Document:

exh10_2.htm

COMPLETION GUARANTY

WHEREAS, KEWALO DEVELOPMENT LLC, a Hawaii limited liability company (the “Borrower”), has applied to FIRST HAWAIIAN BANK, WELLS FARGO BANK, N.A., BANK OF HAWAII and CENTRAL PACIFIC BANK (collectively, the “Lender”) for a loan (the “Loan”) in the principal sum of up to ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00), the proceeds from which will be used to finance the costs of acquiring, developing, designing, constructing, furnishing, marketing and selling a high-rise condominium project to be known as “Waihonua” (the “Project”) to consist of three hundred forty-one (341) residential condominium units, together with other appurtenant improvements and amenities (the “Improvements”), on certain land owned by the Borrower in Honolulu, Hawaii, all as more particularly described in certain plans and specifications dated March 26, 2012, prepared by Design Partners Incorporated, and listed on Schedule “1” attached hereto and made a part hereof (the “Plans and Specifications”); and

WHEREAS, the Loan is to be made upon and in accordance with the terms and conditions set forth in that certain Loan Agreement to be executed by the Borrower and the Lender in connection with the Loan (the “Loan Agreement”); and

WHEREAS, A & B PROPERTIES, INC., a Hawaii corporation (hereinafter called the “Completion Guarantor”) is the manager of the Borrower, and the  sole member of Waimanu Development LLC, the owner of a 50% membership interest in the Borrower, and deems it to be to its own financial benefit that the Lender make the Loan to the Borrower; and

WHEREAS, an essential condition precedent to the obligation of the Lender to make the Loan to the Borrower is the delivery to the Lender of this Completion Guaranty duly executed by the Completion Guarantor;

NOW, THEREFORE, as an essential inducement to the Lender to make the Loan to the Borrower, and as a consideration for its so doing, the Completion Guarantor hereby unconditionally, irrevocably, and absolutely, warrants, represents, covenants and agrees, with the Lender, as follows:

1.           The Completion Guarantor represents and warrants as follows:

(a)           This Completion Guaranty constitutes the legal, valid and binding obligations of the Completion Guarantor, enforceable against it in accordance with the terms, conditions and limitations set forth herein.

(b)           There are no actions, suits, proceedings or investigations currently pending, or, to the best knowledge of the Completion Guarantor, threatened against or affecting the Completion Guarantor or any of the Completion Guarantor’s properties or assets in any court at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, an adverse decision in which might materially affect the Completion Guarantor’s ability to observe and perform the Completion Guarantor’s obligations under this Completion Guaranty.

 

(c)           All tax returns and reports of the Completion Guarantor required by law to be filed have been duly filed, and all taxes, assessments, contributions, fees and other governmental charges (other than those currently payable without penalty or interest and those currently being contested in good faith) upon the Completion Guarantor or upon the Completion Guarantor’s properties, assets or income which are due and payable have been paid.

(d)           To the best knowledge of the Completion Guarantor, there is no provision of any mortgage, indenture, contract, agreement or instrument applicable to the Completion Guarantor or by which the Completion Guarantor is  bound which materially adversely affects, or in the future (so far as the Completion Guarantor can now reasonably foresee) will materially adversely affect, the Completion Guarantor’s ability to observe and perform the Completion Guarantor’s obligations under this Completion Guaranty, and, to the best knowledge of the Completion Guarantor,  the Completion Guarantor is not in violation of or in default with respect to any material provision of any such mortgage, indenture, contract, agreement or instrument which violation or default gives rise to a remedy that, if exercised, would materially adversely affect the Guarantor's ability to observe and perform the Guarantor's obligations under this Completion Guaranty.

(e)           All financial statements heretofore delivered to the Lender by the Completion Guarantor are true and correct in all material respects, and fairly represent the financial condition of the Completion Guarantor as of the respective dates thereof; and no material adverse changes have occurred in the financial conditions reflected therein since the respective dates thereof.

(f)           The Completion Guarantor, in its capacity as manager of the Borrower, and for the purpose of observing and performing its obligations under this Completion Guaranty, has received, reviewed and approved the Loan Agreement, and all of the “Loan Documents” described therein.  The Completion Guarantor, in its capacity as manager of the Borrower, and for the purpose of observing and performing its obligations under this Completion Guaranty, has also received, reviewed and approved the Plans and Specifications, the “Construction Contract”, as defined in the Loan Agreement, the “Major Contracts”, as defined in the Loan Agreement, the “Bonds”, as defined in the Loan Agreement and all other agreements, contracts, documents and instruments executed by the Borrower in connection with the construction, equipping and furnishing of the Improvements.

(g)           Due Execution of Completion Guaranty.  The execution and delivery of this Completion Guaranty by A & B Properties, Inc., have been duly authorized by the Board of Directors of A & B Properties, Inc., and no other corporate action of A & B Properties, Inc., is required therefor.

2.           The Completion Guarantor hereby irrevocably and unconditionally guarantees to the Lender that:

(a)           Upon the occurrence of an Event of Default (as defined in the Loan Agreement) arising from any failure to construct the Improvements (as defined in the Loan Agreement) substantially in accordance with the Plans and Specifications, or within the time required by Section 7.1 of the Loan Agreement (the “Construction Completion Date”), and the expiration of any applicable grace period therefor, then, and in any such event, the Completion Guarantor shall cause the Improvements to be completed and all requirements of the Loan Agreement with respect thereto fulfilled, by the Construction Completion Date, in full compliance with all applicable statutes, ordinances, building codes, regulations and subdivision, zoning, land use, ecological and environmental requirements, and pursuant to the Plans and Specifications, and shall pay all costs and expenses incurred in connection with such construction, as long as the then  undisbursed Loan proceeds which are allocable to the payment of construction costs for the Improvements, as set forth in the Loan Agreement and the Cost Budget and Cash Flow Forecast, including Retentions (as defined in the Loan Agreement), are made available to and advanced directly to the Completion Guarantor in accordance with the construction loan disbursement procedures contained in the Loan Agreement, and  upon approval of the monthly payment request from the Completion Guarantor by the Lender (and such other parties as may be required by the Loan Agreement).  The Lender may, but shall not be required to, approve any adjustments or changes to the Cost Budget and Cash Flow Forecast, or allocations of contingency line items requested by the Completion Guarantor, which have the effect of increasing the amount of Loan proceeds which are allocable to the payment of construction costs for the Improvements; provided, however, that, unless objected to by the Borrower, the Completion Guarantor shall have the same rights relating to the use of any remaining contingency funds under the Cost Budget and Cash Flow Forecast, and to move and balance individual cost line items as provided to the Borrower under the Loan Agreement. At such time as the Lender shall have disbursed the total amount of such undisbursed Loan proceeds which are allocable to the payment of construction costs for the Improvements, the Lender shall have no further obligation whatsoever to the Completion Guarantor to advance funds for construction costs.  The obligations of the Completion Guarantor hereunder shall, however, continue even after the Lender shall have disbursed the total amount of such undisbursed Loan proceeds.  The Completion Guarantor shall indemnify and hold the Lender harmless from and against any and all loss, costs, liability or expense, including reasonable attorneys’ fees, which the Lender may sustain or incur by reason of any failure by the Completion Guarantor to observe and perform its obligations as set forth in this Section 2(a) (except to the extent that such loss, cost, liability or expense arises out of the Lender’s wilful misconduct or gross negligence), including without limitation any claim by the Borrower objecting to the Lender making available to the Completion Guarantor any of the undisbursed Loan proceeds as provided above.  It is understood and agreed that the Completion Guarantor shall have the right to arrange for and cause the surety company which has issued the performance Bond with respect to the Construction Contract to cause the construction of the Improvements to be completed in accordance with the Construction Contract, and if such surety company does in fact cause the construction of the Improvements to be completed in accordance with the Construction Contract, that the same shall be deemed satisfactory performance by the Completion Guarantor of its obligations under this Section 2(a).  However, the failure or refusal of such surety to cause the construction of the Improvements to be completed in accordance with the Construction Contract (whether or not such failure or refusal is justified or excused) shall not relieve the Completion Guarantor of its obligations under this Section 2(a).

(b)           Upon the occurrence of an Event of Default (as defined in the Loan Agreement) arising from any failure to construct the Improvements (as defined in the Loan Agreement) substantially in accordance with the Plans and Specifications, or by the Construction Completion Date, and the expiration of any applicable grace period therefor, the Lender may at its option (but shall not be obligated to) proceed to complete the construction of the Improvements, either before or after the exercise of any other right or remedy which it may have against the General Contractor or any other person (including without limitation the surety company which has issued the performance Bond with respect to the Construction Contract), and in that event, the Completion Guarantor will, on demand, pay to the Lender all sums (plus interest at the applicable interest rate then in effect under the Note) expended for such purposes by or on behalf of the Lender in excess of the  undisbursed Loan proceeds which are allocable to the payment of construction costs for the Improvements, as set forth in the Loan Agreement and the Cost Budget and Cash Flow Forecast, including Retentions (as defined in the Loan Agreement).

(c)           The “Work”, as described in the Construction Contract,  shall be completed free and clear of any mechanics’ and materialmen’s liens, and all costs of the “Work” will be paid for in full.  Upon the occurrence of an Event of Default arising from the General Contractor’s or the Borrower’s failure to pay any amount due to any subcontractor, materialman, laborer or employee who may be engaged in the “Work”, and the expiration of any grace period therefor, the Completion Guarantor shall, within ten (10) business days after demand, pay all such amounts (except to the extent the same are being contested by the Borrower, the surety company which has issued the labor and material payment Bond with respect to the Construction Contract or  the Completion Guarantor in good faith by appropriate action diligently pursued and that the security afforded by the “Mortgage”, the “Security Agreement”, the “Assignment of Rents” and the “Assignment of Sales Contracts and Proceeds”(as such terms are defined in the Loan Agreement) shall not thereby be subjected to any sale, forfeiture or loss, or reasonable probability thereof), and will indemnify and hold the Lender harmless from and against any and all loss, cost, liability or expense, including reasonable attorneys’ fees, which the Lender may sustain or incur by reason of the assertion of any claims by any such subcontractor, materialman, laborer, employee or other person having a statutory lien right.  It is understood and agreed that the Completion Guarantor shall have the right to arrange for and cause the surety company which has issued the labor and material payment Bond with respect to the Construction Contract to pay all amounts due to any such subcontractor, materialman, laborer or employee, and if such surety company does in fact pay all such amounts, that the same shall be deemed satisfactory performance by the Completion Guarantor of its obligations under this Section 2(c).  However, the failure or refusal of such surety to pay all such amounts (whether or not such failure or refusal is justified or excused) shall not relieve the Completion Guarantor of its obligations under this Section 2(c).

(d)           Upon the occurrence of an Event of Default arising from the Borrower’s failure to remove, bond off, or discharge any mechanic’s or materialman’s lien filed by any subcontractor, materialman, laborer or employee against the Improvements or the Mortgaged Property, or against the proceeds of the Loan, and the expiration of any grace period therefor, the Completion Guarantor shall within ten (10) business days after written demand from the Lender, bond against or pay, the lien amount in order to effect the discharge of the lien against the Improvements or the Mortgaged Property or the proceeds of the Loan, as applicable.  The Completion Guarantor shall  indemnify and hold the Lender harmless therefrom in all respects.  If the Completion Guarantor fails to bond against or pay and discharge any such mechanic’s or materialman’s lien as provided for in this Section 2(d), the Lender may (but shall not be obligated to) procure any required bond to discharge the same, in which event the Completion Guarantor will, on demand, fully reimburse and repay to the Lender all costs and expenses incurred by the Lender in respect thereof, including reasonable attorneys’ fees incident thereto and together with interest thereof at the Default Rate described in the Loan Agreement.  It is understood and agreed that the Completion Guarantor shall have the right to arrange for and cause either the General Contractor or the surety company which has issued the labor and material payment Bond with respect to the Construction Contract to remove, bond off, or discharge any such mechanic’s or materialman’s lien, and if such General Contractor or  surety company does in fact  remove, bond off, or discharge any such mechanic’s or materialman’s lien, that the same shall be deemed satisfactory performance by the Completion Guarantor of its obligations under this Section 2(d).  However, the failure or refusal of such General Contractor or such surety to remove, bond off, or discharge any such mechanic’s or materialman’s lien (whether or not such failure or refusal is justified or excused) shall not relieve the Completion Guarantor of its obligations under this Section 2(d).

(e)           Upon the occurrence of an Event of Default arising from the Borrower’s failure to fund, or otherwise assure the payment, in accordance with the terms of the Loan Agreement, of the shortfall, if any (as determined from time to time by the Lender in accordance with the provisions of the Loan Agreement) between (i) the total amount of “Project Costs”, as defined in the Loan Agreement and (ii) the amounts available (either from proceeds of the Loan, equity funds deposited by the Borrower with the Lender, subordinated financing approved by the Lender, buyers’ deposits used for construction, or otherwise) to pay for all Project Costs, the  Completion Guarantor will, from time to time, and within thirty (30) days after receipt of a written request from the Lender, deposit with the Lender, for disbursement by the Lender pursuant to the terms of the Loan Agreement, the sum or sums equal to such shortfall.

3.           The obligations of the Completion Guarantor under this Completion Guaranty shall be absolute, unconditional and irrevocable. The Completion Guarantor shall be liable as primary obligor for the payment and performance of its obligations under this Completion Guaranty, regardless of any defense or set-off or counterclaim which Borrower may have or assert, and regardless of whether or not the Lender has instituted any action, suit or proceeding, or exhausted its remedies or taken any steps to enforce any rights against the Borrower or any other party to compel any such performance, either pursuant to the Loan Documents, or at law or in equity, and regardless of any other condition or contingency.   However, nothing contained herein shall prevent the Lender from pursuing any right or remedy it may now have or hereafter acquire against the Borrower or any other party, notwithstanding that the same may in fact destroy any rights that the Completion Guarantor may have against or with respect to, the Borrower or any third party, and the Completion Guarantor agrees that the exercise of any such right or remedy by the Lender shall not constitute a discharge of any of the obligations of the Completion Guarantor under this Completion Guaranty.

4.           The obligations, covenants, agreements and duties of the Completion Guarantor under this Completion Guaranty shall not be released, affected or impaired, without the written consent of the Lender, by (a) any waiver by the Lender, or by any indorsee or assignee of the Lender of the performance or observance by the Borrower of any of its agreements, covenants, terms or conditions contained in the Loan Documents; or (b) any extension of the time for payment by the Borrower of any amounts payable under or in connection with the Loan Documents, or of the time for performance by the Borrower or any other obligations under or arising out of the Loan Documents or any extensions or renewals thereof; or (c) the modification or amendment (whether material or otherwise) of any duty, agreement or obligation of the Borrower set forth in the Loan Documents; or (d) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of the Borrower or the Completion Guarantor; or (e) any receivership, insolvency, bankruptcy, reorganization, or other similar proceedings, affecting the Borrower or the Completion Guarantor or any of their respective assets; or (f) any invalidity, irregularity, or unenforceability of any agreement (including the Construction Contract) involving the Improvements; or (g) any right, claim, or defense of any character whatsoever available to the General Contractor under the Construction Contract, including, without limitation, any right, claim or defense, or rescission , recoupment, reduction, termination, set-off, counterclaim or waiver; or (h) any act, omission or breach (including without limitation an Event of Default under the Loan Agreement) on the part of the Borrower or the General Contractor, or any other person; or (i) the release or discharge of the Borrower from the performance or observance of any agreement, covenant, term or condition contained in the Loan Documents; or (j) any amendment, alteration, modification or change to the Plans and Specification or the Construction Contract made by the Borrower, including, without limitation, change orders, the Completion Guarantor acknowledging that, in its capacity as manager of the Borrower, and for the purpose of observing and performing its obligations under this Completion Guaranty,  it will have direct involvement with any and all such amendments, alterations, modification and changes; or  (k) the operation of law or any other cause, whether similar to or dissimilar to the foregoing.

5.           Any and all payments required to be made to the Lender by the Completion Guarantor under this Completion Guaranty shall be in lawful money of the United States in federal or immediately available funds.

6.           No failure or delay on the part of the Lender or any indorsee or assignee of the Lender in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. No amendment, modification, termination or waiver of any provision of this Completion Guaranty, nor consent to any departure by the Completion Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender or such indorsee or assignee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Completion Guarantor in any case shall entitle the Completion Guarantor to any other or further notice or demand in similar or other circumstances.

7.           The Completion Guarantor agrees to maintain at all times an aggregate “Net Worth”, as defined below, of not less than $500,000,000.00.  As used herein, the term “Net Worth” shall mean the excess of “total assets” over “total liabilities”, as determined in accordance with generally accepted accounting principles.  The Completion Guarantor acknowledges that its agreement to maintain an aggregate Net Worth of not less than $500,000,000.00 is a material consideration for the Lender to make the Loan to the Borrower, and that if the Completion Guarantor fails to maintain an aggregate Net Worth of not less than $500,000,000.00 at any time during the term of the Loan, and fails to correct the deficiency within thirty (30) days after notification thereof from the Lender, then, in such event, the Completion Guarantor will, upon request of the Lender, promptly furnish or make available to the Lender such satisfactory additional security in such manner as the Lender may reasonably request to compensate for such failure.

8.           The Completion Guarantor will at all times maintain 100% of the ownership interests in Waimanu Development LLC, and will ensure that Waimanu Development LLC at all times maintains at least a 50% ownership interest in the Borrower.  The Completion Guarantor will submit to the Lender, within ninety (90) days after the close of each fiscal year, its annual (unaudited) financial statements in form satisfactory to the Lender.  The Lender agrees to observe the confidentiality provisions of Section 11.22 of the Loan Agreement with respect to all of the financial and other information which it receives in connection herewith.

9.           The Completion Guarantor hereby waives, releases and discharges any claim or right that it may have to be subrogated to the rights of the Lender following the performance of any obligation of the Completion Guarantor under this Completion Guaranty.  This waiver, release and discharge (with regard to subrogation) shall continue even after all indebtedness under the Loan has been paid in full and the obligations of the Lender under the Loan Documents have terminated.

10.           The obligations of the Completion Guarantor under this Completion Guaranty shall be continuing obligations and a new cause of action shall be deemed to arise in respect to each default thereunder. The Completion Guarantor shall from time to time deliver, upon written request of the Lender or any indorsee or assignee of the Lender, satisfactory acknowledgments of the Completion Guarantor’s continued liability hereunder.

11.           All of the covenants, agreements, terms and conditions contained in this Completion Guaranty shall bind and inure to the benefit of the Completion Guarantor and its successors and permitted assigns, and shall bind, inure to the benefit of and be enforceable by the Lender and the indorsees and assignees of the Lender. This Completion Guaranty is also given for the benefit of any person claiming by, through or under the Lender and any purchaser of the security or any portion thereof at foreclosure or otherwise as a result of the exercise of any right or remedy provided under the Loan Documents as permitted by law.

12.           This Completion Guaranty shall for all purposes be construed and interpreted in accordance with and shall be governed by the laws of the State of Hawaii. The Completion Guarantor hereby consents to jurisdiction in the Circuit Court of the First Circuit of the State of Hawaii and agrees that service of process may be made by serving a copy of the summons and complaint upon the Completion Guarantor at the address set forth below in accordance with the applicable laws of the State of Hawaii.

13.           The Completion Guarantor shall indemnify the Lender from and against all costs and expenses, including, but not limited to, all court costs and reasonable  attorneys’ fees, whether or not legal action be instituted, incurred or paid by the Lender in enforcing this Completion Guaranty.

14.           If any term or provision of this Completion Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions thereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by law.

15.           Any notices, demands and requests required under this Completion Guaranty shall be in writing and shall be deemed to have been given or made if served personally, or sent by the United States registered or certified mail, postage prepaid, addressed to the addresses set forth below or to such other addresses as either party may hereafter designate by like notice.

	
     To the Lender at:

	
999 Bishop Street

Honolulu, Hawaii 96813

Attention:  Commercial Real Estate Division

 

	
  

	
To the Completion Guarantor at:

	
822 Bishop Street

Honolulu, Hawaii  96813

Attention:  Michael G. Wright

                  

16.           The provisions of this Completion Guaranty shall extend and be applicable to all renewals, amendments, extensions and modifications of the Loan Documents, and all references to such documents shall be deemed to include any such renewals, extensions, amendments or

modifications thereof.

17.           The initiation of foreclosure proceedings by the Lender or the exercise of any other rights or remedies by the Lender under the Loan Documents shall not exonerate the Completion Guarantor in any respect, and notwithstanding such action by the Lender, the Completion Guarantor shall remain fully liable and responsible to perform its obligations under the terms of this Completion Guaranty.

18.           The Completion Guarantor hereby knowingly, voluntarily and intentionally waives any right it may have to a jury trial in any legal proceeding which may be hereinafter instituted by the Lender or the Completion Guarantor to assert any of their respective claims arising out of or relating to this Completion Guaranty or any of the other Loan Documents or any other agreement, instrument or document contemplated thereby.  In such event, the Completion Guarantor, at the request of the Lender, shall cause its attorney of record to effectuate such waiver in compliance with the Hawaii Rules of Civil Procedure, as the same may be amended from time to time.

19.           The Lender, the Borrower and the Completion Guarantor are obligated to comply with the laws and regulations administered by the United States Office of Foreign Asset Control (“OFAC Restrictions”).  In order to comply with OFAC Restrictions, the Lender may be required to temporarily suspend processing or funding of the Loan, which may result in delayed availability of funds, or may be prohibited from closing the Loan altogether.  The Completion Guarantor agrees to the foregoing, and further agrees that if the Lender is required by applicable OFAC Restrictions to suspend processing or funding of the Loan, or is prohibited by applicable OFAC Restrictions from closing the Loan, the Completion Guarantor will nevertheless continue to perform and will not be relieved from its obligations under this Completion Guaranty, and the Lender will not be liable for any damages of any kind or nature (including, without limitation, actual, consequential, special, incidental, punitive, or indirect damages, whether arising out of claims for “lender liability” or any other cause), which the Borrower or the Completion Guarantor may suffer or incur in connection with any such suspension of, or failure to close, the Loan.

  

  

  

IN WITNESS WHEREOF, the Completion Guarantor has executed this instrument as of November 30, 2012.

A & B PROPERTIES, INC.

 

By          /s/ Michael G. Wright

Its  Executive Vice President

By         /s/ Charles W. Loomis

Its  Assistant Secretary

  

  

  

STATE OF HAWAI' I                                                         )

)           SS:

CITY AND COUNTY OF HONOLULU                             )

On November 28, 2012, in the First Circuit, State of Hawai'i, before me personally appeared Michael G. Wright, and Charles W. Loomis,to me personally known, who, being by me duly sworn or affirmed, did say that they are the Executive Vice President and Assistant Secretary respectively, of A & B Properties, Inc., a Hawaii corporation, that said persons executed the foregoing instrument identified or described as Completion Guaranty on behalf of said A & B Properties, Inc., by authority of its board of directors and said Michael G. Wright and Charles W. Loomis  acknowledged the instrument to be the free act and deed of said corporation.

The foregoing instrument is undated and contained 10 pages at the time of this acknowledgment/certification.

                         /s/ Dayle S. Sasaki-Hamamoto             

Print Name:    Dayle S. Sasaki-Hamamoto         

Notary Public, State of Hawai'i

My commission expires: August 3, 2015Exhibit1054

Exhibit 10.54

APPLIED MATERIALS, INC. 
EMPLOYEES’ STOCK PURCHASE PLAN

(Amended and Restated Effective as of October 28, 2012)
SECTION 1 
PURPOSE
Applied Materials, Inc. having established the Applied Materials, Inc. Employees’ Stock Purchase Plan (the “Plan”), in order to provide eligible employees of the Company with the opportunity to purchase Common Stock through payroll deductions or, if payroll deductions are not permitted under local laws, through other means as specified by the Committee, hereby amends and restates the Plan in its entirety, effective as of October 28, 2012 (except as otherwise indicated herein).  The Plan is intended to qualify as an employee stock purchase plan under Section 423(b) of the Code, although the Company makes no undertaking or representation to maintain such qualification.  
SECTION 2 
DEFINITIONS
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    “Board” means the Board of Directors of the Company.
2.3    “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.
2.4    “Committee” shall mean the committee appointed by the Board to administer the Plan.  Any member of the Committee may resign at any time by notice in writing mailed or delivered to the Secretary of the Company.  Until otherwise determined by the Board, the Plan shall be administered by the Human Resources and Compensation Committee of the Board.
2.5    “Common Stock” means the common stock of the Company, $0.01 par value per share.
2.6    “Company” means Applied Materials, Inc., a Delaware corporation.

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2.7    “Compensation” means a Participant’s base salary or base hourly wages payable for standard hours, excluding any other type of compensation such as commissions, overtime, bonuses, allowances or shift differential.  The Committee, in its discretion, may, on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2(f), establish a different definition of Compensation prior to an Enrollment Date for all options to be granted on such Enrollment Date in an Offering.
2.8    “Eligible Employee” means every Employee of an Employer, except (a) any Employee who immediately after the grant of an option under the Plan, would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company (including stock attributed to such Employee pursuant to Section 424(d) of the Code), or (b) as provided in this Section 2.8.  The Committee, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment Date in an Offering, determine on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2 that an Employee shall not be an Eligible Employee if he or she: (1) has not completed the required length of service with the Company, if any, as such length may be determined by the Committee in its discretion (such length of required service not to exceed two (2) years), (2) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Committee in its discretion), (3) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Committee in its discretion), (4) is a highly compensated employee under Section 414(q) of the Code, (5) is a highly compensated employee under Section 414(q) of the Code with compensation above a certain level or who is an officer or subject to the disclosure requirements of Section 16(a) of the 1934 Act, provided any exclusion be applied with respect to an individual Offering in a manner complying with Treasury Regulation Section 1.423-2(e)(2)(ii).  Further, and notwithstanding the foregoing, Employees who are citizens or residents of a non-U.S. jurisdiction (without regard to whether they also are citizens or residents of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from the Plan or an Offering if the participation of such Employees is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or an Offering to violate Section 423 of the Code.  An Employee who otherwise is an Eligible Employee shall be treated as continuing to be such while the Employee is on sick leave or other leave of absence approved in writing by the Employer, except that if the period of leave exceeds three (3) months and the Employee’s right to reemployment is not guaranteed by statute or contract, he or she shall cease to be an Eligible Employee on the date three (3) months and one (1) day following the start of such leave.  Until and unless determined otherwise by the Committee, Eligible Employees shall exclude each Employee (other than as excluded by subsection (a) of this Section 2.8) of an Employer who is customarily employed by the Company and/or a Subsidiary to work less than or equal to twenty (20) hours per week or five (5) months per calendar year. 
2.9    “Employee” means an individual who is a common-law employee of any Employer, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.  

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2.10    “Employer” or “Employers” means any one or all of the Company and those Subsidiaries which, with the consent of the Board or the Committee, have adopted the Plan or have been designated by the Board or the Committee in writing as an Employer for purposes of participation in the Plan. With respect to a particular Participant, Employer means the Company or Subsidiary, as the case may be, that directly employs the Participant.
2.11    “Enrollment Date” means such dates as may be determined by the Committee, in its discretion and on a uniform and nondiscriminatory basis, from time to time.
2.12    “Grant Date” means any date on which a Participant is granted an option under the Plan.
2.13    “Offering” means an offer under this Plan of an option that may be exercised during the period described in Section 5.2.  For purposes of the Plan, all Eligible Employees will be deemed to participate in the same Offering unless the Committee otherwise determines that Eligible Employees of one or more Employers will be deemed to participate in separate Offerings, in which case the Offerings will be considered separate even if the dates of each such Offering are identical and the provisions of the Plan will separately apply to each Offering.  To the extent permitted by Treasury Regulation Section 1.423-2(a)(1), the terms of each Offering need not be identical provided that the terms of the Plan and the Offering together satisfy Treasury Regulation Sections 1.423-2(a)(2) and (a)(3).
2.14    “Participant” means an Eligible Employee who (a) has become a Participant in the Plan pursuant to Section 4.1 and (b) has not ceased to be a Participant pursuant to Section 8 or Section 9.
2.15    “Plan” means the Applied Materials, Inc. Employees’ Stock Purchase Plan, as set forth in this instrument and as hereafter amended from time to time.
2.16    “Purchase Date” means such dates on which each outstanding option granted under the Plan shall be exercised (except in such instance in which the Plan has been terminated), as may be determined by the Committee, in its discretion and on a uniform and nondiscriminatory basis from time to time prior to an Enrollment Date for all options to be granted on such Enrollment Date.
2.17    “Purchase Period” means the period beginning on such date as may be determined by the Committee, in its discretion and on a uniform and nondiscriminatory basis, and ending on a Purchase Date.
2.18    “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.
2.19    “Treasury Regulations” means the Treasury regulations of the Code.  Reference to a specific Treasury Regulation or Section of the Code shall include such Treasury 

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Regulation or Section, 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.

SECTION 3 
SHARES SUBJECT TO THE PLAN
3.1    Number Available.  A maximum of 98,200,000 shares of Common Stock shall be available for issuance pursuant to the Plan.  Shares issued under the Plan may be newly issued shares or treasury shares.  
3.2    Adjustments.  In the event of any reorganization, recapitalization, stock split, reverse stock split, stock dividend, spin off, combination of shares, merger, consolidation, offering of rights or other similar change in the capital structure of the Company, the Committee shall proportionately adjust the number, kind and purchase price of the shares available for purchase under the Plan, the per person share number limits on purchases and the purchase price and number of shares subject to any option under the Plan which has not yet been exercised.
SECTION 4 
ENROLLMENT
4.1    Participation.  Each Eligible Employee may elect to become a Participant by enrolling or re-enrolling in the Plan effective as of any Enrollment Date.  In order to enroll, an Eligible Employee must complete, sign and submit to the Company an enrollment form in such form, manner and by such deadline as may be specified by the Committee from time to time, in its discretion and on a nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2, and which may be in electronic form.  Any Participant whose option expires and who has not withdrawn from the Plan shall be automatically re-enrolled in the Plan on the Enrollment Date immediately following the Purchase Date on which his or her option expires.
4.2    Payroll Withholding and Contribution.  On his or her enrollment form, each Participant must elect to make Plan contributions via payroll withholding from his or her Compensation or, if payroll withholding is not permitted under local laws, via such other means as specified by the Committee to the extent permitted by Treasury Regulation Section 1.423-2.  Pursuant to such procedures as the Committee may specify from time to time (which may be in electronic form), a Participant may elect to have withholding equal to, or otherwise contribute, a whole percentage from one percent (1%) to fifteen percent (15%) (or such greater or lesser percentage or dollar amount that the Committee may establish from time to time, in its discretion and on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2, for all options to be granted on any Enrollment Date in an Offering).  Unless and until the Committee determines otherwise, no Participant may contribute more than $6,500 during any one Purchase Period.  If permitted by the Committee, a Participant instead may elect to have a specific amount withheld or to contribute a specific amount, in dollars or in the applicable local currency, subject to such uniform and nondiscriminatory rules (or as otherwise 

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permitted by Treasury Regulation Section 1.423-2) as the Committee in its discretion may specify.  A Participant may elect to increase or decrease his or her rate of payroll withholding or contribution by submitting an election (which may be in electronic form) in accordance with, and if and to the extent permitted by, procedures established by the Committee from time to time, which may, if permitted by the Committee, include a decrease to zero percent (0%); provided, however, that unless determined otherwise by the Committee, a decrease to zero percent (0%) shall be deemed a withdrawal from the Plan.  A Participant may stop his or her payroll withholding or contribution by submitting an election in accordance with and to the extent permitted by procedures as may be established by the Committee from time to time.  In order to be effective as of a specific date, an enrollment election must be received by the Company no later than the deadline specified by the Committee, in its discretion and on a nondiscriminatory basis, from time to time.  Any Participant who is automatically re-enrolled in the Plan shall be deemed to have elected to continue his or her payroll withholding or contributions at the percentage last elected by the Participant.  Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 5.3 of the Plan, the Company may automatically decrease a Participant’s payroll deductions to zero percent (0%) at any time during an option period.  Under such circumstances, payroll deductions shall recommence at the rate provided in such Participant’s enrollment form at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 7 of the Plan.
SECTION 5 
OPTIONS TO PURCHASE COMMON STOCK
5.1    Grant of Option.  On each Enrollment Date on which the Participant enrolls or re-enrolls in the Plan, he or she shall be granted an option to purchase shares of Common Stock.
5.2    Duration of Option.  Each option granted under the Plan shall expire on the earliest to occur of (a) the completion of the purchase of shares on the last Purchase Date occurring within 27 months of the Grant Date of such option, (b) such shorter option period as may be established by the Committee from time to time, in its discretion and on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2, prior to an Enrollment Date for all options to be granted on such Enrollment Date, or (c) the date on which the Participant ceases to be such for any reason.  
5.3    Number of Shares Subject to Option.  The maximum number of shares available for purchase by each Participant under the option or on any given Purchase Date shall be established by the Committee from time to time prior to an Enrollment Date for all options to be granted on such Enrollment Date, subject to this Section 5.3.  Unless and until otherwise determined by the Committee, a Participant may not purchase more than 1,000 shares of Common Stock (subject to adjustment in accordance with Section 3.2) on any given Purchase Date.  Notwithstanding any contrary provision of the Plan, to the extent required under Section 423(b) of the Code, an option (taken together with all other options then outstanding under this Plan and under all other similar employee stock purchase plans of the Employers) shall not give 

5

the Participant the right to purchase stock of the Company or any Subsidiary at a rate which accrues in excess of $25,000 worth of stock (determined using the fair market value of a share of the stock on the Grant Date of each such option) for each calendar year in which such option is outstanding, in accordance with Treasury Regulation Section 1.423-2(a)(3)(vi).  
5.4    Other Terms and Conditions.  Each option shall be subject to the following additional terms and conditions:
(a)    payment for shares purchased under the option shall be made only through payroll withholding under Section 4.2, unless payroll withholding is not permitted under local laws as determined by the Committee, in which case the Participant may contribute by such other means as specified by the Committee to the extent permitted by Treasury Regulation Section 1.423-2;
(b)    purchase of shares upon exercise of the option shall be accomplished only in accordance with Section 6.1;
(c)    the price per share under the option shall be determined as provided in Section 6.1, subject to adjustment pursuant to Section 3.2; 
(d)    the option in all respects shall be subject to such other terms and conditions as the Committee shall determine from time to time in its discretion (applied on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2); and
(e)    each option will be granted under the same Offering unless the Committee otherwise designates separate Offerings for the Eligible Employees of one or more Employers, in which case, each Participant’s option will be granted under the Offering designated for the Eligible Employees of the Participant’s Employer.
SECTION 6 
PURCHASE OF SHARES
6.1    Exercise of Option.  Subject to Section 6.2 and the limits established under Section 5.3, on each Purchase Date, the funds then credited to each Participant’s account shall be used to purchase whole shares of Common Stock.  Any cash remaining after whole shares of Common Stock have been purchased or that exceed the $25,000 cap described in Section 5.3 above, shall be refunded to the Participant without interest (except as otherwise required under local laws, in which case the Committee may determine that interest must be paid to all Participants in the relevant Offering in order to comply with Section 423 of the Code).  The price per share of Common Stock of the shares purchased under any option granted under the Plan shall be determined by the Committee from time to time, in its discretion and on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2, for all options to be granted on an Enrollment Date in an Offering.  However, in no event shall the price be less than eighty-five percent (85%) of the lower of:

6

(a)    the closing price per share of Common Stock on the Grant Date for such option on the  Nasdaq Global Select Market; or
(b)    the closing price per share of Common Stock on the Purchase Date on the Nasdaq Global Select Market.
If a closing price is not available on the Grant Date or Purchase Date, then the closing price per share of Common Stock referred to in 6.1(a) and (b) above shall refer to the closing price per share of Common Stock on the first Nasdaq Global Select Market trading day immediately following the Grant Date or preceding the Purchase Date, respectively. 
6.2    Delivery of Shares.  As directed by the Committee in its sole discretion, shares purchased on any Purchase Date shall be delivered directly to the Participant or to a custodian or broker, if any, designated by the Committee to hold shares for the benefit of the Participants.  As determined by the Committee from time to time, such shares shall be delivered as physical certificates or by means of a book entry system.
6.3    Exhaustion of Shares.  If at any time the shares available under the Plan are over-enrolled, enrollments shall be reduced to eliminate the over-enrollment, as the Committee determines, which determination shall be on a uniform and nondiscriminatory manner.  For example, the Committee may determine that such reduction method shall be “bottom up”, with the result that all option exercises for one share shall be satisfied first, followed by all exercises for two shares, and so on, until all available shares have been exhausted.  Any funds that, due to over-enrollment, cannot be applied to the purchase of whole shares shall be refunded to the Participants without interest thereon, except as otherwise required under local laws (in which case the Committee may determine that interest must be paid to all Participants in the relevant Offering in order to comply with Section 423 of the Code).
6.4    Tax Withholding.  Prior to the delivery of any shares purchased under the Plan (or at any other time that a taxable event related to the Plan occurs), 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 and social insurance liability obligations and requirements in connection with the options and shares purchased thereunder, if any, including, without limitation, all federal, state, and local taxes (including the Participant’s FICA obligation, if any) that are required to be withheld by the Company or the employing Subsidiary, the Participant’s and, to the extent required by the Company (or the employing Subsidiary), the Company’s (or the employing Subsidiary’s) fringe benefit tax liability, if any, associated with the grant, vesting, or sale of shares and any other Company (or employing Subsidiary) taxes the responsibility for which the Participant has agreed to bear with respect to such shares.  

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SECTION 7 
WITHDRAWAL
A Participant may withdraw from the Plan by submitting a withdrawal form to the Company in such form and manner as the Committee may specify (which may be in electronic form).  A withdrawal shall be effective only if it is received by the Company by the deadline specified from time to time by the Committee, in its discretion and on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2.  Unless otherwise determined by the Committee, when a withdrawal becomes effective, the Participant’s payroll contributions shall cease and all amounts then credited to the Participant’s account shall be distributed to him or her, without interest thereon, except as otherwise required under local laws (in which case the Committee may determine that interest must be paid to all Participants in the relevant Offering in order to comply with Section 423 of the Code).
SECTION 8 
CESSATION OF PARTICIPATION
A Participant shall cease to be a Participant immediately upon the cessation of his or her status as an Eligible Employee (for example, because of his or her termination of employment from all Employers for any reason), except that the Committee, in its discretion and on a uniform and nondiscriminatory basis, may permit an individual who has ceased to be an Eligible Employee to exercise his or her option on the next Purchase Date to the extent permitted by Code Section 423.  As soon as practicable after such cessation, the Participant’s payroll contributions shall cease and all amounts then credited to the Participant’s account shall be distributed to him or her without interest thereon, except as otherwise required under local laws (in which case the Committee may determine that interest must be paid to all Participants in the relevant Offering in order to comply with Section 423 of the Code).
SECTION 9 
DESIGNATION OF BENEFICIARY
9.1    Designation.  Each Participant may, pursuant to such uniform and nondiscriminatory procedures (or as otherwise permitted by Treasury Regulation Section 1.423‐2) as the Committee may specify in its discretion from time to time, designate one or more individuals to receive any amounts credited to the Participant’s account at the time of his or her death (“Beneficiaries”).  Notwithstanding any contrary provision of this Section 9, Sections 9.1 and 9.2 shall be operative only after, and for so long as, the Committee determines on a uniform and nondiscriminatory basis (or as otherwise permitted by Treasury Regulation Section 1.423-2) to permit the designation of Beneficiaries.
9.2    Changes.  A Participant may designate different Beneficiaries or may revoke a prior Beneficiary designation at any time by delivering a new designation or revocation of a prior designation, as applicable, in like manner.  Any designation or revocation shall be effective only if it is received by the Committee.  However, when so received, the designation or revocation shall be effective as of the date the designation or revocation is executed, whether or not the Participant still is living, but without prejudice to the Committee on account of any 

8

payment made before the change is recorded.  The last effective designation received by the Committee shall supersede all prior designations.
9.3    Failed Designations.  If a Participant dies without having effectively designated a Beneficiary, or if no Beneficiary survives the Participant, the Participant’s account shall be payable to his or her estate.
SECTION 10
ADMINISTRATION
10.1    Plan Administrator.  The Plan shall be administered by the Committee.  The Committee shall have the authority to control and manage the operation and administration of the Plan.
10.2    Actions by Committee.  Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee.  The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.
10.3    Powers of Committee.  The Committee shall have all powers and discretion necessary or appropriate to administer the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the following discretionary powers:
(a)    To interpret and determine the meaning and validity of the provisions of the Plan and the options and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or the options;
(b)    To determine the form and manner for Participants to make elections under the Plan;
(c)    To determine any and all considerations affecting the eligibility of any Employee to become a Participant or to remain a Participant in the Plan;
(d)    To cause an account or accounts to be maintained for each Participant and establish rules for the crediting of contributions and/or shares to the account(s);
(e)    To determine the time or times when, and the number of shares for which, options shall be granted;
(f)    To establish and revise an accounting method or formula for the Plan;
(g)    To designate a custodian or broker to receive shares purchased under the Plan and to determine the manner and form in which shares are to be delivered to the designated custodian or broker;
(h)    To determine the status and rights of Participants and their Beneficiaries or estates;

9

(i)    To employ such brokers, counsel, agents and advisers, and to obtain such broker, legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;
(j)    To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan;
(k)    To adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by employees who are foreign nationals or employed outside of the United States;
(l)    To determine that, to the extent permitted by Treasury Regulation Section 1.423-2(f), the terms of an option granted under the Plan or an Offering to citizens or residents of a non-U.S. jurisdiction (without regard to whether they also are citizens or residents of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) will be less favorable than the terms of options granted under the Plan or the same Offering to Employees resident in the United States; 
(m)    To designate separate Offerings for the Eligible Employees of one or more Employers, in which case the Offerings will be considered separate even if the dates of each such Offering are identical and the provisions of the Plan will separately apply to each Offering; and
(n)    To delegate to any one or more of its members or to any other person including, but not limited to, employees of any Employer, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan.
10.4    Decisions of Committee.  All actions, interpretations, and decisions of the Committee shall be made in the sole discretion of the Committee and shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
10.5    Administrative Expenses.  All expenses incurred in the administration of the Plan by the Committee, or otherwise, including legal fees and expenses, shall be paid and borne by the Employers, except any stamp duties or transfer taxes applicable to the purchase of shares may be charged to the account of each Participant.  Any brokerage fees for the purchase of shares by a Participant shall be paid by the Company, but fees and taxes (including brokerage fees) for the transfer, sale or resale of shares by a Participant, or the issuance of physical share certificates, shall be borne solely by the Participant.
10.6    Eligibility to Participate.  No member of the Committee who is also an employee of an Employer shall be excluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Committee, to act or pass upon any matters pertaining specifically to his or her own account under the Plan.

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10.7    Indemnification.  Each of the Employers shall, and hereby does, indemnify and hold harmless the members of the Committee and the Board, from and against any and all losses, claims, damages or liabilities, including attorneys’ fees and amounts paid, with the approval of the Board or the Committee, in settlement of any claim, arising out of or resulting from the implementation of a duty, act or decision with respect to the Plan, so long as such duty, act or decision does not involve gross negligence or willful misconduct on the part of any such individual.
SECTION 11
AMENDMENT, TERMINATION, AND DURATION
11.1    Amendment, Suspension, or Termination.  The Board or the Committee, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason.  If the Plan is amended, suspended or terminated, the Board or the Committee, in its discretion, may elect to terminate all outstanding options either immediately or upon completion of the purchase of shares on the next Purchase Date (which, notwithstanding Section 2.16, may be sooner than originally scheduled, if determined by the Board or the Committee in its discretion), or may elect to permit options to expire in accordance with their terms (and participation to continue through such expiration dates).  If the options are terminated prior to expiration, all amounts then credited to Participants’ accounts that have not been used to purchase shares shall be returned to the Participants (without interest thereon, except as otherwise required under local laws, in which case the Committee may determine that interest must be paid to all Participants in the relevant Offering in order to comply with Section 423 of the Code) as soon as administratively practicable.  Except as provided in Section 3.2 and this Section 11 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any Participant unless his or her consent is obtained.  To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval of any amendment in such a manner and to such a degree as required.  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, 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 total 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 option theretofore granted to such Participant.  No option may be granted during any period of suspension or after termination of the Plan.  Without stockholder approval and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Committee shall be entitled to change the duration of an option, limit the frequency and/or number of changes in the amount withheld during the duration of an option, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for 

11

delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan.
     Without regard to whether any Participant’s rights may be considered to have been “adversely affected”, in the event the Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Committee may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:
(a)    Amending the Plan to conform with the safe harbor definition under Statement of Financial Accounting Standards 123(R), including with respect to an option issued at the time of the amendment;
(b)    Increasing or otherwise altering the exercise price for any option including an option issued at the time of the change in exercise price;
(c)    Reducing the maximum percentage of Compensation a Participant may elect to set aside as payroll deductions; 
(d)    Shortening the duration of any option so that the option ends on a new Purchase Date, including an option issued at the time of the Committee action; and
(e)    Reducing the number of shares that may be purchased upon exercise of outstanding options.
Such modifications or amendments shall not require stockholder approval or the consent of any Participants.
11.2    Duration of the Plan.  The Plan shall commence on the date specified herein, and subject to Section 11.1 (regarding the Board’s and the Committee’s right to amend or terminate the Plan), shall remain in effect thereafter.

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SECTION 12
GENERAL PROVISIONS
12.1    Participation by Subsidiaries.  One or more Subsidiaries of the Company may become participating Employers by adopting the Plan and obtaining approval for such adoption from the Board or the Committee.  By adopting the Plan, a Subsidiary shall be deemed to agree to all of its terms, including, but not limited to, the provisions granting exclusive authority (a) to the Board and the Committee to amend the Plan, and (b) to the Committee to administer and interpret the Plan.  An Employer may terminate its participation in the Plan at any time.  The liabilities incurred under the Plan to the Participants employed by each Employer shall be solely the liabilities of that Employer, and no other Employer shall be liable for benefits accrued by a Participant during any period when he or she was not employed by such Employer.
12.2    Inalienability.  In no event may either a Participant, a former Participant or his or her Beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process.  Accordingly, for example, a Participant’s interest in the Plan is not transferable pursuant to a domestic relations order.
12.3    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.
12.4    Requirements of Law.  The granting of options and the issuance of shares shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or securities exchanges as the Committee may determine are necessary or appropriate.
12.5    Compliance with Rule 16b-3.  Any transactions under this Plan with respect to officers, as defined in Rule 16a-1 promulgated under the 1934 Act, are intended to comply with all applicable conditions of Rule 16b-3.  To the extent any provision of the Plan 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.  Notwithstanding any contrary provision of the Plan, if the Committee specifically determines that compliance with Rule 16b-3 no longer is required, all references in the Plan to Rule 16b-3 shall be null and void.
12.6    No Enlargement of Employment Rights.  Neither the establishment or maintenance of the Plan, the granting of options, the purchase of shares, nor any action of any Employer or the Committee, shall be held or construed to confer upon any individual any right to be continued as an employee of the Employer nor, upon dismissal, any right or interest in any specific assets of the Employers other than as provided in the Plan.  Each Employer expressly reserves the right to discharge any employee at any time, with or without cause.

13

12.7    Apportionment of Costs and Duties.  All acts required of the Employers under the Plan may be performed by the Company for itself and its Subsidiaries, and the costs of the Plan may be equitably apportioned by the Committee among the Company and the other Employers.  Whenever an Employer is permitted or required under the terms of the Plan to do or perform any act, matter or thing, it shall be done and performed by any officer or employee of the Employers who is thereunto duly authorized by the Employers.
12.8    Construction and Applicable Law.  The Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.  Any provision of the Plan which is inconsistent with Section 423(b) of the Code shall, without further act or amendment by the Company or the Committee, be reformed to comply with the requirements of Section 423(b).  The provisions of the Plan shall be construed, administered and enforced in accordance with such Section and with the laws of the State of California, excluding California’s conflict of laws provisions.
12.9    Captions.  The captions contained in and the table of contents prefixed to the Plan are inserted only as a matter of convenience, and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the construction of any provision of the Plan.
12.10    Use of Funds.  Payroll withholdings and other contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company will not be obligated to segregate such payroll withholdings or other contributions except under Offerings in which applicable local law requires that such payroll withholdings or other contributions be segregated from the Company’s general corporate funds and/or deposited with an independent third party for Participants in non-U.S. jurisdictions.
12.11    Automatic Transfer to Low Price Option Period.  To the extent permitted by applicable laws and specified by the Committee in advance for particular option periods, if the fair market value of the Common Stock on any Enrollment Date is higher than the fair market value of the Common Stock on the first day of any later Purchase Period during the same option period, then all Participants in such option period shall be automatically withdrawn from such option period and automatically re-enrolled in the immediately following new option period.
 

14

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