EXHIBIT 10

ELECTRO SCIENTIFIC INDUSTRIES, INC.
EMPLOYMENT AGREEMENT

Executive

James T. Dooley
3200 N.W. Linmere Drive
Portland, OR 97229

ESI

Electro Scientific Industries, Inc.,
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.

        1.        Employment. ESI hereby employs Executive as the President and
Chief Executive Officer of ESI and Executive accepts such employment with ESI,
on the terms and conditions set forth in this Employment Agreement (this
“Agreement”).

        2.        Period of Employment. Executive’s employment hereunder shall
commence on the date hereof (the “Effective Date”) and shall continue until
terminated in accordance with the provisions of section 8.

        3.        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 Board of Directors (the “Board”) shall
reasonably direct and are consistent with the position of Chief Executive
Officer, including but not limited to strategic planning, implementation of
business objectives and supervision of day-to-day business affairs of ESI.
Executive shall devote such time, energy, and skill to ESI’s business as shall
reasonably be required for the performance of his duties.

        4.        Annual Salary and Bonus.

                (a)      Base Salary. Beginning with the effective date of this
Agreement, ESI shall pay Executive a base salary of $400,000 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 the Board.

                 (b)      Stock Options. ESI shall grant Executive an option to
purchase 150,000 shares of ESI Common Stock. The date of the option grant shall
be the Effective Date and the terms of the option grant shall be consistent with
the customary terms of option grants previously provided Executive. A Stock
Option Agreement detailing the option terms will be provided to Executive.
Additional stock options may be granted to Executive from time to time in the
sole discretion of the Board.

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                (c)      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 (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.

        5.      Benefits and Reimbursement.

                (a)      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.

                (b)      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.

                (c)      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.

        6.      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”).

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

                (a)      “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, after a written demand for performance
has been delivered to Executive by the Chairman of the Board which specifically
identifies the manner in which the Chairman believes that Executive has not
substantially performed his duties, or (ii) the willful engaging by Executive in
illegal conduct which is materially and demonstrably injurious to ESI. 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. 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 ESI shall be conclusively presumed
to be done, or omitted to be done, by Executive in good faith and in the best
interests of the corporation. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Executive 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 Executive and an opportunity for Executive, together with
his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive has engaged in the conduct set forth above in
(i) or (ii) of this paragraph (a) and specifying the particulars thereof in
detail.

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

                (c)      “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.

        8.      Term, Extension of Term and Early Termination.

                (a)      Term. Except as provided in Section 8(b), this
Agreement shall terminate on December 31, 2005 (the “Termination Date”).

                (b)      Termination. This Agreement and Executive’s employment
hereunder may be terminated prior to the Termination Date by either party 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).

        9.      Effect of Termination.

                (a)      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.

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                 (b)      Termination by Executive or by ESI for Cause. If ESI
terminates Executive’s employment for Cause or Executive terminates his
employment prior to the Termination Date, 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.

                (c)       Termination by ESI Without Cause. Except as provided
in section 9(a), if ESI terminates Executive’s employment without Cause prior to
the Termination Date, Executive shall be entitled to receive:

                        (i)      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;

                        (ii)      a severance payment (subject to applicable
taxes and withholding) paid in equal installments in accordance with the ESI’s
normal pay practices in an amount equal to two times Executive’s Base Salary at
the time of termination; 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; and

                        (iii)      until such time as Executive becomes eligible
for Medicare or retirement benefits, maintenance in effect of all employee
medical and dental benefit plans which are substantially equivalent to those in
which Executive was participating immediately prior to termination.

                (d)       Termination on Termination Date. Except as provided in
section 9(a), if ESI terminates Executive’s employment without Cause on the
Termination Date, Executive shall be entitled to receive:

                        (i)      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 Termination Date but which have not yet been paid to Executive;

                        (ii)      a severance payment (subject to applicable
taxes and withholding) paid in equal installments in accordance with the ESI’s
normal pay practices in an amount equal to one year of the Executive’s Base
Salary at the time of termination; 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; and

                        (iii)      until such time as Executive becomes eligible
for Medicare or retirement benefits, maintenance in effect of all employee
medical and dental benefit plans which are substantially equivalent to those in
which Executive was participating immediately prior to termination.

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                (e)      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

                (f)      Disability. If Executive’s employment is terminated as
a result of Executive’s Disability, Executive shall be entitled to receive:

                         (i)     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; and

                         (ii)     until such time as Executive becomes eligible
for MediCare or retirement benefits, maintenance in effect of all employee
medical and dental benefit plans in which Executive was participating
immediately prior to termination.

                (g)     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.

                 (h)     Release of Claims. ESI shall have the right to require
Executive to executive a limited 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(c) or 9(d).

        10.        Resignation of Corporate Offices. Executive shall resign as a
director of ESI and as a director and/or officer of any affiliate of ESI,
effective as of the date of termination of this Agreement. 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.

        11.        Non-Competition and Non-Disclosure; Executive Cooperation.

                (a)      Without the consent in writing of the Board, upon
termination of Executive’s employment for any reason, Executive shall not for a
period of two years 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;
provided, however, that the limitation of subsection (i) shall not apply if
Executive’s employment is terminated as a result of a termination by ESI without
Cause. 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).

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                (b)      Executive shall not, at any time during the term of
this Agreement or following Executive’s termination of employment 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.

                (c)      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.

        12.       Miscellaneous.

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

                (b)      Successors. Upon Executive’s written request, ESI will
seek to have any Successor (as hereinafter defined), by agreement in form and
substance satisfactory to Executive, 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.

                (c)      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.

                (d)      Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon.

                (e)      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.

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        Notwithstanding anything to the contrary in this section 12(d),
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 additional 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.

                (f)      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.

                (g)      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).

                (h)      Entire Agreement. This Agreement, including the
attachments and exhibits hereto 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.

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

                (j)      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.

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                (k)      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.

                (l)      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.

                (m)      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.

                (n)      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.

[SIGNATURE PAGE FOLLOWS]

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        IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the 13th day of December, 2002.

ELECTRO SCIENTIFIC INDUSTRIES, INC.

By: /s/ DAVID F. BOLENDER
      ——————————————
      David F. Bolender
      Chairman of the Board of Directors
EXECUTIVE

By: /s/ JAMES T. DOOLEY
      ——————————————
      James T. Dooley

Exhibit A: Calculation of Annual Bonus

Exhibit B: Change in Control Agreement

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EXHIBIT A

CALCULATION OF ANNUAL BONUS

Executive shall be eligible to receive an annual cash bonus that is targeted at
payment of 80 percent 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:

[linechart.gif]

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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EXHIBIT B

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.

         1.        Agreement to Provide Services; Right to Terminate.

          (i)     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.

          (ii)     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.

        2.       Effective Date. The Effective Date of this agreement is January
1, 2003.

        3.       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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        4.       Change in Control; Potential Change in Control; Person.

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

          (A)     The approval by the shareholders of the Company of:

          (1)     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;

          (2)     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

          (3)     the adoption of any plan or proposal for the liquidation or
dissolution of the Company;

          (B)     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

          (C)     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.

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

          (A)     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;

          (B)     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

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

          (iii)     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.

         5.      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).

          (i)     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.

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

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          (iii)     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.

          (iv) Good     Reason. Termination by you of your employment for “Good
Reason” shall mean termination based on:

          (A)     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;

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

          (C)     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;

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          (D)     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;

          (E)     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;

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

          (G)     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.

        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.

          (v)     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.

          (vi)     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.

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        6.       Severance Benefit.

          (i)     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).

          (A)     The “Specified Benefits” are as follows:

          (1)     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);

          (2)     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;

          (3)     for a thirty-six (36) 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 thirty-six (36) month period, and any such benefit actually received
by you shall be reported to the Company; and

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          (4)     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.

          (B)     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.

          (ii)     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.

        7.       Successors; Binding Agreement.

          (i)     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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          (ii)     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.

        8.       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.

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

        10.       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.

        11.       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.

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        12.       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.

        13.       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.

        14.       RelatedAgreements. 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.

        15.       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.

[Signature page follows.]

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Electro Scientific Industries, Inc.

By: /s/ DAVID F. BOLENDER
       ——————————————
Name: David F. Bolender
Title: Chairman of the Board of Directors

Agreed to this 13th day of December, 2002

/s/ JAMES T. DOOLEY
 —————————————————
JAMES T. DOOLEY

 

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