Document:

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                                                                   EXHIBIT 10.73

                      TENTH AMENDMENT TO CREDIT AGREEMENT

          THIS TENTH AMENDMENT TO CREDIT AGREEMENT ("Tenth Amendment") is
                                                     ---------------
effective as of December 16, 1999, and is entered into by and among P-COM, INC.,
a Delaware corporation ("Borrower"); the financial institutions signatory hereto
                         --------
(each individually a "Lender" and collectively the "Lenders"); UNION BANK OF
                      ------                        -------
CALIFORNIA, N.A., for itself, as a Lender, as issuing bank (in such capacity,

"Issuing Bank"), and as administrative agent for Lenders (in such capacity,
-------------
"Agent"); and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (for
------
itself, as a Lender, and as syndication agent for Lenders (in such capacity,

"Syndication Agent").
------------------

                                    RECITALS
                                    --------

          A.  Borrower, Lenders, Agent, Issuing Bank, and Syndication Agent have
entered into that certain Credit Agreement dated as of May 15, 1998, as amended
(collectively, the "Credit Agreement"), pursuant to which Agent, Syndication
                    ----------------
Agent, Issuing Bank, and Lenders agreed to provide financial accommodations to
or for the benefit of Borrower upon the terms and conditions contained therein.
Unless otherwise defined herein, capitalized terms or matters of construction
defined or established in the Credit Agreement shall be applied herein as
defined or established therein.

          B.  Issuing Bank has issued a Letter of Credit in the amount of
$3,000,000 for the account of Borrower in favor of Banca Di Roma (the "Banca Di
                                                                       --------
Roma L/C"), which Letter of Credit is set to expire on December 17, 1999.
--------

          C.  Borrower has requested that Agent, Syndication Agent, Issuing
Bank, and Lenders consent to an extension to the expiration date of the Banca Di
Roma L/C, and that the Issuing Bank issue such an extension, and Agent,
Syndication Agent, Issuing Bank, and Lenders are willing to do so subject to the
terms and conditions of this Tenth Amendment.

                                 AGREEMENT
                                 ---------

          NOW, THEREFORE, in consideration of the continued performance by
Borrower of its promises and obligations under the Credit Agreement and the
other Loan Documents, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Borrower, Lenders, Agent, and
Syndication Agent hereby agree as follows:

          1.  Ratification and Incorporation of Credit Agreement and Other Loan
              -----------------------------------------------------------------
Documents.  Except as expressly modified under this Tenth Amendment, (a)
---------
Borrower hereby acknowledges, confirms, and ratifies all of the terms and
conditions set forth in, and all of its obligations under, the Credit Agreement
and the other Loan Documents, and (b) all of the terms and conditions set forth
in the Credit Agreement and the other Loan Documents are incorporated herein by
this reference as if set forth in full herein.  Without limiting the generality
of the foregoing, each of Borrower and each other Loan Party acknowledges and
agrees that as of December 16, 1999, the sum of (i) the aggregate outstanding
principal amount of all Loans, plus (ii) the aggregate outstanding Letter of
                               ----
Credit Usage was $29,981,880.43.  Each of Borrower and

                                       1
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each other Loan Party represents that it has no offset, defense, counterclaim,
dispute or disagreement of any kind or nature whatsoever with respect to the
amount of such Debt.

          2.  Amendments to Credit Agreement.
              ------------------------------

              The definition of "Revolving Commitment" is hereby deleted in its
                                 --------------------
entirety and the following is substituted in lieu  thereof:

                    "Revolving Commitment":  (a) $50,000,000, at all times prior
                     --------------------
          to August 15, 1999; (b) $40,000,000, at all times on and after August
          15, 1999, and prior to October 15, 1999; (c) $30,000,000, at all times
          on and after October 15, 1999, and prior to December 16, 1999; and (d)
          $27,000,000, at all times on and after December 16, 1999, and prior to
          the Maturity Date, in each case as such amount may be further reduced
          (i) pursuant to Section 2.1(e) and (ii) by the amount of any Letters
                          --------------
          of Credit that expire and are not renewed during the period from April
          21, 1999, through the Maturity Date.

          3.  Consent.  Notwithstanding any contrary term or provision set forth
              -------
in the Credit Agreement, (i) Agent and Lenders hereby consent, subject to the
terms and conditions set forth herein, to the extension of the expiration date
of the Banca Di Roma L/C from December 17, 1999, to January 15, 2000, and (ii)
prior to the expiration of the Banca Di Roma L/C the Issuing Bank shall execute
and deliver a letter of credit amendment or such other documentation necessary
to effect such an extension.

          4.  Conditions to Effectiveness.  This Tenth Amendment shall become
              ---------------------------
effective on December 16, 1999 (the "Effective Date"), only upon satisfaction of
                                     --------------
each of the following conditions:

              (a) receipt by Agent of this Tenth Amendment duly executed by
Borrower, Bank of America National Trust and Savings Association, as Syndication
Agent and Lender, and Union Bank of California, N.A., as Agent and Lender;

              (b) receipt by Agent of the attached Guarantor Consents
(individually, a "Guarantor Consent" and collectively, the "Guarantor
                  -----------------                         ---------
Consents"), duly executed by each Guarantor;
--------
              (c) the absence of any Potential Events of Default or Events of
Default.

          5.  Representations and Warranties.  In order to induce Lenders to
              ------------------------------
enter into this Tenth Amendment, Borrower represents and warrants to Agent,
Syndication Agent, and Lenders that the following statements are true, correct
and complete as of the Effective Date of this Tenth Amendment:

              (a) Corporate Power and Authority.  Borrower has all requisite
                  -----------------------------
corporate power and authority to enter into this Tenth Amendment and to carry
out the

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transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Tenth Amendment (the "Amended Agreement"). The
                                                   -----------------
Certificate of Incorporation and Bylaws of Borrower have not been amended since
the copies previously delivered to Agent, Syndication Agent, and Lenders.

              (b) Authorization of Agreements.  The execution and delivery of
                  ---------------------------
this Tenth Amendment and the performance by Borrower of the Amended Agreement
have been duly authorized by all necessary corporate action on the part of
Borrower.

              (c) No Conflict.  The execution and delivery by Borrower of this
                  -----------
Tenth Amendment do not and will not contravene (i) any law or any governmental
rule or regulation applicable to Borrower, except to the extend not resulting in
a Material Adverse Effect, (ii) the Certificate of Incorporation or Bylaws of
Borrower, (iii) any order, judgment or decree of any court or other agency of
government binding on Borrower, or (iv) any material agreement or instrument
binding on Borrower, except to the extent not resulting in a Material Adverse
Effect.

              (d) Governmental Consents.  The execution and delivery by Borrower
                  ---------------------
of this Tenth Amendment and the performance by Borrower of the Amended Agreement
do not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body (except routine reports required
pursuant to the Securities Exchange Act of 1934, as amended (as such act is
applicable to any Loan Party), which reports will be made in the ordinary course
of business).

              (e) Binding Obligation.  This Tenth Amendment and the Amended
                  ------------------
Agreement have been duly executed and delivered by Borrower and are the binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws and equitable principles relating to or affecting creditors' rights.

              (f) Incorporation of Representations and Warranties From Credit
                  -----------------------------------------------------------
Agreement.  The representations and warranties contained in the Credit Agreement
---------
are correct in all material respects on and as of the Effective Date of this
Tenth Amendment as though made on and as of such date, except (a) to the extent
that a particular representation or warranty by its terms expressly applies only
to an earlier date, or (b) to the extent that Borrower or any other Loan Party,
as applicable, has previously advised Agent in writing as contemplated under the
Credit Agreement.

              (g) Absence of Default.  No event has occurred and is continuing
                  ------------------
or will result from the consummation of the transactions contemplated by this
Tenth Amendment that would constitute an Event of Default or a Potential Event
of Default.

          6.  Release.
              -------

                                       3
<PAGE>

          (a) Each Loan Party acknowledges that Agent, Syndication Agent, and
Lenders would not enter into this Tenth Amendment without the Loan Parties'
assurance that each Loan Party has no claims against Agent, Syndication Agent,
or Lenders, or any of such parties' shareholders, officers, directors,
employees, agents, or attorneys arising out of or related to the Loan Documents
or any other agreement between any Loan Party and any Lender.  Except for the
obligations arising hereafter under the Amended Agreement, each Loan Party, for
itself and on behalf of its successors, assigns, and present and future
shareholders, officers, directors, employees, agents, and attorneys, hereby
remises, releases and forever discharges each of Agent, Syndication Agent, and
each Lender and their respective present and former shareholders, officers,
directors, employees, agents, attorneys, successors and assigns from any and all
claims, rights, actions, causes of action, suits, liabilities, defenses, damages
and costs that both (a) exist or may exist as of the Effective Date and (b)
arise from or are otherwise related to the Credit Agreement or the other Loan
Documents, any transaction contemplated thereby, the administration of the Loans
and other financial accommodations made thereunder, the collateral security
given in connection therewith, or any related discussions or negotiations, in
each case whether known or unknown, suspected or unsuspected.  Each Loan Party
waives the provisions of California Civil Code section 1542, which states:

     A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.

          (b) The provisions, waivers and releases set forth in this section are
binding upon each Loan Party and each Loan Party's shareholders, agents,
employees, assigns and successors in interest.  The provisions, waivers and
releases of this section shall inure to the benefit of each Lender, Agent,
Syndication Agent, and each such party's shareholders, agents, employees,
officers, directors, assigns and successors in interest as parties to the Credit
Agreement.

          (c) The provisions of this section shall survive payment in full of
the obligations, full performance of all the terms of this Tenth Amendment and
the Loan Documents, or Agent's or any Lender's actions to exercise any remedy
available under the Loan Documents or otherwise.

          (d) Each Loan Party warrants and represents that each such Loan Party
is the sole and lawful owner of all right, title and interest in and to all of
the claims released hereby and each such Loan Party has not heretofore
voluntarily, by operation of law or otherwise, assigned or transferred or
purported to assign or transfer to any Person any such claim or any portion
thereof.  Each Loan Party shall indemnify and hold harmless each Lender, Agent,
and Syndication Agent, from and against any claim, demand, damage, debt,
liability (including payment of reasonable attorneys' fees and costs actually
incurred whether or not litigation is commenced) based on or arising out of any
assignment or transfer.

      7.  Entire Agreement.  This Tenth Amendment, together with the Credit
          ----------------
Agreement and the other Loan Documents, is the entire agreement between the
parties hereto with respect to the subject matter hereof.  This Tenth Amendment
supersedes all prior and

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contemporaneous oral and written agreements and discussions with respect to the
subject matter hereof.

      8.  Miscellaneous.
          -------------

          (a) Counterparts.  This Tenth Amendment may be executed in identical
              ------------
counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.  Delivery of an
executed counterpart of a signature page to this Tenth Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.

          (b) Headings.  Section headings used herein are for convenience of
              --------
reference only, are not part of this Tenth Amendment, and are not to be taken
into consideration in interpreting this Tenth Amendment.

          (c) Recitals.  The recitals set forth at the beginning of this Tenth
              --------
Amendment are true and correct, and such recitals are incorporated into and are
a part of this Tenth Amendment.

          (d) Governing Law.  THIS TENTH AMENDMENT SHALL BE GOVERNED BY, AND
              -------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.

          (e) Effect.  Upon the effectiveness of this Tenth Amendment, from and
              ------
after the date hereof, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby and each reference in the
other Loan Documents to the Credit Agreement, "thereunder," "thereof," or words
of like import shall mean and be a reference to the Credit Agreement as amended
hereby.

          (f) No Novation.  Except as expressly provided in this Tenth
              -----------
Amendment, the execution, delivery, and effectiveness of this Tenth Amendment
shall not (i) limit, impair, constitute a waiver of, or otherwise affect any
right, power, or remedy of Agent or any Lender under the Credit Agreement or any
other Loan Document, (ii) constitute a waiver of any provision in the Credit
Agreement or in any of the other Loan Documents, or (iii) alter, modify, amend,
or in any way affect any of the terms, conditions, obligations, covenants, or
agreements contained in the Credit Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.

          (g) Conflict of Terms.  In the event of any inconsistency between the
              -----------------
provisions of this Tenth Amendment and any provision of the Credit Agreement,
the terms and provisions of this Tenth Amendment shall govern and control.

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       6
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          IN WITNESS WHEREOF, this Tenth Amendment to Credit Agreement has been
duly executed as of the date first written above.

                              P-COM, INC., as Borrower

                              By: /s/ Robert E. Collins
                                 -------------------------------------
                              Name:  Robert E. Collins
                                   -----------------------------------
                              Title:  VP & CFO
                                    ----------------------------------

                              UNION BANK OF CALIFORNIA, N.A.,
                              as Agent, Issuing Bank and a Lender

                              By: /s/ David Jackson
                                 -------------------------------------
                              Name: David Jackson
                                   -----------------------------------
                              Title: Vice President
                                    ----------------------------------

                              BANK OF AMERICA NATIONAL TRUST AND SAVINGS
                              ASSOCIATION, as Syndication Agent and a Lender

                              By: /s/ M. Duncan McDuffle
                                 -------------------------------------
                              Name: M. Duncan McDuffle
                                   -----------------------------------
                              Title: Managing Director
                                    ----------------------------------

                                       7
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                               GUARANTOR CONSENTS

          Each of the undersigned hereby (i) ratifies and reaffirms, as of the
date hereof, all of the provisions of that certain Subsidiary Guaranty in favor
of Agent dated as of May 15, 1998 (the "Guaranty"), (ii) acknowledges receipt of
                                        --------
a copy of the Tenth Amendment to Credit Agreement effective as of December 16,
1999 (the "Tenth Amendment"), (iii) consents to all of the provisions of the
           ---------------
Tenth Amendment, and (iv) acknowledges and agrees that nothing contained in the
Tenth Amendment in any way affects the validity and enforceability of the
Guaranty.

Effective as of December 16, 1999    CONTROL RESOURCES CORPORATION

                                     By:  /s/ George Roberts
                                        -------------------------------------
                                     Name: George Roberts
                                          -----------------------------------
                                     Title:
                                           ----------------------------------

Effective as of December 16, 1999    P-COM NETWORK SERVICES, INC.

                                     By: /s/ George Roberts
                                        -------------------------------------
                                     Name: George Roberts
                                          -----------------------------------
                                     Title:
                                           ----------------------------------

Effective as of December 16, 1999    P-COM FINANCE CORPORATION

                                     By: /s/ George Roberts
                                        -------------------------------------
                                     Name: George Roberts
                                          -----------------------------------
                                     Title:
                                           ----------------------------------

Effective as of December 16, 1999    P-COM UNITED KINGDOM, INC.

                                     By: /s/ George Roberts
                                        -------------------------------------
                                     Name: George Roberts
                                          -----------------------------------
                                     Title:
                                           ----------------------------------

Effective as of December 16, 1999    TELEMATICS, INC.

                                     By: /s/ George Roberts
                                        -------------------------------------
                                     Name: George Roberts
                                          -----------------------------------
                                     Title:
                                           ----------------------------------<PAGE>

                                                                     EXHIBIT 4.1

                    1990 EMPLOYEE STOCK OPTION PLAN OF ETEC

  SECTION 1.  ESTABLISHMENT AND PURPOSE.
  -------------------------------------

  The Plan was established in 1990 to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, by purchasing Shares of the Company's
Common Stock. The Plan provides for the grant of Options to purchase Shares.
Options granted under the Plan may include Nonstatutory Options as well as ISOs
intended to qualify under section 422 of the Code.

  SECTION 2.  DEFINITIONS.
  -----------------------

     (a)      "Board of Directors" shall mean the Board of Directors of the
               ------------------
Company, as constituted from time to time.

     (b)      "Code" shall mean the Internal Revenue Code of 1986, as amended.
               ----

     (c)      "Committee" shall mean the Compensation Committee of the Board of
               ---------
Directors, as described in Section 3(a).

     (d)      "Company" shall mean Etec Systems, Inc., a Nevada corporation.
               -------

     (e)      "Employee" shall mean any individual who is (i) a common-law
               --------
employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) an independent contractor who performs services for the
Company or a Subsidiary. Service as a member of the Board of Directors or as an
independent contractor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a).

     (f)      "Exercise Price" shall mean the amount for which one Share may be
               --------------
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

     (g)      "Fair Market Value" shall mean the fair market value of a Share,
               -----------------
as determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons .

     (h)      "ISO" shall mean an employee incentive stock option described in
section 422(b) of the Code.

     (i)      "Nonstatutory Option" shall mean an employee stock option not
               -------------------
described in sections 422(b) or 423(b) of the Code.

                                      -1-
<PAGE>

     (j)      "Option" shall mean an ISO or Nonstatutory Option granted under
               ------
the Plan and entitling the holder to purchase Shares.

     (k)      "Optionee" shall mean an individual who holds an Option.
               --------

     (l)      "Plan" shall mean this 1990 Employee Stock Option Plan of Etec.
               ----

     (m)      "Service" shall mean service as an Employee.
               -------

     (n)      "Share" shall mean one share of Stock, as adjusted in accordance
               -----
with Section 8 (if applicable).

     (o)      "Stock" shall mean the Common Stock of the Company.
               -----

     (p)      "Stock Option Agreement" shall mean the agreement between the
               ----------------------
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his Option.

     (q)      "Subsidiary" shall mean any corporation, if the Company and/or one
               ----------
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.

     (r)      "Total and Permanent Disability" shall mean that the Optionee is
     q         ------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than twelve months.

  SECTION 3.  ADMINISTRATION.
  --------------------------

     (a)      Committee Membership. The Plan shall be administered by the
              --------------------
Committee, which shall consist of members of the Board of Directors. The members
of the Committee shall be appointed by the Board of Directors. If no Committee
has been appointed, the entire Board of Directors shall constitute the
Committee.

     (b)      Committee Procedures. The Board of Directors shall designate one
              --------------------
of the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to and approved in writing by all Committee members, shall be valid acts of the
Committee.

     (c)      Committee Responsibilities. Subject to the provisions of the Plan,
              --------------------------
the Committee shall have full authority and discretion to take the following
actions:

              (i)    To interpret the Plan and to apply its provisions;

                                      -2-
<PAGE>

          (ii)   To adopt, amend or rescind rules, procedures and forms relating
to the Plan;

          (iii)  To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;

          (iv)   To determine when Options are to be granted under the Plan; (v)
To select the Optionees;

          (vi)   To determine the number of Shares to be made subject to each
Option;

          (vii)  To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, to determine whether such Option is to
be classified as an ISO or as a Nonstatutory Option, and to specify the
provisions of the Stock Option Agreement relating to such Option;

          (viii) To amend any outstanding Stock Option Agreement, subject to
applicable legal restrictions and to the consent of the Optionee who entered
into such agreement; and

          (ix)   To take any other actions deemed necessary or advisable for the
administration of the Plan.

     All decisions, interpretations and other actions of the Committee shall be
final and binding on all Optionees and all persons deriving their rights from an
Optionee. No member of the Committee shall be liable for any action that he has
taken or has failed to take in good faith with respect to the Plan or any Option
to acquire Shares under the Plan.

     (d)  Financial Reports. Not less often than annually, the Company shall
          -----------------
furnish to Optionees reports of its financial condition, unless such Optionees
have access to equivalent information through their employment. Such reports
need not be audited.

  SECTION 4.  ELIGIBILITY.
  -----------------------

     (a)  General Rule. Only Employees shall be eligible for designation as
          ------------
Optionees by the Committee. In addition, only individuals who are employed as
common-law employees by the Company or a Subsidiary shall be eligible for the
grant of ISOs.

     (b)  Ten-Percent Shareholders. An Employee who owns more than 10 percent of
          ------------------------
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for designation as an
Optionee unless (i) the Exercise Price is at least 110 percent of the Fair
Market Value of a Share on the date of grant and (ii) in the case of an ISO, the
Option granted by its term is not exercisable after the expiration of five years
from the date of grant.

                                      -3-
<PAGE>

     (c)  Attribution Rules. For purposes of Subsection (b) above, in
          -----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.

     (d)  Outstanding Stock. For purposes of Subsection (b) above, "outstanding
          -----------------
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

  SECTION 5.  STOCK SUBJECT TO PLAN.
  ---------------------------------

     (a)  Basic Limitation. Shares offered under the Plan shall be authorized
          ----------------
but unissued Shares and treasury stock. The aggregate number of Shares which may
be issued under the Plan shall not exceed 600,000 Shares, subject to adjustment
pursuant to Section 8. The number of Shares which are subject to Options
outstanding at any time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.

     (b)  Additional Shares. In the event that any outstanding Option for any
          -----------------
reason expires or is cancelled or otherwise terminated, the Shares allocable to
the unexercised portion of such Option shall again be available for the purposes
of the Plan. In the event that Shares issued under the Plan are reacquired by
the Company pursuant to a forfeiture provision, a right of repurchase, a right
of first refusal or a transaction under Section 7(b), such Shares shall again be
available for the purposes of the Plan.

  SECTION 6.  TERMS AND CONDITIONS OF OPTIONS.
  -------------------------------------------

     (a)  Stock Option Agreement. Each grant of an Option under the Plan shall
          ----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

     (b)  Number of Shares. Each Stock Option Agreement shall specify the number
          ----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 8. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.

     (c)  Exercise Price. Each Stock Option Agreement shall specify the Exercise
          --------------
Price. The Exercise Price shall not be less than 100 percent of the Fair Market
Value of a Share on the date

                                      -4-
<PAGE>

of grant, except as otherwise provided in Section 4(b). Subject to the preceding
sentence, the Exercise Price under any Option shall be determined by the
Committee at its sole discretion. The Exercise Price shall be payable in a form
described in Section 7.

     (d)  Withholding Taxes. As a condition to the exercise of an Option, the
          -----------------
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option .

     (e)  Exercisability and Term. Each Stock Option Agreement shall specify the
          -----------------------
date when all or any installment of the Option is to become exercisable. An
Option shall become exercisable at least as rapidly as set forth in the
following schedule:

<TABLE>
<CAPTION>
     Anniversary of                                                    Minimum Percentage
     Date of Grant                                                         Exercisable
     ------------------------------------------                      ----------------------
     <S>                                                             <C>
     First....................................................                 20%
     Second...................................................                 40%
     Third....................................................                 60%
     Fourth...................................................                 80%
     Fifth....................................................                100%
</TABLE>

     Subject to the preceding sentence, the vesting of any Option shall be
determined by the Committee at its sole discretion. The Stock Option Agreement
shall also specify the term of the Option. The term shall not exceed 10 years
from the date of grant, except as otherwise provided in Section 4(b). Subject to
the preceding sentence, the Committee at its sole discretion shall determine
when an Option is to expire.

         (f)  Nontransferability. During an Optionee's lifetime, his Option(s)
              ------------------
shall be exercisable only by him and shall not be transferable. In the event of
an Optionee's death, his Option(s) shall not be transferable other than by will
or by the laws of descent and distribution .

         (g)  Termination of Service (Except by Death). If an Optionee's Service
              ----------------------------------------
terminates for any reason other than his death, then his Option(s) shall expire
on the earliest of the following occasions:

              (i)  The expiration date determined pursuant to Subsection (e)
above;

              (ii) The date 60 days after the termination of his Service for any
reason other than Total and Permanent Disability; or

                                      -5-
<PAGE>

          (iii) The date six months after the termination of his Service by
reason of Total and Permanent Disability. The Optionee may exercise all or part
of his Option(s) at any time before the expiration of such Option(s) under the
preceding sentence, but only to the extent that such Option(s) had become
exercisable before his Service terminated or became exercisable as a result of
the termination. The balance of such Option(s) shall lapse when the Optionee's
Service terminates. In the event that the Optionee dies after the termination of
his Service but before the expiration of his Option(s), all or part of such
Option(s) may be exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Option(s) directly from him by bequest or inheritance, but only to the extent
that such Option(s) had become exercisable before his Service terminated or
became exercisable as a result of the termination.

     (h)  Leaves of Absence. For purposes of Subsection (g) above, Service shall
          -----------------
be deemed to continue while the Optionee is on military leave, sick leave or
other bona fide leave of absence (as determined by the Committee). The foregoing
notwithstanding, in the case of an ISO granted under the Plan, Service shall not
be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.

     (i)  Death of Optionee. If an Optionee dies while he is in Service, then
          -----------------
his Option(s) shall expire on the earlier of the following dates:

          (i)   The expiration date determined pursuant to Subsection (e) above;
or

          (ii)  The date six months after his death. All or part of the
Optionee's Option(s) may be exercised at any time before the expiration of such
Option(s) under the preceding sentence by the executors or administrators of his
estate or by any person who has acquired such Option(s) directly from him by
bequest or inheritance, but only to the extent that such Option(s) had become
exercisable before his death or became exercisable as a result of his death. The
balance of such Option(s) shall lapse when the Optionee dies.

     (j)  No Rights as a Shareholder. An Optionee, or a transferee of an
          --------------------------
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 8.

     (k)  Modification, Extension and Renewal of Options. Within the limitations
          ----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of outstanding Options (to the extent not previously
exercised) in return for the grant of new Options at the same or a different
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair his rights or increase his
obligations under such Option.

     (l)  Restrictions on Transfer of Shares. Any Shares issued upon exercise of
          ----------------------------------
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement or in any agreement referred to therein and shall

                                      -6-
<PAGE>

apply in addition to any general restrictions that may apply to all holders of
Shares. Any service-based vesting conditions shall not be less rapid than the
schedule set forth in Subsection (e) above.

     SECTION 7.  PAYMENT FOR SHARES.
     -------------------------------

          (a)  General Rule. The entire Exercise Price of Shares issued under
               ------------
the Plan shall be payable in cash at the time when such Shares are purchased,
except as provided in Subsections (b) and (c) below.

          (b)  Surrender of Stock. To the extent that a Stock Option Agreement
               ------------------
so provides, payment may be made all or in part with Shares which have already
been owned by the Optionee or his representative for more than six months and
which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

          (c)  Promissory Note. To the extent that the Stock Option Agreement so
               ---------------
provides, a portion of the Exercise Price for Shares issued under the Plan may
be payable by a full recourse promissory note, provided that (i) the par value
of such Shares must be paid in lawful money of the United States of America at
the time when such Shares are purchased, (ii) the Shares are security for
payment of the principal amount of the promissory note and interest thereon, and
(iii) the interest rate payable under the terms of the promissory note shall be
no less than the minimum rate (if any) required to avoid the imputation of
additional interest under the Code. Subject to the foregoing, the Committee (at
its sole discretion) shall specify the term, interest rate, amortization
requirements (if any), and other provisions of such note.

     SECTION 8.  ADJUSTMENT OF SHARES.
     ---------------------------------

          (a)  General. In the event of a subdivision of the outstanding Stock,
               -------
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the value of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares covered by each outstanding
Option or (iii) the Exercise Price under each outstanding Option.

          (b)  Reorganizations. In the event that the Company is a party to a
               ---------------
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for the
assumption of outstanding Options by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), or for the acceleration of their exercisability followed by the
cancellation of Options (as long as such Options have been outstanding for
twelve months or more) not exercised, in all cases without the Optionees'
consent; provided, however, that, as an alternative for the Optionee, such
agreement may provide for payment of a cash settlement equal to the difference
between the amount to be paid for one Share under such agreement and the
Exercise Price if the Optionee

                                      -7-
<PAGE>

consents to such cash settlement. Any cancellation shall not occur earlier than
30 days after such acceleration is effective and Optionees have been notified of
such acceleration.

          (c)  Reservation of Rights. Except as provided in this Section 8, an
               ----------- -- ------
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Shares subject to
an Option. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

     SECTION 9.  LEGAL REQUIREMENTS.
     ------------------------------

     Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which the Company's
securities may then be listed.

     SECTION 10. NO EMPLOYMENT RIGHTS.
     --------------------------------

     No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee. The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason.

     SECTION 11. DURATION AND AMENDMENTS.
     -----------------------------------

          (a)  Term of the Plan. The Plan, as set forth herein, shall become
               ---- -- --- ----
effective on March 5, 1990 subject to the approval of the Company's
shareholders. In the event that the shareholders fail to approve the Plan within
12 months after its adoption by the Board of Directors, any Option grants
already made shall be null and void, and no additional Option grants shall be
made after such date. The Plan shall terminate automatically 10 years after its
adoption by the Board of Directors and may be terminated on any earlier date
pursuant to Subsection (b) below.

          (b)  Right to Amend or Terminate the Plan. The Board of Directors may
               ----- -- ----- -- --------- --- ----
amend, suspend or terminate the Plan at any time and for any reason; provided,
however, that any amendment of the Plan which increases the number of Shares
available for issuance under the Plan (except as provided in Section 8), or
which materially changes the class of persons who are eligible for the grant of
ISOs, shall be subject to the approval of the Company's shareholders.
Shareholder approval shall not be required for any other amendment of the Plan.

                                      -8-
<PAGE>

          (c)  Effect of Amendment or Termination. No Shares shall be issued or
               ------ -- --------- -- -----------
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.

     SECTION 12. EXECUTION.
     ---------------------

     To record the adoption of the Plan by the Board of Directors on March 5,
1990, the Company has caused its authorized officer to execute the same.

Etec Systems, Inc.

By /s/ Stephen E. Cooper
   ---------------------
   Chief Executive Officer

                                      -9-
<PAGE>

                            AMENDMENT NO. 1 TO THE
                              ETEC SYSTEMS, INC.
                        1990 EMPLOYEE STOCK OPTION PLAN

     ETEC SYSTEMS, INC., having established the Etec Systems, Inc. 1990 Employee
Stock Option Plan (the "Plan"), hereby amends the Plan, effective as of March
29, 2000 as follows:

          1.   Section 11 of the Plan is hereby amended in its entirety as
follows:

               SECTION 11. TERM OF THE PLAN.  In connection with the merger
               ----------------------------
     (the "Merger") of Etec Systems, Inc. ("Etec") and Boston Acquisition Sub,
     Inc. ("Boston"), a Nevada corporation and a wholly-owned subsidiary of
     Applied Materials, Inc. ("AMAT"), Options previously granted to Optionees
     under the Plan that remain outstanding as of March 29, 2000 (the
     "Outstanding Options"), have been modified pursuant to the Agreement and
     Plan of Reorganization and Merger dated as of January 12, 2000 (the "Merger
     Agreement"), among Etec, Boston and AMAT, so as to be exercisable only into
     shares of common stock of AMAT, par value $0.01 per share (the "Stock"),
     all as set forth in the Merger Agreement and subject to its terms and
     conditions. Effective as of March 29, 2000, except with respect to the
     Outstanding Options, the Plan is terminated. Accordingly no Shares remain
     available for future grant under the Plan, other than pursuant to the
     Outstanding Options.

          2.   Section 2.(c) of the Plan is amended in its entirety as follows:

               2.(c) "Committee" shall mean the Stock Option and Compensation
                      ---------
     Committee of the Board of Directors of AMAT.

          3.   Section 2.(o) of the Plan is amended in its entirety as follows:

               2.(o) "Stock" shall mean the Common Stock of Applied Materials,
                      -----
     Inc., a Delaware company.

          4.   Section 3.(a) and 3.(b) are hereby amended in their entirety to
     read as follows, and each remaining provision in Section 3 shall be
     renumbered accordingly:

               3.(a) Administration. The Plan shall be administered by the Stock
                     --------------
     Option and Compensation Committee of the Board of Directors of AMAT. As
     used throughout this Plan, the "Board" and "Committee" shall mean the Stock
     Option and Compensation Committee of the Board of Directors of AMAT.

          5.   Section 4 is hereby amended in its entirety to read as follows:

               SECTION 4. NO FURTHER OPTION GRANTS.  Effective March 29, 2000,
               -----------------------------------
     except with respect to the Outstanding Options, the Plan is terminated.
     Accordingly, no further Options shall be granted under the Plan. Optionees
     holding Outstanding Options may continue to exercise such Outstanding
     Options in accordance with their terms, subject to the terms and conditions
     of the Merger Agreement.

                                      -1-
<PAGE>

          6.   Section 5 is hereby amended in its entirety to read as follows:

               SECTION 5. STOCK SUBJECT TO PLAN. AMAT has reserved such number
               --------------------------------
     of Shares as are necessary to satisfy the Outstanding Options.

          7.   Section 12 is hereby amended by changing its title to "Execution
                                                                      ---------
     and Termination" and by adding the following sentence to the end thereto
     ---------------
     to read as follows:

     Except with respect to the Outstanding Options, the Plan shall terminate
effective as of March 29, 2000.

     IN WITNESS WHEREOF, Etec Systems, Inc., by the officer identified below,
who has been duly authorized by the Board of Directors of the Company, has
executed this Amendment No. 1 on the date indicated below.

                                             ETEC SYSTEMS, INC.

                                             By: _____________________

                                             Title: __________________

                                             Date: ___________________

                                      -2-

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