Document:

Prepared by MERRILL CORPORATION

QuickLinks
 -- Click here to rapidly navigate through this document

  

EXHIBIT 4-A  

 
 

ELECTRO SCIENTIFIC INDUSTRIES, INC.    
  

and  

 MELLON INVESTOR SERVICES LLC  

 Amended and Restated  

 Rights Agreement  

 Dated as of March 1, 2001  

1

  

 
 

TABLE OF CONTENTS    
  

	1.	 	Certain Definitions	 	3
	2.	 	Appointment of Rights Agent	 	6
	3.	 	Issue of Rights Certificates	 	6
	4.	 	Form of Rights Certificates	 	7
	5.	 	Countersignature and Registration	 	8
	6.	 	Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Certificates	 	9
	7.	 	Exercise of Rights; Purchase Price; Expiration Date of Rights	 	10
	8.	 	Cancellation and Destruction of Rights Certificates	 	11
	9.	 	Reservation and Availability of Capital Stock	 	11
	10.	 	Preferred Stock Record Date	 	12
	11.	 	Adjustment of Purchase Price, Number of Shares or Number of Rights	 	13
	12.	 	Certificate of Adjusted Purchase Price or Number of Shares	 	20
	13.	 	Consolidation, Merger or Sale or Transfer of Assets or Earning Power	 	20
	14.	 	Fractional Rights and Fractional Shares	 	22
	15.	 	Rights of Action	 	23
	16.	 	Agreement of Rights Holders	 	24
	17.	 	Rights Certificate Holder Not Deemed a Shareholder	 	24
	18.	 	Concerning the Rights Agent	 	24
	19.	 	Merger or Consolidation or Change of Name of Rights Agent	 	25
	20.	 	Duties of Rights Agent	 	25
	21.	 	Change of Rights Agent	 	27
	22.	 	Issuance of New Rights Certificates	 	28
	23.	 	Redemption	 	28
	24.	 	Exchange	 	29
	25.	 	Notices	 	30
	26.	 	Supplements and Amendments	 	30
	27.	 	Successors	 	31
	28.	 	Benefits of this Agreement	 	31
	29.	 	Severability	 	31
	30.	 	Determinations and Actions by the Board of Directors, Etc	 	31
	31.	 	Governing Law	 	32
	32.	 	Counterparts	 	32
	33.	 	Descriptive Headings	 	32

2

  

 
 

AMENDED AND RESTATED RIGHTS AGREEMENT    
  

    This AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of March 1, 2001 (the "Agreement"), between Electro Scientific Industries, Inc., an Oregon
corporation (the "Company"), and Mellon Investor Services LLC (the "Rights Agent"), successor to First Chicago Trust Company of New York.

 
 

WITNESSETH    
  

    WHEREAS, effective as of May 7, 1999, the Board of Directors of the Company authorized and declared a dividend of one Right for each share of Common
Stock (as such terms are hereinafter defined) of the Company outstanding on June 4, 1999 (the "Record Date"), and has authorized the issuance of one Right with respect to each share of Common
Stock issued by the Company between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date (as such terms are hereinafter defined), with each Right
initially representing the right to purchase one one-hundredth of a share of Preferred Stock (as hereinafter defined) having the rights, powers and preferences set forth in the form of
Amendment to the Company's Third Restated Articles of Incorporation attached hereto as Exhibit A, upon the terms and subject to the conditions
herein set forth (the "Rights"); and 

    WHEREAS,
the Board of Directors of the Company had considered whether approval of this Agreement and the distribution of the Rights was in the best interests of the Company and all
other pertinent factors; and 

    WHEREAS,
the Board of Directors of the Company had concluded that approval of this Agreement and the distribution of the rights was in the best interests of the Company because the
existence of the Rights will help preserve the Board of Directors' bargaining power and flexibility to deal with third-party acquirors, to pursue the business strategies of the Company and to
otherwise seek to maximize value for all of the shareholders; 

    NOW
THEREFORE, in consideration of the mutual agreements set forth herein, the parties hereby agree as follows: 

    1.  Certain Definitions.  For purposes of this Agreement, the following terms have the meanings
indicated: 

    (a)
"Acquiring Person" shall mean (i) any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter,
defined) of such Person, shall become the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the shares of Common Stock then outstanding or (ii) any Person who is an
Adverse Person (as such term is hereinafter defined); provided, however, that an Acquiring Person shall not include the Company, any Subsidiary (as such
term is hereinafter defined) of the Company or any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms
of any such plan. Notwithstanding the foregoing, no Person shall be deemed to be an "Acquiring Person" either (i) as the result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of shares Beneficially Owned by such Person to 15% or more of the Common Stock of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Stock then outstanding by reason of
share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of Common Stock, then such Person shall be deemed to be an
"Acquiring Person," or (ii) if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person divests 

3

 

as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a). 

    (b)
"Act" shall mean the Securities Act of 1933, as amended. 

    (c)
"Adverse Person" shall mean any Person declared to be an Adverse Person by the Board of Directors of the Company upon a determination that such Person, alone or together with its
Affiliates and Associates, has, at any time after the date of this Agreement, become the Beneficial Owner of an amount of Common Stock which the Board of Directors determines to be substantial (which
amount shall be more than 10% of the shares of Common Stock then outstanding) and a determination by at least a majority of the Board of Directors who are not officers of the Company, after reasonable
inquiry and investigation, including consultation with such persons as such directors shall deem appropriate, that (i) such beneficial ownership by such Person is intended to cause the Company
to repurchase the Common Stock beneficially owned by such Person or to cause pressure on the Company to take action or enter into a transaction or series of transactions intended to provide such
Person with short-term financial gain under circumstances where the Board of Directors determines that the best long-term interests of the Company and its shareholders would
not be served by taking such action or entering into such transactions or series of transactions at that time, or (ii) such beneficial ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of relationships with customers or impairment of the Company's ability to maintain its competitive position) on the business or
prospects of the Company. 

    (d)
"Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act
(as such term is hereinafter defined), as in effect on the date of this Agreement. 

    (e)"Agreement"
shall mean this Rights Agreement. 

    (f)
A Person shall be deemed the "Beneficial Owner" of and shall be deemed to beneficially own any, securities: 

    (i)
which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the power to vote or dispose of, including pursuant to any agreement, arrangement
or understanding, whether or not in writing; 

    (ii)
which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire voting or dispositive power over (whether such right is
exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; or 

    (iii)
which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement arrangement or understanding, whether or not in writing, for the purpose of acquiring, holding, voting or disposing of any securities of the Company; 

provided, however, that nothing in this paragraph (f) shall cause a person to be the "Beneficial Owner" of, or to "beneficially own,"
(A) any securities that may be issued on the exercise of Rights, (B) any security if the agreement, arrangement or understanding to vote such security arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act,
(C) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such 

4

 

tendered securities are accepted for purchase or exchange, or (D) any securities acquired by a Person engaged in business as an underwriter of securities through such Person's participation in
good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition; and
provided, further, that a Person who is an officer, director or employee of the Company or a Beneficial Owner as of the date of this Agreement of more than 10 percent of the outstanding shares
of Common Stock shall not be deemed under Section 1(f)(iii) to be the "Beneficial Owner" of, or to "beneficially own," any security which is beneficially owned by another such Person
unless the Board of Directors determines that such attribution of beneficial ownership is appropriate in the circumstances. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. 

    (g)
"Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of Oregon or the State of Washington are authorized or
obligated by law or executive order to close. 

    (h)
"Close of Business" on any given date shall mean 5:00 p.m., Pacific time, on such date; provided, however, that if such date
is not a Business Day, it shall mean 5:00 p.m., Pacific time, on the next succeeding Business Day. 

    (i)
"Common Stock" shall mean the Common Stock of the Company. The term "common stock" when used with reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person together with all rights and benefits (however denominated or constituted) relating to such common stock (including, without
limitation any rights or warrants to acquire additional shares of such common stock or other securities or assets, or to participate in any trust for the benefit of holders of such shares, or to share
in the benefits of any agreements or other arrangements for the benefit of such holders), whether or not such rights are yet exercisable, and together with any other securities which are represented
by the certificates for such common stock or are transferred in connection with transfers of such common stock. 

    (j)
"Common Stock Equivalents" shall have the meaning set forth in Section 11(a)(iii). 

    (k)
"Current Per Share Market Price" shall have the meaning set forth in Section 11(d). 

    (l)
"Current Value" shall have the meaning set forth in Section 11(a)(iii). 

    (m)
"Distribution Date" shall have the meaning set forth in Section 3(a). 

    (n)
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 

    (o)
"Final Expiration Date" shall have the meaning set forth in Section 7(a). 

    (p)
"Person" shall mean any individual, firm, corporation, partnership or other entity and shall include any successor (by merger or otherwise) of such entity. 

    (q)
"Preferred Stock" means shares of Series A No Par Preferred Stock of the Company and, to the extent that there is not a sufficient number of shares of Series A No
Par Preferred Stock authorized to permit the full exercise of the Rights, any other shares of any other series of Preferred Stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A No Par Preferred Stock. 

    (r)
"Preferred Stock Equivalents" shall have the meaning set forth in Section 11(b). 

    (s)
"Principal Party" shall have the meaning set forth in Section 13(b). 

5

 

    (t) "Purchase Price" shall mean the dollar amount payable upon exercise of one Right to acquire the number of one one-hundredths of a share of Preferred Stock or other
securities or assets for which the Right is then exercisable and shall initially be the price set forth in Section 7(b). 

    (u)
"Record Date" shall have the meaning set forth in the first WHEREAS clause at the beginning of this Agreement. 

    (v)
"Redemption Date" shall have the meaning set forth in Section 7(a). 

    (w)
"Redemption Price" shall have the meaning set forth in Section 23(a). 

    (x)
"Rights" shall have the meaning set forth in the first WHEREAS clause at the beginning of this Agreement. 

    (y)
"Rights Certificate" shall have the meaning set forth in Section 3(a). 

    (z)
"Section 11(h) Event" shall have the meaning set forth in Section 11(i). 

    (aa)
"Section 13 Event" shall mean any event described in Section 13(a). 

    (bb)
"Spread" shall have the meaning set forth in Section 11(a)(iii). 

    (cc)
"Stock Acquisition Date" shall mean the first date of public announcement (including, without limitation, the date a report is filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become an Acquiring Person. 

    (dd)
"Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by such Person. 

    (ee)
"Substitution Period" shall have the meaning set forth in Section 11(a)(iii). 

    (ff)
"Trading Day" shall have the meaning set forth in Section 11(d). 

    2.  Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may
deem necessary or desirable. The Rights Agent shall have no duty to supervise, and in no event shall it be liable for, the acts or omissions of any such
co-Rights Agent. 

    3.  Issue of Rights Certificates.  

    (a)
Until the earlier of (i) the Close of Business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date is prior to the
Record Date, the Close of Business on the Record Date) or (ii) the Close of Business on the tenth day after the date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the Beneficial Owner of 15 percent or
more of the shares of Common Stock then outstanding (the earlier of (i) and (ii) being herein referred to as the "Distribution Date"), then (w) the Rights will be evidenced by the
certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates shall also be deemed to be certificates for Rights) and not by separate Rights
Certificates, (x) the Rights and the right to receive Rights Certificates will be transferable only in connection with the transfer of the underlying Common Stock and any transfer of Common
Stock shall also constitute the transfer of the associated Rights represented by the 

6

 

same certificate, (y) in the event the Company purchases or acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such acquired Common
Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with shares of Common Stock that are no longer outstanding, and (z) in the
event the Company issues any Common Stock after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, the Company shall issue one Right
for each such newly issued share of Common Stock (subject to adjustment as provided in Section 11(h)) which Right shall be evidenced by the certificate for the associated share of Common Stock.
As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will,
if requested and provided with all necessary information, send) by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Distribution
Date, at the address of such holder shown on the records of the Company, a Rights Certificate, in substantially the form of Exhibit B hereto (a
"Rights Certificate"), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(h), at the time the Rights Certificates are distributed the Company shall make the necessary and appropriate rounding adjustments pursuant to
Section 14(a) so that Rights Certificates are distributed representing only whole numbers of Rights and cash is paid in lieu of fractional Rights. As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates. 

    (b)
As soon as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form
of Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records of the Company. 

    (c)
All Common Stock certificates which are issued, either upon an original issuance by the Company or upon a transfer by a holder, after the Record Date but prior to the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date, shall have impressed on, printed on, written on or otherwise affixed to them the following legend: 

This
certificate also evidences and entitles the holder hereof to certain rights set forth in an Amended and Restated Rights Agreement between Electro Scientific Industries, Inc. (the
"Company") and Mellon Investor Services LLC dated as of March 1, 2001 (the "Rights Agreement"), the terms of which are incorporated herein by reference and a copy of which is on file at the
principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights
beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement), and Rights previously owned by such Persons, may become null and void. 

    4.  Form of Rights Certificates.  

    (a)
The Rights Certificates (and the form of election to purchase and form of assignment to be printed on the reverse thereof) shall be substantially the same as  Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate (but which do not affect the rights, duties or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this 

7

 

Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may
from time to time be listed, or to conform to usage. Subject to the provisions of Sections 11, 22 and 24, the Rights Certificates, whenever distributed, shall entitle the holders thereof to purchase
for the Purchase Price such number of one one-hundredths of a share of Preferred Stock as shall be set forth therein, but the amount and type of securities purchasable upon exercise and
the Purchase Price shall be subject to adjustment as provided herein. 

    (b)
Any Rights Certificate issued pursuant to Section 3 hereof that represents Rights beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of an
Acquiring Person, (ii) any other Person if such Rights formerly were beneficially owned by an Acquiring Person (or by an Associate or Affiliate of such Acquiring Person) at a time after the
Acquiring Person became an Acquiring Person, or (iii) a transferee of Rights from an Acquiring Person (or from any Associate or Affiliate thereof) who became a transferee prior to or
concurrently with the Acquiring Person becoming an Acquiring Person and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or
its Affiliate or Associate) to holders of equity interests in such Acquiring Person (or its Affiliate or Associate) or to any Person with whom such Acquiring Person (or its Affiliate or Associate) has
any continuing agreement, arrangement or understanding regarding the transferred Rights, or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of Section 7(e), and any Rights Certificate issued pursuant to Section 6, 7(d) or 22 upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain the following legend: 

The
Rights represented by this Rights Certificate are or were beneficially owned by a Person who was an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement; 

provided, however, that the Rights Agent shall not have any responsibility to ascertain the existence of facts that would require the imposition of such
legend and shall be required to impose such legend only if instructed to do so by the Company or if a holder fails to certify upon transfer or exchange in the space provided on the Rights Certificate
that such holder is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person. 

    5.  Countersignature and Registration.  The Rights Certificates shall be executed on behalf of the
Company by its President or any Vice President, either manually or by facsimile signature, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had
not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall
be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. 

Following
the Distribution Date and receipt by the Rights Agent of all relevant information, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such books 

8

 

shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the
Rights Certificates. 

    6.  Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen
Certificates.  

    (a)
Subject to the provisions of Sections 4(b), 7(e) and 14, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier
of the Redemption Date
or the Final Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number of shares of Preferred Stock or other securities or property as the Rights Certificate or Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have properly completed and signed the certificate
contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e) and 14, countersign and deliver to the
person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split-up, combination or exchange of Rights Certificates. The Rights Agent shall have no duty or obligation to take any action under
any Section of this Agreement which requires the payment by a Rights holder of applicable taxes or governmental charges unless and until the Rights Agent is satisfied that all such taxes and/or
charges have been paid. 

9

  

    (b)
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of
loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. 

    7.  Exercise of Rights; Purchase Price; Expiration Date of Rights.  

    (a)
At any time after the Distribution Date and at or prior to the earlier of (i) the Close of Business on May 7, 2009 (the "Final Expiration Date") or (ii) the
time at which the Rights are redeemed as provided in Section 23 (the "Redemption Date"), subject to Section 7(e), the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Sections 9(c), 11(a)(iii)) and 23(a) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each Right that is exercised. 

    (b)
The Purchase Price to be paid on exercise of each Right shall initially be $270 and shall be payable in lawful money of the United States of America in accordance with
paragraph (c) below. Each Right shall initially entitle the holder to acquire one one-hundredth of a share of Preferred Stock upon exercise of the Right. The Purchase Price and the
number of shares of Preferred Stock or other securities or assets for which a Right is exercisable shall be subject to adjustment as provided in Sections 11 and 13. 

    (c)
Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the
shares to be purchased and an amount equal to any applicable tax or governmental charge, the Rights Agent shall, subject to Section 20(k), thereupon promptly (i) requisition from any
transfer agent of the Preferred Stock (or make available, if the Rights Agent is the transfer agent) certificates for the number of shares of Preferred Stock to be purchased and the Company hereby
authorizes its transfer agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14, (iii) after receipt of the certificates for Preferred Stock cause the same to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of
such Rights Certificate. The payment of the Purchase Price (as such amount may be adjusted pursuant to
Section 11 hereof) may be made, at the election of the holder of the Rights Certificate, (x) in cash or by certified check or cashiers' check payable to the order of the Company or
(y) by delivery of Rights if and to the extent authorized by Section 11(n) hereof. In the event that the Company is obligated to issue other securities (including, but not limited to,
debt securities) of the Company, and/or distribute other property pursuant to Section 11, the Company covenants that it will make all arrangements necessary so that such other securities and/or
property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement. 

    (d)
In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 6
and Section 14. 

10

 

    (e) Notwithstanding any other provision of this Agreement, from and after the occurrence of a Stock Acquisition Date, any Rights beneficially owned by (i) an Acquiring Person,
or any Associate or Affiliate of an Acquiring Person, (ii) any other Person if such Rights formerly were beneficially owned by an Acquiring Person (or by an Associate or Affiliate of such
Acquiring Person) at a time after such Acquiring Person became an Acquiring Person, or (iii) a transferee of Rights from an Acquiring Person (or from any Associate or Affiliate thereof) who
became a transferee prior to or concurrently with the Acquiring Person becoming an Acquiring Person and receives such Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person (or its Affiliate or Associate) to holders of equity interests in such Acquiring Person (or its Affiliate or Associate) or to any Person with whom the Acquiring Person (or
its Affiliate or Associate) has any continuing agreement, arrangement or understanding regarding the transferred Rights, or (B) a transfer which the Board of Directors has determined is part of
a plan, arrangement or understanding that has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void and any holder of such Rights shall thereafter have
no right to exercise such Rights under any provision of this Agreement. The Company shall promptly notify the Rights Agent of the applicability of this Section 7(e), and the Company shall use
all reasonable efforts to ensure that the provisions of this Section 7(e) and of Section 4(b) are complied with, but neither the Company nor the Rights Agent shall have any liability to
any holder of Rights Certificates or any other Person as a result of their failure to make any determinations with respect to an Acquiring Person, or any of its Affiliates, Associates or transferees
hereunder. 

    (f)
Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder
upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the surrendered Right Certificate and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. 

    8.  Cancellation and Destruction of Rights Certificates.  All Rights Certificates surrendered for the
purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of
this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such
canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. 

    9.  Reservation and Availability of Capital Stock.  

    (a)
The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Stock (and, following the occurrence of a Stock
Acquisition Date or a Section 13 Event, out of its authorized and unissued shares of Common Stock and/or other securities), the number of shares of Preferred Stock (and, following the
occurrence of a Stock Acquisition Date or a Section 13 Event, Common Stock and/or other securities) that, as provided in this Agreement, will be sufficient to permit the exercise in full of all
outstanding Rights; provided, however, that shares issuable pursuant to Section 11(a)(iii) shall be reserved only following the occurrence of an event described in that section. 

    (b)
If any shares of Preferred Stock are listed on a national securities exchange, and so long as the shares of Preferred Stock (and, following the occurrence of a Stock Acquisition
Date or a 

11

 

Section 13 Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on that exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on the exchange upon official notice of issuance upon exercise. 

    (c)
The Company shall use its best efforts (i) to file, as soon as practicable following a Stock Acquisition Date and the determination by the Company in accordance with
Section 11(a)(iii) of the consideration to be delivered by the Company upon exercise of the Rights, or as soon as is required by law following the Distribution Date, as the case may be,
a registration statement under the Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) to cause such registration statement to become
effective as soon as practicable after such filing, and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until
the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action
as may be appropriate under or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily
suspend the
exercisability of the Rights, for a period of time not to exceed 90 days after the date the Company first becomes obligated to use its best efforts to file a registration statement as
set forth in clause (i) of the first sentence of this Section 9(c), in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension,
the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer
in effect. The Company will promptly notify the Rights Agent in writing whenever it makes a public announcement pursuant to this Section 9(c). Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement has been
declared effective. 

    (d)
The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Stock
Acquisition Date or Section 13 Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares of such shares
(subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. 

    (e)
The Company further covenants and agrees that it will pay when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the
Rights Certificates or of any shares of Preferred Stock or other securities upon the exercise of Rights. The Company shall not, however, be required to pay any tax or charge which may be payable in
respect of any transfer, split-up, combination or exchange of Rights Certificates, or any issuance or delivery of certificates for shares in a name other than that of the registered holder
of the Rights Certificate evidencing Rights surrendered for exercise, and shall not be required to issue or deliver any certificates for shares upon the exercise of any Rights until any such tax or
charge shall have been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that
no such tax or charge is due. 

    10.  Preferred Stock Record Date.  Each Person in whose name any certificate for a number of one
one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the 

12

 

Purchase Price (and any applicable taxes and charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including,
without limitation, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as
provided herein. 

    11.  Adjustment of Purchase Price, Number of Shares or Number of Rights.  The Purchase Price, the number
and kind of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. 

    (a)
(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in Preferred Stock,
(B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the number and kind of shares of capital stock issuable at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number
and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he or she
would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. The adjustments provided for in this
Section 11(a)(i) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or reclassification is effected. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). 

    (ii)
In the event that a Stock Acquisition Date occurs, proper provision shall be made so that each holder of a Right, except as provided below and in Section 7(e), shall
thereafter have a right to receive, upon exercise thereof and payment of the Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common Stock as shall equal the result obtained by dividing the then current Purchase Price by 50 percent of the Current Per Share Market
Price of the Common Stock (determined pursuant to Section 11(d)) on the Stock Acquisition Date (such number of shares being the "Adjustment Shares"). 

    (iii)
In the event the number of shares of Common Stock which are authorized by the Company's articles of incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company
shall (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the then current Purchase Price (such
excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the applicable Purchase Price, (3) shares of Common Stock or other equity 

13

 

securities of the Company (including, without limitation, shares, or units of shares, of preferred stock that the Board of Directors of the Company has deemed to have the same value as shares of
Common Stock ("Common Stock Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the Board of Directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 30 days following the Stock
Acquisition Date, then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30-day period set forth above may be extended to the extent
necessary, but not more than 90 days after the Stock Acquisition Date, in order that the Company may seek shareholders approval for the authorization of such additional shares (such period, as
it may be extended as so permitted, the "Substitution Period"). To the extent the Company determines that some action must be taken pursuant to the first or second sentences of this
Section 11(a)(iii), the Company (x) shall provide that such action shall apply uniformly to all outstanding Rights other than those that are null and void as provided in
Section 7(e), and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect (with prompt written
notice by the Company of such announcement to the Rights Agent). For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the Current Per Share Market Price (as
determined pursuant to Section 11(d) hereof) of the Common Stock on the date of the Stock Acquisition Date and the value of any Common Stock Equivalent shall be deemed to have the same value as
the Common Stock on such date. 

14

  

    (b)
In case the Company shall at any time after the date of this Agreement fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock
entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having the same rights, privileges and preferences as the
Preferred Stock ("Preferred Stock Equivalents")) or securities convertible into Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred Stock or Preferred Stock Equivalent (or
having a conversion price per share, if a security convertible into Preferred Stock or Preferred Stock Equivalents) less than the then Current Per Share Market Price of the Preferred Stock (as defined
in Section 11(d)) on such record date, the number of shares of Preferred Stock for which each Right shall be exercisable after such record date shall be determined by multiplying the number of
shares of Preferred Stock for which each Right was exercisable immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date plus the number of additional shares of Preferred Stock and/or Preferred Stock Equivalents to be offered for subscription or purchase (or into which the convertible securities so
to be offered are initially convertible) and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred Stock and/or Preferred Stock Equivalents so to be offered (and/or the aggregate initial conversion price of convertible
securities so to be offered) would purchase at such Current Per Share Market Price. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Preferred Stock
owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is
fixed; and in the event that such rights, options or warrants are not so issued, the number of shares of Preferred Stock for which each Right shall be exercisable shall be readjusted to be the number
of shares of Preferred Stock for which each Right would then be exercisable if such record date had not been fixed; and to the extent such rights, options or warrants are issued but not exercised
prior to their expiration, the number of shares for which each Right shall be exercisable shall be readjusted to be the number which would have resulted from the adjustment provided for in this
Section 11(b) if only the rights or warrants that were exercised had been issued. 

    (c) (i)
In case the Company shall at any time after the date of this Agreement fix a record date for the making of a distribution to all holders of Preferred Stock
(including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a
regular quarterly cash dividend or a dividend payable in shares of Preferred Stock but including any dividend payable in stock other than Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b)), the number of shares of Preferred Stock for which each Right shall be exercisable after such record date shall be determined by multiplying the number of
shares of Preferred Stock for which each Right was exercisable immediately prior to such record date by a fraction, the numerator of which shall be the then Current Per Share Market Price of the
Preferred Stock (as defined in Section 11(d)) on such record date, and the denominator of which shall be such Current Per Share Market Price of the Preferred Stock, less the fair market value
(as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants
applicable to one share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the number of
shares of Preferred Stock for which each Right shall be exercisable shall be readjusted to be the number of shares of Preferred Stock for which each Right would then be exercisable if such record date
had not been fixed. 

15

 

    (ii)
In case the Company shall at any time after the date of this Agreement fix a record date for the making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly
cash dividend or a dividend payable in shares of Common Stock) or subscription rights or warrants (excluding those referred to in Section 11(h)(ii)), the number of shares of Preferred Stock for
which each Right shall be exercisable after such record date shall be determined by multiplying the number of shares of Preferred Stock for which each Right was exercisable immediately prior to such
record date by a fraction, the numerator of which shall be the then Current Per Share Market Price of the Common Stock (as defined in Section 11(d)) on such record date, and the denominator of
which shall be such Current Per Share Market Price of the Common Stock, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Common
Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the number of shares of Preferred Stock for which each
Right shall be exercisable shall be readjusted to be the number of shares of Preferred Stock for which each Right would then be exercisable if such record date had not been fixed. 

    (d) (i)
For the purpose of any computation hereunder, the "Current Per Share Market Price" of common stock (including Common Stock) on any date shall be deemed to be
the average of the daily closing prices per share of the common stock for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to but not including such date;
provided, however, that in the event the Current Per Share Market Price of common stock is determined during a period following the announcement by the issuer of such common stock of (A) a
dividend or distribution on such common stock payable in such common stock or securities convertible into such common stock, or (B) any subdivision, combination or reclassification of such
common stock, and prior to the expiration of 30 Trading Days after but not including the ex-dividend date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to take into account such event. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the common stock is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the common
stock is listed or admitted to trading, or, if the common stock is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the common stock is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional market maker making a market in the common stock selected by a majority of the Board of Directors. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which the common stock is listed or admitted to trading is open for the transaction of business or, if the common stock is not
listed or admitted to trading on any national securities exchange, a Business Day. If the common stock is not publicly held or so listed or traded, "Current Per Share Market Price" shall mean the fair
value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. 

16

 

    (ii)
For the purpose of any computation hereunder, the "Current Per Share Market Price" of Preferred Stock shall be determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Per Share Market Price of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the "Current Per Share Market Price" of Preferred
Stock shall be conclusively deemed to be an amount equal to the Current Per Share Market Price of the Common Stock multiplied by the Adjustment Number as that term is defined in Section 2 of
the Amendment to the Company's Third Restated Articles of Incorporation, designating the Preferred Stock (initially 100). If neither the Common Stock nor the Preferred Stock is publicly held or so
listed or traded, "Current Per Share Market Price" of Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the current market price of one one-hundredth of
a share of Preferred Stock shall be equal to the Current Per Share Market Price of one share of Preferred Stock divided by 100. 

    (e)
No adjustment in the Purchase Price or the number of shares for which a Right is exercisable shall be required unless such adjustment would require an increase or decrease of at
least one percent in the Purchase Price or the number of shares for which a Right is exercisable; provided, however, that any adjustments which by reason of this Section 11(e) are not required
to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share of Common Stock or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the
date of the expiration of the right to exercise any Rights. 

    (f)
If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of
the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11 and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares. 

    (g)
All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price or the number of shares of Preferred Stock for which a Right is exercisable
hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein. 

    (h) (i)
In the event the Company shall, after the date of this Agreement and prior to the Distribution Date, (A) declare a dividend on the Common Stock payable
in Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares of Common Stock, or (D) issue any shares of
Common Stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving
corporation), the number of Rights associated with each share of Common Stock then outstanding, and the number of Rights to be associated with each share of Common Stock which may thereafter become
outstanding prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights associated with each share of Common Stock following any such event shall equal the result 

17

 

obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. 

    (ii)
In the event the Company shall, after the date of this Agreement and prior to the Distribution Date, fix a record date for the issuance of rights, options or warrants to all
holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock or securities convertible into Common Stock at a
price per share of Common Stock (or having a conversion price per share, if a security convertible into Common Stock) less than the then Current Per Share Market Price (as defined in
Section 11(d)) of the Common Stock on such record date, the number of Rights associated with each share of Common Stock then outstanding, and the number of Rights to be associated with each
share of Common Stock which may thereafter become outstanding prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights associated with each share of Common Stock
after such record date shall be determined by multiplying the number of Rights associated with each share of Common Stock immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock
so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which shall
be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible
securities so to be
offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Common Stock owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. In the event that such rights, options or
warrants are not so issued, the number of Rights associated with each share of Common Stock shall be readjusted to be the number of Rights that would have been associated with each share of Common
Stock if such record date had not been fixed; and to the extent such rights, options or warrants are issued but not exercised prior to their expiration, the number of Rights associated with each share
shall be readjusted to be the number which would have resulted from the adjustment provided for in this Section 11(h)(ii) if only the rights, options or warrants that were exercised had
been issued. 

    (iii)
Notwithstanding the foregoing, the adjustments provided for in this Section 11(h) shall not be made if the Company exercises its election provided for in
Section 11(i). 

    (i)
The Company may elect on or after the date of any event described in clauses (A) through (D) of Section 11(h)(i) or described in
Section 11(h)(ii), if such event occurs before the Distribution Date (a "Section 11(h) Event"), to adjust the Purchase Price and the number of shares of Preferred Stock purchasable upon
the exercise of a Right in substitution for any adjustment under Section 11(h) in the number of Rights associated with each share of Common Stock. If such election is made, (i) the
number of Rights associated with each share of Common Stock prior to the Section 11(h) Event shall be maintained after the Section 11(h) Event, (ii) any new shares of Common Stock
issued in the Section 11(h) Event shall, as provided in Section 3(a), have issued with it the number of Rights associated with each share of Common Stock outstanding, and
(iii) any combination of shares of Common Stock into a smaller number of shares in the Section 11(h) Event shall result in a similar combination of the associated Rights. The 

18

 

Purchase Price and the number of Shares of Preferred Stock purchasable upon exercise of a Right after such adjustment shall be determined by multiplying the Purchase Price and the number of Shares of
Preferred Stock purchasable upon exercise of a Right, respectively, in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Rights that would have
been associated with each share of Common Stock after the Section 11(h) Event if the Company had not exercised its election provided for in this Section 11(i) and the denominator
of which shall be the number of Rights associated with each share of Common Stock immediately prior to the Section 11(h) Event. To the extent the number of Rights that would have been
associated with each share of Common Stock if the Company had not exercised its election provided for in this Section 11(i) may be readjusted as provided in the last sentence of
Section 11(h)(ii), the Purchase Price and number of shares of Preferred Stock purchasable upon exercise of a Right shall be similarly readjusted. 

    (j)
Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of
a share and the number of one one-hundredths of a share of Preferred Stock which were expressed in the initial Rights Certificates issued hereunder. 

    (k)
In any case in which this Section 11 shall require that an adjustment in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock
for which a Right is exercisable be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice of such election to the Rights Agent) until the
occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price and the number of one one-hundredths of a share of Preferred Stock for which a Right is exercisable in
effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment. 

    (l)
Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Stock, issuance wholly for cash of any Preferred Stock at less than the current market price, issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable for shares of Preferred Stock, dividends on Preferred Stock payable in Preferred Stock or issuance of rights, options or warrants referred to in
Section 11(b), hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such shareholders or shall reduce the taxes payable by such shareholders. 

    (m)
The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26, take (or permit any Subsidiary to
take) any action, including any merger, consolidation or sale of assets if at the time such action is taken or immediately thereafter it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the Rights. 

    (n)
In the event that the Rights become exercisable following a Stock Acquisition Date, the Company, by action of a majority of the Board of Directors, may authorize that the Rights,
subject to Section 7(e) hereof, either (i) will only be, or (ii) may, at the option of the holder entitled to exercise the Rights be, exercisable for, in either case
50 percent of the Common Stock (or cash or other securities or assets to be substituted for the Adjustment Shares pursuant to 

19

 

Section 11(a)(iii)) that would otherwise be purchasable under Section 11(a), in consideration of the surrender to the Company of the Rights so exercised and without other payment of the
Purchase Price.
Rights exercised under this Section 11(n) shall be deemed to have been exercised in full and shall be canceled. 

    12.  Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as
provided in Sections 11 and 13, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts and computations accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the Preferred Stock and the Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each holder of Rights in accordance with Section 25. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein, and the Rights Agent
shall have no duty with respect to and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. 

    13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power.  

    (a)
In the event that, following the Distribution Date, directly or indirectly, 

    (i)
the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(m)) and
the Company shall not be the continuing or surviving Person of such consolidation or merger, 

    (ii)
any Person shall acquire shares of Common Stock of the Company in a share exchange, 

    (iii)
any Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(m)) shall consolidate with the Company, or merge with and into the
Company and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding Common
Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or 

    (iv)
the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power
aggregating 50 percent or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person other than the Company or one or more of its wholly owned
Subsidiaries in a transaction that complies with Section 11(m), 

then, and in each such case, proper provision shall be made so that (A) each holder of a Right (except as otherwise provided in
Section 7(e)) shall thereafter have the right to receive, upon the exercise thereof and payment of the Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable and freely tradeable shares of common stock of the Principal Party (as hereinafter defined) not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result obtained by dividing the then current Purchase Price by 50 percent of the Current Per Share Market Price of the
common stock of the Principal Party (determined pursuant to Section 11(d)) on the date of consummation of the Section 13 Event, (B) the Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement, (C) the term "Company" shall thereafter be deemed to
refer to the Principal Party, it being specifically intended that the provisions of Section 11 shall apply to the Principal Party only following the first occurrence of a Section 13
Event, and (D) the Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its common stock in accordance with
Section 9) in connection with such consummation as may be necessary to ensure that the provisions of this Agreement shall thereafter be applicable, as nearly as reasonably may be, in relation
to the common stock thereafter deliverable upon the exercise of the Rights. The provisions of Section 11(a)(ii) shall be of no effect following the first occurrence of an event described
in Section 13. 

20

 

    (b) The term "Principal Party" shall mean 

    (i)
in the case of any transaction described in clause (i), (ii) or (iii) of Section 13(a), the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger or consolidation, or for which shares of Common Stock are exchanged in such share exchange, and if no securities are so issued, the
Person that is the other party to such merger, consolidation or share exchange or, if there is more than one such Person, the Person the common stock of which has the highest aggregate Current Per
Share Market Price (determined pursuant to Section 11(d)); and 

    (ii)
in the case of any transaction described in clause (iv) of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred
pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person the common stock of which has the
highest aggregate Current Per Share Market Price (determined pursuant to Section 11(d)); 

provided, however, that, if the common stock of such Person is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act or such Person is not a corporation, then (A) if such Person is a direct or indirect Subsidiary of one other Person which has
common stock so registered, "Principal Party" shall refer to such other Person, (B) if such Person is a direct or indirect Subsidiary of another Person but is not a direct or indirect
Subsidiary of another Person which has common stock so registered, "Principal Party" shall refer to the ultimate parent entity of such first-mentioned Person, (C) if such Person is directly or
indirectly controlled by more than one Person, and one or more of such other persons has common stock so registered,
"Principal Party" shall refer to whichever of such Persons that is the issuer of common stock so registered having the highest aggregate Current Per Share Market Price (determined pursuant to
Section 11(d)), and (D) if such Person is directly or indirectly controlled by more than one Person, and none of such other Persons have common stock so registered, "Principal Party"
shall refer to whichever ultimate parent entity is the corporation having the greatest shareholders' equity or, if no such ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets. 

    (c)
The Company shall not enter into any transaction described in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights.
In addition, the Company shall not consummate any such transaction unless the Principal Party shall have a sufficient number of authorized shares of common stock which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in this Section 13 and further providing that, as soon as practicable after execution of such agreement, the
Principal Party will 

    (i)
prepare and file a registration statement under the Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as soon as practicable after such filing, (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date and, as soon as practicable following the execution of such agreement, take such action as may be required to ensure that any acquisition of
such shares of common stock upon the exercise of the Rights complies with any applicable state security or "blue sky" laws; and 

21

 

    (ii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act. 

    (d)
In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its Articles or
Certificate of Incorporation or Bylaws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection
with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of common stock of such Principal Party at less than the then Current Per Share Market
Price (determined pursuant to Section 11(d)) or securities exercisable for, or convertible into, shares of common stock of such Principal Party at less than the then Current Per Share Market
Price (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the shares of
common stock of such Principal Party pursuant to the provisions of Section 13; then, in such
event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. 

    (e)
The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the Stock Acquisition Date, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13. The
provisions of Section 11(a)(ii) shall be of no effect following the first occurrence of a Section 13 Event. 

    (f)
In the event that the Rights become exercisable under Section 13(a), the Company, by action of a majority of the Board of Directors, may authorize that the Rights either
(i) will only be or (ii) may, at the option of the Principal Party be, exercisable for, 50 percent of the shares of Common Stock of the Principal Party that would otherwise be
purchasable under Section 13(a), in consideration of the surrender to the Principal Party, as the successor to the Company under Section 13(a)(ii), of the Rights so exercised and without
other payment of the Purchase Price. Rights exercised under this Section 13(f) shall be deemed to have been exercised in full and shall be canceled. 

    14.  Fractional Rights and Fractional Shares.  

    (a)
The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there
shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Right would otherwise be issuable, an amount in cash equal to the same fraction of the current
market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior
to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either case are reported in the principal consolidated transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange, or if the Rights are not listed or admitted to trading on the New York Stock Exchange, are reported in the principal, consolidated transaction reporting
system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional
market maker making a 

22

 

market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be used. 

    (b)
The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-hundredths of a share of Preferred
Stock the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market
value of one one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-hundredth of a share of Preferred Stock
shall be one one-hundredth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to
the date of such exercise. 

    (c)
Following the occurrence of a Stock Acquisition Date or Section 13 Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of current market value of one share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be the closing price of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such exercise. 

    (d)
The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as
provided above). 

    (e)
Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent under any section of this Agreement, the Company shall (i) promptly prepare
and deliver to the Rights Agent a certificate setting forth in reasonable delay the facts related to such payment and the prices and/or formulas utilized in calculating such payments, and
(ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and
shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of
fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies. 

    15.  Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Section 18, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common
Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of Common Stock), without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of Common Stock), may, in his own behalf and for his own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the
manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations of any Person subject to this Agreement. 

23

 

    16.  Agreement of Rights Holders.  Every holder of a Right, by accepting the same, consents and agrees
with the Company and the Rights Agent and with every other holder of a Right that: 

    (a)
prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock; 

    (b)
after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated
for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; 

    (c)
subject to Sections 6 and 7(f), the Company and the Rights Agent may deem and treat the Person in whose name the Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or
the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e), shall be affected by any notice to the contrary; and 

    (d)
Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result
of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, judgment
decree or ruling lifted or otherwise overturned as soon as possible. 

    17.  Rights Certificate Holder Not Deemed.  No holder, as such, of any Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a share of Preferred Stock or any other securities of the Company which
may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to
give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 23(c)), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. 

    18.  Concerning the Rights Agent.  

    (a)
The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the preparation, delivery, administration execution and any amendment of this Agreement and the exercise and performance of its
duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (each as finally determined by a court of competent jurisdiction), for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including, without limitation, the costs and expenses of defending against any claim of
liability. The indemnity provided herein shall survive the termination of this Agreement and the expiration of the Rights. The costs and expenses incurred by the Rights Agent in enforcing this right
of indemnification shall be paid by the Company. 

    (b)
The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with its acceptance and
administration of this 

24

 

Agreement in reliance upon any Rights Certificate or certificate for shares of Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20. 

    19.  Merger or Consolidation or Change of Name of Rights Agent.  

    (a)
Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation
to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the business of the Rights Agent or any successor rights agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this
Agreement. 

    (b)
In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement. 

    20.  Duties of Rights Agent.  The Rights Agent undertakes only the duties and obligations expressly
imposed by this Agreement (with no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be
bound: 

    (a)
The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent for, and the Rights Agent shall incur no liability in respect of, any action taken, suffered or omitted by it and in accordance with such advice or opinion. 

    (b)
Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the
Company prior to taking, omitting to take or suffering any action hereunder (including, without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market
Price), such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively provided and established by a certificate signed by any one of
the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent
for any action taken, omitted to be taken or suffered by it under the provisions of this Agreement in reliance upon such certificate. 

    (c)
The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct (each as finally determined by a
court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights 

25

 

Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been
advised of the likelihood of such loss or damage. Any liability of the Rights Agent under this Rights Agreement will be limited to the amount of fees paid by the Company to the Rights Agent. 

    (d)
The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. 

    (e)
The Rights Agent shall not have any liability or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights
becoming null and void pursuant to Section 7(e) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in this Agreement or the
ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice that such
change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock or Common
Stock to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Preferred Stock or Common Stock will, when issued, be validly authorized and issued, fully paid
and nonassessable. 

    (f)
The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. 

    (g)
The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the President, any Vice
President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken,
omitted to be taken or suffered by it in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, omitted to be taken
or suffered by the Rights Agent under this Agreement and the date on or after which such action shall be taken or suffered or such omission shall be effective. The Rights Agent shall not be liable and
shall be fully protected for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application
(which date shall not be less than five Business Days after the date any such officer of the Company actually receives such application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application
specifying the action to be taken, suffered or omitted. 

    (h)
The Rights Agent and any shareholder, affiliate, director, officer, or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person. 

26

 

    (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, absent gross negligence, bad faith or willful misconduct (each as determined by a court of competent jurisdiction) in the selection and continued employment thereof. 

    (j)
No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. 

    (k)
If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company. 

    21.  Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days notice in writing mailed to the Company and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and
to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or of any State of the United
States, in good standing, which is authorized under such laws to exercise corporate trust powers or stock transfer powers and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (b) an affiliate or subsidiary of a Person described in
clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Stock and Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be. 

27

 
    22.  Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of Common Stock of the Company following the Distribution Date and prior to the Final Expiration Date, the Company (a) shall,
with respect to Common Stock of the Company so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of
securities issued by the Company prior to the Distribution Date, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the person to whom such Rights Certificate would be
issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. 

    23.  Redemption.  

    (a)
The Board of Directors of the Company may at its option, at any time prior to the earliest of (i) the Close of Business on the tenth day following a Stock Acquisition Date
(or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the Close of Business on the tenth day following the Record Date), (ii) a determination by the Board of
Directors that any Person is an Adverse Person, or (iii) the Close of Business on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption
price of $.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to
as the "Redemption Price"). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable as provided in Section 11(a)(ii) until such time as
the Company's right of redemption hereunder has expired. 

    (b)
Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights (or at such later time as shall be specified in the resolution taking
such action), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding
Rights and the Rights Agent by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the shares of Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the Redemption Price will be made. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Per Share Market Price, as defined in Section 11(d), of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors. 

    (c)
In case the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of its Preferred Stock or Common Stock or to make any other
distribution to the holders of its Preferred Stock or Common Stock (other than a regular cash dividend), (b) to offer to the holders of its Preferred Stock or Common Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or Common Stock or shares of stock of any class 

28

 

or any other securities, (c) to effect any reclassification of its Preferred Stock or Common Stock (other than a reclassification involving only the subdivision of outstanding shares of
Preferred Stock or Common Stock), (d) to effect any consolidation, merger or share exchange into or with any other Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(m)), (e) to effect any sale or other transfer or to permit one or more of its Subsidiaries to effect any sale or other transfer, in one or more related transactions, of
50 percent or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(m)), or (f) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give
to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25, a notice of such proposed action, which shall specify the record date for the purposes of such
stock dividend or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, exchange, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the Preferred Stock or Common Stock if any such date is to be fixed, and such notice shall be so given in the case of any action covered
by clause (a) or (b) above at least 20 days prior to the record date for determining holders of the Preferred Stock or Common Stock for purposes of such action, and in the case of
any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Preferred Stock or Common Stock
whichever shall be the earlier. 

In
case a Stock Acquisition Date shall occur, the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Rights Certificate, in accordance with
Section 25, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii). 

    24.  Exchange.  

    (a)
The Board of Directors of the Company may, at its option, at any time and from time to time after a Stock Acquisition Date, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e)) for shares of Common Stock or Common Stock Equivalents, or any
combination thereof, at an exchange
ratio of one share of Common Stock, or such number of Common Stock Equivalents or units representing fractions thereof as would be deemed to have the same value as one share of Common Stock, per
Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). 

    (b)
Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of
Common Stock and/or Common Stock Equivalents equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange
(with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock
and/or Common Stock Equivalents for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall 

29

 

be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e)) held by each holder of Rights. 

    (c)
In the event that the number of shares of Common Stock which are authorized by the Company's Articles of Incorporation as amended but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient to permit an exchange of Rights as contemplated in accordance with this Section 24, the Company may, at its option, take all
such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. 

    (d)
The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such
fractional shares of Common Stock, the Company shall pay to the registered holders of Rights with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the value of a whole share of Common Stock. For purposes of this Section 24, the value of a whole share of Common Stock shall be the closing price (as determined
pursuant to the second sentence of Section 11(d)(i) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24), and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on such date. 

    25.  Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or
by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows: 

Electro
Scientific Industries, Inc.

13900 NW Science Park Drive

Portland, OR 97229

Attention: Corporate Secretary 

    Subject
to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or
on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: 

Mellon
Investor Services LLC

520 Pike Street, Suite 1220

Seattle, WA 98101

Attention: Relationship Manager 

    Notices
or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. 

    26.  Supplements and Amendments.  Prior to the Distribution Date and subject to the penultimate and third
to last sentence of this Section 26, the Company and the Rights Agent shall, if the Board of Directors of the Company so directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate and third to last sentence of this Section 26,
the Company and the Rights Agent shall, if the Board of Directors of the Company so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem 

30

 

necessary or desirable and which shall not adversely affect the interest of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of any such Person);
provided, however, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed
at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of or the benefits
to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this
Section 26, and provided that such amendment does not change or increase the Rights Agent's rights, duties, liabilities or obligations, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock for which a Right is exercisable; provided, however, that this sentence shall not prohibit an amendment that
substitutes for each one one-hundredth of a share of Preferred Stock issuable on exercise of a Right the number of shares of Common Stock (initially, one) that is economically equivalent
to one one-hundredth of a share of Preferred Stock. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of
shares of Common Stock. 

    27.  Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company
or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns. 

    28.  Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Stock). 

    29.  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language
from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23(a) shall be reinstated and shall not expire until the Close
of Business on the tenth day following the date of such determination by the Board of Directors of the Company. 

    30.  Determinations and Actions by the Board of Directors, Etc.  The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as
may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make
all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (b) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors of the Company in
good faith, shall (a) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (b) not subject the Board of Directors of
the Company to any liability to the holders of the Rights. The Rights Agent shall always be entitled to assume that the Company's 

31

 

Board of Directors acted in good faith and shall be fully protected and shall incur no liability in reliance thereon. 

    31.  Governing Law.  This Agreement and each Rights Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Oregon and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed
entirely within such State; provided, however, that all provisions, regarding the rights, duties and obligations of the Right Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely within such State. 

    32.  Counterparts.  This Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 

    33.  Descriptive Headings.  Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written. 

	 	 	ELECTRO SCIENTIFIC INDUSTRIES, INC.
	

 	
 	

By	
 	

    Joseph L. Reinhart

    Vice President & Corporate Secretary
	

 	
 	

MELLON INVESTOR SERVICES LLC
	

 	
 	

By	
 	

    Name:

    Title:

32

  

 
 

EXHIBIT A    
  

FORM OF AMENDMENT TO THIRD RESTATED

ARTICLES OF INCORPORATION

OF

ELECTRO SCIENTIFIC INDUSTRIES, INC.

AMENDING TERMS OF

SERIES A NO PAR PREFERRED STOCK  

 ARTICLE XI  

    This Article XI sets forth the designation, preferences, limitations and relative rights of a series of No Par Preferred Stock of the corporation as
determined by the board of directors of the corporation pursuant to its authority under Oregon Revised Statutes 60.134 and Section 2(i) of Article III of these Articles of
Incorporation. 

    1.  Designation and Amount.  The shares of such series shall be designated as "Series A No Par
Preferred Stock" and the number of shares constituting such series shall be 300,000. 

    2.  Dividends and Distributions.  

    (i)  The
holders of shares of Series A No Par Preferred Stock shall be entitled to receive, when and as declared by the board of directors, out of funds legally
available for the purpose, dividends in an amount per share equal to 100 (the "Adjustment Number") multiplied by the aggregate per share amount of all cash dividends, and the Adjustment Number
multiplied by the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, without par value, of the corporation (the "Common Stock") after the first issuance of any
share or fraction of a share of Series A No Par Preferred Stock. 

    (ii)  The
corporation shall declare a dividend or distribution on the Series A No Par Serial Preferred Stock as provided in paragraph (i) above at the
same time that it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). 

    (iii)  Dividends
shall not be cumulative. Unpaid dividends shall not bear interest. Dividends paid on the shares of Series A No Par Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. 

    3.  Voting Rights.  Except as otherwise provided by law, shares of Series A No Par Preferred Stock
shall be entitled to a number of votes equal to the Adjustment Number on any matter submitted to the shareholders and the Series A No Par Preferred Stock, any other series of Preferred Stock
and the Common Stock shall vote together as one class. 

    4.  Certain Restrictions.

    (i)  Whenever
dividends or distributions payable on the Series A No Par Preferred Stock as provided in Section 2 have not been declared or paid for any
fiscal year, until all such dividends and distributions for such fiscal year on shares of Series A No Par Preferred Stock outstanding shall have been declared and paid in full, the corporation
shall not in such fiscal year 

    (a)  declare
or pay dividends on or make any other distributions on any shares of stock ranking junior or on a parity (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A No Par Preferred Stock except dividends paid ratably on the 

33

 

Series A No Par Preferred Stock and-all such parity stock on which dividends are payable in proportion to the total amounts to which the holders of all such shares are then entitled
and dividends or distributions payable in Common Stock; 

    (b)  purchase
or otherwise acquire for consideration any shares of Series A No Par Preferred Stock or any shares of stock ranking on a parity with the
Series A No Par Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the board of directors) to all holders of such shares upon such
terms as the board of directors, after consideration of the respective dividend rates and other relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the respective series or classes. 

    (ii)  The
corporation shall not permit any subsidiary of the corporation to purchase or otherwise acquire for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (i) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 

    5.  Restriction on Issuance of Shares; Reacquired Shares.  The corporation shall not issue any shares of
Series A No Par Preferred Stock except upon exercise of rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement dated as of March 1, 2001, between the
corporation and Mellon Investor Services LLC (the "Rights Agreement"), a copy of which is on file with the secretary of the corporation at its principal executive office and shall be made available to
stockholders of record without charge upon written request. Any shares of Series A No Par Preferred Stock purchased or otherwise acquired by the corporation in any manner whatsoever may be
restored to the status of authorized but unissued shares after the acquisition thereof. All such shares shall upon any such restoration become authorized but unissued shares of Preferred Stock and may
be reissued as part of a new series of Preferred Stock to be created by the board of directors, subject to the conditions and restrictions on issuance set forth herein. 

    6.  Liquidation, Dissolution or Winding Up.

    (i)  Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A No Par Preferred Stock unless, prior thereto, the holders of shares of Series A No
Par Preferred Stock shall have received the Adjustment Number multiplied by the per share amount to be distributed to holders of Common Stock, plus an amount equal to declared and unpaid dividends and
distributions thereon to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A No Par Preferred Stock. 

    (ii)  In
the event that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A No Par Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation preferences. 

    7.  Consolidation, Merger, etc.  In case the corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of
Series A No Par Preferred Stock shall at the same time be similarly exchanged or changed in an amount
per share equal to the Adjustment Number multiplied by the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. 

34

 

    8.  Anti-Dilution Adjustments to Adjustment Number.  In the event the corporation shall at
any time after May 7, 1999 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number for all purposes of this Article XI shall be adjusted by
multiplying the Adjustment Number then in effect by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the corporation shall at any time after the Rights Declaration Date, fix a record date for the
issuance of rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock
or securities convertible into Common Stock at a price per share of Common Stock (or having a conversion price per share, if a security convertible into Common Stock) less than the then Current Per
Share Market Price of the Common Stock (as defined in Section 11(d) of the Rights Agreement) on such record date, then in each such case the Adjustment Number for all purposes of this
Article XI shall be adjusted by multiplying the Adjustment Number then in effect by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible) and the
denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price (as defined
in Section 11(d) of the Rights Agreement). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the board of directors. Common Stock owned by or held for the account of the corporation shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a record date is fixed. In the event that such rights, options or warrants are not so issued, the Adjustment Number shall be
readjusted as if such record date had not been fixed; and to the extent such rights, options or warrants are issued but not exercised prior to their expiration, the Adjustment Number shall be
readjusted to be the number which would have resulted from the adjustment provided for in this Section 8 if only the rights, options or warrants that were exercised had been issued. 

    9.  No
Redemption.  The shares of Series A No Par Preferred Stock shall not be redeemable at the option of the corporation or any holder thereof.
Notwithstanding the foregoing sentence, the corporation may acquire shares of Series A No Par Preferred Stock in any other manner permitted by law. 

    10.  Amendment.  Subsequent
to the Distribution Date (as defined in the Rights Agreement) these articles of incorporation shall not be further amended in
any manner which would materially alter or change
the preferences, limitations and relative rights of the Series A No Par Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A No Par Preferred Stock, voting separately as a class. 

    11.  Fractional
Shares.  Series A No Par Preferred Stock may be issued in fractions of a share in integral multiples of one
one-hundredth of a share, which shall entitle the holder, in proportion to such holders' fractional shares, to exercise voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series A No Par Preferred Stock. 

35

  

 
 

EXHIBIT B
  [Form of Rights Certificate]    
  

	

Certificate No. R-            	
 	

            Rights

NOT EXERCISABLE AFTER MAY      , 2009 OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR RESPECTIVE AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY RIGHTS PREVIOUSLY OWNED BY SUCH PERSONS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]1 

 
 

Rights Certificate
  Electro Scientific Industries, Inc.    
  

    This
certifies that      , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the
terms, provisions and conditions of the Amended and Restated Rights Agreement, dated as of March 1, 2001 (the "Rights Agreement") between Electro Scientific Industries, Inc. an Oregon
corporation (the "Company"), and Mellon Investor Services LLC (the "Rights Agent"), to purchase from the Company at any time prior to 5 p.m., Pacific time, on May 7, 2009 (the "Final
Expiration Date") at the office or offices of the Rights Agent
designated for such purpose, one one-hundredth of a fully paid and nonassessable share of Series A No Par Preferred Stock (the "Preferred Stock") of the Company, at a purchase price
of $270 (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. Except as provided in Sections
11(n) and 13(f) of the Rights Agreement, the Purchase Price may be paid in cash or by certified check or cashier's check payable to the order of the Company. The number of Rights evidenced by this
Rights Certificate, the number of one one-hundredths of a share of Preferred Stock which may be purchased upon exercise hereof, and the Purchase Price per Right set forth above are the
number of Rights, the number of one one-hundredths of a share and the Purchase Price as of May      , 1999, based on the Preferred Stock and Common Stock as constituted at such
date. 

    Upon
the occurrence of a Stock Acquisition Date (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by
(i) an Acquiring Person or any Affiliate or Associate of such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) any other person if such Rights formerly were
beneficially owned by such Acquiring Person (or by an Associate or Affiliate thereof) at a time after such Acquiring Person, became an Acquiring Person, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of Rights from such Acquiring Person (or from any Associate or Affiliate thereof) who became a transferee prior to or concurrently with such Acquiring
Person becoming an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such an event. 

1 The
portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence. 

36

 

    As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities or property which may be obtained upon the exercise of
the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including a Stock Acquisition Date or a Section 13 Event (as
such terms are defined in the Rights Agreement). 

    This
Rights Certificate is subject to all of the terms, provisions, and conditions of the Rights Agreement, which terms, provisions, and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the Rights and the limitations on the rights, obligations, duties, and immunities
hereunder of the Rights Agent, the Company, and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to
the Company. 

    This
Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a share of
Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. 

    Subject
to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.001 per Right at
any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date (as such period, may be extended pursuant to the Rights Agreement) and
(ii) the Final Expiration Date. 

    No
fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one
one-hundredths of a share of Preferred Stock, which may, at the election of the Company be evidenced by depository receipts), but in lieu thereof a cash payment will be made as provided in
the Rights Agreement. 

    No
holder of this Rights Certificate, as such, shall be entitled to vote, receive dividends, or be deemed for any purpose the holder of shares of Preferred Stock or of any other
securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. 

    This
Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. 

37

 

    WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. 

	
 
	
 	

 

	
Dated as of            , 20    .	
 	

 
	

ATTEST:	
 	

ELECTRO SCIENTIFIC INDUSTRIES, INC.
	

Secretary	
 	

Title:
	

Countersigned:	
 	

 
	

Mellon Investor Services LLC	
 	

 
	

By 
	
 	

 
	  Authorized Signature	 	 

38

 
[Form of Reverse Side of Rights Certificate] 

FORM OF ASSIGNMENT  

(To
be executed by the registered holder if such

holder desires to transfer the Rights Certificate.) 

	 	FOR VALUE RECEIVED	

	hereby sells, assigns, and transfers unto	

	 	 
	

	(Please print name and address of transferee)
	 	 
	

this Rights Certificate, together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint
            , Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. 

Dated
            , 20  . 

	 	 	 
	 	 	 
	 	 	

	 	 	Signature
	 	 	 
	 	 	 

Signature
Guaranteed: 

Certificate  

    The undersigned hereby certifies by checking the appropriate boxes that: 

    (1)  this
Rights Certificate  is  is not being sold, assigned, and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement); 

    (2)  after
due inquiry and to the best knowledge of the undersigned, it  did  did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was, or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. 

Dated
            , 20  . 

	 	 	 
	 	 	 
	 	 	

	 	 	Signature
	 	 	 
	 	 	 

Signature
Guaranteed: 

39

   NOTICE  

    The signatures to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever. 

FORM OF ELECTION TO PURCHASE  

(To
be executed if holder desires to exercise

Rights represented by the Rights Certificate.) 

TO:
Electro Scientific Industries, Inc. 

    The
undersigned hereby irrevocably elects to exercise                          Rights represented by this Rights Certificate to
purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that
certificates for such shares be issued in the name of and delivered to: 

	 	 
	

	(Please print name and address)
	 	 
	

	Please insert social security	 
	or other identifying number:	

    If
such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of
and delivered to: 

	 	 
	

	(Please print name and address)
	 	 
	

	Please insert social security	 
	or other identifying number:	

Dated
            , 20  . 

	 	 	 
	 	 	 
	 	 	

	 	 	Signature
	 	 	 
	 	 	 

Signature
Guaranteed: 

40

   Certificate  

    The undersigned hereby certifies by checking the, appropriate boxes that: 

    (1)  the
Rights evidenced by this Rights Certificate              are              are not being
exercised by or on behalf of a Person is or was an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined pursuant to the Rights Agreement); 

    (2)  after
due inquiry and to the best knowledge of the undersigned, it              did
             did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was, or became Acquiring Person or an Affiliate or Associate of
an Acquiring Person. 

Dated
            , 20  . 

	 	 	 
	 	 	 
	 	 	

	 	 	Signature
	 	 	 
	 	 	 

Signature
Guaranteed: 

41

  

 
 

EXHIBIT C    
  

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED STOCK  

Effective
as of May 7, 1999, the Board of Directors of Electro Scientific Industries, Inc. (the "Company") declared a dividend of one Right for each outstanding share of Common Stock of
the Company to shareholders of record at the close of business on June 4, 1999. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share
of Series A No Par Preferred Stock (the "Preferred Stock") at a Purchase Price of $270, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and Mellon Investor Services LLC, as Rights Agent. 

    Initially,
the Rights will be attached to the certificates representing outstanding shares of Common Stock, and no separate Rights Certificates will be distributed. The Rights will
separate from the Common Stock and a Distribution Date will occur upon the earlier of (i) ten days following a public announcement that (A) a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire from shareholders, beneficial ownership of 15 percent or more of the outstanding Common Stock or (B) the Board of Directors of the
Company shall declare any person to be an Adverse Person (as described below) (each, an "Acquiring Person"), or (ii) ten days following the commencement of a tender offer or exchange offer that
would result in a person or group beneficially owning 15 percent or more of such outstanding Common Stock, as such periods may be extended pursuant to the Rights Agreement. 

    An
Adverse Person is any person declared to be an Adverse Person by the Board of Directors upon a determination that such person, alone or together with its affiliates and associates,
has become the beneficial owner of an amount of Common Stock which the Board of Directors determines to be substantial (which amount shall be more than 10% of the Common Stock then outstanding) and a
determination by at least a majority of the Board of Directors who are not officers of the Company, after reasonable inquiry and investigation, including consultation with such persons as such
directors shall deem appropriate, that (i) such beneficial ownership by such person is intended to cause the Company to repurchase the Common Stock beneficially owned by such person or to cause
pressure on
the Company to take action or enter into a transaction or series of transactions intended to provide such person with short-term financial gain under circumstances where the Board of
Directors determines that the best long-term interests of the Company and its shareholders would not be served by taking such action or entering into such transactions or series of
transactions at that time or (ii) such beneficial ownership is causing or reasonably likely to cause a material adverse impact (including, but not limited to, impairment of relationships with
customers or impairment of the Company's ability to maintain its competitive position) on the business or prospects of the Company. 

    Until
the Distribution Date, (i) the Rights will be evidenced by and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock
certificates issued after June 4, 1999, will contain a legend incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificate for Common Stock
will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. 

    The
Rights are not exercisable until the Distribution Date and will expire at the Close of Business on May 7, 2009, unless earlier redeemed by the Company as described below. 

As
soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the Close of Business on the Distribution Date, and thereafter,
the separate Rights Certificates alone will represent the Rights. Except as 

42

 

otherwise determined by the Board of Directors, only Common Stock issued prior to the time the Rights become exercisable or issued upon exercise or conversion of rights, warrants, options or
convertible securities issued prior to the time the Rights become exercisable will be issued with Rights. 

    In
the event that any person becomes an Acquiring Person, each holder of a Right shall thereafter have the right to receive, upon exercise, in lieu of Preferred Stock, Common Stock of
the Company (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. In lieu of requiring payment of the
Purchase Price upon exercise of the Rights following any such event, the Company may permit the holders simply to surrender the Rights, in which event they will be entitled to receive Common Stock
(and other property, as the case may be) with a value of 50 percent of what could be purchased by payment of the full Purchase Price. However, Rights are not exercisable as described in this
paragraph until such time as the Rights are no longer redeemable by the Company as set forth below. Notwithstanding any of the foregoing, if any person becomes an Acquiring Person all Rights that are,
or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by an Acquiring Person will become null and void. 

    For
example, at an exercise price of $270 per Right, each Right not owned by the Acquiring Person (or by certain related parties or transferees) following the event set forth in the
preceding paragraph would
entitle its holder to purchase $540 worth of Common Stock (or other consideration, as noted above) for $270. Assuming that the Common Stock had a per share value of $45 at such time, the holder of
each valid Right would be entitled to purchase 12 shares of Common Stock for $270. Alternatively, the Company could permit the holder to surrender each Right in exchange for six shares of Common Stock
(with an aggregate value of $270) without the payment of any consideration other than the surrender of the Right. 

    In
the event that, at any time following the Distribution Date, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not
the surviving corporation or in which the Common Stock are exchanged for stock or other securities or property, or (ii) 50 percent or more of the Company's assets or earning power is
sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the Right. Again, provision may be made to permit surrender of the Rights in exchange for one-half of the value
otherwise purchasable. 

    The
Purchase Price payable, and the number of one one-hundredths of a share of Preferred Stock or other securities or property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock or the Common
Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the
Preferred Stock, (iii) if holders of Common Stock are granted certain rights or warrants to subscribe for Common Stock or convertible securities at less than the current market price of the
Common Stock, or (iv) upon the distribution to holders of Preferred Stock or Common Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above). 

    With
certain exceptions, no adjustment in the Purchase Price or the number of shares of Preferred Stock issuable upon exercise of a Right will be required until cumulative adjustments
would require an increase or decrease of at least 1 percent. No fractional shares of Preferred Stock will be issued (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the
date of exercise. 

43

 

At
any time until a determination that any person is an Adverse Person or ten days (or longer if extended pursuant to the terms of the Rights Agreement) after a person otherwise becomes an Acquiring
Person, the Company may redeem the Rights in whole, but not in part, at a price of $.001 per Right (payable in cash, Common Stock or other consideration), appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.001 redemption price. 

    At
any time after a person becomes an Acquiring Person, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which become
null and void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-hundredth of a share of Preferred Stock (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges), per Right (subject to adjustment). 

    Until
a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.
While the distribution of the Rights will not be taxable to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or for common stock of the acquiring company as set forth above. 

    The
Preferred Stock will be non-redeemable. The Preferred Stock may rank on a lower priority in respect of the preference as to dividends and the distribution of assets
with other classes or series of the Company's preferred stock. Each share of Preferred Stock will be entitled to an aggregate of 100 times the cash and non-cash (payable in kind) dividends
and distributions (other than dividends and distributions payable in Common Stock) declared on the Company's Common Stock. In the event of liquidation, the holders of Preferred Stock will be entitled
to receive a liquidation payment in an amount equal to 100 times the payment made per share of Common Stock, plus an amount equal to declared and unpaid dividends and distributions thereon. In the
event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged, each share of Preferred Stock will be entitled to receive 100 times the amount received per share
of Common Stock. The dividend and liquidation rights of the Preferred Stock are protected by antidilution provisions. Each share of Preferred Stock will be entitled to 100 votes (subject to certain
adjustments) on all matters submitted to the shareholders. Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to
make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period governing redemption may be made at such time as the Rights are not redeemable. 

    A
copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K dated June 9, 1999. A
copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference. 

44

QuickLinks

ELECTRO SCIENTIFIC INDUSTRIES, INC.

TABLE OF CONTENTS

AMENDED AND RESTATED RIGHTS AGREEMENT

WITNESSETH

EXHIBIT A

EXHIBIT B [Form of Rights Certificate]

Rights Certificate Electro Scientific Industries, Inc.

EXHIBIT CPrepared by MERRILL CORPORATION

QuickLinks
 -- Click here to rapidly navigate through this document

  

 
 

EXHIBIT 10-C    
    

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 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
                        . 

    3.  Term of Agreement.  This Agreement shall commence on the Effective Date and shall continue in effect
until January 1 of the year following the Effective Date; 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. 

1

 

    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. 

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. 

2

 

    (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. 

    (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 or
President 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 

3

 

termination of your employment for Cause, Disability or Retirement or as a result of your death or by you other than 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; 

    (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 

4

 

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. 

    6.  Compensation Upon Termination or During Disability.

    (i)  During
any period following a change in control that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall
continue to receive your full base salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such
Plans, until your employment is terminated pursuant to and in accordance with paragraphs 5(i) and 5(vi) hereof. Thereafter, your benefits shall be determined in accordance with the Plans
then in effect. 

    (ii)  If
your employment shall be terminated for Cause or as a result of Retirement or Death following a change in control of the Company, the Company shall pay you
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 the 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. Thereupon the Company shall have no further obligations to you under
this Agreement. 

    (iii)  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 

5

 

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

    (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. 

    (iv)  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. 

    (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 

6

 

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. 

    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.  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. 

    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. 

7

 

    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. 

Electro
Scientific Industries, Inc. 

By:                                       
   

    Donald R. VanLuvanee

    President and CEO 

Agreed
to this          day of                         , 2001 

                                        
     

Name  

8

QuickLinks

EXHIBIT 10-C

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}]]