Document:

EX-10.1

 Exhibit 10.1 
  

					
	

	  		  	PO Box 362708
	  		  	San Juan, Puerto Rico 00936-2708
	  		  	Telephone 787-765-9800

 June 22, 2018 

PERSONAL AND CONFIDENTIAL 
 Dear Ms. Soto:

 We are very pleased to welcome you to the Board of Directors (the “Board”) of Popular, Inc. (the “Corporation”), and are writing to
set forth the general terms of your compensation as a Director of the Corporation and certain of its wholly owned subsidiaries. These terms are subject to future modification by the Board. 

As compensation for your services you will receive: 
  

	 	•	 	 A grant of $83,334 (the “Restricted Stock Grant”) payable in Restricted Stock of the Corporation (the
“Restricted Stock”) under the Popular, Inc. 2004 Omnibus Incentive Plan (the “Omnibus Plan”); and 

  

	 	•	 	 A retainer fee (the “Annual Retainer”) of $41,667 (payable in cash or in shares of Restricted Stock, at
your option); 

 The aforementioned compensation is attributable to the period commencing on July 1, 2018 and ending on the day
before the 2019 annual shareholders’ meeting. The total cash and Restricted Stock compensation will be paid and/or delivered on or before July 15, 2018. 

The Annual Retainer will be paid in cash, unless you elect to receive payment in Restricted Stock under the Omnibus Plan. In order to make such election, you
must return to us the attached Director Compensation Election Form within 5 days from the date of this letter. If you do not submit the Director Compensation Election Form within said 5-day period, the Annual
Retainer will be payable to you in cash. An election to receive the Annual Retainer in the form of Restricted Stock will result in deferral of taxation of those amounts until such later year as the restrictions lapse.  

The number of shares of Restricted Stock to be delivered in payment of the Restricted Stock Grant and the Annual Retainer will be determined by dividing the
corresponding amount of the payment in cash by the closing price of the Corporation’s common stock on June 29, 2018. The Restricted Stock will be subject to the terms and conditions of the Restricted Stock Agreement attached hereto. Any
dividends paid on your Restricted Stock will be reinvested in your name in the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan. Dividends will be subject to Puerto Rico income taxes in the year paid by the Corporation. 

 Please note that, if you are a Puerto Rico resident, cash payments and a subsequent vesting of Restricted
Stock may impose an obligation on you to collect and remit to the Puerto Rico Department of the Treasury any value added tax imposed on the Corporation in connection with the compensation received by you as a director. 

We have enclosed the following documents regarding the foregoing: 
  

	 	1.	 Director Compensation Election Form; 

 

	 	2.	 Restricted Stock Agreement; and 

 

	 	3.	 Omnibus Plan. 

Please complete and sign the Director Compensation Election Form and the Restricted Stock Agreement where indicated, and return the executed documents..
Please retain a copy of the documents for your records. 
 Cordially, 

/s/ Javier D. Ferrer 
 Javier D. Ferrer 

Executive Vice President, 
 Chief Legal Officer &
Secretary 

 RESTRICTED STOCK AGREEMENT 

This Restricted Stock Agreement (“Agreement”) by and between Popular, Inc. (the “Corporation”) and Myrna M. Soto
(“Director”), whereby the Corporation in consideration of Director’s services as a member of the Board of Directors of the Corporation and/or certain of its wholly-owned subsidiaries, grants to the Director a number of restricted
shares of the Corporation’s Common Stock (the “Restricted Stock”) subject to the terms and conditions hereinafter set forth and the terms and conditions of the Popular, Inc. 2004 Omnibus Incentive Plan (the “Plan”), a copy
of which is attached hereto as Exhibit A. Capitalized terms not otherwise defined herein shall having the meaning ascribed them in the Plan. 

1.    NUMBER OF SHARES. Pursuant to the terms of the
Director’s compensation letter dated June 22, 2018 and the Director’s election thereunder, the Corporation has agreed to grant to the Director Restricted Stock in the amount stated in the compensation letter and election form, as may
be amended from time to time. The number of shares of Restricted Stock to be granted will be based on the closing price of the Corporation’s common stock on June 29, 2018, the Grant Date. For all purposes the Grant Price shall be zero
($0). 
 The Restricted Stock shall be subject to all the terms, conditions, and restrictions set forth in this Agreement and the Plan. In
the event any stock dividend, stock split, recapitalization or other change affecting the outstanding common stock of the Corporation as a class is effected without consideration, then any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) that is by reason of any such transaction distributed with respect to shares of Restricted Stock will be immediately subject to the provisions of this Agreement in the same manner and to
the same extent as the Restricted Stock with respect to which such change was effected. Cash dividends paid on the Restricted Stock shall be reinvested in Common Stock through the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan. 

2.    VESTING, FORFEITURE AND TRANSFER
RESTRICTIONS. All Restricted Stock granted to Director shall become vested and not subject to restrictions upon the termination of service as a Director for any reason other than for Cause (as defined in the Plan). In the event
Director’s relationship with the Corporation, is terminated for Cause (as defined in the Plan), or if Director, Director’s legal representative, or other holder of the Restricted Stock attempts to sell, exchange, transfer, pledge, or
otherwise dispose of any Restricted Stock, all Restricted Stock will be immediately forfeited without any further action by the Corporation. 

Restricted Stock may not be assigned, transferred, pledged or otherwise disposed of in any way other than by the Last Will and Testament of
the Director or the laws of descent and distribution, subject to the bylaws of the Corporation. Any Restricted Stock held by a beneficiary shall be subject to the restrictions imposed on such Restricted Stock. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect. 
 3.    SECURITIES
LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, no shares under this Agreement may be granted unless the shares of Restricted Stock issuable upon such grant are then
registered under the Securities Act of 1933, as amended 

 
(the “Securities Act”) or, if such shares of Restricted Stock are not then so registered, the Corporation has determined that such grant and issuance would be exempt from the
registration requirements of the Securities Act. The grant of shares must also comply with other applicable laws and regulations governing the grant, and no grant of shares will be permitted if the Corporation determines that such purchase would not
be in material compliance with such laws and regulations. 
 4.    STOCK
LEGEND. The Corporation and Director agree that, to the extent certificates representing shares of Restricted Stock are issued by the Corporation, during such time as such Restricted Stock are subject to the provisions of this
Agreement and the Plan, such certificates will have endorsed upon them in bold-faced type a legend substantially in the following form: 

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF THE RESTRICTED STOCK AGREEMENT BETWEEN THE CORPORATION AND THE INITIAL HOLDER OF THE SHARES. THE RESTRICTED STOCK AGREEMENT MAY GRANT CERTAIN PURCHASE OPTIONS TO THE CORPORATION, PROVIDES FOR FORFEITURE OF THE STOCK IN
CERTAIN CIRCUMSTANCES, AND IMPOSES RESTRICTIONS ON THE TRANSFER OF THESE SHARES. A COPY OF THE RESTRICTED STOCK AGREEMENT IS ON DEPOSIT AT THE PRINCIPAL OFFICE OF THE CORPORATION AND WILL BE FURNISHED BY THE CORPORATION TO THE REGISTERED HOLDER
HEREOF UPON WRITTEN REQUEST. 
 5.    AGREEMENT NOT A
SERVICE CONTRACT. This Agreement is not an employment or service contract, and nothing in this Agreement nor the Plan shall be deemed to create in any way whatsoever any obligation for the Director to
continue his relationship with the Corporation or its subsidiaries, as applicable, or of the Corporation or its subsidiaries, as applicable, to continue the relationship with the Director. 

6.    SECTION 83(b) ELECTION. Director acknowledges that if he
is subject to taxation under the United States Internal Revenue Code of 1986, as amended (the “Code”), under Section 83(b) of the Code, the difference between the Grant Price and its fair market value at the time any forfeiture
restrictions applicable to such Restricted Stock lapse is reportable as ordinary income at that time. For this purpose, the term “forfeiture restrictions” includes the forfeiture provisions, and restrictions described in Section 2 of
this Agreement. 
 Notwithstanding the preceding, Director understands that he or she may elect to be taxed at the time the Restricted Stock
is acquired hereunder, rather than when and as such Restricted Stock ceases to be subject to such forfeiture restrictions, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days after the Grant
Date. If the Grant Price equals the fair market value of the Restricted Stock on such date, or if it is likely that the fair market value of the Restricted Stock at the time any forfeiture restrictions lapse will exceed the Grant Price, the election
may avoid adverse tax consequences in the future. Director understands that the failure to make this filing within said 30 day period will result in the recognition of ordinary income by Director (in the event the fair market value of the
Restricted Stock increases after Grant 

 
Date) as the forfeiture restrictions lapse. Director acknowledges that it is his or her sole responsibility, and not the Corporation’s, to file a timely election under Section 83(b) of
the Code. Director further acknowledges that the election under Section 83(b) of the Code is an election that must be made with respect to each separate grant of Restricted Stock that is subject to this Agreement and that, immediately after
filing the election with the Internal Revenue Service, Director will deliver a copy of such election to the Corporation. 

7.    Section 409A. The Restricted Stock granted under this Agreement is intended to be exempt from
Section 409A of the Code, to the extent applicable, and this Agreement is intended to, and shall be interpreted, administered and construed consistent therewith.

8.    NOTICES. Any notices provided for in this Agreement or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Corporation to the Director, five (5) days after deposit in the United States mail, postage prepaid, addressed to the
Director at the last address the Director provided to the Corporation. Notice to the Corporation shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail to the Corporation by the
Director, five (5) days after deposit in the United States mail, postage prepaid, addressed to Chief Legal Officer, Popular, Inc. Board of Directors (751), PO Box 362708, San Juan, Puerto Rico 00936-2708. 

9.    RIGHTS AS A
SHAREHOLDER. Except for the restrictions set forth in this Agreement and the Plan and unless otherwise determined by the Corporation, the Director shall be entitled to all of the rights of a
shareholder with respect to the shares of Restricted Stock awarded pursuant to this Agreement including the right to vote such shares of Restricted Stock and to receive dividends and other distributions (if any) payable with respect to such shares.
Provided, however, that cash dividends paid on Restricted Stock shall be reinvested in common stock of the Corporation through the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan. 

10.    TAX WITHHOLDING. The Corporation may withhold or cause
to be withheld from any Restricted Stock grant (or Director’s compensation) any Federal, Puerto Rico, state or local taxes required by law to be withheld with respect to such Restricted Stock grant. By acceptance of this Agreement, Director
agrees to such deductions. 
 11.    GOVERNING LAW.
All questions arising with respect to this Agreement and the provisions of the Plan shall be determined by application of the laws of the Commonwealth of Puerto Rico except to the extent such governing law is preempted by Federal law. The
obligation of the Corporation to grant and deliver Restricted Stock under this Agreement is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of
such Restricted Stock. 
 12.    SEVERABILITY. If any provision of this
Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Agreement, but such provision shall be fully severable and the Agreement shall be construed and enforced as if
the illegal or invalid provision had never been included in the Agreement. 

 13.    SUCCESSORS. This
Agreement shall be binding upon the Director, his legal representatives, heirs, legatees, distributees, and shall be binding upon the Corporation and its successors and assigns. 

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of June 22, 2018. 

 

			
	POPULAR, INC.
		
	By:	 	/s/ Javier D. Ferrer 
	Name:	 	Javier D. Ferrer
	Title:	 	Executive Vice President, Chief Legal Officer and Secretary

  

	
	DIRECTOR:
	
	/s/ Myrna M. Soto
	Name: Myrna M. Soto

					
	

	  		  	PO Box 362708
	  		  	San Juan, Puerto Rico 00936-2708
	  		  	Telephone 787-765-9800

 DIRECTOR COMPENSATION ELECTION FORM 

I have received the letter informing me of my compensation as a member of the Board of Directors of Popular, Inc. and some of its subsidiaries. I am in
agreement with the terms set forth therein. 
 In connection therewith, I hereby make the following election with respect to my future compensation as a
member of the Board of Directors of Popular, Inc. and some of its subsidiaries: 
 ANNUAL RETAINER FEE 

 

					
	CASH	  	RESTRICTED
STOCK	 
		  	 	X	 

 I understand that an election to receive restricted stock will not change the nature of the compensation income to be
received. Amounts received in cash will be taxed as ordinary income when received. Compensation income received in the form of restricted stock will be taxed as ordinary income on the date the restrictions lapse and I am free to sale,
transfer or otherwise dispose of the shares based on the fair market value of the shares on the date the restrictions lapse. 
  

	
	
	
	/s/ Myrna M. Soto
	Name: Myrna M. Soto
	Date: 6/22/18Exhibit

RESTRICTED STOCK UNITS
AWARD AGREEMENT
This Award Agreement (the “Agreement”) is entered into as of [Grant Date] by and between Electro Scientific Industries, Inc., an Oregon corporation (the “Company”), and [Recipient Name] (“Recipient”), for the grant of restricted stock units with respect to the Company’s Common Stock (“Common Stock”).  By accepting this award Recipient agrees to be bound by the terms and conditions of this Agreement.
The Compensation Committee of the Company’s Board of Directors (the “Committee”) made a restricted stock units award to Recipient pursuant to 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 [Total Shares Granted] restricted stock units, subject to the adjustments, restrictions, terms and conditions set forth in this Agreement.
(a)Rights under Restricted Stock Units.  A restricted stock unit (an “RSU”) represents the unsecured right to require the Company to deliver to Recipient one share of Common Stock for each RSU, subject to Section 1(c).  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) and Section 1(c), the RSUs shall vest according to the below vesting schedule.  The RSUs shall become vested on the vesting date only if Recipient continues to be an employee of the Company through such vesting date.  The delivery date for a RSU shall be the date on which such RSU vests.
	
		
	Vest Date
	# of Shares

	{vest date 1}
	{# of Shares 1}

	{vest date 2} (if needed)
	{# of Shares 2}

	{vest date 3} (if needed)
	{# of Shares 3}

	(and so on if needed. )
	 

(c)Payment before Vesting Date.  
(1)Payment 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 service by the total number of whole months in the vesting period (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 approved by the Company, causes Recipient to be unable to perform his or her duties as an 

employee, director, officer or consultant of the Company and unable to engage in any substantial gainful activity.  Total disability shall be deemed to have occurred after both of the following have occurred:
(A)The two independent physicians have furnished their written opinion of total disability to the Company; and
(B)The Company has reached an opinion of total disability.
(2)Acceleration on Normal Retirement.  After Recipient attains age 65, outstanding but unvested RSUs shall become vested each calendar year in an amount determined by multiplying the total number of RSUs subject to this Agreement by the Pro Rata Percentage as of the earlier of December 31 of the year or the date of Recipient’s termination of employment.  The delivery date shall also be accelerated.
(3)Double Trigger Acceleration on Change in Control.  
(i)All of the RSUs shall immediately vest if a Change in Control (as defined below) occurs and at any time after the Change in Control and on or before the first anniversary of the Change in Control, (i) the Recipient’s employment is terminated by the Company (or its successor) without Cause (as defined below), or (ii) the Recipient’s employment is terminated by the Recipient for Good Reason (as defined below); provided, however, that the RSUs may also immediately vest in connection with a sale of the Company as provided in Section 1(c)(4) below.
(ii)For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events:
(A)At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office;
(B)Any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) 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 Exchange Act), directly or indirectly, of more than fifty percent (50%) of the then outstanding Common Stock of the Company;
(C)A consolidation, merger or plan of exchange involving the Company (“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 corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or
(D)A sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company.
(iii)For purposes of this Agreement, “Cause” shall mean (a) the willful and continued failure to perform substantially the Recipient’s reasonably assigned duties with the Company (or its successor) (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the Recipient by the Company (or its successor) which specifically identifies the manner in which the Company (or its successor) believes that the Recipient has not substantially performed 

the Recipient’s duties, (b) the willful engagement in illegal conduct which is materially and demonstrably injurious to the Company (or its successor), or (c) the commission of an act by Recipient, or the failure of Recipient to act, which constitutes gross negligence or gross misconduct.  No act, or failure to act, shall be considered “willful” if the Recipient reasonably believed that the action or omission was in, or not opposed to, the best interests of the Company (or its successor).
(iv)For purposes of this Agreement, “Good Reason” shall mean Recipient’s voluntary termination, within 30 days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Recipient’s consent:
(A)the assignment of a different title, job or responsibilities that results in a substantial reduction in the duties of the Recipient after the Change in Control when compared to the Recipient’s duties with respect to the Company’s operations prior to the Change in Control; provided that any change made solely as the result of the Company becoming a subsidiary or business unit of a larger company in a Change in Control shall not constitute Good Reason unless Recipient’s new duties are substantially reduced from his or her prior duties; 
(B)a reduction in Recipient’s target bonus or base salary as in effect immediately prior to the Change in Control; 
(C)a material reduction in total benefits available to the Recipient under cash incentive, stock incentive and other employee benefit plans after the Change in Control compared to the total package of such benefits as in effect prior to the Change in Control;
(D)the Recipient is required to be based more than 50 miles from where the Recipient’s office is located immediately prior to the Change in Control except for required travel on company business to an extent substantially consistent with the business travel obligations which the Recipient undertook on behalf of the Company prior to the Change in Control; or 
(E)the failure by any successor to the Company to expressly assume this Agreement or any obligation under this Agreement.
Recipient may not resign for Good Reason without first providing the Company with written notice within 90 days of the initial existence of the condition that Recipient believes constitutes Good Reason specifically identifying the acts or omissions constituting the grounds for Good Reason and a reasonable cure period of not less than 30 days following the date of such notice. 
For purposes of the “Good Reason” definition, the term “Company” will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(4)Sale of the Company.  If there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which the outstanding shares of Common Stock of the Company are converted into cash or other stock, securities or property, or a 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, then, as determined by the Committee or the Board of Directors, either:
(i)the unvested RSUs shall be converted into restricted stock units for stock of the surviving or acquiring corporation in the applicable transaction, with the amount and type of shares subject thereto to be conclusively determined by the Committee, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by the former holders of the Company’s Common Stock following the applicable transaction, 

and disregarding fractional shares, with the dates for vesting of RSUs and delivery of shares of Common Stock unchanged;
(ii)the unvested RSUs shall be converted into a cash payment obligation of the surviving or acquiring corporation in an amount equal to the proceeds a holder of the underlying shares would have received in proceeds from such transaction with respect to those shares; or 
(iii)all of the unvested RSUs shall immediately vest and all underlying shares shall be delivered simultaneously with the closing of the applicable transaction such that the Recipient will participate as a shareholder in receiving proceeds from such transaction with respect to those shares.
(d)Forfeiture of RSUs on Other Terminations of Employment.  If Recipient ceases to be an employee of the Company for any reason that does not result in acceleration or payment 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.  If Recipient dies before the delivery date, the shares will be released with the Company’s brokerage, or Recipient’s brokerage if separately designated. Recipient should maintain proper beneficiary designations with the brokerage and/or ensure Recipient’s estate is aware of the share’s location for proper delivery.  
(f)Reinvestment of Dividend Equivalents.  On each date on which the Company pays a dividend on a share of Common Stock with respect to an RSU, the number of RSUs subject to this Agreement shall be increased by a number equal to the number of whole or fractional shares of Common Stock with a value 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.  If the vesting date for any RSUs subject to this Agreement occurs within seven business days of the payment date for a dividend, the Company, at its option, may elect to pay to Recipient cash, net of withholding, equal to the cash dividend payable on the RSUs which so vest in lieu of increasing the number of RSUs subject to this Agreement.
(g)Delivery on Delivery Date.  As soon as practicable following the delivery date, the Company shall deliver to Recipient a certificate for the number of shares of Common Stock represented by all 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.  If shares or cash are to be delivered on a particular date, the shares or cash shall be deemed delivered on that date for purposes of compliance with the terms of this Agreement if the cash or shares are actually delivered within 45 days after the specified date as determined in the Company’s discretion with the Recipient having no right to determine the delivery date.  Recipient shall not have any right to determine or direct the date of actual delivery.
(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, not later than the actual delivery date, the value of delivered shares of Common Stock 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.  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 (which election must be made on or before the vesting date), by surrendering to the Company for cancellation shares of the Company’s Common Stock to be delivered 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 vesting date.  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 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.  For example, notwithstanding anything to the contrary in this Agreement, (i) a termination of employment shall be determined with respect to standards for “separation from service” within the meaning of applicable regulations; (ii) the provisions described in Sections 1(c)(4)(ii) and 1(c)(4)(iii) shall apply only if such events qualify as a “termination or liquidation of the plan” within the meaning of Treas. Reg. § 1.409A 3(j)(4)(ix); and (iii) the provision described in Section 1(c)(4)(i) shall apply only if such events qualify as a “change of control event” within the meaning of Treas. Reg. § 1.409A-3(i)(5)(i).
(1)Notwithstanding any provision of the award to the contrary, 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 appropriate to (1) 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 (2) comply with the requirements of Section 409A. 
(2)If an amount is determined to be subject to applicable provisions of Section 409A of the Code, payment in connection with termination of employment for a reason other than death may not start or be made to Recipient if the Company determines Recipient is a “key employee” as defined in Section 416(i) of the Code, without regard to Section 416(i)(5) of the Code, before the date which is six months after the date of termination, notwithstanding any other provisions for time of payment in this Agreement, if such delay in payment is necessary to comply with Section 409A of the Code.  The Company may determine that Recipient is a key employee in the event of doubt or to avoid impractical efforts or expense to make an exact determination of key employees.  Recipient shall have no claim, rights or remedy if the determination is not correct.
2.Miscellaneous.
(a)Entire Agreement; Amendment.  This Agreement and the Plan (including without limitation Section 17 thereof) 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.

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