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 Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s options and RSU awards typically vest over a period of three years or less, although awards assumed in connection with the acquisition of Novellus Systems, Inc. (“Novellus”), have vesting terms up to four years. The Company also has an employee stock purchase plan 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				Nine Months Ended
	March 29, 2015		March 30, 2014		March 29, 2015		March 30, 2014
	(in thousands)
Equity-based compensation expense	$	32,948	$	24,334	$	95,620	$	70,615
Income tax benefit related to equity-based compensation expense	$	5,705	$	4,112	$	16,545	$	11,710

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 Lam Research Corporation 2007 Stock Incentive Plan, as amended and 2011 Stock Incentive Plan, as amended (collectively the “Stock Plans”) provide for the grant of non-qualified equity-based awards to eligible employees, consultants and advisors, and non-employee directors of the Company and its subsidiaries. A summary of stock plan transactions is as follows:


	Options Outstanding					Restricted Stock Units Outstanding
	Number of Shares			Weighted- Average Exercise Price		Number of Shares			Weighted-Average Fair Market Value at Grant
June 29, 2014		1,331,886		$	32.20		5,635,469		$	45.83
Granted		76,659		$	80.60		1,713,990		$	79.74
Exercised		(513,913	)	$	31.61		N/A			N/A
Cancelled		(7,452	)	$	29.86		(136,375	)	$	49.02
Vested restricted stock		N/A			N/A		(1,603,237	)	$	41.23

March 29, 2015		887,180		$	36.74		5,609,847		$	57.43

As of March 29, 2015, there was $3.4 million of total unrecognized compensation cost related to unvested stock options granted and outstanding; that cost is expected to be recognized over a weighted-average remaining vesting period of 2.3 years. As of March 29, 2015, there was $228.3 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 2.2 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 Common Stock at a purchase price per share equal to the lower of 85% of the fair market value of 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.

Purchase rights under the 1999 ESPP were valued using the Black-Scholes option valuation model and the following weighted-average assumptions for the three and nine months ended March 29, 2015 and March 30, 2014:


	Three Months Ended						Nine Months Ended
	March 29, 2015			March 30, 2014			March 29, 2015			March 30, 2014
Expected term (years)		0.51			0.51			0.68			0.68
Expected stock price volatility		30.47	%		28.89	%		27.62	%		30.24	%
Risk-free interest rate		0.11	%		0.09	%		0.07	%		0.07	%
Dividend Yield		0.51	%		N/A			1.15	%		N/A

As of March 29, 2015, there was $6.2 million of unrecognized compensation expense related to the 1999 ESPP, which is expected to be recognized over a remaining period of approximately five months.