Exhibit 10.46
Adjustments to Executive Officer Salaries
and Fiscal Year 2007 Performance Goals
and Performance-Based Equity Awards
for Named Executive Officers
Adjustments to Executive Officer Salaries
On December 12, 2006, the Human Resources and Compensation Committee of the
Board of Directors of Applied Materials, Inc. (“Applied”) approved the following
annual base salaries for Applied’s named executive officers, effective
December 18, 2006:

          Executive Officer   Salary  
Michael R. Splinter,
  $ 945,000  
President, Chief Executive Officer
       
 
       
George S. Davis,
  $ 450,000  
Senior Vice President, Chief Financial Officer
       
 
       
Franz Janker,
  $ 550,000  
Executive Vice President, Sales and Marketing
       
 
       
Farhad Moghadam,
  $ 525,000  
Senior Vice President, General Manager Thin Films Product Business Group and
Foundation Engineering
       
 
       
Mark R. Pinto,
  $ 500,000  
Senior Vice President, Chief Technology Officer and General Manager New Business
and New Products Group
       
 
       
Thomas St. Dennis,
  $ 485,000  
Senior Vice President, General Manager Etch, Cleans, Front End and Implant
Product Business Groups
       
 
       
Nancy H. Handel,
  $ 440,000  
Senior Vice President, Finance
       

Each salary shown above represents an increase from the prior level, except that
the salaries for Michael R. Splinter and Nancy H. Handel have not changed.
Ms. Handel retired from Applied effective January 5, 2007.

 

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Senior Executive Bonus Plan — Fiscal Year 2007 Performance Goals
On January 23, 2007, the Human Resources and Compensation Committee (the
“Committee”) of the Board of Directors of Applied approved performance goals and
a bonus formula under Applied’s Senior Executive Bonus Plan (the “Bonus Plan”)
that will be used to calculate bonus awards for Applied’s named executive
officers for fiscal 2007.
As set forth in the Bonus Plan, which was most recently approved by Applied’s
stockholders at the 2002 Annual Meeting of Stockholders, the Committee may
choose from a range of specified and defined performance measures in setting the
performance goals.
For Michael R. Splinter, President and Chief Executive Officer, the Committee
chose three primary measures: Applied’s earnings per share (weighted at 50%),
annual revenue growth of Applied relative to its major competitors (weighted at
25%), and certain strategic goals (weighted at 25%), including entry into new
markets, and strong operational and financial performance.
For George S. Davis, Senior Vice President, Chief Financial Officer, the
Committee chose two primary measures (each weighted at 50%): Applied’s earnings
per share and certain strategic goals, including revenue targets for Applied and
for particular business units.
For Franz Janker, Executive Vice President, Sales and Marketing, the Committee
chose two primary measures (each weighted at 50%): certain company-wide
strategic goals, including annual revenue growth of Applied relative to its
major competitors, and certain business-unit-specific strategic goals, including
revenue growth and growth of new orders.
For Farhad Moghadam, Senior Vice President, General Manager Thin Films Product
Business Group and Foundation Engineering, the Committee chose two primary
measures (each weighted at 50%): certain company-wide strategic goals, including
annual revenue growth of Applied relative to its major competitors, and certain
business-unit-specific strategic goals, including revenue growth, growth of new
orders and improvements in operational performance.
For Thomas St. Dennis, Senior Vice President, General Manager Etch, Cleans,
Front End and Implant Product Business Groups, the Committee chose two primary
measures (each weighted at 50%): certain company-wide strategic goals, including
annual revenue growth of Applied relative to its major competitors, and certain
business-unit-specific strategic goals, including revenue growth, growth of new
orders and improvements in operational performance.
The bonus formula also considers Applied’s total shareholder return relative to
the peer group described below under the section entitled “Employee Stock
Incentive Plan — Performance-Based Equity Awards,” and if results are above the
55th percentile position,

 

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additional bonus amounts may be earned to the extent that the actual level of
total shareholder return exceeds this threshold. Even if the goals described
above are achieved, no bonus will be paid under the Bonus Plan unless Applied
achieves a specified level of profit after tax. The bonus to Mr. Splinter under
the Bonus Plan could range from zero to 525% of his annual base salary. The
bonus for the other named executive officers could range from zero to 375% of
annual base salary, depending on the officer. However, no bonus paid under the
Bonus Plan to any individual may exceed $5 million. For all of the officers, the
maximum bonus will be payable only if actual performance significantly exceeds
all targeted goals and total shareholder return is above the 55th percentile in
the above-mentioned peer group.
The actual bonuses paid (if any) will vary depending on the extent to which
actual performance meets, exceeds or falls short of the goals described above.
Extraordinary, non-recurring items generally will be excluded when determining
actual performance, unless otherwise determined by the Committee during its
regular review of actual performance compared to the specified goals. In
addition, the Committee retains discretion to reduce or eliminate (but not
increase) the bonus that otherwise would be payable under the Bonus Plan based
on actual performance. An executive must remain an employee for all of fiscal
year 2007 in order to be eligible for any bonus under the Bonus Plan.
Employee Stock Incentive Plan — Performance-Based Equity Awards
On January 25, 2007, the Committee approved new grants of equity awards for
Applied’s
named executive officers. These awards will vest only if specific performance
goals set by the Committee are achieved. The goals require the achievement of
specified levels of Applied’s annual operating profit relative to the operating
profit performance of certain other companies and also that the officer remain
an employee of Applied through the vesting date. The awards will not vest if the
performance goals are not achieved, even if the officer otherwise remains an
employee of Applied. The following sets forth the maximum number of shares that
may be earned under these grants:

              Maximum       Number of       Shares that   Executive Officer  
may be Earned  
Michael R. Splinter
    500,000  
George S. Davis
    200,000  
Franz Janker
    300,000  
Farhad Moghadam
    225,000  
Thomas St. Dennis
    225,000  

All of the above awards are in the form of performance shares (also sometimes
referred to as restricted stock units) except that 30% of Mr. Splinter’s award
will be in the form of shares of restricted stock. Performance shares and shares
of restricted stock are similar, except that performance shares are awards that
are paid in shares of Applied common

 

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stock once the applicable vesting criteria have been met, while restricted stock
consists of shares of Applied common stock that are issued promptly after the
grant date but are subject to forfeiture if the applicable vesting criteria are
not met. All of the awards were granted under the Applied Materials, Inc.
Employee Stock Incentive Plan (the “Incentive Plan”) that has been approved by
stockholders, and all awards are subject to standard forms of agreement under
the Incentive Plan.
Vesting of the awards depends on Applied’s annual operating profit performance
as compared to operating profit performance by a group of Applied’s peer
companies. The peer group consists of more than twenty major companies in the
high technology industry with which Applied competes for executive talent. The
Committee previously selected the peer group for purposes of benchmarking
Applied’s executive and non-employee director compensation.
Beginning with fiscal 2007, Applied’s annual operating profit will be measured
each fiscal year for four consecutive years. The awards may vest in full only if
Applied’s operating profit results in Applied achieving a ranking at or above
the 65th percentile of operating profit for the peer group (the “performance
target”). If Applied fully meets or exceeds this performance target for any year
within the four year period, the maximum number of shares will become eligible
to vest, provided that the officer remains an employee of Applied through
December 19, 2010. Assuming that the performance target has been fully
satisfied, up to 1/4 of the shares may vest for each year that has elapsed since
December 19, 2006. For example, if the performance target were met fully by the
end of fiscal 2008, one-half of the shares would vest on December 19, 2008,
provided the officer remains an employee of Applied through that date. The
remaining shares would vest in equal installments on December 19, 2009 and
December 19, 2010, provided the officer remains an employee of Applied through
those dates. However, no shares will vest unless the performance target is
satisfied, even if the officer remains an employee of Applied.
If the performance target is not fully met but is above a required minimum
ranking in a given year within the four year period, a portion of the shares
underlying the award will then become eligible to vest in accordance with the
four year vesting period described above. However, for each five percentile
position that Applied is below the performance target described above, the
percentage of shares that will become eligible to vest will be reduced
significantly. Specifically, for each five percentile points by which Applied’s
rank position within the peer group falls short of the performance target
described above, the percentage of shares that will become eligible that year to
vest will be reduced by 15%. For example, if Applied’s percentile rank is only
55th, only 70% of the shares will become eligible that year to vest in
accordance with the four year vesting period described above. Moreover, if
Applied’s operating profit is below a minimum ranking (which is the 40th
percentile) within the peer group, performance will deemed to have failed for
that year and no additional shares will become eligible in that year to vest
under the four year vesting period described above. In addition, if there is an
operating loss in a given year, performance also will be deemed to have failed
for that year, even if Applied’s performance ranks above the rest of the peer
group. If performance falls below

 

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the performance target in a particular year, any shares that did not become
eligible to vest due to the under-performance still may become eligible to vest
if actual performance meets or exceeds the performance target in subsequent
years. However, any shares that have not vested or become eligible to vest by
the end of fiscal 2010 will be forfeited on that date (or if earlier, on the
date the officer’s employment with Applied terminates).