ADE CORP, 10-K, 1998-07-29

ADE CORP
10-K, 1998-07-29
MEASURING & CONTROLLING DEVICES, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-K

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED APRIL 30, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-26714

ADE CORPORATION

(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2441829
(State of incorporation) (I.R.S. Employer Identification
No.)

80 WILSON WAY 02090
Westwood, Massachusetts (Zip Code)
(Address of principal executive offices)

(781) 467-3500
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $0.01 PAR VALUE
(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

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

As of July 22, 1998, there were outstanding 13,137,412 shares of Common
Stock, $.01 par value per share. The aggregate market value of shares of Common
Stock held by non-affiliates of the registrant, based upon the last sale price
for such stock on that date as reported by Nasdaq, was approximately
$174,898,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 1998 Annual Meeting of
Stockholders are incorporated by reference into Part III.

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PART I

ITEM 1. BUSINESS

CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH
FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH IN THIS ITEM 1
("BUSINESS") AND IN ITEM 7 ("MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS") AS WELL AS ELSEWHERE IN THIS REPORT. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
DISCUSSED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 12 BELOW AND
ELSEWHERE IN THIS REPORT. ANY FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE DATE
OF THIS REPORT AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD-LOOKING STATEMENTS OR TO UPDATE THE REASONS WHY ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS.

ADE Corporation is a leader in the design, manufacture, marketing and
service of metrology and inspection systems for the semiconductor wafer
manufacturing industry. In addition, the Company is a growing supplier of
metrology systems to the semiconductor device and computer hard disk industries.
The Company's systems analyze and report product quality at critical
manufacturing process steps, sort wafers and disks and provide manufacturers
with quality certification data. Semiconductor wafer and device and computer
hard disk manufacturers use the Company's systems to improve yield and capital
productivity. The Company's products have evolved from single instruments used
in off-line engineering analysis to multi-function systems for automated in-line
monitoring of process-induced defects throughout the wafer and disk
manufacturing processes. The Company's systems are designed to deliver the high
throughput, reliability and information and analysis necessary to meet the
demands of increasingly complex and time-sensitive manufacturing processes.

PRODUCTS

ADE's product strategy is to develop versatile, modular instrumentation and
automation sub-systems that can be assembled to form a number of integrated
products. These products support multiple metrology and inspection functions and
sorting in the semiconductor wafer and device and hard disk fabrication
processes. The Company has over 35 major products currently in use by the
semiconductor wafer and device and hard disk manufacturing industries and has
shipped more than 1,700 systems. During the past fiscal year, semiconductor
equipment sales to wafer manufacturers have generated approximately 71% of the
Company's annual revenues. The Company, however, must continue to develop and
introduce new products and product enhancements to keep pace with technological
developments and changing customer requirements.

The Company's principal products in the semiconductor wafer, semiconductor
device and computer hard disk industries are described below. All metrology and
inspection systems have the capability to record, print and store measurement
data locally, as well as distribute the data via a network for yield and process
management, future analysis and Silicon Wafer Order Form ("SWOF") quality
certification.

SEMICONDUCTOR INDUSTRY PRODUCTS

WAFERCHECK 7000 SERIES. The WaferCheck 7000 series of products are flexible,
modular systems capable of automatically characterizing, inspecting and sorting
semiconductor wafers. The WaferCheck 7000, the first large-scale, automated
metrology system for the wafer manufacturing market, was introduced by the
Company in 1983. To meet the industry's increasing demand for the manufacture of
200 millimeter wafers, the Company introduced the WaferCheck 7200 in 1987. These
systems measure thickness, flatness, shape, conductivity type, and resistivity
on as-cut and etched wafers and provide high speed sorting. The products combine
an automated transfer belt module with one or more customer selected measurement
modules into a single, floor mounted system. These systems, which are capable of
operating in a class 1000 cleanroom environment, provide a non-destructive
in-line sorting capability and precise wafer classification

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at submicron accuracies. The WaferCheck 7000 ranges in price from $160,000 to
$475,000. The WaferCheck 7200 ranges in price from $200,000 to $750,000.

ULTRASCAN 9000 SERIES. The UltraScan 9000 series of products are high
throughput, in-line production systems that perform metrology and sorting at
various stages of the wafer manufacturing and device fabrication processes. The
9300 and 9350 systems, introduced in 1990, employ the Company's E station
measurement module to measure thickness down to an accuracy of 0.5 microns. The
9600 and 9650 systems, introduced in 1994 and based on the more advanced E-Plus
station, measure thickness down to an accuracy of 0.25 microns. The 9350 and
9650 systems have a smaller footprint than their larger counterparts, making
them more suitable for applications in the device fabrication process, including
photolithography, thermal processing, CMP and thin film deposition. The
UltraScan 9000 systems are capable of being operated in a class 10 cleanroom
environment. The UltraScan 9000 systems measure wafer thickness, flatness,
shape, conductivity type and resistivity and can be integrated with factory
automation systems using industry standard protocols. The UltraScan 9300 and
9350 systems range in price from $250,000 to $500,000. The UltraScan 9600 and
9650 systems range in price from $360,000 to $590,000.

ULTRAGAGE 9000 SERIES. The UltraGage 9000 series of products are benchtop
metrology systems containing a single measurement module, which is capable of
making selected measurements, including flatness, thickness and stress. The
UltraGage 9500 system, introduced in 1992, is based on the Company's E station
measurement module. The UltraGage 9700 system, introduced in 1995, is based on
the E-Plus station measurement module. The UltraGage 9000 systems are capable of
being operated in a class 10 cleanroom environment. These systems were designed
to operate together with applications software to be used by device
manufacturers in applications such as chemical mechanical planarization ("CMP")
and thermal processing. The UltraGage 9500 system ranges in price from $150,000
to $220,000. The UltraGage 9700 system ranges in price from $210,000 to
$260,000.

WIS SERIES. The WIS series products are high throughput, in-line production
systems that are used to detect, measure and characterize particles and other
defects on wafer surfaces and provide process analysis and control information
for the wafer manufacturer. The first of these optical-based systems was
introduced in 1981. Based on the Company's existing CR80 production tool design,
the WIS-CR81 and WIS-CR82, introduced in 1997, detect particles down to 0.1
microns on wafers up to 200 millimeters in diameter. The WIS systems can be
integrated with factory automation systems using industry standard protocols. A
variety of software packages are available from the Company to tailor the system
to specific customer requirements. The WIS systems are capable of being operated
in a class 10 cleanroom environment. The WIS systems range in price from
$300,000 to $450,000.

GALAXY SERIES. The Galaxy series of products are modular, high throughput,
in-line production systems that perform metrology and sorting at various stages
of the wafer manufacturing and device fabrication processes. A key feature of
the systems is their unique ability to measure both the front and back surface
of the wafer, holding the wafer gently and only by the edges, so as not to
introduce any damage or contamination on either the front or the back surface of
the wafer. The AFS-300 and the AWIS-300 systems employ the identical wafer
handling platform. The AFS-300 and the AWIS-300 systems range in price from
$650,000 to $1,000,000.

The AFS-300 series systems, introduced in 1997, are generally operated in a
class 10 cleanroom environment, are based on ADE's advanced E-Plus station and
measure thickness down to an accuracy of 0.25 microns. The AFS-300 series
systems measure wafer thickness, flatness, shape, conductivity type and
resistivity and can be integrated with factory automation systems using industry
standard protocols. The Company has delivered beta units to certain customers.

The AWIS-300 series systems, currently in the final stages of development,
are based on ADE's proprietary ARS (Angle Resolved Scatter) technologies for the
optical inspection of bare and film wafer surfaces, and are intended for use in
a class 1 or better cleanroom environment. The AWIS-300 is designed

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to provide the combination of front and backside measurement, sensitivity,
throughput and sorting capabilities required by wafer manufacturers.

DISK INDUSTRY PRODUCTS

VIBRATING SAMPLE AND TORQUE LABORATORY MAGNETOMETERS. These computerized
systems are used for the magnetic characterization of a broad range of materials
(i.e. disks, tapes, powders, crystals, magneto-optic materials and
superconducting materials). Since only a small piece of a magnetic material can
be measured in these laboratory systems, a magnetic disk must be cut in order to
be measured in such systems. Model 1660 is the only magnetometer which combines
Vibrating Sample Magnetometer (VSM) and torque measurements in a single tool.
The VSM and torque measurement systems range in price from $110,000 to $275,000.

ROBOTIC KERR-EFFECT AND MRT MAGNETOMETERS. These are fully automated in-line
robotic systems used for fast and accurate mapping of the important magnetic
properties of computer hard disks. The systems have the capability to record,
store, process and print measurement results locally, as well as to transmit the
data to a network for process tune-up, quality control, certification, and
subsequent sorting of the disks. These robotic systems range in price from
$185,000 to $300,000.

AUTOGAGER 1500 SERIES. The Autogager 1500 series of products are modular
systems capable of automatically characterizing, inspecting and sorting hard
disks. The Autogager 1500, the first large-scale, automated dimensional
metrology system for the hard disk market, was introduced by the Company in 1996
to meet the industry's increasing demand for the manufacture of
Magneto-Resistive ("MR") quality hard disks. These systems measure thickness and
thickness variation on advanced hard disks and provide high speed sorting. The
products combine an industrial robot with the company's capacitive dimensional
metrology into a single, floor-mounted system. These systems, which are capable
of operating in a class 1000 cleanroom environment, provide a non-destructive
in-line sorting capability and precise disk classification at submicron
accuracies. The Autogager 1500 systems range in price from $250,000 to 375,000.

PRODUCTS IN DEVELOPMENT

In order to maintain its technology leadership, the Company continues to
introduce new products. Among those products is the EpiScan 1000 for epitaxial
film measurements, InfoTools Software Suite for increased productivity on an ADE
tool and Constellation for automated inspection of 200 and 300 mm polished and
epi wafer inspection.

EPISCAN 1000 SERIES. The EpiScan 1000 series of products are high speed film
thickness measurement and mapping tools designed specifically for leading edge
characterization measurements of advanced thin epi. The EpiScan 1000 system,
introduced in 1997, is based on advanced, model-based FTIR (Fourier Transform
Infrared Spectroscopy) technology licensed to the Company by On-Line
Technologies, Inc. The system is capable of being operated in a class 10
cleanroom environment. The EpiScan 1000 system ranges in price from $210,000 to
$300,000. Episcan 1000 was released as a production system in July, 1998.

CONSTELLATION. The Constellation is a fully automated inspection tool
designed to handle the needs of both 200mm and 300mm polished and epi wafer
inspection. Constellation offers advanced inspection capabilities for high
volume 200 mm production, while offering simple, software-driven conversions to
handle 300 mm pilot and production requirements. The Constellation ranges in
price from $500,000 to $650,000. Constellation systems are currently in beta
test at customers.

INFOTOOLS SOFTWARE SUITE. InfoTools is an off-line application suite of
productivity tools for ADE's UltraScan, UltraGage and WaferCheck systems.
InfoTools includes ReportTools for off-line processing of wafer data and
RecipeTools for centralized recipe storage. InfoTools increases machine
availability and leads to a lower cost of ownership of an ADE tool. InfoTools is
modularly priced based on the number of users and applications required.
Infotools was released as a product in July, 1998.

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TECHNOLOGY

The Company's metrology and inspection products use its proprietary
non-contact capacitive, magnetic and optical technologies to measure the
dimensional, magnetic and surface characteristics of semiconductor wafers and
devices and computer hard disks.

DIMENSIONAL TECHNOLOGY

The Company's non-contact capacitive gaging technology, which is the subject
of a series of patents, is used to measure the dimensional parameters
(thickness, flatness, shape) of semiconductor wafers, computer hard disks and
other objects. This technology is based on the measurement of the capacitance
between a measurement probe and the surface of the object. The capacitance
varies as a precise function of the distance between the probe and the object
being measured, permitting the distance to be measured with a precision of
better than 0.01 microns. For example, in the measurement of a semiconductor
wafer, two probes, one on each side of the wafer, map both wafer surfaces
simultaneously. Electronic circuitry converts the probe capacitance signal into
distance signals which are translated by the Company's software to produce
information concerning the wafer's thickness, flatness and shape.

SURFACE INSPECTION TECHNOLOGY

The Company uses optical methods to detect microscopic surface defects. A
finely focused laser beam is scanned over the surface of the wafer. Surface
particles or defects cause some of the beam's energy to scatter. Sensitive
detectors quantify this scattering signal, which is translated by the Company's
software to produce information about particles, micro scratches, haze and other
process induced defects on the wafer surface. Although the principles of the
Company's optical technology are similar to those used by other manufacturers,
the Company believes its theoretical modeling and patented optical engineering
and proprietary software result in products having a superior combination of
high sensitivity and throughput.

FOURIER TRANSFORM INFRARED SPECTROSCOPY TECHNOLOGY

Fourier Transform Infrared Spectroscopy Technology ("FTIR") is used in a
broad range of laboratory applications for examining various technical
properties of materials and chemicals. On-Line Technologies, Inc., a
Connecticut-based technology company, has licensed its FTIR technology to ADE
for incorporation into metrology tools for the wafer market. ADE is integrating
this technology to provide the increasing precision and accuracy needed to
support ever-tightening Epi specifications.

MAGNETICS CHARACTERIZATION TECHNOLOGY

The Company's products for characterizing magnetic materials use a variety
of non-contact measurement technologies including lasers (the Kerr effect),
vibrating sample and torque-effect inductive sensing techniques. The Company
believes its theoretical modeling and magnetics engineering enable it to offer
automated products with superior sensitivity, speed, accuracy, and
reproducibility.

PROPRIETARY SOFTWARE

ADE's proprietary software analyzes and transforms the large amounts of data
generated by ADE's metrology and inspection systems to produce information about
process induced defects that aids in process control. The flexible design of the
software permits reconfiguration of the Company's products to serve new
applications with a minimum of hardware or software redesign or development. The
Company's software is designed to integrate the Company's various metrology
functions with one another and to implement industry standards for integrating
the Company's products with the manufacturing facility's information systems.
The Company currently is seeking patent protection on certain features of its
software.

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MARKETING, SALES AND CUSTOMER SUPPORT

The Company markets and sells its semiconductor metrology and inspection
products through its direct sales force, distributors and independent sales
representatives. The Company markets and sells its metrology and inspection
products in the United States, Europe and Malaysia through full-time
salespersons located in Milpitas, Dallas, Portland and Boston, in the United
States, in the United Kingdom, in Germany, and in Malaysia. During the past
fiscal year, approximately 50% of the Company's revenues were derived through
its direct sales organization. The Company's direct sales force is supported by
applications engineers in selected field offices and in its manufacturing
locations.

Sales of dimensional systems in Japan are supported by Japan ADE Limited, a
joint venture of the Company and Kanematsu Electronics, Ltd. Sales of optical
surface inspection products are provided in Japan by a separate distributor. The
Company also sells its semiconductor metrology and inspection products in
Israel, South Korea, Singapore, Taiwan, India and the People's Republic of China
through independent sales representatives. The Company markets and sells its
computer hard disk products in the United States through two full-time
salespersons and internationally through distributors and sales representatives.
The Company's gaging products are sold worldwide through distributors and
independent sales representatives.

The selling process for the Company's products frequently involves
participation by sales, marketing and customer support personnel. Customers and
potential customers often evaluate the Company's products by sending
semiconductor wafers to the Company for measurement or by installing
demonstration equipment at their facilities. The Company maintains demonstration
equipment at its manufacturing sites and some of its sales offices for this
purpose. The Company plans to increase its investment in demonstration equipment
to accelerate the introduction of products. The Company's marketing activities
also include participation in international standards organizations, trade
shows, publication of articles in trade journals, participation in industry
forums and distribution of sales literature.

The Company believes that its strong commitment to service is essential,
based on the growing complexity of the equipment used in the semiconductor
manufacturing process. This complexity makes it difficult for semiconductor
wafer and device manufacturers to maintain an internal workforce sufficiently
skilled and specialized to support the disparate equipment and technologies used
in their processes. ADE has customer support centers in Boston, Charlotte,
Austin, Dallas, Milpitas, Vancouver, WA, Milton Keynes, England, Munich, Germany
and Kuala Lumpur, Malaysia. In addition, the Company's distributors and sales
representatives provide customer support. ADE also offers training programs and
maintenance contracts for its customers. The Company offers warranties of up to
twelve months covering the performance and reliability of its products.

CUSTOMERS

The Company's customers include all of the leading semiconductor wafer
manufacturers and many of the leading semiconductor device and computer hard
disk and disk drive manufacturers throughout the world. Historically, a
relatively limited number of customers have accounted for a substantial portion
of the Company's revenues. In fiscal years 1998, 1997, and 1996, sales to the
Company's top five customers accounted for approximately 49%, 50% and 45%,
respectively, of the Company's revenue. During fiscal year 1998 one of the
Company's customers, Shin-Etsu Handotai Co., accounted for 17% of the Company's
revenue. During the past fiscal year, approximately 71% of the Company's
revenues were derived from sales made to wafer manufacturers, with the remainder
of the Company's revenues derived from sales to manufacturers of semiconductor
devices, and computer hard disks and disk drives and semiconductor equipment.
The Company's principal customers are as follows:

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SEMICONDUCTOR WAFER MANUFACTURERS

Komatsu
LG Silicon
MEMC Electronic Materials
Mitsubishi International
Posco Huls
Shin-Etsu Handotai
Sumitomo Sitix Silicon
Toshiba
Wacker Siltronic

SEMICONDUCTOR DEVICE MANUFACTURERS

IBM
Intel
Lucent Technologies
Motorola
ST Microsystems
Texas Instruments
Winbond Electronic

COMPUTER HARD DISK AND DISK DRIVE MANUFACTURERS

HMT
Hyundai Electronics
IBM
Komag
Quantum
Seagate Technology
Trace
Western Digital

RESEARCH AND DEVELOPMENT

The market for semiconductor wafer and device and computer hard disk and
disk drive equipment is characterized by rapid technological change and product
innovation. The Company's research and development efforts are designed to
enhance the Company's current products and develop and introduce new products to
keep pace with technological developments and respond to constantly evolving
customer requirements. The Company devotes significant resources to programs
directed towards developing new and enhanced products, as well as developing new
applications for existing products.

In fiscal years 1998, 1997 and 1996, the Company's research and development
expenditures were $26.0 million, $17.0 million and $7.8 million respectively,
representing 21.1%, 16.8% and 11.6% of revenues. Research and development
expenditures consist primarily of salaries, project materials and other costs
associated with the Company's ongoing research and development efforts.

Industry standards organizations, such as Semiconductor Equipment and
Materials International ("SEMI") and American Standards for Testing and
Materials ("ASTM"), are pivotal in defining the test methods, measurement
parameters and specifications governing commercial transactions within the
semiconductor industry. The Company maintains a significant presence on
standards committees of SEMI, ASTM and other international standards
organizations. The Company believes that its involvement with these
organizations has helped to ensure that the Company's new products conform to
industry standards.

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BACKLOG

Backlog decreased to approximately $34.7 million at April 30, 1998 from
approximately $61.2 million at April 30, 1997, as a result of increased sales
volume in fiscal 1998 and decreased sales orders related to general
semiconductor and computer hard disk industries downturns in the second half of
fiscal 1998. The Company schedules production based on firm customer commitments
and anticipated orders during the planning cycle. The Company includes in its
backlog only those customer orders for which it has accepted written purchase
orders against which it expects to ship within the following twelve months. All
orders are subject to cancellation or delay by the customer with limited or no
penalty. The Company does not believe that the level of backlog is an accurate
indicator of the Company's performance in future periods.

MANUFACTURING

The Company's principal manufacturing activities take place at its ISO
9001-registered facility in Westwood, Massachusetts, where dimensional metrology
systems are manufactured, and Charlotte, North Carolina, where optical surface
inspection equipment is manufactured. The Company's gaging products for the
computer disk and disk drive and other industries are manufactured in Newton,
Massachusetts and Milpitas, California. Manufacturing activities consist
primarily of assembling and testing components and subassemblies which are
supplied by third party vendors and then integrated into the Company's finished
products. Many of the components and subassemblies are standard products,
although certain items are made to Company specifications. The Company
manufactures its semiconductor metrology and inspection systems in a cleanroom
environment.

Certain components and subassemblies, including certain system controllers
and robotics components incorporated into the Company's systems, are obtained
from a single source or a limited group of suppliers. Management routinely
monitors single or limited source supply parts, and the Company endeavors to
ensure that adequate inventory is available to maintain manufacturing schedules
should the supply of any part be interrupted. Although the Company seeks to
reduce its dependence on sole and limited source suppliers, it has not qualified
a second source for these products and the partial or complete loss of certain
of these sources could have an adverse effect on the Company's results of
operations and damage customer relationships. Further, a significant increase in
the list price of one or more of these components could adversely affect the
Company's results of operations.

COMPETITION

The semiconductor and computer hard disk equipment industries are highly
competitive. While the Company believes that it does not presently have
significant established competitors in the metrology area of the semiconductor
wafer equipment industry, the Company understands that certain companies with
complementary technologies may be developing products that could compete with
the Company's existing and future products. In the market for optical defect
inspection equipment, the Company competes directly with Hitachi Electronics
Engineering Co., Ltd. and KLA-Tencor Corporation, both of which have
significantly greater financial resources than the Company. In the metrology
area of the device industry, the Company has encountered, and expects to
encounter in the future, competition from companies offering similar and
competing technologies, some of which have significantly greater financial
resources than the Company or an existing market presence in the device
industry, or both. The Company also expects to encounter intense competition in
the areas of metrology and inspection for the hard disk industry. The Company's
competitors can be expected to continue to improve the design and performance of
their products and to introduce new products with competitive price/performance
characteristics. Competitive pressures can necessitate price reduction which can
adversely affect operating results. Although the Company believes that it has
certain technical and other advantages over its competitors, maintaining such
advantages will require a continued high level of investment by the Company in
research and development and sales, marketing and service. There can be no
assurance that the Company will have sufficient resources to continue to make
such investment or that the Company will be able to make the

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technological advances necessary to maintain such competitive advantages. The
current financial situation in Asia could also have the effect of making
equipment built in Asia more price competitive than that of the Company.

PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS

The Company relies on a combination of patent, copyright, trademark and
trade secret laws and license agreements to establish and protect its
proprietary rights in its products. The Company believes, however, that its
success depends to a greater extent upon innovation, technological expertise and
distribution strength. The Company requires each of its employees, including its
executive officers, to enter into standard employee agreements pursuant to which
the employee agrees to keep confidential all proprietary information of the
Company and to assign to the Company all rights in any proprietary information
or technology made or contributed by the employee during his or her employment
or made thereafter as a result of any inventions conceived or work done during
such employment. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. In addition,
effective patent, copyright and trade secret protection may be unavailable or
limited in certain foreign countries.

As of April 21, 1998 the Company holds 28 United States patents and 15
foreign patents covering existing and potential products and has applied for 4
additional patents in the United States and 22 additional foreign patents.

The Company has licensed its prealigner patents to a number of companies
following the settlement of a patent infringement suit brought by the Company.
The Company is actively pursuing similar licensing arrangements with a number of
other companies.

As is typical in the Company's industry, the Company and its customers from
time to time receive letters from third parties, including some of the Company's
competitors, alleging infringement of such parties' patent rights by the
Company's products. There can be no assurance that the Company would prevail in
any litigation seeking damages or expenses from the Company or to enjoin the
Company from selling its products on the basis of such alleged infringement or
that the Company would be able to license any valid and infringed patents on
reasonable terms.

EMPLOYEES

As of April 30, 1998, the Company employed a total of 619 persons at all of
its locations. Management believes that the Company's ongoing success depends on
its continued ability to attract and retain highly skilled employees. There can
be no assurance that the Company will be successful in attracting or retaining
such personnel. None of the Company's employees is represented by a labor union,
and the Company has experienced no work stoppages. The Company considers its
employee relations to be good.

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EXECUTIVE OFFICERS

The names, ages and positions held by the executive officers of the Company
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>

Robert C. Abbe............................ 60 President and Chief Executive Officer

E. Fred Schiele........................... 46 Vice President and General Manager, ADE Semiconductor Systems

Mark D. Shooman........................... 51 Vice President and Chief Financial Officer

Noel S. Poduje............................ 53 Vice President of Strategic Technology Development

William H. Ohm............................ 51 Vice President and General Manager of ADE Technologies, Inc.

Barry Glasgow............................. 52 Vice President of Worldwide Sales and Customer Support
</TABLE>

All executive officers are elected by the Board of Directors to serve in
their respective capacities until their successors are elected and qualified or
until their earlier resignations or removal.

Robert C. Abbe founded the Company in 1967. Since that time, he has served
as President, Chief Executive Officer and a director of the Company. Mr. Abbe
received an AB in Physics from Harvard College.

E. Fred Schiele joined the Company in 1996 and serves as the Vice President
and General Manager of ADE Semiconductor Systems, which consists of the
Dimensional Systems in Westwood and the Optical Systems in Charlotte. Prior to
joining ADE, Mr. Schiele was a Vice President at Electro Scientific Industries,
Inc. and has held senior level positions at Xerox Corporation, Inmos
Corporation, RTE Corporation and UVC Corporation. Mr. Schiele holds a BS in
Physics from Principia College and an MBA from the University of Wisconsin. Mr.
Schiele left the Company in April, 1998.

Mark D. Shooman joined the Company in April 1992 and has served as Vice
President and Chief Financial Officer since May 1994. From January 1991 to March
1992, Mr. Shooman served as President of Asbury Associates, Inc., a management
consulting firm he founded in 1988. From 1989 to January 1991, he served as a
Vice President and the Chief Financial Officer of the retail sales division of
Fidelity Investments. Mr. Shooman received a BS in Electrical Engineering from
Renesselaer Polytechnic Institute and a MBA from The Ohio State University. Mr.
Shooman is a Certified Public Accountant.

Noel S. Poduje joined the Company in 1972 and has served as Vice President
of Strategic Technology Development since 1985. Mr. Poduje received a BS in
Electrical Engineering from the Massachusetts Institute of Technology.

William Ohm joined the Company in 1994 and serves as Vice President and
General Manager of ADE Technologies, Inc. From 1992 through 1994, Mr. Ohm served
as Director of Sales and Marketing for Holographix, Inc. From 1990 to 1991, Mr.
Ohm was Marketing Manager for Presstek, Inc. and from 1976 to 1990, Product Line
Manager and Engineering Manager for Agfa Compugraphic, a Division of Agfa
Corporation. Mr. Ohm received a B.S. in Electrical Engineering from the
Massachusetts Institute of Technology and an M.B.A. from Harvard Business
School.

Barry Glasgow joined the Company in 1997 as Vice President of Worldwide
Sales and Customer Support. From July 1995 to June 1997, he served as director
of Worldwide Sales for Semiconductor Systems Group of Electro Scientific
Industries, Inc. From May 1987 to July 1995, he served as Vice President of
Sales and Marketing of XRL, Inc. Mr. Glasgow received a BS in Physics and
Psychology from the University of Massachusetts, and studied experimental
psychology in the Ph.D. programs at Indiana University and the University of
Minnesota. Mr. Glasgow left the Company in June, 1998.

9
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE COMMON STOCK OF THE COMPANY INVOLVES A HIGH DEGREE OF
RISK. INVESTORS AND PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS AND THOSE DISCUSSED ELSEWHERE IN THIS REPORT.

CYCLICALITY OF THE COMPANY'S BUSINESS. The Company's business depends in
large part upon the capital expenditures of semiconductor wafer and device and
computer hard disk and disk drive manufacturers, which in turn depend on the
current and anticipated market demand for integrated circuits, products
utilizing integrated circuits and systems requiring hard disk drives,
respectively. The semiconductor and hard disk industries are cyclical and have
historically experienced periodic downturns, which have had a severe effect on
the demand for capital equipment. Prior semiconductor and hard disk industry
downturns and construction of excess capacity by the industry have adversely
affected the Company's revenues, gross margin and net income and have also
adversely affected the market price for the Company's Common Stock. No assurance
can be given that the Company will continue to achieve the revenue growth it has
experienced in recent years. In addition, the need for continued investment in
research and development and extensive customer service and support capability
worldwide will limit the Company's ability to reduce expenses in the event of a
downturn in the industry.

FLUCTUATIONS OF QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results have varied and may continue to vary significantly. The
Company's quarterly revenues typically are derived from a relatively small
number of customer orders. These customer orders may consist of multiple
systems, each of which are priced between approximately $100,000 and $750,000.
As a result, the timing of significant orders or a reduction in the number of
systems shipped in a quarter could have a material effect on the Company's
revenues and results of operations for that quarter. The results for a
particular quarter may also vary due to a number of factors, including economic
conditions in the semiconductor and hard disk industries, the timing of
shipments of orders to major customers, the mix of products sold by the Company,
competitive pricing pressures and the Company's ability to design, introduce and
manufacture new products on a cost effective and timely basis. Moreover,
customers may cancel or reschedule shipments, and production difficulties or the
inability to obtain critical components could delay shipments. In addition, the
Company's product sales have fluctuated, and are likely to continue to
fluctuate, based on seasonal factors, such as customers' capital budget approval
cycles, among others. These factors could have a material adverse effect on the
Company's results of operations. The Company has increased its research and
development spending in recent periods, in part to support its development of
systems for next-generation 300 millimeter semiconductor wafers. The Company's
expense levels are fixed in advance and based in part on its expectations as to
future revenues. As a consequence, any material shortfall in revenue in a given
quarter could have a material adverse effect on the Company's earnings.

RAPID TECHNOLOGICAL CHANGE AND INTRODUCTION OF NEW PRODUCTS. The market for
semiconductor wafer and device and computer hard disk metrology and inspection
equipment is characterized by rapid technological advances, changing customer
requirements, evolving industry standards and frequent new product introductions
and enhancements. The Company's future success will depend in large part on the
Company's ability to enhance its current products and to develop and introduce
new products that keep pace with technological developments, achieve market
acceptance and respond to customer requirements that are constantly evolving.
New product introductions may contribute to fluctuations in quarterly operating
results, as customers may defer ordering products from the Company's existing
product lines. If new products have reliability or quality problems, then
reduced orders, higher manufacturing costs, delays in collecting accounts
receivable and additional service and warranty expense may result. Responding to
rapid technological change and the need to develop and introduce new products to
meet customers' expanding needs and evolving industry standards will require the
Company to make substantial investments in research and product development. Any
failure by the Company to anticipate or respond adequately to technological
developments and customer requirements or any significant delays in product
development or introduction could result in a loss of competitiveness and could
materially adversely affect

10
<PAGE>
the Company's operating results. There can be no assurance that the Company will
successfully develop and manufacture new products or that any product
enhancements or new products developed by the Company will gain market
acceptance. There can be no assurance that the Company will be able to develop
enhancements and new products successfully or in time to meet emerging demand,
or that enhancements and new products developed by the Company will be accepted
by the Company's customers.

COMPETITION. The semiconductor and computer hard disk equipment industries
are highly competitive. There can be no assurance that companies with
complementary technologies and greater financial resources will not enter these
industries and develop products that are superior to the Company's products or
achieve market acceptance. In the market for optical defect inspection
equipment, the Company competes directly with Hitachi Electronics Engineering
Co., Ltd. and KLA-Tencor Corporation, both of which have significantly greater
financial resources than the Company. In the metrology area of the device
industry, the Company has encountered, and expects to encounter in the future,
competition from companies offering similar and competing technologies, some of
which have significantly greater financial resources than the Company or an
existing market presence in the device industry, or both. The Company also
expects to encounter intense competition in the areas of metrology and
inspection for the hard disk industry. The Company's competitors can be expected
to continue to improve the design and performance of their products and to
introduce new products with competitive price/performance characteristics.
Competitive pressures often necessitate price reduction which can adversely
affect operating results. In order to remain competitive, the Company must
maintain a high level of investment in research and development and sales,
marketing and service. There can be no assurance that the Company will have
sufficient resources to continue to make such investment or that the Company
will be able to make the technological advances necessary to remain competitive.

The Company expects acquisitions and business combinations, by competitors
and potential competitors of the Company, in the metrology as well as in the
defect inspection markets. Acquisitions by the Company's competitors and
potential competitors could allow them to offer new products without the lengthy
time delays typically associated with internal product development, which could
afford such competitors and potential competitors an advantage in meeting
customers' demands. Such acquisitions by others could also have the effect of
limiting the Company's access to commercially significant technologies. The
greater resources, including financial and marketing and support resources, of
competitors engaged in these acquisitions could permit them to accelerate the
development and commercialization of new competitive products and the marketing
of existing competitive products to their larger installed bases. Accordingly,
such business combinations and acquisitions by competitors and potential
competitors could have an adverse impact on both the Company's market share and
the pricing of its products, which could have a material adverse effect on the
Company's business and results of operations.

The Company relies upon a combination of internal product development and
partnerships with certain other companies to broaden its product line to meet
customer demand. The increasing competitiveness within the industry, together
with acquisitions by the Company and its competitors of businesses possessing
complementary technologies, could materially limit the Company's ability to
continue to partner with other companies for new or complementary products,
which could have a material adverse effect upon the Company's ability to offer
in a timely manner products that meet customers' needs.

The ongoing financial crisis in Asia has created an unstable market for the
Company's products. The current trend in foreign exchange rates raises the cost
of equipment manufactured in the United States to Asian companies. Furthermore,
it makes equipment manufactured in Asia more price competitive to local
customers than the equipment of the Company. Given that historically
approximately 50% of the Company's revenue has come from Asia, the current
financial crisis could materially affect the competitive position of the Company
and consequently, financial results.

COST REDUCTIONS. The current down cycles in the semiconductor and computer
hard disk industries have adversely affected the Company. There can be no
assurance that the Company will be able to attract and retain the necessary
personnel to accomplish its strategic goals, satisfactorily support its
customers or

11
<PAGE>
operations or successfully bring new products to market while aligning its cost
structure with market conditions.

CUSTOMER AND INDUSTRY CONCENTRATION. A relatively limited number of
customers have historically accounted for a substantial portion of the Company's
revenues in each year. In fiscal years 1998, 1997 and 1996, sales to the
Company's top five customers in each period, all of which are in the
semiconductor wafer industry, accounted for approximately 49%, 50% and 45%,
respectively, of the Company's revenue. In fiscal 1998, one of the Company's
customers accounted for 17% of the Company's revenue. The loss of or any
reduction in orders by any of these customers, including reductions due to
market, economic or competitive conditions in the semiconductor industry or in
other industries that manufacture products utilizing semiconductors, could
adversely affect the Company's business, financial condition and results of
operations. In each of the last three fiscal years the Company has derived over
70% of its revenue, including approximately 71% in fiscal 1998, from customers
in the semiconductor wafer industry. While the Company is focusing on expanding
the level of its business in the device and hard disk industries, there can be
no assurance that the Company's efforts will be successful. The Company's
ability to maintain or increase its sales levels in the future will depend in
part upon its ability to obtain orders from new customers as well as the
financial condition and success of its existing customers and the general
economy. There can be no assurance that the Company will be able to maintain or
continue to increase the level of its revenues in the future or that the Company
will be able to retain existing customers or to attract new customers. In
addition, given the limited number of customers, any delay in collecting, or
inability to collect, accounts receivable could have a material adverse effect
on the Company's financial results. See Notes 2 and 11 of Notes to Consolidated
Financial Statements.

DEPENDENCE ON SUPPLIERS. Certain of the components and subassemblies,
including certain systems controllers and robotics components, incorporated in
the Company's systems are obtained from a single source or a limited group of
suppliers. The Company has not qualified a second source for these products and
the partial or complete loss of certain of these sources could have an adverse
effect on the Company's results of operations and damage customer relationships.
Further, a significant increase in the price of one or more of these components
could adversely affect the Company's results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. International sales
accounted for 63%, 60% and 59% of the Company's revenues for the fiscal years
1998, 1997 and 1996, respectively. See Note 11 of Notes to Consolidated
Financial Statements. The Company expects that international sales will continue
to represent a significant percentage of revenues. The Company's international
business may be affected by changes in demand resulting from fluctuations in
interest and currency exchange rates as well as by factors such as the risk of
government financed competition, changes in trade policies, tariff regulations
and difficulties in obtaining U.S. export licenses.

PATENTS AND OTHER INTELLECTUAL PROPERTY. The Company's success depends in
part on its proprietary technology. The Company attempts to protect its
proprietary technology through patents, copyrights, trademarks, trade secrets
and license agreements. The Company believes, however, that its success will
depend to a greater extent upon innovation, technological expertise and
distribution strength. There can be no assurance that the Company will be able
to protect its technology or that competitors will not be able to develop
similar technology independently. No assurance can be given that the claims
allowed on any patents held by the Company will be sufficiently broad to protect
the Company's technology. In addition, no assurance can be given that any
patents issued to the Company will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide competitive
advantages to the Company. In addition, effective patent, copyright and trade
secret protection may be unavailable or limited in certain foreign countries.

12
<PAGE>
selling its products on the basis of such alleged infringement or that the
Company would be able to license any infringed patents on reasonable terms.

Some customers using certain products of the Company have received a notice
of infringement from the Lemelson Foundation, alleging that equipment used in
the manufacture of semiconductor products infringes patents issued to Mr. Jerome
H. Lemelson relating to "computer image analysis" or "digital signal generation
and analysis." Certain of these customers have notified the Company that they
may seek indemnification from the Company for any damages and expenses resulting
from this matter. Neither the Company nor any of its products has been
identified by the Lemelson Foundation as infringing its patents. There can be no
assurance, however, that the Lemelson Foundation would not bring a claim against
the Company for infringement or that the Company would prevail in any such
action. If the Lemelson Foundation were to prevail in any such action, the
Company might be required to pay license fees or royalties to the Foundation,
which could have an adverse impact on the Company's profitability.

RISKS ASSOCIATED WITH ACQUISITIONS AND ALLIANCES. The Company has addressed
the need to offer new products, in part, through the acquisition of technology
and other businesses. The acquisition of other businesses involves numerous
risks, including the difficulty of assimilating the operations, technologies and
products of the acquired business, the diversion of management's attention from
other business concerns, the risks of entering markets in which the Company has
no or limited direct prior experience and must compete with competitors having
stronger market positions, and the potential loss of key employees of the
acquired business. The integration of other businesses into ADE requires, among
other things, integration of product offerings and coordination of sales,
marketing, research, development, and management organizations. There can be no
assurance that such integration will be accomplished smoothly or successfully.
The difficulties of such integration may be increased by the necessity of
coordinating organizations which are separated geographically. The inability of
management to successfully integrate the operations of such acquired businesses
could have a material adverse effect on the business and results of operations
of the Company.

CONTROL BY EXISTING STOCKHOLDERS. The Company's directors and executive
officers and members of their immediate families beneficially own over one-third
of the Company's outstanding shares of Common Stock. Accordingly, these
stockholders acting together have the ability to significantly influence
corporate actions requiring stockholder approval, including the election of the
Company's directors. This concentration of ownership may also have the effect of
delaying or preventing a change of control of the Company.

VOLATILITY OF STOCK PRICE. The stock market in general and the market for
shares of technology companies in particular recently have experienced extreme
price fluctuations, which have often been unrelated to the operating performance
of the affected companies. Many companies in the semiconductor and semiconductor
equipment industries, including the Company, experienced dramatic volatility in
the market prices of their common stock during the last two years. The Company
believes that factors such as announcements of developments related to the
Company's business or its competitors' or customers' businesses, fluctuations in
the Company's financial results, general conditions or developments in the
semiconductor and semiconductor equipment industries and the worldwide economy,
sales of the Company's Common Stock into the market, the number of market makers
for the Company's Common Stock, announcements of technological innovations or
new or enhanced products by the Company or its competitors or customers, a
shortfall in revenue, gross margin, earnings or other financial results from or
changes in analysts' expectations and developments in the Company's
relationships with its customers and suppliers, or a variety of factors beyond
the Company's control could cause the price of the Company's Common Stock to
fluctuate, perhaps substantially. There can be no assurance that the market
price of the Company's Common Stock will not experience significant fluctuations
in the future, including fluctuations that are material, adverse and unrelated
to the Company's performance.

13
<PAGE>
ITEM 2. PROPERTIES

The Company's principal operations are located in an approximately 117,000
square foot company-owned building in Westwood, Massachusetts. During the year
ended April 30, 1998, the Company purchased a 46,000 square foot building in
Newton, Massachusetts that it had formerly leased under a five year lease that
was to expire in May, 2002. The Company also disposed of a 14,400 square foot
building in Burlington, Massachusetts during the year ended April 30, 1998. In
addition, the Company leases a 38,000 square foot building in Charlotte, North
Carolina under a ten year lease that expires in September 2004 and a 14,200
square foot building in Milpitas, California under a five year lease that
expires in December 2001. The Company also leases space for sales and service
support offices in various other locations.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended April 30, 1998.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

MARKET PRICE OF COMMON STOCK

The Company's Common Stock trades on the Nasdaq Stock Market ("Nasdaq")
under the symbol "ADEX." The following table sets forth the high and low sale
prices for each quarter for the Common Stock as reported by Nasdaq for the
periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1998
First quarter................................................................ 30 1/4 18 1/4
Second quarter............................................................... 45 1/2 19 3/4
Third quarter................................................................ 32 1/2 14 7/16
Fourth quarter............................................................... 21 14 5/8
FISCAL YEAR ENDED APRIL 30, 1997
First quarter................................................................ 22 1/4 8 3/4
Second quarter............................................................... 11 5/8 8 1/4
Third quarter................................................................ 20 5/8 8 3/5
Fourth quarter............................................................... 20 3/4 16 1/2
FISCAL YEAR ENDED APRIL 30, 1996
Second quarter (beginning 10/18/95).......................................... 18 1/2 14 1/8
Third quarter................................................................ 18 1/4 12
Fourth quarter............................................................... 16 12 1/2
</TABLE>

The last sale price of the Common Stock on July 22, 1998, as reported by
Nasdaq, was $13 5/16 per share. As of July 22, 1998, there were 119 holders of
record of the Common Stock (approximately 3,163 beneficial holders).

The Company has never declared or paid any cash dividends on its Common
Stock and currently expects that future earnings will be retained for use in its
business.

RECENT SALES OF UNREGISTERED SECURITIES

In June 1998, in consideration of a merger between a wholly-owned subsidiary
of the Company and Phase Shift Technology, Inc. ("PST"), a privately-owned
company, the Company issued an aggregate of 2,000,000 shares of Common Stock to
the Phase Shift shareholders. All of the recipients of shares were

14
<PAGE>
"accredited investors" under the definition of that term in Regulation D under
the Securities Act. The issuance of the shares was privately negotiated in the
context of negotiations for the merger with Phase Shift, and was exempt from the
registration requirements of Section 5 of the Securities Act of 1933 pursuant to
Section 4(2) of that Act.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected financial data of the Company for
and as of the fiscal years ended April 30, 1998, 1997, 1996, 1995 and 1994. The
selected financial data as of April 30, 1998, 1997 and 1996 and for the three
years ended April 30, 1998 have been derived from the Company's consolidated
financial statements which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The selected financial data as of April 30, 1996, 1995
and 1994 and for the two years ended April 30, 1995 have been derived from the
Company's audited consolidated financial statements, together with the unaudited
financial statements of DMS as of March 31, 1995 and 1994 and for the two years
ended March 31, 1995. The selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto. No cash
dividends were declared or paid in any of the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---------- ---------- --------- --------- ---------

<CAPTION>
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue............................................... $ 123,265 $ 101,403 $ 67,339 $ 46,152 $ 32,828
Cost of revenue....................................... 56,129 44,838 31,135 23,293 16,861
---------- ---------- --------- --------- ---------
Gross profit........................................ 67,136 56,565 36,204 22,859 15,967
---------- ---------- --------- --------- ---------
Operating expenses:
Research and development............................ 26,038 17,012 7,798 6,318 6,073
Purchased in-process research and development....... 6,100 -- -- -- --
Marketing and sales................................. 14,991 13,665 10,169 6,842 5,981
General and administrative.......................... 12,764 7,446 6,759 4,455 4,186
---------- ---------- --------- --------- ---------
Total operating expenses.......................... 59,893 38,123 24,726 17,615 16,240
---------- ---------- --------- --------- ---------
Income (loss) from operations......................... 7,243 18,442 11,478 5,244 (273)
---------- ---------- --------- --------- ---------
Other income (expense):
Interest income (expense), net...................... 2,232 329 331 (404) (392)
Other income........................................ -- -- -- -- 229
---------- ---------- --------- --------- ---------
Total other income (expense).......................... 2,232 329 331 (404) (163)
---------- ---------- --------- --------- ---------
Income (loss) before provision (benefit) for income
taxes and equity in net earnings (loss) of
affiliated companies................................ 9,475 18,771 11,809 4,840 (436)
Provision (benefit) for income taxes.................. 1,823 5,705 4,004 1,709 (83)
---------- ---------- --------- --------- ---------
Income (loss) before equity in net earnings (loss) of
affiliated companies................................ 7,652 13,066 7,805 3,131 (353)
Equity in net earnings (loss) of affiliated
companies........................................... (1,005) 99 -- -- --
---------- ---------- --------- --------- ---------
Net income (loss)................................... $ 6,647 $ 13,165 $ 7,805 $ 3,131 $ (353)
---------- ---------- --------- --------- ---------
Basic earnings (loss) per share....................... $ 0.64 $ 1.55 $ 1.04 $ 0.49 $ (0.06)
---------- ---------- --------- --------- ---------
Diluted earnings (loss) per share..................... $ 0.61 $ 1.48 $ 0.98 $ 0.48 $ (0.06)
---------- ---------- --------- --------- ---------
Weighted average common shares--basic................. 10,415 8,501 7,502 6,417 6,360
---------- ---------- --------- --------- ---------
Weighted average common shares--diluted............... 10,822 8,880 7,938 6,490 6,360
---------- ---------- --------- --------- ---------
</TABLE>

15
<PAGE>
<TABLE>
<CAPTION>
APRIL 30,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---------- ---------- --------- --------- ---------

<CAPTION>
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 68,541 $ 19,374 $ 21,513 $ 3,277 $ 1,870
Working capital....................................... 106,765 45,769 39,828 15,415 11,856
Total assets.......................................... 165,618 88,417 61,978 28,763 25,758
Long-term debt, less current portion.................. 8,613 5,091 677 2,166 2,121
Total stockholders' equity............................ $ 138,525 $ 61,388 $ 46,502 $ 16,205 $ 13,200
</TABLE>

16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION PROVIDES AN ANALYSIS OF THE COMPANY'S FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND SHOULD BE READ IN CONJUNCTION WITH THE
"SELECTED CONSOLIDATED FINANCIAL DATA" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO.

OVERVIEW

The Company was founded in 1967 to develop and market certain advanced
concepts and designs in capacitive and other measurement technologies suitable
for industrial applications requiring precise, reliable, damage-free and
repeatable measurements. The Company's products have evolved from single
instruments used in off-line engineering analysis to multi-function systems for
automated in-line monitoring of process-induced defects throughout the wafer and
disk manufacturing processes. The Company operates in two major business areas,
the Semiconductor Group and the Computer Disk Group. The Semiconductor Group
manufactures multifunctional semiconductor metrology and automation systems and
optical wafer defect inspection equipment used to detect particles and other
defects on wafer surfaces. The Computer Disk Group is primarily engaged in the
production of metrology systems for the computer hard disk industry.

A relatively limited number of customers have accounted for a substantial
portion of the Company's revenue. Moreover, during the past fiscal year
approximately 71% of the Company's revenue was derived from sales made to wafer
manufacturers, with the remainder of the revenue derived principally from sales
to manufacturers of semiconductor devices and computer hard disks. The Company
derives a substantial portion of its revenue from a relatively small number of
customer orders. These customer orders often consist of multiple systems, which
can range in price from approximately $100,000 to $750,000. As a result, the
timing of significant orders or a reduction in the number of systems shipped in
a quarter could have a material effect on the Company's revenue and results of
operations for that quarter.

Revenue from product sales is recorded upon shipment. The Company accrues
for anticipated warranty costs upon shipment. Service revenue is recognized as
the services are performed. Service contract revenue is recognized ratably over
the contractual periods the services are provided. The Company does not provide
the right to return products. Revenue from software licenses is recognized when
an agreement has been executed, software has been delivered and all significant
contractual obligations have been met. Revenue from software consulting services
provided on a time and reimbursable expense basis is recognized as the services
are provided. Customer support revenue is deferred and recognized ratably over
the contractual periods the services are provided

On September 17, 1997 ADE Software Corporation, a wholly owned subsidiary of
the Company, acquired substantially all of the assets, and assumed certain
liabilities of the Semiconductor Solutions Division of LPA Software, Inc.
("SSD"), in exchange for $10 million in cash. The Company incurred $48,000 in
transaction costs related to the acquisition. SSD, located in Burlington,
Vermont, provides yield enhancement and defect analysis software applications to
the semiconductor industry and has been integrated into the Company as ADE Yield
Enhancement Solutions. A portion of the purchase price was allocated to
in-process research and development, representing research and development which
had not reached technological feasibility and which had no alternative future
use, which resulted in a charge to the Company's operations of $6.1 million. In
addition, $1.1 million was allocated to existing software technology. The excess
of the purchase price over the estimated fair value of net assets acquired
(goodwill) was approximately $2.4 million. The operating results of SSD have
been included in the Company's results from the date of acquisition.

On June 11, 1998, pursuant to an Agreement and Plan of Merger (the "PST
Agreement"), the Company, through a wholly owned subsidiary, merged with Phase
Shift Technology, Inc. ("PST"), an Arizona corporation. PST designs,
manufactures and markets a broad line of high-performance, non-

17
<PAGE>
contact surface metrology equipment using advanced optical interferometric
technology. Pursuant to the PST Agreement, each outstanding share of PST common
stock was exchanged for two shares of the Company's common stock. A total of
2,000,000 shares of the Company's common stock were issued in this transaction.
This transaction has been accounted for as a pooling-of-interests. Accordingly,
upon issuance of financial statements inclusive of the date of merger, all prior
period financial statements will be restated as if the merger occurred at the
beginning of such periods.

RESULTS OF OPERATIONS

For the periods indicated, the following table sets forth the percentage of
total revenue represented by the respective line items in the Company's
consolidated statement of income.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Revenue.................................................................................. 100.0% 100.0% 100.0%
Cost of revenue.......................................................................... 45.5 44.2 46.2
Gross profit............................................................................. 54.5 55.8 53.8

Operating expenses:
Research and development................................................................. 21.1 16.8 11.6
Purchased in-process research and development............................................ 4.9 -- --
Marketing and sales...................................................................... 12.2 13.5 15.1
General and administrative............................................................... 10.4 7.3 10.0
Income from operations................................................................... 5.9 18.2 17.1
Other income............................................................................. 1.9 0.3 0.5
Net income............................................................................... 5.4% 13.0% 11.6%
</TABLE>

FISCAL YEAR ENDED APRIL 30, 1998 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1997

REVENUE. Revenue increased 21.6% to $123.3 million in fiscal 1998 from
$101.4 million in fiscal 1997. The increase was primarily due to increased unit
sales of the Company's products. The increase in unit sales resulted primarily
from strong demand for capital equipment in the semiconductor industry and
increased throughput in the Company's manufacturing operations. Additionally,
the Company experienced increased demand for its gaging equipment used in the
computer disk drive industry. The Company is currently developing product
enhancements and new products designed to meet increasing demand for metrology
and inspection equipment for advanced 200 millimeter and 300 millimeter wafers.
A competitor of the Company has begun shipping optical inspection products for
advanced 200 millimeter and 300 millimeter wafers. The Company believes that its
next generation product, for which beta units have been shipped to customers,
will be technologically superior to the competitor's new product. Until the
Company begins shipping production units of its next generation product, the
Company's sales of its wafer inspection systems could be adversely affected.

The Company has been adversely affected by a general slowdown in capital
equipment spending in both the semiconductor and computer disk drive industries.
Additionally, the current financial uncertainty within the economies of certain
Asian countries has adversely affected, and may continue to adversely affect the
Company. These effects have included and could include delay or cancellation of
orders, postponement of delivery dates, price concessions and extended payment
terms on product sales. The Company remains cautious about when growth in these
industries will return.

GROSS MARGIN. Gross margin decreased to 54.5% in fiscal 1998 from 55.8% in
fiscal 1997. The decrease was primarily due to costs associated with increased
manufacturing capacity and overhead expense. The Company operated in its new
headquarters and expanded manufacturing facility in Westwood, Massachusetts and
expanded facilities in its Charlotte, North Carolina manufacturing site during
all

18
<PAGE>
of fiscal 1998 compared to only the third and fourth quarters of fiscal 1997.
The Company also purchased and renovated its former manufacturing facility in
Newton, Massachusetts during fiscal 1998, which currently serves as the
headquarters of the Company's ADE Technologies, Inc. ("ATI") subsidiary, which
markets to the computer hard disk industry. Additionally, the Company has
increased its worldwide customer service organization to support its higher
levels of system sales, with the related personnel and travel costs contributing
to a lower overall gross margin. Gross margins in the near future may be
adversely affected by the distribution of fixed overhead costs over lower sales
volume, price concessions on product sales or increased customer service costs
as a percentage of total revenue.

RESEARCH AND DEVELOPMENT. Research and development expense in fiscal 1998
increased 53.1% to $26.0 million from $17.0 million in fiscal 1997 and increased
as a percentage of revenue to 21.1% from 16.8%. The continuing delays in
expected volume sales of 300 millimeter equipment and the Company's belief that
a second generation of 300 millimeter products will become available by the time
volume purchases begin resulted in significantly increased expenditures on the
Company's 300 millimeter surface inspection and wafer thickness products. The
Company also continues to develop upgrades and enhancement features to its
current products as its semiconductor industry customers seek to improve their
yields on 200 millimeter wafers.

MARKETING AND SALES. Marketing and sales expense increased 9.7% to $15.0
million in fiscal 1998 from $13.7 million in fiscal 1997, but decreased as a
percentage of revenue to 12.2% in fiscal 1998 from 13.5% in fiscal 1997. The
increase in expenses reflects the growth of the marketing and sales
organizations to support the Company's increased sales volume, with the decrease
as a percentage of revenue reflecting growth in expense at a slower rate than
the overall increase in sales.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
71.4% to $12.8 million in fiscal 1998 from $7.4 million in fiscal 1997 and
increased as a percentage of revenue to 10.4% from 7.3%. Expenses increased as
the Company continued to develop management infrastructure to support its rapid
growth. Fiscal 1998 expenses included $1.1 million in additional bad debt
reserves due to the adverse economic conditions in certain Asian countries as
well as the impact of the semiconductor industry downturn on certain domestic
customers.

OTHER INCOME. Other income was $2.2 million in fiscal 1998 versus $329,000
in fiscal 1997. Fiscal 1998 interest income of $2.7 million was partially offset
by interest expense of $507,000 associated with the Industrial Development Bonds
used to finance the acquisition and renovation of the Company's corporate
headquarters and manufacturing facility in Westwood, Massachusetts and the
headquarters and primary manufacturing facility of the Company's ATI subsidiary
in Newton, Massachusetts.

PROVISION FOR INCOME TAXES. The effective tax rates for fiscal 1998 and
1997 were 19.2% and 30.4%, respectively, and differed from the federal statutory
rate primarily because of benefits from the use of a foreign sales corporation
by the Company, state income taxes and tax credits. The fiscal 1998 rate was
lower than the fiscal 1997 rate due to the benefit of investment tax credits
resulting from increased capital spending in fiscal 1998 and the benefit from
increased federal and state research and development tax credits primarily
realized in the fourth quarter of fiscal 1998.

FISCAL YEAR ENDED APRIL 30, 1997 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1996

REVENUE. Revenue increased 50.6% to $101.4 million in fiscal 1997 from
$67.3 million in fiscal 1996. The increase was primarily due to increased unit
sales of the Company's products. The increase in unit sales resulted primarily
from strong demand for capital equipment in the semiconductor industry and
increased demand for gaging equipment in the computer disk drive industry.

GROSS MARGIN. Gross margin increased to 55.8% in fiscal 1997 from 53.8% in
fiscal 1996. The increase was primarily due to distributing relatively fixed
overhead costs over increased sales. Gross

19
<PAGE>
margins were higher in the first and second quarters of fiscal 1997, as the
Company operated near capacity in its facilities, as compared to the third and
fourth quarters of fiscal 1997. During the third and fourth quarters of the
fiscal year, the Company increased capacity and overhead by moving into a new
facility in Westwood, Massachusetts and by increasing the capacity of its
existing facility in Charlotte, North Carolina.

RESEARCH AND DEVELOPMENT. Research and development expense in fiscal 1997
increased 118.2% to $17.0 million from $7.8 million in fiscal 1996 and increased
as a percent of revenue to 16.8% from 11.6%. This increase was primarily due to
increased spending on next generation products and expenses recognized during
the fourth quarter for products under development, a portion of which had been
capitalized during the previous three quarters.

MARKETING AND SALES. Marketing and sales expense increased 34.4% to $13.7
million in fiscal 1997 from $10.2 million in fiscal 1996, but decreased as a
percentage of revenue to 13.5% in fiscal 1997 from 15.1% in fiscal 1996. The
increase in expenses reflects the growth of the marketing and sales
organizations to support the Company's increased sales volume, with the decrease
as a percentage of revenue reflecting growth in expense at a slower rate than
the overall increase in sales.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
10.2% to $7.4 million in fiscal 1997 from $6.8 million in fiscal 1996 and
decreased as a percent of revenue to 7.3% from 10.0%. General and administrative
expenses increased at a lower rate than revenue growth, as these expenses are
relatively stable compared to revenue growth.

OTHER INCOME. Net interest income was $329,000 in fiscal 1997 versus net
interest income of $331,000 in fiscal 1996. Interest income was offset by
interest expense associated with an Industrial Development Bond used to finance
the acquisition and renovation of the Westwood manufacturing facility.

PROVISION FOR INCOME TAXES. The effective tax rates for fiscal 1997 and
1996 were 30.4% and 33.9%, respectively, and differed from the federal statutory
rate primarily because of benefits from the use of a foreign sales corporation
by the Company and state income taxes. The fiscal 1997 rate was lower than the
fiscal 1996 rate due to the benefit of investment tax credits resulting from
increased capital spending in fiscal 1997 and the benefit from federal and state
research and development tax credits realized in the fourth quarter of fiscal
1997.

SELECTED CONSOLIDATED QUARTERLY OPERATING RESULTS

The following tables set forth consolidated statement of income data for
each of the eight quarters in the period beginning May 1, 1995 and ending April
30, 1998. This information has been derived from the Company's unaudited
financial statements. The unaudited financial statements have been prepared on
the same basis as the audited financial statements contained herein and include
all adjustments, consisting only of normal recurring adjustments, that the
Company considers necessary to present fairly this information when read in
conjunction with the Company's annual audited financial statements and notes
thereto appearing elsewhere in this Form 10-K. The Company's operating results
for any one quarter are not necessarily indicative of results for any future
period.

20
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1996 1996 1997 1997 1997 1997 1998* 1998
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Revenue.......................... $ 19,991 $ 22,882 $ 26,193 $ 32,337 $ 31,446 $ 33,601 $ 33,102 $ 25,116
Cost of revenue.................. 8,685 9,882 11,898 14,373 14,151 13,952 15,545 12,481
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 11,306 13,000 14,295 17,964 17,295 19,649 17,557 12,635
--------- --------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Research and development....... 3,221 3,783 3,757 6,251 5,252 6,021 6,624 8,141
Purchased in-process research
and development.............. -- -- -- -- -- 6,100 -- --
Marketing and sales............ 2,977 2,868 3,272 4,548 3,669 4,446 3,117 3,759
General and administrative..... 1,421 1,676 1,738 2,611 2,609 2,797 3,205 4,153
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses..... 7,619 8,327 8,767 13,410 11,530 19,364 12,946 16,053
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations.... 3,687 4,673 5,528 4,554 5,765 285 4,611 (3,418)
Other income (expense), net...... 151 79 (14) 113 156 595 696 785
--------- --------- --------- --------- --------- --------- --------- ---------
Income before provision for
(benefit from) income taxes and
equity in net earnings (loss)
of affiliated companies........ 3,838 4,752 5,514 4,667 5,921 880 5,307 (2,633)
Provision for (benefit from)
income taxes................... 1,290 1,650 1,851 914 2,072 308 1,737 (2,294)
--------- --------- --------- --------- --------- --------- --------- ---------
Income before equity in net
earnings (loss) of affiliated
companies...................... 2,548 3,102 3,663 3,753 3,849 572 3,570 (339)
Equity in net earnings (loss) of
affiliated companies........... -- 15 156 (72) 34 58 216 (1,313)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income....................... $ 2,548 $ 3,117 $ 3,819 $ 3,681 $ 3,883 $ 630 $ 3,786 $ (1,652)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Basic earnings per share......... $ 0.30 $ 0.37 $ 0.45 $ 0.43 $ 0.45 $ 0.06 $ 0.34 $ (0.15)
Diluted earnings per share....... $ 0.29 $ 0.36 $ 0.43 $ 0.41 $ 0.43 $ 0.06 $ 0.33 $ (0.15)
Weighted average shares
outstanding--basic............. 8,443 8,450 8,516 8,596 8,617 10,838 11,096 11,100
Weighted average shares
outstanding -- diluted......... 8,864 8,772 8,871 9,012 9,124 11,316 11,447 11,100
</TABLE>

21
<PAGE>

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

*Restated -- see note 16 to the consolidated financial statements.

The Company's quarterly operating results have varied and may continue to
vary significantly due to a number of factors, including economic conditions in
the semiconductor and computer hard disk industries, the timing of shipments of
orders to major customers, the mix of products sold by the Company and
competitive pricing. Customers may cancel or reschedule shipments. Production
difficulties or the inability to obtain critical components could delay
shipments. These factors could have a material adverse effect on the Company's
results of operations. As cost of revenue includes manufacturing overhead, which
is relatively constant from quarter to quarter, gross margins can vary
significantly from quarter to quarter due to varying levels of production and
revenue. There can be no assurance that the Company will be profitable in any
future period. Marketing and sales expenses can vary from quarter to quarter
based on a number of factors, including mix of sales channels, geographic mix
and timing of marketing events.

FOURTH QUARTER ADJUSTMENTS

The Company recorded a $2.3 million credit to the provision for income taxes
during the fourth quarter of fiscal 1998, which included a $1.8 million credit
resulting from the difference between the Company's actual effective tax rate
for fiscal 1998 of 19.2% and the estimated effective tax rate of 34% utilized
during the first three quarters of fiscal 1998. Also in the fourth quarter of
1998, the Company reversed accrued employee bonus expense of $1.3 million, which
had been recorded in the first two quarters of fiscal 1998. The difference
between the Company's actual effective tax rate and the estimated effective tax
rate used in the first three quarters of fiscal 1998 resulted primarily from the
effect of a $2.6 million pre-tax loss for the three months ended April 30, 1998
compared to pre-tax income of $12.1 million for the first nine months of fiscal
1998 and larger than anticipated federal and state research and development tax
credits, due in part to increased expenditures in the fourth quarter of fiscal
1998. The reversal of the accrued bonus expense reflects the Company's cost
reduction measures during the current semiconductor and computer disk drive
industry downturns.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 1998, the Company had cash and cash equivalents of $68.5
million and working capital of $106.8 million. In addition, the Company had $3.8
million in restricted cash held as security for the tax-exempt Industrial
Development Bond (the "IDB") issued through the Massachusetts Industrial Finance
Agency ("MIFA") described below.

22
<PAGE>
Net cash provided by operating activities prior to investments in working
capital for fiscal 1998 was $16.2 million. This amount was comprised of net
income of $6.6 million, a decrease in total accounts receivable of $4.5 million,
non-cash charges for depreciation and amortization of $3.4 million, purchased
in-process research and development of $6.1 million and a $1.1 million charge
related to the Company's equity in net losses of affiliated companies. These
amounts were partially offset by a $3.6 million increase in deferred income tax
benefits and a $1.9 million decrease in income taxes payable. The increase in
deferred income tax benefits is primarily due to the purchased in-process
research and development charge of $6.1 million, which is deductible over a
fifteen year period for tax purposes. Investments in working capital consisted
primarily of increased inventory and prepaid expenses and other current assets
of $5.0 million and $6.1 million, respectively, as well as aggregate reductions
in accounts payable and accrued expenses of $1.1 million.

Net cash used in investing activities was $28.2 million. Cash used in
investing activities consisted primarily of $12.5 million for purchases of fixed
assets, $10.0 million for the acquisition of the Semiconductor Solutions
Division of LPA Software, Inc., $1.8 million of additional investments in and
advances to affiliated companies and $3.8 million in restricted cash used to
secure the December 1997 IDB described below. Included in the fixed asset
purchases was $4.5 million to purchase, refurbish and equip ATI's new
headquarters in Newton, Massachusetts. During the next fiscal year, the Company
anticipates investing between $5 million and $6 million in a new facility for
PST in Tucson, Arizona to provide additional manufacturing capacity as PST's
products and technology are integrated with those of the Company.

Net cash provided by financing activities was $73.5 million. Cash provided
by financing activities consisted of $67.8 million received as net proceeds from
a public offering of 2,300,000 shares of the Company's common stock completed in
August 1997, $4 million in proceeds from the IDB issued through MIFA in December
1997 and $1.3 million in tax benefits related to the exercise of common stock
options. These amounts were partially offset by $943,000 in repayments of long
term debt.

The December 1997 IDB carries an interest rate of 5.79%, with 50% of the
outstanding principal payable monthly on a ratable basis for 10 years with the
remaining 50% due in December 2007. The proceeds from the IDB were used to
finance the purchase and renovation of the ATI facility, with the related debt
secured by $3.8 million in cash pledged by the Company as collateral. This cash
is classified as restricted cash on the April 30, 1998 balance sheet. Under the
terms of the bond agreement, the Company may substitute a letter of credit in an
amount equal to 105% of the outstanding principal balance as collateral for the
Company's obligations under the IDB, allowing the restricted cash balance to be
used for general corporate purposes. The Company also issued a $5.5 million IDB
in June 1996, which carries an interest rate of 5.74% and requires monthly
principal and interest payments of $43,000 through June 2006, when the remaining
principal balance of $2.8 million becomes due. This IDB is secured by a standby
letter of credit from a financial institution bearing a fee of 1.25% of the
outstanding bond balance.

In December 1997, the Company entered into an unsecured revolving line of
credit facility (the "Credit Facility") with a bank, with a maximum borrowing
amount of $8 million. The Credit Facility provides the Company the option of
borrowing at either the bank's prime rate or the bank's LIBOR rate plus 2%. The
Credit Facility expires and all outstanding amounts thereunder are due December
21, 1999. There were no borrowings outstanding under the Credit Facility at
April 30, 1998.

Since inception, the Company has satisfied its cash requirements primarily
through cash flow from operations, private placements and an initial and follow
on public offering of the Company's common stock, bank borrowings and equipment
financing.

The Company believes that cash from operations, existing cash resources and
bank borrowings, together will be adequate to fund operations for at least the
next 12 months.

The Company's long-term capital requirements will be affected by many
factors, including the success of the Company's current and anticipated product
offerings, the Company's ability to enhance its current

23
<PAGE>
products and to develop and introduce new products that keep pace with
technological developments and general trends in the semiconductor wafer and
device industries. The Company plans to finance its long-term capital needs with
existing cash reserves and interest earned thereon, revenue from product sales,
bank loans, leases and debt financings. To the extent that such funds are
insufficient to finance the Company's activities, the Company will have to raise
additional funds through the issuance of additional equity or debt securities or
through other means. There can be no assurance that additional financing will be
available on acceptable terms.

YEAR 2000

The Company has formed a task force to assess the nature, extent and cost of
remediation of any Year 2000 compliance issues confronting the Company and its
suppliers. The project encompasses reviewing the Company's internal systems and
products as well as supplier compliance. This assessment has begun at each of
its operating units and the Company has identified certain requisite corrective
actions. Some of these actions have already been and others remain to be
completed. The Company is planning to complete all Year 2000 upgrades to its
major systems, both internal and those included in the Company's products, in
calendar 1998. Additionally, the Company's suppliers have been sent letters
requesting information regarding their own Year 2000 compliance efforts, as well
as requesting confirmation that the components and services provided by these
suppliers are Year 2000 compliant.

Based upon its initial assessment, the Company has concluded that Year 2000
issues at its facilities should not have a material impact on its financial or
operating performance. However, there can be no assurance that the systems of
other companies upon which the Company's systems and business rely will be
timely converted or that any such failure to convert by another company would
not have a material adverse effect on the Company's business or results of
operations. While the Company does not believe the Year 2000 issue will have a
material impact on the Company, there can be no assurance that unanticipated
problems will not arise that will have a material adverse effect on the
Company's business and operations.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." The statement establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. This standard will require that an enterprise display an amount
representing total comprehensive income for the period. SFAS No. 130 will be
effective for the Company's fiscal year ending April 30, 1999. Adoption of SFAS
No. 130 requires disclosure only and will have no impact the Company's financial
position or results of operations.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which supersedes SFAS No. 14. This
statement changes the way that public business enterprises report segment
information, including financial and descriptive information about their
operating segments, in annual financial statements and would require that those
enterprises report selected segment information in interim financial reports to
stockholders. Operating segments are defined as revenue-producing components of
the enterprise which are generally used internally for evaluating segment
performance. SFAS No. 131 will be effective for the Company beginning with the
Company's fiscal year ending April 30, 1999. Adoption of SFAS No. 131 requires
disclosure only and will have no impact the Company's financial position or
results of operations.

In October, 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 97-2, "Software Revenue Recognition." SOP 97-2 provides guidance on the
timing and amount of revenue recognition when licensing,

24
<PAGE>
selling, leasing or otherwise marketing computer software. SOP 97-2 supercedes
SOP 91-1 (also entitled "Software Revenue Recognition") and is effective for
transactions entered into during fiscal years beginning after December 15, 1997.
The Company will be required to adopt SOP 97-2 for its fiscal year ending April
30, 1999. The adoption of SOP 97-2 is not expected to have a material effect on
the Company's financial position or it's results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new standards
for the recognition of gains and losses on derivative instruments and provides
guidance as to whether a derivative may be accounted for as a hedging
instrument. Gain or loss from hedging transactions may be wholly or partially
recorded in earnings or comprehensive income as part of a cumulative translation
adjustment, depending upon the classification of the hedge transaction. Gain or
loss on a derivative instrument not classified as a hedging instrument is
recognized in earnings in the period of change. SFAS No. 133 will be effective
for the Company beginning in fiscal 2001. The Company does not believe adoption
of SFAS No. 133 will have a material impact on its financial position or its
results of operations.

INFLATION

To date, inflation has not had a significant impact on the Company's
operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is contained on pages F-1 through F-24 of
this report.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding directors required by this Item is included in the
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Stockholders, to be filed with the Commission on or about August 20, 1998 (the
"1998 Proxy Statement"), under "Election of Directors" and is incorporated
herein by reference. The information regarding executive officers required by
this Item is included in Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is included in the 1998 Proxy
Statement under "Executive Compensation" and is incorporated herein by reference
(excluding, however, the "Report on Executive Compensation" and the Performance
Graph contained in the 1998 Proxy Statement, which shall not be deemed
incorporated herein).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is included in the 1998 Proxy
Statement under "Security Ownership of Certain Beneficial Owners and Management"
and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

25
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) FINANCIAL STATEMENTS. The Financial Statements required to be filed
by Item 8 of Form 10-K, and filed herewith, are as follows:

<TABLE>
<CAPTION>
PAGE NUMBER IN
THIS FORM 10-K
-------------------
<S> <C>

Report of Independent Accountants................................................................ F-1

Consolidated Balance Sheet as of April 30, 1998 and 1997......................................... F-2

Consolidated Statement of Income for the three years ended April 30, 1998........................ F-3

Consolidated Statement of Stockholders' Equity for the three years ended April 30, 1998.......... F-4

Consolidated Statement of Cash Flows for the three years ended April 30, 1998.................... F-5

Notes to Consolidated Financial Statements....................................................... F-6

(a)(2) FINANCIAL STATEMENT SCHEDULE:

II--Valuation and Qualifying Accounts and Reserves for the three years ended
April 30, 1998................................................................................. S-1
</TABLE>

All other schedules are omitted because they are either not applicable or
the requiredinformation is included in the financial statements or notes
thereto.

(a)(3) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 27, 1997 by and between ADE Corporation, ADE
Technologies, Inc., Digital Measurement Systems, Inc., Dennis E. Speliotis, Elias Speliotis, Evanthia
Speliotis, Ismene Speliotis, Advanced Development Corporation, David C. Bono and Alan Sliski (filed as
Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated
herein by reference).

2.2 Agreement and Plan of Merger dated as of May 31, 1998 by and among ADE Corporation, Theta Acquisition
Corp., Phase Shift Technology, Inc., Chris Koliopoulos and David Basila (filed as Exhibit 2 to the
Company's Form 8-K dated June 25, 1998 and incorporated herein by reference).

3.1 Restated Articles of Organization (filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-1 (33-96408) or amendments thereto and incorporated herein by reference).

3.2 By-laws (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-1 (33-96408) or
amendments thereto and incorporated herein by reference).

4.1 Specimen Common Stock Certificate (filed as Exhibit 4 to the Company's Registration Statement on Form
S-1 (33-96408) or amendments thereto and incorporated herein by reference).
</TABLE>

26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.2 Registration Rights Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E.
Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated
August 18, 1992 recorded in the Middlesex South District Registry of Deeds at Book 22305, Page 375
(filed as Exhibit 10.21 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and
incorporated herein by reference).

4.3 Registration Rights Agreement dated as of May 31, 1998 by and among ADE Corporation, Chris Koliopoulos
and David Basila (filed as Exhibit 4.6 to the Company's Form 8-K dated June 25, 1998).

10.1 Form of Employee Confidentiality Agreement (filed as Exhibit 10.1 to the Company's Registration
Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).

10.2 1995 Stock Option Plan (filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1
(33-96408) or amendments thereto and incorporated herein by reference).*

10.3 1992 Stock Option Plan (filed as Exhibit 10.5 to the Company's Registration Statement on Form S-1
(33-96408) or amendments thereto and incorporated herein by reference).*

10.4 1982 Stock Option Plan (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8
(333-2280) and incorporated herein by reference).*

10.5 Stock Option Agreement dated October 22, 1992 between the Registrant and Kendall Wright (filed as
Exhibit 4.6 to the Company's Registration Statement on Form S-8 (333-2280) and incorporated herein by
reference).*

10.6 Employee Stock Purchase Plan (as amended) (filed as Exhibit 10.6 to the Company's Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by reference).*

10.7 Lease of Corporate Headquarters in Newton, Massachusetts, dated December 9, 1988, as amended, between
the Company and Wellco Newton Limited Partnership (which Lease and amendment were filed as Exhibit 10.6
to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated
herein by reference); and Third Amendment dated June 6, 1997 (filed herewith).

10.8 Lease of ADE Optical Systems' Charlotte, North Carolina facility, dated June 26, 1984, as assigned and
renewed, between Pine Brook Center Limited Partnership and ADE Optical Systems Corporation (filed as
Exhibit 10.7 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and
incorporated herein by reference).

10.9 Purchase and Sale Agreement for 80 Wilson Way, Westwood, Massachusetts, dated January 11, 1996, between
Met Path New England, Inc., and the Company, with Schedules (filed as Exhibit 10.12 to the Company's
Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).

10.10 Loan Agreement dated as of June 7, 1996, among GE Capital Public Finance, Inc., Massachusetts Industrial
Finance Agency and the Company (filed as Exhibit 10.9 to the Company's Form 10-K for the fiscal year
ended April 30, 1996 and incorporated herein by reference).

10.11 Certificate as to Nonarbitrage and Tax Compliance, dated as of June 7, 1996, from the Company to
Massachusetts Industrial Finance Agency (filed as Exhibit 10.10 to the Company's Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by reference).
</TABLE>

27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.12 Letter of Credit Agreement, dated June 7, 1996, between Citizens Bank of Massachusetts and the Company
(filed as Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and
incorporated herein by reference).

10.13 Mortgage, Security Agreement, and Assignment, dated June 7, 1996, from the Company to Citizens Bank of
Massachusetts (filed as Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended April 30,
1996 and incorporated herein by reference).

10.14 Pledge Agreement, dated June 7, 1996, from the Company to Citizens Bank of Massachusetts (filed as
Exhibit 10.14 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated
herein by reference).

10.15 Oil and Hazardous Materials Indemnification Agreement, dated June 7, 1996, between the Company and
Citizens Bank of Massachusetts (filed as Exhibit 10.15 to the Company's Form 10-K for the fiscal year
ended April 30, 1996 and incorporated herein by reference).

10.16 Indemnification Agreement, dated as of February 28, 1996, among MetPath of New England, Inc., Corning
Life Sciences, Inc. and the Company (filed as Exhibit 10.16 to the Company's Form 10-K for the fiscal
year ended April 30, 1996 and incorporated herein by reference).

10.17 Letter Agreement regarding collateral assignment of Indemnification from the Company to Citizens Bank of
Massachusetts, with attachment, (filed as Exhibit 10.17 to the Company's Form 10-K for the fiscal year
ended April 30, 1996 and incorporated herein by reference).

10.18 Registration Rights Agreement dated as of February 27, 1997, by and among ADE Corporation and Advanced
Development Corporation, David C. Bono and Alan Sliski (filed as Exhibit 10.19 to the Company's Form
10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).

10.19 Purchase and Sale Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E.
Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated
August 18, 1992, Elias Speliotis, Evanthia Speliotis and Ismene Speliotis (filed as Exhibit 10.20 to the
Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).

10.20 Escrow Agreement dated as of May 31, 1998 by and among ADE Corporation, Chris Koliopoulos, David Basila,
and Norman Fenton as Escrow Agent (filed herewith).

10.21 Noncompetition Agreement dated as of May 31, 1998 by and between ADE Corporation and Chris Koliopoulos
(filed herewith).

10.22 Noncompetition Agreement dated as of May 31, 1998 by and between ADE Corporation and David Basila (filed
herewith).

10.23 Employment Agreement dated as of May 31, 1998 by and between Phase Shift Technology, Inc. and Chris
Koliopoulos (filed herewith).

10.24 Employment Agreement dated as of May 31, 1998 by and between Phase Shift Technology, Inc. and David
Basila (filed herewith).

21.1 Subsidiaries of the Company (filed herewith).

23.1 Consent of PricewaterhouseCoopers LLP (filed herewith).

24.1 Power of Attorney (filed herewith as part of the signature page hereto).
</TABLE>

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

* Compensatory plan or agreement applicable to management and employees.

28
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT ON FORM
10-K TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

ADE CORPORATION

By: /s/ ROBERT C. ABBE
-----------------------------------------
Robert C. Abbe
July 29, 1998 PRESIDENT AND CHIEF EXECUTIVE OFFICER

Each person whose signature appears below constitutes and appoints Robert C.
Abbe, Mark D. Shooman, Willard G. McGraw, Jr., and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution in each of them, for him and in his name, place, and stead, and
in any and all capacities, to sign this Annual Report on Form 10-K of ADE
Corporation and any amendments thereto, and to file the same, with all exhibits
thereto and any other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully and to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or their or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

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

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

President, Chief Executive
/s/ ROBERT C. ABBE Officer and Director
- ------------------------------ (Principal Executive July 29, 1998
Robert C. Abbe Officer)

Vice President and Chief
/s/ MARK D. SHOOMAN Financial Officer
- ------------------------------ (Principal Financial July 29, 1998
Mark D. Shooman Officer)

/s/ JOSEPH E. ROVATTI Controller (Principal
- ------------------------------ Accounting Officer) July 29, 1998
Joseph E. Rovatti

/s/ LANDON T. CLAY Chairman of the Board
- ------------------------------ July 29, 1998
Landon T. Clay

/s/ FRANCIS B. LOTHROP, JR. Director
- ------------------------------ July 29, 1998
Francis B. Lothrop, Jr.

/s/ H. KIMBALL FAULKNER Director
- ------------------------------ July 29, 1998
H. Kimball Faulkner

/s/ KENDALL WRIGHT Director
- ------------------------------ July 29, 1998
Kendall Wright

/s/ HARRIS CLAY Director
- ------------------------------ July 29, 1998
Harris Clay

29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of ADE Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) and (2) on page 26 present fairly, in all
material respects, the financial position of ADE Corporation and its
subsidiaries at April 30, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended April 30, 1998,
in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP

Boston, Massachusetts
June 30, 1998

F-1
<PAGE>
ADE CORPORATION

CONSOLIDATED BALANCE SHEET

(in thousands, except share data)

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 68,541 $ 19,374
Accounts receivable:
Trade, less allowance for doubtful accounts
of $1,705 and $577, respectively...................................................... 14,413 19,248
Affiliate............................................................................... 1,393 1,083
Inventories............................................................................... 27,152 22,160
Prepaid expenses and other current assets................................................. 6,424 310
Deferred income taxes..................................................................... 7,322 5,348
--------- ---------
Total current assets.............................................................. 125,245 67,523

Fixed assets, net........................................................................... 25,484 15,735
Deferred income taxes....................................................................... 1,905 234
Investments................................................................................. 3,892 3,162
Intangible assets, net...................................................................... 4,996 1,500
Restricted cash............................................................................. 3,808 --
Other assets................................................................................ 288 263
--------- ---------
$ 165,618 $ 88,417
--------- ---------
--------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................................................... $ 434 $ 899
Accounts payable.......................................................................... 5,009 5,535
Accrued expenses and other current liabilities............................................ 10,526 10,744
Deferred income on sales to affiliate..................................................... 2,511 2,661
Income taxes payable...................................................................... -- 1,915
--------- ---------
Total current liabilities......................................................... 18,480 21,754
--------- ---------
Long-term debt.............................................................................. 8,613 5,091
--------- ---------
Excess of net assets acquired over cost..................................................... -- 184
--------- ---------

STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or
outstanding............................................................................. -- --
Common stock, $.01 par value; 25,000,000 shares authorized; 11,116,052 and 8,604,160
issued and outstanding at April 30, 1998 and 1997, respectively......................... 111 86
Capital in excess of par value............................................................ 99,064 28,660
Retained earnings......................................................................... 39,493 32,846
--------- ---------
138,668 61,592
Deferred compensation..................................................................... (143) (204)
--------- ---------
138,525 61,388
--------- ---------

Commitments (Note 14).......................................................................
--------- ---------
$ 165,618 $ 88,417
--------- ---------
--------- ---------
</TABLE>

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

F-2
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(In thousands, except per share date)

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ---------
Revenue........................................................................ $ 105,490 $ 89,218 $ 67,339
Revenue from affiliate......................................................... 17,775 12,185 --
---------- ---------- ---------
Total revenue................................................................ 123,265 101,403 67,339
---------- ---------- ---------
Cost of revenue................................................................ 49,019 39,762 31,135
Cost of revenue from affiliate................................................. 7,110 5,076 --
---------- ---------- ---------
Total cost of revenue........................................................ 56,129 44,838 31,135
---------- ---------- ---------
Gross profit............................................................... 67,136 56,565 36,204
---------- ---------- ---------
Operating expenses:
Research and development..................................................... 26,038 17,012 7,798
Purchased in-process research and development................................ 6,100 -- --
Marketing and sales.......................................................... 14,991 13,665 10,169
General and administrative................................................... 12,948 7,698 7,011
Amortization of excess of net assets acquired over cost...................... (184) (252) (252)
---------- ---------- ---------
Total operating expenses................................................... 59,893 38,123 24,726
---------- ---------- ---------
Income from operations......................................................... 7,243 18,442 11,478
Other income (expense):
Interest income.............................................................. 2,739 752 535
Interest expense............................................................. (507) (423) (204)
---------- ---------- ---------
Income before provision for income taxes and equity in net earnings (loss) of
affiliated companies......................................................... 9,475 18,771 11,809
Provision for income taxes..................................................... 1,823 5,705 4,004
---------- ---------- ---------
Income before equity in net earnings (loss) of
affiliated companies......................................................... 7,652 13,066 7,805
Equity in net earnings (loss) of affiliated companies.......................... (1,005) 99 --
---------- ---------- ---------
Net income..................................................................... $ 6,647 $ 13,165 $ 7,805
---------- ---------- ---------
---------- ---------- ---------
Basic earnings per share....................................................... $ 0.64 $ 1.55 $ 1.04
Diluted earnings per share..................................................... $ 0.61 $ 1.48 $ 0.98
Weighted average shares outstanding--basic..................................... 10,415 8,501 7,502
Weighted average shares outstanding--diluted................................... 10,822 8,880 7,938
</TABLE>

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

F-3
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(In thousands, except share data)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- CAPITAL IN
NUMBER PAR EXCESS OF RETAINED TREASURY DEFERRED
OF SHARES VALUE OF PAR EARNINGS STOCK COMPENSATION
--------- ----- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1995.................. 6,416,554 $ 64 $ 4,976 $ 11,768 $ (352) $ (251)
Exercise of warrants....................... 241,578 2 702 352
Sale of common stock in connection with
initial public offering in October 1995,
net of issuance costs of $2,315.......... 1,617,600 16 20,315
Exercise of common stock options........... 163,984 2 660
Compensation related to the grant of common
stock options............................ 58 (58)
Amortization of deferred compensation...... 50
Tax benefit related to exercise of common
stock options............................ 393
Net income................................. 7,805
--------- ----- ----------- ----------- ----- -----
Balance at April 30, 1996.................. 8,439,716 84 27,104 19,573 -- (259)

Exercise of common stock options........... 154,400 2 660
Sale of common stock pursuant to the
Employee Stock Purchase Plan............. 10,044 102
Amortization of deferred compensation...... 55
Tax benefit related to exercise of common
stock options............................ 794
Net income................................. 13,165
Net income of Digital Measurement Systems,
Inc. for the one month ended April 30,
1997 (Note 3)............................ 108
--------- ----- ----------- ----------- ----- -----
Balance at April 30, 1997.................. 8,604,160 86 28,660 32,846 -- (204)
Sale ofcommon stock in connection with
public offering in August 1997, net of
issuance costs of $4,320................. 2,300,000 23 67,820
Exercise of common stock options........... 183,896 2 834
Sale of common stock pursuant to the
Employee Stock Purchase Plan............. 27,279 452
Common stock issued in lieu of Board of
Directors fees........................... 717 12
Amortization of deferred compensation...... 61
Tax benefit related to exercise of common
stock options............................ 1,286
Net income................................. 6,647
--------- ----- ----------- ----------- ----- -----
Balance at April 30, 1998.................. 11,116,052 $ 111 $ 99,064 $ 39,493 $ -- $ (143)
--------- ----- ----------- ----------- ----- -----
--------- ----- ----------- ----------- ----- -----

TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Balance at April 30, 1995.................. $ 16,205
Exercise of warrants....................... 1,056
Sale of common stock in connection with
initial public offering in October 1995,
net of issuance costs of $2,315.......... 20,331
Exercise of common stock options........... 662
Compensation related to the grant of common
stock options............................ --
Amortization of deferred compensation...... 50
Tax benefit related to exercise of common
stock options............................ 393
Net income................................. 7,805
------------
Balance at April 30, 1996.................. 46,502
Exercise of common stock options........... 662
Sale of common stock pursuant to the
Employee Stock Purchase Plan............. 102
Amortization of deferred compensation...... 55
Tax benefit related to exercise of common
stock options............................ 794
Net income................................. 13,165
Net income of Digital Measurement Systems,
Inc. for the one month ended April 30,
1997 (Note 3)............................ 108
------------
Balance at April 30, 1997.................. 61,388
Sale ofcommon stock in connection with
public offering in August 1997, net of
issuance costs of $4,320................. 67,843
Exercise of common stock options........... 836
Sale of common stock pursuant to the
Employee Stock Purchase Plan............. 452
Common stock issued in lieu of Board of
Directors fees........................... 12
Amortization of deferred compensation...... 61
Tax benefit related to exercise of common
stock options............................ 1,286
Net income................................. 6,647
------------
Balance at April 30, 1998.................. $ 138,525
------------
------------
</TABLE>

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

F-4
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(in thousands)

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ---------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income................................................................... $ 6,647 $ 13,165 $ 7,805
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.............................................. 3,413 1,646 1,052
In-process research and development from business acquisition.............. 6,100 -- --
Equity in net (earnings) loss of affiiated companies, net of dividends
received................................................................. 1,060 (99) --
Deferred income taxes...................................................... (3,645) (2,299) (1,275)
Shares issued in lieu of directors' fees................................... 12 -- --
Amortization of deferred compensation...................................... 61 55 50
Changes in assets and liabilities, net of acquisition:
Accounts receivable, trade............................................... 4,835 (3,329) (6,192)
Accounts receivable, affiliate........................................... (310) (1,083) --
Inventories.............................................................. (4,992) (8,626) (3,382)
Prepaid expenses and other current assets................................ (6,114) 18 (102)
Accounts payable......................................................... (526) 833 862
Accrued expenses and other current liabilities........................... (577) 2,044 4,751
Deferred income on sales to affiliate.................................... (150) 2,661 --
Income taxes payable..................................................... (1,915) 1,626 (1,278)
---------- ---------- ---------
Net cash provided by operating activities.............................. 3,899 6,612 2,291
---------- ---------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of fixed assets.................................................... (12,535) (10,363) (5,337)
Change in restricted cash.................................................... (3,808) -- --
Equity investments and advances.............................................. (1,790) (3,050) --
Acquisition of business for cash............................................. (10,048) -- --
Decrease (increase) in other assets.......................................... (25) (1,578) 6
---------- ---------- ---------
Net cash used in investing activities.................................. (28,206) (14,991) (5,331)
---------- ---------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayment of long-term debt.................................................. (943) (231) (179)
Proceeds from (repayment of) note payable to related party................... -- (577) 69
Proceeds from issuance of long-term debt..................................... 4,000 5,500 --
Proceeds from issuance of common stock, net of issuance costs................ 69,131 764 20,993
Tax benefit related to the exercise of common stock options.................. 1,286 794 393
---------- ---------- ---------
Net cash provided by financing activities.............................. 73,474 6,250 21,276
---------- ---------- ---------
Adjustment for DMS activity for the one month ended April 30, 1997 (Note 3).... -- (10) --
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents........................... 49,167 (2,139) 18,236
Cash and cash equivalents, beginning of period................................. 19,374 21,513 3,277
---------- ---------- ---------
Cash and cash equivalents, end of period....................................... $ 68,541 $ 19,374 $ 21,513
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

See supplemental disclosures of cash flow information (Note 15)

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

F-5
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

ADE Corporation (the "Company") designs, manufactures, markets and services
highly precise, automated measurement, defect detection and handling equipment
with current applications in the production of semiconductor wafers, integrated
circuits and computer memory disks. The predominant market for the Company
consists of semiconductor wafer and device manufacturing concerns located in the
United States, Japan, Europe and the Far East.

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 material intercompany transactions and
balances have been eliminated.

Investments in companies in which the Company has a majority voting interest
but does not have control due to significant minority stockholder rights and
investments in 50% or less owned companies over which the Company has the
ability to exercise significant influence are accounted for using the equity
method. Investments in 20% or less owned companies are accounted for using the
cost method (Note 4).

REVENUE RECOGNITION

Revenue from product sales is recognized upon shipment. The Company accrues
for anticipated warranty costs upon shipment. Service revenue is recognized as
the services are performed. Service contract revenue is recognized ratably over
the contractual periods the services are provided. The Company does not provide
the right to return products.

Revenue from software licenses is recognized when an agreement has been
executed, software has been delivered and all significant contractual
obligations have been met. Revenue from software consulting services provided on
a time and reimbursable expense basis is recognized as the services are
provided. Customer support revenue is deferred and recognized ratably over the
contractual periods the services are provided.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
invests its excess cash in money market accounts. These investments are subject
to minimal credit and market risks. At April 30, 1998 and 1997, the Company has
classified its cash equivalent investments totaling $63,586,000 and $10,465,000,
respectively, as available for sale. The carrying amount of these investments
approximates fair market value.

INVENTORIES

Inventories are stated at the lower of cost or market, cost being determined
on a first-in, first-out basis.

FIXED ASSETS

Fixed assets are stated at cost. Additions and betterments, unless of a
relatively minor amount, are capitalized. Expenditures for normal maintenance
and repairs are charged to expense as incurred. Depreciation is provided by use
of the straight-line method over the estimated useful lives of the assets.

F-6
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Leasehold improvements are amortized over the shorter of their useful life or
the remaining life of the lease.

INTANGIBLE ASSETS

Intangible assets consist of capitalized license fees for software included
in the Company's products as well as the estimated fair value of certain assets
obtained through the acquisition of the Semiconductor Solutions Division of LPA
Software, Inc. ("SSD") (Note 3). Goodwill and assembled workforce acquired in
connection with the acquisition of SSD are amortized on a straight-line basis
over ten and six years, respectively. Capitalized software is amortized at the
greater of 1) the ratio that current gross revenue for the related products bear
to the total current and anticipated future gross revenue for those products or
2) on a straightline basis over its estimated useful life.

EXCESS OF NET ASSETS ACQUIRED OVER COST

The excess of net assets acquired over cost represents the unamortized
excess of the fair market value of the net assets acquired determined at the
date ADE Optical Systems, Inc. ("AOS") was acquired over the purchase price of
AOS, after reducing the basis in noncurrent assets acquired to zero. The
original amount of the excess of net assets acquired over cost is being
amortized using the straight-line method over five years.

CONCENTRATIONS

CREDIT RISK

Financial instruments which potentially expose the Company to concentration
of credit risk include cash, cash equivalents and trade accounts receivable. A
significant amount of the Company's cash and cash equivalents are held by three
financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured cash balances totaled
approximately $4,078,000 and $8,117,000 at April 30, 1998 and 1997,
respectively. The Company does not believe that such deposits are subject to any
unusual credit risk associated with operating its business.

The Company's customer base primarily consists of semiconductor wafer,
semiconductor device and computer hard disk manufacturers. Accounts receivable
from two customers accounted for approximately 35% and 36% of total accounts
receivable at April 30, 1998 and 1997, respectively. The Company performs
ongoing credit evaluations of customers' financial condition and has used
letters of credit from financial institutions to secure payments, although it
generally does not require collateral. The Company maintains reserves for
potential credit losses.

SUPPLIERS

Certain of the components and subassemblies incorporated into the Company's
systems are obtained from a single source or a limited group of suppliers. The
Company seeks to reduce the impact from its dependence on those sole and limited
source suppliers by considering alternate sources of supply, alternate designs
for its products and by maintaining an adequate supply of the components and
subassemblies. However, the loss of one or more of the sole or limited suppliers
could cause a delay in manufacturing and a potential loss of sales, which could
affect operating results adversely.

F-7
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, which include
cash, cash equivalents, accounts receivable, accounts payable, accrued expenses,
and long-term debt, approximates their fair value at the balance sheet dates. It
was not practicable to estimate the fair value of the Company's long-term
investments as the stock of the related investees is not publicly traded.

STOCK-BASED COMPENSATION

Stock-based compensation awards to employees under the Company's stock plans
are accounted for using the intrinsic value method prescribed in Accounting
Principles Board Opinion ("APB") No.25, "Accounting for Stock Issued to
Employees" and related interpretations. The Company has adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation."

EARNINGS PER SHARE

On November 1, 1997, the Company adopted SFAS No. 128, "Earnings per Share",
which establishes standards for computing and presenting earnings per share. The
new standard replaces the presentation of earnings per share as prescribed in
Accounting Principles Board Opinion No. 15, "Earnings Per Share", with a
presentation of basic and diluted earnings per share on the face of the
statement of operations. Basic earnings per share is computed by dividing net
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share is computed using
the weighted average number of common shares outstanding and gives effect to all
dilutive potential common shares outstanding during the period. Potential common
shares include shares issuable upon the assumed exercise of dilutive stock
options reflected under the treasury stock method.

In February 1998, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 98, which supersedes SAB No. 83 and includes new
guidance with respect to historical earnings per share computations in an
initial public offering ("IPO") of stock and is effective upon a company's
adoption of SFAS No. 128. Pursuant to SAB No. 98, nominal issuances of common
stock during the period from January 1, 1995 through October 19, 1996, the
effective date of the Company's initial public offering (the "Nominal Period"),
would be included in computing basic earnings per share as if outstanding for
all periods presented. In computing diluted earnings per share for such periods,
nominal issuances of common stock and potential common stock would be included
as if outstanding for all periods presented. The Company did not have nominal
issuances of any common stock or potential common stock as defined by SAB No. 98
during the Nominal Period. The Company adopted SFAS No. 128 and SAB No. 98 in
the third quarter of fiscal 1998 and has restated earnings per share for all
periods presented.

F-8
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following is a reconciliation of the numerators and denominators used in
calculating basic and diluted earnings per share:

<TABLE>
<CAPTION>
(in thousands)
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Shares used in computation:

a. Weighted average common stock outstanding used in computation of basic earnings per
share.............................................................................. 10,415 8,501 7,502

b. Dilutive effect of stock options and warrants outstanding.......................... 407 379 436
--------- --------- ---------

c. Share used in computation of diluted earnings per share............................ 10,822 8,880 7,938
--------- --------- ---------
--------- --------- ---------
</TABLE>

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at April 30, 1998 and 1997, and the reported amounts
of revenues and expenses during the three year period ended April 30, 1998.
Areas particularly subject to estimation include the allowance for doubtful
accounts, the reserve for potential excess and obsolete inventory and the
valuation allowance on deferred tax assets. Actual results could differ from
those estimates.

RECLASSIFICATIONS

Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 presentation.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." The statement establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. This standard will require that an enterprise display an amount
representing total comprehensive income for the period. SFAS No. 130 will be
effective for the Company's fiscal year ending April 30, 1999. SFAS No. 130
requires disclosure only and will have no impact on the Company's financial
position or results of operations.

F-9
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

segment performance. SFAS No. 131 will be effective for the Company beginning
with the Company's fiscal year ending April 30, 1999. SFAS No. 130 requires
disclosure only and will have no impact on the Company's financial position or
results of operations.

In October 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 97-2, "Software Revenue Recognition." SOP 97-2 provides guidance on the
timing and amount of revenue recognition when licensing, selling, leasing or
otherwise marketing computer software. SOP 97-2 supersedes SOP 91-1 (also
entitled "Software Revenue Recognition") and is effective for transactions
entered into during fiscal years beginning after December 15, 1997. The Company
will be required to adopt SOP 97-2 for its fiscal year ending April 30, 1999.
The adoption of SOP 97-2 is not expected to have a material effect on the
Company's financial position or it's results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new standards
for the recognition of gains and losses on derivative instruments and provides
guidance as to whether a derivative may be accounted for as a hedging
instrument. Gains or losses from hedging transactions may be wholly or partially
recorded in earnings or comprehensive income as part of a cumulative translation
adjustment, depending upon the classification of the hedge transaction. Gain or
loss on a derivative instrument not classified as a hedging instrument is
recognized in earnings in the period of change. SFAS No. 133 will be effective
for the Company beginning in fiscal 2001. The Company does not believe adoption
of SFAS No. 133 will have a material impact on its financial position or its
results of operations.

3. BUSINESS ACQUISITIONS

On September 17, 1997, ADE Software Corporation, a wholly owned subsidiary
of the Company, acquired substantially all of assets of the Semiconductor
Solutions Division of LPA Software, Inc. ("SSD") in exchange for $10,000,000 in
cash and the assumption of certain liabilities. The Company also incurred
$48,000 in transaction costs related to the acquisition. SSD, which has been
integrated into the Company as ADE Yield Enhancement Solutions, provides yield
management and defect analysis software applications to the semiconductor
industry.

The acquisition has been accounted for under the purchase method.
Accordingly, the results of operations of SSD and the estimated fair market
values of the acquired assets and assumed liabilities have been included in the
Company's financial statements as of the date of the acquisition. Unaudited pro
forma results of operations presenting the acquisition as though it had been
made at the beginning of fiscal 1998 and fiscal 1997, including the write-off of
purchased in-process research and development, amortization of acquired
intangible assets and elimination of intercompany transactions, are as follows:

<TABLE>
<CAPTION>
(in thousands, except
per share data)
YEAR ENDED APRIL 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Revenue....................................................................... $ 123,858 $ 103,603
Net income.................................................................... 5,906 8,047
Basic earnings per share...................................................... 0.57 0.95
Diluted earnings per share.................................................... 0.55 0.91
</TABLE>

F-10
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS ACQUISITIONS (CONTINUED)

The purchase price has been allocated to the acquired assets and assumed
liabilities as follows:

<TABLE>
<CAPTION>
(in
thousands)
-------------
<S> <C>
Property and equipment................................................................. $ 354
In-process research and development.................................................... 6,100
Acquired software...................................................................... 1,100
Assembled workforce.................................................................... 450
Goodwill............................................................................... 2,403
Current liabilities.................................................................... (359)
-------------
$ 10,048
-------------
-------------
</TABLE>

The amount allocated to in-process research and development was determined
by an independent appraiser and represented technology which had not reached
technological feasibility and had no alternative future use. Accordingly, this
amount of $6,100,000 was charged to operations at the acquisition date. The
$2,403,000 allocated to goodwill and $450,000 allocated to assembled workforce
are being amortized on a straight line basis over their estimated useful lives
of ten and six years, respectively, with accumulated amortization at April 30,
1998 of $143,000 and 47,000, respectively. The $1,100,000 allocated to acquired
software is being amortized at the greater of 1) the ratio that current gross
revenue for the related products bear to the total current and anticipated
future gross revenue for those products or 2) on a straight-line basis over its
estimated useful life of 4 years. This capitalized software had accumulated
amortization at April 30, 1998 of $267,000.

On February 28, 1997, pursuant to an Agreement and Plan of Merger (the "DMS
Agreement"), the Company, through its wholly-owned subsidiary ADE Technologies,
Inc. ("ATI"), acquired Digital Measurement Systems, Inc. ("DMS"), a
Massachusetts corporation, and a building which is integral to the operations of
DMS and which was controlled by a significant stockholder of DMS. DMS designs,
manufactures, markets and services magnetic measurement devices with current
applications in the production of computer memory disks. Pursuant to the DMS
Agreement, each outstanding share of DMS capital stock was converted into 759.73
shares of the Company's common stock. Immediately prior to the acquisition,
there were 1,000 shares of DMS Class A common stock and 53 shares of DMS Class B
common stock outstanding. Pursuant to the terms of the DMS Agreement, the
Company also issued 21,000 shares in connection with the acquisition of the
building. In total, 821,000 shares of the Company's common stock were issued in
this transaction. This transaction has been accounted for as a pooling-of-
interests and, therefore, all prior period financial statements presented have
been restated as if the acquisition took place at the beginning of such periods.

DMS had a March 31 year end and, accordingly, the results of operations for
DMS for the years ended March 31, 1997 and 1996 have been combined with the
results of operations for the Company's years ended April 30, 1997 and 1996,
respectively. Additionally, the financial position of DMS as of March 31, 1996
has been combined with the Company's financial position as of April 30, 1996. In
order to conform DMS to the Company's fiscal year end, the financial position of
DMS and the Company have been combined as of April 30, 1997. Accordingly, an
adjustment has been made to retained earnings in fiscal 1997 to record the net
income of DMS for the one month period ended April 30, 1997 totaling $108,000.
Other results of operations for such one month period of DMS included revenues
of $684,000 and operating costs and expenses of $527,000.

F-11
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS ACQUISITIONS (CONTINUED)

There were no material transactions between the Company and DMS during any
of the periods presented prior to the DMS Agreement. All material intercompany
transactions and balances subsequent to the DMS Agreement have been eliminated.
No material adjustments to net assets or the results of operations were
necessary to conform the accounting practices of DMS to those of the Company.

Separate results of operations for the periods prior to the acquisition of
DMS and the Company were as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
NINE MONTHS
ENDED YEAR ENDED
JANUARY 31, APRIL 30,
1997 1996
----------- -----------

<CAPTION>
(UNAUDITED)
<S> <C> <C>
Revenue:
ADE Corporation........................................................................ $ 64,749 $ 65,616
DMS, Inc............................................................................... 4,317 1,723
----------- -----------
Combined............................................................................... $ 69,066 $ 67,339
----------- -----------
----------- -----------
Net income (loss):
ADE Corporation........................................................................ $ 8,448 $ 7,832
DMS, Inc............................................................................... 1,036 (27)
----------- -----------
Combined............................................................................... $ 9,484 $ 7,805
----------- -----------
----------- -----------
</TABLE>

On June 11, 1998, pursuant to an Agreement and Plan of Merger (The "PST
Agreement"), the Company, through a wholly owned subsidiary, merged with Phase
Shift Technology, Inc. ("PST"), an Arizona corporation. PST designs,
manufactures and markets a broad line of high-performance, non-contact surface
metrology equipment using advanced optical interferometric technology. Pursuant
to the PST Agreement, each outstanding share of PST common stock was exchanged
for two shares of the Company's common stock. A total of 2,000,000 shares of the
Company's common stock were issued in this transaction. This transaction has
been accounted for as a pooling-of-interests. Accordingly, upon issuance of
financial statements inclusive of the date of merger, all prior period financial
statements will be restated as if the merger occurred at the beginning of such
periods. There were no material transactions between the Company and PST prior
to the PST Agreement.

F-12
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS ACQUISITIONS (CONTINUED)

Separate results of operations for the periods prior to the merger for PST
and the Company were as follows:

<TABLE>
<CAPTION>
(in thousands)
YEAR ENDED APRIL 30,
---------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ---------
Revenue:
ADE Corporation.............................................................. $ 123,265 $ 101,403 $ 67,339
PST.......................................................................... 12,435 9,730 5,739
---------- ---------- ---------
Combined..................................................................... $ 135,700 $ 111,133 $ 73,078
---------- ---------- ---------
---------- ---------- ---------
Net income:
ADE Corporation.............................................................. $ 6,647 $ 13,165 $ 7,805
PST 2,320 1,881 1,068
Combined..................................................................... $ 8,967 $ 15,046 $ 8,873
---------- ---------- ---------
---------- ---------- ---------
Earnings per share--basic.................................................... $ 0.72 $ 1.43 $ 0.93
Earnings per share--diluted.................................................. $ 0.70 $ 1.38 $ 0.89
</TABLE>

4. INVESTMENTS

Investments in companies in which the Company has a majority voting interest
but does not have control due to significant minority stockholder rights and
investments in 50% or less owned companies over which the Company has the
ability to exercise significant influence are accounted for using the equity
method. Investments carried at equity consist of Japan ADE Ltd. ("JAL"), a
Japanese corporation, and Microspec Technologies Ltd. ("Microspec"), an Israeli
corporation.

In July 1996, the Company acquired 1,410 shares of JAL for $1,300,000 which
increased the Company's investment in JAL from 3% to 50%. JAL has been the
exclusive distributor of ADE dimensional products in Japan since 1986. In
connection with this investment, JAL and the Company also agreed to reduce the
discount provided on sales to JAL. Sales to JAL which have not in turn been sold
to unrelated third parties at April 30, 1998 and 1997 have been eliminated, and
the related profit on such sales is recorded as deferred income on sales to
affiliate.

In July 1996, the Company acquired a 25.1% interest in Microspec for
$1,250,000. In connection with this investment, the Company also executed an
exclusive five-year agreement to distribute Microspec products, subject to
certain performance criteria. In April 1998, the Company acquired an additional
37.5% of Microspec, bringing the Company's total investment to 62.6%, by
purchasing shares owned by one of the two other stockholders for $1,500,000.
Accordingly, the Company has allocated the cost of its additional investment to
its proportional share of the estimated fair values of the assets and
liabilities of Microspec at the date of acquisition. In-process research and
development, which represented technology that had not reached technological
feasibility and had no alternative future use, was valued at $1,664,000. This
amount was recorded in the equity in net earnings (loss) of affiliated companies
in the statement of operations. The Company continues to account for this
investment under the equity method of accounting due to certain contractual
minority rights of the remaining stockholder. There were no material purchases
from or sales to Microspec during fiscal 1998 or 1997.

F-13
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS (CONTINUED)

The summarized unaudited financial information below for fiscal years 1998
and 1997 represents an aggregation of the Company's nonsubsidiary affiliates:

<TABLE>
<CAPTION>
(in thousands)
YEAR ENDED APRIL 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Revenue......................................................................... $ 37,856 $ 26,933
Gross profit.................................................................... 12,852 9,820
Net income...................................................................... 1,791 419
</TABLE>

<TABLE>
<CAPTION>
APRIL 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Current assets.................................................................. $ 27,378 $ 16,664
Noncurrent assets............................................................... 1,981 1,381
Current liabilities............................................................. 24,160 14,382
Noncurrent liabilities.......................................................... 723 418
</TABLE>

The Company's share of undistributed earnings of one affiliated company was
$1,641,000 at April 30, 1998 and the Company's share of the losses of the other
affiliated company included in consolidated retained earnings was $(302,000) at
April 30, 1998. The Company received $55,000 in dividends from JAL during fiscal
year 1998. At April 30, 1998 the Company's investment exceeds the underlying net
assets of affiliated companies by $1,113,000. This excess is being amortized by
decreasing the equity in net earnings of affiliated companies using the
straight-line method over five years. Related amortization expense of $363,000
and $273,000 was recorded in fiscal 1998 and 1997, respectively.

Pro forma revenue, net income and earnings per share as though the
investments in affiliated companies were made at the beginning of fiscal year
1996, including the effect of eliminating the profit on affiliated sales in
beginning and ending inventory for the period, have not been included as they
are not materially different from actual revenue, net income and earnings per
share for the three years ended April 30, 1998.

The Company also has a less than 20% investment in a company in the amount
of $500,000 that is accounted for using the cost method. The Company has paid
$1,500,000 to license technology for use in its products from this investee
company. This license fee has been capitalized and will be amortized upon the
sale of the equipment at the greater of 1) the ratio that current gross revenue
for the related products bear to the total current and anticipated future gross
revenue for those products or 2) on a straight-line basis over its estimated
useful life of 5 years.

F-14
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
(in thousands)
APRIL 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Raw materials and purchased parts............................................... $ 14,856 $ 9,867
Work-in-process................................................................. 10,506 11,464
Finished goods.................................................................. 1,790 829
--------- ---------
$ 27,152 $ 22,160
--------- ---------
--------- ---------
</TABLE>

6. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
(in thousands)
---------------------------------
<S> <C> <C> <C>
APRIL 30,
USEFUL LIFE --------------------
IN YEARS 1998 1997
----------- --------- ---------
Land................................................................ $ 2,217 $ 1,288
Building and improvements........................................... 15-25 12,787 8,967
Machinery and equipment............................................. 3-10 12,707 6,976
Office equipment.................................................... 3-10 4,474 2,370
Leasehold improvements.............................................. 5 1,530 1,374
Construction-in-progress............................................ 329 414
--------- ---------
34,044 21,389
Less--accumulated depreciation and amortization..................... 8,560 5,654
--------- ---------
$ 25,484 $ 15,735
--------- ---------
--------- ---------
</TABLE>

Depreciation expense for the years ended April 30, 1998, 1997 and 1996 was
$3,140,000, $1,912,000 and $1,304,000, respectively.

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

<TABLE>
<CAPTION>
(in thousands)
APRIL 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Accrued salaries, wages, vacation pay and bonuses............................... $ 2,039 $ 2,972
Accrued commissions............................................................. 1,392 1,852
Accrued warranty costs.......................................................... 2,098 1,832
Deferred revenue................................................................ 2,649 306
Other........................................................................... 2,348 3,782
--------- ---------
$ 10,526 $ 10,744
--------- ---------
--------- ---------
</TABLE>

F-15
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. BORROWINGS

NOTE PAYABLE TO RELATED PARTY

At April 30, 1996, the Company had a $577,000 note payable due to a company
affiliated with a principal stockholder of DMS, which bore interest at an annual
rate of 15%. Interest expense for the years ended April 30, 1997 and 1996
totaled $87,000 and $88,000, respectively. During the year ended April 30, 1997,
DMS repaid the entire principal on the note.

LONG-TERM DEBT

In June 1994, the Company entered into an agreement with a former executive
to purchase 34,430 shares of the Company's common stock by paying cash of
$38,000 and issuing a promissory note payable for $114,000. The Company paid the
remaining principal balance of $38,000 in full in August 1997.

Under the terms of the DMS Agreement, the Company assumed a mortgage loan
which was secured by the acquired building. The Company paid the remaining
principal balance of $639,000 in full in June 1997.

In December 1997 and June 1996, the Company issued a tax exempt Industrial
Development Bond through the Massachusetts Industrial Finance Agency. The face
value of the December 1997 bond (the "1997 bond") and the June 1996 bond (the
"1996 bond") was $4,000,000 and $5,500,000, respectively. The 1997 bond and the
1996 bond bear interest at a rate of 5.79% and 5.74%, respectively, and provide
for 50% of the principal to be paid over ten years from the dates of issuance
with the remaining 50% due in December 2007 and June 2006, respectively. Monthly
payments of principal and accrued interest for the 1997 bond commence at
approximately $36,000 and decrease to approximately $27,000 over the ten-year
payment period. Monthly payments of principal and accrued interest for the 1996
bond are approximately $43,000. The proceeds of the 1997 bond were used to fund
the acquisition and renovation of a manufacturing facility. The Company secured
the issuance of this bond with cash, which is classified as restricted cash on
the April 30, 1998 balance sheet. The proceeds of the June 1996 bond were used
to fund the acquisition and renovation of the manufacturing facility in the
Company's headquarters site. The Company secured the issuance of this bond with
a standby letter of credit from a financial institution. The standby letter of
credit, bearing a fee of 1.25% of the outstanding bond balance, is secured by a
mortgage on the building and land. Under the terms of the letter of credit, the
Company is required to comply with certain financial covenants. Future
maturities of these bonds are as follows:

<TABLE>
<CAPTION>
(in
thousands)
-------------
<S> <C>
Year ending April 30,
1999................................................................................... $ 434
2000................................................................................... 449
2001................................................................................... 464
2002................................................................................... 479
2003................................................................................... 496
Thereafter............................................................................. 6,725
------
$ 9,047
------
------
</TABLE>

In December 1997, the Company entered into an unsecured revolving line of
credit facility (the "Credit Facility") with a bank, with a maximum borrowing
amount of $8 million which is limited by certain

F-16
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. BORROWINGS (CONTINUED)

receivables. The Credit Facility provides the Company the option of borrowing at
either the bank's prime rate or the bank's LIBOR rate plus 2%. The Credit
Facility expires and all outstanding amounts thereunder are due December 21,
1999. Interest on outstanding borrowings is payable monthly in arrears. Under
the credit facility, the Company is obligated to comply with certain financial
covenants. There were no borrowings outstanding under the Credit Facility at
April 30, 1998.

9. EMPLOYEE COMPENSATION PLANS

In April 1992, the Company adopted the 1992 Stock Option Plan (the "1992
Plan"). The 1992 Plan provides for the issuance to employees of options to
purchase 479,000 shares of common stock plus any expired or canceled options
granted pursuant to the Company's expired 1982 Stock Option Plan. In August
1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"). The 1995
Plan provides for the issuance to employees of stock options or stock awards to
purchase 400,000 shares of common stock. In October 1997, the Company adopted
the 1997 Employee Stock Option Plan (the "1997 Plan"). The 1997 Plan provides
for the issuance to employees of stock options or stock awards to purchase
500,000 shares plus the number of shares reserved under the 1995 Plan that have
not been issued or have been issued and subsequently cancelled. At April 30,
1998, 481,590 shares were available for future grants under the Company's stock
option plans. Options are granted under the 1992, 1995 and 1997 Plans as either
incentive stock options or non-qualified stock options and at exercise prices
not less than the fair value of the stock on the date of grant or less than 110%
of the fair value in the case of optionees holding more than 10% of the total
combined voting power of all classes of stock of the Company. The terms of the
options generally may not exceed ten years or five years in the case of
optionees holding more than 10% of the total combined voting power of all
classes of stock of the Company. The options are exercisable over periods
determined by the compensation committee of the board of directors, generally at
the rate of 20% per year, on a cumulative basis, beginning with the first
anniversary of the date of grant.

In October 1996, the Board of Directors adopted the Employee Stock Purchase
Plan (the "Purchase Plan") effective as of October 1, 1996. The Purchase Plan
provides full-time employees, nearly all of whom are eligible to participate,
the opportunity to purchase common shares, on a quarterly basis, at 85% of the
fair market value of the shares on either the first or last day of the
applicable quarter, whichever is lower. The term of the Purchase Plan is for
five years, and the Company has authorized 1,000,000 shares of the Company's
common stock for issuance under the Purchase Plan. Under the Purchase Plan, the
Company sold 27,279 and 10,044 shares to employees in fiscal years 1998 and
1997, respectively.

The Company applies APB No. 25 and related interpretations in accounting for
stock-based compensation. During fiscal 1996, the Company recorded deferred
compensation of $58,000 which is equivalent to the difference between the fair
market value of the underlying securities and the exercise price of the related
options granted. Such compensation is being amortized over the vesting periods
of the related options. The Company has recognized $61,000, $55,000 and $50,000
as compensation expense in fiscal years 1998, 1997 and 1996, respectively, for
stock-based compensation. Had compensation cost for the stock-based compensation
been determined based on the fair value at the grant dates of awards consistent

F-17
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. EMPLOYEE COMPENSATION PLANS (CONTINUED)

with the provisions of SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts as follows:

<TABLE>
<CAPTION>
(in thousands, except per share
data)
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Net income
As reported...................................................... $ 6,647 $ 13,165 $ 7,805
Pro forma........................................................ 5,782 12,840 7,768
Basic earnings per share
As reported...................................................... $ 0.64 $ 1.55 $ 1.04
Pro forma........................................................ $ 0.56 $ 1.51 $ 1.04
Diluted earnings per share
As reported...................................................... $ 0.61 $ 1.48 $ 0.98
Pro forma........................................................ $ 0.54 $ 1.46 $ 0.98
</TABLE>

The fair value of each option and purchase right grant was estimated on the
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for fiscal years 1998, 1997 and 1996: no dividend
yield; risk free interest rate of 5.7%, 6.4% and 5.7%, respectively; expected
option term of 6 years and expected purchase right term of three months;
volatility of 60% for options and purchase rights granted in fiscal year 1998,
50% for options and purchase rights granted subsequent to August 1995 and prior
to May 1997 and no volatility for options granted prior to the initial filing of
the Company's registration statement on Form S-1 in August 1995. The weighted
average fair value per option for options granted with option exercise prices
equal to the fair value of the underlying common stock in fiscal years 1998,
1997 and 1996 was $14.49, $7.25 and $8.09, respectively. The weighted average
fair value per option for options granted with exercise prices above the fair
value of the underlying common stock in fiscal 1998 was $10.48. The weighted
average fair value per option for options granted with exercise prices below the
fair value of the underlying common stock in fiscal year 1996 was $9.08. The
weighted average fair value per purchase right for purchase rights granted in
fiscal years 1998 and 1997 was $7.08 and $2.82, respectively.

Because options vest over several years and additional option and purchase
right grants are expected to be made in subsequent years, the pro forma impact
on fiscal years 1998, 1997 and 1996 is not necessarily representative of the pro
forma effects of reported net income and earnings per share for future years.

F-18
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. EMPLOYEE COMPENSATION PLANS (CONTINUED)

Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
Options outstanding at April 30, 1995.......................................... 797,000 $ 4.17
Granted.................................................................... 137,500 14.23
Exercised.................................................................. (163,984) 4.04
Canceled................................................................... (8,000) 3.25
----------
Options outstanding at April 30, 1996.......................................... 762,516 6.02
Granted.................................................................... 211,500 12.94
Exercised.................................................................. (154,400) 4.24
Canceled................................................................... (45,400) 8.21
----------
Options outstanding at April 30, 1997.......................................... 774,216 8.14
Granted.................................................................... 170,100 22.52
Exercised.................................................................. (183,896) 4.54
Canceled................................................................... (44,400) 12.64
----------
Options outstanding at April 30, 1998.......................................... 716,020 $ 12.20
----------
----------
</TABLE>

The number and weighted average exercise price of options exercisable at
April 30, 1998, 1997 and 1996 is 198,220 and $8.04; 199,316 and $5.40; and
190,916 and $4.11, respectively.

The following table summarizes information about stock options outstanding
at April 30, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ------------------------------------------------------ ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 3.25 - 5.88........................................ 277,920 5.9 $ 4.28 120,320 $ 4.21
9.38 - 14.75........................................ 203,100 7.8 12.66 64,400 13.20
17.38 - 19.31........................................ 185,300 8.8 17.93 13,500 17.62
27.86 - 41.25........................................ 49,700 9.2 33.31 -- --
----------- -----------
716,020 $ 12.20 198,220 $ 8.04
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

10. STOCKHOLDERS' EQUITY

COMMON STOCK

In August 1997, the Company completed a public offering of 2,300,000 shares
of its common stock. The proceeds to the Company from the offering, net of
offering expenses, were $67,843,000.

F-19
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCKHOLDERS' EQUITY (CONTINUED)

RESERVED SHARES

At April 30, 1998, the Company has reserved 2,160,287 shares of common stock
for issuance upon the exercise of outstanding and available common stock options
and for issuance to employees under the Purchase Plan.

PREFERRED STOCK

The Company has 1,000,000 shares of $1.00 par value preferred stock
authorized. Shares of preferred stock may be issued at the discretion of the
Board of Directors of the Company with such designation, rights and preferences
as the Board may determine from time to time. The preferred stock may have
voting rights, preferences as to dividends and liquidation, conversion and
redemption rights and sinking fund provisions which are more expansive than
those of the holders of the common stock.

11. EXPORT SALES AND MAJOR CUSTOMERS

Revenue by geographic area is summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C> <C>
YEAR ENDED APRIL 30,
---------------------------------

<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
United States........................................................ $ 46,194 $ 40,600 $ 27,635
Far East............................................................. 34,266 27,098 21,582
Japan................................................................ 27,909 24,199 11,404
Europe............................................................... 14,896 9,506 6,718
---------- ---------- ---------
$ 123,265 $ 101,403 $ 67,339
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

Revenue from JAL in fiscal years 1998, 1997 and 1996 totaled $17,775,000
(14%), $12,185,000 (12%) and $8,380,000 (13%), respectively. Revenue from
another customer in fiscal years 1998, 1997 and 1996 totaled $20,988,000 (17%),
$16,269,000 (16%) and $7,703,000 (12%), respectively. Revenue from a foreign
distributor other than JAL totaled $9,823,000 (10%) in fiscal 1997. Revenue from
a separate customer in fiscal 1996 totaled $6,759,000 (10%).

F-20
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. INCOME TAXES

The provision for income taxes consists of:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C> <C>
YEAR ENDED APRIL 30,
-------------------------------

<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current tax expense:
Federal............................................................................ $ 5,118 $ 7,037 $ 4,540
Foreign............................................................................ 49 -- --
State.............................................................................. 541 967 739
--------- --------- ---------
5,708 8,004 5,279
--------- --------- ---------
Deferred tax benefit:
Federal............................................................................ (3,368) (2,046) (1,131)
State.............................................................................. (517) (253) (144)
--------- --------- ---------
(3,885) (2,299) (1,275)
--------- --------- ---------
$ 1,823 $ 5,705 $ 4,004
--------- --------- ---------
--------- --------- ---------
</TABLE>

The significant components of deferred tax assets and liabilities consist of
the following:

<TABLE>
<CAPTION>
(in thousands)
APRIL 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Deferred tax assets:
Inventories, due to reserves and additional costs inventoried for tax purposes..... $ 3,084 $ 2,332
Acquired in-process research and development and intangibles....................... 2,335 --
Accrued expenses................................................................... 1,307 1,625
Deferred revenue................................................................... 1,002 119
Deferred profit on sales to affiliates............................................. 954 1,038
Net operating loss carryforwards................................................... 450 409
Depreciation....................................................................... -- 140
Bad debt reserve................................................................... 648 225
Other.............................................................................. 180 40
--------- ---------
Gross deferred tax assets........................................................ 9,960 5,928
Deferred tax asset valuation allowance............................................. (352) (346)
--------- ---------
Net deferred tax assets.......................................................... 9,608 5,582
Deferred tax liabilities:
Depreciation..................................................................... (381) --
--------- ---------
Total deferred tax assets.......................................................... $ 9,227 $ 5,582
--------- ---------
--------- ---------
</TABLE>

Net operating loss carryforwards remaining at April 30, 1998 and 1997, not
limited in their use due to ownership changes, totaled $939,000 and $164,000,
respectively. Included in the net operating loss carryforwards for April 30,
1998 are $806,000 of state net operating losses that are only available to
offset taxable state income. A valuation allowance of $346,000 has been recorded
at April 30, 1998 and 1997 to

F-21
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. INCOME TAXES (CONTINUED)

reflect operating carryforwards which will expire before they can be used due to
ownership change limitations. These carryforwards begin to expire in the year
2000.

The Company does not provide for taxes which would be payable if
undistributed earnings of its foreign affiliates were remitted because the
Company either considers these earnings to be invested for an indefinite period
or anticipates that if such earnings were distributed, the U.S. income taxes
payable would be substantially offset by foreign tax credits.

The following is a reconciliation between the amount of reported income tax
expense and the amount computed using the U.S. Federal Statutory rate of 35% for
fiscal 1998, 1997 and 1996:

<TABLE>
<CAPTION>
(in thousands)
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Statutory federal rate.................................................... $ 3,316 $ 6,570 $ 4,133
State taxes, net of federal benefit....................................... 15 415 449
Foreign sales corporation benefit......................................... (646) (1,117) (601)
Research and development tax credits...................................... (886) (389) --
Other..................................................................... 24 226 23
--------- --------- ---------
$ 1,823 $ 5,705 $ 4,004
--------- --------- ---------
--------- --------- ---------
</TABLE>

The income tax benefits related to the exercise and certain disqualifying
dispositions of stock options reduces taxes currently payable and is credited to
additional paid-in capital. Such amount approximated $1,286,000, $794,000 and
$393,000 for the years ended April 30, 1998, 1997 and 1996, respectively.

13. INCENTIVE SAVINGS AND PROFIT SHARING PLAN

The Company has an incentive savings and profit sharing plan covering
substantially all employees who wish to participate and meet minimum age and
service requirements. Annual Company contributions are determined by the Board
of Directors and are limited to the maximum amount deductible under the Internal
Revenue Code. Company contributions for fiscal 1998, 1997 and 1996 were
approximately $517,000, $325,000 and $196,000 respectively.

14. COMMITMENTS

OPERATING LEASES

The Company leases land and certain buildings, machinery and equipment under
operating leases which expire through 2004. Under the terms of the leases, the
Company is responsible for normal maintenance, utility expenses and taxes and
pays a monthly property management fee on certain leases.

F-22
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. COMMITMENTS (CONTINUED)

Future minimum lease payments under operating leases, including management
fees, are as follows:

<TABLE>
<CAPTION>
(in
thousands)
-------------
<S> <C>
Year ending April 30,
1999..................................................................................... $ 1,078
2000..................................................................................... 900
2001..................................................................................... 825
2002..................................................................................... 616
2003..................................................................................... 343
Thereafter............................................................................... 474
------
Total minimum lease payments......................................................... $ 4,236
------
------
</TABLE>

Total rent expense under noncancelable operating leases was approximately
$1,159,000, $1,266,000 and $1,150,000 for the years ended April 30, 1998, 1997
and 1996, respectively.

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
(in thousands)
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Cash paid during the year
Interest................................................................ $ 506 $ 423 $ 221
Income taxes, net of refunds received................................... 11,510 5,584 6,164
</TABLE>

NON-CASH INVESTING AND FINANCING ACTIVITIES

During fiscal 1996, $1,056,000 of long-term debt was canceled as
consideration for the exercise of a warrant to purchase 325,000 shares of the
Company's common stock.

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) AND FOURTH QUARTER ADJUSTMENTS

JAL, the Company's 50% owned Japanese affiliate, recognizes revenue from
product sales upon formal written acceptance by its customers. As stated in Note
2, the Company recognizes revenue upon shipment of product and accrues for
anticipated warranty costs at the time of shipment. This difference in revenue
recognition policies resulted in the Company prematurely recognizing income on
certain sales to its affiliate during fiscal 1998 for equipment installed at
end-user customer locations but not formally accepted by the customers. The
Company has determined that its results of operations should be restated for the
three and nine months periods ended January 31, 1998 to reflect a reduction in
revenue of $1,237,000 and net income of $531,000. Accordingly, the Company
amended its prior filing on Form 10-Q for the period ended January 31, 1998 to
reflect these adjustments. In the opinion of management, all

F-23
<PAGE>
ADE CORPORTATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) AND FOURTH QUARTER ADJUSTMENTS
(CONTINUED)

adjustments necessary to revise the quarterly financial statements have been
recorded. Following is a summary of the unaudited results of operations for the
three and nine months ended January 31, 1998:

<TABLE>
<CAPTION>
(in thousands)
THREE MONTHS ENDED
JANUARY 31, 1998
----------------------
<S> <C> <C>
AS
PREVIOUSLY
RESTATED REPORTED
--------- -----------
Revenue.......................................................................... $ 33,102 $ 34,339
Income from operations........................................................... 4,611 5,416
Net income....................................................................... 3,786 4,317
Earnings per share--basic........................................................ $ 0.34 $ 0.39
Earnings per share--diluted...................................................... $ 0.33 $ 0.38
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31, 1998
----------------------
<S> <C> <C>
AS
PREVIOUSLY
RESTATED REPORTED
--------- -----------
Revenue....................................................................... $ 98,149 $ 99,386
Income from operations........................................................ 10,661 11,466
Net income.................................................................... 8,299 8,830
Earnings per share--basic..................................................... $ 0.81 $ 0.87
Earnings per share--diluted................................................... $ 0.78 $ 0.83
</TABLE>

The Company recorded a $2,294,000 credit to the provision for income taxes
during the fourth quarter of fiscal 1998, which included a $1,789,000 credit
resulting from the difference between the Company's actual effective tax rate
for fiscal 1998 of 19.2% and the estimated effective tax rate of 34% utilized
during the first three quarters of fiscal 1998. Also in the fourth quarter of
1998, the Company reversed accrued bonus expense of $1,323,000, which had been
recorded in the first two quarters of fiscal 1998. Pro forma net income for the
nine months ended January 31, 1998, including the reversal of the bonus accrual
and utilizing the actual effective tax rate of 19.2%, is $9,837,000, compared to
reported net income for the nine months ended January 31, 1998 of $8,299,000.

F-24
<PAGE>
FINANCIAL STATEMENT SCHEDULE
(IN THOUSANDS)

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO BALANCE AT
BALANCE AT COSTS AND OTHER DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1995 EXPENSES ACCOUNTS WRITE-OFFS 1996
- -------------------------------------------------- ----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts................... $ 138 $ 338 -- -- $ 476
Inventory obsolescence............................ 672 295 -- -- 967
Deferred tax asset valuation allowance............ 346 -- -- -- 346
</TABLE>

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO BALANCE AT
BALANCE AT COSTS AND OTHER DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1996 EXPENSES ACCOUNTS WRITE-OFFS 1997
- -------------------------------------------------- ----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts................... $ 476 $ 112 -- $ (11) $ 577
Inventory obsolescence............................ 967 1,034 -- (370) 1,631
Deferred tax asset valuation allowance............ 346 -- -- -- 346
</TABLE>

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO BALANCE AT
BALANCE AT COSTS AND OTHER DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1997 EXPENSES ACCOUNTS WRITE-OFFS 1998
- -------------------------------------------------- ----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts................... $ 577 $ 1,140 -- $ (12) $ 1,705
Inventory obsolescence............................ 1,631 2,867 -- (971) 3,527
Deferred tax asset valuation allowance............ 346 6 -- -- 352
</TABLE>

S-1

<PAGE>

EXHIBIT 10.20

ESCROW AGREEMENT

AGREEMENT made as of May 31, 1998, by and among Norman Fenton
(the "Escrow Agent"), ADE Corporation, a Massachusetts corporation
("ADE") and the undersigned stockholders (the "Stockholders") of Phase
Shift Technology, Inc., an Arizona corporation.

WHEREAS, pursuant to that certain Agreement and Plan of Merger
dated March 8, 1998 (the "Merger Agreement") by and among ADE, Theta
Acquisition Corporation, an Arizona corporation, said Phase Shift
Technology, Inc. ("PST") and the Stockholders, a copy of which
agreement has been delivered to the Escrow Agent, the Stockholders are
exchanging all of the outstanding shares of common stock, no par
value, of PST for 2,000,000 shares in the aggregate of the common
stock, $.01 par value per share, of ADE ("ADE Common Stock").

WHEREAS, under the Merger Agreement, the Stockholders have agreed
to indemnify the ADE Indemnitees (as defined therein) against certain
Losses (as defined therein) suffered or incurred by the ADE
Indemnitees; and

WHEREAS, to provide a fund as a partial source of payment of
such indemnification, a portion of the shares of ADE Common Stock to
be issued to the Stockholders under the Merger Agreement is to be held
in escrow as hereinafter provided.

NOW, THEREFORE, in consideration of the mutual promises
of the parties hereunder, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

1. Establishment of Escrow Fund. The Stockholders have
herewith deposited with the Escrow Agent and the Escrow Agent
acknowledges receipt of Two Hundred Thousand (200,000) shares of ADE
Common Stock (the "Escrow Shares"), representing a portion of the

<PAGE>

shares of ADE Common Stock issued pursuant to the Merger Agreement as
more particularly set forth on Schedule 1 annexed hereto. The Escrow
Shares and all capital distributions in respect thereof (that is, all
securities, cash or other property received by the Stockholders as a
result of stock dividends splits, recapitalization, liquidation,
merger, consolidation or otherwise, paid or distributed with respect
to said shares) are hereinafter referred to collectively as the
"Escrow Fund". The Escrow Fund shall be held by the Escrow Agent in
escrow subject to the terms and conditions set forth herein.

2. Investment of Escrow Fund. The Escrow Agent shall hold the
assets comprising the Escrow Fund in the form in which they are
received except that any portion of the Escrow Fund constituting cash
shall be deposited in one or more interest-bearing or daily money
market accounts (the "Escrow Account") of a bank or other financial
institution in the name of the Escrow Agent. Any interest or
dividends paid on amounts deposited in the Escrow Account shall become
a part of the Escrow Fund and shall be held hereunder upon the same
terms as the cash or other property with respect to which such
interest and dividends shall have been paid. Notwithstanding anything
herein elsewhere to the contrary, the Escrow Agent shall, at the
request of the Stockholders' Agent (as defined below), release any or
all of the Escrow Shares for sale by one or more of the Stockholders
in a public offering covered by an effective registration statement
filed by ADE under the Securities Act of 1933, as amended, provided
that arrangement is made, in each instance, reasonably satisfactory to
ADE, to substitute the proceeds of such sale or sales in the Escrow
Fund to be held in lieu of the Escrow Shares so sold.

3. Stockholders' Agent. Each of the Stockholders hereby
appoints Chris Koliopoulos ("Stockholders' Agent") as attorney in
fact, with full power of substitution, to act upon his, her or its
behalf with respect to all matters arising under this Agreement,
including

2
<PAGE>

without limitation to assume all the responsibilities imposed upon the
Stockholders hereunder, to waive compliance by ADE with any of the
terms hereof, to compromise or settle any claim against the Escrow
Fund hereunder and to execute and deliver any instrument evidencing
the entitlement of the ADE Indemnitees to payment from the Escrow
Fund. This power of attorney shall remain in effect until all
obligations of the parties hereunder have been discharged in full.
ADE and the Escrow Agent may rely and act upon the written
instructions of the Stockholders' Agent as to all matters encompassed
by this Agreement.

4. Claims Against Escrow Fund for Indemnification. The ADE
Indemnitees may make claims against the Escrow Fund for
indemnification pursuant to the Merger Agreement by notifying the
Stockholders' Agent and the Escrow Agent of each such claim and
specifying the amount and basis thereof with reasonable particularity.
If the Stockholders' Agent disputes any such claim, he shall give
written notice of such objection to the claimant and the Escrow Agent
within ten (10) days after receipt of notice of such claim; otherwise,
such claim shall be deemed to have been acknowledged to be payable in
the full amount thereof and shall be paid forthwith to the claimant
from the Escrow Fund which charge shall be allocated ratably against
each Stockholder's interest in the Escrow Fund as set forth in
Schedule 1. For purposes of valuing indemnification amounts recovered
by the ADE Indemnitees pursuant to this Agreement from shares of ADE
Common Stock held in the Escrow Fund, such shares of ADE Common Stock
will be valued at the last sale price for a share of such stock as
reported by Nasdaq on the day prior to the Effective Date of the
Merger.

5. Disputed Claims for Indemnification. If the Stockholders'
Agent shall dispute an indemnification claim as above provided, the
Escrow Agent shall set aside a portion of the

3
<PAGE>

Escrow Fund sufficient to pay such claim in full together with
interest accrued from the date of such claim at the rate of 8% per
annum. The amount so set aside shall be held by the Escrow Agent
pending receipt of either (i) written instructions with respect
thereto signed by the claimant and the Stockholders' Agent or (ii) the
order of a court of competent jurisdiction.

6. Termination. This Agreement shall terminate on the two
hundred seventieth (270th) day following the date hereof if there are
no outstanding indemnification claims on that date (the "Preliminary
Termination Date"), otherwise when all indemnification claims made
prior to said date shall have been disposed of (the "Final Termination
Date"). On the Preliminary Termination Date, the Escrow Agent shall
distribute to the Stockholders, in the proportions set forth in
Schedule 1, all shares of ADE Common Stock then held in the Escrow
Fund but not then claimed against under Sections 4 or 5 hereof. On
the Final Termination Date, the Escrow Agent shall distribute the
remaining Escrow Fund to the Stockholders in accordance with said
Schedule 1. No fractional shares of ADE Common Stock shall be
distributed. ADE shall purchase any such fractional shares to which
any Stockholder otherwise would be entitled at the price per share
specified in the last sentence of Section 4 hereof.

7. Authority to Act. The Escrow Agent may act upon any
instrument or signature believed to be genuine and may assume that any
person purporting to give any notice or instruction hereunder,
believed to be authorized, has been duly authorized to do so. In case
of any uncertainty on the part of the Escrow Agent as to the proper
course of action, he or it may decline to act unless and until
appropriately indemnified by the party requesting such action.

8. Fees and Expenses. The Escrow Agent shall have the right to
receive a reasonable fee for his or its services hereunder and to be
reimbursed for all reasonable expenses incurred in connection with
such services. Such fees and expenses shall be paid one-half by the

4
<PAGE>

Stockholders and one-half by ADE and if they are not so paid, they
shall be paid from the Escrow Fund in which event ADE and the
Stockholders shall make an appropriate adjustment as between
themselves in order that the burden of such fees and expenses may be
borne equally. The Escrow Agent shall have no responsibility to
undertake or defend any litigation arising in connection with this
Agreement unless and until indemnified to the Escrow Agent's
reasonable satisfaction by ADE or the Stockholders or otherwise.

9. Liability of the Escrow Agent. The Escrow Agent shall have
no liability for acts or omissions hereunder except for his or its own
gross negligence or willful misconduct.

10. Resignation or Removal of Escrow Agent. The Escrow Agent
may resign at any time without cause by giving at least 30 days' prior
written notice to ADE and the Stockholders, such resignation to be
effective upon the acceptance of appointment by his successor (the
"Successor Escrow Agent"). In addition, ADE and the Stockholders may
at any time remove the Escrow Agent without cause by a notice in
writing signed by ADE and the Stockholders and delivered to the Escrow
Agent, such removal to be effective upon the acceptance of appointment
by the Successor Escrow Agent. If a Successor Escrow Agent shall not
have been appointed within 30 days after such notice of resignation or
removal, the Escrow Agent, ADE or the Stockholders may apply to any
court of competent jurisdiction to appoint a Successor Escrow Agent to
act until such time, if any, that a Successor Escrow Agent of ADE and
the Stockholders' choosing shall have accepted appointment. Any
Successor Escrow Agent shall be deemed to have accepted appointment
upon his, her or its execution and delivery of a counterpart of this
Agreement to ADE and the Stockholders.

11. Miscellaneous. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns, heirs and personal
representatives of the parties hereto and also the ADE

5
<PAGE>

Indemnitees. Notices hereunder shall be given to ADE and the
Stockholders in accordance with Section 13.4 of the Merger Agreement
and to the Escrow Agent at the following address:

Judge Norman Fenton
P.O. Box 85280
Tucson, AZ 85754

or at such other addresses as any party may notify the other parties
of in writing and in the manner described in Section 13 of the Merger
Agreement.

[remaining page intentionally left blank]

6
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement or
caused the same to be executed by their duly authorized
representatives as of the date first set forth above.

ESCROW AGENT: /s/ Norman Fenton
----------------------------
Norman Fenton

STOCKHOLDERS: /s/ Chris Koliopoulos
----------------------------
Chris Koliopoulos

/s/ David Basila
----------------------------
David Basila

ADE: ADE CORPORATION

By: /s/ Mark D. Shooman
--------------------------
Name: Mark D. Shooman
Title: Vice President and Chief
Financial Officer

<PAGE>

Schedule 1 -- Escrow Shares

<TABLE>
<CAPTION>
<S> <C> <C>
Chris Koliopoulos 133,400 shares (66.7%)
David Basila 66,600 shares (33.3%)
</TABLE>

<PAGE>

EXHIBIT 10.21

NONCOMPETITION AGREEMENT

AGREEMENT made as of May 31, 1998 between ADE Corporation, a
Massachusetts corporation ("ADE"), with offices at 80 Wilson Way, Westwood,
Massachusetts 02090, and Chris Koliopoulos ("Stockholder"), an individual
having his principal residence at the address set forth on the signature page
hereto.

W I T N E S S E T H

WHEREAS, Stockholder is a stockholder of Phase Shift Technology, Inc. an
Arizona corporation ("PST");

WHEREAS, ADE (which for purposes of this Agreement shall be deemed to
mean ADE Corporation and each of its subsidiaries (including PST as of the
Effective Date of the Merger) unless the context otherwise requires) is on
the date hereof combining with PST by means of the merger (the "Merger") of a
wholly owned subsidiary of ADE with and into PST, pursuant to an Agreement
and Plan of Merger dated March 8, 1998 (the "Merger Agreement");

WHEREAS, under the terms of the Merger Agreement, Stockholder in
connection with the Merger will receive substantial consideration in the form
of shares of the Common Stock of ADE.

WHEREAS, in order to insure for itself the benefits of the ownership of
PST and the operation of PST's business, ADE has as a condition of its
obligation to cause the Merger to be consummated, pay the consideration
contemplated by the Merger Agreement, and consummate the other transactions
contemplated by the Merger Agreement, required that certain of the persons
who immediately prior to the effectiveness of the Merger were stockholders of
PST agree not to engage in any activities competitive with the business of
ADE (including without limitation the business of PST) as provided herein;

NOW, THEREFORE, in order to induce ADE to cause the Merger to be
consummated, pay to Stockholder the consideration due to him as contemplated
by the Merger Agreement, and to consummate the other transactions
contemplated by the Merger Agreement, in consideration of the mutual
covenants and promises contained herein and in the Merger Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ADE and Stockholder agree as follows (capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Merger Agreement):

1. For a period of five (5) years from the date hereof or, if later,
until two (2) years after the termination of Stockholder's employment with
ADE or any of its subsidiaries, Stockholder agrees that he will not, directly
or indirectly:

<PAGE>

(a) engage in, conduct, manage, operate, control or own, whether
as a proprietor, partner, stockholder, joint venturer, investor, lender,
officer, director, employee, consultant, agent, participant or otherwise,
anywhere in the world, any business, venture or activity which(i) competes
with any business that ADE is engaged in or has been strategically planning
or developing prior to the termination of the Stockholder's employment with
ADE or (ii) likely would result in the unauthorized disclosure of
Confidential Information (as defined in an Employment Agreement of even date
between the Stockholder and Phase Shift Technology, Inc.).

(b) recruit, solicit or induce, or attempt to recruit, solicit or
induce, any employee of or consultant to ADE to terminate his or her
employment with, or otherwise cease his or her relationship with, ADE; or

(c) solicit, divert or take away, or attempt to solicit, divert or
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of ADE.

The foregoing provisions of this Section 1 shall not be construed to limit
or prohibit Stockholder from holding, solely for investment, not more than
five percent (5%) of the outstanding stock of a publicly traded company.

2. Stockholder agrees that a breach of this Agreement could cause
irreparable damage and that in the event of such breach ADE shall have, in
addition to any and all remedies at law, the right to an injunction, specific
performance or other equitable relief to prevent the violation of
Stockholder's obligations hereunder.

3. No waiver by ADE of a breach of any portion of this Agreement shall
operate or be construed as a waiver of any other or subsequent breach hereof.

4. Each provision herein shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in no
way impair the enforceability of any of the other clauses herein. Moreover,
if one or more of the provisions contained in this Agreement shall for any
reason be held to be excessively broad as to scope, activity or subject so as
to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them, so as
to be enforceable to the extent compatible with the applicable law as it
shall then appear.

5. This Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Massachusetts.

6. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof.

7. This Agreement shall be binding upon and shall inure to the benefit
of the successors and assigns of the parties hereto.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Noncompetition
Agreement to be duly executed as of the day and year first above written.

ADE CORPORATION

By: /s/ Mark D. Shooman
-------------------
Name: Mark D. Shooman
Title: Vice President and
Chief Financial Officer

/s/ Chris Koliopoulos
---------------------
Chris Koliopoulos
Address: c/o Phase Shift
Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

<PAGE>

EXHIBIT 10.22

NONCOMPETITION AGREEMENT

AGREEMENT made as of May 31, 1998 between ADE Corporation, a
Massachusetts corporation ("ADE"), with offices at 80 Wilson Way,
Westwood, Massachusetts 02090, and David Basila ("Stockholder"), an
individual having his principal residence at the address set forth on
the signature page hereto.

W I T N E S S E T H

WHEREAS, Stockholder is a stockholder of Phase Shift Technology,
Inc. an Arizona corporation ("PST");

WHEREAS, ADE (which for purposes of this Agreement shall be
deemed to mean ADE Corporation and each of its subsidiaries (including
PST as of the Effective Date of the Merger) unless the context
otherwise requires) is on the date hereof combining with PST by means
of the merger (the "Merger") of a wholly owned subsidiary of ADE with
and into PST, pursuant to an Agreement and Plan of Merger dated March
8, 1998 (the "Merger Agreement");

WHEREAS, under the terms of the Merger Agreement, Stockholder in
connection with the Merger will receive substantial consideration in
the form of shares of the Common Stock of ADE.

WHEREAS, in order to insure for itself the benefits of the
ownership of PST and the operation of PST's business, ADE has as a
condition of its obligation to cause the Merger to be consummated, pay
the consideration contemplated by the Merger Agreement, and consummate
the other transactions contemplated by the Merger Agreement, required
that certain of the persons who immediately prior to the effectiveness
of the Merger were stockholders of PST agree not to engage in any
activities competitive with the business of ADE (including without
limitation the business of PST) as provided herein;

NOW, THEREFORE, in order to induce ADE to cause the Merger to be
consummated, pay to Stockholder the consideration due to him as
contemplated by the Merger Agreement, and to consummate the other
transactions contemplated by the Merger Agreement, in consideration of
the mutual covenants and promises contained herein and in the Merger
Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, ADE and Stockholder
agree as follows (capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Merger
Agreement):

1. For a period of five (5) years from the date hereof or, if
later, until two (2) years after the termination of Stockholder's
employment with ADE or any of its subsidiaries, Stockholder agrees
that he will not, directly or indirectly:

1
<PAGE>

(a) engage in, conduct, manage, operate, control or own,
whether as a proprietor, partner, stockholder, joint venturer,
investor, lender, officer, director, employee, consultant, agent,
participant or otherwise, anywhere in the world, any business, venture
or activity which(i) competes with any business that ADE is engaged in
or has been strategically planning or developing prior to the
termination of the Stockholder's employment with ADE or (ii) likely
would result in the unauthorized disclosure of Confidential
Information (as defined in an Employment Agreement of even date
between the Stockholder and Phase Shift Technology, Inc.).

(b) recruit, solicit or induce, or attempt to recruit,
solicit or induce, any employee of or consultant to ADE to terminate
his or her employment with, or otherwise cease his or her relationship
with, ADE; or

(c) solicit, divert or take away, or attempt to solicit,
divert or take away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or accounts,
of ADE.

The foregoing provisions of this Section 1 shall not be construed
to limit or prohibit Stockholder from holding, solely for investment,
not more than five percent (5%) of the outstanding stock of a publicly
traded company.

2. Stockholder agrees that a breach of this Agreement could
cause irreparable damage and that in the event of such breach ADE
shall have, in addition to any and all remedies at law, the right to
an injunction, specific performance or other equitable relief to
prevent the violation of Stockholder's obligations hereunder.

3. No waiver by ADE of a breach of any portion of this
Agreement shall operate or be construed as a waiver of any other or
subsequent breach hereof.

4. Each provision herein shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall
in no way impair the enforceability of any of the other clauses
herein. Moreover, if one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to
scope, activity or subject so as to be unenforceable at law, such
provision or provisions shall be construed by the appropriate judicial
body by limiting and reducing it or them, so as to be enforceable to
the extent compatible with the applicable law as it shall then appear.

5. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of
Massachusetts.

6. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof.

7. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties hereto.

2
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Noncompetition Agreement to be duly executed as of the day and year
first above written.

ADE CORPORATION

By: /s/ Mark D. Shooman
----------------------------
Name: Mark D. Shooman
Title: Vice President and
Chief Financial Officer

/s/ David Basila
---------------------------
David Basila
Address: c/o Phase Shift
Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

<PAGE>

EXHIBIT 10.23

EMPLOYMENT AGREEMENT

AGREEMENT made as of the 31st day of May, 1998, by and between
Phase Shift Technology, Inc., an Arizona corporation having its
principal offices at 3480 East Britannia, Suite 110, Tucson, Arizona
85706 ("PST"), and Chris Koliopoulos, an individual having his
principal residence at the address set forth on the signature page
hereof (the "Executive").

WITNESSETH:

WHEREAS, Theta Acquisition Corp., an Arizona corporation
("Subsidiary") is a wholly owned subsidiary of ADE Corporation, a
Massachusetts corporation ("ADE") (references to "ADE" will include
ADE Corporation and its subsidiaries, unless the context requires
otherwise).

WHEREAS, on the date hereof Subsidiary is merging with and into
PST and as a result of such merger (the "Merger") PST will become a
wholly owned subsidiary of ADE;

WHEREAS, the Executive prior to the Merger was a key employee of
PST and wishes to continue similar employment with PST following the
Merger, and PST wishes to employ the Executive following the Merger,
all on the terms and conditions provided below;

NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

1. Employment Period. PST hereby agrees to employ the Executive,
and the Executive hereby agrees to remain in the employ of PST for the
Employment Period. Unless sooner terminated pursuant to Section 4,
the Employment Period will be the period beginning on the date of this
Agreement and ending on the third anniversary of such date.

2. Position and Duties.

(a) During the Employment Period, the Executive will serve
as President of PST and as such he shall report to the Board of
Directors of PST. He shall have such responsibilities as would
normally inhere in such position except insofar as such
responsibilities may be changed by the Board of Directors. He shall
also be a Director of PST.

(b) Excluding periods of vacation and sick leave to which
the Executive is entitled, the Executive agrees to devote
substantially all of his attention and time during normal business
hours to the business and affairs of PST and to use his best efforts
to perform faithfully and diligently such responsibilities.

3. Compensation and Benefits.

(a) Salary. The Executive will receive an annual salary
("Salary"), which shall not be subject to reduction, to be established
from time to time by the Board of Directors of PST

<PAGE>

during the Employment Period. The initial Salary amount shall be
$180,000.00. The Salary shall be paid at such times and in such
amounts as is consistent with the customary payroll practices of ADE
for its similarly situated executives.

(b) Incentive, Savings and Retirement Plans. In addition to
the Salary payable as hereinabove provided, the Executive shall be
entitled to participate, during the Employment Period, in all savings
and retirement plans and programs of ADE and all short and long-term
incentive plans and programs applicable to other similarly situated
executives of ADE.

(c) Benefit Plans. During the Employment Period the Executive
shall be eligible to participate in employee benefit plans of ADE made
available from time to time to similarly situated executives of ADE,
including cash bonus incentives, health and disability insurance,
401(k) and employee stock option plans. The parties agree to
negotiate in good faith subsequent to the execution of this Agreement
to reach a mutually satisfactory disability insurance arrangement for
the Executive. The number of stock options (if any) to be granted to
the Executive as of the date of this Agreement, the plan pursuant to
which they are to be granted, the effective date of grant, and the
exercise price therefor are set forth in Schedule A hereto.

(d) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the policies of
ADE as in effect from time to time during the Employment Period with
respect to other similarly situated executives of ADE.

4. Termination.

(a) Death or Disability. This Agreement will terminate
automatically upon the Executive's death. PST may terminate this
Agreement upon the Executive's Disability (as defined below) by giving
to the Executive written notice of its intention to terminate the
Executive's employment. In such case, the Executive's employment with
PST will terminate effective 30 days after receipt of such notice (the
"Disability Effective Date"), unless the Executive has previously
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means a physical or mental
disability that significantly impairs the Executive's performance of
his duties and which continues for at least 180 days.

(b) Cause. PST may terminate the Executive's employment for
"Cause." For purposes of this Agreement, "Cause" means (i) the
Executive's willful and continued failure or refusal to perform in any
material respect his responsibilities hereunder or any lawful
directive of the Board of Directors in keeping with Executive's title
and position with PST (other than any such failure resulting from
incapacity due to physical or mental illness), (ii) the Executive's
willful conduct which is materially injurious to the ADE, or (iii) the
Executive's conviction of a felony.

2
<PAGE>

forth in reasonable detail the facts and circumstances which provide a
basis for termination of the Executive's employment under the
provision so indicated.

(d) Date of Termination. "Date of Termination" means the date
of the Executive's death, the Disability Effective Date, or the date
of the Executive's receipt of an effective Notice of Termination, as
the case may be.

5. Obligations of PST upon Termination.

(a) Cause. If the Executive's employment is terminated for
Cause, PST will pay the Executive his full Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given and will have no further obligations to the Executive under this
Agreement.

(b) Other Reasons. If, during the Employment Period, PST
terminates the Executive's employment for any reason other than for
death, Cause, or Disability, PST shall pay to the Executive, as
severance pay in lieu of any further salary payments for periods
subsequent to the Date of Termination, a monthly severance payment
determined as follows: the sum of (i) the Salary in effect immediately
prior to the Date of Termination and (ii) the amount of any bonus paid
to the Executive pursuant to any bonus plan of ADE with respect to the
year preceding that in which the termination occurs will be divided by
twelve. Such payment will continue to be made for the number of
months remaining in the Employment Period.

6. Noncompetition. The Executive shall be subject to the terms
of the Noncompetition Agreement of even date herewith between the
Executive and ADE.

7. Confidential Information and Inventions.

(a) The Executive agrees that Confidential Information (as
defined below) of ADE, is the property of ADE to be held by him in
trust and solely for ADE's benefit, and shall not be used for the
benefit of the Executive or disclosed by the Executive to others
either during or after his employment without ADE's prior written
consent unless such disclosure is required to be disclosed pursuant to
any law, regulation or ruling of any governmental body or authority or
court order in which case Executive shall give to ADE as much advance
notice of the date, time, place, nature and manner of the required
disclosure as is possible in the circumstances.

"Confidential Information" means any Company proprietary
information, technical data, trade secrets or know-how, including, but
not limited to, research and development information, product plans,
products, services, customer lists and customers (including, but not
limited to, customers of ADE on whom the Executive called or with whom
the Executive became acquainted during the term of the Executive's
employment), supplies, personnel, markets, software, product
development information, hardware configuration information, marketing
information, costs, pricing information, finances or other business
information disclosed to the Executive by ADE either directly or
indirectly in writing, electronically transmitted, orally or by
drawings or inspection of parts or equipment. "Confidential
Information" does not include

3
<PAGE>

general industry or other information to the extent that such
information is publicly available or is otherwise in the public domain
(other than through breach of this Agreement).

(b) The Executive agrees further to give to ADE, both
during the period of his employment by ADE and subsequent thereto, all
assistance ADE reasonably requires in order to protect Confidential
Information.

(c) The Executive agrees further that any improvements or
inventions, original works of authorship, developments and trade
secrets made by him either alone or with others, during his employment
by ADE or made thereafter as a result of any invention conceived or
work done during his employment by ADE so far as the same relate to
ADE's business, products, processes and developments, and all his
right, title and interest in and to the same shall be deemed as made
and held by him in a fiduciary capacity and solely for the benefit of
ADE, shall not be disclosed to others without its written consent and
shall be the sole and exclusive property of ADE.

(d) The Executive agrees to disclose promptly and fully to
ADE and to its attorneys all said improvements, inventions, original
works of authorship, developments and trade secrets and shall upon its
request surrender to it all tangible evidence of said improvements,
inventions, original works or authorship, developments and trade
secrets.

(e) The Executive, when requested so to do either during or
after said employment, agrees

(i) to assign and convey to ADE his entire right, title and
interest in and to said improvements, inventions, original
works or authorship, developments and trade secrets;

(ii) to assist ADE and its agents in preparing applications
for patents, copyrights or other intellectual property
rights, United States and foreign, covering the same;

(iii) to sign and deliver all said applications and
assignments of the same to ADE; and

(iv) generally, to give all information and testimony, sign
all papers and do all things which may be needed or
requested by ADE, to the end that ADE may obtain, extend,
reissue, maintain and enforce United States and foreign
patents, copyrights and other intellectual property rights
covering said improvements and inventions.

(f) ADE agrees to bear all expenses which it causes to be
incurred in obtaining, extending, reissuing, maintaining and enforcing
said patents, copyrights or other intellectual property rights, and in
vesting and perfecting title thereto in ADE, and agrees further to pay
the Executive for any time which it may require of him therefor
subsequent to the termination of his employment, such payment to be at
a reasonable hourly rate to be negotiated by the parties at the time.

4
<PAGE>

(g) The Executive represents and warrants that

(i) He has not entered into and will not enter into any
agreement which is inconsistent herewith; and

(ii) His employment by ADE is not incompatible with any previous
employment.

8. Successors.

(a) This Agreement is personal to the Executive and may not
be assigned by the Executive without the prior written consent of PST.

(b) This Agreement will inure to the benefit of and be
binding upon PST and its successors. Any successor to PST will, by an
agreement in form and substance satisfactory to the Executive,
expressly assume and agree to perform this Agreement in the same
manner and to the same extent as PST would have been required to
perform.

9. Miscellaneous.

(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended otherwise than by
a written agreement executed by the parties hereto.

(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or
by certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to the Executive:

Chris Koliopoulos
c/o Phase Shift Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

5
<PAGE>

If to PST:

Robert C. Abbe, Chairman
Phase Shift Technology, Inc.
c/o ADE Corporation
80 Wilson Way
Westwood, Massachusetts 02090-1806

or to such other address as either party furnishes to the other in
writing in accordance herewith. Notices and other communications will
be effective when actually received by the addressee.

(b) The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any
other provision of this Agreement.

(c) PST may withhold from any amounts payable under this
Agreement such Federal, state, or local taxes as required to be
withheld pursuant to any applicable law or regulation.

[SIGNATURE PAGE FOLLOWS]

6
<PAGE>

IN WITNESS WHEREOF, the Executive and PST have executed this
Agreement as of the day and year first above written.

/s/ Chris Koliopoulos
----------------------------------------
Chris Koliopoulos
Address: c/o Phase Shift Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

PHASE SHIFT TECHNOLOGY, INC.

By: /s/ Robert C. Abbe
-----------------------------------
Name: Robert C. Abbe
Title: Chairman

ADE Corporation agrees to provide benefits
in accordance with Section 3 hereof:

ADE CORPORATION

By: /s/ Robert C. Abbe
------------------------------------
Name: Robert C. Abbe
Title: President and
Chief Executive Officer

<PAGE>

Schedule A

Information Regarding Stock Options to Be Granted

<S> <C>

Number of Underlying Shares of
ADE Common Stock: None

Name of Plan: N/A

Date of Grant: N/A

Exercise Price: N/A

</TABLE>

<PAGE>

EXHIBIT 10.24

EMPLOYMENT AGREEMENT

AGREEMENT made as of the 31st day of May, 1998, by and between
Phase Shift Technology, Inc., an Arizona corporation having its
principal offices at 3480 East Britannia, Suite 110, Tucson, Arizona
85706 ("PST"), and David Basila, an individual having his principal
residence at the address set forth on the signature page hereof (the
"Executive").

WITNESSETH:

WHEREAS, on the date hereof Subsidiary is merging with and into
PST and as a result of such merger (the "Merger") PST will become a
wholly owned subsidiary of ADE;

NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

2. Position and Duties.

(a) During the Employment Period, the Executive will serve
as Vice President of PST and as such he shall report to the Board of
Directors of PST. He shall have such responsibilities as would
normally inhere in such position except insofar as such
responsibilities may be changed by the Board of Directors. He shall
also be a director of PST.

<PAGE>

3. Compensation and Benefits.

(a) Salary. The Executive will receive an annual salary
("Salary"), which shall not be subject to reduction, to be established
from time to time by the Board of Directors of PST during the
Employment Period. The initial Salary amount shall be $ 120,000.00.
The Salary shall be paid at such times and in such amounts as is
consistent with the customary payroll practices of ADE for its
similarly situated executives.

(b) Incentive, Savings and Retirement Plans. In addition
to the Salary payable as hereinabove provided, the Executive shall be
entitled to participate, during the Employment Period, in all savings
and retirement plans and programs of ADE and all short and long-term
incentive plans and programs applicable to other similarly situated
executives of ADE.

4. Termination.

(b) Cause. PST may terminate the Executive's employment for
"Cause." For purposes of this Agreement, "Cause" means (i) the
Executive's willful and continued failure or refusal to perform in any
material respect his responsibilities hereunder or any lawful
directive of the Board of Directors in keeping with the Executive's
title and position with PST (other than any such failure resulting
from incapacity due to physical or mental illness), (ii) the
Executive's willful conduct which is materially injurious to the
Company, or (iii) the Executive's conviction of a felony.

2
<PAGE>

(c) Notice of Termination. Any termination by PST for Cause
will be effected by a Notice of Termination to the Executive given in
accordance with Section 8 (b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this Agreement
relied upon and (ii) sets forth in reasonable detail the facts and
circumstances which provide a basis for termination of the Executive's
employment under the provision so indicated.

5. Obligations of PST upon Termination.

6. Noncompetition. The Executive shall be subject to the terms
of the Noncompetition Agreement of even date herewith between the
Executive and ADE.

7.Confidential Information and Inventions.

3
<PAGE>

general industry or other information to the extent that such
information is publicly available or is otherwise in the public domain
(other than through breach of this Agreement).

(e) The Executive, when requested so to do either during or
after said employment, agrees

(i) to assign and convey to ADE his entire right, title and
interest in and to said improvements, inventions, original
works or authorship, developments and trade secrets;

(ii) to assist ADE and its agents in preparing applications
for patents, copyrights or other intellectual property
rights, United States and foreign, covering the same;

(iii) to sign and deliver all said applications and
assignments of the same to ADE; and

4
<PAGE>

(g) The Executive represents and warrants that

(i) He has not entered into and will not enter into any
agreement which is inconsistent herewith; and

(ii) His employment by ADE is not incompatible with any previous
employment.

8. Successors.

(a) This Agreement is personal to the Executive and may not
be assigned by the Executive without the prior written consent of PST.

9. Miscellaneous.

If to the Executive:

David Basila
c/o Phase Shift Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

5
<PAGE>

If to PST:

Robert C. Abbe, Chairman
Phase Shift Technology, Inc.
c/o ADE Corporation
80 Wilson Way
Westwood, Massachusetts 02090-1806

or to such other address as either party furnishes to the other in
writing in accordance herewith. Notices and other communications will
be effective when actually received by the addressee.

(b) The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any
other provision of this Agreement.

(c) PST may withhold from any amounts payable under this
Agreement such Federal, state, or local taxes as required to be
withheld pursuant to any applicable law or regulation.

[SIGNATURE PAGE FOLLOWS]

6
<PAGE>

IN WITNESS WHEREOF, the Executive and PST have executed this
Agreement as of the day and year first above written.

/s/ David Basila
------------------------------------------
David Basila
Address: c/o Phase Shift Technology, Inc.
3480 East Britannia, Suite 110
Tucson, Arizona 85706

PHASE SHIFT TECHNOLOGY, INC.

By: /s/ Robert C. Abbe
------------------------------------------
Name: Robert C. Abbe
Title: Chairman

ADE Corporation agrees to provide benefits
in accordance with Section 3 hereof:

ADE CORPORATION

By: /s/ Robert C. Abbe
- --------------------------------------
Name: Robert C. Abbe
Title: President and
Chief Executive Officer

<PAGE>

Schedule A

Information Regarding Stock Options to Be Granted

Number of Underlying Shares of
ADE Common Stock: None

Name of Plan: N/A

Date of Grant: N/A

Exercise Price: N/A

<PAGE>

EXHIBIT 21.1

ADE CORPORATION

List of Wholly-Owned Subsidiaries

<S> <C>

ADE Optical Systems Corporation ADE Securities Corporation
9625 Southern Pine Boulevard 80 Wilson Way
Charlotte, NC 28273 Westwood, MA 02090

ADE Technologies, Inc. ADE Software Corporation
80 Wilson Way 80 Wilson Way
Westwood, MA 02090 Westwood, MA 02090

ADE International Corporation ATI Foreign Sales Corporation
32 Loockerman Square c/o Corporate Services
Suite L-100 Price Waterhouse Centre
Dover, DE Collymore Rock, St. Michael
Barbados
ADE International GmbH
Klausnerring 17
85551 Kirchheim
85551 Heimstetten
Germany

List of Partially-Owned Subsidiaries

Japan ADE Ltd. Microspec Technologies Ltd.
Tokimec Building Ramat Gabriel Industrial Park
16-1, 2-chome, Minamikamata Migdal Haemek, Israel 23101
Ohta-ku, Tokyo 144, Japan

</TABLE>

<PAGE>

Exhibit 23.1

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-2280, No. 333-4652, and No. 333-46505) and in
the Prospectus constituting part of the registration statement on Form S-3
(No. 333-46503) of ADE Corporation of our report dated June 30, 1998
appearing on page F-1 of this Form 10-K.

PricewaterhouseCoopers LLP

Boston, Massachusetts
July 29, 1998

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ADE CORPORATION FOR THE YEAR ENDED APRIL
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<CASH> 68,541
<SECURITIES> 0
<RECEIVABLES> 17,511
<ALLOWANCES> 1,705
<INVENTORY> 27,152
<CURRENT-ASSETS> 125,245
<PP&E> 34,044
<DEPRECIATION> 8,560
<TOTAL-ASSETS> 165,618
<CURRENT-LIABILITIES> 18,480
<BONDS> 9,047
0
0
<COMMON> 111
<OTHER-SE> 138,414
<TOTAL-LIABILITY-AND-EQUITY> 165,618
<SALES> 123,265
<TOTAL-REVENUES> 123,265
<CGS> 56,129
<TOTAL-COSTS> 56,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507
<INCOME-PRETAX> 9,475
<INCOME-TAX> 1,823
<INCOME-CONTINUING> 7,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,647
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.61

</TABLE>