Item 1.01 Entry into a Material Definitive Agreement.

On December 24, 2008, Kulicke and Soffa Industries, Inc. (the "Company"), through its Israeli subsidiaries, entered into an agreement with the tax authority in Israel settling a tax dispute for approximately $12.5 million, which will be paid in the Company's second fiscal quarter. As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ending September 27, 2008, in October 2007, the tax authority in Israel asserted that the Company owed withholding and income taxes. As of September 27, 2008, the asserted amount totaled $34.3 million after adjustment for foreign currency changes.

The Company maintains tax reserves related to this and other tax liabilities. As a consequence of the settlement, the Company expects to reduce its tax reserves in an amount that is not yet determinable.

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