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EXHIBIT 10.10

1.

ELECTRO SCIENTIFIC INDUSTRIES, INC.
EMPLOYMENT AGREEMENT

Executive
Mr. J. Michael Dodson
11691 E. Charter Oak Drive
Scottsdale, AZ 85259

Electro Scientific Industries, Inc.,ESI
an Oregon corporation
13900 NW Science Park Dr.
Portland, OR 97229

In consideration of the mutual covenants contained herein, and other good and
valuable consideration, the parties hereto agree as follows.

Employment. Effective as of May 5, 2003 (the “Effective Date”), Electro
Scientific Industries, Inc. (“ESI”) hereby employs J. Michael Dodson
(“Executive”) as the Vice President – Administration and Chief Financial Officer
of ESI and Executive accepts such employment with ESI, on the terms and
conditions set forth in this Employment Agreement (this “Agreement”).

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At-Will Employment. The parties agree that Executive’s employment with ESI will
be “at-will” employment and may be terminated at any time with or without cause
and, except as expressly set forth in this Agreement, with or without notice.
Executive understands and agrees that neither his job performance nor
promotions, commendations, bonuses or the like from ESI give rise to or in any
way serve as the basis for modification, amendment, or extension, by implication
or otherwise, of his employment with ESI.

Executive’s Duties. Executive shall, during the term of this Agreement,
faithfully and diligently perform all such acts and duties, and furnish such
services, as ESI’s Chief Executive Officer and President shall reasonably direct
and are consistent with the position of Vice-President – Administration and
Chief Financial Officer, including but not limited to management of ESI’s
accounting and financial reporting functions, human resources group, facilities
operations, information systems and technology department and other
administrative functions as requested by the President and CEO from time to
time. During the term of this Agreement, Executive shall devote his full
business efforts and time to ESI.

Annual Salary and Bonus.

Base Salary. Beginning with the Effective Date, ESI shall pay Executive a base
salary of $250,000 per fiscal year (prorated for any portion of a year), payable
in equal periodic installments in accordance with ESI’s customary practices (the
“Base Salary”). The amount of the Base Salary shall be reviewed annually and may
be increased from time to time in the sole discretion of ESI’s Board of
Directors (the “Board”).

Stock Options. ESI shall grant Executive an option to purchase 70,000 shares of
ESI Common Stock (the “Option”). The Option will be, to the extent possible
under the $100,000 rule of Section 422(d) of the Internal Revenue Code of 1986,
as amended (the “Code”), an “incentive stock option” (as defined in Section 422
of the Code). The date of the Option grant shall be the Effective Date. The
Option will vest as to 25% of the shares subject to the Option one year after
the date of grant, and as to an additional 25% of the shares subject to the
Option on each annual anniversary thereafter, so that the Option will be fully
vested and exercisable four (4) years from the date of grant, subject to
Executive’s continued service to ESI on the relevant vesting dates. The Option
will be subject to the terms, definitions and provisions of ESI’s 2000 Stock
Option Incentive Plan (the “Option Plan”) and the stock option agreement by and
between Executive and ESI (the “Option Agreement”), both of which documents are
incorporated herein by reference. Additional stock options may be granted to
Executive from time to time in the sole discretion of the Board.

Annual Performance Bonus. Executive shall be eligible to receive an annual bonus
calculated in accordance with Exhibit A hereto upon his achievement of
performance goals to be established by the Board in its sole discretion (the
“Annual Bonus”). Such performance goals shall be reviewed annually by the Board
and adjusted in a manner consistent with performance goals for other ESI
executives.

Sign-On Bonus. Executive shall be entitled to receive a sign-on bonus (the
“Sign-On Bonus”) of $100,000, payable sixty (60) days after the Effective Date,
subject to Executive’s continued employment with ESI as of such date.

Benefits and Reimbursement.

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Vacation and Sick Leave. Executive shall be entitled to paid annual vacation,
all paid ESI holidays and reasonable sick leave each in accordance with ESI’s
standard policies applicable to other employees.

Benefit Plans. Executive shall be entitled to participate in all employee
benefit plans and incentive compensation plans of ESI, to the extent such plans
are available to other similarly situated executives or employees of ESI.

Reimbursed Business Expenses. ESI shall reimburse Executive for all expenses and
disbursements reasonably incurred at ESI’s request or in accordance with ESI’s
policies, and substantiated by Executive, in the performance of Executive’s
duties hereunder.

Relocation and Temporary Living Reimbursement. ESI will pay all reasonable and
ordinary costs of Executive’s relocation from Scottsdale, Arizona to the
Portland, Oregon area, so long as Executive remains employed with ESI as of the
date of such relocation. This includes costs associated with house-hunting
trips, normal selling costs for the home in Scottsdale, normal buying costs of
the home in the Portland area, and a payment of the equivalent of one (1)
month’s salary for miscellaneous relocation expenses. ESI agrees to pay either
rent or a house payment (PITI) in the Portland area until such time as
Executive’s house in Scottsdale is sold or nine months from the Effective Date,
whichever occurs sooner, so long as Executive continues to remain employed by
ESI during such period. To the extent that any relocation/commuting benefits are
taxable to Executive, ESI will pay a full gross-up (except to the extent that
such expenditures may be deducted on Executive’s personal income tax) so that
the amounts paid by ESI, net of Executive’s taxes, fully cover the relevant
expenses. Executive agrees that the sale of Executive’s current home in
Scottsdale, Arizona and the purchase of Executive’s new home in the Portland,
Oregon area will be conducted in accordance with the “Home Sale
Assistance/Market Value Purchase” and “Home Purchase Assistance” provisions
contained in ESI’s Officer Relocation Program Guide (the “Relocation Guide”),
the terms of which are incorporated herein by reference.

Change in Control Agreement. Concurrently with the execution of this Agreement,
the parties hereto shall enter into a Change in Control Agreement in the form
attached hereto as Exhibit B (the “Change in Control Agreement”).

Definitions. The following terms shall have the following meanings for purposes
of this Agreement:

“Cause” shall mean (i) the willful and continued failure by Executive
substantially to perform his reasonably assigned duties with ESI (consistent
with those duties assigned to Executive prior to any Change in Control), other
than a failure resulting from Executive’s incapacity due to physical or mental
illness or impairment, (ii) the willful engaging by Executive in illegal conduct
which was or is materially and demonstrably injurious to ESI, (iii) Executive’s
violation of a federal or state law or regulation applicable to ESI’s business,
(iv) Executive’s material breach of the terms of any confidentiality agreement
or invention assignment agreement between Executive and ESI, or (v) Executive
being convicted of, or entering a plea of nolo contendere to, a felony or
committing any act of moral turpitude, dishonesty or fraud against, or the
misappropriation of material property belonging to, ESI or its affiliates. For
purposes of this subsection (a), no act, or failure to act, on Executive’s part
shall be considered “willful” unless done, or omitted to be done, by Executive
in knowing bad faith and without reasonable belief that his action or omission
was in, or not opposed to, the best interests of ESI.

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“Change in Control” shall have the meaning given to it in the Change in Control
Agreement.

“Disability” shall mean the absence of Executive from his duties with ESI on a
full-time basis for 180 consecutive days as a result of Executive’s incapacity
due to physical or mental illness, unless within 30 days after a Notice of
Termination (as defined below) is given to Executive following such absence,
Executive shall have returned to the full performance of Executive’s duties.

Termination. This Agreement and Executive’s employment hereunder may be
terminated by either party at any time, with or without Cause, by providing the
other party with written notice that indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated (a “Notice of
Termination”). The effective date of any such termination of this Agreement
shall be: (i) if Executive’s employment is terminated for Disability, 30 days
after a Notice of Termination is given (provided that Executive shall not have
returned to the performance of Executive’s duties on a full-time basis during
such 30-day period), (ii) if Executive’s employment is terminated by ESI for
Cause, the date on which the Notice of Termination is given, and (iii) if
Executive’s employment is terminated by Executive or by ESI for any other
reason, the date specified in the Notice of Termination, which shall be a date
no earlier than 90 days after the date on which the Notice of Termination is
given, unless an earlier date has been agreed to by the party receiving the
Notice of Termination either in advance of, or after, receiving such Notice of
Termination. Notwithstanding anything in the foregoing to the contrary, if the
party receiving a Notice of Termination has not previously agreed to the
termination, then within 30 days after the Notice of Termination is given, the
party receiving the Notice of Termination may notify the other party that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in Section 12(e)
Effect of Termination.

Termination by ESI. If, within two years following a Change in Control
Executive’s employment by ESI is terminated based on an event occurring
concurrent with or subsequent to a Change in Control, Executive shall be
entitled to severance pay and benefits as provided in the Change in Control
Agreement.

Termination by Executive or by ESI for Cause. If ESI terminates Executive’s
employment for Cause or Executive terminates his employment, Executive shall be
entitled to receive only the Base Salary and Annual Bonus earned and payable
through the effective date of Executive’s termination, together with any other
compensation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to Executive. Notwithstanding
the foregoing, if Executive voluntarily terminates his employment with ESI
during the period commencing on the first day of employment of the ESI Chief
Executive Officer hired to succeed Barry L. Harmon (the “Successor Hire Date”)
and ending twelve (12) months following the Successor Hire Date, Executive shall
be entitled to receive continuing payments of severance (subject to applicable
taxes and withholding), at a rate equal to Executive’s Base Salary at the time
of termination, for a period of twelve (12) months from the date of such
termination, to be paid in equal installments in accordance with ESI’s normal
pay practices; provided that payments made pursuant to this Section 9(b) shall
be repaid by Executive in the event Executive violates in any material respect
the provisions of Section 11 hereof.

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Termination by ESI Without Cause. Except as provided in Section 9(a), if ESI
terminates Executive’s employment without Cause during the period commencing on
the Effective Date and ending on the third anniversary thereof:

Executive shall be entitled to receive the Base Salary and Annual Bonus earned
and payable through the effective date of Executive’s termination, together with
any other compensation or benefits which have been earned or become payable as
of the date of termination but which have not yet been paid to Executive;
Executive shall be entitled to receive continuing payments of severance pay
(subject to applicable taxes and withholding), at a rate equal to Executive’s
Base Salary at the time of termination, for a period of twelve (12) months from
the date of such termination, to be paid in equal installments in accordance
with ESI’s normal pay practices; provided that payments made pursuant to this
subsection (ii) shall be repaid by Executive in the event Executive violates in
any material respect the provisions of Section 11 hereof;  that portion of any
unvested stock options that Executive holds as of the date of termination of
Executive’s employment that would otherwise vest through the end of twelve (12)
months after the date of such termination shall be immediately accelerated as of
the date of termination and, together with any other shares vested as of such
date, shall remain exercisable for a period of twelve (12) months after the date
of termination

Death. If Executive’s employment is terminated as a result of Executive’s death,
Executive shall be entitled to receive the Base Salary and Annual Bonus earned
and payable through the date on which Executive’s employment is terminated,
together with any other compensation or benefits which have been earned or
become payable as of the date of termination but which have not yet been paid to
Executive; and

Disability. If Executive’s employment is terminated as a result of Executive’s
Disability, Executive shall be entitled to receive the Base Salary and Annual
Bonus payable through the date on which Executive’s employment is terminated,
together with any other compensation or benefits which have been earned or
become payable as of the date of termination but which have not yet been paid to
Executive.

Date of Payment. Except as otherwise provided herein, all cash payments and
lump-sum awards required to be made pursuant to the provisions of this Section 9
shall be made no later than the 30th day following the effective date of
Executive’s termination.

Release of Claims. ESI shall have the right to require Executive to execute a
standard release with respect to claims that could be brought by Executive
hereunder as a condition to Executive’s receipt of any payments pursuant to
Section 9(b) or 9(c).

Resignation of Corporate Offices. Executive shall resign as a director of ESI
and as a director and/or officer of any affiliate of ESI, if applicable,
effective as of the date of termination of Executive’s employment with ESI.
Executive agrees to provide  ESI such written resignation(s) upon request and
that no amounts will be paid under this Agreement until such resignation(s) are
provided.

Non-Competition and Non-Disclosure; Executive Cooperation.

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Without the consent in writing of the Board, upon termination of Executive’s
employment for any reason, Executive shall not for a period of one year
thereafter, acting alone or in conjunction with others, directly or indirectly
(i) engage (either as owner, partner, stockholder, employer, employee, director,
consultant or agent) in any business which is directly in competition with a
business conducted by ESI or any of its subsidiaries; (ii) induce any customers
of ESI or any of its subsidiaries with whom Executive has had contacts or
relationships, directly or indirectly, during and within the scope of his
employment with ESI or any of its subsidiaries, to curtail or cancel their
business with such companies or any of them; (iii) solicit or canvas business
from any person who was a customer of ESI or any of its subsidiaries at or
during the two-year period immediately preceding termination of Executive’s
employment; or (iv) induce, or attempt to influence, any employee of ESI or any
of its subsidiaries to terminate his employment. The provisions of
subsections (i), (ii), (iii) and (iv) above are separate and distinct
commitments independent of each of the other subsections. It is agreed that the
ownership of not more than 1/2 of 1% of the equity securities of any company
having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with clause
(i) of this subsection (a).

Executive shall not, at any time during the term of his employment with ESI or
following Executive’s termination of employment with ESI for any reason
whatsoever, disclose, use, transfer or sell, except in the course of employment
with ESI, any confidential or proprietary information of ESI and its
subsidiaries so long as such information has not otherwise been publicly
disclosed by ESI or is not otherwise in the public domain, except as required by
law or pursuant to legal process.

Executive agrees to cooperate with ESI, by making himself available to testify
on behalf of ESI or any subsidiary or affiliate of ESI, in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, and to
assist ESI, or any subsidiary or affiliate of ESI in any such action, suit or
proceeding, by providing information and meeting and consulting with the Board
or its representatives or counsel, or representatives or counsel of ESI, or any
subsidiary or affiliate of ESI, as requested by the Board, representatives or
counsel. ESI agrees to reimburse Executive, on an after-tax basis, for all
expenses actually incurred in connection with his provision of testimony or
assistance.

Miscellaneous.

Withholding. Payment of all compensation under this Agreement, including but not
limited to the Base Salary, Annual Bonus and Sign-On Bonus, shall be subject to
all applicable federal, state and local tax withholding.

Successors. Upon Executive’s written request, ESI will seek to have any
Successor (as hereinafter defined), by agreement, assent to the fulfillment by
ESI of its obligations under this Agreement. For purposes of this Agreement,
“Successor” shall mean any Person that succeeds to, or has the practical ability
to control (either immediately or with the passage of time), ESI’s business
directly, by merger, consolidation or purchase of assets, or indirectly, by
purchase of ESI’s voting securities or otherwise.

Assignment; Binding Agreement. Neither party may assign or transfer this
Agreement or any rights or obligations under this Agreement without the prior
written consent of the other party, provided, however, that ESI may, without
Executive’s consent, assign its rights and obligations under this Agreement to
any Successor, and the provisions hereof shall inure to the benefit of and be
binding upon each Successor. This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

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Governing Law. This Agreement shall be construed in accordance with and governed
by the laws of the State of Oregon (with the exception of its conflict of law
provisions).

Dispute Resolution. Executive agrees that, to the fullest extent permitted by
applicable law and with the exception of disputes arising out of Section 11, any
dispute concerning Executive’s employment or this Agreement shall first be
submitted to confidential mediation before a mediator selected by the parties.
Should any dispute not be resolved through mediation, it shall be submitted and
settled exclusively by confidential binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or such
comparable rules as may be agreed upon by the parties. Disputes which Executive
agrees to arbitrate, and thereby agrees to waive any right to a trial by jury,
include any statutory claims under state or federal law, including, but not
limited to, claims under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act, claims of harassment,
discrimination or wrongful termination and any statutory claims.

        Executive understands that this Agreement does not prohibit Executive
from pursuing an administrative claim with a local, state or federal
administrative body such as the Department of Fair Employment and Housing, the
Equal Employment Opportunity Commission or the workers’ compensation board. This
Agreement does, however, preclude Executive from pursuing court action regarding
any such claim.

        Notwithstanding anything to the contrary in this Section 12(e),
Executive acknowledges that ESI has a compelling business interest in preventing
unfair competition stemming from the intentional or inadvertent use or
disclosure of ESI’s confidential information or the solicitation of ESI’s
customers or suppliers. Executive further acknowledges and agrees that damages
for a breach or threatened breach of any of the covenants set forth in Section
11 of this Agreement will be difficult to determine and will not afford a full
and adequate remedy, and therefore agrees that ESI, in addition to seeking all
other damages in connection therewith, may seek specific enforcement of any such
covenant in any court of competent jurisdiction, including without limitation,
by the issuance of a temporary or permanent injunction without the necessity of
showing any actual damages or posting any bond or furnishing any other security,
and that the specific enforcement of the provisions of this Agreement will not
diminish Executive’s ability to earn a livelihood or create or impose upon
Executive any undue hardship. Executive also agrees that any request for such
relief by ESI shall be in addition to, and without prejudice to, any claim for
monetary or other damages that ESI may elect to assert.

Attorneys’ Fees. Each party shall bear his or its own costs and attorneys’ fees
which have been or may be incurred in connection with any matter herein or in
connection with the negotiation and consummation of this Agreement or any
attachment or exhibit hereto or in any action to enforce the provisions of this
Agreement or any attachment or exhibit hereto.

Notices. All notices, requests, demands, consents, approvals, declarations and
other communications required by this Agreement shall be in writing and shall be
deemed delivered (i) if given by facsimile, when transmitted and the appropriate
telephonic confirmation is received; (ii) if given by first-class air mail
(certified and return receipt requested), when delivered; and (iii) when given
by a nationally recognized overnight courier, when received or personally
delivered, in each case, with all charges prepaid and addressed to the
respective party set forth on the first page of this Agreement, or to such other
address as any party shall specify in a notice delivered to all other parties in
accordance with this Section 12(g).

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Entire Agreement. This Agreement, including the attachments and exhibits hereto,
the Option Plan, the Option Agreement, the Relocation Guide, the Relocation
Agreement, the Employee Confidentiality and Assignment Agreement and the Change
in Control Agreement contain the entire agreement between Executive and ESI
concerning the subject matters discussed herein. This Agreement supersedes all
prior negotiations, agreements and understandings of the parties with respect to
Executive’s employment relationship with ESI and the other subject matter
herein.

Modification.     Modification of this Agreement shall be effective only if in
writing and signed by each party or its duly authorized representative

No Waiver. The waiver of any breach of this Agreement by one party shall not
constitute waiver by the non-breaching party of any other breach of the
Agreement.

Severability.     If any of the provisions or terms of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other terms of this Agreement, and this Agreement shall be
construed as if such unenforceable term had never been contained in this
Agreement.

Surviving Provisions. Not withstanding anything in this Agreement to the
contrary, Sections 9, 10, 11 and this Section 12 shall survive the termination
of Executive’s employment and this Agreement.

Interpretation.     Unless specifically identified as a reference to another
document, any reference to a “section” or “subsection” herein shall be deemed to
be a reference to a section or subsection of this Agreement. Whenever the terms
hereof call for any notice, payment or other action on a day which is not a
business day, such payment or action may be taken, or such notice given, as the
case may be, on the next succeeding business day.

Counterparts and Facsimile Signatures. This Agreement may be executed in two or
more counterparts, each of which shall constitute one and the same instrument.
Facsimile signatures may be used in place of original signatures on this
Agreement.

Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive
is executing this Agreement voluntarily and without any duress or undue
influence by ESI or anyone else. Executive further acknowledges and agrees that
Executive has carefully read this Agreement and that Executive has asked any
questions needed for Executive to understand the terms, consequences and binding
effect of this Agreement and fully understand it, including that Executive is
waiving Executive’s right to a jury trial. Finally, Executive agrees that
Executive has been provided an opportunity to seek the advice of an attorney of
Executive’s choice before signing this Agreement.

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2.      [SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the 5th
day of May, 2003.

ELECTRO SCIENTIFIC INDUSTRIES, INC. EXECUTIVE

BY: BARRY L. HARMON
———————————————————
BY: J. MICHAEL DODSON
———————————————————
Barry L. Harmon
J. Michael Dodson
President and Chief Executive Officer

Exhibit A: Calculation of Annual Bonus

Exhibit B: Change in Control Agreement

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3. EXHIBIT A

4. CALCULATION OF ANNUAL BONUS

Executive shall be eligible to receive an annual cash bonus that is targeted at
payment of 60 percent (60%) of Executive’s Base Salary (the “Annual Bonus”). The
Annual Bonus will be earned and deemed payable in a manner consistent with the
terms of the Annual Bonus Program approved by the Compensation Committee of
ESI’s Board of Directors. The terms of the Annual Bonus Program for ESI’s fiscal
year 2003 are further described below.

GOAL VS. TARGET BONUS:

[chart.jpg]

PAYMENT STRUCTURE

• Measurement Period: 06/02/02 to 05/31/03

• Payout Date: August 2003

• Total corporate payout will not exceed 20% of operating profits

• Maximum bonus payout will not exceed 200% of target

• Operating profit margin of less than 5% will result in zero payout

• Bonus target is split between 70% corporate results and 30% individual
objectives to equal 100% of targeted bonus

• Individual objectives must be agreed and approved by the Board of Directors
each year

• Unless the operating profit margin threshold is achieved, no funding is
available for corporate or individual bonuses

*Operating profit margin is operating profit divided by revenue. Operating
profit is the profit after deducting operating costs from gross profit.
Generally Accepted Accounting Principles (GAAP) will be used to determine
operating profit.

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5. EXHIBIT B

6. CHANGE IN CONTROL AGREEMENT

Electro Scientific Industries, Inc., an Oregon corporation (the “Company”),
considers the establishment and maintenance of a sound and vital management to
be essential to protecting and enhancing the best interest of the Company and
its shareholders. In this connection, the Company recognizes that, as is the
case with many publicly held corporations, the possibility of a change in
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the “Board”) has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company’s management to their
assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company.

In order to induce you to remain in the employ of the Company, this agreement,
the form of which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a “change in control” of
the Company under the circumstances described below.

• Agreement to Provide Services; Right to Terminate.

  • Except as otherwise provided in paragraph (ii) below, the Company or you may
terminate your employment at any time, subject to the provisions of any
employment agreement between you and the Company and the Company’s providing the
benefits hereinafter specified in accordance with the terms hereof.

  • In the event of a potential change in control of the Company as defined in
Section 4 hereof, you agree that you will not leave the employ of the Company
(other than as a result of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services contemplated in the recitals
to this Agreement until the earliest of (a) a date which is 270 days from the
occurrence of such potential change in control of the Company, or (b), a
termination of your employment pursuant to which you become entitled under this
Agreement to receive the benefits provided in Section 6(iii) below.

• Effective Date. The Effective Date of this agreement is May 5, 2003.

• Term of Agreement. This Agreement shall commence on the Effective Date and
shall continue in effect until December 31, 2003; provided, however, that
commencing on the first day of the new year following the Effective Date and
each January 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless at least 90 days prior to such January 1
date, the Company or you shall have given notice that this Agreement shall not
be extended (provided that no such notice may be given by the Company during the
pendency of a potential change in control); and provided, further, that this
Agreement shall continue in effect for a period of twenty-four (24) months
beyond the term provided herein if a change in control of the Company, as
defined in Section 4 hereof, shall have occurred during such term.
Notwithstanding anything in this Section 3 to the contrary, this Agreement shall
terminate if you or the Company terminate your employment prior to a change in
control of the Company as defined in Section 4 hereof. In addition, the Company
may terminate this Agreement during your employment if, prior to a change in
control of the Company as defined in Section 4 hereof, you cease to hold your
current position with the Company, except by reason of a promotion.

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• Change in Control; Potential Change in Control; Person.

  • For purposes of this Agreement, a “change in control” of the Company shall
mean the occurrence of any of the following events:

  • The approval by the shareholders of the Company of:

  • any consolidation, merger or plan of share exchange involving the Company (a
“Merger”) in which the Company is not the continuing or surviving corporation or
pursuant to which shares of Common Stock of the Company (“Company Shares”) would
be converted into cash, securities or other property, other than a Merger
involving Company Shares in which the holders of Company Shares immediately
prior to the Merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the Merger;

  • any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, the assets of the
Company; or

  • the adoption of any plan or proposal for the liquidation or dissolution of
the Company;

  • At any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board (“Incumbent Directors”) shall
cease for any reason to constitute at least a majority thereof, unless each new
director elected during such two-year period was nominated or elected by
two-thirds of the Incumbent Directors then in office and voting (with new
directors nominated or elected by two-thirds of the Incumbent Directors also
being deemed to be Incumbent Directors); or

  • Any Person (as hereinafter defined) 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 Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company ordinarily having the right to vote for
the election of directors (“Voting Securities”) representing twenty percent
(20%) or more of the combined voting power of the then outstanding Voting
Securities.

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Notwithstanding anything in the foregoing to the contrary, unless otherwise
determined by the board, no change in control shall be deemed to have occurred
for purposes of this Agreement if (1) you acquire (other than on the same basis
as all other holders of the Company Shares) an equity interest in an entity that
acquires the Company in a change in control otherwise described under
subparagraph (A) above, or (2) you are part of group that constitutes a Person
which becomes a beneficial owner of Voting Securities in a transaction that
otherwise would have resulted in a change in control under subparagraph (C)
above.

  • For purposes of this Agreement, a “potential change in control” of the
Company shall be deemed to have occurred if:

  • the Company enters into an agreement, the approval of which by the
shareholders would result in the occurrence of a change in control of the
Company;

  • any Person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a change in
control of the Company; or

  • the Board adopts a resolution to the effect that, for purposes of this
Agreement, a potential change in control of the Company has occurred.

  • For purposes of this Agreement, the term “Person” shall mean and include any
individual, corporation, partnership, group, association or other “person”, as
such term is used in Section 14 (d) of the Securities Exchange Act of 1934 (the
“Exchange Act”), other than the Company or any employee benefit plan(s)
sponsored by the Company.

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Mr. Gary Kapral
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  • Termination Following Change in Control. If any of the events described in
Section 4 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 6(iii)
hereof upon the termination of your employment within twenty-four (24) months
after such event, unless such termination is (a) because of your death or
Retirement, (b) by the Company for Cause or Disability or (c) by you other than
for Good Reason based on an event occurring concurrent with or subsequent to a
change in control (as all such capitalized terms are hereinafter defined).

  • Disability. Termination by the Company of your employment based on
“Disability”shall mean termination because of your absence from you duties with
the Company on a full-time basis for one hundred eighty (180) consecutive days
as a result of your incapacity due to physical or mental illness, unless within
thirty (30) days after Notice of Termination (as hereinafter defined) is given
to you following such absence you shall have returned to the full-time
performance of your duties.

  • Retirement. Termination by you or by the Company of your employment based on
“Retirement” shall mean termination on or after your 65th birthday.

  • Cause. Termination by the Company of your employment for “Cause” shall mean
termination upon (a) the willful and continued failure by you to perform
substantially your reasonably assigned duties with the Company consistent with
those duties assigned to you prior to the change in control (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board of the Company which specifically identifies the manner in which such
executive believes that you have not substantially performed your duties, or (b)
the willful engaging by you in illegal conduct which is materially and
demonstrably injurious to the Company. For purposes of this paragraph (iii), no
act, or failure to act, on your part shall be considered “willful”unless done,
or omitted to be done, by you in knowing bad faith and without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advise of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the corporation. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.

  • Good Reason. Termination by you of your employment for "Good Reason" shall
mean termination based on:

  • a change in your status, title, position(s) or responsibilities as an
officer of the Company which, in your reasonable judgment, does not represent a
promotion from your status, title, position(s) and responsibilities as in effect
immediately prior to the change in control, or the assignment to you of any
duties or responsibilities which, in your reasonable judgment, are inconsistent
with such status, title or position(s), or any removal of you from or any
failure to reappoint or reelect you to such position(s), except in connection
with the termination of your employment for Cause, Disability or Retirement or
as a result of your death or by you other than for Good Reason; provided,
however, that a position equivalent to that of chief operating officer or chief
financial officer of a business substantially the same as that operated by the
Company on the Effective Date shall not be deemed grounds for termination for
Good Reason;

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  • a reduction by the Company in your base salary as in effect immediately
prior to the change in control;

  • the failure by the Company to continue in effect any Plan (as hereinafter
defined) in which you are participating at the time of the change in control of
the Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in control, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any of such Plans on at least
as favorable a basis to you as in the case on the date of the change in control
or which would materially reduce your benefits in the future under any of such
Plans or deprive you of any material benefit enjoyed by you at the time of the
change in control;

  • the failure by the Company to provide and credit you with the number of paid
vacation days to which you are then entitled in accordance with the Company’s
normal vacation policy as in effect immediately prior to the change in control;

  • the Company’s requiring you to be based anywhere other than where your
office is located immediately prior to the change in control except for required
travel on the Company’s business to an extent substantially consistent with the
business travel obligations which you undertook on behalf of the Company prior
to the change in control;

  • the failure by the Company to obtain from any Successor (as hereinafter
defined) the assent to this Agreement contemplated by Section 7 hereof; or

  • any purported termination by the Company of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective.

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For purpose of this Agreement, “Plan” shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance, or relocation plan or policy or any other plan, program or policy of
the Company intended to benefit employees.

  • Notice of Termination. Any purported termination by the Company or by you
following a change in control shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a “Notice
of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.

  • Date of Termination. “Date of Termination” following a change in control
shall mean (a) if your employment is to be terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that you shall not have
returned to the performance of your duties on a full-time basis during such
thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause, the date on which a Notice of Termination is given, and (c)
if your employment is to be terminated by you or by the Company for any other
reason, the date specified in the Notice of Termination, which shall be a date
no earlier than ninety (90) days after the date on which a Notice of Termination
is given (provided that if the termination is by you for Good Reason the
circumstances giving rise to the Good Reason have not been fully corrected by
the specified date), unless an earlier date has been agreed to by the party
receiving the Notice of Termination either in advance of, or after, receiving
such Notice of Termination. Notwithstanding anything in the foregoing to the
contrary, if the party receiving the Notice of Termination has not previously
agreed to the termination, then within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination may notify
the other party that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written agreement
of the parties or by the arbitrators in a proceeding as provided in Section 13
hereof.

• Severance Benefit.

  • If, within twenty-four (24) months after a change in control of the Company
shall have occurred, as defined in Section 4 above, your employment by the
Company shall be terminated (a) by the Company other than for Cause, Disability
or Retirement or (b) by you for Good Reason based on an event occurring
concurrent with or subsequent to a change in control, then, by no later than the
fifth day following the Date of Termination (except as otherwise provided), you
shall be entitled, without regard to any contrary provisions of any Plan, to a
severance benefit (the “Severance Benefit”) equal to the lesser of (x) the
Specified Benefits (as defined in subsection (A) below), or (y) the Capped
Benefit (as defined in subsection (B) below).

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Mr. Gary Kapral
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  • The "Specified Benefits" are as follows:

  • the Company shall pay your full base salary through the Date of Termination
at the rate in effect just prior to the time a Notice of Termination is given
plus any benefits or awards (including both cash and stock components) which
pursuant to the terms of any Plans have been earned or become payable, but which
have not yet been paid to you (including amounts which previously had been
deferred at your request);

  • as severance pay and in lieu of any further salary for periods subsequent to
the Date of Termination, the Company shall pay to you in a single payment an
amount in cash equal to three times the higher of (a) your annual base salary at
the rate in effect just prior to the time a Notice of Termination is given or
(b) your annual base salary in effect immediately prior to the change in control
of the Company;

  • for a twenty-four (24) month period after the Date of Termination, the
Company shall arrange to provide you and your dependents with life, accident,
medical and dental insurance benefits substantially similar to those which you
were receiving immediately prior to the change in control of the Company.
Notwithstanding the foregoing, the Company shall not provide any benefit
otherwise receivable by you pursuant to this paragraph (3) to the extent that a
similar benefit is actually received by you from a subsequent employer during
such twenty-four (24) month period, and any such benefit actually received by
you shall be reported to the Company; and

  • the Company shall pay you for any vacation time earned but not taken at the
Date of Termination, at an hourly rate equal to your annual base salary as in
effect immediately prior to the time a Notice of Termination is given divided by
2080.

  • The “Capped Benefit” equals the Specified Benefits, reduced by the minimum
amount necessary to prevent any portion of the Specified Benefits from being a
“parachute payment” as defined in Section 280G (b)(2) of the Internal Revenue
Code of 1986, as amended (“IRC”), or any successor provision. The amount of the
Capped Benefit shall therefore equal (1) three times the “base amount” as
defined in IRC, § 280G (b)(3)(A) reduced by $1 (One Dollar), and further reduced
by (2) the present value of all other payments and benefits you are entitled to
receive from the Company that are contingent upon a change in control of the
Company within the meaning of IRC § 280G (b)(2)(A)(i), including accelerated
vesting of options and other awards under the Company’s stock option plans, and
increased by (3) all Specified Benefits that are not contingent upon a change in
control within the meaning of IRC § 280G (b)(2)(A)(i). If you receive the Capped
Benefit, you may determine the extent to which each of the Specified Benefits
shall be reduced. The parties recognize that there is some uncertainty regarding
the computations under IRC § 280G which must be applied to determine the Capped
Benefit. Accordingly, the parties agree that, after the Severance Benefit is
paid, the amount of the Capped Benefit may be retroactively adjusted to the
extent any subsequent Internal Revenue Service regulations, rulings, audits or
other pronouncements establish that the original calculation of the Capped
Benefit was incorrect. In that case, amounts shall be paid or reimbursed between
the parties so that you will have received the Severance Benefit you would have
received if the Capped Benefit had originally been calculated correctly.

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  • Except as specifically provided above, the amount of any payment provided
for in this Section 6 shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation earned by you as the result of employment
by another employer after the Date of Termination, or otherwise. Your
entitlements under Section (6)(iii) are in addition to, and not in lieu of, any
rights, benefits or entitlements you may have under the terms or provisions of
any Plan.

• Successors; Binding Agreement.

  • Upon your written request, the Company will seek to have any Successor (as
hereinafter defined), by agreement in form and substance satisfactory to you,
assent to the fulfillment by the Company of its obligations under this
Agreement. Failure of the Company to obtain such assent prior to or at the time
a Person becomes a Successor shall constitute Good Reason for termination by you
of your employment and, if a change in control of the Company has occurred,
shall entitle you immediately to the benefits provided in Section 6(iii) hereof
upon delivery by you of a Notice of Termination which the Company, by executing
this Agreement, hereby assents to. For purposes of this Agreement, “Successor”
shall mean any Person that succeeds to, or has the practical ability to control
(either immediately or with the passage of time), the Company’s business
directly, by merger, consolidation or purchase of assets, or indirectly, by
purchase of the Company’s Voting Securities or otherwise.

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  • This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.

• Fees and Expenses. The Company shall pay all legal fees and related expenses
incurred by you as a result of (i) your termination following a change in
control of the Company (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination) or (ii) your seeking to obtain
or enforce any right or benefit provided by this Agreement.

• Survival. The respective obligations of, and benefits afforded to, the Company
and you as provided in Sections 6, 7(ii), 8 and 13 of this Agreement shall
survive termination of this Agreement.

• Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed to the
address of the respective party set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Chairman of the Board or President of the Company, with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.

• Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Oregon.

• Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

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• Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Portland, Oregon
by three arbitrators in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators’ award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 13.

• Related Agreements. To the extent that any provision of any other agreement
between the Company or any of its subsidiaries and you shall limit, qualify or
be inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provision of this Agreement
shall control and such provision of such other agreement shall be deemed to have
been superseded, and to be of no force or effect, as if such other agreement had
been formally amended to the extent necessary to accomplish such purpose.

• Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.

If this correctly sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.

7.     [Signature page follows.]

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Agreed to this 5th day of May, 2003

J. MICHAEL DODSON
—————————————
J. Michael Dodson

Electro Scientific Industries, Inc.

By:  BARRY L. HARMON
        ——————————————
Name: Barry L. Harmon
Title: President and CEO

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