SCHEDULE 14A(Rule 14a-101) SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of the Filed by the Registrant [_] Check the appropriate box: |
[_] Preliminary Proxy Statement | [_] Soliciting Material Under Rule 14a-12 |
[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
[X] Definitive Proxy Statement |
[_] Definitive Additional Materials |
KLA-TENCOR CORPORATION Payment of Filing Fee (Check the appropriate box): |
[_] | No fee required. |
[_] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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of each class of securities to which transaction applies: |
(2) | Aggregate
number of securities to which transaction applies: |
(3) | Per
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Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it
was determined): |
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[_] | Fee paid previously with preliminary materials: |
[_] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Party: |
(4) | Date
Filed: |
![]() KLA-TENCOR CORPORATIONNOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
|
1. To elect three Class III directors to each serve for a three-year term and until their successors are duly elected. |
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent accountants of the Company for the fiscal year ending June 30, 2002. |
3. To transact such other business as may properly come before the meeting or any adjournment or adjournment thereof. |
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Only stockholders of record at the close of business on September 14, 2001 are entitled to notice of, and to vote at the meeting and any adjournment thereof. |
Sincerely, By: Larry W. Sonsini Larry W. Sonsini Secretary |
San
Jose, California |
2001 ANNUAL MEETING OF
STOCKHOLDERS
|
Voting and SolicitationOn all matters to be voted upon, each share has one vote. The cost of soliciting proxies will be borne by the Company. The Company has retained the services of Automatic Data Processing (ADP) to aid in the solicitation of proxies from brokers, bank nominees and other institutional owners. The Company estimates that it will pay ADP a fee of approximately $100,000 for forwarding solicitation material to beneficial and registered stockholders and processing the results. Proxies may be solicited by certain of the Companys directors, officers and regular employees, without additional compensation, personally or by telephone or telegram. A copy of the Companys Annual Report to Stockholders on Form 10-K for the year 2001, including financial statements, has been sent simultaneously with this Proxy Statement or has been previously provided to all stockholders entitled to vote at the Annual Meeting. In addition, upon written request to the Company at its principal executive offices, attention Assistant Secretary, the Company will provide without charge to each person solicited a copy of the Companys Annual Report. It is also available at the worldwide website of the Securities and Exchange Commission (www.sec.gov). Deadline for Receipt of Stockholder ProposalsProposals of stockholders of the Company which are intended to be presented by such stockholders at the Companys annual meeting in 2002 must be received by the Company at its principal executive offices, attention Assistant Secretary, no later than June 6, 2002 and must satisfy the conditions established by the Securities and Exchange Commission for stockholder proposals in order that such proposals may be included in the proxy statement and form of proxy relating to that meeting. The attached proxy card grants the proxy holdersdiscretionary authority to vote on any matter raised at the Annual Meeting. If a stockholder intends to submit a proposal at the Companys annual meeting in 2002, which is not eligible for inclusion in the proxy statement and form of proxy relating to that meeting, the stockholder must give appropriate notice no later than August 23, 2002. If such a stockholder fails to comply with the foregoing notice provision the Company intends to draft the proxy so that the proxy holders will be allowed to use their discretionary voting authority if the proposal is raised at the Companys annual meeting in 2002. SECURITY OWNERSHIPPrincipal StockholdersDuring the last fiscal year, the following person was known to the Company to be the beneficial owner of more than 5% of the Companys Common Stock: |
Name and Address |
Number of Shares Owned |
Percentage Total (1) | |
---|---|---|---|
FMR Corp. (2) | 16,386,089 | 8.84% | |
82 Devonshire Street | |||
Boston, MA 02109 |
(1) | Based on 188,175,083 outstanding shares of Common Stock as of September 14, 2001. |
(2) | Based on information provided pursuant to Schedule 13F filed with the Securities and Exchange Commission (the SEC) on June 30, 2001. FMR Corp. is a parent holding company and includes shares held by Fidelity Management &Research Company, Fidelity Management Trust Company and Fidelity International Limited. |
2 |
Security Ownership of ManagementThe following table sets forth the beneficial ownership of Common Stock of the Company as of September 14, 2001 by all directors and nominees, each of the named executive officers set forth in the Summary Compensation Table and by all directors and current executive officers as a group: |
Name |
Amount Owned |
Approximate Percentage Owned* | |||
---|---|---|---|---|---|
Kenneth Levy (1) | 3,702,643 | 1.97 | |||
Kenneth L. Schroeder (2) | 1,328,902 | ** | |||
Edward W. Barnholt (3) | 55,832 | ** | |||
H. Raymond Bingham (4) | 20,000 | ** | |||
Robert T. Bond (5) | 22,000 | ** | |||
Richard J. Elkus, Jr. (6) | 126,000 | ** | |||
Dean O. Morton (7) | 49,582 | ** | |||
Jon D. Tompkins (8) | 131,924 | ** | |||
Lida Urbanek (9) | 1,371,130 | ** | |||
Gary E. Dickerson (10) | 354,662 | ** | |||
Edward C. Grady (11) | 179,219 | ** | |||
Neil Richardson (12) | 196,627 | ** | |||
All directors and executive officers | |||||
as a group (20 persons) (13) | 8,455,579 | 4.49% |
* | Based on 188,175,083 outstanding shares of the Common Stock of the Company as of September 14, 2001. |
** | Less than 1% |
(1) | Includes 755,822 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001, 2,035,866 shares, which are held in trust for the benefit of Mr. Levys family, 40,000 shares which are held by the Levy Family Foundation, and 658,000 shares which are held by the KGMW, LP. |
(2) | Includes 804,382 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(3) | Includes 54,686 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(4) | Includes 20,000 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(5) | Includes 20,000 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(6) | Includes 25,375 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(7) | Includes 36,248 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(8) | Includes 61,278 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(9) | Includes 42,954 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(10) | Includes 141,772 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(11) | Includes 57,509 shares, options for which are presently exercisable or will become exercisable, within 60 days of September 14, 2001. |
3 |
(12) | Includes 47,938 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
(13) | Includes 2,355,218 shares, options for which are presently exercisable or will become exercisable within 60 days of September 14, 2001. |
PROPOSAL ONE
TO ELECT THREE CLASS III DIRECTORS TO EACH SERVE FOR A
|
Name of Director | Age | Position | Director Since | ||||
---|---|---|---|---|---|---|---|
Kenneth Levy | 58 | Chairman of the Board | 1975 | ||||
Kenneth L. Schroeder | 55 | President and Chief Executive Officer | 1991 | ||||
Edward W. Barnholt | 58 | Director | 1995 | ||||
H. Raymond Bingham | 55 | Director | 2000 | ||||
Robert T. Bond | 58 | Director | 2000 | ||||
Richard J. Elkus, Jr | 66 | Director | 1997 | ||||
Dean O. Morton | 69 | Director | 1997 | ||||
Jon D. Tompkins | 61 | Director | 1997 | ||||
Lida Urbanek | 56 | Director | 1997 |
There are no family relationships between or among any directors or executive officers of the Company. 4 |
Kenneth Levy is a co-founder of KLA Instruments Corporation and since July 1, 1999 has been Chairman of the Board and a Director of KLA-Tencor. From July 1998 until June 30, 1999, he was the Chief Executive Officer and a Director. From April 30, 1997 until June 30, 1998 he was Chairman of the Board. From 1975 until April 30, 1997 he was Chairman of the Board and Chief Executive Officer of KLA Instruments Corporation. He currently serves on the boards of directors of Ultratech Stepper, Inc., SpeedFam-IPEC, Inc. and is a Director Emeritus of SEMI, an industry trade association. Kenneth L. Schroeder has been President, Chief Executive Officer and a Director of KLA-Tencor since July 1, 1999. From November 1991 until June 30, 1999, he was President and Chief Operating Officer and a Director. He currently serves on the board of directors of SEMI, an industry trade association. Edward W. Barnholt has been a Director of the Company since 1995. Since May 1999, Mr. Barnholt has been President, Chief Executive Officer and a director of Agilent Technologies, Inc. Mr. Barnholt was the Executive Vice President and General Manager of the Test and Measurement Organization of Hewlett-Packard Company from November 1996 to February 1999. He was elected a Senior Vice President of Hewlett-Packard in 1993 and an Executive Vice President in 1996. From December 1988 until 1990 he was General Manager of the Electronic Instrument Group of Hewlett-Packard. In July 1988 he was elected Vice President of Hewlett-Packard. Mr. Barnholt joined Hewlett-Packard in December 1966. He serves on the boards of directors of Agilent Technologies, Inc. and the Tech Museum of Innovation. H. Raymond Bingham has been a Director of KLA-Tencor since August 2000. He has been the President and Chief Executive Officer of Cadence Design Systems, Inc. since May 1999. Prior to this position, he served as Executive Vice President and Chief Financial Officer of Cadence Design Systems, Inc. from April 1993 to April 1999. Prior to joining Cadence Design Systems, Inc., Mr. Bingham was Executive Vice President and Chief Financial Officer of Red Lion Hotels. He is the chairman of the board of Electronic Design Automation Consortium and also serves on the boards of directors of Cadence Design Systems, Inc., Legato Systems, Inc., and Onyx Software Corporation. Robert T. Bond has been a Director of KLA-Tencor since August 2000. Mr. Bond has been a private investor since February 1998. From April 1996 to January 1998, Mr. Bond served as Chief Operating Officer of Rational Software Corporation. Prior to that, he held various executive positions at Rational Software Corporation. Mr. Bond was employed by Hewlett-Packard Company from 1967 to 1983 and held various management positions during his tenure there. Richard J. Elkus, Jr. has been a Director of KLA-Tencor since April 1997. He was Executive Vice President and Vice Chairman of the board of directors of Tencor Instruments from February 1994 until April 1997. He is the Chairman of the Board and a director of Voyan Technology. He currently serves on the boards of directors of SOPRA, Lam Research Corporation, and Virage Logic. Dean O. Morton has been a Director of KLA-Tencor since April 1997. From June 1993 until April 1997 he was a director of Tencor Instruments. In October 1992 Mr. Morton retired as Executive Vice President, Chief Operating Officer and a director of Hewlett-Packard Company. Mr. Morton held various positions at Hewlett-Packard Company from 1960 until his retirement. Mr. Morton currently serves on the boards of directors of The Clorox Company, BEA Systems Inc., Cepheid, and Pharsight Corporation. Mr. Morton is also a trustee of the Metropolitan Series Fund and State Street Research Funds Group and Portfolios, Inc. Jon D. Tompkins was Chairman of the Board from July 1998 to June 1999, when he retired his position as Chairman of the Board. Mr. Tompkins has continued to serve as a Director. From May 1997 until July 1998 he was Chief Executive Officer and a Director of KLA-Tencor. From April 1991 until April 1997 he was President and Chief Executive Officer of Tencor Instruments prior to its merger with KLA Instruments Corporation. He was a director of Tencor Instruments from 1991 until April 1997 and was appointed Chairman of the Board of Directors of Tencor Instruments in 5 |
PROPOSAL TWOTO RATIFY THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
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Executive CompensationThe following table shows, as to the person who served as Chief Executive Officer during the fiscal year ended June 30, 2001 and each of the four other most highly compensated executive officers whose salary plus bonus exceeded $100,000, information concerning all reportable compensation awarded to, earned by or paid to each for services to the Company in all capacities during the fiscal year ended June 30, 2001, as well as such compensation for each such individual for the Companys previous two fiscal years. SUMMARY COMPENSATION TABLE |
Long-term Compensation |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Awards |
Payouts |
||||||||||||||||
Annual Compensation |
Other Annual Compensation |
Restricted Stock Award(s) |
Securities Underlying Options/ |
LTIP Payouts |
All Other Compensation | ||||||||||||
Name and Principal Position | Year | Salary | Bonus | ($) | ($)1 | SARS(#)2 | ($)3 | ($)4 | |||||||||
Kenneth Levy | 2001 | $287,066 | $498,049 | $N/A | -0- | 75,803 | -0- | $42,564 | |||||||||
Chairman of | 2000 | $341,483 | $502,196 | $N/A | -0- | 90,000 | -0- | $79,681 | |||||||||
the Board | 1999 | $456,097 | $429,597 | $N/A | -0- | 102,136 | -0- | $10,005 | |||||||||
Kenneth L. Schroeder | 2001 | $554,403 | $959,894 | $N/A | -0- | 151,600 | -0- | $84,128 | |||||||||
President & Chief | 2000 | $505,246 | $737,827 | $N/A | -0- | 150,000 | -0- | $95,600 | |||||||||
Executive Officer | 1999 | $445,723 | $420,492 | $N/A | -0- | 102,136 | -0- | $ 9,804 | |||||||||
Gary E. Dickerson | 2001 | $422,391 | $653,479 | $N/A | -0- | 130,000 | -0- | $64,828 | |||||||||
Chief Operating | 2000 | $366,288 | $418,371 | $N/A | -0- | 100,000 | -0- | $58,504 | |||||||||
Officer | 1999 | $304,387 | $189,587 | $N/A | -0- | 62,882 | -0- | $ 6,844 | |||||||||
Neil Richardson | 2001 | $330,884 | $301,520 | $N/A | -0- | 75,000 | -0- | $50,191 | |||||||||
Executive Vice | 2000 | $317,364 | $299,948 | $N/A | -0- | 50,000 | -0- | $ 6,541 | |||||||||
President | (a) | 1999 | $289,892 | $191,133 | $N/A | -0- | 87,717 | -0- | $28,604 | ||||||||
Jon D. Tompkins | 2001 | $490,880 | $854,947 | $N/A | -0- | 10,000 | -0- | $73,277 | |||||||||
Director | 2000 | $482,573 | $705,578 | $N/A | -0- | 10,000 | -0- | $43,392 | |||||||||
1999 | $291,478 | $214,797 | $N/A | -0- | 50,809 | -0- | $ 5,977 |
(a) | Excludes re-priced options of 92,283 in fiscal year 2000. |
(1) | The Company has not granted any restricted stock rights. |
(2) | The Company has not granted any stock appreciation rights. |
(3) | The Company does not have any Long Term Incentive Plans as that term is defined in the regulations. |
(4) | All Other Compensation is itemized as follows: |
| In fiscal 2001, Mr. Levy received $28,717 in cash profit sharing; $12,847 in profit sharing was contributed by the Company to the 401(k) Plan; $1,000 was contributed by the Company as a matching contribution to the 401(k) Plan. |
| In fiscal 2001, Mr. Schroeder received $57,435 in cash profit sharing; $25,693 in profit sharing was contributed by the Company to the 401(k) Plan; $1,000 was contributed by the Company as a matching contribution to the 401(k) Plan. |
| In fiscal 2001, Mr. Dickerson received $44,100 in cash profit sharing; $19,728 in profit sharing was contributed by the Company to the 401(k) Plan; $1,000 was contributed by the Company as a matching contribution to the 401(k) Plan. |
| In fiscal 2001, Mr. Richardson received $33,987 in cash profit sharing; $15,204 in profit sharing was contributed by the Company to the 401(k) Plan; $1,000 was contributed by the Company as a matching contribution to the 401(k) Plan. |
| In fiscal 2001, Mr. Tompkins received $49,933 in cash profit sharing; $22,344 in profit sharing was contributed by the Company to the 401(k) Plan; $1,000 was contributed by the Company as a matching contribution to the 401(k) Plan. |
8 |
Stock Option Grants and ExercisesThe following tables set forth the number of securities underlying stock options granted to the named executive officers under the Companys stock option plans and the options exercised by such named executive officers during the fiscal year ended June 30, 2001. The Option/SAR Grant Table sets forth hypothetical gains or option spreads for the options at the end of their respective ten-year terms, as calculated in accordance with the rules of the Securities and Exchange Commission. Each gain is based on an arbitrarily assumed annualized rate of compound appreciation of the market price at the date of grant of 5% and 10% from the date the option was granted to the end of the option term. Actual gains, if any, on option exercises are dependent on the future performance of the Companys Common Stock and overall market conditions. 9 |
OPTION/SAR1 GRANTS IN LAST FISCAL YEARKla-tencor Corporation 1982 Stock Option Plan2 |
Individual Grants | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of Securitites Underlying Options/SARS |
Percent of Total Options/SARS Granted to Employees |
Exercise or Base Price |
Expiration | Potential Realizable Value At Assumed Annual Rates of Stock Price Appreciation for Option Term | |||||||||
Name | Granted(#) | In Fiscal Year | ($/Share) | Date | 5% | 10% | |||||||
Kenneth Levy | 37,901 | $44.6875 | 8/13/2010 | $1,065,159 | $2,699,323 | ||||||||
18,951 | $26.2500 | 11/10/2010 | $ 312,852 | $ 792,829 | |||||||||
18,951 | $32.7500 | 4/4/2011 | $ 390,320 | $ 989,149 | |||||||||
75,803 | 0.74 | % | $1,768,331 | $4,481,301 | |||||||||
Kenneth L. Schroeder | 75,800 | $44.6875 | 8/13/2010 | $2,130,263 | $5,398,504 | ||||||||
37,900 | $26.2500 | 11/10/2010 | $ 625,671 | $1,585,575 | |||||||||
37,900 | $32.7500 | 4/4/2011 | $ 780,600 | $1,978,193 | |||||||||
151,600 | 1.48 | % | $3,536,534 | $8,962,272 | |||||||||
Gary E. Dickerson | 65,000 | $44.6875 | 8/13/2010 | $1,826,742 | $4,629,324 | ||||||||
32,500 | $26.2500 | 11/10/2010 | $ 536,526 | $1,359,662 | |||||||||
32,500 | $32.7500 | 4/4/2011 | $ 669,380 | $1,696,340 | |||||||||
130,000 | 1.27 | % | $3,032,648 | $7,685,326 | |||||||||
Neil Richardson | 30,000 | $44.6875 | 8/13/2010 | $ 843,112 | $2,136,611 | ||||||||
15,000 | $26.2500 | 11/10/2010 | $ 247,627 | $ 627,536 | |||||||||
45,000 | $32.7500 | 4/4/2011 | $ 926,833 | $2,348,778 | |||||||||
90,000 | 0.87 | % | $2,017,572 | $5,112,925 | |||||||||
Jon D. Tompkins | 10,000 | 0.10 | % | $26.2500 | 11/10/2010 | $ 165,085 | $ 418,357 |
1 | The Company has not granted any stock appreciation rights. |
2 | The material terms of the grants (other than those set forth in the table) are: (a) the exercise price of the options is the fair market value of Common Stock as of the date of grant; (b) as of fiscal year 2002, the options vest on a five year schedule with 20% vesting after one year and the remaining option shares vesting 1/48 per month for the remainder of the vesting term. Options issued prior to fiscal year 2002 vest on a four year schedule with 25% vesting after one year and the remaining option shares vesting 1/36 per month for the remainder of the vesting term; (c) to the extent unexercised, the options lapse after ten years; (d) the options are non-transferable and are only exercisable during the period of employment of the optionee and for 30 days following termination of employment, subject to limited exceptions in the cases of certain terminations, death or permanent disability of the optionee. |
AGGREGATED OPTION/SAR
EXERCISES IN LAST FISCAL
|
Number of Shares Acquired on |
Total Number of Securities Underlying Unexercised Options Held At Fiscal Year-End |
Total Value2 Unexercised, In-the-Money Options Held At Fiscal Year End | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Exercise | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||
Kenneth Levy | | $ 0 | 682,954 | 272,849 | $30,986,379 | $ 9,547,296 | |||||||
Kenneth L. Schroeder | 50,000 | $2,680,300 | 713,320 | 378,280 | $31,678,336 | $11,958,788 | |||||||
Gary E. Dickerson | 91,686 | $3,853,004 | 78,300 | 271,815 | $ 2,295,621 | $ 8,284,383 | |||||||
Neil Richardson | 120,611 | $4,520,080 | 4,690 | 174,380 | $ 171,032 | $ 5,561,504 | |||||||
Jon D. Tompkins | 76,676 | $3,852,399 | 80,703 | 71,425 | $ 3,291,814 | $ 2,968,507 |
1 | The Company has not granted any stock appreciation rights. |
2 | Total value of vested options based on fair market value of Companys Common Stock of $58.47 per share as of June 30, 2001. |
10 |
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUE1Tencor Instruments 1993 Equity Incentive Plan |
Number of Shares Acquired On |
Total Number of Securities Underlying Unexercised Options Held At Fiscal Year-End |
Total Value2 of Unexercised, In-the-Money Options Held At Fiscal Year End | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Exercise | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||
Kenneth Levy3 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||
Kenneth L. Schroeder3 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||
Gary E. Dickerson3 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||
Neil Richardson3 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||
Jon D. Tompkins | 71,488 | $2,644,687 | 41,676 | -0- | $2,440,651 | -0- |
1 | The Company has not granted any stock appreciation rights. |
2 | Total value of vested options based on fair market value of Companys Common Stock of $58.47 per share as of June 30, 2001. |
3 | Messrs. Levy, Schroeder, Dickerson, and Richardson have never received options under the Tencor Instruments 1993 Equity Incentive Plan. The information under this table is inapplicable to them. |
contribution by the Company is forfeited. Although the executive officer is eligible to participate in both the Companys profit sharing plan and the Outstanding Corporate Performance Plan, any amounts contributed by the Company pursuant to the Outstanding Corporate Performance Plan will be reduced by the amount of profit sharing paid during the fiscal year. Long-term Incentives. Longer term incentives are provided through the Stock Option Plan and the Excess Profit Stock Plan, each of which reward executive officers through the growth in value of the Companys Common Stock. The Committee believes that employee equity ownership is highly motivating, provides a major incentive for employees to build stockholder value and serves to align the interests of employees with those of stockholders. Grants of stock options to executive officers are based upon each executive officers relative position, responsibilities, historical and expected contributions to the Company, and the executive officers existing stock ownership and previous option grants, with primary weight given to the executive officers relative rank and responsibilities. Stock options are granted at market price on the date of grant and will provide value to the executive officers only when the price of the Companys Common Stock increases over the exercise price. |
Members of the Compensation Committee Edward W. Barnholt Robert T. Bond Lida Urbanek |
13 |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONThe members of the Compensation Committee are set forth in the preceding section. There are no members of the Compensation Committee who were officers or employees of the Company or any of its subsidiaries during the fiscal year, formerly officers of the Company, or had any relationship otherwise requiring disclosure hereunder. REPORT OF THE AUDIT COMMITTEEThe Companys Audit Committee (Audit Committee) is composed of independent directors, all of whom meet the standards of independence set forth in Rule 4200(a)(14) of the National Association of Securities Dealers listing standards. For fiscal year 2001, the members of the Audit Committee are H. Raymond Bingham, Richard J. Elkus, Jr. and Dean O. Morton. Attached as Appendix I to this Proxy Statement is a copy of the Audit Committee Charter. During each of its five meetings during fiscal year 2001, the Audit Committee met with the senior members of the Companys financial management team, the independent auditors and the Companys General Counsel when appropriate. The Audit Committees chairman was responsible for preparing an agenda for each meeting. During the Committees private sessions, the Audit Committee met with the Companys independent auditors and separately with the Companys Chief Financial Officer. The parties candidly discussed financial management, accounting and internal controls. The Audit Committee recommended to the Board of Directors the engagement of PricewaterhouseCoopers LLP as the Companys independent auditors and reviewed with the Companys financial managers and the independent auditors the overall audit scopes and plans, the results of internal and external audit examinations, evaluations by the auditors of the Companys internal controls and the quality of the Companys financial reporting. The Audit Committee has reviewed and discussed the audited financial statements to be included in the Companys Annual Report on Form 10-K with the Companys management including, without limitation, a discussion of the quality, not just the acceptability of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. In addressing the quality of managements accounting judgments, members of the Audit Committee asked for managements representations that the audited consolidated financial statements of the Company have been prepared in conformity with generally accepted accounting principles, and have expressed to both management and auditors their general preference for conservative policies when a range of accounting options is available. In its meetings with representatives of the independent auditors, the Audit Committee asked the representatives to address and discuss their responses to several questions that the Audit Committee believes are particularly relevant to its oversight. These questions included (1) whether there were any significant accounting judgments made by management in preparing the financial statements that would have been made differently had the auditors themselves prepared and been responsible for the financial statements; (2) whether, based on the auditors experience, and their knowledge of the Company, the Companys financial statements fairly present to investors, with clarity and completeness, the Companys financial position and performance for the reporting period in accordance with generally accepted accounting principles and SEC disclosure requirements; and (3) whether, based on their experience, and their knowledge of the Company, they believe the Company has implemented internal controls and internal audit procedures that are appropriate for the Company. The Audit Committee also discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committees). The Audit Committee received from the auditors the written disclosures and the letter from the auditors required by Independence Standards Board Standard No. 1, (Independence Discussions With Audit Committees), and the Company discussed with the auditors the auditors independence, 14 |
which such discussion included, without limitation, the consideration of whether the provision of financial information systems design and implementation and other non-audit services provided by them to the Company during fiscal year 2001 was compatible with the auditors independence. In performing all of these functions, the Audit Committee acts only in an oversight capacity. The Audit Committee does not complete its reviews prior to the Companys public announcement of financial results and, necessarily, in its oversight role, the Audit Committee relies on the work and assurances of the Companys management, which has the primary responsibility for financial statements and reports, and of the independent auditors, who, in their report, express an opinion on the conformity of the Companys financial statements to generally accepted accounting principles. Based on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2001, for filing with the Securities and Exchange Commission. |
Members of the Audit Committee H. Raymond Bingham, Chairman Richard J. Elkus, Jr. Dean O. Morton |
15 |
PERFORMANCE GRAPHThe stock price performance shown on the graph following is not necessarily indicative of future price performance. Comparison of Five Year Cumulative Total Return Among KLA-Tencor Corporation, the Nasdaq-US Index and the Hambrecht & Quist Technology Index*. ![]() |
1996 | 1997 | 1998 | 1999 | 2000 | 2001 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
KLA-Tencor Corporation | 100.00 | 209.68 | 119.09 | 279.04 | 503.77 | 502.97 | |||||||
The NASDAQ-US Index | 100.00 | 121.60 | 160.06 | 230.22 | 340.39 | 184.52 | |||||||
Hambrecht & Quist Technology Index | 100.00 | 130.32 | 164.85 | 266.44 | 465.91 | 230.97 |
16 |
CERTAIN TRANSACTIONSIn connection with the merger between KLA Instruments Corporation and Tencor Instruments (effective April 30, 1997) the Company entered into identical employment arrangements, subsequently amended, with Messrs. Levy, Schroeder and Tompkins, all executive officers of the Company. The arrangements, as amended, provide that certain benefits would be paid if certain events took place after April 30, 1997. The purpose of these arrangements was to retain the services of Messrs. Levy, Schroeder and Tompkins to ensure the continued smooth transition associated with the Merger. The terms of those arrangements provide that if an individual were to leave the Company after April 30, 1998, subject to releasing the Company from all claims, and in connection with working part-time for 36 months, he will receive (i) his base salary for the first 24 months of part-time employment, (ii) a mutually agreeable level of compensation per month for the final 12 months of part-time employment, (iii) an annual bonus (based on an achievement of 100% of bonus objectives) in the fiscal year of his transition to part-time employment, (iv) a bonus paid in the fiscal year following the payment of the annual bonus above, (based on achievement of 100% of his individual bonus objectives) and (v) a pro-rated bonus for the fiscal year in which part-time employment ended. During the periods of part-time employment, all options to exercise stock of the Company, which were granted more than 12 months prior to the termination of full-time employment, will continue to vest. The same benefits shall be payable in the event the Company terminates his employment without cause. If he is terminated for cause (defined as (i) gross negligence or willful misconduct in connection with the performance of duties, (ii) conviction of or plea of nolo contendere to any felony, or (iii) the embezzlement or misappropriation of Company property) then he will receive a lump-sum payment equal to 25% of his base salary. In December 2000, the Company made a loan to John Kispert, the Companys Chief Financial Officer, in the amount of $300,000. The loan was evidenced by a promissory note (Note). The Note incurs interest at a rate of 6.3% per annum and is repayable in December 2020. The Note is secured by a Third Deed of Trust on Mr. Kisperts real property. In fiscal year 2001, the Company entered into a Bonus Agreement with Mr. Kispert, whereby Mr. Kispert will receive payments of $93,000 a year, for the next four years. Voluntary Stock Option Exchange ProgramOn December 7, 2000, the Company announced a voluntary stock option exchange program for its employees who had stock options with an exercise price of $55 per share or greater (the Exchange Program). Under the terms of the Exchange Program, eligible employees were given the opportunity to elect to cancel outstanding stock options issued to them for six months prior to the date of the Exchange Program in exchange for an equal number of new options, with the same vesting terms, to be granted more than six months and one day in the future. The new options were granted at an exercise price equal to the fair market value of the Companys Common Stock on July 10, 2001. No executive officers participated in the Exchange Program. Outside directors and consultants were not eligible to participate in the Exchange Program. Change in Control AgreementsIn fiscal year 2002, the Board of Directors approved individual change-in-control agreements for Messrs. Schroeder, Dickerson and Kispert (each, an Executive). The change-in-control provisions of these agreements take effect if the Executives employment is terminated involuntarily or constructively within two years of a change in control of the Company. If the provisions become effective, the Executive becomes eligible to receive: (1) an amount equal to two times his annual compensation; (2) an amount equal to two times his bonus amount; (3) continuation of health benefits for two years; and (4) the acceleration of vesting for all options held. In addition, in the case of Mr. Schroeder, he would receive an option grant equal to his planned option grants for the forthcoming four years. For the purpose of these agreements, a change in control occurs upon merger 17 |
of the Company with or into another corporation, or a change in more than half of the total voting power of the Company, or upon the sale of substantially all of the assets of the Company. These arrangements have been approved by the Board of Directors, but have not been memorialized in agreements as of the date of this Proxy Statement. Section 16(A) Beneficial Ownership Reporting ComplianceSection 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys executive officers, directors, and persons who own more than ten percent of a registered class of the Companys equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Mr. Schroeder filed a Form 4 late for the month ending May 31, 2001 due to a processing error. OTHER MATTERSThe Company knows of no other matters to be submitted to the stockholders at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of Proxy to vote the shares they represent as the Board of Directors may recommend. |
The Board of Directors |
October 1, 2001 18 |
Audit Committee Charter Kla-tencor Corporation, a Delaware CorporationPurposeThe Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance by the Company with legal and regulatory requirements and (3) the independence and performance of the Companys internal and external auditors. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the power to retain outside counsel, auditors or other experts for this purpose. The Board and the Committee are in place to represent the Companys shareholders; accordingly, the outside auditor is ultimately accountable to the Board and the Committee. Membership and MeetingsThe Committee shall be comprised of not less than three non-employee members of the Board. The Board shall appoint the members of the Committee, one of whom shall be designated a chairman of the Committee, such members shall serve at the discretion of the Board. The Committees composition will meet the requirements of the Audit Committee Policy of the NASDAQ National Market. Accordingly, all of the members will be directors who: |
| Each member shall be an independent director, as defined in NASDAQ Rule 4200; and |
| Are financially literate or who become financially literate within a reasonable period of time after appointment to the Committee. In addition, at least one member of the Committee will have accounting or related financial management expertise. |
The Committee shall meet at least four times annually or more frequently as the Committee may deem appropriate. Key ResponsibilitiesThe following functions shall be the common recurring activities of the Committee in carrying out its oversight function. These functions are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate given the circumstances. Review and discuss with management and the independent auditors the audited financial statements to be included in the Companys Annual Report on Form 10-K (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K). Review with the outside auditors the Companys interim financial results to be included in the Companys quarterly earnings release and quarterly reports to be filed with Securities and Exchange Commission prior to the Companys filing of the Form 10-Q. |
| Review and consider with the outside auditors the requirements of Statement of Auditing Standards (SAS) No. 61 as they relate to audited and interim financial statements. |
| Discuss with management and the outside auditors the quality and adequacy of the Companys internal controls. |
| Review the activities, organizational structure and qualifications of the Companys finance department. |
| The audit committee shall review the independence and performance of the auditors. With respect to the independence of the independent auditors, the Committee shall: |
A-1 |
| Request from the outside auditors annually, a formal written statement delineating all relationships between the auditor and the Company consistent with Independence Standards Board Standard Number 1; |
| Discuss with the outside auditors any such disclosed relationships and their impact on the outside auditors independence; and |
| If circumstances require, recommend that the Board take appropriate action to oversee the independence of the outside auditor. |
The Committee, subject to any action that may be taken by the full Board, shall have the ultimate authority and responsibility to select (or nominate for shareholder approval), evaluate and, where appropriate, replace the outside auditor. The Committee shall review its own structure, processes and membership requirements, including reviewing the adequacy of this Charter on an annual basis. In addition to the above responsibilities, the Committee will undertake such other duties as the Board delegates to it, and will report, at least annually, to the Board regarding the Committees examinations and recommendations. The Committee is authorized to conduct any investigation appropriate to fulfilling its responsibilities and may retain, at the Companys expense, such consultants and experts as it deems necessary to assist it in conducting any such investigation. Other MattersThe Committee shall prepare such reports as are required by the Securities and Exchange Commission for inclusion in the Companys annual proxy statement and maintain minutes of its meetings. A-2 |
![]() KLA-TENCOR CORPORATION VOTE BY INTERNET - www.proxyvote.com VOTE BY TELEPHONE - 1-800-690-6903 VOTE BY MAIL YOUR VOTE IS IMPORTANT All stockholders are cordially invited to attend the meeting in person, however, to assure your representation at the meeting, you are requested to complete, sign and date below and return it in the enclosed envelope or follow the instructions to the right, to vote by telephone or via the Internet. Any stockholder attending the meeting may vote in person even if he or she returned a proxy. |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KLA-TENCOR CORPORATIONThe Board Recommends a Vote FOR all Nominees for Director and FOR Proposal 2.Vote On Directors |
1. | To elect three Class III directors to each serve for a three year term and until their successors are duly elected. |
01) Edward W. Barnholt, 02) Dean O. Morton, and 03) Kenneth L. Schroeder |
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To withhold authority to vote, mark For All Except and write the nominee's number on the line below. _________________________________________________ |
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2. | To ratify the appointment of PricewaterhouseCoopers LLP as independent accountants of the Company for the fiscal year ending June 30, 2002. |
To transact such other business as may properly come before the meeting or any adjournment or adjournment thereof. |
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In their discretion, the proxy holders are authorized to vote on all such other matters as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name appears on your stock certificate(s), date and return this Proxy promptly in the reply envelope provided. Please correct your address before returning this Proxy. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign. MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT [_] MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_] |
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Vote by Internet Follow these four easy steps: 1. Read the accompanying Proxy Statement and Proxy Card. 2. Go to the Website: http://www.proxyvote.com. 3. Enter your 12-digit Control Number located on the reverse side. 4. Follow the instructions provided. Your vote is important! Go to http://www.proxyvote.com anytime! |
Do not return your Proxy Card if you are voting by Telephone or Internet.DETACH PROXY CARD HERE THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSKLA-TENCOR CORPORATION
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