8-KLeadership ChangesMaterial AgreementsFinancial Events

APPLIED MATERIALS INC /DE 8-K Report, Material Agreement (Jan 29, 2007)

Filed January 29, 2007For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) filed an 8-K on January 29, 2007, reporting on two primary events. First, the company entered into a significant $1 billion, five-year unsecured credit agreement with Citicorp as Administrative Agent and The Bank of Tokyo-Mitsubishi UFJ, Ltd. as Syndication Agent. This new facility replaces a previously announced $100 million, 364-day credit agreement and is intended for general corporate purposes. The agreement includes customary covenants and requires the maintenance of a funded-debt-to-adjusted-earnings ratio. Second, the filing details the approved performance goals and bonus formulas for the company's Senior Executive Bonus Plan for fiscal year 2007. The goals are tied to metrics such as earnings per share, revenue growth relative to competitors, and strategic objectives. Additionally, the company announced new performance-based equity awards granted to its named executive officers, which are contingent upon achieving specific annual operating profit targets relative to a peer group of over twenty high-technology companies. These equity awards have a four-year vesting period and are also subject to forfeiture if performance targets are not met.

Key Highlights

  • 1Entered into a $1 billion, five-year unsecured credit agreement, replacing a smaller, shorter-term facility.
  • 2The new credit facility is intended for general corporate purposes.
  • 3The credit agreement includes customary affirmative and negative covenants, and requires maintaining a funded-debt-to-adjusted-earnings ratio.
  • 4Approved fiscal year 2007 performance goals for the Senior Executive Bonus Plan, focusing on EPS, revenue growth, and strategic goals.
  • 5Granted performance-based equity awards to named executive officers, contingent on achieving specific operating profit targets relative to peers.
  • 6Equity awards have a four-year vesting schedule and are subject to forfeiture if performance goals are not met.
  • 7No advances were drawn under the new credit agreement as of the filing date.

Frequently Asked Questions

The new $1 billion, five-year credit agreement is intended by Applied Materials, Inc. for general corporate purposes.

The new credit agreement replaces a $100 million, 364-day credit agreement that was entered into on September 14, 2006. No advances had been drawn under the older agreement.

For the fiscal year 2007 bonus plan, key metrics include earnings per share, relative revenue growth compared to competitors, and strategic goals. The performance-based equity awards are primarily tied to Applied Materials' annual operating profit performance relative to a defined peer group of high-technology companies.

Bonuses are contingent on achieving specific performance goals and a specified level of profit after tax. Equity awards will only vest if specific operating profit performance targets are met relative to the peer group over a four-year period, and the executive remains employed through the vesting date. Failure to meet performance targets can lead to forfeiture of equity awards.