Cymer (CYMI) DEF 14A Definitive proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.      )

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¨	Preliminary Proxy Statement	¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material Pursuant to §240.14a-12

CYMER, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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CYMER, INC.

17075 THORNMINT COURT

SAN DIEGO, CALIFORNIA 92127

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 19, 2011

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Cymer, Inc., a Nevada corporation, which will be held on Thursday, May 19, 2011 at 10:00 a.m. local time at our offices at 17075 Thornmint Court, San Diego, California 92127 for the following purposes:

1. To elect Charles J. Abbe, Robert P. Akins, Edward H. Braun, Michael R. Gaulke, William G. Oldham, Eric M. Ruttenberg, Peter J. Simone, Young K. Sohn and Jon D. Tompkins as directors to serve until the 2012 Annual Meeting of Stockholders.

2. To approve our 2011 Equity Incentive Plan.

3. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2011.

4. To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement.

5. To indicate, on an advisory basis, the preferred frequency of stockholder advisory votes on the compensation of our named executive officers.

6. To conduct any other business properly brought before the meeting.

The foregoing items of business are more fully described in the Proxy Statement accompanying this notice.

We have elected to provide access to our proxy materials over the Internet under the Securities and Exchange Commission’s “notice and access” rules. This method of access facilitates getting the necessary information to stockholders while reducing the costs associated with printing and mailing proxy materials as well as reducing the environmental impact associated with our Annual Meeting. On April 8, 2011, we mailed to our stockholders a Notice containing instructions on how to access our 2011 Proxy Statement and Annual Report and vote online. The Notice contains instructions on how you can (i) receive a paper copy of the Proxy Statement and Annual Report, if you only received a Notice by mail, or (ii) elect to receive your Proxy Statement and Annual Report over the Internet, if you received them by mail this year.

Only stockholders of record at the close of business on March 21, 2011 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof.

Whether or not you expect to attend the Annual Meeting in person, we urge you to vote your shares in order to ensure your representation at the meeting. Promptly vote your shares by telephone, via the Internet, or by signing, dating, and returning the proxy card. If you are receiving these proxy materials by mail, an addressed return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience if you wish to vote by mail. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

By Order of the Board of Directors

Paul B. Bowman

Secretary

San Diego, California

April 8, 2011

PROXY STATEMENT

TABLE OF CONTENTS

	Page
Questions and Answers About These Proxy Materials and Voting		1
Proposal 1—Election of Directors		5
Information Regarding the Board of Directors and Its Committees		9
Compensation of Directors		13
Director Compensation for 2010		14
Executive Compensation		15
Compensation Discussion and Analysis		15
Compensation of Executive Officers		29
Summary Compensation Table		30
Detail of All Other Compensation		32
Grants of Plan-Based Awards in 2010		33
Outstanding Equity Awards at Year End		35
Options Exercised and Stock Vested for 2010		36
Nonqualified Deferred Compensation for 2010		36
Potential Payments Upon Qualifying Change in Control Related Terminations		37
Potential Payments Upon Qualifying Retirement Terminations		38
Compensation Policies and Practices as They Relate to the Company’s Risk Management		39
Compensation Committee Interlocks and Insider Participation		39
Certain Relationships and Related Transactions		39
Compensation Committee Report		40
Proposal 2—Approval of 2011 Equity Incentive Plan		41
New Plan Benefits		50
Equity Compensation Plan Information		51
Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm		51
Independent Registered Public Accounting Firm Fees		52
Pre-Approval Policies and Procedures		52
Report of the Audit Committee of the Board of Directors		53
Proposal 4—Advisory Vote on Executive Compensation		54
Proposal 5—Advisory Vote on the Frequency of Solicitation of an Advisory Vote on Executive Compensation		55
Security Ownership of Certain Beneficial Owners and Management		56
Section 16(a) Beneficial Ownership Reporting Compliance		57
Other Matters		57

CYMER, INC.

17075 THORNMINT COURT

SAN DIEGO, CALIFORNIA 92127

PROXY STATEMENT

FOR THE 2010 ANNUAL MEETING OF STOCKHOLDERS

To Be Held on May 19, 2011

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these proxy materials?

We have made these proxy materials available to you on the Internet, or, upon your request, delivered printed versions of these materials to you by mail, in connection with our Board of Directors’ solicitation of your proxy vote for use at our Annual Meeting of Stockholders to be held on May 19, 2011. We request that you cast your vote on each of the proposals described in this Proxy Statement. You are invited to attend the Annual Meeting, but you do not need to attend the meeting in person to vote your shares.

If you have received a printed copy of these proxy materials by mail, you may simply complete, sign and return your proxy card or vote by proxy over the telephone or the Internet as instructed below. If you did not receive a printed copy of these materials by mail and are accessing them on the Internet, you may simply follow the instructions below to submit your proxy on the Internet.

We intend to mail a printed copy of this Proxy Statement and proxy card to our stockholders who have requested them on or about April 8, 2011. All other stockholders will receive a Notice of Internet Availability of Proxy Materials (the “Notice”), which we also intend to mail on or about April 8, 2011.

What items will be voted on at the Annual Meeting?

There are five matters scheduled for a vote:

• Election of Charles J. Abbe, Robert P. Akins, Edward H. Braun, Michael R. Gaulke, William G. Oldham, Eric M. Ruttenberg, Peter J. Simone, Young K. Sohn and Jon D. Tompkins as directors to serve until the 2012 Annual Meeting of Stockholders;

• Approval of our 2011 Equity Incentive Plan;

• Ratification of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011;

• Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement in accordance with the rules adopted by the Securities and Exchange Commission (“SEC”); and

• Advisory indication of the preferred frequency of stockholder advisory votes on the compensation of our named executive officers.

Who can vote at the Annual Meeting?

If you owned our common stock at the close of business on March 21, 2011 (the “Record Date”), then you will be entitled to attend and vote at the Annual Meeting. On the Record Date, we had 30,472,312 shares of our common stock outstanding.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least 15,236,157 shares, a majority of the shares outstanding on the Record Date, are represented at the meeting in

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person or by proxy. Your shares will be counted towards the quorum only if you submit a valid proxy vote or vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting in person or represented by proxy may adjourn the meeting to another date.

Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to rules adopted by the SEC, we provide stockholders access to our proxy materials via the Internet. On or about April 8, 2011, we are sending a Notice to our stockholders of record and beneficial owners. All stockholders will have the ability to access the proxy materials on a website referred to in the Notice. Stockholders may request to receive a full set of printed proxy materials by mail. Instructions on how to access the proxy materials on the Internet or request a printed copy may be found in the Notice.

Will I receive any other proxy materials by mail?

We may send you a proxy card, along with a second Notice, on or after April 18, 2011. To receive a full set of printed proxy materials by mail, you must request them in accordance with the instructions in the Notice.

What does it mean if I receive more than one Notice?

If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on each Notice to ensure that all of your shares are voted.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR” and (with respect to proposals other than the election of directors and the advisory indication of the frequency of stockholder advisory votes on the compensation of our named executive officers) “AGAINST” votes, abstentions and broker non-votes. Abstentions and broker non-votes will be counted in determining whether a quorum is present. However, an abstention or broker non-vote will not constitute a vote cast and, accordingly, will not be counted in the vote total for any proposal.

If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of the New York Stock Exchange on which your broker may vote shares held in street name in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes.

How many votes are needed to approve each proposal?

• For the election of directors in Proposal 1, you may vote “FOR” all nine of the nominees named herein, or you may withhold your vote from any nominee that you specify or all nine nominees. The nine nominees receiving the most “FOR” votes among votes properly cast will be elected. Only the nine nominees named herein have been properly nominated for election as directors.

• You may vote “FOR” or “AGAINST” Proposal 2, to approve our 2011 Equity Incentive Plan, or you may “ABSTAIN” from voting on this proposal. To be approved, the number of votes “FOR” the proposal must exceed the number of votes “AGAINST” the proposal.

• You may vote “FOR” or “AGAINST” Proposal 3, the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2011, or you may “ABSTAIN” from voting on this proposal. To be approved, the number of votes “FOR” the proposal must exceed the number of votes “AGAINST” the proposal.

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• You may vote “FOR” or “AGAINST” Proposal 4, the advisory approval of the compensation of our named executive officers, or you may “ABSTAIN” from voting on this proposal. To be approved, the number of votes “FOR” the proposal must exceed the number of votes “AGAINST” the proposal.

• With respect to Proposal 5, the advisory indication of the preferred frequency of stockholder advisory votes on the compensation of our named executive officers, you may vote “1 Year”, “2 Years”, “3 Years” or “ABSTAIN”. The frequency of voting receiving the most votes will be considered the frequency preferred by the stockholders.

Broker non-votes and abstentions will not be counted towards the vote total for any proposal.

How many votes do I have?

On each proposal to be voted upon, you have one vote for each share of our common stock that you owned on the Record Date. In the election of directors, you may cast that vote “FOR” all of the nine nominees named herein, or you may withhold your vote from any nominee or all of the nominees.

What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in street name?

Stockholder of Record: If, on the Record Date, your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record with respect to those shares.

Beneficial Owner of Shares Held in Street Name: If, on the Record Date, your shares were held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct the stockholder of record on how to vote the shares held in your account. You are also invited to attend the Annual Meeting.

If I am a stockholder of record of Cymer shares, how do I vote?

If you are the stockholder of record, you may vote in person at the Annual Meeting or by proxy.

• To vote in person, come to the Annual Meeting, and we will give you a ballot when you arrive.

• If you do not wish to vote in person or if you will not be attending the Annual Meeting, you may vote by proxy. You can vote by proxy over the Internet by following the instructions provided in the Notice, or if you request a full set of printed copies of the proxy materials by mail, you may also vote by mail or by telephone.

We provide Internet proxy voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

If I am a beneficial owner of Cymer shares held in street name, how do I vote?

If you are a beneficial owner of shares registered in the name of your broker, bank, dealer or other similar organization, and you wish to vote in person at the Annual Meeting, you must obtain a valid proxy from the organization that holds your shares. If you do not wish to vote in person or you will not be attending the Annual Meeting, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Please follow the voting instructions provided by your broker, dealer or other similar organization to ensure that your vote is counted.

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What happens if I do not make specific voting choices?

Stockholder of Record: If you are a stockholder of record and you:

• indicate when voting on the Internet or by telephone that you wish to vote as recommended by our Board of Directors; or

• sign and return a proxy card without giving specific voting instructions,

then the proxy holders will vote your shares in the manner recommended by our Board of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the meeting.

Beneficial Owner of Shares Held in Street Name: If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform our inspector of elections that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” When our inspector of elections tabulates the votes for any particular matter, broker non-votes will be counted for purposes of determining whether a quorum is present, but will not otherwise be counted. We encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided in the Notice.

Can I change my vote after I have voted?

Yes. You may revoke your proxy and change your vote at any time before the final vote at the meeting.

Stockholder of Record: If you are a stockholder of record, you may revoke your proxy in any one of the following ways:

• You may send a written notice that you are revoking your proxy to the Corporate Secretary of Cymer, Inc., 17075 Thornmint Court, San Diego, California 92127.

• You may send a subsequent properly completed proxy card in accordance with the instructions in this Proxy Statement.

• You may grant a subsequent proxy by telephone or through the Internet.

• You may attend the Annual Meeting, revoke the proxy in writing and vote in person.Your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the meeting or specifically request in writing that your prior proxy be revoked.

The most current proxy card or telephone or Internet proxy our inspector of elections receives is the one that is counted.

Beneficial Owner of Shares Held in Street Name: If you are a beneficial owner of shares held in street name, you will need to follow the instructions included on the proxy form provided to you by your broker regarding how to change your vote.

How can I find out the voting results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of elections after the Annual Meeting and will be reported on Form 8-K, which will be filed with the SEC within four business days after the Annual Meeting.

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What is the deadline to propose actions for consideration at the 2012 annual meeting of stockholders?

For a stockholder proposal to be considered for inclusion in our Proxy Statement for our 2012 annual meeting of stockholders, your proposal must be received in writing by the Corporate Secretary of Cymer, Inc., 17075 Thornmint Court, San Diego, California 92127, no later than December 10, 2011. Stockholders wishing to submit proposals or director nominations that are not to be included in our proxy materials for that annual meeting of stockholders must do so no earlier than January 20, 2012 and no later than February 19, 2012.

You are advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. Our Bylaws are available on our website athttp://www.cymer.com under Investor Relations—Corporate Governance.

How can I communicate with Cymer’s Board of Directors?

Our Board of Directors has adopted a process for stockholder communication with the board. Stockholders wishing to communicate with the board may send a written communication addressed to the Corporate Secretary of Cymer, Inc. at 17075 Thornmint Court, San Diego California 92127 or by e-mail to the following address:board@cymer.com. The Corporate Secretary will screen all communications for spam, junk mail, mass mailings, product complaints, product inquiries, new product suggestions, resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening, illegal, unsuitable, frivolous, patently offensive or otherwise inappropriate material before forwarding to the Board. The process regarding stockholder communications with the board is posted on our website athttp://www.cymer.com under Investor Relations—Contact Board.

Who is paying for this proxy solicitation?

We will pay for the entire cost of the solicitation of proxies. We have retained the services of Morrow & Co., LLC to aid in the solicitation of proxies from brokers, bank nominees and other institutions for a fee of $7,750, plus its reasonable out-of-pocket expenses. We will also reimburse brokers, banks, dealers and other similar organizations representing beneficial owners of shares held in street name for the cost of forwarding the Notice and printed proxy materials by mail to beneficial owners who specifically request them, and obtaining beneficial owners’ voting instructions. In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies on our behalf, in person, by telephone or by other means of communication. Directors, officers and employees will not be paid any additional compensation for soliciting proxies.

PROPOSAL 1

ELECTION OF DIRECTORS

Current Nominees

Listed below are our nine directors, each of whom is nominated for re-election at the Annual Meeting of stockholders. Each director to be elected at the Annual Meeting will serve a one-year term expiring at the next Annual Meeting of stockholders or until his respective successor is elected and qualified or, if sooner, until his death, resignation or removal. Each of the nominees listed below currently serves as one of our directors. All of the nominees were previously elected by our stockholders. Directors are elected by a plurality of the votes properly cast in person or by proxy. All of the nominees for election as a director at the 2010 Annual Meeting of Stockholders attended the 2010 Annual Meeting of Stockholders.

Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nine nominees named in this Proxy Statement. If any nominee becomes unavailable for election as a result of an unexpected occurrence, his shares will be voted for the election of a substitute nominee proposed by our Board of Directors. Each person nominated for election has agreed to be named in this Proxy Statement and to serve if elected. We have no reason to believe that any nominee will be unable to serve.

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The following table lists the director nominees for election at the Annual Meeting and is followed by a brief biography of each of the nominees and a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the nominating and corporate governance committee to recommend that person as a nominee for director, as of the date of this Proxy Statement:

Name	Age		Positions with the Company	Director Since
Charles J. Abbe		69	Director		2003
Robert P. Akins		59	Chairman and Chief Executive Officer		1986
Edward H. Braun		71	Director		2003
Michael R. Gaulke		65	Director		2000
William G. Oldham		72	Director		2001
Eric M. Ruttenberg		55	Director		2009
Peter J. Simone		63	Director		1993
Young K. Sohn		55	Director		2003
Jon D. Tompkins		70	Director		1999

Charles J. Abbe has served as a director of Cymer since January 2003. Mr. Abbe served as president and chief operating officer and as director of JDS Uniphase Corporation from February 2000 until his retirement in June 2001. He was employed previously as president, chief executive officer and director at Optical Coating Laboratory, Inc. from 1996 until the company merged with JDS Uniphase in February 2000. From 1990 to 1996, he served in several positions of increasing responsibility, including senior vice president, electronics sector, at Raychem Corporation. Mr. Abbe practiced business consulting with McKinsey & Company from 1971 to 1989. Mr. Abbe also currently serves as director of Opnext, Inc., and CoSine Communications, Inc., both publicly held companies, and as director of several privately financed technology companies. Mr. Abbe received a B.S. and M.S. in chemical engineering from Cornell University and a M.B.A. from Stanford University.

The nominating and corporate governance committee believes that Mr. Abbe’s prior history in financial and senior executive positions, along with his current role as a director for several technology companies, including two other public companies, provides him with operational and industry expertise, as well as leadership skills, that are valuable to his role as a director of Cymer and its audit committee chairman.

Robert P. Akins is one of Cymer’s co-founders, has served as its chairman and chief executive officer since Cymer’s inception in 1986, and served as president of Cymer from its inception until May 2000. Mr. Akins currently serves on the boards of directors of KLA-Tencor Corporation, and Semiconductor Equipment and Materials International (“SEMI”) North America, and is chairman of the board of SEMI. He is also a member of the council of advisors to the Irwin and Joan Jacobs School of Engineering at the University of California, San Diego (“UCSD”), and has served on the board of the UC San Diego Foundation. Mr. Akins received the Ernst & Young Entrepreneur of the Year Award for San Diego County in 1997, and with fellow Cymer co-founder Rick Sandstrom, received the outstanding alumnus award from UCSD, and the prestigious SEMI Award for North America, the highest honor conferred by SEMI, in 1996 for contributions to the field of deep ultraviolet (“DUV”) lithography. Mr. Akins received a B.S. in physics, a B.A. in literature, and a Ph.D. in applied physics from UCSD.

The nominating and corporate governance committee believes that Mr. Akins’ scientific and industry background and extensive history with the Company brings valuable historic knowledge and continuity to the Board of Directors, along with a thorough understanding of our operations, investors, customers and technology.

Edward H. Braun has served as a director of Cymer since March 2003. Mr. Braun has been chairman of the board of Veeco Instruments, Inc since January 1990. In addition, he was Veeco’s chief executive officer from January 1990 to July 2007. Mr. Braun is a director emeritus of the board of directors of SEMI, of which he was chairman of the board in 1993. Mr. Braun also serves as a director of Axcelis Technologies and QD Vision, Inc. Mr. Braun received a BSME from Clarkson College of Technology.

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The nominating and corporate governance committee believes that Mr. Braun’s extensive experience managing Veeco, a provider of metrology and process equipment solutions for the semiconductor, magnetic memory media, and flat panel display industries, provide him with broad industry, operational, and manufacturing expertise, and general leadership skills, which are important to the Board of Directors.

Michael R. Gaulke has served as a director of Cymer since August 2000. Mr. Gaulke has served on the board of directors of Exponent, Inc., a nationally recognized engineering and scientific consulting firm that performs in-depth investigations in more than 90 technical disciplines to analyze failures and accidents to determine their causes, since 1994. Mr. Gaulke served as Exponent’s executive chairman from May 2009 to June 2010 and as its chief executive officer from June 1996 to May 2009. Mr. Gaulke first joined Exponent in September 1992, as executive vice president and chief financial officer. In March 1993, he was named Exponent’s president and was appointed as a member of its board of directors in January 1994. Prior to 1992, Mr. Gaulke served as executive vice president and chief financial officer of Raynet Corporation, which pioneered a fiber-to-the-curb architecture for telecommunications. Before that, he served as executive vice president and chief financial officer of Spectra-Physics, a leading manufacturer of a broad range of lasers and laser-related products. Mr. Gaulke served as a director of LECG Corporation from June 2003 to 2007. Mr. Gaulke serves on the board of Sutter Health and is also a member of the board of trustees of the Palo Alto Medical Foundation. Mr. Gaulke received a B.S. in electrical engineering from Oregon State University and a M.B.A. from Stanford University.

The nominating and corporate governance committee believes that, as a result of his extensive experience in financial and executive leadership positions, Mr. Gaulke brings to the Board of Directors and its audit committee valuable insights into the financial and operational requirements of a large company. The committee also believes that Mr. Gaulke’s lengthy tenure at Exponent provides him with a unique perspective into understanding and managing risk.

William G. Oldham, Ph.D. has served as a director of Cymer since January 2001. He is the Robert S. Pepper Professor of Electrical Engineering and Computer Science, emeritus, at the University of California, Berkeley, where he has been on the faculty since 1964. Dr. Oldham’s research interest is in semiconductor materials and process technology, including optical and extreme ultraviolet lithography. He has published more than 200 articles and holds 13 patents. He also served as an outside consultant on our scientific advisory board from its inception in 1999 until August 2002. He also served as program manager for dynamic RAM technology development and circuit design at Intel Corporation from 1974 to 1976. In 2003, he was awarded the Semiconductor Industry Association’s University Research Award for his career contributions to the semiconductor industry, and he is a member of the National Academy of Engineering. He also serves on the board of directors of Nanometrics Inc. He received B.S., M.S. and Ph.D. degrees from the Carnegie Institute of Technology.

The nominating and corporate governance committee believes that Dr. Oldham brings an invaluable, deep understanding of the technology, science and engineering of the semiconductor industry to our Board of Directors, including current state of the art developments in extreme ultraviolet lithography.

Eric M. Ruttenberghas served as director of Cymer since October 1, 2009. Mr. Ruttenberg serves as Co-Managing Member of the General Partner of Tinicum Capital Partners II, L.P., a New York based investment firm since 1998. Mr. Ruttenberg also currently serves as a director of several of Tinicum’s privately held portfolio companies. Mr. Ruttenberg has previously served on the boards of SPS Technologies and Kollmorgen Corporation. Mr. Ruttenberg received a B.A. from Hampshire College, where he concentrated in mathematics and business.

The nominating and corporate governance committee believes that, as a result of his extensive experience as an investor in a broad array of private and public companies, Mr. Ruttenberg provides our Board of Directors with valuable perspective as an individual and institutional stockholder, along with the benefit of his experience with manufacturing companies and financial markets.

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Peter J. Simone has served as a director of Cymer since July 1993. Mr. Simone is an independent consultant to the investment community and serves on the boards of directors of Inphi Corporation, Newport Corporation, Monotype Imaging, Inc. and Veeco Instruments, Inc., as well as several private companies. Mr. Simone was executive chairman of SpeedFam-IPEC, Inc., a semiconductor equipment company, from June 2001 to December 2002, when it was acquired by Novellus Systems, Inc. Mr. Simone served as a director of Sanmina-SCI Corp from 2003 to 2008. Mr. Simone’s previous experience includes 17 years with GCA Corporation, a manufacturer of semiconductor photolithography capital equipment, holding various management positions, including president and director. Mr. Simone received a B.S. in accounting from Bentley University and a M.B.A. from Babson College.

The nominating and corporate governance committee believes that Mr. Simone’s lithography background and long tenure as a director of Cymer brings necessary historic knowledge and continuity to the Board of Directors. The committee also believes that Mr. Simone’s extensive financial and management experience, along with his current role as a director for several technology companies, provides him with operational, manufacturing and inventory management expertise that are valuable to our audit committee and our Board of Directors.

Young K. Sohn has served as a director of Cymer since March 2003. Mr. Sohn currently serves as president, chief executive officer and director of Inphi Corporation, a semiconductor company. From May 2005 through December 2007, Sohn was an independent consultant to the high technology industry. He served as president of the Semiconductor Products Group (SPG) at Agilent Technologies Inc. from October 2003 through April 2005. Prior to joining Agilent, he served as president and chief executive officer and chairman of the board of directors of Oak Technology, Inc. which was acquired by Zoran Corporation in August 2003. Prior to joining Oak Technology, Inc. in 1999, Mr. Sohn was employed by Quantum Corporation for six years, serving most recently as president of its Hard Drive Business. From August 1983 to January 1993, he was director of marketing at Intel Corporation. Mr. Sohn also serves on the board of directors of Arm Holdings, PLC. He received a B.S. in electrical engineering from the University of Pennsylvania and a M.S. and M.B.A. from the Massachusetts Institute of Technology’s Sloan School of Management.

The nominating and corporate governance committee believes that Mr. Sohn’s extensive experience in the semiconductor industry provides our Board of Directors with valuable insight into the business of our chipmaker customers. The committee also believes that Mr. Sohn’s extensive involvement with overseas operations bring valuable international insights to the Board of Directors, particularly with respect to our business and relationships in Japan, Korea, Singapore, China and Taiwan.

Jon D. Tompkins has served as a director of Cymer since May 1999. Mr. Tompkins served as chief executive officer of KLA-Tencor Corporation from April 1997 until June 1998 and served as chairman of the board of KLA-Tencor from July 1998 until his retirement in 1999. He served as president and chief executive officer of Tencor Instruments from April 1991 until its merger with KLA Instruments in April 1997 and chairman of the board from November 1993 until the merger. He has also previously served as president and chief executive officer of Spectra-Physics. Mr. Tompkins served as director of Credence Systems Corporation from September 1999 to April 2008 and also served as its lead independent director. Since April 2003, Mr. Tompkins has served as chairman of the board of Electro Scientific Industries. Mr. Tompkins received a B.S. in electrical engineering from the University of Washington and a M.B.A. from Stanford University with an emphasis in finance and accounting.

The nominating and corporate governance committee believes that Mr. Tompkins’ significant experience in executive leadership roles at Tencor and KLA-Tencor, suppliers of metrology and yield management solutions for the semiconductor industry, provides our Board of Directors with unique insights into the businesses of our lithography equipment manufacturing customers, as well as our chipmaker customers.

THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH NAMED NOMINEE

FOR ELECTION TO THE BOARD OF DIRECTORS

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INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES

During 2010, our Board of Directors held six meetings. Each director attended 75% or more of the aggregate number of the meetings of the board and the committees on which he served, held during the portion of the last fiscal year for which he was a director or committee member, respectively.

The following table lists the chairman and members of each committee and the number of meetings held by each committee during 2010:

Name	Audit	Compensation	Nominating and Corporate Governance	Scientific Advisory
Charles J. Abbe	Chairman	—	—	—
Edward H. Braun	—	Chairman	—	—
Michael R. Gaulke	Member	—	Member	—
William G. Oldham	—	Member	—	Chairman
Eric M. Ruttenberg	—	Member	—	—
Peter J. Simone	Member	—	Member	—
Young K. Sohn	—	—	Member(1)	—
Jon D. Tompkins	—	Member	Chairman	—
Total meetings in 2010	12	7	4	3

(1) Mr. Sohn served on the compensation committee until May 2010. He was appointed to the nominating and corporate governance committee in May 2010.

Independence of the Board of Directors

As required under the NASDAQ Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors. Our Board of Directors consults with our legal counsel to ensure that the Board of Directors’ determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent Nasdaq listing standards, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his family members, and Cymer, our senior management and our independent registered public accounting firm, our Board of Directors affirmatively has determined that all of our directors are independent directors within the meaning of the applicable Nasdaq listing standards, except for Mr. Akins, our chief executive officer and chairman of the Board of Directors. As required under Nasdaq listing standards, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present and the executive session chairman presides.

Board Leadership Structure and Risk Oversight

Since Cymer’s inception in 1986, Mr. Akins has served as our chief executive officer and chairman of the board. Our Board of Directors is comprised of Mr. Akins and eight independent directors. The Board of Directors established the position of executive session chairman in 2004. Our Board of Director policy requires that independent directors who have served on our board for at least one year, other than those who are active chief executive officers or the chairman of the audit committee, serve as chair of the executive sessions at our board meetings for a two year term on a rotating basis.

The executive session chairman:

• reviews and approves the meeting agenda for our Board of Directors;

• sets the agenda for the executive session after consultation with the other independent directors;

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• presides during the executive session;

• conveys any messages from the executive session to the chief executive officer;

��� is available to discuss with the other directors any concerns they may have about Cymer and its performance and to relay those concerns, where appropriate, to the full Board of Directors;

• is available to consult with the chief executive officer regarding the concerns of the directors; and

• is available to be consulted by any of our senior executives as to any concerns the executive might have.

During 2009 and 2010 Mr. Braun served as executive session chairman. Mr. Gaulke has been appointed by the Board of Directors to serve as executive session chairman for 2011 and 2012.

The Board of Directors has four standing committees: the audit committee, the compensation committee, the nominating and corporate governance committee and the scientific advisory committee. Each of the committees is comprised of independent directors, with each of the four committees having a separate chair. Our audit committee is responsible for overseeing and monitoring financial risk and our nominating and corporate governance committee is responsible for the oversight of enterprise risk management.

Mr. Akins is seen by our customers and investors as providing strong leadership for the company and the semiconductor industry. In light of the considerations discussed above, we believe that having Mr. Akins as our chief executive officer and chairman of the Board of Directors, combined with independent chairs for each of our board committees and an independent executive session chair, has been effective and provides the right form of leadership for us.

Audit Committee

The audit committee of the Board of Directors oversees our corporate accounting and financial reporting process. For this purpose, the audit committee performs the following functions, among other things:

• appoints our independent registered public accounting firm and determines the funding for audit and review by them of our consolidated financial statements and internal controls over financial reporting;

• evaluates and oversees our independent registered public accounting firm’s independence and performance;

• determines in advance whether to engage our independent registered public accounting firm to provide any non-audit services and pre-approves these engagements;

• oversees and monitors our management and independent registered public accounting firm and their activities with respect to our financial reporting and compliance with our disclosure policies;

• discusses and reviews our financial statements, the results of our annual integrated audit and all press releases containing financial information with management and our independent registered public accounting firm;

• approves the disclosures in and filing of our periodic reports on Form 10-K and Form 10-Q to be filed with the SEC;

• establishes procedures to receive and address complaints regarding accounting and auditing matters;

• reviews and approves the internal audit function;

• considers periodically whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm;

• reviews with our management and independent registered public accounting firm the effectiveness of internal controls over financial reporting; and

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• performs such other duties of an audit committee specified in the Sarbanes-Oxley Act of 2002 and rules and regulations implemented by the SEC and Nasdaq.

During 2010, the audit committee was comprised of three independent directors, Messrs. Abbe, Gaulke and Simone. Our audit committee charter is available on our website athttp://www.cymer.com under Investor Relations—Corporate Governance.

The Board of Directors annually reviews the Nasdaq listing standards definition of independence for audit committee members and has determined that all members of the audit committee are independent (as currently defined in the Nasdaq listing standards and SEC rules). The Board of Directors has also determined that Messrs. Abbe, Gaulke and Simone qualify as “audit committee financial experts,” as defined in the applicable SEC rules.

Compensation Committee

The compensation committee acts on behalf of the Board of Directors to oversee and determine executive compensation. The compensation committee, among other things:

• reviews, evaluates and approves our compensation policy for executive officers;

• approves all forms of compensation to be provided to our executive officers;

• reviews, modifies and approves our overall compensation strategy, philosophy and programs;

• establishes policies with respect to equity compensation arrangements and evaluates the efficacy of our compensation policies and programs;

• acts as administrator of our equity incentive and employee stock purchase plans; and

• performs such other functions regarding compensation as the board may delegate.

The compensation committee also reviews with management the information set forth in the “Executive Compensation—Compensation Discussion and Analysis” and considers whether to recommend that it be included in Proxy Statements and other filings.

During 2010, the compensation committee was comprised of five independent directors. Messrs. Braun, Tompkins, Ruttenberg and Dr. Oldham served on the compensation committee for the entire year, and Mr. Sohn served until May 2010. Our compensation committee charter is available on our website athttp://www.cymer.com under Investor Relations—Corporate Governance.

For specific details about the determination of executive compensation for 2010, see the section titled “Executive Compensation—Compensation Discussion and Analysis.”

Nominating and Corporate Governance Committee

During 2010, the nominating and corporate governance committee was comprised of four independent directors. Messrs. Gaulke, Simone and Tompkins served on the nominating and corporate governance committee for the entire year and Mr. Sohn served since his appointment in May 2010. The nominating and corporate governance committee, among other things:

• acts on behalf of the board identifying individuals qualified to become directors and recommending that the board select the candidates for all directorships to be filled by the board or by the stockholders;

• oversees the composition, structure and evaluation of the board and each of its committees;

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• oversees board compensation; and

• develops and recommends to the board for its approval a set of corporate governance principles applicable to us.

Our corporate governance principles and our nominating and corporate governance committee charter are available on our website athttp://www.cymer.com under Investor Relations—Corporate Governance.

The nominating and corporate governance committee is responsible for reviewing from time to time the specific experience, qualifications, attributes and skills necessary and appropriate for our directors in the context of the board’s composition. These include such factors as business experience, international background, and knowledge of technology, manufacturing, operations, finance and/or marketing, and other skills that would enhance the board’s effectiveness.

The nominating and corporate governance committee believes that directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of our stockholders. The nominating and corporate governance committee evaluates candidates based on qualities such as inquisitiveness, objectivity and possession of practical wisdom and mature judgment. The nominating and corporate governance committee believes the board should represent diverse experience at policy-making levels in business, education and technology, and in areas that are relevant to our global activities.

Our directors who also serve as chief executive officers, or in equivalent positions, at other companies may serve on the boards of no more than three public companies, including Cymer’s. Directors who are not chief executive officers, or in equivalent positions, may serve on the boards of no more than four public companies, including Cymer’s. The Board of Directors may approve requests for waivers of this policy with the approval of at least two- thirds of the directors (other than the director requesting the waiver); provided that each such waiver shall be subject to annual review and re-approval by at least two-thirds of the directors then in office (other than the director requesting the waiver). In November 2010, the Board of Directors approved a waiver with respect to Mr. Simone for his service on the boards of directors of five public companies.

In order to further align the economic interests of directors with those of stockholders, the Board of Directors has adopted a policy requiring that within one year after the date on which an individual becomes a director, each director shall be required to hold not less than 2,500 shares of our common stock.

Because of the significant time investment and energy required to become familiar with the intricacies of the semiconductor capital equipment industry, the Board of Directors does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe that directors should expect to be re-nominated annually. Additionally, the Board of Directors has determined that there should be no arbitrary age limit or mandatory retirement age for board members. Each board committee’s performance review and assessment, and the nominating and corporate governance committee’s review and assessment of the Board of Directors’ performance will help determine each director’s tenure.

The nominating and corporate governance committee will consider director candidates recommended by stockholders. The committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether the candidate was recommended by a stockholder or not. Stockholders who wish to recommend individuals for consideration by the nominating and corporate governance committee to become nominees for election to the Board of Directors may do so by delivering a written recommendation to the nominating and corporate governance committee at the following address: Cymer, Inc., 17075 Thornmint Court, San Diego, California 92127 at least 120 days prior to the anniversary date of the mailing of our proxy statement for the last annual meeting of stockholders. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information, a description of the proposed nominee’s qualifications as

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a director and a representation that the nominating stockholder is a beneficial or record owner of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.

Our Bylaws authorize nine members for the Board of Directors and authorize the Board of Directors to change the number of directors from time to time. Between annual meetings of stockholders, the Board of Directors may elect directors to serve until the next annual meeting. The Board of Directors believes the current size of the board is appropriate and adequate to properly oversee our business, but will reassess as our size as circumstances require.

Scientific Advisory Committee

The scientific advisory committee was formed in August 2002, and charged with interacting with and attending meetings of our scientific advisory board. The scientific advisory committee currently consists solely of Dr. Oldham. The scientific advisory board met three times during 2010 and Dr. Oldham was in attendance at all scientific advisory board meetings.

COMPENSATION OF DIRECTORS

Each of our non-employee directors received an annual retainer of $25,000 prior to April 2010, payable quarterly, a fee of $2,500 for each board meeting attended and $1,000 for each committee meeting attended, with the exception of the chairman. In February 2010, our Board of Directors approved an increase in the annual retainer to $30,000, payable quarterly, and beginning in April 2010. The chairman of the audit committee receives $3,000 for each meeting attended and the chairman of the compensation committee, the nominating and corporate governance committee, and the scientific advisory committee each receive $2,000 for each meeting attended. The executive session chairman receives an annual retainer of $10,000, payable quarterly. In addition, all members of the audit committee, including the chairman, receive a separate quarterly fee of $1,000 for their service on the audit committee. Total cash compensation paid to outside directors in 2010 was $422,500. No fees are paid for telephonic meetings scheduled to last less than one hour. The members of the Board of Directors are also eligible for reimbursement for their expenses incurred to attend board meetings, in accordance with our policy.

Newly elected non-employee directors are granted an initial restricted stock unit (“RSU”) award for the number of shares determined by dividing $200,000 by the closing sales price per share of our common stock as reported on the Nasdaq Global Select Market as of the date of the first regular quarterly meeting of the compensation committee following the non-employee directors’ initial election. Each RSU award shall vest 25% on each of the next four anniversaries of the date the non-employee director is first elected to the Board of Directors. On the first trading day of each fiscal year each non-employee director then in office who has served for at least one year will be granted an RSU award pursuant to the Amended and Restated 2005 Equity Incentive Plan. If our stockholders approve Proposal 2, the award will instead be granted under the 2011 Equity Incentive Plan. This discussion refers to whichever of the two equity incentive plans is in force as the “Incentive Plan”. The number of shares issued under the RSU award shall be determined by dividing $100,000 by the closing sales price per share of our common stock as reported on the Nasdaq Global Select Market as of the date of grant. Each RSU award vests 100% one year from the date of grant.

The vesting of “stock awards” (which include RSU awards and other equity incentives that may be granted under the Incentive Plan) may be accelerated in full in the event of a Corporate Transaction. The term “Corporate Transaction” is defined in the Incentive Plan and includes transactions such as a sale of all of our assets, a sale of at least 90% of our outstanding stock or a merger, consolidation or similar transaction following which we are not the surviving corporation or following which we are the surviving corporation but the shares of our common stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged into other securities, cash or other property.

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According to the terms of the Incentive Plan, in the event of a Corporate Transaction, any surviving corporation or acquiring corporation may assume or continue any or all stock awards outstanding under the Incentive Plan. A surviving corporation or acquiring corporation may choose to assume or continue only a portion of a stock award or substitute a similar stock award for only a portion of a stock award. With respect to stock awards that have not been assumed, continued or substituted and are held by non-employee directors whose continuous service has not terminated prior to the effective date of the Corporate Transaction, the vesting of stock awards shall be accelerated in full to a date prior to the effective date of the Corporate Transaction as determined by our Board of Directors (or, if our Board of Directors did not determine a date, to the date that is five days prior to the effective date of the Corporate Transaction), and the stock awards shall not terminate.

For outstanding options that were granted under our 1996 Stock Option Plan, in the event of any change-in-control transaction involving us, each outstanding option would be assumed or an equivalent option substituted by the successor corporation. If the successor corporation refuses to assume or substitute the options, the non-employee director would have the right to exercise all of the option shares, including shares not otherwise exercisable. In such event, the plan administrator would notify the non-employee director that the option is fully exercisable for 15 days from the date of such notice and the option terminates upon expiration of such period.

DIRECTOR COMPENSATION FOR 2010

The table below summarizes the compensation paid to our non-employee directors during 2010:

Name	Paid in Cash ($)(1)		Awards ($)(2)		Total ($)
Charles J. Abbe		57,250		99,987		157,237
Edward H. Braun		61,250		99,987		161,237
Michael R. Gaulke		53,250		99,987		153,237
William G. Oldham		52,250		99,987		152,237
Eric M. Ruttenberg		46,250		—		46,250
Peter J. Simone		53,250		99,987		153,237
Young K. Sohn		44,750		99,987		144,737
Jon D. Tompkins		54,250		99,987		154,237

(1) Amounts shown include an annual retainer and fees for meetings held and attended by each non-employee director during 2010

(2) The number of RSUs awarded, in whole shares, was determined by dividing $100,000 by the closing price per share of our common stock as of the date of grant. In January 2010, each non-employee director was awarded 2,552 RSUs with a grant date fair value of $39.18 per share. Each RSU award vests 100% one year from the date of grant. Mr. Ruttenberg was not eligible to receive an annual RSU grant in 2010 because he had not served on the Board of Directors for at least one year as of the date of grant.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview

This Compensation Discussion and Analysis (“CD&A”) provides information regarding the 2010 compensation program for the principal executive officer, the principal financial officer, and the two other executive officers of Cymer, Inc (the “named executive officers”). During 2010, our named executive officers were:

• Robert P. Akins, our Chairman of the Board and Chief Executive Officer;

• Edward J. Brown, Jr., our President and Chief Operating Officer;

• Paul B. Bowman, our Senior Vice President, Chief Financial Officer, and Secretary; and

• Karen K. McGinnis, our Vice President, Corporate Controller, and Chief Accounting Officer.

We design and operate our executive compensation program to achieve specific objectives including: market competitiveness to attract, retain, and motivate our executive officers; pay-for-performance; and incentive compensation representing a large portion of an executive officer’s total compensation. These objectives are further described in the section entitled“Executive Compensation Philosophy” below.

In the cyclical environment in which we operate, applying these objectives leads to changes in our programs from time to time. For example, in response to the downturn in late 2008 and early 2009, we reduced the annual base salaries of Messrs. Akins and Brown by 15% for the first six months of 2009; suspended the Short-Term Incentive Plan for 2009; and reduced the target award values for long-term equity incentive awards by 35%. Effective July 2009, the salaries were restored to 2008 levels and a cash incentive plan was implemented for the second half of 2009. As business results improved during 2010, cash and equity incentive targets were restored. As the business climate changes, we will continue to adjust our programs to reward the management behaviors that we believe will deliver the best results for our stockholders over the long-term.

Though the semiconductor industry has long been acknowledged as being a very cyclical industry, full cycles have recently been measured in terms of four to six years. In the past two years alone, however, we have witnessed dramatic swings in demand in our industry, with equipment demand in 2010 recovering significantly compared to the multi-cycle low recorded in 2009.

This trend was reflected in our operating results for 2010:

• 74% increase in revenues; $534.2 million in 2010 compared to revenue of $307.7 million in 2009

• 51% gross margin, with gross profit totaling $272.8 million

• 23% operating margin, with operating income totaling $121.1 million

• 658% increase in net income; net income totaled $91.0 million, equal to $3.02 per share (diluted) in 2010, compared to net income of $12.0 million, equal to $0.40 per share (diluted) for 2009

• 17% increase in cash and investments, totaling approximately $217 million, an increase of $31 million from December 31, 2009.

In general, our compensation programs address this cyclicality through a mix of short and long-term incentives, including both cash and equity, as well as through grants of performance-based restricted stock units that allow our Board of Directors and compensation committee to tailor the incentives to the goal of delivering the best results for our stockholders over the long term.

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2010 Compensation Program Highlights:

The following compensation actions were taken with respect to the compensation of our executive officers in 2010. Each of these items is discussed in greater detail under the section titled “Elements of Executive Compensation”.

• Base Salaries. Salaries were reviewed and adjusted, effective April 1, 2010. Both Messrs. Akins and Brown received increases of 3.0%, less than the typical increase being given to other Cymer U.S. employees and consistent with increases given by our peer companies. Neither Mr. Bowman nor Ms. McGinnis received increases in 2010 as Mr. Bowman accepted the role of our Chief Financial Officer and Ms. McGinnis was hired in late 2009.

• Short-Term Incentive Program ( “STIP”)

• The compensation committee structured the STIP for 2010 to emphasize achievement based on two measures: revenue and operating margin. We believe these metrics drive the results necessary to increase shareholder value. The compensation committee established a funding pool with a maximum aggregate value of two times the aggregate target payout levels, with actual payouts to each executive officer based on achievement of corporate and individual performance goals. In 2010, we exceeded our financial plan, resulting in the funding of the STIP pool at 184.77% of target levels. This resulted in the following 2010 STIP awards to our executive officers:

	Actual 2010 Cash Incentive
Robert P. Akins	$	1,421,540
Edward J. Brown, Jr.	$	918,219
Paul B. Bowman	$	517,356
Karen K. McGinnis	$	233,388

• Long-Term Incentive Program (“LTIP”).

• In 2010, two-thirds of the equity awards granted to our executive officers was in the form of performance-based restricted stock units (“PRSUs”) with a one-year performance period and a three-year vesting period from date of grant. The remaining one-third of the equity awards granted to our executive officers was in the form of restricted stock units (“RSUs”) with a three-year vesting period from date of grant. The PRSUs were granted subject to two different performance measures: relative financial performance against our peer companies and achievement against a pre-defined market share goal. We believe that use of multiple performance metrics in our LTIP leads to better alignment of pay and performance, while this design also promotes the achievement of results that are not directly rewarded under the STIP.

The actual number of shares issued under the PRSU award based on relative financial performance against our peer companies was 65% of the target award levels, and the actual number of shares issued under the PRSU award based on the market share goal was 81.25% of the target awards levels. As a result, the actual number of shares earned by our executive officers under these PRSU awards were as follows:

	Financial Performance PRSUs				Market Share PRSUs
	Target Award		Actual Award		Target Award		Actual Award
Robert P. Akins		28,667		18,633		28,666		23,291
Edward J. Brown, Jr.		17,334		11,267		17,333		14,083
Paul B. Bowman		10,800		7,020		10,800		8,775

Ms. McGinnis did not receive an equity award from the 2010 LTIP as she was not eligible for this program.

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• Equity Dilution

• We continued to manage our equity compensation program conservatively as shown in the table below:

Parameter(1)	3-Year Average Burn Rate(2)			Issued Overhang(3) Fiscal  Year End			Total Overhang(4) Fiscal  Year End
Core Peer Group 50th Percentile		4.2	%		11.4	%		18.5	%
Core Peer Group 75th Percentile		4.7	%		14.1	%		29.1	%
Cymer		3.5	%		5.9	%		9.9	%
Percent Rank within Peer Group		36.0	%		7.0	%		1.0	%

(1) Reflects Core Peer Group data filed with the SEC through January 27, 2011 and Cymer’s data as of December 31, 2010.

(2) ‘Burn Rate’ is defined as total equity (stock options and full-value shares) granted within the latest fiscal year, as a percentage of shares outstanding.

(3) ‘Issued Overhang’ is defined as outstanding total equity (stock options and full-value shares), as a percentage of shares outstanding.

(4) ‘Total Overhang’ is defined as the sum of outstanding equity (stock options and full-value shares), as well as shares available for future issuance, as a percentage of shares outstanding.

Executive Compensation Philosophy

We operate in an industry that is both highly competitive and undergoing significant globalization. As a result, we have a high demand for qualified and experienced executives. Through our executive compensation program, we seek to attract and retain executives with the requisite knowledge, skills, experience, and integrity to manage our business, and to motivate and reward these individuals to achieve our strategic, operational, and financial objectives, while supporting our core values and culture. In so doing, we provide our executive officers with total compensation that we believe is competitive with other leading companies in our industry and rewards performance as measured against the achievement of challenging business objectives. We also seek to align our executive officers’ business objectives and, thereby, their financial interests, with the long-term interests of our stockholders.

We have designed a compensation program which puts a substantial percentage of executive pay at-risk, subject to increase when corporate targets are overachieved and subject to reduction when corporate targets are not achieved. This provides us with a more variable expense structure, allowing us to reduce our compensation costs in challenging times and reward performance when business conditions warrant. Consistent with our goal of linking pay and performance, approximately 87% of the targeted total compensation awarded to Mr. Akins in 2010 was comprised of incentive compensation tied to the achievement of specific performance objectives.

Further, to achieve our executive compensation objectives, our executive compensation decisions are influenced by the following principles:

• Market Competitiveness

Each year, we evaluate the various elements of our executive compensation program, relative to the compensation paid to the executives of the companies within our peer groups, as identified below, as well as against compensation survey data of companies in our industry sector with comparable annual revenues. This analysis is intended to assess the competitiveness of the compensation that we offer to our executive officers as compared to that offered to executives at companies with which we compete for talent. Due to the difficulty in identifying a suitable number of comparable executive positions at the companies within our peer groups, typically we use the peer group data along with the

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survey data to analyze the competitive market for our chief executive officer and chief financial officer positions, and use only the industry sector survey data to analyze the competitive market for our other executive officer positions.

The peer groups consists of 18 semiconductor capital equipment companies either comparable to or larger than Cymer as measured by revenue, market capitalization, business maturity, and general growth opportunities. For analytical purposes, these companies were broken into two groups.

The first group, which is our core group of peer companies (“core peer group”), represents the companies against which the compensation committee believes our executive compensation program should be competitive for our chief executive officer and chief financial officer positions. These companies are similar to us in terms of scope and general business complexity and operations. Compensia, Inc. (“Compensia”), our compensation committee’s independent compensation consultant, conducted an analysis using publicly-available compensation information from these companies to determine the base salary, annual cash incentive compensation, aggregate equity award values, and overall compensation provided by the core peer group to their chief executive and chief financial officers.

For 2010, our core peer group consisted of:

Advanced Energy Industries	FormFactor	Teradyne
Brooks Automation	MKS Instruments	Ultratech
Coherent	Newport	Varian Semiconductor Equipment
FEI	Novellus Systems	Veeco Instruments

The second group consists of our aspirational peer companies (“aspirational peer group”). This group represents companies with which we aggressively compete for senior executive talent. These companies are much larger than us in terms of both revenue and market capitalization and are considered mature bellwethers for our industry. Therefore, this peer group is only used to analyze long-term incentive plan design (but not individual award levels) for our executive officers.

For 2010, our aspirational peer group consisted of:

Agilent Technologies	KLA-Tencor	Leap Wireless International
Applied Materials	Lam Research	Microchip Technology

In addition, for all of our executive officers, Compensia performed a compensation analysis using survey data for base salary, annual cash incentive compensation, aggregate equity award values, and total overall compensation at companies in our industry sector with comparable annual revenues to determine competitive pay levels for each executive position.

Using this analysis, the compensation committee sought to target each individual compensation element for our executive officers for 2010 at approximately the 60^thpercentile of the competitive market. The compensation committee determined that this positioning provided a greater incentive compensation opportunity for strong performance and enabled total compensation to be competitive with the companies in our peer groups. The compensation committee also evaluated the total compensation of our executive officers to ensure that it appropriately recognized each individual’s position and role, scope of responsibility, experience, performance, and contributions. The compensation committee has discretion to set compensation at a level that may be higher or lower than the percentiles of the market data.

• Pay for performance.We believe that a significant portion of an executive officer’s total compensation should be tied not only to individual performance, but also to overall corporate performance as measured against strategic, operational, and financial objectives. During periods when our performance meets or exceeds established objectives, executive officers should be paid at or above target levels. When our performance does not meet key objectives, incentive award payments, if any, should be less than target levels.

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• Incentive compensation should represent a large portion of an executive officer’s total compensation.We minimize the amount of fixed compensation paid to executive officers to reduce costs when our performance does not meet or exceed target levels. Further, we believe the majority of an executive officer’s total compensation should be in the form of short-term and long-term incentives, which are based primarily on our level of revenue and profitability. As shown in the charts below, Mr. Akins receives approximately 87% of his total target compensation in performance-based compensation, while our other executive officers receive approximately 80% of their total target compensation in performance-based compensation. Accordingly, we believe our executive officers are motivated to increase our profitability and stockholder return to earn their target compensation.

Where appropriate, the compensation committee includes multiple measures of performance in our incentive plan design. However, to mitigate the potential risks of incentive payments, we have incorporated appropriate maximums of between 1.25x – 2.0x target payments for both our STIP and LTIP, with the compensation committee having oversight and approval on both plans to ensure that there continues to be the appropriate balance of short-term financial results and long-term strategic vision.

Compensation Process

Role of the Compensation Committee

The compensation committee oversees and determines executive compensation on behalf of our Board of Directors. Among its duties, the compensation committee establishes our compensation philosophy and the framework for determining the compensation of our executive officers and, within that philosophy and framework, reviews, evaluates, and approves base salaries, short-term and long-term incentives, and all other forms of compensation for these individuals.

The compensation committee receives compensation recommendations and supporting data, as described below, on the compensation of our executive officers from its compensation consultant as well as performance evaluations and compensation recommendations for our executive officers from Mr. Akins (other than for himself). In addition, the compensation committee members rely on their own personal experience with compensation practices through their involvement as either executives or directors of other companies. Historically, the compensation committee has made adjustments to our executive officers’ base salaries, determined annual cash incentive payments, granted equity awards, and established new annual and long-term performance objectives in the first quarter of the year, as part of our formal annual executive compensation review process. Generally, the compensation committee’s process comprises two related elements: (i) the determination of compensation levels and (ii) the establishment of performance objectives for the current year.

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In the case of Mr. Akins, the evaluation of his performance is conducted by the compensation committee, which determines any adjustments to his base salary, as well as any annual cash incentive payments and equity awards, and establishes the performance objectives required to earn those awards. Mr. Akins is not permitted to participate in or be present during any deliberations or determinations of the compensation committee regarding his compensation or individual performance objectives. The compensation committee also meets at every regularly scheduled compensation committee meeting in executive sessions without management present.

As part of its evaluation process, the compensation committee solicits the opinions of all members of our Board of Directors. As part of its considerations and deliberations on the compensation for our executive officers the compensation committee may review and consider such materials as it deems appropriate, as well as recommendations from the compensation committee’s compensation consultant. Each executive officer performs an annual self-assessment to measure his or her performance against his or her pre-established individual performance objectives. This self-assessment is then reviewed with the executive officers who are ranked at least one level higher and who have authority to approve and/or modify the self-assessment. Mr. Akins’ self-assessment is reviewed by the compensation committee and other members of our Board of Directors.

For more information on the compensation committee, please see “Information Regarding the Board of Directors and its Committees.”

Role of the Independent Compensation Consultant

The compensation committee has the sole authority to retain compensation consultants to assist in its evaluation of executive compensation, including the authority to approve the consultant’s fees and the other terms of its engagement. The compensation committee has engaged Compensia, an independent, nationally-recognized executive compensation consulting firm, which does not provide any other services to us and works with our management only on matters for which the compensation committee is responsible.

Compensia performed the following services during 2010:

• advised the compensation committee on current compensation market trends and the specifics of new legislation affecting executive compensation;

• assessed our relative performance against our peer groups;

• evaluated our current executive total compensation program, including base salaries, short- and long-term incentives, with a view to supporting and reinforcing our long-term strategic goals; and

• assisted with the development of our 2011 long-term incentive program guidelines.

Elements of Executive Compensation

During 2010, our executive compensation program consisted of the following elements:

• base salaries;

• annual cash incentives;

• long-term incentives;

• retirement, health, and welfare benefits;

• change in control benefits; and

• perquisites and other benefits.

The level of base salary versus incentive compensation (annual cash and long-term incentive awards) is dependent on both the performance rating and level of the executive officer. Consistent with our pay-for-performance philosophy, an executive officer’s position and responsibility for influencing stockholder value are determinative of the percentage of his or her incentive elements of compensation relative to base salary.

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Base Salaries

We seek to provide our executive officers with a level of fixed cash compensation in the form of base salary commensurate with their professional status and accomplishment. This level should be directly linked to both market competitive pay levels and the individual’s performance. The compensation committee determines the base salaries for our executive officers based on a number of factors, including the following:

• job scope and responsibilities;

• past and current individual performance and contributions; and

• in the case of newly hired executive officers, the results of individual negotiations and the then-current market conditions at the time the individual is recruited.

Annual Cash Incentives

Short-Term Incentive Bonus Plan

We use annual cash incentive awards to re-enforce our performance-based compensation philosophy. Under our STIP, our executive officers are eligible to receive performance-based annual cash incentive awards that are calculated as a percentage of their base salaries.

Under the STIP, an executive officer’s annual cash incentive award generally depends on two categories of performance measures, one related to our financial performance and one related to the executive officer’s individual performance as evaluated against specific management-by-objective goals (“MBOs”).

Our Board of Directors approved our annual operating plan before the beginning of the year, and our compensation committee approved the STIP and target amounts during the first quarter of 2010. The compensation committee adopted a pool-based funding approach whereby our financial performance determined a funding factor for the STIP cash incentive pool. The STIP cash incentive pool was the aggregate of the annual cash incentive award targets for all participants at target payout levels and was subject to increase or decrease based upon the level of our achievement against the following performance measures:

• Revenue—Actual revenue achieved for the year as compared to an annual revenue target.; and

• Operating Margin—Actual operating margin achieved for the year as compared to an annual operating margin target.

Our 2010 revenue was $534.2 million and our operating margin was 22.7%, both of which exceeded the targets established by our Board of Directors, resulting in a funding factor of 184.77% for the STIP cash incentive pool. We believe that by using both revenue and operating profitability measures for incentives under our STIP, we mitigate risk through the focus on several metrics and drive multiple business results important to our success.

A portion of the final cash incentive award payable to the executive officers was subject to increase or decrease based on their individual achievement against specific corporate and individual MBOs. In the case of our executive officers, the corporate MBOs focused on important, but non-financial, corporate measures and the individual MBOs were tailored and weighted toward the operational performance of each executive officer based on his or her corporate responsibility.

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Under the STIP, the annual cash incentive award targets for our executive officers for 2010, expressed as a percentage of his or her base salary, as well as the weighting of the cash incentive award amount subject to adjustment based on MBOs, were as follows:

	Target Annual Cash Incentive (as a % of base salary)			% of Cash Incentive Adjusted for Individual Achievement Against MBOs
Robert P. Akins		120	%		20	%
Edward J. Brown, Jr.		100	%		20	%
Paul B. Bowman		80	%		20	%
Karen K. McGinnis		50	%		30	%

For 2011, the compensation committee approved a decrease to Robert P. Akins’ incentive target under our STIP. His incentive target was reduced from 120% of base salary to 100% of base salary.

Long-Term Incentives

To further align the long-term interests of our executive officers with the interests of our stockholders, each year we provide them with long-term incentives in the form of equity awards. The compensation committee believes that a large portion of the executive officers’ total compensation should consist of equity awards which have a longer term focus as they vest over several years, rather than cash which is primarily tied to shorter term performance.

Long-Term Incentive Program

Our executive officers are eligible to participate in the LTIP. The compensation committee sets the target levels annually for the LTIP awards based on:

• an analysis of the aggregate values of the long-term incentive awards being offered by similarly sized companies in our industry sector;

• stockholder dilution considerations;

• the accounting treatment for stock-based compensation expense and its effect on our operating budget; and

• the recommendations of the compensation committee’s independent compensation consultant.

Award Targets:Equity awards are granted under our Amended and Restated 2005 Equity Incentive Plan (the “2005 Equity Plan”) and may include any of the following equity vehicles: PRSUs, RSUs, stock options, and/or any other equity awards permitted under the 2005 Equity Plan. All potential equity awards granted under the LTIP are based on a target award value which is evaluated annually against similarly-sized companies within our industry. This target award value is then converted into a number of shares by dividing a 30 calendar day average price of our common stock into the target award value to determine the size of the equity award.

PRSU Performance Measures:The number of shares subject to any PRSU awards that will vest and become issuable to participants is subject to increase or decrease based on our actual performance against specific performance measures approved by the compensation committee.

LTIP Awards—2010

In February 2010, the compensation committee set target levels for the annual LTIP awards for our executive officers. In addition to the annual LTIP awards, the compensation committee also approved discretionary PRSU and RSU awards for certain executive officers in recognition of their sustained efforts over

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multiple years and the stockholder value which they have created over time as well as to provide potential equity ownership levels that the compensation committee believes is more reflective of the current competitive market levels. The PRSUs granted to our executive officers are subject to the same performance goals as the annual and discretionary PRSUs granted to other critical employees throughout the company.

The target award values and number of shares of our common stock subject to the PSRU and RSU awards granted to our executive officers were as follows:

	Target LTIP Award Value(1)		# of RSUs (2)		Target # of PRSUs(3)
Robert P. Akins	$	1,200,000		12,000		24,000
Edward J. Brown, Jr.	$	900,000		9,000		18,000
Paul B. Bowman	$	580,000		5,800		11,600
Karen K. McGinnis(4)	$	—		—		—
	Target Discretionary Award Value(1)		# of RSUs (2)		Target # of PRSUs(3)
Robert P. Akins	$	1,661,000		16,667		33,333
Edward J. Brown, Jr.	$	830,000		8,333		16,667
Paul B. Bowman	$	498,000		5,000		10,000
Karen K. McGinnis(4)	$	—		—		—

(1) The target award value for each executive officer represents the target dollar value of the LTIP awards, as established by the compensation committee consistent with our compensation philosophy, and assumes that the target performance levels for the related financial and individual performance measures associated with the PRSUs is achieved.

(2) The number of RSUs granted was calculated by dividing the target award value applicable to that portion of the LTIP award by the 30 calendar day average closing market price of our common stock as of February 16, 2010, $33.22 per share, and rounding the result to the nearest ten shares. RSUs will vest and become issuable in three equal annual installments beginning January 1, 2011.

(3) The target number of PRSUs granted was calculated by dividing the target award value applicable to that portion of the LTIP award by the 30 calendar day average closing market price of our common stock as of February 16, 2010, $33.22 per share, and rounding the result to the nearest ten shares. PRSUs will vest in three equal installments with the initial installment vesting upon determination of the actual number of shares earned under the award and the second and third installments vesting on January 1, 2012 and 2013, respectively.

(4) Ms. McGinnis was not eligible for LTIP or discretionary awards in 2010.

2010 PRSU Performance Measures

Half of the number of shares of our common stock issued under the 2010 PRSUs was determined based on our percentile ranking relative to our peer groups over the 2010 performance period with respect to two specified financial measures: revenue growth and net income change as a percentage of revenue, as follows:

Percentile Rank vs. Peers	% of Target Number of Shares To Be Issued
<40th Percentile		0	%
40th - 50thPercentile		50	%
50th - 60thPercentile		75	%
60th - 70thPercentile		100	%
70th - 80thPercentile		125	%
80th - 90thPercentile		150	%
Greater than 90thPercentile		200	%

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The other half of the number of shares of our common stock issued under the 2010 PRSUs was determined based on our market share of deep ultraviolet light source installations during 2010 as follows:

Market Share	% of Target Number of Shares To Be Issued
Less than 64%		0	%
64%		80	%
70%		87.5	%
80%		100	%
90%		112.5	%
100		125	%

In February 2011, the compensation committee approved the level of achievement against the 2010 PRSU Performance Measures as described above. The level of achievement based on relative financial performance against our peer companies was 65% of the target award levels, and the level of achievement based on the market share goal was 81.25% of the target awards levels. As a result, the following number of PRSU shares were issued to our executive officers, with 33% of such shares vesting immediately and the remaining shares vesting in equal installments in 2012 and 2013, subject to continued employment with us:

Name	Grant Date		Threshold # of PRSU's		Target # of PRSU's		Maximum # of PRSU's		PRSU Shares Issued
Robert P. Akins		2/26/2010		14,400		24,000		39,000		17,550
(1)		2/26/2010		20,000		33,333		54,167		24,374
Edward J. Brown, Jr.		2/26/2010		10,800		18,000		29,250		13,163
(1)		2/26/2010		10,000		16,667		27,084		12,187
Paul B. Bowman		2/26/2010		6,960		11,600		18,850		8,483
(1)		2/26/2010		6,000		10,000		16,250		7,313
Karen K. McGinnis(2)		—		—		—		—		—

(1) Represents discretionary awards.

(2) Ms. McGinnis was not eligible for LTIP or discretionary awards in 2010.

LTIP Awards—2009

The target award values and number of shares of our common stock subject to the PSRU and RSU awards granted to our executive officers under the 2009 LTIP were as follows:

	Initial Target LTIP Award Value(1)		Reduced Target LTIP Award Value(1)		# of RSUs (2)		Target # of PRSUs(2)
Robert P. Akins	$	1,200,000	$	780,000		17,820		17,820
Edward J. Brown, Jr.	$	900,000	$	585,000		13,370		13,370
Paul B. Bowman	$	600,000	$	390,000		8,910		8,910
Karen K. McGinnis	$	200,000	$	130,000		2,970		2,970

(1) The target award value for each executive officer represents the target dollar value of the LTIP awards, as established by the compensation committee consistent with our compensation philosophy, and assumes that the target performance levels for the related financial and individual performance measures associated with the PRSUs is achieved. In view of the global economic recession and our business outlook for 2009, the 2009 equity awards were reduced to approximately 65% of the previously approved award values under the LTIP.

(2) The number of RSUs granted was calculated by dividing the target award value applicable to that portion of the LTIP award by the 30 calendar day average closing market price of our common stock as of January 2,

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2009, $21.88 per share, and rounding the result to the nearest ten shares. RSUs were granted to Messrs. Akins, Brown, and Bowman on February 5, 2009 and will vest over a three year period. RSU’s were granted to Ms. McGinnis on February 26, 2010 and will vest on each of the next three anniversaries of her employment commencement date, which was November 30, 2009. PRSUs were granted to Messrs. Akins, Brown and Bowman on February 5, 2009 and to Ms. McGinnis on February 26, 2010 and will vest and become issuable in three equal annual installments beginning January 1, 2010.

2009 PRSU Performance Measures

The number of shares of our common stock that will be issued under the 2009 PRSUs is determined based on our percentile ranking relative to our peer groups over a three year performance period (2009 through 2011) with respect to two specified financial measures: revenue growth and net income change as a percentage of revenue, as follows:

Percentile Rank vs. Peers	% of Target Number of Shares To Be Issued(1)
<40th Percentile		0	%
40th - 50thPercentile		50	%
50th - 60thPercentile		75	%
60th - 70thPercentile		100	%
70th - 80thPercentile		125	%
80th - 90thPercentile		150	%
Greater than 90thPercentile		200	%

(1) The number of shares of our common stock that will vest and become issuable under the PRSUs is subject to reduction if an executive officer’s individual average annual MBO achievement over the three year performance period is less than 100% of his or her targeted MBO as determined by the compensation committee, in the case of Mr. Akins, and by Mr. Akins, in the case of the other executive officers.

LTIP Awards—2008

The target award values and number of shares of our common stock subject to the stock options and PRSU awards granted to our executive officers under the 2008 LTIP were as follows:

	Target LTIP Award Value(1)		Components of Target Award Value
			Stock Options(2)		Target # of PRSUs(3)
Robert P. Akins	$	1,800,000		69,345		22,480
Edward J. Brown, Jr.	$	1,350,000		52,005		16,860
Paul B. Bowman(4)	$	45,600		—		1,550
Karen K. McGinnis(5)		—		—		—

(1) The target award value for each executive officer represents the target dollar value of the LTIP awards, as established by the compensation committee consistent with our compensation philosophy, and assumes that the target performance levels for the related financial and individual performance measures associated with the PRSUs is achieved.

(2) The number of shares subject to stock options was determined by dividing 50% of the target award value by the Black-Scholes value on December 14, 2007, rounding such number to the nearest 10 shares, and multiplying that result by 1.5. These stock options were granted on January 2, 2008 and will vest over a four-year period based on the executive officer’s continue employment through the applicable vesting period.

(3) The target number of shares subject to PRSUs was determined by dividing 50% of the target award value by the average stock price for the 60 days immediately preceding December 14, 2007 and rounding down to the nearest whole number of shares.

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(4) Mr. Bowman’s LTIP award reflects the pro-rated PRSU grant he received when he joined us in May 2008 and is generally consistent with the size of awards received by the other executive officers hired in 2008.

(5) Ms. McGinnis began her employment with us on November 30, 2009 and, therefore, was not eligible for an LTIP award under this program.

2008 PRSU Performance Measures

The number of shares issuable under the 2008 PRSUs was to be determined based on our percentile ranking relative to our peer groups over a three year performance period (2008 through 2010) with respect to two specified financial measures: revenue growth and net income change as a percentage of revenue, as follows:

Percentile Rank vs. Peers	% of Target Number of Shares To Be Issued(1)
<40th Percentile		0	%
40th - 50thPercentile		50	%
50th - 60thPercentile		75	%
60th - 70thPercentile		100	%
70th - 80thPercentile		125	%
80th - 90thPercentile		150	%
Greater than 90thPercentile		200	%

(1) The number of 2008 PRSUs that vest and become issuable was subject to reduction if an executive officer’s individual average annual MBO achievement over the three year performance period was less than 100% of his targeted MBO as determined by the compensation committee, in the case of Mr. Akins, and by Mr. Akins, in the case of the other executive officers.

In February 2011, the compensation committee approved the achievement against the 2008 PRSU Performance Measures described above. The level of achievement based on relative financial performance against our peer companies was 60% of the target award levels. As a result, the following shares of our common stock were issued to our executive officers:

Name	Grant Date		Threshold # of PRSU's		Target # of PRSU's		Maximum # of PRSU's		PRSU Shares Issued
Robert P. Akins		1/2/2008		11,240		22,480		44,960		12,557
Edward J. Brown, Jr		1/2/2008		8,430		16,860		33,720		10,116
Paul B. Bowman		5/21/2008		775		1,550		3,100		921
Karen K. McGinnis(1)		—		—		—		—		—

(1) Ms. McGinnis began her employment with us on November 30, 2009 and, therefore, was not eligible for an award under this program.

Equity Award Grant Policy

Our Board of Directors has approved an equity award grant policy that is applicable to all equity awards granted by the compensation committee, including awards to executive officers. Under this policy, equity awards are granted generally only at the regularly scheduled meetings of the compensation committee held in conjunction with the quarterly meetings of our Board of Directors. To the extent that stock options are granted by the compensation committee, the exercise price is set at the closing market price of our common stock on the date the compensation committee approved the award. We have not attempted to coordinate equity award grants with the release of material non-public information, and, under this policy, have expressly prohibited such a practice.

In general, we grant equity awards to our newly hired executive officers as an incentive to commence employment. In determining the number of awards to be granted to newly hired executive officers, we take into consideration the individual’s position, scope of responsibility, ability to affect profits and stockholder value, and the value of stock options in relation to other elements of total compensation. We also consider external factors,

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such as current market conditions for executive employees and competitive peer or survey data, as applicable to the position, to determine the number and value of shares of common stock to be granted. We also engage in direct negotiations with the candidate over the terms of employment, including the size of the stock option to be granted if the candidate accepts our offer of employment. For LTIP awards, the type of award and number of shares of common stock to be granted and the applicable vesting period is determined as described above. Awards of PRSUs, stock options, and other equity awards are intended to align the interests of our executive officers with the interests of our stockholders through stock ownership, increase the reward to our executive officers when our stock price increases, and serve as a retention tool for our executive officers.

Ms. McGinnis was granted a stock option for 20,000 shares of our common stock from the 2005 Equity Plan as approved by the compensation committee in February 2010. These shares vest 25% on November 30, 2010 and 1/48 each month thereafter, subject to Ms. McGinnis’ continued service through the applicable vesting dates.

Stock Ownership Policy for Certain Executive Officers

Our Board of Directors believes that it is in the best interest of Cymer and its stockholders to require our chief executive officer, chief operating officer, and chief financial officer to maintain ownership stakes that align the interests of these executive officers who are most responsible for influencing stockholder value with the interests of our stockholders. Accordingly, it has adopted a policy requiring that, within five years after the date on which an individual is first appointed to any of the following positions, such individual must hold not less than the number of shares of common stock specified below:

Chief Executive Officer	15,000 shares
Chief Operating Officer	10,000 shares
Chief Financial Officer	10,000 shares

For purposes of determining whether the executive officer meets the applicable stock ownership requirements, shares of common stock subject to vested stock options and RSU awards held by such individual are counted as owned. As of December 31, 2010, Messrs. Akins, Brown, and Bowman each met their applicable stock ownership requirements.

Retirement, Health, and Welfare Benefits

Employee 401(k) Defined Contribution Plan. We have a 401(k) plan that allows participating employees to contribute a percentage of their eligible compensation, subject to annual Internal Revenue Service limits. The plan is available to all full-time U.S. employees, including our executive officers. Pursuant to the terms of the plan, we are allowed to make a matching contribution of up to 4% of each participating employee’s eligible compensation, not to exceed $5,000 per year. The amounts we contribute vest annually over a three year period based on the employee’s date of hire. All four of our executive officers received the maximum matching contribution of $5,000 during 2010.

Executive Deferred Compensation Plan. We maintain an executive deferred compensation plan for senior management level employees. This plan is intended to be a non-qualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code. The plan is maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974 (“ERISA”). We have purchased company-owned life insurance to finance this plan. The plan allows eligible participants to defer receipt of their base salary and/or annual cash incentive payments to provide retirement and other benefits to the employee. We do not provide a matching contribution on any deferrals under this plan.

We maintain this plan for the purpose of providing a competitive benefit by providing our executive officers an opportunity to defer income tax payments on their cash compensation. Currently, we have 29 employees eligible for this plan, totaling 5 percent of the U.S. employee population, with approximately 41% of the eligible employees participating in the plan. Of our executive officers, only Mr. Akins participates in this plan.

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Officer Retirement Program. We maintain an optional executive health coverage extension program for our executive officers who voluntarily retire while in good standing. We provide this program to reward our executive officers who have provided us with services over a significant number of years. We do not provide significant cash benefits under this program because we intend that the benefits provided under our long-term incentive plans, our 401(k) plan, and the deferred compensation plan will provide a significant source of retirement income for our executive officers.

The only executive officer who is currently eligible for this program is Mr. Akins. See the discussion below under “Potential Payments Upon Qualifying Retirement Terminations” for a more detailed description of the material terms of this program.

Change in Control Benefits

The compensation committee believes that to continue to retain the services of our executive officers and focus their efforts on stockholder interests when considering strategic alternatives, it is important to provide them with income and benefit protection against their potential loss of employment in connection with a change in control of Cymer. Accordingly, we provide for such payments and benefits if a change in control results in their reduced responsibilities, compensation, or involuntary loss of employment.

We have entered into employment agreements with Messrs. Akins, Brown, and Bowman and Ms. McGinnis which entitle each individual to certain payments and benefits in the event his or her employment is involuntarily terminated other than for cause or is constructively terminated upon or within 18 months after a change in control of Cymer. The executive officer is also entitled to similar benefits if he or she voluntarily resigns for any reason within the 30-day period beginning one year after a change of control. A mechanism is provided in each agreement to limit payments in the event they would result in the levy of an excise tax under Section 4999 of the Internal Revenue Code. See the discussion below under “Potential Payments Upon Qualifying Change in Control Related Terminations” for a more detailed description of the material terms of our change in control payments and benefits.

Perquisites and Other Benefits

We provide benefits to our executive officers that are available to all of our full-time employees, including participation in group life, health, dental, and vision insurance plans. In addition to these company-wide benefits, we provide our executive officers with a group long-term disability insurance plan, and they are eligible to receive comprehensive financial planning services.

Other than the group long-term disability plan and financial planning services mentioned above, we offer no other additional perquisites or other personal benefits to our executive officers.

Regulatory Considerations

Certain tax and accounting requirements may influence the design and operation of our executive compensation program.

Section 162(m)—Deductibility of Remuneration in Excess of $1 Million

Section 162(m) of the Internal Revenue Code limits the amount that we may deduct as compensation expense for federal income tax purposes with respect to the remuneration paid to our chief executive officer and each of our other executive officers other than our chief financial officer, or the covered officers, to $1 million per individual per year. There are certain exceptions to this deduction limit on compensation paid to our covered officers, including an exception for remuneration that qualifies as “performance-based compensation” (that is, compensation that is payable solely upon the achievement of objective performance criteria).

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We structure our executive compensation program to maximize the deductibility of the remuneration paid to the covered officers to the extent that the compensation committee believes that doing so is in Cymer’s best interests. Consequently, our incentive compensation plans have been designed to permit the compensation committee to grant stock options and other awards which will qualify as “performance-based compensation” under Section 162(m)), and we believe that the PRSUs and stock options granted to our covered officers qualify under Section 162(m) as performance-based compensation. However, to maintain flexibility in compensating the covered officers in a manner designed to promote varying corporate goals, the compensation committee has not adopted a policy that all compensation must be deductible. For example, the vesting of shares of restricted stock units granted under our LTIP that are not subject to the achievement of specified performance objectives does not qualify as performance-based compensation and, accordingly, the compensation expense related to such awards to our covered officers will count toward the $1 million limit on deductibility.

While we cannot predict how the $1 million deduction limit may affect our executive compensation program in future years, we intend to maintain an approach to executive compensation that strongly links pay to performance. The compensation committee may, in its judgment, authorize and pay non-deductible compensation when it believes that such compensation is necessary and appropriate to attract and retain key executive officers. The compensation committee intends to continue to evaluate the effects of the compensation deduction limits of Section 162(m) and to grant compensation awards in the future in a manner consistent with Cymer’s best interests.

Section 409A—Treatment of Nonqualified Deferred Compensation

Section 409A of the Internal Revenue Code requires that amounts that qualify as “nonqualified deferred compensation” satisfy certain documentation and operational requirements with respect to the timing of deferral elections, timing of payments, and certain other matters. We intend to administer our executive compensation program and design individual compensation elements, as well as the compensation plans and arrangements applicable to our employees generally, so that they are either exempt from, or satisfy the requirements of, Section 409A. From time to time, we may be required to amend some of our compensation plans and arrangements to ensure that they continue to be either exempt from or compliant with the requirements of Section 409A.

Valuation of Stock-Based Compensation

The compensation committee takes accounting implications into consideration in designing equity-based compensation plans and arrangements for our executive officers and other employees. One of the accounting requirements that directly affects employee compensation expense is the accounting treatment for stock-based compensation. The accounting for stock-based compensation requires us to record compensation expense in our statements of operations for all equity awards granted to our executive officers and other employees.

COMPENSATION OF EXECUTIVE OFFICERS

The employment agreements with certain of our named executive officers provide for an annual base salary. These base salaries are reviewed by the compensation committee at least annually. The compensation committee may, at its discretion, increase the base salary but not decrease the base salary below the amount in the respective employment agreement. For further details of our executive compensation programs, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Executive Compensation.”

Compensation awarded or paid to, or earned by, our chief executive officer, our chief financial officer and our other two most highly compensated executive officers, whom we refer to as our “named executive officers,” for 2010, 2009 and 2008 is included in the table below.

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SUMMARY COMPENSATION TABLE

Name and Principal Position	Year		Salary		Bonus		Stock Awards(1)		Option Awards(2)		Non-Equity Incentive Plan Compensation(3)		Change  in Pension Value & Nonqualified Deferred Compensation Earnings (Loss)(4)		All Other Compensation(7)		Total
			($)		($)		($)		($)		($)		($)		($)		($)
Robert P. Akins Chairman of the Board of Directors and Chief Executive Officer		2010 2009 2008		640,746 584,678 626,377		—   —   —		2,087,475 452,907 468,011		—   —   840,489		1,548,436 1,267,073 414,300		115,608 173,164 (185,277)		23,207 17,170 23,523		4,415,472 2,494,992 2,187,423
Paul B. Bowman(5) Senior Vice President, Chief Financial Officer and Secretary		2010 2009 2008		350,000 316,481 134,135		—   —   —		786,445 228,537 42,256		—   —   186,380		517,356 103,551 —		—   —   —		14,454 1,282 5,963		1,668,255 649,851 368,734
Edward J. Brown, Jr. President and Chief Operating Officer		2010 2009 2008		496,655 453,195 485,515		—   —   —		1,262,186 339,807 351,088		—   —   630,321		1,015,258 813,410 161,610		—   —   —		24,352 18,191 32,649		2,798,451 1,624,603 1,661,183
Karen K. McGinnis(6) Vice President, Corporate Controller and Chief Accounting Officer		2010 2009		250,000 14,423		—   —		162,785 —		191,416 —		233,388 2,949		—   —		27,221 178		864,810 17,550

(1) The amounts shown represent the grant date fair value of the RSU and PRSU stock awards granted to our named executive officers. For PRSUs, the grant date fair value included in the calculation was based on the probable outcome of the performance conditions, determined at the grant date. The amounts shown exclude the effect of estimated forfeitures.

For 2010, the grant date fair value was calculated based on the closing price of our common stock on February 26, 2010 (the date of grant) of $31.32 multiplied by the number of RSU awards and the number of PRSU awards based on the probable outcome of the PRSU performance conditions as of the grant date. For half of the PRSUs, the maximum award attainable was 200% of the target number of PRSU awards and for the other half of the PRSUs, the maximum award attainable was 125% of the target PRSU awards. Assuming the highest level of performance conditions was achieved for the PRSUs, the maximum fair value of the PRSUs would have been as follows: Mr. Akins—$2,917,990, Mr. Bowman—$1,099,332 and Mr. Brown -$1,764,381. The actual PRSU award was 65% of the target amount for half of the PRSUs and 81.25% of the target amount for the other half of the PRSUs, based on actual achievement against the performance conditions.

In February 2010, in connection with the commencement of her employment on November 30, 2009, Ms. McGinnis was granted RSU awards and 2009 PRSU awards that are subject to vesting based on our performance over a three-year performance period. The grant date fair value was calculated based on the closing price of our common stock on February 26, 2010 (the date of grant) of $31.32 multiplied by the number of RSU awards and the number of PRSU awards based on the probable outcome of the PRSU performance conditions as of the grant date. For the PRSUs, the maximum award attainable is 200% of the target number of PRSU awards. Assuming the highest level of performance conditions was achieved for the PRSUs, the maximum fair value of the PRSUs would have been $186,041. The actual PRSU award will be determined after the three-year performance period ending December 31, 2011.

For 2009, the grant date fair value was calculated based on the closing price of our common stock on February 5, 2009 (the date of grant) of $21.76 multiplied by the number of RSU awards and the number of PRSU awards based on the probable outcome of the PRSU performance conditions as of the grant date. For the PRSUs, the maximum award attainable is 200% of the target number of PRSU awards. Assuming the

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highest level of performance conditions was achieved for the PRSUs, the maximum fair value of the PRSUs would have been as follows: Mr. Akins $ 775,526, Mr. Bowman $387,763 and Mr. Brown $581,862. The actual PRSU award will be determined after the three-year performance period ending December 31, 2011. Ms. McGinnis was not eligible for stock awards in 2009.

For 2008, the grant date fair value was calculated based on the closing price of our common stock on January 2, 2008 (the date of grant) of $38.13 for Mr. Akins and Mr. Brown and on May 21, 2008 of $29.42 (the date of grant) for Mr. Bowman multiplied by the number of RSU awards and the number of PRSU awards based on the probable outcome of the PRSU performance conditions as of the grant date. For the PRSUs, the maximum award attainable was 200% of the target number of PRSU awards. Assuming the highest level of performance conditions was achieved for the PRSUs, the maximum fair value of the PRSUs would have been as follows: Mr. Akins $ 1,714,325, Mr. Bowman $91,202 and Mr. Brown $1,285,744. The actual PRSU award was 60% of the target amount, based on actual achievement against the performance conditions.

(2) The amounts shown reflect the grant date fair value of stock options awarded. Assumptions used in the calculation are included in Part II, Item 8 “Financial Statements and Supplementary Data” of our 2010 Annual Report on Form 10-K in the Notes to the Consolidated Financial Statements, Note 10, “Equity.” The amounts shown exclude the effect of estimated forfeitures.

Ms. McGinnis was granted 20,000 stock options in February 2010 in conjunction with the commencement of her employment on November 30, 2009. No stock options were granted to any of our named executive officers in 2009. The 2008 stock options were awarded to our named executive officers in 2008 under our LTIP.

(3) For 2010, the amounts shown reflect compensation earned in 2010 and paid in early 2011 as follows: for Mr. Akins, the 2010 STIP of $1,421,540 and the 2007 LTIP of $126,896; for Mr. Bowman, the 2010 STIP of $517,356; for Mr. Brown, the 2010 STIP of $918,219 and the 2007 LTIP of $97,039; and for Ms. McGinnis, the 2010 STIP of $233,388.

For 2009, the amounts shown reflect compensation earned in 2009 and paid in early 2010 as follows: for Mr. Akins, the 2H-2009 bonus of $286,957, the 2007 LTIP of $126,896, and the 3-Year bonus program of $853,220; for Mr. Bowman, the 2H-2009 bonus of $103,551; for Mr. Brown, the 2H-2009 bonus of $185,355, the 2007 LTIP of $97,038, and the 3-Year bonus program of $531,017; and for Ms. McGinnis, the 2H-2009 bonus of $2,949.

For 2008 amounts shown reflect compensation earned in 2008 and paid in early 2009 as follows: for Mr. Akins, the 2007 LTIP of $126,896 and the 3-Year bonus program of $287,404; and for Mr. Brown the 2007 LTIP of $97,038 and the 3-Year bonus program of $64,572.

(4) Amounts include the aggregate earnings in 2010 and 2009 and aggregate loss in 2008 for Mr. Akins, which are based upon investment results of participant selected phantom investment alternatives that track the actual performance of various market investments. Messrs. Brown and Bowman, and Ms. McGinnis were not participants in the nonqualified deferred compensation plan during 2010, 2009 or 2008.

(5) Mr. Bowman serves as our chief financial officer, treasurer and secretary effective October 26, 2009. From December 19, 2008 to October 26, 2009, he served as our interim chief financial officer, treasurer and secretary. Mr. Bowman joined us as vice president of investor relations on May 19, 2008.

(6) Ms. McGinnis serves as our vice president, corporate controller, and chief accounting officer effective November 30, 2009.

(7) See the table below for the details of all other compensation.

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DETAIL OF ALL OTHER COMPENSATION

Name	Year		Matching 401(k) Contributions ($)(1)		Life Insurance Premiums ($)		Financial Planning Services ($)(2)		Disability Income Protection ($)(3)		Relocation Expenses ($)		Total ($)
Robert P. Akins		2010		5,000		1,282		14,654		2,271		—		23,207
		2009		—		1,282		13,617		2,271		—		17,170
		2008		5,000		1,282		14,970		2,271		—		23,523
Paul B. Bowman		2010		5,000		1,282		4,835		3,337		—		14,454
		2009		—		1,282		—		—		—		1,282
		2008		5,000		963						—		5,963
Edward J. Brown, Jr.		2010		5,000		1,282		14,649		3,421		—		24,352
		2009		—		1,282		13,572		3,337		—		18,191
		2008		5,000		1,282		23,030		3,337		—		32,649
Karen K. McGinnis		2010		5,000		1,070		—		—		21,151		27,221
		2009		—		—		—		178		—		178

(1) In 2009, we suspended our 401(K) matching contributions for the year due to the global economic conditions.

(2) We provide our executive officers, if desired, with comprehensive financial counseling services to include the following core disciplines:

• Optimal utilization and integration of our plan benefits;

• Capital accumulation and investment planning;

• Short-term/retirement cash-flow planning;

• Income tax forecasting and tax return preparation;

• Estate planning; and

• Life, disability and property/casualty insurance planning.

We pay 100% of these benefits and the amounts paid are reported as income to the executive officer.

(3) We provide group long term disability (“LTD”) coverage to replace 50% of the executive officer’s base annual salary up to $13,000 per month. In addition, we provide executive officers who are at a senior vice president level or above with a supplemental individual disability plan. This plan may provide up to an additional 10% of income replacement while the executive officer is disabled not to exceed 60% of monthly base earnings when combined with the group LTD coverage. Amounts vary by individual and any benefit amounts that would exceed $5,000 per month are subject to individual underwriting and approval by the insurance carrier.

Benefits under the group and individual policies begin after a 90-day elimination period and continue as long as the executive officer remains disabled from performing the duties of his or her own occupation until age 65. While we pay the monthly premiums for both the group and individual policies, premiums are subsequently taxed as imputed income to the executive officer. Benefits received under these policies are not taxable to the executive officer. Ms. McGinnis was not eligible to participate in this program.

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The following table shows certain information regarding grants of plan-based awards to our named executive officers. The amounts included in the table below represent those that were granted under our LTIP during 2010. For further details of our non-equity incentive compensation programs, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Executive Compensation.”

GRANTS OF PLAN-BASED AWARDS IN 2010

Name		Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards							Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Stock Awards: Number of Shares of Stock or Units		Grant Date Fair Value of Stock and Option Awards ($)
				Threshold ($)		Target ($)		Maximum ($)			Threshold (#)		Target (#)		Maximum (#)		Target (#)
Robert P. Akins	(1)		1/1/2010		384,448		768,895		1,537,790			—		—		—		—		—
	(2)		2/26/2010		—		—		—	(7)		4,800		12,000		24,000		—		169,128
	(3)		2/26/2010		—		—		—	(7)		6,667		16,667		33,334		—		234,905
	(2)		2/26/2010		—		—		—	(8)		9,600		12,000		15,000		—		328,860
	(3)		2/26/2010		—		—		—	(8)		13,333		16,666		20,833		—		456,732
	(4)		2/26/2010		—		—		—			—		—		—		12,000		375,840
	(5)		2/26/2010		—		—		—			—		—		—		16,667		522,010
Paul B. Bowman	(1)		1/1/2010		140,000		280,000		560,000			—		—		—		—		—
	(2)		2/26/2010		—		—		—	(7)		2,320		5,800		11,600		—		81,745
	(3)		2/26/2010		—		—		—	(7)		2,000		5,000		10,000		—		70,470
	(2)		2/26/2010		—		—		—	(8)		4,640		5,800		7,250		—		158,949
	(3)		2/26/2010		—		—		—	(8)		4,000		5,000		6,250		—		137,025
	(4)		2/26/2010		—		—		—			—		—		—		5,800		181,656
	(5)		2/26/2010		—		—		—			—		—		—		5,000		156,600
Edward J. Brown, Jr	(1)		1/1/2010		248,327		496,655		993,309			—		—		—		—		—
	(2)		2/26/2010		—		—		—	(7)		3,600		9,000		18,000		—		126,846
	(3)		2/26/2010		—		—		—	(7)		3,334		8,334		16,668		—		117,459
	(2)		2/26/2010		—		—		—	(8)		7,200		9,000		11,250		—		246,645
	(3)		2/26/2010		—		—		—	(8)		6,666		8,333		10,416		—		228,366
	(4)		2/26/2010		—		—		—			—		—		—		9,000		281,880
	(5)		2/26/2010		—		—		—			—		—		—		8,333		260,990
Karen K. McGinnis	(1)		1/1/2010		62,500		125,000		250,000			—		—		—		—		—
	(9)		2/26/2010		—		—		—			1,485		2,970		5,940		—		69,765
	(6)		2/26/2010		—		—		—			—		—		—		20,000		191,416
	(4)		2/26/2010		—		—		—			—		—		—		2,970		93,020

(1) Amounts shown represent the potential STIP cash incentive amounts for performance in 2010. The amounts earned, based on actual performance, were as follows: Mr. Akins—$1,421,540; Mr. Bowman—$517,356; Mr. Brown—$918,219; and Ms. McGinnis—$233,388.

(2) Amounts shown reflect PRSU awards for 2010 subject to vesting based on our performance over a one-year performance period under the LTIP. The grant date fair value reflects the probable outcome of performance conditions at the date of grant. For further details on these awards, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Executive Compensation—LTIP Awards—2010.” These PRSU awards were granted from our 2005 Plan.

(3) Represents discretionary PRSU awards for 2010 subject to vesting based on our performance over a one year performance period. The grant date fair value reflects the probable outcome of performance conditions at the date of grant. For further details on these awards, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Executive Compensation—LTIP Awards—2010.”

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(4) Amounts represent RSU awards for 2010 under the LTIP. These RSUs vest annually over a three-year period. Grant date fair value is calculated based on $31.32, the closing stock price on the date of grant.

(5) Represents discretionary RSU awards for 2010. These RSUs vest annually over a three-year period. Grant date fair value is calculated based on $31.32, the closing stock price on the date of grant.

(6) Ms. McGinnis was granted an option to purchase 20,000 shares of stock in February 2010. The option vests 25% on November 30, 2010 and 1/48 each month thereafter, subject to Ms. McGinnis’ continued service through the applicable vesting dates.

(7) The minimum threshold for meeting our financial targets was based on attainment of the 40^th percentile ranking of actual performance as measured relative to our peer companies and the maximum was based on attainment of greater than the 90^th percentile ranking of actual performance as measured relative to our peer companies.

(8) The PRSU minimum and maximum thresholds are based on meeting 80% and 125%, respectively, of the target market share of deep ultraviolet light source installations.

(9) Amount shown reflects a 2009 PRSU award under the LTIP subject to vesting based on our performance over a three-year performance period. The grant date fair value reflects the probable outcome of performance conditions at the date of grant. For further details on this award, see “Executive Compensation-Compensation Discussion and Analysis-Elements of Executive Compensation-LTIP Awards-2009.” These PRSU Awards were granted from our 2005 Plan. The minimum threshold for meeting our financial targets was based on attainment of the 40^th percentile ranking of actual performance as measured relative to our peer companies and the maximum was based on attainment of greater than the 90^th percentile ranking of actual performance as measured relative to our peer companies.

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OUTSTANDING EQUITY AWARDS AT YEAR END

The following table contains certain information with respect to the value of all unexercised options and unvested awards previously awarded to our named executive officers as of December 31, 2010:

	Option Awards										Stock Awards
Name	Number of Securities Underlying Unexercised Options Exercisable (#)			Number of Securities Underlying Unexercised Options Unexercisable (#)			Option Exercise Price ($)		Option Expiration Date (1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(9)
Robert P. Akins		11,031	(3)		—			50.15		4/1/2012		43,394	(4)		1,955,768
		15,998	(2)		—			34.58		1/2/2013		22,480	(5)		1,013,174
		23,283	(2)		—			23.76		4/1/2013		17,820	(6)		803,147
		17,342	(2)		—			31.90		7/1/2013		57,333	(7)		2,583,998
		3,377	(2)		—			39.81		10/1/2013		—			—
		12,724	(2)		—			45.27		1/2/2014		—			—
		9,144	(2)		—			39.37		4/1/2014		—			—
		10,112	(2)		—			35.60		7/1/2014		—			—
		12,051	(2)		—			30.87		10/1/2014		—			—
		13,498	(2)		—			27.56		1/3/2015		—			—
		50,564	(2)		18,781	(2)		38.13		1/2/2018		—			—
Paul B. Bowman		12,916	(2)		7,084	(2)		29.42		5/21/2018		16,740	(4)		754,472
		—			—			—		—		1,550	(5)		69,859
		—			—			—		—		8,910	(6)		401,574
		—			—			—		—		21,600	(7)		973,512
Edward J. Brown, Jr.		37,920	(2)		14,085	(2)		38.13		1/2/2018		28,423	(4)		1,281,025
		250,000	(2)		—			33.57		9/6/2015		16,860	(5)		759,880
		—			—			—		—		13,370	(6)		602,586
		—			—			—		—		34,667	(7)		1,562,442
Karen K. McGinnis		416	(2)		14,584	(2)		31.32		2/26/2020		1,980	(4)		89,239
		—			—			—		—		2,970	(8)		133,858

(1) The expiration date of each stock option occurs ten years from the date of grant.

(2) Stock options vest 25% on the first anniversary of the grant date and 1/48 each month thereafter.

(3) Stock options vest one year from the grant date.

(4) These shares represent RSUs outstanding at December 31, 2010 and vest annually over a three year period from 2011 through 2013.

(5) These shares represent PRSUs outstanding at December 31, 2010 that were granted in 2008. These PRSUs are subject to vesting in 2011 based on our performance over a three-year performance period from 2008 through 2010.

(6) These shares represent PRSUs outstanding at December 31, 2010 that were granted in 2009. These PRSUs are subject to vesting in 2012 based on our performance over a three-year performance period from 2009 through 2011.

(7) These shares represent PRSUs outstanding at December 31, 2010 that were granted in 2010. These PRSUs are subject to vesting over a three year period from 2011 through 2013 based on our performance during 2010.

(8) These shares represent PRSUs outstanding at December 31, 2010 that were granted in 2010. These PRSUs are subject to vesting in 2012 based on our performance over a three-year performance period from 2009 through 2011.

(9) The market value amount is calculated based on the closing price of our common stock of $45.07 at December 31, 2010.

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OPTIONS EXERCISED AND STOCK VESTED FOR 2010

The following table shows certain information regarding our named executive officers’ stock option exercises and the realized value upon exercise and all stock awards vested and the value realized upon vesting for 2010:

	Option Awards				Stock Awards
Name	Number of shares Acquired on Exercise (#)		Value Realized on Exercise ($)(1)		Number of Shares acquired on vesting (#)		Value Realized on Vesting ($)(2)
Robert P. Akins		78,977		810,534		8,787		289,971
Paul B. Bowman		—		—		2,970		98,010
Edward J. Brown, Jr.		—		—		6,634		218,922
Karen K. McGinnis		5,000		41,050		990		37,689

(1) The value realized equals the difference between the exercise price and the fair market value of the stock option at the date of exercise.

(2) The value realized equals the fair market value of our common stock on the vesting date multiplied by the number of shares that vested.

NONQUALIFIED DEFERRED COMPENSATION FOR 2010

The following table summarizes participation and activity in the nonqualified deferred compensation plan during the year ended December 31, 2010 for our named executive officers. For further details regarding the plan see “Compensation Discussion and Analysis—Retirement, Health, and Welfare Benefits.”

Name	Executive Contributions in Last FY ($)		Registrant Contributions in Last FY ($)		Aggregate Earnings in Last FY ($)(1)		Aggregate Withdrawals/ Distributions ($)		Aggregate Balance at Last FYE ($)
Robert P. Akins		—		—		115,608		—		2,018,022(2)
Paul B. Bowman(3)		—		—		—		—		—
Edward J. Brown, Jr.(3)		—		—		—		—		—
Karen K. McGinnis(3)		—		—		—		—		—

(1) Earnings are based on the investment results of phantom investment alternatives selected by the individual participant that track the actual performance of various market investments. Phantom fund selections may be changed by the individual once per year.

(2) $1,992,984 of such amount was previously reported in the Summary Compensation Table for prior years and the remaining amount of $90,570 represents the aggregate gains of $417,661 on such amounts, offset by the aggregate withdrawals/distributions of $508,231.

(3) These individuals were eligible but did not participate in the non qualified deferred compensation plan in 2010.

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POTENTIAL PAYMENTS UPON QUALIFYING CHANGE IN CONTROL RELATED TERMINATIONS

We enter into employment agreements with certain of our executive officers which include change in control termination provisions. The executive officer will not be entitled to receive any severance or other benefits pursuant to the agreement if the Board of Directors, as constituted prior to the change in control, determines that the executive officer was demoted to a position not eligible for an employment agreement as of the effective date.

In the event that severance benefits are triggered, Messrs. Akins and Brown are entitled to receive the following for 24 months, Mr. Bowman is entitled to receive the following for 18 months and Ms. McGinnis is entitled to receive the following for 12 months:

• a continuation of his or her monthly base compensation as well as monthly payments equivalent to 1/36 of the aggregate amounts of his or her bonus amounts for the prior three years; and

• a continuation of medical benefits.

Additionally, in the event that severance benefits are triggered, the eligible individuals will also receive the following benefits:

• a percentage of the cash incentive that would otherwise be payable for the year of termination based on the number of days during the year in which the individual was employed by us; and

• accelerated vesting of all unvested stock options and other equity awards.

A “change in control” means:

• the acquisition by a person or entity of 50% or more of the voting power of our outstanding securities;

• a change in the composition of the Board of Directors within a two-year period as a result of which fewer than a majority of the directors are persons who were either our directors on the date of the respective agreement or who were elected or nominated by a majority of such persons; or

• a merger resulting in a 50% or greater change in voting power of our outstanding securities.

In the event of a qualifying termination of employment in connection with a change in control, our named executive officers are entitled to receive the following benefits assuming the triggering event took place on December 31, 2010.

Name	Term of Payout in Months		Pay Continuation ($)(1)		Equity Awards(2)				Medical Benefits ($)(5)		Total ($)
					Stock Options ($)(3)		Stock Awards ($)(4)
Robert P. Akins		24		3,444,840		1,946,747		5,039,289		13,083		10,443,959
Paul B. Bowman		18		835,452		313,000		1,842,352		21,064		3,011,868
Edward J. Brown, Jr.		24		2,328,024		3,235,915		3,391,713		40,056		8,995,708
Karen K. McGinnis		12		328,776		206,250		203,018		20,028		758,072

(1) Amounts include the continuation of monthly base compensation as well as monthly payments equivalent to 1/36 of the aggregate bonus amounts for the prior three years.

(2) The unvested portion of any stock options or other equity awards shall vest and become exercisable in full effective as of the date of the termination.

(3) Amounts related to change-in-control termination scenarios were calculated using the in-the money value of stock options that would have become exercisable on December 31, 2010 based on the fair market value of the stock. The stock-based compensation expense recorded for accounting purposes may differ from the value as disclosed in this column.

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(4) Amounts related to change-in-control termination scenarios are based on the intrinsic value of unvested stock awards that would have become vested on December 31, 2010 based on the fair market value of the stock. The value of PRSU awards was based on the probable outcome of the PRSU performance conditions as of December 31, 2010. The stock-based compensation expense recorded for accounting purposes may differ from the value as disclosed in this column.

(5) Amounts include continuation of premium payments under COBRA assuming election of continuing health insurance benefits for the executive and his/her qualified beneficiaries for a maximum of 18 months and an additional 6 months of Cal-COBRA medical insurance coverage for Messrs. Akins and Brown.

POTENTIAL PAYMENTS UPON QUALIFYING RETIREMENT TERMINATIONS

We have a retirement program for executive officers that provides for payments upon qualifying retirement terminations. To be eligible for the program, the executive officer must have been an executive officer for at least five consecutive years of full-time service and must have either had (i) at least 10 consecutive years of full-time service with us and be at least 55 years old, or (ii) at least 15 consecutive years of full-time service with us and be at least 50 years old. To receive the benefits of the program, a retiring executive officer must complete an approved succession planning process and enter into a release and waiver of claims and consulting agreement with us. The executive must also either relinquish all stock options granted to him or her within one year of termination, or have an individual employment agreement with us that would provide for acceleration of vesting of all stock options in connection with such termination. Additionally, the program requires the executive officer to provide us with four years of consulting services in return for $1,000 per month in payment for those services, continued vesting in his or her retained stock options and other equity awards during the term of the consulting agreement, and an extended period to exercise options after retirement. The program also provides the executive officer with specific health insurance continuation benefits for a period of 12 months, and following such period the health benefits may be continued at the executive officer’s own expense. One former executive participated in the health insurance continuation benefits portion of the program in 2010.

The only executive officer named in the Summary Compensation Table who is currently eligible for this program is our chief executive officer, Mr. Akins. No other executive officer named in the Summary Compensation Table will be eligible for this program until 2015 when our president and chief operating officer, Mr. Brown becomes eligible, assuming the eligibility criteria of our officer retirement program does not change and he meets these criteria.

Our retirement program for executive officers would provide the following potential payments upon qualifying retirement terminations of the named executive officers included in our Summary Compensation Table, provided that such qualifying termination event took place on December 31, 2010:

Name	Term of Consulting agreement		Consulting Services ($)(1)		Equity Awards(2)				Benefits ($)(5)		Total ($)
					Stock Options ($)(3)		Stock Awards ($)(4)
Robert P. Akins		4 years		48,000		1,946,747		5,039,289		6,541		7,040,577
Paul B. Bowman(6)		—		—		—		—		—		—
Edward J. Brown, Jr.(6) .		—		—		—		—		—		—
Karen K. McGinnis(6)		—		—		—		—		—		—

(1) Amount includes consulting services paid at a rate of $1,000 per month.

(2) Stock options and other equity awards will continue to vest during the term of the four year consulting agreement pursuant to the terms and conditions of the stock option and equity award agreements. The amounts shown in these two columns assume that the unvested stock options and equity awards at December 31, 2010 will vest in full over the four year consulting agreement. The value of outstanding vested and unvested stock options and awards is calculated based on the fair market value of our stock as of December 31, 2010. The stock-based compensation recorded for accounting purposes may differ from the amounts disclosed in these two columns.

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(3) Amounts related to stock options were calculated using the in-the money value of stock options that would have become exercisable on December 31, 2010 based on the fair market value of the stock.

(4) Amounts related to stock awards are based on the intrinsic value of unvested stock awards on December 31, 2010 based on the fair market value of the stock. The value of the unvested PRSU awards was based on the probable outcome of the PRSU performance conditions as of December 31, 2010.

(5) Amount includes continuation of premium payments under our Group Health Plan, for the executive and his qualified beneficiaries for 12 months.

(6) These named executive officers did not meet the minimum service requirements for benefits under the officer retirement program as of December 31, 2010.

COMPENSATION POLICES AND PRACTICES AS THEY RELATE TO THE COMPANY’S RISK MANAGEMENT

We believe that our compensation policies and practices for all employees, including our executive officers, do not create risks that are reasonably likely to have a material adverse effect on the company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2010, the compensation committee consisted of five independent directors. Messrs. Braun, Tompkins, Ruttenberg and Oldham served on the compensation committee for the entire year and Mr. Sohn served until May 2010. None of these directors have ever been an officer or employee of us or our subsidiaries, or had any relationships requiring disclosure under this caption.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

Under our audit committee charter, our audit committee is responsible for reviewing and approving, on a quarterly basis, every transaction with a related person that must be disclosed by us pursuant to item 404(a) of SEC Regulation S-K. In addition, our Board of Directors determines annually whether any related party relationships exist among the directors which would interfere with the independent judgment of individual directors in carrying out his responsibilities as director.

During 2010, we engaged Exponent, Inc. to perform a one-time component reliability analysis for a fee of $164,000. Mr. Gaulke, a member of our Board of Directors and member of Exponent’s board of directors, served as an executive officer of Exponent until he retired from his executive chairman role on June 3, 2010.

Indemnification Agreements

We have entered into indemnification agreements with our executive officers and directors which contain provisions that may require us, among other things, to indemnify those officers and directors against liabilities that may arise by reason of their service as officers or directors. The agreements also require us to advance to the officers and directors expenses that they expect to incur as a result of any proceeding against them as to which they could be indemnified.

Code of Conduct

Our Board of Directors has adopted the Cymer, Inc. Code of Conduct and Corporate Governance that applies to all officers, directors and employees. The Code of Conduct and Corporate Governance is available on

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our website athttp://www.cymer.com under Investor Relations—Corporate Governance. If we make any substantive amendments to the Code of Conduct and Corporate Governance or grant any waiver from a provision of the Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

COMPENSATION COMMITTEE REPORT(1)

The compensation committee has reviewed and discussed the information contained under the caption “Executive Compensation—Compensation Discussion and Analysis” (the “CD&A”) for 2010 with management and, based on such review and discussions, the compensation committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the year ended December 31, 2010.

Compensation Committee

Edward H. Braun, Chairman

William G. Oldham

Eric M. Ruttenberg

Jon D. Tompkins

(1) The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “1933 Act”), or the Securities Exchange Act of 1934, as amended (the “1934 Act”), whether made before or after the date hereof and without regard to any general incorporation language contained in such filing.

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PROPOSAL 2

APPROVAL OF 2011 EQUITY INCENTIVE PLAN

Our 2011 Equity Incentive Plan (the “2011 Incentive Plan”), was adopted by our Board of Directors on March 23, 2011, subject to stockholder approval. The 2011 Incentive Plan is the successor to our 2005 Equity Plan.

In the event our stockholders approve the 2011 Incentive Plan so that it becomes effective, the 2005 Equity Plan will automatically be terminated. No awards may be granted pursuant to the 2005 Equity Plan following its termination. However, any shares remaining available for issuance under the 2005 Equity Plan as of the date of the Annual Meeting will become available for issuance under the 2011 Incentive Plan. All outstanding stock awards granted under the 2005 Equity Plan will continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the 2005 Equity Plan.

This Proposal 2 seeks a 1,500,000 share increase in the number of shares that may be issued under the 2011 Incentive Plan beyond those previously reserved and available for issuance under the 2005 Equity Plan as of the date of the Annual Meeting. The share reserve for the 2011 Incentive Plan will also automatically be increased, without any further action by our Board of Directors or stockholders, by an amount equal to the number of shares of our common stock subject to any outstanding stock award granted under the 2005 Equity Plan that expires or terminates for any reason prior to exercise or settlement, is forfeited because of the failure to meet a contingency or condition required to vest such shares , or otherwise but for the termination of the 2005 Equity Plan would have reverted to the share reserve of the 2005 Equity Plan (collectively, the“Returning Shares”).

The key terms of the 2011 Incentive Plan are similar to those of our 2005 Equity Plan, except as otherwise specifically noted below.

Why We Recommend That You Vote For this Proposal

The board recommends approval of the 2011 Incentive Plan for the following reasons:

The Need to Provide Competitive Compensation. Similar to other companies in our industry, we believe equity compensation is integral in providing a competitive total compensation package necessary to recruit, retain and reward key employees. Equity awards are commonly used by similar companies in our industry, and the ability to provide competitive grants is essential to competing in our labor markets. Therefore, we believe it is imperative to provide long-term equity incentive awards as a component of our compensation program. We seek an appropriate balance between meeting employee hiring, retention, and compensation goals and avoiding excessive stockholder dilution.

Cash Compensation Expense Increase. If our ability to provide equity compensation is impaired, our cash compensation costs could increase substantially to offset equity compensation typically provided in the marketplace. We believe it is important that we use our cash resources to operate and expand our business, rather than unnecessarily divert cash to pay compensation.

Our Continuing Emphasis on Providing Performance-Based Compensation. We believe it is essential to provide a long-term link between compensation and stockholder value creation and we rely on equity compensation as one of the most efficient and effective means to create such a relationship. Our long-term equity incentive program is designed to align the interests of our executives and other key employees with those of stockholders, motivate the executive team to achieve key strategic and financial goals, and reward superior performance over a multi-year period. We have historically utilized stock options and performance-based restricted stock units (“PRSUs”) to create this link between pay and performance. Stock options inherently have no value unless the stock price of Cymer increases, while PRSUs allow us to target specific financial goals. If those goals are not met, the PRSUs are canceled and the award holder receives no value. If stockholders do not approve the 2011 Incentive Plan, our ability to create long-term incentives for key employees will be substantially diminished.

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Historical Company Equity Usage. We believe that our historical equity usage has been conservative when compared to our core peer group and high-technology sector norms. We set targets for equity compensation based on competitive target grant levels, the equity usage of our core peer group, industry standards and recommendations made by our compensation consultant. Based on this information, we believe that our equity usage has been conservative when viewed against both our core peer group and the broader market. As shown in the table below, both Cymer’s 2010 “3-year average burn rate” of 3.5% and its “total overhang” of 9.9% of shares outstanding is positioned below the median of our core peer group, illustrating our historically conservative use of equity. In addition, the fact that we are significantly below our core peer group median total overhang demonstrates our need for additional shares as compared to the core peer group.

Parameter(1)	3-Year Average Burn Rate(2)		Issued Overhang(3) Fiscal Year End		Total Overhang(4) Fiscal Year End
Core Peer Group 50th Percentile		4.2%		11.4%		18.5%
Core Peer Group 75th Percentile		4.7%		14.1%		29.1%
Cymer		3.5%		5.9%		9.9%
Percent Rank within Peer Group		36.0%		7.0%		1.0%

(1) Reflects Core Peer Group data filed with the SEC through January 27, 2011 and Cymer’s data as of December 31, 2010.

(2) ‘Burn Rate’ is defined as total equity (stock options and full-value shares) granted within the latest fiscal year, as a percentage of shares outstanding.

(3) ‘Issued Overhang’ is defined as outstanding total equity (stock options and unvested full-value shares), as a percentage of shares outstanding.

(4) ‘Total Overhang’ is defined as the sum of outstanding equity (stock options, unvested full-value shares) as well as shares available for future issuance, as a percentage of shares outstanding.

KEY FEATURES OF THE 2011 INCENTIVE PLAN

The 2011 Incentive Plan authorizes the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, stock bonus awards, stock purchase awards, stock unit awards, performance stock awards, performance cash awards and other stock awards.

• Term of the 2011 Incentive Plan.The 2011 Incentive Plan will terminate on March 22, 2021.

• Authorized Shares.The number of shares that may be issued under the 2011 Incentive Plan consists of 1,500,000 shares, plus the number of shares that remain available for future issuance under the 2005 Equity Plan as of the date of the Annual Meeting, plus the number of any Returning Shares. As of March 4, 2011, 803,775 shares of common stock remain available for future issuance under the 2005 Equity Plan. As of March 4, 2011 1,763,313 shares subject to awards previously granted under the 2005 Equity Plan could potentially become Returning Shares. Accordingly, the maximum number of shares that may be issued under the 2011 Incentive Plan is not expected to exceed 4,067,088 shares.

• Minimum Vesting.In general, the 2011 Incentive Plan provides that no award shall vest at a rate that is any more rapid than ratably over a three-year period following the date that such award was granted. However, awards granted to our directors, scientific advisory board members and consultants, and awards that vest subject to achievement of specific performance goals, may vest earlier. Additionally, the board retains the discretion to accelerate the vesting of any award granted under the 2011 Incentive Plan.

• No Discount Option Awards.The 2011 Incentive Plan prohibits the grant of an option award with an exercise price less than the fair market value of our stock on the date of grant.

• No Repricing of Awards.The board does not have the authority, without the prior consent of our stockholders, to reprice any outstanding stock option or award.

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• Administration by the Board of Directors.The board will administer the 2011 Incentive Plan, but may, at its discretion, delegate administration of the plan to a committee composed of two or more outside directors. The board has delegated administration to the compensation committee and references to the Board of Directors in the following outline of the 2011 Incentive Plan include the compensation committee.

A copy of the 2011 Incentive Plan is attached as Appendix A of this Proxy Statement and has been filed with the SEC in connection with the filing of this Proxy Statement. The essential features of the 2011 Incentive Plan are outlined below. This outline is only a summary of these features and you are encouraged to read the entire 2011 Incentive Plan, which is attached as Appendix A of this Proxy Statement.

GENERAL

The 2011 Incentive Plan provides for the grant of the following:

• Incentive stock options, as defined in the IRC, which may be granted solely to our employees, including officers; and

• Nonstatutory stock options, stock appreciation rights, stock bonus awards, stock purchase awards, stock unit awards, performance stock awards, performance cash awards and other stock awards (collectively “awards”), which may be granted to our directors, consultants and employees, including officers.

Incentive stock options granted under the 2011 Incentive Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the IRC. Nonstatutory stock options granted under the 2011 Incentive Plan are not intended to qualify as incentive stock options under the IRC. See “Federal Income Tax Information” on page 48 for a discussion of the tax treatment of awards.

PURPOSE

The Board of Directors adopted the 2011 Incentive Plan to provide a means by which our employees, directors and consultants (and the employees, directors and consultants of any of our subsidiaries designated by the board to participate in the 2011 Incentive Plan) may be given an opportunity to purchase shares of our common stock, to assist us in retaining the services of such persons, to secure and retain the services of persons capable of filling such positions and to provide incentives for such persons to exert maximum efforts for the success of our business and the business of our affiliates. All of the employees, directors and consultants of Cymer and its affiliates are eligible to participate in the 2011 Incentive Plan.

ADMINISTRATION

The Board of Directors administers the 2011 Incentive Plan. Subject to the 2011 Incentive Plan’s provisions, the board has the power to interpret the 2011 Incentive Plan and to determine all terms of each award granted under it, including who will receive the award, the date on which it will be granted, the number of shares to be awarded, when the award may be exercised, the exercise price, the type of consideration, the vesting schedule and any acceleration of vesting. The board will also settle all controversies regarding the 2011 Incentive Plan and the awards granted under it, submit any amendment to the 2011 Incentive Plan for stockholder approval, and adopt such procedures and sub-plans as are necessary or appropriate to permit our employees, directors or consultants who are foreign nationals or employed outside the United States to participate in the 2011 Incentive Plan.

The board has the power to delegate administration of the 2011 Incentive Plan to a committee composed of two or more outside directors. The board has delegated administration of the 2011 Incentive Plan to the compensation committee. The board also has the power to delegate to one or more of our officers the authority to

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designate other officers and employees to receive awards under the 2011 Incentive Plan, the terms of such awards, and the numbers of shares of our common stock to be the subject of such awards up to a limit to be determined by the board. The board does not currently delegate authority to any officer to exercise such powers.

The 2011 Incentive Plan provides that, in the board’s discretion, directors serving on the committee may be “outside directors” to satisfy the requirements of Section 162(m) of the IRC or “non-employee directors” to satisfy the requirements of Rule 16b-3 of the 1934 Act. All of the current members of the compensation committee qualify as outside directors and non-employee directors.

Repricing. Awards granted under the 2011 Incentive Plan may not be repriced without the consent of our stockholders.

STOCK SUBJECTTOTHE 2011 INCENTIVE PLAN

If the stockholders approve this Proposal 2, the total number of shares of our common stock reserved for issuance under the 2011 Incentive Plan will consist of:

• 1,500,000 shares; plus

• the number of shares remaining available for future issuance under the 2005 Equity Plan as of date of the Annual Meeting; plus

• the number of Returning Shares.

If stock awards granted under the 2011 Incentive Plan expire or otherwise terminate without being exercised, the shares of our common stock not acquired pursuant to such awards again become available for issuance under the 2011 Incentive Plan. If we reacquire unvested stock issued under the 2011 Incentive Plan, the reacquired stock will again become available for reissuance under the 2011 Incentive Plan. If any shares subject to a stock award are not delivered to a participant because such shares are withheld for the payment of taxes or the stock award is exercised through a reduction of shares subject to the stock award (i.e., “net exercised”), or an appreciation distribution in respect of a stock appreciation right is paid in shares of common stock, the number of shares that are not delivered shall remain available for issuance under the 2011 Incentive Plan. If the exercise price of any stock award is satisfied by tendering shares of common stock held by the participant, then the number of shares so tendered shall remain available for issuance under the 2011 Incentive Plan. Shares may be issued in connection with a merger or acquisition as permitted by the rules of the applicable national securities exchange, and such issuance shall not reduce the number of shares available for issuance under the 2011 Incentive Plan.

The aggregate maximum number of shares of common stock that may be issued under the 2011 Incentive Plan pursuant to the exercise of incentive stock options is 4,067,088 shares.

ELIGIBILITY

Incentive stock options may be granted under the 2011 Incentive Plan only to employees (including officers) of Cymer and its affiliates. Employees (including officers), directors, and consultants of both Cymer and its affiliates are eligible to receive all other types of awards under the 2011 Incentive Plan. All of our approximately 850 employees, 8 directors, and 4 consultants are eligible to receive awards under the 2011 Incentive Plan. No incentive stock option may be granted under the 2011 Incentive Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of Cymer or any of its affiliates, unless the exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and the term of the option does not exceed five years from the date of grant. In addition, the aggregate fair market value, determined at the time of grant, of the shares of our common stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year may not exceed $100,000.

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In order to qualify certain awards as “performance-based compensation” under Section 162(m) of the IRC, no person may be granted under the 2011 Incentive Plan during any calendar year (i) stock options or stock appreciation rights that are exercisable for more than 250,000 shares of our common stock, (ii) performance stock awards covering more than 250,000 shares of our common stock, or (iii) performance cash awards totaling more than $5,000,000.

TERMSOFOPTIONS

The following is a description of the permissible terms of options under the 2011 Incentive Plan. Individual option grants may be more restrictive as to any or all of the permissible terms described below.

Exercise Price; Payment. The exercise price of incentive stock options or nonstatutory stock options may not be less than 100% of the fair market value of the stock subject to the option on the date of the grant and, in some cases (see “Eligibility” above), may not be less than 110% of such fair market value. As of March 21, 2011, the closing price of our common stock as reported on the Nasdaq Global Select Market was $51.28 per share.

The exercise price of options granted under the 2011 Incentive Plan is generally payable (i) in cash or check, (ii) in bank draft or money order payable to us, (iii) through a broker-dealer sale and remittance procedure, (iv) by delivery of shares of our common stock, (v) pursuant to a “net exercise” arrangement or (vi) in any other form of legal consideration acceptable to the Board of Directors (excluding any form of consideration that may include deferred payment through the use of a promissory note).

Option Exercise. Options granted under the 2011 Incentive Plan may become exercisable in cumulative increments (“vest”) and may be subject to different vesting terms. Generally, no option shall fully vest at a rate that is any more rapid than ratably over a three-year period following the date that such option was granted with the exception of options that vest based on the satisfaction of performance goals, and options granted to our directors and scientific advisory board members, which may vest earlier. The board has the power to accelerate the time during which an option may vest or be exercised.

Term. The maximum term of options under the 2011 Incentive Plan is 10 years, except that in certain cases (see “Eligibility”) the maximum term is five years.

Termination of Service. Options under the 2011 Incentive Plan generally terminate three months after termination of the option recipient’s service unless (i) such termination is due to the recipient’s permanent and total disability (as defined in the IRC), in which case the option may be exercised within 12 months of such termination, if certain conditions are met; (ii) such termination is due to the recipient’s death or the recipient dies within a specified period (typically three months) after the recipient’s service has terminated for any reason other than cause, in which case the option may be exercised within 18 months of the option recipient’s death by the person or persons to whom the rights to such option pass by will or by the laws of descent and distribution; (iii) the option recipient is terminated for cause, in which case the option shall terminate upon the termination of the recipient’s service to us, or (iv) the option by its terms specifically provides otherwise. Individual option grants by their terms may provide for exercise within a longer period of time following termination of service.

The option term generally is not extended in the event that exercise of the option within these periods is prohibited. However, certain option agreements may provide for the extension of the option’s term for a specified period if the exercise of the option following the termination of the recipient’s service would be prohibited because the exercise would violate the registration requirements under the Securities Act of 1933, as amended.

Restrictions on Transfer. An option recipient may not transfer a stock option other than by will, by the laws of descent and distribution or pursuant to a domestic relations order, provided that a recipient may designate a beneficiary who may exercise an option following the recipient’s death.

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TERMSOF STOCK BONUSAND STOCK PURCHASE AWARDS

Stock purchase awards or bonus awards are granted through a stock purchase or bonus award agreement.

Payment. Subject to certain limitations, the purchase price for stock purchase or bonus awards, which is determined by the Board of Directors, must be at least the par value of our common stock. The board may award stock bonuses in consideration of past services without a purchase payment.

Vesting. Shares of stock sold or awarded under the 2011 Incentive Plan may be subject to a repurchase option in favor of us in accordance with a vesting schedule determined by the board. Though the board retains the authority to accelerate vesting, generally no stock purchase award or stock bonus award shall vest at a rate that is any more rapid than ratably over a three-year period following the date that such award was granted with the exception of awards that vest based on the satisfaction of performance goals, and awards granted to our directors, scientific advisory board members, or consultants, which may vest earlier.

Restrictions on Transfer. Rights under a stock bonus or stock purchase agreement may not be transferred except where such assignment is required by law or expressly authorized by the terms of the applicable stock bonus or stock purchase agreement.

STOCK UNIT AWARDS

Stock unit awards are granted through a stock unit award agreement. The consideration to be paid by a recipient of a stock unit award, if any, will be determined by the Board of Directors, and may be payable in any form acceptable to the board and permitted under applicable law. The board may impose any restrictions or conditions upon the vesting of stock unit awards, or that delay the delivery of the consideration after the vesting of stock unit awards, that it deems appropriate. Stock unit awards may be settled in shares of our common stock, in cash, in any combination of the two or in any other form of legal consideration approved by the board. If a stock unit award recipient’s service relationship with us terminates, any unvested portion of the stock unit award is forfeited upon the recipient’s termination of service.

STOCK APPRECIATION RIGHTS

The 2011 Incentive Plan broadly authorizes the grant of stock appreciation rights, subject to such terms and conditions as the Board of Directors may determine at the time of grant. Upon exercise, the participant is entitled to receive an appreciation distribution equal to the fair market value of the number of shares in which the participant is vested less the fair market value of that number of shares on the date of grant. Appreciation distributions payable upon exercise of stock appreciation rights may be made in cash, in shares of stock or a combination thereof. The board may impose any restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate. If a recipient’s relationship with us ceases for any reason, the recipient may exercise any vested stock appreciation right up to three months following cessation of service, unless the terms of the agreement provide for earlier or later termination.

PERFORMANCE AWARDS

The 2011 Incentive Plan provides for two types of performance awards: performance stock awards and performance cash awards. Performance awards may be granted, vest or be exercised based upon the attainment during a certain period of time of certain performance goals. All of our employees, directors and consultants are eligible to receive performance awards under the 2011 Incentive Plan. The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained shall be determined by the Board of Directors. The maximum number of shares subject to performance stock awards granted to any individual in a calendar year may not exceed 250,000 shares. The maximum amount attributable to performance cash awards granted to any individual in a calendar year may not exceed $5,000,000.

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In granting a performance award, the board will set a period of time, or a performance period, over which the attainment of one or more performance goals will be measured for the purpose of determining whether the award recipient has a vested right in or to such performance award. Within the time period prescribed by Section 162(m) of the IRC (typically before the 90th day of a performance period), the board will establish the performance goals, based upon one or more pre-established performance criteria enumerated in the 2011 Incentive Plan and described below. As soon as administratively practicable following the end of the performance period, the board will certify (in writing) whether the performance goals have been satisfied.

Performance goals under the 2011 Incentive Plan shall be determined by the board, based on one or more of the following performance criteria: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre-tax profit; (xiv) sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xviii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) free cash flow (cash provided by operating activities less acquisition of property, equipment, patent licenses and/or any other expenses specified by the Board of Directors); (xxii) operating cash flow; (xxiii) any per share measure of any of the foregoing cash flow metrics; (xxiv) share price performance; (xxv) debt reduction; (xxvi) implementation or completion of projects or processes; (xxvii) customer satisfaction; (xxviii) stockholders’ equity; and (xxix) to the extent an award is not intended to comply with Section 162(m) of the IRC, other measures of performance selected by the Board of Directors.

OTHER STOCK AWARDS

Other forms of stock awards based on shares of our common stock may be granted either alone or in addition to other awards available under the 2011 Incentive Plan. The Board of Directors has sole and complete authority to determine the persons to whom and the time or times such other awards will be granted, the number of shares to be granted and all other terms and conditions of such other awards. No other form of stock award shall fully vest prior to the third anniversary of the grant date except for awards that vest based on the satisfaction of performance goals.

ADJUSTMENT PROVISIONS

Transactions not involving receipt of consideration by us, such as a merger, consolidation, reorganization, stock dividend, or stock split, may change the type(s), class(es) and number of shares of our common stock subject to the 2011 Incentive Plan and outstanding awards, including awards outstanding under our former equity plans. In that event, the 2011 Incentive Plan and outstanding awards will be appropriately adjusted.

EFFECTOF CERTAIN CORPORATE TRANSACTIONS

In the event of certain corporate transactions, all outstanding stock awards under the 2011 Incentive Plan may be assumed, continued or substituted for by any surviving entity. If the surviving entity does not assume, continue or substitute for such awards, then the vesting of such awards (and, if applicable, the time during which such awards may be exercised) will be accelerated in full and such awards will be terminated if not exercised prior to the effective date of the corporate transaction. In this situation, the Board of Directors, in its sole discretion, may provide that the holder of the stock award may not exercise the stock award but, instead, will receive a payment equal to the difference between the value of the award and its exercise price. A stock award may be subject to acceleration of vesting in the event of a change in control as may be provided in the applicable stock award agreement or other written agreement between the award recipient and us. The acceleration of a stock award in the event of a corporate transaction or a change in control event may be viewed as an anti-takeover provision, which may have the effect of discouraging a proposal to acquire or otherwise obtain control of Cymer.

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DURATION, AMENDMENTAND TERMINATION

The Board of Directors may suspend or terminate the 2011 Incentive Plan without stockholder approval or ratification at any time or from time to time. Unless sooner terminated, the 2011 Incentive Plan will terminate on March 22, 2021.

The board may also amend the 2011 Incentive Plan at any time or from time to time. No amendment, suspension or termination of the 2011 Incentive Plan shall adversely affect any rights under awards already granted to a participant unless agreed to by the affected participant. We will obtain stockholder approval of any such amendment to the 2011 Incentive Plan in such a manner and to such a degree as may be required.

FEDERAL INCOME TAX INFORMATION

The information set forth below is a summary only of the principal United States federal income tax consequences to participants and us with respect to awards granted under the 2011 Incentive Plan and does not purport to be complete. This summary does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award. The 2011 Incentive Plan is not qualified under the provisions of Section 401(a) of the IRC, and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income.

Incentive Stock Options. Incentive stock options under the 2011 Incentive Plan are intended to be eligible for the favorable federal income tax treatment accorded “incentive stock options” under the IRC. There generally are no federal income tax consequences to the participant or to us by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the participant’s alternative minimum tax liability, if any. If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option is granted and more than one year from the date on which the shares are transferred to the participant upon exercise of the option, any gain or loss on a disposition of such stock will be a long-term capital gain.

Generally, if the participant disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (ii) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the stock was held for more than one year. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, we will generally be entitled to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.

Nonstatutory Stock Options. No taxable income is recognized by a participant upon the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock option, the participant will recognize ordinary income equal to the excess, if any, of the fair market value of the purchased shares on the exercise date over the exercise price paid for those shares. Generally, with respect to employees, we will be required to withhold from regular wages or supplemental wage payments an amount based on the ordinary income recognized. We will generally be entitled to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the participant.

When he or she sells the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the amount paid for such stock plus any amount recognized as ordinary income when the stock was acquired. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.

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Stock Purchase Awards and Stock Bonus Awards. If we grant a stock purchase award or stock bonus award that is unvested and that we could reacquire if the participant’s service terminates prior to vesting, the participant will not recognize any taxable income when the shares are issued, but will have to report as ordinary income an amount equal to the excess of the fair market value of the shares over the price paid, if any, for such shares on the date our repurchase right lapses. The participant may, however, elect under Section 83(b) of the IRC to include the fair market value of the shares on the date issued as ordinary income in the year they are issued. We will be entitled to a corresponding income tax deduction in the tax year in which the participant recognizes such ordinary income.

Upon disposition of the stock acquired upon the receipt of a stock purchase or stock bonus award, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock (if any) plus any amount recognized as ordinary income upon issuance (or vesting) of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.

Restricted Stock Unit Awards. No taxable income is recognized upon grant of a restricted stock unit award. In general, the participant will recognize ordinary income in the year in which the shares to be issued in respect of that unit are actually issued to the participant in an amount equal to the fair market value of the shares on the date of issuance. We will be entitled to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the participant.

Stock Appreciation Rights. The participant is not required to realize taxable income when he or she receives a stock appreciation right, but when it is exercised, the participant will recognize ordinary income in an amount equal to the fair market value of the shares (or cash in lieu of shares) received. We will be entitled to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the participant.

Potential Limitation on Our Deductions. Section 162(m) of the IRC denies a publicly held company a deduction for compensation paid to certain “covered employees” in a taxable year in the amount that compensation to the covered employee exceeds $1 million. It is possible that compensation attributable to awards, when combined with all other types of compensation received by one of our covered employees, may cause this limitation to be exceeded in any particular year.

Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation.

In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock options and stock appreciation rights will qualify as performance-based compensation if the award is granted by a compensation committee comprised solely of “outside directors” and either (i) the plan contains a per-employee limitation on the number of shares for which such awards may be granted during a specified period, the per-employee limitation is approved by the stockholders, and the exercise price of the award is no less than the fair market value of the stock on the date of grant, or (ii) the award is granted (or exercisable) only upon the achievement (as certified in writing by the compensation committee) of an objective performance goal established in writing by the compensation committee while the outcome is substantially uncertain, and the award is approved by stockholders.

Performance stock awards and performance cash awards will qualify as performance-based compensation under the Treasury Regulations only if (i) the award is granted by a compensation committee comprised solely of “outside directors,” (ii) the award is granted (or exercisable) only upon the achievement of an objective performance goal established in writing by the compensation committee while the outcome is substantially uncertain, (iii) the compensation committee certifies in writing prior to the granting (or exercisability) of the

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award that the performance goal has been satisfied and (iv) prior to the granting (or exercisability) of the award, stockholders have approved the material terms of the award (including the class of employees eligible for such award, the business criteria on which the performance goal is based, and the maximum amount—or formula used to calculate the amount—payable upon attainment of the performance goal).

Section 409A of the IRC. We intend that all awards granted under the 2011 Incentive Plan shall either be exempt from application of Section 409A of the IRC or comply with its requirements so that the adverse tax consequences of Section 409A of the IRC will not apply to 2011 Incentive Plan awards.

NEW PLAN BENEFITS

As of March 4, 2011, no options or stock awards have been granted under the 2011 Incentive Plan for which stockholder approval is sought under this Proposal 2. Except for our annual grants of restricted stock units to our non-employee directors, the grant of awards under our 2011 Incentive Plan is within the discretion of the compensation committee. Therefore, we are unable to determine the number of awards that will be granted to eligible participants, except as described below. The following table provides information for benefits that we can currently determine for our annual grants of RSUs to our non-employee directors:

Name and Position	Dollar Value ($)		Number of Units (1)
Charles J. Abbe		100,000		1,952
Edward H. Braun		100,000		1,952
Michael R. Gaulke		100,000		1,952
William G. Oldham		100,000		1,952
Eric M. Ruttenberg		100,000		1,952
Peter J. Simone		100,000		1,952
Young K. Sohn		100,000		1,952
Jon D. Tompkins		100,000		1,952
Non-Executive Director Group		800,000		15,616

(1) The number of shares to be issued under the RSU award as shown in this table is for illustrative purposes only and was calculated using the closing price per share of our common stock on March 4, 2011 of $51.21. The actual number of shares to be issued under the RSU award will be determined by dividing the dollar value shown in the table by the closing price per share of our common stock on the date of grant. Each RSU award vests 100% one year from the date of grant.

EFFECTIVE DATEOFTHE 2011 INCENTIVE PLAN

The 2011 Incentive Plan, including the 1,500,000 share increase in the aggregate number of shares of common stock authorized for issuance under the 2011 Incentive Plan, will only become effective upon stockholder approval of Proposal 2. Upon the effectiveness of the 2011 Incentive Plan, the 2005 Equity Plan will be terminated and no further equity awards will be granted under the 2005 Equity Plan.

Stockholders are requested in Proposal 2 to approve the 2011 Incentive Plan. The number of votes cast “FOR” Proposal 2 must exceed the number of votes cast “AGAINST” this Proposal to approve the 2011 Incentive Plan. Abstentions and broker non-votes will not be counted towards the vote total for this proposal.

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THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR PROPOSAL 2

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes our equity compensation plans as of December 31, 2010:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under  equity compensation plans (excluding securities reflected in column (a)) (c) (3)
Equity compensation plans approved by security holders (1)		2,035,471	$	31.92		1,469,586
Equity compensation plans not approved by security holders (2)		438,217	$	34.92		—
Total		2,473,688	$	33.16		1,469,586

(1) Includes the 1996 Stock Option Plan and the 2005 Equity Plan.

(2) Consists solely of the 2000 Equity Incentive Plan (“2000 Plan”). The exercise price of the options granted under the 2000 Plan was equal to the quoted market value of the common stock at the date of grant. Options issued under the 2000 Plan expire ten years after the options are granted and generally vest and become exercisable ratably over a four year period following the date of grant. The plan was terminated in May 2005 upon the approval of the 2005 Equity Plan.

(3) Includes 261,419 shares reserved for issuance under the 1996 Employee Stock Purchase Plan.

PROPOSAL 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee of our Board of Directors has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011, and has further directed that management submit the appointment of our independent registered public accounting firm for ratification by the stockholders at the annual meeting. KPMG LLP has audited our financial statements since 2000. Representatives of KPMG LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Stockholder ratification of the appointment of KPMG LLP as our independent registered public accounting firm is not required under our bylaws or otherwise. However, the Board of Directors is submitting the appointment of KPMG LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the committee determines that such a change would be in the best interests of us and our stockholders.

The number of votes cast “FOR” Proposal 3 must exceed the number of votes cast “AGAINST” Proposal 3 to ratify the selection of KPMG LLP. Abstentions and broker non-votes will not be counted towards the vote total in determining whether this proposal has been approved.

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Independent Registered Public Accounting Firm Fees

The following table represents aggregate fees for professional audit services rendered by KPMG LLP for the audit of our annual financial statements for the years ended December 31, 2010 and 2009, and fees billed for other services rendered by KPMG LLP. All fees described below were approved by the audit committee.

	Year Ended December 31,
	2010		2009
Audit fees(1)	$	1,253,252	$	1,228,416
Audit related fees		—		—
Tax fees(2)		—		11,524
All other fees(3)		2,190		1,595
Total fees	$	1,255,442	$	1,241,535

(1) Audit Fees consist of fees billed for the audit of our consolidated annual financial statements, the reviews of our interim consolidated financial statements and required statutory audits for certain of our subsidiaries.

(2) Tax Fees consist of the aggregate fees billed by KPMG LLP for international tax consulting services.

(3) All Other Fees for the years ended December 31, 2010 and 2009 consist of fees billed for KPMG LLP sponsored seminars.

Pre-Approval Policies and Procedures

The audit committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, KPMG LLP. The audit committee generally pre-approves specified services in the defined categories of audit services, audit-related services, tax services and all other fees up to specified amounts. Pre-approval may also be given as part of the audit committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. All of the independent audit fees were pre-approved by the audit committee and no services were performed other than by KPMG. The chairman of the audit committee has been delegated the authority to grant pre-approval under the pre-approval policy. Any approval by the chairman under this authority is reported to the audit committee at its next regular meeting.

The audit committee has determined that the rendering of the services other than audit services by KPMG LLP is compatible with maintaining the independent registered public accounting firm’s independence.

THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR THE RATIFICATION OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS(2)

The audit committee of the Board of Directors is comprised of three independent directors, as defined in Nasdaq Market Rule 4200(a)(15) and SEC Rule 10A-3, and operates under a written charter adopted by the board. The members of the committee are Messrs. Charles J. Abbe, Michael R. Gaulke and Peter J. Simone. The Board of Directors determined that Messrs. Charles J. Abbe, Michael R. Gaulke and Peter J. Simone are audit committee financial experts as defined by SEC rules. The audit committee is charged with the oversight of the integrity of our consolidated financial statements, including the review of the quarterly financial statements and disclosures contained in our Quarterly Report on Form 10-Q and annual financial statements and disclosures contained in our Annual Report on Form 10-K as filed with the SEC; the appointment, compensation, qualifications, independence and work of our independent registered public accounting firm; and the performance of our internal audit function. In addition, the committee has reviewed the requirements of the Sarbanes-Oxley Act of 2002, the rules of the SEC and the corporate governance listing standards of Nasdaq as they relate to audit committee policies.

Management is responsible for our internal controls over financial reporting, disclosure controls and procedures and preparing our consolidated financial statements. We have a full-time internal audit department that reports directly to the audit committee and reports administratively to management. The responsibility of this department is to objectively review and evaluate the adequacy, effectiveness and quality of our system of internal controls. The audit committee reviews and approves the internal audit plan annually and receives periodic updates on internal audit activities, including the status of the Section 404 internal controls over financial reporting requirements, which are discussed in meetings held with management at least quarterly throughout the year. KPMG LLP, our independent registered public accounting firm, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, as well as expressing an opinion on the effectiveness of our internal control over financial reporting. The audit committee’s responsibility is to monitor, evaluate and oversee these processes. The independent registered public accounting firm understands that it is accountable to the audit committee, not our management.

In this context, the audit committee has met and held discussions with management and our independent registered public accounting firm. Management represented to the committee that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The committee has reviewed and discussed the consolidated financial statements with management and our independent registered public accounting firm, including whether any off-balance sheet financing transactions or any transactions with related parties existed. The committee discussed with our independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards,Vol. 1. AU section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T regarding “Communication with Audit Committees”.

The audit committee reviewed and discussed with our independent registered public accounting firm matters related to their independence including a review of audit and non-audit fees and the written disclosures in the letter from KPMG LLP to the committee required by the Public Company Accounting Oversight Board’s Independence Rule 3526 regarding the independent registered public accounting firm’s communication with the audit committee concerning independence.

Based on the audit committee’s discussions with management and our independent registered public accounting firm and the committee’s review of the representation of management and the report of our independent registered public accounting firm to the committee, the committee recommended that the Board of Directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the Securities and Exchange Commission on February 18, 2011.

Audit Committee

Charles J. Abbe, Chairman

Michael R. Gaulke

Peter J. Simone

(2) The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any of our filings under the 1933 Act or 1934 Act whether made before or after the date hereof and without regard to any general incorporation language contained in such filing.

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PROPOSAL 4

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Under the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Section 14A of the 1934 Act, our stockholders are entitled to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Pursuant to the Dodd-Frank Act, the stockholder vote is an advisory vote and is not binding to us or our Board of Directors.

While this vote is non-binding, the Board of Directors and the compensation committee, which is comprised of independent directors, expect to take into account the outcome of this vote in considering future executive compensation arrangements.

The compensation of our named executive officers subject to the vote is described in more detail in our “Compensation Discussion & Analysis” on pages 15 to 29, including the compensation tables and any related material disclosed in this Proxy Statement. As discussed in those disclosures, we believe that our compensation programs are structured to enable us to attract, retain, motivate and reward our named executive officers in order to achieve our strategic, operational and financial objectives and also to support our core values and culture. Our Board of Directors believes that our current executive compensation programs are tied to both individual and corporate performance while also aligning the interest of our executive officers with those of our stockholders.

The board recommends stockholder approval of the compensation of our named executive officers as described in this Proxy Statement by casting a non-binding advisory vote “FOR” the following resolution:

“RESOLVED, that the compensation paid to the named executive officers of Cymer, Inc., as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

The number of votes cast “FOR” Proposal 4 must exceed the number of votes “AGAINST” Proposal 4 to approve this proposal. Abstentions and broker non-votes will not be counted towards the vote total in determining whether this proposal has been approved.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN OUR PROXY STATEMENT

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PROPOSAL 5

ADVISORY VOTE ON THE FREQUENCY OF SOLICITATION OF

AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Dodd-Frank Act and Section 14A of the 1934 Act also provide the opportunity for our stockholders to indicate their preference, on an advisory basis, as to whether the advisory vote on executive compensation should occur once every one, two or three years. For the reasons described below, the board recommends that the stockholders select a frequency of one year.

Although this advisory vote on the frequency of soliciting the stockholder advisory vote on executive compensation is non-binding, the Board of Directors and the compensation committee will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

The board believes that the advisory vote to approve executive compensation should occur every year so that stockholders can express their views on our executive compensation programs. The Compensation Committee, which oversees and determines executive compensation, values the opinions express by stockholders in these votes and will continue to consider the outcome of these votes in making its decisions on executive compensation.

While the board believes that its recommendation is appropriate at this time, the stockholders are not voting to approve or disapprove that recommendation, but are instead asked to indicate their preferences, on an advisory basis, as to whether the non-binding advisory vote on the approval of our executive compensation practices should be held every year, every other year or every three years. The option among these choices that receives the highest number of votes from holders of shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be deemed to be the frequency preferred by the stockholders. Abstentions and broker non-votes will not be counted towards the vote total in determining which option is preferred by the stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EVERY “1 YEAR” FOR THE FREQUENCY OF SOLICITATION OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of March 4, 2011 by: (i) each nominee for director; (ii) each of the executive officers named in the Summary Compensation Table; (iii) all of our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.

Beneficial Owner	Beneficial Ownership(1) Number of Shares and Nature of Ownership(2)		Percent of Total
5% Stockholders
FMR LLC		4,020,299		13.2	%
82 Devonshire Street
Boston, MA 02109
Blackrock, Inc.		2,319,793		7.6	%
10 East 52nd Street
New York, NY 10222
Tinicum Lantern II L.L.C.		2,125,203		7.0	%
800 Third Avenue, 40th Floor
New York, NY 10022
T. Rowe Price Associates, Inc.(3)		1,619,530		5.3	%
100 E. Pratt Street
Baltimore, MD 21202
Officers and Directors
Charles J. Abbe		50,789		*
Robert P. Akins.		244,960		*
Edward H. Braun		11,196		*
Michael R. Gaulke		41,189		*
William G. Oldham		18,151		*
Eric M. Ruttenberg(4)		2,131,598		7.0	%
Peter J. Simone		18,718		*
Young K. Sohn		37,539		*
Jon D. Tompkins		8,218		*
Paul B. Bowman		24,449		*
Edward J. Brown, Jr.		303,121		1.0	%
Karen K. McGinnis		2,083		*
All executive officers and directors as a group (12 persons)		2,892,011		9.3	%

* Less than one percent.

(1) This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13F and 13G filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 30,471,166 shares outstanding on March 4, 2011, adjusted as required by rules promulgated by the SEC. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed to be beneficially owned by the person holding such option for computing the percentage of ownership of such person but are not treated as outstanding for computing the percentage of any other person. The information shown does not include options, RSUs or PRSUs that vest more than 60 days after the Table Date.

(2) Includes the following number of shares issuable upon exercise of options exercisable as of, or that will have become exercisable within 60 days of, March 4, 2011: Mr. Abbe, 34,400 shares; Mr. Akins, 186,347

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shares; Mr. Braun, 3,200 shares; Mr. Gaulke, 25,800 shares; Dr. Oldham, 7,200 shares; Mr. Ruttenberg, no shares, Mr. Simone, 10,400 shares; Mr. Sohn, 21,550 shares; Mr. Tompkins, 600 shares; Mr. Bowman, 14,583 shares; Mr. Brown, 293,337 shares; Ms. McGinnis 2,083 shares; and all executive officers and directors as a group 599,500 shares.

(3) The amended Schedule 13G filed with the SEC by T. Rowe Price Associates, Inc. on February 10, 2011 indicates that these securities are owned by various individual and institutional investors for whom T. Rowe Price Associates, Inc. serves as investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the 1934 Act, T. Rowe Price Associates is deemed to be a beneficial owner of such securities; however, T. Rowe Price Associates expressly denies that it is, in fact, the beneficial owner of such securities.

(4) Mr. Ruttenberg disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein, and the inclusion of these shares in this report shall not be deemed an admission of beneficial ownership of all of the reported shares for purposes of Section 16 or for any other purpose.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the 1934 Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the year ended December 31, 2010, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

OTHER MATTERS

The Board of Directors knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

By Order of the Board of Directors

Paul B. Bowman

Secretary

April 8, 2011

A copy of our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission, is being provided to stockholders with this Proxy Statement with the list of exhibits attached. Exhibits to our Annual Report on Form 10-K are available for a charge equal to our reasonable expenses incurred in furnishing such exhibits upon written request to: Corporate Secretary, Cymer, Inc., 17075 Thornmint Court, San Diego, California 92127.

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A number of brokers with account holders who are Cymer stockholders will be “householding” our proxy materials. As a consequence, a single Proxy Statement or Notice of Internet Availability of Proxy Materials will be delivered to the address of such stockholders unless they have provided contrary instructions to their brokers. If you have received notice from your broker that it will be householding communications to you, householding will continue until you revoke your consent or are notified that this procedure will be discontinued. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Proxy Statement and annual report and Notice of Internet Availability of Proxy Materials, please notify your broker or contact Investor Relations at Cymer, Inc., at (858) 385-6097 or in writing to Cymer, Inc., 17075 Thornmint Court, San Diego, California 92127.

Stockholders who currently receive multiple copies of the Proxy Statement or Notice of Internet Availability of Proxy Materials at their address and would like to request householding should contact their brokers.

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APPENDIX A

2011 EQUITY INCENTIVE PLAN

APPROVEDBY BOARD: MARCH 23, 2011

APPROVEDBY STOCKHOLDERS:

TERMINATION DATE: MARCH 22, 2021

1. General.

(a) Successor to and Continuation of Prior Plan. The Plan is intended as the successor to the Cymer, Inc. 2005 Equity Incentive Plan (the “Prior Plan”). Following the Effective Date, no additional stock awards shall be granted under the Prior Plan. Any shares remaining available for issuance under the Prior Plan as of the Effective Date (the “Prior Plan’s Available Reserve”) shall become available for issuance pursuant to Stock Awards granted hereunder. From and after the Effective Date, all outstanding stock awards granted under the Prior Plan shall remain subject to the terms of the Prior Plan;provided, however, any shares subject to outstanding stock awards granted under the Prior Plan that expire or terminate for any reason prior to exercise or settlement, are forfeited because of the failure to meet a contingency or condition required to vest such shares, or otherwise but for the termination of the Prior Plan would have reverted to the share reserve of the Prior Plan (collectively, the “Returning Shares”), shall become available for issuance pursuant to Awards granted hereunder. All Awards granted on or after the Effective Date of this Plan shall be subject to the terms of this Plan.

(b) Eligible Award Recipients. The persons eligible to receive Awards are Employees, Directors and Consultants.

(c) Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Purchase Awards, (iv) Stock Bonus Awards, (v) Stock Appreciation Rights, (vi) Stock Unit Awards, (vii) Performance Stock Awards, (viii) Performance Cash Awards, and (ix) Other Stock Awards.

(d) General Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Awards as set forth in Section 1(a), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Awards.

2. DEFINITIONS.

As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a)“Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

(b)“Award” means a Stock Award or a Performance Cash Award.

(c)“Award Agreement” means a Stock Award Agreement or a Performance Cash Award Agreement.

(d)“Board” means the Board of Directors of the Company.

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(e)“Capitalization Adjustment” has the meaning ascribed to that term in Section 11(a).

(f)“Cause”means with respect to a Participant, the occurrence of any of the following: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated by reason of dismissal without Cause for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

(g)“Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

(h)“Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 3(c).

(i)“Common Stock” means the common stock of the Company.

(j)“Company” means Cymer, Inc., a Nevada corporation.

(k)“Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

(l)“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service. For example, a change in status from an employee of the Company to a consultant to an Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

(m)“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i)a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii)a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

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(iii)the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv)the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(n)“Covered Employee” shall have the meaning provided in Section 162(m)(3) of the Code and the regulations promulgated thereunder.

(o)“Director” means a member of the Board.

(p)“Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.

(q)“Effective Date” means the effective date of this Plan document, which is the date of the annual meeting of stockholders of the Company held in 2011, provided this Plan is approved by the Company’s stockholders at such meeting.

(r)“Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

(s)“Entity” means a corporation, partnership, limited liability company or other entity.

(t)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(u)“Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i)If the Common Stock is listed on any established stock exchange, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange (or the exchange with the greatest volume of trading in the Common Stock) on the date in question, as reported inThe Wall Street Journalor such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii)In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.

(v)“Incentive Stock Option” means an Option that is intended to be and qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(w)“Non-Employee Director”means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

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(x)“Nonstatutory Stock Option” means any Option that does not qualify as an Incentive Stock Option.

(y)“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(z)“Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

(aa)“Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

(bb)“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if permitted under the terms of this Plan, such other person who holds an outstanding Option.

(cc)“Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 7(f).

(dd)“Other Stock Award Agreement”means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(ee)“Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

(ff)“Own,” “Owned,” “Owner,” “Ownership”A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(gg)“Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.

(hh)“Performance Cash Award” means an award of cash granted pursuant to the terms and conditions of Section 7(e)(ii).

(ii)“Performance Cash Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Performance Cash Award. Each Performance Cash Award Agreement shall be subject to the terms and conditions of the Plan.

(jj)“Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre-tax profit; (xiv) sales or revenue

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targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xviii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) free cash flow (cash provided by operating activities less acquisition of property, equipment, patent licenses and/or any other expenses specified by the Board); (xxii) operating cash flow; (xxiii) any per share measure of any of the foregoing cash flow metrics; (xxiv) share price performance; (xxv) debt reduction; (xxvi) implementation or completion of projects or processes; (xxvii) customer satisfaction; (xxviii) stockholders’ equity; and (xxix) to the extent an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.

(kk)“Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. The Board is authorized at any time in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; or (iii) in view of the Board’s assessment of the business strategy of the Company, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant. Specifically, the Board is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (x) to exclude the dilutive effects of acquisitions or joint ventures; (y) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; and (z) to exclude the effect of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends. In addition, with respect to Performance Goals established for Participants who are not Covered Employees, and who will not be Covered Employees at the time the compensation will be paid, the Board is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (A) to exclude restructuring and/or other nonrecurring charges; (B) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (C) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (D) to exclude the effects to any statutory adjustments to corporate tax rates; (E) to exclude the impact of any “extraordinary items” as determined under generally accepted accounting principles; and (F) to exclude any other unusual, non-recurring gain or loss or other extraordinary item.

(ll)“Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of an Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.

(mm)“Performance Stock Award” means any right to receive Common Stock granted pursuant to the terms and conditions of Section 7(e)(i).

(nn)“Performance Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Performance Stock Award. Each Performance Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(oo)“Plan” means this Cymer, Inc. 2011 Equity Incentive Plan.

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(pp)“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(qq)“Securities Act” means the Securities Act of 1933, as amended.

(rr)“Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 7(d).

(ss)“Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

(tt)“Stock Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Stock Purchase Award, Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award, a Performance Stock Award, or any Other Stock Award.

(uu)“Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant, including an Option Agreement, a Stock Purchase Award Agreement, Stock Bonus Award Agreement, a Stock Appreciation Right Agreement, a Stock Unit Award Agreement, a Performance Stock Award Agreement, or any Other Stock Award Agreement. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(vv)“Stock Bonus Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(b).

(ww)“Stock Bonus Award Agreement” means a written agreement between the Company and a holder of a Stock Bonus Award evidencing the terms and conditions of a Stock Bonus Award grant. Each Stock Bonus Award Agreement shall be subject to the terms and conditions of the Plan.

(xx)“Stock Purchase Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(a).

(yy)“Stock Purchase Award Agreement” means a written agreement between the Company and a holder of a Stock Purchase Award evidencing the terms and conditions of a Stock Purchase Award grant. Each Stock Purchase Award Agreement shall be subject to the terms and conditions of the Plan.

(zz)“Stock Unit Award”means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(c).

(aaa)“Stock Unit Award Agreement”means a written agreement between the Company and a holder of a Stock Unit Award evidencing the terms and conditions of a Stock Unit Award grant. Each Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

(bbb)“Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).

(ccc)“Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

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3. ADMINISTRATION.

(a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 3(c).

(b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i)To determine from time to time (A) which of the persons eligible under the Plan shall be granted Awards; (B) when and how each Award shall be granted; (C) what type or combination of types of Award shall be granted; (D) the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock or cash pursuant to an Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award.

(ii)To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or any Award Agreement in a manner and to the extent it shall deem necessary or expedient to make the Plan or Award fully effective.

(iii)To settle all controversies regarding the Plan and Awards granted under it.

(iv)To accelerate the time at which a Stock Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

(v)To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant.

(vi)To amend the Plan, subject to the limitations, if any, of applicable law. However, except as provided in Section 11(a) relating to Capitalization Adjustments, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable law or applicable exchange listing requirements. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.

(vii)To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees.

(viii)To amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to bring the Plan or Incentive Stock Options granted under it into compliance therewith.

(ix)To approve the forms of Award Agreements for use under the plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion;provided, however, that the rights under any Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in

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writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent if necessary to maintain the qualified status of the Award as an Incentive Stock Option or to bring the Award into compliance with Section 409A of the Code

(x)Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.

(xi)To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.

(c) Delegation to Committee.

(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated to the subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

(ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee of Directors who need not be Outside Directors the authority to grant Awards to eligible persons who are either (I) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award, or (II) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, or (B) delegate to a Committee of Directors who need not be Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.

(d) Delegation to an Officer. The Board may delegate to one or more Officers the authority to do one or both of the following (i) designate Officers and Employees to be recipients of Awards and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to any Stock Awards granted to such Officers and Employees;provided, however,that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding anything to the contrary in this Section 3(d), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 2(u)(ii) above.

(e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

(f) Repricings.Notwithstanding any provision or provisions to the contrary in this Plan, the Board or Committee may not, without prior approval of its stockholders, effect (A) the reduction of the exercise price of any outstanding Option under the Plan; (B) the cancellation of any outstanding Option or Stock Appreciation Right under the Plan and the grant in substitution therefor of (I) a new Option under the Plan or another equity

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plan of the Company covering the same or a different number of shares of Common Stock, (II) a Stock Purchase Award, (III) a Stock Bonus Award, (IV) a Stock Appreciation Right under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (V) a Stock Unit Award, (VI) an Other Stock Award, (VII) cash, including a Performance Cash Award, or (VIII) other valuable consideration (as determined by the Board, in its sole discretion); or (C) any other action that is treated as a repricing under generally accepted accounting principles.

4. SHARES SUBJECTTOTHE PLAN.

(a) Share Reserve. Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed, in the aggregate, the sum of (i) the number of shares subject to the Prior Plan’s Available Reserve, plus (ii) an additional one million five hundred thousand (1,500,000) new shares, plus (iii) the Returning Shares. For clarity, the Share Reserve in this Section 4(a) is a limitation on the number of shares of the Common Stock that may be issued pursuant to the Plan and does not limit the granting of Stock Awards except as provided in Section 4(a). Shares may be issued in connection with a merger or acquisition as permitted by, as applicable, NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance shall not reduce the number of shares available for issuance under the Plan. Furthermore, if a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan.

(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, if any shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”), the number of shares that are not delivered to the Participant shall remain available for issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan.

Notwithstanding anything to the contrary in this Section 4(b), subject to the provisions of Section 11(a) relating to Capitalization Adjustments the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be four million sixty seven thousand eighty eight (4,067,088) shares of Common Stock.

(c) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company.

5. ELIGIBILITY.

(a) Eligibility for Specific Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants;provided, however, Nonstatutory Stock Options and Stock Appreciation Rights may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless the

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stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code or unless such Stock Awards comply with the distribution requirements of Section 409A of the Code.

(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

(c) Section 162(m) Limitation on Annual Grants. Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is granted covering more than two hundred fifty thousand (250,000) shares of Common Stock during any calendar year.

(d) Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other rule governing the use of Form S-8.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical;provided, however, that each Option Agreement shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

(a) Term. No Option shall be exercisable after the expiration of ten (10) years from the date of its grant.

(b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Sections 409A and 424(a) of the Code.

(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Sections 409A and 424(a) of the Code.

(d) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to grant Options

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that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The methods of payment permitted by this Section 6(d) are:

(i)by cash or check;

(ii)bank draft or money order payable to the Company;

(iii)pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

(iv)by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

(v)if the option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price;provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such holding back of whole shares;provided, further, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

(vi)in any other form of legal consideration that may be acceptable to the Board;provided, however,that such form of consideration may not include deferred payment through the use of a promissory note.

(e) Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

(i) Restrictions on Transfer. An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.

(ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order.

(iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

(f) Vesting Generally. The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 6(f) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised. Notwithstanding the foregoing, no Option shall vest at a rate that is any more rapid than ratably over a three (3)-year period from the date of grant with the exception of (i) Options that vest based on the satisfaction of Performance Goals and (ii) Options granted to Scientific Advisory Board members or Directors.

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(g) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(h) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability or upon a Change in Control) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

(i) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(j) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(k) Termination for Cause. Except as explicitly provided otherwise in an Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate upon the termination date of such Optionholder’s Continuous Service, and the Optionholder shall be prohibited from exercising his or her Option from and after the time of such termination of Continuous Service.

(l) Early Exercise. The Option Agreement may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time necessary to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.

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(m) Non-Exempt Employees. No Option, whether or not vested, granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a Corporate Transaction in which such Option is not assumed, continued, or substituted, or (iii) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement or in another applicable agreement or in accordance with the Company’s then current employment policies and guidelines), any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

7. PROVISIONSOF STOCK AWARDSOTHERTHAN OPTIONS.

(a) Stock Purchase Awards. Each Stock Purchase Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Stock Purchase Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of Stock Purchase Award Agreements may change from time to time, and the terms and conditions of separate Stock Purchase Award Agreements need not be identical,provided, however,that each Stock Purchase Award Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i) Purchase Price. At the time of the grant of a Stock Purchase Award, the Board will determine the price to be paid by the Participant for each share subject to the Stock Purchase Award. To the extent required by applicable law, the price to be paid by the Participant for each share of the Stock Purchase Award will not be less than the par value of a share of Common Stock.

(ii) Consideration. At the time of the grant of a Stock Purchase Award, the Board will determine the consideration permissible for the payment of the purchase price of the Stock Purchase Award. The purchase price of Common Stock acquired pursuant to the Stock Purchase Award shall be paid either: (A) in cash or by check at the time of purchase, (B) by past services rendered to the Company, or (C) in any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(iii) Vesting. Shares of Common Stock acquired under a Stock Purchase Award may be subject to a share repurchase right or option in favor of the Company in accordance with a vesting schedule to be determined by the Board. Notwithstanding the foregoing, no Stock Purchase Award shall vest at a rate that is any more rapid than ratably over a three (3)-year period from the date of grant with the exception of (i) Stock Purchase Awards that vest based on the satisfaction of Performance Goals, (ii) Stock Purchase Awards granted pursuant to VIA (Values in Action) Awards and granted to Consultants (both of which are vested at 100% at time of grant), and (iii) Stock Purchase Awards granted to Directors or Scientific Advisory Board Members.

(iv) Termination of Participant’s Continuous Service. In the event that a Participant’s Continuous Service terminates, the Company shall have the right, but not the obligation, to repurchase or otherwise reacquire, any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Stock Purchase Award Agreement. At the Board’s election, the price paid for all shares of Common Stock so repurchased or reacquired by the Company may be at the lesser of: (A) the Fair Market Value on the relevant date, or (B) the Participant’s original cost for such shares. The Company shall not be required to exercise its repurchase or reacquisition option until at least six (6) months (or such longer or shorter period of time necessary to avoid a charge to earnings for financial accounting purposes) have elapsed following the Participant’s purchase of the shares of Common Stock acquired pursuant to the Stock Purchase Award unless otherwise determined by the Board or provided in the Stock Purchase Award Agreement.

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(v) Transferability. Rights to purchase or receive shares of Common Stock granted under a Stock Purchase Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Stock Purchase Award Agreement, as the Board shall determine in its sole discretion, and so long as Common Stock awarded under the Stock Purchase Award remains subject to the terms of the Stock Purchase Award Agreement.

(b) Stock Bonus Awards. Each Stock Bonus Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Stock Bonus Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of Stock Bonus Award Agreements may change from time to time, and the terms and conditions of separate Stock Bonus Award Agreements need not be identical,provided, however, that each Stock Bonus Award Agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i) Consideration. A Stock Bonus Award may be awarded in consideration for (A) past services actually rendered to the Company or an Affiliate, or (B) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii) Vesting. Shares of Common Stock awarded under the Stock Bonus Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board. Notwithstanding the foregoing, no Stock Bonus Award shall vest at a rate that is any more rapid than ratably over a three (3)-year period from the date of grant with the exception of (i) Stock Bonus Awards that vest based on the satisfaction of Performance Goals, (ii) Stock Bonus Awards granted pursuant to VIA (Values in Action) Awards and granted to Consultants (both of which are vested at 100% at time of grant), and (iii) Stock Bonus Awards granted to Directors or Scientific Advisory Board Members.

(iii) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Stock Bonus Award Agreement.

(iv) Transferability. Rights to acquire shares of Common Stock under the Stock Bonus Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Stock Bonus Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Stock Bonus Award Agreement remains subject to the terms of the Stock Bonus Award Agreement.

(c) Stock Unit Awards.Each Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Stock Unit Award Agreements need not be identical,provided, however,that each Stock Unit Award Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i) Consideration. At the time of grant of a Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii) Vesting.At the time of the grant of a Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Stock Unit Award as it, in its sole discretion, deems appropriate. Notwithstanding

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the foregoing, no Stock Unit Award shall vest at a rate that is any more rapid than ratably over a three (3)-year period from the date of grant with the exception of (i) Stock Unit Awards that vest based on the satisfaction of Performance Goals and (ii) Stock Unit Awards granted to Directors, Scientific Advisory Board Members or Consultants).

(iii) Payment. A Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Stock Unit Award Agreement.

(iv) Additional Restrictions.At the time of the grant of a Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Stock Unit Award after the vesting of such Stock Unit Award.

(v) Dividend Equivalents.Dividend equivalents may be credited in respect of shares of Common Stock covered by a Stock Unit Award, as determined by the Board and contained in the Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Stock Unit Award Agreement to which they relate.

(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Stock Unit Award Agreement, such portion of the Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

(d) Stock Appreciation Rights.Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical;provided, however, that each Stock Appreciation Right Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant.

(ii) Strike Price and Calculation of Appreciation. Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) an amount (the strike price) that will be determined by the Board at the time of grant of the Stock Appreciation Right.

(iii) Vesting.At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate. Notwithstanding the foregoing, no Stock Appreciation Right shall vest at a rate that is any more rapid than ratably over a three (3)-year period from the date of grant with the exception of (i) Stock Appreciation Rights that vest based on the satisfaction of Performance Goals and (ii) Stock Appreciation Rights granted to Scientific Advisory Board members and Directors.

(iv) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

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(v) Payment. The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

(vi) Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination) but only within such period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

(e) Performance Awards.

(i) Performance Stock Awards. A Performance Stock Award is a Stock Award that may be granted, may vest, or may be exercised based upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Board in its sole discretion. The maximum number of shares that may be granted to any Participant in a calendar year attributable to Performance Stock Awards described in this Section 7(e)(i) shall not exceed two hundred fifty thousand (250,000) shares of Common Stock. Any vesting or other benefit under a Performance Stock Award contingent upon the achievement of Performance Goals that have not been attained as of the date of termination of Continuous Service, so that the Participant is not irrevocably entitled to the benefit at the time of his or her termination of Continuous Service, shall be forfeited at the time of termination unless otherwise determined by the Board. In addition, to the extent permitted by applicable law and the applicable Performance Stock Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.

(ii) Performance Cash Awards. A Performance Cash Award is a cash award that may be granted upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Board in its sole discretion. The maximum value that may be granted to any Participant in a calendar year attributable to Performance Cash Awards described in this Section 7(e)(i) shall not exceed five million dollars ($5,000,000). The Board may provide for or, subject to such terms and conditions as the Board may specify, may permit a Participant to elect for, the payment of any Performance Cash Award to be deferred to a specified date or event. The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property. In addition, to the extent permitted by applicable law and the applicable Performance Cash Award Agreement, the Board may determine that Common Stock authorized under this Plan may be used in payment of Performance Cash Awards, including additional shares in excess of the Performance Cash Award as an inducement to hold shares of Common Stock.

(iii) Board Discretion. The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.

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(f) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under Section 6 and the preceding provisions of this Section 7. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards. Notwithstanding the foregoing, no Other Stock Award shall vest prior to the third anniversary of the date that such Award was granted with the exception of Other Stock Awards that vest based on the satisfaction of Performance Goals.

8. COVENANTSOFTHE COMPANY.

(a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law.

(c) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

(d) Compliance with Section 409A of the Code.To the extent that the Board determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (i) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance, including without limitation any such regulations or other guidance that may be issued or amended

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after the Effective Date. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded and a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death.

(e) No Obligation to Notify or Minimize Taxes.The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

9. USEOF PROCEEDSFROM SALESOF COMMON STOCK.

Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

10. MISCELLANEOUS.

(a) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting an offer by the Company of Common Stock to any Participant under the terms of a Stock Award shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is actually received or accepted by the Participant.

(b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.

(c) No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or other instrument executed thereunder or any Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

(d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

(e) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the

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Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

(f) Withholding Obligations. To the extent provided by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award;provided, however,that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; or (iv) by such other method as may be set forth in the Award Agreement.

(g) Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

11. ADJUSTMENTSUPON CHANGESIN COMMON STOCK; OTHER CORPORATE EVENTS.

(a) Capitalization Adjustments. If any change is made in, or other events occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”)), the Board shall appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 4(a), (ii) the class(es) and number of securities subject to each outstanding stock award under the Prior Plan that are added from time to time to the share reserve under the Plan pursuant to Section 4(a), (iii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 4(b), (iv) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 5(c), (v) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 10(i); and (vi) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service,provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent

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such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c) Corporate Transaction.The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.

(i) Stock Awards May Be Assumed. In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award. The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of Section 3.

(ii) Stock Awards Held by Current Participants. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the Corporate Transaction).

(iii) Stock Awards Held by Persons other than Current Participants. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction;provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.

(iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in the event a Stock Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may not exercise such Stock Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (A) the value of the property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise.

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12. TERMINATIONOR SUSPENSIONOFTHE PLAN.

(a) Plan Term. Unless sooner terminated by the Board pursuant to Section 3, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

(b) No Impairment of Rights. Termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant.

13. EFFECTIVE DATEOF PLAN.

This Plan shall become effective on the Effective Date, but no Stock Award shall be exercised (or, in the case of a Stock Purchase Award, Stock Bonus Award, Stock Unit Award, or Other Stock Award shall be granted) under this Plan unless and until this Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date this Plan is adopted by the Board.

14. CHOICEOF LAW.

The law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement/Annual Report on Form 10-K are available at www.proxyvote.com.

M23269-P91839        

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS May 19, 2011.
The stockholder(s) hereby appoint(s) Robert P. Akins, Edward J. Brown, Jr., and Paul B. Bowman, or each of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Cymer, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 10:00 a.m., Pacific Time on May 19, 2011, at Cymer’s offices, 17075 Thornmint Court, San Diego, California, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE BUT THE CARD IS SIGNED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3, FOR PROPOSAL 4, AND FOR 1 YEAR FOR PROPOSAL 5 AND IN THE DESCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
	Address Changes/Comments:
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE SIDE

CYMER, INC. 17075 THORNMINT COURT SAN DIEGO, CA 92127 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 18, 2011. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.   ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Cymer, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.   VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 18, 2011. Have your proxy card in hand when you call and then follow the instructions   VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
	M23268-P91839	KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.		DETACH AND RETURN THIS PORTION ONLY

CYMER, INC.				For     All	Withhold   All	For All     Except	To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
	The Board of Directors recommends a voteFOR all nominees.
	Vote on Directors			0	0	0
	1.	Election of nine nominees listed below to serve as directors until the 2012 Annual Meeting of Stockholders.
		Nominees:
		01)    Charles J. Abbe 02)    Robert P. Akins 03)    Edward H. Braun 04)    Michael R. Gaulke 05)    William G. Oldham	06)    Eric M. Ruttenberg 07)    Peter J. Simone 08)    Young K. Sohn 09)    Jon D. Tompkins
	Vote on Proposals
	The Board of Directors recommends a voteFOR Proposals 2, 3 and 4 and for “1 YEAR” for Proposal 5.								For	Against	Abstain
	2.	To approve our 2011 Equity Incentive Plan.							0	0	0
	3.	Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011.							0	0	0
	4.	An advisory vote to approve, by non-binding vote, the compensation of Cymer’s executive officers.							0	0	0
								1 Year	2 Years	3 Years	Abstain
	5.	An advisory vote to recommend, by non-binding vote, the frequency of solicitation of an advisory vote on executive compensation.						0	0	0	0
	6.	Conducting any other business properly brought before the meeting.
	For address changes and/or comments, please check this box and write them on the back where indicated.					0
	Please indicate if you wish to view meeting materials electronically via the Internet rather than receiving a hard copy. Please note that you will continue to receive a proxy card for voting purposes only.			0 Yes	0 No
	Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
	Signature [PLEASE SIGN WITHIN BOX]		Date				Signature [Joint Owners]		Date