of any such
action  shall  not  relieve  such  indemnifying  party of any  liability  to the
Indemnified  Person or  Indemnified  Party  under this  Section 6, except to the
extent that the  indemnifying  party is prejudiced in its ability to defend such
action or incurs additional costs.

                  (d) The  indemnification  required by this  Section 6 shall be
made by  periodic  payments  of the  amount  thereof  during  the  course of the
investigation or defense,  as and when bills are received or Indemnified Damages
are incurred.

                  (e) The  indemnity  agreements  contained  herein  shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified  Person  against  the  indemnifying  party or  others,  and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7. CONTRIBUTION.

         To  the  extent  any   indemnification  by  an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

                                        9
<PAGE>
         8. REPORTS UNDER THE EXCHANGE ACT.

         With a view to making  available to the  Investors the benefits of Rule
144  promulgated  under the  Securities Act or any similar rule or regulation of
the SEC that may at any time  permit the  Investors  to sell  securities  of the
Company to the public without registration ("RULE 144") the Company agrees to:

                  (a) make and keep public information available, as those terms
are understood and defined in Rule 144;

                  (b) file with the SEC in a timely manner all reports and other
documents  required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's  obligations under Section 4(c) of
the  Securities  Purchase  Agreement)  and the filing of such  reports and other
documents as are required by the applicable provisions of Rule 144; and

                  (c)  furnish to each  Investor so long as such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
Securities  Act and the Exchange  Act,  (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company,  and (iii) such other information as may be reasonably requested to
permit  the  Investors  to sell such  securities  pursuant  to Rule 144  without
registration.

         9. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance  thereof
may  be  waived  (either  generally  or  in a  particular  instance  and  either
retroactively  or  prospectively),  only with the written consent of the Company
and  Investors  who then  hold at  least  two-thirds  (2/3)  of the  Registrable
Securities.  Any amendment or waiver  effected in accordance with this Section 9
shall be binding upon each Investor and the Company.  No such amendment shall be
effective  to the extent that it applies to fewer than all of the holders of the
Registrable Securities.  No consideration shall be offered or paid to any Person
to amend or consent to a waiver or  modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

         10. MISCELLANEOUS.

                  (a)  A  Person  is  deemed  to  be  a  holder  of  Registrable
Securities  whenever  such  Person  owns  or is  deemed  to own of  record  such
Registrable  Securities.  If  the  Company  receives  conflicting  instructions,
notices  or  elections  from two (2) or more  Persons  with  respect to the same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

                  (b) Any  notices,  consents,  waivers or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated

                                       10
<PAGE>
and kept on file by the  sending  party);  or (iii) one (1)  business  day after
deposit with a nationally  recognized  overnight delivery service,  in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:

If to the Company, to:          Newgold, Inc.
                                400 Capitol Mall - Suite 900
                                Sacramento, CA 95814
                                Attention: Scott Dockter
                                Telephone: (916) 449-3913
                                Facsimile: (916) 449-8259

With Copy to:                   James W. Kluber
                                327 Copperstone Trail
                                Coppell, TX 75019
                                Telephone: (214) 447-5336
                                Facsimile: (214) 359-0306

                                Weintraub Genshlea Chediak
                                400 Capital Mall - 11th Floor
                                Sacramento, CA 95814
                                Attention: Roger Linn, Esq.
                                Telephone: (916) 558-6000
                                Facsimile: (916) 446-1611

If to an  Investor,  to its  address  and  facsimile  number on the  Schedule of
Investors attached hereto, with copies to such Investor's representatives as set
forth on the  Schedule of Investors or to such other  address  and/or  facsimile
number and/or to the  attention of such other person as the recipient  party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written  confirmation of receipt (A) given by the
recipient  of  such  notice,  consent,   waiver  or  other  communication,   (B)
mechanically  or  electronically  generated  by the sender's  facsimile  machine
containing the time, date,  recipient facsimile number and an image of the first
page of such  transmission  or (C)  provided by a courier or  overnight  courier
service shall be rebuttable  evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

                  (c) Failure of any party to exercise any right or remedy under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy, shall not operate as a waiver thereof.

                  (d) The  laws of the  State of New  Jersey  shall  govern  all
issues  concerning  the relative  rights of the Company and the Investors as its
stockholders.  All  other  questions  concerning  the  construction,   validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by the
internal laws of the State of New Jersey, without giving effect to any choice of
law or conflict of law  provision or rule (whether of the State of New Jersey or
any other  jurisdiction)  that would  cause the  application  of the laws of any
jurisdiction  other than the State of New Jersey.  Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the

                                       11
<PAGE>
Superior Courts of the State of New Jersey, sitting in Hudson County, New Jersey
and federal  courts for the District of New Jersey sitting  Newark,  New Jersey,
for the adjudication of any dispute hereunder or in connection  herewith or with
any transaction  contemplated hereby or discussed herein, and hereby irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is brought in an inconvenient  forum or that the
venue of such  suit,  action  or  proceeding  is  improper.  Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any  manner  permitted  by law.  If any  provision  of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or  unenforceability  shall not affect the  validity  or  enforceability  of the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability  of any  provision of this  Agreement in any other  jurisdiction.
EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO
REQUEST,  A JURY  TRIAL FOR THE  ADJUDICATION  OF ANY  DISPUTE  HEREUNDER  OR IN
CONNECTION  HEREWITH  OR  ARISING  OUT OF  THIS  AGREEMENT  OR  ANY  TRANSACTION
CONTEMPLATED HEREBY.

                  (e)   This   Agreement,   the   Irrevocable   Transfer   Agent
Instructions,  the Securities Purchase Agreement and related documents including
the Convertible  Debentures,  the Security  Agreement dated the date hereof (the
"SECURITY AGREEMENT"), and the Pledge and Escrow Agreement dated the date hereof
(the "PLEDGE AND ESCROW  Agreement")  and the  Memorandum  of Security  Interest
dated January 30, 2006 (the  "MEMORANDUM OF SECURITY  INTEREST")  constitute the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof  and  thereof.  There  are  no  restrictions,   promises,  warranties  or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the Irrevocable Transfer Agent Instructions,  the Securities Purchase
Agreement  and  related  documents  including  the  Convertible  Debenture,  the
Security  Agreement,  Memorandum of Security  Interest and the Pledge and Escrow
Agreement  supersede all prior agreements and  understandings  among the parties
hereto with respect to the subject matter hereof and thereof.

                  (f)  This  Agreement  shall  inure  to the  benefit  of and be
binding upon the permitted successors and assigns of each of the parties hereto.

                  (g) The  headings in this  Agreement  are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

                  (h) This Agreement may be executed in identical  counterparts,
each of which shall be deemed an original but all of which shall  constitute one
and the same  agreement.  This  Agreement,  once  executed  by a  party,  may be
delivered to the other party hereto by facsimile  transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

                  (i) Each party shall do and  perform,  or cause to be done and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,

                                       12
<PAGE>
instruments and documents, as the other party may reasonably request in order to
carry out the intent and  accomplish  the  purposes  of this  Agreement  and the
consummation of the transactions contemplated hereby.

The language used in this Agreement will be deemed to be the language  chosen by
the parties to express their mutual  intent and no rules of strict  construction
will be applied against any party.

                  (j) This  Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       13
<PAGE>
         IN WITNESS WHEREOF, the parties have caused this Investor  Registration
Rights Agreement to be duly executed as of day and year first above written.

                                       COMPANY:
                                       NEWGOLD, INC.

                                       By: /s/ SCOTT DOCKTER
                                          -------------------------------------
                                       Name: Scott Dockter
                                       Title: Chief Executive Officer

                                       14
<PAGE>
                                   SCHEDULE I
                                   ----------

                              SCHEDULE OF INVESTORS
                              ---------------------

<TABLE>
<CAPTION>
                                                                                               Address/Facsimile
              Name                                    Signature                               Number of Investors
------------------------------    ----------------------------------------------    ------------------------------------
<S>                               <C>                                               <C>
Cornell Capital Partners, LP       By:      Yorkville Advisors, LLC                  101 Hudson Street - Suite 3700
                                   Its:     General Partner                          Jersey City, NJ  07303
                                                                                     Facsimile: (201) 985-8266

                                   By: /s/ MARK ANGELO
                                      ------------------------------
                                   Name: Mark Angelo
                                   Its:  Portfolio Manager

With a copy to:                    David Gonzalez, Esq.                              101 Hudson Street - Suite 3700
                                                                                     Jersey City, NJ 07302
                                                                                     Facsimile: (201) 985-8266

------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
                                    EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT
                            -------------------------

Attention:

         Re: NEWGOLD, INC.

Ladies and Gentlemen:

         We  are  counsel  to  Newgold,   Inc.,  a  Delaware   corporation  (the
"COMPANY"),  and have  represented  the Company in connection  with that certain
Securities Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT") entered into
by and among the Company and the  investors  named  therein  (collectively,  the
"INVESTORS") pursuant to which the Company issued to the Investors shares of its
Common Stock, par value $0.001 per share (the "COMMON  STOCK").  Pursuant to the
Purchase  Agreement,  the Company  also has entered into a  Registration  Rights
Agreement  with the Investors  (the "INVESTOR  REGISTRATION  RIGHTS  AGREEMENT")
pursuant  to which the  Company  agreed,  among other  things,  to register  the
Registrable  Securities (as defined in the Registration  Rights Agreement) under
the Securities  Act of 1933, as amended (the  "SECURITIES  ACT").  In connection
with the Company's  obligations  under the  Registration  Rights  Agreement,  on
____________  ____, the Company filed a Registration  Statement on Form ________
(File No.  333-_____________) (the "REGISTRATION STATEMENT") with the Securities
and Exchange SEC (the "SEC") relating to the Registrable  Securities which names
each of the Investors as a selling stockholder there under.

         In connection  with the  foregoing,  we advise you that a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the  Registration  Statement  effective  under the  Securities  Act at
[ENTER TIME OF EFFECTIVENESS]  on [ENTER DATE OF  EFFECTIVENESS]  and we have no
knowledge,  after  telephonic  inquiry of a member of the SEC's staff,  that any
stop order suspending its  effectiveness has been issued or that any proceedings
for  that  purpose  are  pending  before,  or  threatened  by,  the  SEC and the
Registrable  Securities  are  available  for  resale  under the  Securities  Act
pursuant to the Registration Statement.

                                        Very truly yours,

                                        [Law Firm]

                                        By:____________________________________

cc:      [LIST NAMES OF INVESTORS]Exhibit 10.14

AGREEMENT

          This amended and restated Agreement (the “Agreement”) is entered into by and between KLA-Tencor Corporation (the “Company”) and Kenneth L. Schroeder (“Executive”) effective as of December 21, 2005 (the “Effective Date”).

Recitals:

          A.          The Company desires to continue to retain the services of Executive as set forth in this Agreement and Executive desires to continue to provide services to the Company upon the terms and conditions set forth herein.

          B.          The Company desires to ensure that Executive does not compete with and is available to continue to provide services to the Company as set forth herein.

Agreement:

          In consideration of the covenants and agreements contained herein, the parties agree as follows:

          1.          Effectiveness of Agreement.  This Agreement shall become effective upon the Effective Date and amends and restates in its entirety the Agreement entered into by and between the Company and Executive dated February 23, 2005 (the “Prior Agreement”).  The Company and Executive agree that this Agreement shall govern the terms and conditions of Executive’s provision of services to the Company from and after the Effective Date.

          2.          Term.  This Agreement shall commence on the Effective Date and shall end on the date that all obligations hereunder have been fully discharged.

          3.          Duties.

                       a.          Responsibilities. 
From and after the Effective Date until the earlier of the commencement of any
Part-Time Employment Term (as defined in Section 7 of this Agreement) or
termination of Executive’s full-time employment hereunder (the
“Full-Time Employment Period”), the Company shall employ the Executive
as Chief Executive Officer with such duties and responsibilities as are
commensurate with such position.  It is understood and agreed that
Executive will be considered an employee of the Company for tax withholding and
all other purposes for the duration of both the Full-Time Employment Period and
the Part-Time Employment Term.  Executive acknowledges that during the
Part-Time Employment Term he shall not have the power to bind the
Company.

                       b.          Board Membership.  If Executive is serving as a member of the Company’s Board of Directors (the “Board”) on the date of termination of the Full-Time Employment Period, he shall tender to the Board his resignation from the Board effective as of such date.  The Board shall not be obligated to accept such resignation, unless Executive requires it.

          4.          Obligations.  Executive agrees, during the Full-Time Employment Period, not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board; provided, however, that Executive may serve in any capacity with any civic, educational or charitable organization, or as a member of corporate Boards of Directors or committees thereof without the approval of the Board.

          5.          Employee Benefits.  During the Full-Time Employment Period, Executive shall be eligible to participate in (i) all employee benefit plans currently and hereafter maintained by the Company for senior management according to their terms, and (ii) such other employee benefits as are set forth in this Agreement or as may otherwise be awarded by the Board or its Compensation Committee.  During any Part-Time Employment Term, Executive shall only be eligible to participate in the Company’s group health, vision and dental plans or in alternative arrangements providing at least the same level of benefits and shall not be eligible to participate in the Company’s other employee benefit plans and arrangements.  Subject to the other provisions hereof, Executive and his spouse shall, during the Full-Time
Employment Period, the Part-Time Employment Term and thereafter, but no later than the earlier of Executive’s death or his obtaining the age of 65, be entitled to the same medical and other health benefits as senior active executives (and their respective spouses) and on the same contribution basis as such senior active executives.  Such benefits shall at all times be made available on a nontaxable basis to Executive and his spouse (except to the extent active senior executives (and their respective spouses) would be taxed on receipt of the same benefit as active executives (the “Retiree Health Benefit”)).  The standard form of indemnification agreement for officers and directors that Executive has entered into and any fiduciary insurance maintained by the Company shall remain in effect to the same extent that said indemnification or fiduciary insurance remains in effect for all officers and directors of the Company.

          6.          Full Time Employment Period Compensation.

                       a.          Base Salary.  During the Full-Time Employment Period, and during certain Part-Time Employment Terms as specified in Section 7 hereof, the Company shall pay the Executive as compensation for his services a base salary at an initial annualized rate (which initial rate shall in no event be less than the Executive’s base salary as of the Effective Date) recommended by the Compensation Committee of the Board and approved by the Board, as may be increased (but not decreased) from time to time by the Board or its Compensation Committee (the “Base Salary”).  The Base Salary shall be paid periodically in accordance with normal Company payroll practices and subject to the usual, required withholding.  References to Base Salary
herein as it relates to the Part-Time Employment Term shall mean the last full-time salary as of the beginning of the Part-Time Employment Term.  

-2-

                       b.          Bonus.  During the Full-Time Employment Period and during certain Part-Time Employment Terms as specified in Section 7 hereof, Executive shall participate in bonus programs generally available to senior management of the Company and shall be eligible to receive bonuses as determined by the Board or its Compensation Committee.  Subject to Section 7(c), the Company shall have the obligation to pay any and all bonuses referred to in this Agreement only at the same time as bonuses are normally paid to senior management of the Company and contingent in each case upon the Company’s payment of bonuses to senior officers of the Company for such fiscal year; provided, however, that any bonus due Executive upon his transition to Part-Time
Employment or becoming due in the six-month period thereafter shall be paid to Executive six months and one day following his transition to Part-Time Employment.

          7.          Termination of Employment; Transition to Part-Time Employment.

                       a.          Part-Time Employment Term Definition; Obligations.  The periods of part-time employment specified in this Section 7 shall be defined as the “Part-Time Employment Term” and Executive may be referred to as a “Part-Time Employee” while employed thereunder for the purposes of this Agreement.  During any Part-Time Employment Term, Executive shall be required to devote such time in rendering services to the Company as shall be mutually agreed upon and acceptable to Executive and the Company; provided, however, that such services shall not include any service relating to the discharge of Executive’s duties as a member of the Board.  The parties expect the Company will utilize Executive’s services during the
Part-Time Employment Term between five to ten hours per month.  Such services may be rendered by Executive at his residence, to the extent practicable.  During the Part-Time Employment Term, Executive shall be free to serve as a director, employee, consultant or advisor to any other corporation or other business enterprise without the prior written consent of the Company so long as such activities do not interfere with his duties and obligations under this Agreement, including, without limitation, Executive’s obligations under Section 8 hereof.  In consideration of Executive’s not working for a non-Competing Company or a Competing Company and being available to provide the mutually agreed upon services required hereunder during the Part-Time Employment Term, the Executive shall receive the compensation specified in this Section 7.  At the end of such Part-Time Employment Term, the Executive’s employment with the Company shall terminate.

                       b.          Termination of Full-Time Employment for Cause.  The Company may at any time terminate Executive’s full-time employment hereunder for “Cause.”  For the purposes of this Agreement “Cause” shall mean (i) Executive’s gross negligence or willful misconduct in connection with the performance of his duties, (ii) Executive’s conviction of or plea of nolo contendere to, any felony in a court of competent jurisdiction, or (iii) Executive’s embezzlement or misappropriation of Company property.  If the Executive’s full-time employment is terminated by the Company for Cause, then, subject to Executive entering into and not revoking a release of claims agreement with the
Company substantially in the form attached hereto as Exhibit A (the “Release”), the Executive will receive a lump-sum payment equal to 25% of Base Salary and Executive shall not be entitled to any other benefits hereunder.

                       c.          Voluntary Termination of Full-Time Employment by Executive.  If the Executive desires to voluntarily terminate his full-time employment with the Company, then Executive shall provide the Company with written notice of such termination.  Subject to Executive entering into and not revoking the Release, Executive shall remain employed by the Company as a Part-Time Employee on the terms described herein.  The Part-Time Employment Term shall be 60 months.  During such 60-month period, Executive shall be paid (i) Base Salary for the first 30 months, 

-3-

paid in accordance with the Company’s normal payroll practices (except as provided in the succeeding paragraph), (ii) a mutually agreeable level of compensation per month which is no lower than an hourly rate determined by dividing the annual Base Salary dollar amount by 2080 for the final 36 months, paid monthly, (iii) an annual bonus equal to the amount that would otherwise have been payable to Executive upon Executive’s achievement of 100% of his individual bonus objectives (in distinction to Company bonus objectives, which shall be based upon actual Company performance for such fiscal year) for the Company’s fiscal year in which Executive’s transition to Part-Time Employment occurs (the “Target Bonus”), (iv) for the Company’s fiscal year ending in the period between the first anniversary of the date of termination of Executive’s full-time employment and the second anniversary of the date of termination of
Executive’s full-time employment with the Company, an amount equal to the amount that would otherwise have been payable to Executive upon Executive’s achievement of 100% of his individual bonus objectives (in distinction to Company bonus objectives, which shall be based upon actual Company performance for such fiscal year) under the Company’s bonus plan for such fiscal year (the “Second Year Bonus”), (v) for the Company’s fiscal year ending in the period between the second anniversary of the date of termination of Executive’s full-time employment and the third anniversary of the date of termination of Executive’s full-time employment with the Company, an amount equal to the amount that would otherwise have been payable to Executive upon Executive’s achievement of 100% of his individual bonus objectives (in distinction to Company bonus objectives, which shall be based upon actual Company performance for such fiscal year) under the Company’s bonus plan
for such fiscal year (the “Third Year Bonus”), and (vi) for the Company’s fiscal year ending in the period between the third anniversary of the date of termination of Executive’s full-time employment and the fourth anniversary of the date of termination of Executive’s full-time employment with the Company, an amount equal to the amount that would otherwise have been payable to Executive upon Executive’s achievement of 100% of his individual bonus objectives (in distinction to Company bonus objectives, which shall be based upon actual Company performance for such fiscal year) under the Company’s bonus plan for such fiscal year (the “Fourth Year Bonus”).  Executive will not be eligible to receive an annual bonus for the remainder of the Part-Time Employment Term.  Any bonuses to be paid pursuant to clauses (iii), (iv), (v) and (vi) of this paragraph will be paid no later than the later of (A) two and one half months following the completion of
the Company’s relevant fiscal year, or (B) the date that is six months and one day following the commencement of the Part-Time Employment Term. 

          Any Base Salary to be paid pursuant to clause (i) of the preceding paragraph will not be paid during the six-month period following the commencement of the Part-Time Employment Term.  Instead, on the first day following such six-month period, the Company will pay Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been paid to Executive under clause (i) of the preceding paragraph.  Thereafter, Executive will receive his Base Salary pursuant to clause (i) of the preceding paragraph in accordance with the Company’s normal payroll practices.

          With respect to any stock options held by Executive (or his affiliates) as of the commencement of the Part-Time Employment Period other than options granted on and after September 21, 2004 (“Prior Options”), such Prior Options shall terminate and be without further force and effect on the earliest of (i) December 31 of the calendar year in which falls the date that is thirty days following the third anniversary of the Part-Time Employment Period commencement date (the “37-Month Anniversary Date”) , but only if Executive remains a Part-Time Employee through such third anniversary date, (ii) on the date specified in the relevant Prior Option agreement, in the event that Executive does not remain a Part-Time Employee through the third anniversary date, (iii) the last day of the original Prior Option term.

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          In the event that Executive remains a Part-Time Employee through October 1st of the calendar year in which falls the 37-Month Anniversary Date, then any then outstanding Prior Options shall have their vesting automatically accelerated as of such date to an additional twenty-one months’ vesting, as measured from such October 1 date (but in no event as to more shares than are subject to each Prior Option).

          In the event that Executive remains a Part-Time Employee through the end of the Part-Time Employment Period, then Option Nos. 70866 and 82422 shall have their vesting automatically accelerated as of such date to an additional six months’ vesting (but in no event as to more shares than are subject to each option).

                       d.          Termination of Full-Time Employment by Company Other than for Cause.  If the Company desires to terminate Executive’s full-time employment with the Company other than for Cause, then the Company shall provide Executive with written notice of such termination.  If the Executive’s full-time employment is terminated by the Company other than for Cause, then, subject to Executive entering into and not revoking a Release, Executive shall remain employed by the Company as a Part-Time Employee on the terms described herein and shall receive the same benefits as set forth in subsection (c) above.

                       e.          Reduction of Part-Time Employment Term Compensation and Benefits If Executive Becomes Employed by a Non-Competing Company.  If during the Part-Time Employment Term, Executive becomes a full-time employee (or equivalent thereof) of an entity that is not a “Competing Company” (as defined in Section 8 hereof), Executive (i) shall have his Base Salary reduced to a mutually agreeable amount per month (determined based on the level of services expected to be rendered to the Company) in exchange for Executive providing mutually agreed upon services to the Company, (ii) shall not be eligible to receive any Target Bonus, Second Year Bonus, Third Year Bonus or Fourth Year Bonus to the extent not already earned by Executive, and
(iii) shall not be eligible to participate or receive benefits under any other employee benefit plans, policies, practices or arrangements of the Company or its predecessors (except that Executive and his spouse shall continue receiving the Retiree Health Benefit (as defined in Section 5), and subject to Section 7(f) below with respect to the vesting of Executive’s equity awards and Section 11 hereof relating to the treatment of any Retention Option/SAR Grants and Retention Restricted Stock/Unit Grants, as such terms are defined in Section 11 hereof).  For the purposes of the foregoing, the Target Bonus, Second Year Bonus, Third Year Bonus and Fourth Year Bonus shall be deemed earned, to the extent otherwise payable, if Executive is a Part-Time Employee and is not employed by a non-Competing Company as a full-time employee (or equivalent thereof) through the last day of the fiscal year to which such bonuses relate.

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                       f.          Vesting of Equity Awards During Part-Time Employment Term.  Except as provided in Section 7(c) hereof, during the Part-Time Employment Term, all equity awards that were granted to Executive prior to the termination of Executive’s full-time employment shall continue to vest in accordance with the terms and conditions of the original agreements relating to such awards, except any Retention Option/SAR Grants and Retention Restricted Stock/Unit Grants, as such terms are defined in Section 11 hereof, which shall be treated in accordance with Section 11 hereof.  The term “equity award” as used herein does not include any right to participate in the employee stock purchase plans of the Company, which right shall terminate immediately
upon the termination of the Full-Time Employment Period.

                       g.          Termination of Employment Relationship.  Executive’s Part-Time Employment relationship with the Company may not be terminated by the Company prior to the end of the Part-Time Employment Term, except (i) upon the death or permanent disability of Executive, (ii) by written agreement between both of the parties hereto; provided, however, that Executive’s employment with the Company, whether full-time or part-time, shall immediately and automatically terminate upon Executive’s breach of Section 8 hereof.  No additional benefits or payments will become payable to Executive hereunder upon a termination of Executive’s Part-Time Employment Term in accordance with the prior sentence.

                       h.          Breach of Covenant Not to Compete.  Executive’s employment with the Company hereunder, whether full-time or part-time, shall immediately and automatically terminate upon Executive’s breach of Section 8 hereof.  Notwithstanding anything to contrary set forth herein, no additional benefits or payments will become payable to Executive hereunder upon any such termination.

                       i.          Death or Disability.  Subject to Section 11 hereof relating to the treatment of any Retention Option/SAR Grants and the Retention Restricted Stock/Unit Grants, as such terms are defined in Section 11 hereof, in the event of Executive’s death or permanent Disability, this Agreement shall terminate, unless otherwise decided by the Board.

                       j.          No Duty to Mitigate; No Right of Set-Off.  In the case of any claim or action by Executive as a result of the purported breach of this Agreement by the Company, Executive will not be required to mitigate the amount of any payments, benefits or rights contemplated by this Agreement (whether during the Full-Time Employment Period or Part-Time Employment Term), nor will any earnings that Executive may receive from any other source reduce any such payments, benefits or rights and the Company will have no right of set-off for amounts Executive may owe the Company against amounts the Company may owe Executive hereunder.

          8.          Covenant Not to Compete.

                       a.          Covenant Not to Compete.  During the Full-Time Employment Period and the Part-Time Employment Term, Executive will not render services as an employee, consultant, director, partner, owner to, or participate as more than a two percent shareholder in, any Competing Company in a Restricted Territory, as such terms are defined immediately below; provided, however, that (i) Executive shall be permitted to work for a division, entity, or subgroup of any of such Competing Company so long as such division, entity, or subgroup does not engage in a business (including, without limitation, development, manufacturing, marketing, sales or technical or sales support) that makes such entity a Competing Company, and (ii) Executive may also receive and hold in such
situation equity in the Competing Company that he obtains in connection with such service on the same basis as other employees similarly situated to Executive.

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                       b.          Competing Company.  “Competing Company” shall mean another semiconductor capital equipment company, partnership, limited liability corporation or other entity any portion of whose business, including, without limitation, development, manufacturing, marketing, sales or technical or sales support, competes with the Company’s business at that time.

                       c.          Restricted Territory.  “Restricted Territory” means any county in the State of California, each state in the United States and each country in the world.

          9.          Limitation on Payments.  If the benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 9, would be subject to the excise tax imposed by Section 4999 of the Code, then the Executive’s benefits hereunder shall be either (i) delivered in full, or (ii) delivered as to such lesser extent which, or at such later time as, would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the Executive on an after-tax
basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such benefits may (or might otherwise) be taxable under Section 4999 of the Code.  Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 9 shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes; provided that if benefits are reduced or deferred, the Executive shall choose the order in which such benefits are reduced or deferred.  For purposes of making the calculations required by this Section 9, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and the Executive shall furnish to the
Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  In the event a determination is made under this Section 9, the Company shall also require the Accountants to furnish Executive with a tax opinion regarding the calculations performed under this Section 9.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9.

          10.        Double-Trigger Option Vesting Acceleration.  If, on or after a Change of Control (as defined herein) or within 30 days prior to a Change of Control, Executive’s employment with the Company terminates (whether during the Full-Time Employment Period or the Part-Time Employment Term) due to (i) a voluntary termination for “Good Reason” (as defined in Section 7(g) and this Section 10), or (ii) an involuntary termination by the Company other than for “Cause” (as defined in Section 7(b) hereof), then, subject to Executive executing and not revoking a Release and not breaching the terms of Section 8 hereof, all of Executive’s Company stock options and other equity compensation awards shall immediately accelerate vesting as to 100% of the then unvested shares.  

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          For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following events:

                              (i)          Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the “beneficial
owner” (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then
outstanding voting securities; or

                              (ii)         The consummation of the sale or disposition by the Company of all or substantially all the Company’s assets; or

                              (iii)        The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

                              (iv)         A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date upon which this Agreement was entered into, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii), or (iii) above, or in connection with an actual or threatened proxy contest relating to the election of directors to the Company.

                    For purposes of this Agreement, during the Full-Time Employment Period, “Good Reason” means, without Executive’s express consent, (i) a material reduction of Executive’s duties, title, authority or responsibilities, relative to Executive’s duties, title, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Executive of such reduced duties, title, authority or responsibilities, (ii) a material reduction of the facilities and perquisites (including office space and location) available to Executive immediately prior to such reduction, other than a reduction generally applicable to all senior management of the Company; (iii) a reduction by the Company in the Base Salary of Executive as in effect immediately prior to such reduction; (iv) a material reduction by the
Company in the aggregate level of employee benefits, including target bonuses, to which Executive was entitled immediately prior to such reduction with the result that Executive’s aggregate benefits package is materially reduced (other than a reduction that generally applies to Company employees); (v) the relocation of Executive to a facility or a location more than thirty-five (35) miles from Executive’s then present location; or (vi) any act or set of facts or circumstances which would, under California case law or statute constitute a constructive termination of Executive.

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          11.          Retention Awards.  

          (a)          Retention Option/SAR Grants.  With respect to Company stock options or stock appreciation rights granted to Executive on and after September 21, 2004, other than (i) 75,800 shares subject to the September 21, 2004 stock option grant that are scheduled to vest  as to 20% on September 21, 2008 and as to 1/48th of the remaining shares vesting monthly thereafter, and (ii) 75,800 shares subject to any stock option or stock appreciation right granted to Executive in 2005 vesting as to 20% four years after the date of grant and as to 1/48th of the remaining shares vesting monthly thereafter (the stock options and stock appreciation rights covered by this Section 11(a) are referred to herein as “Retention Option/SAR Grants”), notwithstanding any other provisions of this
Agreement, including, without limitation, Section 7(f) hereof, the following terms shall apply: 

                         (i)          In the event that (i) Executive’s full-time employment is terminated for Cause or breach of Section 8 hereof, or (ii) Executive’s Part-Time Employment is terminated for breach of Section 8 hereof, then the Retention Option/SAR Grants shall immediately, to the extent then unvested, expire and become without further force and effect and Executive shall have thirty (30) days following the date of such termination (but in no event beyond an award’s original term) in which to exercise any vested portion of the Retention Option/SAR Grants following which they shall expire and become without further force and effect.

                         (ii)         Subject to Section 11(a)(ix), in the event that, prior to July 1, 2006, Executive voluntarily terminates his position as Chief Executive Officer other than for Good Reason, even if Executive remains a Service Provider, as such term is defined in the Company’s 2004 Equity Incentive Plan (“Service Provider”), the Retention Option/SAR Grants shall immediately, to the extent then unvested, expire and become without further force and effect and Executive shall have thirty (30) days following the date of such termination (but in no event beyond an award’s original term) in which to exercise any vested portion of the Retention Option/SAR Grants following which they shall expire and become without further force and effect. 

                         (iii)        Subject to Section 11(a)(ix), in the event that, on and after July 1, 2006 and prior to July 1, 2007, Executive voluntarily terminates as a Service Provider other than for Good Reason (whether during the Full-Time Employment Period or Part-Time Employment Term), the Retention Option/SAR Grants shall immediately, to the extent then unvested, expire and become without further force and effect and Executive shall have thirty (30) days following the date of such event (but in no event beyond an award’s original term) in which to exercise any vested portion of the Retention Option/SAR Grants following which they shall expire and become without further force and effect. 

                         (iv)        Subject to Section 11(a)(ix), in the event that, on and after July 1, 2007, Executive (i) voluntarily terminates as a Service Provider other than for Good Reason (whether during the Full-Time Employment Period or Part-Time Employment Term), the Retention Option/SAR Grants shall immediately, to the extent then unvested, expire and become without further force and effect and Executive shall have five years following the date of such event (but in no event beyond an award’s original term) in which to exercise any vested portion of the Retention Option/SAR Grants following which they shall expire and become without further force and effect.

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                         (v)         Subject to the other provisions of this Section 11(a), in the event that, on and after July 1, 2006, Executive transitions to a Part-Time Employee or otherwise remains a Service Provider and does not remain as Chief Executive Officer, the Retention Option/SAR Grants shall continue to vest according to their terms and the terms of this Agreement and, subject to Sections 11(a)(iii), (ix) and (x), Executive shall have five years from the date his employment as a Part-Time Employee terminates (but in no event beyond an award’s original term) to exercise the Retention Option/SAR Grants, after which period they shall expire and become without further force and effect.  In the event that Executive remains as Chief Executive Officer, the Retention
Option/SAR Grants shall also continue to vest according to their terms and the terms of this Agreement.

                         (vi)        In the event that (i) Executive’s full-time employment is terminated without Cause and other than for breach of Section 8 hereof, or (ii) Executive voluntarily terminates his full-time employment for Good Reason, then Executive shall become a Part-Time Employee (pursuant to Sections 7(c) or (d), respectively) and any Retention Option/SAR Grants shall continue to vest according to their terms and the terms of this Agreement.  Subject to Sections 11(a)(iii), (ix) and (x), Executive shall have five years from the date his employment as a Part-Time Employee terminates (but in no event beyond an award’s original term) in which to exercise the Retention Option/SAR Grants, after which period they shall expire and become without further force
and effect.  

                         (vii)       Subject to Section 11(a)(ii), in the event Executive’s status as a Part-Time Employee terminates for any reason (including, without limitation, upon Executive’s voluntary termination for any reason) other than (A) upon the death or permanent Disability of Executive, (B) upon Executive’s breach of Section 8, or (C) by written agreement between both parties hereto, all of the Retention Option/SAR Grants shall immediately accelerate vesting as to 100% of the then unvested shares.  Notwithstanding the accelerated vesting provided for in the previous sentence, any such Retention Option/SAR Grants will not become exercisable (though they will be vested) until they would have otherwise become exercisable pursuant to their original vesting
terms.  Subject to Sections11(a)(iii), (ix) and (x), Executive shall have five years from the date his employment as a Part-Time Employee terminates (but in no event beyond an award’s original term) in which to exercise the Retention Option/SAR Grants, after which period they shall expire and become without further force and effect.  

                         (viii)      In the event that Executive’s employment terminates due to the Executive’s death or Disability (as defined herein) (whether during the Full-Time Employment Period or Part-Time Employment Term), then (A) the Retention Option/SAR Grants shall have their vesting accelerated as to a pro rata fraction of the initially covered shares less any shares that have already vested, which pro rata fraction shall be determined by dividing the number of days elapsed from the grant date to the employment termination date by the number of days between the grant date and July 1, 2007, and (B) Executive (or his estate or personal representative) shall have five years from the date of such employment termination (but in no event beyond an award’s original term) in which to
exercise the Retention Option/SAR Grants, after which period they shall expire.

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          For the purposes of this Agreement, “Disability” means that Executive has been unable to perform his employment duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or his legal representative (such agreement as to acceptability not to be unreasonably withheld).

                         (ix)        In the event of a Change of Control occurring during the Full-Time Employment Period, then Executive may at his election transition to Part-Time Employment and continue to vest in his Retention Stock Option/SAR Grants during such period of Part-Time Employment.  In the event of a Change of Control occurring while Executive is a Service Provider, then the Retention Option/SAR Grants shall remain exercisable, to the extent they are or become vested, through July 1, 2012 (but in no event beyond an award’s original term).

                         (x)         Notwithstanding any other provisions of this Agreement, in the event that Executive renders services as an employee, consultant, director, partner, owner to, or participates as more than a two percent shareholder in, any Competing Company in a Restricted Territory, as such terms are defined in Section 8 hereof, then Executive shall promptly notify the Company in writing of such competitive activity.  The Company, at any time following it first becoming aware of such competitive activity, shall deliver a notice to Executive specifying the reasons for its belief that Executive is engaging in such competitive activity.  Executive shall have thirty (30) days following the receipt of such notice in which to cease such competitive activity to the
Company’s satisfaction.  In the event Executive fails to cease such activity to the Company’s satisfaction within the thirty-day notice period, then any five (5) year post-termination exercise period for the Retention Option/SAR Grants to which Executive would otherwise be entitled shall be shortened to thirty (30) days following the date upon which the thirty-day notice period expires (but in no event beyond an award’s original term), following which period such Retention Option/SAR grants shall expire and be without further force and effect.  However, this Section 11(a)(x) limitation shall not apply to the extended post-termination exercise provisions arising pursuant to a Change of Control under Section 11(a)(ix) hereof.

          (b)          Retention Grants – Restricted Stock Units.  With respect to the 100,000 share restricted stock unit award granted to Executive effective October 18, 2004 and any award of restricted stock, restricted stock units or other similar award granted on or after such date (awards of restricted stock, restricted stock units or other similar awards covered by this Section 11(b) are referred to herein as “Retention Restricted Stock/Unit Grants”), notwithstanding any other provisions of this Agreement, the following terms shall apply:

                         (i)          In the event that (i) Executive’s full-time employment is terminated for Cause or breach of Section 8 hereof, or (ii) Executive’s Part-Time Employment is terminated for breach of Section 8 hereof, then any Retention Restricted Stock/Unit Grants shall immediately, to the extent then unvested, be forfeited to the Company.

                         (ii)         Subject to Section 11(b)(ix), in the event that, prior to July 1, 2006, Executive voluntarily terminates his position as Chief Executive Officer other than for Good Reason, even if Executive remains a Service Provider, any Retention Restricted Stock/Unit Grants shall immediately be forfeited to the Company. 

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                         (iii)        Subject to Section 11(b)(ix), in the event that, on and after July 1, 2006 and prior to July 1, 2007, Executive voluntarily terminates as a Service Provider other than for Good Reason (whether during the Full-Time Employment Period or Part-Time Employment Term), any Retention Restricted Stock/Unit Grants shall immediately be forfeited to the Company. 

                         (iv)        In the event that, on and after July 1, 2007, Executive voluntarily terminates as a Service Provider other than for Good Reason (whether during the Full-Time Employment Period or Part-Time Employment Term), any Retention Restricted Stock/Unit Grants shall immediately, but only if then unvested, be forfeited to the Company.

                         (v)         Subject to the other provisions of this Section 11(b), in the event that, on and after July 1, 2006, Executive transitions to a Part-Time Employee or otherwise remains a Service Provider and does not remain as Chief Executive Officer, any Retention Restricted Stock/Unit Grants shall continue to vest according to its terms and the terms of this Agreement.  In the event that Executive remains as Chief Executive Officer, any Retention Restricted Stock/Unit Grants shall also continue to vest according to its terms and the terms of this Agreement.

                         (vi)        In the event that (i) Executive’s full-time employment is terminated without Cause and other than for breach of Section 8 hereof, or (ii) Executive voluntarily terminates his full-time employment for Good Reason, then Executive shall become a Part-Time Employee (pursuant to Sections 7(c) or (d), respectively) and any Retention Restricted Stock/Unit Grants shall continue to vest according to its terms and the terms of this Agreement.  

                         (vii)       Subject to Section 11(b)(ii), in the event Executive’s status as a Part-Time Employee terminates for any reason (including, without limitation, upon Executive’s voluntary termination for any reason) other than (A) upon the death or permanent Disability of Executive, (B) upon Executive’s breach of Section 8, or (C) by written agreement between both parties hereto, any Retention Restricted Stock/Unit Grants shall immediately accelerate vesting as to 100% of the then unvested shares.  

                         (viii)      In the event that Executive’s employment terminates due to the Executive’s death or Executive’s becoming “disabled,” as such term is defined in Code Section 409A(c) and proposed or final Treasury Regulations (as applicable) promulgated thereunder (a “409A Disability”), then any Retention Restricted Stock/Unit Grants shall have their vesting accelerated as to a pro rata fraction of the initially covered shares, which pro rata fraction shall be determined by dividing the number of days elapsed from the grant date to the employment termination date by the number of days between the grant date and July 1, 2007.

                         (ix)        In the event of a Change of Control occurring during the Full-Time Employment Period, then Executive may at his election transition to the Part-Time Employment Period and continue to vest in his Retention Restricted Stock/Unit Grants during such period of Part-Time Employment.  

                         (x)         Any vested Retention Restricted Stock/Unit Grants shall be delivered to Executive (or, in the event of Executive’s death or 409A disability, as defined below, his estate or personal representative) on the earliest to occur of (i) July 1, 2007, (ii) Executive’s death, or (iii) Executive’s 409A Disability.

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          12.          Attorneys’ Fees.  The Company will pay all of Executive’s reasonable attorneys’ fees in connection with the negotiation, preparation and execution of this Agreement (including the November, 2005 restatement thereof) with the Company.

          13.          Assignment.  Executive’s rights and obligations under this Agreement shall not be assignable by Executive.  The Company’s rights and obligations under this Agreement shall not be assignable by the Company except as incident to the transfer, by merger, liquidation, or otherwise, of all or substantially all of the business of the Company.  Any such assignee of the Company shall deliver Executive a written confirmation confirming its assumption of this Agreement.

          14.          Notices.  Any notice required or permitted under this Agreement shall be given in writing and shall be deemed to have been effectively made or given if personally delivered, or if sent by facsimile, or mailed or sent via Federal Express to the other party at its address set forth below in this Section 14, or at such other address as such party may designate by written notice to the other party hereto.  Any effective notice hereunder shall be deemed given on the date personally delivered or on the date sent by facsimile or deposited in the United States mail (sent by certified mail, return receipt requested), as the case may be, at the following addresses:

	
  
 
  	
  
If to the   Company:
  	
  
KLA-Tencor   Corporation
  
	
  
 
  	
  
 
  	
  
160 Rio   Robles
  
	
   
  	
  
 
  	
  
San Jose, CA   95134
  
	
  
 
  	
  
 
  	
  
Attn:   General Counsel
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
If to   Executive:
  	
  
Kenneth L.   Schroeder
  
	
  
 
  	
  
 
  	
  
at the last   primary residential address known to the Company
  

          15.          Arbitration.  The parties hereto agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be finally settled by binding arbitration to be held in Santa Clara County, California under the Employment Dispute Resolution Rules of the American Arbitration Association as then in effect (the “Rules”).  The arbitrator may grant injunctions or other relief in such dispute or controversy.  The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration, and judgment may be entered on the decision of the arbitrator in any court having jurisdiction.

          The arbitrator shall apply California law to the merits of any dispute or claim, without reference to rules of conflicts of law, and the arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law.

          The Company shall pay the costs and expenses of such arbitration, and each party shall pay its own counsel fees and expenses.

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THE PARTIES HERETO HAVE READ AND UNDERSTAND   THIS SECTION 15, WHICH DISCUSSES ARBITRATION.  THE PARTIES HERETO UNDERSTAND THAT BY SIGNING THIS AGREEMENT,   THEY AGREE TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION   WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,   PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT   THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EACH PARTY’S RIGHT TO A JURY   TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EXECUTIVE’S   RELATIONSHIP WITH THE COMPANY.
  

          16.          Withholding.  The Company shall be entitled to withhold, or cause to be withheld, from payment any amount of withholding taxes required by law with respect to payments made to Executive in connection with his employment hereunder.

          17.          Severability.  If any term or provision of this Agreement shall to any extent be declared illegal or unenforceable by arbitrator(s) or by a duly authorized court of competent jurisdiction, then the remainder of this Agreement or the application of such term or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law and the illegal or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term of provision.

          18.          Entire Agreement.  This Agreement and the agreements relating to the Retention Option/SAR Grants, the Retention Restricted Stock/Unit Grants and any other equity compensation agreements represent the entire agreement of the parties with respect to the matters set forth herein, and to the extent inconsistent with other prior contracts, arrangements or understandings between the parties, supersedes all such previous contracts, arrangements or understandings between the Company and Executive, including without limitation the Prior Agreement.  The Agreement may be amended at any time only by mutual written agreement signed by the parties hereto.

          19.          Governing Law.  This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of California without reference to rules relating to conflict of law (other than any such rules directing application of California law).

          20.          Headings.  The headings of sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

          21.          Counterparts.  This Agreement may be executed by either of the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

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          22.          Code Section 409A.  This Agreement will be deemed amended to the extent necessary to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Code section 409A and any proposed or final Treasury Regulations and guidance promulgated thereunder.

	
  
EXECUTIVE
  	
  
 
  	
  
KLA-TENCOR CORPORATION
  
	
  
 
  	
  
 
  	
  
 
  
	
  
/s/ Kenneth L. Schroeder
  	
  
 
  	
  
/s/ Stuart J. Nichols
  
	
  

  	
  
 
  	
  

  
	
  
Kenneth L.   Schroeder
  	
  
 
  	
  
Stuart J.   Nichols
  
	
  
 
  	
  
 
  	
  
Vice-President,   General Counsel
  

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EXHIBIT A

RELEASE OF CLAIMS

          This Release of Claims (“Release”) is made by and between KLA-Tencor Corporation (the “Company”), and _______________ (“Employee”).

          WHEREAS, Employee has agreed to enter into a release of claims in favor of the Company in return for obtaining certain severance benefits specified in the agreement by and between the Company and Employee dated November __, 2005 which amended and restated in its entirety that Agreement dated February 23, 2005 (the “Agreement”).

          NOW THEREFORE, in consideration of the mutual promises made herein, the Parties hereby agree as follows:

          1.          Termination.  Employee’s employment from the Company terminated on ________________ (the “Termination Date”).

          2.          Consideration.  Pursuant to the terms of Section __ of the Agreement, upon the Effective Date of this Release, Executive will be entitled to severance payments and benefits as provided therein.

          3.          Confidential Information.  Employee shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the [Confidentiality Agreement] between Employee and the Company.  Employee shall return all the Company property and confidential and proprietary information in his possession to the Company on the Effective Date of this Release.

          4.          Payment of Salary.  Employee acknowledges and represents that the Company has paid all severance, salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Employee as of the date hereof.

          5.          Release of Claims.  Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company.  Employee, on behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that he may possess arising from any
omissions, acts or facts that have occurred up until and including the Effective Date of this Release including, without limitation,

                       a.          any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship; 

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                       b.          any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law; 

                       c.          any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

                       d.          any
and all claims for violation of any federal, state or municipal statute,
including, but not limited to, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the
Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker Adjustment and
Retraining Notification Act, the California Fair Employment and Housing Act, and
Labor Code section 201, et seq. and section 970, et seq. and all
amendments to each such Act as well as the regulations issued
thereunder;

                       e.          any and all claims for violation of the federal, or any state, constitution; 

                       f.          any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

                       g.          any and all claims for attorneys’ fees and costs.

Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.  Notwithstanding the previous sentence, the Parties agree that Employee will continue to be covered by the terms and conditions of the [Indemnity Release] entered into between Employee and the Company on [DATE] (the “Indemnity Release”) and the terms of the Company’s D&O insurance policy for claims against Employee that arise out of matters or events that occurred prior to the Termination Date.  This release does not extend to any severance benefits due Employee under the Agreement or any rights to indemnification Employee may have under the Indemnification Release or the Company’s D&O insurance policy.

          6.          Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Release.  Employee acknowledges that the consideration given for this Release is in addition to anything of value to which Employee was already entitled.  Employee further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to executing this Release; 

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(b) he has at least twenty-one (21) days within which to consider this Release; (c) he has seven (7) days following the execution of this Release by the parties to revoke the Release; (d) this Release shall not be effective until the revocation period has expired; and (e) nothing in this Release prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.  Any revocation should be in writing and delivered to the General Counsel at the Company by close of business on the seventh day from the date that Employee signs this Release.

          7.          Civil Code Section 1542.  Employee represents that he is not aware of any claims against the Company other than the claims that are released by this Release.  Employee acknowledges that he has been advised by legal counsel and is familiar with the provisions of California Civil Code 1542, below, which provides as follows:

	
  
 
  	
  
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS   WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME   OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED   HIS SETTLEMENT WITH THE DEBTOR.
  

                    Employee, being aware of said code section, agrees to expressly waive any rights he may have thereunder, as well as under any statute or common law principles of similar effect.

          8.        No
Pending or Future Lawsuits.  Employee represents that he has no
lawsuits, claims, or actions pending in his name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein.  Employee also represents that he does not intend to bring any
claims on his own behalf or on behalf of any other person or entity against the
Company or any other person or entity referred to herein.

          9.        Application for Employment.  Employee understands and agrees that, as a condition of this Release, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any right, or alleged right, of employment or re-employment with the Company.

          10.      No Cooperation.  Employee agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so.

          11.      Costs.  The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Release.

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          12.        Authority.  Employee represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Release.

          13.        No Representations.  Employee represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Release.  Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Release.

          14.        Severability.  In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Release shall continue in full force and effect without said provision.

          15.        Entire Release.  This Release, along with the Agreement, the Employee Proprietary Information and Investors Agreement and the Indemnification Agreement, represents the entire agreement and understanding between the Company and Employee concerning Employee’s separation from the Company.

          16.        No Oral Modification.  This Release may only be amended in writing signed by Employee and the Chairman of the Board of Directors of the Company.

          17.        Governing Law.  This Release shall be governed by the internal substantive laws, but not the choice of law rules, of the State of California.

          18.        Effective Date.  This Release is effective after it has been signed by both Parties, but no sooner than seven (7) days have passed since Employee has signed the Release (the “Effective Date”), unless revoked by Employee prior to the Effective Date.

          19.        Counterparts.  This Release may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

          20.        Voluntary Execution of Release.  This Release is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims.  The Parties acknowledge that:

                       a.          They have read this Release;

                       b.          They have been represented in the preparation, negotiation, and execution of this Release by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

                       c.          They understand the terms and consequences of this Release and of the releases it contains; and

                       d.          They are fully aware of the legal and binding effect of this Release.

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          IN WITNESS WHEREOF, the Parties have executed this Release on the respective dates set forth below.

	
  
 
  	
  
KLA-Tencor Corporation
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
Dated:   __________, 20__
  	
  
By
  	
  
 
  
	
   
  	
   
  	
  

  
	
   
  	
   
  	
   
  
	
   
  	
   
  	
   
  
	
  Dated:   __________, 20__
  	
   
  	
   
  
	
   
  	
   
  	
  

  
	
   
  	
   
  	
  Kenneth L.   Schroeder
  
	
   
  	
   
  	
   
  

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