Document:

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).exv10w47

 

Exhibit 10.47

APPLIED MATERIALS, INC.

EMPLOYEE STOCK INCENTIVE PLAN

(as amended and restated on September 11, 2007)

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 “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.

     2.4 “Award Agreement” means the written agreement (which may be in electronic form)
setting forth the terms and provisions applicable to each Award granted under the Plan.

     2.5 “Award Transfer Program” means any program instituted by the Committee which would
permit Participants the opportunity to transfer any outstanding Awards to a financial institution
or other person or entity approved by the Committee.

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

     2.7 “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.

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

     2.9 “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.

     2.10 “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.

     2.11 “Customer Satisfaction MBOs” means as to any Participant for any Performance
Period, 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 and/or ratings.

     2.12 “Determination Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based compensation” under Section
162(m) of the Code.

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

     2.14 “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.

     2.15 “Earnings Per Share” means as to any Performance Period, Net Income, divided by a
weighted average number of common shares outstanding and dilutive common equivalent shares deemed
outstanding.

     2.16 “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.

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

     2.18 “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

2

 

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.

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

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

     2.21 “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.

     2.22 “Individual MBOs” means as to a Participant for any Performance Period, the
objective and measurable goals set by a “management by objectives” process and approved by the
Committee, in its discretion.

     2.23 “Market Share” means as to any Performance Period, the Company’s or a business
unit’s percentage of a market segment with respect to a product or business. 

     2.24 “Net Income” means as to any Performance Period, the income after taxes for the
Performance Period determined in accordance with generally accepted accounting principles.

     2.25 “New Orders” means as to any Performance Period, 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.

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

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

     2.28 “Operating Profit” means as to any Performance Period, the difference between
revenue and related costs and expenses, excluding income derived from sources other than regular
activities and before income deductions.

     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 for a Performance Period. As
determined by the Committee, the Performance Goals applicable to each Participant shall provide for
a targeted level or levels of achievement using one or more of the following measures:
(a) Customer Satisfaction MBOs, (b) Earnings Per Share, (c) Individual MBOs, (d) Market Share,
(e) Net Income, (f) New Orders, (g) Operating Profits, (h) Return on Designated Assets, (i) Return on Equity,
(j) Return on Sales, (k) Revenue, and (l) Total Shareholder Return. Any criteria used may be
measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited,
the passage of time and/or against other companies or financial metrics), (iii) on a per share and/or share

3

 

per capita basis, (iv) against the performance of the Company as a whole or against
particular segments or products of the Company and/or (v) on a pre-tax or after-tax basis. Prior
to the Determination Date, the Committee shall determine whether any element(s) (for example, but
not by way of limitation, the effect of mergers or acquisitions) shall be included in or excluded
from the calculation of any Performance Goal with respect to any Participants (whether or not such
determinations result in any Performance Goal being measured on a basis other than generally
accepted accounting principles).

     2.32 “Performance Period” means the time period during which the performance
objectives or continued status as an Employee or Consultant must be met pursuant to Section 8.

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

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

     2.35 “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, (i) a Period of Restriction that expires solely as the result of continued employment or
service shall expire in full no earlier than the three (3) year anniversary of the Grant Date, and
(ii) a Period of Restriction that does not expire solely as the result of continued employment or
service shall expire in full no earlier than the one (1) year anniversary of the Grant Date, unless
determined otherwise by the Committee at its discretion solely by reason of death, Disability,
Retirement or major capital change.

     2.36 “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.

     2.37 “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.

     2.40 “Return on Designated Assets” means as to any Performance Period, Net Income
divided by the average of beginning and ending designated Company or business unit assets.

     2.41 “Return on Equity” means as to any Performance Period, the percentage equal to
Net Income divided by average stockholder’s equity, determined in accordance with generally
accepted accounting principles.

     2.42 “Return on Sales” means as to any Performance Period, the percentage equal to Net
Income, divided by Revenue.

4

 

     2.42 “Revenue” means net sales for the Performance Period, determined in accordance
with generally accepted accounting principles.

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

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

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

     2.46 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 6 is designated as an SAR. 

     2.47 “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.

     2.48 “Tax Obligations” means tax and social insurance liability obligations and
requirements in connection with the Awards, including, without limitation, (a) all federal, state,
and local taxes (including the Participant’s FICA obligation) that are required to be withheld by
the Company or the employing Affiliate, (b) the Participant’s and, to the extent required by the
Company (or the employing Affiliate), the Company’s (or the employing Affiliate’s) fringe benefit
tax liability, if any, associated with the grant, vesting, or sale of Shares, and (c) any other
Company (or employing Affiliate) taxes the responsibility for which the Participant has agreed to
bear with respect to such Award (or exercise thereof or issuance of Shares thereunder).

     2.49 “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.

     2.50 “Total Shareholder Return” means as to any Performance Period, the total return
(change in share price plus reinvestment of any dividends) of a share of the Company’s common
stock.

     2.52 “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 twelve (12). The Employee’s latest hire date shall be determined after giving effect to the

5

 

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.

     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) to implement an Award Transfer Program in accordance
with Section 10.7, (f) adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith, and (g) 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 (other
than pursuant to an Award Transfer Program) 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

6

 

that may be granted pursuant to awards of Restricted Stock, Performance Shares and
Performance Units may not exceed 90,000,000 Shares.

     4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled, terminates,
expires, or lapses for any reason, any Shares subject to such Award again shall be available to be
the subject of an Award. With respect to Stock Appreciation Rights, Shares actually issued pursuant
to a Stock Appreciation Right as well as the Shares that represent payment of the exercise price
and tax related to the Award shall cease to be available under the Plan. Shares that have actually
been issued under the Plan under any Award shall not be returned to the Plan and shall not become
available for future distribution under the Plan; provided, however, that if unvested Shares of
Restricted Stock, Performance Shares or Performance Units are repurchased by the Company or are
forfeited to the Company, such Shares shall become available for future grant under the Plan. To
the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment shall
not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding
anything in the Plan, or any Award Agreement to the contrary, Shares actually issued pursuant to
Awards transferred under any Award Transfer Program shall not be again available for grant under
the Plan. Notwithstanding the foregoing and, subject to adjustment provided in Section 4.3, the
maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall
equal the aggregate Share number stated in Section 4.1, plus, to the extent allowable under
Section 422 of the Code, any Shares that become available for issuance under the Plan under this
Section 4.2.

     4.3 Adjustments in Awards and Authorized Shares. In the event that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the
Company, or other change in the corporate structure of the Company affecting the Shares occurs, the
Committee shall adjust the number and class of Shares that may be issued 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, 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.

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.

7

 

     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 ten percent (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 (which may
be in electronic form); or

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

               (c) The expiration of three (3) years 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

8

 

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 notice of
exercise (in such form and manner as the Company may designate) 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 notification of exercise (in such form and manner as
the Company may designate) 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.

     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.

9

 

          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 ten percent (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.

          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, provided, however, that the exercise price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant. After a SAR is granted, the
Committee, in its sole discretion, may accelerate the exercisability of the SAR.

     6.2 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.

     6.3 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.

     6.4 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.

10

 

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 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
Participant’s continued status as an Employee or Consultant, 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

11

 

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.

     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

     The provisions of this Section 8 are applicable only to Performance Units and Performance
Shares granted to Employees and Consultants (and to the extent provided in Section 9.2.8, to
Performance Shares granted to Nonemployee Directors).

     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 (including, without limitation, continued status as an Employee or Consultant) in its

12

 

discretion which, depending on the extent to which they are met, shall determine the number or
value of Performance Units/Shares that shall be paid out to the Participants. 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. Notwithstanding the foregoing, and except as otherwise provided in the Plan,
(i) Performance Units/Shares that vest solely as a result of continued employment or service shall
vest in full no earlier than the three (3) year anniversary of the Grant Date, and (ii) Performance
Units/Shares that do not vest solely based on continued employment or service shall vest in full no
earlier than the one (1) year anniversary of the Grant Date. Notwithstanding the foregoing
sentence, the Committee, in its sole discretion, may provide at the time of or following the date
of grant for accelerated vesting for an Award of Performance Units/Shares solely by reason of
death, Disability, Retirement or major capital change.

          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 status as an Employee or Consultant), 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 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 or other vesting
provisions 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.

13

 

SECTION 9

NONEMPLOYEE DIRECTOR AWARDS

     The provisions of this Section 9 are applicable only to Performance Shares granted to
Nonemployee Directors.

     9.1
Granting of Performance Shares.

          9.1.1 Initial Awards. 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 Award of 20,000 Performance Shares (the “Initial Award”).

          9.1.2 Ongoing Awards. 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 Award of 10,000 Performance Shares
(the “Ongoing Award”).

     9.2
Terms of Initial Award and Ongoing Awards.

          9.2.1 Award Agreement. Each
Award of Performance Shares granted pursuant to this Section 9 shall be evidenced by a written
Award Agreement (which may be in electronic form) between the Participant and the Company.

          9.2.2 Value of Performance Shares. Each Performance Share shall have an initial value
equal to the Fair Market Value of a Share on the Grant Date.

          9.2.3 Performance Objectives and Other Terms. Each Performance Share Award granted
pursuant to this Section 9 shall be earned and paid out as to twenty-five percent (25%) of the
Shares subject to the Initial Award and Ongoing Awards on each of the first four (4) annual
anniversaries of the Grant Date. Notwithstanding the preceding, once a Participant ceases to be a
Director, his or her Performance Shares which are not then earned shall never be earned or paid out
and shall be immediately forfeited, except to the limited extent provided in the Section 9.2.7.

          9.2.4 Earning of Performance Shares. After the applicable Performance Period has
ended, the holder of Performance Shares shall be entitled to receive a payout of the number of
Performance Shares earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding vesting provisions have been achieved.

          9.2.5 Form and Timing of Payment of Performance Shares. Payment of earned Performance
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 Shares in the form of
cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned
Performance Shares at the close of the applicable Performance Period) or in a combination thereof.

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

14

 

          9.2.7 Death of Participant. If a Participant dies while serving as a Director prior
to the vesting of his or her Performance Shares, then one hundred percent (100%) of the Performance
Shares shall immediately become one hundred percent (100%) vested and payable.

          9.2.8 Other Terms. All provisions of the Plan not inconsistent with this Section 9
shall apply to Performance Shares granted to Nonemployee Directors, including but not limited to
the provisions of Section 8.

     9.3 Amendments. The Committee, in its sole discretion, may change the number of
Performance Shares subject to future grants of the Initial Award and Ongoing Awards at any time.

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.

     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.

15

 

     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.

          10.7.1 General. 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 and this Section 10.7. 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, if the Committee (in its discretion) so
permits, (a) transfer an Award to in accordance with an Award Transfer Program instituted by the
Committee, (b) 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 (c) 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.

          10.7.2 Award Transfer Program. Notwithstanding any contrary provision of the Plan,
the Committee shall have all discretion and authority to determine and implement the terms and
conditions of any Award Transfer Program instituted pursuant to this Section 10.7 and shall have
the authority to amend the terms of any Award participating in the Award Transfer Program,
including (but not limited to) the authority to (i) amend (including to extend) the expiration
date, post-termination exercise period and/or forfeiture conditions of a participating Award,
(ii) amend or remove any provisions of the Award relating to the Award holder’s continued service
to the Company, (iii) amend the permissible payment methods for the exercise or purchase such
Award, (iv) amend the adjustments to be implemented in the event of changes in capitalization and
other similar events, and (v) make such other changes to the terms of such Award as the Committee
deems necessary or appropriate, in its sole discretion.

     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 (which may be in book entry form)
shall have been issued, recorded on the records of the Company or its transfer agents or
registrars, and delivered to the Participant (or beneficiary).

16

 

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
Company will obtain stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with applicable laws. In addition, an amendment will be subject to stockholder
approval if the Committee or the Board, in their sole discretion, deems such amendment to be a
material amendment, except with respect to such an amendment which will impact Awards covering, in
the aggregate, no more than five percent (5%) of the shares reserved for issuance under the Plan.
The following amendments shall be deemed material amendments for purposes of the preceding sentence
(i) material increases to the benefits accrued to Participants under the Plan; (ii) increases to
the number of securities that may be issued under the Plan; (iii) material modifications to the
requirements for participation in the Plan; and (iv) the addition of a new provision allowing the
Board or the Committee to lapse or waive restrictions at its discretion. 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 11, 2007, and subject to Section 11.1 (regarding the Board’s right to amend or terminate
the Plan), shall remain in effect thereafter. However, without further stockholder approval,
no Incentive Stock Option may be granted under the Plan after January 16, 2017.

SECTION 12

TAX WITHHOLDING

     12.1 Withholding Requirements.  Prior to the delivery of any Shares or cash pursuant
to an Award (or exercise thereof), or at such earlier time as the Tax Obligations are due, 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 all Tax Obligations.

     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
Obligations, 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 or remitted. The amount of the Tax Obligations 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 or the Company, as applicable, with respect to the Award on
the date that the amount of tax or social insurance liability to be withheld or remitted 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 Tax Obligations are required to be withheld.

17

 

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, excluding its conflict of laws
provisions.

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

18

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