ELECTRO SCIENTIFIC INDUSTRIES, INC.
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the “Agreement”) is made and entered into by
and between ____________ (“Executive”) and Electro Scientific Industries, Inc.,
an Oregon corporation (the “Company”), effective as of _____________ (the
“Effective Date”) and states in its entirety the Change in Control Agreement
between Executive and the Company dated ____________.
RECITALS
1.The Compensation Committee (the “Committee”) of the Company’s Board of
Directors (the “Board”) believes that it is in the best interests of the Company
and its stockholders (i) to assure that the Company will have the continued
dedication and objectivity of Executive, notwithstanding the possibility,
threat, or occurrence of a Change in Control and (ii) to provide Executive with
an incentive to continue Executive’s employment prior to a Change in Control and
to motivate Executive to maximize the value of the Company upon a Change in
Control for the benefit of its stockholders.

2.Certain capitalized terms used in the Agreement are defined in Section 6
below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
1.Term of Agreement. This Agreement will have an initial term of two years
commencing on the Effective Date (the “Initial Term”). On the second anniversary
of the Effective Date and each anniversary thereafter, this Agreement will renew
automatically for an additional one year term (an “Additional Term”), unless
either party provides the other party with written notice of non-renewal at
least 90 days prior to the date of automatic renewal. If a Change in Control
occurs when there are fewer than 24 months remaining during the Initial Term or
an Additional Term, the term of this Agreement will extend automatically through
the date that is 24 months following the effective date of the Change in
Control. If Executive becomes entitled to benefits under Section 3 during the
term of this Agreement, the Agreement will not terminate until all of the
obligations of the parties hereto with respect to this Agreement have been
satisfied.

2.At-Will Employment. The Company and Executive acknowledge that Executive’s
employment is and will continue to be at-will, as defined under applicable law.
As an at-will employee, either the Company or the Executive may terminate the
employment relationship at any time, with or without Cause.

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3.Severance Benefits.

(a)    Termination without Cause or Resignation for Good Reason in Connection
with a Change in Control. If the Company terminates Executive’s employment with
the Company without Cause (excluding death or Disability) or if Executive
resigns from such employment for Good Reason, and, in each case, such
termination occurs during the Change in Control Period, then subject to Section
4, Executive will receive the following:

(i)    Accrued Compensation. The Company will pay Executive all expense
reimbursements, wages, and other benefits due to Executive under any
Company-provided plans, policies, and arrangements.

(ii)     Severance Payment. Executive will receive an amount in cash (less
applicable withholding taxes) equal to 12 months of Executive’s annual base
salary as in effect immediately prior to Executive’s termination date, with
one-half of such amount payable in six monthly installments as a salary
continuation at the existing rate during the six month period following the date
of termination (with the first installment paid on the last day of the month in
which the date of termination occurs and each later installment paid on the last
day of each successive month) and the balance paid in a lump sum on the date
that is six months after the date of termination.

(iii)     Bonus Payment. Executive will receive a lump-sum payment equal to 100%
of Executive’s target bonus as in effect for the fiscal year in which the
termination of employment occurs. Payment will be made on the first Company
payroll following the Release Deadline, subject to Section 4(c).

(iv)    Continuation Coverage. If Executive elects continuation coverage
pursuant to COBRA within the time period prescribed pursuant to COBRA for
Executive and Executive’s eligible dependents, then the Company will reimburse
Executive for the COBRA premiums for such coverage (at the coverage levels in
effect immediately prior to Executive’s termination) until the earlier of (A) a
period of 12 months from the date of termination or (B) the date upon which
Executive and/or Executive’s eligible dependents become covered under similar
plans. The reimbursements will be made by the Company to Executive consistent
with the Company’s normal expense reimbursement policy.

(b)    Exclusive Remedy. In the event of a termination of Executive’s employment
as set forth in Section 3(a) of this Agreement, the provisions of Section 3 and
the change in control provisions in any equity award agreements between
Executive and the Company are intended to

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be and are exclusive and in lieu of any other rights or remedies to which
Executive or the Company otherwise may be entitled, whether at law, tort or
contract, in equity, or under this Agreement (other than the payment of accrued
but unpaid wages, as required by law, and any unreimbursed reimbursable
expenses). Executive will be entitled to no benefits, compensation or other
payments or rights upon a termination of employment other than those benefits
expressly set forth in Section 3 of this Agreement and in the change in control
provisions in any equity award agreements between Executive and the Company.

4.Conditions to Receipt of Severance.

(a)    Release of Claims Agreement. The receipt of any severance payments or
benefits (other than the accrued benefits set forth in either Sections 3(a)(i))
pursuant to this Agreement is subject to Executive signing and not revoking the
Company’s customary separation and release of claims agreement (the “Release”),
which must become effective and irrevocable no later than the 60th day following
Executive’s termination of employment (the “Release Deadline”). If the Release
does not become effective and irrevocable by the Release Deadline, Executive
will forfeit any right to severance payments or benefits under this Agreement.
In no event will severance payments or benefits be paid or provided until the
Release actually becomes effective and irrevocable.

(b)    Confidential Information and Invention Assignment Agreement and
Restrictive Covenants. Executive’s receipt of any payments or benefits under
Section 3 (other than the accrued benefits set forth in either Section 3(a)(i)
will be subject to Executive continuing to comply with the terms of the
Confidential Information and Invention Assignment Agreement between the Company
and Executive as such agreement may be amended and/or superseded from time to
time (the “Confidential Information Agreement”), and the Release.

(c)    Section 409A.

(i)    Notwithstanding anything to the contrary in this Agreement, no severance
pay or benefits to be paid or provided to Executive, if any, pursuant to this
Agreement that, when considered together with any other severance payments or
separation benefits, are considered deferred compensation under Section 409A of
the Code, and the final regulations and any guidance promulgated thereunder
(“Section 409A”) (together, the “Deferred Payments”) will be paid or otherwise
provided until Executive has a “separation from service” within the meaning of
Section 409A. Similarly, no severance payable to Executive, if any, pursuant to
this Agreement that otherwise would be exempt from Section 409A pursuant to
Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a
“separation from service” within the meaning of Section 409A.

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(ii)    It is intended that none of the severance payments under this Agreement
will constitute Deferred Payments but rather will be exempt from Section 409A as
a payment that would fall within the “short-term deferral period” as described
in Section 4(c)(iv) below or resulting from an involuntary separation from
service as described in Section 4(c)(v) below.

(iii)    Notwithstanding anything to the contrary in this Agreement, if
Executive is a “specified employee” within the meaning of Section 409A at the
time of Executive’s termination (other than due to death), then the Deferred
Payments, if any, that are payable within the first six months following
Executive’s separation from service, will become payable on the first payroll
date that occurs on or after the date six months and one day following the date
of Executive’s separation from service. All subsequent Deferred Payments, if
any, will be payable in accordance with the payment schedule applicable to each
payment or benefit. Notwithstanding anything herein to the contrary, if
Executive dies following Executive’s separation from service, but before the six
month anniversary of the separation from service, then any payments delayed in
accordance with this paragraph will be payable in a lump sum as soon as
administratively practicable after the date of Executive’s death and all other
Deferred Payments will be payable in accordance with the payment schedule
applicable to each payment or benefit. Each payment and benefit payable under
this Agreement is intended to constitute a separate payment under Section
1.409A-2(b)(2) of the Treasury Regulations.

(iv)    Any amount paid under this Agreement that satisfies the requirements of
the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the
Treasury Regulations will not constitute Deferred Payments for purposes of
clause (i) above.

(v)    Any amount paid under this Agreement that qualifies as a payment made as
a result of an involuntary separation from service pursuant to Section
1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section
409A Limit (as defined below) will not constitute Deferred Payments for purposes
of clause (i) above.

(vi)    The foregoing provisions are intended to comply with the requirements of
Section 409A so that none of the severance payments and benefits to be provided
hereunder will be subject to the additional tax imposed under Section 409A, and
any ambiguities herein will be interpreted to so comply. The Company and
Executive agree to work together in good faith to consider amendments to this
Agreement and to take such reasonable actions which are necessary, appropriate
or desirable to avoid imposition of any additional tax or income recognition
before actual payment to Executive under Section 409A.

5.Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Executive (i) constitute
“parachute payments” within the

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meaning of Section 280G of the Code, and (ii) but for this Section 5, would be
subject to the excise tax imposed by Section 4999 of the Code, then Executive’s
benefits under Section 3 will be either:

(a)
delivered in full, or

(b)    delivered as to such lesser extent which would result in no portion of
such 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 of the
Code, results in the receipt by Executive on an after-tax basis, of the greatest
amount of benefits, notwithstanding that all or some portion of such benefits
may be taxable under Section 4999 of the Code. If a reduction in severance and
other benefits constituting “parachute payments” is necessary so that benefits
are delivered to a lesser extent, reduction will occur in the following order:
(i) reduction of cash payments; (ii) cancellation of awards granted “contingent
on a change in ownership or control” (within the meaning of Code Section 280G),
(iii) cancellation of accelerated vesting of equity awards; (iv) reduction of
employee benefits. In the event that acceleration of vesting of equity award
compensation is to be reduced, such acceleration of vesting will be cancelled in
the reverse order of the date of grant of Executive’s equity awards.
Unless the Company and Executive otherwise agree in writing, any determination
required under this Section 5 will be made in writing by the Company’s
independent public accountants immediately prior to a Change in Control or such
other person or entity to which the parties mutually agree (the “Firm”), whose
determination will be conclusive and binding upon Executive and the Company. For
purposes of making the calculations required by this Section 5, the Firm 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 Executive will furnish to
the Firm such information and documents as the Firm may reasonably request in
order to make a determination under this Section. The Company will bear all
costs the Firm may incur in connection with any calculations contemplated by
this Section 5.
6.Definition of Terms. The following terms referred to in this Agreement will
have the following meanings:

(a)    “Cause” means:
 
(i)    the willful and continued failure to perform substantially Executive’s
reasonably assigned duties with the Company (or its successor) (other than any
such failure resulting from incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to Executive by the Company
(or its successor) which specifically identifies the manner in which the Company
(or its successor) believes that Executive has not substantially performed
Executive’s duties;

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(ii)    the willful engagement in illegal conduct which is materially and
demonstrably injurious to the Company (or its successor); or

(iii)    the commission of an act by Executive, or the failure of Executive to
act, which constitutes gross negligence or gross misconduct.

No act, or failure to act, shall be considered “willful” if the Executive
reasonably believed that the action or omission was in, or not opposed to, the
best interests of the Company (or its successor).

(b)    “Change in Control” means the occurrence of any of the following events:

(i)    At any time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(“Incumbent Directors”) shall cease for any reason to constitute at least a
majority thereof; provided, however, that the term “Incumbent Director” shall
also include each new director elected during such two-year period whose
nomination or election was approved by two-thirds of the Incumbent Directors
then in office;

(ii)    Any “person” or “group” (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer,
open market purchases or privately negotiated purchases from anyone other than
the Company, have become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, of more than fifty percent
(50%) of the then outstanding Common Stock of the Company;

(iii)    A consolidation, merger or plan of exchange involving the Company
(“Merger”) as a result of which the holders of outstanding securities of the
Company ordinarily having the right to vote for the election of directors
(“Voting Securities”) immediately prior to the Merger do not continue to hold at
least 50% of the combined voting power of the outstanding Voting Securities of
the surviving corporation or a parent corporation of the surviving corporation
immediately after the Merger, disregarding any Voting Securities issued to or
retained by such holders in respect of securities of any other party to the
Merger; or

(iv)    A sale, lease, exchange, or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company.

(c)    “Change in Control Period” means the period beginning on and ending
24 months following, a Change in Control.

(d)    “Code” means the Internal Revenue Code of 1986, as amended.

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(e)    “Disability” means that Executive has been unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months.

(f)    “Good Reason” means Executive’s voluntary termination, within 30 days
following the expiration of any Company cure period (discussed below) following
the occurrence of one or more of the following, without Executive’s consent:

(i)    the assignment of a different title, job or responsibilities that results
in a substantial reduction in the duties of the Executive after the Change in
Control when compared to the Executive’s duties with respect to the Company’s
operations prior to the Change in Control; provided that any change made solely
as the result of the Company becoming a subsidiary or business unit of a larger
company in a Change in Control shall not constitute Good Reason unless
Executive’s new duties are substantially reduced from his or her prior duties;

(ii)    a reduction in Executive’s target bonus or base salary;

(iii)    the Company’s requiring Executive to be based more than 50 miles from
the principal office at in which Executive is based immediately prior to the
Change in Control, except for reasonably required travel on the Company’s
business; or

(iv)    the failure by any successor to the Company to expressly assume this
Agreement or any obligation under this Agreement.
Executive may not resign for Good Reason without first providing the Company
with written notice within 90 days of the initial existence of the condition
that Executive believes constitutes Good Reason specifically identifying the
acts or omissions constituting the grounds for Good Reason and a reasonable cure
period of not less than 30 days following the date of such notice.
For purposes of the “Good Reason” definition, the term “Company” will be
interpreted to include any subsidiary, parent, affiliate or successor thereto,
if applicable.
(g)    “Section 409A Limit” means two times the lesser of: (i) Executive’s
annualized compensation based upon the annual rate of pay paid to Executive
during the Executive’s taxable year preceding the Executive’s taxable year of
Executive’s termination of employment as determined under, and with such
adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1)
and any Internal Revenue Service guidance issued with respect thereto; or (ii)
the maximum amount that may be taken into account under a qualified plan
pursuant to Section 401(a)(17) of the Code for the year in which Executive’s
employment is terminated.

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7.Successors.

(a)    The Company’s Successors. The Company shall require any successor to the
Company (whether direct or indirect and whether by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets to 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” will include any successor to the Company’s
business and/or assets which executes and delivers the assumption agreement
required in this Section 7(a) or which becomes bound by the terms of this
Agreement by operation of law.

(b)    Executive’s Successors. The terms of this Agreement and all rights of
Executive hereunder will inure to the benefit of, and be enforceable by,
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

8.Notice.

(a)    General. Notices and all other communications contemplated by this
Agreement will be in writing and will be deemed to have been duly given when
sent electronically or personally delivered when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid or when delivered
by a private courier service such as UPS, DHL or Federal Express that has
tracking capability. In the case of Executive, notices will be sent to the
e-mail address or addressed to Executive at the home address, in either case
which Executive most recently communicated to the Company in writing. In the
case of the Company, electronic notices will be sent to the e-mail addresses of
the Chief Executive Officer and mailed notices will be addressed to its
corporate headquarters, and all notices will be directed to the attention of its
Chief Executive Officer.

(b)    Notice of Termination. Any termination by the Company for Cause or by
Executive for Good Reason will be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice will indicate the specific termination provision in this Agreement relied
upon, will set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and will
specify the termination date (which will be not more than 90 days after the
giving of such notice).

9.Resignation. Upon the termination of Executive’s employment for any reason,
Executive will be deemed to have resigned from all officer and/or director
positions held at the Company and its affiliates voluntarily, without any
further required action by Executive, as of the end of Executive’s

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employment and Executive, at the Board’s request, will execute any documents
reasonably necessary to reflect Executive’s resignation.

10.Miscellaneous Provisions.

(a)    No Duty to Mitigate. Executive will not be required to mitigate the
amount of any payment contemplated by this Agreement, nor will any such payment
be reduced by any earnings that Executive may receive from any other source
(except to the extent provided in Section 3(a)((iv) regarding COBRA).

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

(c)    Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.

(d)    Entire Agreement. This Agreement, together with the Confidential
Information Agreement and any equity award agreements between Executives and the
Company containing change in control provisions, constitutes the entire
agreement of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof, including, but not limited to, any rights to any
severance and/or change in control benefits set forth in Executive’s original
offer letter or any prior change in control agreement. No waiver, alteration, or
modification of any of the provisions of this Agreement will be binding unless
it is in a writing that specifically mentions this Agreement and that is signed
by Executive and by an authorized officer of the Company (other than Executive).

(e)    Choice of Law; Venue. The validity, interpretation, construction and
performance of this Agreement will be governed by the laws of the State of
Oregon (with the exception of its conflict of laws provisions). Any claims or
legal actions by one party against the other arising out of the relationship
between the parties contemplated herein (whether or not arising under this
Agreement) will be commenced or maintained in any state or federal court located
in Multnomah County.

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

(g)    Withholding. All payments made pursuant to this Agreement will be subject
to withholding of applicable income, employment and other taxes.

(h)    Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
[Signature Page to Follow]

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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 set forth
below.

 
 
 
 
 
 
 
COMPANY
 
ELECTRO SCIENTIFIC INDUSTRIES, INC.
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
Title:
 
 
 
 
 
 
 
 
 
 
Date:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXECUTIVE
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
Date:
 
 

[signature page of the Amended and Restated Change in Control Agreement]