NOTE 3 — EQUITY-BASED COMPENSATION PLANS

The Company has stock plans that provide for grants of equity-based awards to eligible participants, including stock options and restricted stock units ("RSUs"), of Lam Research common stock ("Common Stock"). An option is a right to purchase the Company's stock at a set price. An RSU award is an agreement to issue shares of the Company's stock at the time of vesting. The Company's options and RSU awards typically vest over a period of two years or less. The Company also has an employee stock purchase plan ("ESPP") that allows employees to purchase its Common Stock at a discount through payroll deductions.

The Company recognized the following equity-based compensation expense and related income tax benefit in the Condensed Consolidated Statements of Operations:


	Three Months Ended				Six Months Ended
	December 25,		December 26,		December 25,		December 26,
	2011		2010		2011		2010
	(in millions)
Equity-based compensation expense	$	18.2	$	12.8	$	36.0	$	25.8
Income tax benefit related to equity-based compensation expense	$	2.1	$	2.2	$	4.8	$	4.3

The estimated fair value of the Company's stock-based awards, less expected forfeitures, is amortized over the awards' vesting term on a straight-line basis.

Stock Options and RSUs

The 2007 Stock Incentive Plan provides for grants of equity-based awards to eligible participants. Additional shares are reserved for issuance under the Company's 1997 Stock Incentive Plan and its 1999 Stock Option Plan pursuant to awards previously granted under those plans (together with the 2007 Stock Incentive Plan, the "Plans"). As of December 25, 2011, there were a total of 2,787,348 shares reserved to cover options and RSUs issued and outstanding under the Plans. As of December 25, 2011, there were an additional 7,910,788 shares reserved and available for future equity-based awards under the 2007 Stock Incentive Plan.

A summary of stock option activity under the Plans as of December 25, 2011 and changes during the six months then ended is presented below:


Options	Shares (in thousands)			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value as of December 25, 2011 (in thousands)
Outstanding at June 26, 2011		310		$	21.50		2.26
Exercised		(64	)	$	22.87
Forfeited or expired		(3	)	$	20.00

Outstanding at December 25, 2011		243		$	21.15		2.03	$	3,838

Exercisable at December 25, 2011		243		$	21.15		2.03	$	3,838

The total intrinsic value of options exercised during the three months ended December 25, 2011 and December 26, 2010 was $0.9 million and $4.0 million, respectively. The total intrinsic value of options exercised during the six months ended December 25, 2011 and December 26, 2010 was $1.1 million and $4.8 million, respectively.

As of December 25, 2011, all stock options outstanding were fully vested and all related compensation expense has been recognized.

A summary of the Company's RSUs as of December 25, 2011 and changes during the six months then ended is presented below:


Unvested Restricted Stock Units	Shares (in thousands)			Average Grant- Date Fair Value
Unvested at June 26, 2011		2,331		$	39.90
Granted		887		$	39.60
Vested		(630	)	$	42.82
Forfeited		(44	)	$	39.18

Unvested at December 25, 2011		2,544		$	41.66

The fair value of the Company's RSUs was calculated based upon the fair market value of the Company's stock at the date of grant. As of December 25, 2011, there was $60.3 million of total unrecognized compensation expense related to unvested RSUs granted; that expense is expected to be recognized over a weighted average remaining period of 1.3 years.

ESPP

The 1999 Employee Stock Purchase Plan (as amended and restated, the "1999 ESPP") allows employees to designate a portion of their base compensation to be withheld through payroll deductions and used to purchase the Company's Common Stock at a purchase price per share equal to the lower of 85% of the fair market value of the Company's Common Stock on the first or last day of the applicable purchase period. Each offering period generally lasts up to 12 months and includes up to three interim purchase dates. As of December 25, 2011, there were a total of 9,389,557 shares available for issuance under the 1999 ESPP.

Purchase rights under the 1999 ESPP were valued using the Black-Scholes model assuming no expected dividends and the following weighted-average assumptions for the three and six months ended December 25, 2011:


	Three Months Ended December 25, 2011			Six Months Ended December 25, 2011
Expected term (years)		0.68			0.73
Expected stock price volatility		44.45	%		44.37	%
Risk-free interest rate		0.10	%		0.11	%

As of December 25, 2011, there was $6.3 million of unrecognized compensation expense related to the 1999 ESPP, which is expected to be recognized over the next 0.7 years.