8-KLeadership Changes

APPLIED MATERIALS INC /DE 8-K Report, Executive Changes (Dec 21, 2006)

Filed December 21, 2006For Securities:AMAT

Summary

This Form 8-K filing from Applied Materials, Inc. (AMAT) on December 21, 2006, details the formal separation agreement with Senior Vice President, Finance, Nancy H. Handel, whose retirement was previously announced for January 5, 2007. The agreement outlines her continued employment through retirement, consulting services post-retirement, and various compensation and benefits. Key financial implications for investors include the severance payments totaling $1,375,000 (paid in two installments), a lump sum bonus payment of $692,010, and specific terms for accelerated vesting of stock options. Ms. Handel will also provide consulting services for a year post-retirement, ensuring a smoother transition for her former responsibilities. These details are important for understanding executive compensation and potential one-time charges related to executive departures.

Key Highlights

  • 1Formal separation agreement signed with Nancy H. Handel, Senior Vice President, Finance, effective upon retirement on January 5, 2007.
  • 2Ms. Handel to receive two payments of $687,500 each, totaling $1,375,000, contingent upon continued service through January 5, 2007.
  • 3A lump sum payment of $692,010 will be made to Ms. Handel, representing her earned amount under the Senior Executive Bonus Plan.
  • 4Ms. Handel will provide consulting services for up to five days per month from January 6, 2007, to January 6, 2008, for a fee of $10,000 per month.
  • 5Significant acceleration of stock option vesting is provided for Ms. Handel, with 100% vesting on options that would have vested by January 31, 2008, and 50% vesting on options that would have vested between February 1, 2008, and January 31, 2009.
  • 6Outstanding stock options will remain exercisable until the earlier of their maximum term or December 31, 2007.
  • 7The agreement includes standard provisions such as a general release in favor of Applied Materials, confidentiality, and non-disparagement obligations.

Frequently Asked Questions

The direct payments related to Ms. Handel's separation include $1,375,000 in payments tied to her continued service through January 5, 2007, and a $692,010 lump sum bonus payment. Additionally, there is a consulting fee of $10,000 per month for one year post-retirement, totaling $120,000. The accelerated vesting of stock options also represents a potential dilution or cost to the company.

Ms. Handel will receive accelerated vesting on her outstanding stock options as if she had retired at age 60 with her current years of service. Specifically, 100% of options that would have vested by January 31, 2008, will vest immediately, and 50% of options that would have vested between February 1, 2008, and January 31, 2009, will also vest immediately. This allows her to exercise a substantial portion of her granted options sooner than originally scheduled.

Following her retirement on January 5, 2007, Ms. Handel will provide consulting services to Applied Materials for up to five days per month during the period from January 6, 2007, through January 6, 2008. She will receive a monthly fee of $10,000 for these services, which will facilitate the transition of her duties and responsibilities.

Yes, the payments totaling $1,375,000 are contingent upon Ms. Handel continuing to provide the requested services through her retirement date of January 5, 2007. The agreement also requires that she does not revoke her consent to the separation agreement within seven days of December 15, 2006.