8-KLeadership ChangesMaterial AgreementsOther Events+1

KLA CORP 8-K Report, Agreement Terminated (Oct 18, 2006)

Filed October 18, 2006For Securities:KLAC

Summary

KLA Corporation (KLAC) filed an 8-K on October 18, 2006, detailing significant executive changes and the near completion of its investigation into historical stock option practices. The company terminated its employment relationship with former CEO Kenneth L. Schroeder and intends to cancel his improperly granted stock options. General Counsel Stuart J. Nichols resigned, and his retroactively priced options will be re-priced. Founder and Chairman Kenneth Levy retired from his director and employee roles, and his options will also be re-priced. The company's Special Committee investigation is substantially complete, with an expected total additional non-cash charge for stock-based compensation not to exceed $400 million. Importantly, the Board concluded that current senior management, including the CEO, COO, and CFO appointed in early 2006, were not involved in the improper practices. The company is working to restate its financial statements and expects to file its delayed 2006 10-K soon.

Key Highlights

  • 1Termination of Kenneth L. Schroeder, former CEO and Director, due to stock option practices investigation.
  • 2Resignation of Stuart J. Nichols, General Counsel, effective immediately.
  • 3Retirement of Kenneth Levy, Founder and Chairman, effective immediately; named Chairman Emeritus.
  • 4Edward W. Barnholt appointed as Chairman of the Board.
  • 5Total additional non-cash charges for stock-based compensation expected not to exceed $400 million.
  • 6Current senior management (CEO, COO, CFO) cleared of involvement in improper stock option practices.
  • 7Company working to restate financial statements and expects to file delayed Annual Report on Form 10-K.

Frequently Asked Questions

The company is conducting an investigation into its historical stock option practices. As a result, former CEO Kenneth L. Schroeder's employment was terminated, General Counsel Stuart J. Nichols resigned, and Founder & Chairman Kenneth Levy retired. These actions are related to the findings and recommendations from the Special Committee's investigation into these practices.

The company expects that the total additional non-cash charges for stock-based compensation expenses resulting from the investigation will not exceed $400 million. The company is in the process of restating its financial statements to reflect these charges.

No, the Board of Directors concluded that current members of Company management, including Richard P. Wallace (CEO), John H. Kispert (COO), and Jeffrey L. Hall (CFO), who took their positions in early 2006, were not involved in the improper stock option practices. However, Mr. Kispert's retroactively priced options will be re-priced as he served as CFO during part of the period in question.

KLA Corporation is currently in the process of restating its affected financial statements due to the stock option investigation. The company anticipates filing its Annual Report on Form 10-K for the fiscal year ended June 30, 2006, and other required reports as soon as practicable.