<PAGE>
 
================================================================================
 
                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )
        
Filed by the Registrant [X]

Filed by a Party other than the Registrant [_] 

Check the appropriate box:

[_]  Preliminary Proxy Statement        [_]  Confidential, for Use of the 
                                             Commission Only (as permitted by
                                             Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement 

[_]  Definitive Additional Materials 

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

                          LAM RESEARCH CORPORATION
- --------------------------------------------------------------------------------
              (Name of Registrant as Specified In Its Charter)


- --------------------------------------------------------------------------------
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

   
     (1) Title of each class of securities to which transaction applies:

     -------------------------------------------------------------------------


     (2) Aggregate number of securities to which transaction applies:

     -------------------------------------------------------------------------


     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
         the filing fee is calculated and state how it was determined):

     -------------------------------------------------------------------------
      

     (4) Proposed maximum aggregate value of transaction:

     -------------------------------------------------------------------------


     (5) Total fee paid:

     -------------------------------------------------------------------------

[_]  Fee paid previously with preliminary materials.
     
[_]  Check box if any part of the fee is offset as provided by Exchange
     Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.
     
     (1) Amount Previously Paid:
 
     -------------------------------------------------------------------------


     (2) Form, Schedule or Registration Statement No.:

     -------------------------------------------------------------------------


     (3) Filing Party:
      
     -------------------------------------------------------------------------


     (4) Date Filed:

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Notes:




<PAGE>
 
LOGO
 
                           LAM RESEARCH CORPORATION
 
                               ----------------
 

                   NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
                          TO BE HELD NOVEMBER 7, 1997
 
                               ----------------
 
To the Stockholders:
 
  NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of Lam
Research Corporation, a Delaware corporation (the "Company"), will be held on
Friday, November 7, 1997, 11:00 a.m., local time, at the principal offices of
the Company at 4650 Cushing Parkway, Fremont, California 94538, for the
following purposes:
 
  1. To elect directors to serve for the ensuing year and until their
     successors are elected.
 
  2. To approve an amendment of the Company's 1984 Employee Stock Purchase
     Plan (the "1984 Purchase Plan") to increase the number of shares
     reserved for issuance thereunder by 350,000 shares to 2,037,500.
 
  3. To ratify the appointment of Ernst & Young LLP as independent auditors
     of the Company for the fiscal year ending June 30, 1998.
 
  4. To transact such other business as may properly come before the meeting
     or any adjournment thereof.
 
  The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
 
  Only stockholders of record at the close of business on September 9, 1997
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
 
  All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
 
                                          By Order of the Board of Directors,

                                          /s/Richard H. Lovgren
                                          Richard H. Lovgren
                                          Secretary
 
Fremont, California
S
eptember 26, 1997
 
 
                            YOUR VOTE IS IMPORTANT
 IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED
 TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
 AND RETURN IT IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE NEED BE
 AFFIXED IF MAILED IN THE UNITED STATES).

<PAGE>
 
                            LAM RESEARCH CORPORATION
 
                               ----------------
 
                                PROXY STATEMENT
                                      FOR
                         ANNUAL MEETING OF STOCKHOLDERS
                          TO BE HELD NOVEMBER 7, 1997
 
                               TABLE OF CONTENTS
 

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Information Concerning Solicitation and Voting.............................   1

Proposal No. 1--Election of Directors......................................   2
Security Ownership of Certain Beneficial Owners and Management.............   5
Director Compensation......................................................   6
Executive Compensation and Other Information...............................   7
Certain Relationships and Related Transactions.............................  14
Compensation Committee Interlocks and Insider Participation................  14
Report of the Compensation Committee.......................................  14
Comparative Stock Performance..............................................  17
P
roposal No. 2--Amendment of the 1984 Employee Stock Purchase Plan.........  18
P
roposal No. 3--Ratification of Appointment of Independent Auditors........  22

Compliance with Section 16(a) of the Securities Exchange Act...............  22
Other Matters..............................................................  23
</TABLE>


<PAGE>
 
 
                          LAM RESEARCH CORPORATION
 
                               ----------------
 
            PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
 
                INFORMATION CONCERNING SOLICITATION AND VOTING
 
GENERAL
 
  The enclosed proxy is solicited on behalf of Lam Research Corporation, a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held Friday, November 7, 1997 at
11:00 a.m., local time, or at any adjournment thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
The Annual Meeting will be held at the principal executive offices of the
Company at 4650 Cushing Parkway, Fremont, California 94538. The Company's
telephone number at that location is (510) 659-0200.
 
  These proxy solicitation materials will be mailed on or about October 1,
1997 to all stockholders entitled to vote at the meeting. A copy of the
Company's 1997 Annual Report to Stockholders accompanies this Proxy Statement.
 
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
 
  Stockholders of record at the close of business on September 9, 1997 are
entitled to receive notice of and to vote at the Annual Meeting. At the record
date, 36,612,676 shares of the Company's Common Stock were issued and
outstanding.
 
REVOCABILITY OF PROXIES
 
  Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. Attending the Annual
Meeting in and of itself may not constitute a revocation of a proxy.
 
VOTING AND SOLICITATION
 
  Every stockholder voting in the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected (seven at this meeting) multiplied by the
number of shares held by such stockholder, or distribute the stockholder's
votes on the same principle among as many candidates as the stockholder deems
appropriate, provided that votes cannot be cast for more than seven
candidates. However, no stockholder shall be entitled to cumulate votes for a
candidate unless the candidate's name has been placed in nomination prior to
the voting. On all other matters, each share has one vote.
 
  Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector"). The Inspector will also
determine whether or not a quorum is present. The seven candidates for
election as directors at the Annual Meeting who receive the highest number of
affirmative votes will be elected. The amendment of the 1984 Purchase Plan, as
defined below, will require the affirmative vote of a majority of the shares
of the Company's Common Stock present or represented and entitled to vote at
the Annual Meeting. The ratification of the independent auditors for the
Company for the current year will require the affirmative vote of a majority
of the shares of the Company's Common Stock present or represented and
entitled to vote at the Annual Meeting.
 
  In general, Delaware law also provides that a quorum consists of a majority
of the shares entitled to vote and present or represented by proxy at the
meeting. The Inspector will treat abstentions as shares that are present or
represented and entitled to vote for purposes of determining the presence of a
quorum but will not treat abstentions as votes in favor of approving any
matter submitted to the stockholders for a vote. Thus, abstentions have the
same effect as negative votes. Any proxy which is properly dated, executed and
returned using the form

<PAGE>
 
of proxy enclosed will be voted at the Annual Meeting in accordance with the
instructions of the stockholder. If no specific instructions are given, the
shares will be voted for the election of directors, for approval of the
amendment of the 1984 Purchase Plan, for ratification of the appointment of
the designated independent auditors and, with respect to any other matters
that may come before the meeting, as the proxy holders deem advisable in
accordance with their best judgment. If a broker indicates on the enclosed
proxy or its substitute that it does not have discretionary authority as to
certain shares to vote on a particular matter ("broker non-votes"), those
shares will not be considered as present or represented with respect to that
matter. Shares as to which proxy authority has been withheld with respect to
any matter will not be considered as present or represented with respect to
that matter.
 
  The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of Beacon Hill Partners, Inc. to aid in the solicitation
of proxies from bankers, bank nominees and other institutional owners. The
Company estimates that it will pay Beacon Hill a fee of approximately $5,500
for its services and will reimburse Beacon Hill for certain out-of-pocket
expenses. The Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
 
STOCKHOLDER PROPOSALS AND NOMINATIONS
 
  Stockholders of the Company may from time to time submit proposals which
they believe should be voted on at the Annual Meeting or nominate persons for
election to the Board of Directors. In accordance with the Company's bylaws,
any such proposal or nomination must be submitted in writing to the Secretary
of the Company not less than 60 days nor more than 90 days prior to the date
of the Annual Meeting. The submission must include certain specified
information concerning the proposal or nominee, as the case may be, and
information about the proponent and the proponent's ownership of Common Stock
of the Company. Proposals or nominations that do not meet these requirements
will not be entertained at the Annual Meeting. The Secretary should be
contacted in writing at the address on the first page of this Proxy Statement
to make any submission or to obtain additional information as to the proper
form and content of submissions.
 
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S 1998 PROXY STATEMENT
 
  Pursuant to applicable rules under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), some stockholder proposals may be eligible for
inclusion in the Company's 1998 Proxy Statement. Any such proposal must be
received by the Company no later than May 19, 1998. Stockholders interested in
submitting such a proposal are advised to contact counsel familiar with the
detailed requirements of the applicable securities rules.
 
 
                               PROPOSAL NO. 1
                             ELECTION OF DIRECTORS
 
NOMINEES
 
  A board of seven directors is to be elected at the Annual Meeting. The
bylaws of the Company provide that the number of directors shall be fixed at
seven. The proxies cannot be voted for a greater number of persons than the
seven nominees named below. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the Company's seven nominees named
below, all of whom are presently directors of the Company. If any nominee of
the Company should decline or be unable to serve as a director at the time of
the Annual Meeting, the proxies will be voted for any substitute nominee who
shall be designated by the present Board of Directors to fill the vacancy. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of
the nominees listed below as possible, and in such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company
is not aware of any nominee
 
                                       2

<PAGE>
 
who will be unable or will decline to serve as a director. The term of office
of each person elected as a director will continue until the next Annual
Meeting or until a successor has been elected and qualified.
 
 
               THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
                        EACH OF THE SEVEN NOMINEES FOR
                           DIRECTOR SET FORTH BELOW.
 
  The following table sets forth certain information concerning the nominees
which is based on data furnished by them.
 

<TABLE>
<CAPTION>
          NOMINEES              DIRECTOR   PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
        FOR DIRECTOR        AGE  SINCE                DURING PAST FIVE YEARS
        ------------        --- --------   --------------------------------------------
 <C>                        <C> <C>      <S>
 Roger D. Emerick..........  58   1982   Mr. Emerick has been Chairman of the Board since
                                         1984. From July 1982 to August 1997, Mr. Emerick
                                         was Chief Executive Officer of the Company. Mr.
                                         Emerick is a Director of Electroglas, Inc.,
                                         Brooks Automation, Inc., and Semiconductor
                                         Equipment and Materials International (SEMI).
 James W. Bagley...........  58   1997   Mr. Bagley has been Chief Executive Officer and
                                         a director of the Company since August 6, 1997,
                                         the day following consummation of the merger
                                         between OnTrak Systems, Inc., a Delaware
                                         corporation ("OnTrak") and the Company (the
                                         "Merger"). He is a director of KLA-Tencor
                                         Corporation, Teradyne, Inc., Kulicke & Soffe
                                         Industries, Inc. and Micron Technology, Inc.
                                         From June 1996 to August 1997, Mr. Bagley served
                                         as Chairman of the Board and Chief Executive
                                         Officer of OnTrak. Prior to joining OnTrak, Mr.
                                         Bagley was employed by Applied Materials, Inc.
                                         for 15 years in various senior management
                                         positions, most recently as Chief Operating
                                         Officer and Vice Chairman of the Board.
 David G. Arscott(1,2,3)...  53   1980   Mr. Arscott was Chairman of the Board from 1982-
                                         1984. He is currently and has been since 1989
                                         General Partner of Compass Management Partners.
                                         From 1978 to 1989, Mr. Arscott was a Managing
                                         General Partner of Arscott, Norton & Associates,
                                         a venture capital firm.
 Richard J. Elkus, Jr.(1)..  62   1997   Mr. Elkus has been a director of the Company
                                         since August 6, 1997, the day following
                                         consummation of the Merger. He is currently and
                                         has been since 1996 Co-Chairman of Voyan
                                         Technology and is currently a director of KLA-
                                         Tencor Corporation. From February 1994 until
                                         consummation of the merger between Tencor
                                         Instruments, Inc. ("Tencor") and KLA
                                         Instruments, Inc. in April 1997, Mr. Elkus was
                                         Vice Chairman of the Board of Tencor. From
                                         February 1994 to September 1996, Mr. Elkus was
                                         Executive Vice President of Tencor and was one
                                         of the founders of Prometrix Corporation which
                                         was acquired by Tencor in February 1994. Mr.
                                         Elkus was Chairman of the Board and Chief
                                         Executive Officer of Prometrix Corporation from
                                         1983 until February 1994.
</TABLE>

 
                                       3

<PAGE>
 

<TABLE>
<CAPTION>
        NOMINEES             DIRECTOR     PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
      FOR DIRECTOR       AGE  SINCE                  DURING PAST FIVE YEARS
      ------------       --- --------     --------------------------------------------
 <C>                     <C> <C>      <S>
 Jack R. Harris(1,2,3)..  55   1982   Mr. Harris is currently and has been since 1986
                                      Chairman, Chief Executive Officer, President and
                                      Chief Financial Officer of Optical Specialties,
                                      Inc. Mr. Harris is a director of ILEX.
 Grant M. Inman(1,2)....  55   1981   Mr. Inman is currently and has been since 1985 a
                                      General Partner of Inman & Bowman. Mr. Inman is a
                                      director of Paychex, Inc. and Insite Vision. Mr.
                                      Inman is a trustee of the University of California,
                                      Berkeley Foundation and is also a trustee of the
                                      University of Oregon Foundation.
 Osamu Kano(1)..........  60   1987   Mr. Kano has been Chairman of Lam Research Co.,
                                      Ltd. in Japan since 1991. From 1987 to June 1991,
                                      Mr. Kano served as the Company's Senior Vice
                                      President of Japan Operations. He is currently and
                                      has been since 1991 President of Innoquest
                                      Corporation. Mr. Kano is a director of Optical
                                      Specialties, Inc., Innotech Corporation, and XMR,
                                      Inc.
</TABLE>

- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Stock Committee.
 
  There is no family relationship between any of the foregoing nominees or
between any of such nominees and any of the Company's executive officers.
 
BOARD MEETINGS AND COMMITTEES
 
  The Board of Directors of the Company held a total of eight regularly
scheduled or special meetings during the fiscal year ended June 30, 1997. The
Board of Directors has an Audit Committee, a Compensation Committee and a
Stock Committee. There is no Nominating Committee or committee performing the
functions of a nominating committee. Except for Mr. Bagley and Mr. Elkus, who
became members of the Board on August 6, 1997, each incumbent director
attended all the meetings of the Board of Directors held during fiscal 1997,
and each incumbent director attended all the meetings of the committee or
committees on which he served during fiscal 1997.
 
  The Audit Committee, which consisted of Messrs. Arscott, Harris, Inman and
Kano, all non-employee directors, held three meetings during fiscal 1997. This
committee recommends to the Board for its approval and for ratification by the
stockholders the engagement of the Company's independent auditors to serve the
following fiscal year, reviews the scope of the audit, considers comments made
by the independent auditors with respect to accounting procedures and internal
controls and the consideration given thereto by the Company's management and
reviews the internal accounting procedures and controls with the Company's
financial and accounting staff. Mr. Elkus became a member of the Audit
Committee on August 6, 1997, the day following consummation of the Merger.
 
  The Compensation Committee, which consisted of Messrs. Arscott, Harris and
Inman, held eight meetings and acted by Unanimous Written Consent once during
fiscal 1997. This committee recommends salaries, incentives and other forms of
compensation for directors, officers and other employees of the Company,
administers the Company's various incentive compensation and benefit plans and
recommends policies relating to such compensation and benefit plans.
 
  The Stock Committee, which consisted of Messrs. Arscott and Harris, held two
meetings during fiscal 1997. This committee approves grants of stock options,
restricted stock, deferred stock and performance share awards to officers and
other employees of the Company.
 
                                       4

<PAGE>
 

        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The table below sets forth the beneficial ownership of shares of Common
Stock of the Company by: (i) each person or entity who, based on the
information provided to the Company by such persons or entities, owned
beneficially more than five percent of the Company's Common Stock ("5%
stockholder") and the address of each such person or entity; (ii) each
director of the Company; (iii) each named executive officer ("named
executive") described in the section of this proxy statement captioned
"Executive Compensation and Other Information;" and (iv) all current directors
and executive officers as a group. With the exception of 5% stockholders, the
information provided below refers to holdings as of September 9, 1997.
 

<TABLE>
<CAPTION>
 
                                                     SHARES       APPROXIMATE
         NAME OF PERSON OR ENTITY OR GROUP             OWNED      PERCENT OWNED
         ---------------------------------           ---------    -------------
<S>                                                  <C>          <C>
FMR Corp............................................ 3,913,100(1)     12.84(5)
 82 Devonshire Street
 Boston, MA 02109
The Capital Group Companies, Inc. .................. 3,137,200(2)      10.2(5)
 333 Hope Street, 52nd Floor
 Los Angeles, CA 90071
Roger D. Emerick....................................   285,635(3)         *
James W. Bagley.....................................   684,000(3)      1.87
David G. Arscott....................................    73,260(3)         *
Richard J. Elkus, Jr................................    14,940(3)         *
Jack R. Harris......................................    36,000(3)         *
Grant M. Inman......................................    53,633(3)         *
Osamu Kano..........................................    56,367(3)         *
Hsui-Sheng (Way) Tu.................................    74,195(3)         *
Thomas O. Yep.......................................    57,980(3)         *
Raymond L. Degner...................................    61,480(3)         *
Henk J. Evenhuis....................................    37,916(3)         *
Rick P. Friedman....................................    23,051(3)         *
All current directors and executive officers
 as a group (17 persons)............................ 1,540,992(4)      4.21
</TABLE>

- --------
 *  Less than 1%.
(1) This information is based on Amendment No. 1 to the statement on Schedule
    13G filed with the Securities and Exchange Commission ("SEC") on February
    13, 1997, by FMR Corp., a parent holding company ("FMR"), which has sole
    voting power with respect to 120,200 shares and sole dispositive power as
    to all 3,913,100 shares. A wholly owned subsidiary of FMR Corp., Fidelity
    Management & Research Company ("Fidelity"), is a registered investment
    adviser to various investment companies and as a result is the beneficial
    owner of 3,567,600 of the shares reported (11.7% of the outstanding Common
    Stock as of the date reported). One of the investment companies, Fidelity
    Advisor Growth Opportunities Portfolio ("Fidelity Growth"), is the
    beneficial owner of 1,693,100 of the shares reported (5.55% of the
    outstanding Common Stock as of the date reported). The principal business
    office of Fidelity and Fidelity Growth is 82 Devonshire Street, Boston,
    Massachusetts 02109.
(2) This information is based on the joint statement on Schedule 13G filed
    with the SEC on July 9, 1997, by The Capital Group Companies, Inc.
    ("Capital Group") which has sole voting power for 2,477,200 shares
 
                                       5

<PAGE>
 
    and sole dispositive power with respect to 3,137,200 shares, and Capital
    Guardian Trust Company ("Capital Guardian"), a bank and a wholly owned
    subsidiary of the Capital Group. The number of shares shown for Capital
    Group includes 2,585,000 shares beneficially owned by Capital Guardian,
    which reports that it has sole voting power with respect to 1,925,000 shares
    and sole dispositive power with respect to 2,585,000 shares. Capital Group
    is deemed to be the beneficial owner of shares held by various institutional
    accounts over which various operating subsidiaries of Capital Group,
    including Capital Guardian, exercise investment discretion. The principal
    business office of Capital Guardian is 333 Hope Street, 52nd Floor, Los
    Angeles, California 90071.
(3) Includes shares subject to outstanding options that are currently
    exercisable or exercisable within 60 days after September 9, 1997 by Mr.
    Emerick, Mr. Bagley, Mr. Arscott, Mr. Elkus, Mr. Harris, Mr. Inman, Mr.
    Kano, Mr. Tu, Dr. Yep, Dr. Degner, Mr. Evenhuis and Mr. Friedman for
    269,970, 664,000, 30,000, 4,150, 30,000, 30,000, 30,000, 62,504, 53,424,
    46,690, 30,549 and 20,574 shares, respectively.
(4) Includes 684,279 shares subject to outstanding options that are currently
    exercisable or exercisable within 60 days after September 9, 1997.
(5) These are the percentages provided on the Schedule 13G filed by each 5%
    stockholder as of the date of filing.
 
                             DIRECTOR COMPENSATION
 
  Directors who are not employees of the Company receive annual retainers of
$15,000; meeting fees of $1,000 for each Board of Directors meeting attended,
plus reimbursement for reasonable travel expenses; fees of $500 for each
telephonic Board meeting (aggregate fees for Board meetings not to exceed
$8,000); committee meeting fees of $500 per meeting, plus reimbursement for
reasonable travel expenses; and fees of $250 for each telephonic committee
meeting (no aggregate fee limit for committee meetings). In addition, each
person who is a non-employee director is automatically granted on the first
business day of each calendar year an option to purchase 6,000 shares of the
Company's Common Stock under the Company's various stock option plans at a
price per share equal to the fair market value of one share of the Company's
Common Stock on that date. Each option has a term of ten years and is
immediately exercisable. Unexercised options cease to be exercisable
immediately upon termination of director status.
 
                                       6

<PAGE>
 

                 EXECUTIVE COMPENSATION AND OTHER INFORMATION
 
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
 
  The following table provides, for the three fiscal years ended June 30,
1997, 1996 and 1995, certain summary information concerning compensation paid
or accrued by the Company to or on behalf of the Company's Chief Executive
Officer, each of the four other most highly compensated executive officers of
the Company (determined at the end of the last fiscal year) and one former
executive officer who was not serving as an executive officer at the end of
fiscal 1997.
 
                          SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                  LONG TERM
                                ANNUAL COMPENSATION             COMPENSATION
                             ----------------------------   -----------------------
                                                  OTHER     RESTRICTED   NUMBER OF
                                                 ANNUAL       STOCK      SECURITIES    ALL OTHER
       NAME AND              SALARY      BONUS   COMPEN-     AWARD(S)    UNDERLYING   COMPENSATION
  PRINCIPAL POSITION    YEAR ($)(1)     ($)(1)  SATION($)     ($)(8)     OPTIONS(#)       ($)
  ------------------    ---- -------    ------- ---------   ----------   ----------   ------------
<S>                     <C>  <C>        <C>     <C>         <C>          <C>          <C>
Roger D. Emerick....... 1997 721,878(2) 109,838    2,587(3)                15,000       539,175(18)(19)
 Chairman of the Board  1996 640,758(2) 579,853   33,675(4)   99,494(9)    60,000(15)   108,106(18)
  and former Chief      1995 577,105(2) 387,965      594(3)                37,400        81,666(18)
  Executive Officer    
Hsui-Sheng (Way) Tu.... 1997 424,008     51,941    2,270(3)                20,000         3,023(20)
 President              1996 273,926    205,683    2,033(3)   47,076(10)   32,000(16)     3,095(20)
                        1995 190,772    133,745      --                    22,600         3,102(20)
Thomas O. Yep.......... 1997 276,306     36,965    2,440(3)                 8,000         6,191(21)
 Senior Vice President  1996 241,280    173,734    3,663(3)   31,193(11)   28,000(16)     6,659(21)
                        1995 225,582    107,935      753(3)                22,600         7,062(21)
Raymond L. Degner...... 1997 276,266     36,960    1,937(3)                 5,000         7,429(22)
 Senior Vice President  1996 269,658    192,777    2,899(3)   33,495(12)   22,000(16)     7,999(22)
                        1995 234,214    121,018   38,959(5)                22,600         8,131(22)
Henk J. Evenhuis....... 1997 262,392     34,766   55,459(6)                 5,000         7,079(23)
 Retired Executive Vice 1996 249,891    183,463    1,860(3)   31,515(13)   22,000(16)     7,197(23)
  President, Finance    1995 237,904    124,442      410(3)                22,600         6,646(23)
  and Chief Financial
  Officer
Rick P. Friedman....... 1997 254,384     28,054      114(3)                13,000         6,699(24)
 Vice President, World- 1996 162,380     33,735  150,086(7)   20,964(14)   35,000(17)     5,771(24)
  wide Sales and        1995  99,998     11,058  145,389(7)                 7,600         3,792(24)
  Service
</TABLE>

- --------
(1) Includes amounts earned but deferred at the election of executive officers
    under the Company's Elective Deferred Compensation Plan and the Company's
    Employee Savings Plus Plan, a qualified defined contribution plan under
    Section 401(k) of the Internal Revenue Code of 1986, as amended.
(2) Includes $100,000 in contributions paid by the Company on behalf of Mr.
    Emerick pursuant to a Deferred Compensation Agreement between Mr. Emerick
    and the Company.
(3) Includes interest earned on deferred compensation to the extent that the
    interest rate exceeded 120% of the applicable federal long-term rate.
(4) The Company grants each employees on his or her fifth anniversary with the
    Company a bonus of six weeks paid time off, six weeks pay in lieu of the
    time off or a combination of the foregoing. This amount includes $31,198
    that was paid by the Company in lieu of six weeks paid time off ("five-
    year bonus buy-out") and $2,477 in interest earned on deferred
    compensation to the extent that the interest rate exceeded 120% of the
    applicable federal long-term rate.
(5) Includes $20,916 paid by the Company for five-year bonus buy-out and $658
    in interest earned on deferred compensation to the extent that the
    interest rate exceeded 120% of the applicable federal long-term rate.
(6) Mr. Evenhuis retired from his position as Executive Vice President,
    Finance, and Chief Financial Officer effective April 30, 1997. See the
    discussion below under "Employment and Termination Agreements, Change of
    Control Arrangements and Retirement Benefits." Includes $54,098 paid by
    the Company for five-year bonus buy-out and $1,361 in interest earned on
    deferred compensation to the extent that the interest rate exceeded 120%
    of the applicable federal long-term rate.
(7) Includes commissions received on sales of the Company's products and
    services.
(8) No dividends are paid on restricted stock.
(9) The dollar value of the restricted stock is based on the closing sales
    price of 1,503 shares of Common Stock on March 29, 1996 ($34.88) and 1,815
    shares of Common Stock on June 28, 1996 ($25.94).
 
                                       7

<PAGE>
 
(10) The dollar value of the restricted stock is based on the closing sales
     price of 711 shares of Common Stock on March 29, 1996 ($34.88) and 859
     shares of Common Stock on June 28, 1996 ($25.94).
(11) The dollar value of the restricted stock is based on the closing sales
     price of 440 shares of Common Stock on March 29, 1996 ($34.88) and 611
     shares of Common Stock on June 28, 1996 ($25.94).
(12) The dollar value of the restricted stock is based on the closing sales
     price of 506 shares of Common Stock on March 29, 1996 ($34.88) and 611
     shares of Common Stock on June 28, 1996 ($25.94).
(13) The dollar value of the restricted stock is based on the closing sales
     price of 476 shares of Common Stock on March 29, 1996 ($34.88) and 575
     shares of Common Stock on June 28, 1996 ($25.94).
(14) The dollar value of the restricted stock is based on the closing sales
     price of 259 shares of Common Stock on March 29, 1996 ($34.88) and 460
     shares of Common Stock on June 28, 1996 ($25.94).
(15) Includes 30,000 stock options that were repriced on January 15, 1996 to
     $33.625 per share.
(16) Includes 11,000 stock options that were repriced on January 15, 1996 to
     $33.625 per share.
(17) Includes 14,500 stock options that were repriced on January 15, 1996 to
     $33.625 per share.
(18) Includes $125,000 for 1997, $100,000 for 1996 and $75,000 for 1995, under
     the terms of a Deferred Compensation Agreement between the Company and
     Mr. Emerick. Mr. Emerick may defer compensation of up to $500,000 over
     ten years, and the Company will match the first $50,000 of Mr. Emerick's
     deferrals in any year at the rate of 50%. No matching contribution is
     made for any year in which the Company is not profitable. The amounts
     paid to Mr. Emerick are based on the Company's performance and his
     deferrals for the preceding fiscal year. The Company's 50% matching
     contribution, if any, is cumulative only for profitable years based on
     aggregate contributions by Mr. Emerick and continues annually through the
     tenth year of the Agreement. Also includes the Company's matching
     contributions to the Company's 401(k) plan in the amounts of $5,359 for
     1997, $4,056 for 1996 and $2,310 for 1995; and term life insurance
     premiums in the amounts of $3,816 for 1997, $4,050 for 1996 and $4,356
     for 1995.
(19) Includes $405,000 that the Company paid into Mr. Emerick's elective
     deferred compensation plan as reimbursement for the value of the stock
     options forfeited as a result of Mr. Emerick's resignation from the Board
     of Directors of Integrated Process Equipment Corporation ("IPEC").
(20) Includes the Company's matching contributions to the Company's 401(k)
     plan in the amounts of $2,375 for 1997, $2,375 for 1996 and $2,310 for
     1995; and $648, $720 and $792 for term life insurance premiums for 1997,
     1996 and 1995, respectively.
(21) Includes the Company's matching contributions to the Company's 401(k)
     plan in the amounts of $2,375 for 1997, $2,375 for 1996 and $2,310 for
     1995; and $3,816, $4,284 and $4,752 for term life insurance premiums for
     1997, 1996 and 1995, respectively.
(22) Includes the Company's matching contributions to the Company's 401(k)
     plan in the amounts of $4,909 for 1997, $5,155 for 1996 and $4,963 for
     1995; and $2,520, $2,844 and $3,168 for term life insurance premiums for
     1997, 1996 and 1995, respectively.
(23) Includes the Company's matching contributions to the Company's 401(k)
     plan in the amounts of $4,875 for 1997, $4,828 for 1996 and $4,226 for
     1995; and $2,204, $2,369 and $2,420 for term life insurance premiums for
     1997, 1996 and 1995, respectively.
(24) Includes the Company's matching contributions to the Company's 401(k)
     plan in the amounts of $5,691 for 1997, $4,871 for 1996 and $3,000 for
     1995; and $1,008, $900 and $792 for term life insurance premiums for
     1997, 1996 and 1995, respectively.
 
STOCK PLANS
 
 1984 Incentive Stock Option Plan and 1991 Incentive Stock Option Plan.
 
  The Company's Amended 1984 Incentive Stock Option Plan (the "1984 Option
Plan") and the Amended 1991 Incentive Stock Option Plan (the "1991 Option
Plan") (collectively, the "Option Plans") permit the grant of both "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), as well as nonstatutory stock options. Only
employees (including employees of any company in which the Company owns
directly or indirectly at least 50 percent of the voting shares) may receive
incentive stock options, while employees, paid consultants and, in certain
limited instances, outside directors, may receive nonstatutory options.
 
  A total of 7,147,781 shares of Common Stock have been reserved for issuance
under the Option Plans. As of September 9, 1997, options to purchase 4,024,678
shares had been exercised, options to purchase 2,930,292 shares were
outstanding at an average exercise price of $28.56 per share, and 167,415
shares remained available for future grant under the Option Plans.
 
  During fiscal 1997, the Company granted options to purchase 167,000 shares
to all current executive officers as a group (12 persons) at an average
exercise price of $27.65, options to purchase 24,000 shares to all current
directors who are not executive officers as a group (four persons) at an
average exercise price of $27.69 and options to purchase 749,915 shares to all
current employees as a group (excluding executive officers and directors) at
an average exercise price of $25.13.
 
                                       8

<PAGE>
 
 1984 Employee Stock Purchase Plan.
 
  The 1984 Purchase Plan is implemented by periodic six-month offerings. As of
September 9, 1997, approximately 1,348,873 shares had been issued under the
1984 Purchase Plan. The 1984 Purchase Plan is administered by the Board of
Directors of the Company or by a committee appointed by the Board. Employees
of the Company or any majority owned subsidiary, including officers, are
eligible to participate if they are customarily employed by the Company for at
least 20 hours per week and more than five months per calendar year. The 1984
Purchase Plan currently permits eligible employees to purchase Common Stock
through payroll deductions (which may not exceed ten percent of an employee's
base compensation) at 85% of the fair market value thereof at the beginning or
at the end of each offering period, whichever is lower. Employees may reduce
or end their participation in an offering at any time during the offering
period, and participation ends automatically on termination of employment with
the Company.
 
 Performance-Based Restricted Stock Plan.
 
  In 1995, the Company adopted a Performance-Based Restricted Stock Plan (the
"Restricted Stock Plan") which was implemented on January 1, 1996. As of
September 9, 1997, approximately 39,624 shares (of the 150,000 shares reserved
for issuance) had been issued under the Restricted Stock Plan (of which 12,252
shares were subsequently repurchased). The Restricted Stock Plan is
administered by the Board of Directors or by a committee appointed by the
Board and is designed to reward executives based on achievement of certain
predetermined goals, which include overall corporate results, business unit
performance, and certain qualitative factors such as organization and
management development. Such goals are formula-based so that 80% of the award
is made on performance against financial objectives. Once performance has been
measured against objectives, a stock award is granted based on the fair market
value of the Company's stock at the close of the quarter. The award vests 100%
at the end of five years. If an executive leaves the Company during the five-
year period following the date of award, any unvested shares are forfeited.
All unvested shares vest upon an executive's retirement, and the administrator
of the Restricted Stock Plan may accelerate the vesting of all or a portion of
the shares upon termination of an executive's employment due to death or
disability.
 
 1997 Stock Incentive Plan.
 
  On August 5, 1997, the stockholders approved the 1997 Stock Incentive Plan
(the "1997 Stock Plan"). The 1997 Stock Plan provides for the grant of
incentive stock options, nonstatutory stock options, restricted stock,
deferred stock and performance share awards to participating officers,
directors, employees, consultants and advisors of the Company and its
subsidiaries.
 
  Initially, a total of 3,000,000 shares of Common Stock were reserved for
issuance under the 1997 Stock Plan. The number of shares to be issued will
automatically increase each calendar quarter subject to certain provisions and
restrictions and shall in no event exceed 5,000,000 shares. As of September 9,
1997, options to purchase 786,700 shares were outstanding at an average
exercise price of $55.45 per share. No restricted stock, deferred stock or
performance share awards had been granted under the 1997 Stock Plan as of
September 9, 1997, and 2,213,300 shares remained available for future grant.
 
 OnTrak Stock Options and Employee Stock Purchase Plan Rights
 
  Pursuant to the Merger, a total of 1,828,700 shares of Common Stock were
reserved for issuance on the exercise of stock options held by OnTrak
directors, officers and employees. As of September 9, 1997, options to
purchase 6,821 shares had been exercised subsequent to the Merger and options
to purchase 1,703,263 shares were outstanding at an average exercise price of
$18.44 per share.
 
  In addition, a total of 91,300 shares were reserved for issuance to OnTrak
employees who were participating in OnTrak's employee stock purchase plan
during the purchase period in which the Merger was consummated.
 
                                       9

<PAGE>
 
  See Proposal No. 2--"Amendment of the 1984 Employee Stock Purchase Plan."
 
  The following table provides certain information concerning the grant to the
named executives in fiscal 1997 of options to purchase the Company's Common
Stock and the potential realizable value of those options at projected
appreciation levels.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
                               INDIVIDUAL GRANTS
 
 

<TABLE>
<CAPTION>
                                                                             POTENTIAL REALIZABLE VALUE
                          NUMBER OF   % OF TOTAL                               AT ASSUMED ANNUAL RATES
                         SECURITIES    OPTIONS                               OF STOCK PRICE APPRECIATION
                         UNDERLYING   GRANTED TO                            FOR OPTION TERM (10 YEARS)(2)
                           OPTIONS   EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------------
          NAME           GRANTED (#) FISCAL YEAR      ($/SH)      DATE (1)        5%            10%
          ----           ----------- ------------ -------------- ---------- -------------- ---------------
<S>                      <C>         <C>          <C>            <C>        <C>            <C>
Roger D. Emerick........   15,000        1.59%        $27.69       1/2/07   $      261,188 $      661,901
Hsui-Sheng (Way) Tu.....   10,000        1.06%        $20.63      7/24/06   $      129,710 $      328,709
                           10,000        1.06%        $27.69       1/2/07   $      174,125 $      441,267
Thomas O. Yep...........    8,000        0.85%        $27.69       1/2/07   $      139,300 $      353,014
Raymond L. Degner.......    5,000        0.53%        $27.69       1/2/07   $       87,063 $      220,634
Henk J. Evenhuis........    5,000        0.53%        $27.69       1/2/07   $       87,063 $      220,634
Rick P. Friedman........    5,000        0.53%        $23.75      8/30/06   $       74,681 $      189,257
                            8,000        0.85%        $27.69       1/2/07   $      139,300 $      353,014
</TABLE>

- --------
(1)  The options in this table were granted under the 1991 Option Plan and
     have a ten-year term. Pursuant to option agreements executed by the Chief
     Executive Officer and the named executives, 12/48 of the options granted
     are exercisable on the first anniversary of the date of grant and an
     additional 1/48 of the options are exercisable at the end of each full
     month thereafter. The exercisability of outstanding stock options may
     accelerate in certain circumstances (see "1984 Incentive Stock Option
     Plan and 1991 Incentive Stock Option Plan;" and "Employment and
     Termination Agreements, Change of Control Arrangements and Retirement
     Benefits").
(2) The "potential realizable value" shown represents hypothetical gains based
    on annual compound stock price appreciation of 5% and 10% from the date of
    grant through the full ten-year option term, net of exercise price, but
    before taxes associated with exercise. The amounts represent certain
    assumed rates of appreciation only, based on SEC rules. Actual gains, if
    any, on stock option exercises depend on the future performance of the
    Common Stock, overall market conditions and the option holders' continued
    employment through the vesting period. The amounts reflected in this table
    may not necessarily be achieved and do not reflect the Company's estimate
    of future stock price growth.
 
                                      10

<PAGE>
 
  The following table provides certain information concerning the exercise of
options to purchase the Company's Common Stock in the fiscal year ended June
30, 1997 and the unexercised options held as of June 30, 1997 by the named
executives:
 
              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                         FISCAL YEAR END OPTION VALUES
 

<TABLE>
<CAPTION>
                                                                                                 VALUE OF
                                                         NUMBER OF UNEXERCISED           UNEXERCISED IN-THE-MONEY
                            SHARES                    OPTIONS AT FISCAL YEAR END       OPTIONS AT FISCAL YEAR END(2)
                         ACQUIRED ON       VALUE      ------------------------------   -----------------------------
  NAME                   EXERCISE (#) REALIZED ($)(1) EXERCISABLE     UNEXERCISABLE     EXERCISABLE   UNEXERCISABLE
  ----                   ------------ --------------- -------------   --------------   -----------------------------
<S>                      <C>          <C>             <C>             <C>              <C>           <C>
Roger D. Emerick........        0         $     0             262,269          47,631  $     6,495,607 $     310,524
Hsui-Sheng (Way) Tu.....    3,000         $59,438              54,495          41,560  $       707,562 $     345,054
Thomas O. Yep...........        0         $     0              48,874          27,226  $       566,682 $     170,706
Raymond L. Degner.......    1,641         $40,102              42,640          20,101  $       440,965 $     133,335
Henk J. Evenhuis........        0         $     0              91,499          20,101  $     1,870,821 $     133,335
Rick P. Friedman........        0         $     0              16,358          29,742  $        81,391 $     199,589
</TABLE>

- --------
(1) Market value of underlying securities at exercise minus the exercise
    price.
(2) Market value of underlying securities at year-end minus the exercise
    price.
 
  The following table sets forth, as to the Company's Chief Executive Officer
and each of the named executives, all current executive officers as a group
and all employees (excluding executive officers) as a group who participated
in the 1984 Purchase Plan: (i) the number of shares of the Company's Common
Stock purchased under the 1984 Purchase Plan during the last fiscal year; (ii)
the dollar value of the benefit (see footnote (1) to the table); and (iii) the
amount of payroll deductions for purchases accumulated through June 30, 1997
for the purchase period that commenced on March 24, 1997 and ended on
September 21, 1997:
 
                        EMPLOYEE STOCK PURCHASE SUMMARY
 

<TABLE>
<CAPTION>
                                      NO. OF
       NAME OF INDIVIDUAL OR          SHARES      DOLLAR      CURRENT PERIOD
         IDENTITY OF GROUP           PURCHASED VALUE ($)(1) PAYROLL DEDUCTIONS
       ---------------------         --------- ------------ ------------------
<S>                                  <C>       <C>          <C>
Roger D. Emerick....................       71         880           1,674
Hsui-Sheng (Way) Tu.................    1,061      13,156          11,416
Thomas O. Yep.......................      677       5,470           3,720
Raymond L. Degner...................      672       5,452           3,719
Henk J. Evenhuis....................      515       4,140           2,800
Rick P. Friedman....................    1,189       9,872           6,849
All current executive officers as a
 group (12) persons.................    7,176      63,672          48,677
All current employees, excluding
 executive officers, as a group.....  376,270   3,044,627       4,255,800
</TABLE>

- --------
(1) Market value on date of purchase minus the purchase price.
 
                                      11

<PAGE>
 
                    EMPLOYMENT AND TERMINATION AGREEMENTS,
            CHANGE OF CONTROL ARRANGEMENTS AND RETIREMENT BENEFITS
 
EMPLOYMENT AGREEMENT WITH ROGER D. EMERICK
 
  In July 1996, the Company signed an employment agreement with Roger D.
Emerick, Chairman of the Board and Chief Executive Officer. The agreement,
which became effective on July 1, 1996, provided that Mr. Emerick was to serve
as Chief Executive Officer of the Company for a period of two years, which
period extended automatically (but not beyond June 30, 2002) unless terminated
by the Company or Mr. Emerick with at least 180 days' advance notice. In the
event Mr. Emerick ceased to serve as the Chief Executive Officer of the
Company, Mr. Emerick was to serve as a consultant to the Company through June
30, 2002. The agreement was amended on June 26, 1997 (the agreement, as
amended, the "Emerick Agreement") to provide for the continued employment of
Mr. Emerick following the appointment of James W. Bagley as Chief Executive
Officer of the Company. Mr. Emerick's employment is to continue until June 30,
1998, which period automatically extends (but not beyond June 30, 2002) unless
terminated by the Company or Mr. Emerick with at least 180 days' advance
notice. Upon expiration of Mr. Emerick's employment period, Mr. Emerick shall
serve as a consultant to the Company.
 
  The Emerick Agreement provides for an initial annual base salary of
$621,857, which will be reviewed at least annually. The Emerick Agreement also
provides for an annual performance bonus of up to 50% of base salary based on
attainment of certain performance targets established by the Company's Board
of Directors. After termination of his employment period, the Company will pay
Mr. Emerick a monthly consulting fee of $33,333 for his services. Mr. Emerick
also participates in all of the incentive compensation plans and programs
generally available to the senior management of the Company as well as any
employee benefit plan maintained by the Company for its employees. If Mr.
Emerick's employment is involuntarily terminated without cause, he will be
entitled to receive a lump sum payment equal to his base pay through June 30,
1998 (if the termination occurs prior to that date), his targeted bonus
amount, plus an amount equal to the consulting fee, for the period beginning
on the date of termination and ending June 30, 2002, subject to a maximum of
48 months, as well as certain other benefits. In addition, upon involuntary
termination without cause or a change in control of the Company, the unvested
portion of Mr. Emerick's stock options and restricted stock will automatically
be accelerated in full so as to become fully vested.
 
EMPLOYMENT AGREEMENT WITH JAMES W. BAGLEY
 
  On July 1, 1997, the Company signed an employment agreement with James W.
Bagley which became effective on August 6, 1997, the day following
consummation of the Merger (the "Bagley Agreement"), pursuant to which Mr.
Bagley is to serve as Chief Executive Officer of the Company. The term of the
Bagley Agreement is five years, unless earlier terminated by the Company or
Mr. Bagley. The Bagley Agreement provides for a base salary at the annualized
rate of $100,000. Mr. Bagley is not entitled to participate in any performance
bonus plan of the Company unless otherwise determined by the Board of
Directors. As an incentive to joining the Company, Mr. Bagley was granted non-
qualified stock options to purchase 250,000 shares of Common Stock (the
"Incentive Options"). In lieu of additional base compensation or participation
in performance bonus plans, the Company granted Mr. Bagley non-qualified stock
options to purchase 225,000 shares of Common Stock (the "Base Options"). Under
the Bagley Agreement, Mr. Bagley is also entitled to participate in the
Company's Elective Deferred Compensation Plan and other benefit plans and
compensation programs generally maintained for other key executives of the
Company.
 
  In the event of a change in control of the Company or involuntary
termination without cause, all unvested Incentive Options will automatically
be accelerated in full so as to become fully vested. Mr. Bagley will have two
years from the date of termination in which to exercise such options. In
addition, if Mr. Bagley's employment is involuntarily terminated without cause
prior to the first anniversary of the effective date of the Bagley Agreement,
Mr. Bagley will be entitled to receive a lump sum payment of $200,000, and
that portion of
 
                                      12

<PAGE>
 
the Base Options that would have vested on or before the second anniversary of
the effective date will automatically be accelerated so as to become
completely vested. If Mr. Bagley's employment is involuntarily terminated
without cause on or after the first anniversary of the effective date of the
Bagley Agreement, he will be entitled to receive a lump sum payment of
$100,000 and any portion of the Base Options that would have vested within the
one year period following the date of such termination. The Bagley Agreement
also provides for a tax gross up to offset the effects of any excise tax
imposed under the "golden parachute" provisions of the Code.
 
AGREEMENT WITH HENK J. EVENHUIS
 
  Henk J. Evenhuis retired from his position as Executive Vice President,
Finance and Chief Financial Officer, effective April 30, 1997. Mr. Evenhuis
signed an agreement regarding his change in employment status on November 19,
1996, which agreement became effective on November 27, 1996 (the "Evenhuis
Agreement"). Pursuant to the terms of the Evenhuis Agreement, Mr. Evenhuis
commenced a fully paid Leave of Absence ("LOA") from the Company on April 30,
1997. The term of the LOA will be 15 months unless sooner terminated. During
the period of the LOA, Mr. Evenhuis agreed to discharge such duties and
perform such services as may be assigned to him by the Chief Executive Officer
and not to engage in any other significant business activity, whether or not
competitive with Lam. Mr. Evenhuis will continue to receive his annual salary
on a biweekly basis during the LOA term. He will also be entitled to
participate in the Elective Deferred Compensation Plan and all stock, bonus,
profit sharing or other benefit plans available to non-officer vice presidents
of the Company. While Mr. Evenhuis' stock options will continue to vest during
the LOA term, no additional stock options will be granted to him. In the event
the Company involuntarily terminates Mr. Evenhuis' LOA without cause, the
Company will have the option to continue providing compensation and benefits
or accelerate payment of salary, bonuses and other compensation and pay the
same in a lump sum disbursement.
 
CHANGE OF CONTROL ARRANGEMENTS
 
  In addition to the change of control provisions in the foregoing agreements,
the Option Plans and 1984 Purchase Plan provide that, upon a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding option or right to purchase Common
Stock will be assumed or an equivalent option or right substituted by the
successor corporation or a parent or subsidiary of the successor corporation.
In the event that the successor corporation does not agree to assume the
option or right or substitute an equivalent option or right, some or all of
the options granted under the Option Plans shall be fully exercisable for a
period of 15 days, and all of the rights granted under the 1984 Purchase Plan
shall be fully exercisable for a period of 30 days, from the date of notice by
the Board of Directors. Following the expiration of such periods, the options
and rights will terminate.
 
  The 1997 Stock Plan provides that, in the event of any merger,
reorganization, consolidation or other changes in corporate structure
affecting the Common Stock, a substitution or adjustment will be made in (i)
the aggregate number of shares reserved for issuance under the 1997 Stock
Plan, (ii) the kind, number and option price of shares subject to outstanding
options granted under the Plan, and (iii) the kind, number and purchase price
of shares issuable pursuant to awards of stock, as may be determined by the
administrator, in its sole discretion. The administrator may in its sole
discretion make other substitutions or adjustments, including the cancellation
of any outstanding awards or payment in cash or other property therefor.
 
RETIREMENT MEDICAL AND DENTAL BENEFITS
 
  The Board of Directors also approved a plan in July 1996, allowing
executives and directors to continue to participate in the Company's group
medical and dental plans after retirement.
 
                                      13

<PAGE>
 
 
               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  In April 1996, Roger D. Emerick, Chairman of the Board and former Chief
Executive Officer, borrowed $600,000 from the Company pursuant to a promissory
note bearing interest at 5.05% per annum. In April 1997, the loan was renewed
by the Company. As of June 30, 1997, $600,000 plus accrued interest remained
outstanding.
 
  In connection with the initial and continued employment of Mercedes Johnson,
Vice President, Finance and Chief Financial Officer as of April 7, 1997, the
Company loaned Ms. Johnson $150,000, payable in equal annual installments over
a four-year period with no interest. On each of the first four anniversaries
of Ms. Johnson's employment, the Company will pay Ms. Johnson a bonus in the
amount of $37,500, which amount will be used to offset the loan. In the event
Ms. Johnson terminates her employment prior to the fourth anniversary of her
employment with the Company, she will be required to pay the outstanding
balance of the loan in accordance with its terms.
 
  On March 28, 1997, the Company invested $4 million in an investment limited
partnership, Tribridge International, L.P. (the "Partnership"), the general
partner of which is a limited liability company, Tribridge Venture Management
LLC (the "General Partner"). Roger D. Emerick, Grant M. Inman and Osamu Kano,
each of whom is a Director of the Company, are the sole stockholders of the
General Partner. The Partnership was organized for the purpose of investing in
emerging technology companies. Pursuant to the terms of the partnership
agreement, the General Partner will be paid an annual management fee of one
percent of the Partnership's committed capital contributions. In addition, the
General Partner has a carried interest in the Partnership of four percent of
the $12.5 million in capital contributions.
 
  On April 23, 1997, the Partnership made an investment of $2 million in
Optical Specialties, Inc. ("OSI"), a company of which Jack R. Harris, a
Director of the Company, is Chairman, Chief Executive Officer, President and
Chief Financial Officer. Osamu Kano is also a director of OSI. Messrs. Harris
and Kano and David G. Arscott all hold shares of OSI.
 
 
         COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  Osamu Kano, a Director of the Company since 1987, was a member of the
Compensation Committee in fiscal 1993 and 1994. Mr. Kano is currently the
Chairman of Lam Research Co., Ltd. in Japan, a subsidiary of the Company, and
served as the Company's Senior Vice President of Japan Operations from 1987 to
June 1991. As of August 18, 1994, Mr. Kano became a member of the Audit
Committee and no longer serves on the Compensation Committee.
 
  Grant M. Inman, a Director of the Company since 1981, is a member of the
Compensation Committee. Mr. Inman is currently a stockholder of Tribridge
Venture Management LLC, which is paid an annual management fee of one percent
of the committed capital contributions of Tribridge International, L.P.
 
  Jack R. Harris, a Director of the Company since 1982, is a member of the
Compensation Committee. The Company has invested a total of $500,000 to
purchase Series A Preferred Stock and Series E Preferred Stock of OSI in two
transactions. Other outside investors also participated in the transactions.
The latter of the transactions took place in December 14, 1994. Tribridge
International, L.P. invested $2 million in OSI on April 23, 1997.
 
                     REPORT OF THE COMPENSATION COMMITTEE
 
  Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended ("Securities
Act"), or the Exchange Act, that might incorporate all or portions of future
filings, including this Proxy Statement, the following Report of the
Compensation Committee,
 
                                      14

<PAGE>
 
and the Performance Graph on page 17 shall not be incorporated by reference
into any such filings, nor shall they be deemed to be soliciting material or
deemed filed with the SEC under the Securities Act or the Exchange Act
 
  The Compensation Committee (the "Committee") of the Board of Directors,
comprised of three non-employee directors, determines and administers the
Company's executive compensation policies and programs.
 
COMPENSATION POLICIES
 
  One of the Committee's primary goals in setting compensation policies is to
maintain competitive, progressive programs to attract, retain and motivate
high caliber executives, foster teamwork and maximize the long-term success of
the Company by appropriately rewarding such individuals for their
achievements. Another goal is to provide an incentive to executives to focus
efforts on long-term strategic goals for the Company by closely aligning their
financial interests with stockholder interests. To attain these goals, the
Committee has designed the Company's executive compensation program to include
base salary, annual incentives and long-term incentives.
 
  In formulating and administering the individual elements of the Company's
executive compensation program, the Committee emphasizes planning,
implementing and achieving long-term objectives and strives to use prudent
judgment in establishing performance objectives, evaluating performance and
determining actual incentive awards.
 
  The Committee believes that the Company's executive compensation programs
have met these objectives. The Company has been able to attract and retain the
executive talent necessary to support a corporation that has increased its
revenues by more than 103% over the last four years, while providing higher
than average stockholder returns (see the Performance Graph on page 17). The
Company also has the flexibility to reduce the payment of bonuses during
periods, such as fiscal 1997, in which the Company's revenue and gross margins
decreased.
 
COMPENSATION COMPONENTS
 
 Base Salary
 
  The Committee establishes the base salaries of executive officers after
review of relevant data of other executives with similar responsibilities from
published industry reports and surveys of similarly situated companies.
Accordingly, the Committee strives to maintain the Company's annual executive
salaries at levels competitive with the market average base salary of
executive officers in similar positions. The market is comprised of similarly
sized high technology companies within and outside the Company's industry. In
addition, a large portion of each executive officer's compensation will be
annual incentives in the form of a cash bonus, provided certain target
performance objectives are met.
 
 Annual Incentives
 
  The more aggressive incentive bonus levels for executives are intended to
provide the appropriate elements of variability and risk. Bonus payments are
tied specifically to targeted corporate performance. The Committee will
establish a base bonus amount, determined through review of a competitive
market survey for executives at similar levels, which will be incrementally
reduced if the Company does not meet its targeted performance or increased if
the Company exceeds its targeted performance. There is no minimum or maximum
percentage by which a bonus can be reduced or increased.
 
 Long-Term Incentives
 
  Stock Options
 
  The Committee grants stock options to focus executives' attention on the
long-term performance of the Company and on maximizing stockholder value. The
grant of stock options is closely tied to individual executive
 
                                      15

<PAGE>
 
performance. The Committee grants such stock options after a review of various
factors, including the executive's potential contributions to the Company,
current equity ownership in the Company and vesting rates of existing stock
options, if any. Stock options are granted with an exercise price equal to the
current fair market value of the Company's Common Stock and utilize vesting
periods to encourage retention of executive officers. Because of the direct
benefit executive officers receive through improved stock performance, the
Committee believes stock options serve to align the interests of executive
officers closely with those of other stockholders.
 
  Restricted Stock
 
  Restricted stock awards are granted to executives under the Restricted Stock
Plan, which was approved by the Company's stockholders in 1995. The award of
restricted stock is based on the Company's performance measured against
quarterly targets. Because the restricted stock does not vest until five years
after the date of the award, the Restricted Stock Plan is expected to serve as
a retention tool, as well as a means of aligning executive and stockholder
interests.
 
  Deferred Compensation Plan
 
  Another component of the Company's executive compensation program is the
Elective Deferred Compensation Plan (the "Deferred Plan"), a voluntary, non-
tax-qualified, deferred compensation plan that encourages officers to save for
retirement. Under the Deferred Plan, participants are entitled to defer
compensation until retirement, death, other termination of employment, or
until specified dates. Participants receive a fixed rate yield based on the
average annual interest rate of ten-year United States Treasury Notes for the
previous ten years. An enhanced yield of up to 115 percent of the fixed rate
yield will be payable in the event of death, retirement under certain
circumstances, and termination of employment after plan participation for a
specified number of years. Because the benefits of the Deferred Plan increase
with each year of participation, offering the Deferred Plan to executives
encourages them to stay with the Company.
 
COMPENSATION OF CHIEF EXECUTIVE OFFICER
 
  The Committee based compensation of the Chief Executive Officer on the
policies and procedures described above. In determining the Chief Executive
Officer's base salary and bonus, the Committee examined compensation levels
for other chief executive officers in high technology firms within and outside
the industry. The Committee compared this information to the relevant
performance of such firms relative to the Company's performance.
 
  In accordance with the Emerick Agreement, Mr. Emerick, Chief Executive
Officer of the Company until August 6, 1997, received a base salary of
$621,878. Mr. Emerick also received a bonus of $109,838 in the first quarter
of fiscal 1997 based on the Company's performance in the fourth quarter of
fiscal 1996. The Emerick Agreement and Mr. Emerick's current compensation
arrangement with the Company also reflects the Company's desire to retain and
motivate him with long-term incentives. To this end, the Company granted Mr.
Emerick 15,000 stock options. Mr. Emerick also has a ten-year deferred
compensation arrangement with the Company, which provides for an increasing
portion of compensation to be paid to Mr. Emerick each year in which the
Company is profitable. The Company's contribution in fiscal 1997 reflects the
fact that the Company was profitable in fiscal 1996. (See Summary Compensation
Table, footnote 18). In fiscal 1997, the Company contributed $405,000 to Mr.
Emerick's Deferred Plan. This amount was paid into the Deferred Plan to
reimburse Mr. Emerick for the stock options he forfeited as a result of his
resignation from the Board of Directors of IPEC.
 
EFFECT OF SECTION 162(m) OF THE INTERNAL REVENUE CODE
 
  Section 162(m) of the Code generally limits the corporate deduction for
compensation paid to certain executive officers to $1 million, unless the
compensation is performance based. The Committee has carefully considered the
potential impact of this tax code provision on the Company and has concluded
in general that the best interests of the Company and the stockholders will be
served if certain of the Company's stock-based long-
 
                                      16

<PAGE>
 
term incentives qualify as performance-based compensation within the meaning
of the Code. It is the Committee's intention that, so long as it is consistent
with its overall compensation objectives, virtually all executive compensation
will be deductible by the Company for federal income tax purposes.
 
 
                                          COMPENSATION COMMITTEE
 
                                          David G. ArscottJack R.
                                           Harris Grant M. Inman
 
                         COMPARATIVE STOCK PERFORMANCE
 
  Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock for the last five fiscal years against
the cumulative total return on the Nasdaq National Market Index (U.S.
companies only) and the Hambrecht & Quist ("H&Q") Semiconductor Index over the
same period. The graph and table assume that the investment in the Company's
Common Stock and each index was $100 on June 30, 1992 and that dividends, if
any, were reinvested. This data was furnished by H&Q. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
 
                           LAM RESEARCH CORPORATION
                        H&Q SEMICONDUCTOR SECTOR INDEX
                       NASDAQ NATIONAL MARKET-U.S. INDEX
 
                       [PERFORMANCE GRAPH APPEARS HERE]
 
                                          NASDAQ
                          LAM             STOCK           H&Q
                          RESEARCH        MARKET          SEMICONDUCTOR
                          --------        ------          -------------
           Jun-92         100             100             100
           Sep-92         140             104.11          117.85
           Dec-92         175.79          121.12          149.52
           Mar-93         253.68          123.39          188.77
           Jun-93         333.68          125.76          198.99
           Sep-93         429.47          136.36          250.21
           Dec-93         410.53          139.04          221.59
           Mar-94         391.58          133.19          251.03
           Jun-94         353.68          126.97          235.82
           Sep-94         508.42          137.48          257.72
           Dec-94         470.53          135.91          272.11
           Mar-95         565.26          148.17          328.6
           Jun-95         808.42          169.48          461.17
           Sep-95         754.74          189.89          521.19
           Dec-95         577.89          192.21          378.69
           Mar-96         442.11          201.17          357.64
           Jun-96         328.42          217.59          342.77
           Sep-96         336.32          225.33          389.11
           Dec-96         355.26          236.4           490.44
           Mar-97         426.32          223.16          551.21
           Jun-97         468.16          264.61          621.62
 
                                      17

<PAGE>
 

                                PROPOSAL NO. 2
              AMENDMENT OF THE 1984 EMPLOYEE STOCK PURCHASE PLAN
 
  In July 1997, the Board of Directors approved an amendment to the 1984
Employee Stock Purchase Plan (the "1984 Purchase Plan" or "Plan") increasing
the number of shares reserved thereunder from 1,687,500 to 2,037,500. The
stockholders are being asked to approve this amendment at the Annual Meeting.
 
PURPOSE
 
  The purpose of the 1984 Purchase Plan is to provide employees (including
officers) of the Company who participate in the 1984 Purchase Plan with an
opportunity to purchase Common Stock of the Company through payroll
deductions.
 
ADOPTION OF PLAN AND PRIOR AMENDMENTS
 
  In 1984 the Company adopted the 1984 Purchase Plan and reserved 112,500
shares for issuance thereunder. In November 1987, the Board of Directors
amended the 1984 Purchase Plan to increase the number of shares reserved
thereunder to 262,500, which amendment was approved by stockholders in
February 1988. In September 1989, the Board of Directors amended the Plan to
increase the number of shares authorized thereunder to 487,500, which
amendment was approved by the stockholders in November 1989. In July 1991, the
Board of Directors amended the Plan to increase the number of shares
authorized thereunder to 862,500, which amendment was approved by the
stockholders in November 1991. In July 1993, the Board of Directors amended
the Plan to increase the number of shares authorized thereunder to 1,087,500,
which amendment was approved by the stockholders in October 1993. In August
1994, the Board of Directors amended the Plan to increase the number of shares
authorized thereunder to 1,187,500, which amendment was approved by the
stockholders in October 1994. In August 1995, the Board of Directors amended
the Plan to increase the number of shares authorized thereunder to 1,337,500,
which amendment was approved by the stockholders in October 1995. In July
1996, the Board of Directors amended the Plan to increase the number of shares
authorized thereunder to 1,687,500, which amendment was approved by the
stockholders in October 1996.
 
ADMINISTRATION
 
  The 1984 Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board, and is currently being administered by the
Board of Directors. All questions of interpretation or application of the Plan
are determined in the sole discretion of the Board of Directors or its
committee, and its decisions are final and binding upon all participants.
Members of the Board of Directors who are eligible employees are permitted to
participate in the Plan, provided that such members may not vote on any matter
affecting administration of the Plan or serve on a committee formed to
administer the Plan. No charges for operations or other costs may be made
against the payroll deductions of a participant in the Plan. Members of the
Board of Directors receive no additional compensation for their services in
connection with the administration of the Plan.
 
ELIGIBILITY
 
  Any regular employee (including an officer) who is employed by the Company
(or by any of its majority-owned subsidiaries) for at least 20 hours per week
and more than five months in a calendar year is eligible to participate in the
1984 Purchase Plan, provided that such employee is employed on the
commencement date of the offering period and subject to certain limitations
imposed by Section 423(b) of the Code. As of September 9, 1997, approximately
4,421 employees were eligible to participate in the Plan; 2,039 employees
participated in the offering period ended September 21, 1997.
 
  Notwithstanding the foregoing, no employee is permitted to subscribe for
shares under the 1984 Purchase Plan if, immediately after the grant of the
option, the employee would own five percent or more of the voting stock or
value of all classes of stock of the Company or its majority-owned
subsidiaries (including stock which
 
                                      18

<PAGE>
 
may be purchased through subscriptions under the Plan or pursuant to any other
options), nor will any employee be granted an option which would permit his or
her rights to purchase stock under all employee stock purchase plans of the
Company to accrue at a rate which exceeds $25,000 of the fair market value of
such stock (determined at the fair market value of the shares at the time the
option is granted) for each calendar year in which such option is outstanding
at any time.
 
OFFERING DATES
 
  The 1984 Purchase Plan is implemented by one offering during each six-month
period of the Plan. Since its adoption in 1984, there have been 22 six-month
offering periods. The twenty-third offering period began on September 22,
1997. The Board of Directors may alter the duration of the offering periods
without stockholder approval.
 
PARTICIPATION IN THE PLAN
 
  Eligible employees become participants in the 1984 Purchase Plan by
delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date, or at such other time as may
be determined by the Board of Directors for all eligible employees with
respect to a given offering. An employee who becomes eligible to participate
in the 1984 Purchase Plan after the commencement of an offering may not
participate in the Plan until the commencement of the next offering.
 
PURCHASE PRICE
 
  The purchase price per share at which shares are sold under the 1984
Purchase Plan is the lower of 85% of the fair market value of a share of
Common Stock on the date of commencement of the offering period or 85% of the
fair market value of a share of Common Stock on the last day of the six-month
offering period. For so long as the Company's Common Stock is listed on the
Nasdaq National Market, the fair market value of the Common Stock on a given
date shall be based on the mean of the bid and asked price as of such date.
 
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
 
  The purchase price of the shares is accumulated by payroll deductions during
the offering period. The deductions may not exceed ten percent of a
participant's eligible compensation, which is defined in the 1984 Purchase
Plan to include all regular straight time salary, exclusive of any payments
for overtime, bonuses, commissions or incentive compensation. A participant
may discontinue his or her participation in the 1984 Purchase Plan or may
decrease, but not increase, the rate of payroll deductions at any time during
the offering period. Payroll deductions commence on the first payday following
the commencement date of the offering and continue at the same rate until the
end of the offering period unless sooner terminated as provided in the 1984
Purchase Plan.
 
  All payroll deductions are credited to the participant's account under the
1984 Purchase Plan and are deposited with the general funds of the Company. To
the extent that an employee's payroll deductions exceed the amount required to
purchase the shares subject to option, such excess is refunded to the employee
without interest. All payroll deductions received or held by the Company may
be used by the Company for any corporate purpose.
 
PURCHASE OF STOCK; EXERCISE OF OPTION
 
 
  By executing a subscription agreement to participate in the 1984 Purchase
Plan, each employee is in effect granted an option to purchase shares of
Common Stock. The number of shares placed under option to a participant in an
offering is limited such that, in each calendar year in which the option is
outstanding, the participant may not purchase more than $25,000 worth of stock
under all stock purchase plans of the Company (with such value determined at
the time the option is granted). See "Payment of Purchase Price; Payroll
 
                                      19

<PAGE>
 
Deductions" for limitations on payroll deductions. If the number of shares
which would otherwise be placed under option at the beginning of an offering
period exceeds the number of shares then available under the 1984 Purchase
Plan, a pro rata allocation of the shares remaining shall be made in as
equitable a manner as is practicable. Unless an employee withdraws from
participation in the Plan (See "Withdrawal") or his or her participation is
otherwise discontinued (See "Termination of Employment"), the employee's
option for the purchase of shares will be exercised automatically at the end
of the offering period for the maximum number of shares at the applicable
price.
 
WITHDRAWAL
 
  While each participant in the 1984 Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest in a given offering may be terminated in whole, but not in part, by
signing and delivering to the Company a notice of withdrawal from the 1984
Purchase Plan. Such withdrawal may be elected at any time prior to the end of
the applicable six-month offering period. Any withdrawal by the employee of
accumulated payroll deductions for a given offering automatically terminates
the employee's interest in that offering. A participant's withdrawal from an
offering does not have any effect upon such participant's eligibility to
participate in subsequent offerings under the 1984 Purchase Plan.
 
  In effect, therefore, the employee is given an option which he or she may or
may not exercise at the end of the six-month offering period. By executing the
subscription agreement to choose to participate in the 1984 Purchase Plan, the
employee does not become obligated to make the stock purchase; rather, the
subscription agreement is merely an election by the employee to have shares
placed under option to him or her. Unless the employee's participation is
discontinued or his or her payroll deductions withdrawn, however, the option
for the purchase of shares will be exercised automatically at the end of the
offering period, and the maximum number of full shares subject to option which
are purchasable with the employee's accumulated payroll deductions will be
purchased for the employee at the applicable price.
 
TERMINATION OF EMPLOYMENT
 
  Termination of a participant's continuous status as an employee for any
reason, including retirement or death, cancels his or her participation in the
1984 Purchase Plan immediately. In such event, the payroll deductions credited
to the participant's account will be returned to such participant or, in the
case of death, to the person or persons entitled thereto as specified by the
employee in the subscription agreement. Failure to remain in the continuous
employ of the Company for at least 20 hours per week during the offering
period will be deemed to be a withdrawal from the 1984 Purchase Plan.
 
CAPITAL CHANGES
 
  In the event any change is made in the capitalization of the Company, such
as stock splits or stock dividends, which results in an increase or decrease
in the number of shares of Common Stock outstanding without receipt of
consideration by the Company, appropriate adjustments will be made by the
Company in the shares subject to purchase and in the purchase price per share,
subject to any required action by the stockholders of the Company.
 
  In the event of the liquidation or dissolution of the Company, the offering
period shall terminate automatically unless otherwise provided by the Board.
In the event of the merger of the Company with another corporation or the sale
of all or substantially all of the assets of the Company, the 1984 Purchase
Plan provides that each outstanding option will be assumed or an equivalent
option will be substituted by the successor corporation. If the successor
corporation does not agree to assume the option or to substitute an equivalent
option, the Board will provide for the optionee to have the right to exercise
the option as to all the optioned stock, including the shares as to which the
option would not otherwise be exercisable.
 
 
                                      20

<PAGE>
 
NONASSIGNABILITY
 
  No rights or accumulated payroll deductions of an employee under the 1984
Purchase Plan may be pledged, assigned or transferred for any reason, and any
such attempt may be treated by the Company as an election to withdraw from the
1984 Purchase Plan.
 
REPORTS
 
  Individual accounts are maintained for each participant in the 1984 Purchase
Plan. Each participant receives as promptly as practicable after the end of
the six-month offering period a report of his or her account setting forth the
total amount of payroll deductions accumulated, the per share purchase price,
the number of shares purchased and the remaining cash balance, if any.
 
AMENDMENT AND TERMINATION OF THE PLAN
 
  The Board of Directors may at any time amend or terminate the 1984 Purchase
Plan, except that such termination shall not affect options previously granted
nor may any amendment make any change in an option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to
the 1984 Purchase Plan without prior approval of the stockholders of the
Company if such amendment would increase the number of shares reserved under
the 1984 Purchase Plan, materially modify the eligibility requirements under
the 1984 Purchase Plan or materially increase the benefits which may accrue to
participants under the 1984 Purchase Plan. In addition, to the extent
necessary to comply with Rule 16b-3 under the Securities Exchange Act, or with
Section 422 of the Code, (or any other applicable law or regulation), the
Company must obtain stockholder approval of any amendment of the 1984 Purchase
Plan in such a manner and to such a degree as required. In any event, the 1984
Purchase Plan will terminate in 2004.
 
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
 
  The 1984 Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and
423 of the Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares. On
disposition of the shares, the participant will generally be subject to tax.
If the shares have been held by the participant for more than two years after
the first day of the offering period and more than 18 months after the
purchase date of the shares, the lesser of (a) the excess of the fair market
value of the shares at the time of such disposition over the purchase price of
the shares, or (b) 15% of the fair market value of the shares on the first day
of the offering period, will be treated as ordinary income, and any further
gain on such disposition will be treated as long-term capital gain. If the
shares are disposed of before the expiration of the holding periods described
above, the excess of the fair market value of the shares on the last day of
the offering period over the purchase price will be treated as ordinary
income, and any further gain or any loss on such disposition will be treated
as a capital gain or loss. Different rules may apply with respect to optionees
subject to Section 16(b) of the Securities Exchange Act. The Company is not
entitled to a deduction for amounts taxable to a participant, except to the
extent of ordinary income reported by participants on disposition of shares
prior to the expiration of the holding periods described above.
 
  THE FOREGOING IS ONLY A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE 1984 PURCHASE PLAN TO PARTICIPANTS AND THE COMPANY AND
DOES NOT PURPORT TO BE COMPLETE. REFERENCE SHOULD BE MADE TO THE APPLICABLE
PROVISIONS OF THE CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE INCOME
TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
PARTICIPANTS ARE CAUTIONED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
APPLICABILITY OF THESE TAX LAWS TO THEIR PURCHASE OF SHARES UNDER THE PLAN AND
SUBSEQUENT DISPOSITION OF SUCH SHARES, ESPECIALLY IN LIGHT OF RECENT CHANGES
TO THE CODE.
 
RESTRICTION ON RESALE
 
  Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act.
Common Stock acquired under the 1984 Purchase Plan by an affiliate
 
                                      21

<PAGE>
 
may only be reoffered or resold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or another
exemption from the registration requirements of the Securities Act.
 
VOTE REQUIRED
 
  Approval of the amendment increasing shares under the 1984 Purchase Plan
will require the affirmative vote of a majority of the outstanding shares of
Common Stock present or represented at the Annual Meeting.
 
 
               THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
            THE INCREASE IN THE NUMBER OF SHARES RESERVED UNDER THE
                      1984 EMPLOYEE STOCK PURCHASE PLAN.
 

                                PROPOSAL NO. 3
              RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
 
  Unless marked to the contrary, proxies received will be voted "FOR" the
ratification of the appointment of Ernst & Young LLP as the independent
auditors for the Company for the current year. Ernst & Young LLP has been the
Company's independent auditors since fiscal year 1981.
 
  Audit services of Ernst & Young LLP during the 1997 fiscal year included the
examination of the consolidated financial statements of the Company and
services related to filings with the SEC and other regulatory bodies.
 
  The Audit Committee of the Company meets with Ernst & Young LLP on an annual
or more frequent basis. At such time, the Audit Committee reviews both audit
and non-audit services performed by Ernst & Young LLP for the preceding year,
as well as the fees charged for such services. Among other things, the
Committee examines the effect that the performance of non-audit services may
have upon the independence of the auditors.
 
  A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have an opportunity to make a statement if he or she
so desires. The representative will also be available to respond to
appropriate questions from the stockholders.
 
  Approval of Proposal No. 3 will require the affirmative vote of a majority
of the outstanding shares of Common Stock present or represented at the Annual
Meeting.
 
 
      THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
             RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
                 AS INDEPENDENT AUDITORS FOR FISCAL YEAR 1998.
 

         COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
 
  Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class
of the Company's equity securities to file an initial report of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the SEC. Executive
officers, directors and greater than ten percent stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file. Specific due dates for these reports have been established,
and the Company is required to disclose in this Proxy Statement any failure to
file such reports on a timely basis. Based solely on its review of the copies
of such forms received by it, or written representations from certain
reporting persons, the Company believes that all of these requirements were
satisfied during the last fiscal year.
 
                                      22

<PAGE>
 
 
                                OTHER MATTERS
 
  The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent
as the Board of Directors may recommend.
 
  It is important that your stock be represented at the meeting, regardless of
the number of shares which you hold. You are, therefore, urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
 
 
                                          By Order of The Board of Directors,
 
                                          /s/Richard H. Lovgren
                                          Richard H. Lovgren
                                          Secretary
 
Fremont, California
Dated: September 26, 1997
 
                                      23

<PAGE>
 
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                           LAM RESEARCH CORPORATION
                      1997 ANNUAL MEETING OF STOCKHOLDERS
                               NOVEMBER 7, 1997

        The undersigned stockholder of LAM RESEARCH CORPORATION, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated September 26, 1997, and
1997 Annual Report to Stockholders, and hereby appoints Roger D. Emerick and
Richard H. Lovgren, or either of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1997 Annual Meeting of Stockholders of LAM
RESEARCH CORPORATION to be held on November 7, 1997 at 11:00 a.m. local time, at
the principal executive offices of the Company at 4650 Cushing Parkway, Fremont,
California 94538, and at any adjournment or adjournments thereof, and to vote
all shares of Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth below, and, in their
discretion, upon such other matter or matters which may properly come before the
meeting or any adjournment or adjournments thereof.

        THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS 
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE
1994 EMPLOYEE STOCK PURCHASE PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF 
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

                  CONTINUED AND TO BE SIGNED ON REVERSE SIDE

- --------------------------------------------------------------------------------
                             FOLD AND DETACH HERE


<PAGE>
 
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
                                                               Please mark
                                                               your votes as
                                                               indicated in
                                                               this example. [X]
1. Election of Directors:

 FOR all nominees             WITHHOLD               (If you wish to withhold
listed to the right           AUTHORITY              authority to vote for any
 (except as marked     to vote for all nominees      individual nominee, strike
  to the contrary)       listed to the right.        a line through the 
        [_]                     [_]                  nominee's name in the list
                                                     below)

Roger D. Emerick; James W. Bagley; David G. Arscott; Richard J. Elkus, Jr.; Jack
R. Harris; Grant M. Inman; Osamu Kano

2. Proposal to approve the Amendment to the 1984 Employee Stock Purchase Plan to
increase the number of shares reserved for issuance thereunder by 350,000 shares
to 2,037,500 shares:

                FOR   AGAINST  ABSTAIN
                [_]     [_]      [_]

3. Proposal to ratify the appointment of Ernst & Young LLP as the independent 
auditors of the Company for fiscal 1998:

                FOR   AGAINST  ABSTAIN
                [_]     [_]      [_]

(This Proxy should be marked, dated and signed by the stockholder(s) exactly as 
his or her name appears hereon, and returned promptly in the enclosed envelope. 
Persons signing in a fiduciary capacity should so indicate. If shares are held 
by joint tenants or as community property, both should sign.)

Dated _________________________________________________________________, 1997
               (Be sure to date Proxy.)

_____________________________________________________________________________
Signature

_____________________________________________________________________________
Signature

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED 
ENVELOPE.

- -------------------------------------------------------------------------------
                             FOLD AND DETACH HERE