KLA Chairman Steps Down With Re-Priced Options

The chairman of KLA-Tencor Corp. retired Tuesday with a less valuable stock option package, becoming the latest insider swept up in the computer chip supplier’s efforts to clean up an accounting mess expected to cost as much as $400 million.

Kenneth Levy, who founded the company, decided to step down from the board late Monday after KLA acknowledged that it was among dozens of companies nationwide that had improperly booked employee stock options for several years. Levy, 64, will be replaced as nonexecutive chairman by Edward Barnholt, 63, a member of KLA’s board since 1995.

KLA shares fell $1.22 to $48.32.

As part of its stock option remedy, KLA severed its ties with former President and Chief Executive Kenneth L. Schroeder, who had been acting as a special advisor, and accepted the resignation of its general counsel, Stuart J. Nichols.

The San Jose-based company also canceled Schroeder’s outstanding stock options and vowed to re-price the value of Nichols’ options so he wouldn’t benefit from a practice, known as backdating, that increases the size of the profit realized when the awards are cashed in.

Levy’s options also will be re-priced, an indication that the company suspects that he bears some responsibility for the backdating of options that occurred from July 1997 through June 2002.