Exhibit 10.38
 
AMCC
 
DEFERRED COMPENSATION PLAN

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AMCC
DEFERRED COMPENSATION PLAN
 
Table of Contents
 
Article
       
Page
1
  
Purpose
  
1
2
  
Definitions
  
1
3
  
Participation in the Plan
  
4
4
  
Contributions and Allocations
  
5
5
  
Vesting
  
7
6
  
Distributions to Participants
  
7
7
  
Amendment or Termination of the Plan
  
10
8
  
Plan Administration
  
10
9
  
Miscellaneous
  
14

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AMCC
DEFERRED COMPENSATION PLAN
 
The Board of Directors of Applied Micro Circuits Corporation (the “Company”), a
California corporation, adopts this non-qualified deferred compensation plan,
known as the AMCC DEFERRED COMPENSATION PLAN (the “Plan”), effective April 1,
2002.
 
ARTICLE 1
 
1.    PURPOSE.    The purpose of the Plan is to permit a select group of
management or highly compensated employees of the Company to accumulate
additional retirement income through a nonqualified deferred compensation plan
that enables them to make elective deferrals in excess of those permitted under
the AMCC 401(k) Retirement Plan.
 
This Plan is not intended to be a qualified plan within the meaning of sections
401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
This Plan is designed to qualify under the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), as an unfunded plan maintained by the Company
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees. If, for any reason, including but
not limited to, the promulgation of regulations by the United States Department
of Labor, this Plan, either in form or in operation, shall fail to so qualify,
the Plan shall be revised, as necessary, and notwithstanding any other
limitations herein, to comply with the requirements for maintaining such an
unfunded plan.
 
ARTICLE 2
 
2.    DEFINITIONS.    As used in this Plan, the following capitalized words and
phrases have the meanings indicated, unless a different meaning is expressly
provided or plainly required by the context:
 
2.1.    Account means amounts credited to bookkeeping entries established or
maintained for a Participant under the Plan.
 
2.2.    Allocation Date means the last day of any Plan Year, or any other date
designated by the Committee.
 
2.3.    Beneficiary means the person or persons designated by a Participant, or
otherwise entitled, to receive any amount credited to his Account that remains
undistributed at his death.
 
2.4.    Bonus Compensation means the aggregate bonus amount paid to a
Participant by the Company for the Plan Year, which bonus amount is based in
whole or in part upon the performance of the business unit(s) which the
Participant is responsible for managing.

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2.5.    Change in Control means:
 
(A)    the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;
 
(B)    substantially all of the assets or stock of the Company are sold or
otherwise transferred to parties that are not within the “controlled group of
corporations” (as defined in Section 1563 of the Code) in which the Company is a
member; or
 
(C)    a merger, consolidation or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation or
reorganization that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation or reorganization.
 
2.6.    Code means the Internal Revenue Code of 1986, as amended from time to
time.
 
2.7.    Committee means the committee appointed in accordance with Section 8.1
to administer the Plan.
 
2.8.    Company means Applied Micro Circuits Corporation, a California
corporation; any entity within the “controlled group of corporations” (as
defined in Section 1563 of the Code) that, with the consent of the Committee,
shall participate in this Plan; and any successor that shall maintain this Plan.
Where, in the context of the Plan, Company refers to a single entity, Company
means AMCC
 
2.9.    Compensation Reduction Accrual means an amount credited to the
Compensation Reduction Accrual Account pursuant to a Compensation Reduction
Agreement.
 
2.10.    Compensation Reduction Accrual Account means the account established to
record Compensation Reduction Accruals authorized by Participants under the
terms of this Plan.
 
2.11.    Compensation Reduction Agreement means an agreement between a
Participant and the Company, under which the Participant agrees to a reduction
in his Salary Compensation and/or Bonus Compensation and the Company agrees to
credit him with Compensation Reduction Accruals under this Plan.
 
2.12.    Disability means a “disability” as defined in any group long-term
disability policy or program sponsored by the Company and in effect at the time
a Participant who has suffered a physical or mental impairment makes application
under this Plan for a disability distribution.
 
2.13.    Effective Date means April 1, 2002, the date on which this Plan went
into effect.

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2.14.    Eligible Employee means an employee of the Company who has been
designated to participate in the Plan by the Committee.
 
2.15.    Entry Date means the first day of each payroll period.
 
2.16.    Participant means any Eligible Employee who satisfies the conditions
for participation in the Plan set forth in Section 3.1.
 
2.17.    Plan means the AMCC Deferred Compensation Plan, as set forth herein and
as from time to time amended.
 
2.18.    Plan Year means the twelve (12) consecutive month period beginning each
January 1st and ending each December 31st.
 
2.19.    Qualified Plan means the AMCC 401(k) Retirement Plan, as from time to
time amended.
 
2.20.    Salary Compensation means the base annual salary payable to a
Participant but shall not include Bonus Compensation. Salary Compensation also
includes Compensation Reduction Accruals attributable to Salary Compensation
under this Plan and any elective deferrals under cash-or-deferred arrangements
or cafeteria plans that are not includible in gross income by reason of sections
125 or 402(a)(8) of the Code, but Salary Compensation does not include any other
amounts contributed pursuant to, or received under, any other plan of deferred
compensation or other amounts which may be compensation under section 3401(a) of
the Code or otherwise.
 
2.21.    Termination of Employment means a Participant’s or former Participant’s
separation from the service of the Company (including all affiliates of the
Company) by reason of his resignation, retirement, discharge or death.
 
2.22.    Valuation Date means any Allocation Date and any other date as of which
the value of Participants’ Accounts is determined.
 
Rules of Construction
 
2.23.    Governing Law—Except to the extent preempted by ERISA, construction and
operation of this Plan will be governed by the laws of the State of California.
 
2.24.    Undefined Terms—unless the context clearly requires another meaning,
any term not specifically defined in this Plan is used in the sense given to it
by the Qualified Plan.
 
2.25.    Headings—the headings of Articles, Sections and Subsections are for
reference only and are not to be utilized in construing the Plan.
 
2.26.    Gender—unless clearly inappropriate, all pronouns of whatever Gender
refer indifferently to persons or objects of any gender.

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2.27.    Singular and Plural—unless clearly inappropriate, singular terms refer
also to the plural number and vice versa.
 
2.28.    Severability—if any provision of this Plan is held illegal or invalid
for any reason, the remaining provisions are to remain in full force and effect
and are to be construed and enforced in accordance with the purposes of the Plan
as if the illegal or invalid provision did not exist.
 
ARTICLE 3
 
3.    PARTICIPATION IN THE PLAN
 
3.1.    Commencement of Participation.    An employee of the Company becomes a
Participant on the first Entry Date following the date on which he becomes an
Eligible Employee, provided he has made a Written Election in accordance with
the terms of Section 3.3 below.
 
3.2.    Cessation of Participation.    If a Participant ceases to satisfy the
conditions set forth in Section 3.1, his participation in this Plan terminates
immediately, except that his Account will continue to be held for his benefit
and will be distributed to him in accordance with the provisions of Article 6.
He may resume participation as of any Entry Date on which he again satisfies the
conditions of Section 3.1.
 
3.3.    Written Election by Participant.    Each Eligible Employee shall submit
to the Committee a Written Election prior to the last day of the third quarter
of the Corporate Fiscal Year for which he will be a Participant or, in the case
of the Plan Year that includes the date on which the Plan is adopted, not later
than thirty (30) days after such adoption; provided that in no event shall a
Written Election be submitted later than December 31 of the year prior to the
year for which Salary Compensation and/or Bonus Compensation is to be deferred.
 
3.3.1.    Such Written Election shall be made on the form made available by the
Committee and shall set forth:
 
(A)    his participation in this Plan under the terms hereof;
 
(B)    the amount of Salary Compensation and/or Bonus Compensation the Eligible
Employee has determined to defer under this Plan for the Plan Year, pursuant to
Section 4.1 below;
 
(C)    the investment vehicles into which the Participant elects to have his
Compensation Reduction Accrual Account deemed invested and the percentage of the
account allocated to each elected investment vehicle; and
 
(D)    the form in which his benefit is to be distributed upon termination of
service.

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3.3.2.    A Participant may change a submitted Written Election in accordance
with the following:
 
(A)    A Participant may change the investment vehicle(s) and the percentage of
his Compensation Reduction Accrual Account allocated to each investment vehicle
by completing and submitting any form or forms required by the Committee.
Changes submitted to the Committee more than fifteen (15) days prior to the end
of a calendar month shall be effective on the first day of the following
calendar month. Changes submitted less than fifteen (15) days prior to the end
of a calendar month shall become effective on the first day of the calendar
month that is fifteen (15) or more days following delivery of the form to the
Committee.
 
(B)    A Participant may change the form of distribution by submitting a new
Written Election to the Company, provided that such change is submitted at least
one hundred eighty (180) days prior to the commencement of distributions or, in
the event of Disability, at any time on or after the determination of Disability
has been approved by the Committee.
 
ARTICLE 4
 
4.    CONTRIBUTIONS AND ALLOCATIONS
 
4.1.    Participant Contributions.    A Participant may elect to defer a portion
of his Salary Compensation and/or Bonus Compensation for each Plan Year. The
amount deferred must be expressed as a percentage in whole numbers, of such
Salary or Bonus Compensation. The Committee shall determine from time to time
the minimum and maximum annual deferrals permitted for each Participant;
provided, however, that the maximum annual deferral limitation for Salary
Compensation is 85% of such Salary Compensation and, for Bonus Compensation,
100% of such Bonus Compensation. The minimum deferral a Participant must defer
is $10,000.
 
4.2.    Establishment of Accounts.    The accounts specified in this Article 4
are established under the Plan to record the liability of the Company to
Participants. All accounts are maintained on the books of the Company, and the
Company is under no obligation to segregate any assets to provide for these
liabilities; provided, however, that the Company may create a grantor trust in
accordance with Section 8.5.2.
 
4.2.1.    Compensation Reduction Accrual Accounts.    A Compensation Reduction
Accrual Account is maintained for each Participant for the purpose of recording
the current value of his Compensation Reduction Accruals.

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4.3.    Valuation of Accounts.
 
4.3.1.    Timing of Valuation.    All Accounts are valued as of each Allocation
Date and as of any other Valuation Date fixed by the Committee.
 
4.3.2    Method of Valuing Accounts.
 
(A)    Allocation of Participant Contributions.    All salary amounts which a
Participant elects to defer under the terms of this Plan shall be allocated to
his Compensation Reduction Accrual Account on the last day of the month in which
the pay date occurs. All annual bonus amounts which a Participant elects to
defer under the terms of this Plan shall be allocated to his Compensation
Reduction Accrual Account on the day that the annual bonus payment actually
occurs.
 
(B)    Credited Earnings.    The amount credited to the Compensation Reduction
Accrual Account of each Participant shall be deemed to be invested in investment
vehicles as may be selected by the Committee in its sole discretion and the
Committee shall not be obliged to make any investment directed pursuant to
Section 3.3.1., the purpose of such deemed investment directions being to
establish a method of adjusting each Participant’s Compensation Reduction
Accrual Account in order to determine the amount that may ultimately be
distributed hereunder. As of the last day of each month, a Participant’s
Compensation Reduction Accrual Account shall be increased to reflect the
additions credited to the Participant as a result of such deemed investments,
determined as if the investments had actually been made and shall be charged
with a reasonable estimate of the amount of expenses that would have been
incurred had such investments actually been made.
 
(C)    Deductions.    A Participant’s Compensation Reduction Accrual Account
shall be decreased by any distributions made with respect to the Participant
pursuant to Article 6.
 
(D)    Investment Risk.    By electing to participate in this Plan, the
Participant agrees on behalf of himself and his Beneficiaries to assume all risk
in connection with any increase or decrease in the value of the investments
which are deemed to be held in his Account.

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ARTICLE 5
 
5.    VESTING.    A Participant’s interest in his Account is vested when it is
not subject to forfeiture for any reason. Subject to Section 6.12, a
Participant’s interest in his Compensation Reduction Accrual Account is fully
(100%) vested at all times.
 
ARTICLE 6
 
6.    DISTRIBUTIONS TO PARTICIPANTS
 
6.1.    Termination of Employment Benefit.    Distribution of benefits will be
made or commence, whichever is applicable, as soon as reasonably practicable
after the first day of the second Plan Year following the Plan Year in which the
Participant incurs a Termination of Employment.
 
6.1.1.    Manner of Distribution.    Each Written Election must specify in what
form benefits accrued under the Plan will be distributed to the Participant.
Available forms of distribution include:
 
(A)    lump sum;
 
(B)    annual installments paid over three (3) years;
 
(C)    annual installments paid over five (5) years;
 
(D)    annual installments paid over ten (10) years; or
 
(E)    annual installments paid over fifteen (15) years.
 
Notwithstanding any prior Written Election by a Participant, if a Participant
incurs a delayed distribution pursuant to Section 8.6, the distribution to such
Participant will only be made in annual installments paid over five (5) years.
 
6.1.2.    Interest Accrual.    If the form of distribution is in annual
installments, the Participant’s Account will continue to be deemed invested in
the investment vehicles elected by the Participant and the annual installment
payments will be adjusted to reflect the earnings of such deemed investments.
 
6.2.    Disability Benefit.    If a Participant becomes disabled as defined in
Section 2.12, distribution of benefits will commence as soon as reasonably
practicable after the Participant is disabled. Disability benefits will be paid
according to the Participant’s Written Election.

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6.3.    Survivor Benefits.
 
6.3.1    If a Participant dies after a distribution has commenced, his
Beneficiary shall receive, as soon as practicable after the date of death, a
distribution of the Participant’s entire benefit in a lump sum.
 
6.3.2    If a Participant dies before a distribution has commenced and the
Company has not purchased a life insurance contract in connection with such
Participant’s benefit, the Company will pay the Participant’s Beneficiary an
amount equal to the Participant’s current Account balance. Such benefit shall be
distributed, as soon as practicable after the death of the Participant, in a
lump sum.
 
6.4.    Unplanned In-Service Benefit.    A Participant may elect to receive his
Account balance as an Unplanned In-Service Benefit, in any form of distribution
permitted under Section 6.1.1, and commencing (or to be made) as soon as
reasonably practicable after the first day of the second Plan Year following the
date of the election, by providing the Committee with a written election to do
so. In consideration for receiving an Unplanned In-Service Benefit, such
Participant shall permanently forfeit an amount equal to ten (10%) of his
Account balance and forego all future participation for the remainder of the
Plan Year and the following Plan Year.
 
6.5.    Financial Hardship Benefit.    A Participant may request a distribution
of a portion of his Account as a Financial Hardship Benefit at any time by
providing the Committee, to its satisfaction, with a written election to do so,
proof of an unforeseeable financial hardship and proof that all other financial
resources have been explored and utilized. The amount of a Financial Hardship
Benefit shall be limited to the lesser of the amount needed for the financial
hardship or such Participant’s Account balance. In consideration for receiving a
Financial Hardship Benefit, such Participant shall forego all future
participation for the remainder of the Plan Year and the following Plan Year.
 
6.6.    Change in Control Benefit.    In the case of a Change in Control as
defined in Section 2.5, all Participant Accounts shall be distributed in a lump
sum payment as soon as administratively practicable.
 
6.7.    Type of Property to be Distributed.    All distributions from the Plan
to Participants and Beneficiaries shall be made in cash, unless the Committee
determines that other property should be distributed.
 
6.8.    Election of Beneficiary
 
6.8.1.    Designation or Change of Beneficiary by Participant.    When an
Eligible Employee qualifies for participation in the Plan, the Committee will
send him a Beneficiary designation form, on which he may designate one or more
Beneficiaries and successor Beneficiaries. A Participant may change his
Beneficiary designation at any time by filing the prescribed form with the
Committee and the consent of the Participant’s current Beneficiary is not
required for a change of Beneficiary. No Beneficiary

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has any rights under this Plan except as are provided by its terms. The rights
of a Beneficiary who predeceases the Participant who designated him immediately
terminate, unless the Participant has specified otherwise.
 
6.8.2.    Beneficiary if No Election is Made.    Unless a different Beneficiary
has been elected in accordance with Section 6.9.1, the Beneficiary of any
Participant who is lawfully married on the date of his death is his surviving
spouse of if no surviving spouse, then surviving children shall be the
beneficiary. The Beneficiary of any other Participant who dies without having
designated a Beneficiary is his estate.
 
6.9.    Nonalienability.    The rights of each Participant are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or any
Beneficiary. Neither the Participant nor Beneficiary may assign, transfer or
pledge the benefits under this Plan. Any attempt to assign, transfer or pledge a
Participant’s benefits under this Plan is void.
 
6.10.    Dissolution of Marriage.    If a Participant is divorced prior to the
commencement of his Annual Benefit, the former spouse of the Participant shall
only be entitled to receive a portion of the Participant’s Annual Benefit, if at
all, at such time and in such form as the Participant is entitled to his Annual
Benefit. Any rights of the former spouse are contingent upon the rights of the
Participant hereunder, and the former spouse shall not be entitled to accelerate
distributions and shall not be entitled to any funds before they are available
to the Participant, if at all, under the terms of the Plan.
 
6.11.    Income Recognition.    If it shall be determined by a final
administrative decision of the Internal Revenue Service (which is not appealed
by the Participant) or by a final decision of a court of competent jurisdiction
(which is not appealed by the Participant) that all or any part of the
Participant’s Account is includable in the income of the Participant prior to
the actual receipt of such amount, the Committee shall make a special payment to
such Participant, which shall, to that extent, discharge the Company’s
obligations under this Plan, in an amount equal to such Participant’s estimated
federal, state and local income tax liabilities related to such inclusion and to
the inclusion in income of such special payment; provided, that such special
payment shall not exceed the value of the Participant’s Account balance. The
Participant shall have no obligation to appeal any determination made by the
Internal Revenue Service or the decision of any such court.
 
6.12.    Manner of Payment.    Any payment to be made by the Committee hereunder
may be made by the Company’s check. Mailing to a person entitled to payment
hereunder at the address of such person last furnished to the Company shall be
adequate delivery of such payment for all purposes. If the whereabouts of a
person entitled to payment under the Plan cannot be determined after reasonable
search by the Committee and such person’s whereabouts continue to be unknown for
a period of three (3) years, the Committee may determine that such person has
died, and payment shall be made to such person’s Beneficiary or, if after a
reasonable search by the Committee, no such Beneficiary shall be located, the
Participant’s Account

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under the Plan shall be forfeited. Any determination hereunder shall be final
and binding on all persons under the Plan, and no interest or penalty shall be
payable with respect to any payment that cannot be delivered because a person’s
whereabouts cannot be so determined or continue to be unknown.
 
ARTICLE 7
 
7.    AMENDMENT OR TERMINATION OF THE PLAN
 
7.1    Committee’s Right to Amend or Terminate Plan.    The Committee may, at
any time and from time to time, amend, in whole or in part, any of the
provisions of this Plan or may terminate it as a whole or with respect to any
Participant or group of Participants. Any such amendment or termination is
binding upon all Participants and their Beneficiaries and all other parties in
interest.
 
7.2    When Amendment or Termination Take Effect.    A resolution amending or
terminating the Plan becomes effective as of the date specified therein.
 
7.3    Restriction on Retroactive Amendments.    No amendment may be made that
retroactively deprives a Participant of any benefit accrued before the date of
the amendment.
 
ARTICLE 8
 
8.     PLAN ADMINISTRATION
 
8.1    The Administrative Committee.    The Plan is administered by the
Committee which consists of one or more persons appointed by the Chief Executive
Officer. The Chief Executive Officer may remove any member of the Committee at
any time, with or without cause, and may fill any vacancy. If a vacancy occurs,
the remaining member or members of the Committee have full authority to act. Any
member of the Committee may resign by delivering his written resignation to the
Chief Executive Officer and the Committee. Any such resignation becomes
effective upon its receipt by the Chief Executive Officer or on such other date
as is agreed to by the Committee and the resigning member. The Committee acts by
a majority of its members at the time in office and may take action either by
vote at a meeting or by consent in writing without a meeting. The Committee may
adopt such rules and appoint such subcommittees, as it deems desirable for the
conduct of its affairs and the administration of the Plan. If, at any time, the
Chief Executive Officer of the Company has been determined to be incapacitated
by the Committee, the Chief Operating Officer of the Company shall succeed to
the functions set forth herein of the Chief Executive Officer.
 
8.2    Powers of the Committee.    In carrying out its duties with respect to
the general administration of the Plan, the Committee has, in addition to any
other powers conferred by the Plan or by law, the following powers:

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(a)    to determine all questions relating to eligibility to participate in the
Plan;
 
(b)    to compute the amount and kind of distributions payable to Participants
and their Beneficiaries;
 
(c)    to maintain all records necessary for the administration of the Plan;
 
(d)    to interpret the provisions of the Plan and make any and all
determinations arising thereunder, such interpretations and determinations to be
final, conclusive and binding on all Participants and Beneficiaries hereunder;
 
(e)    to establish and modify the method of accounting for the Plan;
 
(f)    to employ counsel, accountants and other consultants to aid in exercising
its powers and carrying out its duties hereunder; and
 
(g)    to perform any other acts necessary and proper for the administration of
the Plan.
 
8.3    Indemnification
 
8.3.1    Indemnification of Members of the Committee by the Company.    The
Company agrees to indemnify and hold harmless each member of the Committee
against any and all expenses and liabilities arising out of his action or
failure to act in such capacity, excepting only expenses and liabilities arising
out of his own willful misconduct or gross negligence. This right of
indemnification is in addition to any other rights to which any member of the
Committee may be entitled.
 
8.3.2    Liabilities for which Members of the Committee are
Indemnified.    Liabilities and expenses against which a member of the Committee
is indemnified hereunder include, without limitation, the amount of any
settlement or judgment, costs, counsel fees and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought against him
or the settlement thereof.
 
8.3.3.    Company’s Right to Settle Claims.    The Company may, at its own
expense, settle any claim asserted or proceeding brought against any member of
the Committee when such settlement appears to be in the best interests of the
Company.
 
8.4.    Claims Procedure.    Any Participant or Beneficiary who believes that he
is being denied a benefit to which he is entitled under the Plan and who wishes
to request review of a claim for benefits, or who wishes an explanation of a
benefit or its denial, may direct to the Committee a written request for such
review. The Committee shall respond to the request by issuing a notice to the
claimant as soon as possible, but in no event later than ninety (90) days from
the date of the request. This notice furnished by the Committee shall be written
in a manner calculated to be understood by the claimant and shall include the
following:

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·    The specific reason or reasons for any denial of benefits;
 
·    The specific Plan provisions on which any denial is based;
 
·    A description of any further material or information which is necessary for
the claimant to perfect his claim and an explanation of why the material or
information is needed; and
 
·    An explanation of the Plan’s claim appeals procedure.
 
If the claimant does not respond to the notice, posted by first-class mail to
the address of record of the Committee, within sixty (60) days from the posting
of the notice, the claimant shall be considered satisfied in all respects. If
the Committee fails to respond to the claimant’s written request for a review,
the claimant shall be entitled to proceed to the claim appeals procedure
described in the next paragraph.
 
In the event that the claimant wishes to appeal the claim review denial, the
claimant or his duly authorized representative may submit to the Committee,
within sixty (60) days of the receipt of the notice, a written notification of
appeal of the claim denial. The notification of appeal of the claim denial shall
permit the claimant or his duly authorized representative to utilize the
following claim appeals procedures:
 
·    To review pertinent documents; and
 
·    To submit issues and comments in writing to which the Committee shall
respond.
 
The Committee shall furnish a written decision on the appeal no later than sixty
(60) days after receipt of the notification of appeal, unless special
circumstances require an extension of the time for processing the appeal. In no
event, however, shall the Committee respond later than one hundred twenty (120)
days after a request for an appeal. The decision on appeal shall be in writing
and shall include specific reasons for the decision, and shall be written in a
manner calculated to be understood by the claimant and contain specific
reference to the pertinent Plan provisions on which the decision is based.
 
8.5.    Deferred Compensation As An Unsecured Promise
 
8.5.1.    No Segregation.    The Company shall not be required to segregate any
funds representing the Accounts of Participants hereunder, and nothing in this
Plan shall be construed as providing for such segregation.

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8.5.2.    Creation of Trust.    The Company may create a grantor trust (within
the meaning of Section 671 of the Code) in connection with the adoption of this
Plan to which it may from time to time make contributions. Notwithstanding any
creation of such a trust, the benefits hereunder shall be a general obligation
of the Company. Payment of benefits from such trust shall, to that extent,
discharge the Company’s obligations under this Plan. All payments provided for
under this Plan not so discharged shall be paid in cash from general assets of
the Company.
 
8.5.3.    Reliance.    Nothing in this Plan, and no action taken pursuant to its
terms, shall create or be construed to create a trust or escrow account of any
kind, or a fiduciary relationship between the Committee or the Company and any
Participant or any other person. The Participants shall rely solely on the
unsecured promise of the Company to make the payments required hereunder, but
shall have the right to enforce such a claim in the same manner as any unsecured
general creditor of the Company.
 
8.5.4.    Insurance Policies.    In the event that, in its discretion, the
Company purchases an insurance policy or policies insuring the life of a
Participant to allow the Company to recover the cost of providing benefits, in
whole or in part, hereunder, neither the Participant nor his Beneficiary shall
have any rights therein or in the proceeds therefrom. The Company shall be the
sole owner and beneficiary of any such insurance policy and shall possess and
exercise all incidents of ownership therein.
 
8.6.    Delayed Distributions.    Notwithstanding any other provision of this
Plan, all rights to a Participant’s Account, and to any payments hereunder,
shall be delayed until the second anniversary of the date of termination, if any
one of the following circumstances occur:
 
·    the Participant is discharged from employment with the Company for “cause;”
or
 
·    the Participant violates the non-competition and non-disclosure agreements
previously entered into with the Company.
 
For purposes of this Plan, the Participant shall be deemed terminated for cause
if the Company terminates the Participant, or the Participant terminates his
employment, after the Participant shall have committed any felony relating to
the Company or its property, including, but not limited to, a felony involving
fraud, theft, misappropriation, dishonesty, or embezzlement.

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ARTICLE 9
 
9.    MISCELLANEOUS
 
9.1    Plan not a Contract of Employment.    The adoption and maintenance of the
Plan does not constitute a contract between the Company and any Participant or
to be consideration for the employment of any person. Nothing herein contained
gives any Participant the right to be retained in the employ of the Company or
derogates from the right of the Company to discharge any Participant at any time
without regard to the effect of such discharge upon his rights as a Participant
in the Plan.
 
9.2    No Rights Under Plan Except as Set Forth Herein. Nothing in this Plan,
express or implied, is intended, or shall be construed, to confer upon or give
to any person, firm, association, or corporation, other than the parties hereto
and their successors in interest, any right, remedy, or claim under or by reason
of this Plan or any covenant, condition, or stipulation hereof, and all
covenants, conditions and stipulations in this Plan, by or on behalf of any
party, are for the sole and exclusive benefit of the parties hereto.
 
9.3    Withholding.    The Company retains the right to deduct and withhold from
any payments made hereunder all sums which it then may be required to deduct or
withhold pursuant to any applicable tax, statute, law, regulation, or order of
any jurisdiction whatsoever.
 
9.4    Obligations to the Company.    If a Participant becomes entitled to a
distribution of benefits under the Plan, and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount owed
to the Company, the payment to the Participant or his Beneficiary shall be
reduced by, or set off against, the amount of such indebtedness or claim, and
the Participant, as a condition of participation hereunder, consents to such
set-off. In addition to the foregoing, the payment to a Participant or his
Beneficiary also shall be reduced by the Company’s costs and expenses, including
reasonable attorneys’ and accountants’ fees, incurred in defending any claim for
benefits brought against it by such Participant or Beneficiary.
 
9.5    Notice.    Any notice required or permitted to be made under the Plan
shall be sufficient if in writing and hand delivered, or sent by registered or
certified mail, to (i) in the case of notice to the Company or the Committee,
the principal office of the Company, directed to the attention of the Committee,
and (ii) in the case of a Participant or Beneficiary, the Participant’s (or
Beneficiary’s) mailing address maintained in the Company’s personnel records.
Such notice shall be deemed given

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as of the date of delivery or, if delivery is made by mail, as of the date shown
on the receipt for registration or certification.
 
9.6    No Loans.    The account balances in the plan are not available for
loans. The amounts cannot be pledged as collateral for loans from third parties.
 
9.7    FICA Withholding.    Although not subject to state or federal income tax
withholding at time of deferral, such deferrals are subject to FICA tax
withholding. FICA tax withholding on amounts deferred will be withheld from
compensation paid to the participant.
 
IN WITNESS WHEREOF, Applied Micro Circuits Corporation has caused this Plan to
be executed by its duly authorized officer on April     , 2002.
 
APPLIED MICRO CIRCUITS CORPORATION
 
By:                                     
                                                            
 
Its:                                    
                                                            

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