**EXHIBIT 10.31**

 

**AGREEMENT**

 

This Agreement is entered into as of the 24th day ofMarch, 2005 by and between Ibis Technology Corporation, a Massachusettscorporation (the “Company”) and William Schmidt (the “Executive”).

 

WHEREAS the Executive is Chief Financial Officer ofthe Company and has been employed in such capacity since May 2004;

 

WHEREAS because of the skills and experience of theExecutive and his knowledge of the Company, his service to the Company is veryimportant to the future success of the Company;

 

WHEREAS the Executive desires to enter into thisAgreement to provide him with certain financial protection in the event thathis employment terminates for certain reasons in connection with or within aperiod of time after a change of control of the Company; and

 

WHEREAS the Board of Directors of the Company hasdetermined that it is in the best interests of the Company to enter into thisAgreement.

 

NOW, THEREFORE, for good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the Company andthe Executive agree as follows:

 

1.             DEFINITIONS.

 

(a)           Cause.  As used herein, “Cause” shall mean atermination for one or more of the following reasons, as determined by amajority vote of the Board: (i) Executive’s continuing failure to render services to theCompany in accordance with his assigned duties and such failure of performancecontinues for a period of more than 120 days after notice thereof has beenprovided to the Executive by the Board; (ii) the Executive’s willfulmisconduct or gross negligence; (iii) the Executive is convicted of afelony, either in connection with the performance of his obligations to theCompany or which conviction materially adversely affects his ability to performsuch obligations, or materially adversely affects the business activities,reputation, goodwill or image of the Company; (iv) willful disloyalty,deliberate dishonesty, and breach of fiduciary duty; (v) the commission bythe Executive of an act of fraud, embezzlement or deliberate disregard of therules or policies of the Company which results in significant loss, damage orinjury to the Company; (vi) the Executive’s willful unauthorizeddisclosure of any trade secret or confidential information of the Company; or(vii) Executive’s willful commission of an act which constitutes unfaircompetition with the Company or which induces any employee or customer of theCompany to break a contract with the Company.

 

In making any determination under this Section 1(a),the Board shall act fairly and in utmost good faith and shall give theExecutive an opportunity to appear and be heard at a meeting of the Board orany committee thereof and present evidence on his behalf.  For purposes of this Section, no act, orfailure to act, by the Executive shall be considered “willful” unless

 

1

----

 

done, or admitted to be done, by the Executive in badfaith and without reasonable belief that such action or omission was in thebest interest of the Company.

 

(b)           ChangeOf Control.  As used herein, a “Changeof Control” shall be deemed to have occurred if (i) there is a sale ortransfer of all or substantially all of the assets of the Company in one or aseries of transactions; (ii) any “person,” as such term is used inSection 13(d) of the Securities Exchange Act of 1934, as amended (or anysuccessor provision) (the “Exchange Act”), together with all “affiliates” and “associates”(as such terms are defined in Rule 12b-2 under the Exchange Act or anysuccessor provision) of such person, shall become the “beneficial owner” or “beneficialowners” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or anysuccessor provision), directly or indirectly, of securities of the Companyrepresenting in the aggregate thirty percent (30%) or more of either(1) the then outstanding shares of common stock of the Company or(2) the combined voting power of all then outstanding securities of theCompany having the right under ordinary circumstances to vote in an election ofthe Board of Directors of the Company (hereafter referred to as an “Acquisition”);PROVIDED, that, notwithstanding the foregoing, an Acquisition shall not bedeemed to have occurred for purposes of this clause (ii) solely as theresult of an acquisition of securities by the Company which, by reducing thenumber of shares of common stock or other voting securities outstanding,increases (x) the proportionate number of shares of common stockbeneficially owned by any person to thirty percent (30%) or more of the commonstock then outstanding or (y) the proportionate voting power representedby the voting securities beneficially owned by any person to thirty percent(30%) or more of the combined voting power of all then outstanding votingsecurities; or (iii) there is a merger or consolidation between theCompany and an entity other than a subsidiary of the Company in which theCompany is not the continuing or surviving corporation and pursuant to whichthe holders of the Company’s voting stock immediately prior to such merger orconsolidation would not be the holders immediately after such merger orconsolidation of at least 50% of the voting stock of the continuing orsurviving corporation.

 

©             GoodReason.  As used herein, a “GoodReason” shall mean a material change in the Executive’s authority, functions,duties or responsibilities as Chief Financial Officer of the Company(including, without limitation, material changes in the control or managerialstructure of the Company) which would cause his position with the Company tobecome of less dignity, responsibility, importance or scope than his positionon the date hereof or as of any subsequent date prior to the Change of Control,a reduction in the Executive’s salary or a material reduction in benefits fromthe amount of salary paid or the value of the benefits available on the datehereof or as of any subsequent date prior to the Change of Control, a transferof the principal location of the place of performance of the Executive’s dutiesfrom the Danvers, Massachusetts area without the Executive’s consent, or thefailure of the Board of Directors of the Company to elect the Executive asChief Financial Officer of the Company at any time such elections are made, orremoval from such office of the Company, PROVIDED that such material change isnot in connection with a termination of the Executive’s employment for Cause,and, PROVIDED, FURTHER, that any notice of termination by the Executive forGood Reason shall be given by him within ninety (90) days of when he becomesaware of such change, of such failure or removal.

 

----

 

2.             SEVERANCECOMPENSATION.  In the event that at ornear the time of, in connection with, or within a period of two (2) yearsafter, a Change of Control, the Executive’s employment with the Company isterminated either (i) by the Company other than for Cause or (ii) bythe Executive for a Good Reason, then the Company, within ten (10) days of theapplicable termination date, shall pay to the Executive, in addition to anyamounts due to Executive for services rendered prior to the termination date, alump sum amount equal to one (1) times the Executive’s highest Annual Salaryduring the preceding three year period, including the year of suchtermination.  Annual Salary shall meanExecutive’s annual base salary and bonus, excluding reimbursements and amountsattributable to stock options and other non-cash compensation.

 

3.             CONTINUATIONOF BENEFITS.  In the event that at thetime of, in connection with, or within a period of (2) two years after a Changein Control, the Executive’s employment with the Company is terminated either(i) by the Company other than for Cause or (ii) by the Executive fora Good Reason, then the Company shall arrange to provide the Executive withlife, disability, group dental and health insurance benefits substantiallysimilar to those the Executive was receiving, immediately prior to thetermination, until the earlier of (a) one (1) years following histermination date, or (b) the date upon which she becomes eligible for suchcoverage offered by a subsequent employer. Executive’s termination date shall be the date of any qualifying eventunder the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) andthe COBRA coverage that may be available to Executive, if any, shall be offsetby any period of coverage provided hereunder.

 

3A.          SPECIFIEDEMPLOYEE.  Notwithstanding the provisionsof Sections 2 and 3, if the Executive is a “specified employee” within themeaning of Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, asamended (the “Code”), then payment of the amount described in Section 2(a)shall be made on the date which is six (6) months after the applicabletermination date or, if earlier, the date of death of the Executive, and thebenefit described in Section 3 shall commence on the date which is six (6)months after the applicable termination date and, subject to the otherprovisions of Section 3, continue until thirty (30) months after theapplicable termination date.

 

4.             NODUPLICATION OF COMPENSATION OR BENEFITS. The Executive’s severance compensation and benefits set forth inSections 2 and 3 above shall replace, and be provided in lieu of, anyseverance compensation and benefits that may be provided to Executive under anyother agreement, PROVIDED, that this prohibition against duplication shall notbe construed to otherwise limit Executive’s rights as to payments or benefitsprovided under any pension plan (as defined in Section 3(2) of the EmployeeRetirement Income Security Act of 1974, as amended), deferred compensation,stock, stock option or similar plan sponsored by the Company.

 

5.             ENFORCEABILITY;REDUCTION.

 

(a)           Ifany provision of this Agreement shall be deemed invalid or unenforceable aswritten, this Agreement shall be construed, to the greatest extent possible, ormodified, to the extent allowable by law, in a manner which shall render itvalid and enforceable and any limitation on the scope or duration of anyprovision necessary to make it valid and enforceable

 

3

----

 

shall be deemed to be a part thereof.  No invalidity or unenforceability of anyprovision contained herein shall affect any other portion of this Agreement.

 

(b)           Notwithstandinganything provided herein, if the Executive is a “disqualified individual” (asdefined in Section 280G of the Internal Revenue Code (“Code”), and theseverance compensation and continuation of benefits provided for inSections 2 and 3 hereof (collectively “Severance Compensation”) togetherwith any other payments which the Executive has the right to receive from theCompany (or its affiliates and subsidiaries), would constitute a “parachutepayment” (as defined in Section 280G(b)(2) of the Code), the SeveranceCompensation shall be reduced.  Thereduction shall be in an amount so that the present value of the total amountreceived by the Executive from the Company (or its affiliates and subsidiaries)will be one dollar ($1.00) less than three (3) times the Executive’s BaseAmount (as defined in Section 280G of the Code) so that no portion of theamounts received by the Executive shall be subject to the excise tax imposed bySection 4999 of the Code (excise tax).

 

The determination as to whether any reduction inSeverance Compensation is necessary and the amount of any such reduction shallbe made by the Company’s independent public accountants (the “Accounting Firm”)which shall provide detailed supporting calculations both to the Company and tothe Executive within fifteen (15) business days of the Executive’s terminationdate.  Any such determination by theAccounting Firm shall be conclusive and binding upon the Executive and theCompany.  The Executive shall determinewhich part of the Severance Compensation shall be eliminated or reducedconsistent with the requirements of this Section 5 and shall notify theCompany promptly in writing; PROVIDED, that if the Executive does not make suchdetermination within ten (10) business days of the receipt of the calculationsmade by the Accounting Firm, the Company shall determine which part of theSeverance Compensation shall be eliminated or reduced consistent with therequirements of this Section 5 and shall notify the Executive promptly inwriting of such election.

 

If through error or otherwise the Executive shouldreceive payments under this Agreement, together with other payments theExecutive has the right to receive from the Company (or its affiliates andsubsidiaries), in excess of one dollar ($1.00) less than three times his BaseAmount, the Executive shall immediately repay the excess to the Company uponnotification that an overpayment has been made.

 

6.             MITIGATION.  The Executive shall not be required tomitigate the amount of any payment provided for in this Agreement by seekingother employment or otherwise, nor shall the amount of any payment provided forherein be reduced by any compensation earned by the Executive as the result ofemployment by another employer or by retirement benefits after the terminationdate or otherwise.

 

7.             NOTICES.  All notices, requests, consents and othercommunications hereunder shall be in writing, shall be addressed to thereceiving party’s address set forth below or to such other address as a partymay designate by notice hereunder, and shall be either (i) delivered by hand,(ii) made by telex, telecopy or facsimile transmission, (iii) sent byovernight courier, or (iv) sent by registered or certified mail, returnreceipt requested, postage prepaid.

 

----

 

If to the Company:

 
|   | Ibis Technology Corporation |
|--------|-----------------------------|
|   |                        |
|   | 32 Cherry Hill Drive        |
|   |                        |
|   | Danvers, MA 01923           |
|   |                        |
|   | Attn: Board of Directors    |

 

If to the Executive:

 
|   | William Schmidt |
|--------|-----------------|

 

All notices, requests, consents and othercommunications hereunder shall be deemed to have been given either (i) ifby hand, at the time of the delivery thereof to the receiving party at theaddress of such party set forth above, (ii) if made by telex, telecopy orfacsimile transmission, at the time that receipt thereof has been acknowledgedby electronic confirmation or otherwise, (iii) if sent by overnightcourier, on the next business day following the day such notice is delivered tothe courier service, or (iv) if sent by registered or certified mail, onthe 5th business day following the day such mailing is made.

 

8.             ENTIREAGREEMENT.  This Agreement embodies theentire agreement and understanding between the parties hereto with respect tothe subject matter hereof and supersedes all prior oral or written agreementsand understandings relating to the subject matter hereof.  No statement, representation, warranty,covenant or agreement of any kind not expressly set forth in this Agreementshall affect, or be used to interpret, change or restrict, the express termsand provisions of this Agreement.

 

9.             MODIFICATIONSAND AMENDMENTS.  The terms and provisionsof this Agreement may be modified or amended only by written agreement executedby all parties hereto.

 

10.           WAIVERSAND CONSENTS.  The terms and provisionsof this Agreement may be waived, or consent for the departure therefromgranted, only by written document executed by the party entitled to thebenefits of such terms or provisions.  Nosuch waiver or consent shall be deemed to be or shall constitute a waiver orconsent with respect to any other terms or provisions of this Agreement,whether or not similar.  Each such waiveror consent shall be effective only in the specific instance and for the purposefor which it was given, and shall not constitute a continuing waiver orconsent.

 

11.           ASSIGNMENT.  The rights and obligations under thisAgreement may not be assigned by either party hereto without the prior writtenconsent of the other party.

 

5

----

 

12.           INDEPENDENTADVICE; BENEFIT.  The Executive agreesand acknowledges that he has had the opportunity to seek independent advicefrom legal, accounting and tax advisors of his own choosing in connection withthis Agreement.  All statements,representations, warranties, covenants and agreements in this Agreement shallbe binding on the parties hereto and shall inure to the benefit of therespective successors and permitted assigns of each party hereto.  Nothing in this Agreement shall be construedto create any rights or obligations except among the parties hereto, and no personor entity shall be regarded as a third-party beneficiary of this Agreement.

 

13.           GOVERNINGLAW.  This Agreement and the rights andobligations of the parties hereunder shall be construed in accordance with andgoverned by the law of the Commonwealth of Massachusetts, without giving effectto the conflict of law principles thereof.

 

14.           JURISDICTIONAND SERVICE OF PROCESS.  Any legal actionor proceeding with respect to this Agreement may be brought in the courts ofthe Commonwealth of Massachusetts or of the United States of America for the Districtof Massachusetts.  By execution anddelivery of this Agreement, each of the parties hereto accepts for itself andin respect of its property, generally and unconditionally, the jurisdiction ofthe aforesaid courts.  Each of theparties hereto irrevocably consents to the service of process of any of theaforementioned courts in any such action or proceeding by the mailing of copiesthereof by certified mail, postage prepaid, to the party at its address setforth in Section 7 hereof.

 

15.           NOWAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party hereto in exercising any right, power orremedy under this Agreement, and no course of dealing between the partieshereto, shall operate as a waiver of any such right, power or remedy of the party.  No single or partial exercise of any right,power or remedy under this Agreement by a party hereto, nor any abandonment ordiscontinuance of steps to enforce any such right, power or remedy, shallpreclude such party from any other or further exercise thereof or the exerciseof any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute awaiver of the right of such party to pursue other available remedies.  No notice to or demand on a party not expresslyrequired under this Agreement shall entitle the party receiving such notice ordemand to any other or further notice or demand in similar or othercircumstances or constitute a waiver of the rights of the party giving suchnotice or demand to any other or further action in any circumstances withoutsuch notice or demand.

 

16.           COUNTERPARTS.  This Agreement may be executed in one or morecounterparts, and by different parties hereto on separate counterparts, each ofwhich shall be deemed an original, but all of which together shall constituteone and the same instrument.

 

----

 

IN WITNESS WHEREOF, the parties have executed thisAgreement as of the day and year first above written.

 
|   | COMPANY:                     |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | IBIS TECHNOLOGY  CORPORATION |
|   |                         |
|   |                         |
|   | By:                          |
|   |                         |
|   |                         |
|   |                         |
|   |                         |
|   | Authorized Officer           |
|   |                         |
|   |                         |
|   | EXECUTIVE:                   |
|   |                         |
|   |                         |
|   |                         |
|   |                         |
|   | WILLIAM SCHMIDT              |

 

----