Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03445/USCOURTS-cand-5_06-cv-03445-8/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1331 Fed. Question: Securities Violation

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MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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1-SF/7572247.5

STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

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JOHN H. HEMANN (SBN 165823)

JOSEPH E. FLOREN (SBN 168292)

BENJAMIN P. SMITH (SBN 197551)

CHRISTOPHER J. BANKS (SBN 218779)

TERA M. HEINTZ (SBN 241414)

One Market, Spear Street Tower

San Francisco, CA 94105-1126

Tel: 415.442.1000

Fax: 415.442.1001

E-mail: jhemann@morganlewis.com

jfloren@morganlewis.com

bpsmith@morganlewis.com

cbanks@morganlewis.com

theintz@morganlewis.com

Attorneys for Defendants Jeffrey L. Hall, Richard P. 

Wallace, and Nominal Defendant KLA-Tencor 

Corporation

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION

In re KLA-TENCOR CORPORATION 

SHAREHOLDER DERIVATIVE 

LITIGATION

This Document Relates to:

JAMES ZIOLKOWSKI,

Plaintiff,

vs.

KENNETH LEVY, et al.,

Defendants.

Case No. C-06-03445-JW

STIPULATION AND [PROPOSED] 

ORDER REGARDING KLATENCOR’S VOLUNTARY OPTION 

PLAN 

Case No. C-06-03445-JW

TO THE HONORABLE COURT:

Plaintiff and Nominal Defendant KLA-Tencor Corporation (“KLA-Tencor” or the 

“Company”), hereby stipulate and agree, by and through their undersigned counsel, as follows: 

Case 5:06-cv-03445-JW Document 110 Filed 07/16/07 Page 1 of 6
MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

2

WHEREAS, this is a shareholder derivative action on behalf of nominal defendant KLATencor against certain current and former executives and members of its Board of Directors; 

WHEREAS, on June 1, 2006, plaintiff James Ziolkowski (“Ziolkowski”) filed a motion 

for preliminary injunction in the above-captioned case, seeking, among other things, an order 

enjoining the exercise of certain KLA-Tencor stock options during the pendency of this litigation 

by those persons who are individual defendants;

WHEREAS, on May 24, 2006, KLA-Tencor’s Board of Directors appointed a special 

committee of its board of directors (“Special Committee”) to conduct an investigation into the 

Company’s historical stock options grants and related accounting practices;

WHEREAS, following the filing of this action and pending completion of the Special 

Committee’s investigation, KLA-Tencor entered into a voluntary plan to restrict the exercise of 

all options held by the Company’s present and former officers and directors, including the 

exercise of such options that were issued to individual defendants (“Voluntary Plan”);

WHEREAS, on September 22, 2006, this Court entered an Order Denying Plaintiff’s 

Motion for Preliminary Injunction in the Ziolkowski action, and ordering KLA-Tencor to give 

written Notice to Plaintiff, and file the notice with the Court 28 days before altering or 

terminating the Voluntary Plan with respect to stock options granted by KLA-Tencor between 

January 1, 1997, and July 31, 2002 (the “Review Period”) to those individuals who are 

defendants, and requiring such Notice to identify the options as to which it is terminating the 

prohibition and information concerning the reasons for terminating the prohibition; 

WHEREAS, on October 23, 2006, the Court consolidated the Ziolkowski action with three 

related shareholder derivative actions, appointed the Alaska Electrical Pension Fund as Lead 

Plaintiff and Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Lead Counsel, and retitled 

this case In re KLA-Tencor Corp. Shareholder Derivative Litigation;

WHEREAS, the operative complaint in this consolidated action, which supersedes the 

prior complaints, is the Amended Consolidated Complaint filed on February 20, 2007 against 

KLA-Tencor, as nominal defendant, and 17 individual defendants (the “Individual Defendants”); 

WHEREAS, one of KLA-Tencor’s current outside directors, Individual Defendant Lida 

Case 5:06-cv-03445-JW Document 110 Filed 07/16/07 Page 2 of 6
MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

3

Urbanek, currently holds 5,000 stock options that were granted to her by the Company on July 22, 

1997, and which will expire on July 22, 2007 if they are not exercised before then;

WHEREAS, based on the Special Committee’s investigation, KLA-Tencor has concluded 

and hereby represents to Plaintiff and the Court that (i) none of the stock options granted to KLATencor’s outside directors during the Review Period were retroactively priced or otherwise 

improperly granted, and (ii) the option grant to Lida Urbanek on July 22, 1997 was made on that 

date and was priced at the fair market value of the Company’s stock on that date;

WHEREAS, KLA-Tencor has secured Ms. Urbanek’s agreement that, if she elects to sell 

some or all of the shares acquired as a result of exercising the 5,000 stock options granted to her

on July 22, 1997, she will maintain (in a bank or securities brokerage account) the net proceeds of 

any such sale(s) pending either (i) a further order of the Court, or (ii) resolution, dismissal or 

other termination of the claims against her in this action; 

WHEREAS, based on the foregoing representations and imminent expiration of the 

options at issue, Plaintiff does not intend to file a preliminary injunction motion with respect to 

the exercise by Ms. Urbanek of the 5,000 stock options that the Company granted to her on July 

22, 1997, and thus, subject to this Court’s approval, does not require compliance with the 28-day

notice period provided under this Court’s September 22, 2006 Order; and

WHEREAS, the parties agree that nothing in this Stipulation shall be construed as a 

waiver of any claims, rights, arguments, or damages by Plaintiff with respect to any stock options 

or defendants, including the stock options that are the subject of this Stipulation, and that all such 

claims, rights, arguments, and damages are expressly reserved;

NOW, THEREFORE, IT IS HEREBY STIPULATED, SUBJECT TO THIS COURT’S 

APPROVAL, AS FOLLOWS:

1. KLA-Tencor may allow Lida Urbanek to exercise the 5,000 stock options granted 

to her on July 22, 1997, that are set to expire on July 22, 2007, notwithstanding that the Company 

did not give Plaintiff 28 days advance notice of its intent to allow such exercise, or file such 

notice with the Court.

2. This Court’s September 22, 2006 Order remains in effect as to options granted to 

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MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

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the Individual Defendants in all other respects.

IT IS SO STIPULATED.

DATED: July 6, 2007 MORGAN, LEWIS & BOCKIUS LLP

JOHN H. HEMANN

JOSEPH E. FLOREN

BENJAMIN P. SMITH

By: /s/___

Joseph E. Floren

One Market, Spear Street Tower

San Francisco, CA 94105-1126

Telephone: (415) 442-1000

Facsimile: (415) 442-1001

Attorneys for Defendants Jeffrey L. Hall, 

Richard P. Wallace, and Nominal Defendant 

KLA-Tencor Corporation

I, Joseph E. Floren, am the ECF User whose ID and password are being used to file this 

STIPULATION AND [PROPOSED] ORDER. In compliance with General Order 45, X.B., I 

hereby attest that the signatory identified below has concurred in this filing.

DATED: July 6, 2007 LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

SHAWN A. WILLIAMS 

MONIQUE C. WINKLER

AELISH M. BAIG

/s/

SHAWN A. WILLIAMS

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)

Case 5:06-cv-03445-JW Document 110 Filed 07/16/07 Page 4 of 6
MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

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LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

WILLIAM S. LERACH

DARREN J. ROBBINS

TRAVIS E. DOWNS III

655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone: 619/231-1058

619/231-7423 (fax)

Lead Counsel for Plaintiffs

Case 5:06-cv-03445-JW Document 110 Filed 07/16/07 Page 5 of 6
MORGAN, LEWIS &

BOCKIUS LLP

ATTORNEYS AT LAW

SAN FRANCISCO

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STIPULATION AND [PROPOSED] ORDER 

REGARDING KLA-TENCOR’S 

VOLUNTARY OPTION PLAN (C-06-03445-JW)

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O R D E R

PURSUANT TO STIPULATION, AND GOOD CAUSE APPEARING, IT IS 

HEREBY ORDERED THAT:

1. KLA-Tencor may allow Lida Urbanek to exercise the 5,000 stock options granted 

to her on July 22, 1997, that are set to expire on July 22, 2007, notwithstanding that the Company 

did not give Plaintiff 28 days advance notice of its intent to allow such exercise.

2. This Court’s September 22, 2006 Order remains in effect as to options granted to 

the Individual Defendants in all other respects.

SO ORDERED.

DATED: ______________, 2007

Hon. James Ware

United States District Judge

July 16 

Case 5:06-cv-03445-JW Document 110 Filed 07/16/07 Page 6 of 6