CYMER INC
EX-10.8
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>13
<FILENAME>a2079238zex-10_8.txt
<DESCRIPTION>EX-10.8
<TEXT>
<Page>

                                                                    EXHIBIT 10.8

                              EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is made and entered into effective
as of April 1, 2002 by and between David S. Knowles (the "Employee") and Cymer,
Inc., a Nevada corporation (the "Company").

                                    RECITALS

A.   The Company may from time to time need to address the possibility of an
acquisition transaction or change of control event. The Board of Directors of
the Company (the "Board") recognizes that such events can be a distraction to
the Employee and can cause the Employee to consider alternative employment
opportunities. The Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company,
although no such Change of Control is now contemplated.

B.   The Board believes that it is in the best interests of the Company and its
stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

C.   The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient incentive and encouragement to the Employee to remain with
the Company notwithstanding the possibility of a Change of Control.

D.   To accomplish the foregoing objectives, the Board has directed the Company,
upon execution of this Agreement by the Employee, to agree to the terms provided
herein.

E.   Certain capitalized terms used in this Agreement are defined in Section 7
below.

                                    AGREEMENT

In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Employee by the Company, the parties agree
as follows:

1.   DUTIES AND SCOPE OF EMPLOYMENT. The Company shall employ the Employee in
the position of Vice President, Engineering, as such position has been defined
in terms of

                                       1.
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responsibilities and compensation as of the effective date of this Agreement;
provided, however, that the Board shall have the right, at any time prior to the
occurrence of a Change of Control, to revise such responsibilities and
compensation as the Board in its discretion may deem necessary or appropriate.
The Employee shall comply with and be bound by the Company's operating policies,
procedures and practices from time to time in effect during his employment.
During the term of the Employee's employment with the Company, the Employee
shall continue to devote his full time, skill and attention to his duties and
responsibilities, and shall perform them faithfully, diligently and competently,
and the Employee shall use his best efforts to further the business of the
Company and its affiliated entities.

2.   BASE COMPENSATION. The Company shall pay the Employee as compensation for
his services a base salary at the annualized rate of $177,600 ("Base
Compensation"). Such salary shall be paid periodically in accordance with normal
Company payroll practices. The Board or the Compensation Committee of the Board
shall review the base salary of the Employee according to normal Company
practice, but no less frequently than annually, and may in its discretion
increase but not decrease the base salary below the amount specified in this
agreement.

3.   ANNUAL INCENTIVE. Beginning with the Company's current fiscal year and for
each fiscal year thereafter during the term of this Agreement, the Employee
shall be eligible to receive an annual bonus under the Company's annual
incentive plan (the "Annual Incentive") based upon performance targets approved
by the Compensation Committee of the Board (the "Target Incentive") in its sole
discretion. The Annual Incentive payable hereunder shall be payable in
accordance with the Company's normal practices and policies.

4.   EMPLOYEE BENEFITS. The Employee shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by the
Company applicable to other key executives of the Company, including (without
limitation) retirement plans, savings or profit-sharing plans, stock option,
incentive or other bonus plans, life, disability, health, accident and other
insurance programs, paid vacations, and similar plans or programs, subject in
each case to the generally applicable terms and conditions of the applicable
plan or program in question and to the sole determination of the Board or any
committee administering such plan or program.

5.   EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with any Company plan or policy approved by the Board.

6.   TERMINATION BENEFITS.

     (a)  Subject to Sections 8 and 9 below, in the event the Employee's
employment terminates as a result of an Involuntary Termination other than for
Cause upon or within eighteen (18) months after a Change of Control, then the
Employee shall be entitled to receive severance and other benefits as follows:

                                       2.
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          (i)   PAY CONTINUATION. The Employee shall be entitled to monthly
payments equal to the Employee's monthly Base Compensation as in effect
immediately prior to the Change of Control plus one-twelfth (1/12) of the
average of the annual bonus amount paid to the Employee with respect to the
three previous calendar years. Such monthly amounts shall be paid according to
the normal payroll practice of the Company for 12 months following the date of
termination (the "Termination Period").

          (ii)  ANNUAL INCENTIVE. The Employee shall be entitled to receive a
percentage of the Employee's Target Incentive for the calendar year in which
such termination occurs. Such percentage shall equal a fraction, the numerator
of which shall be the number of days in such calendar year up to and including
the date of such termination and the denominator of which shall be the number of
days in such calendar year. Such amount shall be payable according to the normal
practice of the Company with respect to the payment of bonuses.

          (iii) OPTIONS. The unvested portion of any stock option(s) held by the
Employee under the Company's stock option plans shall vest and become
exercisable in full upon the date of such termination. Employee shall have one
year from the date of such termination to exercise any vested options.

          (iv)  MEDICAL BENEFITS. The Company shall reimburse the Employee for
the cost of the Employee's group health, vision and dental plan coverage in
effect until the end of the Termination Period. The Employee may use this
payment, as well as any other payment made under this Section 6, for such
continuation coverage or for any other purpose. To the extent the Employee pays
the cost of such coverage, and the cost of such coverage is not deductible as a
medical expense by the Employee, the Company shall "gross-up" the amount of such
reimbursement for all taxes payable by the Employee on the amount of such
reimbursement and the amount of such gross-up.

     (b)  In the event the Employee voluntarily resigns his employment with the
Company within the 30-day period beginning one year after a Change of Control,
the Employee shall receive the severance and other benefits set forth in
Sections 6(a)(i)-(iv) above.

7.   DEFINITION OF TERMS. The following terms referred to in this Agreement
shall have the following meanings:

     (a)  CAUSE. "Cause" shall mean any of the following: (i) any act of
personal dishonesty taken by the Employee in connection with his
responsibilities as an employee and intended to result in substantial personal
enrichment of the Employee, (ii) conviction of a felony that is injurious to the
Company, (iii) a willful act by the Employee which constitutes gross misconduct
and which is injurious to the Company, or (iv) continued violations by the
Employee of the Employee's obligations under Section 1 of this Agreement after
there has been delivered to the Employee a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his duties.

     (b)  CHANGE OF CONTROL. "Change of Control" shall mean the occurrence of
any of the following events:

                                       3.
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          (i)   The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (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)  A change in the composition of the Board of Directors of the
Company 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
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or

          (iii) 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.

     (c)  DISABILITY. "Disability" shall mean that the Employee has been unable
to substantially perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least 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 the Employee
or the Employee's legal representative (such agreement as to acceptability not
to be unreasonably withheld).

     (d)  EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

     (e)  INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean (i)
without the Employee's express written consent, the significant reduction of the
Employee's duties or responsibilities relative to the Employee's duties or
responsibilities in effect immediately prior to such reduction; provided,
however, that a reduction in duties or responsibilities solely by virtue of the
Company being acquired and made part of a larger entity (as, for example, when
the Chief Financial Officer of Company remains as such following a Change of
Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination"; (ii) without the
Employee's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii)
without the Employee's express written consent, a material reduction by the
Company in the Base Compensation or Target Incentive of the Employee as in
effect immediately prior to such reduction, or the ineligibility of the Employee
to continue to participate in any long-term incentive plan of the Company; (iv)
a material reduction by the Company in the kind or level of

                                       4.
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employee benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employee's overall benefits package is
significantly reduced; (v) the relocation of the Employee to a facility or a
location more than 50 miles from the Employee's then present location, without
the Employee's express written consent; (vi) any purported termination of the
Employee by the Company which is not effected for death or Disability or for
Cause; or (vii) the failure of the Company to obtain the assumption of this
agreement by any successors contemplated in Section 10 below.

8.   LIMITATION ON PAYMENTS.

     (a)  In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to the Employee (i) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section 8 would be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee's
severance benefits under Section 6 shall be payable either (i) in full, or (ii)
as to such lesser amount which 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 Employee on an after-tax basis, of the greatest amount of
severance benefits under this Agreement, notwithstanding that all or some
portion of such severance benefits may be taxable under Section 4999 of the
Code.

     (b)  If a reduction in the payments and benefits that would otherwise be
paid or provided to the Employee under the terms of this Agreement is necessary
to comply with the provisions of Section 8(a), the Employee shall be entitled to
select which payments or benefits will be reduced and the manner and method of
any such reduction of such payments or benefits (including but not limited to
the number of options that would vest under Section 6(b) subject to reasonable
limitations (including, for example, express provisions under the Company's
benefit plans) (so long as the requirements of Section 8(a) are met). Within
thirty (30) days after the amount of any required reduction in payments and
benefits is finally determined in accordance with the provisions of Section
8(c), the Employee shall notify the Company in writing regarding which payments
or benefits are to be reduced. If no notification is given by the Employee, the
Company will determine which amounts to reduce. If, as a result of any reduction
required by Section 8(a), amounts previously paid to the Employee exceed the
amount to which the Employee is entitled, the Employee will promptly return the
excess amount to the Company.

     (c)  Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 8 shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section 8, 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 Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 8.

                                       5.
<Page>

9.   CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the Board,
upon receipt of a written opinion of the Company's independent public
accountants, that the enforcement of any Section or subsection of this
Agreement, including, but not limited to, Section 6(b) hereof, which allows for
the acceleration of vesting of options to purchase shares of the Company's
common stock upon a termination in connection with a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void, but only if the absence of enforcement of such Section would preserve the
pooling treatment. For purposes of this Section 9, the Board's determination
shall require the unanimous approval of the disinterested Board members.

10.  SUCCESSORS.

     (a)  COMPANY'S SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and assets which executes and
delivers the assumption agreement described in this Section 10(a) or which
becomes bound by the terms of this Agreement by operation of law.

     (b)  EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees.

11.  NOTICE. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.

12.  MISCELLANEOUS PROVISIONS.

     (a)  WAIVER. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

                                       6.
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     (b)  WHOLE AGREEMENT. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.

     (c)  CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.

     (d)  SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

     (e)  ARBITRATION. Any dispute or controversy arising out of, relating to or
in connection with this Agreement shall be settled exclusively by binding
arbitration in San Diego, California, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The arbitrator shall: a) have the authority to compel
adequate discovery for the resolution of the dispute and to award such relief as
would otherwise be permitted by law; and (b) issue a written arbitration
decision including the arbitrator's essential findings and conclusions and a
statement of the award. Both the Employee and the Company shall be entitled to
all rights and remedies they would have in a court of law. The Company shall pay
all fees in excess of those which will be required if the dispute were decided
in a court of law.

     (f)  NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Section 12(g) shall be void.

     (g)  ASSIGNMENT BY COMPANY. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.

     (h)  COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.

                                       7.
<Page>

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

COMPANY:        CYMER, INC.


                By:    /s/ WALLACE E. BREITMAN

                Title: SR. VICE PRESIDENT, HUMAN RESOURCES
                       AND ADMINISTRATION


                --------------------------------------------------


EMPLOYEE:       /s/ DAVID S. KNOWLES
                --------------------------------------------------

                                       8.

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