1
EXHIBIT 10.22
APPLIED MATERIALS, INC.
1995 EQUITY INCENTIVE PLAN
APPLIED MATERIALS, INC., hereby adopts the Applied Materials,
Inc. 1995 Equity Incentive Plan, effective as of December 7, 1994, as follows:
SECTION 1
BACKGROUND, PURPOSE AND DURATION
1.1 Background and Effective Date. The Plan permits the grant
of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, and Performance Shares. The Plan is effective as of December
7, 1994, subject to ratification by an affirmative vote of the holders of a
majority of the Shares which are present in person or by proxy and entitled to
vote at the 1995 Annual Meeting of Stockholders. Awards may be granted prior to
the receipt of such vote, but such grants shall be null and void if such vote is
not in fact received.
1.2 Purpose of the Plan. The Plan is intended to attract,
motivate, and retain (1) employees of the Company and its Affiliates, (2)
consultants who provide significant services to the Company and its Affiliates,
and (3) directors of the Company who are employees of neither the Company nor
any Affiliate. The Plan also is designed to encourage stock ownership by
Participants, thereby aligning their interests with those of the Company's
shareholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following
meanings unless a different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as
amended. Reference to a specific section of the 1934 Act or regulation
thereunder shall include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section or
regulation.
2.2 "Affiliate" means any corporation or any other entity
(including, but not limited to, partnerships and joint ventures) controlling,
controlled by, or under common control with the Company.
2.3 "Affiliated SAR" means an SAR that is granted in
connection with a related Option, and which automatically will be deemed to be
exercised at the same time that the related Option is exercised.
2.4 "Annual Revenue" means the Company's or a business unit's
net sales for the Fiscal Year, determined in accordance with generally accepted
accounting principles; provided, however, that prior to the Fiscal Year, the
Committee shall determine whether any significant item(s) shall be excluded or
included from the calculation of Annual Revenue with respect to one or more
Participants.
2.5 "Award" means, individually or collectively, a grant under
the Plan of Nonqualified Stock Options, Incentive Stock Options, SARs,
Restricted Stock, Performance Units, or Performance Shares.
2
2.6 "Award Agreement" means the written agreement setting
forth the terms and provisions applicable to each Award granted under the Plan.
2.7 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.8 "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a specific section of the Code or regulation thereunder
shall include such section or regulation, any valid regulation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.9 "Committee" means the committee appointed by the Board
(pursuant to Section 3.1) to administer the Plan.
2.10 "Company" means Applied Materials, Inc., a Delaware
corporation, or any successor thereto. With respect to the definitions of the
Performance Goals, the Committee may determine that "Company" means Applied
Materials, Inc. and its consolidated subsidiaries.
2.11 "Consultant" means any consultant, independent
contractor, or other person who provides significant services to the Company or
its Affiliates, but who is neither an Employee nor a Director.
2.12 "Controllable Profits" means as to any Fiscal Year, a
business unit's Annual Revenue minus (a) cost of sales, (b) research,
development, and engineering expense, (c) marketing and sales expense, (d)
general and administrative expense, (e) extended receivables expense, and (f)
shipping requirement deviation expense.
2.13 "Customer Satisfaction MBOs" means as to any Participant,
the objective and measurable individual goals set by a "management by
objectives" process and approved by the Committee, which goals relate to the
satisfaction of external or internal customer requirements.
2.14 "Director" means any individual who is a member of the
Board of Directors of the Company.
2.15 "Disability" means a permanent and total disability
within the meaning of Code section 22(e)(3), provided that in the case of Awards
other than Incentive Stock Options, the Committee in its discretion may
determine whether a permanent and total disability exists in accordance with
uniform and non-discriminatory standards adopted by the Committee from time to
time.
2.16 "Earnings Per Share" means as to any Fiscal Year, the
Company's Net Income or a business unit's Pro Forma Net Income, divided by a
weighted average number of common shares outstanding and dilutive common
equivalent shares deemed outstanding.
2.17 "Employee" means any employee of the Company or of an
Affiliate, whether such employee is so employed at the time the Plan is adopted
or becomes so employed subsequent to the adoption of the Plan.
2.18 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended. Reference to a specific section of ERISA or regulation
thereunder shall include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section or
regulation.
2.19 "Exercise Price" means the price at which a Share may be
purchased by a Participant pursuant to the exercise of an Option.
-2-
3
2.20 "Fair Market Value" means the last quoted per share
selling price for Shares on the relevant date, or if there were no sales on such
date, the arithmetic mean of the highest and lowest quoted selling prices on the
nearest day before and the nearest day after the relevant date, as determined by
the Committee. Notwithstanding the preceding, for federal, state, and local
income tax reporting purposes, fair market value shall be determined by the
Committee (or its delegate) in accordance with uniform and nondiscriminatory
standards adopted by it from time to time.
2.21 "Fiscal Year" means the fiscal year of the Company.
2.22 "Freestanding SAR" means a SAR that is granted
independently of any Option.
2.23 "Grant Date" means, with respect to an Award, the date
that the Award was granted.
2.24 "Incentive Stock Option" means an Option to purchase
Shares which is designated as an Incentive Stock Option and is intended to meet
the requirements of section 422 of the Code.
2.25 "Individual MBOs" means as to a Participant, the
objective and measurable goals set by a "management by objectives" process and
approved by the Committee (in its discretion).
2.26 "Net Income" means as to any Fiscal Year, the income
after taxes of the Company for the Fiscal Year determined in accordance with
generally accepted accounting principles, provided that prior to the Fiscal
Year, the Committee shall determine whether any significant item(s) shall be
included or excluded from the calculation of Net Income with respect to one or
more Participants.
2.27 "New Orders" means as to any Fiscal Year, the firm orders
for a system, product, part, or service that are being recorded for the first
time as defined in the Company's Order Recognition Policy.
2.28 "Nonemployee Director" means a Director who is an
employee of neither the Company nor of any Affiliate.
2.29 "Nonqualified Stock Option" means an option to purchase
Shares which is not intended to be an Incentive Stock Option.
2.30 "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
2.31 "Participant" means an Employee, Consultant, or
Nonemployee Director who has an outstanding Award.
2.32 "Performance Goals" means the goal(s) (or combined
goal(s)) determined by the Committee (in its discretion) to be applicable to a
Participant with respect to an Award. As determined by the Committee, the
Performance Goals applicable to an Award may provide for a targeted level or
levels of achievement using one or more of the following measures: (a) Annual
Revenue, (b) Controllable Profits, (c) Customer Satisfaction MBOs, (d) Earnings
Per Share, (e) Individual MBOs, (f) Net Income, (g) New Orders, (h) Pro Forma
Net Income, (i) Return on Designated Assets, and (j) Return on Sales. The
Performance Goals may differ from Participant to Participant and from Award to
Award.
2.33 "Performance Share" means an Award granted to a
Participant pursuant to Section 8.
-3-
4
2.34 "Performance Unit" means an Award granted to a
Participant pursuant to Section 8.
2.35 "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. As
provided in Section 7, such restrictions may be based on the passage of time,
the achievement of target levels of performance, or the occurrence of other
events as determined by the Committee, in its discretion.
2.36 "Plan" means the Applied Materials, Inc. 1995 Equity
Incentive Plan, as set forth in this instrument and as hereafter amended from
time to time.
2.37 "Pro Forma Net Income" means as to any business unit for
any Fiscal Year, the Controllable Profits of such business unit, minus
allocations of designated corporate expenses.
2.38 "Restricted Stock" means an Award granted to a
Participant pursuant to Section 7.
2.39 "Retirement" means, in the case of an Employee, a
Termination of Service by reason of the Employee's retirement at or after his or
her normal retirement date under the Applied Materials, Inc. Employee Savings
and Retirement Plan, or any successor plan. With respect to a Consultant, no
Termination of Service shall be deemed to be on account of "Retirement". With
respect to a Nonemployee Director, "Retirement" means termination of service on
the Board at or after age 65.
2.40 "Return on Designated Assets" means as to any Fiscal
Year, the Pro Forma Net Income of a business unit, divided by the average of
beginning and ending business unit designated assets, or Net Income of the
Company, divided by the average of beginning and ending designated corporate
assets.
2.41 "Return on Sales" means as to any Fiscal Year, the
percentage equal to the Company's Net Income or the business unit's Pro Forma
Net Income, divided by the Company's or the business unit's Annual Revenue.
2.42 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934
Act, and any future regulation amending, supplementing or superseding such
regulation.
2.43 "Section 16 Person" means a person who, with respect to
the Shares, is subject to section 16 of the 1934 Act.
2.44 "Shares" means the shares of common stock of the Company.
2.45 "Stock Appreciation Right" or "SAR" means an Award,
granted alone or in connection with a related Option, that pursuant to Section 7
is designated as an SAR.
2.46 "Subsidiary" means any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2.47 "Tandem SAR" means an SAR that is granted in connection
with a related Option, the exercise of which shall require forfeiture of the
right to purchase an equal number of Shares under the related Option (and when a
Share is purchased under the Option, the SAR shall be canceled to the same
extent).
-4-
5
2.48 "Termination of Service" means (a) in the case of an
Employee, a cessation of the employee-employer relationship between an employee
and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability,
Retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Company or an
Affiliate; and (b) in the case of a Consultant, a cessation of the service
relationship between a Consultant and the Company or an Affiliate for any
reason, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, or the disaffiliation of an Affiliate, but
excluding any such termination where there is a simultaneous re-engagement of
the consultant by the Company or an Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the
Committee. The Committee shall consist of not less than two (2) Directors. The
members of the Committee shall be appointed from time to time by, and shall
serve at the pleasure of, the Board of Directors. The Committee shall be
comprised solely of Directors who both are (a) "disinterested persons" under
Rule 16b-3, and (b) "outside directors" under section 162(m) of the Code.
3.2 Authority of the Committee. It shall be the duty of the
Committee to administer the Plan in accordance with the Plan's provisions. The
Committee shall have all powers and discretion necessary or appropriate to
administer the Plan and to control its operation, including, but not limited to,
the power to (a) determine which Employees and Consultants shall be granted
Awards, (b) prescribe the terms and conditions of the Awards (other than the
Options granted to Nonemployee Directors pursuant to Section 9), (c) interpret
the Plan and the Awards, (d) adopt such procedures and subplans as are necessary
or appropriate to permit participation in the Plan by Employees, Consultants and
Directors who are foreign nationals or employed outside of the United States,
(e) adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith, and (f) interpret, amend or revoke any such
rules.
3.3 Delegation by the Committee. The Committee, in its sole
discretion and on such terms and conditions as it may provide, may delegate all
or any part of its authority and powers under the Plan to one or more directors
or officers of the Company; provided, however, that the Committee may not
delegate its authority and powers (a) with respect to Section 16 Persons, or (b)
in any way which would jeopardize the Plan's qualification under section 162(m)
of the Code or Rule 16b-3.
3.4 Nonemployee Director Options. Notwithstanding any contrary
provision of this Section 3, the Board shall administer Section 9 of the Plan,
and the Committee shall exercise no discretion with respect to Section 9. In the
Board's administration of Section 9 and the Options granted to Nonemployee
Directors, the Board shall have all of the authority and discretion otherwise
granted to the Committee with respect to the administration of the Plan.
3.5 Decisions Binding. All determinations and decisions made
by the Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
-5-
6
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in
Section 4.3, the total number of Shares available for grant under the Plan shall
not exceed 6,300,000. Shares granted under the Plan may be either authorized but
unissued Shares or treasury Shares.
4.2 Lapsed Awards. If an Award is settled in cash, or is
cancelled, terminates, expires, or lapses for any reason (with the exception of
the termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available to be the subject of
an Award.
4.3 Adjustments in Awards and Authorized Shares. In the event
of any merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other change in the
corporate structure of the Company affecting the Shares, the Committee shall
adjust the number and class of Shares which may be delivered under the Plan, the
number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 5.1, 6.1, 7.1, and 8.1, in such manner as the
Committee (in its sole discretion) shall determine to be appropriate to prevent
the dilution or diminution of such Awards. In the case of Options granted to
Nonemployee Directors pursuant to Section 9, the foregoing adjustments shall be
made by the Board, and any such adjustments also shall apply to the future
grants provided by Section 9. Notwithstanding the preceding, the number of
Shares subject to any Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of
the Plan, Options may be granted to Employees and Consultants at any time and
from time to time as determined by the Committee in its sole discretion. The
Committee, in its sole discretion, shall determine the number of Shares subject
to each Option, provided that during any Fiscal Year, no Participant shall be
granted Options covering more than 350,000 Shares. The Committee may grant
Incentive Stock Options, Nonqualified Stock Options, or a combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an
Award Agreement that shall specify the Exercise Price, the expiration date of
the Option, the number of Shares to which the Option pertains, any conditions to
exercise of the Option, and such other terms and conditions as the Committee, in
its discretion, shall determine. The Award Agreement shall also specify whether
the Option is intended to be an Incentive Stock Option or a Nonqualified Stock
Option.
5.3 Exercise Price. Subject to the provisions of this
Section 5.3, the Exercise Price for each Option shall be determined by the
Committee in its sole discretion.
5.3.1 Nonqualified Stock Options. In the case of a Non-
qualified Stock Option, the Exercise Price shall be not less than one hundred
percent (100%) of the Fair Market Value of a Share on the Grant Date.
-6-
7
5.3.2 Incentive Stock Options. In the case of an Incentive
Stock Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; provided, however,
that if on the Grant Date, the Employee (together with persons whose stock
ownership is attributed to the Employee pursuant to section 424(d) of the Code)
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the Exercise Price
shall be not less than one hundred and ten percent (110%) of the Fair Market
Value of a Share on the Grant Date.
5.3.3 Substitute Options. Notwithstanding the provisions
of Sections 5.3.1 and 5.3.2, in the event that the Company or an Affiliate
consummates a transaction described in section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons who
become Employees or Consultants on account of such transaction may be granted
Options in substitution for options granted by their former employer. If such
substitute Options are granted, the Committee, in its sole discretion and
consistent with section 424(a) of the Code, may determine that such substitute
Options shall have an exercise price less than one hundred (100%) of the Fair
Market Value of the Shares on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate no
later than the first to occur of the following events:
(a) The date for termination of the Option set forth in
the written Award Agreement; or
(b) The expiration of ten (10) years from the Grant Date;
or
(c) The expiration of one (1) year from the date of the
Optionee's Termination of Service for a reason other than the
Optionee's death, Disability or Retirement; or
(d) The expiration of three (3) years from the date of the
Optionee's Termination of Service by reason of Disability; or
(e) The expiration of three (3) years from the date of the
Optionee's Retirement (except as provided in Section 5.8.2 regarding
Incentive Stock Options).
5.4.2 Death of Optionee. Notwithstanding Section 5.4.1, if
an Optionee dies prior to the expiration of his or her options, the Committee,
in its discretion, may provide that his or her options shall be exercisable for
up to three (3) years after the date of death.
5.4.3 Committee Discretion. Subject to the limits of
Sections 5.4.1 and 5.4.2, the Committee, in its sole discretion, (a) shall
provide in each Award Agreement when each Option expires and becomes
unexercisable, and (b) may, after an Option is granted, extend the maximum term
of the Option (subject to Section 5.8.4 regarding Incentive Stock Options).
5.5 Exercisability of Options. Options granted under the
Plan shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall determine in its sole discretion. After an
Option is granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. However, in no event may any Option granted to a
Section 16 Person be exercisable until at least six (6) months following the
Grant Date (or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3).
-7-
8
5.6 Payment. Options shall be exercised by the Participant's
delivery of a written notice of exercise to the Secretary of the Company (or its
designee), setting forth the number of Shares with respect to which the Option
is to be exercised, accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be
payable to the Company in full in cash or its equivalent. The Committee, in its
sole discretion, also may permit exercise (a) by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal to
the total Exercise Price, or (b) by any other means which the Committee, in its
sole discretion, determines to both provide legal consideration for the Shares,
and to be consistent with the purposes of the Plan.
As soon as practicable after receipt of a written notification
of exercise and full payment for the Shares purchased, the Company shall deliver
to the Participant (or the Participant's designated broker), Share certificates
(which may be in book entry form) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, but not limited to, restrictions
related to applicable Federal securities laws, the requirements of any national
securities exchange or system upon which Shares are then listed or traded, or
any blue sky or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Exercisability. The aggregate Fair Market Value
(determined on the Grant Date(s)) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000.
5.8.2 Termination of Service. No Incentive Stock Option
may be exercised more than three (3) months after the Participant's Termination
of Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award Agreement or
the Committee permits later exercise. No Incentive Stock Option may be exercised
more than one (1) year after the Participant's termination of employment on
account of Disability, unless (a) the Participant dies during such one-year
period, and (b) the Award Agreement or the Committee permit later exercise.
5.8.3 Company and Subsidiaries Only. Incentive Stock
Options may be granted only to persons who are employees of the Company or a
Subsidiary on the Grant Date.
5.8.4 Expiration. No Incentive Stock Option may be
exercised after the expiration of ten (10) years from the Grant Date; provided,
however, that if the Option is granted to an Employee who, together with persons
whose stock ownership is attributed to the Employee pursuant to section 424(d)
of the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of the stock of the Company or any of its Subsidiaries, the
Option may not be exercised after the expiration of five (5) years from the
Grant Date.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of the
Plan, an SAR may be granted to Employees and Consultants at any time and from
time to time as shall be determined by the Committee, in its sole discretion.
The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any
combination thereof.
-8-
9
6.1.1 Number of Shares. The Committee shall have complete
discretion to determine the number of SARs granted to any Participant, provided
that during any Fiscal Year, no Participant shall be granted SARs covering more
than 350,000 Shares.
6.1.2 Exercise Price and Other Terms. The Committee,
subject to the provisions of the Plan, shall have complete discretion to
determine the terms and conditions of SARs granted under the Plan. However, the
exercise price of a Freestanding SAR shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date. The exercise price
of Tandem or Affiliated SARs shall equal the Exercise Price of the related
Option. In no event shall an SAR granted to a Section 16 Person become
exercisable until at least six (6) months after the Grant Date (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3).
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for
all or part of the Shares subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related Option. A Tandem SAR
may be exercised only with respect to the Shares for which its related Option is
then exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be
deemed to be exercised upon the exercise of the related Option. The deemed
exercise of an Affiliated SAR shall not necessitate a reduction in the number of
Shares subject to the related Option.
6.4 Exercise of Freestanding SARs. Freestanding SARs shall be
exercisable on such terms and conditions as the Committee, in its sole
discretion, shall determine. However, no SAR granted to a Section 16 Person
shall be exercisable until at least six (6) months after the Grant Date (or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3).
6.5 SAR Agreement. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.
6.6 Expiration of SARs. An SAR granted under the Plan shall
expire upon the date determined by the Committee, in its sole discretion, and
set forth in the Award Agreement. Notwithstanding the foregoing, the rules of
Section 5.4 also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of an SAR, a
Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying:
(a) The difference between the Fair Market Value of a Share on
the date of exercise over the exercise price; times
(b) The number of Shares with respect to which the SAR is
exercised.
-9-
10
At the discretion of the Committee, the payment upon SAR
exercise may be in cash, in Shares of equivalent value, or in some combination
thereof.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock to Employees and Consultants in such amounts as
the Committee, in its sole discretion, shall determine. The Committee, in its
sole discretion, shall determine the number of Shares to be granted to each
Participant, provided that during any Fiscal Year, no Participant shall receive
more than 175,000 Shares of Restricted Stock.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock
shall be evidenced by an Award Agreement that shall specify the Period of
Restriction, the number of Shares granted, and such other terms and conditions
as the Committee, in its sole discretion, shall determine. Unless the Committee
determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.
7.3 Transferability. Except as provided in this Section 7,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction. However, in no event may the restrictions on Restricted Stock
granted to a Section 16 Person lapse prior to six (6) months following the Grant
Date (or such shorter period as may be permissible while maintaining compliance
with Rule 16b-3).
7.4 Other Restrictions. The Committee, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate, in accordance with this Section 7.4.
7.4.1 General Restrictions. The Committee may set
restrictions based upon the achievement of specific performance objectives
(Company-wide, divisional, or individual), applicable Federal or state
securities laws, or any other basis determined by the Committee in its
discretion.
7.4.2 Section 162(m) Performance Restrictions. For
purposes of qualifying grants of Restricted Stock as "performance-based
compensation" under section 162(m) of the Code, the Committee, in its
discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals shall be set by the Committee on or before the
latest date permissible to enable the Restricted Stock to qualify as
"performance-based compensation" under section 162(m) of the Code. In granting
Restricted Stock which is intended to qualify under Code section 162(m), the
Committee shall follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Restricted Stock under
Code section 162(m) (e.g., in determining the Performance Goals).
7.4.3 Legend on Certificates. The Committee, in its
discretion, may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. For example, the Committee may
determine that some or all certificates representing Shares of Restricted Stock
shall bear the following legend:
"The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary,
involuntary, or by operation of law, is subject to certain
restrictions on transfer as set forth in the Applied
Materials, Inc. 1995 Equity Incentive Plan, and in a
Restricted Stock Agreement. A copy of the Plan and such
Restricted
-10-
11
Stock Agreement may be obtained from the Secretary
of Applied Materials, Inc."
7.5 Removal of Restrictions. Except as otherwise provided in
this Section 7, Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall be released from escrow as soon as practicable
after the last day of the Period of Restriction. The Committee, in its
discretion, may accelerate the time at which any restrictions shall lapse, and
remove any restrictions; provided, however, that the Period of Restriction on
Shares granted to a Section 16 Person may not lapse until at least six (6)
months after the Grant Date (or such shorter period as may be permissible while
maintaining compliance with Rule 16b-3). After the restrictions have lapsed, the
Participant shall be entitled to have any legend or legends under Section 7.4.3
removed from his or her Share certificate, and the Shares shall be freely
transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Committee determines
otherwise.
7.7 Dividends and Other Distributions. During the Period of
Restriction, Participants holding Shares of Restricted Stock shall be entitled
to receive all dividends and other distributions paid with respect to such
Shares unless otherwise provided in the Award Agreement. If any such dividends
or distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
With respect to Restricted Stock granted to a Section 16
Person, any dividend or distribution that constitutes a "derivative security" or
an "equity security" under section 16 of the 1934 Act shall be subject to a
Period of Restriction equal to the longer of: (a) the remaining Period of
Restriction on the Shares of Restricted Stock with respect to which the dividend
or distribution is paid; or (b) six (6) months.
7.8 Return of Restricted Stock to Company. On the date set
forth in the Award Agreement, the Restricted Stock for which restrictions have
not lapsed shall revert to the Company and again shall become available for
grant under the Plan.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and
Performance Shares may be granted to Employees and Consultants at any time and
from time to time, as shall be determined by the Committee, in its sole
discretion. The Committee shall have complete discretion in determining the
number of Performance Units and Performance Shares granted to each Participant
provided that during any Fiscal Year, (a) no Participant shall receive
Performance Units having an initial value greater than $3,000,000, and (b) no
Participant shall receive more than 175,000 Performance Shares.
8.2 Value of Performance Units/Shares. Each Performance Unit
shall have an initial value that is established by the Committee on or before
the Grant Date. Each Performance Share shall have an initial value equal to the
Fair Market Value of a Share on the Grant Date.
-11-
12
8.3 Performance Objectives and Other Terms. The Committee
shall set performance objectives in its discretion which, depending on the
extent to which they are met, will determine the number or value of Performance
Units/Shares that will be paid out to the Participants. The time period during
which the performance objectives must be met shall be called the "Performance
Period". Performance Periods of Awards granted to Section 16 Persons shall, in
all cases, exceed six (6) months in length (or such shorter period as may be
permissible while maintaining compliance with Rule 16b-3). Each Award of
Performance Units/Shares shall be evidenced by an Award Agreement that shall
specify the Performance Period, and such other terms and conditions as the
Committee, in its sole discretion, shall determine.
8.3.1 General Performance Objectives. The Committee may
set performance objectives based upon the achievement of Company-wide,
divisional, or individual goals, applicable Federal or state securities laws, or
any other basis determined by the Committee in its discretion.
8.3.2 Section 162(m) Performance Objectives. For purposes
of qualifying grants of Performance Units/Shares as "performance-based
compensation" under section 162(m) of the Code, the Committee, in its
discretion, may determine that the performance objectives applicable to
Performance Units/Shares shall be based on the achievement of Performance Goals.
The Performance Goals shall be set by the Committee on or before the latest date
permissible to enable the Performance Units/Shares to qualify as
"performance-based compensation" under section 162(m) of the Code. In granting
Performance Units/Shares which are intended to qualify under Code section
162(m), the Committee shall follow any procedures determined by it from time to
time to be necessary or appropriate to ensure qualification of the Performance
Units/Shares under Code section 162(m) (e.g., in determining the Performance
Goals).
8.4 Earning of Performance Units/Shares. After the applicable
Performance Period has ended, the holder of Performance Units/Shares shall be
entitled to receive a payout of the number of Performance Units/Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance objectives have been achieved.
After the grant of a Performance Unit/Share, the Committee, in its sole
discretion, may reduce or waive any performance objectives for such Performance
Unit/Share; provided, however, that Performance Periods of Awards granted to
Section 16 Persons shall not be less than six (6) months (or such shorter period
as may be permissible while maintaining compliance with Rule 16b-3).
8.5 Form and Timing of Payment of Performance Units/Shares.
Payment of earned Performance Units/Shares shall be made as soon as practicable
after the expiration of the applicable Performance Period. The Committee, in its
sole discretion, may pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.
8.6 Cancellation of Performance Units/Shares. On the date set
forth in the Award Agreement, all unearned or unvested Performance Units/Shares
shall be forfeited to the Company, and again shall be available for grant under
the Plan.
SECTION 9
NONEMPLOYEE DIRECTOR OPTIONS
The provisions of this Section 9 are applicable only to
Options granted to Nonemployee Directors. The provisions of Section 5 are
applicable to Options granted to Employees and Consultants (and to the extent
provided in Section 9.2.7, to Nonemployee Director Options).
-12-
13
9.1 Granting of Options.
9.1.1 Initial Grants. Each Nonemployee Director who first
becomes a Nonemployee Director on or after the effective date of this Plan,
automatically shall receive, as of the date that the individual first is
appointed or elected as a Nonemployee Director, an Option to purchase 20,000
Shares.
9.1.2 Ongoing Grants. Each Nonemployee Director who both
(a) is a Nonemployee Director on the last business day of a Fiscal Year, and (b)
has served as a Nonemployee Director for the entire Fiscal Year which includes
such last business day, automatically shall receive, as of such last business
day only, an Option to purchase 6,000 Shares.
9.2 Terms of Options.
9.2.1 Option Agreement. Each Option granted pursuant to
this Section 9 shall be evidenced by a written stock option agreement which
shall be executed by the Optionee and the Company.
9.2.2 Exercise Price. The Exercise Price for the Shares
subject to each Option granted pursuant to this Section 9 shall be 100% of the
Fair Market Value of such Shares on the Grant Date.
9.2.3 Exercisability. Each Option granted pursuant to
Section 9.1.1 shall become exercisable as to 6,000 Shares on the first
anniversary of the Grant Date, as to an additional 5,500 Shares on the second
anniversary of the Grant Date, as to an additional 5,000 Shares on the third
anniversary of the Grant Date, and as to the remaining 3,500 Shares on the
fourth anniversary of the Grant Date. Each Option granted pursuant to Section
9.1.2 shall become exercisable as to 1,500 Shares on the first anniversary of
the Grant Date, and as to an additional 1,500 Shares on each succeeding
anniversary until 100% of the Shares subject to such Option have become
exercisable. Notwithstanding the preceding, once an Optionee ceases to be a
Director, his or her Options which are not exercisable shall not become
exercisable.
9.2.4 Expiration of Options. Each Option shall terminate
upon the first to occur of the following events:
(a) The expiration of five (5) years from the Grant Date;
or
(b) The expiration of seven (7) months from the date of
the Optionee's termination of service as a Director for any reason
other than the Optionee's death, Disability or Retirement; or
(c) The expiration of one (1) year from the date of the
Optionee's termination of service by reason of Disability or
Retirement.
9.2.5 Death of Director. Notwithstanding Section 9.2.4, if
a Director dies prior to the expiration of his or her options in accordance with
Section 9.2.4, his or her options shall terminate one (1) year after the date of
his or her death.
9.2.6 Not Incentive Stock Options. Options granted
pursuant to this Section 9 shall not be designated as Incentive Stock Options.
-13-
14
9.2.7 Other Terms. All provisions of the Plan not
inconsistent with this Section 9 shall apply to Options granted to Nonemployee
Directors; provided, however, that Section 5.2 (relating to the Committee's
discretion to set the terms and conditions of Options) shall be inapplicable
with respect to Nonemployee Directors.
SECTION 10
MISCELLANEOUS
10.1 Deferrals. The Committee, in its sole discretion, may
permit a Participant to defer receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award. Any such
deferral elections shall be subject to such rules and procedures as shall be
determined by the Committee in its sole discretion.
10.2 No Effect on Employment or Service. Nothing in the Plan
shall interfere with or limit in any way the right of the Company to terminate
any Participant's employment or service at any time, with or without cause. For
purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a Termination of Service. Employment with the Company and its Affiliates
is on an at-will basis only.
10.3 Participation. No Employee or Consultant shall have the
right to be selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
10.4 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and held harmless
by the Company against and from (a) any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
10.5 Successors. All obligations of the Company under the
Plan, with respect to Awards granted hereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business or assets of the Company.
10.6 Beneficiary Designations. If permitted by the Committee,
a Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of the Plan and of the applicable Award Agreement, any
unexercised vested Award may be exercised by the administrator or executor of
the Participant's estate.
-14-
15
10.7 Nontransferability of Awards. No Award granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will, by the laws of descent and distribution, or to
the limited extent provided in Section 10.6. All rights with respect to an Award
granted to a Participant shall be available during his or her lifetime only to
the Participant.
10.8 No Rights as Stockholder. Except to the limited extent
provided in Sections 7.6 and 7.7, no Participant (nor any beneficiary) shall
have any of the rights or privileges of a stockholder of the Company with
respect to any Shares issuable pursuant to an Award (or exercise thereof),
unless and until certificates representing such Shares shall have been issued,
recorded on the records of the Company or its transfer agents or registrars, and
delivered to the Participant (or beneficiary).
SECTION 11
AMENDMENT, TERMINATION, AND DURATION
11.1 Amendment, Suspension, or Termination. The Board, in its
sole discretion, may amend or terminate the Plan, or any part thereof, at any
time and for any reason. However, if and to the extent required to maintain the
Plan's qualification under Rule 16b-3, any such amendment shall be subject to
stockholder approval. In addition, as required by Rule 16b-3, the provisions of
Section 9 regarding the formula for determining the amount, exercise price, and
timing of Nonemployee Director Options shall in no event be amended more than
once every six (6) months, other than to comport with changes in the Code or
ERISA. (ERISA is inapplicable to the Plan.) The amendment, suspension, or
termination of the Plan shall not, without the consent of the Participant, alter
or impair any rights or obligations under any Award theretofore granted to such
Participant. No Award may be granted during any period of suspension or after
termination of the Plan.
11.2 Duration of the Plan. The Plan shall commence on the date
specified herein, and subject to Section 11.1 (regarding the Board's right to
amend or terminate the Plan), shall remain in effect thereafter. However,
without further stockholder approval, no Incentive Stock Option may be granted
under the Plan after December 6, 2004.
SECTION 12
TAX WITHHOLDING
12.1 Withholding Requirements. Prior to the delivery of any
Shares or cash pursuant to an Award (or exercise thereof), the Company shall
have the power and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy Federal, state, and local
taxes (including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).
12.2 Withholding Arrangements. The Committee, in its sole
discretion and pursuant to such procedures as it may specify from time to time,
may permit a Participant to satisfy such tax withholding obligation, in whole or
in part by (a) electing to have the Company withhold otherwise deliverable
Shares, or (b) delivering to the Company already-owned shares having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount which the
Committee agrees may be withheld at the time the election is made, not to exceed
the amount determined by using the maximum federal, state or local marginal
income tax rates applicable to the Participant with respect to the Award on the
date that the amount of tax to be withheld is to be determined. The Fair Market
Value of the Shares to be withheld or delivered shall be determined as of the
date that the taxes are required to be withheld.
-15-
16
SECTION 13
LEGAL CONSTRUCTION
13.1 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the plural.
13.2 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
13.3 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
13.4 Securities Law Compliance. With respect to Section 16
Persons, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan, Award
Agreement or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.5 Governing Law. The Plan and all Award Agreements
shall be construed in accordance with and governed by the laws of the State of
California.
13.6 Captions. Captions are provided herein for
convenience only, and shall not serve as a basis for interpretation or
construction of the Plan.
EXECUTION
IN WITNESS WHEREOF, Applied Materials, Inc., by its duly
authorized officer, has executed the Plan on the date indicated below.
APPLIED MATERIALS, INC.
Dated: April 5, 1995 By: /s/ Donald A. Slichter
-------------------------
Name: Donald A. Slichter
Title: Secretary
-16-