ELECTRO SCIENTIFIC INDUSTRIES INC
EMPLOYMENT AND SEPARATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>a4233145_ex10-h.htm
<DESCRIPTION>EMPLOYMENT AND SEPARATION AGREEMENT
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     <!-- Control Number: d02-51548                                                        -->
     <!-- Rev Number:     1.0                                                              -->
     <!-- Client Name:    ELECTRO SCIENTIFIC INDUSTRIES, INC.                              -->
     <!-- Project Name:   EXHIBIT 10-H                                                     -->
     <!-- Firm Name:      CCH                                                              -->
     <TITLE>ELECTRO SCIENTIFIC INDUSTRIES, INC. EXHIBIT 10-H</TITLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXHIBIT 10-H </FONT></P>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>ELECTRO SCIENTIFIC INDUSTRIES
<BR>13900 NW SCIENCE PARK DRIVE<BR>PORTLAND, OR 97229</FONT></P>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>May 22, 2002<BR><B>PERSONAL AND CONFIDENTIAL
</B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>VIA HAND DELIVERY</B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Donald R. VanLuvanee<BR>14665 SW150<SUP>th</SUP> Avenue<BR>Tigard, OR 97224</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Re: Employment and
Separation Agreement</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Don:</FONT></P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
letter (the &#147;Agreement&#148;) sets forth the terms of your agreement with
Electro Scientific Industries, Inc. concerning your employment, separation from
employment and resignation from its Board of Directors (Electro Scientific
Industries, Inc. and all related and affiliated companies are hereafter
collectively referred to herein as &#147;ESI&#148; or the
&#147;Company&#148;). </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Resignations.</U> </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
executing this Agreement, you resign your position as a member of the Board of Directors
of ESI and as an officer or director of any related or affiliated company of ESI
effective April 23, 2002.  </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
employment with the Company will terminate May 31, 2004 (the &#147;Separation Date&#148;).
Notwithstanding the designation of this term of employment, your employment with ESI will
be on an &#147;at will&#148; basis with both you and ESI retaining the right to terminate the
employment relationship at any time and for any reason, without liability on the part of
ESI for the termination except that ESI&#146;s obligation to pay the salary and benefits
identified in Section 2 may not be terminated and except as otherwise expressly provided
in this Agreement. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
hereby acknowledge your replacement as President and CEO of ESI effective April 17, 2002. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Salary
and Benefits.</U> Subject to your execution of this Agreement and your satisfaction of the
terms and conditions identified herein (including execution and nonrevocation of the
Release of Claims), ESI will provide you with the following benefits: </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will be paid your base salary (subject to applicable taxes and withholding) through the
Separation Date in accordance with the Company&#146;s normal pay practices. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
bonus for the fiscal year ending May 31, 2002 (if any) will be paid in accordance with
the terms of ESI&#146;s Executive Bonus Plan. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ending May 31, 2003, you will be paid your target bonus (which amounts to
$475,000 in the aggregate) in equal monthly installments commencing June 30, 2002
(subject to applicable taxes and withholding). </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until
the Separation Date, you will continue to be entitled to medical benefits to the same
extent provided under the terms and conditions of the Company&#146;s benefit plans. After the
Separation Date you are eligible to continue medical benefits through ESI&#146;s Post Retiree
Medical Insurance Program (the &#147;Program&#148;). Under the terms of the Program you and your
legal dependents currently enrolled in ESI medical insurance may remain on ESI medical
insurance by assuming responsibility for medical insurance premiums at ESI&#146;s group rates.
The Program allows you to participate in ESI medical insurance until you are eligible to
receive Medicare benefits. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
rights under the Company&#146;s Stock Incentive Plans with respect to stock options and stock
grants shall be as stated in the plan documents or related agreements. For the purpose of
vesting and termination of options, your employment will terminate on the Separation Date. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will receive all amounts owed to you under the Company&#146;s Deferred Compensation Plan
(subject to applicable taxes and withholding) in accordance with the terms of the plan
documents. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
will not receive any other employee benefits except those specified herein. You
acknowledge that you have no vested retirement benefits under any retirement plan or
agreement based on your service to the Company. You agree to waive the right to
participate in any Company employee benefit plan and to receive other fringe benefits or
separation benefits from ESI except those specified in this Separation Agreement. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Responsibilities.</U> </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
the date hereof through the Separation Date, you will be available to meet and consult,
as reasonably requested, with the senior management and board of directors regarding the
affairs of the Company, at the Company&#146;s expense for out of pocket costs. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event the Company requests assistance, you agree to assist for a period through the
Separation Date in defense of ongoing or future litigation or claims about which you have
knowledge, at the Company&#146;s expense for out of pocket costs. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as specified in paragraphs 3.1 and 3.2 above, you will no longer perform services for the
Company and, except as provided above, you will not take actions on the Company&#146;s behalf
or interfere in any way with the operations of the Company. It is acknowledged and
understood that you will not actively participate in the day-to-day operations of the
Company. Accordingly, the Company will not continue to afford you office space and the
Company requests that you make arrangements with the Company to retrieve your personal
belongings from the Company as soon as practicable. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Separation
Benefits.</U> </FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You acknowledge
and agree that the continued employment, compensation and benefits provided to you under
this Agreement are in exchange for your execution and non-revocation of the Release of
Claims (Parts I and II) attached hereto as Exhibit A (the &#147;Release&#148;) as described in
paragraph 9 and are in lieu of any other separation or other severance benefits under any
severance, separation or other plan, policy or practice of ESI. In connection with your
separation, you also acknowledge that following and as of your execution of this
Agreement, you have no disputes with ESI regarding the terms and conditions of your
employment with ESI or the termination of that employment. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Confidentiality,
Non-Solicitation and Non-Competition. </U></FONT></P>



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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Preservation and Non-Use of Confidential Information. </U>You acknowledge that you have a fiduciary
duty as an employee of the Company not to discuss this Agreement except with your
financial, tax, and legal advisors and with members of your family, and not to discuss
Confidential Information obtained during your employment with the Company. For purposes
of this Agreement, &#147;Confidential Information&#148; means any and all confidential or
proprietary information concerning the Company or its affiliates, joint venturers or
other related entities, the disclosure of which could disadvantage ESI or which derives
value from the fact that it is not publicly known. Confidential Information includes
trades secrets as defined under the Uniform Trades Secrets Act.  </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You agree
not to use Confidential Information, during the term of this Agreement or after its
termination, for any personal or business purpose, either for your own benefit or that of
any other person, corporation, government or other entity. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You also
agree that you will not disclose or disseminate any Confidential Information, directly or
indirectly, at any time during the term of this Agreement or after its termination, to
any person, agency, or court unless compelled to do so pursuant to legal process (e.g., a
summons or subpoena) or otherwise required by law and then only after providing the
Company with prior notice and a copy of the legal process. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
5.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Non-Competition.</U>
You agree that you will not, without the express written consent of the Board, for a
period through the Separation Date, directly or indirectly, accept employment or enter
into any business relationship of any sort whatsoever (including, but not limited to, as
a consultant, vendor, partner, officer or director, but excluding passive stock
investments) with any customer or competitor of the Company or any entity with which the
Company has done business or with whom you know the Company intends to do business within
the twelve (12) months following your Separation Date. You specifically acknowledge and
agree that the terms of this provision are reasonable in every respect and, in
particular, because of the competitive and specialized nature of the Company&#146;s business,
that it is reasonable not to include any geographic limitation in this provision.</FONT></FONT> </P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Return
of Property. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or before the date you sign this Agreement with ESI, you will return all property belonging
to ESI, including, but not limited to, all documents, business machines, computers,
computer hardware and software programs, computer data, telephones (cellular, mobile or
otherwise), pagers, </FONT></P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>keys, card keys, credit cards and other Company-owned property. The
Company will maintain your email address with the company for your convenience until May
31, 2003; will assist you if possible to transition your cell phone number to your own
service or account, and will maintain your voicemail on the Company&#146;s system for six
months.</FONT></P>

<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Right
to Consult with Attorney. </U></FONT></P>



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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You
have the right to consult with an attorney or financial advisor regarding this Agreement
and the release of claims, and we advise you to do so. The Company will pay your
reasonable fees incurred for such consultations and advice, promptly upon submission by
you.  </FONT></P>






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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dispute
Resolution. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You
agree that any dispute (1) concerning the interpretation or construction of this
Agreement or the release of claims, (2) arising from your employment with or termination
of employment from ESI, (3) relating to any compensation or benefits you may claim, or
(4) relating in any way to any claim by you for reinstatement or reemployment by ESI
after execution of this Agreement shall be submitted to final and binding confidential
arbitration. Except as specifically provided herein, the arbitration shall be governed by
the rules of the American Arbitration Association or such other rules as agreed to by the
parties. The prevailing party in such arbitration shall be entitled to such award of
attorneys fees as the arbitrator deems fair and just. Both parties agree that the
procedures outlined in this paragraph are the exclusive methods of dispute resolution. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Release
of Claims. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If
you wish to accept this Agreement, you must sign and not later revoke Part I of the
Release of Claims and sign Part II of the Release of Claims on your Separation Date. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Acknowledgments. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You
acknowledge that (a) you have been, and hereby are, advised in writing to consult with an
attorney prior to executing this Agreement (including the Release); (b) you have read the
Release (Parts I and II) and understand the effect of your release and that you are
releasing legal rights; (c) you are aware of certain rights to which you may be entitled
under certain statutes and laws identified in the Release; (d) you have had adequate time
to consider this Agreement (including the Release); and (e) as consideration for
executing this Agreement (including the Release), you have received additional benefits
and compensation of value to which you would not otherwise be entitled. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Time
for Consideration of Offer and Agreement. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You
acknowledge that ESI provided you with a period of at least twenty-one days (21) days
from the date of receipt for your consideration of its offer. This Agreement shall be
effective on the date it is signed. However, once you execute Part I of the Release, you
shall have a period of seven (7) days from the date immediately following the date of
your execution of Part I of the Release in which you may revoke, at your sole election,
both this Agreement and the Release. Notice of this revocation shall be made in writing
addressed to Jack Isselmann, General Counsel, at 13900 NW Science Park </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>
Drive, Portland,
OR 97229. In the event you do not exercise your right to revoke this Agreement and Part I
of the Release, this Agreement shall remain in effect and the Release shall become
effective and irrevocable on the date immediately following the seven-day (7) revocation
period described above. If you elect to revoke this Agreement and Release, you will not
be eligible for any of the severance benefits offered in this Agreement.</FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Part
II of the Release must be signed and returned on your Separation Date. You acknowledge
and agree that your agreement to enter into Part I and Part II of the Release is a
material term of this Agreement. </FONT></P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Entire
Agreement. </U></FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This
Agreement contains the entire agreement between you and ESI concerning the subject
matters discussed herein and supersedes any other discussions, agreements,
representations or warranties of any kind, whether written or oral. Any modification of
this Agreement shall be effective only if in writing and signed by each party or its duly
authorized representative. This Agreement supersedes all prior employment agreements
between you and ESI or any corporation affiliated with or related to ESI. The terms of
this Agreement are contractual and not mere recitals. If for any reason any provision of
this Agreement shall be held invalid in whole or in part, such invalidity shall not
affect the remainder of this Agreement. You further acknowledge that the offer, as
expressed in this Agreement, supersedes all prior agreements, oral and written, and
constitutes the entire agreement between you and ESI, except for stock option agreements
referenced herein, which shall continue under their own terms. </FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This
Agreement shall be construed in accordance with the laws of the state of Oregon. </FONT></P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to reflect your voluntary acceptance and agreement with these terms,
please sign and return the enclosed copy of this Agreement, including Part I of
the Release, to be followed by Part II of the Release of Claims on your
Separation Date. </FONT></P>

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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely,<BR><BR>Electro Scientific Industries, Inc.<BR><BR>
<BR>By: <BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
David F. Bolender<BR>Chairman of the Board</FONT></TD>
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<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACKNOWLEDGMENT AND AGREEMENT: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have read this Agreement
and voluntarily enter into this Employment and Separation Agreement after
careful consideration and the opportunity to review it with financial or legal
counsel of my choice. </FONT></P>

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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Donald R. VanLuvanee</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Date</FONT></TD>
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<BR>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit A </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RELEASE OF
CLAIMS &#150;PART I </FONT> </H1>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Release of Claims (the &#147;Release&#148;) is made and executed by me, Donald
R. VanLuvanee, in connection with my separation from employment with Electro
Scientific Industries, Inc. and in consideration of my receiving valuable
consideration as provided for in that Agreement (the &#147;Agreement&#148;).  </FONT> </P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the fullest extent possible under applicable law, I hereby release Electro
Scientific Industries, Inc. and all of their parents, related corporations,
affiliates and joint venturers, all predecessors and successors for all such
entities, and all officers, directors, employees, agents, insurers,
shareholders, representatives and assigns of the aforementioned (collectively,
the &#147;Company&#148;) from any and all liability, damages or causes of
action, whether known or unknown, relating to my employment with the Company or
the termination of that employment, including, but not limited to, any claims
for additional compensation in any form or damages, or for personal injuries or
attorneys&#146; fees. This Release specifically includes, but is not limited to,
all claims for relief or remedy under any common law theories, including, but
not limited to, breach of contract or tort or tort-like theories, including
without limitation any claims for personal injuries, and all claims under any
state or federal civil rights, labor, and employment laws, including, but not
limited to, Employee Retirement Income Security Act (ERISA), Title VII of the
Civil Rights Act of 1964, the Post-Civil War Civil Rights Acts (42 USCA
&sect;&sect; 1981-1988), the Civil Rights Act of 1991, the Equal Pay Act, the
Age Discrimination in Employment Act, the Older Workers&#146; Benefit Protection
Act, the Americans with Disabilities Act, the Worker Adjustment and Retraining
Notification Act, the Contract Work Hours and Safety Standards Act, the
Walsh-Healy Act, the Rehabilitation Act of 1973, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Fair Labor Standards Act,
Executive Order 11,246, the Family and Medical Leave Act, and all state laws,
including, without limitation, ORS Chapters 652, 653, 654, 659 and 659A, all as
amended, and including any regulations or guidelines thereunder.  </FONT> </P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Release shall not affect any vested rights that I may have under health
insurance plans or under any stock or retirement plans or deferred compensation
plans maintained by Company, nor does it affect any rights I have arising from
or confirmed in the Employment and Separation Agreement between me and the
Company dated May 23, 2002.  </FONT> </P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
acknowledge that I have been given at least twenty-one (21) days to consider the
Agreement and this Release; that I may revoke Part I of the Release within seven
(7) days after signing it; and that unless I so revoke, the Agreement will be
effective the date it is signed and Part I of the Release will be fully
effective on the eighth (8th) day after it is signed; that I agree to sign Part
II of the Release on my last day of employment.  </FONT> </P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
acknowledge that I have had read all of the Agreement and Parts I and II of this
Release, that I have had time to consider the alternatives and consequences of
my signing the Agreement and the Release (Parts I and II); that I am aware of my
right to consult an attorney or financial advisor at my own expense (provided
that the Company has agreed to pay the reasonable costs of securing legal
advice); and that, in consideration for executing this Release (Parts I and II)
and my Agreement, I have received additional compensation or value to which the
terms of my employment do not otherwise entitle me.  </FONT> </P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I HAVE
READ THE FOREGOING RELEASE AND UNDERSTAND THAT I AM RELEASING LEGAL RIGHTS. I VOLUNTARILY
ENTER INTO THIS RELEASE.  </FONT> </P>


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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Every
provision of this Release is intended to be severable. In the event a court or
agency of competent jurisdiction determines that any individual term or
provision contained in this Release is illegal, invalid or unenforceable, such
illegality, invalidity or unenforceability shall not affect the other terms and
provisions of this Release, which shall continue in full force and effect.  </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: _____________________  </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
__________________________<BR>
Donald R. VanLuvanee  </FONT> </P>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RELEASE OF
CLAIMS &#150; PART II<BR>(TO BE SIGNED ON SEPARATION DATE: MAY 31, 2004) </FONT> </H1>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
hereby reaffirm all of the provisions of the Agreement (including Part I of the
Release) and agree that its provisions shall be extended in full force and
effect to apply to any and all claims of any nature or type whatsoever that have
or may have arisen in conjunction with my continued employment with Electro
Scientific Industries, Inc. and the termination of my employment following the
date of execution of the Agreement (including Part I of the Release).  </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
__________________________<BR>
Date Signed  </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
__________________________<BR>
Donald R. VanLuvanee  </FONT> </P>


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