PRI AUTOMATION INC, S-3/A, 2000-05-01

PRI AUTOMATION INC
S-3/A, 2000-05-01
SPECIAL INDUSTRY MACHINERY, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000

REGISTRATION NO. 333-34584
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)

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<S> <C>
MASSACHUSETTS 04-2495703
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
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805 MIDDLESEX TURNPIKE
BILLERICA, MASSACHUSETTS 01821-3986
(978) 670-4270
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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

MITCHELL G. TYSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRI AUTOMATION, INC.
805 MIDDLESEX TURNPIKE
BILLERICA, MASSACHUSETTS 01821-3986
(978) 670-4270
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

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ROBERT L. BIRNBAUM, ESQ. JOHN A. MELTAUS, ESQ.
ROBERT W. SWEET, JR., ESQ. JONATHAN M. MOULTON, ESQ.
FOLEY, HOAG & ELIOT LLP TESTA, HURWITZ & THIBEAULT, LLP
One Post Office Square 125 High Street
Boston, Massachusetts 02109 Boston, Massachusetts 02110
Telephone: (617) 832-1000 Telephone: (617) 248-7000
Facsimile: (617) 832-7000 Facsimile: (617) 248-7100
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 28, 2000

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SHARES

[LOGO]

COMMON STOCK

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

PRI AUTOMATION, INC. IS OFFERING 1,400,000 SHARES OF COMMON STOCK AND THE
SELLING STOCKHOLDERS ARE OFFERING 525,000 SHARES.

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

OUR COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"PRIA."
ON APRIL 27, 2000, THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET WAS $75 5/16 PER SHARE.

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.

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PRICE $ A SHARE

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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS PRI AUTOMATION SELLING STOCKHOLDERS
------ ----------- -------------- --------------------
<S> <C> <C> <C> <C>
PER SHARE............ $ $ $ $
TOTAL................ $ $ $ $
</TABLE>

PRI AUTOMATION HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN
ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS.

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON
, 2000.

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

MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC

CIBC WORLD MARKETS

ROBERTSON STEPHENS

ADAMS, HARKNESS & HILL, INC.

, 2000
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TABLE OF CONTENTS

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PAGE
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PROSPECTUS SUMMARY.................... 3
RISK FACTORS.......................... 6
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND INDUSTRY DATA........ 16
USE OF PROCEEDS....................... 17
DIVIDEND POLICY....................... 17
PRICE RANGE OF COMMON STOCK........... 17
CAPITALIZATION........................ 18
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 21
</TABLE>

BUSINESS.............................. 31
MANAGEMENT............................ 41
RELATED PARTY TRANSACTIONS............ 42
PRINCIPAL AND SELLING STOCKHOLDERS.... 43
UNDERWRITERS.......................... 45
LEGAL MATTERS......................... 47
EXPERTS............................... 47
WHERE YOU CAN FIND MORE INFORMATION... 47
DISCLOSURE OF SEC POSITION ON
INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES......................... 48
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL SHARES OF COMMON STOCK AND
SEEKING OFFERS TO BUY SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

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PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING PRI AUTOMATION AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS WE INDICATE OTHERWISE, ALL INFORMATION IN
THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS DO NOT EXERCISE THEIR
OVER-ALLOTMENT OPTION.

PRI AUTOMATION

We are a leading global supplier of advanced automation systems and software
for the semiconductor industry. We offer complete and flexible solutions that
address a wide range of automation requirements for semiconductor manufacturers
and for original equipment manufacturers, or OEMs, of semiconductor process
tools. Our factory automation systems and software help semiconductor
manufacturers optimize the flow of material and data throughout the
semiconductor fabrication facility, or fab, improving productivity and
increasing the manufacturer's return on investment. Our robotic wafer-handling
systems and software offer high-performance and reliability for OEM process tool
manufacturers, allowing them to focus on developing next generation process
technology. We also provide automation services, including equipment layout and
design, fab simulation, project management, installation and on-site support. We
sell and support our products through a global direct sales and support
organization operating out of offices in North America, Europe, Israel, Taiwan,
South Korea, Singapore, and Japan. Our customers include many of the world's
leading semiconductor manufacturers and semiconductor capital equipment
suppliers.

Semiconductor production is one of the most complex and logistically
challenging manufacturing operations in the world. As the complexity of advanced
semiconductor devices has increased, the capital expenditure required to build
or upgrade semiconductor manufacturing facilities has also grown, and the cost
of constructing and equipping a state-of-the-art production fab today can be in
excess of $1.5 billion. Advances in semiconductor technology, intensifying
competitive pressures and the need to improve the return on invested capital are
driving semiconductor manufacturers to seek ways to:

- increase wafer throughput while maintaining high product yields;

- lower production costs by maximizing utilization of facilities and process
tools;

- more efficiently manage the increasingly complex production process;

- respond more quickly and flexibly to changing customer requirements; and

- solve the ergonomic and logistical problems associated with 300mm wafer
manufacturing.

In an effort to address these challenges, semiconductor manufacturers have
in recent years sought to automate portions of their production processes to
reduce human handling and thereby improve production yields and throughput and
increase the efficiency of their operations. These efforts initially focused on
the automation of individual process tools. Subsequently, semiconductor
manufacturers have been adopting more comprehensive factory automation
strategies, including systems that automate the storage and movement of
materials throughout the fab. As a result, an increasing amount of semiconductor
capital equipment spending has been directed to factory automation systems.

We offer integrated factory automation solutions designed to enhance
productivity throughout the fab, thereby increasing return on investment and
overall factory effectiveness. We combine our advanced automation systems and
factory management software with a broad range of implementation services that
draw on our extensive domain expertise in the semiconductor fabrication process
to provide integrated automation solutions. By optimizing the flow of materials
and data throughout the fab, our products enable customers to more effectively
plan, schedule and carry out their production activity. Our hardware and
software products, ranging from tool automation systems and associated controls
to factory-wide automation systems and planning and scheduling software, are
designed to

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work together efficiently and to be easily installed and flexibly reconfigured.
Our products support industry standards, providing customers with the option of
purchasing our integrated factory automation solutions or incorporating elements
of our system into their existing fab automation infrastructure.

Our objective is to extend our position as the leading supplier of factory
automation solutions for semiconductor manufacturing. To achieve this objective,
we are pursuing a business strategy to:

- provide comprehensive factory automation solutions;

- strengthen our customer relationships;

- expand our product offerings;

- increase our penetration of the Asia-Pacific market; and

- exploit emerging 300mm wafer automation opportunities.

Our principal executive offices are located at 805 Middlesex Turnpike,
Billerica, Massachusetts 01821-3986, and our telephone number is
(978) 670-4270. Our web site address is WWW.PRIA.COM. The information on our web
site is not incorporated by reference into this prospectus.

Encore!, Leverage and PROMIS are our registered trademarks, and AeroLoader,
AeroTrak, FAbuilder, TransNet, TurboStocker and the PRI logo are our trademarks.
This prospectus also contains trademarks and trade names of other companies.

RECENT DEVELOPMENTS

On April 27, 2000, we announced our financial results for the quarter ended
April 2, 2000. Our net revenue for the quarter was $76.7 million, a 31% increase
from the previous quarter and a 153% increase over the second quarter of fiscal
1999. Net income for the quarter was $5.8 million, or $.23 per diluted share,
compared with $294,000, or $.01 per diluted share, for the previous quarter and
a net loss of $10.2 million, or $.48 per diluted share, for the second quarter
of fiscal 1999. We expect to file our Quarterly Report on Form 10-Q for the
quarter ended April 2, 2000, including our unaudited financial statements for
the period, on or before May 17, 2000.

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THE OFFERING

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Common stock offered by:
PRI Automation....................... 1,400,000 shares
Selling stockholders................. 525,000 shares
Common stock to be outstanding after
this offering........................ 24,657,227 shares
Use of proceeds........................ For general corporate purposes, including
working capital and possible
acquisitions.
Nasdaq National Market symbol.......... PRIA
</TABLE>

The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of April 19, 2000. This number
does not include:

- options outstanding at April 19, 2000 to purchase 3,443,167 shares of
common stock;

- an additional 1,035,718 shares of common stock that we have reserved for
grant under our stock option plans after April 19, 2000; and

- 375,798 shares of common stock issuable under our stock purchase plans at
April 19, 2000.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The above table excludes a pro forma net income (loss) presentation, which
gives effect to certain income tax expense adjustments related to our Equipe
acquisition. For more information, see our consolidated statements of operations
included elsewhere in this prospectus.

The as adjusted column in the consolidated balance sheet data below gives
effect to the sale of the 1,400,000 shares of common stock we are offering at an
assumed public offering price of $75.31 per share, after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.

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AS OF JANUARY 2, 2000
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ACTUAL AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 45,164 $144,566
Working capital........................................... 87,301 186,703
Total assets.............................................. 153,568 252,970
Obligation under capital lease, less current portion, and
other non-current liabilities........................... 1,063 1,063
Total stockholders' equity................................ 107,859 207,261
</TABLE>

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RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES WE FACE. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THAT CASE,
THE TRADING PRICE OF OUR COMMON STOCK COULD FALL, AND YOU COULD LOSE ALL OR PART
OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.

RISKS RELATED TO OUR BUSINESS

OVERSUPPLY IN THE SEMICONDUCTOR MARKET MAY IN THE FUTURE REDUCE DEMAND FOR
CAPITAL EQUIPMENT, INCLUDING FOR OUR SYSTEMS.

Our business depends heavily upon capital expenditures by semiconductor
manufacturers, particularly manufacturers that are opening or expanding
semiconductor fabrication facilities. These manufacturers frequently postpone or
abandon their plans to make capital expenditures when demand for their products
and products containing semiconductors is low. The semiconductor industry has
been highly cyclical, and periods of oversupply in the market for semiconductors
have caused significantly reduced demand for capital equipment, including
systems such as ours. We believe that this cyclicality will continue. In
addition, the recent high rate of technical innovation and resulting
improvements in the performance and price of semiconductor devices, which have
driven much of the demand for our products, could slow or encounter limits.

THE SEMICONDUCTOR INDUSTRY RECENTLY EXPERIENCED A DOWNTURN THAT ADVERSELY
AFFECTED OUR OPERATING RESULTS, AND REDUCED DEMAND FOR SEMICONDUCTORS IN THE
FUTURE COULD JEOPARDIZE OUR PLANS.

In recent years, the semiconductor industry experienced a significant
downturn, which seriously harmed our ability to sell our systems. The recent
downturn in the Asia-Pacific market also affected demand for semiconductor
manufacturing equipment, including our systems. These and other factors
significantly reduced our revenue and profitability in fiscal 1999. Our total
net revenue for fiscal 1999 was $136.3 million, compared with total net revenue
of $203.5 million in fiscal 1998. This decline occurred primarily in our factory
automation systems and tool automation systems businesses. In fiscal 1999, we
incurred a net loss of $36.1 million, compared with a net loss of $22.6 million
in fiscal 1998. These losses included special charges, including charges for
restructuring and personnel reductions related to cost-cutting measures we took
in response to the industry downturn. If we take cost-cutting measures in
response to another downturn in the semiconductor industry, we may be unable to
continue to invest in marketing, research, development and engineering at the
levels we think necessary to maintain our competitive position. Our failure to
make these investments could seriously curtail our long-term business prospects.

OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE SALES.

Our systems often have a lengthy sales cycle. As a result, we have
difficulty anticipating the timing and amount of specific sales. We may also
spend significant amounts of money and effort with no assurance that we will
make a sale. Before buying one of our systems, a prospective customer must
generally decide to upgrade or expand existing facilities or to construct new
facilities. These undertakings are major decisions for most prospective
customers and typically involve significant capital commitments and lengthy
evaluation and approval processes. In addition, downturns in the semiconductor
industry may cause prospective customers to postpone decisions regarding major
capital expenditures, including purchases of our systems.

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OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, AND OUR STOCK PRICE COULD
FALL IF OUR OPERATING RESULTS ARE BELOW THE EXPECTATIONS OF ANALYSTS OR
INVESTORS.

Many factors may cause our operating results to fluctuate significantly.
Some of these factors are:

- the timing of significant orders;

- the gain or loss of any significant customer;

- new product announcements and releases by us or our competitors;

- order cancellations and shipment reschedulings or delays;

- patterns of capital spending by our customers;

- market acceptance of new and enhanced versions of our products;

- changes in the pricing and the mix of products we sell;

- cyclicality in the semiconductor industry and the markets served by our
customers;

- the timing of any acquisitions and related costs; and

- changes in personnel and related costs.

In addition, because our services and maintenance revenue is largely
correlated with our product and equipment revenue, a decline in product and
equipment revenue could reduce services and maintenance revenue in the same
quarter or in subsequent quarters.

If our operating results fall below the expectations of financial analysts
or investors, our stock price could fall. As a result of these factors and the
other factors described in this section, we believe that period-to-period
comparisons of our revenue and operating results are not necessarily meaningful.
You should not rely on these comparisons to predict our future performance.

DELAY IN OUR SHIPMENT OF A SINGLE SYSTEM COULD SUBSTANTIALLY DECREASE OUR
SALES FOR A PERIOD.

We derive a substantial portion of our revenue from the sale of a relatively
small number of our systems. The purchase price of our systems generally ranges
from $3.0 million to $15.0 million, and we usually take more than one or two
fiscal quarters to deliver our systems. As a result, any delay in the
recognition of revenue for a single system could harm our results for a given
accounting period. If we delay a shipment near the end of a fiscal period
because, for example, the customer reschedules or cancels its order or we
encounter unexpected manufacturing difficulties, our sales in that fiscal period
could fall significantly below the expectations of financial analysts and
investors. This could cause our stock price to fall.

NEW ACCOUNTING GUIDANCE COULD RESULT IN DELAYED RECOGNITION OF OUR REVENUES.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, entitled "Revenue Recognition in Financial
Statements." The bulletin sets forth the SEC's guidance in applying generally
accepted accounting principles to selected revenue recognition issues. We will
be required to apply the guidance in the bulletin in our financial statements
beginning in our first quarter of fiscal 2001. The effects of applying this
guidance with respect to our historical reported revenue will be reflected as a
cumulative effect adjustment in our statement of operations for the first
quarter of fiscal 2001. We have not completed our evaluation of the guidance in
the bulletin as it relates to our business, and therefore cannot yet assess the
likely impact of application of the guidance on our future results of
operations, or the magnitude of the cumulative effect adjustment, if any, that
may be required. In certain situations, application of the guidance discussed in
the bulletin could delay the recognition of revenue that might otherwise have
been recognized in earlier periods. As a result, our reported revenue could
fluctuate more widely among fiscal periods in the future, and reported

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revenue for a particular fiscal period might not meet expectations. A
significant cumulative effect adjustment or delay in recognition of revenue
resulting from application of the guidance in the bulletin, while not affecting
our cash flow, could adversely affect our results of operations in one or more
future periods, which could cause our stock price to fall.

WE TYPICALLY CHARGE A FIXED PRICE FOR A SYSTEM, WHICH LEAVES US VULNERABLE
TO COST OVERRUNS.

Our operating results also fluctuate because our gross margins vary. Our
gross margins vary for a number of reasons, including:

- the mix of products we sell;

- the average selling prices of products we sell;

- the costs to manufacture, market, service and support our new products and
enhancements;

- the costs to customize our systems; and

- our efforts to enter new markets.

We typically charge a fixed price for our systems. As a result, if the costs we
incur in performing a contract exceed our expectations, we generally cannot pass
those costs on to our customer.

WE HAVE SIGNIFICANT FIXED COSTS WHICH ARE NOT EASILY REDUCED DURING A
DOWNTURN.

We continue to invest in research and development, capital equipment and
extensive ongoing customer service and support capability worldwide. These
investments create significant fixed costs that we may be unable to reduce
rapidly if we do not meet our sales goals. Moreover, if we lack a significant
backlog of orders for an extended period of time, we may have difficulty
planning our future production and inventory levels, which could also cause
fluctuations in our operating results.

WE HAVE A LIMITED NUMBER OF CUSTOMERS, AND THE LOSS, CANCELLATION OR DELAY
OF ANY ORDER BY THESE CUSTOMERS COULD HARM OUR BUSINESS.

Historically, we have derived a significant portion of our revenue from a
limited number of customers. We expect this trend to continue for the
foreseeable future. The loss, cancellation or delay of any order by these
customers could significantly reduce our revenue and harm our reputation in the
industry. Sales to our top ten customers accounted for 67% of our total net
revenue in fiscal 1997, 60% in fiscal 1998 and 54% in fiscal 1999. One customer,
Intel, accounted for 32% of our total net revenue in fiscal 1997, 19% in fiscal
1998 and 21% in fiscal 1999. Our largest customers can change from year to year,
as some customers complete large semiconductor fabrication facilities and others
initiate new projects. Moreover, at least one of our significant customers has
adopted a policy of maintaining multiple vendors for the products it purchases.
This kind of policy could limit our ability to sell our products to our
customers.

WE DO NOT HAVE LONG-TERM PURCHASE AGREEMENTS WITH OUR CUSTOMERS, AND AS A
RESULT OUR CUSTOMERS COULD STOP PURCHASING OUR PRODUCTS AND SERVICES AT ANY
TIME.

None of our customers has any long-term obligation to continue to purchase
our products or services, and any customer could reduce or cease ordering our
products or services. Our failure to obtain large orders from new or existing
customers could seriously harm our business. We believe that sales to some of
our customers will decrease in the near future as they complete their current
purchases for new or expanded semiconductor fabrication facilities. In the past,
our customers have sometimes failed to place orders we expected or have delayed
or canceled delivery schedules as a result of changes in their requirements.
Because of the long sales cycle for our products, we may have difficulty in
quickly replacing orders that our customers cancel or reduce. When a customer
cancels an order, our sales contract generally allows us to recover only our
costs and a portion of our anticipated profits from the sale. Any order
deferrals or cancellations could seriously harm our business.

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DEMAND FOR LESS EXPENSIVE SEMICONDUCTORS IS INCREASING PRESSURE TO REDUCE
PRICES IN OUR INDUSTRY.

Semiconductors are increasingly being incorporated into less expensive
products, which limits the price that semiconductor manufacturers can charge for
semiconductors. As a result, semiconductor manufacturers face increasing
pressure to reduce their costs, which in turn creates pressure on semiconductor
equipment manufacturers, such as ourselves, to reduce the prices of their
products. We believe that over time this trend will lead to lower prices, which
would reduce our revenue and adversely affect our operating results.

INDUSTRY CONSOLIDATION AND OUTSOURCING OF THE MANUFACTURE OF SEMICONDUCTORS
TO FOUNDRIES COULD REDUCE THE NUMBER OF AVAILABLE CUSTOMERS.

The substantial expense of building or expanding a semiconductor fabrication
facility is leading increasing numbers of semiconductor companies to contract
with foundries, which manufacture semiconductors designed by others. As
manufacturing is shifted to foundries, the number of our potential customers
could decrease, which would increase our dependence on our remaining customers.
Recently, consolidation within the semiconductor manufacturing industry has
increased. If semiconductor manufacturing is consolidated into a small number of
foundries and other large companies, our failure to win any significant bid to
supply equipment to those customers could seriously harm our reputation and
materially and adversely affect our revenue and operating results.

OUR ONGOING INVESTMENTS IN THE ASIA-PACIFIC MARKET MAY NOT BE SUCCESSFUL.

We believe that our continued presence in the Asia-Pacific market will be
important to our long-term future financial performance. Accordingly, we expect
to continue to invest significant resources to increase our presence in the
Asia-Pacific market. Many of our Japanese competitors have longstanding
collaborative relationships with Japanese and other semiconductor manufacturers
in the Asia-Pacific region. Accordingly, we may be unable to increase sales in
the Asia-Pacific semiconductor market. This market, which includes South Korea,
Taiwan, Singapore, China and, most significantly, Japan, represents a
substantial percentage of worldwide semiconductor manufacturing capacity.

WE HAVE INVESTED HEAVILY IN 300MM WAFER TECHNOLOGY, WHICH IS BEING ADOPTED
MORE SLOWLY THAN EXPECTED, AND COMPETITION FOR EARLY 300MM ORDERS MAY BE
INTENSE.

We have invested, and are continuing to invest, substantial resources to
develop new systems and technologies to automate the processing of 300mm wafers.
However, the industry transition from the current, widely used 200mm
manufacturing technology to 300mm manufacturing technology is occurring more
slowly than expected, partly as a result of the recent period of reduced demand
for semiconductors. Although a small number of pilot projects are currently in
operation, no 300mm semiconductor fabrication facility is producing wafers in
commercial quantities. Any significant delay in the adoption of 300mm
manufacturing technology, or the failure of the industry to adopt 300mm
manufacturing technology, could significantly reduce our opportunities for
future growth. Moreover, continued delay in the transition to 300mm technology
could permit our competitors to introduce competing or superior 300mm products.
Manufacturers implementing factory automation in 300mm pilot projects may
initially seek to purchase systems from multiple vendors. Competition, including
price competition, for such early 300mm orders could be vigorous. A vendor whose
system is selected for an early 300mm pilot project may have, or be perceived to
have, an advantage in competing for future orders, and thus the award to a
competitor of one or more early 300mm orders could cause our stock price to
fall.

WE NEED MANAGERIAL AND TECHNICAL EMPLOYEES, WHO ARE DIFFICULT TO HIRE AND
RETAIN.

We need to hire additional management-level employees and substantial
numbers of employees with technical backgrounds for both our hardware and
software engineering and technical support staffs. The market for these
employees is becoming increasingly competitive, and we have occasionally

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experienced delays in hiring these personnel. Our failure or inability to
recruit, retain and train adequate numbers of qualified personnel on a timely
basis would adversely affect our ability to develop, manufacture, install and
support our systems.

WE MAY HAVE DIFFICULTY MANAGING GROWTH IN LIGHT OF FLUCTUATING DEMAND.

If the semiconductor industry grows, we may have to design and manufacture
our systems in larger volumes than we do now. If demand for our products
increases rapidly, we may have difficulty increasing our production capacity
while maintaining our standards of quality and reliability, and delivery times
for our systems may increase. In particular, it could be difficult for us to
rapidly recruit and train the substantial number of qualified engineering and
technical personnel who would be necessary to fulfill one or more large,
unanticipated orders. If we fail to meet a customer's delivery or performance
criteria, we could lose business from that customer, cause long-term damage to
our reputation and have higher warranty and service costs. Any of these results
could seriously harm our business. Further, if we are unable to expand our
existing manufacturing capacity to meet demand, a customer's placement of a
large order for the development and delivery of factory automation systems
during a particular period might deter other customers from placing similar
orders with us for the same period.

Our systems, procedures, controls and staffing may not be adequate to
support any rapid growth in our operations, if any. Our failure to respond
effectively to fluctuating demand for our products and to manage our future
growth, if any, could seriously harm our business.

OUR INTERNATIONAL OPERATIONS CREATE SPECIAL RISKS.

Our net export sales to customers outside North America accounted for 46.6%
of our total net revenue in fiscal 1997, 35.5% in fiscal 1998 and 32.4% in
fiscal 1999. We anticipate that international sales will continue to account for
a significant portion of our total net revenue for the foreseeable future. Our
plans to expand internationally may distract our attention from our domestic
operations and may absorb financial resources needed elsewhere. Our
international operations are subject to additional risks, including:

- unexpected changes in trading policies, regulatory requirements, exchange
rates, tariffs and other barriers;

- unstable political and economic environments;

- greater difficulties in collecting accounts receivable;

- difficulties in managing distributors or representatives;

- restrictions on exporting and importing technology;

- fewer protections for our intellectual property;

- longer sales cycles than with domestic customers;

- difficulties in staffing and managing foreign operations;

- restrictions on the repatriation of earnings; and

- potentially adverse tax consequences.

Although our international sales are primarily denominated in U.S. dollars,
changes in currency exchange rates could make it more difficult for us to
compete with foreign manufacturers on price. If our international sales increase
relative to our total revenue, these factors could have a more pronounced effect
on our operating results. In any event, any of these factors could cause serious
harm to our business.

10
<PAGE>
WE FACE SIGNIFICANT COMPETITION FROM OTHER AUTOMATION COMPANIES, WHICH MAY
LIMIT THE PRICES WE CAN CHARGE FOR OUR SYSTEMS AND MAY CAUSE US TO LOSE SALES.

Our factory automation division competes with Daifuku, Murata Machinery,
Shinko Electric and a number of other smaller foreign and domestic manufacturers
of automated machinery used in semiconductor fabrication facilities. Our tool
automation systems division competes with Genmark Automation, Asyst
Technologies, Brooks Automation and a number of other foreign and domestic
wafer-handling robotics companies, including in-house organizations of process
tool manufacturers that develop their own automation technology, as well as
other smaller robotics companies. Our software products compete with products
provided by Consilium, a subsidiary of Applied Materials, Brooks Automation and
other vendors. We believe that competition in our industry is likely to
intensify.

We believe that, once a semiconductor manufacturer selects a vendor's
equipment for a particular fab, the manufacturer may continue to rely upon that
equipment for a specific application in other fabs. Accordingly, we may have
difficulty selling to potential customers that have selected a competitor's
equipment, and we expect that difficulty to last for a significant period of
time. However, at least one of our significant customers has adopted a policy of
maintaining multiple vendors for the products it purchases. This kind of policy
could limit additional sales to existing customers. In addition, the expected
transition to 300mm technology may cause new competitors to enter our markets
and may diminish our competitive advantage with customers for whom we are the
incumbent supplier of automation equipment. In the face of increased
competition, we may need to lower our prices, which could seriously harm our
business.

WE MUST CONTINUALLY IMPROVE OUR TECHNOLOGY TO REMAIN COMPETITIVE.

Technology changes rapidly in the semiconductor manufacturing industry. Our
ability to compete will depend, in part, on our ability to develop and introduce
more advanced systems at competitive prices and on a cost-effective basis so as
to enable our customers to integrate them into their operations either before or
as they begin volume product manufacturing. For example, as the semiconductor
industry transitions from 200mm manufacturing technology to 300mm technology, we
believe it is important to our future success to develop and sell new products
that are compatible with 300mm manufacturing technology. If our competitors
introduce new technologies, our sales could decline and our existing products
could lose market acceptance. Our success in developing, introducing, selling
and supporting more advanced systems depends upon many factors, including:

- component selection;

- timely and efficient completion of product design and development;

- timely and efficient implementation of manufacturing and assembly
processes;

- software development;

- product performance in the field; and

- effective sales, marketing, service and project management.

Because we must commit resources to product development well in advance of
sales, our product development decisions must anticipate technological advances
by leading semiconductor manufacturers. We may not be successful in that effort.
Our inability to select, develop, manufacture and market new systems or enhance
our existing systems could cause us to lose our competitive position and could
seriously harm our business.

11
<PAGE>
WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT AND TECHNICAL DIFFICULTIES
THAT COULD DELAY NEW PRODUCT INTRODUCTIONS.

Because our systems are complex and have a large number of components, there
can be a significant lag between the time we introduce a system and the time we
begin to produce that system in volume. We have occasionally experienced delays
in introducing some of our systems and enhancements, as well as certain
technical and manufacturing difficulties with those systems and enhancements.
For example, as the level of sophistication of technology in the semiconductor
industry increases, we have found it increasingly difficult to coordinate
complex manufacturing equipment and software in our systems and to train our
technical and manufacturing personnel in a timely manner. We could experience
similar delays and difficulties in the future. In addition, we must customize
some of our systems to meet a customer's site or operating requirements. Our
inability to complete the development or meet the technical specifications of
any of our new systems or enhancements or to manufacture and ship these systems
or enhancements in volume in a timely manner could impair our relationships with
our customers and seriously harm our business. In addition, we may incur
substantial unanticipated costs to ensure that our new products function
properly and reliably early in their life cycle. These costs could include
greater than expected installation and support costs or increased materials
costs as a result of expedited changes. We may not be able to pass these costs
on to our customers. Any of these events could seriously harm our business.

FUTURE ACQUISITIONS MAY DISRUPT OUR OPERATIONS.

We acquired Promis Systems in March 1999, we acquired Equipe and its
European distributor, Chiptronix Handling Systems, in the first half of 1998 and
we acquired Interval Logic Corporation in 1997. We actively pursue potential
acquisitions, and any acquisition we make could disrupt our operations and
seriously harm our business. We may encounter difficulties in integrating the
operations of acquired companies with our own operations. We may also be unable
to successfully develop, market and sell their products. Any future acquisitions
also pose additional risks, including:

- diversion of our management's attention;

- loss of key employees of the acquired company;

- interruptions in the sales efforts of the acquired company;

- failure to integrate financial and accounting systems successfully;

- significant acquisition and integration expenses; and

- assumption of legal and other liabilities and risks.

Any of these factors could seriously harm our business. Moreover, these and
future acquisitions may not produce the revenue, earnings or business synergies
that we anticipated, and an acquired product, service or technology might not
perform as we expected. Any such event could cause customer dissatisfaction and
damage our reputation.

If we issue equity securities to pay for an acquisition, the ownership
percentage of our existing stockholders would be reduced. If we use cash to pay
for an acquisition, the payment could significantly reduce the cash that would
be available to fund our operations or for other purposes. Acquisition financing
may not be available on favorable terms, or at all. In addition, we may be
required to amortize significant amounts of goodwill or other intangible assets
in connection with future acquisitions, which could seriously harm our operating
results.

WE DEPEND ON SUBCONTRACTORS AND ONE OR A FEW SUPPLIERS FOR SOME COMPONENTS
AND MANUFACTURING PROCESSES.

For some components or specialized processes that we use in our products,
such as painting of system cabinets and enclosures, we depend on subcontractors
or have available only one or a few

12
<PAGE>
suppliers. Our reliance on subcontractors gives us less control over the
manufacturing process and exposes us to significant risks, especially inadequate
capacity, late delivery, substandard quality and high costs. We intend in the
near future to outsource additional aspects of our manufacturing operations to
additional subcontractors and suppliers. We could experience disruption in
obtaining components we need for our products and may not be able to develop
alternatives in a timely manner. If we are unable to obtain adequate deliveries
of components for our products for an extended period of time, we may have to
pay more for inventory, parts and other supplies, seek alternative sources of
supply or delay shipping products to our customers. We could also damage our
relationships with customers. Any such increased costs, delays in shipping or
damage to customer relationships could seriously harm our business.

WE DEPEND ON MORDECHAI WIESLER AND MITCHELL G. TYSON.

Our future success depends significantly on the skills, experience and
efforts of our founder, Chairman of the Board and Treasurer, Mordechai Wiesler,
and our President and Chief Executive Officer, Mitchell G. Tyson. We also depend
on other executive officers and key personnel. Many of these individuals would
be difficult to replace. The loss of Mr. Wiesler, Mr. Tyson or any other key
person could seriously harm our business.

OUR SOFTWARE PRODUCTS MAY CONTAIN ERRORS OR DEFECTS THAT COULD RESULT IN
LOST REVENUE, DELAYED OR LIMITED MARKET ACCEPTANCE OR PRODUCT LIABILITY CLAIMS
WITH SUBSTANTIAL LITIGATION COSTS.

Complex software products like ours can contain errors or defects,
particularly when we first introduce new products or when we release new
versions or enhancements. Defects or errors in current or future products,
including FAbuilder, PROMIS, TransNet and our recently announced Encore!
software, could result in lost revenue or a delay in market acceptance, which
would seriously harm our business and operating results. In the past, we have
occasionally discovered software errors in our new software products and new
releases after their introduction, and we expect that this will continue.
Despite internal testing and testing by current and potential customers, our
current and future products may contain serious defects.

Because many of our customers use our products for business-critical
applications, any errors, defects or other performance problems could result in
financial or other damage to our customers and could significantly impair their
operations. Our customers could seek to recover damages from us for losses
related to any of these issues. A product liability claim brought against us,
even if not successful, would likely be time consuming and costly to defend and
could adversely affect our marketing efforts.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.

Our success depends to a significant degree upon our patent for certain key
elements of our AeroTrak monorail system, our other patents, our source code and
our other proprietary technology. The steps we have taken to protect our
technology may be inadequate. If so, we might not be able to prevent others from
using what we regard as our technology to compete with us. For example, our
patents could be challenged, invalidated or circumvented, and the rights we have
under our patents could provide no competitive advantages. Existing trade
secret, copyright and trademark laws offer only limited protection. In addition,
the laws of some foreign countries do not protect our proprietary technology to
the same extent as the laws of the United States. Other companies could
independently develop similar or superior technology without violating our
proprietary rights. Any misappropriation of our technology or the development of
competitive technology could seriously harm our business.

If we have to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.

CLAIMS BY OTHERS THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD HARM
OUR BUSINESS.

Third parties could claim that our products or technology infringe their
patents or other proprietary rights. Although we conduct patent searches to
determine whether the technology used in

13
<PAGE>
our products infringes patents held by third parties, these searches are not
comprehensive and may not reveal potential third party claimants. Any claim of
infringement by a third party could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. Furthermore, a party making such a claim could
secure a judgment that requires us to pay substantial damages. A judgment could
also include an injunction or other court order that could prevent us from
selling our products. Any of these events could seriously harm our business.

If anyone asserts a claim against us relating to proprietary technology or
information, we might seek to license their intellectual property or to develop
non-infringing technology. We might not be able to obtain a license on
commercially reasonable terms or on any terms. Alternatively, our efforts to
develop non-infringing technology could be unsuccessful. Our failure to obtain
the necessary licenses or other rights or to develop non-infringing technology
could prevent us from selling our products and could therefore seriously harm
our business.

RISKS RELATED TO THIS OFFERING

THE MARKET PRICE OF OUR COMMON STOCK IS VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.

The market price of our common stock has fluctuated widely and may continue
to do so. For example, during fiscal 1999 and the first two quarters of fiscal
2000 the price of our stock ranged from a high of $94.50 per share to a low of
$9.57 per share. Many factors could cause the market price of our common stock
to rise and fall. These factors include:

- variations in our quarterly operating results;

- announcements of technological innovations;

- introduction of new products or new pricing policies by us or our
competitors;

- announcements by us or our competitors of significant customer orders;

- acquisitions or strategic alliances by us or others in our industry;

- the hiring or departure of key personnel;

- changes in the semiconductor industry cycle;

- changes in market valuations of companies within the semiconductor
industry; and

- changes in estimates of our performance or recommendations by financial
analysts.

When the market price of a stock has been volatile, holders of that stock
have often instituted securities class action litigation against the company
that issued the stock. If any of our stockholders brought such a lawsuit against
us, we could incur substantial costs defending the lawsuit. The lawsuit could
also divert the time and attention of our management. Any of these events could
seriously harm our business.

WE MAY NEED ADDITIONAL FINANCING, WHICH COULD BE DIFFICULT TO OBTAIN.

We expect our existing cash and investment balances, funds available under
our revolving credit facility agreement and cash generated from operations,
together with our net proceeds from this offering, will be sufficient to meet
our cash requirements to fund operations and expected capital expenditures
during at least the next twelve months. After that, we may need to raise
additional funds and we cannot be certain that we will be able to obtain
additional financing on favorable terms, if at all. Further, if we issue
additional equity securities, stockholders may experience additional dilution or
the new equity securities may have rights, preferences or privileges senior to
those of existing holders of common stock. If we cannot raise funds on
acceptable terms, if and when needed, we may not be

14
<PAGE>
able to develop or enhance our products and services, take advantage of future
opportunities, grow our business or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business.

PROVISIONS OF OUR CHARTER AND BY-LAWS AND MASSACHUSETTS LAW MAKE A TAKEOVER
OF OUR COMPANY MORE DIFFICULT.

Our basic corporate documents, our stockholder rights plan and Massachusetts
law contain provisions that could discourage, delay or prevent a change in the
control of our company, even if a change of control would be beneficial to our
stockholders.

WE CANNOT STATE WITH CERTAINTY HOW WE WILL USE THE PROCEEDS OF THIS
OFFERING.

We intend to use our net proceeds from the offering for general corporate
purposes, including working capital and possible acquisitions of and investments
in complementary businesses. We have not reserved or allocated the net proceeds
for any specific purpose, and we cannot state with certainty how we will use the
net proceeds. Accordingly, we will have considerable discretion in applying the
net proceeds. We may not be successful in investing the proceeds from this
offering, in our operations or external investments, to yield a favorable
return.

15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

Some of the information in this prospectus and in the documents that we
incorporate by reference into this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "expect," "anticipate,"
"plan," "believe," "seek," "estimate," "internal," "backlog" and similar words.
Statements that we make in this prospectus and in the documents that we
incorporate by reference into this prospectus that are not statements of
historical fact may also be forward-looking statements. In particular,
statements that we make in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to our shipment level and
profitability, increased market share and the sufficiency of capital to meet
working capital and capital expenditures requirements, are forward-looking
statements. Forward-looking statements are not guarantees of our future
performance, and involve risks, uncertainties and assumptions that may cause our
actual results to differ materially from the expectations we describe in our
forward-looking statements. There may be events in the future that we are not
accurately able to predict, or over which we have no control. You should not
place undue reliance on forward-looking statements. We do not promise to notify
you if we learn that our assumptions or projections are wrong for any reason.
Before you invest in our common stock, you should be aware that the factors we
discuss in "Risk Factors" and elsewhere in this prospectus could cause our
actual results to differ from any forward-looking statements.

This prospectus contains industry data related to our business and the
semiconductor industry. This industry data includes projections that are based
on a number of assumptions. If these assumptions turn out to be incorrect,
actual results may differ from the projections based on these assumptions. The
failure of semiconductor manufacturers to buy wafer fabrication equipment at
expected rates may have a material adverse effect on our business, results of
operations and financial condition, and the market price of our common stock.

16
<PAGE>
USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 1,400,000 shares of
common stock we are offering, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses that we will pay, and
assuming a public offering price of $75.31 per share, will be approximately
$99.4 million, or approximately $120.0 million if the underwriters exercise
their over-allotment option in full. We will not receive any proceeds from the
sale of common stock by the selling stockholders.

We intend to use our net proceeds from the offering for general corporate
purposes, including working capital and possible acquisitions of and investments
in complementary businesses. Accordingly, our management will have broad
discretion in the application of our net proceeds. We currently have no
agreement or understanding regarding any acquisition or investment. Pending
these uses, we intend to invest our net proceeds from the offering in
investment-grade, short-term, interest-bearing instruments.

DIVIDEND POLICY

We have never paid or declared cash dividends on our common stock and do not
anticipate paying cash dividends in the foreseeable future. The current policy
of our board of directors is to retain all earnings, if any, for use in our
business.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the trading
symbol "PRIA." As of April 21, 2000, there were 299 holders of record of our
common stock. We believe that there are a substantial number of additional
beneficial owners that hold stock in nominee or "street name" through brokerage
firms. The following table provides the high and low sales prices for our common
stock as reported on the Nasdaq National Market for each of the periods
indicated:

<TABLE>
<CAPTION>
LOW HIGH
--------------- ---------------
<S> <C> <C>
FISCAL 1998
First Quarter............................................ $ 27.25 $ 55.81
Second Quarter........................................... 23.62 37.00
Third Quarter............................................ 14.06 28.38
Fourth Quarter........................................... 10.44 17.88

FISCAL 1999
First Quarter............................................ 9.57 27.75
Second Quarter........................................... 24.06 44.31
Third Quarter............................................ 20.75 39.00
Fourth Quarter........................................... 24.75 39.75

FISCAL 2000
First Quarter............................................ 32.75 68.13
Second Quarter........................................... 57.63 94.50
Third Quarter (through April 27, 2000)................... $ 50.00 76.75
</TABLE>

On April 27, 2000, the closing sale price for our common stock as reported
on the Nasdaq National Market was $75.31.

17
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of January 2, 2000 on
an actual basis and as adjusted to reflect our receipt of the net proceeds from
the issuance and sale of the 1,400,000 shares of common stock offered by us in
this offering at an assumed public offering price of $75.31 per share, after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us. You should read this information in conjunction
with our consolidated financial statements and the related notes included
herein.

<TABLE>
<CAPTION>
AS OF JANUARY 2, 2000
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Obligation under capital lease, less current portion, and
other non-current liabilities............................. $ 1,063 $ 1,063
Minority interest........................................... 162 162
Stockholders' equity:
Series A participating cumulative preferred stock, $0.01
par value; 250,000 shares authorized; none outstanding,
actual and as adjusted.................................. -- --
Special voting preferred stock, $0.01 par value; one share
authorized and outstanding, actual and as adjusted...... 0 0
Preferred stock (undesignated), $0.01 par value; 149,999
shares authorized; none outstanding, actual and as
adjusted................................................ -- --
Common stock, $0.01 par value; 50,000,000 shares
authorized; 22,788,909 shares outstanding, actual;
24,188,909 shares outstanding, as adjusted.............. 228 242
Additional paid-in capital.................................. 149,529 248,917
Accumulated deficit......................................... (41,898) (41,898)
-------- --------
Total stockholders' equity................................ 107,859 207,261
-------- --------
Total capitalization.................................. $109,084 $208,486
======== ========
</TABLE>

Our Series A participating cumulative preferred stock relates to our
stockholder rights plan, which we adopted in December 1998. Our special voting
preferred stock enables the holders of the exchangeable shares issued in
connection with our acquisition of Promis to vote together with holders of
common stock as a single class.

The information in this table does not reflect the following proposed
corporate actions that were adopted at our annual stockholder meeting, held on
March 10, 2000:

- an increase in our authorized common stock to 75,000,000 shares of common
stock;

- an increase of 70,000 shares of common stock issuable under our 1994
Employee Stock Purchase Plan;

- approval of the 2000 Stock Option Plan, which allows us to grant options
to purchase an additional 400,000 shares of common stock; and

- approval of the 2000 Employee Stock Purchase Plan, which provides for the
issuance of up to 350,000 shares of common stock.

18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data as of September 30, 1998 and 1999
and for each of the three fiscal years in the period ended September 30, 1999
have been derived from our consolidated financial statements included in this
prospectus, which have been audited by PricewaterhouseCoopers LLP, independent
accountants. The report of PricewaterhouseCoopers LLP with respect to those
financial statements, insofar as it relates to amounts included from the
consolidated financial statements of Promis Systems Corporation Ltd. for the
year ended December 31, 1997, which have been audited by Ernst & Young LLP,
independent accountants, is based solely on the report of that firm. We have
derived the following selected consolidated financial data as of September 30,
1995, 1996 and 1997 and for the fiscal years ended September 30, 1995 and 1996
from our consolidated financial statements not included in this prospectus. The
selected consolidated balance sheet data as of January 2, 2000 and the selected
consolidated statement of operations data for the three months ended
December 27, 1998 and January 2, 2000 have been derived from our unaudited
consolidated financial statements, which have been prepared on a basis
substantially consistent with the audited consolidated financial statements and
which, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments and accruals, necessary for a fair presentation of
the financial position and results of operations for these periods. The results
of operations for the three months ended January 2, 2000 are not necessarily
indicative of future results. The following selected consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and related notes included herein.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, -------------------------
---------------------------------------------------- DECEMBER 27, JANUARY 2,
1995 1996 1997 1998 1999 1998 2000
-------- -------- -------- -------- -------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net revenue:
Product and equipment.................. $ 94,868 $151,650 $217,437 $171,791 $100,074 $ 20,717 $ 49,163
Services and maintenance............... 11,410 14,606 18,663 31,754 36,222 8,918 9,530
-------- -------- -------- -------- -------- -------- --------
Total net revenue.................... 106,278 166,256 236,100 203,545 136,296 29,635 58,693
Cost of revenue:
Product and equipment.................. 43,934 65,958 105,616 105,342 63,850 15,766 31,259
Services and maintenance............... 5,063 10,328 15,356 19,413 19,904 4,379 6,056
-------- -------- -------- -------- -------- -------- --------
Total cost of revenue................ 48,997 76,286 120,972 124,755 83,754 20,145 37,315
-------- -------- -------- -------- -------- -------- --------
Gross profit............................. 57,281 89,970 115,128 78,790 52,542 9,490 21,378
Operating expenses:
Research and development............... 18,032 26,303 36,198 44,509 45,480 10,414 12,159
Selling, general and administrative.... 22,875 31,694 43,614 46,787 38,642 9,686 9,015
Acquired in-process research and
development.......................... -- -- -- 8,417 -- -- --
Merger costs and special charges....... 8,775 -- -- 10,091 6,375 650 --
-------- -------- -------- -------- -------- -------- --------
Operating profit (loss).................. 7,599 31,973 35,316 (31,014) (37,955) (11,260) 204
Other income, net........................ 1,285 2,121 1,223 625 2,935 656 200
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ 8,884 34,094 36,539 (30,389) (35,020) (10,604) 404
Provision for (benefit from) income
taxes.................................. 3,698 6,815 9,042 (7,766) 1,065 (2,949) 110
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................ $ 5,186 $ 27,279 $ 27,497 $(22,623) $(36,085) $ (7,655) $ 294
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common share:
Basic.................................. $ 0.32 $ 1.40 $ 1.35 $ (1.08) $ (1.67) $ (0.36) $ 0.01
Diluted................................ $ 0.29 $ 1.33 $ 1.27 $ (1.08) $ (1.67) $ (0.36) $ 0.01
Weighted average number of shares
outstanding:
Basic.................................. 16,348 19,501 20,408 20,988 21,628 21,269 22,514
Diluted................................ 18,019 20,466 21,570 20,988 21,628 21,269 24,483
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF
---------------------------------------------------- JANUARY 2,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 39,273 $ 32,551 $ 36,752 $ 57,047 $ 51,865 $ 45,164
Working capital.................................. 72,324 87,213 122,860 100,448 78,936 87,301
Total assets..................................... 114,915 147,797 195,315 167,478 146,552 153,568
Obligation under capital lease, less current
portion, and other non-current liabilities..... 627 1,038 1,747 1,699 1,199 1,063
Total stockholders' equity....................... 82,674 106,427 141,027 123,140 99,500 107,859
</TABLE>

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a leading global supplier of factory automation systems and factory
management software for semiconductor manufacturers and of automation systems
that are incorporated in semiconductor process tools manufactured by OEMs. We
entered the semiconductor manufacturing automation business in 1982, initially
concentrating on developing, manufacturing and selling tool automation systems.
In fiscal 1992, we installed our first interbay automation systems and in fiscal
1994 we introduced our first intrabay automation systems.

We have expanded our product offerings through a series of acquisitions. In
October 1997, we acquired Interval Logic Corporation, or ILC, a developer of
advanced planning and scheduling software for the semiconductor industry. In
January 1998, we acquired Equipe Technologies, a manufacturer of atmospheric and
vacuum wafer-handling robots, pre-aligners and controllers, and its affiliates
Equipe Japan and E-Machine, which we refer to as the Equipe Companies. In
May 1998, we acquired Chiptronix Handling Systems, Equipe's European
distributor. In March 1999, we acquired Promis Systems, a developer of
manufacturing execution system, or MES, software. We accounted for the Equipe
Companies, Chiptronix and Promis transactions using the pooling-of-interests
method of accounting. We have restated all of the financial statements presented
in this prospectus to include the financial position, results of operations and
cash flows of the Equipe Companies and Promis. We have not restated our
financial statements to reflect the acquisition of Chiptronix, because the
effect of that restatement would be immaterial.

Our business depends upon capital expenditures by semiconductor
manufacturers in response to demand for semiconductor products. The
semiconductor industry has been highly cyclical, and periods of oversupply in
the market for semiconductors have caused significantly reduced demand for
capital equipment, including systems such as ours. Periods of reduced demand for
semiconductor manufacturing equipment occurred in 1992 and again in 1996. The
semiconductor industry has only recently begun to recover from a protracted
worldwide downturn that began in 1998 and increased in severity during 1999,
exacerbated by economic instability in Asia. Our revenue decreased by
approximately 14% from fiscal 1997 to fiscal 1998, and by an additional 33% in
fiscal 1999. However, since the second quarter of fiscal 1999 we have
experienced four successive quarters of revenue growth, reflecting in part,
increased demand for semiconductor products and manufacturing equipment.

In addition to making the acquisitions described above, we have continued to
invest in new product development to maintain our technological and market
leadership, including enhancements of our 200mm product line, development of new
300mm products, and introduction of our new MES and planning and scheduling
software. Our research and development expenditures increased from
$36.2 million in fiscal 1997 to $44.5 million in fiscal 1998 and $45.5 million
in fiscal 1999. Meanwhile, we implemented layoffs and other expense reduction
measures in other areas of our business, to the extent that we could do so
without materially impairing our ability to meet customer requirements. In
fiscal 1998, we recorded restructuring and other special charges of
$5.6 million, reflecting personnel reductions, integration of the operations of
the Equipe Companies and disposition of excess facilities and assets. In fiscal
1999, we recorded charges of $2.4 million relating to additional personnel
reductions, restructuring and disposition of excess facilities. We have also
recorded special charges relating to our recent acquisitions. These include
merger costs of $4.5 million relating to our Equipe Companies acquisition in
fiscal 1998 and merger costs of $4.0 million relating to our acquisition of
Promis in fiscal 1999. We also recorded a charge of $8.4 million for acquired
in-process research and development relating to our acquisition of ILC in fiscal
1998. These charges, along with our continued investment in research and
development expenditures, contributed to our net losses of $22.6 million in
fiscal 1998 and $36.1 million in fiscal 1999.

21
<PAGE>
Product and equipment net revenue includes revenue from all equipment sales,
installation, project management and software licenses. Service and maintenance
net revenue consists of service contracts, spare part sales, repairs and
upgrades, software maintenance contracts and consulting and training services.
Our revenue recognition depends on the particular product or service provided.
For certain contracts eligible under American Institute of Certified Public
Accountants Statement of Position No. 81-1, we recognize revenue on product
sales using the percentage-of-completion accounting method based upon an
efforts-expended method. We recognize changes to total estimated costs and
anticipated losses, if any, in the period in which they are determined. Revenue
recognized under the percentage-of-completion accounting method was
approximately $100.7 million in fiscal 1997, $55.0 million in fiscal 1998 and
$23.4 million in fiscal 1999. Revenue from product sales that we do not
recognize under the percentage-of-completion method is generally recorded upon
shipment to the customer, provided that no significant vendor obligations remain
outstanding and that we deem collection of the related receivable to be
probable. We recognize software license revenue upon delivery of the software
and receipt of a written agreement from the customer, provided that acceptance
is not uncertain, fees are fixed and determinable and we deem collection of the
related receivable to be probable. We recognize revenue from training and
consulting as services are performed. We recognize service revenue ratably over
applicable contract periods or as the services are performed. We accrue for
warranty costs upon shipment.

Historically, a significant portion of our net revenue in any particular
period has been attributable to sales to a limited number of customers. Net
revenue from our largest customer accounted for 32% of our total net revenue in
fiscal 1997, 19% in fiscal 1998 and 21% in fiscal 1999. Our largest customers
may also change from year to year, as large fab projects are completed and new
projects are initiated.

RECENT DEVELOPMENTS

22
<PAGE>
RESULTS OF OPERATIONS

The following table provides, for the fiscal years indicated, information
regarding income and expense items as a percentage of total net revenue:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, -------------------------
------------------------------ DECEMBER 27, JANUARY 2,
1997 1998 1999 1998 2000
-------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net revenue:
Product and equipment.......................... 92.1% 84.4% 73.4% 69.9% 83.8%
Services and maintenance....................... 7.9 15.6 26.6 30.1 16.2
----- ----- ----- ----- -----
Total net revenue............................ 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Product and equipment.......................... 44.7 51.8 46.9 53.2 53.3
Services and maintenance....................... 6.5 9.5 14.6 14.8 10.3
----- ----- ----- ----- -----
Total cost of revenue........................ 51.2 61.3 61.5 68.0 63.6
----- ----- ----- ----- -----
Gross profit..................................... 48.8 38.7 38.5 32.0 36.4
Operating expenses:
Research and development....................... 15.3 21.9 33.3 35.1 20.7
Selling, general and administrative............ 18.5 23.0 28.3 32.7 15.4
Acquired in-process research and development... -- 4.1 --
Merger costs and special charges............... -- 4.9 4.7 2.2 --
----- ----- ----- ----- -----
Operating profit (loss).......................... 15.0 (15.2) (27.8) (38.0) 0.3
Other income, net................................ 0.5 0.3 2.1 2.2 0.4
----- ----- ----- ----- -----
Income (loss) before income taxes................ 15.5 (14.9) (25.7) (35.8) 0.7
Provision for (benefit from) income taxes........ 3.9 (3.8) 0.8 (10.0) 0.2
----- ----- ----- ----- -----
Net income (loss)................................ 11.6% (11.1)% (26.5)% (25.8)% 0.5%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED JANUARY 2, 2000 VERSUS THREE MONTHS ENDED DECEMBER 27, 1998

TOTAL NET REVENUE: Total net revenue for the fiscal quarter ended
January 2, 2000 increased 98.1% to $58.7 million, compared to $29.6 million for
the corresponding period in fiscal 1999. This represents the fourth consecutive
quarter of revenue growth. The growth was experienced across all of our
operating segments. Most of the increase was related to product and equipment
revenue, which increased 137.3%, while services and maintenance revenue
increased 6.9% from the corresponding period in fiscal 1999. The increase in net
revenue is due to the growth in requirements for capital equipment within the
semiconductor industry arising from the increase in demand for semiconductor-
related products. Net export sales to European and Asian customers for the
fiscal quarter ended January 2, 2000 were $24.8 million, or 42.3% of total net
revenue, compared to $5.9 million, or 20.0% of total net revenue for the
corresponding period in fiscal 1999. Sales to foreign customers are denominated
in U.S. dollars with the exception of certain sales of tool automation and spare
parts products which are denominated in local currencies.

GROSS PROFIT: Our gross profit margin was 36.4% for the fiscal quarter
ended January 2, 2000, compared to 32.0% for the corresponding period in fiscal
1999. The increase in gross profit margin was primarily experienced by the
Factory Systems and Tool Automation Systems segments. The increase in the gross
profit margin is due to a number of factors including a change in product mix
with a more significant increase in product and equipment revenue as compared to
service and maintenance revenue. Additionally, the upturn in industry demand has
improved product pricing and the growth in production volume has increased
manufacturing efficiencies and improved related costs. At the same

23
<PAGE>
time, the gross profit margin was adversely impacted by costs related to the
introduction of new products.

RESEARCH AND DEVELOPMENT: Research and development expenses increased to
$12.2 million, or 20.7% of total net revenue, for the fiscal quarter ended
January 2, 2000, compared to $10.4 million, or 35.1% of total net revenue, for
the corresponding quarter in fiscal 1999. The increase in spending reflects our
continued investment in new product development and enhancements of existing
product lines. We continued to invest in the development of 200mm and 300mm
products throughout our factory automation and tool automation product lines, as
well as the manufacturing execution and advanced planning and scheduling
software product lines. Research and development expenses decreased as a
percentage of total net revenue for the fiscal quarter ended January 2, 2000,
compared with the corresponding period in fiscal 1999, due to the increase in
revenues.

SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses decreased to $9.0 million, or 15.4% of total net revenue, for the
fiscal quarter ended January 2, 2000, compared to $9.7 million, or 32.7% of
total net revenue, for the corresponding period in fiscal 1999. The decrease in
the dollar amount of selling, general and administrative expenses for the first
quarter of fiscal 2000 is primarily attributable to the consolidation of
duplicate functions and activities of acquired companies.

SPECIAL CHARGES: We did not incur special charges for the fiscal quarter
ended January 2, 2000. However, at January 2, 2000, $272,000 of previously
incurred special charges remained in accrued expenses. During the quarter ended
March 28, 1999, we recorded special charges of $1.9 million. The special charges
consisted of $1.4 million for compensation-related costs for five management
employees in the selling, general and administrative functions to satisfy
existing contractual obligations related to the acquired companies; $196,000 of
costs associated with the reductions of leased facilities; and $248,000 for
other legal issues. The remaining $272,000 of these special charges are expected
to be paid by the end of calendar year 2000.

During the first fiscal quarter of 1999, we recorded special charges of
$650,000 representing provisions for employee severance compensation relating to
the termination of 62 employees and consultants. The headcount reductions
included 40 in manufacturing and customer support, eight in engineering, and 14
in selling, general and administrative functions. The reduction in force
occurred in response to the downturn in the semiconductor equipment industry.
All of these special charges have been paid.

OPERATING PROFIT (LOSS): As a result of the increase in total net revenue
and the other foregoing factors, the operating profit for the fiscal quarter
ended January 2, 2000 was $204,000, or 0.3% of total net revenue, compared to an
operating loss of $11.3 million, or 38.0% of total net revenue, for the
corresponding quarter in fiscal 1999. Excluding the special charges of $650,000,
the operating loss in the first fiscal quarter of 1999 would have been $10.6
million, or 35.8% of net revenue.

OTHER INCOME, NET: Other income, net for the fiscal quarter ended January
2, 2000 was $200,000, compared to $656,000 for the corresponding quarter in
fiscal year 1999. Interest income for the fiscal quarter ended January 2, 2000
was $537,000, compared to $548,000 for the corresponding quarter in fiscal 1999.
Interest expense for the current quarter was $20,000, compared to $32,000 for
the prior quarter in fiscal 1999. Net translation and foreign exchange losses
for the current fiscal quarter was $241,000, compared to net translation and
foreign exchange gains of $198,000 in the corresponding quarter in fiscal 1999.

PROVISION FOR (BENEFIT FROM) INCOME TAXES: The income tax provision for the
three months ended January 2, 2000 was $110,000, or 27.2% of income before
income taxes, compared to a benefit of $2.9 million, or 27.8% of loss before
income taxes, for the three months ended December 27, 1998. The tax provision of
$110,000 is primarily related to foreign and state taxes. During the third
quarter of fiscal

24
<PAGE>
year 1999, management concluded that a full valuation allowance against our net
deferred tax assets was required, under applicable accounting standards, due to
uncertainties surrounding their realization. Accordingly a valuation allowance
in an amount equal to the net deferred tax assets was established to reflect
these uncertainties. The effective tax rate for the three months ended
December 27, 1998 differed from the statutory rate primarily because income of
certain foreign subsidiaries was not subject to income tax due to available tax
credits and net operating losses.

NET INCOME (LOSS): Net income for the fiscal quarter ended January 2, 2000
was $294,000, compared to the net loss of $7.7 million for the corresponding
quarter in fiscal 1999. Excluding the special charges net of their tax effect,
the net loss for the first quarter of fiscal 1999 would have been $7.2 million.

FISCAL 1999 VERSUS FISCAL 1998

TOTAL NET REVENUE: Total net revenue for fiscal 1999 decreased 33.0% to
$136.3 million, compared to $203.5 million for fiscal 1998. This overall
decrease in our total net revenue is attributable to the downturn in the
worldwide semiconductor industry, which resulted in a significant slowdown in
the construction or expansion of semiconductor fabs. The total net revenue
decline occurred primarily in our factory automation systems segment, which
declined by 34.7% in fiscal 1999, and in our tool automation systems segment,
which declined by 41.1% in fiscal 1999. While product and equipment revenue
decreased, we gained market share in fiscal 1999 and experienced a 14.1%
increase in our services and maintenance revenue. Net export sales to customers
outside North America were $44.2 million, or 32.4% of total net revenue, for
fiscal 1999, compared to $72.2 million, or 35.5% of total net revenue, for the
prior fiscal year.

GROSS PROFIT: Our gross profit margin was 38.5% for fiscal 1999, compared
to 38.7% for the prior fiscal year. In fiscal 1998, we had $14.0 million in
charges to product and equipment cost of revenue related to inventory and
warranty provisions. Excluding these charges, our fiscal 1998 gross profit
margin would have been 45.6%. The decline in gross profit margin in fiscal 1999
occurred principally in our factory automation systems segment, which decreased
to 20.4% from 23.7%. The deterioration in margin was the result of fixed
capacity and related manufacturing costs, which could not be reduced
proportionally with the reduction in production volume, and a decline in product
pricing for competitive reasons during the industry downturn. This decline was
partially offset by favorable changes in product mix. Our gross profit margin
for services and maintenance revenue increased in fiscal 1999 to 45.0% from
38.9% in fiscal 1998 and was primarily related to increased growth in software
maintenance contracts.

RESEARCH AND DEVELOPMENT: Research and development expenses increased
slightly to $45.5 million, or 33.3% of total net revenue, for fiscal 1999,
compared to $44.5 million, or 21.9% of total net revenue, for the prior fiscal
year. The increase in the dollar amount of research and development spending
reflects our continued investment in new product development and enhancements of
existing product lines. We continued to invest in the development of 200mm and
300mm products throughout our factory automation and tool automation product
lines as well as our manufacturing execution and advanced planning and
scheduling software product lines. We believe that these investments are
critical to maintaining and improving our technological and market leadership.

SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses decreased to $38.6 million, or 28.3% of total net revenue, for fiscal
1999, compared to $46.8 million, or 23.0% of total net revenue, for the prior
fiscal year. We reduced our expenses in fiscal 1999 in response to the industry
downturn and through the consolidation of common activities and functions of
acquired companies. In 1999, we reduced our work force by 62 persons, including
14 in sales, general and administrative functions, in addition to a reduction in
force of 244 persons, including 56 in sales,

25
<PAGE>
general and administrative functions, in 1998. See "--Merger costs and special
charges" for a discussion of severance and reductions of leased facilities.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT: In fiscal 1998, we recorded a
charge of $8.4 million in relation to the purchase of incomplete technology
acquired in the ILC acquisition.

MERGER COSTS AND SPECIAL CHARGES: During fiscal 1999, we incurred several
special charges. In the first quarter of fiscal 1999, we recorded special
charges of $650,000 representing provisions for severance compensation relating
to the termination of 62 persons. The personnel reductions included 40 in
manufacturing and customer support, eight in engineering and 14 in sales,
general and administrative functions. In the second quarter of fiscal 1999, we
acquired Promis in a pooling-of-interests transaction and recorded merger costs
of $4.0 million, consisting primarily of investment banking, legal and
accounting fees. In addition, during the second quarter, we recorded special
charges of $1.9 million. The special charges consisted of $1.4 million for
compensation-related costs for five management persons in sales, general and
administrative functions to satisfy existing contractual obligations related to
acquired companies; $196,000 of costs associated with the reduction of leased
facilities; and $248,000 for other legal costs. In the fourth quarter of fiscal
1999, we recognized a credit of $75,000 to adjust the estimated costs to reflect
actual costs. At September 30, 1999, $424,000 of these charges remained in
accrued expenses and are expected to be paid by December 2000.

During fiscal 1998, we incurred several special charges. In the second
quarter of fiscal 1998, we acquired the Equipe Companies in a transaction
accounted for as a pooling-of-interests. Direct acquisition costs, primarily
related to legal, investment banking and accounting fees, amounted to
$4.5 million and were charged against the results of operations in the quarter.
Additionally, during the second, third and fourth quarters of fiscal 1998, we
recorded restructuring and other special charges of $5.6 million in response to
market conditions and to integrate the Equipe operations. The special charges
included provisions for severance compensation of $1.9 million resulting from
terminations of approximately 244 persons completed in 1998. The personnel
reductions consisted of 123 in manufacturing and customer support, 65 in
engineering and 56 in sales, general and administrative functions. In addition,
the special charges included costs of $2.9 million relating to reductions of
leased facilities space and a non-cash write-down of specialized demonstration
equipment for a particular customer of $748,000 and of other assets that are not
usable elsewhere. Of the total of $4.9 million in severance and lease reduction
charges recorded in fiscal 1998, all of these special charges had been paid as
of September 30, 1999.

OPERATING PROFIT (LOSS): As a result of the decline in revenue and the
other foregoing factors, for fiscal 1999 we experienced an operating loss of
$38.0 million, or negative 27.8% of total net revenue, compared to an operating
loss of $31.0 million, or negative 15.2% of total net revenue, for the prior
fiscal year.

OTHER INCOME, NET: Other income, net, in fiscal 1999 was $2.9 million, or
2.1% of total net revenue, compared to $625,000, or 0.3% of total net revenue,
for the prior fiscal year. Interest income was $2.2 million for fiscal 1999 and
$2.0 million for fiscal 1998, and interest expense was $123,000 for fiscal 1999
and $137,000 for fiscal 1998. Net translation and foreign exchange gains of
$854,000 were recorded in fiscal 1999, and net translation and foreign exchange
losses of $1.1 million were incurred in fiscal 1998.

PROVISION FOR (BENEFIT FROM) INCOME TAXES: The income tax provision for
fiscal 1999 was $1.1 million, compared to a benefit of $7.8 million for the
previous fiscal year. The effective tax rate in fiscal 1999 was 3.0% as compared
to a 25.6% benefit for the previous fiscal year. In fiscal 1999, the effective
tax rate was unfavorably affected by the provision for foreign taxes and the
increase in the valuation allowance as a result of management's conclusion that
a full valuation allowance against our

26
<PAGE>
net deferred tax asset was required, under applicable accounting criteria. The
effect of the provision for foreign taxes and the increase in the valuation
allowance was partially offset by our ability to carry back tax losses generated
in fiscal 1999 to a prior profitable period. The fiscal 1998 effective tax
benefit was unfavorably affected by the fact that charges for acquired
in-process research and development and merger and other special charges were
not fully deductible for income tax purposes. This unfavorable impact was
partially offset by the effect of the acquisition of Equipe Technologies and
E-Machine, which were both subchapter S-corporations for federal income tax
purposes for the three months ended December 28, 1997.

FISCAL 1998 VERSUS FISCAL 1997

TOTAL NET REVENUE: Total net revenue for fiscal 1998 decreased 13.8% to
$203.5 million, compared to $236.1 million for fiscal 1997. This decrease is
attributable to the downturn in the worldwide semiconductor industry which began
in fiscal 1998 and which resulted in a significant slowdown in the construction
and expansion of semiconductor fabs. The decline in total net revenue in fiscal
1998 occurred in our factory automation systems segment, which declined by
36.7%. This decline was partially offset by an increase in our tool automation
systems segment of 61.3% and an increase in our MES and other systems segment of
12.8%. Our services and maintenance revenue grew by 70.1% in fiscal 1998 while
product and equipment revenue declined by 21.0%. Net export sales outside North
America were $72.2 million, or 35.5% of total net revenue, for fiscal 1998,
compared to $110.1 million, or 46.6% of total net revenue, for fiscal 1997.

GROSS PROFIT: Our gross profit margin decreased to 38.7% for fiscal 1998,
compared to 48.8% for fiscal 1997. In fiscal 1998, there were $14.0 million in
charges to product and equipment cost of revenue related to inventory and
warranty provisions. Excluding these charges, our fiscal 1998 gross profit
margin would have been 45.6%. The decrease in gross margin is attributable to
the industry downturn during which fixed capacity and the related manufacturing
costs could not be reduced proportionally with the decline in production volume,
and to declines in product pricing for competitive reasons. The decline in gross
profit margin in fiscal 1998 was principally in our factory automation systems
segment, which declined to 23.7% from 43.6% in the prior year. The tool
automation systems segment's gross profit margin declined in fiscal 1998 to
43.6% from 48.2% in fiscal 1997, while the MES and other systems segment's gross
margin remained flat.

RESEARCH AND DEVELOPMENT: Research and development expenses increased to
$44.5 million, or 21.9% of total net revenue, for fiscal 1998, compared to
$36.2 million, or 15.3% of total net revenue, for the prior fiscal year. The
increase in dollar amount reflects our investment in new product development and
enhancement to existing products. We continued to invest in the development of
200mm and 300mm products throughout the factory automation and tool automation
product lines, as well as our manufacturing execution, advanced planning and
scheduling software products.

SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses increased to $46.8 million, or 23.0% of total net revenue, for fiscal
1998, compared to $43.6 million, or 18.5% of total net revenue, for the prior
fiscal year. The increase in dollar amount primarily reflects the increase in
personnel and related expenses associated with expansion in late fiscal 1997 and
early fiscal 1998 of our marketing, market research and communications programs
and increased sales and marketing efforts worldwide. See "--Merger costs and
special charges" for a discussion of severance and reductions of leased
facilities.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT: On October 29, 1997, we
acquired ILC for aggregate consideration of 111,258 shares of our common stock.
In addition, we issued or assumed options to purchase an aggregate of 199,170
shares of our common stock. ILC was formed in 1995 to develop advanced,
high-performance planning and scheduling software solutions for the
semiconductor

27
<PAGE>
industry. The value of the transaction was $8.5 million, including approximately
$600,000 of expenses related to the acquisition. The transaction was accounted
for as a purchase.

At the time of the acquisition, the purchase price was allocated to the
tangible and intangible assets of ILC. Our management is responsible for
estimating the fair value of purchased in-process research and development. The
value assigned to the intangible assets, primarily the acquired technology, was
based on the fair market value using a risk-adjusted discounted cash flow
approach. ILC's sole product at the time of the acquisition was the Leverage
product, which was under development. ILC had no product revenues during its
prior existence and was a development stage enterprise. The total development
effort was estimated to take approximately 225 engineering man-months at a cost
of approximately $2.8 million. The project included completion of the software
requirement definition, data integration, and validation, completion of the
graphics user interface, development of alpha and beta versions for customer
testing, and integration and adaptation with customer systems. The significant
further investments in development required to meet expected customer
requirements were substantially completed in the third quarter of fiscal 1999.
The actual development costs have approximated the cost estimates used in the
valuation model.

The acquired technology had not reached technological feasibility at the
time of the acquisition. We define technological feasibility as the point at
which a working model is functioning to designed specification and has been
placed at a beta test site. The Leverage product was first released to a beta
test site in March 1999. In addition, the technology had no alternative future
use to us in other research and development projects or otherwise. Accordingly,
the acquired technology was expensed as in-process research and development.
Based on the methodology described above, we assigned a fair value of
$8.4 million to the technology.

MERGER COSTS AND SPECIAL CHARGES: During fiscal 1998, we incurred several
special charges. In the second quarter of fiscal 1998, we acquired the Equipe
Companies in a transaction accounted for as a pooling-of-interests. Direct
acquisition costs, primarily related to legal, investment banking and accounting
fees, amounted to $4.5 million and were charged against the results of
operations in the quarter. Additionally, during the second, third and fourth
quarters of fiscal 1998, we recorded restructuring and other special charges of
$5.6 million in response to market conditions and to integrate the Equipe
operations. The special charges included provisions for severance compensation
of $1.9 million resulting from terminations of approximately 244 persons
completed in 1998. The personnel reductions consisted of 123 in manufacturing
and customer support, 65 in engineering and 56 in sales, general and
administrative functions. In addition, the special charges included costs of
$2.9 million relating to reductions of leased facilities space and a non-cash
write-down of specialized demonstration equipment for a particular customer of
$748,000 and of other assets that are not usable elsewhere. Of the total of
$4.9 million in severance and lease reduction charges recorded in fiscal 1998,
all of these special charges had been paid as of September 30, 1999.

OPERATING PROFIT (LOSS): As a result of the foregoing factors, our
operating loss for fiscal 1998 was $31.0 million, or negative 15.2% of total net
revenue, compared to an operating profit of $35.3 million, or 15.0% of total net
revenue, for the prior fiscal year.

OTHER INCOME, NET: Other income, net, in fiscal 1998 decreased to $625,000,
or 0.3% of total net revenue, compared to $1.2 million, or 0.5% of total net
revenue, for the prior fiscal year. Interest income was $2.0 million for fiscal
1998 and $1.5 million for fiscal 1997, and interest expense was $137,000 for
fiscal 1998 and $116,000 for fiscal 1997. Net translation and foreign exchange
losses were $1.1 million in fiscal 1998 and $520,000 in fiscal 1997.

PROVISION FOR (BENEFIT FROM) INCOME TAXES: The income tax benefit for
fiscal 1998 was $7.8 million, compared to a provision of $9.0 million for the
previous fiscal year. The effective tax rate in fiscal 1998 was a 25.6% benefit,
compared to a 24.7% provision in the previous fiscal year. The effective tax

28
<PAGE>
benefit for fiscal 1998 was unfavorably affected by the fact that charges for
acquired in-process research and development and merger and other special
charges were not fully deductible for income tax purposes. This unfavorable
impact was partially offset by the effect of the acquisition of Equipe
Technologies and E-Machine, which were both subchapter S-corporations for
federal income tax purposes for the three months ended December 28, 1997. The
fiscal 1997 effective tax rate reflects the fact that Equipe Technologies and
E-Machine were not subject to federal income taxes before the acquisition due to
S-corporation status.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through public stock offerings in
October 1994 and July 1995, cash generated from operations and bank lines of
credit. As of January 2, 2000, we had working capital of $87.3 million,
including cash and cash equivalents of $45.2 million, compared to working
capital of $78.9 million and cash and cash equivalents of $51.9 million as of
September 30, 1999.

Net cash used in operating activities was $11.8 million for the three months
ended January 2, 2000, compared to $6.7 million for the corresponding period in
fiscal 1999. The net cash used in operations in the first quarter of fiscal 2000
was primarily attributable to increases in contracts in progress of $11.8
million and increases in accounts receivable of $6.0 million. These increases
are related to the significant growth in total net revenue in the first quarter
of fiscal 2000. These cash outflows were slightly offset by proceeds associated
with the decrease in other assets, which is primarily the result of a $5.0
million income tax refund received in the first quarter of fiscal 2000. Net cash
used in operations for the three months ended December 27, 1998 was primarily
attributable to the $7.7 million net loss. Additionally, a decrease in accounts
payable used $5.1 million of net cash. This outflow was partially offset by
proceeds related to decreases in inventories of $4.7 million and increases in
accrued expenses of $1.9 million.

Net cash used in investing activities was $2.4 million for the three months
ended January 2, 2000, compared to $1.4 million for the corresponding period in
fiscal 1999. The increase in investing activities is primarily due to an
additional $1.2 million of property and equipment purchases made in the first
quarter of fiscal 2000 as compared with the corresponding period in fiscal 1999.

Net cash provided by financing activities was $7.9 million for the three
months ended January 2, 2000, compared to $825,000 for the corresponding period
in fiscal 1999. The net cash provided by financing activities for each of these
fiscal periods was primarily attributable to proceeds from the exercise of stock
options and our employee stock purchase plan.

At January 2, 2000, we had a revolving credit facility agreement with Chase
Manhattan Bank (the "Bank"). The revolving credit agreement expires on June 16,
2000. The revolving credit facility enables us to borrow up to $20,000,000 on an
unsecured basis. Outstanding revolving credit loans bear interest, at our
option, at the 30-, 60- or 90-day LIBOR rate plus a credit spread or at the
effective prime rate. At January 2, 2000, our borrowing rate would have been
7.0%. We had outstanding letters of credit with the Bank in the aggregate amount
of $1.4 million at January 2, 2000, and therefore, the available balance under
this credit agreement was $18.6 million at that date. Our ability to borrow
under the revolving credit facility is conditioned upon meeting certain
financial criteria. At January 2, 2000, we were not in compliance with the
minimum consolidated net worth requirement, the minimum fixed charge coverage
ratio and the minimum consolidated net income requirements of the revolving
credit agreement for the fiscal quarter ended January 2, 2000. On January 25,
2000, we obtained a waiver from the Bank of these defaults as of January 2,
2000. We will seek future waivers as necessary from the Bank. However, there can
be no assurance that such waivers will be obtained.

We believe our existing cash balances and funds available under its existing
revolving credit facility will be sufficient to meet our cash requirements to
fund operations and expected capital expenditures

29
<PAGE>
during the next twelve months. However, there can be no assurance that
additional financing, if needed, will be available or at terms acceptable to us.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. We will adopt SFAS No. 133 by fiscal 2001, in
accordance with SFAS No. 137, which deferred the effective date of SFAS
No. 133. We are evaluating SFAS No. 133 to determine the impact on our
consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes the SEC staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in our first quarter of fiscal 2001.
The effects of applying this guidance will be reported as a cumulative effect
adjustment resulting from a change in accounting principle. The Company has not
completed its evaluation of SAB 101 and is therefore unable to determine its
impact.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY AND EXCHANGE RATE RISK

We conduct a portion of our business outside the United States through our
foreign subsidiaries. We have foreign currency exposure related to our
operations in international markets, where we transact some business in foreign
currencies, and accordingly we are exposed to adverse movements in foreign
currency exchange rates. Our foreign subsidiaries maintain their accounting
records in their local currencies. Consequently, changes in currency exchange
rates may affect the translation of foreign statements of operations into U.S.
dollars, which may in turn affect our consolidated statement of operations. Our
functional currency is the U.S. dollar for all of our subsidiaries, and
therefore, translation gains and losses are included as a component of net
income or loss. Substantially all of our revenue is invoiced and collected in
U.S. dollars.

During fiscal 1999, we entered into forward contracts in Canadian dollars to
hedge the expected operating expenses of our Canadian subsidiary, which are
denominated in Canadian dollars. These contracts were used to mitigate our risk
associated with exchange rate movements, as gains and losses on these contracts
were intended to offset exchange losses and gains on underlying cost exposures.
These contracts, for which the contract periods did not exceed sixteen months,
expired in December 1999, and we do not expect to renew them as part of our risk
management strategies. Realized and unrealized gains and losses on these
contracts, which did not qualify for hedge accounting, are classified in other
income, net.

At September 30, 1999, the notional amount of outstanding forward currency
contracts for Canadian dollars was $1.9 million, which was marked to market and
recognized in our consolidated statement of operations. The potential fair value
loss for a hypothetical 10% adverse change in Canadian currency exchange rates
at September 30, 1999 would be $186,000. The potential loss was estimated
calculating the fair value of the forward exchange contracts at September 30,
1999, and comparing that with the value calculated using the hypothetical
forward currency exchange rates.

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BUSINESS

OVERVIEW

We are a leading global supplier of advanced automation systems and software
for the semiconductor industry. We offer complete and flexible solutions that
address a wide range of automation requirements for semiconductor manufacturers
and for OEM manufacturers of semiconductor process tools. Our factory automation
systems and software help semiconductor manufacturers optimize the flow of
material and data throughout the fab, improving productivity and increasing the
manufacturer's return on investment. Our robotic wafer-handling systems and
software offer high-performance and reliability for OEM process tool
manufacturers, allowing them to focus on developing next generation process
technology. We also provide automation services, including equipment layout and
design, fab simulation, project management, installation and on-site support. We
sell and support our products through a global direct sales and support
organization operating out of offices in North America, Europe, Israel, Taiwan,
South Korea, Singapore, and Japan. Our customers include many of the world's
leading semiconductor manufacturers and semiconductor capital equipment
suppliers.

INDUSTRY BACKGROUND

The semiconductor industry has grown significantly during the past
15 years, driven by the demand for consumer electronic products, personal
computers, wireless communications devices and business computing products, and,
more recently, by the growth of the Internet. New products and technologies
typically require greater semiconductor content than previous generations. This
trend, combined with the increasing range of functions performed by integrated
circuits, drives semiconductor manufacturers to produce ever-greater quantities
of more complex, powerful integrated circuits as well as less expensive,
application-specific integrated circuits.

To meet the demand for greater volumes of increasingly complex semiconductor
devices, semiconductor manufacturers are currently making, and are expected to
continue to make, significant investments in manufacturing capacity through the
construction of new wafer facilities and the upgrade of existing wafer
facilities. As the complexity of advanced semiconductor devices has increased,
the cost of building or upgrading these facilities has also grown, and the cost
of constructing and equipping a state-of-the-art production fab today is in
excess of $1.5 billion. Dataquest, an independent research group, has estimated
that in 1999, semiconductor manufacturers spent $17.5 billion worldwide on wafer
fabrication equipment, and that this spending will grow to $38.3 billion in
2002.

Semiconductor production is one of the most complex and logistically
challenging manufacturing operations in the world. A silicon wafer, upon which
integrated circuits are manufactured, can travel approximately ten miles and
undergo 400-500 individual process steps as it moves throughout the fab during
its 30 to 45 day manufacturing cycle. State-of-the-art fabs produce from 10,000
to over 30,000 wafers a month and run 24 hours a day, seven days a week. As
semiconductor technology has advanced, the complexity of the manufacturing
process and the number of process tools and steps required have increased
correspondingly. As a result, managing the efficient flow of materials through
the facility has become an increasingly difficult task. At the same time,
semiconductor manufacturers have had to respond to the accelerating rate of
change in their markets, and to accommodate their customers' shorter product
development cycles, faster time-to-market requirements, more frequent changes in
product mix and delivery schedules and intensifying price competition.

The semiconductor industry is currently preparing for a transition to 300mm
wafer manufacturing that we expect will take place over the next two to five
years. This expected transition to 300mm wafer manufacturing will increase the
challenges described above and add to them the unique ergonomic and logistical
problems associated with handling, transporting and storing larger and heavier
300mm wafers.

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Advances in semiconductor technology, intensifying competitive pressures and
the need to improve the return on invested capital are driving semiconductor
manufacturers to seek ways to:

- increase wafer throughput while maintaining high product yields;

- lower production costs by maximizing utilization of facilities and process
tools;

- more efficiently manage the increasingly complex production process;

- respond more quickly and flexibly to changing customer requirements; and

- solve the ergonomic and logistical problems associated with 300mm
manufacturing.

Adoption of 300mm manufacturing technology is likely to accelerate the trend
towards increased automation. Two key industry standard-setting bodies have
stated that production of 300mm wafers in commercial quantities will require
factory-wide automation of wafer handling, transport and storage, including
enhanced automation within individual process bays.

Manufacturers seeking to implement broader factory automation strategies
have encountered a variety of challenges. To design, install and successfully
operate systems that involve numerous process tools, automation systems and
controls is a difficult task, which is only made more difficult if the
manufacturer must coordinate the efforts of multiple vendors, none of which has
overall responsibility for the design, manufacture or support of the entire
factory automation system. Manufacturers have also come to understand that the
efficient flow of data is as important as the movement of materials, and that to
extract maximum productivity and flexibility from the fab requires the ability
to capture, analyze and quickly act upon massive volumes of data from multiple
sources throughout the fab. This data, which ranges from detailed information
about the location and state of completion of wafer lots and the operational
status of individual process tools to high-level production plans and scheduling
information, is generated by various software systems running on computers
distributed throughout the fab, including individual tool control systems,
materials control systems, manufacturing execution systems and planning and
scheduling systems.

Bringing together these disparate hardware, software and data elements into
a unified factory automation system is a complex task. Because of the critical
role that factory automation systems play in the operation of the fab,
manufacturers demand that these systems provide proven performance and
reliability and be supplied by vendors that have broad expertise in the
semiconductor industry, a history of success in managing large factory
automation projects and the capability to provide responsive, global support.
Increasingly, semiconductor manufacturers are seeking vendors that can meet
these criteria to provide integrated factory automation solutions that not only
increase fab productivity and enhance manufacturers' control over their
production operations, but also increase their flexibility to add new capacity,
reduce the burden and risk of fab construction and improve the return on fab
investments.

THE PRI AUTOMATION SOLUTION

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fab, our products enable customers to more effectively plan, schedule and carry
out their production activity. Our hardware and software products, ranging from
tool automation systems and associated controls to factory-wide automation
systems and planning and scheduling software, are designed to work together
efficiently and to be easily installed and flexibly reconfigured. Our products
support industry standards, providing customers with the option of purchasing
our integrated factory automation solutions or incorporating elements of our
system into their existing fab automation infrastructure.

Our comprehensive product line, sophisticated software offerings and broad
range of implementation services enable customers to address the challenges of
an increasingly complex semiconductor manufacturing process and enhance the
return on their fab investments by:

- providing the manufacturing flexibility to respond to customers' shorter
product cycles and changing requirements;

- enabling fabs to achieve productivity gains through more efficient
planning and scheduling, as well as through more efficient materials
handling and storage;

- increasing return on investment through higher utilization of costly
facilities and process tools;

- providing an integrated factory automation solution that eliminates the
inefficiency and risk involved in coordinating the efforts of multiple
suppliers and systems; and

- supplying a range of automation systems designed to meet the automation
requirements of 300mm production.

STRATEGY

Our objective is to extend our position as the leading supplier of factory
automation systems for semiconductor manufacturing. To achieve this objective,
we are pursuing a business strategy to:

PROVIDE COMPREHENSIVE FACTORY AUTOMATION SOLUTIONS

We deliver integrated factory automation solutions and we intend to expand
and enhance our automation planning and design, project management, factory
integration and field engineering capabilities and product offerings to support
this approach. We believe that continued market leadership will require us to
offer comprehensive factory automation solutions for our customers. We will
continue to work closely with our customers to provide advanced products that
are integrated with the customers' specific manufacturing environments, conform
to industry standards and are compatible with tools and systems provided by
other suppliers. The modular design of our end-user and OEM products uses common
building blocks designed to work together in multiple configurations, to be
implemented without extensive customization and to be rapidly modified to
accommodate changes in a manufacturer's facilities, process sequence or process
tools. In addition, we provide a broad range of automation services designed to
ensure the successful, on-time deployment of our solutions.

STRENGTHEN CUSTOMER RELATIONSHIPS

Our customers include many of the world's leading providers of semiconductor
products and semiconductor process tools. We work closely with our customers to
address their most demanding factory automation needs. This interaction has
given us the opportunity to develop technology responsive to the most recent
advances in semiconductor manufacturing. Because of the geographical diversity
of our customer base and the numerous types of semiconductor products they
manufacture, we have also been called upon to help our customers solve a wide
variety of operational problems, enabling us to develop a broad range of
solutions and expertise. In addition, we believe that, as a result of the
substantial investment by our customers in our factory automation solutions and
the critical role played by our systems in our customers' manufacturing
operations, our relationships with these major customers provide opportunities
for additional sales, as customers expand the scope of installed

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solutions, construct new facilities or refurbish or retrofit existing fabs. We
will seek both to deepen our collaborative relationships with our customers as
well as to seek opportunities to develop similar relationships with others in
the semiconductor industry.

EXPAND PRODUCT OFFERINGS

Through internal development, joint ventures and alliances with other
suppliers and, potentially, through selective acquisitions, we will seek to add
new capabilities identified by our customers as important. We intend to continue
to broaden our product line to address a variety of factory automation needs,
ranging from the automation of individual process tools to implementation of
integrated, fab-wide factory automation systems in new and existing facilities.

INCREASE PENETRATION OF THE ASIA-PACIFIC MARKET

We believe that the Asia-Pacific market represents an important opportunity,
and we intend to continue our effort to penetrate and capture a significant
share of this market by deploying increased marketing, distribution, sales and
support resources in Japan and the rest of the Asia-Pacific region. The
semiconductor manufacturing industry is global in scope, with a significant
percentage of certain types of integrated circuits produced in the Asia-Pacific
region, most notably Japan, Singapore, South Korea and Taiwan. We have
established a significant market position in Singapore and Taiwan, and have
recently begun to penetrate the market in South Korea. We have competed
successfully with Japanese companies for orders from Japanese semiconductor
companies operating outside Japan, however we have yet to sell our factory
automation products for installation in Japan. We intend to increase our focus
on the Japanese market.

CAPITALIZE ON EMERGING 300MM WAFER AUTOMATION OPPORTUNITIES

As semiconductor manufacturers shift to 300mm wafer production, more factory
automation will be required than for existing 200mm wafer production. Certain
tasks that can be handled manually in a 200mm fab, such as loading and unloading
of process tools, must be automated because 300mm wafers are substantially
larger and heavier than 200mm wafers. In addition, the increased number of
integrated circuits on a 300mm wafer increases the risk of economic loss
associated with wafer damage caused by mishandling. We believe that factory-wide
automation systems, including automation of wafer movement within individual
process bays, will therefore be a necessity in 300mm production fabs. A typical
200mm fab presents a factory automation revenue opportunity of $10 million to
$15 million. For a full 300mm fab, the factory automation revenue opportunity is
expected to range from $50 million to $75 million. Over the past several years,
we have made significant investments in our 300mm automation systems. We believe
that the systems we have developed, including our intrabay automation systems,
are well positioned to capture a significant portion of 300mm fab automation
opportunities as they emerge.

PRODUCTS AND SERVICES

We provide our customers with a fully integrated line of factory automation
systems, software and services designed to automate the semiconductor
fabrication process and optimize the flow of products, data, materials and
resources throughout the fab. We have organized our product development,
marketing and sales functions to address a wide range of automation requirements
to improve manufacturing efficiency and increase productivity. Our key product
areas are:

- FACTORY AUTOMATION SYSTEMS that store, transport and manage the movement
of work-in-process wafers throughout the fab.

- TOOL AUTOMATION SYSTEMS that automate the movement of wafers into and out
of the process chamber and provide an integration point between the
factory automation systems and the process tool.

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- FACTORY MANAGEMENT SOFTWARE that manages and directs manufacturing
operations and optimizes material flow, process equipment and other
production resources.

- ADVANCED PLANNING AND SCHEDULING SOFTWARE that enables customers to
develop capacity plans and work-flow schedules to optimize fab-wide
operations and quickly react to changing business requirements.

- AUTOMATION SERVICES AND SUPPORT that help customers throughout the total
automation project lifecycle from initial conceptualization and design to
installing and servicing the equipment in the customer fab.

FACTORY AUTOMATION SYSTEMS

INTERBAY AUTOMATION. We are a leading supplier of interbay automation
systems. Interbay systems transport wafers throughout the factory and store them
in the bay where the next process step will occur. Our interbay automation
products consist of automated storage and retrieval systems linked by an
overhead monorail transport system, together with associated controllers,
software and communications capabilities to provide a tightly integrated wafer
flow solution. The majority of new fabs constructed since 1990 have adopted some
form of interbay automation system. Our interbay automation systems include:

- AEROTRAK OVERHEAD MONORAIL SYSTEMS--Our AeroTrak overhead monorail
transport systems provide clean and fast delivery of material from process
bay to process bay.

- TURBOSTOCKER AUTOMATED STORAGE AND RETRIEVAL SYSTEMS--Our TurboStocker
automated storage and retrieval systems, or stockers, are enclosed,
environmentally controlled structures that store work-in-process wafers in
various locations throughout the fab.

- INTERFLOOR AND INTERBUILDING TRANSPORT SYSTEMS--Interfloor and
interbuilding transport systems move wafers between different floors or
buildings of a fab.

INTRABAY AUTOMATION. Our intrabay products move wafers from storage systems
to individual process tools. Manufacturers anticipate that the shift to 300mm
wafers will require the extensive adoption of intrabay automation systems to
automate the movement of work-in-process wafers from one process tool loadport
to another. Our intrabay automation systems include:

- MACHINE LOADING ROBOT VEHICLE--Machine loading robot vehicles are guided
vehicles that utilize a track system embedded in the floor of the process
bay to transport wafers to and from the process tool.

- AEROLOADER OVERHEAD HOIST TRANSPORT SYSTEMS--Our AeroLoader overhead hoist
transport systems use a monorail to retrieve wafer pods from a stocker and
deliver them directly to the loadport at the process tool.

- AUTOMATED GUIDED VEHICLES--Automated guided vehicles are operator-free,
trackless vehicles that automate the movement of wafers within a process
bay from the stocker directly to the loadport of the process tool.
Automated guided vehicles are ideally suited for low-throughput
applications where floor space is less critical.

- PEOPLE GUIDED VEHICLES--People guided vehicles are manually operated
vehicles used to safely move materials across the fab and assist the
operator in transferring the wafer pod from the vehicle to the process
tool loadport. These vehicles can be used as a backup to automated
systems.

LITHOGRAPHY AUTOMATION SYSTEMS. We are a leading supplier of lithography
automation systems, which automate the storage, retrieval, tracking and delivery
of reticles and wafers within the lithography bay. Reticles are glass plates
containing the device images that are projected onto wafers during the
lithography process. As semiconductor manufacturing technology advances, the
cost of lithography tools, or steppers, is increasing. Also, as device
complexity increases, the number of reticles used in the

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manufacturing process increases, increasing the need for automation to improve
utilization and productivity. Since the lithography bay typically paces overall
fab output, productivity improvements in the lithography bay directly improve
overall fab throughput and productivity. Our lithography automation systems
include:

- BARE RETICLE STOCKERS--Bare reticle stockers provide a high-density
storage and retrieval solution for reticles that are stored without being
placed in a pod or box container. The bare reticle stocker protects the
reticle in an environmentally controlled system and saves expensive floor
space inside the lithography bay.

- RETICLE POD OR BOX STOCKERS--Reticle pod or box stockers provide clean and
safe storage for reticles that are stored in industry-standard pods or
boxes. The reticle pod and box stocker interfaces with our interbay
transport system, allowing the pod or box stocker to be placed anywhere in
the fab.

- COMBINATION RETICLE STOCKERS--Combination reticle stockers combine the
speed and convenience of a pod stocker with the high-density storage of a
bare reticle stocker for greater levels of reticle inventory management
and productivity in the lithography bay.

- RETICLE MANAGEMENT SOFTWARE--Reticle management software manages the use,
kitting and unkitting, delivery and maintenance of reticles for improved
reticle inventory management.

TOOL AUTOMATION SYSTEMS

We provide robotic systems that automate the transfer of wafers into and out
of process tools. The primary customers for these solutions are manufacturers of
process tool equipment. The automation systems are typically integrated directly
into the manufacturer's product before shipment to the end user. Our tool
automation systems include:

- ATMOSPHERIC WAFER-HANDLING SYSTEMS--We are a leading supplier of
atmospheric wafer-handling systems. These systems remove wafers from pods
or cassettes and align them prior to placing them into the process tool
chamber or metrology station.

- VACUUM WAFER-HANDLING SYSTEMS--Vacuum wafer-handling systems automate
wafer-handling within a vacuum chamber. Our vacuum products range from
individual vacuum robotic components to fully integrated vacuum cluster
platforms.

- EQUIPESOFT SYSTEM CONTROL SOFTWARE--Our EquipeSoft system control software
integrates, tracks and controls the wafer-handling robots within the
manufacturer's process tool.

- SFO INTEGRATED FRONT END SYSTEMS--Our SFO integrated front end systems
store work-in-process wafer cassettes, standard mechanical interface pods,
or 300mm front opening unified pods, or FOUPs, directly at the process
tool front-end. These systems also unload wafers from the FOUP, align them
and place them in the process tool. Our integrated front end systems
products include all SEMI-compliant interfaces to the factory automation
systems.

- 300MM LOADPORTS--Our 300mm loadports provide a simple and economical
method for opening and removing wafers from FOUPs.

- SPECIALTY WAFER-HANDLING SYSTEMS--We provide other wafer-handling systems.
These specially designed robots are used in a variety of wafer-handling
applications including chemical mechanical planarization, copper
interconnect processing and other robotic wafer-handling applications.

FACTORY MANAGEMENT SOFTWARE

As more of the semiconductor manufacturing process becomes automated, we
believe that software will play an increasingly important role in a
manufacturer's ability to improve the productivity of its overall fab
operations. Our software products address the most important aspects of wafer
flow logistics

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to deliver a complete software management solution that addresses fab-wide
operations. Our factory management software offerings include:

- MANUFACTURING EXECUTION SYSTEM, OR MES, SOFTWARE--Our MES software manages
and directs complex manufacturing operations by automating process
specification and control. Our PROMIS software bridges business planning
systems and material processing in the factory to optimize the flow of
material and improve process equipment utilization. We expect to introduce
our next-generation MES software offering, Encore!, in late fiscal 2000.

- FABUILDER MANUFACTURING INTEGRATION SOFTWARE--FAbuilder, our manufacturing
integration software, reduces the time required to deploy process tool
automation and provides a flexible solution for distributing and
maintaining equipment automation throughout the fab.

- TRANSNET MATERIAL CONTROL SOFTWARE--Our TransNet material control software
directs the movement of wafers throughout the fab and is integrated with
our interbay and intrabay automation systems.

ADVANCED PLANNING AND SCHEDULING SOFTWARE

Our planning and scheduling software offerings enable semiconductor
manufacturers to increase their return on investment by maximizing production
efficiency, prioritizing the production of high-margin or high-demand customer
orders and minimizing the disruption caused by limited process tool
availability. Our advanced planning and scheduling software offerings include:

- LEVERAGE FOR PLANNING SOFTWARE--Our Leverage for Planning software product
enables customers to develop capacity plans to optimize wafer starts and
quickly react to changing business requirements.

- LEVERAGE FOR SCHEDULING SOFTWARE--When released for commercial sale in the
second half of fiscal 2000, our Leverage for Scheduling software product
will enable customers to develop and modify work-flow schedules that
optimize fab-wide operations based on many factors, including process tool
availability, demand for specific semiconductor batches or types and
changing business and technical requirements.

AUTOMATION SERVICES AND SUPPORT

We provide a variety of automation services and support that are essential
to the success of large-scale factory automation projects. These include:

- AUTOMATION PLANNING AND DESIGN SERVICES--We work with customers in
assessing their automation needs during the design phase of a project to
build or upgrade a fab. We develop a complete automation plan identifying
the type and configuration of the automation systems and simulate the
design using computer modeling techniques to verify that the design layout
meets customer requirements.

- PROJECT MANAGEMENT SERVICES--We provide customers with project management
support during the building and manufacturing of the automation systems.

- INSTALLATION SERVICES--We develop an installation plan and timetable that
meets the customer's manufacturing schedule and install the equipment in
the customer's fab.

- POST-INSTALLATION SERVICE AND SUPPORT--We provide a variety of
post-installation services to ensure the automation systems continue to
operate at optimum performance levels.

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MARKETING, SALES AND CUSTOMER SUPPORT

We market our products worldwide to semiconductor manufacturers and OEM
semiconductor capital equipment suppliers. In North America, we sell and support
our products through a direct sales and support organization operating out of
our headquarters in Billerica, Massachusetts and regional offices located in
California and Texas. In Europe, our products are sold and supported by a direct
sales and support organization with offices in France, Germany, Ireland, Israel,
Switzerland and the United Kingdom. In Asia, our products are sold and supported
by a direct sales and support organization with offices in Japan, Singapore,
South Korea and Taiwan.

We offer a variety of service programs to meet a broad range of customer
requirements. These services can range from telephone hot-line support to
full-time, on-site customer service provided by our personnel based at the
customer's facility. We maintain a fully staffed and equipped training center at
our Billerica, Massachusetts headquarters to support the training requirements
of our customers.

COMPETITION

Rapid technological change and intense competition characterize the
semiconductor capital equipment market. Our factory automation division competes
with Daifuku, Murata Machinery, Shinko Electric and a number of other smaller
foreign and domestic manufacturers of automated machinery used in semiconductor
fabrication facilities. Our tool automation systems division competes with
Genmark Automation, Asyst Technologies, Brooks Automation and a number of other
foreign and domestic wafer-handling robotics companies, including in-house
organizations of process tool manufacturers that develop their own automation
technology, as well as other smaller robotics companies. Our software products
compete with products provided by Consilium, a subsidiary of Applied Materials,
Brooks Automation and other vendors. We believe that competition in our industry
is likely to intensify.

We believe that the market for our products is characterized by market
pressures on semiconductor manufacturers to increase productivity and reduce
costs. We compete on the basis of product performance, quality, reliability,
customer service and support, delivery capability and price. We believe that we
have the following competitive advantages in the factory automation market:

- a broad range of integrated and flexible factory automation systems and
factory management software products;

- technological leadership;

- experience in managing large factory automation projects;

- domain expertise in automation applications;

- specialized manufacturing skills; and

- a worldwide customer support infrastructure.

However, existing or future competitors, particularly those with greater
resources than ours, or who are able to bring technologically superior products
to market, could overcome these competitive advantages.

We believe that once a semiconductor manufacturer selects a vendor's
equipment for a particular fab, the manufacturer may continue to rely upon that
equipment for a specific application in other fabs. Accordingly, we may have
difficulty selling to potential customers that have selected a competitor's
equipment, and we expect that difficulty to last for a significant period of
time. However, at least one of our significant customers has adopted a policy of
maintaining multiple vendors for the products it purchases. This kind of policy
could limit additional sales to existing customers. In addition, the expected
transition to 300mm technology may cause new competitors to enter our markets
and may diminish our competitive advantage with customers for whom we are the
incumbent supplier of automation equipment. In the face of increased
competition, we may need to lower our prices, which could seriously harm our
business.

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RESEARCH AND DEVELOPMENT

We continuously invest in the development of new products to improve
performance and reliability and to introduce new functionality in order to
maintain our leading position in providing factory automation systems and
software. The ongoing development of technologies and products, particularly
relating to 300mm technology, is vital to our success. Our research and
development expenses were $36.2 million, or 15% of total net revenue, in fiscal
1997, $44.5 million, or 22% of total net revenue, in fiscal 1998,
$45.5 million, or 33% of total net revenue, in fiscal 1999 and $12.2 million, or
21% of total net revenue, in the three months ended January 2, 2000.

CUSTOMERS

Our customers include many of the leading global manufacturers of
semiconductors, as well as OEM semiconductor equipment suppliers in the United
States, Europe and the Asia-Pacific region. Historically, a significant portion
of our total net revenue for any particular period has been attributable to
sales to a limited number of customers. Sales to our top ten customers accounted
for 67% of total net revenue in fiscal 1997, 60% of total net revenue in fiscal
1998 and 54% of total net revenue in fiscal 1999.

Our largest customers change from year to year, as large projects are
completed and new projects are initiated. Sales to Intel accounted for 32% of
total net revenue in fiscal 1997, 19% of total net revenue in fiscal 1998 and
21% of total net revenue in fiscal 1999. At September 30, 1999, Intel and Texas
Instruments accounted for 13% and 10% of our backlog, respectively.

BACKLOG

Our backlog at January 2, 2000 was $106.6 million, compared to
$86.4 million at September 30, 1999 and $40.4 million at December 27, 1998. We
include in backlog only those customer orders for products, spare parts and
services for which we have accepted signed purchase orders with assigned
delivery dates within twelve months. Tool automation products and software
products typically have shorter lead times than do factory automation products.
Therefore, backlog is not a relevant indicator of business levels for these
products.

MANUFACTURING

Our manufacturing operations take place in Billerica, Massachusetts and in
Mountain View, California. Our manufactured products consist of standard
components that can be customized to meet unique customer requirements. Our
manufacturing operations consist primarily of assembly and test functions, with
fabrication of most components and subassemblies outsourced to key suppliers.
Completed subassemblies are tested for functionality prior to their assembly
into completed systems. Completed systems are subjected to functional testing
prior to shipment. We expect to continue to seek to outsource manufacturing
operations with the objective of reducing costs and increasing our flexibility
to respond to changes in semiconductor demand.

Our manufacturing department is responsible for managing the transition of
new products from engineering to production, and for improving manufacturing
efficiency. We operate a "concurrent engineering" process to provide an
effective integration of disciplines from design through manufacturing,
acceptance, testing and installation. Our objective is not only to meet
customers' delivery deadlines, but to ensure that products are designed so they
can be manufactured at the lowest cost while providing the reliability,
serviceability and support required by customers.

We have implemented quality control and quality assurance processes based on
total quality management principles. Quality control is maintained through
inspections of components and in-process inspection and testing of
subassemblies. After all manufacturing operations are completed, our quality
assurance personnel perform final test and acceptance of each system to ensure
that it meets product specifications and quality standards prior to shipment to
the customer.

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We have implemented a supplier excellence program to assist management in
qualifying and selecting external suppliers. By more effectively managing our
external supplier base, we can maximize the suppliers' technical capabilities to
provide us with the flexibility and capacity utilization needed to meet
production requirements and lower our costs. Our commodity management group
works closely with the design and manufacturing engineering groups to provide
multiple sources for most components.

INTELLECTUAL PROPERTY RIGHTS

While we believe that our success will depend more upon our technological
expertise and the capabilities of our employees than upon protection through the
legal system of our intellectual property rights, our success also depends to a
significant degree upon our patent for certain key elements of our monorail
system, our other patents, our source code and our other proprietary technology.
At January 2, 2000, we held seven U.S. patents relating to certain key elements
of our wafer-handling systems. We also had 16 U.S. patent applications pending,
and we intend to file additional patent applications as appropriate. Our patents
expire at various times from 2007 to 2019. We cannot predict whether any patents
will issue from our patent applications, or whether any of our issued patents or
subsequently issued patents will provide any meaningful protection. We also seek
to protect our trade secrets and other proprietary technology through
confidentiality agreements with employees, consultants and other parties. The
steps we have taken to protect our technology may be inadequate. If so, we might
not be able to prevent others from using what we regard as our technology to
compete with us. For example, our patents could be challenged, invalidated or
circumvented, and the rights we have under our patents could provide no
competitive advantages. Existing trade secret, copyright and trademark laws
offer only limited protection. In addition, the laws of some foreign countries
do not protect our proprietary technology to the same extent as the laws of the
United States. Other companies could independently develop similar or superior
technology without violating our proprietary rights. Any misappropriation of our
technology or the development of competitive technology could seriously harm our
business.

EMPLOYEES

At January 2, 2000, we had 1,194 full-time employees. In addition, we
utilize the services of temporary or contract personnel within some functional
areas to assist on project-related activities. The number of temporary or
contract personnel varies depending on specific project activity. At January 2,
2000, we employed 135 temporary or contract personnel. We believe that our
future success will depend in large part on our ability to attract and retain
highly skilled employees. None of our employees is covered by a collective
bargaining agreement. We consider our relationship with our employees to be
good.

FACILITIES

Our corporate headquarters are located in a 122,342-square foot leased
building in Billerica, Massachusetts. The lease on this facility expires in
2001. We also lease three additional facilities, with lease expiration dates in
2000 and 2001, in Billerica, Massachusetts, with a total of 117,100 square feet.
Our Billerica, Massachusetts facilities are primarily used by our factory
automation systems division for engineering and manufacturing. We also lease
facilities in Austin, Texas, Mountain View, California, Mesa, Arizona, and
Toronto, Ontario, as well as France, Germany, Japan, Singapore, South Korea,
Switzerland, Taiwan and the United Kingdom, under leases with expiration dates
ranging from May 2000 to November 2006. We believe that our existing facilities
will be adequate to meet our currently anticipated requirements and that
suitable additional or substitute facilities will be available as required.

40
<PAGE>
MANAGEMENT

The following table lists our executive officers and directors as of
April 27, 2000.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Mordechai Wiesler...................... 69 Chairman of the Board of Directors
Mitchell G. Tyson...................... 46 President, Chief Executive Officer and Director
Cosmo S. Trapani....................... 61 Vice President and Chief Financial Officer
Robert G. Postle....................... 45 Vice President, General Manager, Factory Systems
Division
Edward A. Wagner....................... 51 Vice President, General Manager, OEM Systems Division
Amram Rasiel (1)....................... 70 Director
Boruch B. Frusztajer (1)(2)............ 69 Director
Alexander V. d'Arbeloff (2)............ 72 Director
Kenneth M. Thompson.................... 61 Director
</TABLE>

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

(1) Member of the audit committee

(2) Member of the compensation committee

MORDECHAI WIESLER, a founder of our company, has been a director since our
inception. Mr. Wiesler served as our President from our inception until
February 1995, as our Chief Executive Officer from our inception until
August 1998 and as our Treasurer from our inception until September 1999.
Mr. Wiesler was also the founder, president and chairman of Transistor
Automation Corporation until its sale to Teledyne, Inc. in 1966. Mr. Wiesler
received a B.S. in mechanical engineering from the Techion in Israel.

MITCHELL G. TYSON was named our Chief Executive Officer in August 1998. He
was elected to the office of President and named a director in 1995. Mr. Tyson
served as our Chief Operating Officer from 1990 to 1998. From 1987 to 1990, he
served as our Vice President, Operations. From 1984 to 1987, Mr. Tyson was the
director of product management of GCA Corporation, a manufacturer of
semiconductor capital equipment. Mr. Tyson holds a B.S. in physics, an M.S. in
political science and an M.S. in nuclear engineering, all from the Massachusetts
Institute of Technology. Mr. Tyson is a member of the board of directors of the
Semiconductor Industry Suppliers of North America, formerly SEMI-SEMATECH, Inc.
In addition, Mr. Tyson is a member of the North American Advisory Board of SEMI,
a trade association that represents the worldwide semiconductor equipment
industry.

COSMO S. TRAPANI was named our Vice President and Chief Financial Officer in
March 2000. From October 1999 to February 2000, Mr. Trapani was Senior Vice
President and Chief Financial Officer at Circor International, Inc., a
manufacturer of fluid control systems. From 1990 to 1999, he served as Executive
Vice President and Chief Financial Officer of Unitrode Corporation, a
manufacturer of analog and mixed signal integrated circuits. Mr. Trapani holds a
B.S. in accounting from Boston College and is a certified public accountant.

ROBERT G. POSTLE was named our Vice President, General Manager, Factory
Systems Division in September 1999. Mr. Postle joined us in 1994 as Vice
President, Marketing and Sales, became Vice President, Marketing, Sales and
Service in 1997 and was named Vice President, Sales, Service and Field
Operations in 1998. From 1989 to 1994, Mr. Postle was Vice President of
Marketing and Sales at ULVAC Technologies, Inc., a manufacturer of vacuum
technology products. From 1987 to 1989, Mr. Postle was Vice President of
Marketing and Sales at ASM Ion Implant, Inc., a manufacturer of ion implantation
equipment. Mr. Postle holds a B.S. in business administration from the State
University of New York, Brockport.

EDWARD A. WAGNER was appointed our Vice President, General Manager, OEM
Systems Division in January 1999. Mr. Wagner joined us as Vice President, Sales
in 1997. From 1989 to 1997, Mr. Wagner

41
<PAGE>
held the position of Vice President of U.S. operations for Metron Technology, a
worldwide sales and distribution company supporting many of the major
semiconductor equipment manufacturers in both the United States and Japan. From
1979 to 1989, he served as President and General Manager of BGL Corp., a
manufacturer of OEM automation products and quartz glass products. Mr. Wagner
holds a B.S. from the University of California at Berkeley and an M.B.A. from
Golden Gate University, San Francisco.

AMRAM RASIEL has been a director since 1982. Dr. Rasiel is a private
investor and, from December 1989 to May 1990, was Co-Chief Executive Officer of
ENSR Corporation, an environmental engineering firm. Dr. Rasiel is a director of
Progress Software Corporation, a provider of application development software,
and of a number of privately held companies.

BORUCH B. FRUSZTAJER became a director in 1982. Mr. Frusztajer has been the
President of BBF Corporation, an industrial management company, since 1984.

ALEXANDER V. D'ARBELOFF became a director in 1982. Mr. d'Arbeloff has been
Chairman of the Board of Teradyne, Inc., a publicly held manufacturer of
automatic testing equipment used in the manufacture of semiconductors, since
1977. From 1971 to 1996, Mr. d'Arbeloff served as President of Teradyne, and
also served as its Chief Executive Officer from 1971 to 1997. He is Chairman of
the Corporation of the Massachusetts Institute of Technology. Mr. d'Arbeloff is
a director of a number of privately held companies.

KENNETH M. THOMPSON became a director in July 1998. Mr. Thompson was
employed by Intel Corporation for twenty-five years, most recently as Vice
President, Technology Manufacturing Engineering. He retired from Intel in 1998.
Mr. Thompson is a director of LAM Research Corp., Silicon Valley Group, Inc. and
Gasonics Corporation.

RELATED PARTY TRANSACTIONS

In August 1998, we entered into a loan arrangement with Robert G. Postle,
then our Vice President, Sales, Service and Field Operations and now our Vice
President, General Manager, Factory Systems Division. We loaned Mr. Postle
$150,000 pursuant to a three-year promissory note with interest accruing at 6%.
The note was secured by a mortgage on Mr. Postle's residence. The outstanding
principal under the note, together with accrued interest thereon, was due and
payable at the maturity date or upon the earlier termination of Mr. Postle's
employment either by us for cause or voluntarily by Mr. Postle. This note,
together with all accrued interest, was repaid in full in January 2000.

42
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table provides information with respect to the beneficial
ownership of our common stock as of April 19, 2000 by:

- each person or entity known to us to own beneficially five percent or more
of our common stock;

- each of our directors;

- our Chief Executive Officer and our other executive officers who were
serving as executive officers at the end of fiscal 1999;

- all of our directors and executive officers as a group; and

- each selling stockholder.

Beneficial ownership is determined in accordance with the rules of the SEC.
The persons named in this table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to community property laws where applicable and subject to the
information contained in the footnotes to this table. Shares of common stock
subject to options currently exercisable or exercisable within 60 days following
the date of this table are deemed outstanding for computing the share ownership
and percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. The number of
shares of common stock outstanding as of the date of this table, April 19, 2000,
was 23,257,227, including exchangeable shares issued in the Promis acquisition
which are exchangeable into shares of common stock. All shares included below
under "Right to Acquire" represent shares subject to outstanding stock options
currently exercisable or exercisable within 60 days following the date of this
table.

<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY OWNED
SHARES -------------------
BENEFICIALLY RIGHT TO NUMBER OF SHARES BEFORE AFTER
NAME OWNED ACQUIRE BEING OFFERED OFFERING OFFERING
- ---- ------------ -------- ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
Mordechai Wiesler(1)..................... 790,320 80,060 100,000 3.7 2.8

Mitchell G. Tyson(2)..................... 176,069 127,040 75,000 1.3 *

Amram Rasiel............................. 526,210 22,000 100,000 2.4 1.8

Mem & Mem Associates LP.................. 300,000 -- 250,000 1.3 *

Boruch B. Frusztajer(3).................. 83,512 22,000 -- * *

Alexander V. d'Arbeloff.................. 64,764 22,000 -- * *

Kenneth M. Thompson...................... -- 5,000 -- * *

Stephen D. Allison(4).................... 551 -- -- * *

Robert G. Postle......................... -- 7,681 -- * *

Edward A. Wagner......................... -- 4,875 -- * *

Cosmo S. Trapani......................... -- 2,500 -- * *

All directors and executive officers as a
group (9 persons)...................... 1,640,875 293,156 525,000 8.2 3.1
</TABLE>

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

* Less than one percent.

(1) Excludes 300,000 shares held by Mem & Mem Associates LP ("Mem & Mem
Associates"), a Delaware limited partnership. A limited liability company
controlled by Mr. Wiesler is the general

43
<PAGE>

partner and owns a 1% partnership interest in Mem & Mem Associates. The
balance of the interests in Mem & Mem Associates is held by its limited
partners, which are two trusts established by Mr. Wiesler for the benefit of
members of his family. Mr. Wiesler disclaims beneficial ownership of the
shares held by Mem & Mem Associates, except to the extent of his indirect
pecuniary interest therein.

(2) Includes 8,100 shares held by members of Mr. Tyson's family.

(3) Includes 58,762 shares held by members of Mr. Frusztajer's family.

(4) Mr. Allison resigned from his position as Chief Financial Officer of the
Company effective January 28, 2000.

44
<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions contained in the underwriting
agreement, the underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co., Banc of America Securities LLC, CIBC World
Markets Corp., FleetBoston Robertson Stephens Inc. and Adams, Harkness & Hill,
Inc. are acting as representatives, have severally agreed to purchase, and we
and the selling stockholders have agreed to sell to them, an aggregate of
shares of common stock. The number of shares of common stock that
each underwriter has agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Goldman, Sachs & Co. .......................................
Banc of America Securities LLC..............................
CIBC World Markets Corp.....................................
FleetBoston Robertson Stephens Inc..........................
Adams, Harkness & Hill, Inc.................................
-------
Total.................................................
=======
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and the selling stockholders and subject to
prior sale. The underwriting agreement provides that the obligations of the
several underwriters to pay for and accept delivery of the shares of common
stock offered by this prospectus are subject to the approval of legal matters by
their counsel and to other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered in this offering, other
than those covered by the over-allotment option described below, if any of the
shares are taken.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus and part to selected dealers at a price that represents
a concession not in excess of $ a share under the public offering price.
Any underwriter may allow, and those dealers may reallow, a concession not in
excess of $ a share to other underwriters or to selected dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives of the
underwriters.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 288,750
additional shares of common stock at the public offering price set forth on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock offered in this offering. To the extent such option is exercised,
each underwriter will become obligated to purchase approximately the same
percentage of such additional shares of common stock as the number set forth
next to such underwriter's name in the preceding table bears to the total number
of shares of common stock set forth next to the names of all underwriters in the
preceding table. If the underwriters' over-allotment option is exercised in
full, the total price to the public would be $ , the total underwriters'
discounts and commissions would be $ , and the total proceeds to us
would be $ , before deducting offering expenses payable by us.

We will pay the expenses of the offering, which we estimate will be
approximately $500,000.

We, our directors and executive officers and the selling stockholders have
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the

45
<PAGE>
period ending 90 days after the date of this prospectus, we and each of them
will not directly or indirectly:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock,

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.

The restrictions described in the previous paragraph do not apply to:

- the sale of up to 100,000 shares by Mordechai Wiesler, less any shares
sold by Mr. Wiesler in this offering, the sale of up to 75,000 shares by
Mitchell G. Tyson, less any shares sold by Mr. Tyson in this offering, and
the sale of up to 100,000 shares by Amram Rasiel, less any of shares sold
by Mr. Rasiel in this offering, provided in each case that such sales are
made pursuant to Rule 144 under the Securities Act and after the
expiration of the 30-day period following the date of this prospectus;

- the sale of shares of common stock to the underwriters under the
underwriting agreement;

- our issuance of shares of our common stock upon the conversion of
exchangeable shares outstanding on the date of this prospectus;

- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares of common stock; and

- issuances of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on the
date of the prospectus and consistent with past practices.

The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

Our common stock is listed on the Nasdaq National Market under the symbol
"PRIA."

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed shares of common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.

From time to time, some of the underwriters have provided, and may continue
to provide, investment banking services to us.

PRI and the selling stockholders have agreed to indemnify each other and the
underwriters against stated liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act").

46
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Foley, Hoag & Eliot LLP, Boston, Massachusetts. A member of that
firm beneficially owns 4,000 shares of our common stock. Legal matters in
connection with this offering will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

Our audited financial statements as of September 30, 1998 and 1999 and for
each of the three years in the period ended September 30, 1999, included in this
prospectus, except as they relate to Promis Systems Corporation Ltd. for the
year ended December 31, 1997, have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon appears herein, and insofar as
they relate to Promis Systems Corporation Ltd., by Ernst & Young LLP,
independent accountants, whose report thereon appears as an exhibit to the
registration statement of which this prospectus is a part. Such financial
statements have been so included in reliance on the reports of such independent
accountants given on the authority of such firms as experts in auditing and
accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual reports, quarterly reports, current reports, proxy statements
and other information with the SEC. You may read and copy any of our SEC filings
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may call the SEC at 1-800-SEC-0330 for further information about the
Public Reference Room. Our SEC filings are also available to the public on the
SEC's web site at HTTP://WWW.SEC.GOV.

The SEC allows us to incorporate by reference information from some of our
other SEC filings. This means that we can disclose information to you by
referring you to those other filings, and the information incorporated by
reference is considered to be part of this prospectus. In addition, some
information that we file with the SEC after the date of this prospectus will
automatically update, and in some cases supersede, the information contained or
otherwise incorporated by reference in this prospectus. We are incorporating by
reference the information contained in the following SEC filings:

- our Annual Report on Form 10-K for the fiscal year ended September 30,
1999 (as filed on December 23, 1999), as amended by Form 10-K/A (as filed
on January 28, 2000);

- our Quarterly Report on Form 10-Q for the three months ended January 2,
2000 (as filed on February 16, 2000);

- the description of our common stock contained in the Registration
Statement on Form 8-A (as filed on October 12, 1994), and any other
amendment or report filed to update the description; and

- any filings that we make with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and before the
date of termination of this offering. Information in these filings will be
incorporated as of the filing date.

You may request copies of the filings, at no cost, by writing to or calling
our Vice President and Chief Financial Officer as follows:

PRI Automation, Inc.
805 Middlesex Turnpike
Billerica, Massachusetts 01821-3986
Telephone: (978) 670-4270

47
<PAGE>
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC under the Securities Act. This prospectus does not contain
all of the information contained in the registration statement. For further
information about us and our common stock, you should read the registration
statement and the exhibits filed with the registration statement.

DISCLOSURE OF SEC POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our articles of organization provide that, subject to certain exceptions, we
will indemnify and hold harmless each of our officers and directors to the
fullest extent authorized by the Massachusetts Business Corporation Law, and
that we may also, to the extent authorized by the Board of Directors, indemnify
and advance expenses to any employee or agent of PRI. The Massachusetts Business
Corporation Law generally authorizes a corporation to indemnify its directors,
officers, employees and other agents unless such person is adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the corporation.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling PRI pursuant to
the foregoing provisions, we have been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

48
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of September 30, 1998 and
1999 and January 2, 2000.................................. F-3
Consolidated Statements of Operations for the years ended
September 30, 1997, 1998 and 1999 and the three-month
periods ended
December 27, 1998 and January 2, 2000..................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended
September 30, 1997, 1998 and 1999 and the three-month
period ended
January 2, 2000........................................... F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1998 and 1999 and the three-month
periods ended
December 27, 1998 and January 2, 2000..................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
PRI Automation, Inc.:

In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of PRI Automation, Inc. and its
subsidiaries at September 30, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles
in the United States. 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. The consolidated financial statements
give retroactive effect to the merger of Promis Systems Corporation Ltd. in a
transaction accounted for as a pooling of interests, as described in Note N to
the consolidated financial statements. We did not audit the consolidated
financial statements of Promis Systems Corporation Ltd., which statements, not
included herein, reflect total revenues of $23,967,000, before conforming
accounting policy adjustments, for the year ended December 31, 1997. Those
statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for Promis Systems Corporation Ltd., is based solely on the
report of the other auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards in the United States,
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 and the report of
other auditors provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 15, 1999

F-2
<PAGE>
PRI AUTOMATION, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 2,
------------------- -----------
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 57,047 $ 51,865 $ 45,164
Trade accounts receivable, less allowance for doubtful
accounts of $3,252, $2,646 and $2,227................... 34,443 31,436 37,476
Contracts in progress..................................... 9,017 6,018 17,805
Inventories............................................... 27,494 28,351 28,924
Deferred income taxes..................................... 7,832 -- --
Other current assets...................................... 7,254 7,063 2,416
-------- -------- --------
Total current assets.................................... 143,087 124,733 131,785
Property and equipment, net................................. 20,306 19,128 19,503
Deferred income taxes....................................... 559 -- --
Other assets, net........................................... 3,526 2,691 2,280
-------- -------- --------
Total assets............................................ $167,478 $146,552 $153,568
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 12,281 $ 16,900 $ 17,456
Accrued expenses and other liabilities.................... 14,823 16,396 15,134
Line of credit............................................ 11 -- --
Current portion of obligation under capital lease......... 798 570 501
Billings in excess of revenues and customer advances...... 14,726 11,931 11,393
-------- -------- --------
Total current liabilities............................... 42,639 45,797 44,484
Obligation under capital lease.............................. 734 411 301
Other non-current liabilities............................... 965 788 762
Commitments and contingencies (Notes F, I and U)
Minority interest........................................... -- 56 162
Stockholders' equity:
Preferred stock, 400,000 shares authorized; none
outstanding............................................. -- -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 21,235,525, 22,265,676 and 22,788,909 issued
and outstanding......................................... 212 223 228
Additional paid-in capital................................ 129,035 141,469 149,529
Accumulated deficit....................................... (6,107) (42,192) (41,898)
-------- -------- --------
Total stockholders' equity.............................. 123,140 99,500 107,859
-------- -------- --------
Total liabilities and stockholders' equity.............. $167,478 $146,552 $153,568
======== ======== ========
</TABLE>

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

F-3
<PAGE>
PRI AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, --------------------------
------------------------------ DECEMBER 27, JANUARY 2,
1997 1998 1999 1998 2000
-------- -------- -------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue:
Product and equipment....................... $217,437 $171,791 $100,074 $ 20,717 $ 49,163
Services and maintenance.................... 18,663 31,754 36,222 8,918 9,530
-------- -------- -------- -------- --------
Total net revenue....................... 236,100 203,545 136,296 29,635 58,693
Cost of revenue:
Product and equipment....................... 105,616 105,342 63,850 15,766 31,259
Services and maintenance.................... 15,356 19,413 19,904 4,379 6,056
-------- -------- -------- -------- --------
Total cost of revenue................... 120,972 124,755 83,754 20,145 37,315
-------- -------- -------- -------- --------
Gross profit.................................. 115,128 78,790 52,542 9,490 21,378
Operating expenses:
Research and development.................... 36,198 44,509 45,480 10,414 12,159
Selling, general and administrative......... 43,614 46,787 38,642 9,686 9,015
Acquired in-process research and
development............................... -- 8,417 -- -- --
Merger costs and special charges............ -- 10,091 6,375 650 --
-------- -------- -------- -------- --------
Operating profit (loss)....................... 35,316 (31,014) (37,955) (11,260) 204
Other income, net............................. 1,223 625 2,935 656 200
-------- -------- -------- -------- --------
Income (loss) before income taxes............. 36,539 (30,389) (35,020) (10,604) 404
Provision for (benefit from) income taxes..... 9,042 (7,766) 1,065 (2,949) 110
-------- -------- -------- -------- --------
Net income (loss)............................. $ 27,497 $(22,623) $(36,085) $ (7,655) $ 294
======== ======== ======== ======== ========
Net income (loss) per common share:
Basic....................................... $ 1.35 $ (1.08) $ (1.67) $ (0.36) $ 0.01
Diluted..................................... $ 1.27 $ (1.08) $ (1.67) $ (0.36) $ 0.01
Weighted average number of shares outstanding:
Basic....................................... 20,408 20,988 21,628 21,269 22,514
Diluted..................................... 21,570 20,988 21,628 21,269 24,483

UNAUDITED PRO FORMA NET INCOME (LOSS) PER
COMMON SHARE:
Historical net income (loss):................. $ 27,497 $(22,623) $(36,085) $ (7,655) $ 294
Adjustment to Equipe income tax expense to
convert from S-corporation to
C-corporation status...................... (3,639) (1,156) -- -- --
-------- -------- -------- -------- --------
Unaudited pro forma net income (loss)......... $ 23,858 $(23,779) $(36,085) $ (7,655) $ 294
======== ======== ======== ======== ========
Unaudited pro forma net income (loss) per
common share:
Basic....................................... $ 1.17 $ (1.13) $ (1.67) $ (0.36) $ 0.01
Diluted..................................... $ 1.11 $ (1.13) $ (1.67) $ (0.36) $ 0.01
</TABLE>

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

F-4
<PAGE>
PRI AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE YEARS ENDED SEPTEMBER 30, 1999
AND FOR THE THREE MONTHS ENDED JANUARY 2, 2000 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS/ OTHER TOTAL
------------------- PAID-IN (ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) INCOME/(LOSS) EQUITY
-------- -------- ---------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1996.................... 20,039 $200 $100,525 $ 5,702 $106,427
Exercise of stock options...................... 371 4 2,396 2,400
Tax benefit on exercise of stock options....... 2,065 2,065
Proceeds from warrants offering................ 5,990 5,990
Conversion of warrants to common shares........ 271 3 (3) --
Stock-based compensation....................... 140 140
Issuance of common stock in connection with the
Employee Stock Purchase Plan................. 49 812 812
Distributions to shareholders of Equipe........ (8,011) (8,011)
Adjustment to conform fiscal year of Equipe.... 3,705 3,705
Comprehensive income:
Net income................................. 27,497 27,497
Other comprehensive income:
Change in unrealized gain on
securities............................. $ 2 2
--------
Total comprehensive income................... 27,499
------- ---- -------- -------- ---- --------
Balance, September 30, 1997.................... 20,730 207 111,925 28,893 2 141,027
Exercise of stock options...................... 178 2 1,050 1,052
Tax benefit on exercise of stock options....... 439 439
Issuance of common stock in connection with the
Employee Stock Purchase Plan................. 115 1 1,574 1,575
Distributions to shareholders of Equipe........ (4,507) (4,507)
Adjustment of retained earnings for
S-corporation earnings of Equipe............. 5,911 (5,911) --
Issuance of common stock in connection with the
acquisition of ILC........................... 111 1 5,915 5,916
Stock options assumed in connection with the
acquisition of ILC........................... 2,015 2,015
Reduction in paid-in capital for contingent
consideration................................ (1,364) (1,364)
Issuance of common stock in connection with the
pooling of interests with Chiptronix......... 105 1 12 13
Acquired accumulated deficit from Chiptronix... (1,556) (1,556)
Tax benefit from Chiptronix acquisition........ 1,591 1,591
Adjustment to conform fiscal year of Promis.... (3) (33) (403) (436)
Comprehensive loss:
Net loss................................... (22,623) (22,623)
Other comprehensive loss:
Change in unrealized gain on
securities............................. (2) (2)
--------
Total comprehensive loss..................... (22,625)
------- ---- -------- -------- ---- --------
Balance, September 30, 1998.................... 21,236 212 129,035 (6,107) -- 123,140
Exercise of stock options...................... 859 9 10,091 10,100
Issuance of common stock in connection with the
Employee Stock Purchase Plan................. 171 2 2,385 2,387
Stock-based compensation....................... 236 236
Reduction in paid-in capital for contingent
consideration................................ (278) (278)
Comprehensive loss:
Net loss................................... (36,085) (36,085)
------- ---- -------- -------- ---- --------
Balance, September 30, 1999.................... 22,266 223 141,469 (42,192) -- 99,500
Exercise of stock options...................... 523 5 8,119 8,124
Reduction in paid-in capital for contingent
consideration................................ (59) (59)
Comprehensive income:
Net income................................. 294 294
------- ---- -------- -------- ---- --------
Balance, January 2, 2000 (unaudited)........... 22,789 $228 $149,529 $(41,898) -- $107,859
======= ==== ======== ======== ==== ========
</TABLE>

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

F-5
<PAGE>
PRI AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED
------------------------------ -------------------------------------
1997 1998 1999 DECEMBER 27, 1998 JANUARY 2, 2000
-------- -------- -------- ------------------ ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 27,497 $(22,623) $(36,085) $(7,655) $ 294
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............ 5,396 8,307 8,679 2,248 2,249
Provisions for write-downs of inventories........ 5,024 12,389 785 200 --
Provision for bad debts.......................... 956 1,724 (523) 54 --
Deferred income taxes............................ (2,674) (5,329) 8,391 -- --
Tax benefit from disqualified dispositions....... 2,065 439 -- -- --
Net loss on disposal of assets................... 125 2,042 54 54 --
Stock-based compensation......................... 140 -- 236 -- --
Amortization of premiums or discounts on
marketable securities.......................... 64 42 -- -- --
Translation losses (gains), net.................. 520 1,086 (854) (198) 241
Minority interests in losses of subsidiaries..... -- -- (143) -- 106
Write-off of acquired in-process research and
development.................................... -- 8,417 -- -- --
Changes in operating assets and liabilities:
Trade accounts receivable...................... (40,805) 46,386 3,726 (104) (5,999)
Contracts in progress.......................... 6,361 6,446 2,999 (856) (11,787)
Inventories.................................... (16,075) (5,739) (1,642) 4,673 (573)
Other assets................................... (1,630) (5,984) 34 (416) 4,692
Accounts payable............................... 3,186 (12,050) 4,760 (5,105) 773
Accrued expenses and other liabilities......... 9,981 (4,605) 1,916 1,854 (1,285)
Billings in excess of revenues and customer
advances..................................... 3,000 6,889 (2,795) (1,441) (539)
-------- -------- -------- ------- --------
Net cash provided by (used in) operating
activities......................................... 3,131 37,837 (10,462) (6,692) (11,828)
-------- -------- -------- ------- --------
Cash flows from investing activities:
Proceeds from the sale of marketable securities.... 9,079 6,867 -- -- --
Proceeds from maturities of marketable
securities....................................... 5,390 2,035 -- -- --
Purchases of marketable securities................. (5,431) (5,798) -- -- --
Purchases of intangible assets..................... -- (112) (305) (260) --
Proceeds from sale of property and equipment....... -- 24 9 6 --
Purchases of property and equipment................ (7,677) (13,665) (6,249) (1,114) (2,296)
Cash paid for contingent consideration............. -- (1,364) (278) (76) (59)
Net effect on cash balances from Chiptronix
acquisition...................................... -- 246 -- -- --
Net effect on cash balances from MASE
acquisition...................................... (1,533) (1,533) -- -- --
-------- -------- -------- ------- --------
Net cash used in investing activities................ (172) (13,300) (6,823) (1,444) (2,355)
-------- -------- -------- ------- --------
Cash flows from financing activities:
Proceeds from borrowings........................... 1,769 -- -- -- --
Repayments of borrowings........................... (1,702) (1,913) -- -- --
Proceeds from borrowings under capital lease
obligations...................................... 510 1,001 -- -- --
Repayment of capital lease obligations............. (461) (758) (551) (102) (179)
Proceeds from issuance of warrants................. 5,990 -- -- -- --
Proceeds from minority shareholders................ -- -- 199 93 --
Distributions to shareholders of Equipe............ (8,011) (4,507) -- -- --
Repayments under line of credit.................... -- -- (11) 48 --
Proceeds from exercise of stock options and
Employee Stock Purchase Plan..................... 3,212 2,627 12,487 786 8,124
-------- -------- -------- ------- --------
Net cash provided by (used in) financing
activities......................................... 1,307 (3,550) 12,124 825 7,945
-------- -------- -------- ------- --------
Adjustment to conform fiscal years of Promis and
Equipe............................................. 218 (50) -- -- --
Effect of changes in exchange rates on cash.......... (283) (642) (21) -- (463)
-------- -------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents........................................ 4,201 20,295 (5,182) (7,311) (6,701)

Cash and cash equivalents at beginning of year....... 32,551 36,752 57,047 57,047 51,865
-------- -------- -------- ------- --------
Cash and cash equivalents at end of year............. $ 36,752 $ 57,047 $ 51,865 $49,736 $ 45,164
======== ======== ======== ======= ========

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest......................................... $ 113 $ 155 $ 125 32 20
Income taxes..................................... 5,314 8,730 908 768 2
Non-cash transactions:
Property and equipment acquired under capital
leases......................................... 265 -- -- -- --
Acquisition of Interval Logic Corporation (see
Note Q)
Acquisition of Chiptronix Handling Systems GmbH
(see Note P)
</TABLE>

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

F-6
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. DESCRIPTION OF BUSINESS:

PRI Automation, Inc. (the "Company") is a leading global supplier of factory
automation systems and factory management software for semiconductor
manufacturers and of automation systems that are incorporated in semiconductor
process tools manufactured by original equipment manufacturers. The Company is
subject to risks and uncertainties common to companies in the semiconductor
industry including, but not limited to, the highly cyclical nature of the
semiconductor industry leading to recurring periods of over-supply, rapid
technological change and the development by the Company or its competitors of
new technological innovations, dependence on key personnel, the protection of
proprietary technology, management of inventory and manufacturing capacity,
fluctuations in operating results, doing business in Asian and European markets
and related currency risks, competitive pressure on selling prices, the timing
and cancellation of customer orders and the Company's ability to absorb and
manage acquisitions.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of PRI
Automation, Inc., its wholly owned domestic subsidiaries and its wholly owned
and majority-owned foreign subsidiaries (collectively, the "Company"). All
significant intercompany transactions and balances have been eliminated. Certain
reclassifications have been made to prior years' financial statements to conform
to the current presentation.

In March 1999, the Company acquired Promis Systems Corporation Ltd.
("Promis"). In January 1998, the Company acquired Equipe Technologies, Inc.,
E-Machine, Inc., and Equipe Japan Ltd. (collectively, "Equipe"). In May 1998,
the Company acquired Chiptronix Handling Systems GmbH ("Chiptronix"), the
European distributor of Equipe products. The acquisitions of Promis, Equipe and
Chiptronix were accounted for using the pooling-of-interests method of
accounting. All prior period historical consolidated financial statements
presented herein have been restated to include the financial position, results
of operations, and cash flows of Promis and Equipe. The Company has not restated
its financial statements for the acquisition of Chiptronix because the effect of
restatement is immaterial.

UNAUDITED INTERIM FINANCIAL INFORMATION

The interim financial data as of January 2, 2000 and for the three months
ended January 2, 2000 and December 27, 1998 is unaudited; however, in the
opinion of the Company, the interim data includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. The results for interim periods are not
necessarily indicative of the results for the entire year. For interim reporting
purposes, the Company closes its first three fiscal quarters on the Sunday
nearest the last day of December, March and June in each year. The Company's
fiscal year ends on the last day of September.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual

F-7
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
results could differ from those estimates and would impact future results of
operations and cash flows. Significant estimates are inherent in determining
revenue recognition and associated profits under the percentage-of-completion
method.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of commercial paper, Eurodollars, money market
mutual funds, short-term guaranteed investment certificates and other highly
liquid investments with original maturities of three months or less.

MARKETABLE SECURITIES

Current marketable securities include all investments with remaining
maturities of twelve months or less. Non-current marketable securities include
all investments with remaining maturities greater than twelve months. The
Company classifies all securities as available-for-sale. These securities are
reported at fair value as of the balance sheet date with net unrealized holding
gains and losses included in stockholders' equity. Gains and losses on sales of
securities are calculated using the specific identification method. The Company
did not hold any marketable securities as of September 30, 1998 and 1999. Gross
realized gains and losses for the year ended September 30, 1997 were $9,000 and
$7,000, respectively. Gross unrealized gains and losses at September 30, 1997
were $3,000 and $1,000, respectively. Gross realized gains and losses from
marketable securities for the year ended September 30, 1998 were $6,000 and
$1,000, respectively. Interest income included in other income, net was
$1,523,000, $1,991,000 and $2,233,000 for the years ended September 30, 1997,
1998 and 1999, respectively.

FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to significant
concentrations of financial or credit risk consist principally of cash and cash
equivalents, current and non-current marketable securities, trade accounts
receivable, accounts payable and debt. The Company generally invests its cash
and investments in investment-grade securities. The carrying value of financial
instruments approximates their related fair values.

The Company's customers are primarily concentrated in one industry, the
semiconductor manufacturing and related capital goods industry. Historically,
significant portions of the Company's sales have been to a limited number of
customers within this industry. The Company performs ongoing credit evaluations
of its customers' financial condition, and may require deposits on large orders
but does not require collateral or other security to support customer
receivables.

OFF-BALANCE SHEET RISK

The Company has entered into forward contracts in Canadian dollars to hedge
the expected operating expenses of its Canadian subsidiary that are denominated
in Canadian dollars. These contracts are used to mitigate the Company's risk
associated with exchange rate movements, as gains and losses on these contracts
are intended to offset exchange losses and gains on underlying cost exposures.
These contracts do not qualify for hedge accounting. The contract periods which
do not exceed sixteen months expire monthly through December 1999. The Company
does not enter into

F-8
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
forward currency contracts for speculative purposes. Both realized and
unrealized gains and losses on the contracts are classified as components of
other income, net, in the consolidated statement of operations. At
September 30, 1999, the notional amount of outstanding forward currency
contracts was $1,914,000, which was marked to market and recognized in the
consolidated statements of operations.

The fair value of these contracts as of September 30, 1998 and 1999,
determined by applying fiscal year end currency exchange rates to the notional
contract amounts, represented a net unrealized loss of $60,000 and net
unrealized gain of $131,000, respectively.

RETAINAGES

Accounts receivable include certain amounts which are not due until final
customer acceptance or until contract provisions allow for billing. Such
retainages were approximately $13,832,000 and $9,605,000 at September 30, 1998
and 1999, respectively. The retainages are expected to be collected within the
next twelve months.

CONTRACTS IN PROGRESS

Contracts in progress include costs and estimated profits under incomplete
contracts accounted for using the percentage-of-completion method, net of
amounts billed. These amounts are expected to be collected within the next
twelve months as units are delivered. Amounts billed at September 30, 1998 and
1999 were $24,757,000 and $7,701,000, respectively.

INCOME TAXES

The Company recognizes deferred tax assets and liabilities based on
temporary differences between the financial statement and tax bases of assets
and liabilities using the expected tax rates in the year in which the
differences are expected to reverse. The Company provides a valuation allowance
against net deferred tax assets if, based on the available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized. Equipe Technologies, Inc. and one of the related companies,
E-Machine, Inc., elected to be treated as an S-corporation under the provisions
of the Internal Revenue Code, prior to their acquisition by the Company, and as
such, the shareholders of Equipe Technologies, Inc. and E-Machine, Inc. were
liable for individual federal and certain state income taxes on their allocated
portions of the respective company's taxable income. Accordingly, U.S. income
tax expense related to Equipe Technologies, Inc. and E-Machine, Inc. was not
recorded by the Company for all periods through January 22, 1998, the date of
consummation of the merger with the Company (see Note O) except that Equipe
Technologies, Inc. and E-Machine, Inc. were subject to California franchise tax
based on 1.5% of taxable income.

INVENTORIES

Inventories, consisting of raw materials, work-in-process and finished
goods, are stated at the lower of cost (determined principally on a first-in,
first-out basis) or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Betterments and major renewals
are capitalized and included in property and equipment, while repairs and
maintenance are charged to expense as incurred.

F-9
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Depreciation and amortization of property and equipment are primarily provided
using the straight-line method over the estimated useful lives of the assets.
The amortization of assets recorded under capital leases is included in
depreciation and amortization expense. Upon retirement or sale, the cost of the
assets disposed and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is credited or charged to operations.

OTHER ASSETS

Goodwill, included in other assets, represents the excess of the purchase
price over the fair value of net assets acquired and is amortized on a straight
line basis over ten years. Goodwill was fully amortized as of September 30,
1999. Additionally, other intangible assets, including intellectual property
acquired in Promis' MASE acquisition and capitalized software licenses are
amortized on a straight line basis over the estimated useful lives of the assets
ranging from two to five years. The Company periodically reviews the value of
intangible assets in relation to the expected associated undiscounted cash flows
in order to assess whether there has been a permanent impairment in carrying
value. The Company believes that no significant impairment has occurred.

BILLINGS IN EXCESS OF REVENUES

Billings in excess of revenues include amounts billed on incomplete
contracts, accounted for using the percentage-of-completion method net of costs
and estimated profits recognized.

REVENUE RECOGNITION

For certain contracts eligible under American Institute of Certified Public
Accountants ("AICPA") Statement of Position No. 81-1, revenue on product sales
is recognized using the percentage-of-completion accounting method based upon an
efforts-expended method. In all cases, changes to total estimated costs and
anticipated losses, if any, are recognized in the period in which determined.
Revenue recognized under the percentage-of-completion accounting method was
approximately $100,699,000, $54,999,000 and $23,383,000 during fiscal years
1997, 1998 and 1999, respectively. Revenue from product sales not recognized
under the percentage-of-completion method is generally recorded upon shipment to
the customer, provided that no significant vendor obligations remain outstanding
and that collection of the related receivable is deemed probable by management.
Software license revenue is recognized upon delivery of the software and receipt
of a written agreement from the customer, provided that acceptance is not
uncertain, fees are fixed and determinable and collectibility of the related
receivable is deemed probable by management. Revenues from training and
consulting are recognized as services are performed. Service revenue is
recognized ratably over applicable contract periods or as the services are
performed. Additionally, the Company accrues for warranty costs upon shipment.
Product and equipment net revenue includes revenue from all equipment sales,
installation, project management and software licenses. Service and maintenance
net revenue consists of service contracts, spare part sales, repairs and
upgrades, software maintenance contracts and consulting and training services.

COMMISSIONS

The Company pays certain commissions to agents and distributors under
certain agreements in return for obtaining orders; and, in certain cases,
providing installation and warranty services.

F-10
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Commissions that are due upon the Company receiving payment in full from the
customers are charged against the related revenues. These amounts totaled
approximately $2,381,000 and $98,000 for fiscal years 1997 and 1998,
respectively. No such commissions were paid in fiscal 1999.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses all engineering, research and development costs as
incurred. Expenses subject to capitalization in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," were insignificant.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of foreign subsidiaries which are denominated in
foreign currencies are remeasured into U.S. dollars at rates of exchange in
effect at the end of the fiscal year, except for nonmonetary assets and
liabilities, which are remeasured using historical exchange rates. Revenue and
expense amounts are remeasured using an average of exchange rates in effect
during the period, except those amounts related to nonmonetary assets and
liabilities, which are remeasured at historical exchange rates. The Company's
functional currency is the U.S. dollar for all of its subsidiaries. Net realized
and unrealized gains and losses resulting from foreign currency remeasurement
are included in the consolidated statements of operations as other income or
expense.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company continues to apply the accounting provisions of Accounting
Principles Board ("APB") Opinion 25 and has elected the disclosure-only
alternative permitted under Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." The Company has disclosed
pro forma net income (loss) and pro forma net income (loss) per share in the
footnotes using the fair value based method.

NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is based upon the weighted average
number of common shares outstanding during each period. Diluted net income
(loss) per common share gives effect to all dilutive potential common shares
outstanding during the period. The computation of diluted net income (loss) per
common share does not assume the issuance of potential common shares that have
an anti-dilutive effect.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company will adopt SFAS No. 133 by fiscal
2001, in accordance with SFAS No. 137, which deferred the

F-11
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
effective date of SFAS No. 133. The Company is evaluating SFAS No. 133 to
determine the impact on its consolidated financial statements.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes the staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in the Company's first quarter of the
fiscal year 2001. The effects of applying this guidance will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
The Company has not completed its evaluation of SAB 101 and is therefore unable
to determine its impact.

C. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents consisted of the following at September 30:

<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash on hand.............................................. $ 21 $ 11
Cash deposited with banks................................. 5,924 4,660
Eurodollars............................................... 32,088 10,967
Money market funds........................................ 11,014 36,179
Time deposits............................................. 8,000 48
------- -------
$57,047 $51,865
======= =======
</TABLE>

D. INVENTORIES:

Inventories consisted of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999 JANUARY 2, 2000
-------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials............................... $19,072 $16,492 $19,694
Work-in-process............................. 5,242 5,804 6,100
Finished goods.............................. 3,180 6,055 3,130
------- ------- -------
$27,494 $28,351 $28,924
======= ======= =======
</TABLE>

F-12
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following at September 30:

<TABLE>
<CAPTION>
DEPRECIABLE 1998 1999
--------------------------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Machinery and equipment............... 2-7 years $ 27,058 $ 31,259
Furniture and fixtures................ 5-7 years 6,025 6,479
Leasehold improvements................ Shorter of life of lease or useful life 5,475 5,883
-------- --------
38,558 43,621
Accumulated depreciation and
amortization........................ (18,252) (24,493)
-------- --------
$ 20,306 $ 19,128
======== ========
</TABLE>

Depreciation expense was $4,733,000, $6,691,000 and $7,364,000 for the years
ended September 30, 1997, 1998 and 1999, respectively. Assets capitalized under
leases totaled $3,083,000 and $3,415,000 as of September 30, 1998 and 1999,
respectively. Accumulated amortization of these assets was $1,148,000 and
$1,822,000 as of September 30, 1998 and 1999, respectively.

F. LEASE COMMITMENTS:

The Company leases manufacturing and office facilities and equipment under
noncancelable operating and capital leases expiring through the year 2006 (see
Notes E and K). Rent expense under operating leases was $2,680,000, $4,343,000
and $4,418,000 for fiscal years 1997, 1998 and 1999, respectively.

At September 30, 1999, future minimum payments, net of sub-lease proceeds,
required under all noncancelable operating and capital leases were as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
- ----------- --------- --------
(IN THOUSANDS)
<S> <C> <C>
2000...................................................... $ 4,373 $ 594
2001...................................................... 3,555 368
2002...................................................... 2,642 87
2003...................................................... 1,469 --
2004...................................................... 603 --
2005 and thereafter....................................... 601 --
------- ------
Total minimum lease payments.............................. $13,243 1,049
======= ------
Less: amount representing interest........................ 68
------
Present value of minimum lease payments................... $ 981
======
</TABLE>

F-13
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

G. ACCRUED EXPENSES AND OTHER LIABILITIES:

The significant components of accrued expenses and other liabilities
consisted of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999 JANUARY 2, 2000
-------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued expenses............................ $ 6,699 $ 7,295 $ 6,842
Accrued compensation........................ 3,086 4,718 3,853
Warranty reserves........................... 5,038 4,383 4,439
------- ------- -------
$14,823 $16,396 $15,134
======= ======= =======
</TABLE>

H. STOCKHOLDERS' EQUITY:

STOCK OPTIONS

During 1984, the Board of Directors voted to adopt the 1984 Incentive Stock
Option Plan (the "1984 Option Plan") and subsequently reserved 1,050,000 shares
of its authorized common stock for issuance under this plan. On March 17, 1994,
the Board of Directors approved the 1994 Incentive and Nonqualified Stock Option
Plan (the "1994 Option Plan") and reserved 810,000 shares of common stock for
issuance under this plan. At the Company's annual stockholder meeting held on
January 26, 1996, the shareholders voted to increase the number of shares
authorized for issuance under the 1994 Option Plan to 1,810,000 shares. In 1997,
the Board of Directors voted to adopt the 1997 Non-Incentive Stock Option Plan
(the "1997 Option Plan") which authorizes the issuance of non-qualified options
to purchase up to an aggregate of 1,400,000 shares of common stock. The Board of
Directors has also granted non-qualified options to directors of the Company.
Incentive stock options generally vest over five years and expire six years
after issuance. Non-qualified stock options generally vest between zero and five
years and expire between five and ten years after issuance. Additionally, the
Company assumed Promis' obligations under its Amended and Restated Stock Options
Plan dated September 30, 1998. The Promis plan reserved 290,895 options, as
converted, for available grants by the Company's Board of Directors.

On July 1, 1998, the Compensation Committee of the Board of Directors, in an
effort to restore the long-term incentive feature of employee stock options that
were significantly out of the money, voted to provide employees with the
opportunity to exchange options dated April 1, 1997 and thereafter for new
options with an exercise price of $14.75, the then fair market value of the
Company's common stock. Options to purchase 1,637,300 shares of common stock
with an average exercise price of $27.98 were canceled and replaced with an
equal number of stock options effective July 17, 1998. The vesting period
started over again on repriced options.

F-14
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H. STOCKHOLDERS' EQUITY: (CONTINUED)
Information with respect to option activity for the fiscal years 1997, 1998
and 1999 is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at September 30, 1996................. 1,609,087 $ 7.94
Granted........................................... 877,248 20.52
Canceled.......................................... (260,573) 11.98
Exercised......................................... (371,474) 6.64
----------
Outstanding at September 30, 1997................. 1,854,288 13.62
----------
Granted........................................... 3,759,160 20.24
Canceled.......................................... (1,894,464) 27.26
Exercised......................................... (173,314) 5.80
----------
Outstanding at September 30, 1998................. 3,545,670 13.78
----------
Granted........................................... 1,532,805 32.37
Canceled.......................................... (460,354) 17.24
Exercised......................................... (858,734) 11.76
----------
Outstanding at September 30, 1999................. 3,759,387 $19.17
==========
</TABLE>

Summarized information about stock options outstanding at September 30, 1999
is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.33-$13.63 676,705 3.52 $10.66 520,402 $10.24
13.74- 14.75 1,179,350 4.84 14.75 203,712 14.74
15.13- 25.50 1,000,575 5.10 21.98 237,714 19.66
25.88- 41.44 902,757 5.50 28.22 63,326 27.81
--------- ---------
$ 3.33-$41.44 3,759,387 4.83 $19.17 1,025,154 $14.40
========= =========
</TABLE>

At September 30, 1997 and 1998 options exercisable were 523,696 and 822,914,
respectively.

On October 29, 1997, the Company granted Interval Logic Corporation ("ILC")
common stock options ("ILC options") in accordance with the Board of Directors'
adoption of the 1997 Interval Logic Corporation Incentive and Non-Qualified
Stock Option Plan. ILC is a subsidiary of the Company engaged in the development
of the Leverage advanced planning and scheduling software product for
semiconductor fabs. These options give ILC employees the option to purchase ILC
common shares at exercise prices of $0.10 through $1.00. The options vest over
four years and expire after ten years.

F-15
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H. STOCKHOLDERS' EQUITY: (CONTINUED)
Information with respect to the ILC options activity for fiscal years 1998
and 1999 is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Granted............................................ 2,445,250 $0.10
Canceled........................................... (430,000) 0.10
Exercised.......................................... -- --
---------
Outstanding at September 30, 1998.................. 2,015,250 0.10
---------
Granted............................................ 391,750 0.19
Canceled........................................... (154,765) 0.11
Exercised.......................................... (24,018) 0.10
---------
Outstanding at September 30, 1999.................. 2,228,217 $0.11
=========
</TABLE>

Summarized information about ILC stock options outstanding at September 30,
1999 is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.10 2,192,817 8.30 $0.10 938,632 $0.10
1.00 35,400 6.42 1.00 -- --
--------- -------
$0.10-$1.00 2,228,217 8.27 $0.11 938,632 $0.10
========= =======
</TABLE>

There were no ILC options exercisable as of September 30, 1997 and 1998.

EMPLOYEE STOCK PURCHASE PLAN

Since May 1994, the Company has offered an Employee Stock Purchase Plan
("ESPP") under which rights are granted to purchase shares of common stock at
85% of the lesser of the market value of such shares at either the beginning or
the end of each six month offering period. The plan permits employees to
purchase common stock through payroll deductions, which may not exceed 10% of an
employee's compensation as defined in the plan. The Company, in 1994, had
reserved 450,000 shares of common stock for issuance to eligible employees.
Shares purchased during fiscal years 1997, 1998 and 1999, were 49,044, 114,996
and 171,436, respectively, at average prices ranging from $9.78 to $22.26 per
share. Shares available for future purchase under the ESPP totaled 9,320 at
September 30, 1999.

F-16
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H. STOCKHOLDERS' EQUITY: (CONTINUED)

STOCK-BASED COMPENSATION PLANS

The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock-based compensation plan and accordingly, no
compensation expense has been recognized for options granted to employees and
shares purchased under these plans. Had compensation expense for the stock-based
compensation plans been determined based on the fair value at the grant dates
for options granted and shares purchased under the plans consistent with the
method of SFAS No. 123, "Accounting for Stock-Based Compensation," the net
income (loss) and net income (loss) per diluted share for the years ended
September 30 would have been as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net income (loss):
As Reported.................................. $27,497 $(22,623) $(36,085)
Pro Forma.................................... 25,018 (28,816) (50,304)
Net income (loss) per share:
Basic
As Reported................................ $ 1.35 $ (1.08) $ (1.67)
Pro Forma.................................. 1.23 (1.37) (2.33)
Diluted
As Reported................................ 1.27 (1.08) (1.67)
Pro Forma.................................. 1.16 (1.37) (2.33)
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
likely to be representative of the effects on reported net income for future
years, because SFAS 123 does not apply to awards granted prior to fiscal year
1996 and additional awards are anticipated in future years.

The estimated weighted average fair value of options granted in fiscal year
1997, 1998 and 1999, to purchase the Company's common stock, were $11.87, $12.78
and $16.86, respectively. The fair value of options at the date of grant was
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Expected life (years)--stock
options......................... 5 5 5
Expected life (years)--ESPP....... 0.5 0.5 0.5
Risk-free interest rate........... 5.51%-6.52% 5.42%-5.74% 4.59%-5.86%
Volatility........................ 64% 67% 71%
Dividend yield.................... 0 0 0
</TABLE>

The fair value of ILC options at the date of grant was estimated using the
Black-Scholes option pricing model with the following assumptions: expected life
of one year to four years, risk-free interest rate of 4.84% to 5.77%, volatility
of 85% and dividend yield of 0. The estimated weighted average fair value of
options granted in fiscal year 1998 and 1999 was $0.07 and $0.13, respectively.

STOCK WARRANTS

Pursuant to an agreement dated February 26, 1996, prior to the acquisition
of Promis by the Company, Promis issued and sold 270,600 warrants, converted at
the common stock exchange ratio of 0.1353, at $22.09 per warrant for aggregate
proceeds of $6.6 million. Each warrant was convertible into

F-17
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H. STOCKHOLDERS' EQUITY: (CONTINUED)
one common share. The associated costs of the warrants offering were
approximately $0.6 million. On June 16, 1997, the 270,600 warrants were
converted into 270,600 common shares.

On May 1, 1996, Promis granted warrants to a third party to purchase up to
13,530 common shares, as converted at the common stock exchange ratio. These
warrants have an expiration date of April 30, 2000.

Summarized information about warrants outstanding at September 30, 1999 is
as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WARRANTS EXERCISE
OUTSTANDING PRICE
- --------------------- --------
<S> <C>
10,148 $11.75
3,382 12.27
------
13,530 $11.88
======
</TABLE>

RIGHTS AGREEMENT

The Board of Directors of the Company adopted a Rights Agreement, dated as
of December 9, 1998, between the Company and State Street Bank and Trust
Company, as Rights Agent. In connection with this agreement, the Board
distributed one common share purchase right for each share of common stock then
or thereafter outstanding. The rights will become exercisable only if a person
or group acquires beneficial ownership of 20% or more of the outstanding common
shares of the Company. Each right, when it becomes exercisable, will entitle the
holder to purchase from the Company one one-hundredth of a share of Series A
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company, at a price of $140. Prior to any party acquiring 20% or more of the
outstanding common shares of the Company or prior to the expiration date, the
Board of Directors of the Company may redeem the rights in whole, but not in
part, at a price, in cash or common shares or other securities of the Company
deemed by the Board of Directors to be at least equivalent in value, of $.001
per right. The rights expire on December 9, 2008 unless otherwise redeemed by
the Company prior to that date.

I. CONTINGENT LIABILITY:

At January 2, 2000, the Company had a contingent liability of approximately
$142,000. In 1993, Promis purchased the business assets and assumed selected
liabilities of Palette Systems, Inc., a Canadian company (the "sellers"). The
purchase price of approximately $9.9 million consisted of $5.5 million in cash
and 59,889 exchangeable common shares, as converted at the common stock exchange
ratio, of the Company, valued at $73.91 per common share. At the time of the
acquisition, Promis agreed that on April 7, 1998 it would pay additional cash
consideration to the sellers of an amount equal to the amount by which
approximately $4.0 million exceeded the market value of the common shares owned
by the sellers on April 7, 1998.

On March 29, 1996, Promis made a formal claim against the sellers pursuant
to the dispute resolution provisions of the original purchase and sale
agreements. The sellers filed certain counterclaims against Promis. In 1997,
Promis and the sellers reached a settlement of the dispute. The settlement
provided that commencing on April 7, 1998 Promis would pay additional cash to
the sellers

F-18
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

I. CONTINGENT LIABILITY: (CONTINUED)
in an amount equal to the amount by which the market value of 59,889
exchangeable common shares, on each of the agreed-upon payment dates, is less
than $73.91 per common share. As part of the settlement, half the additional
cash consideration was payable on April 7, 1998, with the remaining half due in
20 quarterly installments commencing on July 7, 1998 through April 7, 2003.
Under the terms of the settlement agreement, the sellers are restricted as to
the number of shares of the Company's common stock which can be sold in any
quarter prior to April 7, 2003.

Since the payment of additional consideration is determined based on the
Company's share price at various future dates, any consideration in addition to
that paid to date will be recorded as a reduction in additional paid-in capital
of the Company as the amounts become determinable. The Company's contingent
liability as of January 2, 2000, calculated based on the market value of the
Company's common stock at January 2, 2000, is approximately $142,000.

J. INCOME TAXES:

The following summarizes the Company's provision for (benefit from) income
taxes for the years ended September 30:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax provision (benefit):
Federal........................................ $10,871 $(2,806) $(7,667)
State.......................................... 845 17 21
Foreign........................................ -- 267 320
------- ------- -------
Total current provision (benefit)................ 11,716 (2,522) (7,326)
------- ------- -------
Deferred (benefit) provision:
Federal........................................ (2,324) (3,349) 4,570
State.......................................... (350) (1,895) 2,643
Foreign........................................ -- -- 1,178
------- ------- -------
Total deferred (benefit) provision............... (2,674) (5,244) 8,391
------- ------- -------
Total provision for (benefit from) income
taxes.......................................... $ 9,042 $(7,766) $ 1,065
======= ======= =======
</TABLE>

The tax benefit recognized from the Chiptronix acquisition was recorded
directly to stockholders' equity and, therefore, the deferred tax benefit does
not reflect the change in the deferred tax assets in fiscal 1998.

F-19
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

J. INCOME TAXES: (CONTINUED)
The differences between the effective tax rates and the U.S. federal
statutory tax rates were as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
U.S. federal income tax statutory rate........... 35.0% (34.0)% (34.0)%
Change in valuation allowance.................... 0.0 0.0 43.4
State income taxes, net of federal benefit....... 2.9 (2.6) (0.4)
Foreign rate differential........................ 0.3 0.6 (0.1)
U.S. and foreign tax credits..................... (4.1) (2.1) (9.6)
Foreign sales corporation tax benefit............ (2.4) 0.0 0.0
S-corporation income of Equipe................... (9.3) (1.4) 0.0
Acquisition costs not deductible for tax
purposes....................................... 0.0 14.3 3.9
Other............................................ 2.3 (0.4) (0.2)
---- ----- -----
Effective tax rate............................... 24.7% (25.6)% 3.0%
==== ===== =====
</TABLE>

At September 30, the components of net deferred tax assets (liabilities)
were as follows:

<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Gross deferred tax assets:
Bad debts............................................. $ 622 $ 306
Inventory............................................. 5,599 3,087
Compensation.......................................... 270 322
Intangible assets..................................... 2,477 2,338
Tax credits........................................... 3,178 6,890
Canadian R&D and capital cost allowances.............. 9,572 9,884
Net operating losses.................................. 1,069 10,715
Warranty.............................................. 1,559 1,332
Other................................................. 1,519 1,815
-------- --------
Subtotal............................................ 25,865 36,689
-------- --------
Gross deferred tax liabilities:
Long-term contracts................................... (1,753) (993)
Accounts receivable................................... (334) (698)
Depreciation.......................................... (1,719) (1,650)
-------- --------
Subtotal............................................ (3,806) (3,341)
-------- --------
Valuation allowance..................................... (13,668) (33,348)
-------- --------
Net deferred tax assets........................... $ 8,391 $ --
======== ========
</TABLE>

The Company experienced net operating losses during fiscal years 1998 and
1999 and, therefore, believes sufficient uncertainty exists regarding the
realizability of the net deferred tax assets and accordingly has established a
full valuation allowance in fiscal 1999. The net increase in the valuation
allowance during 1998 and 1999 was $2,459,000 and $19,680,000, respectively.

F-20
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

J. INCOME TAXES: (CONTINUED)
At September 30, 1999, the Company had U.S. federal net operating losses
(NOLs) of $43,814,000, of which $19,868,000 is expected to be utilized in full
upon carryback and the remaining amount of $23,946,000 is available to offset
future taxable income. The Company has recorded a tax receivable related to the
NOL carryback claim which is classified in other current assets. Approximately
$8,343,000 of the NOL is attributable to the exercise of stock options for which
the tax benefit and related valuation allowance was recorded directly to
stockholders' equity. The U.S. federal net operating losses are available for
carryforward and expire in fiscal year 2020. The Company also has U.S. federal
credit carryforwards of $1,926,000 that begin to expire in fiscal year 2012. The
Company has available state net operating losses of $39,455,000 that expire in
fiscal year 2004 to fiscal year 2020 and state credit carryforwards of
$2,673,000 that expire beginning in fiscal year 2013. The Company also has
non-U.S. losses of $2,130,000 that expire beginning in fiscal year 2005, and
non-U.S. credits of $3,200,000 that begin to expire in fiscal year 2005.

K. FINANCING ARRANGEMENTS:

REVOLVING CREDIT

On June 16, 1998, the Company entered into a revolving credit facility
agreement with Chase Manhattan Bank (the "Bank"). The revolving credit facility
enables the Company to borrow up to $20,000,000 on an unsecured basis.
Outstanding revolving credit loans bear interest, at the Company's option, at
the 30, 60 or 90 day LIBOR rate plus a credit spread, or at the effective prime
rate. At September 30, 1999, the LIBOR borrowing rate would have been 6.50%. The
ability of the Company to effect borrowings under the revolving credit facility
is conditioned upon the meeting of certain financial criteria. The revolving
credit agreement expires on June 16, 2000. The Company had outstanding letters
of credit with the Bank of $1,875,000 at September 30, 1999, and therefore, the
available balance under this credit agreement was $18,125,000 at September 30,
1999. At September 30, 1999, the Company was not in compliance with certain of
the required covenants but has subsequently received a waiver from the Bank on
November 15, 1999 for the quarter ended September 30, 1999. The Company was in
default of the minimum consolidated net worth requirement, the minimum fixed
charge coverage ratio, and the minimum consolidated net income requirements of
the revolving credit agreement for the three months ended September 30, 1999.
The Company expects to seek future waivers as necessary from the Bank. However,
there can be no assurance that such waivers will be obtained.

Promis' operating line of credit of $2.9 million with the Bank of Nova
Scotia expired on April 30, 1999 and was not renewed. There were no borrowings
against this operating facility while in effect.

CAPITAL LEASE OBLIGATIONS

The Company holds certain property and equipment under capital leases. The
obligations under capital leases represent the present value of future minimum
lease payments and are secured by certain assets of the Company. The capital
lease obligations bear interest at rates of 7.0% to 9.9% per annum and expire at
various dates through July 2002 (see Note F).

L. DEFINED CONTRIBUTION PLANS:

Eligible employees can participate in the Company's 401(k) Savings and
Retirement Plan by making voluntary contributions to the plan in amounts up to
the statutory limit or 15% of their annual compensation. Currently, the Company
has elected to match a portion of the employee deferral up to

F-21
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

L. DEFINED CONTRIBUTION PLANS: (CONTINUED)
certain prescribed limits, and these contributions vest at a rate of 20% per
year. Pursuant to the acquisition of Promis, certain eligible employees receive
Company matching contributions which vest 100% after one year. The Company's
contribution expense under these plans amounted to $780,000, $1,101,000, and
$1,118,000 for fiscal years 1997, 1998 and 1999, respectively. Employees of
Equipe were not eligible under this plan until after the acquisition (see
Note O).

Canadian employees are eligible to participate in the Registered Retirement
Savings Plan ("RRSP") which allows voluntary contributions up to the statutory
limit. The Company has elected to match a portion of the employee contributions,
up to a maximum of $5,000 per employee per year. These contributions are fully
vested when made. The Company's contribution expenses under the RRSP were
approximately $129,000, $148,000, and $172,000 in fiscal years 1997, 1998 and
1999, respectively.

M. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION:

Effective for fiscal year 1999, the Company adopted SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
standard designates the Company's internal organization as used by management
for making operating decisions and assessing performance as the source of
business segments.

The Company operates in three primary segments, all within the semiconductor
manufacturing and OEM equipment supply industry, which serve both domestic and
international markets. These reportable operating segments consist of Factory
Automation Systems, Tool Automation Systems and MES and Other Systems. These
businesses are segregated into their respective reportable segments based on the
Company's management reporting structure and its method of internal resource
allocations. Additionally, the Company's product development processes and
customers were evaluated in determination of the segments.

The Factory Automation Systems segment provides automation products for
interbay, intrabay and lithography automation as well as integration and support
services to semiconductor manufacturers. The Tool Automation Systems segment
provides wafer-handling systems, software and services for process tool
equipment suppliers. The MES and Other Systems segment primarily provides
manufacturing execution system ("MES") software and advanced planning and
scheduling software to semiconductor manufacturers. This segment, however, does
not include all of the Company's software products, as material control software
("MCS") and tool connectivity software are components of the other segments.

The Company's operating segments have no significant intersegment revenues
and expenses, as all segments' revenues are generated from sales to unaffiliated
customers. External revenues and expenses are allocated between the applicable
segments. The Company's segments are evaluated on an operating profit basis, and
other income and expenses and income tax provisions or benefits are not
calculated for the specific segments. Any results of operations or assets not
specifically allocated to these segments are included in the Corporate and Other
category. The Corporate and Other category assets include all non-identifiable
assets, primarily cash and investments, deferred income taxes, and other current
and non-current assets. Activity related to strategic technology development,
corporate marketing, general corporate administrative expenses, merger costs and
special charges, other income and expenses and income taxes are included in the
Corporate and Other segment. Depreciation expense and expenditures for
long-lived assets by segment are not presented below as amounts are not used in
measuring

F-22
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION: (CONTINUED)
segment operating performance by the Company's chief operating decision maker.
The accounting policies of the reportable segments are the same as those
described in Note B, "Summary of Significant Accounting Policies."

SUMMARY OF BUSINESS SEGMENTS

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, THREE MONTHS ENDED
------------------------------ -----------------------------------
1997 1998 1999 DECEMBER 27, 1998 JANUARY 2, 2000
-------- -------- -------- ----------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TOTAL NET REVENUE FROM UNAFFILIATED
CUSTOMERS
Factory Automation Systems............. $169,465 $107,215 $ 70,046 $ 18,704 $32,524
Tool Automation Systems................ 43,694 70,459 41,496 6,608 20,260
MES and Other Systems.................. 22,941 25,871 24,754 4,323 5,909
-------- -------- -------- -------- -------
Total net revenue.................. $236,100 $203,545 $136,296 $ 29,635 $58,693
======== ======== ======== ======== =======
SEGMENT OPERATING PROFIT (LOSS)
Factory Automation Systems............. $ 33,183 $ (3,531) $(21,454) $ (4,543) $(1,632)
Tool Automation Systems................ 9,715 9,781 1,426 (1,502) 4,549
MES and Other Systems.................. 965 (6,785) (3,062) (2,882) (188)

Other reconciling items:
Corporate and other expenses........... (8,547) (30,479) (14,865) (2,333) (2,525)
-------- -------- -------- -------- -------
Consolidated operating profit
(loss)........................... $ 35,316 $(31,014) $(37,955) (11,260) 204
-------- -------- -------- -------- -------
Other income, net...................... 1,223 625 2,935 656 200
-------- -------- -------- -------- -------
Consolidated income (loss) before
income taxes..................... $ 36,539 $(30,389) $(35,020) $(10,604) $ 404
======== ======== ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------
1997 1998 1999
IDENTIFIABLE SEGMENT ASSETS: -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Factory Automation Systems............. $111,804 $ 58,791 $ 52,094
Tool Automation Systems................ 15,087 14,543 19,097
MES and Other Systems.................. 13,481 12,858 9,253
-------- -------- --------
Identifiable segment assets........ 140,372 86,192 80,444
-------- -------- --------
Corporate and other.................... 56,782 81,286 66,108
-------- -------- --------
Consolidated total assets.......... $197,154 $167,478 $146,552
======== ======== ========
</TABLE>

F-23
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION: (CONTINUED)
One customer comprised 10% or more of the Company's total net revenue for
the years ended September 30 as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Customer A (1)................................ 32% 19% 21%
</TABLE>

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

(1) Total net revenue for this customer in fiscal years 1997, 1998, and 1999
were recorded by the Factory Automation Systems segment.

SUMMARY OF GEOGRAPHIC INFORMATION

Information as to the Company's sales in different geographical areas for
the years ended September 30 were as follows (2):

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................. $125,895 $130,718 $ 91,632
Taiwan........................................ 24,442 13,274 6,012
Germany....................................... 4,011 23,699 15,990
Rest of world................................. 81,752 35,854 22,662
-------- -------- --------
Total net revenue........................... $236,100 $203,545 $136,296
======== ======== ========
</TABLE>

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

(2) Sales are attributable to geographic areas based on location of customer.

Long-lived assets, including property and equipment, goodwill, intellectual
property and other intangible assets by geographical areas as of September 30
were as follows (3):

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................. $14,463 $19,149 $17,651
Canada........................................ 5,715 3,711 3,041
Rest of world................................. 430 514 495
-------- -------- --------
Total long-lived assets..................... $20,608 $23,374 $21,187
======== ======== ========
</TABLE>

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

(3) Long-lived assets in countries outside of the United States and Canada are
individually not a significant portion of the Company's assets.

N. ACQUISITION OF PROMIS:

On March 2, 1999, the Company acquired Promis, a Canadian corporation, in a
transaction accounted for as a pooling of interests. Promis is a developer of
manufacturing execution systems ("MES") software solutions for semiconductor and
precision electronics manufacturers. In connection with the acquisition, the
Company issued 0.1353 exchangeable shares for each outstanding Promis share, or
an aggregate of 1,389,974 exchangeable shares. Each exchangeable share may be
exchanged at any time for one share of common stock of the Company. The Company
assumed options to purchase 270,336 shares of the Company's common stock and a
warrant to purchase 13,530 shares of common

F-24
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

N. ACQUISITION OF PROMIS: (CONTINUED)
stock, converted at the common stock exchange ratio, under this acquisition
agreement (see Note H). The consolidated financial statements of the Company for
periods prior to the acquisition have been restated to include the financial
position, results of operations and cash flows of Promis.

Prior to the acquisition, Promis prepared its financial statements based on
a December 31 fiscal year-end. Accordingly, Promis' results of operations,
statements of stockholders' equity and cash flows for the year ended
December 31, 1997 were combined with the Company's results of operations,
statements of stockholders' equity and cash flows for the year ended
September 30, 1997. The results of operations, statements of stockholders'
equity and cash flows for fiscal 1998 are for the twelve months ended
September 30, 1998 for both the Company and Promis. Promis' results of
operations for the three months ended December 31, 1997, including net revenue
of $6,457,000 and net income of $403,000, are included in the Company's
consolidated statements of operations, statements of stockholders' equity, and
cash flows for both the years ended September 30, 1998 and 1997. To conform
fiscal periods, an amount equal to Promis' net income and $33,000 of Promis'
additional paid-in capital from the exercise of stock options for the three
months ended December 31, 1997 were eliminated from the consolidated statement
of stockholders' equity for the year ended September 30, 1998. Additionally,
Promis' $50,000 increase in cash and cash equivalents for the three months ended
December 31, 1997 has been eliminated in the Company's condensed consolidated
statement of cash flows for the year ended September 30, 1998, because this
increase has been included in the beginning cash and cash equivalents at
October 1, 1997.

The following information presents certain statements of operations data of
the Company, after restatement from the Equipe acquisition, and Promis for the
period prior to the Promis acquisition. The Company made certain adjustments, as
shown below, to Promis' accounting policies related to software revenue
recognition under SOP 97-2, "Software Revenue Recognition," and to limit the
life of goodwill in a technology-related acquisition to no more than 10 years:

<TABLE>
<CAPTION>
PRI HISTORICAL ADJUSTED COMBINED
AUTOMATION PROMIS ADJUSTMENT PROMIS COMPANIES
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue for:
Fiscal 1997............................. $213,159 $23,967 $(1,026) $22,941 $236,100
Fiscal 1998............................. 178,193 25,352 -- 25,352 203,545
Three months ended December 27, 1998.... 25,316 4,319 -- 4,319 29,635
Net income (loss) for:
Fiscal 1997............................. $ 26,572 $ 2,073 $(1,148) $ 925 $ 27,497
Fiscal 1998............................. (23,942) 1,319 -- 1,319 (22,623)
Three months ended December 27, 1998.... (5,608) (2,047) -- (2,047) (7,655)
</TABLE>

O. ACQUISITION OF EQUIPE:

On January 22, 1998, the Company acquired Equipe, a worldwide developer,
manufacturer, and supplier of wafer and substrate handling robots, pre-aligners
and controllers for semiconductor process tool manufacturers. The Company issued
4,088,016 shares of its common stock in exchange for all of the outstanding
stock of Equipe Technologies, Inc., using an exchange ratio of 0.760372 of one
share of the Company's common stock for each share of Equipe Technologies, Inc,
and the Company issued 36,000 and 240,000 shares of the Company's common stock
for the common stock of E-Machine, Inc. and Equipe Japan Ltd., respectively. In
addition, all outstanding Equipe stock options were converted,

F-25
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

O. ACQUISITION OF EQUIPE: (CONTINUED)
at the common stock exchange ratio, into options to purchase the Company's
common stock. The business combination was accounted for as a
pooling-of-interests. The consolidated financial statements of the Company for
periods prior to the acquisition have been restated to include the financial
position, results of operations and cash flows of Equipe. Significant
intercompany transactions among the Equipe Combined Companies prior to the
period in which the business combination occurred have been eliminated from the
accompanying financial statements.

Prior to the acquisition, Equipe prepared its financial statements based on
a December 31 fiscal year-end. Accordingly, Equipe's results of operations,
statements of stockholders' equity and cash flows for the year ended
December 31, 1996 were combined with the Company's results of operations,
statements of stockholders' equity and cash flows for the year ended
September 30, 1996. The results of operations, statements of stockholders'
equity and cash flows for fiscal 1997 are for the twelve months ended
September 30, 1997 for both the Company and Equipe. Equipe's results of
operations for the three months ended December 31, 1996 (including revenues, net
income and distributions to shareholders of $6,906,000, $1,582,000 and
$5,287,000, respectively) are included in the Company's consolidated statements
of operations, statements of stockholders' equity and cash flows for both the
years ended September 30, 1997, as presented herein, and 1996. Therefore, an
amount equal to Equipe's net income and distributions to shareholders for the
three months ended December 31, 1996 was eliminated from the consolidated
statement of stockholders' equity for the year ended September 30, 1997.
Equipe's decrease in cash and cash equivalents for the three months ended
December 31, 1996 of $218,000 is included in the consolidated statement of cash
flows for both the years ended September 30, 1997, as presented herein, and
1996. Therefore, this amount was eliminated from the consolidated statement of
cash flows for the year ended September 30, 1997.

Equipe Technologies, Inc. and E-Machine, Inc. were S-corporations for income
tax purposes prior to the acquisition. Pro forma net income (loss) and net
income (loss) per common share, which give effect to adjustments that provide
for income taxes as if Equipe Technologies, Inc. and E-Machine, Inc. had been
treated as C-corporations for the period presented, have been presented on the
consolidated statements of operations. The pro forma information is shown for
comparative purposes only.

The following information presents certain statements of operations data of
the Company and Equipe for the period prior to the Equipe acquisition. The
statements of operations data for Promis is included below so as to reconcile
with the consolidated statements of operations:

<TABLE>
<CAPTION>
PRI COMBINED
AUTOMATION EQUIPE COMPANIES PROMIS CONSOLIDATED
---------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue for:
Fiscal 1997............................. $169,465 $43,694 $213,159 $22,941 $236,100
Three months ended December 28, 1997.... 46,830 18,303 65,133 6,457 71,590
Net income (loss) for:
Fiscal 1997............................. $ 17,076 $ 9,496 $ 26,572 $ 925 $ 27,497
Three months ended December 28, 1997.... (3,449) 3,042 (407) 403 (4)
</TABLE>

P. ACQUISITION OF CHIPTRONIX:

On May 19, 1998, the Company acquired Chiptronix, a Switzerland corporation,
for aggregate non-cash consideration of 105,000 shares of the Company's common
stock. Chiptronix was the European distributor of Equipe products. The business
combination was accounted for as a pooling of

F-26
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P. ACQUISITION OF CHIPTRONIX: (CONTINUED)
interests. However, as the financial position and results of operations of
Chiptronix are immaterial to the financial position and results of operations of
the Company on a consolidated basis, no prior period financial amounts have been
restated. In accordance with this business combination, the Company has acquired
the net liabilities of Chiptronix, in the amount of $1,543,000, including net
cash assumed of $246,000. Additionally, the Company acquired Chiptronix'
retained deficit of $1,556,000 as of March 29, 1998 and this amount is included
in the changes to stockholders' equity for the year ended September 30, 1998.
The results of operations of Chiptronix for the six months ended September 30,
1998 have been included in the accompanying consolidated financial statements of
the Company.

Q. ACQUISITION OF INTERVAL LOGIC CORPORATION:

On October 29, 1997 the Company acquired ILC, a California corporation, for
aggregate non-cash consideration of 111,258 shares of the Company's common
stock. In addition, the Company assumed options to purchase an aggregate of
199,170 shares of the Company's common stock. ILC was formed in 1995 to develop
advanced, high-performance planning and scheduling software solutions for the
semiconductor industry. The value of the transaction was $8,523,000, including
approximately $600,000 of expenses related to the acquisition. $424,000 of net
liabilities of ILC were acquired under this transaction. The Company accounted
for the transaction as a purchase. Pro forma information for the previous period
has been omitted because the effect of restatement would be immaterial.

At the time of the acquisition, the purchase price was allocated to the
tangible and intangible assets of ILC. Management is aware that it is
responsible for estimating the fair value of purchased in-process research and
development. The value assigned to the intangible assets, primarily the acquired
technology, was based on the fair market value using a risk-adjusted discounted
cash flow approach. ILC's sole product at the time of the acquisition was the
Leverage product, which was under development. ILC had no product revenues
during its prior existence and was a development stage enterprise. Specifically,
the purchased technology was evaluated through extensive interviews and analysis
of data concerning the state of the technology and needed developments. This
evaluation of underlying technology acquired considered the inherent
difficulties and uncertainties in completing the development, and thereby
achieving technological feasibility, and the risks related to the viability of
and potential changes in future target markets. The significant assumptions that
affected the valuation of ILC concerned potential revenue and cost of
completion, as well as the timing of the product release. In addition, the
selection of an appropriate discount rate was a major factor in the valuation
analysis.

The revenue assumptions for this product were a key variable in the
Company's valuation analysis. The Company developed revenue projections based on
management's expected release date of March 1999 for the beta version of the
Leverage product. Given that ILC had no historical revenue to rely on as a
guide, the Company based its projections on revenues from a population of
comparable companies. The revenue growth rates projected for the Leverage
product were comparable to the 3-year cumulative average growth rate for the
comparable companies. The costs of completion assumptions for the Leverage
product were a second key variable in the Company's valuation analysis. These
assumptions were based on detailed cost analysis provided by the head of
research and development for ILC, and included assumptions regarding completion
dates for development milestones. The total development effort was estimated to
take approximately 225 engineering man-months at a cost of approximately
$2,800,000. This project included completion of the software requirement
definition, data integration and validation, completion of the graphics user
interface, development of alpha and beta versions for customer testing, and
integration and adaptation with

F-27
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Q. ACQUISITION OF INTERVAL LOGIC CORPORATION: (CONTINUED)
customer systems. The significant further investments in development required to
meet expected customer requirements were substantially completed in the third
quarter of fiscal 1999. The actual development costs have approximated the cost
estimates used in the valuation model.

The acquired technology had not reached technological feasibility at the
time of the acquisition. The Company defines technological feasibility as the
point at which a working model is functioning to designed specifications and has
been placed at a beta test site. The Leverage product was first released to a
beta test site in March 1999. In addition, the technology had no alternative
future use to the Company in other research and development projects or
otherwise. Accordingly, the acquired technology was expensed as in-process
research and development. Based on the methodology described above, the Company
assigned a fair value of $8,417,000 to the technology.

R. ACQUISITION OF MASE:

Effective October 2, 1997, prior to the acquisition of Promis by the
Company, Promis purchased the net assets of MASE Systems, Inc. ("MASE") of San
Jose, California for $1,533,000 in cash. The Company acccounted for the
transaction as a purchase. The net assets of MASE acquired included $170,000 of
net non-cash working capital, $26,000 in net property and equipment, and
$1,337,000 in intellectual property. Pro forma information for the previous
period has been omitted because the effect of restatement on the Company's
results of operations would be immaterial.

S. MERGER COSTS AND SPECIAL CHARGES:

For the year ended September 30, 1999, the Company recorded special charges
of $650,000 in the first quarter. These charges represent provisions for
severance compensation relating to the termination of 62 personnel. The
personnel reductions included 40 in manufacturing and customer support, eight in
engineering, and 14 in selling, general and administrative functions. The
reduction in force occurred in response to the continued downturn in the
semiconductor equipment industry. As of September 30, 1999, all of the severance
compensation had been paid.

For the year ended September 30, 1999, the Company, in the second quarter,
recorded merger costs of $3,950,000 related to the acquisition of Promis,
primarily consisting of legal, accounting and investment banking fees. As of
September 30, 1999, all of these merger costs had been paid. Additionally,
during the second quarter the Company recorded special charges of $1,850,000.
The special charges consisted of $1,406,000 for compensation-related costs for
five management personnel in the selling, general, and administrative functions
to satisfy existing contractual obligations related to the acquired companies;
$196,000 of costs associated with the reductions of leased facilities; and
$248,000 for other legal issues. In the fourth fiscal quarter, the Company
recognized a special credit of $75,000 to adjust the estimated costs to reflect
actual costs. At January 2, 2000, $272,000 of these charges remained in accrued
expenses and are expected to be paid by December 2000.

In connection with the acquisition of Equipe, direct acquisition costs of
$4,490,000 for legal, investment banking and accounting fees were recorded in
fiscal 1998. Approximately $35,000 remained in accrued expenses at January 2,
2000 in connection with these direct acquisition costs and are expected to be
paid by the end of the second fiscal quarter of 2000.

Additionally, during the second, third and fourth quarters of fiscal 1998,
the Company recorded restructuring and other special charges of $5,601,000 in
response to market conditions and to integrate the Equipe operations. The
special charges included provisions for severance compensation of

F-28
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

S. MERGER COSTS AND SPECIAL CHARGES: (CONTINUED)
$1,910,000 resulting from terminations of approximately 244 personnel completed
in 1998. The personnel reductions consisted of 123 in manufacturing and customer
support, 65 in engineering and 56 in sales, general and administrative
functions. In addition, the special charges included costs of $2,943,000
relating to reductions of leased facilities space and a non-cash write-down of
specialized demonstration equipment for a particular customer of $748,000 and
other assets that are not usable elsewhere. Of the total $4,853,000 severance
and lease reduction charges recorded in fiscal 1998, all of these special
charges had been paid as of September 30, 1999.

T. NET INCOME (LOSS) PER SHARE:

A reconciliation between basic and diluted net income (loss) per share is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, THREE MONTHS ENDED
------------------------------ -----------------------------------
1997 1998 1999 DECEMBER 27, 1998 JANUARY 2, 2000
-------- -------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Net income (loss):...................... $27,497 $(22,623) $(36,085) $(7,655) $ 294
Shares used in computation:
Weighted average common shares
outstanding used in computation of
basic net income (loss) per common
share............................... 20,408 20,988 21,628 21,269 22,514
Dilutive effect of stock options and
warrants............................ 1,162 -- -- -- 1,969
------- -------- -------- ------- -------
Shares used in computation of diluted
net income (loss) per common
share............................... 21,570 20,988 21,628 21,269 24,483
======= ======== ======== ======= =======
Basic net income (loss) per common
share............................... $ 1.35 $ (1.08) $ (1.67) $ (0.36) $ 0.01
Diluted net income (loss) per common
share............................... $ 1.27 $ (1.08) $ (1.67) $ (0.36) $ 0.01
</TABLE>

During the years ended September 30, 1998 and 1999, options to purchase
3,545,670 and 3,759,387 shares of common stock were outstanding but were not
included in the computation of diluted net loss per common share because the
Company was in a loss position and, the inclusion of such shares would be
anti-dilutive. Options to purchase 55,281 shares of common stock were
outstanding for fiscal year 1997 but were not included in the computation of
diluted net loss per common share because the options' exercise prices were
greater than the average market price of the common shares, and therefore, would
be anti-dilutive under the treasury stock method.

Options to purchase 768,150 shares of common stock were outstanding as of
January 2, 2000 but were not included in the computation of diluted net income
per common share because the options' exercise prices were greater than the
average market price of the common shares, and therefore, would be anti-dilutive
under the treasury stock method. Options to purchase 3,391,906 shares of common
stock were outstanding as of December 27, 1998, but were not included in the
computation of diluted net loss per common share because the Company was in a
loss position, and the inclusion of such shares would be anti-dilutive.

F-29
<PAGE>
PRI AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U. JOINT VENTURE:

Effective June 1, 1998, the Company entered into a joint venture with
Shinsung Engineering Co. Ltd. ("SEC") and Chung Song Systems Co., Ltd. ("CSSC")
to distribute the Company's products and services in Korea. SEC and CSSC are in
the business of developing and marketing of products and services for the
semiconductor industry. Under the terms of the agreement, the Company owns 80%
of the joint venture and SEC and CSSC each own 10% of the joint venture. The
Company, SEC and CSSC have committed to invest on a pro rata basis 2.6 billion
Korean won, or approximately $2.1 million, based on a September 30, 1999
exchange rate of 1216 Korean won per U.S. dollar, in the joint venture over a
two-year period through June 2000. As of September 30, 1999, the company had
outstanding commitments under this agreement of 1.0 billion Korean won, or
approximately $0.9 million.

As of January 2, 2000, CSSC has withdrawn from the joint venture. The
Company continues to participate in the joint venture with SEC. As of
January 2, 2000, the Company had outstanding commitments under this agreement of
1.2 billion Korean won, or approximately $1.0 million.

F-30
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses payable by PRI in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions. All amounts
shown are estimates except the Securities and Exchange Commission registration
fee and the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
PAYABLE
BY PRI
--------
<S> <C>
Securities and Exchange Commission registration fee......... $ 46,200
National Association of Securities Dealers, Inc. filing
fee....................................................... 18,000
Nasdaq National Market listing fee.......................... 15,000
Printing and engraving expenses............................. 100,000
Transfer agent fees......................................... 5,000
Accounting fees and expenses................................ 75,000
Legal fees and expenses..................................... 200,000
Blue Sky fees and expenses (including related legal fees)... 5,000
Miscellaneous............................................... 35,800
--------
Total................................................. $500,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article 6C of PRI's Restated Articles of Organization provides that PRI
(with certain exceptions) will indemnify and hold harmless to the fullest extent
authorized by the Massachusetts Business Corporation Law each person who was or
is made a party or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (hereinafter a "Proceeding"), by reason of the fact
that he or she is or was (a) a director of PRI, (b) an officer of PRI elected or
appointed by the stockholders or the Board of Directors, or (c) serving, at the
request of PRI as evidenced by a vote of the Board of Directors prior to the
occurrence of the event to which the indemnification relates, as a director,
officer, employee or other agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (such persons described in (a), (b) and (c) are sometimes
hereinafter referred to as an "Indemnitee") against all expense, liability, and
loss reasonably incurred by any such Indemnitee in connection therewith. PRI may
also, to the extent authorized by the Board of Directors, grant rights to
indemnification, and to an advancement of expenses, to any employee or agent of
PRI. Notwithstanding the foregoing, if Massachusetts Business Corporation Law
requires, an advancement of expenses incurred by an Indemnitee will be made only
upon delivery to PRI of an undertaking, by or on behalf of such Indemnitee, to
repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is not further right to appeal that such
Indemnitee is not entitled to be indemnified for such expenses.

The rights under Article 6C may not be amended or terminated so as to
adversely affect an individual's rights with respect to the period prior to such
amendment without the consent of the person entitled to the indemnification
(unless otherwise required by the Massachusetts Business Corporation Law).

Section 67 of Chapter 156B of the Massachusetts Business Corporation Law
authorizes a corporation to indemnify its directors, officers, employees and
other agents unless such person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that

II-1
<PAGE>
his action was in the best interests of the Corporation or to the extent that
such matter relates to service with respect to an employee benefit plan, in the
best interests of the participants of such employee benefit plan.

The effect of these provisions would be to authorize such indemnification by
PRI for liabilities arising out of the Securities Act of 1933 (the "Securities
Act").

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement

4.1 Restated Articles of Organization (filed as Exhibit 3.5 to
PRI's registration statement on Form S-1, File No. 33-81836,
and incorporated herein by reference).

4.2 Articles of Amendment to Restated Articles of Organization
(filed as Exhibit 3.6 to PRI's quarterly report on Form
10-Q, for the quarterly period ended March 30, 1997, File
No. 000-24934, and incorporated herein by reference).

4.3 Articles of Amendment to Restated Articles of Organization
(filed as Exhibit 3.7 to PRI's quarterly report on Form
10-Q, for the quarterly period ended December 28, 1997, File
No. 000-24934, and incorporated herein by reference).

4.4 Articles of Amendment to Restated Articles of Organization.

4.5 Certificate of Designation of Series A Participating
Cumulative Preferred Stock (attached as Exhibit A to the
Rights Agreement filed as Exhibit 4.1 to PRI's current
report on Form 8-K, dated December 7, 1998, File
No. 000-24934, and incorporated herein by reference).

4.6 Rights Agreement dated as of December 9, 1998, between PRI
and State Street Bank and Trust Company, as Rights Agent
(filed as Exhibit 4.1 to PRI's current report on Form 8-K,
dated December 7, 1998, File No. 000-24934, and incorporated
herein by reference).

4.7 Form of Rights Certificate (attached as Exhibit B to the
Rights Agreement filed as Exhibit 4.1 to PRI's current
report on Form 8-K, dated December 7, 1998, File No.
000-24934, and incorporated herein by reference).

5.1 Opinion of Foley, Hoag & Eliot LLP.

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of Ernst & Young LLP, independent auditors.

23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit
5.1).

24.1 Power of Attorney (previously filed).

99.1 Report of Ernst & Young LLP, independent auditors, dated
November 27, 1998 (filed as Exhibit 23.3 to PRI's Annual
Report on Form 10-K for the year ended September 30, 1999
and incorporated herein by reference).
</TABLE>

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

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's

II-2
<PAGE>
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the town of Billerica, Massachusetts, on
April 28, 2000.

<TABLE>
<S> <C> <C>
PRI AUTOMATION, INC.

BY: /S/ MITCHELL G. TYSON
-----------------------------------------
Mitchell G. Tyson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MORDECHAI WIESLER Chairman of the Board and
------------------------------------------- Director April 28, 2000
Mordechai Wiesler*

President, Chief Executive
/s/ MITCHELL G. TYSON Officer and Director
------------------------------------------- (principal executive April 28, 2000
Mitchell G. Tyson officer)

/s/ COSMO S. TRAPANI* Chief Financial Officer
------------------------------------------- (principal financial and April 28, 2000
Cosmo S. Trapani* accounting officer)

/s/ ALEXANDER V. D'ARBELOFF* Director
------------------------------------------- April 28, 2000
Alexander V. d'Arbeloff*

/s/ BORUCH B. FRUSZTAJER* Director
------------------------------------------- April 28, 2000
Boruch B. Frusztajer*

/s/ AMRAM RASIEL* Director
------------------------------------------- April 28, 2000
Amram Rasiel*

/s/ KENNETH M. THOMPSON* Director
------------------------------------------- April 28, 2000
Kenneth M. Thompson*
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ MITCHELL G. TYSON
--------------------------------------
Mitchell G. Tyson
AS ATTORNEY-IN-FACT
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement

4.1 Restated Articles of Organization (filed as Exhibit 3.5 to
PRI's registration statement on Form S-1, File No. 33-81836,
and incorporated herein by reference).

4.4 Articles of Amendment to Restated Articles of Organization.

5.1 Opinion of Foley, Hoag & Eliot LLP.

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of Ernst & Young LLP, independent auditors.

23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit
5.1).

24.1 Power of Attorney (previously filed).

<PAGE>

_______________ SHARES

PRI AUTOMATION, INC.

COMMON STOCK, $0.01 PAR VALUE PER SHARE

UNDERWRITING AGREEMENT

__________, 2000

<PAGE>

_____________, 2000

Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Banc of America Securities LLC
CIBC World Markets Corp.
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036

Dear Sirs and Mesdames:

PRI Automation, Inc., a Massachusetts corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule II
hereto (the "UNDERWRITERS"), and certain shareholders of the Company (the
"SELLING SHAREHOLDERS") named in Schedule I hereto severally propose to sell to
the several Underwriters, an aggregate of _______________ shares of the Common
Stock, $0.01 par value per share, of the Company (the "FIRM SHARES"), of which
___________ shares are to be issued and sold by the Company and _________ shares
are to be sold by the Selling Shareholders, each Selling Shareholder selling the
amount set forth opposite such Selling Shareholder's name in Schedule I hereto.

The Company also proposes to issue and sell to the several Underwriters
not more than an additional ______________ shares of its Common Stock, $0.01 par
value per share (the "ADDITIONAL SHARES") if and to the extent that you, as
Managers of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "SHARES." The shares of Common
Stock, $0.01 par value per share, of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK." The Company and the Selling Shareholders are hereinafter
sometimes collectively referred to as the "SELLERS."

The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the

<PAGE>

information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION
STATEMENT"; the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS" (including, in the case of all
references to the Registration Statement and the Prospectus, documents
incorporated therein by reference). If the Company has filed an abbreviated
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"),
then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed
to include such Rule 462 Registration Statement.

1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Underwriters that:

(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.

(b) (i) Each document, if any, filed or to be filed pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) the
Registration Statement, when it became effective, did not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.

(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to

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<PAGE>

transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

(d) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens, encumbrances,
equities or claims.

(e) This Agreement has been duly authorized, executed and
delivered by the Company.

(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.

(g) The shares of Common Stock (including the Shares to be
sold by the Selling Shareholders) outstanding prior to the issuance of
the Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable.

(h) The Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights.

(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification

-3-
<PAGE>

with, any governmental body or agency is required for the performance
by the Company of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.

(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).

(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.

(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.

(m) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.

(n) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in

-4-
<PAGE>

the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.

(p) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.

(q) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.

(r) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem (that is, any significant risk that computer hardware or
software applications used by the Company and its subsidiaries will
not, in the case of dates or time periods occurring after December 31,
1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000); as a result of such
review, (i) the Company has no reason to believe, and does not believe,
that (A) there are any issues related to the Company's preparedness to
address the Year 2000 Problem that are of a character required to be
described or referred to in the Registration Statement or Prospectus
which have not been accurately described in the Registration Statement
or Prospectus and (B) the Year 2000 Problem will have a material
adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company and its subsidiaries,
taken as a whole, or result in any material loss or interference with
the business or operations of the Company and its subsidiaries, taken
as a whole; and (ii) the Company reasonably believes, after due
inquiry, that the suppliers, vendors, customers or other material third
parties used or served by the Company and such subsidiaries are
addressing or will address the Year 2000 Problem in a timely manner,
except to the extent that a failure to address the Year 2000 Problem by
any supplier, vendor, customer or material third party would not have a
material adverse effect

-5-
<PAGE>

on the condition, financial or otherwise, or on the earnings, business
or operations of the Company and its subsidiaries, taken as a whole.

(s) The Shares have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance.

(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business
now operated by them, and, except as described in the Prospectus,
neither the Company nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
material adverse affect on the Company and its subsidiaries, taken as a
whole.

2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each of
the Selling Shareholders, severally and not jointly, represents and warrants to
and agrees with each of the Underwriters that:

(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Shareholder.

(b) The execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations
under, this Agreement, the Custody Agreement signed by such Selling
Shareholder and the Company, as Custodian, relating to the deposit of
the Shares to be sold by such Selling Shareholder (the "CUSTODY
AGREEMENT") and the Power of Attorney appointing certain individuals as
such Selling Shareholder's attorneys-in-fact to the extent set forth
therein, relating to the transactions contemplated hereby and by the
Registration Statement (the "POWER OF ATTORNEY") will not contravene
any provision of applicable law, or the certificate of incorporation
(or similar charter) or by-laws of such Selling Shareholder (if such
Selling Shareholder is a corporation), or any agreement or other
instrument binding upon such Selling Shareholder or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over such Selling Shareholder, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of its
obligations under this Agreement or the Custody Agreement or Power of
Attorney of such Selling Shareholder, except such as may be required by
the securities or

-6-
<PAGE>

Blue Sky laws of the various states in connection with the offer and
sale of the Shares.

(c) Such Selling Shareholder has, and on the Closing Date will
have, valid title to the Shares to be sold by such Selling Shareholder
and the legal right and power, and all authorization and approval
required by law, to enter into this Agreement, the Custody Agreement
and the Power of Attorney and to sell, transfer and deliver the Shares
to be sold by such Selling Shareholder.

(d) The Shares to be sold by such Selling Shareholder pursuant
to this Agreement have been duly authorized and are validly issued,
fully paid and non-assessable.

(e) The Custody Agreement and the Power of Attorney have been
duly authorized, executed and delivered by such Selling Shareholder and
are valid and binding agreements of such Selling Shareholder.

(f) Delivery of the Shares to be sold by such Selling
Shareholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances.

(g) Such Selling Shareholder has reviewed the Registration
Statement and the Prospectus and such Selling Shareholder (i) has no
reason to believe that the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) has no reason to
believe that the Prospectus contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, provided, however, that the representations
and warranties set forth in this paragraph 2(g) do not apply to
statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use
therein.

3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at $______ a share (the "PURCHASE
PRICE") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm

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<PAGE>

Shares set forth in Schedule II hereto opposite the name of such Underwriter
bears to the total number of Firm Shares.

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule II hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.

The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing or (C) the issuance by the Company of
shares of Common Stock or options to purchase shares of Common Stock issued
pursuant to the Company's stock plans as described in the Prospectus. The
Company agrees that, without the prior written consent of Morgan Stanley, it
will not, during the period ending 90 days after the date of the Prospectus,
file or cause to become effective any registration statement relating to any
securities of the Company, including a registration statement registering shares
under any of the Company's stock plans or other employee benefit plans.

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<PAGE>

Each Selling Shareholder hereby agrees to execute and deliver on or
before the Closing Date a "lock-up" agreement substantially in the form of
Exhibit A hereto. In addition, each Selling Shareholder agrees that, without the
prior written consent of Morgan Stanley on behalf of the Underwriters, it will
not, during the period ending 90 days after the date of the Prospectus, make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.

4. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.

5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by each
Seller shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on ____________, 2000, or at such other time on the same or such other
date, not later than _________, 2000, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "CLOSING
DATE".

Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 3 or at such other time on the same or on such other
date, in any event not later than _______, 2000, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE".

Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.

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<PAGE>

6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Sellers to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:30 p.m. (New York City time) on the date hereof.

The several obligations of the Underwriters are subject to the
following further conditions:

(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:

(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and

(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated
in the Prospectus.

(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in Section 6(a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.

The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.

(c) The Underwriters shall have received on the Closing Date
an opinion of Foley, Hoag & Eliot LLP, outside counsel for the Company,
dated the Closing Date, to the effect that:

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<PAGE>

(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole;

(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole;

(iii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;

(iv) the shares of Common Stock (including the Shares
to be sold by Selling Shareholders) outstanding prior to the
issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;

(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims;

(vi) the Shares to be sold by the Company have been
duly authorized and, when issued and delivered in accordance
with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights;

(vii) this Agreement has been duly authorized,
executed and delivered by the Company;

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<PAGE>

(viii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the
Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of
the Shares;

(ix) the statements (A) in the Prospectus under the
captions "Related Party Transactions" and "Underwriters" and
(B) in the Registration Statement in Item 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;

(x) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required;

(xi) the Company is not and, after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
required to register as an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;

(xii) the Company and its subsidiaries (A) are in
compliance with any and all applicable Environmental Laws, (B)
have received all permits, licenses or other approvals
required of them under applicable

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<PAGE>

Environmental Laws to conduct their respective businesses and
(C) are in compliance with all terms and conditions of any
such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries,
taken as a whole; and

(xiii) such counsel (A) is of the opinion that each
document, if any, filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and
the Prospectus (except for financial statements and schedules
as to which such counsel need not express any opinion)
complied when so filed as to form in all material respects
with the Exchange Act, and the applicable rules and
regulations of the Commission thereunder, (B) is of the
opinion that the Registration Statement and Prospectus (except
for financial statements and schedules and other financial
data derivable from the financial statements and included
therein, as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder, (C) has no reason to believe that
(except for financial statements and schedules and other
financial data derivable from the financial statements and as
to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at
the time the Registration Statement became effective contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading and (D) has no
reason to believe that (except for financial statements and
schedules and other financial data derivable from the
financial statements and as to which such counsel need not
express any belief) the Prospectus contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.

(d) The Underwriters shall have received on the Closing Date
an opinion of __________________, Ontario counsel for the Company,
dated the Closing Date, to the effect that:

(i) ________________________ (the "Ontario
Subsidiary") has been duly incorporated, is validly existing
as a corporation under the laws of Ontario, has the corporate
power and authority to own its property and to conduct its
business as now conducted and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct

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<PAGE>

of its business or its ownership or leasing of property
requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;

(ii) all of the issued shares of capital stock of the
Ontario Subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens,
encumbrances, equities or claims, and there are no options,
warrants or rights to purchase, or other agreements or
obligations to issue, or rights to convert any obligation into
any shares of capital stock or ownership interest in the
Ontario Subsidiary; and

(iii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Ontario Subsidiary is a party or to which any of
the properties of the Ontario Subsidiary is subject.

(e) The Underwriters shall have received on the Closing Date
an opinion of _____________________, ____________ counsel for the
Company, dated the Closing Date, to the effect that:

(i) ________________ (the "______________
Subsidiary") has been duly incorporated, is validly existing
as a corporation under the laws of ________________, has the
corporate power and authority to own its property and to
conduct its business as now conducted and is duly qualified to
transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;

(ii) all of the issued shares of capital stock of the
_______________ Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims, and there are no
options, warrants or rights to purchase, or other agreements
or obligations to issue, or rights to convert any obligation
into any shares of capital stock or ownership interest in the
_________________ Subsidiary; and

(iii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the

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<PAGE>

_____________ Subsidiary is a party or to which any of the
properties of the _______________ Subsidiary is subject.

(f) The Underwriters shall have received on the Closing Date
an opinion of Foley, Hoag & Elliot LLP, counsel for each of the Selling
Shareholders, dated the Closing Date, to the effect that:

(i) this Agreement has been duly authorized, executed
and delivered by or on behalf of each of the Selling
Shareholders;

(ii) the execution and delivery by each Selling
Shareholder of, and the performance by such Selling
Shareholder of its obligations under, this Agreement and the
Custody Agreement and Powers of Attorney of such Selling
Shareholder will not contravene any provision of applicable
law, or the certificate of incorporation or by-laws of such
Selling Shareholder (if such Selling Shareholder is a
corporation), or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon such Selling
Shareholder or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Selling Shareholder, and
no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of
its obligations under this Agreement or the Custody Agreement
or Power of Attorney of such Selling Shareholder, except such
as may be required by the securities or Blue Sky laws of the
various states in connection with offer and sale of the
Shares;

(iii) each of the Selling Shareholders has sole and
exclusive rights and interests in and to the Shares to be sold
by such Selling Shareholder and the legal right and power, and
all authorization and approval required by law, to enter into
this Agreement and the Custody Agreement and Power of Attorney
of such Selling Shareholder and to sell, transfer and deliver
the Shares to be sold by such Selling Shareholder;

(iv) the Custody Agreement and the Power of Attorney
of each Selling Shareholder have been duly authorized,
executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder; and

(v) upon the Underwriters obtaining control of the
Shares to be sold by the Selling Shareholders, and assuming
the Underwriters acquired such Shares for value and without
notice of any adverse claim to such Shares within the meaning
of Section 8-102 of the Uniform Commercial

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<PAGE>

Code as in effect in The Commonwealth of Massachusetts, the
Underwriters will have acquired all rights of the Selling
Shareholders in such Shares free of any adverse claim, any
lien in favor of the Company and any restrictions on transfer
imposed by the Company.

(g) The Underwriters shall have received on the Closing Date
an opinion of Testa, Hurwitz & Thibeault, LLP, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to
in Sections 6(c)(vi), 6(c)(vii), 6(c)(ix) (but only as to the
statements in the Prospectus under "Underwriters") and clauses (B), (C)
and (D) of 6(c)(xiii) above.

With respect to Section 6(c)(xiii) above, Foley, Hoag & Eliot
LLP may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and documents
incorporated by reference and review and discussion of the contents
thereof, but are without independent check or verification, except as
specified. With respect to clauses (B), (C) and (D) of Section
6(c)(xiii) above, Testa, Hurwitz & Thibeault, LLP may state that their
opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto (other than the documents
incorporated by reference), but are without independent check or
verification, except as specified. With respect to Section 6(f) above,
Foley, Hoag & Eliot LLP may rely upon an opinion or opinions of counsel
for any Selling Shareholders and, with respect to factual matters and
to the extent such counsel deems appropriate, upon the representations
of each Selling Shareholder contained herein and in the Custody
Agreement and Power of Attorney of such Selling Shareholder and in
other documents and instruments; PROVIDED that (A) each such counsel
for the Selling Shareholders is satisfactory to your counsel, (B) a
copy of each opinion so relied upon is delivered to you and is in form
and substance satisfactory to your counsel, (C) copies of such Custody
Agreements and Powers of Attorney and of any such other documents and
instruments shall be delivered to you and shall be in form and
substance satisfactory to your counsel and (iv) Foley, Hoag & Eliot LLP
shall state in their opinion that they are justified in relying on each
such other opinion.

The opinion of Foley, Hoag & Eliot LLP, __________ and
__________ described in Section 6(c), 6(d), 6(e) and 6(f) above shall
be rendered to the Underwriters at the request of the Company or one of
the Selling Shareholders, as the case may be, and shall so state
therein.

(h) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from

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<PAGE>

PricewaterhouseCoopers LLP, independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; PROVIDED that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.

(i) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.

The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.

7. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:

(a) To furnish to you, without charge, six (6) signed copies
of the Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter a
conformed copy of the Registration Statement (without exhibits thereto
but including documents incorporated by reference) and to furnish to
you in New York City, without charge, prior to 10:00 a.m. New York City
time on the business day next succeeding the date of this Agreement and
during the period mentioned in Section 7(c) below, as many copies of
the Prospectus, any documents incorporated by reference and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request. The terms "supplement" and "amendment" or
"amend" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the
Exchange Act that are deemed to be incorporated by reference in the
Prospectus.

(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable

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<PAGE>

period specified in Rule 424(b) under the Securities Act any prospectus
required to be filed pursuant to such Rule.

(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.

(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.

(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending ________, 2001 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.

8. EXPENSES. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Sellers agree to
pay or cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel, the Company's accountants and counsel for the
Selling Shareholders in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in connection
with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state

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<PAGE>

securities laws as provided in Section 7(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and the reasonable fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to listing the
Shares on the Nasdaq National Market and the Toronto Stock Exchange, (vi) the
cost of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the costs and
expenses of the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show, (ix) all expenses in connection with any offer
and sale of the Shares outside of the United States, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with offers and sales outside of the United States, and (x) all other
costs and expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 9 entitled
"Indemnity and Contribution", and the last paragraph of Section 11 below, the
Underwriters will pay all of their costs and expenses, including fees and
disbursements of their counsel, stock transfer taxes payable on resale of any of
the Shares by them and any advertising expenses connected with any offers they
may make.

The provisions of this Section shall not supersede or otherwise affect
any agreement that the Sellers may otherwise have for the allocation of such
expenses among themselves.

9. INDEMNITY AND CONTRIBUTION. (a) The Sellers, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the

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<PAGE>

statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein. Notwithstanding anything contained herein to the
contrary, the aggregate liability of any Selling Shareholder under this Section
9(a) shall be limited to the gross proceeds from the sale of Shares by such
Selling Shareholder hereunder.

(b) Each Selling Shareholder agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Selling Shareholder furnished
in writing by or on behalf of such Selling Shareholder expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto. Notwithstanding
anything contained herein to the contrary, the aggregate liability of
each Selling Shareholder under this Section 9(b) shall be limited to
the gross proceeds from the sale of Shares by such Selling Shareholder
hereunder.

(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Shareholders, the
directors of the Company, the officers who sign the Registration
Statement and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company and each Selling Shareholder
to such Underwriter, but only with reference to information relating to
such Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments
or supplements thereto.

(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 9(a), or 9(b) or
9(c), such person (the "INDEMNIFIED PARTY") shall promptly notify the
person against whom such indemnity may be

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<PAGE>

sought (the "INDEMNIFYING PARTY") in writing and the indemnifying
party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate
in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if
any, who control any Underwriter within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, (ii) the
fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section and (iii) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all Selling Shareholders and all persons, if any, who
control any Selling Shareholder within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the
Underwriters and such control persons of any Underwriters, such firm
shall be designated in writing by Morgan Stanley. In the case of any
such separate firm for the Company, and such directors, officers and
control persons of the Company, such firm shall be designated in
writing by the Company. In the case of any such separate firm for the
Selling Shareholders and such control persons of any Selling
Shareholders, such firm shall be designated in writing by the persons
named as attorneys-in-fact for the Selling Shareholders under the
Powers of Attorney. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the

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<PAGE>

aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior
to the date of such settlement. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which
any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
proceeding.

(e) To the extent the indemnification provided for in Section
9(a), 9(b) or 9(c) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph,
in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other hand
from the offering of the Shares or (ii) if the allocation provided by
clause 9(e)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 9(e)(i) above but also the relative fault of the
indemnifying party on the one hand and of the indemnified party or
parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Sellers on the one hand and the Underwriters
on the other hand in connection with the offering of the Shares shall
be deemed to be in the same respective proportions as the net proceeds
from the offering of the Shares (before deducting expenses) received by
each Seller and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on
the cover of the Prospectus, bear to the aggregate Public Offering
Price of the Shares. The relative fault of the Sellers on the one hand
and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Sellers or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute
pursuant to this Section 9 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.

(f) The Sellers and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 9 were
determined by PRO RATA allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable

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<PAGE>

considerations referred to in Section 9(e). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section
9 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in
equity.

(g) Any payment obligation of the Selling Stockholders under
this Section 9 shall be limited to the amount of losses, claims,
damages and liabilities that are not paid by the Company pursuant to
Section 9, and any payment by the Selling Stockholders under this
Section 9 shall not be required until after demand for payment has been
made by the Underwriters first upon the Company and such payment has
not been made by the Company within thirty (30) days of such demand,
PROVIDED, HOWEVER, that this clause (g) shall not apply with respect to
any Selling Stockholder in the event and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus
or the Prospectus, or any amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to such
Selling Stockholder furnished to the Company by such Selling
Stockholder specifically for use in the preparation thereof.

(h) The indemnity and contribution provisions contained in
this Section 9 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, any Selling
Shareholder or any person controlling any Selling Shareholder, or the
Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Shares.

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<PAGE>

10. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 10(a)(i) through 10(a)(iv), such event, singly
or together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.

11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; PROVIDED that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
number of Shares without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional

-24-
<PAGE>

Shares and the aggregate number of Additional Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.

12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

13. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.

14. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.

Very truly yours,

PRI AUTOMATION, INC.

By: ____________________________
Name: Mitchell G. Tyson
Title: President and Chief Executive Officer

The Selling Shareholders named in
Schedule I hereto acting severally

-25-
<PAGE>

By: ____________________________
Attorney-in-Fact

Accepted as of the date hereof:

Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Banc of America Securities LLC
CIBC World Markets Corp.
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.

By: Morgan Stanley & Co. Incorporated

By: __________________________
Name:
Title:

-26-
<PAGE>

SCHEDULE I

NUMBER OF FIRM
SHARES TO BE SOLD
-----------------
<S> <C>
Company ..................................................

SELLING SHAREHOLDERS:

Mitchell G. Tyson..........................................
Mordechai Wiesler..........................................
Mem & Mem Associates, LP...................................
Amram Rasiel...............................................

Total ..............................................

</TABLE>

<PAGE>

SCHEDULE II

NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
<S> <C>
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Banc of America Securities LLC
CIBC World Markets Corp.
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
---------------
Total ........
===============

</TABLE>

<PAGE>

EXHIBIT A

[FORM OF LOCK-UP LETTER]

_____________, 2000

Dear Sirs and Mesdames:

The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with PRI Automation, Inc., a Massachusetts corporation
(the "COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by
the several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of
shares (the "SHARES") of the Common Stock, $0.01 par value per share, of the
Company (the "COMMON STOCK") by the Company and Selling Shareholders.

To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 90 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not

<PAGE>

apply to (a) the sale of any Shares to the Underwriters pursuant to the
Underwriting Agreement or (b) transactions relating to shares of Common Stock or
other securities acquired in open market transactions after the completion of
the Public Offering. In addition, the undersigned agrees that, without the prior
written consent of Morgan Stanley on behalf of the Underwriters, it will not,
during the period commencing on the date hereof and ending 90 days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.

Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.

Very truly yours,

-------------------------
Signature

-------------------------
(Print Name)

-------------------------
(Address)

-2-

\<PAGE>

EHXIBIT 4.4

FEDERAL IDENTIFICATION
NO. 04-2495703

THE COMMONWEALTH OF MASSACHUSETTS
Examiner
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512

ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
Name
Approved
We, Mitchell G. Tyson , *President/
-----------------------------------------------------------

and Robert L. Birnbaum , *Clerk/
--------------------------------------------------------------

of PRI Automation, Inc
------------------------------------------------------------------------,
(EXACT NAME OF CORPORATION)

located at 850 Middlesex Turnpike, Billerica, MA 01821
----------------------------------------------------------------,
(STREET ADDRESS OF CORPORATION IN MASSACHUSETTS)

certify that these Articles of Amendment affecting articles numbered:

3
---------------------------------------------------------------------------
(NUMBER THOSE ARTICLES 1, 2, 3, 4, 5 AND/OR 6 BEING AMENDED)

of the Articles of Organization were duly adopted at a meeting held on
March 10, 2000, by vote of:

16,349,749 shares of Common Stock, $0.01 par value per share
---------- ---------------------------------------
(TYPE, CLASS & SERIES, IF ANY)

of 22,780,837 shares outstanding,
----------

shares of of shares outstanding, and
----- ------------------------------ ------
(TYPE, CLASS & SERIES, IF ANY)

shares of of shares outstanding,
------- -------------------------------- ------
(TYPE, CLASS & SERIES, IF ANY)

C -
P -
M - (1)** being at least a majority of each type, class or series
R.A. - outstanding and entitled to vote thereon:/and of each type, class or
series of stock whose rights are adversely affected thereby:

*DELETE THE INAPPLICABLE WORDS. **DELETE THE INAPPLICABLE CLAUSE.
(1)FOR AMENDMENTS ADOPTED PURSUANT TO CHAPTER 156B, SECTION 70.
(2)FOR AMENDMENTS ADOPTED PURSUANT TO CHAPTER 156B, SECTION 71.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE
8 1/2 X 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH.
- ----- ADDITIONS TO MORE THAN ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO
P.C. LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS CLEARLY INDICATED.

<PAGE>

To CHANGE the number of shares and the par value (if any) of any type, class
or series of stock which the corporation is authorized to issue, fill in the
following:

The total PRESENTLY authorized is:

- ------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------------------------------------------------
Common: Common: 50,000,000 $ 0.01
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
Preferred: Preferred: 400,000 $ 0.01
- ------------------------------------------------------------------------------

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

CHANGE the total authorized to:

- ------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------------------------------------------------
Common: Common: 75,000,000 $ 0.01
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
Preferred: Preferred: 400,000 $ 0.01
- ------------------------------------------------------------------------------

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

<PAGE>

The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a LATER effective date not more than THIRTY DAYS after such
filing, in which event the amendment will become effective on such later date.

Later effective date:
------------------------------------

SIGNED UNDER THE PENALTIES OF PERJURY, this 10th day of March, 2000
---- -----------

/s/ Mitchell G. Tyson , *President/
-----------------------------------------------------------

/s/ Robert L. Birnbaum , *Clerk/
-----------------------------------------------------------

*DELETE THE INAPPLICABLE WORDS

<PAGE>

Exhibit 5.1

FOLEY, HOAG & ELIOT LLP
[LETTERHEAD]

April 28, 2000

PRI Automation, Inc.
805 Middlesex Turnpike
Billerica, MA 01821-3986

Ladies and Gentlemen:

We are familiar with the Registration Statement on Form S-3, File No.
333-34584, as amended by Amendments No. 1 and No. 2 (the "Registration
Statement") filed by PRI Automation, Inc., a Massachusetts corporation (the
"Company"), with the Securities and Exchange Commission under the Securities Act
of 1933, as amended. The Registration Statement relates to the proposed offering
by the Company of 1,688,750 shares (the "Company Shares") of its common stock,
par value $0.01 per share ("Common Stock"), assuming the exercise in full of the
over-allotment option described in the Registration Statement, and the proposed
offering by certain stockholders of the Company of 525,000 shares (the "Selling
Stockholder Shares" and together with the Company Shares, the "Shares") of
Common Stock, all of which Selling Stockholder Shares are issued and outstanding
or issuable upon the exercise of outstanding stock options.

In arriving at the opinion expressed below, we have examined and relied
on the following documents:

1. The Restated Articles of Organization, as amended, and the Amended and
Restated By-Laws of the Company.

2. The records of meetings and consents of the Board of Directors and
stockholders of the Company provided to us by the Company.

In addition, we have examined and relied on the originals or copies
certified or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.

<PAGE>

Based upon the foregoing, it is our opinion that:

3. The Company has corporate power adequate for the issuance of the
Company Shares in accordance with the Registration Statement.

4. The Company has taken all necessary corporate action required to
authorize the issuance and sale of the Company Shares.

5. The Selling Stockholder Shares that are issued and outstanding on the
date hereof are legally issued, fully paid and non-assessable. When
certificates for any Selling Stockholder Shares issuable upon the
exercise of options have been duly executed and countersigned, and
delivered against due receipt of the exercise price therefor as
described in the options relating thereto, such Selling Stockholder
Shares will be legally issued, fully paid and non-assessable.

6. When certificates for the Company Shares have been duly executed and
countersigned, and delivered against due receipt of consideration
therefor as described in the Registration Statement, the Company Shares
will be legally issued, fully paid and non-assessable.

We here consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus forming part of the Registration Statement.

Sincerely,

Foley, Hoag & Eliot LLP

By: /s/ Robert W. Sweet, Jr.
--------------------------------
Robert W. Sweet, Jr., a partner

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement of Amendment
No. 2 to Form S-3 of our report dated November 15, 1999, relating to the
financial statements of PRI Automation, Inc., which appears in such
Registration Statement. We also consent to the incorporation by reference of
our report dated November 15, 1999 relating to the financial statement
schedule, which appears in PRI Automation, Inc.'s Annual Report on Form 10-K
for the year ended September 30, 1999. We also consent to the references to
us under the headings "Experts" and "Selected Consolidated Financial Data" in
such Registration Statement.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts
April 28, 2000

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report dated February 27, 1998 with respect to
the financial statements of Promis Systems Corporation Ltd. as at December
31, 1997 and for the year ended December 31, 1997 included in Amendment No. 2
to the registration statement on Form S-3 of PRI Automation, Inc. dated April
28, 2000.

/s/ Ernst & Young LLP

Chartered Accountants
Toronto, Canada
April 28, 2000