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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549

FORM 10-K



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the Fiscal Year Ended June 27, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number 0-26634

LeCROY CORPORATION

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 13-2507777                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|700 CHESTNUT RIDGE ROAD CHESTNUT RIDGE, NEW YORK               |  | 10977                               
|(Address of principal executive office)                        |  | (Zip Code)                          

(845) 425-2000

(Registrants telephone number, including area code)

Securities registered pursuant to
Section 12(b) of the Act:



|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Title of each class                    |  | Name of exchange on which registered
|Common Stock, Par Value $.01 Per Share |  | The NASDAQ Stock Market LLC         

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES   ̈            NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES   ̈            NO  x

Indicate by check mark whether the registrant: (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x            NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES   ̈            NO   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark (X) whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈            Accelerated filer   ̈            Non-Accelerated filer  x            Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES   ̈            NO  x

The number of shares outstanding of the registrants common stock, as of September 3, 2009, was 12,498,110 shares. The aggregate market value
of shares of common stock held by non-affiliates as of the last business day of the registrants most recently completed second fiscal quarter was $31,660,532.

Documents Incorporated by Reference

Portions of the Definitive Proxy Statement to be delivered to
shareholders in connection with the 2009 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.









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LeCROY CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED JUNE 27, 2009

TABLE OF CONTENTS



|                                                          |  |                                                                                                              |  |    
|--------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---
|Form 10-K Item Number:                                    |  | PageNo.                                                                                                     
|                                                          | 
|Cautionary Statement Regarding Forward-Looking Statements |  | 3                                                                                                           
|                                                          |  |                                                                                                             
|                                                          |  | PART I                                                                                                       |  |    
|Item 1.                                                   |  | Business                                                                                                     |  | 4  
|Item 1A.                                                  |  | Risk Factors                                                                                                 |  | 18 
|Item 1B.                                                  |  | Unresolved Staff Comments                                                                                    |  | 32 
|Item 2.                                                   |  | Properties                                                                                                   |  | 32 
|Item 3.                                                   |  | Legal Proceedings                                                                                            |  | 32 
|Item 4.                                                   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 32 
|                                                          |  |                                                                                                             
|                                                          |  | PART II                                                                                                      |  |    
|Item 5.                                                   |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 33 
|Item 6.                                                   |  | Selected Financial Data                                                                                      |  | 36 
|Item 7.                                                   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 37 
|Item 7A.                                                  |  | Quantitative and Qualitative Disclosure About Market Risk                                                    |  | 53 
|Item 8.                                                   |  | Financial Statements and Supplementary Data                                                                  |  | 54 
|Item 9.                                                   |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 99 
|Item 9A.                                                  |  | Controls and Procedures                                                                                      |  | 99 
|Item 9B.                                                  |  | Other Information                                                                                            |  | 100
|                                                          |  |                                                                                                             
|                                                          |  | PART III                                                                                                     |  |    
|Item 10.                                                  |  | Directors, Executive Officers and Corporate Governance                                                       |  | 101
|Item 11.                                                  |  | Executive Compensation                                                                                       |  | 101
|Item 12.                                                  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 101
|Item 13.                                                  |  | Certain Relationships, Related Transactions and Director Independence                                        |  | 101
|Item 14.                                                  |  | Principal Accounting Fees and Services                                                                       |  | 101
|                                                          |  |                                                                                                             
|                                                          |  | PART IV                                                                                                      |  |    
|Item 15.                                                  |  | Exhibits and Financial Statement Schedules                                                                   |  | 102
|                                                          |  | Signatures                                                                                                   |  | 106

LeCroy®, WaveLink®, WaveMaster®, WavePro®, WaveJet®, WaveAce®, WaveRunner®, WaveScan, WaveSurfer, WaveExpert, MAUI, CATC, and QualiPHY® are our trademarks, among others not referenced in this document. All other trademarks or servicemarks
referred to in this Annual Report on Form 10-K are the property of their respective owners.



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information included in or incorporated by reference in this report, in press releases, written statements or other documents filed with or
furnished to the SEC, or in our communications and discussions through webcasts, phone calls, conference calls and other presentations and meetings, other than purely historical information, including, without limitation, those statements relating
to the Companys future business prospects, projected operating or financial results, revenues, business plans and objectives, trends, seasonality, cyclicality and growth in the markets we sell into, our strategic direction, our future
effective tax rate and tax valuation allowance, earnings from our foreign subsidiaries, new product introductions, changes to our manufacturing processes, the use of contract manufacturers, the impact of local government regulations, our ability to
generate cash from continuing operations, working capital, liquidity, capital needs, plans for future operations, expectations regarding capital expenditures and operating expenses, growth in our business, the potential impact of adopting new
accounting pronouncements, our purchase commitments, our cost-control activities, savings and headcount reduction recognized from our business realignment programs, our stock and convertible note repurchase programs, the existence or length of an
economic recovery, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are
identified by the words believe, project, expect, anticipate, estimate, intend, strategy, plan, future, may, should,
will, would, will be, will continue, will likely result, and similar expressions.

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking
statements speak only as of the date of the report, press release, statement, document, webcast, or oral discussion in which they were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled
Risk Factors (refer to Part I, Item 1A).



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PART I



|ITEM 1. | BUSINESS
|------- | --------

Our Company

LeCroy Corporation (the Company, LeCroy, us, we or our) was founded in 1964 and is
incorporated in the State of Delaware. Our principal executive offices and manufacturing facilities are located at 700 Chestnut Ridge Road, Chestnut Ridge, New York 10977 and our telephone number is (845) 425-2000. Our website is located at
www.lecroy.com. We sell our products and provide service worldwide through direct sales, including our wholly-owned subsidiaries, manufacturers representatives, telesales, distributors, and electronic commerce.

We develop, manufacture, sell and license high-performance oscilloscopes and global communication protocol analyzers. Our oscilloscopes are tools used by
designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems, validate electronic designs and improve time to market. We offer seven families of oscilloscopes, which address different
solutions for the markets we serve: WaveExpert, our line of Sampling Oscilloscopes; WaveMaster, one of our high performance product families; WavePro, which is targeted at the mid- to high-performance sector; WaveRunner, designed for the
mid-performance sector; WaveSurfer and WaveJet, designed for value-oriented users in the low bandwidth sector of the market; and WaveAce, our entry-level oscilloscope products. Our protocol analyzers are used to reliably and accurately monitor
communications traffic and diagnose operational problems in a variety of communications devices to ensure that they comply with industry standards. The protocol analyzers are used by designers and engineers whose products are in development and
production and also for products deployed in the field.

We generate revenue in a single segment within the Test and Measurement market,
primarily from the sale of our oscilloscopes, protocol analyzers, probes, accessories, and applications solutions. To a lesser extent, we also generate revenue from the sales of our extended warranty contracts, maintenance contracts and repairs and
calibrations on our instruments after their warranties expire. We sell our products into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace. We believe
designers in all of these markets are developing products which rely on increasingly complex electronic signals to provide the features and performance their customers require.

Test and Measurement Market

Test and Measurement equipment is used in the design, development,
manufacture, deployment and operation of electronic products and systems. This equipment is required to verify functionality and performance of new product designs and to ensure compliance to industry standards and overall product quality. These
instruments are used across all electronic equipment industries, including computer, semiconductor, communications, consumer, automotive, defense, and video. In addition, Test and Measurement instruments are utilized to install, maintain and monitor
wireless and wire-line communications and broadcast networks. This Test and Measurement equipment aids in the research and development of new products, testing of products in production, and maintenance and service of products in the field.

According to Prime Data, Inc., an independent market research firm tracking the Test and Measurement industry, the market for this
equipment was approximately $7.8 billion in 2008. Certain segments of the Test and Measurement industry have historically experienced greater volatility than the overall industry because of their exposure to certain end markets, such as
communications, that experienced rapid growth in the late 1990s, followed by rapid declines.

Growth in the Test and Measurement market is
driven by improvements in electronic systems performance, growth in the electronics market and emerging technologies and standards. Designers in a wide variety of industries are being constantly driven to increase the performance of their products
and to add new features and capabilities. These improvements rely on advanced semiconductor technology and require the design of faster, more powerful and complex electronic systems. As a result, the underlying technological advances in
communications and electronic



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signals are increasing exponentially in complexity and speed. This is driving the demand for analysis tools that allow designers and manufacturers of these
devices to improve new-product cycle time. With each advance in technology, engineers designing next generation technologies and products must contend with both a reduced margin for error and a progressively more difficult task of fully
characterizing new product design.

While the overall market for test and measurement equipment is made up of hundreds of different types
of instruments and measurement tools, one of the largest single product categories is oscilloscopes. We estimate that oscilloscopes represented approximately $1.2 billion of the overall $7.8 billion market in 2008 and protocol analyzers, inclusive
of versions for wireless, represented approximately $750 million. Protocol analyzers address specific communications standards in the wide area network (WAN), local area network (LAN), storage area network (SAN), computer peripheral interconnect
market spaces and wireless networks and systems. LeCroy presently focuses on the storage area network and computer peripheral interconnect space. We believe the potential total available market for the Companys protocol analyzers lies in the
$100 million range of the total protocol analyzer product category.

Oscilloscope Product Category

Oscilloscopes are the primary instrument used by engineers for testing and analyzing electronic signals. Historically, oscilloscope products within the
Test and Measurement industry have experienced less volatility than the industry as a whole because of their widespread use across many applications and end markets. Thorough testing of complex electronic signals requires a measurement tool capable
of physically attaching to the signal of interest, capturing data with high resolution for long periods of time and supporting detailed signal analysis while providing additional insight into data characteristics and signal trends over time. An
oscilloscope utilizes a graphical display device that allows an engineer to view an electronic signal. The most basic display of an oscilloscope plots a signals voltage versus time (typically in billionths and trillionths of a second),
providing a user insight into the performance of an electronic circuit. In many cases, a user is trying to either verify that the circuit is behaving as designed or measure the signal to gain a basic understanding of signal performance.

Todays oscilloscopes are digital devices which capture electronic signals and convert the voltage values to digital representations, which are
stored in computer memory, allowing the instrument not only to display the signal on a screen, but also to utilize a computer to analyze the signals characteristics. The ability of an oscilloscope to conduct in-depth analysis of a complex
electronic signals characteristics and trends is referred to as wave shape analysis, which is increasingly important as signals become more complex.

The three primary specifications of an oscilloscope are its bandwidth or the capacity to capture a signal of a particular speed; sample rate, or number of data points that can be captured within a specific time,
typically billions of samples per second in modern oscilloscopes; and memory length, or the number of data points that may be captured at one time. Higher bandwidths allow capture of higher speed signals, increased sample rate improves resolution,
and longer memory allows capture of longer, more complex signals. The merit of a specific oscilloscope depends on the combination of these specifications. Real-time oscilloscopes with bandwidths ranging from 20 Megahertz (MHz) up to 30
Gigahertz (GHz) are currently available. Generally, the prices of oscilloscopes increase as the primary specifications increase. We believe the oscilloscope market can be generally divided into four major categories:



| |  |  | High-end oscilloscopes.The largest part of the market, which we believe currently accounts for slightly more than half of the market based on revenues
generated, comprises instruments with the ability to capture and analyze signals ranging from 300 MHz up to the highest available real-time bandwidths. These instruments generally sell from $4,000 up to over $200,000 depending on their capabilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower-end oscilloscopes.We believe about one-third of the markets revenue comes from these products which include less complex instruments with the
ability to capture and analyze signals ranging from 20 MHz to 300 MHz. These instruments generally sell for below $4,000.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Handheld oscilloscopes.This includes a variety of handheld oscilloscopes which we believe currently comprise less than 10% of the overall market. Selling
prices for these handheld instruments are generally between $1,000 and $3,000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Sampling oscilloscopes.For certain high signal speed applications, instruments with bandwidths of up to 100 GHz are required. At these speeds, real-time
oscilloscopes do not have the ability to track the signal shape in real time and take samples quickly enough to be effective. We believe this category currently comprises less than 10% of the overall market, but because of their ability to provide
extremely high bandwidths, sampling oscilloscopes can range in price generally from $22,000 to $90,000.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Protocol
Analyzer Product Category

The demand for digital information has accelerated the need for communication among multiple electronic
devices in various markets, including computers, telecommunications, networking, storage, consumer electronics, aerospace, automotive, industrial automation and medical instrumentation. This growing demand centers on the widespread need to transmit
digital information. Communication among digital devices, or connectivity, occurs over a variety of physical media, such as copper wire and fiber optic cable, as well as over wireless frequencies.

Computer technology initially provided connectivity only among internal devices, such as the processor, memory and storage, and with external peripheral
devices, such as the keyboard, mouse and printer. Today, computer technology also enables connectivity among multiple computing devices and across networks, such as LAN, WAN, SAN, home area networks, personal area networks and the Internet. Consumer
electronics technology is progressively enabling connectivity among devices, such as Internet appliances, digital cameras, mobile telephones, gaming systems, audio systems and televisions.

Digital devices communicate by sending electronic signals through a transmission channel according to a specified protocol. A protocol is a set of
detailed rules that govern and regulate the manner in which the signals are sent, received, and interpreted. The channel and the protocol are both typically specified in a formal communications standard. For communication to be successful, each
device must implement and conform to the same standard.

Early communications standards were relatively simple, typically involving
low-speed communications between two simple devices connected directly by copper wire. Current standards are increasingly complex, typically involving high-speed communications among multiple sophisticated devices indirectly linked to other devices
and across various physical media, including copper wire and fiber optic cables, or wireless technologies with rapidly fluctuating frequencies. As a result, standards that were specified initially in only a few pages of text may now extend to over
one thousand pages. The specifications for these standards are broadly available, which facilitates interoperability of hardware and software products from different manufacturers.

A communication standard is typically introduced by several leading technology and infrastructure companies. These core promoter companies comprise the
nucleus of independent standards groups. These groups are sometimes referred to as implementers forums, trade associations or special interest groups which assist in the development, implementation, promotion, and compliance with the
standards. As commercial interest in a standard increases, the communications standards group typically expands to include system and device manufacturers and service providers. The promoter companies typically remain closely associated with the
standard throughout its lifecycle.

A standard is implemented over a lifecycle that includes three overlapping phases: development,
production and market deployment. During the development phase, key component manufacturers develop and produce important building blocks such as semiconductors, embedded software, protocol stacks and device drivers which will be used by others in
the industry to create products. During the production phase, system and device manufacturers apply these building blocks to construct their unique products and applications. The market deployment phase includes the introduction and sale of products
and applications to end users in the market. Similarly, products associated with a particular standard follow their own unique lifecycle from development through production and deployment.

Protocol analyzers are standard specific tools; they enable a design engineer to analyze the conversation between two devices.
Many distinct communications standards are emerging to meet the growing demand for digital connectivity in the Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and



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Military/Aerospace industries. The characteristics of each standard, including its principal uses, physical medium, transmission speed and distance covered,
vary greatly. Examples of existing and emerging standards supported by our products in the computer peripheral interconnect and storage space include the following:



| |  |  | Fibre Channel.Fibre Channel enables reliable, cost-effective information storage and delivery at very high-speeds. Fibre Channel development started in 1988
and the American National Standards Institute (ANSI) standards body approved the first revision in 1994. Fibre Channel is designed to operate at speeds of 1, 2, 4, and 8 Gbps and gives users the option to develop storage networks with configuration
choices at different price points, levels of scalability and availability. Fibre Channel is a layered protocol that supports additional storage or networking protocols such as SCSI (Small Computer System Interface), IP (Internet Protocol), VI
(Virtual Interface), FcoE (Fibre channel over Ethernet) and ESCON (Enterprise System Connection), thus offering many choices for storage connectivity, cluster computing and network interconnect.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IEEE 1394.The IEEE 1394 standard, commonly known as 1394, FireWire or i.Link, enables high-speed connectivity among computers, peripheral devices and
consumer electronic devices, including audio systems, television sets, digital cameras, video recorders, video players and game consoles. 1394a was introduced in 1987 and was ratified by the IEEE in 1995. The promoter group includes Apple, Canon,
Hewlett-Packard, IBM, Intel, Microsoft, NEC, Philips, Sony, Sun Microsystems, Texas Instruments and Yamaha. 1394a enables connectivity through copper wire at speeds of up to 400 Mbps over distances of up to four and one-half meters. This speed
increases to up to 3.2 Gbps over distances of up to 100 meters in the 1394b standard approved by the IEEE in April 2002.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | InfiniBand. The InfiniBand standard enables high-speed connectivity inside computers and among computers and storage devices in complex storage area
networks. InfiniBand was introduced in 1999 and is used largely in enterprise database, high performance computing (HPC) and storage applications. The promoter group consists of Dell, Hewlett-Packard, IBM, Intel, Qlogic, Cisco, Microsoft and Sun
Microsystems. InfiniBand operates over copper wire and fiber optic cable at speeds of up to 10 Gbps per lane over distances of up to ten meters for copper wire and ten kilometers for fiber optic cable.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PCI Express. PCI Express is an emerging standard first introduced in 2002 and is intended to enhance the Peripheral Connect Interface (PCI) architecture
spanning multiple computer market segments: clients (desktop and mobile), servers (standard and enterprise), embedded computers and communication devices. PCI Express provides system original equipment manufacturers, or OEMs, and peripheral
developers the ability to realize product versatility and market differentiation without the burden of maintaining obsolete interfaces or losing compatibility. The promoter group consists of Hewlett-Packard, Dell, IBM, Intel and Microsoft. PCI
Express runs at 2.5 Gbps per lane in each direction, providing a total bandwidth of 80 Gbps in a 16-lane configuration. The next generation of PCI Express, Generation 2 or Gen 2, runs at 5.0 Gbps per lane in each direction, providing a total
bandwidth of 160 Gbps for a 16-lane configuration. The adoption of PCI Express Gen 2 began in the first half of fiscal 2007.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Serial ATA. The Serial ATA standard (Serial Advanced Technology Attachment, or SATA) enables high-speed, low-cost internal storage connections for desktops
and mobile computers. Serial ATA was introduced in 2000 and has replaced Parallel ATA, the standard used to connect storage devices such as hard drives, DVD and CD drives to the motherboard. Serial ATA operates over copper wire at speeds up to 6
Gbps over distances of up to one meter. Broad based adoption of Serial ATA in the storage market has led to the use of SATA in new applications including server, networked storage and consumer electronics devices.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Serial Attached SCSI. Initiated in December 2001 by the Small Computer System Interface (SCSI) Trade Association, Serial Attached SCSI (SAS) was designed to
be the logical evolution of SCSI to satisfy the data center requirements of scalability, performance, reliability and manageability, while leveraging a common low-cost electrical and physical connection interface from Serial ATA. SAS provides
universal interconnect with Serial ATA, while offering logical SCSI compatibility along with the reliability, performance and manageability of parallel SCSI. SAS is positioned primarily for enterprise class storage
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | applications. SAS allows each host to address up to 4,096 devices via expanders. SASs flexibility allows single or multiple lane communications with
devices, with a 3 Gbps four lane wide connection providing 12 Gbps total throughput. The SAS-2 specification initiated in May of 2005 runs at 6.0 Gbps per lane in each direction, providing a total bandwidth of 24 Gbps. Early adopters began sampling
6.0 Gbps devices in the second half of fiscal 2007.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Universal Serial Bus. The Universal Serial Bus standard (USB) enables low, medium and high-speed connectivity between computers and peripheral devices,
including keyboards, mice, printers, scanners, joysticks and cameras, using plug and play technology. In addition, it is becoming widely used as the replacement technology for proprietary cabling on medical and industrial control equipment. USB was
introduced in 1995 and replaces the serial, parallel, mouse and keyboard ports. The specifications for the second version of USB, or USB 2.0, were released in April 2000. USB 2.0 enabled connectivity through copper wires at speeds of up to 480 Mbps
over distances of up to five meters. USB 3.0 was ratified in November 2008 and introduced a new connectivity speed of 5.0 Gbps over distances of up to five meters. The promoter group for USB consists of Hewlett-Packard, Intel, Microsoft, NEC, ST-NXP
and Texas Instruments. Market research firm In-Stat forecasts that USB-enabled electronics device annual shipments will double from 1.4 billion in 2005 to 3.9 billion in 2012.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

LeCroy is a provider of protocol analyzers for these existing and emerging digital communications standards. Our products are used by
semiconductor, device, system and software companies at each phase of their products lifecycles from development through production and market deployment. We have expertise in the Fibre Channel, IEEE 1394, InfiniBand, PCI, PCI Express, SCSI,
Serial ATA, SAS, and USB standards and are actively engaged with our customers throughout their development and production processes in order to deliver solutions that meet their needs. Utilizing our easy to use, color-coded expert analysis software
called CATC Trace and Catalyst Trace View, our products generate, capture, filter and analyze high-speed communications traffic, allowing our customers to quickly discover and correct persistent and
intermittent errors and flaws in their product design. Our production products are used during the manufacturing process to ensure that our customers products comply with standards and operate with other devices, as well as assist system
manufacturers to download software onto new computers.

Our Competitive Strengths

We are a leading, worldwide provider of oscilloscopes and protocol analyzers as well as a provider of related test and measurement equipment used by
electronic designers and engineers to measure and analyze complex electronic signals and communication protocols. Our key competitive strengths include:

Technology leadership.We are a recognized technology leader in the Test and Measurement industry and continue to leverage our core strengths to develop new and innovative products for the changing requirements
of the markets we serve. Most recently, we have focused on incorporating our internally developed operating system and our advanced methodology for enabling high-speed signal acquisition into our entire oscilloscope product line. We are a major
participant in the various standards groups found in our portfolio of supported protocols. Our expertise has helped make it possible for protocol technologies to increase in scope of utility and stability. We believe this has allowed us to transform
general purpose oscilloscopes into application-specific analysis tools, providing a competitive advantage to our products. These, and our other core technologies, are currently protected by 103 U.S. patents. We also have a significant number of
pending U.S. patent applications, as well as foreign patents and applications where we believe seeking such protection will provide us a competitive advantage.

Broad product portfolio.We offer a broad range of oscilloscope and protocol analyzer products which are designed to capture and analyze a wide range of electronic signals and data packets. We believe our
breadth of product offerings, coupled with our ability to create application-specific analysis tools, address the specific needs of design engineers and systems integration teams in many industries.

Leading customer relationships.Our major customers are leaders in a range of industries, including Computer/Semiconductor/Consumer Electronics,
Data Storage, Automotive/Industrial, and Military/Aerospace. Our ability to work with innovative, industry-leading customers allows us to continuously refine our products to better address the needs of the latest technologies.



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Global sales and distribution.We have a global sales force and distribution structure covering
the Americas, Europe/Middle East, Japan and Asia/Pacific. Each of these regions is a major contributor to our revenue and provided between approximately 8% and 41% of our revenues in the last three fiscal years. We currently have direct sales
personnel in 12 countries and operate in over 50 smaller markets through regional managers, distributors and manufacturers sales representatives. We believe that our sales engineers are recognized by our customers for their technical
expertise. Our sales force often works in tandem with design engineers to create solutions to complex applications.

Experienced
management team.Our management team has a long and successful track record in the Test and Measurement industry with an average of over 20 years of experience in the industry. Our management team has overseen the introduction of many new
products over the recent years and has restructured our operations, enhancing our focus on our core markets while developing our ongoing business strategy, which encourages product innovation.

Our Strategy

In order to enhance our position as a
leading provider of oscilloscopes and protocol analyzers, our objective is to grow our Company and our market share in the markets in which we operate. In addition, we may pursue strategic acquisitions that have strong adjacent market positions or
complement our current product lines. Key strategic goals include:

Focus on the general purpose oscilloscope market.We have a
competitive product offering and ongoing engineering development efforts underway to address customer needs for oscilloscope solutions in market sectors representing the largest and most profitable portion of the oscilloscope market.

Focus on the market for serial data test applications.The market for testing important serial data standards, including PCI Express, Gen I and
Gen 2, Serial ATA, SAS, USB 2.0, and USB 3.0, is a rapidly growing market  on the order of approximately 15% Compound Annual Growth Rates (CAGR) for markets addressed by the Companys products, according to internal estimates. The primary
tools associated with testing serial data links are oscilloscopes (to test the electrical signals and paths or the physical layer) as well as specialized protocol analyzers (to observe, decode and verify that the desired data traffic and
device specific messages are flowing from node to node). Our high end real-time oscilloscope and sampling oscilloscope development efforts are aimed primarily at satisfying the needs of customers in this important applications area. We believe our
offering in these two primary product categories combined with an intense focus on ensuring the right capability is available to our customers at the right time in the most important applications will allow us to continue to grow in this market
segment.



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Products and Services

Oscilloscopes

We currently offer six major real-time oscilloscope families: WaveMaster,
WavePro, WaveRunner, WaveSurfer, WaveJet and WaveAce, and one sampling oscilloscope family, WaveExpert. Each oscilloscope model is capable of capturing and analyzing electronic signals at different bandwidth and performance points in the market.
Each oscilloscope family is also offered with a selection of general software packages that expand its capabilities and allow customization of the operation and measurements of the specific product.



|                                        |  |                |  |                |  |                      |  |                   
|--------------------------------------- |  | -------------- |  | -------------- |  | -------------------- |  | ------------------
|Product Family                          |  | NumberofModels |  | BandwidthRange |  | U.S. ListPrice Range |  | MarketIntroduction
|WaveExpert Sampling Oscilloscope Series |  | 1              |  | Up to 100 GHz  |  | $22,000 - $90,000    |  | April 2005        
|WaveMaster /SDA/DDA 8Zi Series          |  | 18             |  | 4 - 30 GHz     |  | $59,490 - $215,990   |  | January 2009      
|WavePro/SDA/DDA 7Zi Series              |  | 11             |  | 1.5 - 6 GHz    |  | $24,000 - $75,490    |  | July 2008         
|WaveRunner Xi A Series                  |  | 18             |  | 400 - 2000 MHz |  | $9,770 - $22,990     |  | February 2009     
|WaveSurfer Xs A Series                  |  | 12             |  | 200 - 1000 MHz |  | $6,960 - $13,990     |  | March 2009        
|WaveJet 300 A Series                    |  | 8              |  | 100 - 500 MHz  |  | $2,590 - $5,590      |  | April 2009        
|WaveAce Series                          |  | 6              |  | 100 - 500 MHz  |  | $950 - $2,290        |  | October 2008      

Supporting Analyzers and Application Software

Our general purpose oscilloscope products are tailored with proprietary software and hardware to create application specific analyzers which function as
industry-specific oscilloscopes for use in:



| |  |  | Data storage applications  Disk Drive Analyzer products and DDA5000 series, using WaveMaster and WavePro platforms;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | Serial data applications  Serial Data Analyzer products, SDA3000 series, SDA4000, SDA5000 series, SDA6000 series, SDA 7Zi series, and SDA 8Zi series, based on
the WaveMaster platform;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Automotive applications  Hardware and software applications based on the WaveRunner platform for use in understanding serial communications in automobiles and
industrial systems; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Power measurement applications  Hardware and software applications based on the WaveRunner and WaveSurfer platforms for use in a variety of industries.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

Protocol Analyzers

Our protocol analyzer products are advanced verification systems that assist hardware and software manufacturers in the efficient design of reliable and interoperable systems and devices. Most of these systems utilize
our proprietary intuitive expert analysis software, the CATC Trace, which displays communications traffic in searchable, color-coded packets. Highlights include:



| |  |  | Summit T2-16 PCI Express Analyzer. The
Summit T2-16, a new high performance platform, features full bi-directional decode and capture of x1 up to x16 PCI Express lanes at both 2.5 and 5 GT/s (Giga-Transfers per second) per lane. Like its predecessors it can capture, process and
analyze PCI Express traffic, but with the added capability to support physical layer decoding with the Bit Tracer option. Both 1GbE (Gigabit Ethernet) and USB host connectivity are provided to make it easy to set up and use. Passive and Active
interposer technologies allow maximum high impedance and low power signal tapping.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Summit Z2-16 PCI Express Exerciser.
The Summit Z2-16 is capable of emulating PCI Express root complex and end point devices. It supports x1 up to x16 lane training at both 2.5 and 5 GT/s speeds. It is a critical test and verification tool intended to assist engineers in improving the
reliability of their solutions, while providing advanced capabilities for stress and corner case testing. Together with the Summit T2-16 analyzer, the Summit Z2-16 reduces time to market by enabling users to quickly identify logic and design flaws.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Protocol Test Card (PTC). The PTC is a multimodal compliance test board used for checking adherence to the protocol-oriented sections of the PCI Express Gen 2
specification. The PTC has been developed in close collaboration with Intel®, and is specifically designed to meet industry
requirements for next generation development tools for PCI Express. This tool is used by validation and test engineers to check for functionality and interoperability of add-in cards, systems, and chips using PCI Express Gen 2. The tests are mainly
defined to check the platform (basic input/output systems, operating systems and root complex) and add-in devices (endpoints, switches, and bridges) in the form of an add-in card that works at both 5 GT/s and 2.5 GT/s.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PETracer ML. The PETracer ML
(Multi-Lane) is an advanced verification system. First introduced in 2003, the PETracer ML is a high impedance, non-intrusive analyzer, capturing, processing and analyzing PCI Express traffic. The PETracer ML allow for full bi-directional decode and
capture of up to x1 or x8 PCI Express lanes at 2.5 GT/s per lane. This analyzer is based on the UPAS (Universal Protocol Analyzer Systems) 10K platform. The PETracer ML has a variety of interposer probes for embedded and computing board form
factors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PETrainer ML. First introduced in
2003, the PETrainer is a PCI Express exerciser capable of emulating PCI Express root complex and end point devices. The
PETrainer ML supports x1 up to x4 lane training at 2.5 GT/s per lane. It is a critical test and verification tool intended to assist engineers in improving the reliability of their solutions, while providing advanced capabilities for stress and
corner case testing. Together with the CATC PETracer ML, the PETrainer reduces time to market by enabling users to quickly identify logic and design flaws.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Edge T1-4. The Edge T1-4 is an advanced verification system. First introduced in 2008, the Edge T1-4 is a high impedance, non-intrusive analyzer, capturing,
processing and analyzing PCI Express traffic. The Edge T1-4 allows for full bi-directional decode and capture of up to x1 or x4 PCI Express lanes at 2.5 GT/s per lane. This analyzer is based on a card form factor.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sierra M6-4 and M6-2 test platforms. The Sierra systems provide a complete protocol test tool for 6G SAS and/or SATA development, including protocol analysis,
traffic generation, device emulation, error injection and compliance test, all in one package. The Sierra systems offer two hardware platforms: The Sierra M6-4, which supports up to four ports for a lab environment; and the compact, portable Sierra
M6-2, which supports up to two ports for either lab or field environments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | STX Series. The STX SAS Master and SATA Master are integrated analyzer/exerciser systems designed to address the serial storage protocol test and verification
market. The STX 231 and 431 series offer support for Serial ATA (SATA) and Serial Attached SCSI (SAS) 1.5 and 3 Gbps signaling speeds. The flagship STX 460 offers support for 1.5, 3, and 6 Gbps SAS-2 protocol capture. The STX product family also
offers target and host emulation enabling full system validation. The STX products accommodate a high degree of configurability across protocols, speeds, and target applications.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Voyager Analyzer/Exerciser. The Voyager Analyzer/Exerciser system, introduced in 2008, is LeCroys flagship USB development and test tool. Voyager supports all
speeds of the new USB 3.0 specification with both an analyzer and exerciser in a single unit. The Voyagers unique architecture allows for traffic generation and analysis via a single connection point. The ReadyLink feature of the
exerciser allows for seamless connectivity to SuperSpeed devices. The analyzer/exerciser system can be used for error injection and compatibility testing, as well as device and compliance verification.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | USBTracer/Trainer. The
USBTracer/Trainer system, introduced in 2001, is LeCroys standard USB 2.0 development and test tool that provides two independent recording channels and captures all USB bus speeds. The USBTrainer is an integrated traffic generator option
capable of emulating host or device traffic behaviors. The analyzer/exerciser system is used by PC manufacturers and designers, USB silicon and device manufactures to test the robustness of their USB designs. The analyzer/exerciser system can be
used for error injection, compatibility testing and compliance verification.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SBAE-30 Series. The SBAE-30 provides a complete protocol analysis and exerciser system for advanced USB development applications. In addition to supporting all USB
bus speeds, the SBAE-30 provides dual USB recording channels and full support for the latest USB device class decodes. It is available with an integrated traffic generation capability that allows users to emulate USB host and device traffic. The
analyzer/exerciser system can be used for error injection, compatibility testing and compliance verification.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Conquest Series. The Conquest Series
provides a range of entry-level USB protocol analyzers that support 2.0 and 1.1 speeds, upper level protocol decoding and an easy-to-use graphical interface. Targeted at the growing market for embedded USB designs, the Conquest is available in a
Standard and Pro model. Both systems offer high-speed USB protocol analysis with additional features like traffic generation and timing waveform displays available in the Pro model for more sophisticated testing applications.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PeRT3.The PeRT3(Protocol-enabled Receiver and Transmitter Tolerance
Tester) is a new line of products from LeCroy targeted at the important area of electronic design known as receiver testing. It allows parameters to be varied in the physical layer while incorporating protocol and link layer connectivity to enable
seamless control of the device under test to create fully automated test environments for both compliance and margin testing. PeRT3is a Bit Error Rate (BER) Tester based instrument with a 6.125 Gbps pattern generator and error detector, featuring a full range of
stress injection capabilities including random jitter, sinusoidal jitter, common mode noise, pre-emphasis and spread spectrum clocking (SSC). The protocol enabled generators and detectors are capable of performing loopback initialization directly
with the device under test without any external tools, and analysis can be performed for both BER and frame error rate (FER).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Products and Services

We offer our customers a variety of complementary oscilloscope probes and accessory
products. Probes provide the critical physical electrical or optical connection from the customers circuit to the oscilloscope. We believe our WaveLink high frequency differential probes provide the high bandwidth performance necessary to
measure serial data signals in the expanding serial data communications market. We also offer digitizing modules from 150 MHz to 1 GHz bandwidths.

We also provide support, repairs, maintenance, recalibration and a variety of post sale upgrades and installations. We maintain field service centers in Chestnut Ridge, New York; Santa Clara, California; Geneva, Switzerland; Tokyo, Japan;
Seoul, South Korea; Beijing, China; and Singapore.

Our Customers and End Markets

Our products are used primarily by electronic designers and engineers principally in the research and development of new products. These end users
typically employ our oscilloscopes to validate the performance of electronic designs and components. Our protocol analyzers are used by designers and engineers whose products are in development and production and also for products deployed in the
field. We currently provide products to customers in four primary end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace. Our customers also include leading original equipment
manufacturers.



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Computer/Semiconductor/Consumer Electronics.These markets include companies providing components,
interfaces, subsystems and complete products for high speed and general purpose computing, network servers, and related devices and systems. Requirements in this end market have been driven by:



| |  |  | growth in the capability and complexity of devices, which now provide a higher level of integration and functionality;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | a dramatic increase in the use of high speed serial data communications interfaces in both the computer and semiconductor market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | new interface standards, which enable increased interoperability and higher levels of bandwidth between devices and peripherals, including: PCI Express, Gen I and
Gen 2  a high speed serial data interface for connection to high performance subsystems, such as a graphics card, inside a computer; Serial Advanced Technology Attachment (Serial ATA), 1.5 Gb/s, 3.0 Gb/s and 6.0 Gb/s  a high speed serial
data interface for computer disk drives; USB 3.0  the latest version of the Universal Serial Bus standard, a high speed computer peripheral expansion interface; 10 Gigabit Ethernet Attachment Unit Interface (XAUI)  a 10 Gigabit Ethernet
standard that improves the routing of electrical interconnections; and Firewire  a high-speed serial interface for computer peripheral expansion, High Definition Multimedia Interface (HDMI) and DisplayPort  high speed serial data
interfaces used for transmitting digital video and audio to monitors and high definition televisions.; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | system-on-a-chip validation.
| | - |  | ----------------------------

Data Storage Devices.This market includes companies that provide magnetic and optical storage devices such as hard disk drives, removable media, tape, CDs and DVDs. Requirements in this end market are being driven by:



| |  |  | continued pressure to reduce product development life cycle time;
| | - |  | -----------------------------------------------------------------



| |  |  | increasing need to store more information on storage media, which requires the encoding of signals to achieve higher density;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | migration of hard disk drives to portable media applications and consumer devices, such as MP3 players and digital video recorders;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | evolution to perpendicular magnetic recording for higher capacity storage; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | adoption of faster point-to-point connections through the use of the SATA and SAS, interface standards.
| | - |  | -------------------------------------------------------------------------------------------------------

Automotive/Industrial.The automotive market includes automobile OEMs, component suppliers to automobile OEMs and industrial equipment
manufacturers. Requirements in this end market are being driven by:



| |  |  | proliferation of Electronic Control Units, or ECUs, to various automotive subsystems, such as engine control, braking, and traction control;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | progression to networked ECUs; and
| | - |  | ----------------------------------



| |  |  | serial data topologies managing complex inbound and outbound signals.
| | - |  | ---------------------------------------------------------------------

Military/Aerospace.The military and aerospace market includes companies that provide components and systems for defense and commercial airplane
applications. Requirements in this end market are being driven by:



| |  |  | applications that use complex communications signals in challenging environments;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | extraordinarily high need for precision and reliability given the consequences of failure; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | need for long-term support due to long military program life.
| | - |  | -------------------------------------------------------------



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Sales, Marketing and Distribution

We maintain a direct sales force of highly trained, technically sophisticated sales engineers who are knowledgeable in the use of oscilloscopes and protocol analyzers and the features and advantages of our products.
In addition, because of our focus on high-performance oscilloscopes and protocol analyzers, our sales engineers are skilled in performing product demonstrations for current and prospective customers.

We sell our oscilloscopes and protocol analyzers through our own direct sales force, distributors, and manufacturer representatives in the United States.
Internationally, our protocol products are sold through specialized distributors that are aligned with key customers in our end markets as well as our own direct sales force. The oscilloscope products, in addition to being sold through distributors
and manufacturer representatives internationally, are also sold through a direct sales force in Switzerland, Germany, Italy, France, the United Kingdom, Sweden, Japan, China, South Korea and Singapore, with regional sales headquarters located in
Chestnut Ridge, New York; Santa Clara, California; and Geneva, Switzerland.

We support our customers through a worldwide network of
specialized applications engineers. We maintain service, repair and calibration facilities in Chestnut Ridge, New York; Santa Clara, California; Geneva, Switzerland; Seoul, South Korea; Tokyo, Japan; Beijing, China; and Singapore.

In order to raise market awareness of our products, we maintain an informative website (www.lecroy.com), advertise in trade publications, distribute
promotional materials, conduct marketing programs and seminars, issue press releases regarding new products, publish technical articles and participate in industry trade shows and conferences.

Technology and Product Development

We believe we
are a technology leader in both the oscilloscope and protocol analyzer markets. We have developed core capabilities in the design of high-performance, high-speed signal conditioning, sampling and analog-to-digital conversion circuitry. We believe we
are also a leader in the design of technologies related to the storage, movement and processing of the large amounts of data produced by oscilloscopes and protocol analyzers.

In protocol analyzers, with the acquisition of Computer Access Technology Corporation (CATC) in October 2004 and Catalyst Enterprises Inc.
(Catalyst) in October 2006, we believe we have a competitive advantage as a result of our knowledge and expertise in multiple communications standards, computer and software architecture and advanced ASIC and programmable logic design.
This expertise is enhanced by our advanced design tools and collaboration among our various design teams. We have a broad, vertically integrated technology base that includes the knowledge and expertise to design advanced ASICs, use programmable
logic in the form of microcontrollers and programmable logic devices in real-time embedded applications, design electronic circuit boards and systems, and design and develop embedded software, software drivers and software applications. In October
of 2006, LeCroy acquired Catalyst to broaden its protocol product line and increase penetration of certain new customer and market segments. The combination of Catalyst with the LeCroy Protocol Solutions Group allows the combined division to bring
next-generation products to market faster, and satisfy more customer requirements.

Our product development efforts are focused on
hardware, software and mechanical development initiatives. Our hardware product development team is focused on developing innovative signal conditioning, data acquisition and electrical circuit probing technologies that allow better waveform
fidelity and circuit connection capabilities. This is accomplished through the use of advanced integrated circuit techniques and processes, innovative design tools and methodologies and key technology partnerships.

Our software engineering group continues to develop and advance our protocol, wave shape analysis and measurement technologies in order to offer new and
innovative analysis tools for our customers. This group also develops application solutions to perform specific analysis for specific communications protocols, data storage, power measurement, communications and other markets.



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We have also entered into technology agreements that have provided us access to technologies that enable
extremely high-speed, high-fidelity signal capture capabilities and very high throughput data movement capabilities. We intend to continue to develop and leverage such key partnerships in areas that complement or enhance our own internal strengths.

Manufacturing and Suppliers

We have
consolidated and streamlined our manufacturing and operational activity to focus on our core expertise of oscilloscope and protocol analyzer product introduction and development. Our WaveExpert, WaveMaster, and WavePro oscilloscopes and related
products are manufactured at our facility in Chestnut Ridge, New York. Protocol analyzer products are manufactured in our Santa Clara, California facility. Our focus on supply chain execution has allowed us to improve the cycle time required to
build our instruments as well as reduce the time required to test and deliver products to our customers. For example, we have partnered with manufacturing companies in the U.S. and Asia that have allowed us to design and develop innovative products
at reduced costs. This has allowed us to lower the costs of our products to our customers while improving our margins. Our WaveJet products are manufactured in Japan, while our WaveAce products are manufactured in China. Our WaveRunner Xi and
WaveSurfer Xs products are manufactured by a contract manufacturer in Malaysia to a subassembly level, with final assembly done at our headquarters in New York.

We purchase a small number of parts from single-source suppliers. In particular, several key integrated circuits that we use are made by IBM and Toshiba. Although we have not experienced significant production delays
attributable to supply changes, we believe that, for integrated circuits in particular, alternative sources of supply would be difficult to develop over a short period of time. Because we have no direct control over our third-party suppliers,
interruptions or delays in the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary parts or products, we may be unable
to redesign or adapt our technology to work without such parts or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs or quality control problems and loss of revenues.

Competition

Oscilloscopes

The oscilloscope market is highly competitive and characterized by rapid and continual advances in technology. Our principal competitors in this market
are Tektronix, Inc., a subsidiary of Danaher Corporation (Tektronix) and Agilent Technologies, Inc. (Agilent). Both of our principal competitors have substantially greater sales and marketing, development and financial
resources than we do. We believe that Tektronix, Agilent and other competitors offer a range of products that attempt to address most sectors of the oscilloscope market.

We believe that the principal bases of competition in the oscilloscope market are a products performance characterized by the confluence of bandwidth, sample rate, memory length and processing power, its price
and quality, the vendors name recognition and reputation, product availability and the quality of post-sale support. We believe that we currently compete effectively with respect to each of the principal bases of competition in the
oscilloscope market in the general price range ($950 to $216,000) in which our oscilloscopes are focused. We also believe that our success will depend in part on our ability to maintain and develop the advanced technology used in our oscilloscope
products and our ability to offer high-performance products at a favorable price-to-performance ratio.

Protocol Analyzers

Our protocol analyzer markets are highly competitive, and we expect competition to intensify in the future. We compete with a number
of companies, such as Agilent and JDS Uniphase Corporation (who recently acquired the Network Tools Business from Finisar Corporation), our largest competitors. These competitors are diverse and offer a variety of solutions directed at various
segments of this marketplace. We believe the principal factors of competition include:



| |  |  | Product functionality;
| | - |  | ----------------------



15



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##### Table of Contents

| |  |  | Time to market with new products;
| | - |  | ---------------------------------



| |  |  | Ease of product use;
| | - |  | --------------------



| |  |  | Product speed, reliability, stability and accuracy;
| | - |  | ---------------------------------------------------



| |  |  | Price performance;
| | - |  | ------------------



| |  |  | Flexibility and programmability of products;
| | - |  | --------------------------------------------



| |  |  | Upgradeability of products;
| | - |  | ---------------------------



| |  |  | Local support and service for products; and
| | - |  | -------------------------------------------



| |  |  | Breadth of product offerings.
| | - |  | -----------------------------

We
believe we compete favorably with respect to each of these factors and have gained significant market share in some of our target markets as a result. We believe our success has been driven by our vertically integrated technology, ability to
generate customer loyalty and ability to anticipate market trends.

Backlog

Our backlog of unshipped customer orders was approximately $1.6 million and $5.1 million as of June 27, 2009 and June 28, 2008, respectively.
Customers may cancel or reschedule orders at any time. We believe that our level of backlog, at any particular time, is not necessarily indicative of our future operating performance.

Intellectual Property

We rely on a combination of patents, trademarks and trade secret laws,
non-disclosure agreements and other intellectual property protection methods, as well as technical expertise and continuing technological research and development to establish and protect proprietary rights in our products. We believe, however, that
because of the rapid pace of change and advancement in oscilloscope technology, legal intellectual property protection is and will continue to be a less significant factor in our success than our core competency of wave shape analysis and the
experience and expertise of our personnel.

We protect significant technologies, products and processes that we consider important to our
business by, among other things, filing applications for patent protection. We currently hold 103 U.S. patents. We also have a significant number of pending U.S. patent applications, as well as foreign patents and applications. Although none of our
products depends exclusively on any single patent, we believe our patents, in the aggregate, are important to our business and contribute to our competitive advantage.

We license or otherwise acquire key enabling technologies from third parties in order to gain access to technologies that would be too expensive or too time consuming to develop internally or that would give us a
competitive advantage or shorten our product development time-to-market. The capabilities licensed or otherwise acquired through these agreements, and additional license agreements we entered into, could be developed by us, but would require
considerable time and expense.

Although we believe that our products and technologies do not infringe the proprietary rights of third
parties, there can be no assurance that third parties will not assert claims against us based on the infringement or alleged infringement of any such rights. Such claims are typically costly to defend, regardless of the legal outcome. There can be
no assurance that we would prevail with respect to any such claim, or that a license to third party rights, if needed, would be available on acceptable terms. In any event, patent and proprietary rights litigation can be extremely protracted and
expensive.



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##### Table of Contents

Regulatory Matters

As we manufacture our products in the United States and sell our products and purchase parts, components and sub-assemblies in a number of countries, we are subject to legal and regulatory requirements, particularly
the imposition of tariffs and customs, in a variety of countries. Our products are also subject to United States export control restrictions. In certain cases, we may not be permitted to export products without obtaining an export license. U.S.
export laws also prohibit the export of our products to a number of countries deemed by the United States to be hostile. The export of our high-performance oscilloscopes from the United States is also subject to regulation under the Treaty for
Nuclear Non-Proliferation. We cannot be certain that the U.S. government will approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies
with respect thereto, could be revised.

Employees

As of June 27, 2009, we had 389 full-time employees, 154 of whom work in our Chestnut Ridge, New York facility. Our employees are not represented by a labor union and we have not experienced any work stoppages.
We believe that our employee relations are satisfactory.

Investor Information

Our Internet website address is www.lecroy.com. We make available, free of charge on our website, by clicking on About LeCroy and then
selecting the Investor Relations link and the SEC Filings link, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange
Commission (SEC).

Executive Officers of the Registrant

Unless otherwise set forth, below are the names, ages, positions, and a brief account of the business experience of each of our executive officers as of August 31, 2009:



|                    |  |     |  |                                                                          
|------------------- |  | --- |  | -------------------------------------------------------------------------
|Name                |  | Age |  | Position(s)                                                              
|Thomas H. Reslewic  |  | 50  |  | President; Chief Executive Officer and Director                          
|Roberto Petrillo    |  | 49  |  | Vice President, Sales, Americas, Europe, Middle East and Africa          
|David C. Graef      |  | 52  |  | Vice President, Chief Technology Officer                                 
|Sean B. OConnor    |  | 44  |  | Vice President, Finance; Chief Financial Officer; Secretary and Treasurer
|Conrad J. Fernandes |  | 48  |  | Vice President, Sales, Asia/Pacific                                      
|Corey L. Hirsch     |  | 52  |  | Vice President, Chief Information Officer                                

Thomas H. Reslewicwas named to our Board of Directors in January 2002. He joined us in
1990 and has served as President and Chief Executive Officer since January 2002. Mr. Reslewic previously served as President from October 2000 until December 2001, and Executive Vice President and Chief Operating Officer from February 1998
until October 2000. Mr. Reslewic has a Bachelor of Science degree in physics from the College of the Holy Cross and a Master of Business Administration degree from the University of Oregon.

Roberto Petrillo was appointed Vice President Sales, Americas, Europe, Middle East and Africa in January 2007. Previously he held the position of
Vice President  LeCroy EMEA (Europe, Middle East and Africa) since August 2002. Mr. Petrillo held various sales management positions during an 11-year tenure with another leading oscilloscope manufacturer where he led the European
Telecommunication Business Unit and the European Indirect Channel teams that generated $100 million in annual revenue. Earlier in his career, Mr. Petrillo also worked for Hewlett Packard as an Account Manager. Prior to Hewlett Packard,
Mr. Petrillo worked at GTE Telecommunication as an R&D Electronic Engineer. Mr. Petrillo has a Bachelor of Electronic Engineering degree. He received his MBA from Pacific Western University in California.



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David C. Graefhas served as Vice President, Chief Technology Officer since April 2003.
Previously, he served as Vice President, Research and Development from January 1999 through March 2003, Engineering Manager from June 1996 through January 1999 and Senior Engineer from January 1989 through May 1996. Mr. Graef has a Bachelor of
Science degree in Electrical Engineering from the University of Bridgeport.

Sean B. OConnor was appointed Vice President,
Finance and Chief Financial Officer in November 2005. Previously he served as Vice President, Legal Affairs and Chief Compliance Officer, and from August 2001 to May 2005 he served as the Companys Tax Director. Prior to joining LeCroy, he was
an attorney at the law firm of McDermott Will and Emory. Previously Mr. OConnor served as Director of Taxation and Finance at Movado Group and as a senior consultant in the New York office of PricewaterhouseCoopers LLP.
Mr. OConnor, a CPA, received his B.B.A. from Pace University and his J.D. from Seton Hall University School of Law.

Conrad
J. Fernandeswas appointed Vice President, Sales, Asia/Pacific in July 2008. Previously he served as General Manager-Oscilloscope Division. From August 2006 through March 2007 he served as Vice President of Corporate Development and Strategy and
as Vice President, Worldwide Sales from July 2001 to August 2006, Vice President, International Sales from 1999 until 2000, Director of Asia/Pacific Sales from 1994 until 1999 and Product Marketing Manager from 1990 until 1994. Mr. Fernandes
has a Bachelor of Electronic Engineering degree and a Master of Business Administration degree from City University of London.

Dr. Corey L. Hirsch has served as Vice President, Information Systems and Facilities since January 2002, and was named Chief Information Officer in May 2005. He joined LeCroy in September 2001, after a 24-year tenure with
another leading oscilloscope manufacturer, most recently as Director of European Operations, and Acting European Vice President. He completed his Doctorate degree in Business Administration from Brunel University, London and his Masters in Business
Administration from the University of Oregon.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

An investment in our common stock
and convertible notes involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this Form 10-K when evaluating the Company and its business. If any of the following
risks actually occurs, our business, financial condition, or results of operations could suffer. In that case, the trading price of our common stock and convertible note could decline and you may lose all or part of your investment.

A prolonged economic downturn in the U.S. and around the world could materially harm our business by decreasing capital spending.

The current volatility and disruption to the capital and credit markets have reached unprecedented levels and have significantly adversely impacted
global economic conditions. These conditions have led and could further lead to continuing substantial declines in capital spending over the foreseeable future. The current downturn and uncertain outlook in the global economy will likely continue to
have a material adverse impact on the Companys business, financial condition, liquidity and results of operations. Negative trends in the general economy, including trends resulting from actual or threatened military action by the United
States and threats of terrorist attacks in the United States and abroad, could cause a decrease in capital spending in many of the markets we serve. In particular, a downward cycle affecting the computer and semiconductor, data storage devices,
automotive and industrial, and military and aerospace markets would likely result in a reduction in demand for our products and would have a material adverse effect on our business, results of operations, financial condition and liquidity. In
addition, if customers markets decline, we may not be able to collect outstanding amounts due to us. Such declines could harm our consolidated financial position, results of operations, cash flows, stock price and convertible notes valuation,
and could limit our ability to return to and maintain profitability. During an economic downturn, demand for our products may decrease. Restrictions on credit globally and foreign currency exchange rate fluctuations in certain countries may impact
economic activity and our results.



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If the Company is unable to successfully implement its expense reduction plans, its future operating results could
suffer.

During fiscal 2009, the Company implemented expense reduction plans designed to streamline operations, reduce expenses,
and improve efficiencies and effectiveness across the Companys global organization. The Company may not be able to fully realize its expense reductions and sustain them in subsequent periods. In addition, the Company could incur additional
unforeseen expenses that may fully or partially offset these expected expense savings. These reductions of our cost structure, could have the effect of reducing our talent pool and available resources and, consequently, could have long-term effects
on our business by decreasing or slowing improvements in our products, affecting our ability to respond to customers, limiting our ability to increase production quickly if and when the demand for our products increases and limiting our ability to
hire and retain key personnel. Furthermore, there are risks that the Companys human resources could be strained as a result of the streamlining of operations and the reduction of its workforce. The inability to successfully implement its
expense reduction plans could adversely affect the Companys future financial condition, cash flows, and results of operations. These circumstances could cause our income to be lower than it otherwise might be and, as a result, adversely
affecting our stock price and convertible notes valuation.

If the Company misjudges the demand for its products, high inventory levels could
adversely affect future operating results, cash flows and profitability.

Demand for the Companys products can affect
inventory levels. If customer demand is lower than expected, inventory levels can rise causing a strain on operating cash flow. If the inventory cannot be sold, additional reserves or write-offs to future earnings could be necessary. Conversely, if
demand is higher than expected, insufficient inventory levels could result in unfulfilled customer orders, loss of revenue and an unfavorable impact on customer relationships. Failure to properly judge demand and properly manage inventory could have
a material adverse effect on profitability, liquidity and financial position.

Changes in the sales mix of the Companys products could impact
gross profit margins.

The product families that are sold by the Company are sold at a wide range of price points and yield a
variety of gross profit margins. Thus, the mix of sales by product family can have an impact on the gross profit margins of the Company. If the Companys sales mix shifts unfavorably toward products with lower gross profit margins than the
Companys historical consolidated gross profit margin or if the mix of business changes significantly, it could have an adverse effect on the results of operations and cash flows.

Our operating results are expected to continue to fluctuate and may not meet our financial guidance or published analyst forecasts, which may cause the price of our common stock, or value of our convertible
notes, to decline significantly.

Our past operating results, including our gross profits, have fluctuated from fiscal period to
fiscal period. We expect our future operating results and gross profits will continue to fluctuate from fiscal period to fiscal period due to a number of factors, many of which are outside our control and any of which could cause our stock price and
convertible notes valuation to fluctuate. The primary factors that affect our operating results include the following:



| |  |  | visibility into our markets is limited, our quarterly sales and operating results are highly dependent on the volume and timing of orders received during a fiscal
quarter, which are difficult to forecast;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in overall demand for our products;
| | - |  | -------------------------------------------



| |  |  | the timing of the announcement, introduction and market acceptance of new products by us or competing companies;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the timing and magnitude of research and development expenses;
| | - |  | --------------------------------------------------------------



| |  |  | changes in the estimation of the future size and growth rates of our markets;
| | - |  | -----------------------------------------------------------------------------



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| |  |  | changes in our production efficiency;
| | - |  | -------------------------------------



| |  |  | disruptions in operations at any of our facilities, third party suppliers, or the facilities of any of our contract manufacturers for any reason;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the selling prices of our products; and
| | - |  | --------------------------------------------------



| |  |  | changes in foreign currency exchange risks.
| | - |  | -------------------------------------------

In addition, we have historically experienced somewhat lower activity during our first fiscal quarter than in other fiscal quarters which, we believe, is due principally to the lower level of orders and market activity during the summer
months, particularly in Europe. We believe this seasonal aspect of our business is likely to continue in the future.

Our common stock price and
convertible notes valuation may be subject to significant fluctuations and volatility.

The market price of our common stock and
valuation of our convertible notes fluctuates significantly. The stock price and convertible notes valuation could fluctuate in the future due to a number of factors, some of which are beyond our control. These factors include:



| |  |  | historically low trading volume in our stock and convertible notes relative to alternative investments;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | announcements of developments related to our business, including additions or departures of key personnel;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | announcements of technological innovations or new products or enhancements by us or our competitors;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | sales by competitors, including sales to our customers;
| | - |  | -------------------------------------------------------



| |  |  | sales of common stock into the public market, including those by directors and members of management;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | developments in our relationships with our customers, partners, distributors and suppliers;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | shortfalls or changes from analysts expectations in revenue, gross profits, earnings or losses, or other financial results;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | changes to or discontinuance of our stock or convertible note repurchase program;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | regulatory developments;
| | - |  | ------------------------



| |  |  | fluctuations in results of operations;
| | - |  | --------------------------------------



| |  |  | failure to meet our financial obligations and covenants under any loans or financing agreements;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the availability and terms of future financing options, in order to refinance existing debt;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | trends in the seasonality of our sales; and
| | - |  | -------------------------------------------



| |  |  | general conditions in our market or the markets served by our customers.
| | - |  | ------------------------------------------------------------------------

In addition, in recent years the stock market in general and the market for shares of technology stocks in particular have experienced extreme price
fluctuations, which have often been due largely to factors other than the operating performance of the affected companies. We cannot ensure that the market price of our common stock and valuation of our convertible notes will not decline
substantially, or otherwise continue to experience significant fluctuations in the future, including fluctuations that are unrelated to our operating performance.



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If demand for our products does not match manufacturing capacity, we may underutilize our capacity or,
alternatively, be unable to fulfill orders in a timely manner, and in either situation our operating results and cash flows may suffer.

The sale of our products is dependent, to a large degree, on customers whose industries are subject to cyclical trends in the demands for their products. We may not be able to adapt production capacity and related cost structures to rapidly
changing market conditions in a timely manner. When demand does not meet expectations, manufacturing capacity will likely exceed production requirements. We have at times increased our production capacity, purchasing and the overhead that supports
production based on anticipated market demand which has not always developed as expected. As a result, we have periodically underutilized our capacity, which has adversely affected our earnings due to existing fixed costs. In addition, conversely,
if during a market upturn we cannot increase manufacturing capacity to meet product demand, we will be unable to fulfill orders in a timely manner, which in turn may have a negative effect on operating results and cash flows of our overall business.

If our operating results decline, we may be required to establish an additional valuation allowance against our deferred tax assets.

We evaluate whether our deferred tax assets can be realized and assess the need for a valuation allowance on an ongoing basis. As
of June 27, 2009, we have recorded approximately $17.7 million of deferred tax assets related to the future tax benefit of certain temporary differences between our financial statements and our tax returns. Realization of our deferred tax
assets is mainly dependent on our ability to generate future taxable income within the statutory carryforward period, in addition to reversal of taxable temporary differences, and the utilization of available tax planning strategies that could be
implemented to realize the deferred tax assets. As of June 27, 2009, we recorded a valuation allowance of approximately $1.9 million to reserve for those deferred tax assets we believe are not more likely than not to be realized in future
periods. At June 27, 2009, the Company requires approximately $40.0 million in cumulative domestic future taxable income to be generated at various times in the future to realize the domestic net deferred tax assets. If facts or financial
results were to change thereby impacting the likelihood of realizing the deferred tax assets, our tax rate and therefore our earnings and financial position could be adversely affected as a result of recording a valuation allowance against deferred
tax assets. An additional valuation allowance would be recorded if it was deemed more likely than not that some or all of our deferred assets will not be realized. If we establish additional valuation allowances, we would record a tax expense in our
Consolidated Statements of Operations, which would have an adverse impact on our operating results and financial position.

Changes to our tax rates
or exposures to additional income tax liabilities could affect our operating results and cash flows. Additionally, audits by tax authorities could result in additional tax payments for prior year periods.

We are subject to incomes taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax liabilities are subject to the
allocation of income among various tax jurisdictions. Our effective tax rate can be impacted by changes in the mix of earning in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, accruals
related to uncertain tax positions, the results of audits and examinations of previously filed tax returns and changes in tax laws. Any of these factors may negatively impact our tax rate and as a result, decrease our operating results and cash
flows. The amount of income taxes we pay is subject to ongoing audits in the U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from our reserves, our future operating results
and cash flows may include unfavorable adjustments to our tax liabilities.

We face risks from fluctuations in the value of foreign currency versus
the U.S. dollar and the cost of currency exchange, which affect our revenue, cost of revenue and operating margins and could result in exchange losses.

A large portion of our sales and expenses are denominated in foreign currencies. We purchase materials from suppliers and sell our products around the world and maintain investments in foreign subsidiaries, all
denominated in a variety of currencies. As a consequence, we are exposed to risks from fluctuations in foreign currency exchange rates with respect to a number of currencies, changes in government policies and legal and regulatory requirements,
political instability, transportation delays and the imposition of tariffs and export controls. Changes in the relation of



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foreign currencies to the U.S. dollar will affect revenues, our cost of revenue and operating margins and could result in exchange losses. Among the more
significant potential risks to us of relative fluctuations in foreign currency exchange rates is the relationship among and between the U.S. dollar and the Euro, Swiss franc, British pound, Swedish krona, Japanese yen, Korean won, and Singapore
dollar.

We have a program of entering into foreign exchange forward contracts to minimize a portion of the risks associated with currency
fluctuations on assets, liabilities or other transactions denominated in other than the functional currency of our US operations or our subsidiaries. It cannot be assured, however, that this program will effectively offset all of our foreign
currency risk related to these assets or liabilities, or that the Company will choose to offset 100% of these risks. These foreign exchange forward contracts do not qualify for hedge accounting. Other than this program, we do not attempt to reduce
our foreign currency exchange risks by entering into foreign currency management programs. As a consequence, there can be no assurance that fluctuations in foreign currency exchange rates in the future will not result in mismatches between local
currency revenues and expenses, and will not adversely affect our results of operations and cash flows. Moreover, fluctuations in exchange rates could affect the demand for our products.

No assurance can be given that our strategies will prevent future currency fluctuations from having a material adverse affect on our business, financial
condition, results of operations or liquidity.

We face numerous risks associated with our international operations, which could cause a material
adverse effect on our business and results of operations since approximately two-thirds of our revenues are derived from international sales.

We market and sell our products and services outside the United States, and currently have employees located in China, France, Germany, Italy, Japan, Singapore, South Korea, Sweden, Switzerland and the United Kingdom.
Many of our customers and licensees are located outside the United States. As part of our strategy, we have expanded our international sales, particularly in China. We face numerous risks in doing business outside the United States, including:



| |  |  | dependence on sales representatives or foreign distributors and their sales channels;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | longer accounts receivable collection cycles;
| | - |  | ---------------------------------------------



| |  |  | less effective and less predictable recognition, protection and enforcement of intellectual property rights, specifically in areas of Asia and particularly in
China;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | trade protection measures, import or export licensing requirements, tariffs and other trade barriers;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | highly cyclical business environments;
| | - |  | --------------------------------------



| |  |  | unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | strengthening of the U.S. dollar, which could make our products more expensive;
| | - |  | -------------------------------------------------------------------------------



| |  |  | changes in the political or economic condition of a specific country or region, particularly in emerging markets; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | potentially adverse tax consequences.
| | - |  | -------------------------------------

Such factors could cause our future international sales to decline.

We may be greatly impacted by the political, economic, and
military conditions in China, Taiwan, Japan, North Korea, and South Korea. In the recent past, these countries have conducted military exercises in or near the others territorial waters and airspace. Such disputes may continue or escalate,
resulting in economic embargoes, disruptions in



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shipping, or even military hostilities. This could severely harm our business by interrupting or delaying supplies of components and materials and/or
shipment of our products to or through these areas, as well as reducing our sales in these areas.

Our business practices in international markets
subjects us to the requirements of additional regulation. If we or any of our employees are found to have violated these regulations, we could be subject to significant fines and other penalties.

We manufacture certain products in the United States, and sell our products and purchase parts, components and sub-assemblies in a number of foreign
countries. Our international activities subject us to United States export control restrictions and various significant international, federal, state and local regulations, including but not limited to health and safety, product content, labor and
import/export regulations. In certain cases, we may not be permitted to export products without obtaining an export license. U.S. export laws also prohibit the export of our products to a number of countries deemed by the United States to be
hostile. The export of our high-performance oscilloscopes from the United States, which accounts for a material portion of our internationally derived revenue, is also subject to regulation under the Treaty for Nuclear Non-Proliferation. However,
only a small portion of those oscilloscopes are sold in countries where that treaty restricts the end-user. These restrictions may make foreign competitors facing less stringent controls on their products more competitive in the global market. We
cannot be certain that the U.S. government will approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies with respect thereto, could be
revised. Our international sales and, because approximately two-thirds of our revenue is derived from sales outside the United States, our sales in general, could be materially harmed by our inability to obtain required licenses or by the costs of
compliance.

The regulations related to our international sales are complex, change frequently and have tended to become more stringent
over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could also result in cessation of our
operation or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must
comply with additional regulations in marketing our products.

If we suffer loss to our facilities or distribution system due to catastrophe, our
operations could be negatively impacted.

Our facilities and distribution system are subject to catastrophic loss due to fire,
flood, terrorism or other natural or man-made disasters. If any of our facilities were to undergo a catastrophic loss, it could interrupt our operations, delay production, shipments and revenue and could result in large expenses to repair or replace
the facilities.

We depend on single-source suppliers for some of our products, and the loss of these suppliers could harm our business by
interrupting or terminating our manufacture of those products.

We purchase a small number of parts from single-source suppliers.
In particular, several key integrated circuits that we use are made by International Business Machines (IBM). Although we have not experienced significant production delays attributable to supply changes, we believe that, for integrated
circuits in particular, alternative sources of supply would be difficult to develop over a short period of time. Because we have no direct control over our third-party suppliers, interruptions or delays in the products and services provided by these
third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary parts or products, we may be unable to redesign or adapt our technology to work without such parts or find
alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs, or quality control problems.



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Adverse changes in our relationships with, or the financial condition or performance of key distributors could
adversely impact our operating results and/or cash flows.

We sell certain products through key distributors that have valuable
relationships with our end customers. Adverse changes in our relationship could negatively impact our ability to generate revenue in certain markets and negatively impact our results of operations and/or cash flows.

We depend upon key personnel and qualified future hires to implement our corporate strategy, and if we are unable to retain or attract personnel we may not be able
to manage and operate successfully and we may not be able to meet our strategic objectives.

Our success depends on the efforts and
abilities of senior management and key employees in the sales, marketing, research and development, and manufacturing areas. Many of these employees would be difficult to replace. We do not have employment contracts with most of our key personnel.
If we cannot retain existing key managers and employ additional qualified senior employees, our business, financial condition, liquidity and results of operations could be materially and adversely affected. We do not maintain key man
life insurance policies on any of our personnel. Future expansion of operations will require us to attract, train and retain new personnel. In addition, we may be limited by non-solicitation agreements entered into by our key personnel with respect
to hiring employees from our competitors. These factors could increase our operating expenses. If we are unable to recruit or retain a sufficient number of qualified employees, or the costs of compensation or employee benefits increase
substantially, our business, results of operations, cash flows or financial condition could be materially and adversely affected.

We may not be
successful in protecting our intellectual and proprietary rights, which would deprive us of a competitive advantage and thereby negatively impact our ability to compete.

As a technology-based company, our success depends on developing and protecting our intellectual property. We rely generally on patent, copyright,
trademark and trade secret laws in the United States and abroad. Electronic equipment as complex as most of our products, however, is generally not patentable in its entirety. We also license intellectual property from third parties and rely on
those parties to maintain and protect their technology. We cannot be certain that actions we take to establish and protect proprietary rights will be adequate, particularly in countries where intellectual property rights are not highly developed or
protected. If we are unable to adequately protect our technology, or if we are unable to continue to obtain or maintain licenses for protected technology from third parties, it may be difficult to design alternatives to such technology without
incurring significant costs. Thus, the loss of intellectual property rights to technology could have a material adverse effect on our business, results of operations, cash flows or financial condition. From time to time, in the ordinary course of
business, we receive notices from third parties regarding intellectual property infringement or take action against others with regard to intellectual property rights. Even where we are successful in defending or pursuing such claims, we may incur
significant costs. In the event of a successful claim against us, we could lose our rights to needed technology or be required to pay license fees for the infringed rights, either of which could have an adverse impact on our business.

We license certain intellectual property from third parties, and the loss of these licenses could delay development of future products or prevent the sale or
enhancement of existing products.

We rely on licenses of intellectual property for our businesses, including technology used in
our products. We cannot ensure that these licenses will be available in the future on favorable terms or at all. The loss of these licenses or the ability to maintain any of them on acceptable terms could delay development of future products or
prevent the further sale or enhancement of existing products. Such loss could adversely affect our business, results of operations, cash flows and financial condition.



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Our Protocol Solutions Group (formerly Catalyst) outsources a portion of its research and development activities to
a third party in a foreign jurisdiction; the failure of this third party to adequately protect our proprietary rights in the technologies developed for us by this third party or a change in the laws of its jurisdiction may result in the loss of
those proprietary rights.

Our Protocol Solutions Group currently outsources a portion of its research and development activities
to a third party engineering firm located in Malaysia. We do not have any long-term contractual commitment from this engineering firm to continue to provide such services. The discontinuance of such services on short notice or any significant cost
increases in the services they provide could harm our results of operations and cash flows, as well as slow our introduction of new products. In addition, the failure of this engineering firm to adequately protect our proprietary rights in the
technologies developed by this firm, including the failure to comply with the intellectual property laws of Malaysia, may result in the loss of some or all of the proprietary rights in such technologies. In addition, any changes in the laws of
Malaysia could also result in the loss of some or all of the proprietary rights in technologies developed in that country. It may also be more difficult to obtain a judgment enforcing our intellectual property rights in Malaysia than it may be in
the United States.

Potential acquisitions, strategic alliances, and joint ventures may result in financial results that are different than expected.

In the normal course of business, we engage in discussions with third parties relating to possible acquisitions, strategic
alliances and joint ventures. Some of the businesses we acquire may not have historically accounted for their business in the manner we account for our business, which may mean that these financial statements are not representative of what their
financial results would have been if they had been our subsidiary for such periods. For example, on October 2, 2006, we acquired all of the outstanding shares of common stock of Catalyst, an entity that did not maintain its financial statements
in accordance with U.S. GAAP nor did it have audited financial statements. As a result of our acquisition of Catalyst, and other similar transactions that we may consummate in the future, our financial results may differ from the investment
communitys expectations in a given quarter and year. In addition, acquisitions and strategic alliances may require us to integrate a different company culture, management team and business infrastructure. We may have difficulty developing,
manufacturing and marketing the products of the newly-acquired company in a way that enhances the performance of our combined businesses or product lines to realize the value from expected synergies. Depending on the size and complexity of an
acquisition, our successful integration of the entity depends on a variety of factors, including:



| |  |  | the retention of key employees;
| | - |  | -------------------------------



| |  |  | the management of facilities and employees in different geographic areas;
| | - |  | -------------------------------------------------------------------------



| |  |  | the retention of key customers; and
| | - |  | -----------------------------------



| |  |  | the integration or coordination of different research and development, product manufacturing and sales programs and facilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

Any impairment of the value of purchased assets could have a significant negative impact on our future operating results.

All of these efforts require varying levels of management resources, which may divert our attention from other business operations. Further, if market
conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions. If we do not realize the expected benefits or synergies of such transactions, our consolidated financial position,
results of operations, cash flows, convertible notes valuation and stock price could be negatively impacted.



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We may not be able to obtain the capital we need to maintain or grow our business and refinance existing debt as it
matures.

Our ability to execute our long-term strategy may depend, to a significant degree, on our ability to obtain long-term
debt and equity capital. We have no commitments for additional borrowings at this time, other than our $50.0 million revolver with Manufacturers and Traders Trust Company (M&T), and the other lenders party thereto, which is subject to a
borrowing base. We cannot determine the precise amount and timing of our funding needs at this time. We may be unable to obtain future additional financing on terms acceptable to us, or at all. If we fail to comply with certain covenants relating to
our indebtedness, we may need to refinance our indebtedness or repay it. In addition, certain covenants relating to our $50.0 million credit facility impose limitations on additional indebtedness. Pursuant to our secured credit agreement with
M&T and other syndicated lenders, we granted the banks a security interest in all of the domestic assets of LeCroy and its domestic subsidiaries. We also may need to refinance our indebtedness at maturity, particularly in July and October of
fiscal 2012 . We may not be able to obtain additional capital on favorable terms to refinance our indebtedness.

The following factors
could affect our ability to obtain additional financing on favorable terms, or at all:



| |  |  | our results of operations and cash flows;
| | - |  | -----------------------------------------



| |  |  | general economic conditions, and conditions in our industry;
| | - |  | ------------------------------------------------------------



| |  |  | the perception in the global credit and capital markets of our business;
| | - |  | ------------------------------------------------------------------------



| |  |  | the credit availability and/or financial condition of potential lenders;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ratio of debt to equity;
| | - |  | ----------------------------



| |  |  | our financial condition;
| | - |  | ------------------------



| |  |  | risk of greater exposure to variable interest rates, and its affect on our results of operations and cash flows;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | our business prospects; and
| | - |  | ---------------------------



| |  |  | changes in interest rates and foreign exchange.
| | - |  | -----------------------------------------------

The U.S. and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms. If these conditions continue or worsen,
the Companys cost of borrowing may increase and it may be more difficult to obtain financing for the Companys operations or to refinance long-term obligations as they become payable. In addition, the Companys borrowing costs can be
affected by independent rating agencies short and long-term debt ratings which are based largely on the Companys performance as measured by credit metrics including interest coverage and leverage ratios. A decrease in these ratings would
likely also increase the Companys cost of borrowing and make it more difficult for it to obtain financing. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures and reduce research and
development expenditures. Any such actions could have a material adverse effect on our business results, financial condition, results of operations and liquidity.

We have a credit facility that contains financial covenants, and the failure to comply with these covenants could harm our financial condition because our credit facility may be unavailable to us.

We have a $50.0 million revolving credit facility with M&T and the other lenders party thereto. We are subject to financial covenants under this
credit facility, including interest coverage ratio, minimum consolidated net worth, senior leverage ratio and fixed charge coverage ratio requirements. Failure to comply with the financial covenants under our credit facility would cause us to be in
default under the facility, which could result in the acceleration of the indebtedness under the credit facility. The acceleration of our indebtedness under the credit facility would



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adversely affect our business, results of operations, liquidity and financial condition. The acceleration of our indebtedness under the credit facility would
also likely cause an acceleration of the indebtedness due under our notes. Additionally, although the Company does not anticipate needing additional capital in the near term due to our available credit and current financial position, the financial
market disruption may make it difficult to raise additional capital, if needed, on acceptable terms or at all.

We have significantly increased our
leverage as a result of the sale of the notes.

In connection with the previous sale of our 4.00% Convertible Senior Notes, we have
indebtedness of $48.4 million. The degree to which we are leveraged could, among other things:



| |  |  | make it difficult for us to make payments on the notes;
| | - |  | -------------------------------------------------------



| |  |  | make it difficult for us to obtain financing for working capital, acquisitions or other purposes on favorable terms, if at all;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | make us more vulnerable to industry downturns and competitive pressures; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to changes in, our business.
| | - |  | -------------------------------------------------------------------------------

Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to financial, business and other factors
affecting our operations, many of which are beyond our control.

The notes are effectively subordinated to all liabilities of our subsidiaries and to
our secured debt and do not restrict certain corporate actions such as the payment of dividends and issuance of new debt.

None of
our subsidiaries guarantee our obligations under, or have any obligation to pay amounts due on, the notes. As a result, the notes are structurally subordinated to all indebtedness and other liabilities, including trade payables and lease
obligations, of our existing and future subsidiaries (unless such indebtedness is by its terms subordinated to the notes). In addition, the notes are not secured by any of our assets or those of our subsidiaries. As a result, the notes are
effectively subordinated to our $50.0 million credit facility and any secured debt that we, including our subsidiaries, incur. In the event of our bankruptcy, liquidation or reorganization or upon acceleration of the notes, payment on the notes
could be less, ratably, than on any secured indebtedness. We may not have sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. At June 27, 2009, the Company had $17.5 million in net borrowings, excluding
the notes. Our subsidiaries had trade payables and other accrued liabilities (excluding obligations that are inter-company in nature) of approximately $5.9 million in the aggregate.

In addition, the indenture does not restrict us, including any of our subsidiaries, from paying dividends or issuing or repurchasing securities. If we,
including our subsidiaries, were to incur additional debt or liabilities, our ability to pay our obligations on the notes could be adversely affected. Certain of our other debt instruments may, however, restrict these and other actions.

We may be unable to repay, repurchase or redeem the notes.

At maturity, the entire outstanding principal amount of the notes will become due and payable by us. Upon a designated event, as defined in the indenture, or on each of October 15, 2011, October 15,
2016 and October 15, 2021, or upon conversion, the holders may require the Company to repurchase all or a portion of the notes at a repurchase price of 100% of the principal amount of the notes, plus accrued and unpaid interest and additional
interest, if any, to, but excluding, the date of the repurchase of the notes. We cannot assure the note holders that we will have enough funds or be able to arrange for additional financing to pay the principal at maturity or to repurchase the notes
upon a designated event or that our then-existing debt agreements will permit us to repay the principal amount at maturity or repurchase notes.



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Our failure to repay the notes at maturity or to repurchase tendered notes upon a designated event or on
each of October 15, 2011, October 15, 2016 and October 15, 2021, would constitute an event of default under the indenture that governs the notes and may also constitute an event of default under any other indenture or other
agreement governing then-existing indebtedness, which could prevent us from repurchasing the notes. If a designated event occurred and accelerated our other indebtedness, we cannot assure you that we would have sufficient financial resources, or be
able to arrange for additional financing, to repay the principal amount at maturity or pay the repurchase price for the notes and amounts due under any other indebtedness. The change in control feature of the notes could make it more difficult for a
third party to acquire us, even if such an acquisition would be beneficial to the note holders and our stockholders. Our obligation to offer to repurchase the notes upon a designated event would not necessarily afford protection in the event of a
highly leveraged transaction, reorganization, merger or similar transaction involving us.

Holders of notes will not be entitled to any rights with
respect to our common stock, but will be subject to all changes made with respect to our common stock.

Holders of notes will not
be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but will be subject to all changes affecting the common stock.
Holders will only be entitled to rights on the common stock if and when we deliver shares of common stock, in exchange for the notes and in limited cases under the anti-dilution adjustments of the notes. For example, in the event that an amendment
is proposed to our certification of incorporation or bylaws requiring stockholder approval and the record date for determine the stockholders of record entitled to vote on the amendment occurs prior to delivery of the common stock, note holders will
not be entitled to vote on the amendment, although they will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.

Conversion of the notes will dilute the ownership interest of existing stockholders, including stockholders who had previously converted their notes.

The conversion of the notes into shares of our common stock, to the extent we choose not to deliver all cash for the conversion value in excess of the
principal amount, will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon conversion of the notes could adversely affect prevailing market prices of our common stock. In
addition, the existence of the notes may encourage short selling by market participants due to this dilution or facilitate trading strategies involving the notes and our common stock.

Issuance of shares in connection with financing transactions or under stock plans will dilute current stockholders.

Pursuant to our stock plans, our management is authorized to grant restricted stock awards or stock options to our employees, directors and consultants. Our stockholders will incur dilution upon exercise of any
outstanding stock options. In addition, if we raise additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and
new investors could have rights superior to existing stockholders.

Anti-takeover provisions under our charter document and Delaware law could delay
or prevent a change of control and could also limit the market price of our stock.

Our certificate of incorporation and bylaws
contain provisions that could delay or prevent a change of control of our company that our stockholders might consider favorable. Certain provisions of our certificate of incorporation and bylaws allow us to:



| |  |  | authorize the issuance of preferred stock which can be created and issued by the board of directors without prior stockholder approval, with rights senior to those
of the common stock;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide for a classified board of directors, with each director serving a staggered three-year term;
| | - |  | ----------------------------------------------------------------------------------------------------



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| |  |  | prohibit stockholders from filling board vacancies, calling special stockholder meetings, or taking action by written consent; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | require advance written notice of stockholder proposals and director nominations.
| | - |  | ---------------------------------------------------------------------------------

We are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with
stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our
board of directors or initiate actions that are opposed by the then-current board of directors, resulting in, but not limited to, delaying or impeding a merger, tender offer, or proxy contest involving the Company. Any delay or prevention of a
change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. Any of these results could adversely affect the price of our common stock and, therefore, the price of our notes. We may
in the future issue shares of authorized preferred stock at any time.

Because we do not intend to pay dividends, stockholders will benefit from an
investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our common
stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business and repay existing debt, and that no dividends will be paid to holders of the common stock. As
a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There is no guarantee our common stock will appreciate in value.

We could incur substantial costs as a result of violations of or liabilities under environmental laws.

Our operations and products are subject to laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air or water, the management and disposal
of hazardous substances or wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and
revocation by issuing authorities. We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions and third-party claims for property damage and personal injury as a result of violations of or liabilities under
environmental laws or noncompliance with environmental permits.

Our former subsidiary, Digitech Industries, Inc., has been involved in
environmental remediation activities, the liability for which was retained by us and the estimated remediation cost was reserved for after the sale of the Vigilant Networks business and the residual assets of Digitech. Any liability beyond what is
currently expected and reserved for could have a material adverse affect on our results of operations, liquidity and financial condition.

We are
subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with these customers.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various
statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing terms and
conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations might result in suspension of these
contracts, or administrative penalties.

We must successfully execute our strategy to introduce new products.

One of our key strategies is to expand our addressable portion of the oscilloscope and protocol analysis markets by introducing new products such as
high-end oscilloscopes and protocol exercisers and probes. We have in the past withdrawn product lines due to implementation and financial concerns. The success of our new product offerings



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will depend on a number of factors, including our ability to identify customers existing and future needs properly and quickly, timely perform the
necessary research and development to define and create the products, timely manufacture and deliver the products that address these needs in sufficient volumes, differentiate the offerings from competitors offerings, price products
competitively and anticipate competitors development of new products or technological innovations.

Without the timely introduction of
competitive products, our products may become technologically obsolete.

We generally sell our products in industries that are
characterized by rapid technological changes, frequent new product announcements and introductions and changing industry standards. The development of new, technologically advanced products is a complex and uncertain process requiring high levels of
innovation, highly skilled engineering and development personnel, qualification of and coordination with suppliers, and accurate anticipation of technological and market trends. Consequently, product development delays are typical in our industry.
If we fail to introduce competitive products in a timely manner, customers may defer placing orders in anticipation of future releases or may purchase products from competitors. Product development delays may result from numerous factors, including:



| |  |  | changing product specifications and customer requirements;
| | - |  | ----------------------------------------------------------



| |  |  | unanticipated engineering complexities;
| | - |  | ---------------------------------------



| |  |  | difficulties with or delays by contract manufacturers or suppliers of key components or technologies;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | difficulties in allocating engineering resources and overcoming resource limitations; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | difficulties in hiring and retaining necessary technical personnel.
| | - |  | -------------------------------------------------------------------

Without the timely introduction of new products, services and enhancements, our products may become technologically obsolete, in which case our operating results and cash flows could suffer.

If we devote resources to developing products for emerging communications standards that ultimately are not widely accepted, our business could be harmed.

Our future growth depends, in part, upon our ability to develop, manufacture and sell in volume advanced verification systems for
existing, emerging and yet unforeseen communications standards. We have little or no control over the conception, development or adoption of new standards. Moreover, even in relation to currently emerging standards, the markets are rapidly evolving
and we have virtually no ability to impact the adoption of those standards. As a result, there is significant uncertainty as to whether markets for new and emerging standards ultimately will develop at all or, if they do develop, their potential
size or future growth rate. We may incur significant expenses and dedicate significant time and resources to develop products for standards that fail to gain broad acceptance. Failure of a standard for which we devote substantial resources to gain
widespread acceptance would likely harm our corporate growth strategies.

If we fail to maintain and expand our relationships with the core or
promoter companies in our target markets, we may have difficulty developing and marketing certain protocol analyzer products.

It
is important to our success that we establish, maintain and expand our relationships with technology and infrastructure leader companies developing emerging communications standards in our target markets. We must work closely with these companies to
gain valuable insights into new market demands, obtain early access to standards as they develop and help us design new or enhanced products. Generally, we do not enter into contracts obligating these companies to work or share their technology.
Industry leaders could choose to work with other companies in the future. If we fail to establish, maintain and expand our industry relationships, we could lose first-mover advantage with respect to emerging standards and it would likely be more
difficult for us to develop and market products that address these standards.



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We operate in highly competitive markets and this competition could reduce our market share and harm our business.

The oscilloscope and protocol analysis markets are highly competitive and characterized by rapid and continual advances in
technology. Additionally, the Test and Measurement industry has been subject to increased consolidation. Our principal competitors in these markets are Tektronix, a division of Danaher Corporation, Agilent, and JDS Uniphase. Both of our principal
competitors have substantially greater sales and marketing, development and financial resources. We believe that Tektronix, Agilent and other competitors each offer a wide range of products that attempt to address most sectors of the oscilloscope
and many sectors of the protocol analysis markets. We believe that further consolidation in the Test and Measurement industry could result in our competitors increasing their market share through business combinations.

We have historically engaged in intense competition with Tektronix. Some of our senior managers, including our chief executive officer, are former
employees of Tektronix. In fiscal 1994, we settled litigation with Tektronix alleging that our oscilloscope products infringed certain patents held by Tektronix by entering into a license agreement for the right to use that intellectual property. In
fiscal 2005, we settled intellectual property litigation with Tektronix in which both sides claimed patent infringement.

We believe that
the principal bases of competition in the oscilloscope and protocol analysis markets are a products performance (bandwidth, sample rate, memory length and processing power), its price and quality, the vendors name recognition and
reputation, product availability and the quality of post-sale support. If any of our competitors surpass us or are perceived to have surpassed us with respect to one or more of these factors, we may lose customers. We also believe that our success
will depend in part on our ability to maintain and develop the advanced technology used in our oscilloscope products and protocol analyzers and our ability to offer high-performance products timely and at a favorable price-to-performance
ratio. We cannot assure that we will continue to compete effectively.

We may be unable to comply with NASDAQ listing standards.

Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital
markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which could result in our failure to remain in
compliance with the NASDAQs listing standards for market value or equity value or total assets and total revenue. If our stock price declines to the point where our compliance with the listing standard relating to market capitalization is in
jeopardy, we will consider such actions, including equity issuances, as we deem appropriate under the circumstances.



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|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

There are no unresolved
comments to be reported pursuant to Item 1B.



|ITEM 2. | PROPERTIES
|------- | ----------

We own our executive offices and
manufacturing facility, which is an approximately 95,000 square foot building in Chestnut Ridge, New York. Pursuant to our secured credit agreement with M&T and other syndicated lenders, we granted the banks a security interest in this property.
In addition, we lease other office space around the world to support our local sales and service operations and to support our research and development activities. Our Santa Clara, California premises also serve as a manufacturing facility for a
limited number of products. We believe that our facilities are in good condition and are suitable and sufficient for our current operations.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

From time to time, the Company
is involved in lawsuits, claims, investigations and proceedings, including patent and environmental matters, which arise in the ordinary course of business. There are no matters pending that the Company expects to be material to its business,
results of operations, financial condition or cash flows.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

During the fourth quarter of fiscal 2009, there were no matters submitted to a vote of securities holders, through the solicitation of proxies or otherwise.



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Price Range of Common Stock

Our common stock is
traded on the NASDAQ Stock Market under the symbol LCRY. As of August 31, 2009, there were 346 stockholders of record of our common stock. The following table sets forth, for the periods indicated, the high and low closing prices
per share of our common stock as reported on the NASDAQ Stock Market.



|                          |  |      |       |     |   |     
|------------------------- |  | ---- | ----- | --- | - | ----
|                          |  | High |       | Low
|Year Ended June 28, 2008: |  |      |       |     |   |     
|First Quarter             |  | $    | 9.64  |     | $ | 6.74
|Second Quarter            |  |      | 9.99  |     |   | 7.40
|Third Quarter             |  |      | 10.13 |     |   | 7.06
|Fourth Quarter            |  |      | 9.80  |     |   | 7.60
|                          |  |     
|Year Ended June 27, 2009: |  |      |       |     |   |     
|First Quarter             |  | $    | 9.00  |     | $ | 7.78
|Second Quarter            |  |      | 7.96  |     |   | 2.11
|Third Quarter             |  |      | 3.36  |     |   | 1.12
|Fourth Quarter            |  |      | 4.40  |     |   | 2.57

Issuer Purchases of Equity Securities

On May 25, 2006, LeCroys Board of Directors approved the adoption of a share repurchase plan authorizing the Company to purchase up to
2 million shares, not to exceed $25 million, of its common stock. Purchases under this buyback program may be made from time to time on the open market and in privately negotiated transactions. The timing of these purchases is dependent upon
several factors, including market conditions, the market price of the Companys common stock, the effect of the share dilution on earnings, available cash and any other potential risks the Company may encounter. The share repurchase plan may be
discontinued at any time at the discretion of the Company. During fiscal 2008, 2007, and 2006, the Company repurchased approximately 0.3 million, 0.9 million, and 0.1 million shares, respectively, of Company common stock in open
market transactions at a cost of approximately $2.4 million, $10.5 million, and $1.9 million, respectively.

The following table sets forth
information regarding LeCroys purchases of its common stock on a monthly basis during fiscal 2009. Share repurchases are recorded on a trade date basis.



|                                        |  |                               |  |                            |      |                                                                             |         |                                                                            |        
|--------------------------------------- |  | ----------------------------- |  | -------------------------- | ---- | --------------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------- | -------
|Period                                  |  | TotalNumber ofSharesPurchased |  | AveragePrice Paidper Share |      | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor
Program |         | Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans orPrograms
|June 29, 2008 to July 31, 2008          |  |                              |  | $                          |     |                                                                             |        |                                                                            | 664,194
|August 1, 2008 to August 31, 2008       |  | 7,964                         |  | $                          | 8.20 |                                                                             | 7,964   |                                                                            | 656,230
|September 1, 2008 to September 30, 2008 |  | 28,050                        |  | $                          | 7.79 |                                                                             | 28,050  |                                                                            | 628,180
|October 1, 2008 to October 31, 2008     |  | 53,808                        |  | $                          | 6.65 |                                                                             | 53,808  |                                                                            | 574,372
|November 1, 2008 to November 30, 2008   |  | 11,300                        |  | $                          | 3.13 |                                                                             | 11,300  |                                                                            | 563,072
|December 1, 2008 to December 31, 2008   |  |                              |  | $                          |     |                                                                             |        |                                                                            | 563,072
|January 1, 2009 to January 31, 2009     |  |                              |  | $                          |     |                                                                             |        |                                                                            | 563,072
|February 1, 2009 to February 28, 2009   |  | 4,570                         |  | $                          | 1.76 |                                                                             | 4,570   |                                                                            | 558,502
|March 1, 2009 to March 31, 2009         |  |                              |  | $                          |     |                                                                             |        |                                                                            | 558,502
|April 1, 2009 to April 30, 2009         |  |                              |  | $                          |     |                                                                             |        |                                                                            | 558,502
|May 1, 2009 to May 31, 2009             |  |                              |  | $                          |     |                                                                             |        |                                                                            | 558,502
|June 1, 2009 to June 27, 2009           |  |                              |  | $                          |     |                                                                             |        |                                                                            | 558,502
|                                        |  |                               |  |                            |      |                                                                             |         |                                                                            |        
|Total                                   |  | 105,692                       |  | $                          | 6.48 |                                                                             | 105,692 |                                                                            | 558,502
|                                        |  |                               |  |                            |      |                                                                             |         |                                                                            |        



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Equity Compensation Plan Information

Information regarding LeCroys equity compensation plans, including both stockholder approved plans and plans not approved by stockholders, is set
forth in the section entitled Executive Compensation  Equity Compensation Plan Information in LeCroys Notice of Annual Meeting of Stockholders and Proxy Statement, to be filed within 120 days after LeCroys fiscal year
end of June 27, 2009 (the 2009 Proxy Statement), which information is incorporated herein by reference.

Convertible Notes

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified
institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the Notes). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and
October 15, beginning April 15, 2007. The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of
their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not
including, the repurchase date. The Company may, from time to time, at its option repurchase the Notes in the open market. In addition, the Company may redeem the Notes for cash, either in whole or in part, anytime after October 20, 2011 at a
redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into Company common stock by the holders at an
initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $14.55 per share), subject to adjustment as described in the indenture. During fiscal 2009 and 2008, the
Company repurchased approximately $19.1 million and $4.5 million, respectively, of the outstanding convertible notes. The remaining balances at June 27, 2009 and June 28, 2008 were approximately $48.4 million and $67.5 million,
respectively.

Dividend Policy

We
have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to operate and expand our business. Subject to the terms of
our revolving credit agreement, our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.
Under the terms of our bank credit agreement, we are not permitted to declare or pay dividends other than dividends payable solely in additional shares of our equity securities.



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Performance Graph

The performance graph set forth below compares the cumulative total stockholder return of our common stock for the last five fiscal
years through the fiscal year ended June 27, 2009 with that of the U.S. Nasdaq® stock market index, and a peer group
comprising the S&P Information Technology index. The graph assumes an investment of $100 on June 30, 2004 and the reinvestment of dividends (where applicable). The comparisons in this table are set forth in response to SEC disclosure
requirements, and are not intended to forecast or be indicative of future performance of the common stock.

LOGO



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following selected
consolidated financial data has been derived from our consolidated financial statements from each of the five prior fiscal years. The following information should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K, or the respective prior fiscal years Form 10-K.

Consolidated Statements of Operations Data:



|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|----------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | ------------ |  | - | ----------- | - |  | ----------- | ------- | - |  | - | ------- | -
|                                                                        |  | Years Ended  |         
|                                                                        |  | June 27,2009 |          |   | June 28,2008 |   |         | June 30,2007 |  |   | July 1,2006 |   |  | July 2,2005 |        
|(In thousands, except per share amounts)                                |  |              |          |   |              |   |         |              |  |   |             |   |  |             |        
|Revenues:                                                               |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Test and measurement products(1)                                        |  | $            | 125,456  |   |              | $ | 151,077 |              |  | $ | 143,244     |   |  | $           | 151,197 |   |  | $ | 154,877 |  
|Service and other(1)                                                    |  |              | 8,511    |   |              |   | 9,409   |              |  |   | 8,056       |   |  |             | 9,339   |   |  |   | 10,101  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Total revenues                                                          |  |              | 133,967  |   |              |   | 160,486 |              |  |   | 151,300     |   |  |             | 160,536 |   |  |   | 164,978 |  
|Cost of revenues(1)                                                     |  |              | 63,598   |   |              |   | 70,756  |              |  |   | 69,953      |   |  |             | 63,598  |   |  |   | 75,271  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Gross profit                                                            |  |              | 70,369   |   |              |   | 89,730  |              |  |   | 81,347      |   |  |             | 96,938  |   |  |   | 89,707  |  
|Operating expenses:                                                     |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Selling, general and administrative(1)                                  |  |              | 46,991   |   |              |   | 51,299  |              |  |   | 53,218      |   |  |             | 49,901  |   |  |   | 55,702  |  
|Legal settlements                                                       |  |              |         |   |              |   |        |              |  |   |            |   |  |             | 2,792   |   |  |   | 1,000   |  
|Research and development(1)                                             |  |              | 30,851   |   |              |   | 32,576  |              |  |   | 38,302      |   |  |             | 31,722  |   |  |   | 28,050  |  
|Reimbursement from escrow account                                       |  |              |         |   |              |   | (240    | )            |  |   |            |   |  |             |        |   |  |   |        |  
|Impairment of goodwill                                                  |  |              | 105,771  |   |              |   |        |              |  |   |            |   |  |             |        |   |  |   |        |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Total operating expenses                                                |  |              | 183,613  |   |              |   | 83,635  |              |  |   | 91,520      |   |  |             | 84,415  |   |  |   | 84,752  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Operating (loss) income                                                 |  |              | (113,244 | ) |              |   | 6,095   |              |  |   | (10,173     | ) |  |             | 12,523  |   |  |   | 4,955   |  
|Gain on extinguishment of convertible debt, net of issue cost write-off |  |              | 9,606    |   |              |   | 338     |              |  |   |            |   |  |             |        |   |  |   |        |  
|Write-off of deferred bank financing fees                               |  |              |         |   |              |   |        |              |  |   | (997        | ) |  |             |        |   |  |   |        |  
|Interest income                                                         |  |              | 90       |   |              |   | 298     |              |  |   | 124         |   |  |             | 813     |   |  |   | 564     |  
|Interest expense                                                        |  |              | (3,554   | ) |              |   | (4,331  | )            |  |   | (4,293      | ) |  |             | (3,096  | ) |  |   | (2,742  | )
|Other, net                                                              |  |              | 260      |   |              |   | (632    | )            |  |   | (99         | ) |  |             | (204    | ) |  |   | 238     |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|(Loss) income before income taxes                                       |  |              | (106,842 | ) |              |   | 1,768   |              |  |   | (15,438     | ) |  |             | 10,036  |   |  |   | 3,015   |  
|(Benefit) provision for income taxes                                    |  |              | (192     | ) |              |   | 56      |              |  |   | (2,231      | ) |  |             | 3,463   |   |  |   | 872     |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Net (loss) income                                                       |  | $            | (106,650 | ) |              | $ | 1,712   |              |  | $ | (13,207     | ) |  | $           | 6,573   |   |  | $ | 2,143   |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Net (loss) income per common share:                                     |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Basic                                                                   |  | $            | (8.89    | ) |              | $ | 0.15    |              |  | $ | (1.13       | ) |  | $           | 0.54    |   |  | $ | 0.18    |  
|Diluted                                                                 |  |              | (8.89    | ) |              |   | 0.14    |              |  |   | (1.13       | ) |  |             | 0.53    |   |  |   | 0.17    |  
|Weighted average number of common shares:                               |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Basic                                                                   |  |              | 12,003   |   |              |   | 11,749  |              |  |   | 11,702      |   |  |             | 12,218  |   |  |   | 11,774  |  
|Diluted                                                                 |  |              | 12,003   |   |              |   | 12,007  |              |  |   | 11,702      |   |  |             | 12,474  |   |  |   | 12,258  |  
|                                                                        |  |              |          |   |             
|                                                                        |  | June 27,2009 |          |   | June 28,2008 |   |         | June 30,2007 |  |   | July 1,2006 |   |  | July 2,2005 |        
|(In thousands)                                                          |  |              |          |   |              |   |         |              |  |   |             |   |  |             |        
|Consolidated Balance Sheet Data:                                        |  |              |          |   |              |   |         |              |  |   |             |   |  |             |         |   |  |   |         |  
|Cash and cash equivalents                                               |  | $            | 6,413    |   |              | $ | 10,224  |              |  | $ | 10,448      |   |  | $           | 16,972  |   |  | $ | 13,866  |  
|Working capital                                                         |  |              | 37,671   |   |              |   | 45,117  |              |  |   | 54,710      |   |  |             | 46,997  |   |  |   | 44,313  |  
|Total assets                                                            |  |              | 110,037  |   |              |   | 226,986 |              |  |   | 231,319     |   |  |             | 201,974 |   |  |   | 193,168 |  
|Total debt and capital leases                                           |  |              | 66,169   |   |              |   | 67,734  |              |  |   | 85,029      |   |  |             | 38,130  |   |  |   | 45,489  |  
|Total stockholders equity                                              |  |              | 13,400   |   |              |   | 118,960 |              |  |   | 112,731     |   |  |             | 129,703 |   |  |   | 116,818 |  



|(1) | Certain reclassifications have been made to prior years amounts to conform to the current year presentation (See also Note 1 to the Consolidated Financial Statements 
Summary of Significant Accounting Policies, for additional information).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the other financial information and consolidated financial statements and
related notes appearing elsewhere in this Form 10-K and the documents incorporated by reference herein. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of a variety of factors, including those discussed in Item 1A, Risk Factors, and elsewhere in this Form 10-K.

Overview

We were founded in 1964 to develop,
manufacture and sell high performance signal analysis tools to scientists engaged in high-energy physics research. In 1985 we introduced our first oscilloscope using our core competency of designing signal acquisition and digitizing technology.

We are a leading, worldwide provider of oscilloscopes and protocol analyzers as well as a provider of related test and measurement
equipment and currently operate as one business segment in the Test and Measurement market. Our oscilloscopes are tools used by designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems,
to validate electronic designs and to improve time to market. We currently offer seven families of oscilloscopes, which address different solutions to the markets we serve: WaveExpert, a powerful family of sampling oscilloscopes and modules;
WaveMaster, one of our high performance product families; WavePro, which is targeted at the mid- to high-performance sector; WaveRunner, designed for the mid-performance sector; WaveSurfer, designed for users in the low bandwidth sector of the
market; WaveJet, designed for value-oriented users in the low bandwidth sector of the market; and WaveAce, our entry-level oscilloscope products. Our protocol analyzers are tools used by designers and engineers to generate and monitor traffic over
high speed serial data interfaces, including USB 2.0, USB 3.0, Bluetooth, PCI Express, Serial ATA, Serial Attached SCSI (SAS), Wireless USB, and others.

We sell our products into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace markets. We believe that our products offer a
strong value proposition in these markets by providing advanced analysis capabilities coupled with innovative and proprietary technology features. We believe designers in all of these markets are developing products which rely on increasingly
complex electronic signals to provide the features and performance their customers require.

We employ a direct sales model utilizing a
highly skilled global sales force where it makes economic sense to do so. We supplement our direct sales force with a combination of manufacturers representatives and distributors in certain geographic areas. We divide the world into four
areas  the Americas, Europe/Middle East/Africa, Japan and Asia/Pacific. In the Americas, we primarily sell our products directly in the United States. In Europe/Middle East, we sell our products directly in Switzerland, Germany, Italy, France,
the United Kingdom and Sweden. In Japan, we sell our higher end oscilloscope products directly and our lower end scopes and protocol analyzer products through distributors. In Asia/Pacific, we sell our products directly in South Korea, Singapore and
five regions in China.

We generate revenue in a single segment within the Test and Measurement market, primarily from the sale of our
oscilloscopes, protocol analyzers, probes, accessories, and applications solutions. To a lesser extent, we also generate revenue from the sales of our extended warranty, maintenance contracts and repairs and calibrations on our instruments after
their warranties expire.

Generally, we transact revenues and pay our operating expenses in the local currencies of the countries in which
we have a direct distribution presence or other operations, with limited exceptions, most notably in China where our sales and operating expenses are denominated in U.S. dollars. In Europe/Middle East, we transact business in Euros, Swiss francs,
British pounds, Swedish krona and U.S. dollars. In Japan, we transact business in Japanese yen. In South Korea, we transact business in Korean won and in Singapore, we transact business in both U.S. dollars and Singapore dollars. For a discussion of
our foreign currency exchange rate exposure, see below, Item 7A of this Part II entitled Quantitative and Qualitative Disclosure About Market Risk.



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Historically, we have, at times, experienced lower levels of demand during our first fiscal quarter than
in other fiscal quarters which, we believe, have been principally due to the lower level of general market activity during the summer months, particularly in Europe.

Cost of revenues represents manufacturing and service costs, which primarily comprise materials, labor and factory overhead. Gross profit represents revenues less cost of revenues. Additional factors integral to gross
profit earned on our products are mix, as the list prices of our products range from $950 to $216,000, and the effects of foreign currencies, as approximately two-thirds of our revenues are derived overseas, much of which is denominated in local
currencies while product manufacturing costs are primarily U.S. dollar denominated.

Selling, general and administrative expenses consist
primarily of salaries, share based compensation, and related overhead costs for sales, marketing and administrative personnel as well as legal, accounting and other professional services.

Research and development expenses consist primarily of salaries, share based compensation, and related overhead costs associated with employees engaged
in research, design and development activities, as well as the cost of masks, wafers and other materials and related test services and equipment used in the development process.

Our results of operations and financial position are affected by a variety of factors. As discussed below, we believe the most significant recurring
factors are the economic strength of the technology markets into which we sell our products, our ability to identify market demands and develop competitive products to meet those demands, the announcements and actions of our competitors and our
ability to enter into new markets and broaden our presence in existing markets.

Our sales are largely dependent on the health and growth
of technology companies whose operations tend to be cyclical. Consequently, demand for our products tends to coincide with the increase or decrease in capital spending in the Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace industries.

In addition, in response to fluctuations in the technology markets we target, we
continually assess and adopt programs aimed at positioning us for long-term success. These programs may include streamlining operations, discontinuing older and less profitable product lines, changing our future product strategy, and reducing
operating expenses from time to time. As an example, we implemented business realignment and restructuring initiatives intended to reduce costs and more efficiently allocate product development resources (See Note 3 to the Consolidated Financial
Statements  Business Realignment, Restructuring Initiatives and Related Asset Impairments, for additional information).

We face
significant competition in our target markets. We believe that in order to continue to compete successfully, we need to anticipate, recognize and respond to changing market demands by providing products that serve our customers needs as they
arise at prices acceptable to the market. We believe that we compete favorably with our competition in each of these areas. Consequently, we are constantly reviewing our product development strategy and invest time, resources and capital in
development projects we deem most likely to succeed.

In furtherance of our drive to meet our customers changing demands, we also
look outside our organization for opportunities to expand our markets. Accordingly, on October 29, 2004 and October 2, 2006, we completed the acquisitions of Computer Access Technology Corporation (CATC) and Catalyst
Enterprises, Inc. (Catalyst), respectively, to complement our expanding portfolio of serial data test solutions. This product line, Protocol Solutions Group (PSG), now represents about 20% of our total business.

In fiscal 2009, we transformed our entire oscilloscope product lines by introducing a brand new line of WaveAces on the low end and a new line of
WavePros and WaveMasters on the high end. We also refreshed our low and mid-range product lines by introducing updated versions of WaveRunners, WaveSurfers and WaveJet product lines. We believe that our diversified product mix, along with continued
enhancements, strategically positions us to expand our presence in the oscilloscope market.



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Critical Accounting Policies and Estimates

The discussion and analysis of our financial position and results of operations are based upon our Consolidated Financial Statements, which have been
prepared in accordance with U.S. Generally Accepted Accounting Principles. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements. The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes. These
estimates and assumptions are based on managements judgment and available information and, consequently, actual results could differ from these estimates.

The accounting policies that we believe are the most critical in understanding and evaluating our reported financial results include: revenue recognition; reserves on accounts receivable; allowance for excess and
obsolete inventory; uncertain tax positions; valuation of deferred tax assets; valuation of long-lived assets; valuation of goodwill; estimation of warranty liabilities and share-based compensation expense.

Revenue Recognition. We enter into agreements to sell products, services, and other arrangements that include combinations of products and
services. Revenues from products are included in revenues from Test and measurement products in the Consolidated Statements of Operations, net of any applicable sales or value added taxes. Revenue from product sales, net of allowances for
anticipated returns, is recognized provided that persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collection is reasonably assured. Delivery is considered to have occurred when
title and risk of loss have transferred to the customer, or when services have been provided. The price is considered fixed or determinable when it is not subject to refund or adjustments.

Revenue from services is deferred and recognized on a straight-line basis over the contractual period or as services are rendered and accepted by the
customer. When arrangements include multiple elements, we use relative fair values to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. The amount of revenue recognized
is affected by our judgments as to whether an arrangement includes multiple elements and if so, whether objective and reliable evidence of fair value exists for those elements. Changes to the elements in an arrangement and the ability to establish
objective and reliable evidence of fair value for those elements could affect the timing of the revenue recognition.

Due to the
significant software content of our protocol analyzer products, we recognize revenue on the sale of these products upon shipment provided there is persuasive evidence of an arrangement, the product has been delivered, the price is fixed or
determinable and collection is probable. Software maintenance support revenue is deferred based on its vendor specific objective evidence of fair value (VSOE) and recognized ratably over the maintenance support periods. Provisions for
warranty costs are recorded at the time sales of related products are recognized as revenue. Revenues from protocol analyzer products are included in Test and measurement products in the Consolidated Statements of Operations.

In an effort to provide end-user customers an alternative to purchasing the Companys higher end products under its standard terms and conditions,
the Company began offering customers an opportunity to enter into sales-type or direct financing leases for these products. The Company is accounting for these leases in accordance with Statement of Financial Accounting Standards (SFAS) No. 13,
Accounting for Leases. Lease and rental revenues are reported within Test and measurement product revenue.

Reserves on
Accounts Receivable. We maintain an allowance for anticipated returns and doubtful accounts relating to the portion of the accounts receivable which we estimate is non-collectible. We analyze historical bad debts, customer concentrations,
customer creditworthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. Changes in the overall economic environment or in the financial condition of our
customers may require adjustments to the allowance for doubtful accounts which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.



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Allowance for Excess and Obsolete Inventory. We assess the valuation of our inventory and provide
an allowance for the value of estimated excess and obsolete inventory. Our marketing department plays a key role in our inventory review process by providing updated sales forecasts, managing product rollovers and working with our manufacturing
department to maximize recovery of excess inventory. Based upon managements forecast, inventory items no longer expected to be used in the future are considered obsolete and the difference between an inventorys quantity and its
forecasted usage are classified as excess. If actual market conditions are less favorable than those projected by management, additional inventory allowances for excess or obsolete inventory may be required (See Note 5 to the Consolidated Financial
Statements  Inventories, net for additional information).

Uncertain Tax Positions. The recognition and measurement of
uncertain tax positions that we have taken or expect to take is inherently difficult and requires subjective estimations. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision in the period. Although
we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and
accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material effect on our income tax provision and net income in the period or periods for which that determination is made.

On July 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, as amended by FASB Staff Position No. 48-1 (FSP-FIN 48-1), Definition of Settlement in FASB Interpretation 48. FIN 48 prescribes a comprehensive model for how a company should
recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it
is more likely than not that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit greater than 50% likely of being realized upon settlement with a
taxing authority having full knowledge of all relevant information. This measurement is inherently difficult and requires subjective estimations.

A tax benefit from an uncertain position was previously recognized if it was probable of being sustained. Currently, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in
cash within twelve months of the reporting date (See Note 11 to the Consolidated Financial Statements  Income Taxes for additional information).

Valuation of Deferred Tax Assets. We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax
credits, benefits and deductions, and in the calculation of certain tax assets and liabilities, including FIN 48 liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes,
as well as interest and penalties related to uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

The Company is required to recognize a valuation allowance for all or a portion of its deferred tax assets if it believes that it is not more likely than
not, given the weight of all available evidence, that all or a portion of its deferred tax assets will be realized. Management assesses the realizability of the deferred tax assets based on actual and forecasted operating results. The Company
assessed both its positive and negative evidence to determine the proper amount of its required valuation allowance. Factors considered include the Companys current and cumulative losses in certain jurisdictions and managements
projection that the Company expects to utilize its domestic net operating loss carryforwards prior to the initial expiration in fiscal 2022.

In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature,
frequency and severity of current and cumulative losses, forecasts of future profitability, excess of appreciated asset value over the basis of net assets, the duration of statutory carryforward periods, the Companys experience with operating
loss and tax credit carryforwards not expiring unused, and tax planning alternatives. The



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Companys analysis of the need for a valuation allowance recognizes that the Company has incurred a cumulative loss for its domestic operations over the
recent years, which was principally due to a non-recurring goodwill impairment charge as well as acquisition and business realignment charges. The Company believes it will be able to realize all of its domestic deferred tax assets, net of the $1.5
million valuation allowance. Consideration has also been given to the period over which these net deferred tax assets can be realized, and the Companys history of not having federal tax loss carryforwards expire unused. In addition, the
Company has considered tax planning strategies that are both prudent and feasible that will be implemented in a timely manner, if necessary, which will allow the Company to recognize the future tax attributes by increasing taxable income in the
United States.

A valuation allowance of approximately $1.9 million and $1.7 million existed as of June 27, 2009 and June 28, 2008,
respectively, for certain tax credit carryforwards, capital loss carryforwards and foreign deferred tax assets due to the uncertainty surrounding the utilization of these deferred tax assets. During the year ended June 27, 2009, the valuation
allowance increased by approximately $0.2 million. The increase was mainly due to an increase in foreign net operating loss carryforwards and uncertainty surrounding the utilization of such carryforwards. During the year ended June 30, 2008, the
valuation allowance increased by approximately $0.1 million. The increase was due to an increase in state investment tax credit carryforwards, which remain uncertain in their utilization, changes in gross deferred tax assets due to the adoption of
FIN 48 on July 1, 2007, and partially offset by decreases in the valuation allowance due to the utilization of foreign net operating loss carryforwards, and changes surrounding the utilization of such foreign deferred tax assets. Management believes
that it is more likely than not that the Company will realize the benefits of the Companys net deductible temporary differences, net of the valuation allowance. The factors that management considered in assessing the likelihood of realization
included, the forecast of future taxable income, reversal of taxable temporary differences and available tax planning strategies that could be implemented to realize the deferred tax assets. Management will continue to assess the realizability of
the deferred tax assets at each interim and annual balance sheet date based on actual and forecasted operating results. Adjustments to the valuation allowance may be made in the future if it is determined that the realizable amount of net operating
losses and other deferred tax assets is greater or less than the amount recorded. Such adjustments may be material to the Companys financial position, and results of operations.

At June 27, 2009, the Companys net domestic deferred tax assets amounted to approximately $15.7 million. Management has considered the
realizability of the deferred tax assets and has concluded that a domestic valuation allowance of approximately $1.5 million should be recorded, mainly related to certain state investment tax credit carryforwards that are not anticipated to be
realized. Although management determined that a valuation allowance was not required with respect to most of the net domestic deferred tax assets, recovery is primarily dependent on achieving the forecast of future operating income, as well as
prudent tax planning strategies. At June 27, 2009, the Company requires approximately $40 million in cumulative domestic future operating income to be generated at various times in the future to realize the domestic net deferred tax assets. Based
upon the projections, the domestic net operating loss carryforwards and federal tax credit carryforwards would be fully utilized before expiration (See Note 11 to the Consolidated Financial Statements  Income Taxes for additional information).

Valuation ofLong-LivedAssets. We assess the recoverability of our long-lived assets whenever events or changes in
circumstances indicate that the carrying values may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying values of such assets will be recovered
through undiscounted expected future cash flows. If the undiscounted cash flows are less than the carrying amounts, an impairment loss is recorded to the extent that the carrying amounts exceed the fair value. Factors which could trigger an
impairment review include, but are not limited to the following: significant underperformance by us relative to historical or projected operating results; significant changes in the manner of our use of the assets or the strategy for the overall
business; and significant negative industry or economic trends (See Note 8 to the Consolidated Financial Statements  Goodwill, Intangible Assets, net, and Other Non-Current Assets for additional information).



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Valuation of Goodwill. Goodwill is to be tested for impairment annually, or more frequently, if
events or changes in circumstances indicate that the carrying amount of the asset might be impaired. Impairment is assessed at the reporting unit level by applying a fair value-based test. A reporting unit is defined as the same as or
one level below the operating segment level as described in SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company has one reporting unit, in the Test and Measurement business, because none of
the components of the Company constitute a business for which discrete financial information is available and for which Company management regularly reviews the results of operations. In fiscal 2008, the Company changed its annual impairment testing
date from fiscal year end to the last day of the eleventh month of the fiscal year. The Company believes the last day of the eleventh month of the fiscal year is preferable as it provides the Company additional time to complete the impairment test
and report the results of that test in the Companys annual filing on Form 10-K.

The goodwill impairment test is a two-step process
which requires management to make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its
carrying value. Such an event may occur if, for an extended period of time, the market value of the Companys common stock plus a control premium were less than the carrying value of the Company. The determination as to whether a write-down of
goodwill is necessary, and the amount of the impairment charge, involves significant judgment around the assumptions used to determine the impairment charge.

Fiscal 2008

In fiscal 2008, as a result of the decline in our stock price since June 30, 2007,
which affected our market capitalization, we updated our goodwill impairment test as of September 29, 2007, December 29, 2007, and March 29, 2008 respectively, to identify whether a potential impairment of our recorded goodwill
existed. For the first quarter ended September 29, 2007 our market capitalization, without regard to a control premium, exceeded our carrying value. For the second quarter testing as of December 29, 2007, the fair value of our reporting
unit was determined to be $142.8 million, using a 30% control premium, which exceeded our carrying amount by $25.6 million, or 21%. For the third quarter testing as of March 29, 2008, the fair value of our reporting unit was determined to be
$137.8 million, using a 30% control premium, which exceeded our carrying amount by $18.5 million, or 15.5%. For the fourth quarter testing as of May 31, 2008, the fair value of our reporting unit was determined to be $138.0 million, using a 30%
control premium, which exceeded our carrying amount by $19.8 million, or 16.7%.

A 30% control premium was utilized in our second quarter,
third quarter and annual goodwill impairment testing. This control premium was not a standard amount based on broad assumptions; rather, the amount was based on detailed analysis that considered appropriate industry, market, economic and other
pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry, market and economic conditions along with other
factors or available information specific to the Companys business.

We determined that there was no impairment to the recorded
goodwill balances in fiscal 2008. We did, however, during the fourth quarter of fiscal 2007, reduce the goodwill by approximately $0.1 million as a result of a reversal of a pre-acquisition tax contingency reserve. Additionally, upon adoption of
FIN 48 on July 1, 2007, some accruals for uncertain tax positions related to the acquisition of CATC were reduced, resulting in a decrease to goodwill of approximately $0.1 million.

Fiscal 2009

In the first quarter of
fiscal 2009, we updated our goodwill impairment test as of September 27, 2008, and determined that the fair value of our reporting unit was approximately $138.3 million, using a 30% control premium, which exceeded our carrying amount by
approximately $18.9 million, or 16%. In the second quarter of fiscal 2009, as a result of the deterioration in the economic environment and sustained decline in our stock price, which affected our market capitalization, we updated the first step of
our goodwill impairment test and determined



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that our carrying value exceeded our fair value, indicating that goodwill was impaired. We performed the second step of the goodwill impairment test which
calculated the implied fair value of the goodwill by allocating our fair value determined in the first step to all assets and liabilities other than goodwill, including both recognized and unrecognized intangible assets, and compared the residual
amount to our carrying amount of goodwill in order to determine the amount of the goodwill impairment. In the second quarter of fiscal 2009, we recorded approximately $105.8 million of goodwill impairment, resulting in a carrying value of Goodwill
as of June 27, 2009 of zero (See Note 8 to the Consolidated Financial Statements  Goodwill, Intangible Assets, net, and Other Non-Current Assets for additional information).

Warranty Liabilities. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are
derived from historical data of product reliability and for certain new products, third party published expected failure rates. The expected failure is arrived at in terms of units, which are then converted into labor hours to which an average fully
burdened cost per hour is applied to derive the amount of accrued warranty required. On a quarterly basis, we study trends of warranty claims, review estimates of costs to repair and take action to improve the quality of our products and minimize
our warranty exposure. Management believes that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve, which may be material to our results of operations
when made (See Note 10 to the Consolidated Financial Statements  Warranties and Guarantees for additional information).

Share-based Compensation Expense. We recognize the cost resulting from all share-based payment transactions in the financial statements at their fair values. We use the Black-Scholes option pricing model to estimate the fair value of
options and stock appreciation rights. The fair value of stock options is estimated on the date of grant, while the fair value for stock appreciation rights is estimated on the date of grant and remeasured at each subsequent reporting period, since
they are liability-classified. Determining the fair value of options and stock appreciation rights requires certain estimates by management including the expected volatility and expected term of the option. Management also makes decisions regarding
the risk free interest rate used in the model and makes estimates regarding forfeiture rates. If our actual forfeiture rate is materially different from our estimate or if we reevaluate the forfeiture rate in the future, the share-based compensation
expense could be significantly different from what was recorded in the current periods. Further, fluctuations in the market that affect these estimates could have an impact on the resulting compensation cost (See Note 13 to the Consolidated
Financial Statements  Share-Based Compensation for additional information).



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Results of Operations

The following table sets forth certain operating data as a percentage of our total revenues for the fiscal years indicated:



|                                                                        |  |              |    |  |              |   |  |              |   
|----------------------------------------------------------------------- |  | ------------ | -- |  | ------------ | - |  | ------------ | --
|                                                                        |  | Year Ended   |   
|                                                                        |  | June 27,2009 |    |  | June 28,2008 |   |  | June 30,2007 |   
|Revenues:                                                               |  |              |    |  |              |   |  |              |   
|Test and measurement products(1)                                        |  | 93.6         | %  |  | 94.1         | % |  | 94.7         | % 
|Service and other(1)                                                    |  | 6.4          |    |  | 5.9          |   |  | 5.3          |   
|                                                                        |  |              |    |  |              |   |  |              |   
|Total revenues                                                          |  | 100.0        |    |  | 100.0        |   |  | 100.0        |   
|Cost of revenues(1)                                                     |  | 47.5         |    |  | 44.1         |   |  | 46.2         |   
|                                                                        |  |              |    |  |              |   |  |              |   
|Gross profit                                                            |  | 52.5         |    |  | 55.9         |   |  | 53.8         |   
|Operating expenses:                                                     |  |              |    |  |              |   |  |              |   
|Selling, general and administrative(1)                                  |  | 35.1         |    |  | 31.9         |   |  | 35.2         |   
|Research and development(1)                                             |  | 23.0         |    |  | 20.3         |   |  | 25.3         |   
|Reimbursement from escrow account                                       |  |             |    |  | (0.1         | ) |  |             |   
|Impairment of goodwill                                                  |  | 78.9         |    |  |             |   |  |             |   
|                                                                        |  |              |    |  |              |   |  |              |   
|Total operating expenses                                                |  | 137.0        |    |  | 52.1         |   |  | 60.5         |   
|Operating (loss) income                                                 |  | (84.5        | )  |  | 3.8          |   |  | (6.7         | ) 
|Other income (expense):                                                 |  |              |    |  |              |   |  |              |   
|Gain on extinguishment of convertible debt, net of issue cost write-off |  | 7.2          |    |  | 0.2          |   |  |             |   
|Write-off of bank deferred financing fees                               |  |             |    |  |             |   |  | (0.7         | ) 
|Interest income                                                         |  | 0.1          |    |  | 0.2          |   |  | 0.1          |   
|Interest expense                                                        |  | (2.7         | )  |  | (2.7         | ) |  | (2.8         | ) 
|Other, net                                                              |  | 0.2          |    |  | (0.4         | ) |  | (0.1         | ) 
|                                                                        |  |              |    |  |              |   |  |              |   
|Other income (expense), net                                             |  | 4.8          |    |  | (2.7         | ) |  | (3.5         | ) 
|                                                                        |  |              |    |  |              |   |  |              |   
|(Loss) income before income taxes                                       |  | (79.7        | )  |  | 1.1          |   |  | (10.2        | ) 
|(Benefit) provision for income taxes                                    |  | (0.1         | )  |  | 0.0          |   |  | (1.5         | ) 
|                                                                        |  |              |    |  |              |   |  |              |   
|Net (loss) income                                                       |  | (79.6        | )% |  | 1.1          | % |  | (8.7         | )%
|                                                                        |  |              |    |  |              |   |  |              |   



|(1) | Certain reclassifications have been made to prior years amounts to conform to the current year presentation (See also Note 1 to the Consolidated Financial Statements 
Summary of Significant Accounting Policies, for additional information).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Business Realignment, Restructuring Initiatives and Related Asset Impairments

The table below summarizes the charges for business realignment, restructuring initiatives and related asset impairments for the fiscal years ended 2009,
2008 and 2007 (See Note 3 to the Consolidated Financial Statements  Business Realignment, Restructuring Initiatives and Related Asset Impairments for additional information).

(in thousands):



|                                    |  |              |       |              |   |              |  |   |      
|----------------------------------- |  | ------------ | ----- | ------------ | - | ------------ |  | - | -----
|                                    |  | Years Ended 
|                                    |  | June 27,2009 |       | June 28,2008 |   | June 30,2007
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Impaired intangible assets          |  | $            |      |              | $ |             |  | $ | 250  
|Severance and related costs         |  |              | 695   |              |   |             |  |   | 358  
|                                    |  |              |       |              |   |              |  |   |      
|Cost of revenues                    |  | $            | 695   |              | $ |             |  | $ | 608  
|                                    |  |              |       |              |   |              |  |   |      
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Severance and related costs         |  | $            | 1,563 |              | $ |             |  | $ | 467  
|                                    |  |              |       |              |   |              |  |   |      
|Research and development            |  | $            | 1,563 |              | $ |             |  | $ | 467  
|                                    |  |              |       |              |   |              |  |   |      
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Impaired intangible asset           |  | $            |      |              | $ | 699          |  | $ |     
|Severance and related costs         |  |              | 2,079 |              |   | 954          |  |   | 1,248
|Facility closure/lease restructure  |  |              | 749   |              |   |             |  |   | 156  
|                                    |  |              |       |              |   |              |  |   |      
|Selling, general and administrative |  | $            | 2,828 |              | $ | 1,653        |  | $ | 1,404
|                                    |  |              |       |              |   |              |  |   |      

Comparison of Fiscal Years 2009 and 2008

Total revenues were approximately $134.0 million for the year ended June 27, 2009, compared to approximately $160.5 million in the prior year,
representing a decrease of 16.5%, or approximately $26.5 million, primarily as a result of a measurable decline in sales of Test and measurement products driven by the worldwide economic downturn, as well as negative foreign currency impact. Foreign
currency fluctuations decreased total revenues by approximately $3.3 million in fiscal 2009, as compared to fiscal 2008. Our sales were impacted by our customers reducing staffing levels and therefore their need for capital equipment, as well as
postponing spending, mostly for our mid-range oscilloscopes and protocol analyzers.

Service and other revenues primarily consist of
service revenues and maintenance fees. Service and other revenues were approximately $8.5 million for the year ended June 27, 2009, representing a decrease of 9.5% or approximately $0.9 million, as compared to approximately $9.4 million for the
prior year. The decrease was primarily the result of a decline in upgrade purchases furthered by the economic downturn, as customers delayed or cancelled servicing of their products, as well as negative foreign currency impact.

Our geographic breakdown of revenues by area in total dollars and as a percentage of total revenues is as follows (dollars in thousands):



|                   |  |              |         |                        |       |   |              |   |                        |  |       |  
|------------------ |  | ------------ | ------- | ---------------------- | ----- | - | ------------ | - | ---------------------- |  | ----- | -
|                   |  | June 27,2009 |         | June 27,2009percentage |       |   | June 28,2008 |   | June 28,2008percentage | 
|Americas           |  | $            | 39,911  |                        | 29.8  | % |              | $ | 52,883                 |  | 33.0  | %
|Europe/Middle East |  |              | 54,193  |                        | 40.5  |   |              |   | 57,982                 |  | 36.1  |  
|Japan              |  |              | 11,035  |                        | 8.2   |   |              |   | 12,125                 |  | 7.6   |  
|Asia/Pacific       |  |              | 28,828  |                        | 21.5  |   |              |   | 37,496                 |  | 23.3  |  
|                   |  |              |         |                        |       |   |              |   |                        |  |       |  
|Total revenues     |  | $            | 133,967 |                        | 100.0 | % |              | $ | 160,486                |  | 100.0 | %
|                   |  |              |         |                        |       |   |              |   |                        |  |       |  



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For the year end June 27, 2009, the geographic revenues in terms of dollars were lower in all
regions due to the worldwide economic downturn and negative foreign currency impact.

Gross profit for the year ended June 27, 2009
was approximately $70.4 million, or 52.5% gross margin, compared to $89.7 million, or 55.9% gross margin, for the same period last year. The lower gross margin in fiscal 2009 was primarily attributable to decreased demand for our Test and
measurement products, and greater discounting practices necessary to drive sales in an economic downturn, partially offset by increased sales of our higher end products which slightly improved margins. Also contributing to the lower gross margins in
fiscal 2009 was $5.8 million of costs associated with an inventory write-down, as a result of a change in our product strategy due to deteriorating market conditions and approximately $0.7 million in severance costs, as a result of our realignment
initiatives. The gross margin in fiscal 2008 included approximately $3.2 million for inventory write-downs. Absent these charges in both years, fiscal 2009 margins as a percentage of sales were 57.4%, as compared to 57.9% for fiscal 2008.

Selling, general and administrative (SG&A) expense was approximately $47.0 million in fiscal 2009 compared to
approximately $51.3 million in fiscal 2008, representing a decrease of 8.4% or approximately $4.3 million. The decrease was primarily attributable to our extensive cost-reduction program that began in the second quarter of fiscal 2009 which included
reductions in workforce, compensation and other employee benefits. Also contributing to the decrease was a reduction in our share-based compensation expense of approximately $1.5 million, as a result of the reduction in fair value of the stock
appreciation rights (SARs). These cost reductions more than offset approximately $2.8 million of business realignment and restructuring costs in the current year for severance and lease charges. In fiscal 2008, the Catalyst trade name failed the
intangible asset impairment test due to a change in our product strategy, and accordingly we took a non-cash charge of approximately $0.7 million. Additionally, there was approximately $1.0 million of business realignment charges in the prior year.
As a percentage of revenue, SG&A expense increased from 31.9% in fiscal 2008 to 35.1% in fiscal 2009, primarily as a result of a lower sales base.

Research and development (R&D) expense was approximately $30.9 million in fiscal 2009 compared to approximately $32.6 million in fiscal 2008, a decrease of 5.3% or approximately $1.7 million. The
decrease was primarily attributable to our extensive cost-reduction program that began in the second quarter of fiscal 2009, partially offset by approximately $1.6 million of business realignment charges. As a percentage of total revenues, R&D
expense increased from 20.3% in fiscal 2008 to 23.0% in fiscal 2009, primarily as a result of a lower sales base in fiscal 2009.

Impairment of goodwill was approximately $105.8 million in fiscal 2009, representing the write-off of our goodwill balance associated with our Catalyst and CATC acquisitions. This resulted from the sustained decline in our stock price,
which affected our market capitalization and reduced the fair value of our reporting unit below its carrying amount. As of June 27, 2009, no goodwill remains on our Consolidated Balance Sheet.

Other income (expense), net, consists primarily of a gain on the extinguishment of our convertible debt, net of issue cost write-off, interest income and
expense and foreign exchange gains and losses. In fiscal 2009, there was a total net gain of approximately $6.4 million, compared to a total net loss of approximately $4.3 million in fiscal 2008. In 2009, we recognized a gain on the extinguishment
of convertible debt, net of issue cost write-offs, of approximately $9.6 million, resulting from the repurchase of approximately $19.1 million in convertible notes, compared to a gain of approximately $0.3 million in fiscal 2008 from the repurchase
of $4.5 million in convertible notes. Net interest expense, which decreased in fiscal 2009 as a result of our purchases of convertible notes at a discount, was approximately $3.5 million and $4.0 million in fiscal 2009 and 2008, respectively.
Additionally, we recorded net foreign exchange gains of approximately $0.3 million in fiscal 2009 compared to a net loss of approximately $0.6 million in the prior year, resulting from the changes in our foreign exchange forward contracts and on
transactions denominated in other than our functional currencies.

The effective tax rate for fiscal 2009 was 0.2%, compared to an
effective tax rate of 3.2% for fiscal 2008. The effective tax rate for fiscal 2009 includes: a reduction of the tax benefit of approximately $35.4 million related to the impairment of goodwill that is not amortizable for tax purposes; an increase in
the tax benefit of approximately $0.2 million resulting from the true-up of the prior years tax accrual upon filing the actual tax returns related to research



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and development tax credits; an increase in the tax benefit of approximately $0.3 million from the recognition of unrecognized tax benefits due to the
expiration of the statute of limitations; and a reduction of the tax benefit of approximately $0.7 million for the write-down of the deferred tax asset related to restricted stock grants that resulted in a shortfall of cumulative tax benefits. The
effective tax rate for fiscal 2008 includes: the effect of a reduction of tax expense of approximately $0.5 million resulting from both the final true-up of the prior years tax accrual upon filing the actual tax returns and an election for
certain R&D credits made by the Company in the second quarter of fiscal 2008; a reduction of tax expense of approximately $0.4 million from the recognition of unrecognized tax benefits due to the expiration of the statute of limitations; and an
increase in tax expense of approximately $0.6 million for the write-down of the deferred tax asset related to restricted stock grants that resulted in a shortfall of cumulative tax benefits; all of which were treated as discrete items. The Company
calculates income tax expense (benefit) based upon an annual estimated effective tax rate that includes estimates and assumptions that may change. The differences between the annual estimated effective tax rate and the U.S. federal statutory rate of
34% principally result from the Companys geographical distribution of taxable income, and differences between the book and tax treatment of certain items.

Comparison of Fiscal Years 2008 and 2007

Total revenues were approximately $160.5 million for the year ended June 28,
2008, compared to approximately $151.3 million in the fiscal 2007, representing an increase of 6.1%, or approximately $9.2 million, primarily as a result of increased sales of Test and measurement products and positive foreign currency impact.
Foreign currency fluctuations increased total revenues by approximately $4.4 million in fiscal 2008 as compared to fiscal 2007. The increase in Test and measurement products was driven mainly by increased oscilloscope product shipments as a result
of an improved distribution channel and the incremental impact from the Catalyst acquisition in the second quarter of fiscal 2007, which was approximately 1.8% of revenues. These increases were partially offset by decreased demand and softness in
orders from Japan.

Service and other revenues primarily consist of service revenues and maintenance fees. Service and other revenues were
approximately $9.4 million for the year ended June 28, 2008, representing an increase of 16.8% or approximately $1.4 million, as compared to approximately $8.1 million for fiscal 2007. The increase was primarily the result of a company-wide
service initiative that began during fiscal 2008 to improve customer service by focusing on opportunities to add value to our products, positive foreign currency impact and an improved distribution channel.

Our geographic breakdown of revenues by area in total dollars and as a percentage of total revenues is as follows (in thousands):



|                   |  |              |         |                        |       |   |              |   |                        |  |       |  
|------------------ |  | ------------ | ------- | ---------------------- | ----- | - | ------------ | - | ---------------------- |  | ----- | -
|                   |  | June 28,2008 |         | June 28,2008percentage |       |   | June 30,2007 |   | June 30,2007percentage | 
|Americas           |  | $            | 52,883  |                        | 33.0  | % |              | $ | 50,891                 |  | 33.6  | %
|Europe/Middle East |  |              | 57,982  |                        | 36.1  |   |              |   | 51,899                 |  | 34.3  |  
|Japan              |  |              | 12,125  |                        | 7.6   |   |              |   | 16,929                 |  | 11.2  |  
|Asia/Pacific       |  |              | 37,496  |                        | 23.3  |   |              |   | 31,581                 |  | 20.9  |  
|                   |  |              |         |                        |       |   |              |   |                        |  |       |  
|Total revenues     |  | $            | 160,486 |                        | 100.0 | % |              | $ | 151,300                |  | 100.0 | %
|                   |  |              |         |                        |       |   |              |   |                        |  |       |  

For the year end June 28, 2008, the geographic revenues in terms of dollars were higher in
all regions except Japan. The increases in Europe/Middle East and Asia/Pacific were driven by strong distribution channels and improved sales productivity, as well as favorable foreign currency impact. Improved performance in the Americas resulted
from our reorganized distribution channel, including a network of manufacturers representatives. Foreign currency fluctuations increased Europe/Middle East revenues by approximately $4.2 million in fiscal 2008 as compared to fiscal 2007. These
increases were offset by decreases in Japan, primarily from the realignment of our Japan operations at the end of fiscal 2007 and local economic conditions.



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Gross profit for the year ended June 28, 2008 was approximately $89.7 million, or 55.9% gross
margin, compared to $81.3 million, or 53.8% gross margin, for the same period last year. The lower gross margin in fiscal 2007 was primarily attributable to approximately $3.4 million of costs associated with an inventory write-down, including
inventory recorded at fair value in the purchase accounting for Catalyst and the elimination of a product line, $1.7 million of costs associated with the sell through of stepped up inventory acquired in the Catalyst acquisition, $0.4
million relating to the implementation of a business realignment and $0.3 million charge for the impairment of an intangible asset. The gross margin in fiscal 2008 included approximately $3.2 million for inventory write-downs. Approximately $2.4
million resulted from a change in the Companys product strategy and approximately $0.8 million related to certain inventory recorded at fair value in the purchase accounting for Catalyst, a portion of which we were indemnified. This charge was
partially offset by a reduction in amortization expense for an acquired Catalyst intangible asset of approximately $1.3 million. Absent these charges in both years, fiscal 2008 margins as a percentage of sales were consistent with the fiscal 2007.

Selling, general and administrative (SG&A) expense was approximately $51.3 million in fiscal 2008 compared to
approximately $53.2 million in fiscal 2007, representing a decrease of 3.6% or approximately $1.9 million. The decrease was primarily attributable to a reduction in general spending levels, resulting from the prior years cost-cutting efforts.
Business realignment charges in fiscal 2008 were approximately $1.0 million. Additionally, the Catalyst trade name failed the intangible asset impairment test due to a change in our product strategy, and accordingly we took a non-cash charge of
approximately $0.7 million in the fourth quarter of fiscal 2008. Business realignment and restructuring charges in fiscal 2007 were approximately $1.4 million, prompted by the acquisition of Catalyst as well as the reorganization of our Japan
facility. As a percentage of revenue, SG&A expense decreased from 35.2% in fiscal 2007 to 31.9% in fiscal 2008 as a result of a higher sales base as well as benefits derived from fiscal 2007 cost-cutting and realignment efforts.

Research and development (R&D) expense was approximately $32.6 million in fiscal 2008 compared to approximately $38.3 million in fiscal
2007, a decrease of 14.9% or approximately $5.7 million. As a percentage of total revenues, R&D expense decreased from 25.3% in fiscal 2007 to 20.3% in fiscal 2008. The decrease resulted primarily from the $4.0 million charge for acquired
in-process research and development costs related to the Catalyst acquisition and approximately $0.5 million of realignment charges, both recorded in fiscal 2007. Also contributing to the decrease in R&D expense were reductions in expenses in
fiscal 2008 incurred for prototype materials and supplies and general spending levels.

Reimbursement from escrow account represents fiscal
2008 income resulting from the final Catalyst indemnification release. We received approximately $0.2 million from the remaining Catalyst escrow balance, representing the indemnification obligation for certain Catalyst inventory, assumed at
acquisition.

Other income (expense), net, which consists primarily of interest income and expense and foreign exchange gains and losses,
was a loss of approximately $4.3 million for the year ended June 28, 2008, compared to a loss of approximately $5.3 million for fiscal 2007. Net interest expense was approximately $4.0 million and $4.2 million in fiscal 2008 and 2007,
respectively. There was a foreign exchange loss of approximately $0.6 million in fiscal 2008 compared to a loss of approximately $0.3 million in fiscal 2007, resulting from the changes in our foreign exchange forward contracts and on transactions
denominated in other than our functional currency or that of our subsidiaries. Additionally, Other income (expense), net in fiscal 2008 includes a Gain on extinguishment of convertible debt, net of issue cost write-off of approximately $0.3 million,
resulting from the repurchase of $4.5 million of the our convertible notes. Other income (expense), net in fiscal 2007 includes a charge of approximately $1.0 million for the write-off of bank deferred financing fees associated with the repayment of
the term loan and revolver under the prior credit agreement.

The effective tax rate for fiscal 2008 was 3.2%, compared to an effective tax
rate of (14.5)% for fiscal 2007. The effective tax rate for fiscal 2008 includes the effect of a reduction of tax expense of approximately $0.5 million resulting from true-ups of the tax provision to previously filed tax returns; and an election for
certain R&D credits made by the Company in the second quarter of fiscal 2008; a reduction of tax expense of approximately $0.4 million from the recognition of unrecognized tax benefits due to the expiration of the statute of limitations; and an
increase in tax expense of approximately $0.6 million for the write-down of the deferred tax asset related to restricted stock grants that resulted in a shortfall of cumulative tax benefits. The effective tax rate for fiscal 2007 includes the
effects



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of the in-process research and development (IPR&D) charge of $4.0 million related to the Catalyst acquisition, which is not deductible for
tax purposes, and an increase in the valuation allowance of approximately $1.0 million. The Company calculates income tax expense (benefit) based upon an annual estimated effective tax rate that includes estimates and assumptions that may change.
The differences between the annual estimated effective tax rate and the U.S. federal statutory rate of 35% principally result from the Companys geographical distribution of taxable income, and differences between the book and tax treatment of
certain items.

Liquidity and Capital Resources

Cash and cash equivalents at June 27, 2009 were approximately $6.4 million, compared to approximately $10.2 million at June 28, 2008.

We believe that our cash and cash equivalents on hand, cash flow expected to be generated by our operations and availability under our revolving credit
line will be sufficient to fund our operations, working capital, share repurchases and capital expenditure requirements for the foreseeable future and provide funds for potential acquisition opportunities. We believe that the repayment of debt
maturing in fiscal 2012 will be done through a combination of cash generated from operations and working capital, and will also include possible future financing sources such as: (i) new secured bank debt; (ii) the sale or monetization of
certain assets; (iii) new unsecured debt; and (vii) issuance of equity and/or equity-like securities. As of June 27, 2009, we have $17.5 million in borrowings outstanding under our credit facility.

Operating Activities

Net cash used
in operating activities was approximately $7.7 million for the year ended June 27, 2009 compared to net cash provided by operating activities of approximately $22.0 million for the year ended June 28, 2008. The net cash used in operating
activities in fiscal 2009 was mainly attributable to working capital consumption of approximately $7.5 million. The approximate $29.7 million decrease from the prior year is primarily due to a net loss, adjusted for impairment of goodwill and gains
on the extinguishment of convertible notes, net of issuance cost write-offs, and working capital consumption in fiscal 2009, as compared to net income and working capital contributions in fiscal 2008.

Investing Activities

Net cash used
in investing activities was approximately $4.4 million in fiscal 2009 compared to approximately $4.5 million in fiscal 2008. Net cash used in both fiscal 2009 and fiscal 2008 relates to the purchase of property, plant and equipment.

Financing Activities

Net cash
provided by financing activities was approximately $8.9 million in fiscal 2009 compared to net cash used in financing activities of approximately $18.4 million in fiscal 2008. Net cash provided by financing activities in fiscal 2009 primarily
resulted from $17.5 million in net borrowings under the credit line and approximately $0.7 million proceeds from employee stock purchase and option plans, partially offset by approximately $8.4 million repurchase of convertible notes and
approximately $0.7 million for repurchases of treasury stock. Net cash used in financing activities in fiscal 2008 primarily resulted from approximately $9.4 million repayment of borrowings under the credit line, approximately $3.6 million
repurchase of convertible notes, approximately $3.5 million payment of related party note payable and approximately $2.4 million for repurchases of treasury stock.

Debt

Credit Facility

As of June 27, 2009, we have a $50.0 million credit agreement, which has been amended from time to time (New Credit Agreement). The terms of the New Credit Agreement provide us with a $50.0 million
revolving credit facility (Revolver), which includes a $5.0 million swingline loan subfacility and a $5.0 million letter of



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credit subfacility. The performance of our obligations under the New Credit Agreement is secured by all of the domestic assets of LeCroy Corporation and its
domestic subsidiaries, and is guaranteed by our domestic subsidiaries. As of June 27, 2009, we have $17.5 million in outstanding borrowings against the Revolver and zero against the letter of credit subfacility and the swingline loan
subfacility.

We are required to comply with certain financial covenants, measured quarterly, including a minimum interest coverage ratio,
minimum total net worth, maximum leverage ratio, minimum fixed charge coverage ratio and limitations on capital expenditures. As of June 27, 2009, we are in compliance with the financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless, in the absence of any default, extended by us to April 1, 2012, contingent on
the waiver or extension of the first redemption date of our convertible notes (See Note 12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).

Convertible Debt

On
October 12, 2006, we sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the Notes). The Notes bear
interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes are direct, unsecured, senior subordinated obligations and rank:
(i) subordinate in right of payment to all of our existing and future secured indebtedness; (ii) equal in right of payment with all of our existing and future senior unsecured indebtedness, and (iii) senior in right of payment to all
of our existing and future subordinated indebtedness, except that the Notes rank equally with the $3.5 million note issued in connection with the Catalyst acquisition (repaid in fiscal 2008), which is subordinated to our credit facility. In
connection with the issuance and sale of the Notes, we entered into an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee. The terms of the Notes are governed by the indenture.

The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require us to
repurchase for cash all or a portion of their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and
unpaid interest, if any, up to but not including, the repurchase date. We may, from time to time, at our option repurchase the Notes in the open market. In addition, we may redeem the Notes for cash, either in whole or in part, anytime after
October 20, 2011 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into our common stock by
the holders at an initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes, equal to an initial conversion price of approximately $14.55 per share, subject to adjustment as described in the indenture. Upon conversion,
we will deliver for each $1,000 principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 and the conversion value as defined in the indenture, and to the extent that the conversion value exceeds $1,000, at our election,
cash or shares of our common stock in respect of the remainder. Prior to September 15, 2026, holders may convert their notes into cash and shares of our common stock, if any, at the applicable conversion rate, at their option, only under
limited circumstances described in the indenture. On or after September 15, 2026, holders may convert their notes into cash and shares of our common stock, if any, at the applicable conversion price, at our option, at any time prior to the
close of business on the business day immediately preceding the maturity date. Upon conversion of each $1,000 principal amount of the notes, the holder will receive an amount in cash equal to the lesser of (i) $1,000 or (ii) the conversion
value, as described in the indenture; if the conversion value exceeds $1,000 on the conversion date, we will also deliver, at our election, cash or common stock or combination of each with a value equal to such excess.

In fiscal 2009 and 2008, we repurchased approximately $19.1 million and $4.5 million, respectively, of the outstanding convertible notes. As of
June 27, 2009, the remaining balance of approximately $48.4 million is included in Convertible notes on the Consolidated Balance Sheet. As of June 28, 2008, $5.5 million of the remaining balance was in Accrued expenses and other current
liabilities, and $62.0 million was included in Convertible Notes on the Consolidated Balance Sheet (See Note 12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).



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Foreign Credit Facilities

We maintain certain short-term foreign credit facilities. Our Swiss subsidiary has an overdraft facility totaling 1.0 million Swiss francs, or
approximately $0.9 million as of June 27, 2009. As of June 27, 2009, approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations
to Swiss suppliers, such as rent and utilities, are payable under the credit facility only in the event that the subsidiary is unable to meet its financial obligations to those suppliers. We had a 50.0 million yen Japanese facility that was
cancelled in the third quarter of fiscal 2009 (See Note 12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).

Share Purchase Plan

On May 25, 2006, our Board of Directors approved the adoption of a share
repurchase plan authorizing the purchase of up to 2.0 million shares, not to exceed $25.0 million, of our common stock for treasury. Purchases under this buyback program may be made from time to time on the open market and in privately negotiated
transactions, including pursuant to the terms of a 10b5-1 plan. A 10b5-1 plan allows a company to purchase shares during a blackout period, provided the company communicates its share purchase instructions to the broker prior to the blackout period,
pursuant to a written plan that may not be changed. The timing of these purchases is dependent upon several factors, including market conditions, the market price of our common stock, the effect of the share dilution on earnings, available cash and
any other potential risks we may encounter. The share repurchase plan may be discontinued at any time at the discretion of the Company (See Note 14 to the Consolidated Financial Statements  Common Stock, Treasury Stock and Warrants to Purchase
Common Stock for additional information).

Off-Balance Sheet Arrangements

It is not our business practice to enter into off-balance sheet arrangements. We do not enter into off-balance sheet transactions specifically structured
to provide income or tax benefits or to avoid recognizing or disclosing assets or liabilities.

Our 4.00% notes payable are convertible
into shares of our common stock at a conversion price of $14.55 per share and therefore pose a potential for significant dilution. The maximum potential dilutive effect of conversion of the 4.00% notes is approximately 3.3 million shares (See Note
12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).

In addition, stock options to
purchase approximately 2.4 million shares of our common stock at a weighted average exercise price of $7.45 per share and approximately 0.3 million restricted stock units were outstanding at June 27, 2009 that represent additional potential dilution
(See Note 13 to the Consolidated Financial Statements  Share-Based Compensation for additional information).

Contractual Obligations and Other
Commitments

Our contractual obligations and commitments include obligations associated with our employee severance agreements,
supplier agreements, operating and capital leases, revolving credit and convertible note obligations, as set forth in the table below (in thousands):

|                                        |  |                                            |        |                 |   |           |  |           |        |                  |   |       |  |   |    
|--------------------------------------- |  | ------------------------------------------ | ------ | --------------- | - | --------- |  | --------- | ------ | ---------------- | - | ----- |  | - | ---
|                                        |  | Payments due by period as of June 27, 2009
|                                        |  | Total                                      |        | Less than1 Year |   | 1-3 Years |  | 3-5 Years |        | More than 5Years
|Severance                               |  | $                                          | 1,829  |                 | $ | 1,627     |  | $         | 202    |                  | $ |      |  | $ |   
|Supplier agreements                     |  |                                            | 708    |                 |   | 708       |  |           |       |                  |   |      |  |   |   
|Operating lease obligations             |  |                                            | 6,171  |                 |   | 2,127     |  |           | 2,604  |                  |   | 1,319 |  |   | 121
|Vendor supplied capital lease agreement |  |                                            | 319    |                 |   | 253       |  |           | 66     |                  |   |      |  |   |   
|Revolving credit obligation(1)          |  |                                            | 17,500 |                 |   |          |  |           | 17,500 |                  |   |      |  |   |   
|Convertible notes(2)                    |  |                                            | 48,350 |                 |   |          |  |           | 48,350 |                  |   |      |  |   |   
|                                        |  |                                            |        |                 |   |           |  |           |        |                  |   |       |  |   |    
|Total(3)                                |  | $                                          | 74,877 |                 | $ | 4,715     |  | $         | 68,722 |                  | $ | 1,319 |  | $ | 121
|                                        |  |                                            |        |                 |   |           |  |           |        |                  |   |       |  |   |    



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|(1) | The revolving credit facility expires on July 15, 2011, unless, in the absence of any default, extended by the Company to April 15, 2012, contingent on the waiver or extension of
the first redemption date of the Companys convertible notes (See Note 12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The Convertible notes mature on October 15, 2026. Holders of the Convertible notes have the right to require the Company to purchase all or a portion of the Convertible notes on
October 15, 2011, which is reflected above (See Note 12 to the Consolidated Financial Statements  Debt and Capital Leases for additional information).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The Contractual Obligations and Other Commitments does not include any reserves for income taxes under FIN 48 because we are unable to reasonably predict the ultimate amount or
timing of settlement of our reserves for income taxes under FIN 48. As of June 27, 2009, our reserves for income taxes totaled approximately $2.0 million, which are reflected as non-current liabilities and included in Deferred revenue and other
non-current liabilities on our Consolidated Balance Sheets (See Note 11 to the Consolidated Financial Statements  Income Taxes for additional information).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Accounting Pronouncements

The following recent accounting pronouncements are not yet
adopted:



| |  |  | Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), with respect to the Companys
non-financial assets and liabilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (SFAS 141R).
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Financial Accounting Standards Board Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial Accounting Standards Board Staff Position Accounting Principles Board Opinion No. 14-1, Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial Accounting Standards Board Staff Position No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which
amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments and Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

See Note 1 to the Consolidated Financial Statements  Summary of Significant Accounting Policies, New Accounting Pronouncements for additional information on recent pronouncements not yet adopted and
recent pronouncements adopted.

Forward-Looking Information

This Form 10-K contains forward-looking statements. When used in this Form 10-K, the words anticipate, believe, estimate, will, plan, intend, and
expect and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may
not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Form 10-K. Important factors that could cause actual
results to differ materially from our forward-looking statements are set forth in this Form 10-K, including under the heading Risk Factors. All forward-looking statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements set forth in this Form 10-K. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future
events, or otherwise.



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|-------- | ---------------------------------------------------------

We purchase materials from suppliers and sell our products around the world and maintain investments in foreign subsidiaries, all denominated in a variety of currencies. As a consequence, we are exposed to risks from fluctuations in foreign
currency exchange rates with respect to a number of currencies, changes in government policies and legal and regulatory requirements, and political instability. Among the more significant potential risks to us of relative fluctuations in foreign
currency exchange rates is the relationship among and between the U.S. dollar, Euro, Swiss franc, British pound, Swedish krona, Japanese yen, Korean won and Singapore dollar.

Our operations generate non-functional currency cash flows such as third-party vendor payments, revenues and intercompany payments. In anticipation of
these foreign currency cash flows, we have a program of entering into foreign exchange forward contracts to decrease the risks associated with currency fluctuations on assets or liabilities denominated in other than the functional currency of us or
our subsidiaries. It cannot be assured, however, that this program will effectively offset all of our foreign currency risk related to these assets or liabilities. These foreign exchange forward contracts do not qualify for hedge accounting in
accordance with SFAS No. 133, Accounting for Derivative Investments and Hedging Activities (SFAS No. 133).

Other than this program, we do not attempt to reduce our foreign currency exchange risks by entering into foreign currency management programs. As a consequence, there can be no assurance that fluctuations in foreign currency exchange rates
in the future resulting in mismatches between local currency revenues and expenses, the translation of foreign currencies into the U.S. dollar, our financial reporting currency, or otherwise, will not adversely affect our results of operations.
Moreover, fluctuations in exchange rates could affect the demand for our products.

During fiscal 2009, 2008, and 2007, foreign currency
exchange gains and losses on both forward contracts and on transactions denominated in other than the subsidiaries functional currencies was a net gain of approximately $0.3 million, a net loss of approximately $0.6 million, and a net loss of
approximately $0.3 million, respectively. These net gains and losses are included in Other, net in the Consolidated Statements of Operations. At June 27, 2009 and June 28, 2008, the notional amounts of the Companys open foreign
exchange forward contracts, all with maturities of less than six months, were approximately $17.5 million and $16.3 million, respectively, with a net unrealized gain of approximately $0.1 million and zero, respectively.

We performed a sensitivity analysis at June 27, 2009, assuming a hypothetical 10% adverse change in foreign currency exchange rates on our open
foreign exchange forward contracts and our assets and liabilities denominated in other than their functional currencies. We estimate that as of June 27, 2009, a 10% adverse change in foreign currency exchange rates would have resulted in an
incremental expense of approximately $0.1 million, after tax on these instruments and therefore, on our consolidated results of operations, financial position, and cash flows from operations.

On October 15, 2006, we completed the sale of $72.0 million of 4.00% convertible senior notes (the Notes) due October 15, 2026. The
Notes will pay interest semiannually through maturity and will be convertible at an initial conversion rate of 68.7285 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $14.55 per
share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of specified events. Upon conversion of the Notes, holders will receive cash up to the principal amount of each note, and any excess conversion value
will be delivered in cash or shares of our common stock, at our option. During fiscal 2009 and 2008, we repurchased approximately $19.1 million and $4.5 million, respectively, of the outstanding convertible notes, resulting in a balance of
approximately $48.4 million and $67.5 million at June 27, 2009 and June 28, 2008, respectively. As of June 27, 2009 and June 28, 2008, the market value of the convertible notes was approximately $27.7 million and $60.8 million,
respectively.

We are exposed to adverse changes in interest rates primarily due to our investment in cash and cash equivalents, as well
as, our $50.0 million credit facility. Market risk is estimated as the potential change in fair value resulting from a hypothetical 1% adverse change in interest rates, which would have been an incremental charge of approximately $0.1 million, after
tax, to our results of operations, financial position and cash flows in fiscal 2009.



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

LeCROY CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                    |  |   
|----------------------------------------------------------------------------------------------------------------------------------- |  | --
|Report of Independent Registered Public Accounting Firm                                                                             |  | 55
|                                                                                                                                    | 
|Consolidated Balance Sheets as of June 27, 2009 and June 28, 2008                                                                   |  | 56
|                                                                                                                                    | 
|Consolidated Statements of Operations for the years ended June 27, 2009, June 28, 2008 and June 30, 2007                            |  | 57
|                                                                                                                                    | 
|Consolidated Statements of Stockholders Equity for the years ended June 27, 2009, June 28, 2008 and June 30, 2007                  |  | 58
|                                                                                                                                    | 
|Consolidated Statements of Cash Flows for the years ended June 27, 2009, June 28, 2008 and June 30, 2007                            |  | 59
|                                                                                                                                    | 
|Notes to Consolidated Financial Statements                                                                                          |  | 60
|                                                                                                                                    | 
|Financial Statement Schedule  Valuation and Qualifying Accounts for the years ended June 27, 2009, June 28, 2008 and June 30, 2007 |  | 98



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

LeCroy Corporation:

We have audited the accompanying consolidated balance sheets of LeCroy Corporation and subsidiaries as of June 27, 2009 and June 28, 2008,
and the related consolidated statements of operations, stockholders equity, and cash flows for the years ended June 27, 2009, June 28, 2008, and June 30, 2007. In connection with our audits of the consolidated financial
statements, we also have audited the valuation and qualifying accounts financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility
is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LeCroy Corporation and subsidiaries as of June 27, 2009 and
June 28, 2008, and the results of their operations and their cash flows for the years ended June 27, 2009, June 28, 2008, and June 30, 2007, in conformity with U.S. generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for uncertainty in income taxes
effective July 1, 2007 due to the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109.

/s/ KPMG LLP

Short Hills, New Jersey

September 14, 2009



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LeCROY CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)



|                                                                                                                                              |  |              |          |   |              |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | -
|                                                                                                                                              |  | June 27,2009 |          |   | June 28,2008 |  
|ASSETS                                                                                                                                        |  |              |          |   |              |   |         |  
|Current assets:                                                                                                                               |  |              |          |   |              |   |         |  
|Cash and cash equivalents                                                                                                                     |  | $            | 6,413    |   |              | $ | 10,224  |  
|Accounts receivable, net of reserves of $692 and $742 at June 27, 2009 and June 28, 2008, respectively                                        |  |              | 25,209   |   |              |   | 33,274  |  
|Inventories, net                                                                                                                              |  |              | 34,987   |   |              |   | 32,886  |  
|Other current assets                                                                                                                          |  |              | 11,564   |   |              |   | 10,214  |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total current assets                                                                                                                          |  |              | 78,173   |   |              |   | 86,598  |  
|Property, plant and equipment, net                                                                                                            |  |              | 21,817   |   |              |   | 21,683  |  
|Goodwill                                                                                                                                      |  |              |         |   |              |   | 105,771 |  
|Intangible assets, net                                                                                                                        |  |              | 502      |   |              |   | 972     |  
|Other non-current assets                                                                                                                      |  |              | 9,545    |   |              |   | 11,962  |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total assets                                                                                                                                  |  | $            | 110,037  |   |              | $ | 226,986 |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                          |  |              |          |   |              |   |         |  
|Current liabilities:                                                                                                                          |  |              |          |   |              |   |         |  
|Accounts payable                                                                                                                              |  | $            | 14,169   |   |              | $ | 22,280  |  
|Accrued expenses and other current liabilities                                                                                                |  |              | 12,983   |   |              |   | 19,201  |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total current liabilities                                                                                                                     |  |              | 27,152   |   |              |   | 41,481  |  
|Long-term bank debt                                                                                                                           |  |              | 17,500   |   |              |   |        |  
|Convertible notes                                                                                                                             |  |              | 48,350   |   |              |   | 62,000  |  
|Deferred revenue and other non-current liabilities                                                                                            |  |              | 3,635    |   |              |   | 4,545   |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total liabilities                                                                                                                             |  |              | 96,637   |   |              |   | 108,026 |  
|Commitments and contingencies                                                                                                                 |  |              |          |   |              |   |         |  
|                                                                                                                                              |  |             
|Stockholders equity:                                                                                                                         |  |              |          |   |              |   |         |  
|Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and outstanding as of June 27, 2009 and June 28, 2008)              |  |              |         |   |              |   |        |  
|Common stock, $.01 par value (authorized 45,000,000 shares; 12,900,551 shares issued at June 27, 2009 and 12,656,899 issued at
June 28, 2008) |  |              | 129      |   |              |   | 127     |  
|Additional paid-in capital                                                                                                                    |  |              | 117,055  |   |              |   | 113,693 |  
|Accumulated other comprehensive income                                                                                                        |  |              | 1,862    |   |              |   | 3,451   |  
|(Accumulated deficit) retained earnings                                                                                                       |  |              | (102,548 | ) |              |   | 4,102   |  
|Treasury stock, at cost (403,215 shares and 297,523 shares at June 27, 2009 and June 28, 2008, respectively)                                  |  |              | (3,098   | ) |              |   | (2,413  | )
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total stockholders equity                                                                                                                    |  |              | 13,400   |   |              |   | 118,960 |  
|                                                                                                                                              |  |              |          |   |              |   |         |  
|Total liabilities and stockholders equity                                                                                                    |  | $            | 110,037  |   |              | $ | 226,986 |  
|                                                                                                                                              |  |              |          |   |              |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|----------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                                                        |  | Years Ended  |         
|                                                                        |  | June 27,2009 |          |   | June 28,2008 |   |         | June 30,2007 | 
|Revenues:                                                               |  |              |          |   |              |   |         |              |  |   |         |  
|Test and measurement products                                           |  | $            | 125,456  |   |              | $ | 151,077 |              |  | $ | 143,244 |  
|Service and other                                                       |  |              | 8,511    |   |              |   | 9,409   |              |  |   | 8,056   |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Total revenues                                                          |  |              | 133,967  |   |              |   | 160,486 |              |  |   | 151,300 |  
|Cost of revenues                                                        |  |              | 63,598   |   |              |   | 70,756  |              |  |   | 69,953  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Gross profit                                                            |  |              | 70,369   |   |              |   | 89,730  |              |  |   | 81,347  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Operating expenses:                                                     |  |              |          |   |              |   |         |              |  |   |         |  
|Selling, general and administrative                                     |  |              | 46,991   |   |              |   | 51,299  |              |  |   | 53,218  |  
|Research and development                                                |  |              | 30,851   |   |              |   | 32,576  |              |  |   | 38,302  |  
|Reimbursement from escrow account                                       |  |              |         |   |              |   | (240    | )            |  |   |        |  
|Impairment of goodwill                                                  |  |              | 105,771  |   |              |   |        |              |  |   |        |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Total operating expenses                                                |  |              | 183,613  |   |              |   | 83,635  |              |  |   | 91,520  |  
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Operating (loss) income                                                 |  |              | (113,244 | ) |              |   | 6,095   |              |  |   | (10,173 | )
|                                                                        |  |              |         
|Other income (expense):                                                 |  |              |          |   |              |   |         |              |  |   |         |  
|Gain on extinguishment of convertible debt, net of issue cost write-off |  |              | 9,606    |   |              |   | 338     |              |  |   |        |  
|Write-off of bank deferred financing fees                               |  |              |         |   |              |   |        |              |  |   | (997    | )
|Interest income                                                         |  |              | 90       |   |              |   | 298     |              |  |   | 124     |  
|Interest expense                                                        |  |              | (3,554   | ) |              |   | (4,331  | )            |  |   | (4,293  | )
|Other, net                                                              |  |              | 260      |   |              |   | (632    | )            |  |   | (99     | )
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Other income (expense), net                                             |  |              | 6,402    |   |              |   | (4,327  | )            |  |   | (5,265  | )
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|(Loss) income before income taxes                                       |  |              | (106,842 | ) |              |   | 1,768   |              |  |   | (15,438 | )
|(Benefit) provision for income taxes                                    |  |              | (192     | ) |              |   | 56      |              |  |   | (2,231  | )
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|Net (loss) income                                                       |  | $            | (106,650 | ) |              | $ | 1,712   |              |  | $ | (13,207 | )
|                                                                        |  |              |          |   |              |   |         |              |  |   |         |  
|                                                                        |  |              |         
|Net (loss) income per common share:                                     |  |              |          |   |              |   |         |              |  |   |         |  
|Basic                                                                   |  | $            | (8.89    | ) |              | $ | 0.15    |              |  | $ | (1.13   | )
|Diluted                                                                 |  | $            | (8.89    | ) |              | $ | 0.14    |              |  | $ | (1.13   | )
|                                                                        |  |              |         
|Weighted average number of common shares:                               |  |              |          |   |              |   |         |              |  |   |         |  
|Basic                                                                   |  |              | 12,003   |   |              |   | 11,749  |              |  |   | 11,702  |  
|Diluted                                                                 |  |              | 12,003   |   |              |   | 12,007  |              |  |   | 11,702  |  

The accompanying notes are an integral part of these consolidated financial statements.



57



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands)



|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|-------------------------------------------------------- |  | --------------- | - |  | ------------------------ | --- | - | ------------------------------------------ | - | ------- | ------------------------------------ |  | - | ------------- | - |  | ----- | -------- | - |  | - | ------- | - |  | - | -------- | -
|                                                         |  | Common Stock    |   |  | AdditionalPaid-inCapital |     |   | AccumulatedOtherComprehensiveIncome (loss) |   |         | (AccumulatedDeficit)RetainedEarnings |  |   | TreasuryStock |   |  | Total |         
|                                                         |  | Number ofShares |   |  | ParValue                 |     |   |                                            |   |         |                                     
|Balance at July 1, 2006                                  |  | 12,883          |   |  | $                        | 129 |   |                                            | $ | 114,447 |                                      |  | $ | 1,292         |   |  | $     | 15,693   |   |  | $ | (1,858  | ) |  | $ | 129,703  |  
|Comprehensive loss:                                      |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Net loss                                                 |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       | (13,207  | ) |  |   |        |   |  |   | (13,207  | )
|Foreign currency translation                             |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   | 117           |   |  |       |         |   |  |   |        |   |  |   | 117      |  
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                 |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   | (13,090  | )
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Exercise of stock options and employee stock purchases   |  | 156             |   |  |                          | 1   |   |                                            |   | 957     |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 958      |  
|Issuance of restricted stock to employees                |  | 406             |   |  |                          | 3   |   |                                            |   | (3      | )                                    |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Forfeitures of restricted stock for terminated employees |  | (64             | ) |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Issuance of LeCroy stock options in Merger               |  |                |   |  |                          |    |   |                                            |   | 451     |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 451      |  
|Purchase of treasury shares                              |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   | (10,508 | ) |  |   | (10,508  | )
|Retirement of treasury shares                            |  | (1,038          | ) |  |                          | (10 | ) |                                            |   | (12,356 | )                                    |  |   |              |   |  |       |         |   |  |   | 12,366  |   |  |   |         |  
|Share-based compensation expense                         |  |                |   |  |                          |    |   |                                            |   | 5,217   |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 5,217    |  
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Balance at June 30, 2007                                 |  | 12,343          |   |  | $                        | 123 |   |                                            | $ | 108,713 |                                      |  | $ | 1,409         |   |  | $     | 2,486    |   |  | $ |        |   |  | $ | 112,731  |  
|                                                         |  |                 |   |  |                          |     |  
|Comprehensive income:                                    |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Net income                                               |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       | 1,712    |   |  |   |        |   |  |   | 1,712    |  
|Foreign currency translation                             |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   | 2,042         |   |  |       |         |   |  |   |        |   |  |   | 2,042    |  
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Total comprehensive income                               |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   | 3,754    |  
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Exercise of stock options and employee stock purchases   |  | 151             |   |  |                          | 2   |   |                                            |   | 834     |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 836      |  
|Issuance of restricted stock to employees                |  | 227             |   |  |                          | 2   |   |                                            |   | (2      | )                                    |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Forfeitures of restricted stock for terminated employees |  | (64             | ) |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Share-based compensation expense                         |  |                |   |  |                          |    |   |                                            |   | 4,148   |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 4,148    |  
|Adjustment for adoption ofFIN 48                         |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       | 58       |   |  |   |        |   |  |   | 58       |  
|Adjustment for adoption ofEITF 06-2                      |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       | (154     | ) |  |   |        |   |  |   | (154     | )
|Purchase of treasury shares                              |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   | (2,413  | ) |  |   | (2,413   | )
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Balance at June 28, 2008                                 |  | 12,657          |   |  | $                        | 127 |   |                                            | $ | 113,693 |                                      |  | $ | 3,451         |   |  | $     | 4,102    |   |  | $ | (2,413  | ) |  | $ | 118,960  |  
|                                                         |  |                 |   |  |                          |     |  
|Comprehensive loss:                                      |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Net loss                                                 |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       | (106,650 | ) |  |   |        |   |  |   | (106,650 | )
|Foreign currency translation                             |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   | (1,589        | ) |  |       |         |   |  |   |        |   |  |   | (1,589   | )
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                 |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   | (108,239 | )
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Exercise of stock options and employee stock purchases   |  | 204             |   |  |                          | 2   |   |                                            |   | 681     |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 683      |  
|Issuance of restricted stock to employees                |  | 65              |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Forfeitures of restricted stock for terminated employees |  | (25             | ) |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   |         |  
|Share-based compensation expense                         |  |                |   |  |                          |    |   |                                            |   | 2,681   |                                      |  |   |              |   |  |       |         |   |  |   |        |   |  |   | 2,681    |  
|Purchase of treasury shares                              |  |                |   |  |                          |    |   |                                            |   |        |                                      |  |   |              |   |  |       |         |   |  |   | (685    | ) |  |   | (685     | )
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  
|Balance at June 27, 2009                                 |  | 12,901          |   |  | $                        | 129 |   |                                            | $ | 117,055 |                                      |  | $ | 1,862         |   |  | $     | (102,548 | ) |  | $ | (3,098  | ) |  | $ | 13,400   |  
|                                                         |  |                 |   |  |                          |     |   |                                            |   |         |                                      |  |   |               |   |  |       |          |   |  |   |         |   |  |   |          |  

The accompanying notes are an integral part of these consolidated statements.



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                                                                                            |  | Years Ended  |         
|                                                                                                            |  | June 27,2009 |          |   | June 28,2008 |   |         | June 30,2007 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                       |  |              |          |   |              |   |         |              |  |   |         |  
|Net (loss) income                                                                                           |  | $            | (106,650 | ) |              | $ | 1,712   |              |  | $ | (13,207 | )
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:          |  |              |          |   |              |   |         |              |  |   |         |  
|Impairment of goodwill                                                                                      |  |              | 105,771  |   |              |   |        |              |  |   |        |  
|Write-off of acquired in-process research and development                                                   |  |              |         |   |              |   |        |              |  |   | 4,000   |  
|Depreciation and amortization                                                                               |  |              | 6,234    |   |              |   | 7,105   |              |  |   | 8,127   |  
|Share-based compensation                                                                                    |  |              | 2,783    |   |              |   | 4,695   |              |  |   | 5,217   |  
|Amortization of debt issuance costs                                                                         |  |              | 644      |   |              |   | 742     |              |  |   | 530     |  
|Deferred income taxes                                                                                       |  |              | 541      |   |              |   | (644    | )            |  |   | (2,691  | )
|Write-off of bank deferred financing fees                                                                   |  |              |         |   |              |   |        |              |  |   | 997     |  
|Gain on extinguishment of convertible debt, net of issue cost write-off                                     |  |              | (9,606   | ) |              |   | (338    | )            |  |   |        |  
|Impairment of intangible assets                                                                             |  |              |         |   |              |   | 699     |              |  |   | 250     |  
|Loss (gain) on disposal of property, plant and equipment, net                                               |  |              | 60       |   |              |   | (97     | )            |  |   | 176     |  
|Gross profit on non-cash sale                                                                               |  |              |         |   |              |   | (44     | )            |  |   |        |  
|Change in operating assets and liabilities, net of assets acquired and liabilities assumed in acquisitions: |  |              |          |   |              |   |         |              |  |   |         |  
|Accounts receivable                                                                                         |  |              | 7,229    |   |              |   | 547     |              |  |   | (1,977  | )
|Inventories                                                                                                 |  |              | (3,960   | ) |              |   | 3,866   |              |  |   | (1,337  | )
|Other current and non-current assets                                                                        |  |              | (402     | ) |              |   | 1,031   |              |  |   | (475    | )
|Accounts payable, accrued expenses and other liabilities                                                    |  |              | (10,380  | ) |              |   | 2,763   |              |  |   | (234    | )
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Net cash (used in) provided by operating activities                                                         |  |              | (7,736   | ) |              |   | 22,037  |              |  |   | (624    | )
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                       |  |              |          |   |              |   |         |              |  |   |         |  
|Purchase of property, plant and equipment                                                                   |  |              | (4,434   | ) |              |   | (4,483  | )            |  |   | (4,143  | )
|Business acquisition, net of acquired cash                                                                  |  |              |         |   |              |   |        |              |  |   | (31,512 | )
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Net cash used in investing activities                                                                       |  |              | (4,434   | ) |              |   | (4,483  | )            |  |   | (35,655 | )
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                       |  |              |          |   |              |   |         |              |  |   |         |  
|Repayment of term loan                                                                                      |  |              |         |   |              |   |        |              |  |   | (34,076 | )
|Borrowings under credit line                                                                                |  |              | 20,500   |   |              |   |        |              |  |   | 40,160  |  
|Repayment of borrowings under credit line                                                                   |  |              | (3,000   | ) |              |   | (9,410  | )            |  |   | (34,250 | )
|Payment of debt issuance costs                                                                              |  |              |         |   |              |   |        |              |  |   | (3,826  | )
|Repurchase of convertible notes                                                                             |  |              | (8,378   | ) |              |   | (3,583  | )            |  |   |        |  
|Proceeds from issuance of convertible notes                                                                 |  |              |         |   |              |   |        |              |  |   | 72,000  |  
|Purchase of treasury shares                                                                                 |  |              | (685     | ) |              |   | (2,413  | )            |  |   | (10,508 | )
|Payments made on capital leases                                                                             |  |              | (234     | ) |              |   | (283    | )            |  |   | (391    | )
|Payment of note payable to related party for business acquisition                                           |  |              |         |   |              |   | (3,500  | )            |  |   |        |  
|Proceeds from employee stock purchase and option plans                                                      |  |              | 683      |   |              |   | 836     |              |  |   | 958     |  
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Net cash provided by (used in) financing activities                                                         |  |              | 8,886    |   |              |   | (18,353 | )            |  |   | 30,067  |  
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                                |  |              | (527     | ) |              |   | 575     |              |  |   | (312    | )
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Net decrease in cash and cash equivalents                                                                   |  |              | (3,811   | ) |              |   | (224    | )            |  |   | (6,524  | )
|Cash and cash equivalents, beginning of year                                                                |  |              | 10,224   |   |              |   | 10,448  |              |  |   | 16,972  |  
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Cash and cash equivalents, end of year                                                                      |  | $            | 6,413    |   |              | $ | 10,224  |              |  | $ | 10,448  |  
|                                                                                                            |  |              |          |   |              |   |         |              |  |   |         |  
|Supplemental Cash Flow Disclosure                                                                           |  |              |          |   |              |   |         |              |  |   |         |  
|Cash paid during the year for:                                                                              |  |              |          |   |              |   |         |              |  |   |         |  
|Interest                                                                                                    |  | $            | 2,645    |   |              | $ | 3,860   |              |  | $ | 1,184   |  
|Income taxes, net of refunds                                                                                |  |              | 371      |   |              |   | 869     |              |  |   | 695     |  
|Non-cash transactions:                                                                                      |  |              |          |   |              |   |         |              |  |   |         |  
|Issuance of note payable to related party for business acquisition                                          |  |              |         |   |              |   |        |              |  |   | 3,500   |  
|Issuance of LeCroy stock options for business acquisition                                                   |  |              |         |   |              |   |        |              |  |   | 451     |  
|Transaction costs for business acquisition, unpaid at June 30, 2007                                         |  |              |         |   |              |   |        |              |  |   | 99      |  
|Property, plant and equipment acquired under capital lease                                                  |  |              |         |   |              |   | 718     |              |  |   |        |  
|Receipt of advertising in exchange for test and measurement product                                         |  |              |         |   |              |   | 62      |              |  |   |        |  
|Transfer of inventory into property, plant and equipment                                                    |  |              | 1,773    |   |              |   | 2,047   |              |  |   | 1,024   |  
|Repurchase of convertible notes, unpaid at June 27, 2009 and June 28, 2008                                  |  |              | 1,175    |   |              |   | 448     |              |  |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and
per share amounts)

1. Summary of Significant Accounting Policies

Organization

LeCroy Corporation (the Company or LeCroy), was founded
and incorporated in the State of New York in 1964 and reincorporated in the State of Delaware in 1995. The Company develops, manufactures, sells and licenses high-performance oscilloscopes and global communications protocol analyzers. Oscilloscopes
are tools used by designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems, to validate electronic designs and to improve time to market. Protocol analyzers are tools used by designers
and engineers to generate and monitor traffic over high speed serial data interfaces, including USB 2.0, USB 3.0, Bluetooth, PCI Express, Serial ATA, Serial Attached SCSI (SAS), Wireless USB, and others. The Companys products are sold
worldwide into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace. Revenues are also generated from the sale of probes, accessories, and applications
solutions, and to a lesser extent, extended warranty and maintenance contracts, repairs and calibrations performed on instruments after the expiration of their warranties.

Basis of Presentation and Use of Estimates

The Consolidated Financial Statements include the accounts of LeCroy Corporation and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain
reclassifications have been made to prior-years amounts to conform to the current year presentation.

The Companys Consolidated
Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP), which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the revenues and expenses reported during the period. The most significant of these estimates and assumptions
relate to revenue recognition, reserves for accounts receivable, allowance for excess and obsolete inventory, uncertain tax positions, valuation of deferred tax assets, valuation of long-lived assets, valuation of goodwill, share-based compensation
expense and estimation of warranty liabilities. These estimates and assumptions are based on managements judgment and available information and, consequently, actual results could differ from these estimates.

The Companys fiscal years end on the Saturday closest to June 30, resulting in an additional week of results every five or six years. Each of
the fiscal years ended June 27, 2009, June 28, 2008 and June 30, 2007 represented a 52 week period.

Change in
Accounting Policy for Classification of Certain Shipping and Handling Costs

The Companys shipping and handling costs
associated with transporting its products to customers were previously recorded as a component of Selling, general and administrative expenses in the Consolidated Statements of Operations. In accordance with Emerging Issues Task Force Issue No.
00-10 Accounting for Shipping and Handling Fees and Costs, the Company disclosed the amount of these shipping and handling costs that were included as Selling, general and administrative expenses (SG&A) in the
notes to the Consolidated Financial Statements on Form 10-K.

Beginning in fiscal 2009, the Company changed its accounting policy to
classify certain shipping and handling costs as Cost of revenues in the Consolidated Statement of Operations. The amounts classified as Cost of revenues represent shipping and handling costs associated with the distribution of finished product from
their point of manufacturing directly to customers, distributors and wholly-owned international subsidiaries. Management believes that the classification of these shipping and handling costs as Cost of revenues better reflects the cost of



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producing and distributing its products and aligns external financial reporting with the results used internally to evaluate the Companys operational
performance. Shipping and handling costs associated with the transportation of demonstration units shipped to sales personnel and customers, as well as distribution costs associated with servicing the Companys international customers through
its foreign sales offices are recorded as SG&A, as they are considered direct selling expenses.

For purposes of comparability,
approximately $1.8 million and $2.2 million of shipping and handling costs previously classified as SG&A for fiscal years ending June 28, 2008 and June 30, 2007, respectively, have been reclassified to Cost of revenues to apply the new
policy. The remaining shipping and handling costs within SG&A totaled approximately $1.3 million, $1.3 million and $2.0 million for the fiscal years ended June 27, 2009, June 28, 2008 and June 30, 2007, respectively.
This change in accounting principle and reclassification had no impact on operating (loss) income, net (loss) income, or net (loss) income per share.

Revenue

LeCroy recognizes product and service revenue, net of allowances for anticipated
returns, provided that (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured. Delivery is considered to have occurred
when title and risk of loss have transferred to the customer, or when services have been provided. The price is considered fixed or determinable when it is not subject to refund or adjustments.

The Company maintains an allowance for doubtful accounts relating to accounts receivable estimated to be non-collectible. The Company analyzes historical
bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, the Company maintains, when appropriate,
an allowance for anticipated sales returns. The Company analyzes historical return trends as well as in-transit product returns to evaluate the adequacy of the allowance for anticipated returns.

Test and measurement products revenue.The Company generates Test and measurement product revenue from the sales of oscilloscopes and application
solutions, protocol analyzers, probes and accessories. Provisions for warranty costs are recorded at the time products are shipped.

Application solutions, which provide oscilloscopes with additional analysis capabilities, are either delivered via compact disc or are already loaded in the oscilloscopes and activated via a key code after the sale is made to the customer.
No post-contract support is provided on the application solutions. All sales of Test and measurement products are based upon separately established prices for the items and are recorded as revenue according to the above revenue recognition criteria.
Revenues from oscilloscope products are included in revenues from Test and measurement products in the Consolidated Statements of Operations, net of any applicable sales or value added taxes. Certain software is embedded in the Companys
oscilloscopes, but the embedded software component is considered incidental.

Due to the significant software content of its protocol
analyzer products, the Company recognizes revenue on the sale of these products, net of any applicable sales or value added taxes, in accordance with American Institute of Certified Public Accountants Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), as amended by Statement of Position 98-9, Modifications of SOP 97-2 with Respect to Certain Transactions (SOP 98-9), upon shipment, provided there is persuasive
evidence of an arrangement, the product has been delivered, the price is fixed or determinable and collection is probable. Software maintenance support revenue is deferred based on its vendor specific objective evidence of fair value
(VSOE) and recognized ratably over the maintenance support periods. In limited circumstances where VSOE does not exist for software maintenance support, the Company recognizes revenue and accrues costs, if applicable, under the
appropriate provisions of SOP 97-2 determined by the facts and circumstances of each transaction. Provisions for warranty costs are recorded at the time sales of related products are recognized as revenue. Revenues from protocol analyzer products
are included in Test and measurement products in the Consolidated Statements of Operations.



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In an effort to provide end-user customers an alternative to purchasing the Companys higher end
products under its standard terms and conditions, the Company began offering customers an opportunity to enter into sales-type or direct financing leases for these products. The Company is accounting for these leases in accordance with Statement of
Financial Accounting Standards (SFAS) No. 13, Accounting for Leases. Lease and rental revenues are reported within Test and measurement product revenue and were approximately $0.4 million, $0.7 million and $1.8 million
for the years ended June 27, 2009, June 28, 2008 and June 30, 2007, respectively.

Service and other revenue.
Service and other revenue includes extended warranty contracts, software maintenance agreements, repairs and calibrations performed on instruments after the expiration of their normal warranty period and direct service accessories and packages. The
Company records deferred revenue for extended warranty contracts, software maintenance agreements and calibrations services and recognizes such revenue on a straight-line basis over the related service period. When arrangements include multiple
elements, the Company uses relative fair values in accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to allocate revenue to the elements and recognizes revenue
when the criteria for revenue recognition have been met for each element.

Deferred license revenue.Revenue from license fees under
agreements that have exclusivity clauses and, from the licensees perspective, have ongoing requirements or expectations that are more than perfunctory, are recognized on a straight-line basis over the terms of the related agreements. An
ongoing requirement or expectation would be considered more than perfunctory if any party to the contract considers it to be essential to the functionality of the delivered product or service or failure to complete the activities would
result in the customer receiving a full or partial refund or rejecting the products delivered or services performed to date.

Share
-Based Compensation

The Company follows the provisions of SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS 123R) which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements at their fair values. The Company uses the Black-Scholes option pricing model to estimate the fair
value of options and stock appreciation rights. The fair value of stock options is estimated on the date of grant, while the fair value for stock appreciation rights is estimated on the date of grant and remeasured at each subsequent reporting
period, since it is liability-classified. Determining the fair value of options and stock appreciation rights requires certain estimates by management including the expected volatility and expected term of the option. Management also makes decisions
regarding the risk free interest rate used in the model and makes estimates regarding forfeiture rates. Fluctuations in the market or other factors that affect these estimates could have a material impact on the resulting compensation cost. The fair
value of restricted stock grants (referred to as non-vested stock) is determined based on the closing price of the Companys common stock on the date of grant. Related compensation expense is recognized ratably over the associated requisite
service period, giving effect to estimated forfeitures.

On November 10, 2005, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position 123(R)-3 (FSP 123R-3), Transition Election Related to Accounting for the Tax Effects of Share-based Payment Awards, that provided an elective alternative transition method of
calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R (the APIC Pool) to the method otherwise required by paragraph 81 of SFAS 123R. During the second quarter
of fiscal 2007, the Company made the election to use the alternative method; however, the alternative method does not have an impact on the Companys results of operations or financial condition due to the Companys net operating loss
position for tax purposes (See Note 13  Share-Based Compensation for additional information).

Business Realignment and Related
Asset Impairment Costs

The Company records realignment charges related to workforce reductions in accordance with SFAS
No. 112, Employers Accounting for Postemployment Benefits (SFAS 112), and SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits (SFAS 88). Pursuant to SFAS 112, costs related to employee severance are recorded when probable and estimable in accordance



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with our ongoing severance policy. SFAS 88, paragraph 15, provides that contractual termination benefits are recorded when it is probable and estimable.
Charges for the impairment of long-lived assets are recognized in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as described below in the policy titled, Impairment of Long-Lived Assets
and Acquired Intangible Assets.

Restructuring Charges

The Company records restructuring costs in accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146), which requires that a liability for charges associated with an exit or disposal activity be measured and recognized initially at fair value only when the liability is incurred. Related to restructuring (exit) activities, the
Company may also have involuntary terminations that are accounted for under SFAS 112 or SFAS 88 as applicable, or under SFAS 146 if the severance and related costs are considered to be a one-time benefit arrangement outside of the Companys
ongoing severance policy.

Advertising Costs

The costs of general advertising, promotion and marketing programs are charged to Selling, general and administrative expense in the Consolidated Statements of Operations in the fiscal year incurred. The costs of
advertising related to new product introductions are deferred until such advertising first takes place, which generally coincides with product introduction. Advertising expense for the fiscal years ended June 27, 2009, June 28, 2008 and
June 30, 2007 was approximately $2.4 million, $2.8 million and $3.0 million, respectively.

Research and Development

The costs related to research, design and development of test and measurement products are charged to Research and development expense as
incurred. The Company evaluates the requirement to capitalize certain software development costs for protocol analyzers in accordance with SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed (SFAS 86). Under SFAS 86, costs incurred to develop or significantly enhance computer software products are charged to Research and development expense as incurred until technological feasibility has been established. The
nature of the Companys development for protocol analyzers is generally such that the Company can measure technological feasibility most effectively using the working model method where the time between establishment of a working model and
general availability is of short duration which results in very little or no costs that qualify for capitalization. As such, the Company has not capitalized any software development costs for the years ended June 27, 2009, June 28, 2008
and June 30, 2007.

Cash and Cash Equivalents

Cash in excess of current operating requirements are invested in cash equivalents, which are short-term, highly liquid interest bearing investments with
maturities of three months or less at the date of purchase and are stated at cost, which approximates fair value.

Property, Plant
and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Replacements, maintenance and
repairs which do not improve or extend the life of the respective asset are expensed as incurred and major betterments are capitalized. Depreciation of property, plant and equipment is provided on a straight-line basis over the assets
estimated useful life or related lease term, if shorter, as follows:



|                                   |  |            
|---------------------------------- |  | -----------
|Building and improvements          |  | 10-32 years
|Furniture, machinery and equipment |  | 2-10 years 
|Computer software and hardware     |  | 2-7 years  



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Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market, with the exception of demonstration units in finished goods. Costs include material, labor and overhead charges. Demonstration units
are accounted for as inventory since they are sold in the normal course of business and are stated at lower of cost (specific identification method) or market.

The Company reviews the valuation of inventory on a quarterly basis and provides an allowance for the value of estimated excess and obsolete raw materials and work in process inventory. The Companys marketing
department plays a key role in the inventory review process by providing updated sales forecasts, managing product rollovers and working with the manufacturing department to maximize recovery of excess inventory. Based upon managements
forecast, inventory items no longer expected to be used or saleable in the future are considered obsolete and the difference between an inventorys quantity and its forecasted usage or sale are classified as excess. If actual market conditions
are less favorable than those projected by management, additional inventory allowances for excess or obsolete inventory may be required.

Warranty

The Company provides a warranty on its products, generally extending between one and three years after
delivery, and accounted for in accordance with SFAS No. 5, Accounting for Contingencies (SFAS 5). Estimated future warranty obligations related to products are provided by charges to Cost of revenues in the period that
the related revenue is recognized. These estimates are derived from historical data of product reliability and, for certain new products, third party published expected failure rates. The expected failure rate is arrived at in terms of units, which
are then converted into labor hours to which an average fully burdened cost per hour is applied to derive the amount of accrued warranty required. The Company studies trends of warranty claims and performance of specific products and adjusts its
warranty obligation through charges or credits to Cost of revenues (See Note 10  Warranties and Guarantees for additional information).

Impairment of Long-Lived Assets and Acquired Intangible Assets

The Company monitors events and changes in
circumstances that could indicate carrying amounts of long-lived assets, including amortizable intangible assets, which may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that
the carrying amount exceeds the fair value.

Goodwill

Under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill is tested for impairment annually, or more
frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to make judgmental assumptions regarding fair value.
Testing is required between annual tests if events occur or circumstances change that could reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the
Companys common stock plus a control premium were less than the carrying value of the Company. The Company obtains information on acquisition activity of similar sized companies, in the technology industry, to estimate a control premium.

Management also reviews the Companys financial position quarterly for other triggering events as described in SFAS No. 142.

Impairment is assessed at the reporting unit level by applying a fair value-based test. A reporting unit is defined as the
same as or one level below the operating segment level as described in SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company has one reporting unit, in the Test and Measurement business,
because none of the components of the Company constitute a business for which discrete financial information is available and for which Company management regularly reviews the results of operations.



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The first step of the impairment test is to identify if an impairment of goodwill has occurred by
comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of
the reporting unit exceeds its fair value, the second step of the goodwill test is performed to measure the amount of the impairment loss, if any. In this second step, the implied fair value (as defined in SFAS 142) of the reporting
units goodwill is compared with the carrying amount of the goodwill. If the carrying amount of the reporting units goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that
excess, not to exceed the carrying amount of the goodwill.

As the Company consists of only one reporting unit, and is publicly traded,
management estimates the fair value of its reporting unit utilizing the Companys market capitalization, multiplying the number of actual shares outstanding by an average market price over a period of time considered appropriate to determine
fair value, as reflected on the NASDAQ Stock Market, LLC, and applying an additional premium to give effect to the Companys best estimate of a control premium, as if the Company were to be acquired by a single stockholder, which seeks to give
effect to the increased consideration a potential acquirer would be willing to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to the Company.

In fiscal 2008, as a result of the decline in the Companys stock price since June 30, 2007, which affected the Companys market
capitalization, the Company updated its goodwill impairment test on a quarterly basis. A 30% control premium was utilized in the Companys interim and annual goodwill impairment testing. This control premium is not a standard amount based on
broad assumptions; rather, the amount is based on detailed analysis that considers appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control
premium is reviewed taking into consideration current industry, market and economic conditions along with other factors or available information specific to the Companys business. Managements estimate of an appropriate control premium to
apply in determining fair value is an important variable in the Companys goodwill impairment assessment.

In the fourth quarter of
fiscal 2008, the Company changed its annual impairment testing date from fiscal year end to the last day of the eleventh month of the fiscal year. The Company believes the last day of the eleventh month of the fiscal year is preferable as it
provides the Company additional time to complete the impairment test and report the results of that test in the Companys annual filing on Form 10-K. No impairment charge resulted from the Companys interim goodwill impairment testing
during fiscal 2008. Additionally, the Company completed its annual impairment test required under SFAS 142 during the fourth quarter of fiscal 2008 and determined that there was no impairment to the recorded goodwill balance (See Note 8 
Goodwill, Intangible assets, net, and Other Non-Current Assets for additional information).

In the second quarter of fiscal 2009, as a
result of the current economic environment and sustained decline in the Companys stock price since September 27, 2008, which affected the Companys market capitalization, the Company updated the first step of its goodwill impairment
test and determined that its carrying value exceeded its fair value, indicating that goodwill was impaired. The Company performed the second step of the goodwill impairment test which calculated the implied fair value of the goodwill by allocating
the fair value of the Company determined in the first step to all assets and liabilities other than goodwill, including both recognized and unrecognized intangible assets, and compared it to the carrying amount of goodwill in order to determine the
amount of the goodwill impairment.

In the second quarter of fiscal 2009, the Company recorded approximately $105.8 million of goodwill
impairment, reducing the carrying value of Goodwill to zero.

Concentration of Credit Risk

The Company develops, manufactures, sells and licenses high-performance oscilloscopes, serial data analyzers and global communication protocol test
solutions. The Companys products are sold into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace markets. Sales occur in all regions of the United
States as well as a many foreign countries. No customer



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accounted for more than 10% of the Companys consolidated revenues in any of the last three fiscal years. There is no significant concentration of the
Companys accounts receivable portfolio in any customer or geographical region that presents a risk to the Company based on that concentration. The Company performs on-going credit evaluations of its customers. Credit risk may sometimes be
partially mitigated through collateral such as letters of credit, bank guarantees or payment terms such as cash in advance. The Company maintains allowances for potential credit losses. Credit losses have been minimal in fiscal 2009, 2008 and 2007.

Income Taxes

Deferred tax assets and liabilities are recognized under the asset and liability method based upon the difference between the amounts reported for financial reporting and tax purposes. These deferred taxes are measured by applying current
enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Significant management judgment is required in determining whether deferred tax
assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets, such as net operating losses or foreign tax credit carryforwards, will not be realized, a valuation allowance must
be established for the amount of the deferred tax assets that are not expected to be realized. The Company considers all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than
not that deferred tax assets are realizable.

The realization of deferred tax assets, after accounting for tax exposures under FIN 48, is
based on the assessment that it is more likely than not that the Company will be able to generate sufficient future taxable income within statutory carryforward periods to realize the deferred tax assets. Adjustments to the valuation allowance may
be made in the future if it is determined that the realizable amount of net operating losses and other deferred tax assets is greater or less than the amount recorded. Such adjustments may be material to the Companys financial position and
results of operations.

The Companys policy is not to provide for U.S. taxes on undistributed earnings of foreign subsidiaries to the
extent such earnings are determined to be permanently invested outside the United States.

Effective July 1, 2007, the Company adopted
the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), as amended by FASB Staff Position No. FIN 48-1, Definition
of Settlement in FASB Interpretation No. 48 (FSP-FIN 48-1). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that
the Company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the position is sustainable, based on its technical
merits. The tax benefit of a qualifying position is the largest amount of tax benefit greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. A tax benefit from an
uncertain position was previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within twelve months of
the reporting date. Interest and penalties related to income taxes is included in the benefit (provision) for income taxes line of the Consolidated Statement of Operations.

Foreign Exchange

The
Companys foreign subsidiaries generally use their local currency as the functional currency and translate all assets and liabilities at fiscal year-end exchange rates and all income and expenses at average fiscal year exchange rates with
translation adjustments recorded in Accumulated other comprehensive income, a separate component of Stockholders equity in the Consolidated Balance Sheets. Transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in Other, net in the Consolidated Statements of Operations. Foreign currency transaction gains and losses, related to short-term intercompany loans, are recorded in the
Consolidated Statements of Operations as incurred. Intercompany loans that are of a long-term nature are accounted for in accordance with SFAS No. 52, Foreign Currency Translation, (SFAS 52) whereby foreign currency
transaction gains and losses are recorded in Accumulated other comprehensive income,



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a component of Stockholders equity. In fiscal 2007, management changed its intention for one intercompany loan that was previously considered to be
long-term, to be short-term in nature. As required under SFAS 52, foreign exchange gains and losses subsequent to this change in intent are recorded in the Consolidated Statements of Operations as incurred. In fiscal 2008 and 2009, managements
intention for this intercompany loan remained short-term in nature and, as such, foreign exchange gains and losses were recorded in the Consolidated Statements of Operations as incurred, until the loan was fully repaid in the second quarter of
fiscal 2009.

Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other current liabilities in the Consolidated Balance Sheets equal or approximate their fair value due to their short term to
maturity. Borrowings under the revolving line of credit have variable interest rates and their carrying amounts are considered by management to be a reasonable estimate of their fair value. On October 12, 2006, the Company sold and issued $72.0
million 4.0% convertible senior subordinated notes. During fiscal 2009 and 2008, the Company repurchased approximately $19.1 million and $4.5 million, respectively, of the outstanding convertible notes, resulting in a remaining balance of
approximately $48.4 million and $67.5 million at June 27, 2009 and June 28, 2008, respectively. As of June 27, 2009 and June 28, 2008, the market value of the convertible notes was approximately $27.7 million and $60.8 million,
respectively. Fair value is determined through information obtained from a third party using the latest available market data. (See Note 12  Debt and Capital Leases for additional information).

Derivative Instruments

The
Company is exposed to global market exchange rate risks and, as a result, enters into forward exchange contracts to manage financial exposures resulting from changes in foreign currency rates. The Company accounts for derivatives and hedging
activities in accordance with SFAS No. 133, Accounting for Derivative Investments and Hedging Activities, as amended (SFAS 133), which requires that all derivative instruments be recorded on the balance sheet at their
respective fair values. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship and further, on the
type of hedging relationship. The Companys foreign exchange forward contracts are not accounted for as hedges in accordance with SFAS 133; therefore, any changes in fair value of these contracts are recorded in Other, net in the Consolidated
Statements of Operations.

The Company manages its foreign exchange exposure by entering into short-term forward exchange agreements to
purchase foreign currencies at set rates in the future. These foreign currency forward exchange agreements are used to reduce exposure to fluctuations in foreign currency exchange rates on assets and liabilities denominated in currencies other than
the Companys functional currencies. The Company records these short-term forward exchange agreements on the balance sheet at fair value in Other current assets and Accrued expenses and other current liabilities. The changes in the fair values
of these contracts are recorded in Other, net in the Consolidated Statements of Operations and are inversely correlated to changes in the value of certain of the Companys foreign currency-denominated assets and liabilities. The Company does
not use derivative financial instruments for trading or other speculative purposes (See Note 21  Derivative Instruments and Fair Value for additional information).

New Accounting Pronouncements

Recent pronouncements not yet adopted

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. The provisions of SFAS 157 were effective beginning in fiscal 2009. However, the FASB deferred the effective date of SFAS 157, until
the beginning of the Companys 2010 fiscal year, as it relates to fair value measurement requirements for non-financial assets and liabilities that are not remeasured at fair value on a recurring basis. This includes fair value calculated in
impairment assessments of long-lived assets. The effect of



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adopting SFAS 157 for the Companys non-financial assets and liabilities will not have a material impact on the Companys consolidated financial
position and results of operations at the date of adoption, although it may impact the way that fair value for non-financial assets and liabilities is determined in future periods.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business Combinations. This statement establishes
the principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date fair value. Further, it requires that acquisition-related costs be expensed as incurred, restructuring costs be expensed in periods subsequent to the acquisition date and changes in accounting for deferred income tax asset valuation
allowances and acquired income tax uncertainties after the measurement period be included in income tax expense. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. Early adoption is not permitted. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008, with the exception of adjustments made to valuation allowances on deferred taxes and acquired tax contingencies. The Company would apply the provisions of SFAS 141R to future adjustments made to valuation allowances on
deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to the beginning of the Companys 2010 fiscal year. At June 27, 2009, approximately $2.5 million of unrecognized tax benefits are related to a
prior acquisition and would impact the effective tax rate, if recognized.

In April 2008, the FASB finalized Staff Position No. 142-3,
Determination of the Useful Life of Intangible Assets (FSP 142-3). This position amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142 (SFAS 142), Goodwill and Other Intangible Assets. FSP 142-3 applies to intangible assets that are acquired individually or with a group of other assets and both intangible assets
acquired in business combinations and asset acquisitions. This position is effective for fiscal years beginning after December 15, 2008 and management believes its adoption will not have an impact on the Companys consolidated financial
position or results of operations.

In May 2008, the FASB issued FASB Staff Position Accounting Principles Board Opinion No. 14-1,
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1). This FSP requires cash settled convertible debt to be separated into debt and
equity components at issuance and a value to be assigned to each. The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond
cash proceeds and this estimated fair value will be recorded as a debt discount, with an offset to equity, and will be amortized to interest expense, using the effective interest method, over the life of the bond. The FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and for interim periods within those years and requires retrospective application. The Company estimates an increase in net loss (a decrease in net income) of $1.8 million,
$(1.9) million, and $1.3 million in the fiscal years ending June 27, 2009, June 28, 2008, and June 30, 2007, respectively. Revised net loss and loss per common share are as follows (in thousands, except per share data):



|                                          |  |              |          |   |              |   |        |              |  |   |         |  
|----------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------ | ------------ |  | - | ------- | -
|                                          |  | Years Ended  |         
|                                          |  | June 27,2009 |          |   | June 28,2008 |   |        | June 30,2007 | 
|Net loss                                  |  | $            | (108,432 | ) |              | $ | (189   | )            |  | $ | (14,494 | )
|                                          |  |              |          |   |              |   |        |              |  |   |         |  
|Net loss per common share:                |  |              |          |   |              |   |        |              |  |   |         |  
|Basic and diluted                         |  | $            | (9.03    | ) |              | $ | (0.02  | )            |  | $ | (1.24   | )
|Weighted average number of common shares: |  |              |          |   |              |   |        |              |  |   |         |  
|Basic and diluted                         |  |              | 12,003   |   |              |   | 11,749 |              |  |   | 11,702  |  

In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, which amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments and Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting.
This FSP requires the annual disclosures about the fair value of financial instruments required by SFAS No. 107 to be presented in interim



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financial statements. The FSP is effective for interim reporting periods ending after June 15, 2009. Management will adopt the enhanced disclosures
required in the first quarter of fiscal 2010 and does not believe the adoption will have an impact on the Companys consolidated financial position or results of operations.

In June 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162 (SFAS 168). The statement confirmed that the FASB Accounting Standards Codification (the Codification) will become
the single official source of authoritative U.S. GAAP (other than guidance issued by the SEC, which is also a source of U.S. GAAP for SEC registrants), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues
Task Force (EITF), and related literature. Upon the effectiveness of the codification, only one level of authoritative U.S. GAAP will exist. All other literature will be considered non-authoritative. The Codification does not change U.S.
GAAP; instead, it introduces a new structure that is organized in an easily accessible, user-friendly online research system. The Codification, which changes the referencing of financial standards, becomes effective for interim and annual periods
ending on or after September 15, 2009, and we do not expect it to have an effect on the Companys consolidated financial position or results of operations.

Recent pronouncements adopted

In June 2006, the Emerging Issues Task Force (EITF)
issued EITF Abstract 06-2 (EITF 06-2), Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43. EITF 06-2 provides guidance that an employees right to a compensated absence
under a sabbatical or other similar benefit arrangement should be accrued over the requisite service period. EITF 06-2 is effective for fiscal years beginning after December 15, 2006. EITF 06-2 allows for adoption through retrospective
application to all prior periods or through a cumulative-effect adjustment to retained earnings. The Company adopted EITF 06-2 beginning July 1, 2007 using the cumulative-effect adjustment approach. The effect of this adoption resulted in a
decrease to beginning Retained earnings of approximately $0.2 million, an increase to deferred tax assets of approximately $0.1 million and an increase to Accrued expenses and other current liabilities and Deferred revenue and other non-current
liabilities of approximately $0.2 million and $0.1 million, respectively.

In July 2006, the Financial Accounting Standards Board issued
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 was effective for fiscal years beginning after December 15, 2006, and was adopted by the Company effective July 1, 2007 (See Note 11 
Income Taxes for additional information).

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. The provisions of SFAS 157 were effective beginning in fiscal 2009. However, the
FASB deferred the effective date of SFAS 157, until the beginning of the Companys 2010 fiscal year, as it relates to fair value measurement requirements for non-financial assets and liabilities that are not remeasured at fair value on a
recurring basis. This includes fair value calculated in impairment assessments of long-lived assets. The Company adopted the provisions of SFAS 157 at the beginning of its fiscal 2009 year for financial assets and liabilities and its adoption did
not have a material impact on the consolidated financial position or results of operations.

In February 2007, the Financial Accounting
Standards Board (FASB) issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115. This statement
provides companies with an option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. The provisions of SFAS 159 were effective beginning in fiscal
2009 and the Company has chosen not to elect the fair value option for any items that are not already required to be measured at fair value, in accordance with accounting principles generally accepted in the United States.



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In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB
Interpretation No. 48 (FSP-FIN 48-1). FSP-FIN 48-1 further clarifies if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination is the completion
of an examination or audit by a taxing authority. FSP-FIN 48-1 provides that the determination of whether a position is effectively settled should be taken on a case by case basis; however, positions may be grouped by tax year and considered
effectively settled. The adoption of this FSP on July 1, 2007 did not have a significant impact on the Companys consolidated financial statements (See Note 11  Income Taxes for additional information).

In June 2007, the Emerging Issues Task Force (EITF) issued EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities (EITF 07-3). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and
development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the
related services are performed. EITF 07-3 was effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007 and its adoption did not have an impact on the Companys consolidated financial position or
results of operations.

In March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities. This statement requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how
derivative instruments and related hedged items are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect a
companys financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management has adopted the enhanced
disclosures required by SFAS 161.

In May 2009, the FASB issued SFAS No. 165 (SFAS 165), Subsequent
Events. SFAS 165 requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. For nonrecognized subsequent
events that must be disclosed to keep the financial statements from being misleading, an entity will be required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made.
In addition, SFAS 165 requires an entity to disclose the date through which subsequent events have been evaluated. SFAS 165 is effective for interim and annual financial periods ending after June 15, 2009 and should be applied prospectively.
Management has adopted the enhanced disclosure requirements of SFAS 165 (See Note 23  Subsequent Events for additional information).

2. Catalyst
Acquisition

On September 29, 2006, the Company entered into an Agreement and Plan of Merger (the Merger Agreement)
among the Company, 2006 Franklin Congress Corporation, a California corporation and a wholly owned subsidiary of the Company (Sub), Catalyst, and Nader Salehomoum, as Equityholder Representative, pursuant to which Sub merged with and
into Catalyst (the Catalyst Merger), with Catalyst continuing as the surviving corporation and as a 100% owned subsidiary of the Company. Catalyst is a manufacturer of data bus analysis and emulation tools for advanced serial data
communications and strengthens the Companys position in protocol solutions.

The Catalyst Merger was recorded under the purchase
method of accounting in accordance with SFAS 141. On October 2, 2006, the effective date of the Catalyst Merger, all shares of common stock of Catalyst issued and outstanding immediately prior to the Catalyst Merger were exchanged for
approximately $26.7 million in cash immediately. In addition, pursuant to the terms of the Merger Agreement, 10% of the stated consideration was placed into escrow for the twelve-month period following the closing of the Catalyst Merger to secure
certain indemnification obligations under the terms of the Merger Agreement. On October 2, 2007, approximately $3.1 million was released from the escrow to the Catalyst stockholders, pursuant to the terms of the Merger Agreement. In the third
quarter of fiscal 2008, the Company and the former Catalyst owners agreed to a final indemnification



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release. The Company received approximately $0.2 million from the remaining Catalyst escrow balance, representing the indemnification obligation for certain
Catalyst inventory, assumed at acquisition. This amount was recorded as a component of operating income in fiscal 2008.

LeCroy paid cash
of $31.5 million, including direct transaction costs of $2.6 million, net of cash acquired of $1.0 million, using proceeds from the Revolver under the Prior Credit Agreement (Note 12  Debt and Capital Leases for additional information), issued
a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader Salehomoum, a former sole shareholder of Catalyst and former employee of the Company and assumed the fair value of certain vested Catalyst stock options totaling $0.5
million. The Catalyst Merger consideration is summarized below (in thousands):



|                                           |  |   |       
|------------------------------------------ |  | - | ------
|Cash for shares and certain vested options |  | $ | 26,650
|Cash paid in escrow                        |  |   | 3,350 
|Note payable to former shareholder         |  |   | 3,500 
|Fair value of vested stock options assumed |  |   | 450   
|Transaction costs                          |  |   | 2,629 
|                                           |  |   |       
|Total purchase price                       |  | $ | 36,579
|                                           |  |   |       

In connection with the Catalyst Merger, LeCroy assumed Catalysts Stock Option Plan. On
October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to the Catalyst Merger including, without limitation, amendments reflecting that
any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the Company in exchange for the stock options held by the employees of
Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or approximately $1,196,000, is being charged to compensation expense in
operations as earned by employees over their remaining requisite service periods. The fair value of assumed options was determined using the Black-Scholes option pricing model in accordance with EITF 99-12, Determination of the Measurement
Date for the Market Price of Acquiror Securities Issued in a Purchase Business Combination and SFAS 123R.

The Company was required
to grant restricted stock to certain former Catalyst employees contingent on the continuation of employment and the percentage of the escrow paid to the former shareholders of Catalyst twelve months subsequent to the Catalyst Merger. The value of
the 26,733 restricted shares that were granted was approximately $0.2 million.

The fair value of tangible and intangible assets acquired
and liabilities assumed was established based upon the unaudited October 1, 2006 balance sheet of Catalyst, as well as certain assumptions made regarding fair values. The fair value of finished goods inventory is based on estimated selling
prices less direct costs to sell and a reasonable profit margin on the selling effort. The fair value of work in process inventory is based on estimated selling prices less cost to complete, direct costs to sell and a reasonable profit margin on the
cost to complete and selling effort. The fair value of the IPR&D, purchased technology, trade name, backlog and manufacturers representative relationships was determined by considering a variety of factors, including; appraisal, comparable
transactions, and discounted cash flow approaches. The fair value of the IPR&D was based on the total estimated costs to develop the related technologies less the costs incurred to date for the projects, and the intangible asset values were
based on estimates of future cash flows associated with those assets. The purchased technology, backlog and manufacturers representative relationships related to this acquisition were amortized over their estimated economic useful lives
ranging from two to fifteen months. It was originally determined that the Catalyst trade name valued at $0.7 million had an indefinite life. However, during fiscal 2008, the Catalyst trade name failed the impairment test due to a change in the
Companys product strategy and, accordingly, a $0.7 million pre-tax loss was recognized in Selling, general and administrative expenses in the Consolidated Statement of Operations.

The excess of the purchase price over the fair value of the net assets acquired has been allocated to goodwill. The primary contributors to the Catalyst
goodwill, included, (i) substantial revenue benefits due to synergies in product offerings and platforms between the Catalyst and CATC product portfolio; (ii) expanded base of industry knowledge;



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(iii) economies of scale benefits for the protocol products and the complementary strategic fit with the CATC products, including the expansion of
protocol products; and (iv) opportunity to further strengthen direct sales model with Catalysts already experienced sales team. The goodwill is not deductible for tax purposes. See Note 8  Goodwill, Intangible Assets, net, and Other
Non-Current Assets for additional information.

The final purchase price allocation is summarized below (in thousands):



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Cash                                |  | $ | 1,017  |  
|Accounts receivable                 |  |   | 738    |  
|Inventory                           |  |   | 4,269  |  
|Other assets                        |  |   | 206    |  
|In-process research and development |  |   | 4,000  |  
|Purchased intangibles               |  |   | 2,220  |  
|Goodwill                            |  |   | 27,512 |  
|Current liabilities assumed         |  |   | (1,095 | )
|Deferred tax liability              |  |   | (2,288 | )
|                                    |  |   |        |  
|Total purchase price                |  | $ | 36,579 |  
|                                    |  |   |        |  

The following table presents the details of the amortizable intangible assets acquired in the
Catalyst Merger and their carrying values as of June 27, 2009 (in thousands):



|                                                      |  |                              |  |      |       |                         |   |       |  |   |  
|----------------------------------------------------- |  | ---------------------------- |  | ---- | ----- | ----------------------- | - | ----- |  | - | -
|                                                      |  | OriginalWeightedAverageLives |  | Cost |       | AccumulatedAmortization |   | Net  
|Amortizable intangible assets:                        |  |                              |  |      |       |                         |   |       |  |   |  
|Purchased technology                                  |  | 0.9 years                    |  | $    | 1,030 |                         | $ | 1,030 |  | $ | 
|Purchased backlog                                     |  | 0.1 years                    |  |      | 450   |                         |   | 450   |  |   | 
|Purchased manufacturers representative relationships |  | 0.0 years                    |  |      | 40    |                         |   | 40    |  |   | 
|                                                      |  |                              |  |      |       |                         |   |       |  |   |  
|Total amortizable intangibles purchased               |  |                              |  | $    | 1,520 |                         | $ | 1,520 |  | $ | 
|                                                      |  |                              |  |      |       |                         |   |       |  |   |  

Amortization expense for intangible assets acquired in the Catalyst Merger was approximately $0.4
million for the year ended June 28, 2008 and approximately $1.1 million for the year ended June 30, 2007, which was recorded in Cost of revenues in the Consolidated Statements of Operations. All remaining intangible assets related to the
Catalyst acquisition were completely amortized prior to the start of fiscal 2009.

The $4.0 million related to IPR&D was written off at
the time of the acquisition in accordance with FIN 4. This charge is included in Research and development expense in the Consolidated Statement of Operations for the year ended June 30, 2007.

The Consolidated Statements of Operations includes the results of operations of Catalyst since October 2, 2006.



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3. Business Realignment, Restructuring Initiatives and Related Asset Impairments

The table below summarizes the charges for business realignments, restructuring initiatives and related asset impairments for the fiscal years ended
2009, 2008 and 2007.

(in thousands):



|                                    |  |              |       |              |   |              |  |   |      
|----------------------------------- |  | ------------ | ----- | ------------ | - | ------------ |  | - | -----
|                                    |  | Years Ended 
|                                    |  | June 27,2009 |       | June 28,2008 |   | June 30,2007
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Impaired intangible assets          |  | $            |      |              | $ |             |  | $ | 250  
|Severance and related costs         |  |              | 695   |              |   |             |  |   | 358  
|                                    |  |              |       |              |   |              |  |   |      
|Cost of revenues                    |  | $            | 695   |              | $ |             |  | $ | 608  
|                                    |  |              |       |              |   |              |  |   |      
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Severance and related costs         |  | $            | 1,563 |              | $ |             |  | $ | 467  
|                                    |  |              |       |              |   |              |  |   |      
|Research and development            |  | $            | 1,563 |              | $ |             |  | $ | 467  
|                                    |  |              |       |              |   |              |  |   |      
|Charges for:                        |  |              |       |              |   |              |  |   |      
|Impaired intangible asset           |  | $            |      |              | $ | 699          |  | $ |     
|Severance and related costs         |  |              | 2,079 |              |   | 954          |  |   | 1,248
|Facility closure/lease restructure  |  |              | 749   |              |   |             |  |   | 156  
|                                    |  |              |       |              |   |              |  |   |      
|Selling, general and administrative |  | $            | 2,828 |              | $ | 1,653        |  | $ | 1,404
|                                    |  |              |       |              |   |              |  |   |      

Fiscal 2009 Restructuring Initiatives

In the fourth quarter of fiscal 2009, as a result of the current economic downturn and resulting business realignment decisions affecting personnel in
Europe, the Company vacated certain space at its Swiss facility. This resulted in a restructuring charge to SG&A expense of approximately $0.7 million, which represented the present value of the estimated future cash payments, net of estimated
subrental income and expense, through the remainder of the lease term which will expire in the first quarter of fiscal 2014.

Fiscal 2009 Business
Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2009, in an effort to further streamline expenses in response
to the current economic environment, the Company recorded severance of approximately $0.2 million, of which less than $0.1 million was expensed to Cost of revenues, approximately $0.1 million was expensed to SG&A and less than $0.1 million was
expensed to Research and development. This resulted from headcount reductions of twelve employees or approximately 2.6% of the workforce as compared to June 28, 2008. As of June 27, 2009, approximately $0.1 million has been paid in cash
and approximately $0.1 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the second quarter of fiscal 2010.

In the third quarter of fiscal 2009, in an effort to further streamline expenses in response to the dramatic deterioration in economic and market
conditions, the Company recorded severance of approximately $2.6 million, of which approximately $0.6 million was expensed to Cost of revenues, approximately $1.1 million was expensed to SG&A and approximately $0.9 million was expensed to
Research and development. This resulted from headcount reductions of sixty-two employees or approximately 13.6% of the workforce as compared to June 28, 2008. As of June 27, 2009, approximately $1.4 million has been paid in cash, and
approximately $1.0 million remains in Accrued expenses and other current liabilities and approximately $0.2 million remains in Deferred revenue and other non-current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by
the end of the third quarter of fiscal 2012.



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In the second quarter of fiscal 2009, in an effort to streamline expenses in anticipation of further
deterioration in the economic environment, the Company recorded severance of approximately $1.5 million, of which approximately $0.1 million was expensed to Cost of revenues, approximately $0.8 million was expensed to SG&A and approximately $0.6
million was expensed to Research and development. This resulted from headcount reductions of ten employees or 2.2% of the workforce as compared to June 28, 2008. As of June 27, 2009, approximately $1.0 million has been paid in cash and
approximately $0.5 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2010.

Fiscal 2008 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2008, the Catalyst trade name failed the impairment test as a result of a change in the Companys product strategy, and therefore, the Company recorded an approximate $0.7 million
non-cash charge to SG&A expense for the impairment.

In the third quarter of fiscal 2008, as a result of streamlining operational
management processes and staffing requirements, the Company recorded severance of approximately $0.3 million, which was expensed to SG&A. This resulted from headcount reductions of three employees or 0.7% of the workforce as compared to
June 30, 2007. Severance and other related amounts under this plan were fully paid in fiscal 2009, and no accrual remains on the Consolidated Balance Sheet.

In the first quarter of fiscal 2008, primarily as the result of an effort to improve sales effectiveness and channel management, the Company recorded severance of approximately $0.6 million, which was expensed to
SG&A. This resulted from headcount reductions of twelve employees or 2.7% of the workforce as compared to June 30, 2007. Severance and other related amounts under this plan were fully paid in fiscal 2009, and no accrual remains on the
Consolidated Balance Sheet.

Fiscal 2007 Restructuring Initiatives

In the fourth quarter of fiscal 2007, as a result of local economic conditions in Japan, the Company changed its Japan sales strategy and approved a restructuring plan related to the Japanese operations which resulted
in the closure of certain office facilities in Japan, which included lease termination costs. As a result of the office closures, there were headcount reductions of four employees or 0.9% of the workforce as compared to July 1, 2006. As a
result, the Company recorded severance and related expenses of approximately $0.1 million and facility closure costs of approximately $0.2 million, which was expensed to SG&A. Severance and other related amounts under this plan were fully paid
by the end of fiscal 2008.

Fiscal 2007 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2007, an intangible asset was written off due to a change in the Companys product strategy and, accordingly, the
Company took an approximate $0.3 million non-cash charge to Cost of revenues for the impairment.

In the third quarter of fiscal 2007,
prompted by the acquisition of Catalyst, the Company evaluated certain business processes and staffing requirements. As a result, the Company recorded severance and related expense of approximately $1.6 million, of which approximately $0.3 million
was expensed to Cost of revenues, $1.2 million was expensed to SG&A and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of thirty-three employees or 7.2% of the workforce as
compared to July 1, 2006. As of June 27, 2009, approximately $1.6 million has been paid in cash and no accrual remains on the Consolidated Balance Sheet.

In the second quarter of fiscal 2007, as a result of a change in the Companys organization stemming from the Catalyst acquisition, the Company recorded severance and related expenses of approximately $0.4
million, of which approximately $0.1 million was expensed to SG&A and $0.3 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of eleven employees or 2.4% of the workforce as
compared to July 1, 2006. Severance and other related amounts under this plan were fully paid by the end of fiscal 2007.



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4. Accounts Receivable, net

As of June 27, 2009 and June 28, 2008, the Company had an agreement with one of its customers, who is also a vendor, that provided the Company with the legal right to offset outstanding accounts receivable
balances against outstanding accounts payable balances. At June 27, 2009 and June 28, 2008, the Company did not offset the balances, as the amounts were immaterial.

The allowance for doubtful accounts and sales returns was approximately $0.7 million as of June 27, 2009 and June 28, 2008.

5. Inventories, net

Inventories, net consist
of the following (in thousands):



|                |  |              |        |              |   |       
|--------------- |  | ------------ | ------ | ------------ | - | ------
|                |  | June 27,2009 |        | June 28,2008
|Raw materials   |  | $            | 8,351  |              | $ | 9,581 
|Work in process |  |              | 6,590  |              |   | 6,008 
|Finished goods  |  |              | 20,046 |              |   | 17,297
|                |  |              |        |              |   |       
|Total           |  | $            | 34,987 |              | $ | 32,886
|                |  |              |        |              |   |       

The value of demonstration units included in finished goods was $11.3 million and $10.3 million at
June 27, 2009 and June 28, 2008, respectively. The Companys demonstration units are held for sale and are sold regularly in the ordinary course of business through its normal sales distribution channels and to its existing customer
base.The allowance for excess and obsolete inventory, included above, amounted to approximately $5.8 million and $4.5 million at June 27, 2009 and June 28, 2008, respectively.

In fiscal 2009, the Company recorded a total of approximately $5.8 million of inventory reserves and write-downs as a result of its realignment
initiatives and changes in the Companys product strategy. These charges were expensed to Cost of revenues in the Consolidated Statement of Operations.

In fiscal 2008, the Company recorded an approximate $2.4 million inventory write-down as a result of a change in the Companys product strategy and an approximate $0.8 million charge related to certain inventory
recorded at fair value in the purchase accounting of Catalyst, a portion of which the Company was indemnified. These charges totaled approximately $3.2 million and were recorded to Cost of revenues in the Consolidated Statement of Operations.

In fiscal 2007, the Company made certain operational changes as well as realigned its product strategy. These changes resulted in a
write-down of inventory of approximately $3.4 million which was recorded in Cost of revenues, including inventory recorded at fair value in the purchase accounting of Catalyst.

6. Other Current Assets

Other current assets consist of the following (in thousands):



|                            |  |              |        |              |   |       
|--------------------------- |  | ------------ | ------ | ------------ | - | ------
|                            |  | June 27,2009 |        | June 28,2008
|Deferred tax assets, net    |  | $            | 6,399  |              | $ | 5,506 
|Prepaid taxes               |  |              | 619    |              |   | 249   
|Prepaid deposits            |  |              | 729    |              |   | 224   
|Other receivables           |  |              | 776    |              |   | 1,695 
|Value-added tax receivables |  |              | 820    |              |   | 664   
|Other                       |  |              | 2,221  |              |   | 1,876 
|                            |  |              |        |              |   |       
|Total                       |  | $            | 11,564 |              | $ | 10,214
|                            |  |              |        |              |   |       



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Prepaid deposits for the fiscal years ended June 27, 2009 and June 28, 2008, includes deposits
to vendors of approximately $0.4 million and $0.2 million, respectively, for expenses to be incurred within Research and development. Fiscal 2009 also includes approximately $0.3 million for a deposit on a new license agreement for which the
licensed technology will be placed into service in fiscal 2010.

7. Property, Plant and Equipment, net

Property, plant and equipment, net, consist of the following (in thousands):



|                                   |  |              |         |   |              |   |         |  
|---------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | -
|                                   |  | June 27,2009 |         |   | June 28,2008 |  
|Land, building and improvements    |  | $            | 17,332  |   |              | $ | 17,306  |  
|Furniture, machinery and equipment |  |              | 42,186  |   |              |   | 37,620  |  
|Computer software and hardware     |  |              | 21,097  |   |              |   | 20,465  |  
|                                   |  |              |         |   |              |   |         |  
|                                   |  |              | 80,615  |   |              |   | 75,391  |  
|Less: Accumulated depreciation     |  |              | (58,798 | ) |              |   | (53,708 | )
|                                   |  |              |         |   |              |   |         |  
|Total                              |  | $            | 21,817  |   |              | $ | 21,683  |  
|                                   |  |              |         |   |              |   |         |  

Depreciation expense for the fiscal years ended June 27, 2009, June 28, 2008, and
June 30, 2007 was approximately $5.8 million, $5.7 million, and $5.2 million, respectively.

Amortization for assets under capital
leases is included in depreciation expense above. The net carrying value of assets under capital leases is approximately $0.3 million and $0.6 million at June 27, 2009 and June 28, 2008, respectively.

8. Goodwill, Intangible Assets, net, and Other Non-Current Assets

Goodwill and Other non-current assets consist of the following (in thousands):



|                                             |  |              |       |              |   |        
|-------------------------------------------- |  | ------------ | ----- | ------------ | - | -------
|                                             |  | June 27,2009 |       | June 28,2008
|Goodwill                                     |  | $            |      |              | $ | 105,771
|                                             |  |              |       |              |   |        
|Intangible assets, net                       |  | $            | 502   |              | $ | 972    
|                                             |  |              |       |              |   |        
|Other Non-Current Assets:                    |  |              |       |              |   |        
|Deferred tax assets, net                     |  | $            | 7,803 |              | $ | 9,186  
|Deferred financing costs on convertible note |  |              | 986   |              |   | 1,920  
|Other                                        |  |              | 756   |              |   | 856    
|                                             |  |              |       |              |   |        
|Total                                        |  | $            | 9,545 |              | $ | 11,962 
|                                             |  |              |       |              |   |        

Goodwill

The Company completed the acquisition of its two complementary protocol businesses, CATC, on October 29, 2004, and Catalyst, on October 2, 2006. These acquisitions were completed because of their strategic
fit with the Companys existing business and because they were of such a nature and size as to establish new products for growth of the Company. Each of the acquisitions resulted in the recognition of goodwill in the Companys consolidated
financial statements.

Under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill is tested
for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to make judgmental
assumptions regarding fair value. As the Company consists of only one reporting unit, and is publicly traded, management estimated the fair value of its reporting unit utilizing the Companys market



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capitalization, multiplying the number of actual shares outstanding by an average market price for a reasonable period of time considered to be reflective of
fair value and applied a premium to give effect to managements best estimate of a control premium, as if the Company were to be acquired by a single stockholder. The control premium seeks to give effect to the increased consideration a
potential acquirer would be willing to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to the Company. The control premium was based on analysis that considered appropriate industry, market,
economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions.

Testing is
required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market
value of the Companys common stock plus a control premium were less than the carrying value of the Company. The determination as to whether a write-down of goodwill is necessary, and the amount of the impairment charge, involves significant
judgment around the assumptions used to determine the impairment charge.

Fiscal 2008

In fiscal 2008, as a result of the decline in the Companys stock price since June 30, 2007, which affected the Companys market
capitalization, the Company updated its goodwill impairment test as of September 29, 2007, December 29, 2007, and March 29, 2008 respectively, to identify whether a potential impairment of the Companys recorded goodwill
existed. For the first quarter ended September 29, 2007, the Companys market capitalization, without regard to a control premium, exceeded its carrying value. For the second quarter testing as of December 29, 2007, the fair value of
the Companys reporting unit was determined to be $142.8 million, using a 30% control premium, which exceeded the carrying amount by $25.6 million, or 21%. For the third quarter testing as of March 29, 2008, the fair value of the
Companys reporting unit was determined to be $137.8 million, using a 30% control premium, which exceeded the carrying amount by $18.5 million, or 15.5%. For the fourth quarter testing as of May 31, 2008, the fair value of the
Companys reporting unit was determined to be $138.0 million, using a 30% control premium, which exceeded the carrying amount by $19.8 million, or 16.7%.

A 30% control premium was utilized in the Companys second quarter, third quarter and annual goodwill impairment testing. This control premium was not a standard amount based on broad assumptions; rather, the
amount was based on detailed analysis that considered appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed, taking
into consideration current industry, market and economic conditions along with other factors or available information specific to the Companys business.

The Company determined that there was no impairment to the recorded goodwill balances in fiscal 2008. The Company did, however, during the fourth quarter of fiscal 2007, reduce the goodwill by approximately $0.1
million as a result of a reversal of a pre-acquisition tax contingency reserve. Additionally, upon adoption of FIN 48 on July 1, 2007, some accruals for uncertain tax positions related to the acquisition of CATC were reduced, resulting in
a decrease to goodwill of approximately $0.1 million.

Fiscal 2009

In the first quarter of fiscal 2009, the Company updated its goodwill impairment test as of September 27, 2008, and determined that the fair value
of the Companys reporting unit was approximately $138.3 million, using a 30% control premium, which exceeded the carrying amount by approximately $18.9 million, or 16%. In the second quarter of fiscal 2009, as a result of the deterioration in
the economic environment and sustained decline in the Companys stock price, which affected the Companys market capitalization, the Company updated the first step of its goodwill impairment test and determined that its carrying value
exceeded its fair value, indicating that goodwill was impaired. The Company performed the second step of the goodwill impairment test which calculated the implied fair value of the goodwill by allocating the fair value of the Company determined in
the first step to all assets and liabilities other than goodwill, including both recognized and unrecognized intangible assets, and compared the residual amount to the carrying amount of goodwill in order to determine the amount of the goodwill
impairment. In the second quarter of fiscal 2009, the Company recorded approximately $105.8 million of goodwill impairment, reducing the carrying value of Goodwill to zero.



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Intangible Assets

The following table reflects the gross carrying amount and accumulated amortization of the Companys amortizable intangible assets as of the dates indicated (in thousands):



|                                                  |  |                               |  |              |        |   |              |   |        |  
|------------------------------------------------- |  | ----------------------------- |  | ------------ | ------ | - | ------------ | - | ------ | -
|                                                  |  | OriginalWeightedAverage Lives |  | June 27,2009 |        |   | June 28,2008 |  
|Amortizable intangible assets:                    |  |                               |  |              |        |   |              |   |        |  
|Technology, manufacturing and distribution rights |  | 2.9 years                     |  | $            | 8,296  |   |              | $ | 8,296  |  
|Accumulated amortization                          |  |                               |  |              | (8,147 | ) |              |   | (7,729 | )
|                                                  |  |                               |  |              |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $            | 149    |   |              | $ | 567    |  
|                                                  |  |                               |  |              |        |   |              |   |        |  
|Patents and other intangible assets               |  | 5.9 years                     |  |              | 1,592  |   |              |   | 1,592  |  
|Accumulated amortization                          |  |                               |  |              | (1,239 | ) |              |   | (1,187 | )
|                                                  |  |                               |  |              |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $            | 353    |   |              | $ | 405    |  
|                                                  |  |                               |  |              |        |   |              |   |        |  
|Total Net carrying amount                         |  | 3.4 years                     |  |              | 502    |   |              |   | 972    |  
|                                                  |  |                               |  |              |        |   |              |   |        |  

Purchased intangibles acquired in the Catalyst acquisition totaled $2.2 million of which $1.5
million related to amortizable intangible assets with finite lives. All intangible assets related to the Catalyst acquisition were completely amortized at June 28, 2008.

In the fourth quarter of fiscal 2008, the Catalyst trade name, which had been established as an indefinite-lived intangible asset, failed the annual
impairment test due to a change in the Companys product strategy and, accordingly, the Company took an approximate $0.7 million non-cash charge to SG&A expense for the impairment.

In the fourth quarter of fiscal 2007, the Company realigned its product strategy and cancelled certain engineering programs. The cancellation of these
programs resulted in a non-cash impairment charge of an intangible asset of approximately $0.3 million which was recorded in Cost of revenues in the Consolidated Statement of Operations.

Amortization expense for those intangible assets with finite lives was approximately $0.5 million, $1.4 million, and $3.0 million for fiscal 2009, 2008
and 2007, respectively. The cost of an amortizable intangible asset is amortized on a straight-line basis over the estimated economic life of the asset. Management estimates intangible assets amortization expense on a straight-line basis to be
approximately $0.1 million per year for fiscal 2010 through 2014.

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):



|                                                  |  |              |        |              |   |       
|------------------------------------------------- |  | ------------ | ------ | ------------ | - | ------
|                                                  |  | June 27,2009 |        | June 28,2008
|Compensation and benefits, including severance    |  | $            | 6,479  |              | $ | 7,573 
|Income taxes                                      |  |              | 135    |              |   | 114   
|Warranty                                          |  |              | 905    |              |   | 1,313 
|Deferred revenue, current portion(a)              |  |              | 1,366  |              |   | 1,421 
|Accrued interest on debt                          |  |              | 447    |              |   | 598   
|Retained liabilities from discontinued operations |  |              | 160    |              |   | 160   
|Convertible notes(b)                              |  |              |       |              |   | 5,500 
|Capital leases                                    |  |              | 253    |              |   | 234   
|Professional fees                                 |  |              | 896    |              |   | 680   
|Other current liabilities                         |  |              | 2,342  |              |   | 1,608 
|                                                  |  |              |        |              |   |       
|Total                                             |  | $            | 12,983 |              | $ | 19,201
|                                                  |  |              |        |              |   |       



|(a) | The long term portion of Deferred revenues is approximately $0.7 million and $0.8 million for the periods ended June 27, 2009 and June 28, 2008, respectively, and are
classified within Deferred revenues and other non-current liabilities of the Consolidated Balance Sheet.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | This represents an estimate of the amount of convertible notes that the Company intends to repurchase in the next twelve months, using current assets, based on current market
conditions and estimations of the Companys future profitability and liquidity requirements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10. Warranties and Guarantees

The following table is a reconciliation of the changes in the Companys aggregate product warranty liability during the years ended
June 27, 2009, June 28, 2008 and June 30, 2007 (in thousands):



|                                                   |  |              |       |   |              |   |       |              |  |   |       |  
|-------------------------------------------------- |  | ------------ | ----- | - | ------------ | - | ----- | ------------ |  | - | ----- | -
|                                                   |  | June 27,2009 |       |   | June 28,2008 |   |       | June 30,2007 | 
|Balance at beginning of year                       |  | $            | 1,313 |   |              | $ | 1,190 |              |  | $ | 1,005 |  
|Warranty liability assumed in business acquisition |  |              |      |   |              |   |      |              |  |   | 150   |  
|Accruals for warranties issued during the year     |  |              | 538   |   |              |   | 931   |              |  |   | 850   |  
|Warranty costs incurred during the year            |  |              | (754  | ) |              |   | (808  | )            |  |   | (815  | )
|Change in accrual estimate                         |  |              | (192  | ) |              |   |      |              |  |   |      |  
|                                                   |  |              |       |   |              |   |       |              |  |   |       |  
|Balance at end of year                             |  | $            | 905   |   |              | $ | 1,313 |              |  | $ | 1,190 |  
|                                                   |  |              |       |   |              |   |       |              |  |   |       |  

In fiscal 2009, management revisited labor and cost estimates utilized in its existing warranty
model as part of its quarterly review process, and in light of the Companys restructuring initiatives, and determined that the actual labor rates and cost estimates to repair the warranty units were lower than previously estimated. These
changes in estimates reduced the accrual required by approximately $0.2 million.

As is customary in the Test and Measurement industry, and
as provided for by local law in the U.S. and other jurisdictions, the Companys standard terms of sale provide remedies to customers, such as defense, settlement or payment of a judgment for intellectual property claims related to the use of
the Companys products. Such indemnification provisions are accounted for in accordance with SFAS No. 5. To date, there have been no claims under such indemnification provisions.

11. Income Taxes

The income tax benefit
(provision) consists of the following (in thousands):



|                     |  |              |       |   |              |   |      |              |  |   |       |  
|-------------------- |  | ------------ | ----- | - | ------------ | - | ---- | ------------ |  | - | ----- | -
|                     |  | Years Ended  |      
|                     |  | June 27,2009 |       |   | June 28,2008 |   |      | June 30,2007 | 
|Current:             |  |              |       |   |              |   |      |              |  |   |       |  
|U.S. federal         |  | $            | 1,277 |   |              | $ | 147  |              |  | $ | (3    | )
|U.S. state and local |  |              | (230  | ) |              |   | (263 | )            |  |   | (118  | )
|Foreign              |  |              | (314  | ) |              |   | (584 | )            |  |   | (339  | )
|                     |  |              |       |   |              |   |      |              |  |   |       |  
|Subtotal current     |  |              | 733   |   |              |   | (700 | )            |  |   | (460  | )
|Deferred:            |  |              |       |   |              |   |      |              |  |   |       |  
|U.S. federal         |  |              | (335  | ) |              |   | 619  |              |  |   | 3,797 |  
|U.S. state and local |  |              | (54   | ) |              |   | 198  |              |  |   | (782  | )
|Foreign              |  |              | (152  | ) |              |   | (173 | )            |  |   | (324  | )
|                     |  |              |       |   |              |   |      |              |  |   |       |  
|Subtotal deferred    |  |              | (541  | ) |              |   | 644  |              |  |   | 2,691 |  
|                     |  |              |       |   |              |   |      |              |  |   |       |  
|Total                |  | $            | 192   |   |              | $ | (56  | )            |  | $ | 2,231 |  
|                     |  |              |       |   |              |   |      |              |  |   |       |  

The loss before taxes for U.S. domestic operations was $107.0 million, $1.9 million, and $16.4
million for the years ended June 27, 2009, June 28, 2008 and June 30, 2007, respectively. Income before taxes for foreign operations was $0.2 million, $3.7 million, and $0.9 million for the years ended June 27,
2009, June 28, 2008 and June 30, 2007, respectively.



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The reconciliations between the income tax benefit (provision) at the U.S. federal statutory rate and the
Companys effective tax rate is as follows (in thousands):



|                                                        |  |              |         |   |              |   |       |              |  |   |        |  
|------------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ----- | ------------ |  | - | ------ | -
|                                                        |  | Years Ended  |        
|                                                        |  | June 27,2009 |         |   | June 28,2008 |   |       | June 30,2007 | 
|Benefit (provision) at U.S. federal statutory rate      |  | $            | 37,393  |   |              | $ | (619  | )            |  | $ | 5,403  |  
|Impairment of goodwill                                  |  |              | (35,372 | ) |              |   |      |              |  |   |       |  
|Graduated U.S. federal rate reduction                   |  |              | (1,068  | ) |              |   | 18    |              |  |   | (154   | )
|Non-deductible purchased in-process research technology |  |              |        |   |              |   |      |              |  |   | (1,400 | )
|Adjustment of net deferred tax assets                   |  |              |        |   |              |   |      |              |  |   | (100   | )
|State income taxes, net of federal benefit              |  |              | (188    | ) |              |   | 40    |              |  |   | 384    |  
|(Increase) decrease in valuation allowance              |  |              | (205    | ) |              |   | 18    |              |  |   | (1,397 | )
|Non-deductible share-based compensation                 |  |              | (816    | ) |              |   | (825  | )            |  |   | (695   | )
|Tax credits                                             |  |              | 499     |   |              |   | 1,200 |              |  |   |       |  
|Difference between U.S. and foreign rates               |  |              | 69      |   |              |   | 247   |              |  |   | 166    |  
|Other, net                                              |  |              | (120    | ) |              |   | (135  | )            |  |   | 24     |  
|                                                        |  |              |         |   |              |   |       |              |  |   |        |  
|Income tax benefit (provision)                          |  | $            | 192     |   |              | $ | (56   | )            |  | $ | 2,231  |  
|                                                        |  |              |         |   |              |   |       |              |  |   |        |  

Significant components of the Companys net deferred tax assets as of June 27, 2009 and
June 28, 2008 were as follows (in thousands):



|                                               |  |              |        |   |              |   |        |  
|---------------------------------------------- |  | ------------ | ------ | - | ------------ | - | ------ | -
|                                               |  | June 27,2009 |        |   | June 28,2008 |  
|Deferred tax assets:                           |  |              |        |   |              |   |        |  
|U.S. net operating loss carryforwards          |  | $            | 3,132  |   |              | $ | 1,400  |  
|Acquired U.S. net operating loss carryforwards |  |              | 1,902  |   |              |   | 1,902  |  
|Foreign net operating loss carryforwards       |  |              | 295    |   |              |   | 185    |  
|Tax credit carryforwards                       |  |              | 3,502  |   |              |   | 3,479  |  
|Inventory reserves                             |  |              | 2,281  |   |              |   | 1,903  |  
|Deferred revenue                               |  |              | 342    |   |              |   | 320    |  
|Share-based compensation                       |  |              | 1,345  |   |              |   | 1,804  |  
|Accrued compensation/benefits                  |  |              | 729    |   |              |   | 450    |  
|Deferred research expenses                     |  |              | 4,441  |   |              |   | 6,695  |  
|Intangible assets                              |  |              | 404    |   |              |   |       |  
|Other                                          |  |              | 1,312  |   |              |   | 2,343  |  
|                                               |  |              |        |   |              |   |        |  
|Deferred tax assets before valuation allowance |  |              | 19,685 |   |              |   | 20,481 |  
|Valuation allowance                            |  |              | (1,940 | ) |              |   | (1,735 | )
|                                               |  |              |        |   |              |   |        |  
|Deferred tax assets after valuation allowance  |  |              | 17,745 |   |              |   | 18,746 |  
|                                               |  |              |        |   |              |   |        |  
|Deferred tax liabilities:                      |  |              |        |   |              |   |        |  
|Unrepatriated foreign earnings                 |  |              | (1,622 | ) |              |   | (1,622 | )
|Depreciation and amortization                  |  |              | (1,555 | ) |              |   | (2,064 | )
|Other                                          |  |              | (695   | ) |              |   | (691   | )
|                                               |  |              |        |   |              |   |        |  
|Deferred tax liabilities                       |  |              | (3,872 | ) |              |   | (4,377 | )
|                                               |  |              |        |   |              |   |        |  
|Net deferred tax assets                        |  | $            | 13,873 |   |              | $ | 14,369 |  
|                                               |  |              |        |   |              |   |        |  

At June 27, 2009 and June 28, 2008, $6.4 million and $5.5 million, respectively, of the
Companys net deferred tax assets were included on the Consolidated Balance Sheets in Other current assets, $7.8 million and $9.2 million, respectively, were included in Other noncurrent assets, and $0.3 million of deferred tax
liabilities were included in Accrued expenses and other current liabilities in fiscal 2009 and 2008.



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A valuation allowance of approximately $1.9 million and $1.7 million existed as of June 27, 2009 and
June 28, 2008, respectively, for certain tax credit carryforwards, capital loss carryforwards and foreign deferred tax assets due to the uncertainty surrounding the utilization of these deferred tax assets. During the year ended June 27,
2009, the valuation allowance increased by approximately $0.2 million. The increase was mainly due to an increase in foreign net operating loss carryforwards and uncertainty surrounding the utilization of such carryforwards. During the year ended
June 30, 2008, the valuation allowance increased by approximately $0.1 million. The increase was due to an increase in state investment tax credit carryforwards, which remain uncertain in their utilization, changes in gross deferred tax assets
due to the adoption of FIN 48 on July 1, 2007, partially offset by decreases in the valuation allowance due to the utilization of foreign net operating loss carryforwards, and changes surrounding the utilization of such foreign deferred tax
assets. Management believes that it is more likely than not that the Company will realize the benefits of the Companys net deductible temporary differences, net of the valuation allowance.

The Company is required to recognize a valuation allowance for all or a portion of its deferred tax assets if it believes that it is more likely than
not, given the weight of all available evidence, that all or a portion of its deferred tax assets will not be realized. Management assesses the realizability of the deferred tax assets at each interim and annual balance sheet date based on actual
and forecasted operating results. The Company assessed both its positive and negative evidence to determine the proper amount of its required valuation allowance. The recognition of a valuation allowance for deferred tax assets is based on the
assessment of whether it is more likely than not that the Company will be able to realize its deferred tax assets within statutory carryforward periods.

The factors that the Company considered in assessing the likelihood of realization of the deferred tax assets include: the Companys past operating results; the nature and existence of cumulative losses in recent
years, which were principally due to a non-recurring goodwill impairment charge in fiscal 2009, as well as acquisition and business realignment charges; the forecast of future taxable income; the reversal of taxable temporary differences; excess of
appreciated asset value over the basis of net assets; the duration of statutory carryforward periods of net operating losses and tax credits; the Companys positive experience with U.S. net operating loss carryforwards not expiring unused; and
available tax planning strategies that could be implemented to realize a portion of the deferred tax assets. As a result of the review of the quantitative and qualitative information, the Company concluded that sufficient positive evidence outweighs
the negative evidence from recent losses to determine that it is more likely than not the Company will realize its remaining deferred tax assets not already subject to a valuation allowance. Adjustments to the valuation allowance may be made in the
future if it is determined that the realizable amount of net operating losses and other deferred tax assets is greater or less than the amount recorded. Such adjustments may be material to the Companys financial position, and results of
operations.

At June 27, 2009, the Companys net U.S. domestic deferred tax assets amounted to approximately $15.7
million. Management has considered the realizability of the deferred tax assets and has concluded that a domestic valuation allowance of approximately $1.5 million should be recorded, mainly related to certain tax credit carryforwards that are
not anticipated to be realized. Although management determined that a valuation allowance was not required with respect to the remaining net U.S. domestic deferred tax assets, realization of these assets is primarily dependent on achieving the
forecast of future taxable income, as well as prudent and feasible tax planning strategies.

The Company based its forecast of future
taxable income on actual revenues achieved and expenses incurred in the fourth quarter of fiscal 2009 following business realignment activities, excluding any future growth in revenues attributable to an economic recovery. Unexpected decreases in
revenues below levels achieved in fiscal 2009, or an inability to sustain cost reductions achieved, or unanticipated future business realignment or other charges would adversely affect the forecast of future taxable income and may result in the need
for an additional valuation allowance which could be material. At June 27, 2009, the Company requires approximately $40 million in cumulative future taxable income to be generated at various times in the future to realize the net U.S. domestic
deferred tax assets. Based upon the Companys forecast of future taxable income, the U.S. domestic net operating loss carryforwards and federal tax credit carryforwards would be fully utilized before expiration. If required, the Company also
has prudent and feasible tax planning strategies that may be used to prevent net operating loss carryforwards and tax credit carryforwards from expiring unused and prolong their lives.



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Historically, it has been the practice of the Company to reinvest unremitted earnings of foreign
subsidiaries. In a previous fiscal year, however, the Company determined that it would repatriate approximately $7.0 million in future periods from its foreign subsidiaries. The Company believes repatriation of these earnings will result in
additional taxes in the amount of $1.6 million and provided for that amount in the Consolidated Balance Sheet. The cumulative amount of all other undistributed earnings of consolidated foreign subsidiaries, for which U.S. federal income tax has not
been provided, was approximately $10.9 million and $7.7 million at June 27, 2009 and June 28, 2008, respectively. These earnings, which reflect full provision for non-U.S. income taxes, are anticipated to be reinvested permanently outside
the United States. Determining the U.S. income tax liability that might result if these earnings were remitted is not practicable.

At
June 27, 2009, the Company had self-generated federal and state net operating loss carryforwards of approximately $10.3 million and acquired net operating loss carryforwards of approximately $5.3 million available to offset future taxable
income. The carryforwards begin to expire at various dates starting in 2022 through 2029. Self-generated Foreign tax net operating loss carryforwards of approximately $0.9 million at June 27, 2009 are available to offset future taxable income
of certain foreign subsidiaries. Approximately $0.5 million of these foreign net operating loss carryforwards begin to expire in 2014, approximately $0.2 million begins to expire in 2015, and approximately $0.2 million of these foreign net operating
loss carryforwards do not have an expiration period. As of June 27, 2009, the Company has approximately $1.4 million of self-generated foreign tax credit carryforwards, $3.8 million of self-generated state tax credit carryforwards,
approximately $1.2 million of acquired state tax credit carryforwards, approximately $4.8 million of self-generated federal general business tax credit carryforwards, and approximately $0.9 million of acquired federal general business tax credit
carryforwards. The foreign, state and federal tax credits expire at various dates between fiscal 2010 and 2029.

Effective July 1,
2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, as amended by FASB Staff Position No. 48-1 (FSP-FIN
48-1), Definition of Settlement in FASB Interpretation 48. The impact of adopting FIN 48 and FSP-FIN 48-1 on the Companys consolidated financial statements is summarized below:



|                                                    |  |                         |         |                  |   |        |                        |  |   |        
|--------------------------------------------------- |  | ----------------------- | ------- | ---------------- | - | ------ | ---------------------- |  | - | -------
|                                                    |  | Balance atJune 30, 2007 |         | FIN 48Adjustment |   |        | Balance atJuly 1, 2007
|Goodwill                                            |  | $                       | 105,885 |                  | $ | (114   | )                      |  | $ | 105,771
|Other non-current assets                            |  |                         | 14,453  |                  |   | 1,057  |                        |  |   | 15,510 
|Accrued expenses and other current liabilities      |  |                         | 15,527  |                  |   | (1,968 | )                      |  |   | 13,559 
|Deferred revenues and other non-current liabilities |  |                         | 1,246   |                  |   | 2,853  |                        |  |   | 4,099  
|Retained earnings                                   |  |                         | 2,486   |                  |   | 58     |                        |  |   | 2,544  

The Company operates in multiple taxing jurisdictions, both within and outside the United States.
At June 27, 2009 and June 28, 2008, the total amount of unrecognized tax benefits related to federal, state and foreign taxes and accrued interest was approximately $10.8 million and $10.4 million, respectively, of which all would impact
the effective tax rate if recognized. As of June 27, 2009, the Company has approximately $10.8 million of unrecognized tax benefits, of which, approximately $2.0 million are reflected as a non-current liability and approximately $8.8 million
are reflected as a reduction of gross deferred tax assets.

The Company believes it is reasonably possible that approximately $0.5 million
of net unrecognized tax benefits will be recognized during the next twelve months due to the expiration of the statute of limitations and impact the Companys effective tax rate.

The Company files income tax returns in the U.S., various states and in foreign jurisdictions. For federal and foreign income tax purposes, the fiscal
2006 through 2009 tax years remain open for examination by the tax authorities. For state tax purposes, (principally California and New York) fiscal 2005 through 2009 tax years remain open for examination by the tax authorities.



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A reconciliation of the unrecognized tax benefits for the years ended June 27, 2009 and
June 28, 2008 as follows (in thousands):



|                                                                      |  |              |        |   |              |   |        |  
|--------------------------------------------------------------------- |  | ------------ | ------ | - | ------------ | - | ------ | -
|                                                                      |  | June 27,2009 |        |   | June 28,2008 |  
|Beginning balance                                                     |  | $            | 10,409 |   |              | $ | 10,075 |  
|Additions for current year tax positions                              |  |              | 236    |   |              |   | 379    |  
|Additions for prior year tax positions                                |  |              | 393    |   |              |   | 272    |  
|Reduction of tax related to expiration of statute of limitations      |  |              | (222   | ) |              |   | (347   | )
|Reduction of interest related to expiration of statute of limitations |  |              | (33    | ) |              |   | (8     | )
|Additional interest                                                   |  |              | 19     |   |              |   | 38     |  
|                                                                      |  |              |        |   |              |   |        |  
|Ending balance                                                        |  | $            | 10,802 |   |              | $ | 10,409 |  
|                                                                      |  |              |        |   |              |   |        |  

In accordance with our accounting policy, both before and after adoption of FIN 48, interest
expense and penalties related to income taxes are included in the income tax expense line of our Consolidated Statement of Operations. The Company recognizes interest and, if applicable, penalties which could be assessed related to unrecognized tax
benefits in income tax expense. For the years ended June 27, 2009 and June 28, 2008, we recognized approximately $19,000 and $38,000, respectively, for interest expense related to uncertain tax positions. As of June 27, 2009 and
June 28, 2008, the total amount of accrued interest and penalties, before federal and, if applicable, state effect, was approximately $73,000 and $87,000, respectively. We made no accrual for penalties related to income tax positions.

12. Debt and Capital Leases

Credit Agreement

On March 30, 2007, the Company entered into a $40.0 million senior, secured, four-year credit
agreement with the lenders listed therein and Manufacturers and Traders Trust Company (M&T Bank), as administrative agent for such lenders (the New Credit Agreement), which replaced LeCroys existing credit facility
(Prior Credit Agreement) that was entered into on October 29, 2004 and subsequently amended. The terms of the New Credit Agreement provided LeCroy with a $40.0 million revolving credit facility (Revolver), which includes a $5.0
million swingline loan subfacility and a $5.0 million letter of credit subfacility. The performance by LeCroy of its obligations under the New Credit Agreement is secured by all of the domestic assets of LeCroy and its domestic subsidiaries, and is
guaranteed by LeCroys domestic subsidiaries. On March 30, 2007, the Company borrowed $9.4 million under the New Credit Agreement which was used to pay the outstanding balance under LeCroys Prior Credit Agreement and for general
corporate purposes, including the financing of working capital requirements and capital expenditures. Additionally, the termination of the Prior Credit Agreement resulted in a $1.0 million write-off of bank deferred financing fees in fiscal 2007.

The Company had $17.5 million and zero outstanding borrowings against the Revolver as of June 27, 2009 and June 28, 2008,
respectively. The Company did not have any borrowings against the letter of credit subfacility or the swingline loan subfacility as of June 27, 2009 and June 28, 2008.

Effective as of April 26, 2007, LeCroy, in accordance with New Credit Agreement, entered into a First Modification and Lender Joinder Agreement
(Joinder Agreement). This Joinder Agreement increased the Companys credit limit to $50.0 million and added Capital One Bank (formerly North Fork Bank) to the New Credit Agreement. On May 7, 2008, the Company entered into a
Second Modification Agreement to modify certain financial and negative covenants of its New Credit Agreement and on May 4, 2009 the Company entered into a Third Modification Agreement to further modify certain financial and negative covenants,
as well as effective interest rates, of its New Credit Agreement.

Borrowings under the New Credit Agreement, bear interest at variable
rates, based upon LeCroys senior leverage ratio, equal to, at the Companys election, (1) the higher of (a) the prime rate or (b) the federal funds rate plus 0.5%, or (c) one-month London Interbank Offering Rate
(LIBOR) as defined in the New Credit Agreement,



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plus an applicable margin of between 1.75% and 2.75%, or (2) LIBOR plus an applicable margin of between 2.75% and 3.75%. The New Credit Agreement
provides for a LIBOR floor of 1.50% and requires the Company to pay commitment fees on unused revolver borrowings during the term of the New Credit Agreement at rates between 0.25% and 0.5% dependent upon its senior leverage ratio.

The New Credit Agreement contains, among other things, conditions precedent, covenants, representations and warranties and events of default. Negative
covenants include certain restrictions or limitations on, among other things, the incurrence of indebtedness; liens; consolidations and mergers; investments, loans, advances, guarantees and acquisitions; sales of assets, subject to customary
exceptions for sales of inventory in the ordinary course and sales of equipment in connection with the replacement thereof in the ordinary course; sale and lease-back transactions; hedging agreements; and restricted payments, including repurchase of
a portion of the convertible notes not to exceed $50.0 million of face value or $26.0 million of cash, dividends and stock repurchases. As of June 27, 2009, the Company had the ability to repurchase up to an additional $26.4 million face value,
utilizing up to $12.9 million of cash.

The Company is required to comply with certain financial covenants, measured quarterly, including:
a minimum interest coverage ratio; minimum total net worth, which includes deferred tax assets; maximum leverage ratio; minimum fixed charge coverage ratio; and limitations on capital expenditures. As of June 27, 2009, the Company was in
compliance with its financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011,
unless, in the absence of any default, extended by LeCroy to April 1, 2012, contingent on the waiver or extension of the first redemption date of the Companys convertible notes.

The Company incurred approximately $0.2 million of financing costs in connection with entering into the Third Modification Agreement. Total financing
costs in connection with the New Credit Agreement were approximately $0.8 million, which were deferred and are being amortized, on a straight line basis, over the term of the New Credit Agreement. At June 27, 2009, approximately $0.2 million of
deferred financing costs were included in Other current assets, and approximately $0.2 million were included in Other non-current assets on the Consolidated Balance Sheets.

Prior Credit Agreement

On
October 29, 2004, the Company entered into a $75.0 million senior, secured, five-year credit agreement with the lenders listed therein and JP Morgan Chase Bank, N.A., successor to The Bank of New York, as administrative agent for such lenders
(the Prior Credit Agreement). The terms of the Prior Credit Agreement, as amended thereafter, provided the Company with a $50.0 million term loan and a $50.0 million revolving credit facility, which included a $1.0 million swing-line
loan sub-facility and a $1.0 million letter of credit sub-facility. Borrowings under the Prior Credit Agreement, reflected interest at variable rates equal to, at the Companys election, (1) the higher of (a) the prime rate or
(b) the federal funds rate plus 0.5%, plus an applicable margin of between 0.00% and 1.50% based on the Companys leverage ratio, as defined in the Prior Credit Agreement, or (2) LIBOR plus an applicable margin of between 1.25% and
2.75% based on the Companys leverage ratio. In addition, the Company was required to pay commitment fees on unused revolver borrowings during the term of the Prior Credit Agreement at rates between 0.375% and 0.5% dependent upon its leverage
ratio.

Convertible Debt

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the
Notes). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes are direct, unsecured, senior subordinated
obligations of the Company and rank: (i) subordinate in right of payment to all of the Companys existing and future secured indebtedness; (ii) equal in right of payment with all of the Companys existing and future senior
unsecured



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indebtedness, and (iii) senior in right of payment to all of the Companys existing and future subordinated indebtedness, except that the Notes
ranked equally with the $3.5 million note issued in connection with the Catalyst acquisition, which was subordinated to the Companys New and Prior Credit Agreements. In connection with the issuance and sale of the Notes, the Company entered
into an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee. The terms of the Notes are governed by the indenture.

The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of their Notes on
each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not including, the
repurchase date. The Company may, from time to time, at its option repurchase the Notes in the open market. In addition, the Company may redeem the Notes for cash, either in whole or in part, anytime after October 20, 2011 at a redemption price
equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into Company common stock by the holders at an initial conversion rate
equal to 68.7285 shares per $1,000 principal amount of the Notes, equal to an initial conversion price of approximately $14.55 per share, subject to adjustment as described in the indenture. Upon conversion, the Company will deliver for each $1,000
principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 and the conversion value, as defined in the indenture and, to the extent that the conversion value exceeds $1,000, at the Companys election, cash or shares
of Company common stock in respect of the remainder. Prior to September 15, 2026, holders may convert their notes into cash and shares of the Companys common stock, if any, at the applicable conversion rate, at their option, only under
limited circumstances described in the indenture. On or after September 15, 2026, holders may convert their notes into cash and shares of the Companys common stock, if any, at the applicable conversion price, at the Companys option,
at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion of each $1,000 principal amount of the notes, the holder will receive an amount in cash equal to the lesser of (i) $1,000 or
(ii) the conversion value, as described in the indenture; if the conversion value exceeds $1,000 on the conversion date, the Company will also deliver, at the Companys election, cash or common stock or combination of each with a value
equal to such excess.

The Company evaluated the accounting for the conversion feature in accordance with EITF Issue No. 00-19,
Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Companys Own Stock and related issues, at the date of issuance of the Notes and determined that the conversion feature would be
equity-classified if it were a stand-alone instrument, and, therefore, it did not need to be accounted for separately from the Notes.

If
the Company undergoes a change in control, as defined in the indenture, holders of the Notes will have the right, subject to certain conditions, to require the Company to repurchase for cash all or a portion of their Notes at a
repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any.

In
connection with the sale of its Notes, the Company also entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company filed a shelf registration statement, which has been declared effective by the
Securities and Exchange Commission, covering resales by holders of the Notes and any common stock issuable upon conversion of such Notes, subject to certain conditions specified in the Registration Rights Agreement. The Company agreed to use its
commercially reasonable efforts to keep the registration statement effective until the earliest of the following has occurred: (i) all securities covered by the registration statement have been sold pursuant to the registration statement or
Rule 144 under the Securities Act; (ii) the holders of the Notes and the shares of the Companys common stock issuable upon conversion of the Notes that are not affiliates are able to sell all such securities immediately pursuant to Rule
144(k) under the Securities Act; (iii) the date when all of the Notes and shares of common stock issuable upon conversion have ceased to be outstanding; and (iv) October 12, 2008. No amounts are owed, nor have any been recorded for
failure to maintain the effectiveness of the registration statement.

The Company received net proceeds from the sale of the Notes of
approximately $69.0 million. Immediately thereafter, the net proceeds from the sale were used to repay the outstanding term debt balance of approximately



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$31.9 million under the Companys Prior Credit Agreement, repurchase of 850,000 shares of the Companys common stock at a cost of
approximately $9.9 million and repay approximately $22.8 million of revolving debt under the Companys Prior Credit Agreement that was drawn down to fund the acquisition of Catalyst.

The Company incurred approximately $3.0 million of transaction fees in connection with issuing the Notes, which have been deferred and are being
amortized over the term of the Notes using the effective interest method. The term of the Notes for amortization purposes is considered to be five years in accordance with SAB Topic 3-C, Redeemable Preferred Stock, as that is the first
period in which the redemption feature of the Notes can be executed by either the Noteholders or LeCroy and therefore is considered the mandatory redemption date.

During fiscal 2009, the Company repurchased approximately $19.1 million of the outstanding convertible notes, leaving a balance of approximately $48.4 million at June 27, 2009 included in Convertible notes on the
Consolidated Balance Sheet. As of June 27, 2009, the market value of the Notes was approximately $27.7 million. The difference between the net carrying amount and the repayment of the debt along with the write-off of unamortized fees resulted
in an approximate $9.6 million gain on extinguishment of convertible debt in the Consolidated Statement of Operations for the year ended June 27, 2009, which is reflected in the Consolidated Statement of Operations. As of June 27, 2009,
approximately $1.0 million of unamortized fees related to the Notes was included in Other non-current assets on the Consolidated Balance Sheet.

During fiscal 2008, the Company repurchased $4.5 million of the outstanding Notes, leaving a balance of $67.5 million at June 28, 2008. At June 28, 2008 it was the Companys intent to repurchase approximately $5.5 million of
the outstanding notes during fiscal 2009 using current assets, based on current market conditions and estimations of the Companys future profitability and positive cash flows. As such, $5.5 million related to the Notes was included in Accrued
expenses and other current liabilities and $62.0 million was included in Convertible notes on the Consolidated Balance Sheet. As of June 28, 2008, the market value of the Notes was approximately $60.8 million. The difference between the net
carrying amount and the repayment of the debt along with the write-off of unamortized fees resulted in an approximate $0.3 million gain on extinguishment of convertible debt, net of issuance cost write-off in the Consolidated Statement of Operations
for the year ended June 28, 2008. At June 28, 2008, approximately $1.9 million of unamortized fees related to the Notes was included in Other non-current assets on the Consolidated Balance Sheet.

Foreign Credit Facilities

The
Company maintains certain short-term foreign credit facilities. There was a Japanese facility totaling 50.0 million yen that was cancelled in the third quarter of fiscal 2009. No amounts were outstanding under this facility as of the time of
cancellation and as of June 28, 2008. The Companys Swiss subsidiary has an overdraft facility totaling 1.0 million Swiss francs or approximately $0.9 million as of June 27, 2009. As of June 27, 2009 and June 28, 2008,
approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations to Swiss suppliers, such as rent and utilities, are
payable under the credit facility only in the event that the subsidiary is unable to meet its financial obligations to those suppliers.

Capital Lease Agreements

During fiscal 2005, the Company entered into vendor supplied capital lease agreements for
technology rights of approximately $1.3 million. These leases bore interest at 4.5% to 4.88% and were fully paid by the first quarter of fiscal 2008.

During fiscal 2008, the Company acquired a software license under a capital lease agreement for approximately $0.7 million. The lease bears interest at 7.75% with a three-year term. At June 27, 2009, the
Companys outstanding balance under this agreement was approximately $0.3 million, approximately $0.2 million was included in Accrued expenses and other current liabilities and approximately $0.1 million was included in Deferred revenue and
other non-current liabilities on the Consolidated Balance Sheet. Future minimum lease payments required during fiscal years 2010 and 2011 are approximately $0.2 million and $0.1 million, respectively.



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13. Share-Based Compensation

Total share-based compensation expense recorded in the Consolidated Statements of Operations for the years ended June 27, 2009, June 28, 2008, and June 30, 2007 is approximately $2.8 million, $4.7
million, and $5.2 million, respectively.

Approximately $0.1 million, less than $0.1 million and zero of compensation cost was capitalized
in inventory for the year ended June 27, 2009, June 28, 2008, and June 30, 2007, respectively.

Method of Accounting

The Company accounts for share-based compensation in accordance with SFAS 123R, which requires that the costs resulting from all
share-based payment transactions be recognized at their fair values in the financial statements. On November 10, 2005, the FASB issued FASB Staff Position 123(R)-3 (FSP 123R-3), Transition Election Related to Accounting for
the Tax Effects of Share-based Payment Awards, that provided an elective alternative transition method of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R (the
APIC Pool) to the method otherwise required

by paragraph 81 of SFAS 123R. During the second quarter of fiscal 2007, the Company made the
election to use the alternative method, however, the alternative method did not have an impact on the Companys results of operations or financial condition due to the Companys net operating loss position. For the years ended
June 27, 2009, June 28, 2008, and June 30, 2007, there were no excess tax benefits recognized resulting from share-based compensation cost.

Company Stock-Based Plans

The Company maintains share-based payment arrangements under the
following plans: (i) the Amended and Restated 1993 Stock Incentive Plan (1993 Plan), (ii) the Amended and Restated 1995 Employee Stock Purchase Plan (ESPP), (iii) the Amended and Restated 1998 Non-Employee
Director Stock Plan (1998 Plan), (iv) the 2003 Stock Incentive Plan (2003 Plan), (v) the 2004 Employment Inducement Stock Plan (2004 Plan), (vi) the LeCroy Corporation (CATC) Special 2000 Stock
Option Plan, (vii) the LeCroy Corporation (CATC) 2000 Stock Incentive Plan, (viii) the LeCroy Corporation (CATC) 1994 Stock Option Plan (items (vi), (vii) and (viii) collectively the LeCroy (CATC) Plans),
(ix) the LeCroy Catalyst 2005 Stock Option Plan, (x) the 2008 Stock Incentive Plan (2008 Plan), and (xi) the 2007 Stock Appreciation Right Plan (the SAR Plan). The Company has a policy of issuing new
shares of its common stock to satisfy share option exercises.

Shares available for grant under all Company stock-based plans were
1,668,345 and 495,660 at June 27, 2009 and June 28, 2008, respectively. These amounts include 93,230 and 285,680 shares at June 27, 2009 and June 28, 2008, respectively, under the ESPP Plan.

The 1993 Plan expired on January 4, 2003. All options outstanding under the 1993 Plan at the time of its expiration will continue in full force and
effect in accordance with their terms. The lives of the options are generally ten years from the date of grant.

In October 1998, the Board
of Directors and stockholders terminated the 1995 Non-Employee Director Stock Option Plan (1995 Plan) and adopted the 1998 Plan. Pursuant to the 1998 Plan, each non-employee director receives upon initial election to the Board of
Directors either a stock option grant of 15,000 shares to vest ratably over 36 months, or a restricted stock award of 10,000 shares of common stock, subject to such vesting and other conditions and restrictions as the Board may determine at its
discretion. In fiscal 2009, the Compensation Committee of the Board of Directors revised the Board compensation such that each non-employee director will receive annually, at their election, an immediately vested restricted stock award and/or an
immediately vested stock option award (using the Black Scholes valuation technique) equal to $85,000, based on the closing price of the Companys stock on the Annual Shareholder Meeting date, rounded up or down to the nearest hundred shares.
The compensation was effective for equity awards granted at the November 3, 2008 Annual Shareholder Meeting, which resulted in 32,000 immediately vested options and 57,073 of immediately vested restricted stock being granted to



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the non-employee directors. Additionally, each non-employee director receives upon initial election to the Board of Directors, either a stock option grant of
22,500 shares with an exercise price set as the date of the election, or 7,500 shares of restricted stock, as selected by the Board to vest over a three year period. As a result of a new board member being elected to the Board, the Company issued
7,500 shares of restricted stock in fiscal 2009. In fiscal 2008, the Compensation Committee of the Board of Directors revised the Board compensation such that each non-employee director will receive annually, an immediately vested restricted stock
award equal to $95,000, based on the closing price of the Companys common stock on the Annual Shareholder Meeting date, rounded up or down to the nearest hundred shares. The compensation was effective for equity awards granted at the
October 31, 2007 Annual Shareholder Meeting, which resulted in 9,700 shares being granted to each non-employee director. Prior to fiscal 2008, each non-employee director received annually, a restricted stock award of 5,000 shares of common
stock subject to such vesting and other conditions and restrictions as the Board may determine at its discretion. A total of 500,000 shares of common stock can be issued during the term of the 1998 Plan. The 1998 Plan expires on October 27,
2010.

The 2003 Plan provides for the grant of incentive stock options, nonqualified stock options and restricted stock awards to employees
(including officers and employee directors) and consultants. Unless approved by stockholders owning a majority of shares present and entitled to vote at a duly convened meeting of stockholders of the Company, the purchase price of any option granted
under the 2003 Plan may not be less than 100% of the fair value of the Companys common stock on the date of grant. The aggregate number of shares of common stock that may be issued or transferred pursuant to options or restricted stock awards
under the 2003 Plan is 1,560,167 shares. The 2003 Plan also allows for awards based on performance criteria. Such awards may then qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The
Compensation Committee of the Board of Directors administers the 2003 Plan and has the authority to determine the terms of such options or awards including the number of shares, exercise or purchase prices and times at which the options become and
remain exercisable or restricted stock is no longer restricted. In fiscal 2009, approximately 118,000 options have been granted under the 2003 Plan. There have been no performance-based awards granted under the 2003 Plan. The 2003 Plan expires on
October 29, 2013.

In connection with the CATC Merger, on October 29, 2004, the Companys Board of Directors approved the
2004 Plan to promote the interests of the Company and its stockholders by strengthening the Companys ability to attract and induce persons to become employees of the Company, including certain of CATCs employees. The adoption of the 2004
Plan did not require stockholder approval. The number of shares of LeCroy common stock that may be issued or transferred pursuant to options or restricted stock awards granted under the 2004 Plan is 750,000 shares. On October 29, 2004, the
Company issued the following grants under the 2004 Plan: (i) 70,000 shares of restricted common stock to certain former officers of CATC, and (ii) options to purchase an aggregate of 230,984 shares of common stock to 61 former CATC
employees who became non-officer employees of LeCroy (none of whom received an option grant of more than 20,000 shares). The options were issued with vesting periods of four to six years. On September 13, 2005, the Board of Directors resolved
that no further grants would be made under the 2004 Plan. The 2004 Plan expires on October 29, 2014.

In connection with the CATC
Merger, LeCroy assumed the LeCroy (CATC) Plans. On October 27, 2004, the Board of Directors of CATC approved technical amendments to each of the CATC Stock Plans in anticipation of their assumption by LeCroy pursuant to the CATC Merger
including, without limitation, amendments reflecting that any stock option or other award granted thereunder would be exercisable for LeCroy common stock. On September 13, 2005, the Board of Directors resolved that no further grants would be
made under the LeCroy (CATC) Plans.

In connection with the Catalyst Merger, LeCroy assumed Catalysts 2005 Stock Option Plan. On
October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to the Catalyst Merger including, without limitation, amendments reflecting that
any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the Company in exchange for the stock options held by the employees of
Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or approximately $1,196,000, is charged to compensation expense in
operations as earned by employees over their remaining requisite service periods. The fair value of assumed options was determined using the Black-Scholes option pricing model.



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The public announcement of the Catalyst Merger occurred on the same date as the closing, October 2,
2006. Upon completion of the Merger, each outstanding stock option issued by Catalyst was assumed by LeCroy and was converted into an option to purchase that number of shares of LeCroy common stock equal to the number of shares of Catalyst common
stock purchasable pursuant to the Catalyst option immediately prior to the effective time of the merger, multiplied by the exchange ratio, rounded down to the nearest whole number of shares of LeCroy common stock. The exercise price per share was
equal to the exercise price per share of Catalyst common stock divided by the exchange ratio, rounded up to the nearest whole cent. The Companys assumption of the Catalyst issued options was treated as a modification, under SFAS No. 123R,
of the terms of the original Catalyst grant. The same conversion formula was utilized to calculate the number of assumed options as was used in the Merger consideration and, as such, the aggregate fair value of Catalysts awards immediately
prior to the Merger was substantially similar to the aggregate fair value of the LeCroy awards on the date of grant.

The 2008 Plan
provides for the grant of incentive stock options, nonqualified stock options and restricted stock awards. The purchase price of any option granted under the 2008 Plan may not be less than 100% of the fair value of the Companys common stock on
the date of grant. The aggregate number of shares of common stock that may be issued or transferred pursuant to options or restricted stock awards under the 2008 Plan is 2,800,000 shares. The 2008 Plan also allows for awards based on performance
criteria which awards may then qualify as performance- based compensation under Section 162(m) of the Internal Revenue Code. The Compensation Committee of the Board of Directors administers the 2008 Plan and has the authority to
determine the terms of such options or awards including the number of shares, exercise or purchase prices and times at which the options become and remain exercisable or restricted stock is no longer restricted. In fiscal 2009, approximately
1,397,000 options have been granted under the 2008 Plan. There have been no performance-based awards granted under the 2008 Plan. The 2008 Plan expires on September 22, 2015.

Stock Options

The fair value of
options granted is estimated on the date of grant using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical volatility of the Companys stock. Management monitors share option exercise and employee
termination patterns to estimate forfeiture rates. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company analyzes its historical forfeiture rate, the remaining lives
of unvested options and the amount of vested options as a percentage of total options outstanding. If the Companys actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the
future, the stock-based compensation expense could be significantly different from what was recorded in the current periods. The expected holding period of options represents the period of time that options granted are expected to be outstanding.
The risk-free interest rate is based on the interest rate of a 5-year U.S. Treasury note in effect on the date of the grant or such other period that most closely equals the expected term of the option.

The table below presents the assumptions used to calculate the fair value of options granted during the fiscal years ended June 27, 2009,
June 28, 2008, and June 30, 2007 (including Catalyst assumed options in fiscal 2007):



|                                               |  |               |  |               |  |              
|---------------------------------------------- |  | ------------- |  | ------------- |  | -------------
|                                               |  | Years Ended  
|                                               |  | June 27,2009  |  | June 28,2008  |  | June 30,2007 
|Expected holding period (years)                |  | 5.0           |  | 5.0           |  | 3.7          
|Risk-free interest rate                        |  | 1.97% - 3.23% |  | 2.67% - 4.57% |  | 4.46% - 4.91%
|Dividend yield                                 |  | 0.0%          |  | 0.0%          |  | 0.0%         
|Expected volatility                            |  | 41.1% - 56.6% |  | 42.8% - 48.6% |  | 32.0% - 54.2%
|Weighted average fair value of options granted |  | $1.53         |  | $3.69         |  | $10.66       



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Changes in the Companys stock options for the fiscal year ended June 27, 2009 are as follows:



|                                             |  |                 |   |  |                                |       |                                                  |      |                                |   |    
|-------------------------------------------- |  | --------------- | - |  | ------------------------------ | ----- | ------------------------------------------------ | ---- | ------------------------------ | - | ---
|                                             |  | Number ofShares |   |  | Weighted AverageExercise Price |       | Weighted AverageRemainingContractualTerms(Years) |      | AggregateIntrinsic Value($000)
|Outstanding at June 28, 2008                 |  | 1,498,070       |   |  | $                              | 13.46 |                                                  |      |                                |   |    
|Granted                                      |  | 1,547,900       |   |  |                                | 3.25  |                                                  |      |                                |   |    
|Exercised                                    |  | (10,488         | ) |  |                                | 1.87  |                                                  |      |                                |   |    
|Expired                                      |  | (515,874        | ) |  |                                | 12.98 |                                                  |      |                                |   |    
|Forfeited                                    |  | (93,214         | ) |  |                                | 4.21  |                                                  |      |                                |   |    
|                                             |  |                 |   |  |                                |       |                                                  |      |                                |   |    
|Outstanding at June 27, 2009                 |  | 2,426,394       |   |  | $                              | 7.45  |                                                  | 5.33 |                                | $ | 987
|                                             |  |                 |   |  |                                |       |                                                  |      |                                |   |    
|Vested and expected to vest at June 27, 2009 |  | 2,292,288       |   |  | $                              | 6.47  |                                                  | 4.92 |                                | $ | 945
|Exercisable at June 27, 2009                 |  | 912,650         |   |  | $                              | 13.84 |                                                  | 3.13 |                                | $ | 79 

The total intrinsic value of stock options exercised during each of the years ended June 27,
2009, June 28, 2008, and June 30, 2007 was approximately $0.1 million, $0.3 million, and $0.5 million, respectively.

As of
June 27, 2009, there was approximately $2.2 million, of unrecognized compensation cost (net of estimated forfeitures) related to stock options granted under the plans. That cost is expected to be recognized over a weighted-average period of
approximately 3.1 years.

In fiscal 2009, there were 32,000 immediately vested options granted as part of the annual grant to non-employee
directors. The remaining shares issued to employees had vesting periods ranging from two to four years.

Non-Vested Stock

The fair value of new grants is determined based on the closing price on the date of grant. Related compensation expense is recognized
ratably over the associated requisite service period, giving effect to estimated forfeitures. If the Companys actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future,
the stock-based compensation expense could be significantly different from what was recorded in the current periods.

The following table
summarizes transactions related to non-vested stock for the fiscal year ended June 27, 2009:



|                                  |  |                 |   |  |                                      |      
|--------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                  |  | Number ofShares |   |  | Weighted AverageGrant DateFair Value
|Non-vested stock at June 28, 2008 |  | 496,504         |   |  | $                                    | 12.24
|Granted                           |  | 65,361          |   |  | $                                    | 4.83 
|Vested                            |  | (285,434        | ) |  | $                                    | 12.28
|Forfeited                         |  | (24,647         | ) |  | $                                    | 10.33
|                                  |  |                 |   |  |                                      |      
|Non-vested stock at June 27, 2009 |  | 251,784         |   |  | $                                    | 10.47
|                                  |  |                 |   |  |                                      |      

Non-vested stock is included in the issued and outstanding share numbers presented on the
Consolidated Balance Sheets. Non-vested stock is not included in the weighted average share calculation for basic earnings per share. However, the dilutive effect of the non-vested stock is included in the weighted average share calculation for
diluted earnings per share.

In fiscal 2009, 57,073 immediately vested shares were granted to non-employee directors as part of the annual
grant to non-employee directors, and 7,500 shares were granted to a new board member, which vest over a 3 year period. The remaining shares were issued to an employee with a vesting period of two years from the date of grant.



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As of June 27, 2009, there was approximately $1.9 million of unrecognized compensation cost (net of
estimated forfeitures) related to non-vested stock granted under the plans. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years.

Employee Stock Purchase Plan

The
Company has an Employee Stock Purchase Plan (ESPP) with a look-back option that allows employees to purchase shares of common stock at 85% of the market value at the lower of either the date of enrollment or the date of purchase. Payment
for the ESPP is a fixed amount, set at the beginning of the period, made through payroll withholding over the enrollment period of six months. The number of shares the participant can acquire is variable based on the fixed amount withheld and the
applicable fair value. SFAS No. 123R requires an ESPP with a purchase price discount of greater than 5% and a look-back option to be compensatory. The Company accounts for the ESPP in accordance with FASB Technical Bulletin No. 97-1,
Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option. The fair value of the put and call features of the estimated shares to be purchased are estimated at the beginning
of the purchase period using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical six-month volatility of the Companys stock. The expected holding period is equal to the six-month enrollment
period. The risk-free interest rate is based on the interest rate of a six-month U.S. Treasury note in effect on the first day of the enrollment period. The fair value of the shares is liability classified until the end of the six-month period at
which time the amount is then equity classified. As of June 27, 2009 and June 28, 2008, there is less than $0.1 million of liability classified share-based compensation expense for the ESPP included in Accrued expenses and other current
liabilities on the Consolidated Balance Sheets.

The ESPP has reserved for issuance an aggregate of 1,060,000 shares of common stock and is
set to expire on November 30, 2011. In fiscal 2009, 192,450 shares were issued under the ESPP.

Stock Appreciation Rights

On August 20, 2007, the Board of Directors adopted and approved the 2007 Stock Appreciation Right Plan (the SAR
Plan). Under the SAR Plan, the Compensation Committee of the Board of Directors may award stock appreciation rights to eligible employees. Each stock appreciation right (SAR) awarded represents the right to receive an amount of
cash equal to the excess of the fair market value of a share of the Companys common stock on the date that a participant exercises such right over the fair market value of a share of the Company common stock on the date that such SAR was
awarded. Awards of SARs will vest in four successive annual installments of 25% of the SARs subject to such award on the anniversary of the date of the grant of such award. The employee will have four years from the date of vesting of an installment
in which to exercise such installment. The SAR Plan will terminate on August 20, 2017.

The fair value of SARs granted is estimated on
the date of grant and remeasured at each reporting period using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical volatility of the Companys stock. Management monitors award exercise and
employee termination patterns to estimate forfeiture rates. If the Companys actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense
could be significantly different from what was recorded in the current periods. The expected holding period of SARs represents the period of time that SARs granted are expected to be outstanding. The risk-free interest rate is based on the interest
rate of a U.S. Treasury note in effect on the date of the remeasurement for such period closest to the expected term of the SARs.

The
Company records compensation expense ratably over the service period and adjusts for changes in the fair value of SARs at each reporting period. At June 27, 2009, there was approximately $2.9 million of unrecognized compensation cost (net of
estimated forfeitures) related to SARs, which is expected to be recognized over a weighted average period of approximately 3.4 years.



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The table below presents the assumptions used to remeasure the value of the SARs at June 27, 2009
and June 28, 2008:



|                                            |  |                 |  |              
|------------------------------------------- |  | --------------- |  | -------------
|                                            |  | June 27, 2009   |  | June 28, 2008
|Expected holding period (years)             |  | 4.4             |  | 4.5          
|Risk-free interest rate                     |  | 1.40% - 2.53%   |  | 3.14%        
|Dividend yield                              |  | 0.0%            |  | 0.0%         
|Expected volatility                         |  | 56.91% - 61.53% |  | 40.36%       
|Weighted average fair value of SARs granted |  | $1.12           |  | $3.79        

The fair value of the SARs is liability classified because the awards are payable in cash. As of
June 27, 2009 and June 28, 2008, there was approximately $0.7 million and $0.6 million, respectively, of liability classified share-based compensation expense for the SARs included in Accrued expenses and other current liabilities on the
Consolidated Balance Sheet.

Changes in the Companys SAR Plan for the fiscal year ended June 27, 2009 are as follows:



|                                             |  |               |   |  |                                |      |                                                  |      |                                |   |  
|-------------------------------------------- |  | ------------- | - |  | ------------------------------ | ---- | ------------------------------------------------ | ---- | ------------------------------ | - | -
|                                             |  | Number ofSARs |   |  | Weighted AverageExercise Price |      | Weighted AverageRemainingContractualTerms(Years) |      | AggregateIntrinsic Value($000)
|Outstanding at June 28, 2008                 |  | 712,000       |   |  | $                              | 7.60 |                                                  |      |                                |   |  
|Granted                                      |  | 2,717,000     |   |  |                                | 6.63 |                                                  |      |                                |   |  
|Exercised                                    |  |              |   |  |                                |     |                                                  |      |                                |   |  
|Expired                                      |  | (25,000       | ) |  |                                | 7.60 |                                                  |      |                                |   |  
|Forfeited                                    |  | (75,000       | ) |  |                                | 7.60 |                                                  |      |                                |   |  
|                                             |  |               |   |  |                                |      |                                                  |      |                                |   |  
|Outstanding at June 27, 2009                 |  | 3,329,000     |   |  | $                              | 6.81 |                                                  | 5.68 |                                | $ | 
|                                             |  |               |   |  |                                |      |                                                  |      |                                |   |  
|Vested and expected to vest at June 27, 2009 |  | 3,329,000     |   |  | $                              | 6.81 |                                                  | 5.68 |                                | $ | 
|Exercisable at June 27, 2009                 |  | 153,000       |   |  | $                              | 7.60 |                                                  | 3.15 |                                | $ | 

14. Common Stock, Treasury Stock and Warrants to Purchase Common Stock

On May 25, 2006, the Companys Board of Directors approved the adoption of a share repurchase plan authorizing the Company to purchase up to
2.0 million shares, not to exceed $25.0 million, of its common stock for treasury. During fiscal 2009, 2008, and 2007, the Company purchased 105,692 shares, 297,523 shares and 896,000 shares, respectively, for a total consideration of
approximately $0.7 million, $2.4 million and $10.5 million, respectively. During the year ended June 30, 2007, the Company retired 1.0 million shares of its treasury stock.

Purchases under this buyback program may be made from time to time on the open market and in privately negotiated transactions, including pursuant to the
terms of a 10b5-1 plan. A 10b5-1 plan allows a company to purchase shares during a blackout period, provided the company communicates its share purchase instructions to the broker prior to the blackout period, pursuant to a written plan that may not
be changed. The timing of these purchases is dependent upon several factors, including market conditions, the market price of the Companys common stock, the effect of the share dilution on earnings, available cash and any other potential risks
the Company may encounter. The share repurchase plan may be discontinued at any time at the discretion of the Company.

At July 1,
2006 the Company had outstanding warrants to purchase 28,571 shares of common stock at a purchase price of $17.50 per share. These warrants expired on August 15, 2006. No warrants were exercised during the fiscal year ended June 30, 2007
and there are no warrants outstanding as of June 28, 2008 and June 27, 2009.



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15. Net (Loss) Income Per Common Share (EPS)

Basic net (loss) income per common share is net (loss) income divided by the weighted average of common shares outstanding during the period. Diluted net
(loss) income per common share is calculated using the weighted average of common shares outstanding adjusted to include the effect of shares from the assumed exercise of dilutive stock options, convertible debt, if dilutive, and non-vested stock
using the treasury stock method. The following is a presentation of the numerators and the denominators of the basic and diluted net (loss) income per common share computations for the years ended June 27, 2009, June 28, 2008 and
June 30, 2007 (in thousands):



|                                            |  |              |          |   |              |   |              |  |   |         |  
|------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------------ |  | - | ------- | -
|                                            |  | Years Ended  |         
|                                            |  | June 27,2009 |          |   | June 28,2008 |   | June 30,2007 | 
|Numerator:                                  |  |              |          |   |              |   |              |  |   |         |  
|Net (loss) income                           |  | $            | (106,650 | ) |              | $ | 1,712        |  | $ | (13,207 | )
|                                            |  |              |          |   |              |   |              |  |   |         |  
|Denominator:                                |  |              |          |   |              |   |              |  |   |         |  
|Weighted average shares outstanding:        |  |              |          |   |              |   |              |  |   |         |  
|Basic                                       |  |              | 12,003   |   |              |   | 11,749       |  |   | 11,702  |  
|Employee stock options and non-vested stock |  |              |         |   |              |   | 258          |  |   |        |  
|                                            |  |              |          |   |              |   |              |  |   |         |  
|Diluted                                     |  |              | 12,003   |   |              |   | 12,007       |  |   | 11,702  |  
|                                            |  |              |          |   |              |   |              |  |   |         |  

The computations of diluted EPS for the years ended June 27, 2009, June 28, 2008 and
June 30, 2007 do not include approximately 1.9 million, 1.7 million and 2.6 million, respectively, of stock options and non-vested stock, as the effect of their inclusion would have been anti-dilutive to EPS. For the years ended
June 27, 2009, June 28, 2008 and June 30, 2007, the convertible notes had no impact on diluted EPS because the average share price during the fiscal years was below $14.55 per share, the initial conversion price, and accordingly, the
convertible notes, if converted, would have required only cash at settlement.

16. Stockholder Rights Plan

On November 2, 1998, the Companys Board of Directors declared a dividend distribution of one right in respect to each share of LeCroys
common stock outstanding at the record date, November 18, 1998. The rights had been traded together with the common stock and were not exercisable or separately tradable. The rights were exercisable if a person or group acquired 15% or more of
the Companys common stock or announced a tender offer. Right holders, other than the acquiring person or group, were then entitled to purchase an amount of the Companys common stock at a 50% discount to the share price at that time. The
number of shares of common stock that a right holder was entitled to purchase was based on the exercise price. Under certain circumstances, the right entitled the stockholder to buy shares in an acquiring entity at a discount.

The Board of Directors could have redeemed the rights at a price of $0.001 per right up until 10 days following a public announcement that any person or
group had acquired 15% or more of LeCroys common stock. These rights have expired on November 2, 2008, and no new plan has been implemented as of June 27, 2009. The rights plan had no impact on the financial position or results of
operations of the Company.

17. Employee Benefit Plans

The Company has a discretionary employee 401(k) savings plan. It is a trusted, employee 401(k) savings plan for eligible U.S. employees under which the Company contributes an unconditional match of up to 50% of
employee contributions up to a maximum employer contribution of 5% of the employees eligible compensation, as defined. Effective in the third quarter of fiscal 2009, as a result of the weakening economic conditions, the Company temporarily
suspended its 401(k) contribution matching program in an effort to reduce costs. The Company will review its decision to reinstate the 401(k) match when economic conditions improve. For fiscal 2009, 2008 and 2007, the Company expensed approximately
$0.3 million, $0.5 million and $0.5 million, respectively, in matching contributions to this plan.



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The Companys subsidiary in Switzerland maintains a defined contribution plan, which requires
employee contributions based upon a percentage of the employees earnings, as defined, currently ranging from 4.6% to 8.4%. The Company makes a matching contribution based also upon a percentage of the employees earnings, as defined,
currently ranging from 5.4% to 9.6%. For fiscal 2009, 2008 and 2007, the Company has expensed approximately $0.4 million, $0.5 million, and $0.5 million, respectively, in matching contributions to this plan.

18. Segment Reporting and Geographic Information

The Company operates in a single-reportable segment in the Test and measurement market, in which it develops, manufactures sells and licenses high-performance oscilloscopes, serial data analyzers and global communication protocol test
solutions. These products are used by design engineers and researchers to measure and analyze complex electronic signals in order to develop high performance systems, to validate electronic designs and to improve time to market. Revenue from the
sale of the Companys products, which are similar in nature, is reflected as Test and measurement products revenue in the Consolidated Statements of Operations.

Revenues are attributed to countries based on customer ship-to addresses. Revenues by geographic area are as follows (in thousands):



|                   |  |              |         |              |   |              |  |   |        
|------------------ |  | ------------ | ------- | ------------ | - | ------------ |  | - | -------
|                   |  | June 27,2009 |         | June 28,2008 |   | June 30,2007
|Americas           |  | $            | 39,911  |              | $ | 52,883       |  | $ | 50,891 
|Europe/Middle East |  |              | 54,193  |              |   | 57,982       |  |   | 51,899 
|Japan              |  |              | 11,035  |              |   | 12,125       |  |   | 16,929 
|Asia/Pacific       |  |              | 28,828  |              |   | 37,496       |  |   | 31,581 
|                   |  |              |         |              |   |              |  |   |        
|Total revenues     |  | $            | 133,967 |              | $ | 160,486      |  | $ | 151,300
|                   |  |              |         |              |   |              |  |   |        

Total assets by geographic area are as follows:



|                   |  |              |         |              |   |        
|------------------ |  | ------------ | ------- | ------------ | - | -------
|                   |  | June 27,2009 |         | June 28,2008
|Americas           |  | $            | 93,956  |              | $ | 207,572
|Europe/Middle East |  |              | 11,169  |              |   | 13,430 
|Japan              |  |              | 1,541   |              |   | 1,135  
|Asia/Pacific       |  |              | 3,371   |              |   | 4,849  
|                   |  |              |         |              |   |        
|Total assets       |  | $            | 110,037 |              | $ | 226,986
|                   |  |              |         |              |   |        

Total long-lived assets (1) by geographic area are as follows:



|                        |  |              |        |              |   |       
|----------------------- |  | ------------ | ------ | ------------ | - | ------
|                        |  | June 27,2009 |        | June 28,2008
|Americas                |  | $            | 20,795 |              | $ | 20,218
|Europe/Middle East      |  |              | 644    |              |   | 892   
|Japan                   |  |              | 217    |              |   | 232   
|Asia/Pacific            |  |              | 161    |              |   | 341   
|                        |  |              |        |              |   |       
|Total long-lived assets |  | $            | 21,817 |              | $ | 21,683
|                        |  |              |        |              |   |       



|(1) | Long-lived assets presented in the table above include only Property, plant and equipment, net.
|--- | -----------------------------------------------------------------------------------------------

No customer accounted for more than 10% of the Companys consolidated revenues in any of the last three fiscal years. Revenues attributable to
individual countries based on customer ship-to addresses that account for 10% or more of total revenues in fiscal 2009, 2008 and 2007 include the United States of approximately $39.4 million, $48.4 million and $50.9 million, respectively, and
Germany of approximately $20.4 million, $21.3 million, and $16.7 million, respectively.



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19. Commitments and Contingencies

The Companys contractual obligations and commitments include obligations associated with employee severance agreements (See Note 3  Business
Realignment, Restructuring Initiatives and Related Asset Impairments for additional information), supplier agreements, operating leases, capital leases, revolving credit and convertible note obligations (See Note 12  Debt and Capital Leases
for additional information).

Operating Leases and Supplier Agreements

Operating leases covering plant, certain office facilities and equipment expire at various dates in the future. Future minimum annual lease payments
required during fiscal years 2010, 2011, 2012, 2013, 2014 and thereafter, under non-cancelable operating leases having an original term of more than one year, are approximately $2.1 million, $1.5 million, $1.1 million, $0.9 million, $0.4 million,
and $0.1 million, respectively. Aggregate rental expense on non-cancelable operating leases for the fiscal years ended 2009, 2008 and 2007 was approximately $2.6 million, $2.7 million and $2.6 million, respectively.

As of June 27, 2009, the Company is committed to purchase approximately $0.7 million of inventory from suppliers.

Environmental

The
Companys former subsidiary, Digitech Industries, Inc. (Digitech), was notified prior to 1999 by the Connecticut Department of Environmental Protection (the DEP) that it may be responsible for environmental damage that
occurred at its previously leased facilities in Ridgefield, Connecticut (the Ridgefield Site). Based upon recommendations made by the DEP, Digitech engaged environmental consultants to assist it in evaluating the costs associated with
the DEPs recommendations for monitoring and remediation of the environmental damage.

In May 1999, LeCroy, Digitech and the former
owners of the Ridgefield Site entered into an agreement with the current owners of the Ridgefield Site. The current owners purchased an insurance policy providing for $2.0 million of coverage against certain environmental liabilities related to the
Ridgefield Site. That insurance policy names both LeCroy and Digitech as insured parties. The current owners of the Ridgefield Site also agreed to remediate all environmental problems associated with the property and to obtain all applicable
approvals and certifications from the DEP. The current owners of the Ridgefield Site also agreed to hold both LeCroy and Digitech harmless in the event of a claim made against them relating to these environmental matters. In return for the above,
forty-five days after the DEP has provided written notification to the Company that the site remediation has been accomplished to its satisfaction, the Company agreed to pay the former owners of the Ridgefield Site $0.2 million as compensation for
the reduced sale value of the property due to the environmental problems existing on the site. In August 2000, the Company closed the sale of the assets and business of its Vigilant Networks, Inc. subsidiary (Vigilant) and a portion of
the assets and business of its Digitech subsidiary. The Company has accrued retained liabilities from discontinued operations of $0.2 million after the sale of the Vigilant business and the residual assets of Digitech, which amount is recorded in
Accrued expenses and other current liabilities on the June 27, 2009 and June 28, 2008 Consolidated Balance Sheets.

Legal

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, including patent and
environmental matters, which arise in the ordinary course of business. There are no matters pending that the Company expects to have a material adverse affect on its business, results of operations, financial position or cash flows.

20. Related Party Transactions

On
July 19, 2005 the Compensation Committee of the Board of Directors approved a $0.3 million retention bonus to Mr. Reslewic. This retention bonus requires Mr. Reslewic to remain an employee for five years. If Mr. Reslewic
terminates his employment earlier than five years, he will be required to repay the bonus in full. The



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retention bonus is being amortized over five years on a straight line basis as compensation expense. At June 27, 2009, approximately $0.1 million of the
retention bonus remains in Other current assets and less than $0.1 million is included in Other non-current assets, on the Consolidated Balance Sheet.

In conjunction with the Catalyst acquisition, the Company issued a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader Salehomoum, a former sole shareholder of Catalyst and former employee of
the Company. In fiscal 2008, the note was fully repaid.

21. Derivative Instruments and Fair Value

The Company has or had the following derivative instruments:

Interest Rate Swap

As required by the terms of the Companys Prior Credit Agreement (See Note
12  Debt and Capital Leases for additional information), on January 27, 2005 the Company entered into a Master Agreement for an interest rate swap with M&T Bank, the purpose of which was to protect against rising interest rates during
the term of the Prior Credit Agreement.

On October 16, 2006, in conjunction with the repayment of the term loan under the Prior
Credit Agreement (See Note 12  Debt and Capital Leases for additional information), the Company terminated its interest rate swap with M&T Bank. The net interest income earned on the swap was approximately $0.3 million for fiscal 2007 and
is recognized in Interest expense in the Consolidated Statements of Operations.

Forward foreign exchange contracts

The Company is exposed to global market exchange rate risks and, as a result, enters into forward exchange contracts to manage financial exposures
resulting from changes in foreign currency rates. These foreign currency forward exchange agreements are generally 30-day forward contracts, which are monitored and updated on a monthly basis, and used to reduce exposure to fluctuations in foreign
currency exchange rates on assets and liabilities denominated in currencies other than the Companys functional currencies. The Company records these short-term forward exchange agreements on the balance sheet at fair value in Other current
assets and Accrued expenses and other current liabilities. The changes in the fair value are recognized currently in Other, net in the Consolidated Statement of Operations.

During fiscal 2009, 2008 and 2007, foreign currency gains and losses on these derivatives and on all transactions denominated in other than their
functional currencies, were approximately a net gain of $0.3 million, a net loss of $0.6 million and a net loss of $0.3 million, respectively. The net gain resulting from the forward foreign exchange contracts for the fiscal year ended June 27,
2009 was approximately $0.3 million and is included in Other, net in the Consolidated Statement of Operations. At June 27, 2009, the U.S. dollar equivalent of outstanding forward foreign exchange contracts, all with maturities of less than six
months, totaled approximately $17.5 million in notional amounts, including approximately $9.4 million in contracts to buy Swiss francs for US dollars, approximately $3.1 million in contracts to sell Euro for US dollars, and approximately $3.2
million in contracts to sell Euros for Swiss francs, with the remaining contracts totaling approximately $1.8 million covering a variety of other foreign currencies. At June 28, 2008, the notional amounts of the Companys open foreign
exchange forward contracts, all with maturities of less than six months, was approximately $16.3 million.

Fair Value

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the
assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:



| |  |  | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for
identical assets or liabilities in inactive markets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

As of June 27, 2009, the fair values of the Companys financial assets and liabilities are categorized as follows (in thousands):



|                                                |  |       |     |         |   |         |   |         |  |  
|----------------------------------------------- |  | ----- | --- | ------- | - | ------- | - | ------- |  | -
|                                                |  | Total |     | Level 1 |   | Level 2 |   | Level 3
|Other current assets:                           |  |       |     |         |   |         |   |         |  |  
|Foreign exchange forward contracts              |  | $     | 142 |         |  |         | $ | 142     |  | 
|Accrued expenses and other current liabilities: |  |       |     |         |   |         |   |         |  |  
|Foreign exchange forward contracts              |  | $     | 46  |         |  |         | $ | 46      |  | 

The fair values above were based on observable market transactions of spot currency rates and
forward currency prices. The net fair value of the open foreign exchange forward contracts is a net asset of approximately $0.1 million at June 27, 2009 as compared to net liability of almost zero at June 28, 2008.

22. Unaudited Quarterly Results of Operations

The Company has quarterly periods ending on the Saturday closest to the end of the calendar quarter, which comprise of 13 weeks in fiscal years 2009 and 2008. Summarized unaudited quarterly operating results for fiscal years 2009 and 2008
are as follows (in thousands, except per share data):



|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|----------------------------------------------- |  | ---------------- | ------ | - | ---------------- | - | ------ | ------------ |  | - | ------------- | - |  | ------------ | ------ | - | ------------ | - | ------ | ------------ |  | - | ------------- | - |  | - | ------ | - |  | - | ------ | -
|                                                |  | Quarters Ended   |       
|                                                |  | Fiscal Year 2009 |        |   | Fiscal Year 2008 |  
|                                                |  | June 27,2009     |        |   | Mar. 28,2009     |   |        | Dec. 27,2008 |  |   | Sept. 27,2008 |   |  | June 28,2008 |        |   | Mar. 29,2008 |   |        | Dec. 29,2007 |  |   | Sept. 29,2007 |  
|Revenues                                        |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Test and measurement products(1)                |  | $                | 25,353 |   |                  | $ | 24,725 |              |  | $ | 36,948        |   |  | $            | 38,430 |   |              | $ | 38,646 |              |  | $ | 37,761        |   |  | $ | 38,177 |   |  | $ | 36,493 |  
|Service and other(1)                            |  |                  | 1,860  |   |                  |   | 2,198  |              |  |   | 2,159         |   |  |              | 2,294  |   |              |   | 2,013  |              |  |   | 2,793         |   |  |   | 2,396  |   |  |   | 2,207  |  
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Total revenues                                  |  |                  | 27,213 |   |                  |   | 26,923 |              |  |   | 39,107        |   |  |              | 40,724 |   |              |   | 40,659 |              |  |   | 40,554        |   |  |   | 40,573 |   |  |   | 38,700 |  
|Cost of revenue(1)                              |  |                  | 14,449 |   |                  |   | 12,621 |              |  |   | 18,838        |   |  |              | 17,690 |   |              |   | 19,261 |              |  |   | 17,993        |   |  |   | 17,061 |   |  |   | 16,440 |  
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Gross profit                                    |  |                  | 12,764 |   |                  |   | 14,302 |              |  |   | 20,269        |   |  |              | 23,034 |   |              |   | 21,398 |              |  |   | 22,561        |   |  |   | 23,512 |   |  |   | 22,260 |  
|Selling, general and administrative expenses(1) |  |                  | 10,217 |   |                  |   | 11,352 |              |  |   | 12,839        |   |  |              | 12,583 |   |              |   | 12,970 |              |  |   | 12,681        |   |  |   | 13,278 |   |  |   | 12,372 |  
|Research and development expenses(1)            |  |                  | 6,054  |   |                  |   | 8,185  |              |  |   | 8,809         |   |  |              | 7,803  |   |              |   | 8,699  |              |  |   | 8,371         |   |  |   | 7,914  |   |  |   | 7,591  |  
|Reimbursement from escrow account               |  |                  |       |   |                  |   |       |              |  |   |              |   |  |              |       |   |              |   |       |              |  |   | (240          | ) |  |   |       |   |  |   |       |  
|Impairment of goodwill                          |  |                  |       |   |                  |   |       |              |  |   | 105,771       |   |  |              |       |   |              |   |       |              |  |   |              |   |  |   |       |   |  |   |       |  
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Operating (loss) income                         |  |                  | (3,507 | ) |                  |   | (5,235 | )            |  |   | (107,150      | ) |  |              | 2,648  |   |              |   | (271   | )            |  |   | 1,749         |   |  |   | 2,320  |   |  |   | 2,297  |  
|Other (expense) income, net                     |  |                  | (281   | ) |                  |   | 7,906  |              |  |   | (883          | ) |  |              | (340   | ) |              |   | (774   | )            |  |   | (1,031        | ) |  |   | (1,227 | ) |  |   | (1,295 | )
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|(Loss) income before income taxes               |  |                  | (3,788 | ) |                  |   | 2,671  |              |  |   | (108,033      | ) |  |              | 2,308  |   |              |   | (1,045 | )            |  |   | 718           |   |  |   | 1,093  |   |  |   | 1,002  |  
|(Benefit) provision for income taxes            |  |                  | (391   | ) |                  |   | 663    |              |  |   | (1,237        | ) |  |              | 773    |   |              |   | (235   | )            |  |   | 65            |   |  |   | (112   | ) |  |   | 338    |  
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Net (loss) income                               |  | $                | (3,397 | ) |                  | $ | 2,008  |              |  | $ | (106,796      | ) |  | $            | 1,535  |   |              | $ | (810   | )            |  | $ | 653           |   |  | $ | 1,205  |   |  | $ | 664    |  
|                                                |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Net (loss) income per common share:             |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Basic                                           |  | $                | (0.28  | ) |                  | $ | 0.17   |              |  | $ | (8.93         | ) |  | $            | 0.13   |   |              | $ | (0.07  | )            |  | $ | 0.06          |   |  | $ | 0.10   |   |  | $ | 0.06   |  
|Diluted                                         |  | $                | (0.28  | ) |                  | $ | 0.17   |              |  | $ | (8.93         | ) |  | $            | 0.13   |   |              | $ | (0.07  | )            |  | $ | 0.05          |   |  | $ | 0.10   |   |  | $ | 0.06   |  
|Weighted average number of common shares:       |  |                  |        |   |                  |   |        |              |  |   |               |   |  |              |        |   |              |   |        |              |  |   |               |   |  |   |        |   |  |   |        |  
|Basic                                           |  |                  | 12,131 |   |                  |   | 12,037 |              |  |   | 11,962        |   |  |              | 11,881 |   |              |   | 11,717 |              |  |   | 11,763        |   |  |   | 11,785 |   |  |   | 11,730 |  
|Diluted                                         |  |                  | 12,131 |   |                  |   | 12,098 |              |  |   | 11,962        |   |  |              | 12,077 |   |              |   | 11,717 |              |  |   | 12,032        |   |  |   | 12,056 |   |  |   | 11,913 |  



|(1) | Certain reclassifications have been made to current year quarters and prior year quarters to conform to the June 27, 2009 quarter presentation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

23. Subsequent Events

Management has evaluated
events and transactions subsequent to June 27, 2009 through September 14, 2009, which is the date the financial statements were issued and has determined that no additional disclosures are required.



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Schedule II

LeCROY CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)



|                                              |  |                              |  |                                          |   |  |                  |   |  |                       
|--------------------------------------------- |  | ---------------------------- |  | ---------------------------------------- | - |  | ---------------- | - |  | ----------------------
|Description                                   |  | Balance atBeginningof Period |  | Charged to(Recovery of)Costs andExpenses |   |  | Deductions/Other |   |  | Balance atEnd ofPeriod
|Year ended June 30, 2007:                     |  |                              |  |                                          |   |  |                  |   |  |                       
|Net accounts receivable reserves(a)           |  | 458                          |  | 576                                      |   |  | (152             | ) |  | 882                   
|Allowance for excess and obsolete inventory   |  | 1,629                        |  | 1,823                                    |   |  | (791             | ) |  | 2,661                 
|Valuation allowance on deferred tax assets    |  | 258                          |  | 1,443                                    |   |  | (46              | ) |  | 1,655                 
|Year ended June 28, 2008:                     |  |                              |  |                                          |   |  |                  |   |  |                       
|Net accounts receivable reserves(a)           |  | 882                          |  | (134                                     | ) |  | (6               | ) |  | 742                   
|Allowance for excess and obsolete inventory   |  | 2,661                        |  | 2,418                                    |   |  | (542             | ) |  | 4,537                 
|Valuation allowance on deferred tax assets(b) |  | 1,655                        |  | (18                                      | ) |  | 98               |   |  | 1,735                 
|Year ended June 27, 2009:                     |  |                              |  |                                          |   |  |                  |   |  |                       
|Net accounts receivable reserves(a)           |  | 742                          |  | 3                                        |   |  | (53              | ) |  | 692                   
|Allowance for excess and obsolete inventory   |  | 4,537                        |  | 5,751                                    |   |  | (4,464           | ) |  | 5,824                 
|Valuation allowance on deferred tax assets    |  | 1,735                        |  | 205                                      |   |  |                 |   |  | 1,940                 



|(a) | The change in balances includes uncollectible accounts receivable written-off and change in sales return estimates.
|--- | -------------------------------------------------------------------------------------------------------------------



|(b) | The change in balances (Deductions/Other) includes an increase in the deferred tax valuation allowance due to the adoption of FIN 48 as of July 1, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

The Company, under the
supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures
(as defined in Rule 13a-15(b) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of June 27, 2009, the
Companys disclosure controls and procedures are effective to ensure the information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and (2) information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.

There have not been any changes in the Companys internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) during the quarter ended June 27, 2009 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document and test the Companys internal controls over financial
reporting and include in this Annual Report on Form 10-K a report on managements assessment of the effectiveness of the Companys internal controls over financial reporting. See Managements Report on Internal Control over
Financial Reporting.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act. The Companys internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based upon the guidelines established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results
of this evaluation, our management has concluded that our internal control over financial reporting was effective as of June 27, 2009.



99



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|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

Information with respect to our directors will be contained in the section captioned Structure of the Board of Directors and Compensation of Non-Named Executive Officer Directors of the Definitive Proxy Statement
relating to our 2009 Annual Meeting of Stockholders (2009 Proxy Statement), which is scheduled to be held November 18, 2009. Information regarding our Audit, Compensation, and Nominating/Governance Committees may be found under the
caption Structure of the Board of Directors in our 2009 Proxy Statement. Information with respect to Item 405 disclosure of delinquent Form 3, 4 or 5 filers will be contained in the section captioned Section 16(A) Beneficial
Ownership Reporting Compliance in the 2009 Proxy Statement. Those portions of the 2009 Proxy Statement are incorporated herein by reference. The discussion of our executive officers is included in Item 1, Part I of the 2009 Proxy
Statement under Executive Officers of the Registrant.

The Company has adopted a code of ethics entitled Revised
Principles of Business Conduct Policy, which applies to its officers, directors and employees. A copy is publicly available on our website at: www.lecroy.com/aboutlecroy/investorrelations/governance. This information is also available
by writing to the Company address on the cover of this Annual Report on Form 10-K.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

A description of the
compensation of our executive officers will be contained in the section captioned Executive Officer Compensation, Compensation Committee Report, and Compensation Committee Interlocks and Insider Participation of
the 2009 Proxy Statement. Information about the compensation of our directors appears under Director Compensation and Compensation Committee Report of the 2009 Proxy Statement. That portion of the 2009 Proxy Statement is
incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

A description of the security ownership of certain beneficial owners and management will be contained in the section captioned Security Ownership
of Certain Beneficial Owners and Management, Executive Officer Compensation and Compensation Committee Report of the 2009 Proxy Statement. That portion of the 2009 Proxy Statement is incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ---------------------------------------------------------------------

Certain relationships and related transactions with management will be contained in the section captioned Certain Relationships and Related Transactions in the 2009 Proxy Statement. That portion of the
2009 Proxy Statement is incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

A
description of the principal accountant fees and services, as well as related pre-approval policies, will be contained in the section captioned Independent Registered Public Accounting Firm Fees and Services in the 2009 Proxy Statement.
That portion of the 2009 Proxy Statement is incorporated herein by reference.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

The
following documents are filed as part of this report:



| | (a) (1) | Financial Statements  See Index to Consolidated Financial Statements at Part II, Item 8, of this report.
| | ------- | ---------------------------------------------------------------------------------------------------------

| | (a) (2) | Financial Statement Schedules See Index to Consolidated Financial Statements at Part II, Item 8, of this report (Schedule II).
| | ------- | -------------------------------------------------------------------------------------------------------------------------------

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable, not required or is included
elsewhere in the financial statements or notes thereto.



| | (a) (3) | Exhibits
| | ------- | --------

The following exhibits are incorporated
by reference or are filed with this report, as indicated below:



|              |  |                                                                                                                                                                                                                                                                       |  |               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                           |  | Filed Herewith
|2.1           |  | Agreement and Plan of Merger, dated as of September 1, 2004, among the Registrant, Cobalt Acquisition Corporation and Computer Access Technology Corporation, filed as Exhibit 2.1 to
Form 8-K dated September 2, 2004, incorporated herein by reference.             |  |               
|              |  |                                                                                                                                                                                                                                                                      
|2.2           |  | Agreement and Plan of Merger dated as of September 29, 2006, among the Registrant, 2006 Franklin Congress Corporation, Catalyst Enterprises, Inc., and Nader Salehomoum, filed as Exhibit 2.1
to Form 8-K filed on October 3, 2006, incorporated herein by reference. |  |               
|              |  |                                                                                                                                                                                                                                                                      
|3.1           |  | Certificate of Incorporation of the Registrant as of July 24, 1995, filed as Exhibit 3.1 toForm S-1 Registration Statement No. 33-95620, incorporated herein by reference.                                                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                      
|3.2           |  | Amendment to the Certificate of Designation of the Series A Convertible Redeemable Preferred Stock as of April 9, 2001, filed as Exhibit 10.37 to Form 10-Q for the quarterly period ended
March 31, 2001, incorporated herein by reference.                          |  |               
|              |  |                                                                                                                                                                                                                                                                      
|3.3           |  | By-Laws of the Registrant, as amended, dated August 16, 2000, filed as Exhibit 3.3 toForm 10-Q for the quarterly period ended September 30, 2000, incorporated herein by reference.                                                                                   |  |               
|              |  |                                                                                                                                                                                                                                                                      
|3.4           |  | Second Amendment to the By-Laws of Registrant, adopted on December 10, 2007, filed as Exhibit 3.01 to Form 8-K filed on December 11, 2007.                                                                                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                      
|4.1           |  | Purchase Agreement dated October 5, 2006, between LeCroy Corporation and Cowen and Company, LLC, filed as Exhibit 4.1 to Form 8-K filed on October 12, 2006, incorporated herein by
reference.                                                                        |  |               
|              |  |                                                                                                                                                                                                                                                                      
|4.2           |  | Registration Rights Agreement dated October 12, 2006, between LeCroy Corporation and Cowen and Company, LLC, filed as Exhibit 4.2 to Form 8-K filed on October 12, 2006, incorporated
herein by reference.                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                      
|4.3           |  | Indenture dated October 12, 2006, between LeCroy Corporation, as issuer, and U.S. Bank National Association, as trustee, filed as Exhibit 4.3 to Form 8-K filed on October 12, 2006,
incorporated herein by reference.                                                |  |               
|              |  |                                                                                                                                                                                                                                                                      
|10.1          |  | Credit Agreement, dated as of October 29, 2004, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.14 toForm 8-K
filed on November 2, 2004, incorporated herein by reference.                     |  |               
|              |  |                                                                                                                                                                                                                                                                      
|10.2          |  | LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan filed as Exhibit 10.1 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*                                                                                           |  |               
|              |  |                                                                                                                                                                                                                                                                      
|10.3          |  | Amendment to LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated
herein by reference.*                                                             |  |               



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|              |  |                                                                                                                                                                                                                                                                        |  |               
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                            |  | Filed Herewith
|10.4          |  | LeCroy Corporation 1995 Non-Employee Director Stock Option Plan filed as Exhibit 10.2 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*                                                                                              |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.5          |  | LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*                                                                                                        |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.6          |  | LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, incorporated by reference to Appendix A to the Companys Definitive Proxy Statement filed on September 18,
1998.                                                                                      |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.7          |  | Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated August 16, 2000, filed as Exhibit 10.34 to Form 10-Q for the quarterly period ended
September 30, 2000, incorporated herein by reference.*                                     |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.8          |  | Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated October 25, 2000, filed as Exhibit 10.35 to Form 10-Q for the quarterly period ended
September 30, 2000, incorporated herein by reference.*                                    |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.9          |  | LeCroy Corporations 2003 Stock Incentive Plan, incorporated by reference to Appendix A to the Companys Definitive Proxy Statement filed on September 26, 2003.*                                                                                                      |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.10         |  | Form of Restricted Stock Purchase Agreement, filed as Exhibit 10.41 to Form 10-K for the fiscal year ended June 30, 2002, incorporated herein by reference*                                                                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.11         |  | LeCroy Corporation Amended and Restated 1995 Employee Stock Purchase Plan, incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement filed on September 26,
2003.                                                                         |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.12         |  | LeCroy Corporations 2004 Employment Inducement Stock Plan, filed as Exhibit 10.5 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*                                                                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.13         |  | Computer Access Technology Corporation Special 2000 Stock Option Plan, filed asExhibit 10.7 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*                                                                                                  |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.14         |  | Amendments to Computer Access Technology Corporation 2000 Special Stock Option Plan, filed as Exhibit 10.11 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                  |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.15         |  | Amendment to LeCroy Corporation (CATC) Special 2000 Stock Option Plan, filed asExhibit 10.2 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*                                                                                                 |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.16         |  | Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.8 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*                                                                                                      |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.17         |  | Amendments to Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                       |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.18         |  | Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive Plan, filed as Exhibit 10.3 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*                                                                                                     |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.19         |  | Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*                                                                                                         |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.20         |  | Amendments to Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.13 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                          |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.21         |  | Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan, filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*                                                                                                        |  |               
|              |  |                                                                                                                                                                                                                                                                       
|10.22         |  | Employee Agreement Regarding Inventions, Confidentiality and Non-Competition, dated as of March 28, 1995, between the Registrant and Walter O. LeCroy, Jr., filed as Exhibit 10.13 to Form
S-1 Registration Statement No. 33-95620, incorporated herein by reference.* |  |               



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|              |  |                                                                                                                                                                                                                                                                          |  |               
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                              |  | Filed Herewith
|10.23         |  | Form of Indemnification Agreement, between the Registrant and each of its executive officers and directors filed as Exhibit 10.29 to Form S-1 Registration StatementNo. 33-95620, incorporated
herein by reference.*                                                     |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.24         |  | Employment Agreement, dated January 1, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to Form 10-Q for the quarterly period ended March 31, 2003,
incorporated herein by reference.*                                                        |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.25         |  | Amendment No. 1 to Employment Agreement, dated December 16, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.43 to Form 10-Q for the quarterly period ended
March 31, 2003, incorporated herein by reference.*                                   |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.26         |  | Separation Agreement, dated August 19, 2004, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to Form 10-K for the fiscal year ended June 30, 2004, incorporated
herein by reference.*                                                              |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.27         |  | Form of Separation Agreement between the Registrant and certain of its executive officers, filed as Exhibit 10.51 to Form 10-K for the fiscal year ended June 30, 2004, incorporated herein
by reference.*                                                               |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.28         |  | Employment Agreement, dated September 1, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.1 to Form 8-K filed on November 2,
2004, incorporated herein by reference.*                                             |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.29         |  | Amendment No. 1 to Employment Agreement, dated September 30, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.2 to Form 8-K filed
on November 2, 2004, incorporated herein by reference.*                         |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.30         |  | Services Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Dan Wilnai, filed as Exhibit 10.3 to Form 8-K filed on November 2, 2004, incorporated
herein by reference.*                                                                |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.31         |  | Employment Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Peretz Tzarnotsky, filed as Exhibit 10.4 to Form 8-K filed on November 2, 2004,
incorporated herein by reference.*                                                       |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.32         |  | Amendment No. 2 to Credit Agreement, dated as of May 9, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed asExhibit 10.40 to
Form 10-Q filed on May 10, 2006, incorporated herein by reference.             |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.33         |  | Amendment No. 3 to Credit Agreement, dated as of September 26, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit
10.36 to Form 10-Q filed on November 9, 2006, incorporated herein by reference. |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.34         |  | Amendment No. 4 to Credit Agreement, dated as of September 28, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit
10.37 to Form 10-Q filed on November 9, 2006, incorporated herein by reference. |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.35         |  | Amendment No. 5 to Credit Agreement, dated as of December 29, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.1
to Form 8-K filed on December 29, 2006, incorporated herein by reference.   |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.36         |  | Catalyst Enterprises, Inc. 2005 Stock Option Plan, filed as Exhibit 10.1 to Form 8-K filed on December 22, 2006, incorporated herein by reference.*                                                                                                                      |  |               
|              |  |                                                                                                                                                                                                                                                                         
|10.37         |  | Amendments to Catalyst Enterprises, Inc. 2005 Stock Option Plan filed as Exhibit 10.2 to Form 8-K filed on December 22, 2006, incorporated herein by reference.*                                                                                                         |  |               



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|              |  |                                                                                                                                                                                                                                                                                           |  |               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                               |  | Filed Herewith
|10.38         |  | Credit Agreement, dated as of March 30, 2007, among the Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.1 to
Form 8-K filed on April 4, 2007, incorporated herein by reference.                          |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.39         |  | First Modification and Lender Joinder Agreement, dated as of April 26, 2007, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative
Agent, filed as Exhibit 10.1 to Form 8-K filed on May 2, 2007, incorporated herein by reference. |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.40         |  | Assignment and Acceptance, dated as of April 26, 2007, between Manufacturers and Traders Trust Company and North Fork Bank, filed as Exhibit 10.2 to Form 8-K filed on May 2, 2007,
incorporated herein by reference.                                                                     |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.41         |  | Stock Appreciation Right Plan, filed as Exhibit 10.1 to Form 8-K filed on August 24, 2007, incorporated herein by reference.*                                                                                                                                                             |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.42         |  | Stock Appreciation Right Grant Agreement, filed as Exhibit 10.2 to Form 8-K filed on August 24, 2007, incorporated herein by reference.*                                                                                                                                                  |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.43         |  | Second Modification Agreement, dated as of May 7, 2008, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit
10.45 to Form 10-Q filed on May 8, 2008, incorporated herein by reference.                    |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.44         |  | LeCroy Corporation Amended and Restated 2007 Stock Appreciation Right Plan, filed as Exhibit 10.1 to Form 8-K filed on August 24, 2007, incorporated herein by reference.*                                                                                                                |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.45         |  | LeCroy Corporation 2008 Stock Incentive Plan, filed as Exhibit 10.47 to Form 10-Q filed on November 5, 2008, incorporated herein by reference.*                                                                                                                                           |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|10.46         |  | Third Modification Agreement, dated May 4, 2009, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.45 to Form
10-Q filed on May 7, 2009, incorporated herein by reference.                           |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|14.1          |  | Revised Code of Ethics-Principles of Business Conduct dated December 14, 2005, filed as Exhibit 14.1 to Form 10-K for the fiscal year ended July 1, 2006, incorporated herein by
reference.                                                                                               |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|18.1          |  | Preferability Letter of KPMG LLP, Independent Registered Public Accounting Firm, filed as Exhibit 18.1 to Form 10-K for the fiscal year ended June 28, 2008, incorporated herein by reference.                                                                                            |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|18.2          |  | Preferability Letter of KPMG LLP, Independent Registered Public Accounting Firm, filed as Exhibit 18.2 to Form 10-Q for the fiscal quarter ended September 27, 2008, incorporated herein by
reference.                                                                                    |  |               
|              |  |                                                                                                                                                                                                                                                                                          
|21.1          |  | Subsidiaries of LeCroy Corporation.                                                                                                                                                                                                                                                       |  | X             
|              |  |                                                                                                                                                                                                                                                                                          
|23.1          |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                 |  | X             
|              |  |                                                                                                                                                                                                                                                                                          
|31.1          |  | Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002.                                                                                                                                                                                 |  | X             
|              |  |                                                                                                                                                                                                                                                                                          
|31.2          |  | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002.                                                                                                                                                                                 |  | X             
|              |  |                                                                                                                                                                                                                                                                                          
|32.1          |  | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                          |  | X             
|              |  |                                                                                                                                                                                                                                                                                          
|32.2          |  | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                          |  | X             



|* | Indicates management contract or compensatory plan, contract or arrangement.
|- | ----------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.



|                         |  |  |  |                    |  |                         |  |                                            
|------------------------ |  |  |  | ------------------ |  | ----------------------- |  | -------------------------------------------
|                         |  |  |  | LeCroy CORPORATION
|                         |  |  | 
|Date: September 14, 2009 |  |  |  | By                 |  | /s/    SEAN B.
OCONNOR
|                         |  |  |  |                    |  |                         |  | Sean B. OConnor                           
|                         |  |  |  |                    |  |                         |  | Vice President and Chief Financial Officer,
|                         |  |  |  |                    |  |                         |  | Secretary and Treasurer                    

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                     |  |                                                                                                    |  |                   
|---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ------------------
|Signature                                            |  | Title                                                                                              |  | Date              
|                                                     |  |                                                                                                   
|/s/    ALLYN C. WOODWARD,
JR. Allyn C. Woodward, Jr. |  | Chairman of the Board of Directors                                                                 |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    THOMAS H.
RESLEWIC Thomas H. Reslewic         |  | President, Chief Executive Officer and Director (Principal Executive Officer)                      |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    SEAN B.
OCONNOR Sean B. OConnor             |  | Vice President and Chief Financial Officer, Secretary and Treasurer (Principal Accounting Officer) |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    ROBERT E.
ANDERSON Robert E. Anderson         |  | Director                                                                                           |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    ROBERT W.
CHLEBEK Robert W. Chlebek           |  | Director                                                                                           |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    WALTER O. LECROY,
JR. Walter O. LeCroy, Jr.   |  | Director                                                                                           |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    NORMAN R. ROBERTSON Norman R. Robertson       |  | Director                                                                                           |  | September 14, 2009
|                                                     |  |                                                                                                   
|/s/    WILLIAM G.
SCHEERER William G. Scheerer       |  | Director                                                                                           |  | September 14, 2009



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