8-KMaterial AgreementsExhibits & Filings

KLA CORP 8-K Report, Material Agreement (Sep 20, 2006)

Filed September 20, 2006For Securities:KLAC

Summary

KLA-Tencor Corporation (KLAC) announced on September 19, 2006, that its Compensation Committee approved awards of restricted stock units (RSUs) to employees, including executive officers, under its 2004 Equity Incentive Plan. A total of 2,530,689 shares were covered by these awards, with a specific note that for each share issued under these RSUs, the share reserve under the plan will be reduced by 1.8 shares. This announcement is significant as it pertains to executive compensation and potential dilution for shareholders. The awards to executive officers, including the CEO, President, and CFO, are subject to a dual vesting structure: performance-based vesting tied to the company's fiscal year 2007 operating income, and a service-based vesting over four years. This structure links executive compensation directly to company performance and continued employment, which investors often view favorably as it aligns executive interests with shareholder value.

Key Highlights

  • 1KLA-Tencor Corporation approved awards of restricted stock units (RSUs) totaling 2,530,689 shares to employees, including executive officers.
  • 2The RSUs are granted under the Company's 2004 Equity Incentive Plan.
  • 3A key feature of the plan is that for each share issued from these RSUs, the plan's share reserve will be reduced by 1.8 shares, indicating a potential dilution factor.
  • 4Executive officers Richard P. Wallace (CEO) and John H. Kispert (President) were each awarded a maximum of 62,500 RSUs.
  • 5Jeffrey L. Hall (CFO) was awarded a maximum of 18,750 RSUs.
  • 6Vesting for executive officers is contingent on both achieving performance goals related to fiscal year 2007 operating income and completing a four-year service period.
  • 7Performance vesting ranges from 0% to 100% of the awarded units based on attainment of the fiscal year 2007 operating income goal, with service vesting occurring in two 50% installments over four years.

Frequently Asked Questions

The primary purpose of this 8-K filing is to disclose the company's entry into a material definitive agreement regarding the award of restricted stock units to employees, including executive officers, as part of their compensation structure.

For every share of common stock that is ultimately issued under these restricted stock unit awards, the company's share reserve under the 2004 Equity Incentive Plan will be reduced by 1.8 shares. This implies a more significant impact on the share reserve than a 1:1 issuance.

Executive officers' restricted stock units vest based on a combination of factors. First, a performance goal tied to the company's operating income for fiscal year 2007 must be met. The number of units earned will range from 0 to the maximum awarded, depending on the attainment of this performance goal. Second, service vesting requires the executive to remain employed with the company for a four-year period, with 50% vesting after two years and the remaining 50% vesting after an additional two years.

Tying a portion of the executive compensation to fiscal year 2007 operating income signals management's focus on profitability and operational efficiency in the near future. Investors will likely monitor the company's performance against this target to assess how well the executive team is aligned with shareholder interests in driving financial results.