KLA-Tencor Corporation Securities Litigation

In the Lawsuit, Lead Plaintiffs allege that Defendants unlawfully manipulated stock option grant dates in order to provide officers, directors and employees of KLA with more favorable option exercise prices with the benefit of hindsight, in violation of the publicly disclosed terms of KLA's shareholder-approved incentive stock option plans. Lead Plaintiffs also allege that Defendants issued a series of false and misleading statements from 2001 through 2006 regarding the terms of the grants, the expenses associated with the grants, KLA's earnings and other financial information, and the strength of KLA's internal controls. Lead Plaintiffs allege that the misleading nature of these statements remained hidden until a May 22, 2006 article in The Wall Street Journal listed KLA as one of five companies with a questionable pattern of options granting dates. Defendants deny Lead Plaintiffs' claims, deny that any harm to shareholders occurred, and assert various defenses.

Beginning on June 29, 2006, three actions were filed in the United States District Court for the Northern District of California, Garber v. KLA-Tencor Corp., et al., No. C 06-4065 CRB; Police & Fire Retirement System of the City of Detroit and the Louisiana Municipal Police Employees' Retirement System v. KLA-Tencor Corp., et al., No. C 06-4709 MHP; and Spilman v. KLA-Tencor Corp., et al., No. C 06-5225 WHA, which were consolidated under case number 06-4065 for all purposes by an order filed on or about October 13, 2006. In that same Order, the Court appointed the KLA Pension Fund Group, comprised of the Police and Fire Retirement System of the City of Detroit ("PFRS"), the Louisiana Municipal Police Employees' Retirement System ("MPERS"), and the City of Philadelphia Board of Pensions and Retirement ("Philadelphia"), as Lead Plaintiffs and approved Lead Plaintiffs' choice of the law firms of Berman DeValerio Pease Tabacco Burt & Pucillo; Kohn, Swift & Graf, P.C.; Berger & Montague, P.C.; and Trujillo Rodriguez & Richards, LLC as Plaintiffs' Lead Counsel (collectively, "Plaintiffs' Lead Counsel") in the class action.

On March 6, 2007, Lead Plaintiffs, individually and on behalf of all other persons and entities similarly situated, filed and served a Consolidated Class Action Complaint ("Complaint") against KLA and the individual defendants. The Complaint alleges violations of Sections 10(b) and 14(a) of the Securities Exchange Act and Securities Exchange Commission Rules 10b-5 and 14a-9 against all Defendants; violations of Section 20(a) of the Securities Exchange Act against the individual defendants; and violations of Section 20A of the Securities Exchange Act against all Defendants except former defendant Robert Boehlke ("Boehlke").

On May 21, 2007, seven separate motions to dismiss the Complaint were filed by: (1) KLA; (2) Schroeder; (3) Nichols; (4) Levy; (5) Dickerson; (6) Tompkins; and (7) the remaining Individual Defendants (Wallace, Kaufman, Hall, Kispert, Urbanek, Marks, Barnholt, Bond, Elkus, Bingham, Morton and Boehlke). Lead Plaintiffs filed a consolidated opposition to Defendants' motions on September 7, 2007. Defendants filed their respective replies to the opposition on October 12, 2007. Lead Plaintiffs and KLA reached an agreement to settle the case before the Court decided the motions to dismiss.

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