Exhibit
10.7


 


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                                     
(the “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 6
of the Company’s 1996 Stock Incentive Plan] [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 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 the 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 of 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 substantially to perform his
reasonably assigned duties with the Company, other than a failure resulting
from Recipient’s incapacity due to physical or mental illness or impairment,
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 his duties, (ii) the willful
engagement by Recipient in illegal or dishonest conduct which is materially and
demonstrably injurious to the Company, or (iii) the willful failure by
Recipient to follow directives of the Board of Directors or the Chief Executive
Officer or Company policies.


 


(4)                                  Acceleration on Change in Control.  If there is a change in control of the
Company, all outstanding but unvested RSUs shall become immediately
vested.  The delivery date shall also
accelerate.  “Change in control” shall
mean a “Change in Control Event” as defined in IRS Notice 2005-1 or any
successor regulation.


 


(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.


 


(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 the
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 the
Recipient pays the withholding amount in shares of Common Stock, the Company
shall pay to the Recipient in cash the amount of any resulting over payment.


 


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 the 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 the 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 the 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

  



 





















 


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.:


 


E.                                      Primary
Beneficiary(ies)


 


	
  Name

  	
   

  	
   

  	
   

  	
  Social Security Number

  	
   

  	
  -

  	
   

  	
  -

  	
   

  	
   

  
	
  Birth Date

  	
   

  	
   

  	
   

  	
  Relationship

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  	
  City

  	
   

  	
   State

  	
   

  	
   Zip

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  	
   

  	
  Social Security Number

  	
   

  	
  -

  	
   

  	
  -

  	
   

  	
   

  
	
  Birth Date

  	
   

  	
   

  	
   

  	
  Relationship

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  	
  City

  	
   

  	
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  Name

  	
   

  	
   

  	
   

  	
  Social Security Number

  	
   

  	
  -

  	
   

  	
  -

  	
   

  	
   

  
	
  Birth Date

  	
   

  	
   

  	
   

  	
  Relationship

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  	
  City

  	
   

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


 


F.                                      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

  	
   

  	
   

  	
   

  	
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  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