Document:

Tegal_2007_Employment_Agreement_Tom_Mika

    

      EMPLOYMENT
        AGREEMENT

       

      

      This
        Employment Agreement, dated as of July 27, 2007, is entered into between
        Tegal
        Corporation (the “Company”) and Thomas R. Mika (“Employee”).

       

      WHEREAS,
        Employee is the President and Chief Executive Officer of the
        Company;

      

      WHEREAS,
        Employee and the Company entered into an Employment Agreement dated as of
        August
        12, 2002, which Employment Agreement expired by its terms;

      

      WHEREAS,
        the
        Company desires to continue to employ and retain the services of Employee,
        and
        Employee wishes to continue employment by the Company, on the terms set forth
        in
        this Agreement;

      

      NOW,
        THEREFORE,
        in
        consideration of the promises and the mutual covenants set forth in this
        Agreement, the Company and Employee agree as follows:

      

      1.  Term
        of Employment.
        Subject
        to the termination provisions hereinafter set forth, the Company will employ
        the
        Employee, and the Employee accepts employment with the Company, for a period
        of
        two years (the “Initial Term”) commencing as of the date first set forth above.
        The Initial Term shall be automatically renewed for successive one year periods
        (“Successive Terms”) unless either party gives ninety (90) calendar days written
        notice of nonrenewal. The giving by the Company of a notice of nonrenewal
        shall
        be deemed to be a notice of termination without Cause given by the Company
        to
        Employee for the purposes of Section 8(a) hereof; provided,
        however,
        that
        the giving by the Company of a notice of nonrenewal within twelve (12) months
        following a “change of control” shall be deemed to be a notice of termination
        without Cause given by the Company to Employee for the purposes of Section
        8(c)
        hereof.

      

      2.  Duties.
        The
        Employee will serve as President and Chief Executive Officer, reporting to
        the
        Company’s Board of Directors (the “Board
        of Directors”).
        The
        Employee will discharge such duties and responsibilities as are customary
        for
        such position or are prescribed from time to time by the Company. The Employee
        will devote his full time and attention to the affairs of the Company and
        will
        not enter the employ of or serve as a consultant to, or in any way perform
        any
        services for, with or without compensation, any other person, business or
        organization without the prior approval of the Board of Directors. In no
        event
        may any such service be inconsistent with, or prevent Employee from carrying
        out, his duties under this Agreement, as determined at the sole discretion
        of
        the Board of Directors.

      

      3.  Maintaining
        Confidential Information/Property Rights.
        Employee agrees to sign and abide by all Company policies regarding confidential
        information and ethics including, but not limited to the Confidential &
Proprietary Information and Intellectual Property/Property Rights policy,
        as
        attached hereto.

      

      4.  Non-Competition;
        Non-Solicitation.
        During
        the Initial Term, any Successive Term, and for any Salary Continuation Period
        as
        provided in Section 8(a) Employee shall not, directly or
        indirectly:

      

      (a)  own,
        manage, operate, advise, consult, join, control or participate in the ownership,
        management, operation or control of, be employed by, perform services for,
        or be
        connected in any manner with, any enterprise which is engaged in providing:
        i)
        any plasma etch system or any other system capable of etching “new materials”;
        ii) any PVD (physical vapor deposition) system competitive with the Company’s
        products; iii) any ALD (atomic level deposition) system or NLD (nano layer
        deposition) or MOCVD (metal organic deposition systems), or their equivalents,
        to any semiconductor, thin film head, MEMS or other device manufacturers
        anywhere in the world; provided,
        however,
        that
        such restriction shall not apply to Employee’s ownership of any passive
        investment representing an interest of less than five percent (5%) of an
        outstanding class of publicly traded securities; or 

      

      (b)  recruit,
        encourage or solicit any person who is an employee or contractor of the Company
        or any entity affiliated with the Company (the “Affiliated Entity”) to leave the
        Company’s or Affiliated Entity’s employ or service for any reason, or interfere
        in any material manner with employment or service relationships at the time
        existing between the Company or Affiliated Entity and the subject employee
        or
        contractor (except as may be required in any bona fide termination decision
        during the Term or any Successive Term regarding any Company or Affiliated
        Entity employee) in order to induce such employee or contractor of the Company
        to accept other employment or a consulting agreement with any other person
        or
        entity.

      

      Employee
        acknowledges that the services that he shall provide to the Company under
        this
        Agreement are unique and that irreparable harm shall be suffered by the Company
        in the event of the breach by Employee of any of his obligations under this
        Section 4, and that the Company shall be entitled, in addition to its other
        rights and remedies, whether legal or equitable, to enforce such obligations
        by
        an injunction or decree of specific performance. If any restriction set forth
        in
        this non-competition section is found by a court to be unreasonable, then
        Employee agrees, and hereby submits, to the reduction and limitation of such
        prohibition to such area or period as shall be deemed reasonable by such
        court.

      

      
        
          
          

        

        
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      5.  Salary
        and Incentives.

      

      (a) Salary. During
        the Term, the Company will pay the Employee an annual salary of two hundred
        and
        eighty-four thousand dollars ($284,000) (the “Base Salary”); provided that
        Employee’s Base Salary may be reduced to the extent that the Employee elects to
        defer any portion thereof under the terms of any deferred compensation or
        savings plan maintained by the Company. During the Initial Term and any
        Successive Term, Employee shall be entitled to merit increases of his Base
        Salary, from time to time, in accordance with Company policy. Employee’s Base
        Salary may also be reduced during the Initial Term or any Successive Term,
        consistent with reductions made to the salaries of other employees or groups
        of
        employees of the Company.

      

      (b)  Incentive
        Payment.
        Employee will be eligible to receive incentive bonus payments from time to
        time
        in accordance with any incentive bonus program then in effect. Employee will
        be
        entitled to receive an annual
        cash incentive bonus under such program at a target level of 50% of Base
        Salary
        upon the achievement of targets and other objectives for each fiscal year
        as
        approved annually on behalf of the Company by the Board of Directors. Such
        a
        plan will be administered on the Company’s fiscal year basis (currently fiscal
        year ending March 31). For the fiscal year ending March 31, 2008, the Board
        of
        Directors and Employee shall mutually agree upon the targets and other
        objectives to be achieved for Employee’s entitlement to an incentive payment for
        such fiscal year as soon as reasonably practicable after execution of this
        Agreement. For subsequent fiscal years (beginning with the fiscal year ending
        March 31, 2009), the Board of Directors and Employee shall mutually agree
        upon
        the targets and other objectives to be achieved for Employee’s entitlement to an
        incentive payment for such fiscal year no later than the end of the first
        quarter of each fiscal year, provided that the completion and approval by
        the
        Board of Directors of the Company’s audited financial statements for the prior
        fiscal year has occurred. In the event that an incentive payment is earned
        by
        Employee under such a plan for any fiscal year, such payment shall be made
        to
        Employee in a lump sum all-cash amount as earned on or before the later of
        (1)
        the end of the first fiscal quarter of the subsequent fiscal year, or (2)
        the
        completion and approval by the Board of Directors of the Company’s audited
        financial statements for the prior fiscal year has occurred, provided that
        Employee has remained continuously employed in the Company’s service through the
        end of the fiscal year for which the payment is being made. 

      

      (c)  Expenses.
        The
        Company will reimburse the Employee for all reasonable travel, entertainment
        and
        miscellaneous expenses actually and necessarily incurred in connection with
        the
        performance of his duties under this Agreement, provided that the Employee’s
        expenses are in accordance with the Company’s current practices and that
        Employee properly accounts for such expenses.

      

      6.  Benefits.
        The
        Employee will be entitled during the Term or any Successive Term of this
        Agreement to participate in any vacation, pension, insurance or other benefit
        plan that is maintained by the Company for its employees to the extent and
        in
        the manner prescribed by the applicable plan documents.

      

      7.  Long-term
        Incentives.
        Employee will be eligible to receive annual long-term incentive awards from
        time
        to time in accordance with the terms and conditions of long-term incentive
        compensation plans and programs as in effect from time to time as approved
        by
        the Company’s
        Compensation Committee and the Board
        of
        Directors.
        The
        Company will provide for annual target level award(s) pursuant to such program
        with a fair market value on the date of grant equal to 100% of Base
        Salary.
         

      

      8.  Termination.

      

      (a) Termination
        by the Company Without Cause.
        The
        Company may terminate the Employee’s employment under this Agreement without
        Cause at any time by giving no less than ninety (90) calendar days’ written
        notice to the Employee. However, in the event that the Company desires to
        terminate Employee’s employment without Cause, the Company agrees that it will
        pay to Employee the following:

      

      1.  Employee’s
        then-prevailing Base Salary for a period of twenty-four months from the date
        of
        termination (the “Salary
        Continuation Period”);
        and

       

      2.  an
        amount
        equal to two times the average annual incentive bonus paid to Employee by
        the
        Company for the three most recently completed fiscal years in which a cash
        bonus
        program covering the Employee was in effect or a cash bonus was otherwise
        paid,
        payable in equal installments over the Salary Continuation Period. For the
        avoidance of doubt, in the event there are less than three years in which
        a cash
        bonus program covering the Employee was in effect, the average annual incentive
        bonus shall be determined solely with respect to such lesser number of
        years.

       

      
        
          
          

        

        
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      (b) Termination
        by Employee for Good Reason.
        Employee may voluntarily elect to resign his employment with the Company
        prior
        to the end of the Initial Term or any Successive Term for Good Reason (as
        hereinafter defined) upon giving the Company ninety (90) calendar days’ advance
        notice in writing of such termination. If Employee terminates his employment
        for
        Good Reason, it shall be equivalent to a “Termination Without Cause”, and the
        Employee shall be entitled to receive the payments or benefits subject to
        the
        terms and conditions of Section 8(a). "Good Reason" shall mean any of the
        following that are undertaken without the Employee’s express written consent:
        (i) the assignment to the Employee of principal duties or responsibilities,
        or
        the substantial reduction of Employee’s duties and responsibilities, either of
        which is inconsistent with Employee’s position as President and Chief Executive
        Officer of the Company; (ii) a material reduction by the Company in Employee’s
        annual base salary, except to the extent the salaries of other executive
        employees of the Company are similarly reduced; (iii) Employee’s principal place
        of business is, without his consent, relocated by a distance of more than
        fifty
        (50) miles from either of its current facilities located in Petaluma or San
        Jose, California; and (iv) any material breach by the Company of any provision
        of this Agreement that is not cured within forty-five (45) calendar days’
written notice to the Company.

      

      (c) Termination
        in Connection With a Change in Control.
        In the
        event that Employee’s employment is terminated without Cause by the Company or
        Employee terminates his employment for Good Reason within twelve (12) months
        following a “change of control”, in lieu of any amounts payable under Sections
        8(a) or (b), the Company agrees that it will pay Employee a lump sum amount
        equal to the sum of:

      

      1.  two
        (2)
        times the sum of Employee’s then-prevailing Base Salary, plus 

      2.  two
        (2)
        times the average annual incentive bonus paid to Employee by the Company
        for the
        three most recently completed fiscal years in which a cash bonus program
        covering the Employee was in effect. For the avoidance of doubt, in the event
        there are less than three years in which a cash bonus program covering the
        Employee was in effect or a cash bonus was otherwise paid, the average annual
        incentive bonus shall be determined solely with respect to such lesser number
        of
        years.

      

      In
        addition, and notwithstanding any provision to the contrary in any long-term
        incentive award agreement or long-term incentive compensation plan, the Company
        shall cause all outstanding long-term incentive awards then held by the
        Employee, to the extent that such awards are earned or “in the money,” as
        applicable, (including, without limitation, stock options, stock appreciation
        rights, phantom shares, restricted stock or similar awards) to become fully
        vested and, if applicable, exercisable with respect to all the shares subject
        thereto effective immediately prior to the date of termination. In all other
        respects, such awards will continue to be subject to the terms and conditions
        of
        the plans, if any, under which they were granted and any applicable agreements
        between the Company and Employee. A “change of control” shall be defined as and
        include each of the following: (i) the sale of substantially all of the assets
        of the Company, (ii) an event of a merger of the Company with or into another
        corporation in which the holders of at least 50% of the Company's outstanding
        voting power hold less than 50% of the outstanding voting power immediately
        after such merger, or (iii) during
        any period of two consecutive years, individuals who, at the beginning of
        such
        period, constitute the Board of Directors together with any new director(s)
        whose election by the Board or nomination for election by the Company’s
        stockholders was approved by a vote of at least two-thirds of the directors
        then
        still in office who either were directors at the beginning of the two-year
        period or whose election or nomination for election was previously so approved,
        cease for any reason to constitute a majority thereof. Any
        unvested long-term incentive awards at the date of termination shall revert
        to
        the Company. If Employee breaches Section 4 during the Salary Continuation
        Period, the Company’s obligation to pay Employee’s salary and benefits shall
        cease immediately. 

      

      (d) Termination
        by the Company for Cause.
        The
        Company may immediately terminate Employee’s employment at any time for Cause by
        giving written notice to Employee. Upon any such termination for Cause, Employee
        shall have no right to compensation or benefits for any period subsequent
        to the
        date of termination. For the purposes of this Agreement, “Cause” shall mean:
        Employee willfully engages in an act or omission which is in bad faith and
        to
        the detriment of the Company, engages in misconduct, gross negligence, or
        willful malfeasance, in each case that causes material harm to the Company,
        breaches this Agreement, habitually neglects or materially fails to perform
        his
        duties (other
        than any such failure resulting solely from Employee’s physical or mental
        disability or incapacity) after a written demand for substantial performance
        is
        delivered to Employee which identifies the manner in which the Company believes
        that the Employee has not performed Employee’s duties,
        is
        convicted of a felony or any crime involving moral turpitude, uses drugs
        or
        alcohol in a way that either interferes with the performance of his duties
        or
        compromises the integrity or reputation of the Company, or engages in any
        act of
        dishonesty involving the Company, disclosure of Company confidential information
        not required by the duties of Employee, commercial bribery, or perpetration
        of
        fraud; provided, however, that Employee shall have at least forty-five (45)
        calendar days to cure, if curable, any of the events which could lead to
        Employee’s termination for Cause.

      

      (e) Termination
        by Death or Disability. In
        the
        event that Employee dies or becomes completely disabled from performing his
        duties during the Initial Term or any Successive Term of this Agreement,
        the
        Company shall be relieved of all obligations under this Agreement, except
        for
        payment of salary and bonuses to Employee or Employee’s heirs as if the Employee
        had been terminated without Cause in accordance with Section 8(a)
        herein.

      

      (f) Termination
        by Employee. Employee
        may terminate his employment under this Agreement at any time by giving written
        notice to the Company. Such termination will become effective upon the date
        specified in such notice, provided that such date is at least ninety (90)
        calendar days after the date of delivery of the notice. Upon any such
        termination, the Company shall be relieved of all of its obligations under
        this
        Agreement, except for payment of salary and the provision of benefits through
        the effective date of termination.

      

      
        
          
          

        

        
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      9.  Limitations
        on Payment.

      

      (a) Section
        409A.
        Notwithstanding anything contained in this Agreement to the contrary, however,
        to the extent required to comply with Section 409A of the Internal Revenue
        Code
        of 1986, as amended (the “Code”), if Employee is deemed to be a “specified
        employee” for purposes of Section 409A(a)(2)(B) of the Code, payments due to
        Employee under Section 8 of this Agreement in connection with a termination
        of
        employment that would otherwise have been payable at any time during the
        six-month period immediately following such termination of employment shall
        not
        be paid prior to, and shall instead be payable in a lump sum as soon as
        practicable following, the expiration of such six-month period. In the event
        of
        Employee’s death during such six-month period, upon provision to the Company of
        a signed general release of all claims against the Company and its affiliates
        in
        a form acceptable to the Company, Employee’s estate will receive the severance
        benefits described in this Agreement.

      

      (b) Parachute
        Payments.
        Notwithstanding anything contained in this Agreement to the contrary, to
        the
        extent that payments and benefits provided under this Agreement to Employee
        (such payments or benefits are collectively referred to as the “Payments”) would
        be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of
        the Code, the Payments shall be reduced (but not below zero) to the extent
        necessary so that no Payment to be made or benefit to be provided to Employee
        shall be subject to the Excise Tax, but only if, by reason of such reduction,
        the net after-tax benefit received by such Employee shall exceed the net
        after-tax benefit received by him if no such reduction was made. For purposes
        of
        this Section 9(b), “net after-tax benefit” shall mean (i) the Payments which
        such Employee receives or is then entitled to receive from the Company that
        would constitute “parachute payments” within the meaning of Section 280G of the
        Code, less (ii) the amount of all federal, state and local income taxes payable
        with respect to the foregoing calculated at the maximum marginal income tax
        rate
        for each year in which the foregoing shall be paid such Employee (based on
        the
        rate in effect for such year as set forth in the Code as in effect at the
        time
        of the first payment of the foregoing), less (iii) the amount of excise taxes
        imposed with respect to the payments and benefits described in (i) above
        by
        Section 4999 of the Code. The foregoing determination will be made by a
        nationally recognized accounting firm (the “Accounting Firm”) selected by
        Employee and reasonably acceptable to the Company (which may be, but will
        not be
        required to be, the Company's independent auditors). The Company will direct
        the
        Accounting Firm to submit its determination and detailed supporting calculations
        to both the affected Employee and the Company within fifteen (15) calendar
        days
        after Employee’s date of termination. If the Accounting Firm determines that
        such reduction is required by this Section 9(b), Employee, in Employee’s sole
        and absolute discretion, may determine which Payments shall be reduced to
        the
        extent necessary so that no portion thereof shall be subject to the excise
        tax
        imposed by Section 4999 of the Code, and the Company shall pay such reduced
        amount to him. 

      

      10.  Arbitration.

      

      Employee
        and the Company agree to submit any and all disputes, controversies, or claims
        between them based upon, relating to, or arising from Employee’s employment by
        the Company or the terms of this Agreement (other than workers’ compensation
        claims) to final and binding arbitration before a single neutral arbitrator
        in
        Petaluma, California. Subject to the terms of this paragraph, the arbitration
        proceedings shall be initiated in accordance with, and governed by, the National
        Rules for the Resolution of Employment Disputes (“Rules”) of the American
        Arbitration Association (“AAA”). The arbitrator shall be appointed by agreement
        of the parties hereto or, if no agreement can be reached, by the AAA pursuant
        to
        its Rules. Notwithstanding the Rules, the parties may take discovery in
        accordance with Sections 1283.05(a)-(d) of the California Code of Civil
        Procedure (but not subject to the restrictions of Section 1283.05(e)), and
        prior
        to the arbitration hearing the parties may file, and the arbitrator shall
        rule
        on, pre-trial motions such as demurrers and motions for summary judgment
        (applying the procedural standard embodied in Rule 56 of the Federal Rules
        of
        Civil Procedure). The time for filing such motions shall be determined by
        the
        arbitrator. The arbitrator will rule on all pre-trial motions at least ten
        (10)
        business days prior to the scheduled hearing date. Arbitration may be compelled,
        the arbitration award shall be enforced, and judgment thereon shall be entered,
        pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280
et
        seq.).
        The
        prevailing party in any such arbitration shall be entitled to recover from
        the
        other, and the arbitrator is instructed to award to the prevailing party,
        an
        amount equal to the reasonable attorneys’ fees and costs (including expert
        witness fees) incurred in connection with the arbitration, except that the
        Company shall bear AAA’s administrative fees and the arbitrator’s fees and
        costs. If any party is required to compel arbitration of a dispute governed
        by
        this paragraph, the party prevailing in that proceeding shall be entitled
        to
        recover from the other party its reasonable costs and attorneys’ fees and
        expenses incurred to compel arbitration. This paragraph is intended to be
        the
        exclusive method for resolving any and all claims by the parties against
        each
        other for payment of damages under this Agreement or relating to Employee’s
        employment; provided, however, that neither this Agreement nor the submission
        to
        arbitration shall limit the parties’ right to seek provisional relief, including
        without limitation injunctive relief, in any court of competent jurisdiction.
        Both Employee and the Company expressly waive their right to a jury trial.
        This
        paragraph shall survive the expiration or termination of this Agreement.
        If any
        part of this paragraph is found to be void as a matter of law or public policy,
        the remainder of the paragraph will continue to be in full force and
        effect.

      

      
        
          
          

        

        
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      11.  Miscellaneous.

      

      (a)  Assignment.
        The
        rights and obligations of the parties under this Agreement shall inure to
        the
        benefit of and be binding upon their respective successors and assigns. Employee
        agrees that the Company may assign its rights and obligations under this
        Agreement or any successor-in-interest. Employee may assign his rights and
        obligations hereunder only with the express written consent of the Company,
        except that the rights under this Agreement shall inure to the benefit of
        the
        Employee’s heirs or assigns in the event of his death. Except as expressly
        provided in this paragraph, no party may assign its/his rights and obligations
        hereunder; and any attempt to do so will be void.

      

      (b) Severability. If
        any
        provision of this Agreement otherwise is deemed to be invalid or unenforceable
        or is prohibited by the laws of the state or jurisdiction where it is to
        be
        performed, this Agreement shall be considered divisible as to such provision,
        and such provision shall be inoperative in such state or jurisdiction and
        shall
        not be part of the consideration moving from any of the parties to any other.
        The remaining provisions of this Agreement shall be valid and binding and
        of
        like effect as though such provision were not included.

      

      (c) Notice. 
        Notices
        given pursuant to the provisions of this Agreement shall be delivered personally
        or sent by certified mail, postage pre-paid, or by overnight courier, or
        by fax,
        to the Company’s then-current business address or, in the event the notice is to
        Employee, to the address that Employee has represented to the Company as
        current.

      

      (d) Governing
        Law.
        This
        Agreement shall be governed by and construed and enforced in accordance with
        the
        laws of the State of Delaware, without giving effect to the conflict of laws
        rules thereof.

      

      (e) Waiver;
        Amendment. The
        waiver by any party to this Agreement of a breach of any provision hereof
        by any
        other party shall not be construed as a waiver of any subsequent breach.
        No
        provision of this Agreement may be terminated, amended, supplemented, waived
        or
        modified other than by an instrument in writing, signed by the party against
        whom the enforcement of the termination, amendment, supplement, waiver or
        modification is sought.

      

      (f) Entire
        Agreement.
        This
        Agreement represents the entire agreement between the parties with respect
        to
        the subject matter of this Agreement and supersedes any previous agreement
        or
        understanding.

      

      (g) Execution
        in Counterparts. This
        Agreement may be executed in counterparts with the same force and effectiveness
        as though executed as a single document.

      

      (h) Section
        409A.
        The
        parties acknowledge and agree that, to the extent applicable, this Agreement
        shall be interpreted in accordance with, and the parties agree to use their
        best
        efforts to achieve timely compliance with, Section 409A of the Code, and
        the
        Department of Treasury Regulations and other interpretive guidance issued
        thereunder, including, without limitation, any such regulations or other
        guidance that may be issued after the date hereof. Notwithstanding any provision
        of this Agreement to the contrary, in the event that the Company determines
        that
        any amounts payable hereunder would otherwise be taxable to Employee under
        Section 409A, the Company may adopt such limited amendments to this Agreement
        and appropriate policies and procedures, including amendments and policies
        with
        retroactive effect, that the Company reasonably determines are necessary
        or
        appropriate to comply with the requirements of Section 409A and thereby avoid
        the application of penalty taxes under such Section.

      

      [signature
        page follows]

      
        
          
          

        

        
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        IN WITNESS WHEREOF,
        the
        Company and the Employee have executed this Agreement as of the day and year
        first written above.

      

      

                                                       
        TEGAL CORPORATION          
        EMPLOYEE

       

       

       

       

        

          
          
        

         _____________________________                                                                    _______________________________________ 

                            
        Ed
        Dohring            Thomas
        R.
        Mika 

                                     Chairman
        of the Compensation
        Committee                                                                                             
President and Chief Executive Officer 
                                      
          of
          Tegal CorporationTegal_2007_Employment_Agreement_Christine_Hergenrother

    EMPLOYMENT
      AGREEMENT

     

    

    This
      Employment Agreement, dated as of July 27, 2007, is entered into between Tegal
      Corporation (the “Company”) and Christine T. Hergenrother
      (“Employee”).

     

    WHEREAS,
      Employee is the Chief Financial Officer of the Company;

    

    WHEREAS,
      the
      Company desires to continue to employ and retain the services of Employee,
      and
      Employee wishes to continue employment by the Company, on the terms set forth
      in
      this Agreement;

    

    NOW,
      THEREFORE,
      in
      consideration of the promises and the mutual covenants set forth in this
      Agreement, the Company and Employee agree as follows:

    

    1.  Term
      of Employment.
      Subject
      to the termination provisions hereinafter set forth, the Company will employ
      the
      Employee, and the Employee accepts employment with the Company, for a period
      of
      one year (the “Initial Term”) commencing as of the date first set forth above.
      The Initial Term shall be automatically renewed for successive one year periods
      (“Successive Terms”) unless either party gives ninety (90) calendar days written
      notice of nonrenewal. The giving by the Company of a notice of nonrenewal shall
      be deemed to be a notice of termination without Cause given by the Company
      to
      Employee for purposes of Section 8(a) hereof; provided,
      however,
      that
      the giving by the Company of a notice of nonrenewal within twelve (12) months
      following a “change of control” shall be deemed to be a notice of termination
      without Cause given by the Company to Employee for the purposes of Section
      8(c)
      hereof.

    

    2.  Duties.
      The
      Employee will serve as Vice President and Chief Financial Officer, reporting
      to
      the Company’s Chief Executive Officer and the Company’s Board of Directors (the
“Board
      of Directors”).
      The
      Employee will discharge such duties and responsibilities as are customary for
      such position or are prescribed from time to time by the Company. The Employee
      will devote her full time and attention to the affairs of the Company and will
      not enter the employ of or serve as a consultant to, or in any way perform
      any
      services for, with or without compensation, any other person, business or
      organization without the prior approval of the Board of Directors. In no event
      may any such service be inconsistent with, or prevent Employee from carrying
      out, her duties under this Agreement, as determined at the sole discretion
      of
      the Board of Directors.

    

    3.  Maintaining
      Confidential Information/Property Rights.
      Employee agrees to sign and abide by all Company policies regarding confidential
      information and ethics including, but not limited to the Confidential &
Proprietary Information and Intellectual Property/Property Rights policy, as
      attached hereto.

    

    4.  Non-Competition;
      Non-Solicitation.
      During
      the Initial Term, any Successive Term, and for any Salary Continuation Period
      as
      provided in Section 8(a) Employee shall not, directly or
      indirectly:

    

    (a)  own,
      manage, operate, advise, consult, join, control or participate in the ownership,
      management, operation or control of, be employed by, perform services for,
      or be
      connected in any manner with, any enterprise which is engaged in providing:
      i)
      any plasma etch system or any other system capable of etching “new materials”;
      ii) any PVD (physical vapor deposition) system competitive with the Company’s
      products; iii) any ALD (atomic level deposition) system or NLD (nano layer
      deposition) or MOCVD (metal organic deposition systems), or their equivalents,
      to any semiconductor, thin film head, MEMS or other device manufacturers
      anywhere in the world; provided,
      however,
      that
      such restriction shall not apply to Employee’s ownership of any passive
      investment representing an interest of less than five percent (5%) of an
      outstanding class of publicly traded securities; or 

    

    (b)  recruit,
      encourage or solicit any person who is an employee or contractor of the Company
      or any entity affiliated with the Company (the “Affiliated Entity”) to leave the
      Company’s or Affiliated Entity’s employ or service for any reason, or interfere
      in any material manner with employment or service relationships at the time
      existing between the Company or Affiliated Entity and the subject employee
      or
      contractor (except as may be required in any bona fide termination decision
      during the Term or any Successive Term regarding any Company or Affiliated
      Entity employee) in order to induce such employee or contractor of the Company
      to accept other employment or a consulting agreement with any other person
      or
      entity.

    

    Employee
      acknowledges that the services that she shall provide to the Company under
      this
      Agreement are unique and that irreparable harm shall be suffered by the Company
      in the event of the breach by Employee of any of her obligations under this
      Section 4, and that the Company shall be entitled, in addition to its other
      rights and remedies, whether legal or equitable, to enforce such obligations
      by
      an injunction or decree of specific performance. If any restriction set forth
      in
      this non-competition section is found by a court to be unreasonable, then
      Employee agrees, and hereby submits, to the reduction and limitation of such
      prohibition to such area or period as shall be deemed reasonable by such
      court.

    

    
      
        
        

      

      
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    5.  Salary
      and Incentives.

    

    (a) Salary. During
      the Term, the Company will pay the Employee an annual salary of one hundred
      and
      seventy-five thousand dollars ($175,000) (the “Base Salary”); provided that
      Employee’s Base Salary may be reduced to the extent that the Employee elects to
      defer any portion thereof under the terms of any deferred compensation or
      savings plan maintained by the Company. During the Initial Term and any
      Successive Term, Employee shall be entitled to merit increases of her Base
      Salary, from time to time, in accordance with Company policy. Employee’s Base
      Salary may also be reduced during the Initial Term or any Successive Term,
      consistent with reductions made to the salaries of other employees or groups
      of
      employees of the Company.

    

    (b)  Incentive
      Payment.
      Employee will be eligible to receive incentive bonus payments from time to
      time
      in accordance with any incentive bonus program then in effect. Employee will
      be
      entitled to receive an annual
      cash incentive bonus under such program at a target level of 30% of Base Salary
      upon the achievement of targets and other objectives for each fiscal year as
      approved annually on behalf of the Company by the Board of Directors. Such
      a
      plan will be administered on the Company’s fiscal year basis (currently fiscal
      year ending March 31). For the fiscal year ending March 31, 2008, the Board
      of
      Directors and Employee shall mutually agree upon the targets and other
      objectives to be achieved for Employee’s entitlement to an incentive payment for
      such fiscal year as soon as reasonably practicable after execution of this
      Agreement. For subsequent fiscal years (beginning with the fiscal year ending
      March 31, 2009), the Board of Directors and Employee shall mutually agree upon
      the targets and other objectives to be achieved for Employee’s entitlement to an
      incentive payment for such fiscal year no later than the end of the first
      quarter of each fiscal year, provided that the completion and approval by the
      Board of Directors of the Company’s audited financial statements for the prior
      fiscal year has occurred. In the event that an incentive payment is earned
      by
      Employee under such a plan for any fiscal year, such payment shall be made
      to
      Employee in a lump sum all-cash amount as earned on or before the later of
      (1)
      the end of the first fiscal quarter of the subsequent fiscal year, or (2) the
      completion and approval by the Board of Directors of the Company’s audited
      financial statements for the prior fiscal year has occurred, provided that
      Employee has remained continuously employed in the Company’s service through the
      end of the fiscal year for which the payment is being made.  

    

    (c) Expenses.
      The
      Company will reimburse the Employee for all reasonable travel, entertainment
      and
      miscellaneous expenses actually and necessarily incurred in connection with
      the
      performance of her duties under this Agreement, provided that the Employee’s
      expenses are in accordance with the Company’s current practices and that
      Employee properly accounts for such expenses.

    

    6.  Benefits.
      The
      Employee will be entitled during the Term or any Successive Term of this
      Agreement to participate in any vacation, pension, insurance or other benefit
      plan that is maintained by the Company for its employees to the extent and
      in
      the manner prescribed by the applicable plan documents.

    

    7.  Long-term
      Incentives.
      Employee will be eligible to receive annual long-term incentive awards in
      accordance with the terms and conditions of any applicable long-term incentive
      compensation plans and programs as in effect from time to time as approved
      by
      the Company’s Compensation Committee and the Board of Directors. The Company
      will provide for annual target level award(s) pursuant to such program with
      a
      fair market value on the date of grant equal to 30% of Base Salary.

    

    8.  Termination.

    

    (a) Termination
      by the Company Without Cause.
      The
      Company may terminate the Employee’s employment under this Agreement without
      Cause at any time by giving no less than ninety (90) calendar days’ written
      notice to the Employee. However, in the event that the Company desires to
      terminate Employee’s employment without Cause, the Company agrees that it will
      pay to Employee the following:

    

    1.  Employee’s
      then-prevailing Base Salary for a period of twelve months from the date of
      termination (the “Salary
      Continuation Period”);
      and

     

    2.  an
      amount
      equal to one times the average annual incentive bonus paid to Employee by the
      Company for the three most recently completed fiscal years in which a cash
      bonus
      program covering the Employee was in effect, payable in equal installments
      over
      the Salary Continuation Period. For the avoidance of doubt, in the event there
      are less than three years in which a cash bonus program covering the Employee
      was in effect or a cash bonus was otherwise paid, the average annual incentive
      bonus shall be determined solely with respect to such lesser number of years.
      

     

    
      
        
        

      

      
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    (b) Termination
      by Employee for Good Reason.
      Employee may voluntarily elect to resign her employment with the Company prior
      to the end of the Initial Term or any Successive Term for Good Reason (as
      hereinafter defined) upon giving the Company ninety (90) calendar days’ advance
      notice in writing of such termination. If Employee terminates her employment
      for
      Good Reason, it shall be equivalent to a “Termination Without Cause”, and the
      Employee shall be entitled to receive the payments or benefits subject to the
      terms and conditions of Section 8(a). "Good Reason" shall mean any of the
      following that are undertaken without the Employee’s express written consent:
      (i) the assignment to the Employee of principal duties or responsibilities,
      or
      the substantial reduction of Employee’s duties and responsibilities, either of
      which is inconsistent with Employee’s position as Chief Financial Officer of the
      Company; (ii) a material reduction by the Company in Employee’s annual base
      salary, except to the extent the salaries of other executive employees of the
      Company are similarly reduced; (iii) Employee’s principal place of business is,
      without her consent, relocated by a distance of more than fifty (50) miles
      from
      its current facilities located in Petaluma, California; and (iv) any material
      breach by the Company of any provision of this Agreement that is not cured
      within forty-five (45) calendar days’ written notice to the
      Company.

    

    (c) Termination
      in Connection With a Change in Control.
      In the
      event that Employee’s employment is terminated without Cause by the Company or
      Employee terminates her employment for Good Reason within twelve (12) months
      following a “change of control”, in lieu of any amounts payable under Sections
      8(a) or (b), the Company agrees that it will pay Employee a lump sum amount
      equal to the sum of:

    

    1. one
      (1)
      times the sum of Employee’s then-prevailing Base Salary, plus 

    

    2, one
      (1)
      times the average annual incentive bonus paid to Employee by the Company for
      the
      three most recently completed fiscal years in which a cash bonus program
      covering the Employee was in effect. For the avoidance of doubt, in the event
      there are less than three years in which a cash bonus program covering the
      Employee was in effect or a cash bonus was otherwise paid, the average annual
      incentive bonus shall be determined solely with respect to such lesser number
      of
      years. 

    

    In
      addition, and notwithstanding any provision to the contrary in any long-term
      incentive award agreement or long-term incentive compensation plan, the Company
      shall cause all outstanding long-term incentive awards then held by the
      Employee, to the extent that such awards are earned or “in the money,” as
      applicable, (including, without limitation, stock options, stock appreciation
      rights, phantom shares, restricted stock or similar awards) to become fully
      vested and, if applicable, exercisable with respect to all the shares subject
      thereto effective immediately prior to the date of termination. In all other
      respects, such awards will continue to be subject to the terms and conditions
      of
      the plans, if any, under which they were granted and any applicable agreements
      between the Company and Employee. A “change of control” shall be defined as and
      include each of the following: (i) the sale of substantially all of the assets
      of the Company, (ii) an event of a merger of the Company with or into another
      corporation in which the holders of at least 50% of the Company's outstanding
      voting power hold less than 50% of the outstanding voting power immediately
      after such merger, or (iii) during
      any period of two consecutive years, individuals who, at the beginning of such
      period, constitute the Board of Directors together with any new director(s)
      whose election by the Board or nomination for election by the Company’s
      stockholders was approved by a vote of at least two-thirds of the directors
      then
      still in office who either were directors at the beginning of the two-year
      period or whose election or nomination for election was previously so approved,
      cease for any reason to constitute a majority thereof. Any
      unvested long-term incentive awards at the date of termination shall revert
      to
      the Company. If Employee breaches Section 4 during the Salary Continuation
      Period, the Company’s obligation to pay Employee’s salary and benefits shall
      cease immediately. 

    

    (d) Termination
      by the Company for Cause.
      The
      Company may immediately terminate Employee’s employment at any time for Cause by
      giving written notice to Employee. Upon any such termination for Cause, Employee
      shall have no right to compensation or benefits for any period subsequent to
      the
      date of termination. For the purposes of this Agreement, “Cause” shall mean:
      Employee willfully engages in an act or omission which is in bad faith and
      to
      the detriment of the Company, engages in misconduct, gross negligence, or
      willful malfeasance, in each case that causes material harm to the Company,
      breaches this Agreement, habitually neglects or materially fails to perform
      her
      duties (other
      than any such failure resulting solely from Employee’s physical or mental
      disability or incapacity) after a written demand for substantial performance
      is
      delivered to Employee which identifies the manner in which the Company believes
      that the Employee has not performed Employee’s duties,
      is
      convicted of a felony or any crime involving moral turpitude, uses drugs or
      alcohol in a way that either interferes with the performance of her duties
      or
      compromises the integrity or reputation of the Company, or engages in any act
      of
      dishonesty involving the Company, disclosure of Company confidential information
      not required by the duties of Employee, commercial bribery, or perpetration
      of
      fraud; provided, however, that Employee shall have at least forty-five (45)
      calendar days to cure, if curable, any of the events which could lead to
      Employee’s termination for Cause.

    

    (e) Termination
      by Death or Disability. In
      the
      event that Employee dies or becomes completely disabled from performing her
      duties during the Initial Term or any Successive Term of this Agreement, the
      Company shall be relieved of all obligations under this Agreement, except for
      payment of salary and bonuses to Employee or Employee’s heirs as if the Employee
      had been terminated without Cause in accordance with Section 8(a)
      herein.

    

    (f) Termination
      by Employee. Employee
      may terminate her employment under this Agreement at any time by giving written
      notice to the Company. Such termination will become effective upon the date
      specified in such notice, provided that such date is at least ninety (90)
      calendar days after the date of delivery of the notice. Upon any such
      termination, the Company shall be relieved of all of its obligations under
      this
      Agreement, except for payment of salary and the provision of benefits through
      the effective date of termination.

    

    
      
        
        

      

      
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    9.  Limitations
      on Payment.

    

    (a) Section
      409A.
      Notwithstanding anything contained in this Agreement to the contrary, however,
      to the extent required to comply with Section 409A of the Internal Revenue
      Code
      of 1986, as amended (the “Code”), if Employee is deemed to be a “specified
      employee” for purposes of Section 409A(a)(2)(B) of the Code, payments due to
      Employee under Section 8 of this Agreement in connection with a termination
      of
      employment that would otherwise have been payable at any time during the
      six-month period immediately following such termination of employment shall
      not
      be paid prior to, and shall instead be payable in a lump sum as soon as
      practicable following, the expiration of such six-month period. In the event
      of
      Employee’s death during such six-month period, upon provision to the Company of
      a signed general release of all claims against the Company and its affiliates
      in
      a form acceptable to the Company, Employee’s estate will receive the severance
      benefits described in this Agreement.

    

    (b) Parachute
      Payments.
      Notwithstanding anything contained in this Agreement to the contrary, to the
      extent that payments and benefits provided under this Agreement to Employee
      (such payments or benefits are collectively referred to as the “Payments”) would
      be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of
      the Code, the Payments shall be reduced (but not below zero) to the extent
      necessary so that no Payment to be made or benefit to be provided to Employee
      shall be subject to the Excise Tax, but only if, by reason of such reduction,
      the net after-tax benefit received by such Employee shall exceed the net
      after-tax benefit received by her if no such reduction was made. For purposes
      of
      this Section 9(b), “net after-tax benefit” shall mean (i) the Payments which
      such Employee receives or is then entitled to receive from the Company that
      would constitute “parachute payments” within the meaning of Section 280G of the
      Code, less (ii) the amount of all federal, state and local income taxes payable
      with respect to the foregoing calculated at the maximum marginal income tax
      rate
      for each year in which the foregoing shall be paid such Employee (based on
      the
      rate in effect for such year as set forth in the Code as in effect at the time
      of the first payment of the foregoing), less (iii) the amount of excise taxes
      imposed with respect to the payments and benefits described in (i) above by
      Section 4999 of the Code. The foregoing determination will be made by a
      nationally recognized accounting firm (the “Accounting Firm”) selected by
      Employee and reasonably acceptable to the Company (which may be, but will not
      be
      required to be, the Company's independent auditors). The Company will direct
      the
      Accounting Firm to submit its determination and detailed supporting calculations
      to both the affected Employee and the Company within fifteen (15) calendar
      days
      after Employee’s date of termination. If the Accounting Firm determines that
      such reduction is required by this Section 9(b), Employee, in Employee’s sole
      and absolute discretion, may determine which Payments shall be reduced to the
      extent necessary so that no portion thereof shall be subject to the excise
      tax
      imposed by Section 4999 of the Code, and the Company shall pay such reduced
      amount to her. 

    

    10.  Arbitration.

    

    Employee
      and the Company agree to submit any and all disputes, controversies, or claims
      between them based upon, relating to, or arising from Employee’s employment by
      the Company or the terms of this Agreement (other than workers’ compensation
      claims) to final and binding arbitration before a single neutral arbitrator
      in
      Petaluma, California. Subject to the terms of this paragraph, the arbitration
      proceedings shall be initiated in accordance with, and governed by, the National
      Rules for the Resolution of Employment Disputes (“Rules”) of the American
      Arbitration Association (“AAA”). The arbitrator shall be appointed by agreement
      of the parties hereto or, if no agreement can be reached, by the AAA pursuant
      to
      its Rules. Notwithstanding the Rules, the parties may take discovery in
      accordance with Sections 1283.05(a)-(d) of the California Code of Civil
      Procedure (but not subject to the restrictions of Section 1283.05(e)), and
      prior
      to the arbitration hearing the parties may file, and the arbitrator shall rule
      on, pre-trial motions such as demurrers and motions for summary judgment
      (applying the procedural standard embodied in Rule 56 of the Federal Rules
      of
      Civil Procedure). The time for filing such motions shall be determined by the
      arbitrator. The arbitrator will rule on all pre-trial motions at least ten
      (10)
      business days prior to the scheduled hearing date. Arbitration may be compelled,
      the arbitration award shall be enforced, and judgment thereon shall be entered,
      pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280
et
      seq.).
      The
      prevailing party in any such arbitration shall be entitled to recover from
      the
      other, and the arbitrator is instructed to award to the prevailing party, an
      amount equal to the reasonable attorneys’ fees and costs (including expert
      witness fees) incurred in connection with the arbitration, except that the
      Company shall bear AAA’s administrative fees and the arbitrator’s fees and
      costs. If any party is required to compel arbitration of a dispute governed
      by
      this paragraph, the party prevailing in that proceeding shall be entitled to
      recover from the other party its reasonable costs and attorneys’ fees and
      expenses incurred to compel arbitration. This paragraph is intended to be the
      exclusive method for resolving any and all claims by the parties against each
      other for payment of damages under this Agreement or relating to Employee’s
      employment; provided, however, that neither this Agreement nor the submission
      to
      arbitration shall limit the parties’ right to seek provisional relief, including
      without limitation injunctive relief, in any court of competent jurisdiction.
      Both Employee and the Company expressly waive their right to a jury trial.
      This
      paragraph shall survive the expiration or termination of this Agreement. If
      any
      part of this paragraph is found to be void as a matter of law or public policy,
      the remainder of the paragraph will continue to be in full force and
      effect.

    

    
      
        
        

      

      
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    11.  Miscellaneous.

    

    (a)  Assignment.
      The
      rights and obligations of the parties under this Agreement shall inure to the
      benefit of and be binding upon their respective successors and assigns. Employee
      agrees that the Company may assign its rights and obligations under this
      Agreement or any successor-in-interest. Employee may assign her rights and
      obligations hereunder only with the express written consent of the Company,
      except that the rights under this Agreement shall inure to the benefit of the
      Employee’s heirs or assigns in the event of her death. Except as expressly
      provided in this paragraph, no party may assign its/her rights and obligations
      hereunder; and any attempt to do so will be void.

    

    (b) Severability. If
      any
      provision of this Agreement otherwise is deemed to be invalid or unenforceable
      or is prohibited by the laws of the state or jurisdiction where it is to be
      performed, this Agreement shall be considered divisible as to such provision,
      and such provision shall be inoperative in such state or jurisdiction and shall
      not be part of the consideration moving from any of the parties to any other.
      The remaining provisions of this Agreement shall be valid and binding and of
      like effect as though such provision were not included.

    

    (c) Notice. 
      Notices
      given pursuant to the provisions of this Agreement shall be delivered personally
      or sent by certified mail, postage pre-paid, or by overnight courier, or by
      fax,
      to the Company’s then-current business address or, in the event the notice is to
      Employee, to the address that Employee has represented to the Company as
      current.

    

    (d) Governing
      Law.
      This
      Agreement shall be governed by and construed and enforced in accordance with
      the
      laws of the State of Delaware, without giving effect to the conflict of laws
      rules thereof.

    

    (e) Waiver;
      Amendment. The
      waiver by any party to this Agreement of a breach of any provision hereof by
      any
      other party shall not be construed as a waiver of any subsequent breach. No
      provision of this Agreement may be terminated, amended, supplemented, waived
      or
      modified other than by an instrument in writing, signed by the party against
      whom the enforcement of the termination, amendment, supplement, waiver or
      modification is sought.

    

    (f) Entire
      Agreement.
      This
      Agreement represents the entire agreement between the parties with respect
      to
      the subject matter of this Agreement and supersedes any previous agreement
      or
      understanding.

    

    (g) Execution
      in Counterparts. This
      Agreement may be executed in counterparts with the same force and effectiveness
      as though executed as a single document.

    

    (h) Section
      409A.
      The
      parties acknowledge and agree that, to the extent applicable, this Agreement
      shall be interpreted in accordance with, and the parties agree to use their
      best
      efforts to achieve timely compliance with, Section 409A of the Code, and the
      Department of Treasury Regulations and other interpretive guidance issued
      thereunder, including, without limitation, any such regulations or other
      guidance that may be issued after the date hereof. Notwithstanding any provision
      of this Agreement to the contrary, in the event that the Company determines
      that
      any amounts payable hereunder would otherwise be taxable to Employee under
      Section 409A, the Company may adopt such limited amendments to this Agreement
      and appropriate policies and procedures, including amendments and policies
      with
      retroactive effect, that the Company reasonably determines are necessary or
      appropriate to comply with the requirements of Section 409A and thereby avoid
      the application of penalty taxes under such Section.

    

    [signature
      page follows]

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF,
      the
      Company and the Employee have executed this Agreement as of the day and year
      first written above.

    

    

                                                                            
      TEGAL CORPORATION        
      EMPLOYEE

     

     

        

     

     

                           
                                                 

                      By:
      ________________________________________                                              
 ____________________________________________

                         
      Tom
      Mika                                                                                                                               Christine
      Hergenrother

                         
      President & Chief Financial
      Officer                                                                                   

     

     

     

     

     

     

     

     

     

     

    

     

    By:

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