EXHIBIT 10.2

RESTRICTED STOCK UNITS

AWARD AGREEMENT

This Award Agreement (the “Agreement”) is entered into as of _________, 200__ by
and between Electro Scientific Industries, Inc., an Oregon corporation (the
“Company”), and __________________ (“Recipient”), for the grant of restricted
stock units with respect to the Company’s Common Stock (“Common Stock”).

On ________________, 200___, the Compensation Committee of the Company’s Board
of Directors made a restricted stock units award to Recipient pursuant to
Section 9 of the Company’s 2004 Stock Incentive Plan (the “Plan”) and Recipient
desires to accept the award subject to the terms and conditions of this
Agreement.

IN CONSIDERATION of the mutual covenants and agreements set forth in this
Agreement, the parties agree to the following.

1. Grant and Terms of Restricted Stock Units. The Company grants to Recipient
under the Company’s Plan ____________ restricted stock units, subject to the
restrictions, terms and conditions set forth in this Agreement.

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”)
represents the unsecured right to require the Company to deliver to Recipient
one share of Common Stock for each RSU. The number of shares of Common Stock
deliverable with respect to each RSU is subject to adjustment as determined by
the Board of Directors of the Company as to the number and kind of shares of
stock deliverable upon any merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off or other change in the corporate
structure affecting the Common Stock generally.

(b) Vesting and Delivery Dates. The RSUs issued under this Agreement shall
initially be 100% unvested and subject to forfeiture. Subject to this
Section 1(b), the RSUs shall vest on [fifth anniversary of the date of grant].
The RSUs shall become vested on the vesting date only if Recipient continues to
be an employee of the Company immediately after such vesting date. The delivery
date for a RSU shall be the date on which such RSU vests.

(c) Acceleration before Vesting Date.

(1) Acceleration on Death or Total Disability. If Recipient ceases to be an
employee of the Company by reason of Recipient’s death or physical disability,
outstanding but unvested RSUs shall become immediately vested in an amount
determined by multiplying the total number of RSUs subject to this Agreement by
a percentage calculated by dividing the number of whole months elapsed from the
date of this Agreement to the date of termination of employment by 60 (the “Pro
Rata Percentage”); provided, however, that the number of RSUs so vested shall be
reduced by the number of any RSUs that previously vested pursuant to
Section 1(b). The delivery date shall also accelerate. The term “total
disability” means a medically determinable mental or physical impairment that is

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expected to result in death or has lasted or is expected to last for a
continuous period of 12 months or more and that, in the opinion of the Company
and two independent physicians, causes Recipient to be unable to perform his or
her duties as an employee, director, officer or consultant of the Company and
unable to be engaged in any substantial gainful activity. Total disability shall
be deemed to have occurred on the first day after the two independent physicians
have furnished their written opinion of total disability to the Company and the
Company has reached an opinion of total disability.

(2) Acceleration on Normal Retirement. If Recipient terminates his employment
with the Company following normal retirement under the Company’s retirement
policy in place at such time, outstanding but unvested RSUs shall become
immediately vested in an amount determined by multiplying the total number of
RSUs subject to this Agreement by the Pro Rata Percentage; provided, however,
that the number of RSUs so vested shall be reduced by the number of any RSUs
that previously vested pursuant to Section 1(b). The delivery date shall also be
accelerated.

(3) Acceleration on Termination Other Than for Cause. If the Company terminates
Recipient’s employment with the Company other than for cause, outstanding but
unvested RSUs shall become immediately vested in an amount determined by
multiplying the total number of RSUs subject to this Agreement by the Pro Rata
Percentage; provided, however, that the number of RSUs so vested shall be
reduced by the number of any RSUs that previously vested pursuant to
Section 1(b). The delivery date shall also be accelerated. The term “cause”
shall mean (i) the willful and continued failure by Recipient to perform
substantially Recipient’s reasonably assigned duties with the Company, other
than a failure resulting from Recipient’s incapacity due to physical or mental
illness, after a written demand for performance has been delivered to Recipient
by the Company which specifically identifies the manner in which the Company
believes that Recipient has not substantially performed Recipient’s duties,
(ii) the conviction of guilty or entering of a nolo contendere plea to a felony
which is materially and demonstrably injurious to the Company, or (iii) the
commission of an act by Recipient, or the failure of Recipient to act, which
constitutes gross negligence or gross misconduct. For purposes of this
Section 1(c)(3), no act, or failure to act, on Recipient’s part shall be
considered “willful” unless done, or omitted to be done, by Recipient in knowing
bad faith. Any act, or failure to act based upon authority given pursuant to a
resolution duly adopted by the Board of Directors or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Recipient in good faith.

(4) Treatment on Change in Control.

(i) If as a result of a Change in Control, the Company’s Common Stock ceases to
be listed for trading on a national securities exchange (an “Exchange”), any
RSUs subject to this award that are

 

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unvested on the date of the Change in Control shall continue to vest according
to the terms and conditions of this award; provided that such award is replaced
with an award for voting securities of the resulting corporation or the
acquiring corporation, as the case may be (including without limitation, the
voting securities of any corporation which as a result of the Change in Control
owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) (the “Surviving Company”) which
are traded on an Exchange (a “Replacement Award”), which Replacement Award shall
consist of RSUs with a value (determined using the Surviving Company’s stock
price as of the date of the Change in Control) equal to the value of the
replaced award of RSUs (determined using the Company’s stock price as of the
date of the Change in Control), with any restrictions on such Replacement Award
lapsing at the same time and manner as the replaced award; provided, however,
that in the event of a termination by the Company without Cause or by Recipient
for Good Reason during the vesting period of any Replacement Award, the
Replacement Award shall immediately vest; and provided further that upon the
vesting date of all or a portion of a Replacement Award, Recipient shall be
entitled to receive a lump sum cash payment equal to the decrease, if any, in
the value of a share of the Surviving Company’s stock from the date of the
Change in Control (as increased on a calendar quarterly basis using an annual
interest rate, as of the last business day of the calendar quarter, for
zero-coupon U.S. government securities with a constant maturity closest in
length to the time period between the date of the Change in Control and the date
of vesting of the Replacement Award) to the time of vesting multiplied by the
total number of RSUs vesting on such date. If any RSUs that are unvested at the
time of the Change in Control are not replaced with Replacement Awards, such
RSUs shall immediately vest.

(ii) If as a result of a Change in Control, the Company’s Common Stock continues
to be listed for trading on an Exchange, any RSUs that are unvested on the date
of the Change of Control shall continue to vest according to the terms and
conditions of this award; provided however, that, in the event of a termination
by the Company without Cause or by Recipient for Good Reason during the vesting
period of this award such award shall immediately vest; and provided further
that upon the vesting date of all or portion of this award, Recipient shall be
entitled to receive a lump sum cash payment equal to the decrease, if any, in
the value of a share of the Company’s stock from the date of the Change in
Control (as increased on a calendar quarterly basis using an annual interest
rate, as of the last business day of the calendar quarter, for zero-coupon U.S.
government securities with a constant maturity closest in length to the time
period between the date of the Change in Control and the date of the vesting) to
the time of vesting, multiplied by the total number of RSUs vesting on such
date.

 

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(iii) For purposes of this Agreement, a “Change in Control” of the Company shall
mean the occurrence of any of the following events:

(A) Any consolidation, merger or plan of share exchange 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;

(D) At any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (“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, 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 Voting Securities representing fifty percent (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 of Directors, no Change in Control shall be deemed to
have occurred for purposes of this Agreement if (1) Recipient acquires (other
than on the same basis as all other holders of the Company Common Stock) an
equity interest in an entity that acquires the Company in a Change in Control
otherwise described under subparagraph (A) or (B) above, or (2) Recipient is
part of group that constitutes a Person

 

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which becomes a beneficial owner of Voting Securities in a transaction that
otherwise would have resulted in a Change in Control under subparagraph
(E) above.

(iv) 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, a wholly owned subsidiary of the
Company or any employee benefit plan(s) sponsored by the Company.

(v) For purposes of this Agreement, termination by Recipient of his or her
employment for “Good Reason” shall mean termination based on:

(A) a diminution of Recipient’s status, title, position(s) or responsibilities
from Recipient’s status, title, position(s) and responsibilities as in effect
immediately prior to the Change in Control or the assignment to Recipient of any
duties or responsibilities which are inconsistent with such status, title,
position(s) or responsibilities (in either case other than is isolated,
insubstantial or inadvertent actions which are remedied after notice), or any
removal of Recipient from such position(s), except in connection with the
termination of Recipient’s employment for Cause, total disability (as defined in
Section 1(c)(1)) or as a result of Recipient’s death or voluntarily by Recipient
other than for Good Reason;

(B) a reduction by the Company or Surviving Company in Recipient’s rate of base
salary, bonus or incentive opportunity or a substantial reduction in benefits
(other than reductions that do not impact Recipient’s compensation opportunity,
taken as a whole, or a reduction in benefits applicable to substantially all
employees); or

(C) the Company’s or Surviving Company’s requiring Recipient to be based more
than fifty miles from the principal office at in which Recipient is based
immediately prior to the Change in Control, except for reasonably required
travel on the Company’s business.

(d) Forfeiture of RSUs on Other Terminations of Service. If Recipient ceases to
be an employee of the Company for any reason that does not result in
acceleration of vesting pursuant to Section 1(c), Recipient shall immediately
forfeit all outstanding but unvested RSUs granted pursuant to this Agreement and
Recipient shall have no right to receive the related Common Stock.

 

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(e) Restrictions on Transfer and Delivery on Death. Recipient may not sell,
transfer, assign, pledge or otherwise encumber or dispose of the RSUs. Recipient
may designate beneficiaries to receive stock if Recipient dies before the
delivery date by so indicating on Exhibit A, which is incorporated into and made
a part of this agreement. If Recipient fails to designate beneficiaries on
Exhibit A, the shares will be delivered to Recipient’s estate.

(f) Reinvestment of Dividend Equivalents. On each date on which the Company pays
a dividend on shares of Common Stock underlying a RSU, Recipient shall receive
additional whole or fractional RSUs in an amount equal to the value of the
dividends that would have been paid on the stock deliverable pursuant to the
RSUs (if such shares were outstanding), divided by the closing stock price on
the dividend payment date.

(g) Delivery on Delivery Date. As soon as practicable following the delivery
date for a RSU, the Company shall deliver a certificate for the number of shares
represented by all vested RSUs having a delivery date on the same date, rounded
down to the whole share. No fractional shares of Common Stock shall be issued.
The Company shall pay to Recipient in cash an amount equal to the value of any
fractional shares that would otherwise have been issued, valued as of the
delivery date.

(h) Recipient’s Rights as Shareholder. Recipient shall have no rights as a
shareholder with respect to the RSUs or the shares underlying them until the
Company delivers the shares to Recipient on the delivery date.

(i) Tax Withholding. Recipient acknowledges that, at the delivery date, the
value of such vested RSUs will be treated as ordinary compensation income for
federal and state income and FICA tax purposes, and that the Company will be
required to withhold taxes on this income amount. Promptly following the
delivery date, the Company will notify Recipient of the required withholding
amount. Concurrently with or prior to the delivery of the certificate referred
to in Section 1(g), Recipient shall pay to the Company the required withholding
amount in cash or, at the election of Recipient, by surrendering to the Company
for cancellation shares of the Company’s Common Stock to be issued with respect
to the RSUs or other shares of the Company’s Common Stock valued at the closing
market price for the Company’s Common Stock on the last trading day preceding
the date of Recipient’s election to surrender such shares. If Recipient pays the
withholding amount in shares of Common Stock, the Company shall pay to Recipient
in cash the amount of any resulting over payment.

(j) Section 409A. The award made pursuant to this Agreement is intended not to
constitute a “nonqualified deferred compensation plan” within the meaning of
Section 409A the Internal Revenue Code of 1986, as amended, and instead is
intended to be exempt from the application of Section 409A. To the extent that
the award is nevertheless deemed to be subject to Section 409A, the award shall
be interpreted in accordance with Section 409A and Treasury regulations and
other interpretive guidance issued thereunder, including without limitation any
such regulations or other guidance issued after the grant of the award.
Notwithstanding any provision of the award to the contrary, in the event that
the Company determines that the award is or may be subject to Section 409A, the
Company may adopt such amendments to the award or adopt other policies and
procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Company determines are necessary or

 

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appropriate to (i) exempt the award from the application of Section 409A or
preserve the intended tax treatment of the benefits provided with respect to the
award, or (ii) comply with the requirements of Section 409A.

2. Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement constitutes the entire agreement
of the parties with regard to the subjects hereof and may be amended only by
written agreement between the Company and Recipient.

(b) Notices. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed sufficient when delivered personally to the party to
whom it is addressed or when deposited into the United States mail as registered
or certified mail, return receipt requested, postage prepaid, addressed to
Electro Scientific Industries, Inc., Attention: Corporate Secretary, at its
principal executive offices or to Recipient at the address of Recipient in the
Company’s records, or at such other address as such party may designate by ten
(10) days’ advance written notice to the other party.

(c) Rights and Benefits. The rights and benefits of this Agreement shall inure
to the benefit of and be enforceable by the Company’s successors and assigns
and, subject to the restrictions on transfer of this Agreement, be binding upon
Recipient’s heirs, executors, administrators, successors and assigns.

(d) Further Action. The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.

(e) Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement
shall be governed by the laws of the State of Oregon. In the event either party
institutes litigation hereunder, the prevailing party shall be entitled to
reasonable attorneys’ fees to be set by the trial court and, upon any appeal,
the appellate court.

(f) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original.

 

ELECTRO SCIENTIFIC INDUSTRIES, INC.

By:       

Authorized Officer

  

Recipient

 

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EXHIBIT A

DESIGNATION OF BENEFICIARY

 

Name _____________________________    Social Security Number ____-___-_____

I designate the following person(s) to receive any restricted stock units
outstanding upon my death under the Restricted Stock Units Award Agreement with
Electro Scientific Industries, Inc.:

 

A. Primary Beneficiary(ies)

 

Name ________________________    Social Security Number ____-___-_____ Birth
Date ____________________    Relationship ________________________ Address
__________________________    City__________ State____ Zip ________ Name
________________________    Social Security Number ____-___-_____ Birth Date
____________________    Relationship ________________________ Address
__________________________    City__________ State____ Zip ________ Name
________________________    Social Security Number ____-___-_____ Birth Date
____________________    Relationship ________________________ Address
__________________________    City__________ State____ Zip ________

If more than one primary beneficiary is named, the units will be divided equally
among those primary beneficiaries who survive the undersigned.

 

B. Secondary Beneficiary(ies)

In the event no Primary Beneficiary is living at the time of my death, I
designate the following the person(s) as my beneficiary(ies):

 

Name________________________    Social Security Number ____-___-_____ Birth Date
____________________    Relationship ________________________
Address__________________________    City__________ State____ Zip ________
Name________________________    Social Security Number ____-___-_____ Birth Date
____________________    Relationship ________________________
Address__________________________    City__________ State____ Zip ________
Name________________________    Social Security Number ____-___-_____ Birth Date
____________________    Relationship ________________________
Address__________________________    City__________ State____ Zip ________

If more than one Secondary Beneficiary is named, the units will be divided
equally among those Secondary beneficiaries who survive the undersigned.

This designation revokes and replaces all prior designations of beneficiaries
under the Restricted Stock Units Award Agreement.

 

      

Date signed:

       , 20     

Signature

         

 

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