exv10w46



 





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.



 









 







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,



 









 







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



 









 







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



 









 







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).