CFM TECHNOLOGIES INC, 424B4, 1996-06-18

CFM TECHNOLOGIES INC
424B4, 1996-06-18

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Rule 424(b)(4)
Registration No. 33-80359

2,200,000 SHARES

[LOGO OF CFM TECHNOLOGIES APPEARS HERE]

COMMON STOCK
------------

Of the 2,200,000 shares of Common Stock offered, 1,760,000 are being offered
hereby in the United States (the "U.S. Shares") and 440,000 shares are being
offered in a concurrent international offering outside the United States and
Canada. The price to the public and aggregate underwriting discounts and
commissions per share will be identical for both offerings. See "Underwriting."

Of the 2,200,000 shares of Common Stock offered, 2,138,461 shares are being
offered by CFM Technologies, Inc. ("CFM" or the "Company") and 61,539 shares
are being offered by certain shareholders of the Company (the "Selling
Shareholders"). See "Principal and Selling Shareholders." The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price. The Common Stock of the
Company has been approved for quotation on The Nasdaq Stock Market under the
symbol "CFMT."

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price Discounts and Proceeds to Selling
to Public Commissions(1) Company(2) Shareholders
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................ $10.00 $0.70 $9.30 $9.30
- ------------------------------------------------------------------------------
Total.................... $22,000,000 $1,540,000 $19,887,687 $572,313
- ------------------------------------------------------------------------------
Total Assuming Full
Exercise of Over-
Allotment Option(3)..... $25,300,000 $1,771,000 $22,956,687 $572,313
</TABLE>
- -------------------------------------------------------------------------------
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(1) See "Underwriting."
(2) Before deducting expenses estimated at $800,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to
the U.S. Underwriters to purchase up to 330,000 additional shares on the
same terms, solely to cover over-allotments. See "Underwriting."

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

The U.S. Shares of Common Stock are offered by the U.S. Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the U.S.
Underwriters, and subject to their right to reject orders in whole or in part.
It is expected that delivery of the Common Stock will be made in New York City
on or about June 21, 1996.

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

PAINEWEBBER INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES

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

THE DATE OF THIS PROSPECTUS IS JUNE 18, 1996.
<PAGE>

"This fully-enclosed, flow-optimized processing chamber (shown here in a
cutaway view) provides, improved performance in critical semiconductor and flat
panel display manufacturing processes, avoiding many of the deficiencies
associated with traditional wet processing equipment such as contamination
producing air-liquid interfaces, uncontrolled growth of silicon oxides,
watermarks and excessive water usage."

[DIAGRAM APPEARS HERE DEPICTING A CUTAWAY VIEW OF THE COMPANY'S FULL FLOW
PROCESSING VESSEL, PARTIALLY LOADED WITH WAFERS OF SUBSTRATES FOR PROCESSING.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
"The Full-Flow product platform features the Company's proprietary Direct-
Displacement (TM) drying technology and principally consists of the vessel
module, including a fully-enclosed water processing chamber, and associated
robotic, handling equipment as seen here in a dual-vessel installation. Because
the Company's Full-Flow systems may be flush mounted into the cleanroom wall,
use of expensive cleanroom space can be limited to a small operator access
area."

[PHOTOGRAPH APPEARS HERE DEPICTING A DUAL VESSEL FULL FLOW SYSTEM FLUSH
MOUNTED IN THE WALL, WITH OPERATOR ACCESS AREA MOUNTED ON THE WALL.]

[PHOTOGRAPH APPEARS HERE DEPICTING TWO OF THE COMPANY'S FULL-FLOW SYSTEMS
INSTALLED IN A SEMICONDUCTOR FABRICATION FACILITY. ALSO APPEARING IN THE
PHOTOGRAPH ARE TWO SYSTEM OPERATORS.]

"Multiple Full-Flow installation in a large semiconductor fab in Europe."

[PHOTOGRAPH APPEARS HERE DEPICTING AN INDIVIDUAL OPERATING A FULL-FLOW SYSTEM
IN THE COMPANY'S APPLICATIONS LABORATORY.]

"Company personnel test new processes and equipment in the Company's recently
completed applications laboratory which features a Full-Flow system capable of
processing 100 8" wafers."

2
<PAGE>
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. The shares of Common Stock offered hereby involve a high
degree of risk. Investors should carefully consider the information set forth
under "Risk Factors."

THE COMPANY

CFM Technologies, Inc. ("CFM" or the "Company") designs, manufactures and
markets advanced wet processing equipment for sale to the worldwide
semiconductor and flat panel display ("FPD") industries. The Company's products
are based on its patented Full-Flow enclosed processing and Direct-Displacement
drying technologies and are designed to perform various critical cleaning and
etching and photoresist stripping process steps in the manufacture of
semiconductors and FPDs.

According to VLSI Research Inc., total sales of semiconductor process
equipment grew from $2.2 billion in 1980 to $30.9 billion in 1995, with sales
of wet processing equipment totaling approximately $1.4 billion in 1995. As
integrated circuits ("ICs") become increasingly complex and linewidths continue
to decrease, the cost of advanced fabrication equipment escalates. Therefore,
semiconductor manufacturers are increasingly focused on the cost of owning a
particular piece of process equipment compared to competing systems.
Determining such cost of ownership ("COO") involves measuring a variety of
factors, including acquisition and installation costs, yield, throughput and
the use of consumables and facility floor space.

The Company believes that its patented Full-Flow enclosed processing and
Direct-Displacement drying technologies enable it to provide wet processing
systems that address a variety of limitations inherent in conventional systems,
including wet benches and spray tools, resulting in a significantly lower COO
for the Company's Full-Flow systems. The Company's Full-Flow systems
automatically load wafers or FPD substrates into a fully-enclosed, flow-
optimized processing vessel, which isolates them during processing from the
damaging effects of exposure to cleanroom air and associated contaminants. As a
result, particle contamination is substantially reduced, watermark defects and
native oxide growth are substantially eliminated and process control is
improved. In addition, the fully-enclosed processing vessel substantially
reduces the use of water and process chemicals. Also, the modular design of the
Full-Flow system enables flush mounting in the cleanroom wall, with the
majority of the floor space occupied by the system components located outside
the cleanroom environment, minimizing the use of expensive cleanroom floor
space.

In 1990, the Company sold its first Full-Flow system for use in a
semiconductor production line. To date, the Company has sold over 70 Full-Flow
systems to more than 20 semiconductor manufacturers. The Company's customers
include: GEC Plessey, LG International, Motorola, National Semiconductor,
Samsung, SGS-Thomson, Siemens, Texas Instruments and Tower Semiconductor. Full-
Flow systems can currently be configured with either one or two vessels that
are capable of processing 50 8-inch wafers each. The Company recently completed
development of an enhanced Full-Flow system that provides a two-fold increase
in capital productivity by offering vessels capable of processing 100 8-inch
wafers. This enhanced system, which the Company began to ship in April 1996,
addresses the cost-sensitive photoresist strip market as well as other wet
processing applications. In addition, the Company believes its Full-Flow
technology is particularly well-suited for cleaning and precise etching
applications in the manufacture of FPDs, and provides significant COO
advantages over competing FPD wet processing technologies. The Company has
developed and shipped in April 1996 a high-throughput FPD processing system
based on its Full-Flow platform.

The Company's objective is to capitalize on the inherent COO advantages of
its Full-Flow systems to become a leading supplier of advanced wet processing
equipment to the worldwide semiconductor and FPD industries. The Company's
Full-Flow systems are based on a modular design and can be configured using a
variety of process and support modules. By basing new process applications on
its proprietary Full-Flow platform, the Company can focus primarily on the
development and optimization of the applications' process recipes, which the
Company believes significantly reduces the time and cost associated with
entering new wet processing market segments.

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3
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company........................... 2,138,461 shares
Common Stock Offered by the Selling Shareholders.............. 61,539 shares
</TABLE>
------
<TABLE>
<S> <C>
Total Offering................................ 2,200,000 shares
Common Stock to be Outstanding after the
Offering....................................... 5,941,724 shares(1)
Use of Proceeds................................. For debt repayment, expansion
of facilities, upgrade of
systems and general corporate
purposes, including working
capital.
Nasdaq Stock Market Symbol...................... CFMT
</TABLE>

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED
YEAR ENDED TEN MONTHS ENDED ENDED OCTOBER 31, APRIL 30,
DECEMBER 31, OCTOBER 31, ----------------------- --------------
1991 1992(2) 1993 1994 1995 1995 1996
------------ ---------------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $4,943 $5,939 $11,840 $15,937 $23,430 $9,331 $19,697
Operating income........ 1,141 793 2,095 1,573 2,278 454 2,293
Net income.............. 259 145 883 538 1,402 253 1,351
Net income per
share(3)............... $ 0.35 $ 0.06 $ 0.34
Weighted average common
and common equivalent
shares(3).............. 3,994 3,994 3,994
</TABLE>

<TABLE>
<CAPTION>
APRIL 30, 1996
----------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 649 $13,407
Working capital...................................... 7,205 25,453
Total assets......................................... 27,291 39,663
Long-term debt, less current portion................. 3,219 2,379
Shareholders' equity................................. 11,126 30,214
</TABLE>
- --------
(1) Excludes 654,021 shares of Common Stock issuable upon the exercise of
outstanding stock options as of April 30, 1996, of which options to
purchase 395,360 shares were then exercisable. See Note 10 of the Notes to
Consolidated Financial Statements.
(2) In 1992, the Company changed its fiscal year end from December 31 to October
31.
(3) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the computation of net income per share.
(4) Adjusted to reflect the sale by the Company of 2,138,461 shares of Common
Stock offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."

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

Unless otherwise indicated, (a) all references to fiscal years of the Company
in this Prospectus refer to fiscal years ended on October 31 and (b) the
information in this Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option and (ii) has been adjusted to reflect a 3.326-for-one
split of the Common Stock effective immediately prior to the date hereof.

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

Major risks which may affect the Company's business include management of
growth, volatility of the semiconductor industry and reliance on international
sales. For a description of these and other risks, see "Risk Factors" beginning
on page 5.

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

"CFM," "Full-Flow," "Direct-Displacement," "Vapor-Flow" and the logo on the
cover of this Prospectus are trademarks of CFM Technologies, Inc. This
Prospectus also contains trademarks of other companies.

4
<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors in addition to the other information presented in this Prospectus
before purchasing the shares of Common Stock offered hereby. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed
in forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed below.

FLUCTUATIONS IN OPERATING RESULTS

The Company has derived substantially all of its net sales from the sale of
a limited number of wet processing systems which typically have list prices
ranging from $0.9 million to $2.5 million per system. At the Company's current
revenue level, each sale or failure to make a sale can have a material effect
on the Company. A cancellation, rescheduling or delay in a shipment near the
end of a particular quarter may cause net sales in that quarter to fall
significantly below the Company's expectations and thus may materially
adversely affect the Company's operating results for such quarter. Other
factors which may lead to fluctuations in the Company's quarterly and annual
operating results include: market acceptance of the Company's systems and its
customers' products; the number of systems being manufactured during any
particular period; the geographic mix of sales; the mix of sales by
distribution channel; the timing of announcement and introduction of new
systems by the Company and its competitors; a downturn in the market for
personal computers or other products incorporating semiconductors; variations
in the configuration of systems sold; product discounts and changes in
pricing; delays in deliveries from suppliers; delays in orders due to
customers' financial difficulties; and volatility in the semiconductor and FPD
industries and the markets served by the Company's customers. Also, customers
may face competing capital budget considerations, thus making the timing of
customer orders uneven and difficult to predict. Many of the factors listed
above are beyond the control of the Company. In addition, continued
investments in research, development and engineering and the development of a
worldwide sales, marketing and customer satisfaction organization will result
in significantly higher fixed costs. There can be no assurance that the
Company will be able to achieve a rate of growth or level of sales in any
future period commensurate with its level of expenses. The impact of these and
other factors on the Company's operating results in any future period cannot
be forecast with any degree of certainty. Due to the foregoing factors, it is
likely that in some future quarter or quarters the Company's operating results
may be below the expectations of analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Industry Background."

ACCEPTANCE BY CUSTOMERS OF NEW TECHNOLOGY

The Company's products all rely upon proprietary technology to accomplish
wet chemical processing during semiconductor or FPD manufacturing, which
technology is significantly different than the technological approaches in
current usage for these processes. Most of the Company's competitors make use
of established technology with competitive product variations. The
semiconductor industry is especially resistant to the introduction of changes
in process or approach in a manufacturing cycle which is quite long (up to
twelve weeks), consists of many separate process events (up to 300 or more)
and suffers from limited control measurement points during the overall
fabrication process. Accordingly, managers of semiconductor fabrication
facilities ("fabs") have exhibited a strong resistance to changing equipment
and have been reluctant to embrace new technology, including the Company's
Full-Flow systems. Because a substantial investment is required by
semiconductor manufacturers to install and integrate capital equipment into a
semiconductor production line, these manufacturers will tend to choose
semiconductor equipment suppliers based on past relationships, product
compatibility and proven operating performance. Once a manufacturer has
selected a particular vendor's capital equipment, the Company believes that
the manufacturer generally relies upon that equipment for a specific
production line application and frequently will attempt to consolidate related
capital equipment purchases with the same vendor, to the degree that such
consolidation is possible. Many semiconductor manufacturers continue to
extract marginal improvements from existing wet processing technology in order
to address issues such as increases in feature density, reductions in
linewidth and planned increases in wafer size. There can be no assurance that
the Company's products will achieve broad market acceptance. See "Business--
Industry Background" and "Business--Products."

5
<PAGE>

CUSTOMER CONCENTRATION

Historically, relatively few customers have accounted for a substantial
portion of the Company's net sales. Sales to IBM, Texas Instruments, GEC
Plessey and Siemens accounted for approximately 22.6%, 17.2%, 13.1% and 10.6%,
respectively, of net sales in fiscal 1995, and sales to IBM accounted for
approximately 30.5% and 43.1% of net sales in fiscal 1993 and 1994,
respectively. Sales to SGS-Thomson and Motorola accounted for approximately
32.3% and 23.8%, respectively, of net sales in the six months ended April 30,
1996. In addition, at April 30, 1996, orders from LG International represented
approximately $11.6 million or 73.7% of the Company's backlog. There can be no
assurance that any additional orders will be received from LG International or
that these orders will not be delayed or otherwise changed. In February 1996,
Motorola, orders from which had represented a significant percentage of the
Company's backlog as of November 30, 1995, cancelled an order for a Full-Flow
system. There can be no assurance that Motorola will order additional systems
from the Company or that other significant customers will not cancel or delay
orders in the future. The Company expects a significant portion of its future
sales to remain concentrated within a limited number of customers. The
Company's arrangements with its customers are generally on a purchase order
basis and not pursuant to long-term contracts. There can be no assurance that
the Company will be able to retain its major customers or that such customers
will not cancel or reschedule orders or that cancelled orders will be replaced
by other sales. A reduction or delay in orders from any of the Company's
significant customers, including reductions or delays due to market, economic
or competitive conditions in the semiconductor or FPD industries, or the loss
of any such customers, could have a material adverse effect upon the Company's
results of operations. See "Business--Customers."

SOLE OR LIMITED SOURCES OF SUPPLY

The Company relies to a substantial extent on outside vendors to manufacture
and supply many of the components and subassemblies used in the Company's
systems. Certain of these components and subassemblies are obtained from a
sole supplier or a limited group of suppliers, many of which are small,
independent companies. Moreover, the Company believes that certain of these
components and subassemblies can only be obtained from its current suppliers.
The Company's reliance on outside vendors generally, and a sole or a limited
group of suppliers in particular, involves several risks, including a
potential inability to obtain an adequate supply of required components and
reduced control over pricing, timely delivery and quality of components. The
Company has experienced and continues to experience some reliability and
quality problems with certain key components and subassemblies provided by
single source suppliers. Because the manufacture of certain of these
components and subassemblies is a complex process and requires long lead
times, there can be no assurance that delays or shortages caused by suppliers
will not occur. The process of obtaining and qualifying replacement suppliers
could be lengthy, and no assurance can be given that any additional sources
would be available to the Company on a timely basis. Any inability to obtain
adequate deliveries of components and subassemblies which conform to the
Company's reliability and quality requirements or any other circumstance that
would require the Company to seek alternative sources of supply or, if
possible, to manufacture such components internally could delay the Company's
ability to ship its systems and could have a material adverse effect on the
Company. See "Business--Manufacturing."

DEPENDENCE ON LIMITED PRODUCT OFFERINGS

To date, substantially all of the Company's net sales have consisted of
sales of Full-Flow systems to the semiconductor industry. The Company has
recently developed a version of its Full-Flow system for use in FPD
manufacturing. The ability of the Company to diversify its operations through
the introduction and sale of system enhancements with new applications is
dependent upon the success of the Company's continuing research, development
and engineering activities, as well as its marketing efforts. The Company's
continued sales growth will depend upon achieving market acceptance of its
Full-Flow systems and future products. There can be no assurance that the
Company will be able to develop, introduce or market new systems or system
enhancements in a timely or cost-effective manner or that any such systems or
enhancements will achieve market acceptance. See "Business--Products."

DEPENDENCE UPON PRODUCT DEVELOPMENT

6
<PAGE>

remain competitive in the future, the Company will need to develop and
commercialize additional cleaning and etching processes based on its Full-Flow
platform. Further, the Company will need to develop new products which are
capable of supporting customers' increasingly complex process requirements and
which compete effectively on the basis of overall COO, including process
performance and capital productivity. The market for FPD manufacturing
equipment presents an additional challenge as the technology is at an earlier
stage and subject to more rapid evolution. The success of new system
introductions is dependent on a number of factors, including timely completion
of new system designs, system performance and market acceptance, and may be
adversely affected by manufacturing inefficiencies associated with the start
up of such new introductions and the challenge of producing systems in volume
which meet customer requirements. Because it is generally not possible to
predict the time required and costs involved in reaching certain research,
development and engineering objectives, actual development costs could exceed
budgeted amounts and estimated product development schedules may require
extension. Any delays or additional development costs could have a material
adverse effect on the Company's business and results of operations. There can
be no assurance that the Company will successfully develop and introduce new
products or enhancements to its existing products on a timely basis or in a
manner which satisfies customers or achieves widespread market acceptance.

Because of the large number of components in, and the complexity of, the
Company's systems, significant delays can occur between the introduction of
systems or system enhancements and the commencement of commercial shipments.
The Company has from time to time experienced delays in the introduction of,
and certain technical and manufacturing difficulties with, certain of its
systems and enhancements, and may experience such delays and technical and
manufacturing difficulties in future introductions or volume production of new
systems or enhancements. The Company's inability to overcome such
difficulties, to meet the technical specifications of any new systems or
enhancements, or to manufacture and ship these systems or enhancements in
volume and in a timely manner, would materially adversely affect the Company's
business and results of operations, as well as its customer relationships. In
addition, the Company from time to time incurs unanticipated costs to ensure
the functionality and reliability of its products early in their life cycles,
which costs can be substantial. If new products or enhancements experience
reliability or quality problems, the Company could encounter a number of
difficulties, including reduced orders, higher manufacturing costs, delays in
collection of accounts receivable and additional service and warranty
expenses, all of which could materially adversely affect the Company's
business and results of operations. See "Business--Products" and "Business--
Research, Development and Engineering."

MANAGEMENT OF GROWTH

The Company is currently undergoing a period of rapid growth. To accommodate
this growth, the Company is in the process of implementing a variety of new
and upgraded operating and financial systems, procedures and controls. There
can be no assurance that such efforts can be accomplished successfully, or
that the Company's systems, procedures and controls will be adequate to
support the Company's operations. The Company also faces the task of
identifying, recruiting, training and integrating new employees quickly enough
to keep pace with its rapid growth. Many of the positions which are critical
to supporting the Company's growth require experience with semiconductor
capital equipment. The recent overall growth of the semiconductor capital
equipment industry has made the recruitment of such experienced personnel
difficult. The Company's growth may also strain the Company's management,
manufacturing, financial and other resources. Any failure to expand these
areas in an efficient manner could have a material adverse effect on the
Company. The Company has recently leased an additional facility and may be
required to secure additional facilities in the future. The need to acquire
additional remote facilities could be disruptive and could have a material
adverse effect on the Company. See "Business--Employees" and "Business--
Facilities."

DEPENDENCE UPON KEY PERSONNEL

The success of the Company depends to a large extent upon the efforts of key
managerial and technical employees, such as Christopher F. McConnell, the
Company's Chairman and co-founder, Roger A. Carolin, President and Chief
Executive Officer, Huw K. Thomas, Executive Vice President, Alan E. Walter,
Senior Vice

7
<PAGE>

President and co-founder, Steven Bay, Chief Technical Officer, and Steven
Verhaverbeke, Director of Process Technology. The loss of the services of any
of these persons could have a material adverse effect on the Company. The
Company has not entered into written employment agreements with any of its
executive officers other than its chief financial officer, nor does the
Company maintain key man life insurance on any of its personnel. The success
of the Company will also depend upon its ability to attract and retain
qualified employees, particularly highly skilled design and process engineers
involved in the manufacture of existing systems, the development of new
applications and systems and the installation, training and maintenance
related to those systems already installed at customer sites. There can be no
assurance that the Company will be successful in retaining or recruiting,
training and integrating the necessary key personnel to support its
anticipated growth, which could have a material adverse effect on the
Company's results of operations. See "Business--Employees" and "Management--
Directors and Executive Officers."

LENGTHY SALES CYCLE

Sales of the Company's systems depend, in significant part, upon the
decision of a prospective customer to increase manufacturing capacity, which
typically involves a significant capital commitment. The amount of time from
the initial contact with the customer to the first order is typically one to
two years. The Company's ability to obtain orders from potential customers has
depended in the past and may continue to depend in the future upon customers
purchasing a new system in order to evaluate Full-Flow and Direct-Displacement
drying technologies as an alternative to existing wet processing technologies.
For many potential customers, decisions to undertake such evaluations occur
infrequently. The Company often experiences delays in finalizing further
system sales while the customer evaluates and receives approvals for the
purchase of additional systems. Such delays may include the time necessary to
plan, design or complete a new or expanded fab. Due to these factors, the
Company's systems typically have a lengthy sales cycle during which the
Company may expend substantial funds and management effort. There can be no
assurance that any of these expenditures or efforts on the part of the Company
will result in sales. See "Business--Products" and "Business--Competition."

VOLATILITY OF THE SEMICONDUCTOR INDUSTRY

The Company's business depends, in significant part, upon capital
expenditures by manufacturers of semiconductor devices, which in turn depend
upon the current and anticipated market demand for such devices and the
products utilizing such devices. The semiconductor industry has been highly
volatile and historically has experienced periods of oversupply, resulting in
significantly reduced demand for capital equipment, including wet processing
systems. In recent years, the semiconductor industry has experienced
significant growth well above its historical trend, which has resulted in a
corresponding growth in the capital equipment industry. Recently, a number of
semiconductor manufacturers have experienced a reduction in order growth and,
in a few instances, a reduction in overall orders. These events have caused
certain semiconductor manufacturers to postpone or cancel equipment deliveries
to previously planned expansion or new fab construction projects. In February
1996, the Company experienced the cancellation of an order for one Full-Flow
system, and there can be no assurance that further order cancellations or
reductions in order growth or overall orders for semiconductors will not have
a material adverse effect upon the Company's business or results of
operations. The Company believes that the FPD market may be similarly
volatile. The need for continued investment in research, development and
engineering, marketing and customer satisfaction activities may limit the
Company's ability to reduce expenses in response to future downturns in the
semiconductor or FPD industries. The Company's net sales and results of
operations could be materially adversely affected if downturns or slowdowns in
the semiconductor or FPD markets occur in the future.

HIGHLY COMPETITIVE INDUSTRY

8
<PAGE>

processing technology, and have broader product lines, more experience with
high volume manufacturing, broader name recognition, substantially larger
installed bases and significantly greater financial, technical and marketing
resources than the Company. In the semiconductor wet processing market, the
Company competes primarily with Dainippon Screen, FSI International, Santa
Clara Plastics, Steag MicroTech, SubMicron Systems, Tokyo Electron Limited and
Verteq. In the FPD wet processing market, the Company competes primarily with
Dainippon Screen and Semitool. There can be no assurance that the Company will
overcome the established positions of these competitors or that the Company's
competitors will not develop enhancements to or future generations of
competitive products that will offer price and performance features that are
superior to the Company's systems. The Company believes that in order to
remain competitive, it must invest significant financial resources in
developing new product features and enhancements and in maintaining customer
satisfaction worldwide. In marketing its products, the Company will face
competition from suppliers employing new technologies in order to extend the
capabilities of competitive products beyond their current limits or increase
their productivity. In addition, increased competitive pressure could lead to
intensified price-based competition, resulting in lower prices and margins,
which would materially adversely affect the Company's business and results of
operations. See "Business--Competition."

INTELLECTUAL PROPERTY RIGHTS

The Company relies on a combination of patents, copyrights, trademarks and
trade secrets, non-disclosure agreements and other forms of intellectual
property protection to protect its proprietary technology. Although the
Company believes that its patents and trademarks may have value, the Company
believes that its future success will depend primarily on the innovation,
technical expertise and marketing abilities of its personnel. The Company
currently holds 12 patents in the United States and 20 international patents
and has patent applications pending or under evaluation in the United States
and various foreign jurisdictions. The Company is currently asserting its
patent rights in litigation against three defendants, alleging inducement of
infringement and contributory infringement of one of the Company's patents.
The defendants have denied infringement and asserted, among other things, that
the patent at issue is invalid, and one of the defendants has asserted that
the patent is unenforceable. There can be no assurance that any claim in the
subject patent will be adjudged to encompass use of the defendants' products
or that the subject patent will not be found to be unenforceable or invalid
during prosecution of the actions. A finding of invalidity or unenforceability
could result in the Company's competitors developing products using the
Company's proprietary technology, which in turn could have a material adverse
effect on the Company. The Company believes that these actions, even if
completely successful, will be costly to the Company in terms of both
financial and management resources.

There can be no assurance that additional patents will be issued on the
Company's pending applications or that competitors will not be able
legitimately to ascertain proprietary information embedded in the Company's
products which is not covered by patent or copyright. In such case, the
Company may be precluded from preventing its competitors from making use of
such information. There are no pending lawsuits or claims against the Company
regarding infringement of any existing patents or other intellectual property
rights of others. There can be no assurance, however, that such infringement
claims will not be asserted in the future, nor can there be any assurance, if
such claims are made, that the Company will be able to defend such claims
successfully or, if necessary, obtain licenses on reasonable terms. Adverse
determinations in any litigation naming the Company could subject the Company
to significant liabilities to third parties, require the Company to seek
licenses from third parties and prevent the Company from manufacturing and
selling its systems. Any of these events could have a material adverse effect
on the Company. See "Business--Intellectual Property."

ENVIRONMENTAL REGULATION

The Company is subject to a variety of federal, state and local laws, rules
and regulations relating to the use, storage, discharge and disposal of
hazardous chemicals used during its research, development and engineering
activities. The Company believes that it is currently in compliance in all
material respects with such laws, rules and regulations. However, failure to
so comply could result in substantial liability to the Company,

9
<PAGE>

suspension or cessation of the Company's operations, restrictions on the
Company's ability to expand its operations or requirements for the acquisition
of additional equipment or other significant expense. See "Business--
Manufacturing."

INTERNATIONAL SALES

Sales to customers located outside the United States accounted for
approximately 51.7% of the Company's net sales in each of fiscal 1994 and 1995
and 43.4% in the six months ended April 30, 1996. The Company anticipates that
such international sales will continue to account for a significant percentage
of the Company's net sales. International sales are subject to numerous risks,
including United States and international regulatory requirements and policy
changes, political and economic instability, increased installation costs,
difficulties in accounts receivable collection, exchange rates, tariffs and
other barriers, extended payment terms, difficulty in staffing and managing
international operations, dependence on and difficulties in managing
international distributors or representatives and potentially adverse tax
consequences. Furthermore, although the Company endeavors to meet technical
standards established by foreign regulatory bodies, there can be no assurance
that the Company will be able to comply with such standards in the future. In
addition, the laws of certain other countries may not protect the Company's
intellectual property to the same extent as the laws of the United States. As
part of its efforts to penetrate the East Asia market, the Company entered
into a sales agency agreement with ANAM S&T Co., Ltd. ("ANAM") in Korea in
1991 and a distribution agreement with Innotech Corporation ("Innotech") in
Japan in 1992. Although management believes that it maintains good
relationships with ANAM and Innotech, there can be no assurance that these
relationships will continue. In the event of a termination of any of the
Company's existing representation, agency or distribution arrangements, the
Company's strategy to expand international sales could be adversely affected.
Although the Company's sales during fiscal 1995 were predominantly denominated
in United States dollars, to the extent that the Company expands its
international operations or changes its pricing practices to denominate prices
in international currencies, the Company will be exposed to increased risks of
currency fluctuation. Additionally, a strengthening in the value of the United
States dollar in relation to international currencies may adversely affect the
Company's future sales to international customers. There can be no assurance
that any of these factors will not have a material adverse effect on the
Company. See "Business--Sales and Marketing."

EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation, as amended, and the Pennsylvania
Business Corporation Law contain certain provisions which could delay or
impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such a
transaction would be beneficial to the interests of the shareholders, or could
discourage a third party from attempting to acquire control of the Company.
The Company has authorized 1,000,000 shares of Preferred Stock, which the
Company could issue without further shareholder approval and upon such terms
and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine. The Company has no current plans to issue
any Preferred Stock. In addition, provisions of the Pennsylvania Business
Corporation Law prohibit the Company from engaging in certain business
combinations and allow holders of the Company's voting stock to "put" their
stock to an acquiror for fair value in the event of a control transaction (the
acquisition of 20% of the voting stock of the Company). These provisions could
have the effect of delaying, deferring or preventing a change in control of
the Company and may adversely affect the voting and other rights of holders of
Common Stock. Further, the Company's Articles of Incorporation, as amended,
and Amended and Restated By-Laws include provisions to reduce the personal
liability of the Company's directors for monetary damages resulting from
breaches of their fiduciary duty and to permit the Company to indemnify its
directors and officers to the fullest extent permitted by Pennsylvania law.
See "Description of Capital Stock--Anti-Takeover Provisions."

CONTINUED EXISTENCE OF A CONTROL GROUP

Upon completion of this offering, Christopher F. McConnell, the Company's
Chairman of the Board, and all of the executive officers and directors of the
Company, collectively, will beneficially own approximately

10
<PAGE>

20.4% and 40.3%, respectively, of the Common Stock (or 19.3% and 38.3%,
respectively, if the Underwriters' over-allotment option is exercised in
full). Existing management will hold sufficient voting power to enable it to
continue to control the business and affairs of the Company for the
foreseeable future. Such concentration of ownership may also have the effect
of delaying, deferring or preventing a change in control of the Company. See
"Principal and Selling Shareholders."

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

There has been no prior public market for the Company's Common Stock.
Consequently, the initial public offering price has been determined by
negotiations between the Company and the Representatives of the Underwriters.
See "Underwriting." There can be no assurance that an active public market for
the Common Stock will develop or be sustained after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The Company believes that a variety of factors could cause the
price of the Company's Common Stock to fluctuate, perhaps substantially,
including: announcements of developments related to the Company's business;
quarterly fluctuations in the Company's actual or anticipated operating
results and order levels; general conditions in the semiconductor and FPD
industries or the worldwide economy; announcements of technological
innovations; new products or product enhancements by the Company or its
competitors; developments in patents or other intellectual property rights and
litigation; and developments in the Company's relationships with its
customers, distributors and suppliers. In addition, in recent years the stock
market in general, and the market for shares of small capitalization and
semiconductor industry-related stocks in particular, have experienced extreme
price fluctuations which have often been unrelated to the operating
performance of affected companies. Any such fluctuations in the future could
adversely affect the market price of the Company's Common Stock.

DILUTION AND BENEFIT TO EXISTING SHAREHOLDERS

The proposed initial public offering price is substantially higher than the
net tangible book value per share of Common Stock as of April 30, 1996. As a
result, investors participating in this offering will incur immediate and
substantial net tangible book value dilution. After giving effect to the sale
of 2,138,461 shares of Common Stock by the Company in this offering, the net
tangible book value of the Company as of April 30, 1996 would have been
$29,962,000 or $5.04 per share. This represents an immediate increase in such
net tangible book value of $2.18 per share to existing shareholders and an
immediate dilution of $4.96 per share to new investors purchasing shares in
this offering. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of shares of Common Stock in the public market following this offering
by existing shareholders or option holders could adversely affect the market
price of the Common Stock. Upon the completion of this offering, 3,741,724
outstanding shares of Common Stock will be "restricted securities" within the
meaning or Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The beneficial owners of 3,598,721 shares of Common Stock
and options to purchase 539,881 shares of Common Stock, including the
Company's executive officers and directors, have agreed not to sell any of
their shares until 180 days after the date of this Prospectus without the
prior written consent of PaineWebber Incorporated. Under Rule 144 as currently
in effect, these shares will not be eligible for public sale until at least
November 1, 1996, and then will be subject to the volume limitations and other
conditions imposed by Rule 144. No prediction can be made as to the effect, if
any, that future sales of Common Stock, or the availability of Common Stock
for future sale, will have on the market price of the Common Stock prevailing
from time to time. See "Shares Eligible for Future Sale."

11
<PAGE>

THE COMPANY

The Company was incorporated in Pennsylvania in November 1994 under the name
"The CFM Technology Corporation" in connection with the reorganization of the
Company's operations into a holding company structure. Pursuant to the
reorganization, the Company issued shares of Common Stock to the shareholders
of CFM Technologies, Inc., a Pennsylvania corporation incorporated in May 1984
("CFM Sub"), in exchange for all of the issued and outstanding capital stock
of CFM Sub, and CFM Sub became the wholly-owned operating subsidiary of the
Company. In December 1995, the Company changed its name to "CFM Technologies,
Inc." and CFM Sub changed its name to "CFM Technologies, Incorporated." The
Company has four other wholly owned subsidiaries: CFMT, Inc., a Delaware
investment holding company incorporated in 1992; CFM International Corp., a
foreign sales corporation incorporated in Guam in 1995; CFM Technologies
Limited, incorporated in Scotland in 1995; and CFM Technologies, S.A.,
incorporated in France in 1996. As used in this Prospectus, references to the
"Company" and "CFM" refer to CFM Technologies, Inc. and its consolidated
subsidiaries. The Company's principal executive offices are located at 1336
Enterprise Drive, West Chester, Pennsylvania 19380. The Company's telephone
number is (610) 696-8300.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
by the Company in this offering are estimated to be $19,087,687 ($22,156,687
if the Underwriters' over-allotment option is exercised in full) after
deducting underwriting discounts and commissions and estimated offering
expenses. The Company intends to use approximately $2.5 million to repay
short-term working capital borrowings under its revolving line of credit with
a commercial bank. This indebtedness bears interest at a rate equal to the
lending bank's prime rate and is payable upon the demand of the bank. In
addition, the Company intends to use approximately $1.5 million to expand its
manufacturing facility and approximately $1.5 million to construct a flat
panel applications laboratory. Further, the Company intends to use
approximately $1.1 million to repay certain long-term indebtedness of the
Company incurred in October 1995 in order to finance the Company's existing
applications laboratory. This indebtedness bears interest at a rate equal to
the lending bank's prime rate plus 0.25% and matures on November 1, 1998. The
Company also intends to use approximately $0.8 million of the net proceeds to
expand its information systems infrastructure, including purchases of
sophisticated automated design software and workstations. The balance of the
net proceeds will be used for working capital and general corporate purposes,
including possible acquisitions of or investments in complementary businesses
or products or the right to use complementary technologies. The Company is not
currently engaged in any negotiations with respect to such acquisitions or
investments. Pending such uses, the proceeds from this offering will be
invested in deposits with banks and in short-term, investment grade, interest
bearing securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate paying any cash dividends in the foreseeable future.
The Company currently intends to retain its earnings, if any, for the
development of its business.

12
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of April
30, 1996 and as adjusted to give effect to the sale of the 2,138,461 shares of
Common Stock by the Company in this offering and the application of the
estimated net proceeds therefrom (after deduction of underwriting discounts
and commissions and estimated offering expenses).

<TABLE>
<CAPTION>
APRIL 30, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion....................... $3,219 $ 2,379
------- -------
Shareholders' equity:
Preferred stock, no par value; 1,000,000 shares
authorized; no shares issued and outstanding; no shares
issued and outstanding, as adjusted..................... -- --
Common stock, no par value; 10,000,000 shares authorized;
3,803,263 issued and outstanding; 5,941,724 shares
issued and outstanding, as adjusted(1).................. 9,616 28,704
Retained earnings........................................ 1,510 1,510
------- -------
Total shareholders' equity............................. 11,126 30,214
------- -------
Total capitalization................................. $14,345 $32,593
======= =======
</TABLE>
- --------
(1) Excludes 654,021 shares of Common Stock issuable upon the exercise of
stock options outstanding on April 30, 1996, of which options to purchase
395,360 shares were then exercisable. See Note 10 of the Notes to
Consolidated Financial Statements.

13
<PAGE>

DILUTION

As of April 30, 1996, the net tangible book value of the Company was
$10,874,000, or $2.86 per share of Common Stock. "Net tangible book value" per
share is equal to the Company's net tangible book value (total tangible assets
less total liabilities) divided by the number of outstanding shares of Common
Stock. After giving effect to the sale of the 2,138,461 shares of Common Stock
by the Company in this offering (after deduction of underwriting discounts and
commissions and estimated offering expenses), the net tangible book value of
the Company at April 30, 1996 would have been $29,962,000, or $5.04 per share
of Common Stock, representing an immediate increase in such net tangible book
value of $2.18 per share to existing shareholders and an immediate dilution of
$4.96 per share to investors in this offering. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price.................................. $10.00
Net tangible book value per share before this offering....... $2.86
Increase attributable to investors in this offering.......... 2.18
-----
Net tangible book value per share after this offering.......... 5.04
------
Dilution to investors in this offering......................... $ 4.96
======
</TABLE>

The foregoing computations and table assume no exercise of the Underwriters'
over-allotment option or stock options. As of April 30, 1996, options to
purchase 654,021 shares of Common Stock were outstanding, with a weighted
average exercise price of $4.60. If all such options were exercised, the
dilution to investors in this offering would be $5.12 per share. See
"Capitalization," "Management--1992 Stock Option Plan," "Description of
Capital Stock" and Note 10 of the Notes to Consolidated Financial Statements.

The following table summarizes on a pro forma basis, as of April 30, 1996,
the differences between existing shareholders and purchasers of shares in this
offering with respect to the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share
paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholders(1)(2)..... 3,803,263 64.0% $ 9,616,000 31.0% $ 2.53
Investors in this
offering(1)............ 2,138,461 36.0 21,384,610 69.0 10.00
--------- ----- ----------- -----
Total................... 5,941,724 100.0% $31,000,610 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Shareholders in this offering will reduce the number
of shares held by existing shareholders to 3,741,724 or 63.0% of the total
number of shares of Common Stock outstanding after this offering (59.7% if
the Underwriters' over-allotment option is exercised in full), and will
increase the number of shares held by investors in this offering to
2,200,000, or 37.0% of the total number of shares of Common Stock
outstanding after this offering (40.3% if the Underwriters' over-allotment
option is exercised in full).

(2) The above table assumes no exercise of options outstanding as of April 30,
1996. Assuming the exercise of all such options, the total number of
shares held by existing shareholders would be 4,457,284, or 67.6% of the
shares outstanding. The total consideration paid by existing shareholders
would be $12,626,325, or 37.1% of the total consideration, and the average
price per share for all existing shareholders would be $2.83.

14
<PAGE>

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table contains certain selected consolidated financial data of
the Company and is qualified by the more detailed Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. The
consolidated statement of income data for the fiscal years ended October 31,
1993, 1994 and 1995 and the consolidated balance sheet data as of October 31,
1994 and 1995 have been derived from the Consolidated Financial Statements of
the Company which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this
Prospectus. The consolidated statement of income data for the year ended
December 31, 1991, the ten months ended October 31, 1992 and the six months
ended April 30, 1995 and 1996 and the consolidated balance sheet data as of
December 31, 1991, October 31, 1992 and 1993 and April 30, 1996 are derived
from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting only of normal adjustments, that the
Company considers necessary for a fair presentation of the results of
operations for such periods. This data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

<TABLE>
<CAPTION>
TEN MONTHS SIX MONTHS
ENDED FISCAL YEAR ENDED
YEAR ENDED OCTOBER ENDED OCTOBER 31, APRIL 30,
DECEMBER 31, 31, ----------------------- --------------
1991 1992(1) 1993 1994 1995 1995 1996
------------ ---------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $4,943 $5,939 $11,840 $15,937 $23,430 $9,331 $19,697
Cost of sales........... 2,795 3,626 6,752 9,114 13,463 5,594 10,637
------ ------ ------- ------- ------- ------ -------
Gross profit.......... 2,148 2,313 5,088 6,823 9,967 3,737 9,060
Operating expenses:
Research, development
and engineering...... 158 327 720 2,100 1,717 811 2,092
Selling, general and
administrative....... 849 1,193 2,273 3,150 5,972 2,472 4,675
------ ------ ------- ------- ------- ------ -------
Total operating
expenses........... 1,007 1,520 2,993 5,250 7,689 3,283 6,767
------ ------ ------- ------- ------- ------ -------
Operating income........ 1,141 793 2,095 1,573 2,278 454 2,293
Interest expense........ 744 615 755 797 173 74 215
------ ------ ------- ------- ------- ------ -------
Income before income
taxes.................. 397 178 1,340 776 2,105 380 2,078
Income taxes............ 138 33 457 238 703 127 727
------ ------ ------- ------- ------- ------ -------
Net income.............. $ 259 $ 145 $ 883 $ 538 $ 1,402 $ 253 $ 1,351
====== ====== ======= ======= ======= ====== =======
Net income per
share(2)............... $ 0.35 $ 0.06 $ 0.34
======= ====== =======
Weighted average common
and common equivalent
shares(2).............. 3,994 3,994 3,994
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31,
DECEMBER 31, ----------------------------- APRIL 30,
1991 1992 1993 1994 1995 1996
------------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 296 $ 51 $ 112 $ 1,106 $ 408 $ 649
Working capital.......... 1,810 2,211 3,118 7,177 8,136 7,205
Total assets............. 5,049 6,062 9,332 16,689 18,454 27,291
Long-term debt, less
current portion......... 4,934 5,493 5,610 7,820 3,005 3,219
Shareholders' equity
(deficit)............... (991) (846) 237 5,109 9,775 11,126
</TABLE>
- --------
(1) In 1992, the Company changed its fiscal year end from December 31 to
October 31.
(2) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the computation of net income per share.

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

CFM designs, manufactures and markets advanced wet processing equipment for
sale to the worldwide semiconductor and flat panel display manufacturing
industries. The Company was founded in 1984 and began commercial operations in
1990 following a period of technology and product development, during which
time the Company's patented Full-Flow enclosed processing and Direct-
Displacement drying technologies were developed. Sales of Full-Flow systems
have accounted for substantially all of the Company's net sales over the last
three fiscal years. Since 1991, the Company has also designed, manufactured
and sold a number of systems under the Vapor-Flow trade name, including two
such systems for use by flat panel display manufacturers. Because the Vapor-
Flow System supports limited applications, the Company recently developed a
flat panel display wet processing system based on its Full-Flow platform, and
has discontinued offering the Vapor-Flow system.

The Company has derived substantially all of its revenues from the sale of a
relatively small number of its systems, which typically range in price from
$0.9 million to $2.5 million. Although the Company recorded losses in certain
quarters in fiscal 1993 and 1994, the Company was profitable for each of these
fiscal years. While the Company has experienced profitable operations for the
past seven fiscal quarters, there can be no assurance that the Company will be
able to continue this quarterly profitability. The Company has significantly
increased its expense levels to support its recent growth and intends to
expand its sales and marketing and customer satisfaction activities worldwide
and to continue to make significant investments in research, development and
engineering. There can be no assurance that the Company will be able to
achieve a rate of growth or level of sales in any future period commensurate
with its level of expenses. Future results will depend upon a variety of
factors, including the timing of significant orders, the ability of the
Company to bring new systems to market, the timing of new product releases by
the Company's competitors, patterns of capital spending by the Company's
customers, market acceptance of new or enhanced versions of the Company's
systems, changes in pricing by the Company or its competitors and the
volatility of the semiconductor and flat panel display industries and of the
markets served by the Company's customers.

The Company sells its systems worldwide and records a significant portion of
its sales to customers outside the United States. In fiscal 1993, 1994 and
1995 and the six months ended April 30, 1996, international sales constituted
25.3%, 51.7%, 51.7% and 43.4% of net sales, respectively. The Company's
international sales have occurred in Europe, Japan, Korea and Israel. While
gross margins on international sales made by the Company's Korean sales agent
are frequently higher than those on other sales, the net contribution to the
Company's profitability for such sales is similar to sales made in other
territories due to the commissions payable in connection with such sales.
However, installation costs (which impact gross margins) are typically higher
with respect to international sales. The Company anticipates that
international sales will continue to account for a significant portion of net
sales, although the percentage of international sales is expected to fluctuate
from period to period.

16
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth the components of the Company's statements of
income for the fiscal years ended October 31, 1993, 1994 and 1995 and the six
months ended April 30, 1995 and 1996, expressed as a percentage of net sales.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 31, SIX MONTHS ENDED APRIL 30,
------------------- --------------------------
1993 1994 1995 1995 1996
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 57.0 57.2 57.5 60.0 54.0
----- ----- ----- ------------- -------------
Gross profit............ 43.0 42.8 42.5 40.0 46.0
Operating expenses:
Research, development and
engineering.............. 6.1 13.2 7.3 8.7 10.6
Selling, general and
administrative........... 19.2 19.7 25.5 26.5 23.7
----- ----- ----- ------------- -------------
Total operating
expenses............... 25.3 32.9 32.8 35.2 34.3
----- ----- ----- ------------- -------------
Operating income............ 17.7 9.9 9.7 4.8 11.7
Interest expense............ 6.4 5.0 0.7 0.7 1.1
----- ----- ----- ------------- -------------
Income before income taxes.. 11.3 4.9 9.0 4.1 10.6
Income taxes................ 3.9 1.5 3.0 1.4 3.7
----- ----- ----- ------------- -------------
Net income.................. 7.4% 3.4% 6.0% 2.7% 6.9%
===== ===== ===== ============= =============
</TABLE>

Net Sales. Net sales increased 34.7% from $11.8 million in fiscal 1993 to
$15.9 million in fiscal 1994 and 47.2% to $23.4 million in fiscal 1995. Net
sales for the six months ended April 30, 1996 increased 111.1% to $19.7
million from $9.3 million for the six months ended April 30, 1995. These
increases resulted primarily from increased demand for the Company's Full-Flow
systems by the semiconductor industry as the Company's customers equipped new
facilities or expanded facilities, resulting in multiple systems purchases by
some of the Company's major customers, including new customers. With regard to
the flat panel display industry, the Company sold one system in each of fiscal
1993 and 1994 and two systems in the six months ended April 30, 1996 and
expects to have additional net sales in the remainder of fiscal 1996.
International sales represented 25.3%, 51.7%, 51.7% and 43.4% of total net
sales in fiscal 1993, 1994 and 1995 and the six months ended April 30, 1996,
respectively. The number of international customers receiving shipments of the
Company's systems increased in fiscal 1995 and in the six months ended April
30, 1996. The Company expects international sales to continue to represent a
significant portion of its net sales as a result of the Company's planned
expansion of its international marketing efforts.

Gross Profit. Gross profit as a percentage of net sales remained
substantially constant from fiscal 1993 through fiscal 1995. Efficiencies
gained through increased production volume during these periods were more than
offset by increased recruiting and training costs as the Company significantly
increased the size of its production, installation and service staffs to
support the increased level of shipments. Gross profit for the six months
ended April 30, 1996 increased to 46.0% of net sales from 40.0% of net sales
for the six months ended April 30, 1995. This increase was attributable to
increases in sales prices, changes in product mix and manufacturing
efficiencies resulting from the expansion of the Company's manufacturing
facilities.

Research, Development and Engineering. Research, development and engineering
expenses increased from $0.7 million or 6.1% of net sales in fiscal 1993 to
$2.1 million or 13.2% of net sales in fiscal 1994, and decreased to $1.7
million or 7.3% of net sales in fiscal 1995. Research, development and
engineering expenses increased by 158.0% from $0.8 million, or 8.7% of net
sales, in the six months ended April 30, 1995 to $2.1 million, or 10.6% of net
sales, in the six months ended April 30, 1996. The increase in fiscal 1994 was
primarily attributable to two major development projects. In 1993, the Company
was awarded a contract by SEMATECH, a consortium of semiconductor
manufacturers, to develop and produce an advanced semiconductor wet processing
system. Early development work on this project took place during fiscal 1993,
and system production,

17
<PAGE>

delivery and extensive process validation took place during fiscal 1994.
Simultaneously in fiscal 1994, the Company also began developing an improved
wet processing system for flat panel display manufacturing. This development
project resulted in the production of a system which was delivered in late
fiscal 1994. The decline in research, development and engineering expenses in
fiscal 1995 was primarily attributable to the completion of these two major
development projects early in fiscal 1995. SEMATECH provided research and
development funding to the Company in the amount of approximately $1.7 million
in each of fiscal 1993 and fiscal 1994. These amounts were recorded as a
reduction to research, development and engineering expenses in those fiscal
years. See Note 2 of the Notes to Consolidated Financial Statements. The
substantial increase in research, development and engineering spending in the
six months ended April 30, 1996 over the same period in the prior year is
attributable to the Company's completion in March 1996 of the prototype Full-
Flow system configured to process 100 wafers per vessel and the preparation
and release of this system's design to the Company's manufacturing division.
The first production unit of this 100-wafer system was shipped in April 1996.
In addition, during the six months ended April 30, 1996, the Company incurred
substantial research, development and engineering expenses in support of the
development of its first Full-Flow system for use in the manufacture of flat
panel displays. The first FPD system was shipped in April 1996. The Company
has received orders for four other Full-Flow FPD systems for delivery during
the remainder of 1996. The Company believes that a substantial investment in
research, development and engineering is critical to maintaining a strong
technological position and that such expenses will continue to increase in the
remainder of fiscal 1996 over the 1995 level.

Selling, General and Administrative. Selling, general and administrative
expenses increased from $2.3 million or 19.2% of net sales in fiscal 1993 to
$3.2 million or 19.7% of net sales in fiscal 1994, and to $6.0 million or
25.5% of net sales in fiscal 1995. Selling, general and administrative
expenses increased by 89.1% from $2.5 million in the six months ended April
30, 1995 to $4.7 million in the six months ended April 30, 1996, while
selling, general and administrative expenses decreased as a percentage of net
sales to 23.7% of net sales in the six months ended April 30, 1996 from 26.5%
of net sales in the comparable prior year period. The increase in fiscal 1994
was primarily attributable to increases in sales and marketing costs resulting
from expansion of the sales and marketing staff and the formal organization of
the Company's customer service function. The increases in fiscal 1995 and the
six months ended April 30, 1996 resulted primarily from (i) increases in sales
and marketing costs related to increased customer support, (ii) administrative
costs related to increases in staff in the accounting and finance functions
and (iii) legal expenses related to litigation undertaken by the Company to
protect one of the Company's patents. See "Business--Intellectual Property."
The Company believes that selling, general and administrative expenses,
including legal expenses related to the patent litigation, will increase in
fiscal 1996 and beyond, as increased personnel and sales and support expenses
are expected in connection with the Company's efforts to increase its net
sales.

Interest Expense. Interest expense, net of interest income, remained
approximately constant from fiscal 1993 to fiscal 1994 at $0.8 million, which
represented 6.4% of net sales in fiscal 1993 and 5.0% of net sales in fiscal
1994, and decreased to $0.2 million or 0.7% of net sales in fiscal 1995.
Interest expense, net of interest income, increased 190.5% from $0.1 million,
or 0.7% of net sales, in the six months ended April 30, 1995 to $0.2 million,
or 1.1% of net sales, in the six months ended April 30, 1996. In each of
fiscal 1993 and 1994, interest expense was primarily attributable to interest
of $0.7 million on the Company's obligation to two related-party limited
partnerships which provided the Company with research and development funding
in 1984 and 1985. The decrease in net interest expense in fiscal 1995 was
primarily attributable to the elimination on November 1, 1994 of the Company's
obligation to these limited partnerships. See Note 8 of the Notes to
Consolidated Financial Statements. The Company incurred interest expenses due
to intra-period borrowings on its revolving line of credit during fiscal 1995
and experienced a substantial increase in interest expense in the six months
ended April 30, 1996 as borrowings on the Company's line of credit increased
to support increased working capital requirements.

Income Taxes. The Company's effective tax rate decreased from 34.1% of
income before income taxes in fiscal 1993 to 30.6% in fiscal 1994, and
increased to 33.4% in fiscal 1995. The rate for fiscal 1994 was affected

18
<PAGE>

by recognition of a research and development tax credit. The rate for fiscal
1995 reflects a reduction in the research and development tax credit because
of lower research, development and engineering expenses. The Company recorded
income tax expense at an effective rate of 35.0% of income before income taxes
during the six months ended April 30, 1996.

QUARTERLY RESULTS OF OPERATIONS

The following tables present certain unaudited consolidated quarterly
financial information for each quarter in the fiscal years ended October 31,
1994 and 1995 and the first two quarters of fiscal 1996. In the opinion of the
Company's management, this information has been prepared on the same basis as
the Consolidated Financial Statements appearing elsewhere in this Prospectus
and includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial results set forth herein. Results of
operations for any previous quarter are not necessarily indicative of results
for any future period.

<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995 FISCAL 1996
-------------------------------------- ------------------------------------ -----------------
JAN. 31 APRIL 30 JULY 31 OCT. 31 JAN. 31 APRIL 30 JULY 31 OCT. 31 JAN. 31 APRIL 30
-------- --------- ------- -------- ------- --------- ------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $3,808 $1,641 $4,136 $6,352 $4,171 $5,160 $6,601 $7,498 $9,611 $10,086
Cost of sales........... 1,631 1,205 2,086 4,192 2,506 3,088 3,848 4,021 5,555 5,082
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross profit........... 2,177 436 2,050 2,160 1,665 2,072 2,753 3,477 4,056 5,004
Operating expenses:
Research, development
and engineering....... 59 305 733 1,003 255 556 426 480 1,046 1,046
Selling, general and
administrative........ 692 765 1,253 440 1,304 1,168 1,531 1,969 1,821 2,854
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses.............. 751 1,070 1,986 1,443 1,559 1,724 1,957 2,449 2,867 3,900
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Operating income
(loss)................. 1,426 (634) 64 717 106 348 796 1,028 1,189 1,104
Interest expense........ 209 203 224 161 31 43 46 53 72 143
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before
income taxes........... 1,217 (837) (160) 556 75 305 750 975 1,117 961
Income taxes (benefit).. 373 (256) (49) 170 25 102 251 325 391 336
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income (loss)....... $ 844 $ (581) $ (111) $ 386 $ 50 $ 203 $ 499 $ 650 $ 726 $ 625
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
AS A PERCENTAGE OF NET
SALES:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 42.8 73.4 50.5 66.0 60.1 59.8 58.3 53.6 57.8 50.4
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross profit........... 57.2 26.6 49.5 34.0 39.9 40.2 41.7 46.4 42.2 49.6
Operating expenses:
Research, development
and engineering....... 1.5 18.6 17.7 15.8 6.1 10.8 6.4 6.4 10.9 10.4
Selling, general and
administrative........ 18.2 46.6 30.3 6.9 31.3 22.7 23.2 26.3 18.9 28.3
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses.............. 19.7 65.2 48.0 22.7 37.4 33.5 29.6 32.7 29.8 38.7
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Operating income
(loss)................. 37.5 (38.6) 1.5 11.3 2.5 6.7 12.1 13.7 12.4 10.9
Interest expense........ 5.5 12.4 5.4 2.5 0.7 0.8 0.7 0.7 0.7 1.4
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before
income taxes........... 32.0 (51.0) (3.9) 8.8 1.8 5.9 11.4 13.0 11.6 9.5
Income tax (benefit).... 9.8 (15.6) (1.2) 2.7 0.6 2.0 3.8 4.3 4.1 3.3
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income (loss)....... 22.2% (35.4)% (2.7)% 6.1% 1.2% 3.9% 7.6% 8.7% 7.6% 6.2%
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

Net Sales. The Company's net sales have varied significantly from quarter to
quarter as a result of the relatively high average selling price of the
Company's systems in relation to the amount of the Company's overall sales in
any quarter, the Company's lengthy sales cycles, its customer concentration
and the pattern and timing of orders received from the Company's customers.
Increasing sales volume began to reduce the impact of this variability during
the fiscal year ended October 31, 1995.

Gross Profit. Installation and warranty costs are recorded as costs of sales
at the time of revenue recognition based upon historical experience. These
costs tend to be higher for the first system at each customer site as the
training and familiarization of customer personnel represent a major portion
of this activity. In

19
<PAGE>

addition, while gross margins on sales in Korea are frequently higher, the net
contribution to the Company's profitability for such sales is similar to sales
made in other territories due to the increase in selling, general and
administrative expenses resulting from commissions paid on such sales. Higher
sales volume, increased experience in anticipating installation and warranty
expenses and the absence of major sales by commissioned sales agents resulted
in a reduction in the quarterly variation in gross profit as a percent of net
sales during fiscal 1995 and the six months ended April 30, 1996.

Research, Development and Engineering. During fiscal 1994, the Company was
involved in its SEMATECH and FPD development projects, which resulted in
substantial research, development and engineering expenses. Expense levels in
these programs were high during prototype development and testing and were
relatively lower early during the planning phase and later in process
validation. Research, development and engineering expenses during fiscal 1995
and the six months ended April 30, 1996 were predominantly in support of the
development of a single vessel system capable of processing up to 100 8-inch
wafers.

Selling, General and Administrative. Selling, general and administrative
expenses are impacted by increases in the Company's sales and marketing and
finance and administration staffs and their respective activities. Certain of
these activities are not necessarily recurring and therefore contribute to
variability from quarter to quarter. Advertising, patent litigation costs,
customer support and development activities and sales commissions each
contribute to this variability. The Company expects that increased sales
volume will reduce this quarter-to-quarter variability.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has funded its capital requirements through
funding from two research and development limited partnerships, the sale of
private equity securities and, to a lesser extent, bank borrowings and
equipment leases. As of April 30, 1996 the Company had $0.6 million in cash
and $7.2 million in working capital.

Net cash used in operating activities was $2.8 million, $0.4 million, $0.4
million and $3.0 million for fiscal 1994 and 1995 and the six months ended
April 30, 1995 and 1996, respectively. Increases in accounts receivable and
inventories were $2.3 million and $0.8 million, respectively, in fiscal 1994
and $2.9 million and $0.4 million, respectively, in fiscal 1995. In the six
months ended April 30, 1995, accounts receivable decreased by $0.3 million
while inventories increased by $0.7 million. In the six months ended April 30,
1996, accounts receivable increased by $4.2 million and inventories increased
by $1.7 million. Purchases of property, plant and equipment were $2.6 million,
$1.3 million, $0.1 million and $2.3 million for fiscal 1994 and 1995 and the
six months ended April 30, 1995 and 1996, respectively. These expenditures
consisted primarily of the acquisition of the Company's manufacturing and
office facility in fiscal 1994 and expenditures related to facility
improvements and the establishment of the Company's applications laboratory in
fiscal 1995 and the six months ended April 30, 1996.

The Company has a relationship with a commercial bank which includes a
mortgage on the Company's manufacturing and current office facility in the
amount of $1.0 million, a term note in the amount of $0.2 million, a term loan
facility in the amount of $1.1 million used to finance the Company's
applications laboratory and a revolving demand line of credit which was
increased from $3.0 million to $5.0 million in October 1995 and to $7.5
million in April 1996. The mortgage bears interest at an annual rate of 8.9%.
The term note is secured by certain assets of the Company and bears interest
at such bank's prime rate plus 1.0%. The term loan facility commenced in
October 1995 and matures on November 1, 1998 with payments based upon five-
year amortization and interest at a rate equal to such bank's prime rate plus
0.25%. The line of credit is secured by a first lien on substantially all of
the Company's assets with advances of up to 80% of qualified accounts
receivable and 25% of qualified purchase orders up to a sub-limit of $2.5
million at an interest rate equal to such bank's prime rate. As of April 30,
1996, $5.3 million was outstanding under the Company's line of credit.

The Company also has mortgage notes payable to the Pennsylvania Industrial
Development Authority in the amount of $0.6 million bearing interest at 2.0%
and to the Chester County Development Council in the amount of $0.1 million
bearing interest at 5.0%.

20
<PAGE>

The Company has leased a 38,400 square foot office facility in the same
industrial park as its owned manufacturing facility and has incurred
approximately $0.6 million in expenses to outfit and furnish such facility,
which houses the Company's engineering, customer satisfaction, sales and
marketing and administration functions. The Company has also incurred
approximately $0.2 million in expenses related to the expansion of its
manufacturing facilities and approximately $0.1 million in expenses related to
the improvement of the Company's information processing infrastructure. The
Company has incurred commitments totaling approximately $0.4 million for
equipment for use in the Company's applications laboratory and for computer
hardware and software to support its engineering design functions.

The Company had outstanding accounts receivable of approximately $8.9
million and $13.1 million as of October 31, 1995 and April 30, 1996,
respectively. No allowance for doubtful accounts receivable has been recorded
because the Company believes that all such accounts receivable are fully
realizable.

The Company believes that existing cash balances and its available line of
credit, as well as the net proceeds from this offering, will be sufficient to
meet the Company's cash requirements during the next 12 months. However,
depending upon its rate of growth and profitability, the Company may require
additional equity or debt financing to meet its working capital requirements
or capital expenditure needs. There can be no assurance that additional
financing, if needed, will be available when required or, if available, will
be on terms satisfactory to the Company.

21
<PAGE>

BUSINESS

The Company designs, manufactures and markets advanced wet processing
equipment for sale to the worldwide semiconductor and FPD industries. The
Company believes that its patented Full-Flow enclosed processing and Direct-
Displacement drying technologies enable it to provide wet processing systems
that address a variety of limitations inherent in conventional systems,
including wet benches and spray tools, resulting in a significantly lower COO
for the Company's Full-Flow systems. The Company's customers include: GEC
Plessey, LG International, Motorola, National Semiconductor, Samsung, SGS-
Thomson, Siemens, Texas Instruments and Tower Semiconductor.

INDUSTRY BACKGROUND

Market Overview

The worldwide market for semiconductors has experienced significant growth
in recent years and, according to VLSI Research Inc. ("VLSI"), exceeded $153
billion in 1995. VLSI projects this market to reach approximately $349 billion
by 2000. Increasing demand for ICs has resulted from the growth of existing
markets, the emergence of new markets such as wireless communications, mobile
computing and multimedia, and the increasing use of microprocessors in many
common consumer products such as automobiles, kitchen appliances and
audio/video equipment. This increased demand has been driven in large part by
the semiconductor industry's ability to provide increasingly complex, higher
performance ICs at a declining cost per function and with lower power
consumption. These improvements in the ratio of price to performance have been
driven generally by advancements in semiconductor process technology, which
have enabled the cost-effective production of high density ICs with linewidths
below 0.5 micron.

In response to the growing demand for ICs, semiconductor manufacturers are
increasing capacity by expanding and updating existing fabs and constructing
new fabs. According to VLSI, the semiconductor capital equipment market has
grown from an estimated $2.2 billion in 1980 to $30.9 billion in 1995. VLSI
further estimates that sales of wet processing equipment represented $1.4
billion of this market in 1995. Moreover, based on industry data, the Company
believes that there are more than 110 fabs under construction, under expansion
or scheduled to commence construction. The increasing complexity of ICs has
resulted in an increase in both the number and cost of process tools (such as
steppers, etchers, furnaces and wet processors) required to manufacture
semiconductors. In a typical fab in the 1980s, the cost of equipment
represented approximately 50-55% of the total facility costs. Today, the total
cost of an advanced fab can exceed $1 billion, of which equipment costs can
account for 65-75%. Recently, a number of semiconductor manufacturers have
experienced a reduction in order growth and, in a few instances, a reduction
in overall orders. These events have caused certain semiconductor
manufacturers to postpone or cancel equipment deliveries to previously planned
expansion or new fab construction projects.

Semiconductor manufacturers place great pressure on process equipment
manufacturers to decrease the COO of their products. The principal elements of
COO are yield, throughput, capital costs and direct costs. Yield is primarily
determined by contamination levels and process uniformity. Throughput is
primarily a function of the time required to complete a process cycle and the
handling time between process steps. Capital costs include the cost of
acquisition and installation of the process equipment. Direct costs primarily
include consumables used in the manufacturing process and costs of cleanroom
space occupied by the equipment. Semiconductor device manufacturers must also
address environmental costs such as water usage and costs related to the
control and disposal of chemical waste and emissions associated with operating
a fab. Maintaining an acceptable level of COO becomes increasingly challenging
as manufacturing processes become more complex and process tolerances narrow.

Wet Processing in Semiconductor Manufacturing

The manufacture of semiconductors requires a large number of complex process
steps during which layers of electrically insulating or conducting materials
are created or deposited on the surface of a silicon wafer. Before and after
many of these steps, it is necessary to clean, etch, strip or otherwise
condition the surface of the wafer in order to remove unwanted material or
surface contamination in preparation for a subsequent process step.

22
<PAGE>

SEMATECH has estimated that up to 300 fabrication steps are required to
manufacture advanced logic ICs, and that approximately 50 of these steps are
accomplished by wet processing.

The following table identifies the typical wet processing steps in
semiconductor manufacturing.

- -------------------------------------------------------------------------------
CRITICAL CLEANING CRITICAL ETCHING PHOTORESIST STRIP
APPLICATIONS APPLICATIONS APPLICATIONS
- -------------------------------------------------------------------------------
Initial wafer clean Silicon oxide etch
Pre-diffusion clean Polysilicon etch Aqueous chemistry
Pre-oxidation clean Silicon nitride etch resist strip/ post-ash
Pre-thin films deposition clean
clean Solvent chemistry
Post-CMP clean resist strip/ post-ash
Solvent chemistry clean clean
- -------------------------------------------------------------------------------

The above wet processing steps have traditionally been accomplished using
wet benches and spray tools. Advanced wet benches utilize a succession of open
chemical baths and extensive robotic automation to move wafers from one
chemical or rinse bath to the next. Spray tools subject wafers to sequential
spray applications of chemicals as the wafers are spun inside an enclosed
chamber. The Company believes that these traditional wet processing methods
are subject to a number of inherent limitations, including:

Particle Contamination. Submicron ICs are extremely sensitive to small
amounts of particle contamination which can result in poor device
performance or even failure. As device geometries become smaller, the
reduction of particle contamination has become an increasingly critical
factor in maximizing yield. Open-bath wet benches are exposed to the
cleanroom environment and therefore are susceptible to external
contamination. Since particles tend to reside on the surfaces of liquids
due to surface tension, the movement of wafers in and out of liquids can
result in the transfer of particles to the wafer surfaces through a
"skimming" effect. The tendency to add particles from air-liquid
transitions is inherent in wet benches due to multiple immersions and
withdrawals and in spray processing where each spray droplet striking the
wafer surface can act as a separate miniature immersion and withdrawal.

Watermark Defects and Native Oxide Growth. Both wet benches and spray
tools subject the surface of wafers to repeated wetting and evaporative
drying, creating watermark defects and oxidation on the silicon surface
that can significantly impact device performance and interfere with
subsequent process steps.

Process Control Limitations. Process liquids in wet benches and spray
tools are subject to evaporation and absorption of atmospheric gases. As a
result, it is difficult to achieve precise repeatability of process
results. Additionally, wafers in a wet bench must be robotically
transferred from bath to bath through the cleanroom atmosphere. This gap in
processing during transport adds variability due to the effects of wafer
exposure to the cleanroom atmosphere.

Large Physical Size. The cost of cleanroom space is a significant
component in the overall COO calculation for a specific piece of equipment.
Wet benches configured for the multiple-step wet processes required by many
manufacturers can be up to 30 feet in length. Increases in process
complexity or in wafer size will likely require even larger wet benches.

Environmental Impact. Due to the large volume of the open baths which
comprise a wet bench and the need for multiple wet processing steps to
manufacture increasingly complex ICs, wet benches typically consume large
quantities of water during processing. A typical wet bench can consume more
than 20 gallons of water per wafer, and a recent study has estimated that
water costs can comprise up to one-third of the total cost of cleaning.
Additionally, in many wet bench processes, large amounts of chemicals are
utilized. The open nature of the baths in a typical wet bench necessitates
expensive ventilation and filtration systems in order to remediate chemical
fume emissions. As a result, municipalities and environmental authorities
are increasingly concerned by water consumption and chemical fume emissions
by fabs.

Due to the continuing reduction of semiconductor device geometries and the
escalating cost of leading edge fabs, the Company believes that semiconductor
manufacturers are becoming increasingly sensitive to the foregoing limitations
inherent in traditional wet processing methods.

23
<PAGE>

THE CFM SOLUTION

The Company's systems are based on its proprietary Full-Flow wet processing
technology and are used to perform various cleaning and etching process steps
in the manufacture of semiconductors and FPDs. In the Company's Full-Flow wet
processing system, up to 100 wafers automatically load into a fully-enclosed,
flow-optimized vessel that has a lower fluid inlet and an upper fluid outlet.
Once a selected process is begun, the vessel is completely filled with fluid
at all times, with fluids flowing through the vessel one directly after
another without exposing the wafers to air.

CFM FULL-FLOW VESSEL MODULE AND AUTOMATION

[DIAGRAM APPEARS HERE, DEPICTING A CFM FULL-FLOW VESSEL MODULE AND AUTOMATION
AND POINTING OUT SEVERAL COMPONENTS OF THE MODULE, INCLUDING THE VESSEL, THE
VESSEL MODULE, THE PRE-LOAD WAFER STATIONS AND THE WAFER LOADING ROBOT.]

The Company believes that its patented Full-Flow enclosed processing and
Direct-Displacement drying technologies result in superior process performance
and lower COO by offering the following advantages over conventional wet
processing systems:

Reduced Particle Contamination. Full-Flow processing takes place in a
fully-enclosed processing vessel which isolates the wafers from the
external cleanroom environment and associated contaminants. Additionally,
particle contamination through particle skimming is substantially reduced.
Since the Full-Flow system is capable of directly displacing one chemical
or rinse step with the next without draining the vessel, it can eliminate
the air-liquid interfaces (where particles tend to reside) that normally
occur in wet benches and spray tools. The wafers are kept completely
immersed in fluid until they are ready to be dried using the Company's
patented in situ Direct-Displacement drying technology.

Substantial Elimination of Watermark Defects and Native Oxide Growth. The
formation of watermarks is substantially eliminated through the prevention
of water evaporation from the wafer surface.

24
<PAGE>

Once the chemical treatment of the wafers is completed, drying is
accomplished using CFM's patented Direct-Displacement drying technology.
With this technique, the final rinse water is directly displaced with
highly purified isopropyl alcohol ("IPA") vapor and substantially all water
is forced off the surface of the wafer before it is exposed to an air
environment. Additionally, native oxide growth is suppressed by
degassifying the water immediately before it enters the vessel. Since the
vessel itself is totally enclosed, the ultra pure water in the vessel is
not able to absorb oxygen and carbon dioxide from the cleanroom
environment. As a result, the gas content of the water at the surface of
the wafers is much lower than that typically found in a wet bench or spray
tool.

Tight Process Control. Process precision and repeatability result in
large part from the ability to control accurately the physical and chemical
properties of the processing liquids as well as the transition between
process steps. Full-Flow processing is performed in a completely enclosed
vessel, thereby substantially reducing variability of the processing
liquids such as water and chemical evaporation and absorption of
atmospheric gases. Additionally, because one process liquid directly
displaces the previous one, there is no gap in time and no exposure to the
cleanroom atmosphere between process steps.

Cleanroom Space Savings. The Full-Flow system has been designed to
consume a minimum amount of cleanroom space. System support modules can be
located outside the cleanroom and away from the main system. In many fabs,
this means that these support modules can be located in the basement,
further reducing the amount of square footage that is required on the main
floor of the fab where space is at a premium. A dual vessel Full-Flow
system capable of processing 100 8-inch wafers in each of two vessels
requires only 13 linear feet of cleanroom wall space and no direct usage of
cleanroom floor space when flush-mounted. This is significantly less than
the space requirements of a wet bench with similar processing capabilities,
which the Company believes can require up to 350 square feet of total floor
space and approximately 35 linear feet of cleanroom wall space.

COMPARISON OF FULL-FLOW DUAL VESSEL SYSTEM WITH TRADITIONAL WET BENCH SYSTEM

[DIAGRAM APPEARS HERE, DEPICTING A SCHEMATIC OF A CFM FULL-FLOW DUAL VESSEL
SYSTEM NEXT TO A WET BENCH SYSTEM. THE DIAGRAM SHOWS THAT THE BULK OF THE
FULL-FLOW SYSTEM'S MODULES MAY BE LOCATED OUTSIDE OF THE CLEANROOM, RESULTING
IN LESS TOTAL CLEANROOM FLOOR SPACE BEING OCCUPIED AS COMPARED WITH A WET
BENCH WITH SIMILAR PROCESSING CAPABILITIES. THE DIAGRAM INCLUDES THE
APPROXIMATE DIMENSIONS OF THE FULL-FLOW SYSTEM AND THE WET BENCH.]

Environmental Advantages. The Company believes that the Full-Flow system
utilizes less than one-half of the water required by traditional wet bench
systems performing similar processing steps because most

25
<PAGE>

of the water in wet bench systems flows around the wafer carrier rather
than across the surface of the wafers. In the Company's flow-optimized
Full-Flow systems, substantially less water is lost as bypass flow. The
fully-enclosed Full-Flow system also reduces the amount of process
chemicals consumed and the equipment and related costs of remediation of
chemical fume emissions associated with traditional wet processing.

STRATEGY

The Company's objective is to become a leading supplier of advanced wet
processing equipment to the worldwide semiconductor and FPD industries. The
Company intends to achieve this objective by focusing on the following key
elements of its strategy.

Increase Current Market Share. The Company seeks to continue to expand its
share of the semiconductor critical cleaning and etching wet processing market
through significant expansion of its sales and marketing and customer
satisfaction efforts. The Company also intends to continually improve its
existing Full-Flow platform in order to offer enhanced technical capabilities
and lower COO benefits for currently served critical wet processing
applications. For example, in April 1996, the Company shipped a new version of
its Full-Flow system that doubles the throughput and capital productivity of
its predecessor system by enabling the processing of up to 100 8-inch wafers
in a single vessel. Other development projects are underway to further
increase the throughput and capital productivity of future versions of the
Full-Flow system.

Leverage Full-Flow Platform. The Company intends to leverage its Full-Flow
platform to address additional wet processing applications in the
semiconductor manufacturing process where it believes its proprietary Full-
Flow technology can provide important benefits over competing wet processing
technologies. By basing new process applications on this platform, the Company
is able to focus primarily on the development and optimization of the
applications' process recipes, which the Company believes significantly
reduces the time and cost associated with entering new wet processing market
segments. Additional wet processing applications identified by the Company
include solvent-based cleaning and photoresist stripping, in which CFM's
fully-enclosed Full-Flow processing vessel would provide the important benefit
of controlling chemical fume emissions.

Penetrate FPD Market. The Company intends to continue to develop wet
processing equipment for use in the fabrication of FPDs. The Company believes
that its Full-Flow platform is particularly well-suited for cleaning and
precise etching applications in the manufacture of FPDs due to its advanced
process capabilities, its significantly lower use of water and chemicals
relative to comparable wet bench processes and its substantially smaller
footprint which saves increasingly valuable cleanroom floor space. The Company
believes that the FPD market represents a significant opportunity for
increasing sales of its systems, as evidenced by its recent shipments of Full-
Flow systems to Xerox and Motorola and its recent receipt of equipment orders
from LG International. The Company believes that further validation of the
applicability of the Company's Full-Flow technology to the FPD manufacturing
process was provided in February 1996, when the Company was selected by the
United States Display Consortium (the "USDC") to develop an advanced wet
processing system for use in the manufacture of future generation FPDs.

Focus on Customer Satisfaction. The Company believes that its commitment to
customer satisfaction has been a critical factor in its success to date. To
ensure a high level of customer satisfaction, the Company provides
comprehensive customer service and support, thorough customer training and
ongoing process consultation. The Company has already developed a
comprehensive customer service and support organization, and intends to
continue to invest in this area by locating direct sales and service staff in
Europe and East Asia in 1996. The Company also intends to increase the
utilization of its applications laboratory to design and test new processes
and equipment features and to provide customer training services.

Continue Commitment to Worldwide Markets. The Company believes that its
long-term success is substantially dependent on its ability to compete on a
worldwide basis. As such, the Company intends to continue to focus on
expanding its sales activities in each of the primary worldwide markets for
semiconductor and FPD capital equipment. To date, the Company has achieved
considerable success in selling to customers outside the United States, with
such customers accounting for approximately one-half of its net sales in each
of the last two fiscal years and approximately 43% of its net sales in the six
months ended April 30, 1996. The Company intends to build upon this success in
1996 and has hired direct sales personnel covering Europe and East Asia in
support of this intent.

26
<PAGE>

PRODUCTS

The Full-Flow Product Platform

The Company's proprietary Direct-Displacement drying technology is embodied
in its Full-Flow platform, which principally consists of a fully-enclosed
processing vessel incorporating megasonic technology and associated systems
software, hardware and control electronics. Megasonic technology utilizes high
frequency sonic energy to enhance particle removal from the surface of
semiconductor wafers and FPD substrates during wet processing, enabling a
quicker process cycle and a significant reduction in the quantity of process
chemicals used. The Company believes that its Full-Flow platform offers
significant improvements in process performance and a lower COO relative to
competing technologies. Conventional wet bench processes used for many wet
processing applications rely on a succession of open chemical baths and
extensive robotic automation to move semiconductor wafers or FPD substrates
from one chemical bath to the next, which exposes them to contamination.

In the Company's Full-Flow systems, wafers or FPD substrates are loaded
automatically into a fully-enclosed, flow-optimized processing vessel that has
a lower fluid inlet and an upper fluid outlet. They are completely isolated
from cleanroom air and accompanying contaminants as a succession of process
fluids are introduced into the processing vessel one directly after another,
flowing over the wafers or substrates to complete the desired process
application. Once processing is completed, wafers or substrates are dried in
situ using the Company's patented Direct-Displacement drying process. With
this technique, the final rinse water is directly displaced with highly
purified IPA vapor and substantially all water is forced off the surface of
the wafers or substrates before they are exposed to an air environment. This
process substantially eliminates evaporative drying defects such as
watermarks, inhibits native oxide growth and significantly reduces particle
contamination compared to competing technologies, where the wafers or
substrates are exposed to evaporative drying within the cleanroom atmosphere
prior to completion of the drying process. The optimized flow characteristics
of the Full-Flow processing vessel and the advanced process control and
monitoring capabilities of the Full-Flow platform provide process uniformity
and repeatability. Also, the Company's Full-Flow systems can be flush-mounted
in the cleanroom wall, with the majority of the floor space needed by the
system components located outside the cleanroom environment. Due to this
flush-mounting and the Full-Flow system's comparatively smaller size, it
requires significantly less expensive cleanroom floor space than competing wet
bench systems. The Company's Full-Flow systems are based on a modular design
and can be configured to accomplish a broad range of wet processing
applications using a variety of process and support modules offered by the
Company. By basing new process applications on its proprietary Full-Flow
platform, the Company can focus primarily on the development and optimization
of the applications' process recipes, which the Company believes significantly
reduces the time and cost associated with developing new products to address
additional market opportunities.

The following tables list the Company's product offerings.

CFM FULL-FLOW PLATFORM CONFIGURATIONS

<TABLE>
<CAPTION>
FULL-FLOW MARKETS CONFIGURATION CAPACITY LIST PRICE RANGE

- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Semiconductor Single vessel 50 wafer $0.9 - 1.2 million
Single vessel 100 wafer $1.0 - 1.3 million
Dual vessel 100 wafer $1.2 - 1.6 million
Dual vessel 200 wafer $1.5 - 2.0 million
- -------------------------------------------------------------------------------------
Flat panel display Single vessel 50 panel $1.5 - 1.7 million
Dual vessel 100 panel $1.7 - 2.5 million
</TABLE>
- -------------------------------------------------------------------------------

27
<PAGE>

CFM FULL-FLOW SYSTEM MODULES AND FEATURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STANDARD MODULES AND FEATURES
- --------------------------------------------------------------------------------
<C> <S> <C>
Vessel Module Includes a single, fully-enclosed
process vessel for chemical, rinse
and drying processes
Control Module Generates, receives and interlocks all
control signals required to operate
the system hardware
Injection Module Measures and dispenses the appropriate
amount of each chemical concentrate
into the deionized water
IPA Recovery Module Generates and subsequently reclaims
and repurifies processed IPA vapor
for Direct-Displacement IPA drying
Deionized Water Mixing Module Blends combinations of hot and cold
deionized water together to meet
process recipe requirements
Transfer Automation Loads and unloads wafers and FPD
substrates to and from the Full-Flow
process vessel
Touch Screen Graphical Interface Provides operator control of the
system through a user-friendly
graphics touch screen interface

<CAPTION>
- --------------------------------------------------------------------------------
OPTIONAL MODULES AND FEATURES
- --------------------------------------------------------------------------------
<C> <S> <C>
Pumping Module Circulates, heats, filters, dispenses
and recovers a mixture of sulfuric
acid and ozone used to remove organic
contamination and to perform
photoresist stripping and post-ash
cleans
Ozone Module Generates ozone for use in the Pumping
Module
Selective Etch Module Circulates, heats, filters, dispenses
and recovers chemicals used in
selective etching processes
Tri-Dispense Module Supplies a user-selectable mixture of
concentrated chemicals to the
Selective Etch Module
Degassifier Module Removes entrained bubbles and
dissolved oxygen from the deionized
water supply for improved process
control
Mini-environment Encloses the wafers and automation in
a Class 1 environment
Megasonic Capability Provides high-power, high-frequency
sonic energy for enhanced cleaning
capability
Sonic Flow Meters Measures deionized water flow using a
non-contact sonic energy method
Deionized Water Heater Generates a continuous supply of hot
deionized water for use by the Full-
Flow system
Deionized Water Reclaim System Incorporates drain valving and
software to divert deionized water to
a reclaim system
Uninterruptable Power Supply Supplies up to 30 minutes of back-up
power to the Full-Flow system in the
event of a facility power failure
Dilute Chemistries Allows the user to switch solution
concentration operating ranges
without affecting standard
chemistries
Core Maintenance Provides touch screens and keyboards
used primarily for maintenance
functions in remote locations
SMIF Automation Interface Integrates Standard Mechanical
Interface robotics and wafer handling
equipment with the Full-Flow system
GEM 3.0 Compliance Software Allows the fab's host computer control
system to interface with the Full-
Flow system for transfer of critical
process information
Emulation Package Software Simulates the actual operation and
command signals of the Full-Flow
system
Data Logging Software Records significant system events
including alarms, interlocks, process
states and operator actions
- -------------------------------------------------------------------------------
</TABLE>

28
<PAGE>

Semiconductor Manufacturing Applications

The Company first introduced its Full-Flow systems for use in semiconductor
manufacturing research and development facilities in 1988, and shipped its
first systems for use in semiconductor production lines in 1990. To date, the
Company has sold over 70 Full-Flow systems to more than 20 semiconductor
manufacturers. Full-Flow systems can currently be configured with either one
or two vessels, each of which can be designed to accommodate 4-inch, 5-inch,
6-inch or 8-inch wafers. The Company recently completed development of an
enhanced Full-Flow system that doubles capital productivity by enabling
customers to process up to 100 8-inch wafers per vessel, or up to 200 8-inch
wafers simultaneously assuming a dual vessel configuration. This enhanced
system began shipping in April 1996.

A flush-mounted Full-Flow system configured with dual processing vessels
requires approximately 170 square feet of total floor space and approximately
13 linear feet of cleanroom wall space. Assuming similar throughput
capabilities and the same wet process, the Company believes that a competing
wet bench system can require up to 350 square feet of total floor space and
approximately 35 linear feet of cleanroom wall space. Additionally, the
Company believes that its Full-Flow systems can typically achieve a greater
than 50% reduction in the usage of water and chemicals compared to wet benches
performing similar applications. List prices for the Company's Full-Flow
systems offered for sale to the semiconductor industry range from $0.9 million
to $2.0 million depending on system configuration.

SEMATECH has estimated that up to 300 fabrication steps are required to
manufacture advanced logic ICs, and that approximately 50 of these steps are
accomplished by wet processing. The following table identifies the typical wet
processing steps in semiconductor manufacturing and indicates those performed
by the Company's Full-Flow systems (in bold).

- --------------------------------------------------------------------------------
CRITICAL CLEANING CRITICAL ETCHING PHOTORESIST STRIP
APPLICATIONS APPLICATIONS APPLICATIONS
- -------------------------------------------------------------------------------
Initial wafer clean Silicon oxide etch Aqueous chemistry resist
Pre-diffusion clean Polysilicon etch strip/ post-ash
Pre-oxidation clean Silicon nitride etch clean(front-end)
Pre-thin films deposition Solvent chemistry resist
clean strip/ post-ash clean
Post-CMP clean (back-end)
Solvent chemistry clean
(back-end)
-------------------------------------------------------------------------------

For classification purposes, the process to fabricate a semiconductor die
(without testing or packaging) is divided into two major phases referred to as
"front-end" and "back-end." Front-end steps are those that are performed to
fabricate individual components within an IC, such as transistors. Back-end
steps are those that involve the creation of metal patterns on the wafers in
order to connect these individual components to create the IC. For a high-
performance logic IC, approximately 60% of the wet processing steps are front-
end and the balance are back-end.

Critical Cleaning Applications. Critical cleans are those wet processing
steps that are performed in the front-end to remove surface contamination
prior to performing highly sensitive fabrication steps such as gate oxidation
or diffusion. The Company believes that approximately 40% of the wet
processing operations in the front-end fall into this category. To date, most
of the Company's Full-Flow systems have been purchased by semiconductor
manufacturers for use in these applications.

Critical Etching Applications. Wet processing is also commonly used in the
front-end to etch the surface of the wafer to remove silicon dioxide or other
surface material. It is generally important to tightly control the exact
amount of material removed and the uniformity of the etch. The Company
believes that approximately 20% of the wet processing steps in the front-end
involve etching. These etching steps are often performed as part of a wet
clean rather than as stand-alone operations, and as such, most of the Full-
Flow systems sold by the Company to date are also performing critical etching
applications.

29
<PAGE>

Photoresist Strip Applications. Photoresist stripping operations involve the
removal of either virgin or ashed photoresist from the surface of wafers after
a patterning step has been completed. Resist stripping is performed in both
the front-end and the back-end, and the Company believes that it represents
approximately 40% of the wet processing operations in each area. Front-end
cleans and resist strips are generally performed with aqueous chemistries.
However, back-end cleans and resist strips must be accomplished with different
chemistries that utilize solvents, since front-end water-based chemistries are
incompatible with the metal present on wafers in the back-end.

In both cases, resist stripping operations are driven as much by cost as by
process performance. Production shipments of the Company's enhanced throughput
Full-Flow system, capable of processing up to 100 8-inch wafers per vessel,
began in April 1996. For a nominally higher system sales price, this new
system provides all the advantages of Full-Flow technology with double the
throughput of its predecessor. Since the Full-Flow system already utilizes the
chemistries required for front-end stripping, the Company believes that the
throughput and other COO advantages provided by this enhanced system make it
attractive for use in front-end resist strip applications. In April 1996, the
Company delivered such a system for use in front-end applications including
resist stripping. Other development projects are currently underway to further
increase the throughput and capital productivity of future versions of the
Full-Flow system.

Future Applications. Approximately 40% of semiconductor wet processing
operations are performed in the back-end and are comprised primarily of
solvent-based cleans and solvent-based resist strips. The Company believes
that its Full-Flow systems offer a range of attractive benefits for these
applications as process requirements become more demanding and regulatory
restrictions on the release of chemical fumes become more stringent.
Furthermore, the Company believes that its proprietary Direct-Displacement
drying method is well suited for drying wafers with complex topographies that
often exist in the back-end.

FPD Manufacturing Applications

As consumers demand increasingly smaller and lighter electronic devices with
improved functionality, the demand for FPDs continues to increase due to
inherent advantages over cathode ray tubes ("CRTs") with respect to size,
weight and power consumption. Users of desktop displays require high
resolution which translates to increased device density on the glass of the
screen. In order to support the required device density on the screen and
still allow substantial light transmission through the screen (brightness),
significant reductions in feature size will be required. The Company believes
that the superior etch uniformity and cleaning performance possible using a
Full-Flow system may enable manufacturers to meet this combined goal of device
density and brightness.

Despite substantial decreases in price, FPDs continue to be predominantly
used in laptop computers and other low-volume, high-value applications.
According to the Flat Panel Display Forecast Roundtable of the February 1996
USDC Business Conference (the "FPD Roundtable"), however, further decreases in
FPD prices to a premium of $50 or less over the price of desktop CRT-based
displays are expected to shift substantially all of the CRT market to FPDs.
The FPD Roundtable anticipates that such declines in FPD prices may occur
within the next 12 to 18 months. According to Stanford Resources, the market
for FPDs was $8.9 billion in 1995 and is projected to grow to nearly $16
billion by 2000. Like semiconductors, FPDs are manufactured using numerous
process steps, including photolithography, deposition, etching and cleaning.
However, unlike semiconductor wafers, each of which may contain several
hundred individual ICs, a single FPD substrate may contain as few as two
laptop computer displays. Therefore, defects in the manufacturing process tend
to have a much greater impact on FPD yields than on semiconductor yields.

The Company believes that its Full-Flow platform is particularly well-suited
for cleaning and etching applications in the manufacture of FPDs due to its
advanced process capabilities, its significantly lower use of water and
chemicals relative to competing wet bench systems and its substantially
smaller footprint. The Company initially addressed the FPD market with its
Vapor-Flow system, a modified version of its Full-Flow system in which the
process fluids enter the process vessel via an inlet located on the bottom,
like the Full-Flow

30
<PAGE>

system, but exit the vessel on the side, unlike the Full-Flow system in which
process fluids exit at the top. The Company introduced its first Vapor-Flow
system in 1990, and has sold 13 systems to seven customers, including systems
to two manufacturers of FPDs.

To address the rapidly increasing demand for FPDs, the Company has developed
a high-throughput FPD processing system based on its Full-Flow platform and has
discontinued offering its Vapor-Flow system. This Full-Flow FPD system, which
was first shipped in April 1996, has been designed to process up to 50 FPD
substrates per vessel and will be available in a dual vessel configuration
capable of processing up to 100 substrates simultaneously. Each of these FPD
substrates may contain up to four 10.2-inch diagonal laptop computer screens.
The Company believes that this Full-Flow FPD system will address the present
manufacturing requirements of most FPD manufacturers. The Company has an
ongoing program to develop systems which address the FPD market's emerging
requirements for increased substrate size. List prices for the Company's Full-
Flow FPD products range from $1.5 million to $2.5 million depending on system
configuration.

In February 1996, the USDC awarded the Company a development contract to
produce a wet processing system to support both cleaning and etching
requirements during the manufacture of advanced technology FPDs. The Company
will own all of the technology which is developed as a result of this contract.

CUSTOMERS

The Company sells its systems to leading semiconductor manufacturers located
in the United States, Europe and East Asia. The following is a list of certain
end-user customers that have purchased one or more systems from the Company
since the beginning of the 1995 fiscal year:

GEC Plessey Semiconductors Limited SGS-Thomson Microelectronics Srl
LG International (America), Inc. Siemens Microelectronics Center
Motorola, Inc. GmbH
National Semiconductor Corporation Texas Instruments, Inc.
Samsung America, Inc. Tower Semiconductor Ltd.

Sales to IBM, Texas Instruments, GEC Plessey and Siemens accounted for
approximately 22.6%, 17.2%, 13.1% and 10.6%, respectively, of net sales in
fiscal 1995, and sales to IBM accounted for approximately 30.5% and 43.1% of
net sales in fiscal 1993 and 1994, respectively. Sales to SGS-Thomson and
Motorola accounted for approximately 32.3% and 23.8%, respectively, of net
sales in the six months ended April 30, 1996. In addition, at April 30, 1996,
orders from LG International represented approximately $11.6 million or 73.7%
of the Company's backlog. The Company expects to ship the majority of these
orders to a single LG International fab during 1996.

The Company expects a significant portion of its future sales to remain
concentrated within a limited number of customers. The Company's results of
operations could be materially adversely affected by any loss of business from,
the cancellation of orders by, or decreases in prices of systems sold to, any
of its major customers. The Company's arrangements with its customers are
generally on a purchase order basis and not pursuant to long term contracts. A
reduction or delay in orders from any of the Company's significant customers,
including reductions or delays due to market, economic or competitive
conditions in the semiconductor or FPD industries, or the loss of any such
customers, could have a material adverse effect upon the Company's results of
operations. Recently, a number of semiconductor manufacturers have experienced
a reduction in order growth and, in a few instances, a reduction in overall
orders. These events have caused certain semiconductor manufacturers to
postpone or cancel equipment deliveries to previously planned expansion or new
fab construction projects. In February 1996, the Company experienced the
cancellation of an order for one Full-Flow system and subsequently has
experienced the rescheduling of delivery of several other systems as a result
of these events. Certain of the Company's customers, however, have continued or
accelerated the timing of their orders for additional systems in support of
their growth plans. There can be no assurance, however, that industry trends
will improve or that existing orders will not be canceled or postponed. While
the Company actively pursues new customers, there can be no assurance that the
Company will be successful in its efforts, and any significant weakening in
customer demand would have a material adverse effect on the Company.

SALES AND MARKETING

The Company sells its systems through a combination of a direct sales force,
manufacturers' sales representatives, a Korean sales agent and a Japanese
distributor. The Company's field service personnel support its sales force. In
North America, the Company utilizes a combination of a direct sales force and
manufacturers' representatives. In addition to the direct sales force at the
Company's headquarters in West Chester,

31
<PAGE>

Pennsylvania, the Company has direct sales personnel located in Marietta,
Georgia and Austin, Texas. The Company has historically sold its products in
the European market through its North American direct sales force, and has
recently hired a direct salesperson in Paris, France. The Company is also
devoting greater resources to expand the adoption of its products in East Asia
and has recently hired a director of sales and marketing for East Asia,
excluding Japan. The Company signed agreements with ANAM, which markets in
Korea and Taiwan, and Innotech, the Company's distributor in Japan, in 1991
and 1992, respectively. The Company is continuing to evaluate expanding its
sales effort in the remainder of East Asia through additional distributor or
agent arrangements. The Company intends to substantially increase its
expenditures during fiscal 1996 for sales and sales support.

Although the Company believes that it has good relationships with its
manufacturers' sales representatives, sales agents and distributors, there can
be no assurance that these relationships will continue. In the event of a
termination of any of the Company's existing representation, agency or
distribution arrangements, the Company's strategy of worldwide expansion could
be adversely affected.

To date the Company's marketing efforts have principally involved
advertising in trade magazines and trade show participation. The Company
anticipates a substantial increase in its marketing expenditures during fiscal
1996.

CUSTOMER SATISFACTION

The Company believes that high quality customer support, customer training
and process consultation are key elements in the creation of customer
satisfaction. The Company also believes that product reliability, as it is
perceived by the individual customer technician, manager and executive, is
strongly correlated with customer satisfaction and the resulting decisions to
select the Company's technology and its products for broad application within
that individual customer's area of personal authority. The Company has made
substantial investments in its customer support, customer training, customer
communication and reliability engineering and testing programs and intends to
continue to make such investments in the future.

The Company's customer satisfaction organization is headquartered in West
Chester, Pennsylvania, with additional employees and consultants located in
Arizona, California, Colorado, Idaho, New York, Oregon, Texas, Vermont,
France, Germany and the United Kingdom. The Company uses local support
personnel where there are multiple installed systems. Innotech and ANAM
provide service to customers located in Japan and Korea, respectively. The
Company's support personnel generally have prior technical backgrounds in the
mechanical, electronic or chemical processing industries and prior experience
or training in semiconductor manufacturing processes. These field personnel
are supported by the Company's manufacturing and engineering personnel during
system installation and initial process validation. Field support personnel
also perform warranty and after-warranty service and sales support.

The Company's products are typically sold with a 12 month warranty covering
all parts and labor, which commences upon completion of installation and final
acceptance.

BACKLOG

The Company manages its production forecast using both backlog and projected
system orders. The Company includes in backlog only customer purchase orders
which have been accepted by the Company and for which shipment dates have been
assigned within the following 12 months. Orders are generally subject to delay
without penalty, but may contain cancellation penalties. As of April 30, 1995
and 1996, the Company's backlog was approximately $4.8 million and $15.7
million, respectively. All of the Company's backlog at April 30, 1995
consisted of orders for systems to be used in semiconductor manufacturing,
while the backlog at April 30, 1996 was comprised of orders aggregating
approximately $7.8 million for systems to be used in semiconductor
manufacturing and approximately $7.9 million for systems to be used in FPD
manufacturing. The Company expects a majority of the April 30, 1996 backlog to
be filled during the current fiscal year. However, because of the possible
changes in delivery schedules and cancellations of orders, the Company's
backlog at any particular date is not necessarily representative of actual
sales for any succeeding period.

RESEARCH, DEVELOPMENT AND ENGINEERING

CFM maintains an applications laboratory in West Chester, Pennsylvania to
test new equipment and processes, design new features and train customer and
Company personnel. By basing new applications on its

32
<PAGE>

proprietary Full-Flow platform, the Company can reduce substantially the time
and cost required to develop new process applications by focusing primarily on
the optimization of the applications' process recipes. The Company is
currently focusing its research, development and engineering efforts on
equipment to support additional wet process applications such as photoresist
strip processes. The Company believes that its Full-Flow systems offer a range
of attractive benefits for these applications as process requirements become
more demanding and regulatory restrictions on the release of chemical fumes
become more stringent. In addition, the Company recently completed the
development of a system capable of processing 100 8-inch wafers per vessel, or
200 8-inch wafers simultaneously, which the Company began shipping in April
1996. This configuration represents a doubling in system throughput and
capital productivity compared to the predecessor system, and the Company
believes that the high productivity of this new configuration in comparison to
competing alternatives makes it attractive for cost sensitive applications
such as front-end resist stripping. The Company is currently designing new
vessels capable of processing FPDs which are larger than those processed
presently. The Company believes that products with these capabilities will be
available for shipment during 1997. See "Risk Factors--Dependence Upon Product
Development."

The markets in which the Company and its customers compete are characterized
by rapidly changing technology, evolving industry standards and continuous
improvements in products and services. Because of continual changes in these
markets, the Company believes that its future success will depend, in part,
upon its ability to continue to improve its systems and its process
technologies and to develop new system applications which compete effectively
on the basis of COO, including yield, throughput, capital and direct costs and
system performance. In addition, the Company must adapt its systems and
processes to technological changes and to support the standards required by
emerging target markets. The success of new system introductions is dependent
on a number of factors, including timely completion of new system designs,
ultimate system performance achieved by those designs and market acceptance.
There can be no assurance that the Company will be able to improve its
existing systems and process technologies or develop new system applications.

The Company's research, development and engineering expenses for the 1993,
1994 and 1995 fiscal years and the six months ended April 30, 1996 were $0.7
million, $2.1 million, $1.7 million and $2.1 million, respectively,
representing 6.1%, 13.2%, 7.3% and 10.6% of net sales, respectively.

COMPETITION

The Company faces substantial competition in its market segments from both
established competitors and potential new entrants. The Company believes that
the primary competitive factors in the markets in which the Company competes
are yield, throughput, capital and direct costs, system performance, size of
installed base, breadth of product line and customer satisfaction. The Company
believes that it competes favorably with respect to each of these factors. The
Company also faces the challenge posed by semiconductor and FPD manufacturers'
commitment to competing technologies. Most of the Company's competitors have
been in business longer than the Company, offer traditional wet processing
technology, and have broader product lines, more experience with high volume
manufacturing, broader name recognition, substantially larger installed bases
and significantly greater financial, technical and marketing resources than
the Company. In the semiconductor wet processing market, the Company competes
primarily with Dainippon Screen, FSI International, Santa Clara Plastics,
Steag MicroTech, SubMicron Systems, Tokyo Electron Limited and Verteq. See
"Business--Intellectual Property." In the FPD wet processing market, the
Company competes primarily with Dainippon Screen and Semitool. There can be no
assurance that these competitors will not also develop enhancements to or
future generations of competitive products that will offer price or
performance features that are superior to the Company's systems or that the
Company will gain market acceptance. See "Risk Factors--Acceptance by
Customers of New Technology."

The Company believes that in order to remain competitive, it must invest
significant financial resources in developing new product features and
enhancements and in maintaining customer satisfaction worldwide. In marketing
its products, the Company will face competition from suppliers employing new
technologies in order to extend the capabilities of competitive products
beyond their current limits or increase their productivity. Once a
manufacturer has selected a particular vendor's capital equipment, the Company
believes that the manufacturer

33
<PAGE>

generally relies upon that equipment for a specific production line
application and frequently will attempt to consolidate related capital
equipment requirements with the same vendor, to the degree that such
consolidation is possible. In addition, increased competitive pressure could
lead to intensified price-based competition, resulting in lower prices and
margins, which would materially adversely affect the Company's business and
results of operations.

MANUFACTURING

The Company's manufacturing operations are based in West Chester,
Pennsylvania and consist of procurement, assembly and test engineering. The
Company recently completed an expansion of its manufacturing operations, which
resulted in a manufacturing facility with 250% of the production capacity of
the prior facility. An additional expansion is now in the planning phase. The
Company's Full-Flow systems are based upon a common set of modules, enabling
the Company to reduce manufacturing costs by using a large number of common
subassemblies and components. Many of the major subassemblies are purchased
complete from outside sources. The Company focuses its manufacturing efforts
on carefully documented assembly and integration activities which the Company
has determined to be critical to the successful operation of its products. The
Company was awarded a contract in 1993 by SEMATECH to design and build an
advanced wet processing system for semiconductor manufacturing. As a part of
that project, the Company implemented a Company-wide quality program based
upon SEMATECH measurement and improvement methodologies and is presently
preparing to apply for ISO 9001 certification.

Certain of the Company's components and subassemblies are obtained from sole
suppliers or limited groups of suppliers, which are often small, independent
companies. Moreover, the Company believes that certain of these components and
subassemblies can only be obtained from its current suppliers. The Company
generally acquires such components on a purchase order basis and not under
long-term supply contracts. The Company's reliance on outside vendors
generally, and on sole suppliers in particular, involves several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control over pricing, timely delivery and quality of
components. The Company has experienced and continues to experience some
reliability and quality problems with certain key components and subassemblies
provided by single source suppliers. Because the manufacture of certain of
these components and subassemblies is a complex process and can require long
lead times, there can be no assurance that delays or shortages caused by
suppliers will not occur. Historically the Company has not experienced any
significant delays in manufacturing due to an inability to obtain components
and is not currently aware of any specific problems regarding the availability
of components which might significantly delay the manufacturing of its systems
in the future. However, any inability to obtain adequate deliveries or any
other circumstance that would require the Company to seek alternative sources
of supply or, if possible, to manufacture such components internally could
delay the Company's ability to ship its systems and could have a material
adverse effect on the Company.

The Company is subject to a variety of federal, state and local laws, rules
and regulations relating to the use, storage, discharge and disposal of
hazardous chemicals used in its research, development and engineering
activities. The Company believes that it is currently in compliance in all
material respects with such laws, rules and regulations. However, failure to
so comply could result in substantial liability to the Company, suspension or
cessation of the Company's operations, restrictions on the Company's ability
to expand at its present location or requirements for the acquisition of
additional equipment or other significant expense. To date, compliance with
environmental rules and regulations has not had a material effect on the
Company's operations.

INTELLECTUAL PROPERTY

The Company relies on a combination of patent, copyright, trademark and
trade secret laws, non-disclosure agreements and other forms of intellectual
property protection to protect its proprietary technology. The Company
currently holds 12 patents in the United States, four patents in Japan, one
patent in Korea and 15 patents in various European countries. The Company also
has multiple patent applications pending or under evaluation in the United
States and various foreign jurisdictions. Certain of these patents cover the
Company's Full-Flow process and Direct-Displacement drying technologies on
which the Company's current product offerings are based. While the Company
believes that these patents have significant value, the Company also believes
that the innovative skills,

34
<PAGE>

technical expertise and know-how of its personnel in applying the art
reflected in these patents would be difficult, costly and time consuming to
reproduce. The Company has asserted its patent rights against three
defendants, Steag MicroTech, Inc., Steag Microtech GmbH Donaueschingen and
YieldUP International Corp., in actions commenced in July and September 1995,
respectively, in the United States District Court for the District of
Delaware. The Company's complaints in these actions allege inducement of
infringement and contributory infringement of one of the Company's patents and
seek damage awards and to permanently enjoin further infringement. The
defendants have denied infringement and have asserted, among other things,
that the subject patent is invalid. In addition, one of the defendants has
asserted that the patent is unenforceable. There can be no assurance that any
of the claims of the patent cited in these actions will be found to encompass
use of the competitors' products or that the subject patent will not be found
to be unenforceable or invalid during prosection of the actions. A finding of
invalidity or unenforceability could result in the Company's competitors being
able to develop products using the Company's proprietary technology, which in
turn could have a material adverse effect on the Company. Further, there can
be no assurance that any rights granted under any of the Company's patents
will provide adequate protection to the Company, or that the Company will have
sufficient resources to continue to prosecute its rights in the current
actions or others.

Although there are no pending lawsuits against the Company regarding
infringement of any existing patents or other intellectual property rights or
any claims that the Company is infringing intellectual property rights of
others, there can be no assurance that such infringement claims will not be
asserted by third parties in the future. There also can be no assurance in the
event of such claims of infringement that the Company will be able to obtain
licenses on reasonable terms. The Company's involvement in any patent dispute
or other intellectual property dispute or action to protect trade secrets and
know-how, including the actions brought by the Company presently pending,
could result in a material adverse effect on the Company's business. Adverse
determinations in the current litigation or any other litigation in which the
Company may become involved could subject the Company to significant
liabilities to third parties, require the Company to grant licenses to or seek
licenses from third parties and prevent the Company from manufacturing and
selling its products. Any of these situations could have a material adverse
effect on the Company.

EMPLOYEES

As of April 30, 1996, the Company had 218 employees, of which 159 were full-
time and the balance temporary or contract employees. There were 91 employees
in manufacturing operations, 54 in research, development and engineering,
including 9 chemical engineers, 12 in sales and marketing, 45 in customer
satisfaction and field support and 16 in general administrative and finance
positions. The Company plans to hire additional personnel in each of the above
areas during the next 12 months.

While the Company has generally been able to find qualified candidates to
fill new positions, substantial growth throughout the semiconductor capital
equipment industry has made it more difficult to recruit qualified candidates
for certain positions in design, field support, testing and process
engineering. Once recruited, the Company then faces the task of training and
integrating new employees quickly enough to keep pace with its rapid growth.
There can be no assurance that the Company will be successful in retaining or
recruiting, training and integrating the necessary key personnel to support
its anticipated growth, and any failure to expand these areas in an efficient
manner could have a material adverse effect on the Company's results of
operations.

None of the Company's employees is represented by a labor union and the
Company has never experienced a work stoppage, slowdown or strike. The Company
considers its relationships with its employees to be good.

FACILITIES

The Company conducts its manufacturing in a 26,000 square foot facility
which it owns in West Chester, Pennsylvania. In January 1996, the Company
commenced occupancy of a 38,400 square foot leased office building located in
the same industrial park to serve as the new location for its engineering,
sales and marketing, customer satisfaction and administration activities.
These functions were previously located in the facility owned by the Company,
which is now devoted entirely to manufacturing. The lease expires in December
2000 and includes both an option to purchase and an option for early
cancellation in December 1998. While the Company believes that these
facilities will be adequate to support the Company's growth through 1998, more
rapid growth than presently anticipated may require that the Company secure
additional space. The Company believes that suitable additional space, if
needed, will be available on terms acceptable to the Company.

35
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the Company's
directors, executive officers and key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Christopher F.
McConnell.............. 43 Chairman of the Board of Directors
Roger A. Carolin........ 40 President, Chief Executive Officer and Director
Huw K. Thomas........... 31 Executive Vice President
Alan E. Walter.......... 42 Senior Vice President
Joseph Berger........... 38 Vice President--Worldwide Sales and Marketing
Heinrich S. Erhardt..... 52 Vice President--Engineering
John Posta.............. 54 Vice President--Manufacturing
Lorin J. Randall........ 52 Vice President--Finance, Chief Financial Officer, Secretary and Treasurer
Steven Bay.............. 39 Chief Technical Officer
Steven Verhaverbeke..... 30 Director of Process Technology
James J. Kim............ 60 Director(1)
Brad Mattson............ 41 Director
Burton E. McGillivray... 39 Director(1)(2)
Milton S. Stearns,
Jr. ................... 73 Director(2)
</TABLE>
- --------
(1) Member of Executive Compensation and Stock Option Committee.
(2) Member of Audit Committee.

CHRISTOPHER F. MCCONNELL founded the Company in May 1984 and served as
President and Chief Executive Officer until October 1990 when he was named
Chairman of the Board of Directors. Prior to forming the Company, Mr.
McConnell held various technical and marketing positions with Dow Chemical.
Mr. McConnell received his BS and MS degrees in Chemical Engineering from
Dartmouth College and Purdue University, respectively, and his MBA from
Harvard Business School. Mr. McConnell is a named inventor on all of the
Company's patents. See "Certain Relationships and Related Transactions."

ROGER A. CAROLIN has served the Company as a director since its inception in
1984 and as President and Chief Executive Officer since October 1990. From
June 1984 to October 1990 Mr. Carolin was Senior Vice President of The Mills
Group, Inc., a real estate development firm. Previously, Mr. Carolin was with
The General Electric Company and Honeywell, Inc. in a variety of technical
positions. Mr. Carolin received his BS in Electrical Engineering from Duke
University and his MBA from Harvard Business School.

HUW K. THOMAS has been with the Company since 1986 and has served as
Executive Vice President since November 1, 1995. Mr. Thomas has served the
Company in a variety of technical and managerial positions, including software
development manager from 1986 to 1989, project development manager from 1987
to 1991 and Vice President--Customer Satisfaction from 1991 until November
1995. Mr. Thomas received his BS in Electronic Engineering from the University
of London.

ALAN E. WALTER co-founded the Company in 1984 and currently serves as Senior
Vice President, with primary responsibility for the Company's marketing
efforts in the FPD industry. Prior to joining the Company, he was with the
Cochrane Division of Crane Company, a producer of ultra-high purity water
systems. Mr. Walter received his BS in Chemical Engineering from the
University of Delaware. He is a named inventor on ten of the Company's
patents.

JOSEPH BERGER joined the Company in June 1993 and has served as Vice
President--Worldwide Sales and Marketing since December 1995. Mr. Berger
served as the Company's Director of Sales and Marketing from June 1995 to
December 1995, and as Program Director from June 1993 to June 1995. Mr. Berger
served as Director of

36
<PAGE>

Sales for A.E. Staley Manufacturing Co., a manufacturer of corn sweeteners and
starches, from 1990 until May 1993. Mr. Berger received his BS in Chemical
Engineering from the University of Virginia and his MBA from Harvard Business
School.

HEINRICH S. ERHARDT joined the Company in January 1992 as Vice President--
Engineering. Prior to joining the Company, Mr. Erhardt served as Vice
President of Operations for Image Storage/Retrieval Systems, a supplier of
high-density data storage systems, from January to December 1991, and as
President of HEA, Inc., a computer maintenance service and consulting company,
from October 1989 to December 1990. Mr. Erhardt received his BS in Mechanical
Engineering from City University of New York and his MS in Engineering Science
from The Pennsylvania State University.

JOHN POSTA joined the Company in October 1993 as Vice President--
Manufacturing. Mr. Posta served as a consulting engineer to the Company from
August 1993 to October 1993 and as a manufacturing consultant from August 1989
to October 1993. Mr. Posta served as Vice President of Operations for Hercules
Aerospace Display Systems from May 1988 to August 1989, and as Director of
Manufacturing and Director of Materials for Commodore Business Machines, Inc.
from September 1984 to May 1988. Mr. Posta received his BS in Industrial
Management from Fairleigh Dickinson University.

LORIN J. RANDALL joined the Company in January 1995 as Vice President--
Finance, Chief Financial Officer, Secretary and Treasurer. From May 1994 to
June 1995, Mr. Randall served as the President and Chief Executive Officer of
Greenwich Pharmaceuticals Incorporated, a drug development company where from
September 1991 to May 1994, he served as Vice President--Finance and Chief
Financial Officer. From April 1990 to March 1991, Mr. Randall served as
President and Chief Executive Officer of Surgilase, Inc., a supplier of
surgical laser equipment. Mr. Randall received his BS in Accounting from The
Pennsylvania State University and his MBA from Northeastern University. Mr.
Randall is a director of Quad Systems Corporation.

STEVEN BAY joined the Company in April 1992 as Director of Technology and
Marketing/Far East, and has served as Chief Technical Officer since September
1994. From 1990 until April 1992, Mr. Bay was employed by Bridgetek, Inc. of
San Jose, California, which was the manufacturer's representative for the
Company in California and the Pacific Northwest. Mr. Bay received his BA in
Chemistry from St. Louis University.

STEVEN VERHAVERBEKE joined the Company in February 1995 and has served as
Director of Process Technology since that time. Dr. Verhaverbeke was employed
by IMEC of Leuven, Belgium, a microelectronics research institute, as a senior
researcher from August 1994 to January 1995 and as a doctoral researcher from
September 1988 to July 1993. Dr. Verhaverbeke also served as a researcher at
Tohoku University in Sendai, Japan from August 1993 to August 1994. Dr.
Verhaverbeke received his PhD in Chemical Engineering from K.U. Leuven,
Belgium.

JAMES J. KIM has been a director of the Company since 1991. Mr. Kim is the
founder, Chairman and Chief Executive Officer of AMKOR Electronics, a leading
semiconductor assembly company. He also founded and serves as Chairman and
Chief Executive Officer of The Electronics Boutique, an electronics products
retailer, and as Chairman of ANAM Group, the parent of ANAM, the Company's
Korean distributor.

BRAD MATTSON has been a director of the Company since December 1995. Mr.
Mattson founded Mattson Technology, Inc., a manufacturer of semiconductor
fabrication equipment, and has served as its Chief Executive Officer,
President and a Director since its inception in November 1988. Mr. Mattson was
the founder of Novellus, a semiconductor equipment company, and formerly
served as its President, Chief Executive Officer and Chairman. He has also
held executive positions at Applied Materials and LFE Corporation, both
semiconductor equipment companies.

BURTON E. MCGILLIVRAY has been a director of the Company since 1990. Since
January 1994, Mr. McGillivray has served as Managing Director of First Chicago
Equity Capital, a venture capital firm. From January to December 1993, Mr.
McGillivray was a Chicago-based private investor, and from September 1984 to
December 1992, Mr. McGillivray was employed by Continental Illinois Venture
Corporation and Continental Equity Capital Corporation, serving as Managing
Director of both from 1989 to 1992. Mr. McGillivray received his AB from
Harvard University and his MBA from Harvard Business School. Mr. McGillivray
is a member of the board of directors of Three-Five Systems, Inc.

MILTON S. STEARNS, JR. has been a director of the Company since December
1994. Since 1972, Mr. Stearns has been President of Charter Financial Company,
a corporate financial consulting company. Mr. Stearns has been a director of
five public companies and a number of private ones. In addition, from 1976 to
1987, he was Chairman and Chief Executive Officer of Judson Infrared Inc., a
manufacturer of infrared detectors for military

37
<PAGE>

and telecommunications companies. Mr. Stearns received his BS from Harvard
University and his MBA from Harvard Business School.

All directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers are appointed
by the Board of Directors and serve at the discretion of the Board.

COMPENSATION OF DIRECTORS

The Company reimburses directors for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees. In March
1991, the Company and Mr. McGillivray entered into a Stock Option Agreement
(the "McGillivray Agreement") pursuant to which the Company granted to Mr.
McGillivray four-year options to purchase up to 832 shares of Common Stock, at
an exercise price of $2.41 per share, for each meeting of the Board of
Directors attended by Mr. McGillivray during a two year period beginning in
December 1990. This agreement was amended in June 1993 to provide for
additional grants of options to purchase 832 shares of Common Stock for each
meeting of the Board of Directors attended by Mr. McGillivray during the
period from March 1993 to December 1997. The amendment also extended the term
of the options previously granted to ten years. The McGillivray Agreement was
also amended in September 1994 to provide an exercise price of $7.52 per share
with respect to all stock options granted under the McGillivray Agreement
after January 6, 1994. In December 1994, the Company and Mr. Stearns entered
into a Stock Option Agreement (the "Stearns Agreement") pursuant to which the
Company granted to Mr. Stearns ten-year options to purchase up to 832 shares
of Common Stock, at an exercise price of $7.52 per share, for each meeting of
the Board of Directors attended by Mr. Stearns during a one year period
beginning in December 1994. This agreement was amended in November 1995 to
provide for additional grants of options to purchase 832 shares of Common
Stock, at an exercise price of $7.52 per share, for each meeting of the Board
of Directors attended by Mr. Stearns during the period from November 1995 to
October 1997. Messrs. McGillivray and Stearns will continue to be compensated
for their service on and attendance at meetings of the Board of Directors
through stock option grants to be made pursuant to the terms of the
McGillivray Agreement and the Stearns Agreement, respectively. Upon the
respective terminations of the McGillivray Agreement and the Stearns
Agreement, Messrs. McGillivray and Stearns will be compensated for their
service on the Board of Directors pursuant to the Non-Employee Directors'
Stock Option Plan described below.

In March 1996, the Board of Directors granted options to purchase up to
3,000 shares of Common Stock to each of John N. McConnell, Sr. and Vincent L.
Verdiani in connection with the appointment of these individuals as Honorary
Lifetime Directors of the Company. The exercise price of these ten-year
options is $7.52 per share and such options were fully exercisable on the date
of grant. Honorary Lifetime Directors are not elected by the Company's
shareholders, do not receive any compensation for their service as such and
are not voting members of the Board of Directors.

Also in March 1996, the Board of Directors granted to Mr. Mattson ten-year
options to purchase up to 2,000 shares of Common Stock at an exercise price of
$7.52 per share, which will be exercisable in full commencing on March 3,
1997. These options were granted as compensation for Mr. Mattson's service as
a consultant to the Company during the term of the options. In March 1996, Mr.
Mattson also received a grant of options to purchase up to 10,000 shares of
Common Stock at an exercise price of $7.52 per share pursuant to the Company's
Non-Employee Directors' Stock Option Plan. One-third of these options will
vest on each of the first three anniversaries of the date of grant, and the
options will expire upon the earlier of the tenth anniversary of their grant
or twelve months after Mr. Mattson ceases to be a director of the Company.

In the future, the Company may compensate directors for their service as
directors through cash compensation, stock options or stock grants. See "Non-
Employee Directors' Stock Option Plan."

38
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the fiscal
year ended October 31, 1995 of those persons who during such fiscal year (i)
served as the Company's chief executive officer or (ii) were the four most
highly-compensated executive officers (other than the chief executive officer)
(collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG TERM
--------------------- COMPENSATION ALL OTHER
AWARDS
------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING
POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
------------------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Christopher F. McConnell..... $103,551 $33,088 -- $4,231(1)
Chairman of the Board of
Directors
Roger A. Carolin............. 103,551 30,000 -- 4,420(1)
President and Chief
Executive Officer
Huw K. Thomas................ 88,551 26,697 -- 1,922(1)
Executive Vice President
Lorin J. Randall............. 101,563(2) 15,000 39,916 256(3)
Vice President--Finance,
Secretary and Treasurer
Alan E. Walter............... 79,800 25,588 -- 3,131(1)
Senior Vice President
</TABLE>
- --------
(1) Consists of: (a) 401(k) plan matching contributions in the following
amounts: $1,903 for Mr. McConnell; $1,813 for Mr. Carolin; $430 for Mr.
Thomas; and $175 for Mr. Walter; and (b) life insurance premiums in the
following amounts: $2,328 for Mr. McConnell; $2,607 for Mr. Carolin;
$1,492 for Mr. Thomas; and $2,956 for Mr. Walter.
(2) Mr. Randall joined the Company in January 1995. His annual salary is
$125,000.
(3) Consists of life insurance premiums.

The following table contains information regarding stock option grants made
to each of the Named Executive Officers during the fiscal year ended October
31, 1995:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christopher F.
McConnell.............. -- -- -- -- -- --
Roger A. Carolin........ -- -- -- -- -- --
Huw K. Thomas........... -- -- -- -- -- --
Lorin J. Randall........ 39,916 19.3% $7.52 12/14/04 $ 188,668 $ 478,123
Alan E. Walter.......... -- -- -- -- -- --
</TABLE>
- --------
(1) The potential realizable value is based on the term of the option at the
time of grant (ten years). Potential gains are net of the exercise price
but before taxes associated with the exercise. Amounts represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the relevant

39
<PAGE>

option term. The assumed 5% and 10% rates of stock appreciation are based on
appreciation from the exercise price per share established at the relevant
grant date. These rates are provided in accordance with the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. Actual gains, if
any, on stock option exercises are dependent on the future financial
performance of the Company, overall market conditions and the option
holders' continued employment through the vesting period. This table does
not take into account any appreciation in the price of the Common Stock from
the date of grant to the date of this Prospectus, other than the columns
reflecting assumed rates of appreciation of 5% and 10%.

The following table sets forth the number of shares covered by exercisable
and unexercisable options held by the Named Executive Officers on October 31,
1995 and the aggregate gains that would have been realized had these options
been exercised on October 31, 1995, even though these options were not
exercised, and the unexercisable options could not have been exercised on
October 31, 1995. No stock options were exercised by the Named Executive
Officers during the fiscal year ended October 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
--------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Christopher F.
McConnell.............. -- -- -- --
Roger A. Carolin........ 192,928 -- $985,862 --
Huw K. Thomas........... 33,264 -- 84,990 --
Lorin J. Randall........ -- 39,916 -- --
Alan E. Walter.......... -- -- -- --
</TABLE>
- --------
(1) Options are in-the-money if the market value of the shares covered thereby
is greater than the option exercise price. Calculated based on the fair
market value at fiscal year end of $7.52 per share, less the exercise
price. If calculated based on the initial public offering price of $10.00
per share, the value of unexercised in-the-money options at fiscal year end
would be $1,464,324, $167,484 and $98,992 for Messrs. Carolin, Thomas and
Randall, respectively.

1992 STOCK OPTION PLAN

The Company's 1992 Stock Option Plan (the "Option Plan") was adopted by the
Company in 1992 and was amended and restated and was approved by the Company's
shareholders in May 1995. The purposes of the Option Plan are to attract and
retain qualified personnel, to provide additional incentives to employees and
officers of and consultants to the Company and to promote the success of the
Company's business. Options to purchase an aggregate of 606,250 shares of the
Company's Common Stock have been granted under the Option Plan, and no
additional options will be granted thereunder. The Option Plan is administered
by the Executive Compensation and Stock Option Committee of the Board of
Directors (the "Committee"), which Committee has complete discretion to
determine which eligible individuals are to receive option grants, the number
of shares subject to each such grant, the vesting schedule to be in effect for
the option grant and the maximum term for which any granted option is to remain
outstanding.

Each option granted under the Option Plan has a maximum term of ten years (or
five years with respect to holders of more than 10% of the voting power of the
Company's outstanding stock), subject to earlier termination following the
optionee's cessation of service with the Company. Options granted under the
Option Plan may be exercised only for fully vested shares. The exercise price
of options granted under the Option Plan must be at least 100% of the fair
market value of the stock subject to the option on the date of grant (or 110%
with respect to holders of more than 10% of the voting power of the Company's
outstanding stock). The Executive Compensation and Stock Option Committee
determines the fair market value of the Common Stock from time to time. The
option exercise price is payable in cash upon the exercise of the option.

The Committee may amend or modify the Option Plan at any time, provided that
no such amendment or modification may adversely affect the rights and
obligations of the participants with respect to their outstanding

40
<PAGE>

options or unvested shares without their consent. In addition, no amendment of
the Option Plan may, without the approval of the Company's shareholders, (i)
modify the class of individuals eligible for participation, (ii) increase the
number of shares available for issuance, except in the event of certain
changes to the Company's capital structure or (iii) extend the term of the
Option Plan.

ANNUAL PROFIT SHARING PLAN

In March 1995, the Company's Board of Directors adopted an Annual Profit
Sharing Plan (the "Profit Sharing Plan") pursuant to which certain eligible
employees of the Company may receive annual distributions, in cash or Common
Stock at the election of the employee, based upon the Company's operating
profit for the most recent fiscal year. Holders of options to purchase Common
Stock are not eligible to participate in the Profit Sharing Plan. For the 1995
fiscal year, $65,000 was paid to eligible employees under the Profit Sharing
Plan.

1995 INCENTIVE PLAN

In December 1995, the Company's Board of Directors adopted, and in January
1996, the Company's shareholders approved, the 1995 Incentive Plan (the
"Incentive Plan"). Under the Incentive Plan, the Company is authorized to
award up to 400,000 shares of Common Stock to employees of the Company and its
subsidiaries. The Committee administers the Incentive Plan. Under the terms of
the Incentive Plan, the Committee is required to be composed of two or more
directors, each of whom shall be a "disinterested person" within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. The
Committee has the authority to interpret the Incentive Plan and to determine
and designate the persons to whom awards shall be made and the terms,
conditions and restrictions applicable to each award (including, but not
limited to, the price, any restriction or limitation, any vesting schedule or
acceleration thereof and any forfeiture restrictions).

The Incentive Plan contains provisions for granting various stock-based
awards, including incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock
options and Restricted Stock (as further described below). The term of the
Incentive Plan is ten years, subject to earlier termination or amendment.

Stock Options. The Incentive Plan provides for the grant of "incentive stock
options," as defined in Section 422 of the Code, to employees of the Company.
The Incentive Plan also provides for the grant of stock options that do not
qualify as incentive stock options under the Code ("non-qualified stock
options") to employees of the Company, including directors who are employees
of the Company. The exercise price of any incentive stock option granted under
the Incentive Plan may not be less than 100% of the fair market value of the
Company's Common Stock on the date of grant. Options granted under the
Incentive Plan may be exercised for cash, by reduction of the number of shares
of Common Stock issuable upon such exercise or, to the extent determined by
the Committee, in exchange for shares of Common Stock owned by the option
holder having a fair market value on the date of exercise equal to the option
exercise price. The aggregate fair market value, determined on the date of
grant, of the shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year may not
exceed $100,000.

Under the Incentive Plan, each option is exercisable for the full amount or
for any part thereof at such intervals or in such installments as the
Incentive Committee shall determine at the time it grants an option. However,
no award shall be exercisable with respect to any shares of Common Stock later
than ten years after the date of the grant of such option. All options are
non-transferable by the optionee except upon death. The shares subject to
expired options or terminated options which remain unexercised become
available for future grants.

If an optionee ceases to be employed by the Company for any reason other
than death, disability or retirement, any option exercisable on the date of
such termination generally may be exercised for a period of 90 days from the
date of such termination or until the expiration of the stated term of the
option, whichever period is shorter. In the event of termination of employment
by reason of death or retirement, any option exercisable at

41
<PAGE>

the date of such termination generally may be exercised for a period of one
year from the date of termination or until the expiration of the stated term
of the option, whichever period is shorter. In the event of termination of
employment by reason of disability, all options outstanding at the date of
such termination will become immediately exercisable and generally may be
exercised for a period of one year from the date of termination or until the
expiration of the stated term of the option, whichever period is shorter. In
the event of a change of control of the Company, the Incentive Plan provides
that all outstanding options will become immediately exercisable.

Restricted Stock. "Restricted Stock" consists of shares of the Company's
Common Stock granted to an employee for no consideration, which will be
forfeited to the Company if the grantee ceases to be an employee of the
Company during a restriction period specified by the Committee at the time it
grants the Restricted Stock. In the event of death or disability, the
restrictions will lapse with respect to that percentage of Restricted Stock
held by the grantee that is equal to the percentage of the restriction period
that had elapsed as of the date of death or commencement of disability. In the
event of a change of control of the Company, all restrictions on shares of
Restricted Stock will lapse. Shares of Restricted Stock that are forfeited
become available for future grants.

NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

In December 1995, the Company's Board of Directors adopted, and in January
1996, the Company's shareholders approved, the Non-Employee Directors' Stock
Option Plan (the "Directors' Plan"), under which options to purchase up to
150,000 shares of Common Stock may be granted to non-employee directors. The
purposes of the Directors' Plan are to attract and retain independent
directors and to strengthen the mutuality of interests between such directors
and the Company's shareholders.

The Directors' Plan is administered by the Company's Board of Directors.
Under the terms of the Directors' Plan, the option exercise price shall be
100% of the fair market value of the shares on the date of grant and each
option generally expires upon the earlier of twelve months after the optionee
ceases to be a director of the Company or ten years.

Each independent director elected at an annual meeting of shareholders will
automatically be granted an option on the date of such meeting of shareholders
to purchase 3,000 shares of Common Stock, which option will vest on the date
of the next succeeding annual meeting of shareholders. Each independent
director elected to fill a vacancy on the Board of Directors will
automatically be granted an option on the date of election to purchase 10,000
shares of Common Stock, one-third of which shall vest on each of the first
three anniversaries of the date of grant.

Under the Directors' Plan, no award shall be exercisable with respect to any
shares of Common Stock later than ten years after the date of the grant of
such option. All options are non-transferable by the optionee except upon
death. The shares subject to expired options or terminated options which
remain unexercised become available for future grants.

If an optionee ceases to be a member of the Board of Directors for any
reason other than death, disability or retirement, any option exercisable on
the date of such termination generally may be exercised for a period of 90
days from the date of such termination or until the expiration of the stated
term of the option, whichever period is shorter. In the event of termination
of Board membership by reason of death or retirement, any option exercisable
at the date of such termination generally may be exercised for a period of one
year from the date of termination or until the expiration of the stated term
of the option, whichever period is shorter. In the event of termination of
Board membership by reason of disability, all options outstanding at the date
of such termination will become immediately exercisable and generally may be
exercised for a period of one year from the date of termination or until the
expiration of the stated term of the option, whichever period is shorter.

The Board of Directors of the Company may make any amendments to the
Directors' Plan which it deems necessary or advisable.

42
<PAGE>

EMPLOYEE STOCK PURCHASE PLAN

In December 1995, the Company's Board of Directors adopted, and in January
1996, the Company's shareholders approved, an Employee Stock Purchase Plan
(the "Purchase Plan"), which allows all full-time employees of the Company,
subject to certain limitations, to purchase shares of the Company's Common
Stock at a discount from the prevailing market price at the time of purchase.
Such shares may be purchased on the open market or may be newly issued shares
of Common Stock. Any employee owning five percent or more of the voting power
or value of the Company is not eligible to participate in the Purchase Plan. A
maximum of 300,000 shares of the Company's Common Stock may be purchased under
the Purchase Plan.

An eligible employee will be able to specify an amount to be withheld from
his or her paycheck and credited to an account established for him or her (the
"Participation Account"). Amounts in the Participation Account will be applied
to the purchase of shares of the Company's Common Stock on the termination
date of each offering made under the Purchase Plan. The price for such shares
will be equal to 85% of the market price of the Common Stock, as determined
pursuant to the Purchase Plan. Only whole shares of Common Stock may be
purchased. Amounts withheld from an employee's paycheck and not applied to the
purchase of whole shares of Common Stock will, at the election of the
employee, either remain credited to the employee's Participation Account or be
returned to the employee.

Upon termination of an employee's employment for any reason other than death
or an approved leave of absence, all amounts credited to such employee's
Participation Account shall be returned to him or her. Upon termination of an
employee's employment because of death, his or her successor-in-interest shall
have the right to elect before the earlier of the offering termination date or
the 60th day following the employee's date of death either to withdraw the
amount credited to his or her Participation Account or to apply such amounts
to the purchase of Common Stock.

The Purchase Plan is administered by the Board of Directors, which may
delegate responsibility for such administration to a committee of the Board of
Directors. The Board of Directors may amend or terminate the Purchase Plan at
any time. The Purchase Plan is intended to comply with the requirements of
Section 423 of the Code.

Following the date hereof, the Company intends to commence the Purchase
Plan.

401(K) PLAN

In November 1993, the Company adopted a deferred 401(k) salary savings plan
(the "401(k) Plan") for the benefit of its employees and their beneficiaries,
which was amended in April 1995. Generally, any employee who has completed six
months of service and is over 21 years of age is eligible to participate in
the 401(k) Plan. Each eligible employee may elect to contribute to the 401(k)
Plan through payroll deductions up to 15% of his or her eligible compensation.
Participants are 100% vested in their contributions immediately. The Company
matches contributions up to certain levels.

EMPLOYMENT CONTRACTS

The Company has entered into a written employment agreement with Lorin J.
Randall, its Vice President--Finance and Chief Financial Officer. The
agreement continues until terminated pursuant to its terms. The agreement
provides for a base salary of $125,000 and for such employee benefits as are
made available to other employees of the Company. In addition, pursuant to the
agreement, Mr. Randall received a non-qualified option to purchase 39,916
shares of Common Stock of the Company for $7.52 per share under the Company's
1992 Stock Option Plan. In the event the Company terminates the agreement
without "cause" (as defined in the agreement), Mr. Randall will be entitled to
continue to receive his then-current base salary for six months following such
termination, or until the date he commences permanent, full-time employment
elsewhere, whichever first occurs.

Except as set forth above, the Company does not have employment agreements
with any of its executive officers.

43
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Executive Compensation and Stock Option Committee of the Company's Board
of Directors was formed in November 1991 and the members of this committee are
Messrs. Kim and McGillivray. Neither of these individuals was at any time
during the fiscal year ended October 31, 1995 or at any other time an officer
or employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of the Company's Board
of Directors or Executive Compensation and Stock Option Committee.

LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY

The Company's Articles of Incorporation, as amended, and By-Laws include
provisions (i) to reduce the personal liability of the Company's directors for
monetary damages resulting from breaches of their fiduciary duty and (ii) to
permit the Company to indemnify its directors and officers to the fullest
extent permitted by Pennsylvania law.

At present there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 1984 and 1985, CFM Technologies, Incorporated, which is now the Company's
wholly-owned operating subsidiary ("CFM Sub"), entered into research and
development agreements with two related party limited partnerships (together,
the "Partnerships"), in which CFM Sub was the general partner. A significant
number of the limited partners were also significant shareholders of CFM Sub.
In April 1987 and September 1988, CFM Sub exercised its options under the
research and development agreements between CFM Sub and the Partnerships to
purchase the Partnerships' technologies. This exercise resulted in a liability
of CFM Sub to the Partnerships in the aggregate amount of $2,184,000. This
amount was calculated based on the total cost to the Partnerships of
developing the technology, including parts and materials, rent, salaries and
other administrative costs incurred in developing and testing prototype units,
with such cost being multiplied by a factor which depended upon the time at
which the option was exercised. At the time of the exercise of the first
option in April 1987, the development cost was approximately $383,000 and the
factor in effect at that time was 3.00, resulting in a liability of
$1,149,000. Similarly, at the time of the exercise of the second option in
September 1988, the development cost was approximately $345,000 and the factor
in effect at that time was also 3.00, resulting in a liability of $1,035,000.
Through the end of the 1994 fiscal year, CFM Sub had made aggregate payments
of $1,612,000 to the Partnerships. During 1994, in response to inquiries and
requests by a number of the limited partners of the Partnerships, CFM Sub
began to investigate the possibility of exchanging the limited partners'
interests in the Partnerships for common stock or other securities of CFM Sub.
In October 1994, CFM Sub sent a letter to each limited partner of each of the
Partnerships outlining a proposal to exchange the limited partnership
interests of the limited partners for common stock of a new entity, The CFM
Technology Corporation, on a tax-free basis. As of October 31, 1994, the
obligation due from CFM Sub to the Partnerships, net of tax, was approximately
$3,200,000. Also in October 1994, the shareholders of CFM Sub and the general
partner of the Partnerships approved a reorganization for the purpose of
dissolving the Partnerships and incorporating the limited partners thereof as
equity holders of CFM Sub. Pursuant to the reorganization, effective November
1, 1994, the Company was incorporated as "The CFM Technology Corporation" and
acquired all of the outstanding shares of common stock of CFM Sub in exchange
for an equal number of shares of Common Stock. The Company also acquired all
of the assets of the Partnerships, which consisted primarily of CFM Sub's
obligations to the Partnerships, in exchange for an aggregate of 408,339
shares of Common Stock, the value of which approximated the obligation then
due from CFM Sub to the Partnerships, net of tax. The price per share of
Common Stock utilized in connection with the exchange of such Common Stock for
the assets of the Partnerships was determined by reference to the offering
price of the Common Stock in connection with a limited

44
<PAGE>

offering of Common Stock which commenced in January 1994 and concluded in
October 1994. The Common Stock issued to the Partnerships was then distributed
to the limited partners of the Partnerships in accordance with their
respective percentage interests in the Partnerships. Of that Common Stock,
22,188 shares were issued to John N. McConnell and 7,128 shares were issued to
Vincent Verdiani, both of whom were directors of the Company at the time. See
Note 8 of the Notes to Consolidated Financial Statements. John N. McConnell is
the father of Christopher F. McConnell, the Chairman of the Company's Board of
Directors. In December 1995, the Company changed its name to "CFM
Technologies, Inc." The Partnerships' Certificates of Limited Partnership were
cancelled in May 1995. In November 1995, counsel to two shareholders who
acquired 31,614 shares of Common Stock in connection with the November 1, 1994
exchange sent letters to the Securities and Exchange Commission and the
Pennsylvania Securities Commission referencing such shareholders' objection to
that transaction and its valuation and allegations that the Company breached
certain duties and violated unspecified state and federal laws in connection
therewith. Specifically, counsel to these shareholders alleged that the
Company had no right to cause the exchange and that the exchange rate utilized
in the transaction was too low. The Company believes that such shareholders'
objections and allegations are without merit and that any resolution of such
matter will not have a material adverse effect on the Company.

In October 1994, the Company sold 332,633 shares of Common Stock of the
Company to ANAM, a company controlled by Mr. James Kim, a director of the
Company, for $6.02 per share. ANAM acts as the Company's sales agent in Korea
and Taiwan. The Company believes that the terms of the sale of these shares of
Common Stock to ANAM are no less favorable than could have been obtained from
other large investors. During fiscal 1994 and 1995 and the six months ended
April 30, 1996, sales commissions accrued by the Company pursuant to the ANAM
sales agency agreement aggregated $430,173, $282,100 and $626,998,
respectively. The terms of the commissions to ANAM were no less favorable than
would have been obtained from unrelated third parties.

45
<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth, as of May 15, 1996 and as adjusted to
reflect the sale of 2,200,000 shares offered by this Prospectus, information
with respect to the beneficial ownership of the Common Stock of the Company by
(i) each person known to the Company to own 5% or more of the outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers, (iv) all of the directors and executive officers
as a group and (v) the Selling Shareholders.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING(1)(2) OFFERING(1)(2)
----------------- SHARES TO -----------------------
NAME* NUMBER PERCENT BE SOLD NUMBER PERCENT
----- --------- ------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Christopher F.
McConnell(3)............. 1,213,619 31.9% -- 1,213,619 20.4%
Alan E. Walter............ 365,896 9.6 -- 365,896 6.2
James J. Kim(4)........... 347,602 9.1 33,264 314,338 5.3
ANAM S&T Co., Ltd. ....... 306,022 8.0 33,264 272,758 4.6
493-3 Sung Sung-Dong
Cheon-An, Choong-Nam
Korea, 330-300
Roger A. Carolin(5)....... 276,087 6.9 -- 276,087 4.5
John N. McConnell,
Sr.(6)................... 247,779 6.5 -- 247,779 4.2
Stacey Willits
McConnell(7)............. 200,645 5.3 -- 200,645 3.4
Huw K. Thomas(8).......... 182,949 4.8 -- 182,949 3.1
Burton E. McGillivray(9).. 43,244 1.1 -- 43,244 **
David D. Kim Trust(10).... 41,580 1.1 8,316 33,264 **
1345 Enterprise Drive
West Chester, PA 19380
John T. Kim Trust(11)..... 41,580 1.1 8,316 33,264 **
1345 Enterprise Drive
West Chester, PA 19380
Susan Y. Kim Trust(12).... 41,580 1.1 8,316 33,264 **
1345 Enterprise Drive
West Chester, PA 19380
Milton S. Stearns,
Jr.(13).................. 38,254 1.0 -- 38,254 **
Lorin J. Randall(14)...... 14,969 ** -- 14,969 **
Myron S. Gelbach, Jr. .... 9,979 ** 3,327 6,652 **
P.O. Box 298
Lafayette Hill, PA 19444
Brad Mattson.............. -- -- -- -- --
All directors and
executive officers as a
group (13 persons)(15)... 2,567,434 61.8 33,264 2,534,170 40.3
</TABLE>
- --------
* Unless otherwise indicated, the business address of each shareholder named
in this table is CFM Technologies, Inc., 1336 Enterprise Drive, West
Chester, PA 19380.
** Less than 1%.
(1) Unless otherwise indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to
all shares beneficially owned.
(2) Based on 3,803,263 shares outstanding prior to this offering and
5,941,724 shares to be outstanding after this offering, except that
shares underlying options exercisable within 60 days are deemed to be
outstanding for purposes of calculating the percentage owned by the
holder of such options.
(3) Includes 38,919 shares owned by Mr. McConnell's wife, 3,154 shares owned
jointly with Mr. McConnell's wife and 26,624 shares held in trust for Mr.
McConnell's children.
(4) Includes 306,022 shares owned by ANAM, of which Mr. James Kim is,
directly and indirectly, the largest shareholder. The 33,264 shares being
sold in this offering are owned by ANAM.

46
<PAGE>

(5) Consists of 83,159 shares owned by Mr. Carolin's wife and exercisable
options to purchase 192,928 shares.
(6) Consists of 24,855 shares owned jointly with Mr. McConnell's wife,
219,924 shares held in a limited partnership of which Mr. McConnell and
his wife are the sole general partners and exercisable options to
purchase 3,000 shares.
(7) Consists of 38,918 shares owned by Ms. McConnell individually, 3,154
shares owned jointly with Ms. McConnell's husband, Christopher F.
McConnell, and 158,573 held in a trust for which Ms. McConnell is a
trustee. Does not include shares owned by Ms. McConnell's husband
individually or shares held in trust for Ms. McConnell's children, of
which trusts Mr. McConnell is a trustee, all of which shares are
reflected in the table as beneficially owned by Mr. McConnell.
(8) Includes exercisable options to purchase 33,264 shares.
(9) Includes 16,632 shares owned jointly with Mr. McGillivray's wife and
exercisable options to purchase 18,296 shares.
(10) David D. Kim is the primary beneficiary of the David D. Kim Trust.
(11) John T. Kim is the primary beneficiary of the John T. Kim Trust.
(12) Susan Y. Kim is the primary beneficiary of the Susan Y. Kim Trust.
(13) Includes 3,327 shares held in a trust of which Mr. Stearns is trustee and
exercisable options to purchase 4,990 shares.
(14) Consists of exercisable options.
(15) Includes exercisable options to purchase 349,261 shares.

47
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, no par value per share, and 1,000,000 shares of Preferred Stock,
no par value per share. As of May 15, 1996, 3,803,263 shares of Common Stock
and no shares of Preferred Stock were outstanding. The rights of the Company's
capital stock are defined by the Company's Articles of Incorporation, as
amended (the "Articles"), as described below, as well as by the Company's
Amended and Restated By-Laws (the "By-Laws") and the Pennsylvania Business
Corporation Law, as amended. The following summary of certain provisions of
the capital stock of the Company does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of the Articles
and By-Laws, which are included as exhibits to the Registration Statement of
which this Prospectus forms a part, and by provisions of applicable law.

COMMON STOCK

The holders of the Common Stock are entitled to one vote per share for each
share held of record on all matters submitted to a vote of shareholders.
Subject to preferential rights with respect to any series of Preferred Stock
that may be issued, holders of the Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors on the
Common Stock out of funds legally available therefor and, in the event of a
liquidation, dissolution or winding-up of the affairs of the Company, are
entitled to share equally and ratably in all remaining assets and funds of the
Company. The holders of the Common Stock have no preemptive rights or rights
to convert shares of the Common Stock into any other securities and are not
subject to future calls or assessments by the Company. All outstanding shares
of the Common Stock are fully paid and nonassessable by the Company.

PREFERRED STOCK

The Company, by resolution of the Board of Directors and without any further
vote or action by the shareholders, has the authority to issue up to 1,000,000
shares of Preferred Stock in one or more series and to fix from time to time
the number of shares to be included in each such series and the designations,
preferences, qualifications, limitations, restrictions and special or relative
rights of the shares of each such series. The ability of the Company to issue
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could adversely affect the voting
power of the holders of the Common Stock and could have the effect of making
it more difficult for a person to acquire, or of discouraging a person from
acquiring, control of the Company. The Company has no present plans to issue
any of the Preferred Stock.

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Articles and By-Laws may discourage certain
transactions involving a change in control of the Company. For example, the
Articles contain a provision which permits the Board to issue "blank check"
Preferred Stock without shareholder approval. Further, provisions of the
Pennsylvania Business Corporation Law prohibit the Company from engaging in
certain business combinations with a holder of 20% or more of the Company's
voting securities without super-majority board or shareholder approval and
allow holders of voting stock of the Company to "put" their stock to an
acquiror for fair value in the event of a control transaction (the acquisition
of 20% of the voting stock of the Company). Fair value is defined as not less
than the highest price paid by the acquiror during a certain 90-day period.
These provisions could have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect the voting and other
rights of holders of Common Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.

48
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 5,941,724 shares of
Common Stock issued and outstanding, of which 3,741,724 will be "restricted
securities" and may be publicly sold only if registered under the Securities
Act or sold in accordance with an applicable exemption from registration, such
as Rule 144. Under Rule 144 as currently in effect, these restricted
securities will not be eligible for public sale until at least November 1,
1996, and then will be subject to the volume limitations and other conditions
imposed by Rule 144.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned his or her shares for at least two years, including persons
who may be deemed "affiliates" of the Company as that term is defined in the
Securities Act, would be entitled to sell within any three month period a
number of shares which does not exceed the greater of 1% of the then
outstanding shares of the Company's Common Stock or the average weekly trading
volume in such shares in The Nasdaq Stock Market during the four calendar
weeks preceding the date on which notice of sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner of sale limitations,
notice requirements and the availability of current public information about
the Company. Rule 144 also permits, under ordinary circumstances, the sale of
Common Stock without regard to the foregoing limitations by a person (or
persons whose shares are aggregated) who is not an affiliate of the Company
and who has satisfied a three year holding period requirement.

The Company's directors, executive officers and certain shareholders, who
collectively beneficially own an aggregate of 3,598,721 shares of Common Stock
and options to purchase 539,881 shares of Common Stock, have agreed pursuant
to certain agreements that they will not sell any Common Stock owned by them
without the prior written consent of PaineWebber Incorporated for a period of
180 days from the date of this Prospectus.

An aggregate of 1,156,250 shares of Common Stock is reserved for issuance
under employee and director stock option plans. As of May 15, 1996, options
with respect to 654,021 shares of Common Stock had been granted and were
outstanding. See "Management--1992 Stock Option Plan, "Management--1995
Incentive Plan" and "Management--Non-Employee Directors' Stock Option Plan."
The Company intends to file registration statements on Form S-8 under the
Securities Act covering the shares of Common Stock subject to outstanding
options and reserved for issuance under the option plans. Such registration
statements are expected to be filed and become effective as soon as
practicable after the effective date of the Registration Statement.
Accordingly, such registered shares, unless subject to the agreements not to
sell described above, will generally be freely transferable by persons other
than affiliates of the Company. Sales of substantial amounts of Common Stock
in the public market, or the possibility of sales thereof, could adversely
affect prevailing market prices.

49
<PAGE>

UNDERWRITING

The U.S. Underwriters named below, acting through PaineWebber Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Montgomery Securities
as Representatives (the "Representatives"), have severally agreed, subject to
the terms and conditions set forth in the U.S. Underwriting Agreement by and
among the Company, the Selling Shareholders and the Representatives (the "U.S.
Underwriting Agreement"), to purchase from the Company and the Selling
Shareholders, and the Company and the Selling Shareholders have severally
agreed to sell to the U.S. Underwriters, respectively, 1,698,461 shares and
61,539 shares of the Company's Common Stock, which in the aggregate equals the
number of shares of Common Stock (the "U.S. Shares") set forth opposite the
names of such U.S. Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
PaineWebber Incorporated.......................................... 383,000
Donaldson, Lufkin & Jenrette Securities Corporation............... 383,000
Montgomery Securities............................................. 383,000
Alex. Brown & Sons Incorporated................................... 48,000
Cowen & Company................................................... 48,000
Hambrecht & Quist LLC............................................. 48,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 48,000
J.P. Morgan Securities Inc. ...................................... 48,000
Prudential Securities Incorporated................................ 48,000
Salomon Brothers Inc ............................................. 48,000
Adams, Harkness & Hill, Inc. ..................................... 25,000
The Chicago Corporation........................................... 25,000
Kaufman Bros., L.P. .............................................. 25,000
Ladenburg, Thalmann & Co., Inc. .................................. 25,000
Legg Mason Wood Walker Incorporated............................... 25,000
Needham & Company, Inc. .......................................... 25,000
Pennsylvania Merchant Group, Ltd. ................................ 25,000
Piper Jaffray Inc. ............................................... 25,000
Raymond James & Associates, Inc. ................................. 25,000
Soundview Financial Group, Inc. .................................. 25,000
Unterberg Harris.................................................. 25,000
---------
Total......................................................... 1,760,000
=========
</TABLE>

In addition, the International Underwriters (together with the U.S.
Underwriters, the "Underwriters"), in a concurrent offering of the Common
Stock to persons outside the United States and Canada, acting through
PaineWebber International (U.K.) Ltd., Donaldson, Lufkin & Jenrette Securities
Corporation and Montgomery Securities, as International Representatives (the
"International Representatives"), have severally agreed, subject to the terms
and conditions set forth in the International Underwriting Agreement by and
among the Company and the International Representatives (the "International
Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the International Underwriters, 440,000 shares of Common
Stock, respectively (the "International Shares").

The U.S. Underwriting Agreement provides that the obligation of the U.S.
Underwriters to purchase all of the shares of Common Stock is subject to
certain conditions. The U.S. Underwriters are committed to purchase, and the
Company and the Selling Shareholders are obligated to sell, all of the shares
of Common Stock offered by this Prospectus, if any of the shares of Common
Stock being sold pursuant to the U.S. Underwriting Agreement are purchased.
The offering price and underwriting discounts and commissions under both
underwriting agreements are identical. In general, the closing with respect to
the sale of the shares of Common Stock pursuant to the U.S. Underwriting
Agreement is a condition to the closing with respect to the sale of the

50
<PAGE>

shares of Common Stock pursuant to the International Underwriting Agreement
and vice versa. PaineWebber International (U.K.) Ltd. is an affiliate of
PaineWebber Incorporated.

The Company and the Selling Shareholders have been advised by the
Representatives that the U.S. Underwriters propose to offer the shares of
Common Stock to the public initially at the public offering price set forth on
the cover page of this Prospectus, and to certain securities dealers at such
price less a concession not in excess of $0.40 per share. The U.S.
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $0.10 per share. After the initial public offering, the public offering
price and the concessions and discounts may be changed by the Representatives.

Each U.S. Underwriter has agreed that, as part of the distribution of the
U.S. Shares, (a) it is not purchasing any U.S. Shares for the account of
anyone other than a U.S. or Canadian Person and (b) it has not offered or
sold, and will not offer to sell, directly or indirectly, any U.S. Shares or
distribute this Prospectus to any person outside the U.S. or to anyone other
than a U.S. or Canadian Person. Each International Underwriter has agreed
that, as part of the distribution of the International Shares, (a) it is not
purchasing any International Shares for the account of any U.S. or Canadian
Person and (b) it has not offered or sold, and will not offer to sell,
directly or indirectly, any International Shares or distribute the
International Prospectus to any person within the U.S. or Canada or to any
U.S. or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters described below. As used
herein, "U.S. or Canadian Person" means any individual who is a resident of
the United States or Canada, any corporation, pension, profit-sharing or other
trust or other entity organized under or governed by the laws of the United
States or Canada or any political subdivision of either thereof (other than a
foreign branch of any U.S. or Canadian Person) and any U.S. or Canadian branch
of a person who is not otherwise a U.S. or Canadian Person.

The U.S. Underwriters and the International Underwriters have entered into
an Agreement Between U.S. and International Underwriters that provides for the
coordination of their activities. Pursuant to the Agreement Between U.S. and
International Underwriters, sales may be made between the U.S. Underwriters
and the International Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The per share price of any shares so sold shall
be the public offering price set forth on the cover page of this Prospectus,
less an amount not greater than the per share amount of the concession to
dealers set forth above. To the extent there are sales between the U.S.
Underwriters and the International Underwriters, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
International Underwriters may be more or less than the amount appearing on
the cover page of this Prospectus.

The Company has granted an option to the U.S. Underwriters, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to
330,000 additional shares of Common Stock at the initial public offering price
less the underwriting discount and commissions set forth on the cover page of
this Prospectus. The U.S. Underwriters may exercise such option only to cover
over-allotments in the sale of the shares that the U.S. Underwriters have
agreed to purchase. To the extent that the U.S. Underwriters exercise such
option, each of the U.S. Underwriters will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as is approximately the percentage of shares of Common Stock
that it is obligated to purchase of the total number of the U.S. Shares under
the U.S. Underwriting Agreement and as shown in the table set forth above.

The Company and the Selling Shareholders have agreed to indemnify the U.S.
Underwriters and the Company has agreed to indemnify the International
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the U.S. Underwriters and
the International Underwriters may be required to make in respect thereof.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Accordingly, the initial public offering price was determined
by negotiations between the Company and the Representatives of the
Underwriters. Among the factors considered in determining the initial public
offering price were the

51
<PAGE>

Company's record of operations, its current financial condition, its future
prospects, the market for its products, the experience of its management, the
economic conditions of the Company's industry in general, the general
condition of the equity securities market, the demand for similar securities
of companies considered comparable to the Company and other relevant factors.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania. Certain legal matters relating to this offering will be passed
upon for the Underwriters by Pepper, Hamilton & Scheetz, Philadelphia,
Pennsylvania.

EXPERTS

The consolidated balance sheets as of October 31, 1994 and 1995 and the
consolidated statements of income, shareholders' equity and cash flows for
each of the three fiscal years in the period ended October 31, 1995, included
in this Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and,
in each instance where such contract or document is filed as an exhibit to the
Registration Statement, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement, including exhibits filed therewith, may be inspected
without charge at the public reference facilities maintained by the Commission
at its principal office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at regional offices of the Commission located at
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its public reference facilities in Chicago,
Illinois and New York, New York, at prescribed rates.

The Company intends to furnish to its shareholders annual reports containing
consolidated financial statements audited by its independent public
accountants and quarterly reports containing unaudited consolidated financial
statements for the first three quarters of each fiscal year.

In September 1994, the Board of Directors of the Company approved the
engagement of Arthur Andersen LLP as its independent public accountants and
the dismissal of the Company's former auditors. The consolidated balance
sheets as of October 31, 1994 and 1995 and the consolidated statements of
income, stockholders' equity and cash flows for each of the three fiscal years
in the period ended October 31, 1995 included in this Prospectus have been
audited by Arthur Andersen LLP. See "Experts." The former auditors' reports on
the Company's financial statements did not contain an adverse opinion or
disclaimer of opinion and were not modified as to uncertainty, audit scope or
accounting principles. There were no disagreements with the former auditors on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure at the time of the change or with
respect to the Company's financial statements which, if not resolved to the
former auditors' satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their report. Prior to
retaining Arthur Andersen LLP, the Company had not consulted with Arthur
Andersen LLP regarding accounting principles.

52
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants................................... F-3
Consolidated Balance Sheets as of October 31, 1994 and 1995 and April 30,
1996...................................................................... F-4
Consolidated Statements of Income for the fiscal years ended October 31,
1993, 1994 and 1995 and the six months ended April 30, 1995 and 1996...... F-6
Consolidated Statements of Shareholders' Equity for the fiscal years ended
October 31, 1993, 1994 and 1995 and the six months ended April 30, 1996... F-7
Consolidated Statements of Cash Flows for the fiscal years ended October
31, 1993, 1994 and 1995 and the six months ended April 30, 1995 and 1996.. F-8
Notes to Consolidated Financial Statements................................. F-9
</TABLE>

F-1
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CFM Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of CFM
Technologies, Inc. (a Pennsylvania corporation) and subsidiaries as of October
31, 1994 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CFM Technologies, Inc. and
subsidiaries as of October 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended October 31, 1995, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP

Philadelphia, Pa.
June 17, 1996

F-3
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
---------------- -----------
1994 1995 1996
------- ------- -----------
(UNAUDITED)
-----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................. $ 1,106 $ 408 $ 649
Accounts receivable........................ 5,999 8,886 13,112
Inventories................................ 3,342 3,700 5,390
Prepaid expenses and other................. 297 184 303
Deferred income taxes...................... 193 529 592
------- ------- -------
Total current assets..................... 10,937 13,707 20,046
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land....................................... 540 540 540
Building and improvements.................. 1,966 2,205 2,929
Machinery and equipment.................... 516 1,640 2,854
Furniture and fixtures..................... 345 412 820
------- ------- -------
3,367 4,797 7,143
Less--Accumulated depreciation and amorti-
zation.................................... (198) (406) (642)
------- ------- -------
Net property, plant and equipment........ 3,169 4,391 6,501
------- ------- -------
OTHER ASSETS:
Deferred income taxes...................... 2,305 -- --
Patents, net of accumulated amortization of
$41, $57 and $66.......................... 221 251 252
Other...................................... 57 105 492
------- ------- -------
Total other assets....................... 2,583 356 744
------- ------- -------
$16,689 $18,454 $27,291
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
---------------- -----------
1994 1995 1996
------- ------- -----------
(UNAUDITED)
-----------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............... $ 389 $ 574 $ 652
Line of credit.................................. -- -- 5,250
Accounts payable................................ 1,493 2,537 3,451
Accrued expenses................................ 1,047 2,373 3,488
Customer deposits............................... 831 87 --
------- ------- -------
Total current liabilities..................... 3,760 5,571 12,841
------- ------- -------
LONG-TERM LIABILITIES:
Long-term debt.................................. 2,218 3,005 3,219
Obligation to related party partnerships........ 5,602 -- --
Deferred income taxes........................... -- 103 105
------- ------- -------
Total long-term liabilities................... 7,820 3,108 3,324
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 16)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 1,000,000
authorized shares; no shares issued or
outstanding.................................... -- -- --
Common stock, no par value; 10,000,000
authorized shares; 3,392,928, 3,803,263 and
3,803,263 shares issued and outstanding........ 6,352 9,616 9,616
Retained earnings (deficit)..................... (1,243) 159 1,510
------- ------- -------
Total shareholders' equity.................... 5,109 9,775 11,126
------- ------- -------
$16,689 $18,454 $27,291
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31 APRIL 30
----------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES......................... $11,840 $15,937 $23,430 $ 9,331 $ 19,697
COST OF SALES..................... 6,752 9,114 13,463 5,594 10,637
------- ------- ------- ------- --------
Gross profit.................. 5,088 6,823 9,967 3,737 9,060
------- ------- ------- ------- --------
OPERATING EXPENSES:
Research, development and
engineering.................... 720 2,100 1,717 811 2,092
Selling, general and
administrative................. 2,273 3,150 5,972 2,472 4,675
------- ------- ------- ------- --------
Total operating expenses...... 2,993 5,250 7,689 3,283 6,767
------- ------- ------- ------- --------
Operating income.............. 2,095 1,573 2,278 454 2,293
INTEREST EXPENSE (including
related party interest of $728
annually in 1993 and in 1994).... 755 797 173 74 215
------- ------- ------- ------- --------
Income before income taxes.... 1,340 776 2,105 380 2,078
INCOME TAXES...................... 457 238 703 127 727
------- ------- ------- ------- --------
NET INCOME........................ $ 883 $ 538 $ 1,402 $ 253 $ 1,351
======= ======= ======= ======= ========
NET INCOME PER SHARE.............. $ 0.35 $ 0.06 $ 0.34
======= ======= ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES................ 3,994 3,994 3,994
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK RETAINED
----------------- EARNINGS
SHARES AMOUNT (DEFICIT) TOTAL
--------- ------ --------- -------
<S> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1992................ 2,670,284 $1,818 $(2,664) $ (846)
Exercise of stock options.............. 103,948 205 -- 205
Purchase of common stock............... (16,632) (5) -- (5)
Net income............................. -- -- 883 883
--------- ------ ------- -------
BALANCE, OCTOBER 31, 1993................ 2,757,600 2,018 (1,781) 237
Proceeds from sale of common stock..... 670,254 4,533 -- 4,533
Exercise of stock options.............. 6,653 2 -- 2
Purchase of common stock............... (41,579) (201) -- (201)
Net income............................. -- -- 538 538
--------- ------ ------- -------
BALANCE, OCTOBER 31, 1994................ 3,392,928 6,352 (1,243) 5,109
Common stock issued for services....... 1,996 15 -- 15
Exchange of common stock for
Partnership interests (Note 8)........ 408,339 3,249 -- 3,249
Net income............................. -- -- 1,402 1,402
--------- ------ ------- -------
BALANCE, OCTOBER 31, 1995................ 3,803,263 9,616 159 9,775
Net income (unaudited)................. -- -- 1,351 1,351
--------- ------ ------- -------
BALANCE, APRIL 30, 1996 (unaudited)...... 3,803,263 $9,616 $ 1,510 $11,126
========= ====== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31 APRIL 30
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income...................... $ 883 $ 538 $ 1,402 $ 253 $ 1,351
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities--
Depreciation and
amortization................. 69 134 224 106 245
Deferred income tax benefit... (116) (261) (251) (147) (61)
(Increase) decrease in--
Accounts receivable......... (1,578) (2,326) (2,887) 311 (4,226)
Inventories................. (1,141) (809) (358) (720) (1,690)
Prepaid expenses and other
current assets............. (111) (46) (12) 109 (119)
Other assets................ (175) 10 (94) (7) (397)
Increase (decrease) in--
Accounts payable............ 815 80 1,044 380 914
Accrued expenses............ 1,011 (276) 1,311 (30) 1,115
Customer deposits........... 564 201 (744) (670) (87)
------- ------- ------- ------- --------
Net cash provided by (used
in) operating
activities............... 221 (2,755) (365) (415) (2,955)
------- ------- ------- ------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment...................... (137) (2,623) (1,311) (95) (2,346)
------- ------- ------- ------- --------
FINANCING ACTIVITIES:
Net proceeds (repayments) on
line of credit................. (180) -- -- -- 5,250
Payments on long-term debt...... (48) (250) (388) (239) (268)
Proceeds from long-term debt.... -- 2,212 1,241 36 560
Proceeds from sale of common
stock.......................... 205 4,410 125 125 --
------- ------- ------- ------- --------
Net cash provided by (used
in) financing
activities............... (23) 6,372 978 (78) 5,542
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 61 994 (698) (588) 241
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR................ 51 112 1,106 1,106 408
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
YEAR............................. $ 112 $ 1,106 $ 408 $ 518 $ 649
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest expense.. $ 613 $ 745 $ 197 $ 62 $ 176
Cash paid for income taxes...... 98 528 730 557 1,117
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING
ACTIVITIES:
Machinery acquired under capital
leases......................... $ 24 $ 316 $ 398 $ 10 $ 560
Common stock issued for stock
subscriptions receivable....... -- 125 -- -- --
Common stock issued for
Partnership interests.......... -- -- 3,249 3,249 --
Common stock issued for
services....................... -- -- 15 15 --
Note payable issued for common
stock purchases................ -- 201 -- -- --
</TABLE>

The accompanying notes are an integral part of these statements.

F-8
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS ENDED APRIL
30, 1995 AND 1996 IS UNAUDITED)

1. DESCRIPTION OF BUSINESS:

CFM Technologies, Inc., formerly The CFM Technology Corporation (the
Company), designs, manufactures and markets advanced wet processing equipment
for sale to the worldwide semiconductor and flat panel display industries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.

Interim Financial Statements

The financial statements as of April 30, 1996 and for the six months ended
April 30, 1995 and 1996 are unaudited and, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of results for these interim periods. The
results for the six months ended April 30, 1996 are not necessarily indicative
of the results to be expected for the entire year.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. As of
October 31, 1995, the Company's cash and cash equivalents consist of bank and
money market accounts.

Inventories

Inventories are valued at the lower of first-in, first-out cost or market.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Significant improvements
are capitalized and expenditures for maintenance and repairs are charged to
expense as incurred. Upon the sale or retirement of these assets, the cost and
related accumulated depreciation are removed from the accounts and any gain or
loss is included in income.

Depreciation and amortization are provided using straight-line and
accelerated methods based on the estimated useful lives of the assets as
follows:

<TABLE>
<S> <C>
Building and improvements....................................... 40 years
Machinery and equipment......................................... 3-10 years
Furniture and fixtures.......................................... 5-10 years
</TABLE>

As of October 31, 1995 and April 30, 1996, the Company has construction in
progress of $208,000 and $0 included in building and improvements and $772,000
and $1,151,000 included in machinery and equipment, respectively.

F-9
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)
Patents

The cost of patents acquired are being amortized on a straight-line basis
over 17 years. Amortization expense was $9,000, $13,000, $17,000, $8,000 and
$9,000 in fiscal 1993, 1994 and 1995 and the six months ended April 30, 1995
and 1996, respectively.

Revenue Recognition

Net sales are generally recognized upon shipment of the equipment and, if
recognized prior to shipment, upon completion of customer inspection where
risks of ownership are transferred to the customer. The estimated costs of
equipment installation and warranty are accrued when the related sale is
recognized.

Research, Development and Engineering Expenses

Research, development and engineering expenses are charged to expense as
incurred. Research, development and engineering expenses were net of
reimbursement of $1,713,000, $1,835,000, $232,000, $132,000 and $412,000 in
fiscal 1993, 1994 and 1995 and the six months ended April 30, 1995 and 1996,
respectively. Engineering expenses consist of costs related to the development
of new products and the integration of existing products into application-
specific systems.

Income Taxes

The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No.
109 requires the liability method of accounting for deferred income taxes.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities.
Deferred tax assets or liabilities at the end of each period are determined
using the tax rate expected to be in effect when taxes are actually paid or
recovered.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration
of credit risk are accounts receivable. The Company's customer base
principally comprises companies within the semiconductor industry, which
historically has been volatile. The Company does not require collateral from
its customers.

Net Income Per Share

Net income per share was calculated by dividing net income by the weighted
average number of common shares outstanding for the respective period adjusted
for the dilutive effect of common stock equivalents, which consist of stock
options using the treasury stock method. Pursuant to the requirements of the
Securities and Exchange Commission, common stock issued by the Company during
the twelve months immediately preceding the initial public offering, plus the
number of common equivalent shares which became issuable during the same
period pursuant to the grant of common stock options, have been included in
the calculation of the shares used in computing net income per share as if
they were outstanding for all periods presented (using the treasury stock
method and the initial public offering price of $10.00 per share). Pursuant to
the requirements of the Securities and Exchange Commission, the calculation of
shares used in computing net income per share also includes certain redeemable
common stock for which the redemption provisions terminated immediately prior
to the effective date of the initial public offering contemplated in this
Prospectus. Historical net income per share for fiscal 1993 and 1994 is not
presented as such data is not meaningful due to the accretion recorded in each
year for the redeemable common stock (see Note 9).

New Accounting Pronouncement

The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt
this standard for the fiscal year ending October 31, 1996. The Company has
elected to adopt the disclosure requirement of this pronouncement. The
adoption of this pronouncement will have no impact on the Company's financial
position or results of operations.

F-10
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)
3. ACCOUNTS RECEIVABLE:

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
--------------------- -----------
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Billed................................... $4,881,000 $7,162,000 $10,262,000
Unbilled................................. 1,118,000 1,724,000 2,850,000
---------- ---------- -----------
$5,999,000 $8,886,000 $13,112,000
========== ========== ===========
</TABLE>

Unbilled receivables represent final retainage amounts to be billed upon
completion of the installation process.

4. INVENTORIES:

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
--------------------- ----------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Raw materials............................. $2,171,000 $1,979,000 $2,314,000
Work in progress.......................... 971,000 1,721,000 3,076,000
Finished goods............................ 200,000 -- --
---------- ---------- ----------
$3,342,000 $3,700,000 $5,390,000
========== ========== ==========
</TABLE>

5. LINE OF CREDIT:

The Company has a $7,500,000 demand line of credit with a bank. The line of
credit does not have a stated maturity or expiration date, and outstanding
borrowings are payable upon demand by the bank. The borrowing base related to
the line of credit is based upon a certain percentage of eligible accounts
receivable and customer signed purchase orders, as defined. Interest is
charged at the bank's prime rate beginning in October 1995 and was charged at
the bank's prime rate plus 1/2% prior to October 1995. The interest rate under
the line of credit was 8.25% and 8.75% at October 31, 1994 and 1995,
respectively. The line also provides for the issuance of letters of credit. As
of October 31, 1994 and 1995, there were no outstanding borrowings on the
line. Borrowings under the line are collateralized by substantially all of the
Company's assets. The line of credit requires the Company to maintain certain
financial and other covenants, including a minimum tangible net worth and
minimum cash flow to debt service coverage ratio.

6. ACCRUED EXPENSES:

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
--------------------- ----------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Warranty and installation costs........... $ 386,000 $ 991,000 $1,114,000
Payroll and payroll related............... 362,000 732,000 403,000
Commissions............................... 205,000 250,000 1,050,000
Other..................................... 94,000 400,000 921,000
---------- ---------- ----------
$1,047,000 $2,373,000 $3,488,000
========== ========== ==========
</TABLE>

F-11
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)
7. LONG-TERM DEBT:

<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
----------------------- ----------
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
Mortgage note payable to bank,
payable in monthly installments of
$6,250 plus interest at 8.9% through
February 2009, collateralized by
land and building................... $1,075,000 $ 1,000,000 $957,000
Mortgage note payable to Pennsylvania
Industrial Development Authority
(PIDA), payable in monthly
installments of $4,294 including
interest at 2% through August 2009,
collateralized by land and
building............................ 627,000 632,000 610,000
Term note payable to bank, payable in
monthly installments of $20,000 plus
interest at the bank's prime rate
plus 0.25% through October 1998,
remaining outstanding principal due
in November 1998, collateralized by
certain building improvements....... -- 1,200,000 1,080,000
Mortgage note payable to Chester
County Development Council, payable
in monthly installments of $1,067
including interest at 5% through
August 2004, collateralized by land
and building........................ 98,000 91,000 86,000
Term notes payable to bank, payable
in monthly installments of $5,834
plus interest at the bank's prime
rate plus 1% through August 1999,
collateralized by certain assets.... 333,000 275,000 225,000
Capitalized lease obligations, lease
periods expiring at various dates
through 2001, interest rates range
from 7% to 12%, collateralized by
the leased assets................... 373,000 381,000 913,000
Other................................ 101,000 -- --
---------- ----------- ----------
2,607,000 3,579,000 3,871,000
Less-Current portion................. (389,000) (574,000) (652,000)
---------- ----------- ----------
$2,218,000 $ 3,005,000 $3,219,000
========== =========== ==========
</TABLE>

Maturities of long-term debt as of October 31, 1995 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996............................................................ $ 574,000
1997............................................................ 551,000
1998............................................................ 528,000
1999............................................................ 713,000
2000............................................................ 128,000
2001 and thereafter............................................. 1,085,000
----------
$3,579,000
==========
</TABLE>

In February 1994, the Company purchased land and a building to be used as
its manufacturing and office facilities. The cost of the land and building was
$2,558,000, including transaction costs and additional costs to renovate the
building to meet the Company's occupancy requirements. The property and
improvements are subject to the three mortgage notes. The mortgage note due to
PIDA contains certain financial covenants, the most restrictive of which
requires minimum levels of shareholders' equity. In addition, this note bears
interest at 2%, assuming the Company can create a specified number of jobs
over a three-year period. If the Company fails to meet the employment
commitment, the interest rate will increase to a market rate of up to 12.5%,
as defined.

F-12
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)

In fiscal 1995, the Company issued a term note to a bank in order to finance
an expansion and improvements to the Company's facilities. This term note
requires the Company to maintain certain financial and other covenants,
including a minimum tangible net worth and minimum cash flow to debt service
coverage ratio. This note also contains cross default provisions which include
all outstanding debt obligations of the Company. In addition, in fiscal 1994,
the Company issued several term notes to a bank in order to finance additional
improvements and machinery and equipment necessary for the Company's new
facility.

The Company leases machinery and equipment and furniture and fixtures under
capital leases expiring in various years through 2000. The assets and
liabilities under these leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the asset. The assets are
depreciated over their estimated useful lives since ownership will transfer
upon lease expiration. The net book value of equipment under capitalized lease
obligations as of October 31, 1995 is $412,000.

8. RESEARCH AND DEVELOPMENT LIMITED PARTNERSHIPS:

In 1984 and 1985, the Company entered into research and development
agreements with two related-party limited partnerships (the Partnerships), in
which the Company was the general partner. A significant number of the
individuals who were limited partners were also significant shareholders of
the Company. Due to this related party relationship, the cash that was paid by
the Partnerships to the Company was recorded as an obligation due to the
Partnerships and interest was accrued thereon. In April 1987 and September
1988, the Company exercised its purchase options to acquire the Partnerships'
technologies, which resulted in an aggregate liability of $2,184,000. The
obligation due to the Partnerships increased by scheduled amounts which
aggregated $5,030,000 through October 31, 1994 and were recorded as interest
expense. In each of fiscal 1993 and fiscal 1994, $728,000 of interest expense
was recorded. The Company made payments to the Partnerships of $1,612,000 on a
cumulative basis through October 31, 1994. As of October 31, 1994, deferred
taxes of $2,353,000 were recorded for differences in financial statement and
income tax reporting with respect to this obligation. On November 1, 1994, the
Company exchanged 408,339 shares of its common stock for the assets of the
Partnerships, which consisted primarily of the Company's obligation to the
Partnerships. The fair value of these common shares approximated the
obligation due to the Partnerships, net of tax. Accordingly, no gain or loss
was recognized as a result of this transaction.

9. SHAREHOLDERS' EQUITY:

On December 19, 1995, the Company's Board of Directors adopted, and on
January 3, 1996, the Company's shareholders approved, an increase in the
number of authorized common shares from 2,000,000 to 10,000,000 and the
authorization of 1,000,000 shares of no par value preferred stock. In
addition, on June 16, 1996, the Company effected a 3.326-for-1.0 split of its
common stock. All share and stock option data have been restated to reflect
the authorized shares and stock split.

Certain common shareholders had the right to require the Company to redeem
their stock during certain periods and at specified prices. Immediately prior
to the effective date of the initial public offering contemplated in this
Prospectus, these redemption rights terminate and therefore, the related
redemption amounts are included in common stock and shareholders' equity for
all periods presented. The Company recorded the accretion to the redemption
value of $200,000, $200,000 and zero in fiscal 1993, 1994 and 1995,
respectively. The accretion was charged to common stock as the Company had an
accumulated deficit at that time. These amounts are not presented separately
in the statements of shareholders' equity due to the termination of the
redemption rights and are included in common stock for all periods presented.

F-13
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)

The Company and certain employee shareholders have entered into an agreement
which requires, upon the death of the shareholder, that the Company purchase
that number of shares which can be purchased with the proceeds from life
insurance policies on these shareholders owned by the Company. The purchase
price is defined in the agreement. This agreement terminates upon the closing
date of the initial public offering contemplated in this Prospectus.

10. STOCK OPTIONS:

The Company has a stock option plan (the 1992 Plan) whereby 748,423 common
shares may be issued to key management personnel, directors and consultants at
exercise prices not less than fair market value. The options have vesting
terms set by the executive compensation and stock option committee of the
Board of Directors and expire 10 years after the date of grant.

On December 19, 1995, the Company's Board of Directors adopted, and on
January 3, 1996, the Company's shareholders approved, (i) the 1995 Incentive
Plan (Incentive Plan), (ii) the Non-Employee Directors' Stock Option Plan
(Directors' Plan) and (iii) the Employee Stock Purchase Plan (Purchase Plan).
The Incentive Plan and the Directors' Plan authorized the granting of up to
400,000 shares of common stock or options to Company employees and up to
150,000 options to purchase common stock to non-employee directors,
respectively. The Purchase Plan allows eligible employees to purchase up to
300,000 shares of common stock at 85% of market, as defined. The Company will
not grant any additional options under the 1992 Plan.

The following table summarizes stock option activity:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Options outstanding at October 31, 1992.......... 286,899 $ 0.24-$2.41
Granted........................................ 206,232 2.41-7.52
Exercised...................................... (103,947) 0.24-2.41
--------
Options outstanding at October 31, 1993.......... 389,184 0.24-7.52
Granted........................................ 16,632 7.52
Exercised...................................... (6,653) 0.24
--------
Options outstanding at October 31, 1994.......... 399,163 0.24-7.52
Granted........................................ 207,087 7.52
--------
Options outstanding at October 31, 1995.......... 606,250 0.24-7.52
Granted........................................ 48,603 7.52
Canceled....................................... (832) 7.52
--------
Options outstanding at April 30, 1996............ 654,021 0.24-7.52(1)
========
</TABLE>
- --------
(1) The weighted average exercise price per share is $4.60.

As of October 31, 1995, there were 337,213 options vested and exercisable.
As of April 30, 1996, there were 395,360 options vested and exercisable and
507,397 stock options were available for grant under the Company's stock
option plans.

11. EMPLOYEE BENEFIT PLANS:

In fiscal 1994, the Company implemented a defined contribution retirement
plan for the benefit of eligible employees. Management believes that the plan
qualifies under Section 401(k) of the Internal Revenue Code. The plan provides
for matching contributions by the Company at a discretionary percentage of
eligible pretax contributions by the employee. Matching contributions by the
Company were $27,000 and $68,000 in fiscal 1994 and 1995, respectively.

F-14
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)

In fiscal 1995, the Company established a profit-sharing plan for the
benefit of eligible employees. The plan provides for a target contribution of
approximately 2% of total planned salaries and wages, with actual payments
based upon certain annual performance results. In fiscal 1995, the Company
recorded profit sharing expense of $65,000.

12. OTHER RELATED PARTY TRANSACTIONS:

The Company recorded commission expense in fiscal 1994 and 1995 and the six
months ended April 30, 1995 and 1996, of $430,000, $282,000, $282,000 and
$627,000, respectively, which related to commissions payable to a distributor
which is also a shareholder of the Company. This distributor is controlled by
an individual who is a director of the Company. See Note 8 for other related
party transactions.

13. INCOME TAXES:

The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.................................... $546,000 $471,000 $937,000
State...................................... 27,000 28,000 17,000
-------- -------- --------
573,000 499,000 954,000
-------- -------- --------
Deferred:
Federal.................................... (94,000) (235,000) (244,000)
State...................................... (22,000) (26,000) (7,000)
-------- -------- --------
(116,000) (261,000) (251,000)
-------- -------- --------
$457,000 $238,000 $703,000
======== ======== ========
</TABLE>

Income tax expense differs from the amount currently payable because certain
expenses, primarily depreciation and accruals, are reported in different
periods for financial reporting and income tax purposes.

The federal statutory income tax rate is reconciled to the effective income
tax rate as follows:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate.......................... 34.0% 34.0% 34.0%
State income taxes, net of federal benefit...... 0.4 0.2 0.5
Research and development credit................. -- (3.6) (2.4)
Other........................................... (0.3) -- 1.3
------- ------- -------
34.1% 30.6% 33.4%
======= ======= =======
</TABLE>

F-15
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)

The components of the net current and long-term deferred tax assets and
liabilities, measured under SFAS No. 109, are as follows:

<TABLE>
<CAPTION>
OCTOBER 31
--------------------
1994 1995
---------- --------
<S> <C> <C>
Deferred tax assets--
Inventories........................................ $ 33,000 $ 85,000
Warranty and installation accrual.................. 114,000 347,000
Obligation to Partnerships (see Note 8)............ 2,353,000 --
Other.............................................. 46,000 97,000
---------- --------
2,546,000 529,000
Deferred tax liability--
Depreciation....................................... (48,000) (103,000)
---------- --------
Net deferred tax asset........................... $2,498,000 $426,000
========== ========
</TABLE>

14. CUSTOMER AND GEOGRAPHIC INFORMATION:

The Company's operations are conducted in one business segment. Export net
sales were $2,998,000, $8,242,000, $12,102,000, $5,640,000 and $8,555,000 in
fiscal 1993, 1994 and 1995 and the six months ended April 30, 1995 and 1996,
respectively. Export net sales to Europe and East Asia were $1,556,000 and
$1,442,000 in fiscal 1993, $4,625,000 and $3,617,000 in fiscal 1994,
$10,099,000 and $2,033,000 in fiscal 1995, $3,595,000 and $2,045,000 in the
six months ended April 30, 1995 and $5,547,000 and $3,008,000 in the six
months ended April 30, 1996, respectively.

The following table summarizes significant customers with net sales in
excess of 10% of net sales:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31 APRIL 30
-------------------------------- --------------------
CUSTOMER 1993 1994 1995 1995 1996
-------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
A.................. $3,616,000 $6,876,000 $5,287,000 $1,825,000 $ *
B.................. 2,314,000 * * * *
C.................. * 2,583,000 * * 6,363,000
D.................. * * 3,075,000 1,421,000 *
E.................. * * 4,041,000 * *
F.................. * * 2,490,000 * *
G.................. 1,504,000 * * * *
H.................. * * * 1,695,000 4,683,000
I.................. * * * 1,063,000 *
J.................. * * * 1,300,000 *
</TABLE>
--------
* Net sales less than 10% of net sales

15. SUPPLIER CONCENTRATION:

The Company relies to a substantial extent on outside vendors to manufacture
and supply many of the components and subassemblies used in the Company's
systems. Certain of these are obtained from a sole supplier or a limited group
of suppliers, many of which are small, independent companies. Moreover, the
Company believes that certain of these components and subassemblies can only
be obtained from its current suppliers. The Company's reliance on outside
vendors generally, and on sole suppliers in particular, involves several
risks, including a potential inability to obtain an adequate supply of
required components and reduced control over pricing, timely delivery and
quality of components.

F-16
<PAGE>

CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE SIX MONTH PERIODS
ENDED APRIL 30, 1995 AND 1996 IS UNAUDITED)

16. COMMITMENTS AND CONTINGENCIES:

In fiscal 1995, the Company entered into a noncancelable lease effective
December 1, 1995 for office facilities. Future minimum rental payments,
including operating expense allocations, as of October 31, 1995 on this lease
are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996............................................................. $485,000
1997............................................................. 548,000
1998............................................................. 548,000
1999............................................................. 548,000
2000............................................................. 548,000
2001............................................................. 46,000
</TABLE>

The Company has asserted certain of its patent rights against three
defendants. One of the defendants has counterclaimed against the Company,
seeking a declaratory judgment that the subject patent is invalid. Although
management believes that the ultimate resolution of these matters will not
have a material impact on the Company's financial position or results of
operations, there can be no assurance in that regard.

In November 1995, counsel to two shareholders who acquired 31,614 shares of
Common Stock in connection with the November 1, 1994 transaction with the
Partnerships (see Note 8) sent letters to the Securities and Exchange
Commission and the Pennsylvania Securities Commission referencing such
shareholders' objection to that transaction and its valuation and allegations
that the Company breached certain duties and violated unspecified state and
federal laws in connection therewith. Specifically, counsel to these
shareholders alleged that the Company had no right to cause the exchange with
the Partnerships and that the exchange rate utilized in the transaction was
too low. The Company believes that such shareholders' objections and
allegations are without merit and that any resolution of such matter will not
have a material adverse effect on the Company.

"First, customer-provided wafer carriers holding 25 wafers each are mated
with the wafer loading module. All the wafers are then removed from each
carrier, in turn, and placed into the Full-Flow vessel. When loaded, the
Full-Flow vessel is moved laterally back into the vessel module where the
upper and lower inlets clamp the vessel into place, completely sealing it.
At the conclusion of the processing, the process is reversed and all
wafers are returned to their original wafer carrier, maintaining lot
traceability."

[PHOTOGRAPH APPEARS HERE DEPICTING WAFERS SUSPENDED ABOVE THE
FULL-FLOW VESSEL. ALSO DEPICTED IS AN EMPTY WAFER CARRIER]

[PHOTOGRAPH APPEARS HERE DEPICTING AN OPERATOR USING THE TOUCH SCREEN
GRAPHICAL INTERFACE OF AN INSTALLED FULL-FLOW SYSTEM]

"Graphical displays provide real time control information and process
options to operators and engineers while completely isolated from
dangerous processing fluids and vapors."

F-17
<PAGE>

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
The Company.............................................................. 12
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 22
Management............................................................... 36
Certain Relationships and Related Transactions........................... 44
Principal and Selling Shareholders....................................... 46
Description of Capital Stock............................................. 48
Shares Eligible for Future Sale.......................................... 49
Underwriting............................................................. 50
Legal Matters............................................................ 52
Experts.................................................................. 52
Additional Information................................................... 52
Index to Consolidated Financial Statements............................... F-1
</TABLE>

UNTIL JULY 15, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SE-
CURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

2,200,000 SHARES

[LOGO OF CFM TECHNOLOGIES APPEARS HERE]

COMMON STOCK

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

PROSPECTUS

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

PAINEWEBBER INCORPORATED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MONTGOMERY SECURITIES

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

JUNE 18, 1996

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