Exhibit 10.28

 

 

 

NOVELLUS SYSTEMS, INC.

EXECUTIVE VOLUNTARY DEFERRED COMPENSATION PLAN

 

 

 

Amended and Restated Effective January 1, 2005

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ARTICLE 1    PURPOSE; EFFECTIVE DATE    1 1.1      Purpose    1 1.2     
Effective Date    1 ARTICLE 2    DEFINITIONS    2 ARTICLE 3    ELIGIBILITY AND
PARTICIPATION    7 3.1      Eligibility and Participation    7 3.2      Form of
Deferral    8 3.3      Period of Deferral Commitment    9 3.4      Commitment
Limited by Termination or Disability    9 3.5      Modification of Deferral
Election    9 3.6      Adverse Change in Performance Status    9 3.7     
Default Elections in Event of Incomplete or Inaccurate Deferral Election    9
ARTICLE 4    DEFERRED COMPENSATION ACCOUNT    11 4.1      Accounts    11 4.2  
   Timing of Credits; Tax Withholding on Deferred Amounts    11 4.3     
Valuation Funds    11 4.4      Determination of Accounts    12 4.5      Vesting
of Accounts    12 4.6      Statement of Accounts    12 ARTICLE 5    PLAN
BENEFITS    13 5.1      Distribution of Account Balances    13 5.2      Death
Benefit    14 5.3      Form of Payment    14 5.4      Permissible Acceleration
Events    16 5.5      Delay of Distributions    17 5.6      Payments from
Grandfathered Accounts    18 5.7      Effect of Payment    19

 

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ARTICLE 6    BENEFICIARY DESIGNATION    19 6.1      Beneficiary Designation   
19 6.2      Changing Beneficiary    19 6.3      Change in Marital Status    20
6.4      No Beneficiary Designation    20 ARTICLE 7    ADMINISTRATION    21
7.1      Committee; Duties    21 7.2      Administrative Authority    21 7.3  
   Agents    21 7.4      Expenses of Administration    22 7.5      Insurance   
22 7.6      Notices    22 7.7      Indemnity of Committee    22 7.8     
Election of Committee After Change in Control    23 ARTICLE 8    CLAIMS AND
APPEALS PROCEDURES    23 8.1      Claims Procedures    23 8.2      Appeal
Procedures    23 8.3      Subsequent Proceedings    24 ARTICLE 9    AMENDMENT
AND TERMINATION OF PLAN    25 9.1      Amendment    25 9.2      Company’s Right
to Terminate    25 9.3      Liquidation of Plan    26 9.4      Termination in
the Event of Insolvency    26 9.5      Other Termination Events    27 ARTICLE 10
   MISCELLANEOUS    27 10.1    Unfunded Plan    27 10.2    Tax Withholding    28
10.3    Unsecured General Creditor    28

 

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10.4  

   Trust Fund    28

10.5  

   Nonassignability    28

10.6  

   Not a Contract of Employment    29

10.7  

   Alternative Acts and Times    29

10.8  

   Provision of Information    29

10.9  

   Facility of Payment    29

10.10

   Correction of Errors    30

10.11

   Missing Persons    30

10.12

   Governing Law; Severability    30

10.13

   Validity    31

10.14

   Notice    31

10.15

   Successors    31

10.16

   Headings    31

10.17

   Status of Participants    31

 

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NOVELLUS SYSTEMS, INC.

EXECUTIVE VOLUNTARY DEFERRED COMPENSATION PLAN

ARTICLE 1

PURPOSE; EFFECTIVE DATE

1.1 Purpose. The purpose of this Executive Voluntary Deferred Compensation Plan
(hereinafter, the “Plan”) is to permit a select group of management and highly
compensated employees of Novellus Systems, Inc. (the “Company”) and its
subsidiaries to defer the receipt of income which would otherwise become payable
to them through an unfunded “top hat” arrangement exempt from the fiduciary,
funding, vesting, and plan termination insurance provisions of Title I and Title
IV of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
It is intended that this Plan, by providing to eligible employees an opportunity
to defer the receipt of income, will assist in the retaining and attracting
individuals of exceptional ability.

1.2 Effective Date. The effective date of this amended and restated Plan, as it
applies to Compensation deferred on or after January 1, 2005 (and any earnings
on such amounts). shall be January 1, 2005 (“Effective Date”); the Company first
adopted the Plan effective as of October 1, 2001. The amended and restated Plan
provisions set forth herein apply to any Compensation first earned on or after
the Effective Date (inclusive of any earnings on such amounts); provided,
however, that the terms of the prior Plan document as in effect on December 31,
2004 (the “Prior Plan”) will continue to apply to amounts (inclusive of
earnings) maintained in Accounts under the Plan as of December 31, 2004. All
references herein to the term “Plan” shall apply only to the Plan as amended and
restated effective January 1, 2005 and not to the Prior Plan. Together, this
document and the documents for the Prior Plan describe the terms of a single
non-qualified deferred compensation plan. However, amounts subject to the terms
of this Plan (as amended and restated herein) and amounts subject to the terms
of the Prior Plan shall be accounted for separately at all times. No amendment
to the Prior Plan as in effect on October 3, 2004 that would constitute a
“material modification” (within the meaning of Section 1.409A-6(a)(4) of the
Treasury regulations or subsequent administrative or regulatory guidance) shall
be effective with respect to amounts that were deferred in taxable years
beginning before January 1, 2005 (inclusive of any earnings on such deferred
amounts).

 

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ARTICLE 2

DEFINITIONS

For the purpose of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:

2.1 Account. “Account” means the bookkeeping account maintained on the books of
the Company used solely to calculate the amount payable to each Participant or
Beneficiary under this Plan and shall not constitute a separate fund of assets.
Each Participant’s Account shall consist of the following sub-accounts: (1) a
Retirement Account; (2) an In-Service Account; and (3) if applicable, a
Grandfathered Account. Undistributed amounts credited to Participants under the
Prior Plan, if any, shall be tracked separately and retained in each such
Participant’s Grandfathered Account.

2.2 Accrual. “Accrual” means the amount credited to a Participant’s Account (or,
if such amount should be negative, debited from the Account) on each
Determination Date, which shall be based on the Valuation Funds chosen by the
Participant as provided in Section 2.27, below and in a manner consistent with
Section 4.3, below.

2.3 Beneficiary. “Beneficiary” means the person, persons or entity as designated
by a Participant, entitled under Article 6 to receive any Plan benefits payable
after the Participant’s death.

2.4 Board. “Board” means the Board of Directors of the Company.

2.5 Change in Control. A “Change in Control” shall occur if any of the following
transactions occurs:

(a) a merger or consolidation in which the Company is not the surviving entity,
except for a transaction, the principal purpose of which is to change the state
in which the Company is incorporated;

(b) the sale, transfer or other disposition of all or substantially all of the
assets of the Company (including the capital stock of the Company’s subsidiary
corporations);

 

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(c) approval by the Company’s shareholders of any plan or proposal for the
complete liquidation or dissolution of the Company; or

(d) any reverse merger in which the Company is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company’s outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such
merger.

Notwithstanding any provision herein to the contrary, no distributions under the
Plan shall be triggered by any Change in Control that would not be deemed to
constitute a “change in the ownership or effective control, or in the ownership
of a substantial portion of the assets” as defined in Section 409A of the Code
and its related Treasury regulations.

2.6 Claimant. “Claimant” shall have the meaning set forth in Section 8.1(b),
below.

2.7 Code. “Code” means the Internal Revenue Code of 1986, as amended from time
to time.

2.8 Committee. “Committee” means the administrative committee appointed by the
Board to administer the Plan pursuant to Article 7. Notwithstanding any other
provision of the Plan document, any member of the Committee or any other officer
or employee of the Company who exercises discretion or authority on behalf of
the Company shall not be a fiduciary of the Plan merely by virtue of his or her
exercise of such discretion or authority. The Board (or its delegate) shall be
responsible for appointing the members of the Committee. Because this Plan is a
“top hat” arrangement, the Committee shall not be subject to the duties imposed
by the provisions of Part 4 of Title I of ERISA.

2.9 Company. “Company” means Novellus Systems, Inc., a California corporation,
and its successors in interest.

2.10 Compensation. “Compensation” means the base salary, bonus or incentive
compensation, and/or Director Fees payable to a Participant with respect to
services performed for the Company or its affiliates by the Participant. For
purposes

 

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of this Plan, Compensation shall be calculated before reduction for any amounts
deferred by the Participant pursuant to the Company’s tax qualified plans which
may be maintained under Section 401(k) or Section 125 of the Code, or pursuant
to this Plan or any other non-qualified plan which permits the voluntary
deferral of compensation. Inclusion of any other form of compensation is subject
to Committee approval.

2.11 Deferral Election. “Deferral Election” means a commitment made by a
Participant to defer a portion of his or her Compensation, as set forth in
Article 3. A Participant’s Deferral Election shall apply to each payment of his
or her Compensation. Such designation shall be made in whole percentages and
shall be made in the form set forth as Exhibit “A” hereto or in another
substantially-equivalent form acceptable to the Committee. A Deferral Election
shall include the Participant’s election regarding the form and timing of
payments to be made from his or her Account. A Deferral Election shall remain in
effect for the immediately succeeding Deferral Period unless revoked or modified
in accordance with Section 5.1(b)(ii), below.

2.12 Deferral Period. “Deferral Period” means each calendar year.

2.13 Determination Date. “Determination Date” means each business day of the
calendar year.

2.14 Director. “Director” means a member of the Board who is not an Employee.

2.15 Director Fees. “Director Fees” means any cash fees or remuneration paid to
a Director by the Company from time to time.

2.16 Disability or Disabled. “Disability” or “Disabled” means (i) a
Participant’s inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or (ii) a Participant’s receipt, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, of income replacement benefits for a period
of not less than three (3) months under a plan or arrangement covering employees
of the Company.

 

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2.17 Employee. “Employee” means any “employee” of the Company within the meaning
of Section 3121(d) of the Code who is determined by the Committee in its sole
discretion to be a member of “a select group of highly compensated and
management employees” of Company and its affiliates.

2.18 ERISA. “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

2.19 Grandfathered Account. “Grandfathered Account” means a Participant’s
Account balance consisting of amounts credited and vested under the Prior Plan
on or prior to December 31, 2004 and earnings and losses relating to the
foregoing amounts (including earnings and losses accruing on or after January 1,
2005). Each Participant’s Grandfathered Account shall be accounted for
separately within the Participant’s Account. It is intended that the
Grandfathered Accounts will not be subject to the restrictions imposed by
Section 409A of the Code. If applicable, a Participant’s Grandfathered Account
will include separate sub-accounts consisting of a Grandfathered Retirement
Account and a Grandfathered In-Service Account.

2.20 In-Service Account. “In-Service Account” means the sub-account established
under a Participant’s Account into which the Participant elects to contribute
deferred Compensation and from which, pursuant to Section 5.1(b), distributions
are made.

2.21 Participant. “Participant” means any Employee or Director who is eligible,
pursuant to Section 3.1, below, to participate in this Plan, and who has elected
to defer Compensation under this Plan in accordance with Article 3, below. Any
such Employee or Director shall remain a Participant in this Plan for the
relevant Deferral Period(s) and until such time as all benefits payable under
this Plan have been paid in accordance with the provisions hereof.

2.22 Plan. “Plan” means this “Novellus Systems, Inc. Executive Voluntary
Deferred Compensation Plan,” as amended from time to time.

2.23 Prior Plan. “Prior Plan” means the “Executive Voluntary Deferred
Compensation Plan” previously adopted by the Company effective as of October 1,
2001, as in effect through December 31, 2004.

 

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2.24 Retirement Account. “Retirement Account” means the sub-account established
under a Participant’s Account into which the Participant elects to contribute
deferred Compensation and from which, pursuant to Section 5.1(a), distributions
are made.

2.25 Termination of Service or Termination. “Termination of Service” or
“Termination” means a Participant’s (i) separation from service with the
Company, (ii) refusal or failure to return to work within three (3) working days
after the date requested by the Company, (iii) failure to return to work at the
conclusion of a leave of absence; or (iv) in the case of a Director, termination
of service as a Director of the Company. Notwithstanding the foregoing, an
Employee will not be deemed to have experienced a Termination of Service while
absent on military leave, sick leave, or other bona fide leave of absence if the
period of such leave does not exceed six (6) months, or if longer, the period
during which the Employee’s right to reemployment is guaranteed by statute or
contract. If the period of leave exceeds six (6) months, and the Employee’s
right to reemployment is not guaranteed by statute or contract, the Employee
will be deemed to have experienced a Termination of Service as of the first day
immediately following the end of such six-month period. In no event shall any
distribution under the Plan be triggered by a Termination of Service that does
not constitute a “separation from service” within the meaning of
Section 1.409A-1(h) of the Treasury regulations.

2.26 Unforeseeable Emergency. “Unforeseeable Emergency” shall mean an
unforeseeable emergency as defined in Section 409A(a)(2)(B)(ii)(I) of the Code
(as limited by Section 409A(a)(2)(B)(ii)(II) of the Code), the Treasury
regulations thereunder, and any other published interpretive authority, as
issued or amended from time to time.

2.27 Valuation Funds. “Valuation Funds” means one or more of the
independently-established funds or indices that are identified and listed by the
Committee. These Valuation Funds are used solely to calculate the Accrual that
is credited to each Participant’s Account(s) in accordance with Article IV,
below, and do not represent, nor should it be interpreted to convey, any
beneficial interest on the part of the Participant in any asset or other
property. The determination of the increase or decrease in the performance of
each Valuation Fund shall be made by the Committee in its reasonable discretion.
The Committee shall select the various Valuation Funds available to the
Participants with respect to this Plan and shall set forth a list of these
Valuation Funds attached hereto as Exhibit “B”, which may be amended from time
to time in the sole discretion of the Committee.

 

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ARTICLE 3

ELIGIBILITY AND PARTICIPATION

3.1 Eligibility and Participation.

(a) Eligibility. Eligibility to participate in the Plan shall be limited to
(i) Employees who are designated by the Committee for participation in this
Plan; and (ii) Directors who are designated by the Committee for participation
in this Plan. An individual’s eligibility to participate in the Plan does not
confer upon the employee any right to any compensation, award, bonus, or other
remuneration of any kind.

(b) Participation. An Employee’s or Director’s participation in the Plan shall
be effective upon (i) his or her notification by the Committee of eligibility to
participate, and (ii) completion and submission of a Deferral Election to the
Committee no later than fifteen (15) days prior to the beginning of the Deferral
Period in which it is to be effective, except as otherwise provided in Sections
3.1(c) or 3.1(d).

(c) First-Year Participation. If an individual first becomes eligible to
participate in the Plan (and has not previously become eligible to participate
under any other plan that would be aggregated with the Plan for purposes of
Section 1.409A-1(c) of the Treasury regulations) during a Deferral Period, that
individual may submit a Deferral Election to the Committee within thirty
(30) days after his or her receipt of notice of eligibility to participate from
the Committee. Such Deferral Election will be effective only with regard to
Compensation earned and payable following submission of the Deferral Election to
the Committee.

(d) Deferrals of Performance-Based Compensation. If the Committee, in its sole
discretion, determines that all or any portion of a Participant’s Compensation
qualifies as “performance-based compensation” within the meaning of Treasury
regulation Section 1.409A-1(e), the Participant’s Deferral Election with respect
to such Compensation may be made at such time as is permitted by the Committee
(but in no event later than the deadline specified in Treasury regulation
Section 1.409A-2(a)(8)), provided that the Participant performs services
continuously

 

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from the later of the beginning of the applicable performance period or the date
the applicable performance criteria are established through the date the
election is made. However, in no event may an election to defer any such
performance-based Compensation be made after such Compensation has become
readily ascertainable.

3.2 Form of Deferral. A Participant may make a Deferral Election as follows:

(a) Application of Deferral Election. A Deferral Election shall apply to each
payment of Compensation by the Company or an affiliate to a Participant during
the Deferral Period. The Participant shall separately set forth the amount of
salary, bonus or incentive compensation, and/or Director Fees that are to be
deferred in full percentage increments in his or her Deferral Election form.
Deferral Elections relating to base salary payments shall be withheld in
substantially equal amounts over the applicable Deferral Period.

(b) Allocation Among Sub-Accounts. Each Deferral Election shall specify how a
Participant’s deferrals of Compensation for a particular Deferral Period are to
be allocated between his or her Retirement Account and In-Service Account.

(c) Allocation to Valuation Funds. The Participant shall specify in a separate
form (known as the “Allocation Form” and set forth in Exhibit “B” hereto) filed
with the Committee, the Participant’s initial allocation and any subsequent
re-allocations of each Account among the various available Valuation Funds.

(d) Maximum Deferral. Subject to Section 4.2, below, the maximum percentage of
Compensation eligible for deferral under the Plan for each Deferral Period shall
be: (i) in the case of base salary, eighty percent (80%); (ii) in the case of
bonus or other incentive compensation, one hundred percent (100%); and (iii) in
the case of Director Fees, one hundred percent (100%).

(e) Minimum Deferral. The minimum amount of base salary that may be deferred in
a Deferral Period shall be five thousand dollars ($5,000). The minimum amount of
each payment of bonus or incentive compensation that may be deferred in a
Deferral Period shall be five thousand dollars ($5,000) unless an election to
defer at least $5,000 of base salary has been made for the same Deferral Period,
in which case the minimum deferral of bonus or incentive compensation shall be
one dollar ($1.00). The minimum amount of Director Fees that may be deferred in
a Deferral Period shall be five thousand dollars ($5,000).

 

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3.3 Period of Deferral Commitment. Once a Participant has made a Deferral
Election, that Commitment shall remain in effect for the succeeding Deferral
Periods unless revoked or amended in writing by the Participant and delivered to
the Committee no later than fifteen (15) days prior to the beginning of the
subsequent Deferral Period for which it is to be effective; provided, however,
that a Deferral Election relating to any performance-based Compensation for a
Deferral Period shall not apply for payments of performance-based Compensation
in subsequent Deferral Periods, and a separate Deferral Election shall be
required for each Deferral Period’s payment of performance-based Compensation.

3.4 Commitment Limited by Termination or Disability. If a Participant becomes
Disabled or experiences a Termination of Service prior to the end of a Deferral
Period, the Deferral Period shall end as of the date of the Participant’s
Disability or Termination, and no further deferrals of Compensation shall be
made by the Participant thereafter unless he or she recommences active
employment or service with the Company or its affiliates and is subsequently
determined by the Committee to be eligible to participate under Section 3.1,
above.

3.5 Modification of Deferral Election. Except as provided in Section 3.4, above,
and Section 5.1(b)(ii), below, a Deferral Election shall be irrevocable by the
Participant for the duration of a Deferral Period.

3.6 Adverse Change in Performance Status. If the Committee determines, in its
sole discretion, that a Participant’s performance is no longer at a level that
warrants reward through participation in this Plan, but does not terminate the
Participant’s employment or service with Company, the Participant’s existing
Deferral Election shall terminate at the end of the current Deferral Period, and
no new Deferral Election may be made by such Participant after notice of such
determination is given by the Committee, until and unless the Participant
subsequently satisfies the requirements of Section 3.1, above.

3.7 Default Elections in Event of Incomplete or Inaccurate Deferral Election. In
the event that a Participant submits a Deferral Election to the Committee that
omits information necessary to the smooth operation of this Plan, as determined

 

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in the sole discretion of the Committee, or contains information which the
Committee, in its sole discretion, determines to be incomplete or inaccurate,
the Committee shall be authorized conclusively to assume the following, and such
assumptions shall be communicated to the Participant:

 

Incomplete/Inaccurate Information

  

Default Election

No Valuation Fund is specified    Default Valuation Fund specified in Exhibit B
shall be applicable Allocation among Valuation Funds totals less than 100%   
Default Valuation Fund specified in Exhibit B shall be applicable to any
unallocated amounts Allocation among Valuation Funds totals more than 100%   
Each specified allocation will be proportionately reduced No allocation of
deferrals specified as between Retirement Account and In-Service Account    All
deferrals will be credited to the Participant’s Retirement Account. No election
as to the form of payments is specified or in effect    Lump-sum distribution
for In-Service Account and three (3) year installment distribution schedule for
Retirement Account No distribution date specified or in effect for In-Service
Account    Earliest distribution date available under Section 5.2 will be
applicable

Notwithstanding the foregoing, no default election under this Section 3.7 shall
be effective to require a distribution under the Plan to the extent an existing
Deferral Election is in effect, except as may otherwise be permitted by Treasury
regulation Section 1.409A-2(b).

 

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ARTICLE 4

DEFERRED COMPENSATION ACCOUNT

4.1 Accounts. The Compensation deferred by a Participant under the Plan and any
Accruals on such deferrals shall be credited to the Participant’s Account.
Separate records may be maintained on the books of the Company to reflect the
amounts credited to each applicable sub-account. Participant Accounts shall be
used solely to calculate the amount payable to each Participant under this Plan
and shall not constitute a separate fund of assets.

4.2 Timing of Credits; Tax Withholding on Deferred Amounts. A Participant’s
deferred Compensation shall be credited to each Account (and allocated as
directed by the Participant in his or her Deferral Election) on the last day of
the month during which the compensation deferred would have otherwise been
payable to the Participant. Any withholding of taxes or other amounts with
respect to deferred Compensation that is required by local, state or federal law
shall be withheld from the Participant’s corresponding non-deferred portion of
Compensation to the maximum extent possible, and any remaining amount shall
reduce the amount credited to the Participant’s Account in the manner specified
by the Committee.

4.3 Valuation Funds. A Participant shall designate, using the Allocation Form or
another substantially-equivalent means acceptable to the Committee, one or more
Valuation Funds for his or her Account for the sole purpose of determining the
Accruals to be credited or debited to such Account; as specified in his or her
Allocation Form, a Participant may provide separate allocation instructions for
his or her Retirement Account and In-Service Account. Upon notice to the
Committee in accordance with the timing and procedure prescribed by the
Committee from time to time, the Participant may also reallocate the balance in
each Valuation Fund among the then-available Valuation Funds. The Committee
reserves the right to impose reasonable limitations on the timing and procedures
for reallocating Account balances within the Plan.

 

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4.4 Determination of Accounts. The aggregate balance in each Participant’s
Account as of each Determination Date shall consist of the sum of the balances
of his or her Retirement Account and In-Service Account as of the immediately
preceding Determination Date, adjusted as follows:

(a) New Deferrals. Each Account shall be increased by any deferred Compensation
credited since the immediately-preceding Determination Date.

(b) Distributions. Each Account shall be reduced by the amount of each benefit
payment made from that Account since the immediately-preceding Determination
Date. Distributions shall be deemed to have been made proportionally from each
of the Valuation Funds maintained within such Account based on the proportion
that such Valuation Fund bears to the sum of all Valuation Funds maintained
within such Account for that Participant as of the Determination Date
immediately preceding the date of payment.

(c) Accruals. Each Account shall be increased or decreased by the Accrual
allocable to such Account since the immediately-preceding Determination Date as
though the balance of that Account had been invested in the applicable Valuation
Funds chosen by the Participant.

4.5 Vesting of Accounts. Each Participant shall be vested in the amounts
credited to such Participant’s Account as follows:

(a) Retirement Account. A Participant’s interest in his or her Retirement
Account (including any Accruals relating thereto) shall be one hundred percent
(100%) vested at all times.

(b) In-Service Account. A Participant’s interest in his or her In-Service
Account (including any Accruals relating thereto) shall be one hundred percent
(100%) vested at all times.

(c) Grandfathered Account. A Participant’s interest in his or her Grandfathered
Account (including any Accruals relating thereto) shall be one hundred percent
(100%) vested at all times.

4.6 Statement of Accounts. The Committee shall give to each Participant a
statement showing the balances in the Participant’s Accounts on a periodic basis
as determined by the Committee but in no event less frequently than annually.

 

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ARTICLE 5

PLAN BENEFITS

5.1 Distribution of Account Balances.

(a) Distribution of Retirement Account. Except as provided in Section 5.2 below,
the outstanding balance of a Participant’s Retirement Account shall be
distributed to the Participant upon his or her Termination of Service. Benefits
under this Section 5.1 shall be paid or commence to be paid as soon as
administratively practicable after the Participant’s Termination of Employment
but in no event later than sixty (60) days thereafter. The form of benefit
payment shall be that form previously specified by the Participant in his or her
Deferral Election pursuant to Section 5.3(a), below.

(b) Distribution of In-Service Account.

(i) Timing of Payments. The outstanding balance of a Participant’s In-Service
Account shall be distributed to the Participant upon the date previously
specified by the Participant in his or her first Deferral Election which
designated a portion of the Compensation deferred be allocated to the In-Service
Account; provided, however, that the date of payment commencement under this
Section 5.1(b) shall be no earlier than the fifth (5th) anniversary of the
Participant’s initial deferral that is allocated to the In-Service Account. The
form of benefit payment shall be that form previously specified by the
Participant in his or her Deferral Election pursuant to Section 5.3(b), below.
In the event of a Participant’s Termination prior to the date specified in his
or her initial Deferral Election, the Participant’s In-Service Account shall be
added to his or her Retirement Account as of the date of Termination and shall
be paid in accordance with the provisions of Section 5.1(a), above; provided,
however, that in the event the Participant has submitted a modified Deferral
Election pursuant to Section 5.1(b)(ii), below, the payment of his or her
In-Service Account shall be made in accordance with such section and with
Section 409A and its related Treasury regulations notwithstanding the
intervening Termination.

(ii) Subsequent Modifications. A Participant may elect, in accordance with
policies and procedures established by the Committee, to modify a Deferral
Election governing the timing of payments from his or her In-Service

 

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Account, provided that such modification shall not be effective unless (i) it is
made at least one (1) year in advance of the date on which payments otherwise
would have commenced under the initial Deferral Election; and (ii) that under
such modified election, the initial payment shall occur no earlier than five
(5) years after the initial payment would have otherwise been paid under the
initial Deferral Election (i.e., five (5) years after the earlier of the
original stated distribution date or the date of the Participant’s Termination).
All modifications to Deferral Elections shall be made in conformance with
Section 409A(a)(4)(C) of the Code, the Treasury regulations thereunder, and any
other published interpretive authority, as issued or amended from time to time.
For purposes of this Section 5.1(b), the payments to be made from a
Participant’s In-Service Account shall be treated as the entitlement to a single
payment.

5.2 Death Benefit. Upon the death of a Participant prior to the commencement of
benefits under this Plan from any particular Account, Company shall pay or
commence to pay to the Participant’s Beneficiary an amount equal to the
Participant’s Account balance in the form manner chosen by the Participant in
his or her currently-effective Deferral Election filed with the Committee; for
this purpose, a Participant’s “currently-effective Deferral Election” shall be
the most recently-submitted Deferral Election to which the Committee can give
effect consistent with Section 409A of the Code and its related Treasury
regulations . In the event of the death of the Participant after the
commencement of benefits under this Plan from any Account, any remaining
benefits from that Account shall be paid to the Participant’s Beneficiary at the
same time and in the same manner as if the Participant had survived.

5.3 Form of Payment. Benefits payable from any Account under this Plan shall be
paid in one of the forms of benefit as provided below and specified by the
Participant in his or her initial Deferral Election or a subsequent Deferral
Election made thereafter in accordance with Section 5.3(c), below.

(a) Retirement Accounts. The forms of benefit payments available under the Plan
for a Participant’s Retirement Account are as follows:

(i) A lump sum amount which is equal to the Retirement Account balance; or

 

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(ii) Annual installment payments for a period of up to fifteen (15) years where
the annual payment shall be equal to the vested balance of the Account
immediately prior to the payment, multiplied by a fraction, the numerator of
which is one (1) and the denominator of which commences at the number of annual
payment initially chosen and is reduced by one (1) in each succeeding year.
Accruals on the unpaid balance shall be based on the most recent allocation
among the available Valuation Funds chosen by the Participant, made in
accordance with Section 4.3, above.

(b) In-Service Accounts. The forms of benefit payments available under the Plan
for a Participant’s In-Service Account are as follows:

(i) A lump sum amount which is equal to the In-Service Account balance; or

(ii) Annual installment payments for a period of up to five (5) years where the
annual payment shall be equal to the vested balance of the Account immediately
prior to the payment, multiplied by a fraction, the numerator of which is one
(1) and the denominator of which commences at the number of annual payment
initially chosen and is reduced by one (1) in each succeeding year. Accruals on
the unpaid balance shall be based on the most recent allocation among the
available Valuation Funds chosen by the Participant, made in accordance with
Section 4.3, above.

(c) Subsequent Modifications. A Participant may elect, in accordance with
policies and procedures established by the Committee, to modify a Deferral
Election governing the form of payments from his or her Retirement Account
and/or In-Service Account, provided that such modification shall not be
effective unless (i) it is made at least one (1) year in advance of the date on
which payments otherwise would have commenced under the initial Deferral
Election; and (ii) that under such modified election, the initial payment shall
occur no earlier than five (5) years after the initial payment would have
otherwise been paid under the initial Deferral Election. All modifications to
Deferral Elections shall be made in conformance with Section 409A(a)(4)(C) of
the Code, the Treasury regulations thereunder, and any other published
interpretive authority, as issued or amended from time to time. For purposes of
this Section 5.3(c), the payments to be made from a Participant’s Retirement
Account and/or In-Service Account shall be treated as the entitlement to a
single payment.

 

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5.4 Permissible Acceleration Events. Notwithstanding the foregoing, the
Committee may accelerate the payment of a Participant’s Account balance in any
of the following circumstances.

(a) Unforeseeable Emergency. In the event of an Unforeseeable Emergency, the
Committee may, in its sole discretion, permit distribution to a Participant from
his or her Account of an amount no greater than the amount necessary to satisfy
the emergency plus any taxes reasonably anticipated as a result of the
distribution.

(b) Domestic Relations Order. In its sole discretion, the Committee may permit
acceleration of the time or schedule of a payment under the Plan to an
individual other than the Participant as may be necessary to fulfill a domestic
relations order (as defined in Section 414(p)(1)(B) of the Code).

(c) Conflict of Interest. In its sole discretion, the Committee may permit the
acceleration of the time or schedule of a payment under the Plan (i) to the
extent necessary to permit any Participant who becomes employed in the Federal
executive branch to comply with an ethics agreement with the Federal government;
or (ii) to the extent reasonably necessary to avoid the violation of an
applicable Federal, state, local, or foreign ethics or conflicts of interest
law.

(d) De Minimis Distribution. In its sole discretion, the Committee may
distribute a Participant’s entire outstanding Account balance in a single lump
sum payment to the Participant, provided that (i) the balance of the
Participant’s Account as of the relevant Determination Date does not exceed the
applicable dollar amount then in effect under Section 402(g)(1)(B) of the Code;
and (ii) the payment accompanies the termination of the entirety of the
Participant’s interest in the Plan within the meaning of
Section 1.409A-3(j)(4)(v) of the Treasury regulations.

(e) Employment Taxes. In its sole discretion, the Committee may permit
acceleration of the time or schedule of a distribution under the Plan as may be
necessary to pay the Federal Insurance Contributions Act (“FICA”) tax imposed
under Sections 3101, 3121(a) and 3121(v)(2) of the Code (as applicable). In
addition, the Committee may permit acceleration of the time or schedule of a
distribution under the Plan as may be necessary to pay the income tax at source
on wages imposed under Section 3401 of the Code or the corresponding withholding
provisions of applicable

 

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state, local, or non-U.S. tax laws as a result of the payment of the FICA tax,
and to pay the additional income tax at source on wages attributable to the
pyramiding Section 3401 wages and taxes. Notwithstanding the foregoing, the
total accelerated distribution to a Participant under this Section 5.4(e) shall
not exceed the aggregate amount of FICA taxes and the income tax withholding
related to such amount of FICA taxes.

(f) Income Inclusion under Section 409A of the Code. In its sole discretion, the
Committee may permit acceleration of the time or schedule of a distribution
under the Plan at any time the Plan fails to meet the requirements of
Section 409A of the Code and the corresponding Treasury regulations.
Notwithstanding the foregoing, the total accelerated distribution to a
Participant under this Section 5.4(f) shall not exceed the amount required to be
included as income by the Participant as a result of the failure to meet the
requirements of Section 409A of the Code and the applicable Treasury
regulations.

5.5 Delay of Distributions. To the extent permitted under Section 409A of the
Code, a scheduled distribution of a Participant’s Account shall be delayed to a
date after the scheduled payment date under any of the following circumstances:

(a) Company’s Financial Exigency. A scheduled distribution of a Participant’s
Account shall be delayed to a date after the scheduled payment date in the event
the Committee reasonably anticipates that making the distribution will
jeopardize the Company’s ability to continue as a going concern. Any such
delayed distribution shall be made during the first taxable year of the
Participant when the making of the distribution will not cause such a risk to
the Company.

(b) Payments that would Violate Federal Securities Laws or other Applicable Law.
A scheduled distribution of a Participant’s Account shall be delayed to a date
after the scheduled payment date in the event the Committee reasonably
anticipates that making the distribution will violate federal securities laws or
other applicable law. The delayed distribution must be made at the earliest date
at which the Committee reasonably anticipates that making the distribution will
not cause such violation. For purposes of this Section 5.5(b), making a payment
that would cause inclusion in gross income or the application of any penalty
provision or other provision of the Code is not considered a violation of
applicable law.

 

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(c) Payments Limited by Section 162(m) of the Code. A scheduled distribution of
a Participant’s Account shall be delayed to a date after the scheduled payment
date to the extent that the Committee reasonably anticipates that making the
distribution at the scheduled payment date will result in the loss or reduction
of the Company’s deduction with respect to such payment under Section 162(m) of
the Code; as provided in Section 1.409A-2(b)(7)(i) of the Treasury regulations.
The delayed distribution shall be made in the at the earliest date the Committee
reasonably anticipates that the deduction of the payment of the amount will not
be limited or eliminated by application of Section 162(m) of the Code.

(d) Other Events and Conditions. The Committee may delay a scheduled
distribution of the Participant’s Account upon such other events and conditions
as may be prescribed in generally applicable guidance published in the Internal
Revenue Bulletin relating to Section 409A of the Code.

5.6 Limitations on Payments from Grandfathered Accounts.

(a) Application of Prior Plan Terms. Notwithstanding any contrary provision of
the Plan, the amounts and form and timing of all payments from a Participant’s
Grandfathered Account shall be controlled by the terms of the Prior Plan and any
elections made by the Participant thereunder (including any amended elections
made in accordance with the terms of the Prior Plan), to the maximum extent
permitted by Section 409A of the Code and its related Treasury regulations.

(b) Suspension of Participation. To the extent a Participant receives a
distribution from his or her Grandfathered Account in accordance with the terms
of Section 5.4 of the Prior Plan (relating to distributions in the event of
“financial hardship”), the participation suspension period applicable to the
Participant shall commence on the date of such distribution and shall end on the
last day of the thirty-sixth (36th) calendar month thereafter. The Participant’s
eligibility to recommence participation in the Plan during the Deferral Period
beginning after the end of such suspension period shall be determined under
Article 3.

(c) Prohibition on Elective Cash-Out Distributions. Notwithstanding
Section 5.6(a) above, a Participant shall not be entitled to receive a
distribution from his or her Grandfathered Account under Section 5.5 of the
Prior Plan (relating to distributions upon an elective cessation of
participation) nor shall such Participant be entitled to cease participation in
the Plan on an elective basis, except to the extent otherwise provided herein
and permitted by Code Section 409A and its related Treasury regulations.

 

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5.7 Effect of Payment. The full payment of the applicable benefit under this
Article 5 shall completely discharge all obligations on the part of the Company
(and its affiliates) to the Participant (or the Participant’s Beneficiary) with
respect to the operation of this Plan, and the Participant’s (or Participant’s
Beneficiary’s) rights under this Plan shall terminate.

ARTICLE 6

BENEFICIARY DESIGNATION

6.1 Beneficiary Designation. Each Participant shall have the right, at any time,
to designate one (1) or more persons or entity as Beneficiary (both primary and
contingent) to whom benefits under this Plan shall be paid in the event of
Participant’s death prior to complete distribution of the Participant’s vested
Account balance. Each Beneficiary designation shall be in a written form
prescribed by the Committee and shall be effective only when filed with the
Committee during the Participant’s lifetime. Designation by a married
Participant to the Participant’s spouse of less than a fifty percent
(50%) interest in the benefit due shall not be effective unless the spouse
executes a written consent that acknowledges the effect of the designation, or
it is established that the consent cannot be obtained because the spouse cannot
be located or is incompetent.

6.2 Changing Beneficiary. Any Beneficiary designation may be changed by an
unmarried Participant without the consent of the previously named Beneficiary by
the filing of a new Beneficiary designation with the Committee. A married
Participant’s Beneficiary designation may be changed by a Participant with the
consent of the Participant’s spouse as provided for in Section 6.1 above, by the
filing of a new designation shall cancel all designations previously filed.

 

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6.3 Change in Marital Status. If the Participant’s marital status changes after
the Participant has designated a Beneficiary, the following shall apply:

(a) If the Participant is married at death but was unmarried when the
designation was made, the designation shall be void in its entirety unless the
spouse has consented to it in the manner prescribed in Section 6.1 above.

(b) If the Participant is unmarried at death but was married when the
designation was made:

(i) The designation shall be void if and to the extent the spouse was named as
Beneficiary.

(ii) The designation shall remain valid if and to the extent a non-spouse
Beneficiary was named.

(c) If the Participant was married when the designation was made and is married
to a different spouse at death, the designation shall be void in its entirety
unless the new spouse has consented to it in the manner prescribed in
Section 6.1 above.

6.4 No Beneficiary Designation. If any Participant fails to designate a
Beneficiary in the manner provided above, if the designation is void, or if the
Beneficiary designated by a deceased Participant dies before the Participant or
before complete distribution of the Participant’s benefits, the Participant’s
Beneficiary shall be the person in the first of the following classes in which
there is a survivor:

(a) The Participant’s surviving spouse;

(b) The Participant’s children in equal shares, except that if any of the
children predeceases the Participant but leaves surviving issue, then such issue
shall take by right of representation the share the deceased child would have
taken if living; or

(c) The Participant’s estate.

 

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ARTICLE 7

ADMINISTRATION

7.1 Committee; Duties. This Plan shall be administered by the Committee, which
shall consist of not less than three (3) persons appointed by the Board, except
after a Change in Control as provided in Section 7.8 below. No member of the
Committee who is a full-time officer or employee of the Company shall receive
compensation with respect to his or her service on the Committee. Any member of
the Committee may resign by delivering his or her written resignation to the
chair of the Committee or to the Board. The Board may remove any Committee
member by providing him or her with written notice of the removal. A majority
vote of the Committee members shall control any decision. Members of the
Committee may be Participants under this Plan.

7.2 Administrative Authority. The Committee shall be the “administrator” as
defined in Section 3(16)(A) of ERISA for purposes of the reporting and
disclosure requirements of ERISA and the Code. The Committee has full
discretionary authority to perform all functions necessary or appropriate to the
operation of the Plan, including without limitation authority to (a) construe
and interpret the provisions of the Plan document and any related instrument and
determine any question arising under the Plan document or related instrument, or
in connection with the administration or operation thereof; (b) determine in its
sole discretion all facts and relevant considerations affecting the eligibility
of any individual to be or become a Participant; (c) authorize and direct all
disbursements under the Plan; and (d) employ and engage such persons, counsel
and agents and to obtain such administrative, clerical, medical, legal, audit
and actuarial services as it may deem necessary in carrying out the provisions
of the Plan. Notwithstanding anything in the Plan to the contrary, the Committee
shall administer and construe the Plan in accordance with Section 409A of the
Code, the Treasury regulations thereunder, and any other published interpretive
authority, as issued or amended from time to time. The Company’s General Counsel
or other designated officer shall be the agent for service of process on the
Plan.

7.3 Agents. The Committee may, from time to time, employ agents and delegate to
them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Company.

 

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7.4 Expenses of Administration. All reasonable expenses, which are necessary to
operate and administer the Plan, shall be paid directly by the Company and, as
applicable, by the relevant Affiliate. All reasonable costs incurred by a member
of the Committee in the discharge of his or her duties under the Plan shall be
paid or reimbursed by the Company. Such costs shall include fees or expenses
arising from the Committee’s retention, with the consent of the Board, of any
attorneys, accountants, actuaries, consultants or recordkeepers required by the
Committee to discharge its duties under the Plan. Nothing in the preceding two
sentences or in any other provisions of the Plan shall require the Company to
pay or reimburse any person for any cost, liability, loss, fee or expense
incurred by such person in any dispute with the Company; nor may any such person
reimburse himself or herself from any Plan contributions or from the principal
or income of investment or funding vehicle for the Plan for any such cost,
liability, loss, fee or expense.

7.5 Insurance. The Company may, but need not, obtain liability insurance to
protect its directors, officers, employees, or representatives or the Committee
against loss in the discharge of their responsibility in the operation of the
Plan.

7.6 Notices. Any notice from the Company or the Committee to a Participant or
Beneficiary regarding this Plan may be addressed to the last known residence of
said person as indicated in the records of the Company. Any notice to, or any
service of process upon, the Company or the Committee with respect to this Plan
may addressed as follows:

Novellus Systems, Inc.

4000 North First Street

San Jose, CA 95134

 

Attention:    Administrative Committee for the Novellus Systems, Inc. Executive
Voluntary Deferred Compensation Plan

7.7 Indemnity of Committee. The Company shall indemnify and hold harmless the
members of the Committee against any and all claims, loss, damage, expense or
liability arising from any action or failure to act with respect to this Plan on
account of such member’s service on the Committee, except in the case of gross
negligence or willful misconduct.

 

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7.8 Election of Committee After Change in Control. After a Change in Control,
vacancies on the Committee shall be filled by majority vote of the remaining
Committee members and Committee members may be removed only by such a vote. If
no Committee members remain, a new Committee shall be elected by majority vote
of the Participants in the Plan who were Participants immediately preceding such
Change in Control. After a Change in Control, no amendment shall be made to
Article 7 or other Plan provisions regarding Committee authority with respect to
the Plan without prior approval by the Committee.

ARTICLE 8

CLAIMS AND APPEALS PROCEDURES

8.1 Claims Procedures.

(a) A claim for benefits shall be considered filed only when actually received
by the Committee on a form prescribed by the Committee.

(b) Any time a claim for benefits is wholly or partially denied, the Participant
or Beneficiary (hereinafter “Claimant”) shall be given written notice of such
denial within thirty (30) days after the claim is filed, unless special
circumstances require an extension of time for processing the claim. If there is
an extension, the Claimant shall be notified of the extension and the reason for
the extension within the initial thirty (30) day period. The extension shall
expire within sixty (60) days after the claim is filed. Such notice will
indicate the reason for denial, the pertinent provisions of the Plan on which
the denial is based, an explanation of the claims appeal procedure set forth
herein, and a description of any additional material or information necessary to
perfect the claim and an explanation of why such material or information is
necessary.

8.2 Appeal Procedures.

(a) Any person who has had a claim for benefits denied by the Committee, or is
otherwise adversely affected by the action or inaction of the Committee, shall
have the right to request further review by the Committee. Such request must be
in writing, and must be received by the Committee within sixty (60) days after
such person receives notice of the Committee’s action. If written request for

 

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review is not made within such sixty-day period, the Claimant shall forfeit his
or her right to review. The Claimant or a duly authorized representative of the
Claimant may review all pertinent documents and submit issues and comments in
writing.

(b) The Committee shall then review the claim. The Committee may issue a written
decision reaffirming, modifying or setting aside its former action within thirty
(30) days after receipt of the written request for review, or sixty (60) days if
special circumstances require an extension. The Claimant shall be notified in
writing of any such extension within thirty (30) days following the request for
review. An original or copy of the decision shall be furnished to the Claimant.
The decision shall set forth the reasons and pertinent plan provisions or
relevant laws on which the decision rests. The decision shall be final and
binding upon the Claimant and the Committee and all other persons having or
claiming to have an interest in the Plan or in any Account established under the
Plan.

8.3 Subsequent Proceedings.

(a) Exhaustion of Administrative Remedies Required. Notwithstanding any
provision in the Plan to the contrary, a Claimant must exhaust all
administrative remedies available to such Claimant under the Plan before such
Claimant may seek judicial review pursuant to Section 502(a) of ERISA. A
Claimant’s failure to submit a claim or a request for review in accordance with
the procedures and deadlines set forth in Sections 8.1 and 8.2 shall result in
an automatic, conclusive, and binding denial of the Claimant’s claim or appeal,
as the case may be.

(b) Award of Fees, Costs, Etc. to Prevailing Party. In the event of any
litigation arising out of, or relating to, this Plan, the prevailing party shall
automatically be entitled to recover from the other party his/her/its legal
fees, expert witness fees, court costs, and other expenses incurred in
connection with any such litigation.

(c) Necessary Parties. The Plan and the Company will be the necessary parties to
any action or proceeding involving the Plan. No person employed by the Company,
no Participant or Beneficiary or any other person having or claiming to have an
interest in the Plan will be entitled to any notice or process, unless such
person is a named party to the action or proceeding. Any final judgment or
decision that may be entered in any such action or proceeding will be binding
and conclusive on all persons having or claiming to have any interest in the
Plan.

 

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ARTICLE 9

AMENDMENT AND TERMINATION OF PLAN

9.1 Amendment. The Board may at any time amend the Plan by written instrument,
notice of which is given to all Participants and to any Beneficiary then
receiving installment payments, subject to the following:

(a) Preservation of Account Balance. No amendment shall reduce the amount
accrued in any Account as of the date such notice of the amendment is given.

(b) Changes in Accrual Rate. No amendment shall reduce, either prospectively or
retroactively, the rate at which Accruals are credited to the amount already
accrued in any of the Participant’s Account and any amounts credited to the
Account under a Deferral Election already in effect on that date, except as may
be provided in Section 2.27, above, as a result of a selection or deletion of
available Valuation Funds.

(c) Section 409A Compliance; Specified Employee Delay. Notwithstanding the
foregoing, the Board may adopt any amendments to the Plan as it deems necessary
or appropriate, as determined in good faith, to comply with Section 409A of the
Code and any related regulatory or administrative guidance issued by the
Internal Revenue Service. The Board shall delay the payment of any benefits
payable under this Plan to the extent it deems necessary or appropriate to
comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to
certain “specified employees” of certain publicly-traded companies) and in such
event, any such amount to which a Participant would otherwise be entitled during
the six (6) month period immediately following his or her separation from
service will be paid on the first business day following the expiration of such
six (6) month period.

9.2 Company’s Right to Terminate. To the extent permitted by Section 409A of the
Code, the Board may at any time partially or completely terminate the Plan if,
in its judgment, the tax, accounting or other effects of the continuance of the
Plan, or potential payments thereunder would not be in the best interests of
Company.

 

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9.3 Liquidation of Plan. In connection with the termination of the Plan under
Section 9.2, the Board may liquidate the Plan and pay out all outstanding
Account balances; provided, however, that—

(a) The termination and liquidation of the Plan does not occur proximate to a
downturn in the financial health of the Company (within the meaning of
Section 1.409A-3(j)(4)(ix)(C)(1) of the Treasury regulations);

(b) All agreements, methods, programs, and other arrangements sponsored by the
Company that would be aggregated with the Plan under Section 1.409A-1(c) of the
Treasury regulations are terminated and liquidated;

(c) No payments in liquidation of the Plan are made within twelve (12) months of
the date the on which the Board takes all necessary action to irrevocably
terminate and liquidate the Plan other than payments that would have been
payable under the terms of the Plan if the action to terminate and liquidate it
had not occurred;

(d) All payments are made within twenty-four (24) months of the date the Board
takes all necessary action to irrevocably terminate and liquidate the Plan; and

(e) The Company does not adopt a new plan that would be aggregated with Plan
under Section 1.409A-1(c) of the Treasury regulations within three (3) years
following the date the Board takes all necessary action to irrevocably terminate
and liquidate the Plan.

Notwithstanding the foregoing, in no event shall any outstanding Grandfathered
Accounts be liquidated in a manner inconsistent with Section 9.2(b) of the Prior
Plan document.

9.4 Termination in the Event of Insolvency. To the extent permitted under
Section 409A of the Code, the Board shall have the authority, in its sole
discretion, to terminate the Plan and distribute each Participant’s outstanding
Account balance within twelve (12) months of a corporate dissolution taxed under
Section 331 of the Code or with the approval of a bankruptcy court pursuant to
11 U.S.C. § 503(b)(1)(a). The total accelerated distribution under this
Section 9.4 must be included in a Participant’s gross income in the latest of:

(a) The calendar year in which the Plan is terminated;

 

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(b) The calendar year in which the amount of the Participant’s Account is no
longer subject to a substantial risk of forfeiture; or

(c) The calendar year in which distribution of the Participant’s Account is
administratively practicable.

9.5 Other Termination Events. The Board shall have the authority to terminate
the Plan and distribute a Participant’s outstanding Account balance to the
Participant or, if applicable, his or her Beneficiary upon the occurrence of
such other events and conditions as may be prescribed in generally applicable
guidance published in the Internal Revenue Bulletin relating to Section 409A of
the Code.

ARTICLE 10

MISCELLANEOUS

10.1 Unfunded Plan. This plan is an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of “management or
highly compensated employees” within the meaning of Sections 201, 301, and 401
of ERISA, and therefore is intended to be exempt from the provisions of Parts 2,
3 and 4 of Title I of ERISA. Notwithstanding any other provision of this Plan,
Participants and Participants’ Beneficiary shall be unsecured general creditors,
with no secured or preferential rights to any assets of the Company or any other
party for payment of benefits under this Plan. All amounts deferred under this
Plan remain or become general assets of the Company. Any property held by the
Company for the purpose of generating the cash flow for benefit payments shall
remain its general, unpledged and unrestricted assets of the Company. The
Company’s obligations under the Plan shall be an unfunded and unsecured promise
to pay money in the future. This Plan shall not be construed to require the
Company to fund any of the benefits provided hereunder or to establish a trust
or purchase an insurance policy or other product for such purpose. The Company
may make such arrangements as it desires to provide for the payment of benefits.

 

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10.2 Tax Withholding. From any payments made under this Plan, the Company shall
withhold any taxes or other amounts which federal, state or local law requires
the Company to deduct, withhold and deposit. A Beneficiary, however, may elect
not to have withholding of federal income tax to the extent permitted under
Section 3405(a)(2) of the Code, or any successor provision thereto. The
Company’s determination of the type and amount of taxes to be withheld from any
payment shall be final and binding on all persons having or claiming to have an
interest in this Plan.

10.3 Unsecured General Creditor. Notwithstanding any other provision of this
Plan, Participants and Participants’ Beneficiary shall be unsecured general
creditors, with no secured or preferential rights to any assets of the Company
or any other party for payment of benefits under this Plan. All amounts deferred
under this Plan remain or become general assets of the Company. Any property
held by the Company for the purpose of generating the cash flow for benefit
payments shall remain its general, unpledged and unrestricted assets of the
Company. The Company’s obligations under the Plan shall be an unfunded and
unsecured promise to pay money in the future. This Plan shall not be construed
to require the Company to fund any of the benefits provided hereunder or to
establish a trust or purchase an insurance policy or other product for such
purpose. The Company may make such arrangements as it desires to provide for the
payment of benefits.

10.4 Trust Fund. The Company shall be responsible for the payment of all
benefits provided under the Plan. At its discretion, Company may establish one
(1) or more trusts, with such trustees as the Board may approve, for the purpose
of assisting in the payment of such benefits. Although such a trust shall be
irrevocable, its assets shall be held for payment of all the Company’s general
creditors in the event of insolvency. To the extent any benefits provided under
the Plan are paid from any such trust, the Company shall have no further
obligation to pay them. If not paid from the trust, such benefits shall remain
the obligation of the Company.

10.5 Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant’s or any other
person’s bankruptcy or insolvency.

 

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10.6 Not a Contract of Employment. Nothing in this Plan document or in any
related instrument shall cause this Plan to be treated as a contract of
employment within the meaning of the Federal Arbitration Act, 9 U.S.C. § 1 et
seq., or shall be construed as evidence of any agreement or understanding,
express or implied, that the Company (a) will employ any person in any
particular position or level of compensation, (b) will offer any person initial
or continued participation in the Plan or awards in any commission, bonus or
other compensation program, or (c) will continue any person’s employment with
the Company for any particular period of time.

10.7 Alternative Acts and Times. If it becomes impossible or burdensome for the
Company, the Board, or the Committee to perform a specific act at a specific
time required by this Plan, the Company, the Board, or the Committee, as
applicable, may perform such alternative act which most nearly carries out the
intent and purpose of this Plan and may perform such required or alternative act
at a time as close as administratively feasible to the time specified in this
Plan for such performance. Nothing in the preceding sentence shall allow the
Company, the Board, or the Committee to accelerate or defer any payments to
Participants under this Plan, except as otherwise expressly permitted herein and
by the terms of Section 409A of the Code, the Treasury regulations thereunder,
and any other published interpretive authority, as issued or amended from time
to time.

10.8 Provision of Information. A Participant will cooperate with the Company by
furnishing any and all information requested by the Company in order to
facilitate the payment of benefits hereunder, and by taking such physical
examinations as the Company may deem necessary and taking such other action as
may be requested by the Company.

10.9 Facility of Payment. If the Committee, in its sole discretion, determines
that any Participant or Beneficiary by reason of infirmity, minority or other
disability, is physically, mentally or legally incapable of giving a valid
receipt for any payment due him or her or is incapable of handling his or her
own affairs and if the Committee is not aware of any legal representative
appointed on his or her behalf, then the Committee, in its sole discretion, may
direct (a) payment to or for the benefit of the Participant or Beneficiary;
(b) payment to any person or institution maintaining custody of the Participant
or Beneficiary; or (c) payment to any other person selected by the Committee to
receive, manage and disburse such payment for the benefit of the Participant or
Beneficiary. The receipt by any such person of any such payment shall be a
complete satisfaction therefor; and any such payment, to the extent thereof,
shall

 

29

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discharge the liability of the Company, the Board, the Committee, and the Plan
for any amounts owed to the Participant or Beneficiary hereunder. In the event
of any controversy or uncertainty regarding who should receive or whom the
Committee should select to receive any payment under this Plan, the Committee
may seek instruction from a court of proper jurisdiction or may place the
payment into such court with final distribution to be determined by such court.

10.10 Correction of Errors. If a Participant or Beneficiary in an application
for a benefit or in response to any request by the Committee for information,
makes any erroneous statement, omits any material fact, or fails to correct any
information previously furnished incorrectly to the Committee, or if the
Committee makes an error in determining the amount payable to a Participant or
Beneficiary, the Committee may correct its error and adjust any payment on the
basis of correct facts. The amount of any overpayment or underpayment may be
deducted from or added to the next succeeding payments, as directed by the
Committee. The Committee reserve the right to recover any amounts improperly or
incorrectly paid to any person under the Plan or in settlement of a claim or
satisfaction of a judgment involving the Plan. Notwithstanding the foregoing,
any actions taken by the Committee under this Section 10.10 shall comply with
Section 409A of the Code, the regulations thereunder, and any other published
interpretive authority, as issued or amended from time to time.

10.11 Missing Persons. In the event a distribution of part or all of an Account
is required to be made from the Plan to a Participant or Beneficiary, and such
person cannot be located, the relevant portion of the Account shall escheat in
accordance with the laws of the State of California. Prior to forfeiting any
Account, the Committee shall attempt to contact the Participant or Beneficiary
by return receipt mail (or other carrier) at his or her last known address
according to the Company’s records, and, where practical, by letter-forwarding
services offered through the Internal Revenue Service, or the Social Security
Administration, or such other means as the Committee deems appropriate.

10.12 Governing Law; Severability. This Plan shall be construed in accordance
with the laws of the State of California (exclusive of its rules regarding
conflicts of law) to the extent that such laws are not preempted by ERISA or
other federal laws. If any provision of this Plan shall be held illegal or
invalid for any reason, such determination shall not affect the remaining
provisions of this Plan which shall be construed as if said illegal or invalid
provision had never been included.

 

30

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10.13 Validity. If any provision of this Plan shall be held illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Plan shall be construed and enforced as if such illegal
and invalid provision had never been inserted herein.

10.14 Notice. Any notice required or permitted under the Plan shall be
sufficient if in writing and hand delivered or sent by registered or certified
mail. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification. Mailed notice to the Committee shall be
directed to the company’s address. Mailed notice to a Participant or Beneficiary
shall be directed to the individual’s last known address in the Company’s
records.

10.15 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Company and its successors and assigns. The term successors as
used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Company, and successors of
any such corporation or other business entity.

10.16 Headings. The headings in this Plan are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
the Plan.

10.17 Status of Participants. In accordance with Revenue Procedure 92-65
Section 3.01(d), this Plan hereby provides:

(a) Participants under this Plan shall have the status of general unsecured
creditors of the Company;

(b) This Plan constitutes a mere promise by the Company to make benefit payments
in the future;

(c) Any trust to which this Plan refers (i.e. any trust created by the Company
and any assets held by the trust to assist the Company in meeting its
obligations under the Plan) shall conform to the terms of the model trust
described in Revenue Procedure 92-64; and

 

31

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(d) It is the intention of the parties that the arrangements under this Plan
shall be unfunded for tax purposes and for purposes of Title I of ERISA.

[END OF PLAN]

 

32

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NOVELLUS SYSTEMS, INC.

VOLUNTARY EXECUTIVE DEFERRED COMPENSATION PLAN

EXHIBIT A — FORM OF DEFERRAL ELECTION

1. I acknowledge that I have read and understand the terms and conditions of the
NOVELLUS SYSTEMS, INC. VOLUNTARY EXECUTIVE DEFERRED COMPENSATION PLAN (the
“Plan”) and that I have had the opportunity to consult with my financial, tax
and other advisors regarding the consequences of participating in the Plan.
Unless otherwise defined, all capitalized terms used herein shall have the
meanings assigned in the Plan document.

2. I agree to defer a portion of my current compensation, and to have that
income paid to me at a later date pursuant to the terms and conditions of the
Plan, which is incorporated by reference, in its entirety, in this Deferral
Election Form.

3. I understand that this Deferral Election is not an employment agreement, does
not guarantee that I will receive any predetermined amount of compensation, and
does not guarantee that I will receive any salary, bonus or incentive
compensation, or other remuneration of any type.

4. I understand that any compensation I defer will be held as an asset of
Novellus Systems, Inc., and will remain subject to the claims of the general
creditors of Novellus Systems, Inc.

5. If I am an Employee of the Company, I understand that amounts deferred under
the Plan will be subject to applicable tax withholding under the Federal
Insurance Contributions Act during the year in which they are deferred. If I am
a Director of the Company, I understand that amounts deferred under the Plan
will be earnings from self-employment for purposes of the Self-Employment
Contributions Act.

 

Page 1 of 5

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Instructions: Complete your election and allocation instructions below.

 

A. ELECTION TO DEFER COMPENSATION

I hereby elect to defer the following percentage or amount from each of my
regular paychecks (or in the case of bonuses from each bonus paycheck):

 

Regular Salary:

   _______ %

Bonus Payments:

   _______ %

Directors Fees

   _______ %

With respect to subsequent Plan Years, I understand that, if I fail to make an
annual election at a time during which I am eligible to make an election under
the Plan, I will be deemed to have elected to continue deferring the same
percentage/dollar amount of Compensation that I elected to defer above. The
foregoing Deferral Election is voluntarily made by me after reviewing the terms
of the Plan and with knowledge that this Deferral Election is irrevocable until
changed in accordance with the terms of the Plan and applicable law.

 

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B. ALLOCATION OF DEFERRALS

The following allocation applies to all amounts deferred during future Deferral
Periods, adjusted for any Accruals and administrative expenses credited to or
charged against your Account under the Plan and shall remain effective unless
and until I submit a revised allocation to the Committee. I understand that any
such revised allocation shall only be given effect to the extent permitted by
the terms of the Plan and applicable law and, in the event any such revised
allocation has not become effective at the time I become entitled to a receive
payment under the Plan affected by such revised allocation, my prior allocation
shall remain effective.

Please specify the percentages in which your deferrals are to be allocated as
between your Retirement Account and your In-Service Account:

 

     Retirement
Account     In-Service
Account     Total
(must equal 100%)  

Regular Salary

   _______ %   _______ %   _______ %

Bonus Payments

   _______ %   _______ %   _______ %

Directors Fees

   _______ %   _______ %   _______ %

 

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C. DISTRIBUTION ELECTION

The following applies to all amounts deferred during future calendar years,
adjusted for any Accruals and administrative expenses credited to or charged
against your Account under the Plan.

Please select and complete the following:

 

1. Distribution from Retirement Account

The form of distribution from my Retirement Account upon my Termination shall be
(select one):

 

  ¨ A single Lump-Sum Payment; or

 

  ¨ Substantially equal annual installments. The number of installments may be
no less than 2 and no more than 15 as specified below.

 

                    substantially equal annual installments (choose between 2
and 15)

 

2. Distribution from In-Service Account

The form of distribution from my In-Service Account at the date specified below
shall be (select one):

 

  ¨ A single Lump-Sum Payment; or

 

  ¨ Substantially equal annual installments. The number of installments may be
no less than 2 and no more than 5 as specified below.

             substantially equal annual installments (choose between 2 and 5)

My In-Service Account shall be distributed or commence to be distributed on:

   (specify date)

 

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This Deferral Election Form is executed and agreed:

 

          (Signature)     (Date)          (Printed Name)    

FILING ACKNOWLEDGEMENT

Filed with the records of the Company this              day of
                    , 20        .

 

By:     Title:    

 

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NOVELLUS SYSTEMS, INC. VOLUNTARY EXECUTIVE DEFERRED COMPENSATION PLAN

EXHIBIT B — VALUATION FUNDS

 

      Allocation Percentages  

Valuation Fund

   Retirement
Account     In-Service
Account  

1.      Janus Global Technology Portfolio: Service Shares

   _____ %   _____ %

2.      Morgan Stanley UIF U.S. Real Estate Portfolio

   _____ %   _____ %

3.      Janus International Growth Portfolio: Service Shares

   _____ %   _____ %

4.      Nationwide Small Company Fund (Multi-Manager)

   _____ %   _____ %

5.      Dreyfus NSAT Mid Cap Index Fund

   _____ %   _____ %

6.      Oppenheimer Funds Aggressive Growth Fund/VA

   _____ %   _____ %

7.      Dreyfus Stock Index Fund Inc.

   _____ %   _____ %

 

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8.      Dreyfus VIF Appreciation Portfolio

   _____ %   _____ %

9.      Janus Capital Appreciation Portfolio: Service Shares

   _____ %   _____ %

10.    Federated NSAT High Income Bond Fund

   _____ %   _____ %

11.    Federated Quality Bond Fund II

   _____ %   _____ %

12.    Nationwide NSAT Money Market Fund*

   _____ %   _____ %

13.    Janus Global Technology Portfolio: Service Shares

   _____ %   _____ %             

Totals (must equal 100%)

   _____ %   _____ %             

 

* This fund is designated as the default investment, in the absence of an
election.

 

Page 2 of 3

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This Allocation Form is executed and agreed:

 

          (Signature)     (Date)          (Printed Name)    

FILING ACKNOWLEDGEMENT

Filed with the records of the Company this              day of
                    , 20        .

By:         Title:            

 

Page 3 of 3

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NOVELLUS SYSTEMS, INC.

VOLUNTARY EXECUTIVE DEFERRED COMPENSATION PLAN

EXHIBIT C—BENEFICIARY DESIGNATION FORM

In the event that I should die prior to the receipt of all amounts due to me
under the Novellus Systems, Inc. Voluntary Deferred Compensation Plan (the
“Plan”), and in lieu of disposing of my interest1 in my Account by my will or
the laws of intestate succession, I hereby designate the following person(s) as
primary Beneficiary(ies) and contingent Beneficiary(ies) of my interest in my
Account (please attach additional sheets if necessary).

Primary Beneficiary(ies) (Select only one of the three alternatives)

 

¨   (a)     Individuals and/or Charities         %
Share

Name

           

Address

   

Name

           

Address

   

Name

           

Address

   

 

1

A married Participant whose Award is community property may dispose only of his
or her own interest in the Award. In such cases, the Participant’s spouse may
designate the Participant or any other person(s) as the beneficiary(ies) of his
or her interest in the Award on a separate Beneficiary Designation form.

 

Page 1 of 5

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Primary Beneficiary(ies) (Select only one of the three alternatives)

 

¨   (a)     Individuals and/or Charities         %
Share

Name

           

Address

   

 

  ¨    (b)     Residuary Testamentary Trust

In trust, to the trustee of the trust named as the beneficiary of the residue of
my probate estate.

 

  ¨    (c)     Living Trust

The                                                   (specify name) Trust,
dated                                          (date of trust establishment).

Contingent Beneficiary(ies) (Select only one of the three alternatives)

 

¨   (a)     Individuals and/or Charities         %
Share

Name

           

Address

   

Name

           

Address

   

Name

           

Address

   

 

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  ¨    (b)     Residuary Testamentary Trust

In trust, to the trustee of the trust named as the beneficiary of the residue of
my probate estate.

 

  ¨    (c)     Living Trust

The                                                   (specify name) Trust,
dated                                          (date of trust establishment).

Should all the individual primary Beneficiary(ies) fail to survive me or if the
trust named as the primary Beneficiary does not exist at my death (or no will of
mine containing a residuary trust is admitted to probate within six months of my
death), the contingent Beneficiary(ies) shall be entitled to my interest in my
Award in the shares indicated. Should any individual beneficiary fail to survive
me or a charity named as a beneficiary no longer exists at my death, such
beneficiary’s share shall be divided among the remaining named primary or
contingent Beneficiaries, as appropriate, in proportion to the percentage shares
I have allocated to them. In the event that no individual primary
Beneficiary(ies) or contingent Beneficiary(ies) survives me, no trust (excluding
a residuary testamentary trust) or charity named as a primary Beneficiary or
contingent Beneficiary exists at my death, and no will of mine containing a
residuary trust is admitted to probate within six months of my death, then my
interest in my Award shall be disposed of by my will or the laws of intestate
succession, as applicable.

Capitalized terms used but not otherwise defined herein shall have the same
meanings as set forth in the Plan.

 

Page 3 of 5

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This Beneficiary Designation is effective until I file another such Beneficiary
Designation form with the Company. Any previous Beneficiary Designations are
hereby revoked.

I understand and acknowledge that the distribution of any portion of my Account
consisting of amounts deferred or credited under the Voluntary Executive
Deferred Compensation Plan of Novellus Systems, Inc., as in effect on
December 31, 2004 (the “Prior Plan”) shall be controlled by the terms of the
Prior Plan and any beneficiary designation I may have previously made thereunder
and shall not be modified or superseded by this Beneficiary Designation.

[Signature Page Follows]

 

Page 4 of 5

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Submitted by:  ¨ Participant     ¨ Participant’s Spouse           (Signature)  
  (Date)          (Printed Name)    

FILING ACKNOWLEDGEMENT

Filed with the records of Novellus Systems, Inc. this              day of
                        , 20        .

By:     Title:    

 

Page 5 of 5