Exhibit 10.1
CHANGE IN CONTROL
AGREEMENT
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[Name of
Executive]
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“Executive”
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Electro Scientific Industries, Inc.,
an Oregon corporation
13900 N.W. Science Park Dr.
Portland, OR 97229
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“Company”
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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 Executive 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 Executive in
the event Executive’s employment with the Company is
terminated in connection with a “Change in Control” of
the Company under the circumstances described below.
1. Employment at Will; Agreement
to Provide Services; Right to Terminate .
(i) Except as otherwise provided in
paragraph (ii) below, the Company or Executive may terminate
Executive’s employment at any time, subject to the provisions
of any employment agreement between Executive and the Company and
the Company’s providing the benefits in accordance with the
terms of this Agreement.
(ii) In the event of a Potential
Change in Control of the Company as defined in Section 4,
Executive agrees that Executive will not leave the employ of the
Company (other than as a result of Disability or upon Retirement,
as such terms are defined in Section 4), 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 Executive’s employment pursuant to
which Executive becomes entitled under this Agreement to receive
the benefits provided in Section 6.
2. Effective Date
. The Effective Date of this
Agreement is September 21, 2006.
3. Term of Agreement
. This Agreement shall commence on
the Effective Date and shall continue in effect until
December 31, 2006; 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
Executive 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 24 months beyond the term
provided herein if a Change in Control of the Company, as defined
in Section 4, shall have occurred during such term.
Notwithstanding anything in this Section 3 to the contrary,
this Agreement shall terminate if Executive or the Company
terminate Executive’s employment prior to a Change in
Control. In addition, the Company may terminate this Agreement
during Executive’s employment if, prior to a Change in
Control, Executive ceases to hold Executive’s current
position with the Company, except by reason of a
promotion.
4. Definitions
. The following terms shall have the
following meanings for purposes of this Agreement:
(i) “Cause” shall mean
(A) the willful and continued failure by Executive
substantially to perform Executive’s reasonably assigned
duties with the Company consistent with those duties assigned to
Executive prior to the Change in Control, other than a failure
resulting from Executive’s incapacity due to physical or
mental illness, after a written demand for performance has been
delivered to Executive by the Chief Executive Officer or the
Chairman of the Board which specifically identifies the manner in
which the Chairman or the CEO believes that Executive has not
substantially performed Executive’s duties, (B) the
conviction of guilty or entering of a nolo contendere plea to a
felony, which is materially and demonstrably injurious to the
Company, or (C) the commission of an act by Executive, or the
failure by Executive to act, which constitutes gross negligence or
gross misconduct. For purposes of this Section 4(i), no act,
or failure to act, on Executive’s part shall be considered
“willful” unless done, or omitted to be done, by
Executive in bad faith. Any act, or failure to act, expressly
authorized by a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in good
faith. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless the Company shall have
delivered to Executive a copy of a resolution duly adopted by the
Board finding, after reasonable notice to Executive and an
opportunity for Executive to be heard with respect to such matter,
that in the good faith opinion of the Board, Executive has engaged
in the conduct set forth above in (A), (B), or (C) of this
Section 4(i). Any such determination by the Board shall be
subject to de novo review in mediation or in arbitration conducted
pursuant to Section 15.
(ii) “Change of Control”
of the Company shall mean the occurrence of any of the following
events:
(A) any consolidation, merger, plan
of share exchange, or other reorganization involving the Company (a
“Merger”) as a result of which the holders of
outstanding securities of the Company ordinarily having the right
to vote for the election of directors (“Voting
Securities”) immediately prior to the Merger do not continue
to hold at least 50% of the combined voting power of the
outstanding Voting Securities of the surviving or continuing
corporation immediately after the Merger, disregarding any Voting
Securities issued or retained by such holders in respect of
securities of any other party to the Merger;
(B) 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;
(C) the adoption of any plan or
proposal for the liquidation or dissolution of the
Company;
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(D) 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
(E) any Person (as hereinafter
defined) shall have become the beneficial owner (within the meaning
of Rule 13d 3 under the Securities Exchange Act of 1934 (the
“Exchange Act”)), directly or indirectly, of securities
of the Company ordinarily having the right to vote for the election
of directors (“Voting Securities”) representing 50% 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) Executive acquires (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 Section 4(ii)(A)
or (B) above, or (2) Executive is 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 Section 4(ii)(E) above.
(iii) “Disability” shall
mean the absence of Executive from Executive’s duties with
the Company on a full time basis for 180 consecutive days as a
result of Executive’s incapacity due to physical or mental
illness, unless, within 30 days after a Notice of Termination (as
defined below) is given to Executive following such absence,
Executive shall have returned to the full performance of
Executive’s duties.
(iv) “Good Reason” shall
mean:
(A) a diminution of
Executive’s status, title, position(s), or responsibilities
from Executive’s status, title, position(s), and
responsibilities as in effect immediately prior to the Change of
Control or the assignment to Executive of any duties or
responsibilities which are inconsistent with such status, title,
position(s), or responsibilities (in either case other than
isolated, insubstantial or inadvertent actions which are remedied
after notice), or any removal of Executive from such position(s),
except in connection with the termination of Executive’s
employment for Cause, Disability or as a result of
Executive’s death or voluntarily by Executive other than for
Good Reason;
(B) a reduction by the Company in
Executive’s rate of base salary, bonus or incentive
opportunity or a substantial reduction in benefits (other than
reductions that do not impact optionee’s compensation
opportunity, taken as a whole, or a reduction in benefits
applicable to substantially all employees); or
(C) the Company’s requiring
Executive to be based more than 50 miles from the principal office
at in which Executive is based immediately prior to the Change in
Control, except for reasonably required travel on the
Company’s business.
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(v) “Potential Change in
Control” of the Company shall mean the occurrence of any of
the following:
(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.
(vi) “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, any
subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company.
(vii) “Retirement” shall
mean termination on or after Executive’s 65
th
birthday.
5. Notice of Termination;
Effective Date of Termination . Any purported termination by the Company or by
Executive following of 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 Executive’s employment under the
provision so indicated. The “Date of Termination”
following a Change in Control shall mean (a) if
Executive’s employment is to be terminated for Disability, 30
days after Notice of Termination is gi
