Document:

exv10w41

 

Exhibit 10.41

SUPPLEMENTAL CONFIRMATION

	 	 	 
	To:

	 	Applied Materials, Inc.
	 

	 	3050 Bowers Avenue
	 

	 	Santa Clara, CA 95054
	 
	 	 
	From:

	 	Goldman, Sachs & Co.
	 
	 	 
	Subject:

	 	Accelerated Share Buyback
	 
	 	 
	Ref. No:

	 	SDB1622403043
	 
	 	 
	Date:

	 	September 18, 2006

The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the
Transaction entered into between Goldman, Sachs & Co. (“GS&Co.”) and Applied Materials, Inc.
(“Counterparty” and together with GS&Co., the “Contracting Parties”) on the Trade Date specified
below. This Supplemental Confirmation is a binding contract between GS&Co. and Counterparty as of
the relevant Trade Date for the Transaction referenced below.

1. This Supplemental Confirmation supplements, forms part of, and is subject to the Master
Confirmation dated as of September 18, 2006 (the “Master Confirmation”) between the Contracting
Parties, as amended and supplemented from time to time. All provisions contained in the Master
Confirmation govern this Supplemental Confirmation except as expressly modified below.

2. The terms of the Transaction to which this Supplemental Confirmation relates are as follows:

	 	 	 
	Trade Date:

	 	September 18, 2006
	Initial Share Price:

	 	USD17.20 per Share.
	Valuation Date:

	 	January 18, 2007
	Number of Shares:

	 	145,000,000
	Settlement Price Adjustment Amount

	 	USD [***]
	Ordinary Dividend Amount:

	 	For any calendar quarter, USD [***]
	Termination Price:

	 	USD [***] per Share
	Reserved Shares:

	 	62,800,000 Shares
	Counterparty Additional Payment Amount:

	 	USD [***]

3. Counterparty represents and warrants to GS&Co. that neither it (nor any “affiliated purchaser”
as defined in Rule 10b-18 under the Exchange Act) have made any purchases of blocks pursuant to the
proviso in Rule 10b-18(b)(4) under the Exchange Act during the four full calendar weeks immediately
preceding the Trade Date.

 

			
	***	 	information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

4. This Supplemental Confirmation may be executed in any number of counterparts, all of which shall
constitute one and the same instrument, and any party hereto may execute this Supplemental
Confirmation by signing and delivering one or more counterparts.

    Counterparty hereby agrees (a) to check this Supplemental Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly identified and rectified
and (b) to confirm that the foregoing correctly sets forth the terms of the agreement between
GS&Co. and Counterparty with respect to this Transaction, by manually signing this Supplemental
Confirmation or this page hereof as evidence of agreement to such terms and providing the other
information requested herein and immediately returning an executed copy to Equity Derivatives
Documentation Department, facsimile No. 212-428-1980/83.

	 	 	 	 	 
	 	Yours sincerely,

GOLDMAN, SACHS & CO.

 	 
	 	By:  	/s/ Conrad Langenegger
 	 
	 	 	Authorized Signatory 	 
	 	 	Name: 
Title:  	Conrad Langenegger

Vice President,

Equity Derivatives Administration 	 
	 

	 	 	 	 
	Agreed and Accepted

APPLIED MATERIALS, INC.

 	 
	By:  	/s/  Nancy H. Handel
 	 
	 	Name:  	Nancy H. Handel 	 
	 	Title:  	Senior Vice President and

Chief Financial Officer 	 
	 

2exv10w42

 

Exhibit 10.42

APPLIED MATERIALS, INC.

EMPLOYEE STOCK INCENTIVE PLAN

(as amended and restated on September 13, 2006)

SECTION 1

BACKGROUND AND PURPOSE

     1.1 Background. The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, SARs, Restricted Stock, Performance Units, and Performance Shares.

     1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and retain (a)
employees of the Company and its Affiliates, (b) consultants who provide significant services to
the Company and its Affiliates, and (c) directors of the Company who are employees of neither the
Company nor any Affiliate. The Plan also is designed to encourage stock ownership by Participants,
thereby aligning their interests with those of the Company’s stockholders.

SECTION 2

DEFINITIONS

     The following words and phrases shall have the following meanings unless a different meaning
is plainly required by the context:

     2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a
specific section of the 1934 Act or regulation thereunder shall include such section or regulation,
any valid regulation promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section or regulation.

     2.2 “Affiliate” means any corporation or any other entity (including, but not limited
to, partnerships and joint ventures) controlling, controlled by, or under common control with the
Company.

     2.3 “Affiliated SAR” means an SAR that is granted in connection with a related Option,
and which automatically will be deemed to be exercised at the same time that the related Option is
exercised.

     2.4 “Annual Revenue” means the Company’s or a business unit’s net sales for the Fiscal
Year, determined in accordance with generally accepted accounting principles; provided, however,
that prior to the Fiscal Year, the Committee shall determine whether any significant item(s) shall
be excluded or included from the calculation of Annual Revenue with respect to one or more
Participants.

     2.5 “Award” means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, or
Performance Shares.

     2.6 “Award Agreement” means the written agreement setting forth the terms and
provisions applicable to each Award granted under the Plan.

 

 

     2.7 “Board” or “Board of Directors” means the Board of Directors of the
Company.

     2.8 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section or regulation, any
valid regulation promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section or regulation.

     2.9 “Committee” means the committee appointed by the Board (pursuant to Section 3.1)
to administer the Plan.

     2.10 “Company” means Applied Materials, Inc. , a Delaware corporation, or any
successor thereto. With respect to the definitions of the Performance Goals, the Committee may
determine that “Company” means Applied Materials, Inc. and its consolidated subsidiaries.

     2.11 “Consultant” means any consultant, independent contractor, or other person who
provides significant services to the Company or its Affiliates, but who is neither an Employee nor
a Director.

     2.12 “Controllable Profits” means as to any Fiscal Year, a business unit’s Annual
Revenue minus (a) cost of sales, (b) research, development, and engineering expense, (c) marketing
and sales expense, (d) general and administrative expense, (e) extended receivables expense, and
(f) shipping requirement deviation expense.

     2.13 “Customer Satisfaction MBOs” means as to any Participant, the objective and
measurable individual goals set by a “management by objectives” process and approved by the
Committee, which goals relate to the satisfaction of external or internal customer requirements.

     2.14 “Director” means any individual who is a member of the Board of Directors of the
Company.

     2.15 “Disability” means a permanent and total disability within the meaning of Section
22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the
Committee in its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the Committee from time to
time.

     2.16 “Earnings Per Share” means as to any Fiscal Year, the Company’s Net Income or a
business unit’s Pro Forma Net Income, divided by a weighted average number of common shares
outstanding and dilutive common equivalent shares deemed outstanding.

     2.17 “Employee” means any employee of the Company or of an Affiliate, whether such
employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the
adoption of the Plan.

     2.18 “Exercise Price” means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.

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     2.19 “Fair Market Value” means the last quoted per share selling price for Shares on
the relevant date, or if there were no sales on such date, the arithmetic mean of the highest and
lowest quoted selling prices on the nearest day before and the nearest day after the relevant date,
as determined by the Committee. Notwithstanding the preceding, for federal, state, and local
income tax reporting purposes, fair market value shall be determined by the Committee (or its
delegate) in accordance with uniform and nondiscriminatory standards adopted by it from time to
time.

     2.20 “Fiscal Year” means the fiscal year of the Company.

     2.21 “Freestanding SAR” means a SAR that is granted independently of any Option.

     2.22 “Grant Date” means, with respect to an Award, the date that the Award was
granted.

     2.23 “Incentive Stock Option” means an Option to purchase Shares which is designated
as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.

     2.24 “Individual MBOs” means as to a Participant, the objective and measurable goals
set by a “management by objectives” process and approved by the Committee (in its discretion).

     2.25 “Net Income” means as to any Fiscal Year, the income after taxes of the Company
for the Fiscal Year determined in accordance with generally accepted accounting principles,
provided that prior to the Fiscal Year, the Committee shall determine whether any significant
item(s) shall be included or excluded from the calculation of Net Income with respect to one or
more Participants.

     2.26 “New Orders” means as to any Fiscal Year, the firm orders for a system, product,
part, or service that are being recorded for the first time as defined in the Company’s Order
Recognition Policy.

     2.27 “Nonemployee Director” means a Director who is an employee of neither the Company
nor of any Affiliate.

     2.28 “Nonqualified Stock Option” means an option to purchase Shares which is not
intended to be an Incentive Stock Option.

     2.29 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

     2.30 “Participant” means an Employee, Consultant, or Nonemployee Director who has an
outstanding Award.

     2.31 “Performance Goals” means the goal(s) (or combined goal(s)) determined by the
Committee (in its discretion) to be applicable to a Participant with respect to an Award. As
determined by the Committee, the Performance Goals applicable to an Award may provide for a
targeted level or levels of achievement using one or more of the following measures: (a) Annual
Revenue, (b) Controllable Profits, (c) Customer Satisfaction MBOs, (d) Earnings Per Share, (e)
Individual MBOs, (f) Net Income, (g) New Orders, (h) Pro Forma Net Income, (i) Return on Designated
Assets, and (j) Return on Sales. The Performance Goals may differ from Participant to Participant
and from Award to Award. Any criteria used may be (i) measured in absolute terms, (ii) compared to
another company or companies,
(iii) measured against the performance of the Company

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as a whole or a segment of the Company
and/or (iv) measured on a pre-tax or post-tax basis (if applicable).

     2.32 “Performance Share” means an Award granted to a Participant pursuant to Section
8.

     2.33 “Performance Unit” means an Award granted to a Participant pursuant to Section 8.

     2.34 “Period of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial
risk of forfeiture. As provided in Section 7, such restrictions may be based on the passage of
time, the achievement of target levels of performance, or the occurrence of other events as
determined by the Committee, in its discretion. Notwithstanding any contrary provision of the
Plan, a Period of Restriction shall expire at a rate no faster than one-third (1/3) of the Shares
covered by an Award each year unless determined otherwise by the Committee at its discretion solely
by reason of death, Disability, Retirement or major capital change.

     2.35 “Plan” means the Applied Materials, Inc. Employee Stock Incentive Plan, as set
forth in this instrument and as hereafter amended from time to time. The Plan formerly was named
the Applied Materials, Inc. 1995 Equity Incentive Plan.

     2.36 “Pro Forma Net Income” means as to any business unit for any Fiscal Year, the
Controllable Profits of such business unit, minus allocations of designated corporate expenses.

     2.37 “Reload Option” means an Option that automatically is granted if a Participant
pays the exercise price of an Option by tendering Shares.

     2.38 “Restricted Stock” means an Award granted to a Participant pursuant to Section 7.

     2.39 “Retirement” means, in the case of an Employee or a Nonemployee Director: (a) a
Termination of Service occurring on or after age sixty-five (65), or (b) a Termination of Service
occurring on or after age sixty (60) with at least ten (10) Years of Service. Notwithstanding the
preceding, in the case of any Option granted to any Employee prior to December 10, 1998,
“Retirement” means a Termination of Service by reason of the Employee’s retirement at or after his
or her normal retirement date under the Applied Materials, Inc. Employee Savings and Retirement
Plan, or any successor plan. With
respect to a Consultant, no Termination of Service shall be deemed to be on account of
“Retirement.”

     2.40 “Return on Designated Assets” means as to any Fiscal Year, the Pro Forma Net
Income of a business unit, divided by the average of beginning and ending business unit designated
assets, or Net Income of the Company, divided by the average of beginning and ending designated
corporate assets.

     2.41 “Return on Sales” means as to any Fiscal Year, the percentage equal to the
Company’s Net Income or the business unit’s Pro Forma Net Income, divided by the Company’s or the
business unit’s Annual Revenue.

     2.42 “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any future
regulation amending, supplementing or superseding such regulation.

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     2.43 “Section 16 Person” means a person who, with respect to the Shares, is subject to
Section 16 of the 1934 Act.

     2.44 “Shares” means the shares of common stock of the Company.

     2.45 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 7 is designated as an SAR.

     2.46 “Subsidiary” means any corporation in an unbroken chain of corporations beginning
with the Company if each of the corporations other than the last corporation in the unbroken chain
then owns stock possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

     2.47 “Tandem SAR” means an SAR that is granted in connection with a related Option,
the exercise of which shall require forfeiture of the right to purchase an equal number of Shares
under the related Option (and when a Share is purchased under the Option, the SAR shall be canceled
to the same extent).

     2.48 “Termination of Service”
means (a) in the case of an Employee, a cessation of the employee-employer relationship
between the Employee and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, Retirement, or the
disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous
reemployment by the Company or an Affiliate; (b) in the case of a Consultant, a cessation of the
service relationship between the Consultant and the Company or an Affiliate for any reason,
including, but not by way of limitation, a termination by resignation, discharge, death,
Disability, or the disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous re-engagement of the consultant by the Company or an Affiliate; and (c) in the
case of a Nonemployee Director, a cessation of the Director’s service on the Board for any reason,
including, but not by way of limitation, a termination by resignation, death, Disability,
Retirement or non-reelection to the Board.

     2.49 “Years of Service” means, in the case of an Employee, the number of full months
from the Employee’s latest hire date with the Company or an Affiliate to the date in question,
divided by 12. The Employee’s latest hire date shall be determined after giving effect to the
non-401(k) Plan principles of North American Human Resources Policy No. 2-06, Re-Employment of
Former Employees/Bridging of Service, as such Policy may be amended or superseded from time to
time. With respect to a Nonemployee Director, “Years of Service” means the number of years of
continuous service on the Board of Directors.

SECTION 3

ADMINISTRATION

     3.1 The Committee. The Plan shall be administered by the Committee. The Committee
shall consist of not less than two (2) Directors who shall be appointed from time to time by, and
shall serve at the pleasure of, the Board of Directors. The Committee shall be comprised solely of
Directors who both are (a) “non-employee directors” under Rule 16b-3, and (b) “outside directors”
under Section 162(m) of the Code.

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     3.2 Authority of the Committee. It shall be the duty of the Committee to administer
the Plan in accordance with the Plan’s provisions. The Committee shall have all powers and
discretion necessary or appropriate to administer the Plan and to control its operation, including,
but not limited to, the power to (a) determine which Employees and Consultants shall be granted
Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the Plan and the
Awards, (d) adopt such procedures and subplans as are necessary or appropriate to permit
participation in the Plan by Employees, Consultants and Directors who are foreign nationals or
employed outside of the United States, (e) adopt rules for the administration, interpretation and
application of the Plan as are consistent therewith, and (f) interpret, amend or revoke any such
rules. Except as provided in Section 4.3, the Committee may not reprice outstanding Options or
institute a program whereby outstanding Awards are surrendered or cancelled in exchange for Awards
of the same type (which may have a lower
exercise price or purchase price), of a different type and/or cash without first obtaining
stockholder approval.

     3.3 Delegation by the Committee. The Committee, in its sole discretion and on such
terms and conditions as it may provide, may delegate all or any part of its authority and powers
under the Plan to one or more Directors or officers of the Company; provided, however, that the
Committee may not delegate its authority and powers (a) with respect to Section 16 Persons, or (b)
in any way which would jeopardize the Plan’s qualification under Section 162(m) of the Code or Rule
16b-3.

     3.4 Decisions Binding. All determinations and decisions made by the Committee, the
Board, and any delegate of the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

SECTION 4

SHARES SUBJECT TO THE PLAN

     4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the total
number of Shares available for grant under the Plan shall not exceed 367,200,000. Shares granted
under the Plan may be either authorized but unissued Shares or treasury Shares. The total number
of Shares that may be granted pursuant to awards of Restricted Stock, Performance Shares and
Performance Units may not exceed 20,000,000 Shares.

     4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled, terminates,
expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon
exercise of the related Option, or the termination of a related Option upon exercise of the
corresponding Tandem SAR), any Shares subject to such Award again shall be available to be the
subject of an Award.

     4.3 Adjustments in Awards and Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up,
Share combination, or other change in the corporate structure of the Company affecting the Shares,
the Committee shall adjust the number and class of Shares which may be delivered under the Plan,
the number, class, and price of Shares subject to outstanding Awards, and the numerical limits of
Sections 5.1, 6.1, 7.1, 8.1 and 9.1, in such manner as the Committee (in its sole discretion) shall
determine to be appropriate to prevent the dilution or diminution of such Awards. Notwithstanding
the preceding, the number of Shares subject to any Award always shall be a whole number.

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SECTION 5

STOCK OPTIONS

     5.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be
granted to Employees and Consultants at any time and from time to time as determined by the
Committee in its sole discretion. The Committee, in its sole discretion, shall determine the
number of Shares subject to each Option, provided that during any Fiscal Year, no Participant shall
be granted Options covering more than 1,400,000 Shares. The Committee may grant Incentive Stock
Options, Nonqualified Stock Options, or a combination thereof. The Committee may not grant Reload
Options.

     5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall
specify the Exercise Price, the expiration date of the Option, the number of Shares to which the
Option pertains, any conditions to exercise of the Option, and such other terms and conditions as
the Committee, in its discretion, shall determine. The Award Agreement shall also specify whether
the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.

     5.3 Exercise Price. Subject to the provisions of this Section 5.3, the Exercise Price
for each Option shall be determined by the Committee in its sole discretion.

          5.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the
Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value of a
Share on the Grant Date.

          5.3.2 Incentive Stock Options. In the case of an Incentive Stock Option, the Exercise
Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the
Grant Date; provided, however, that if on the Grant Date, the Employee (together with persons whose
stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of all classes of stock of the Company
or any of its Subsidiaries, the Exercise Price shall be not less than one hundred and ten percent
(110%) of the Fair Market Value of a Share on the Grant Date.

          5.3.3 Substitute Options. Notwithstanding the provisions of Sections 5.3.1 and 5.3.2,
in the event that the Company or an Affiliate consummates a transaction described in Section 424(a)
of the Code (e.g., the acquisition of property or stock from an unrelated corporation), persons who
become Employees or Consultants on account of such transaction may be granted Options in
substitution for options granted by their former employer. If such substitute Options are granted,
the Committee, in its sole discretion and consistent with Section 424(a) of the Code, may determine
that such substitute Options shall have an exercise price less than one hundred percent (100%) of
the Fair Market Value of the Shares on the Grant Date.

     5.4 Expiration of Options.

          5.4.1 Expiration Dates. Each Option shall terminate no later than the first to occur
of the following events:

               (a) The date for termination of the Option set forth in the written Award Agreement; or

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               (b) The expiration of seven (7) years from the Grant Date; or

               (c) The expiration of one (1) year from the date of the Participant’s Termination of Service
for a reason other than the Participant’s death, Disability or Retirement; or

               (d) The expiration of three (3) years from the date of the Participant’s Termination of
Service by reason of Disability; or

               (e) The expiration of three (3) years from the date of the Participant’s Retirement (except as
provided in Section 5.8.2 regarding Incentive Stock Options).

          5.4.2 Death of Participant. Notwithstanding Section 5.4.1, if a Participant dies
prior to the expiration of his or her Options, the Committee, in its discretion, may provide that
his or her Options shall be exercisable for up to three (3) years after the date of death.

          5.4.3 Committee Discretion. Subject to the limits of Sections 5.4.1 and 5.4.2, the
Committee, in its sole discretion, (a) shall provide in each Award Agreement when each Option
expires and becomes unexercisable, and (b) may, after an Option is granted, extend the maximum term
of the Option (subject to Section 5.8.4 regarding Incentive Stock Options).

     5.5 Exercisability of Options. Options granted under the Plan shall be exercisable at
such times and be subject to such restrictions and conditions as the Committee shall determine in
its sole discretion. After an Option is granted, the Committee, in its sole discretion, may
accelerate the exercisability of the Option.

     5.6 Payment. Options shall be exercised by the Participant’s delivery of a written
notice of exercise to the Secretary of the Company (or its designee), setting forth the number of
Shares with respect to which the Option is to be exercised, accompanied by full payment for the
Shares.

          Upon the exercise of any Option, the Exercise Price shall be payable to the Company in full in
cash or its equivalent. The Committee, in its sole discretion, also may permit exercise (a) by
tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and to be consistent
with the purposes of the Plan.

          As soon as practicable after receipt of a written notification of exercise and full payment
for the Shares purchased, the Company shall deliver to the Participant (or the Participant’s
designated broker), Share certificates (which may be in book entry form) representing such Shares.

     5.7 Restrictions on Share Transferability. The Committee may impose such restrictions
on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including,
but not limited to, restrictions related to applicable federal securities laws, the requirements of
any national securities exchange or system upon which Shares are then listed or traded, or any blue
sky or state securities laws.

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     5.8 Certain Additional Provisions for Incentive Stock Options.

          5.8.1 Exercisability. The aggregate Fair Market Value (determined on the Grant
Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first
time by any Employee during any calendar year (under all plans of the Company and its Subsidiaries)
shall not exceed $100,000.

          5.8.2 Termination of Service. No Incentive Stock Option may be exercised more than
three (3) months after the Participant’s Termination of Service for any reason other than
Disability or death, unless (a) the Participant dies during such three-month period, and (b) the
Award Agreement or the Committee permits later exercise. No Incentive Stock Option may be
exercised more than one (1) year after the Participant’s Termination of Service on account of
Disability, unless (a) the Participant dies during such one-year period, and (b) the Award
Agreement or the Committee permit later exercise.

          5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be granted only to
persons who are employees of the Company or a Subsidiary on the Grant Date.

          5.8.4 Expiration. No Incentive Stock Option may be exercised after the expiration of
seven (7) years from the Grant Date; provided, however, that if the Option is granted to an
Employee who, together with persons whose stock ownership is attributed to the Employee pursuant to
Section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power
of all classes of the stock of the Company or any of its Subsidiaries, the Option may not be
exercised after the expiration of five (5) years from the Grant Date.

SECTION 6

STOCK APPRECIATION RIGHTS

     6.1 Grant of SARs. Subject to the terms and conditions of the Plan, an SAR may be
granted to Employees and Consultants at any time and from time to time as shall be determined by
the Committee, in its sole discretion. The Committee may grant Affiliated SARs, Freestanding SARs,
Tandem SARs, or any combination thereof.

          6.1.1 Number of Shares. The Committee shall have complete discretion to determine the
number of SARs granted to any Participant, provided that during any Fiscal Year, no Participant
shall be granted SARs covering more than 700,000 Shares.

          6.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions of the
Plan, shall have complete discretion to determine the terms and conditions of SARs granted under
the Plan. However, the exercise price of a Freestanding SAR shall be not less than one hundred
percent (100%) of the Fair Market Value of a Share on the Grant Date. The exercise price of Tandem
or Affiliated SARs shall equal the Exercise Price of the related Option.

     6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for
which its related Option is then exercisable. With respect to a Tandem SAR granted in connection
with an

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Incentive Stock Option: (a) the Tandem SAR shall expire no later than the expiration of
the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR
shall be for no more than one hundred percent (100%) of the difference between the Exercise Price
of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the
underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR
shall be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock
Option exceeds the Exercise Price of the Incentive Stock Option.

     6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be exercised
upon the exercise of the related Option. The deemed exercise of an Affiliated SAR shall not
necessitate a reduction in the number of Shares subject to the related Option.

     6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on such
terms and conditions as the Committee, in its sole discretion, shall determine.

     6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall
specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Committee, in its sole discretion, shall determine.

     6.6 Expiration of SARs. An SAR granted under the Plan shall expire upon the date
determined by the Committee, in its sole discretion, and set forth in the Award Agreement.
Notwithstanding the foregoing, the rules of Section 5.4 also shall apply to SARs.

     6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:

          (a) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times

          (b) The number of Shares with respect to which the SAR is exercised.

          At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.

SECTION 7

RESTRICTED STOCK

     7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may grant Shares of Restricted Stock to Employees and
Consultants in such amounts as the Committee, in its sole discretion, shall determine. The
Committee, in its sole discretion, shall determine the number of Shares to be granted to each
Participant, provided that during any Fiscal Year, no Participant shall receive more than 350,000
Shares of Restricted Stock.

     7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by
an Award Agreement that shall specify the Period of Restriction, the number of Shares granted, and
such other terms and conditions as the Committee, in its sole discretion, shall determine. Unless
the

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Committee determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.

     7.3 Transferability. Except as provided in this Section 7, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.

     7.4 Other Restrictions. The Committee, in its sole discretion, may impose such other
restrictions on Shares of Restricted Stock as it may deem advisable or appropriate, in accordance
with this Section 7.4.

          7.4.1 General Restrictions. The Committee may set restrictions based upon the
achievement of specific performance objectives (Company-wide, divisional, or individual),
applicable federal or state securities laws, or any other basis determined by the Committee in its
discretion.

          7.4.2 Section 162(m) Performance Restrictions. For purposes of qualifying grants of
Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the
Committee, in its discretion, may set restrictions based upon the achievement of Performance Goals.
The Performance Goals shall be set by the Committee on or before the latest date permissible to
enable the Restricted Stock to qualify as “performance-based compensation” under Section 162(m) of
the Code. In granting Restricted Stock which is intended to qualify under Section 162(m) of the
Code, the Committee shall follow any procedures determined by it from time to time to be necessary
or appropriate to ensure qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).

     7.4.3 Legend on Certificates. The Committee, in its discretion, may legend the
certificates representing Restricted Stock to give appropriate notice of such restrictions. For
example, the Committee may determine that some or all certificates representing Shares of
Restricted Stock shall bear the following legend:

     “The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is subject to
certain restrictions on transfer as set forth in the Applied Materials, Inc.
Employee Stock Incentive Plan, and in a Restricted Stock Agreement. A copy of the
Plan and such Restricted Stock Agreement may be obtained from the Secretary of
Applied Materials, Inc.”

     7.5 Removal of Restrictions. Except as otherwise provided in this Section 7, Shares
of Restricted Stock covered by each Restricted Stock grant made under the Plan shall be released
from escrow as soon as practicable after the last day of the Period of Restriction. Subject to the
minimum Period of Restriction specified in Section 2.35, the Committee, in its discretion, may
accelerate the time at which any restrictions shall lapse or be removed. After the restrictions
have lapsed, the Participant shall be entitled to have any legend or legends under Section 7.4.3
removed from his or her Share certificate, and the Shares shall be freely transferable by the
Participant.

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     7.6 Voting Rights. During the Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless the Committee determines otherwise.

     7.7 Dividends and Other Distributions. During the Period of Restriction, Participants
holding Shares of Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the Award Agreement.
If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect
to which they were paid.

     7.8 Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions
have not lapsed shall revert to the Company and again shall become available for grant under the
Plan.

SECTION 8

PERFORMANCE UNITS AND PERFORMANCE SHARES

     8.1 Grant of Performance Units/Shares. Performance Units and Performance Shares may
be granted to Employees and Consultants at any time and from time to time, as shall be determined
by the Committee, in its sole discretion. The Committee shall have complete discretion in
determining the number of Performance Units and Performance Shares granted to each Participant
provided that during any Fiscal Year, (a) no Participant shall receive Performance Units having an
initial value greater than $3,000,000, and (b) no Participant shall receive more than 350,000
Performance Shares.

     8.2 Value of Performance Units/Shares. Each Performance Unit shall have an initial
value that is established by the Committee on or before the Grant Date. Each Performance Share
shall have an initial value equal to the Fair Market Value of a Share on the Grant Date.

     8.3 Performance Objectives and Other Terms. The Committee shall set performance
objectives in its discretion which, depending on the extent to which they are met, will determine
the number or value of Performance Units/Shares that will be paid out to the Participants. The
time period during which the performance objectives must be met shall be called the “Performance
Period.” Each Award of Performance Units/Shares shall be evidenced by an Award Agreement that
shall specify the Performance Period, and such other terms and conditions as the Committee, in its
sole discretion, shall determine.

          8.3.1 General Performance Objectives. The Committee may set performance objectives
based upon the achievement of Company-wide, divisional, and/or individual goals (including, but not
limited to, continued employment), applicable federal or state securities laws, or any other basis
determined by the Committee in its discretion.

          8.3.2 Section 162(m) Performance Objectives. For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the
Committee, in its discretion, may determine that the performance objectives applicable to
Performance Units/Shares shall be based on the achievement of Performance Goals. The

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Performance
Goals shall be set by the Committee on or before the latest date permissible to enable the
Performance Units/Shares to qualify as “performance-based compensation” under Section 162(m) of the
Code. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of
the Code, the Committee shall follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Performance Units/Shares under Section
162(m) of the Code (e.g., in determining the Performance Goals).

     8.4 Earning of Performance Units/Shares. After the applicable Performance Period has
ended, the holder of Performance Units/Shares shall be entitled to receive a payout of the number
of Performance Units/Shares earned by the Participant over the Performance Period, to be determined
as a function of the extent to which the corresponding performance objectives have been achieved.
After the grant of a Performance Unit/Share, the Committee, in its sole discretion, may reduce or
waive any performance objectives for such Performance Unit/Share.

     8.5 Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares shall be made as soon as practicable after the expiration of the
applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.

     8.6 Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares shall be forfeited to the Company, and
again shall be available for grant under the Plan.

SECTION 9

NONEMPLOYEE DIRECTOR OPTIONS

     The provisions of this Section 9 are applicable only to Options granted to Nonemployee
Directors. The provisions of Section 5 are applicable to Options granted to Employees and
Consultants (and to the extent provided in Section 9.2.8, to Options granted to Nonemployee
Directors).

     9.1 Granting of Options.

          9.1.1 Initial Grants. Each Nonemployee Director who first becomes a Nonemployee
Director on or after the effective date of this Plan, automatically shall receive, as of the date
that the individual first is appointed or elected as a Nonemployee Director, an Option to purchase
45,000 Shares.

          9.1.2 Ongoing Grants. Each Nonemployee Director who both (a) is a Nonemployee
Director on the last business day of a Fiscal Year, and (b) has served as a Nonemployee Director
for the entire Fiscal Year which includes such last business day, automatically shall receive, as
of the first business day of the following Fiscal Year only, an Option to purchase 25,000 Shares.

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     9.2 Terms of Options.

          9.2.1 Option Agreement. Each Option granted pursuant to this Section 9 shall be
evidenced by a written Award Agreement between the Participant and the Company.

          9.2.2 Exercise Price. The Exercise Price for the Shares subject to each Option
granted pursuant to this Section 9 shall be 100% of the Fair Market Value of such Shares on the
Grant Date.

          9.2.3 Exercisability. Each Option granted pursuant to this Section 9 shall become
exercisable as to twenty-five percent (25%) of the Shares on each of the first four annual
anniversaries of the Grant Date. Notwithstanding the preceding, once a Participant ceases to be a
Director, his or her Options which are not then exercisable shall never become exercisable and
shall be immediately forfeited, except to the limited extent provided in the Sections 9.2.4 and
9.2.6.

          9.2.4 Retirement of Participant. In the event that a Participant is age sixty (60) or
over and has completed at least ten (10) Years of Service and then incurs a Termination of Service
due to Retirement, the right to exercise all or a portion of any Shares subject to his or her
Options that remain unexercisable immediately prior to such Retirement shall accrue on the date of
Retirement in accordance with the following rules. If the Participant has less than fifteen (15)
Years of Service as of the date of his or her Retirement, fifty percent (50% )of the Shares that
otherwise would have vested during the twelve (12) months immediately following the Retirement (had
the Participant remained a Nonemployee Director throughout such 12 month period) shall vest on the
Retirement date. If the Participant has at least fifteen (15) (but less than twenty (20)) Years of
Service as of the date of the Retirement, one hundred percent (100%) of the Shares that otherwise
would have vested during the twelve (12) months immediately following the Retirement (had the
Participant remained a Nonemployee Director throughout such 12 month period) shall vest on the
Retirement date. If the Participant has at least twenty (20) (but less than twenty-five (25))
Years of Service as of the date of the Retirement, (a) one hundred percent (100%) of the Shares
that otherwise would have vested during the twelve (12) months immediately following the Retirement
(had the Participant remained a Nonemployee Director throughout such 12 month period) shall vest on
the Retirement date, and (b) fifty percent (50%) of the Shares that otherwise would have vested
during the second twelve (12) months following the Retirement (had the Participant remained a
Nonemployee Director throughout such 12 month period) shall vest on the Retirement date. If the
Participant has at least twenty-five (25) Years of Service as of the date of the Retirement, one
hundred percent (100%) of the Shares that otherwise would have vested during the twenty-four (24)
months immediately following the Retirement (had the Participant remained a Nonemployee Director
throughout such 24 month period) shall vest on the Retirement date.

          9.2.5 Expiration of Options. Each Option granted pursuant to this Section 9 shall
terminate upon the first to occur of the following events:

               (a) The expiration of five (5) years or (in the case of any Option granted after October 10,
2000) seven (7) years from the Grant Date; or

               (b) The expiration of seven (7) months from the date of the Participant’s Termination of
Service for any reason other than the Participant’s death, Disability or Retirement; or

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               (c) The expiration of one (1) year from the date of the Participant’s Termination of Service
by reason of Disability or Retirement.

          9.2.6 Death of Participant. Notwithstanding the provisions of Section 9.2.5, if a
Participant dies prior to the expiration of his or her Options in accordance with Section 9.2.5,
then (a) one hundred percent (100%) of the Shares covered by his or her Options shall immediately
become one hundred percent (100%) exercisable, and (b) his or her Options shall terminate one (1)
year after the date of his or her death.

          9.2.7 Not Incentive Stock Options. Options granted pursuant to this Section 9 shall
not be designated as Incentive Stock Options.

          9.2.8 Other Terms. All provisions of the Plan not inconsistent with this Section 9
shall apply to Options granted to Nonemployee Directors.

SECTION 10

MISCELLANEOUS

     10.1 Deferrals. The Committee, in its sole discretion, may permit a Participant to
defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such
Participant under an Award. Any such deferral elections shall be subject to such rules and
procedures as shall be determined by the Committee in its sole discretion.

     10.2 No Effect on Employment or Service. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant’s employment or service at
any time, with or without cause. For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment with the Company and its Affiliates is on an at-will basis
only.

     10.3 Participation. No Employee or Consultant shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to receive a future
Award.

     10.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the Company against and from
(a) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding to which he or she
may be a party or in which he or she may be involved by reason of any action taken or failure to
act under the Plan or any
Award Agreement, and (b) from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled under the
Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or
under any power that the Company may have to indemnify them or hold them harmless.

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     10.5 Successors. All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business or assets of the Company.

     10.6 Beneficiary Designations. If permitted by the Committee, a Participant under the
Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in
the event of the Participant’s death. Each such designation shall revoke all prior designations by
the Participant and shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining unpaid at the
Participant’s death shall be paid to the Participant’s estate and, subject to the terms of the Plan
and of the applicable Award Agreement, any unexercised vested Award may be exercised by the
administrator or executor of the Participant’s estate.

     10.7 Limited Transferability of Awards. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution, or to the limited extent provided in Section 10.6. All rights
with respect to an Award granted to a Participant shall be available during his or her lifetime
only to the Participant. Notwithstanding the foregoing, the Participant may, in a manner specified
by the Committee, (a) transfer a Nonqualified Stock Option to a Participant’s spouse, former spouse
or dependent pursuant to a court-approved domestic relations order which relates to the provision
of child support, alimony payments or marital property rights, and (b) transfer a Nonqualified
Stock Option by bona fide gift and not for any consideration, to (i) a member or members of the
Participant’s immediate family, (ii) a trust established for the exclusive benefit of the
Participant and/or member(s) of the Participant’s immediate family, (iii) a partnership, limited
liability company of other entity whose only partners or members are the Participant and/or
member(s) of the Participant’s immediate family, or (iv) a foundation in which the Participant
an/or member(s) of the Participant’s immediate family control the management of the foundation’s
assets.

     10.8 No Rights as Stockholder. Except to the limited extent provided in Sections 7.6
and 7.7, no Participant (nor any beneficiary) shall have any of the rights or privileges of a
stockholder of the Company with respect
to any Shares issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the records of the
Company or its transfer agents or registrars, and delivered to the Participant (or beneficiary).

SECTION 11

AMENDMENT, TERMINATION, AND DURATION

     11.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may
amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason. The
amendment, suspension, or termination of the Plan shall not, without the consent of the
Participant, alter or impair any rights or obligations under any Award theretofore granted to such
Participant. No Award may be granted during any period of suspension or after termination of the
Plan.

     11.2 Duration of the Plan. The amended and restated Plan shall be effective as of
September 13, 2006 and subject to Section 11.1 (regarding the Board’s right to amend or terminate the
Plan),

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shall remain in effect thereafter. However, without further stockholder approval, no
Incentive Stock Option may be granted under the Plan after December 28, 2013.

SECTION 12

TAX WITHHOLDING

     12.1 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant
to an Award (or exercise thereof), the Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes (including the Participant’s FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).

     12.2 Withholding Arrangements. The Committee, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit a Participant to satisfy such tax
withholding obligation, in whole or in part by (a) electing to have the Company withhold otherwise
deliverable Shares, or (b) delivering to the Company already-owned Shares having a Fair Market
Value equal to the amount required to be withheld. The amount of the withholding requirement shall
be deemed to include any amount which the Committee agrees may be withheld at the time the election
is made, not to exceed the amount determined by using the maximum federal, state or local marginal
income tax rates applicable to the Participant with respect to the Award on the date that the
amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be
withheld or delivered shall be determined as of the date that the taxes are required to be
withheld.

SECTION 13

LEGAL CONSTRUCTION

     13.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall include the singular
and the singular shall include the plural.

     13.2 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.

     13.3 Requirements of Law. The granting of Awards and the issuance of Shares under the
Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

     13.4 Securities Law Compliance. With respect to Section 16 Persons, transactions
under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent
any provision of the Plan, Award Agreement or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.

     13.5 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California.

     13.6 Captions. Captions are provided herein for convenience only, and shall not serve
as a basis for interpretation or construction of the Plan.

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