KLA-Tencor (KLAC)

Restricted Stock Units

The following table shows the applicable number of restricted stock units and weighted-average grant date fair value for restricted stock units granted, vested and released, and forfeited during the nine months ended March 31, 2009 and restricted stock units outstanding as of March 31, 2009 and June 30, 2008:

Since the beginning of the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vested in two equal installments over four or five years from the date of the grant. The value of the restricted stock units is based on the closing market price of the Company’s common stock on the date of award. The restricted stock units have been awarded under the Company’s 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of March 31, 2009, the unrecognized stock-based compensation balance related to restricted stock units was $94.6 million and will be recognized over an estimated weighted-average amortization period of 2.5 years.

In connection with the vested and released restricted stock units, the Company realized tax benefits of $0.5 million and $13.0 million for the three and nine months ended March 31, 2009, respectively.

Restricted Stock Units

The following table shows the applicable number of restricted stock units and weighted-average grant date fair value for restricted stock units granted, vested and released, and forfeited during the six months ended December 31, 2008 and restricted stock units outstanding as of December 31, 2008 and June 30, 2008:

Since the beginning of the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units is based on the closing market price of the Company’s common stock on the date of award. The restricted stock units have been awarded under the Company’s 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of December 31, 2008, the unrecognized stock-based compensation balance related to restricted stock units was $102.3 million and will be recognized over an estimated weighted-average amortization period of 2.8 years.

In connection with the vested and released restricted stock units, the Company realized tax benefits of $0.8 million and $12.5 million for the three and six months ended December 31, 2008, respectively.

Restricted Stock Units

The following table shows the applicable number of restricted stock units and weighted-average grant date fair value for restricted stock units granted, vested and released, and forfeited during the three months ended September 30, 2008 and restricted stock units outstanding as of September 30, 2008 and June 30, 2008:

Since the beginning of the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units granted by the Company generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units is based on the closing market price of the Company’s common stock on the date of award. The restricted stock units have been awarded under the Company’s 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of September 30, 2008, the unrecognized stock-based compensation balance related to restricted stock units was $103.9 million and will be recognized over an estimated weighted-average amortization period of 2.6 years.

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Restricted Stock Units

The following table shows the applicable number of restricted stock units and weighted-average grant-date fair value for restricted stock units granted, vested and released, and forfeited during the fiscal year ended June 30, 2008 and restricted stock units outstanding as of June 30, 2008 and 2007:

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KLA-TENCOR CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the Company’s 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of June 30, 2008, the unrecognized stock-based compensation balance related to restricted stock units was $103.4 million and will be recognized over an estimated weighted-average amortization period of 2.6 years. Additionally, the number of restricted stock awards outstanding as of June 30, 2008 was 5.1 million.

Restricted Stock Units

FACE="Times New Roman" SIZE="2">The following table shows the applicable number of restricted stock units and weighted-average grant-date fair value for restricted stock units granted, vested and released, and forfeited during the fiscal year ended
June 30, 2008 and restricted stock units outstanding as of June 30, 2008 and 2007:

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KLA-TENCOR CORPORATION

ALIGN="center">Notes to Consolidated Financial Statements—(Continued)

Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in
two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary
date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the Company’s 2004 Plan, and each unit will
entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8
shares, as provided under the terms of the 2004 Plan.

As of June 30, 2008, the unrecognized stock-based compensation balance related
to restricted stock units was $103.4 million and will be recognized over an estimated weighted-average amortization period of 2.6 years. Additionally, the number of restricted stock awards outstanding as of June 30, 2008 was 5.1 million.

Restricted Stock Units

The following table shows the number of restricted stock units granted and grant-date fair value for the three and nine months ended March 31, 2008 and 2007:

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Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of March 31, 2008, the unrecognized stock-based compensation balance related to restricted stock units was $105.5 million and will be recognized over an estimated weighted-average amortization period of 2.8 years. Additionally, the number of restricted stock units outstanding as of March 31, 2008 was 5.2 million.

Restricted Stock Units

The following table shows the number of restricted stock units granted and grant-date fair value for the three and six months ended December 31, 2007 and 2006:

Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of December 31, 2007, the unrecognized stock-based compensation balance related to restricted stock units was $115.9 million and will be recognized over an estimated weighted-average amortization period of 3.0 years. Additionally, the number of restricted stock units outstanding as of December 31, 2007 was 5.2 million.

Restricted Stock Units

The following table shows the number of restricted stock units granted, grant-date fair value, and stock-based compensation expense for the three months ended September 30, 2007 and 2006:

Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the 2004 Plan, and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of September 30, 2007, the unrecognized stock-based compensation balance related to restricted stock units was $72.1 million and will be recognized over an estimated weighted-average amortization period of 3.3 years. Additionally, the number of restricted stock units outstanding as of September 30, 2007 was 4.2 million.

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Restricted Stock Units

The following table shows the number of restricted stock units granted, grant-date fair value, and stock-based compensation expense for the fiscal years ended June 30, 2007, 2006 and 2005:

Beginning in the fiscal year ended June 30, 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to the fiscal year ended June 30, 2007, the restricted stock units generally vested in two equal installments over four or five years from the anniversary date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the Company’s 2004 Plan and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the 2004 Plan will be reduced by 1.8 shares, as provided under the terms of the 2004 Plan.

As of June 30, 2007, the unrecognized stock-based compensation balance related to restricted stock units was $71.2 million and will be recognized over an estimated weighted average amortization period of 3.2 years. Additionally, the number of restricted stock awards outstanding as of June 30, 2007 was 3.4 million.

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KLA-TENCOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restricted Stock Units

The following table shows the number of restricted stock units granted, grant-date fair value, and stock-based compensation expense for the three and nine months ended March 31, 2007 and 2006:

Beginning in the fiscal year 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to fiscal year 2007, the restricted stock units generally vested in two equal installments on the fourth and fifth anniversaries of the date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The restricted stock units were awarded under the Company’s 2004 Equity Incentive Plan and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the Plan will be reduced by 1.8 shares, as provided under the terms of such Plan.

As of March 31, 2007, the unrecognized stock-based compensation balance related to restricted stock units was $75.6 million and will be recognized over an estimated weighted average amortization period of 3.5 years.

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Restricted Stock Units

During the six months ended December 31, 2006 and 2005, the Company’s Board of Directors approved the grant of 2.6 million and 0.6 million shares, respectively, of restricted stock units to selected employees. Beginning in the fiscal year 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to fiscal year 2007, the restricted stock units generally vested in two equal installments on the fourth and fifth anniversaries of the date of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The total grant date fair value of the restricted stock units granted during the six months ended December 31, 2006 and 2005 was $83.5 million and $16.8 million, respectively, after estimated forfeitures. Stock-based compensation expense for restricted stock units for the three months ended December 31, 2006 and 2005 was $3.4 million (net of a $4 million reversal of stock-based compensation charges for the Company’s former Chief Executive Officer) and $1.6 million, respectively. Stock-based compensation expense for restricted stock units for the six months ended December 31, 2006 and 2005 was $5.9 million (net of a $4 million reversal of stock-based compensation charges for the Company’s former Chief Executive Officer) and $2.5 million, respectively.

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The restricted stock units were awarded under the Company’s 2004 Equity Incentive Plan and each unit will entitle the recipient to one share of common stock when the applicable vesting requirements for that unit are satisfied. However, for each share actually issued under the awarded units, the share reserve under the Plan will be reduced by 1.8 shares, as provided under the terms of such Plan.

As of December 31, 2006, the unrecognized stock-based compensation balance related to restricted stock units was $100.0 million and will be recognized over an estimated weighted average amortization period of 3.7 years.

Restricted Stock Units

During the fiscal year ended June 30, 2006, the Company’s Board of Directors approved the grant of 710,900 shares of restricted stock units to selected employees. These restricted stock units generally vest in two equal installments on the fourth and fifth anniversaries of the date of grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of grant. The total grant date fair value of the restricted stock units awarded during the fiscal year ended June 30, 2006 was $23.2 million after estimated forfeitures. Stock-based compensation cost for restricted stock units for fiscal years 2006 and 2005 was $8.1 million and $2.1 million, respectively. No stock-based compensation cost was recognized in fiscal year 2004.

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KLA-TENCOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of June 30, 2006, there was $25.8 million of total unrecognized stock-based compensation after estimated forfeitures related to restricted stock units granted under the Equity Incentive Program. That cost is expected to be recognized over an estimated weighted-average amortization period of 3.7 years.

Employee Stock Purchase Plan. KLA-Tencor’s employee stock purchase plan (“ESPP”) provides that eligible employees may contribute up to 10% of their eligible earnings toward the semi-annual purchase of KLA-Tencor’s common stock. The employee’s purchase price is derived from a formula based on the fair market value of the common stock at the time of enrollment into the offering period versus the fair market value on the date of purchase. Offering periods are generally two years in length. The compensation cost in connection with the plan in fiscal year 2006 was $16.2 million, in accordance with SFAS No. 123(R). The total cash received from employees for the issuance of shares under the employee stock purchase plan was approximately $36.3 million during fiscal year 2006. As the plan is non-compensatory under APB Opinion No. 25, no compensation expense was recorded in connection with the plan in fiscal years 2005 and 2004. The ESPP is considered compensatory under SFAS No. 123(R). In fiscal years 2006, 2005 and 2004, employees purchased 1,021,872; 1,059,415; and 958,698 of shares issued at a weighted-average fair value of $36.21, $34.43 and $31.99, respectively.

The plan shares are replenished annually on the first day of each fiscal year by virtue of an evergreen provision. The provision allows for share replenishment equal to the lesser of 2,000,000 shares or the number of shares which KLA-Tencor estimates will be required to issue under the plan during the forthcoming fiscal year. At June 30, 2006, a total of 1,803,864 shares were reserved and available for issuance under this plan.

See Note 16 “Subsequent Events” for discussion of suspension of the plan as announced during the first quarter of fiscal 2007.

Former Chief Executive Officer Agreement and Termination. During November 2005, the Company announced that effective January 1, 2006, Kenneth L. Schroeder would cease to be its Chief Executive Officer and would thereafter be employed as a Senior Advisor. The Company and Mr. Schroeder also revised his prior agreement with the Company and defined the salary, bonus payout and equity award vesting during the period of his employment as a Senior Advisor. Effective January 1, 2006, the Company determined that all service conditions associated with certain prior equity awards under the terms of the revised agreement with Mr. Schroeder had been satisfied; accordingly, the Company recorded at that time an additional non-cash, stock-based compensation charge of approximately $9.8 million relating to these equity awards. The above mentioned charge is included as a component of Selling, General and Administrative expense during fiscal 2006. On October 16, 2006, following the Special Committee investigation of the Company’s historical stock option practices, the Company terminated all aspects of Mr. Schroeder’s employment relationship and agreement with the Company. As a result, vesting of Mr. Schroeder’s then outstanding stock options and restricted stock awards immediately ceased, and the 890,914 unvested option shares and 100,000 unvested restricted stock award shares held by Mr. Schroeder at the time of termination were canceled. Accordingly, in the second quarter of fiscal 2007 the Company will reverse approximately $20 million of the non-cash, stock-based compensation charge recorded in prior periods. In December 2006, the Company canceled 596,740 vested option shares held by Mr. Schroeder as of the time of termination, representing those shares that had been retroactively priced or otherwise improperly granted.

Stockholders’ Rights Plan. In March 1989, KLA-Tencor implemented a plan to protect stockholders’ rights in the event of a proposed takeover of KLA-Tencor. Each stockholder under the plan is entitled to one right per common stock owned. The plan was amended in April 1996. The plan provides that if any person or group acquires 15% or more of KLA-Tencor’s common stock, each right not owned by such person or group will entitle its holder to purchase, at the then-current exercise price, KLA-Tencor’s common stock at a value of twice

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KLA-TENCOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

that exercise price. Under the amended plan, the rights were redeemable at KLA-Tencor’s option for $0.01 per right. All rights expired in April 2006.

Restricted Stock Units.

During the three months ended September 30, 2006 and 2005, the Company’s Board of Directors approved the grant of 2.5 million and 30,000 shares, respectively, of restricted stock units to selected employees. Beginning in the fiscal year 2007, the restricted stock units generally vest in two equal installments on the second and fourth anniversaries of the date of grant. Prior to fiscal year 2007, the restricted stock units generally vested in two equal installments on the fourth and fifth anniversaries of the date

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of the grant. The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award. The total grant date fair value of the restricted stock units granted during the three months ended September 30, 2006 and 2005 was $81.3 million and $1.1 million, respectively, after estimated forfeitures. Stock-based compensation cost for restricted stock units for the three months ended September 30, 2006 and 2005 was $2.5 million and $0.8 million, respectively.

As of September 30, 2006, the total unrecognized stock-based compensation balance related to restricted stock units was $104.9 million and will be recognized over an estimated weighted-average amortization period of 3.8 years.

Restricted Stock Units

          As of July 1, 2005, the Company had a deferred stock-based compensation balance related to restricted stock units of $14.1 million after estimated forfeitures.

          During the nine months ended March 31, 2006, the Company’s Board of Directors approved the grant of 710,900 shares of restricted stock units to selected employees.  These restricted stock units generally vest in two equal installments on the fourth and fifth anniversaries of the date of grant.  The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award.  The total grant date fair value of the restricted stock units granted during the nine months ended March 31, 2006 was $26.5 million after estimated forfeitures.   At December 31, 2005, the Company increased its forfeiture rate estimate and therefore reduced the unrecorded deferred stock based compensation balance by $3.5 million.  Stock-based compensation cost for restricted stock units for the nine months ended March 31, 2006 was $6.6 million.

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Restricted Stock Units

          As of July 1, 2005, the Company had a deferred stock-based compensation balance related to restricted stock units of $14.1 million after estimated forfeitures.

          During the six months ended December 31, 2005, the Company’s Board of Directors approved the grant of 555,900 shares of restricted stock units to selected members of the Company’s senior management.   These restricted stock units generally vest in two equal installments on the fourth and fifth anniversaries of the date of grant.  The value of the restricted stock units was based on the closing market price of the Company’s common stock on the date of award.  The total grant date fair value of the restricted stock units granted during the six months ended December 31, 2005 was $20.3 million after estimated forfeitures.   At December 31, 2005, the company increased its forfeiture rate estimate and therefore reduced the unrecorded deferred stock based compensation balance by $3.3 million.  Stock-based compensation cost for restricted stock units for the six months ended December 31, 2005 was $2.5 million.

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