What is the main reason for the amendments to the KLA-Tencor Executive Severance Plan?

The primary reason for the amendments is to ensure the Severance Plan is in documentary compliance with Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation plans. These changes are intended to avoid adverse tax consequences for participants and facilitate the plan's administration in accordance with regulatory requirements.

How do the changes to the Severance Plan affect executive compensation and benefits?

The changes focus on regulatory compliance and administrative clarity. While certain definitions and payment timing mechanisms for "Specified Employees" have been altered to comply with Section 409A, the amendments state that these changes do not materially alter the benefits payable or other key terms under the Severance Plan. The goal is to maintain compliance and operational efficiency rather than to fundamentally change benefit structures.

What are the implications of the changes to the equity award grant procedures?

The changes clarify the roles of the Compensation Committee and the Board of Directors in approving equity awards. The Compensation Committee has sole authority for most executive officers, with the Board's independent members retaining exclusive authority for the CEO. This streamlines the process, with the Board now receiving formal notification rather than direct approval for executive awards, except for the CEO.

Are there any new forms of equity agreements being introduced?

Yes, KLA-Tencor approved three separate forms of restricted stock unit agreements for use under its 2004 Equity Incentive Plan, effective immediately. These new forms are tailored for employees in the United States, France, and all other international jurisdictions, ensuring compliance with local regulations and practices.

KLAC 8-K: Leadership Changes

Summary

KLA-Tencor Corporation (KLAC) filed an 8-K on November 17, 2008, detailing significant amendments to its Executive Severance Plan and changes to its equity award grant procedures. The primary focus of the severance plan amendment was to ensure compliance with Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation. Key changes include revised definitions of "Employee" and "Good Reason," the introduction of "Separation from Service" and "Specified Employee" terms, and modifications to payment timing for "Specified Employees" to avoid prohibited distributions. In addition, the company's Board of Directors approved new forms of restricted stock unit agreements for its 2004 Equity Incentive Plan, effective immediately, tailored for U.S., French, and other international employees. Furthermore, the Compensation Committee's authority regarding equity grants was clarified, with the committee retaining sole authority for stock options and restricted stock awards to most executive officers, while the independent Board members retain sole authority for the CEO's equity awards. These changes aim to enhance clarity, ensure regulatory compliance, and refine executive compensation and severance practices.

Key Highlights

1KLA-Tencor amended its Executive Severance Plan to comply with Section 409A of the Internal Revenue Code, impacting deferred compensation rules for executives.
2Key definitions within the Severance Plan were updated, including "Employee," "Employer Group," "Good Reason," "Separation from Service," and "Specified Employee" to align with Section 409A requirements.
3The amended Severance Plan introduces specific payment delay provisions for "Specified Employees" to comply with Section 409A, deferring payments until at least six months post-separation from service, with certain exceptions.
4Three new forms of Restricted Stock Unit Agreements were approved for the 2004 Equity Incentive Plan, effective immediately, customized for U.S., French, and other international employees.
5The Compensation Committee's authority for granting equity awards was clarified; it retains sole authority for most executive officers, while the Board's independent members retain sole authority for the CEO's equity awards.
6The Board of Directors will now only receive formal notification of equity awards approved by the Compensation Committee for executive officers, rather than directly approving them.
7Administrative procedures for severance payments were refined for clarity and timeliness, ensuring the first payment is made within 60 days of separation from service.

KLA CORP 8-K Report, Executive Changes (Nov 17, 2008)

Summary

Key Highlights

Frequently Asked Questions