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LAM RESEARCH CORP 8-K Report, Material Agreement (Apr 3, 2008)

Filed April 3, 2008For Securities:LRCX

Summary

Lam Research Corporation (LRCX) filed an 8-K on April 3, 2008, detailing actions taken to address historical stock option granting issues. Following a review by a special committee, the company is initiating a tender offer to amend certain misdated stock options that were granted with an exercise price below the fair market value on the correct grant date. This initiative aims to help employees avoid adverse tax consequences under Section 409A of the Internal Revenue Code. Under the tender offer, eligible employees can increase the exercise price of their misdated options to the appropriate fair market value. In return, Lam Research will compensate these employees with a cash payment equivalent to the incremental increase in the exercise price. The company anticipates amending approximately 741,168 options and making aggregate cash payments of about $2.4 million in January 2009 to resolve these issues.

Key Highlights

  • 1Lam Research is launching a tender offer to correct misdated stock options granted after December 31, 2004.
  • 2The purpose is to adjust the exercise price of options to fair market value on the correct grant date, preventing adverse tax consequences for employees under Section 409A.
  • 3Eligible employees will have their options amended, and in exchange, will receive a cash payment to offset the increased exercise price.
  • 4The company expects to amend up to 741,168 misdated options.
  • 5Lam Research anticipates making aggregate cash payments of $2,409,023 in January 2009.
  • 6Current Section 16 officers are generally excluded, but four specific executives (Maddock, Hariri, Bondur, Anstice) are eligible due to their status at the time of the option grants.

Frequently Asked Questions

The primary reason is Lam Research's decision to conduct a tender offer to amend certain misdated stock options. This action is a result of an internal review into the company's historical stock option granting practices and aims to prevent adverse tax consequences for employees under Section 409A.

Employees who received misdated stock options with an exercise price below fair market value on the correct measurement date are generally eligible. While current Section 16 officers are typically excluded, four executives (Ernest E. Maddock, Abdi Hariri, Thomas J. Bondur, and Martin B. Anstice) are eligible because they were not Section 16 officers when their specific misdated options were granted.

Lam Research expects to make aggregate cash payments of $2,409,023 in January 2009 to employees participating in the tender offer. This amount represents the compensation to make employees whole for the increased exercise price on their amended options.

The company expects to make the aggregate cash compensation payments in January 2009, following the tender offer process to amend the misdated stock options.