What are "misdated options" and why is Lam Research addressing them?

Misdated options refer to employee stock options that were granted with an exercise price potentially set at an incorrect fair market value on the date of grant due to dating issues. Lam Research is addressing these to ensure compliance with Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation, and to prevent adverse tax consequences for employees and the company.

Will the executive officers be negatively impacted by these option adjustments?

No, the company is taking steps to ensure that executive officers are not negatively impacted. While their misdated options are being amended to reflect the correct fair market value, they will receive cash compensation in January 2009 to make them whole for any increase in the exercise price, with the exception of Martin B. Anstice, whose options are amended without a cash payment.

What is the financial impact of these option adjustments and cash payments on Lam Research?

The filing does not provide a precise financial impact. However, the company will incur cash expenses for the payments made to employees and certain executive officers in January 2009. The total amount of these payments is detailed for the four executive officers, with Mr. Maddock receiving the largest expected payment ($102,649) and Mr. Anstice receiving $0.

When will the cash payments related to these option amendments be made?

The cash payments to compensate employees and the affected executive officers for the incremental exercise price increase are expected to be made in January of 2009.

LRCX 8-K: Leadership Changes & Material Agreements

Summary

Lam Research Corporation (LRCX) filed an 8-K on May 7, 2008, detailing actions taken regarding previously issued employee stock options that were identified as potentially misdated. The company completed a tender offer for certain of these "misdated options" which vested after December 31, 2004. To comply with Section 409A of the Internal Revenue Code and avoid adverse tax consequences, these options will have their exercise prices adjusted to the correct fair market value at the time of grant. Participants in the tender offer will receive cash payments in January 2009 to compensate them for the increased exercise price. Importantly, the filing clarifies that no executive officers participated in this tender offer. However, a separate Stock Option Amendment and Special Bonus Agreement was entered into with four executive officers who were not eligible for the tender offer. These agreements also amend their misdated options to adjust exercise prices and provide cash compensation, except for Martin B. Anstice, who will have his options amended without a cash payment. This proactive measure by Lam Research addresses potential compliance issues and aims to protect employees from tax liabilities.

Key Highlights

1Lam Research completed a tender offer for certain misdated employee stock options vested after December 31, 2004.
2The purpose of the tender offer and subsequent amendments is to comply with Section 409A of the IRS code and avoid adverse tax consequences.
3Adjustments involve increasing the exercise price of misdated options to the correct fair market value on the appropriate measurement date.
4Employees participating in the tender offer will receive a cash payment in January 2009 to compensate for the increased exercise price.
5No executive officers of the Company participated in the initial tender offer.
6Four executive officers (Martin B. Anstice, Thomas Bondur, Abdi Hariri, Ernest E. Maddock) entered into separate agreements to amend their misdated options.
7Three of these four executive officers will receive a cash payment in January 2009, with Martin B. Anstice's options being amended without a cash payment.

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

Summary

Key Highlights

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