MATTSON TECHNOLOGY INC
PRER14A, 1997-05-30
SPECIAL INDUSTRY MACHINERY, NEC
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<PAGE>
   
                                AMENDMENT NO. 1
                                       TO
                            SCHEDULE 14A INFORMATION
    
                  Proxy Statement Pursuant to Section 14(a) of
                      the Securities Exchange Act of 1934
 
    Filed by the Registrant /X/
    Filed by a Party other than Registrant / /
 
    Check the appropriate box:
    /X/  Preliminary Proxy Statement
    / /  Confidential, for Use of the Commission Only (as permitted by Rule
         14a-6(e)(2))
    / /  Definitive Proxy Statement
    / /  Definitive Additional Materials
    / /  Soliciting Material Pursuant to Section240.14a-11(c) or
         Section240.14a-12
 
                                   MATTSON TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
                                    MATTSON TECHNOLOGY, INC.
                                    3550 WEST WARREN AVENUE
                                   FREMONT, CALIFORNIA 94538
- --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)
 
Payment of Filing Fee (Check the appropriate box):
 
/X/  No fee required.
/ /  $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
     Item 22(a)(2) of Schedule 14A.
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
     and 0-11.
     (1) Title of each class of securities to which transaction applies:
         -----------------------------------------------------------------------
     (2) Aggregate number of securities to which transaction applies:
         -----------------------------------------------------------------------
     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
         filing fee is calculated and state how it was determined):
         -----------------------------------------------------------------------
     (4) Proposed maximum aggregate value of transaction:
         -----------------------------------------------------------------------
     (5) Total fee paid:
         -----------------------------------------------------------------------
/ /  Fee paid previously with preliminary materials.
/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
     (1) Amount Previously Paid:
         -----------------------------------------------------------------------
     (2) Form, Schedule or Registration Statement No.:
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     (3) Filing Party:
         -----------------------------------------------------------------------
     (4) Date Filed:
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<PAGE>
                                PRELIMINARY COPY
 
                                     [LOGO]
 
                            3550 WEST WARREN AVENUE
                           FREMONT, CALIFORNIA 94538
 
                            ------------------------
 
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD JULY 24, 1997
 
                            ------------------------
 
    The Annual Meeting of Shareholders of Mattson Technology, Inc. (the
"Company") will be held at the Newark Hilton, 39900 Balentine Drive, Newark,
California 94560 on July 24, 1997, at 9:30 a.m. for the following purposes:
 
1.  To elect five (5) directors of the Company to serve until their respective
    successors are elected and qualified.
 
   
2.  To approve the reincorporation of the Company in the State of Delaware and
    other related changes to the rights of shareholders.
 
3.  Subject to the approval of Proposal Two, to approve certain additional
    anti-takeover measures under the Company's Delaware Certificate of
    Incorporation (as defined herein) and Delaware Bylaws (as defined herein) as
    follows:
 
    A. To approve the elimination of cumulative voting for the election of
       directors.
 
    B.  To approve a classified board of directors removable only for cause.
 
    C.  To approve the elimination of action by written consent.
 
    D. To approve certain limitations on the ability to call special meetings.
 
    E.  To approve super-majority vote requirements for certain amendments to
       the Delaware Certificate and Delaware Bylaws.
 
4.  To approve an amendment and restatement of the Company's 1989 Stock Option
    Plan with an increase in the number of shares reserved for issuance
    thereunder by 300,000 shares.
 
5.  To approve an increase in the number of shares reserved for issuance under
    the Company's 1994 Employee Stock Purchase Plan by 400,000 shares.
 
6.  To ratify the selection of Price Waterhouse LLP as independent accountants
    for the fiscal year ending December 31, 1997.
 
7.  To transact such other business as may properly come before the meeting or
    any adjournment or postponement of the meeting.
    
    Only shareholders of record at the close of business on June 16, 1997 will
be entitled to vote at the meeting. Each of these shareholders is cordially
invited to be present and vote at the meeting in person.
 
                                          By Order of the Board of Directors,
                                          Richard S. Mora, SECRETARY
 
Fremont, California
June 23, 1997
 
 YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU
 PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE
 ACCOMPANYING PROXY AND MAIL IT PROMPTLY IN THE RETURN ENVELOPE TO ASSURE THAT
 YOUR SHARES ARE REPRESENTED AT THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR
 PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
<PAGE>
                                PRELIMINARY COPY
 
                            MATTSON TECHNOLOGY, INC.
 
                             3550 WEST WARREN AVE.
                           FREMONT, CALIFORNIA 94538
 
                            ------------------------
 
                              PROXY STATEMENT FOR
                         ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD JULY 24, 1997
 
                            ------------------------
 
                              GENERAL INFORMATION
 
    Your proxy in the enclosed form is solicited by the directors of Mattson
Technology, Inc., a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on July 24, 1997 (the "Meeting") for
the purposes set forth in the accompanying notice and at any adjournment or
postponement of that meeting. The date of this Proxy statement is June 23, 1997,
the approximate date on which this Proxy Statement and accompanying form of
proxy were first sent or given to shareholders.
 
    The shares represented by any proxy in the enclosed form will be voted in
accordance with the instructions given on the proxy if the proxy is properly
executed and is received by the Company prior to the close of voting at the
Meeting or any adjournment or postponement thereof. Proxies received by the
Company on which no contrary instruction has been given will be voted in
accordance with the recommendations of the Board of Directors for each proposal.
A shareholder giving a proxy has the power to revoke it at any time before it is
exercised. A proxy may be revoked by filing with the Secretary of the Company an
instrument revoking it or a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if the person executing the proxy is
present at the meeting and votes in person.
 
    Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names which are beneficially
owned by others (the "Record Holders") to forward to such beneficial owners. In
addition, the Company may reimburse such persons for their cost of forwarding
the solicitation material to such beneficial owners. Original solicitation of
proxies by mail may be supplemented, if deemed desirable or necessary, by one or
more of telephone, telegram, facsimile, or personal solicitation by directors,
officers, or employees of the Company. No additional compensation will be paid
for any such services. The Company reserves the right, if deemed desirable or
necessary, to retain a proxy solicitation firm to deliver soliciting materials
to Record Holders for distribution by them to their principals and to assist the
Company in collecting proxies from such holders. The costs of these services,
exclusive of out-of-pocket costs, is not expected to exceed $6,000. Except as
described above, the Company does not intend to solicit proxies other than by
mail.
 
                      SHARES OUTSTANDING AND VOTING RIGHTS
 
    Only holders of shares of Common Stock of record as of the close of business
on June 16, 1997 are entitled to vote at the meeting. On this record date there
were issued and outstanding         shares of Common Stock. Each share of Common
Stock is entitled to one vote on all matters to be voted upon, except that
shareholders have cumulative voting rights in the election of directors. Under
the cumulative voting method, a shareholder may multiply the number of shares
owned by the number of directors to be elected and cast this total number of
votes for any one candidate or distribute the total number of votes in any
proportion among as many candidates as the shareholder desires. A shareholder
may not cumulate his or her votes for a candidate unless such candidate's name
has been placed in nomination prior to the voting and unless a shareholder has
given notice at the meeting, prior to the voting, of his or her intention to
cumulate his or her votes. If any shareholder gives such notice, all
shareholders may then cumulate their votes. Management is hereby soliciting
discretionary authenticity to cumulate votes represented by proxies if
cumulative voting is invoked.

<PAGE>
   
    The presence, in person or by proxy duly authorized, of the holders of a
majority of the voting shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting and any continuation or
adjournment thereof. Broker non-votes (i.e. shares held by broker or nominee
which are represented at the Annual Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular purpose) will be
counted in determining whether a quorum is present at the Annual Meeting.
Directors are elected by a plurality of votes of the shares present in person or
represented by proxy at the Annual Meeting. Any shares not voted (whether by
abstention, broker non-votes or otherwise) will have no impact on the election
of directors, except to the extent that the failure to vote for an individual
results in another individual receiving a larger portion of votes. The other
proposals submitted to the shareholders in the enclosed proxy must be approved
by the vote of the holders of a majority of the votes of the shares of the
Company represented in person or by proxy and entitled to vote at the Annual
Meeting except for the proposal to approve the reincorporation of the Company in
the State of Delaware and the related proposals being considered in connection
therewith which require the approval of a majority of the voting power of all
shares of the Company entitled to vote at the Annual Meeting. In determining
whether such proposals have been approved, abstentions and broker non-votes are
not counted as votes for or against the proposal; except that for Proposals Two
and Three, abstentions and broker non-votes will have the same effect as a
negative vote.
    

    Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Annual Meeting and to vote in person. Any shareholder
giving a proxy has a right to revoke it at any time by either (i) a later-dated
proxy, (ii) a written revocation sent to and received by the Secretary of the
Company prior to the Annual Meeting, or (iii) attendance at the Annual Meeting
and voting in person.
 
                                       2
<PAGE>
          SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
 
    The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1997 by (i) each
director, director nominee, and executive officer of the Company named in the
Summary Compensation Table; (ii) all current executive officers and directors of
the Company as a group; and (iii) all persons known by the Company to own
beneficially 5% or more of the outstanding shares or voting power of the
Company's voting securities. The table is based upon information supplied by
directors, officers and principal shareholders. Unless otherwise indicated, each
of the listed persons has sole voting and sole investment power with respect to
the shares beneficially owned, subject to community property laws where
applicable.
 
<TABLE>
<CAPTION>
                                                                     SHARES
                                                                  BENEFICIALLY
BENEFICIAL OWNER (1)                                                  OWNED         PERCENTAGE
- --------------------------------------------------------------  -----------------  -------------
<S>                                                             <C>                <C>
Brad Mattson..................................................       3,361,421(2)         23.0%
 
Ralph S. Martin...............................................         267,980(3)          1.8%
 
Stephen J. Ciesinski..........................................          65,203(4)        *
 
Richard S. Mora...............................................          60,122(5)        *
 
John C. Savage................................................          19,791(6)        *
 
Kenneth G. Smith..............................................          16,875(7)        *
 
Yasuhiko Morita...............................................          16,457(8)        *
 
Shigeru Nakayama..............................................               0           *
 
All directors and executive officers as a group (8 persons)...       3,807,849(9)         26.1%
</TABLE>
 
- ------------------------
 
 *  Less than 1%
 
(1) Except as set forth herein the address of the directors and executive
    officers set forth in the table is 3550 West Warren Ave., Fremont,
    California 94538.
 
(2) Includes 294,833 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(3) Includes 149,498 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(4) Includes 33,562 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(5) Includes 52,583 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(6) Includes 19,791 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(7) Includes 16,875 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(8) Includes 15,103 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
(9) Includes 582,245 shares subject to options exercisable within 60 days of
    April 30, 1997.
 
                                       3
<PAGE>
                                  PROPOSAL ONE
                             ELECTION OF DIRECTORS
   
    A Board of five directors is to be elected at the 1997 Annual Meeting. Each
nominee is elected to hold office until the next annual meeting of the
shareholders at which time his term of office expires, and until his successor
is elected and qualified, unless he resigns or his seat on the Board becomes
vacant due to his death, removal or other cause in accordance with the bylaws of
the Company. Management knows of no reason why any of these nominees would be
unable or unwilling to serve; but if any nominee should be unable or unwilling
to serve, the proxies will be voted for the election of such other person(s) for
the office of director as management may recommend in the place of such nominee.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING FOR THE FIVE NOMINEES LISTED BELOW.
    

   
    Yasuhiko Morita resigned from his position as director of the Company in
February 1996 and Shigeru Nakayama was appointed a director by the Board in
March 1996 to fill the vacancy created by Mr. Morita's departure. See "EXECUTIVE
COMPENSATION AND OTHER MATTERS--Certain Relationships and Related Transactions."
    

   
    If the reincorporation of the Company in Delaware is approved, effective
upon the date when the Agreement and Plan of Merger between the Company and the
Delaware Company (as defined in Proposal Two hereto) is made effective in
accordance with applicable law (the "Reincorpoation Effective Date"), the
nominees named below will serve as the directors of the Delaware Company.
Assuming the approval of the reincorporation of the Company in Delaware and the
adoption of the Classified Board Provisions (as defined and discussed in
Proposal Three B hereto), Brad Mattson will serve as a Class I director, with a
term expiring at the Annual Meeting of Shareholders to be held in 1998, John C.
Savage and Kenneth G. Smith will serve as Class II directors, with terms
expiring at the Annual Meeting of Shareholders to be held in 1999 and Stephen J.
Ciesinski and Shigeru Nakayama will serve as Class III directors, with terms
expiring at the Annual Meeting of Shareholders to be held in 2000. Thereafter,
each class of directors shall be elected for a term of office to expire at the
third succeeding annual meeting of shareholders. See Proposal Two,
"REINCORPORATION IN THE STATE OF DELAWARE AND RELATED CHANGES TO THE RIGHTS OF
SHAREHOLDERS," and Proposal Three, "ADDITIONAL ANTI-TAKEOVER MEASURES,"
including Proposal Three B, "CLASSIFIED BOARD OF DIRECTORS REMOVABLE ONLY FOR
CAUSE." Votes in favor of the Reincorporation and the Classified Board
Provisions will together constitute approval of the terms of office of such
directors upon the Reincorporation. Should the proposals for reincorporation or
the Classified Board Provisions not be approved, each of the nominees will serve
as a director until the next annual meeting of shareholders or until his
successor is elected and qualified.
    

<TABLE>
<CAPTION>
NAME                                                   AGE                POSITION WITH COMPANY            DIRECTOR SINCE
- -------------------------------------------------      ---      -----------------------------------------  ---------------
<S>                                                <C>          <C>                                        <C>
Brad Mattson.....................................          42   Director and Chief Executive Officer               1988
 
John C. Savage...................................          49   Director                                           1992
 
Kenneth G. Smith.................................          48   Director                                           1994
 
Stephen J. Ciesinski.............................          48   Director                                           1989
 
Shigeru Nakayama.................................          61   Director                                           1996
</TABLE>
 
    Brad Mattson, age 42, founded the Company in November 1988 and has served as
the Chief Executive Officer and a Director since the Company's inception and
until January 1997 had served as President. Mr. Mattson was the founder of
Novellus Systems, Inc. ("Novellus"), a semiconductor equipment company, and
formerly served as its President, Chief Executive Officer and Chairman. He has
held previous executive positions at Applied Materials, Inc. a semiconductor
equipment company, and LFE Corporation, a semiconductor equipment company.
 
                                       4
<PAGE>
    John C. Savage, age 49, joined the Company's Board of Directors in October
1992. Since 1990, Mr. Savage has been Managing Partner at Glenwood Capital
Partners, a venture buyout partnership, and since 1995 has been a general
partner in Redwood Partners, a successor venture buyout firm. From 1981 to 1990,
he was a general partner of Weiss, Peck & Greer Venture Partners, L.P., a
venture capital partnership, and of several other partnerships affiliated with
Weiss, Peck & Greer. He is a director of FileNet Corporation, a document imaging
processing company, of ELXSI Corporation, a diversified conglomerate, and OrCAD
Inc., an electronic design automation software company. Mr. Savage is a member
of the Audit and Compensation Committees of the Board of Directors.
 
    Kenneth G. Smith, age 48, joined the Company's Board of Directors in August
1994. Since 1996, Mr. Smith has been President and Chief Operating Officer of
Wafer Tech, a semiconductor manufacturer. From 1987 to 1996, Mr. Smith has held
various positions at Micron Semiconductor, Inc., a semiconductor manufacturer.
From 1992 to 1996, he was Vice President of Operations and from 1989 to 1992 he
was a Fab Manager. Mr. Smith is a member of the Audit Committee of the Board of
Directors.
 
    Stephen J. Ciesinski, age 48, joined the Company's Board of Directors in
March 1989. Mr. Ciesinski has been a Director and the President and Chief
Executive Officer of Resumix, Inc., a software company, since 1993. From 1983 to
1993 he held various positions at Octel Communications Corporation, a software
and communications company, the most recent of which was Executive Vice
President, Operations. Mr. Ciesinski is a member of the Audit and Compensation
Committees of the Board of Directors.
 
    Shigeru Nakayama, age 61, joined the Company's Board of Directors in March
1996. Mr. Nakayama is currently a business consultant to Semiconductor
Equipments and Materials International ("SEMI"), an international association of
semiconductor equipment manufacturers and materials suppliers. Mr. Nakayama was
the President of SEMI Japan, a corporation under SEMI, from 1984 to 1994. From
1970 to 1984, he held various positions at Tokyo Electron Limited, a
semiconductor equipment company in Japan.
 
BOARD MEETINGS AND COMMITTEES
 
    During the fiscal year ended December 31, 1996 ("Fiscal 1996"), the Board of
Directors held five meetings. Each director attended at least 75% of the
meetings of the Board and of the Committees on which he served during Fiscal
1996 which occurred on or after the initiation of his term as a director.
 
    During Fiscal 1996 the Board of Directors of the Company had an Audit
Committee and a Compensation Committee. The Company does not have a Nominating
Committee or a committee that performs equivalent functions of a Nominating
Committee.
 
    The Audit Committee oversees the Company's accounting and financial
reporting policies and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board of Directors regarding
appointment of independent auditors. During Fiscal 1996, the Audit Committee
consisted of Messrs. Ciesinski, Smith and Savage. The Audit Committee held four
meetings during Fiscal 1996.
 
    The principal functions of the Compensation Committee are to recommend to
the Board the compensation of directors and officers of the Company, to oversee
the administration of the Company's stock option plans and to perform such other
duties regarding compensation for employees and consultants as the Board may
delegate from time to time. See also "REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION." During Fiscal 1996, the Compensation Committee
consisted of Messrs. Ciesinski and Savage. The Compensation Committee held six
meetings during Fiscal 1996.
 
                                       5
<PAGE>
COMPENSATION OF DIRECTORS
 
    The Company reimburses each of its outside directors for out-of-pocket
expenses associated with attending meetings of the Board of Directors of the
Company, but otherwise does not provide any cash compensation to outside
directors for their services as such.
 
   
    The Company has proposed the amendment and restatement of the Company's 1989
Stock Option Plan (the "1989 Plan") to include a provision for the automatic
grant of options to the Company's nonemployee directors. Subject to approval by
the Company's shareholders, Messrs. Ciesinski, Savage and Smith will be granted
options to purchase 11,500, 10,500 and 13,125 shares, respectively, as of July
24, 1997 (the "Effective Date"). Mr. Nakayama will not receive an option grant
in connection with the amendment and restatement of the 1989 Plan. Nonemployee
directors elected or appointed after the Effective Date each will be granted an
option to purchase 12,500 shares on the date of appointment or election. In
addition, each nonemployee director (including Messrs. Ciesinski, Savage, Smith
and Nakayama) will thereafter be granted an option to purchase 5,000 shares on
the date immediately after each annual meeting of shareholders occurring after
the Effective Date following which he remains a nonemployee director of the
Company, as long as such director has continuously served on the Board for six
months as of the date of such annual meeting. However, the annual grant under
the amended and restated 1989 Plan to Mr. Nakayama in 1998, if any, will be an
option for 3,855 shares. See Proposal Four, "AMENDMENT AND RESTATEMENT OF THE
1989 STOCK OPTION PLAN."
    

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    The affirmative vote of a majority of the votes present or represented by
proxy and entitled to a vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, is required for approval of this proposal.
Abstentions and broker nonvotes will each be counted present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on this proposal.
 
    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
 
                             ADDITIONAL INFORMATION
 
EXECUTIVE OFFICERS
 
    The following table sets forth certain information concerning the Company's
executive officers who are not directors of the Company:
 
<TABLE>
<CAPTION>
NAME                                             AGE                       POSITION
- -------------------------------------------      ---      -------------------------------------------
<S>                                          <C>          <C>
Ralph S. Martin............................          41   President and Chief Operating Officer
 
Richard S. Mora............................          50   Vice President, Finance, Chief Financial
                                                            Officer & Secretary
 
Yasuhiko Morita............................          55   President, Mattson Technology Center, K.K.
</TABLE>
 
    Ralph S. Martin joined the Company in January 1989 as Vice President,
Engineering and Secretary. In October 1992, Mr. Martin became Executive Vice
President, Corporate Development, in February 1995, Mr. Martin became Executive
Vice President and Chief Operating Officer and in January 1997, Mr. Martin
became President. Previously, he held various technical positions at Novellus,
GCA Corporation, a semiconductor equipment company, the Massachusetts Institute
of Technology and LFE Corporation.
 
                                       6
<PAGE>
    Richard S. Mora joined the Company as Vice President of Finance, Chief
Financial Officer and Secretary in August 1994. From September 1988 until
joining the Company, Mr. Mora served as Vice President of Finance of Actel
Corporation, a semiconductor manufacturer. Previously, he served as Vice
President of Finance of HHB Systems, a manufacturer of computer-aided
engineering software and as Controller and Vice President of Finance of Cygnet
Technologies, a telecommunications company.
 
    Yasuhiko Morita was appointed President of the Company's majority-owned
subsidiary in Japan, Mattson Technology Center, K.K., in February 1996. Mr.
Morita served on the Company's Board of Directors from July 1994 through
February 1996. Mr. Morita had been with Marubeni Hytech Corporation ("Marubeni")
since 1967 serving as its Executive Vice President and as a Director from 1988
through 1995.
 
                    EXECUTIVE COMPENSATION AND OTHER MATTERS
 
EXECUTIVE COMPENSATION
 
   
    The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the next three highest compensated
executive officers of the Company whose total salary and bonus for the fiscal
years ended December 31, specified below, exceeded 100,000.
    

                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                     ANNUAL              LONG-TERM
                                                                                  COMPENSATION          COMPENSATION
                                                                             ----------------------  ------------------
NAME AND PRINCIPAL FUNCTION                                         YEAR     SALARY($)   BONUS($)    OPTIONS GRANTED(#)
- ----------------------------------------------------------------  ---------  ---------  -----------  ------------------
<S>                                                               <C>        <C>        <C>          <C>
Brad Mattson....................................................       1996    317,308           0          100,000
  President and Chief Executive Officer                                1995    203,221           0                0
                                                                       1994    146,464           0          124,000
 
Ralph S. Martin.................................................       1996    187,922           0          125,000
  President and Chief Operating Officer                                1995    153,512           0                0
                                                                       1994    117,428           0          142,000
 
Richard S. Mora.................................................       1996    142,595           0                0
  Vice President Finance, Chief Financial Officer &                    1995    126,544           0                0
  Secretary                                                            1994     50,077      36,000          120,000
 
Yasuhiko Morita(1)..............................................       1996    179,931      14,000           25,000
  President, Mattson Technology Center, K.K.                           1995          0           0                0
                                                                       1994          0           0           25,000
</TABLE>
 
- ------------------------
 
(1) Mr. Morita was appointed President of Mattson Technology Center, K.K. in
    February 1996. The amounts shown as being paid to Mr. Morita in Fiscal 1995
    and 1994 represent payment to him while he acted as a director of the
    Company for services in that capacity.
 
                                       7
<PAGE>
STOCK OPTIONS GRANTED DURING FISCAL 1996
 
    The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
December 31, 1996, to the persons named in the Summary Compensation Table.
 
                    STOCK OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                        INDIVIDUAL GRANTS IN FISCAL 1996                POTENTIAL REALIZABLE
                            --------------------------------------------------------  VALUE AT ASSUMED ANNUAL
                             NUMBER OF                                                  RATES OF STOCK PRICE
                            SECURITIES      % OF TOTAL      EXERCISE OR               APPRECIATION FOR OPTION
                            UNDERLYING    OPTIONS GRANTED      BASE                           TERM(3)
                              OPTIONS     TO EMPLOYEES IN    PRICE(2)    EXPIRATION   ------------------------
NAME                        GRANTED(1)      FISCAL YEAR       ($/SH)        DATE        5%($)        10%($)
- --------------------------  -----------  -----------------  -----------  -----------  ----------  ------------
<S>                         <C>          <C>                <C>          <C>          <C>         <C>
Brad Mattson..............     100,000             8.1%      $   10.50     02/28/06   $  660,000  $  1,673,000
 
Ralph S. Martin...........      25,000             2.0%      $   10.50     02/28/06   $  165,000  $    418,250
                               100,000             8.1%      $    8.75     11/21/06   $  375,000  $  1,220,000
 
Richard S. Mora...........      --              --              --           --           --           --
 
Yasuhiko Morita...........      25,000             2.0%      $   10.50     02/28/06   $  165,000  $    418,250
</TABLE>
 
- ------------------------
 
(1) Options granted in Fiscal 1996 under the Company's 1989 Stock Option Plan
    generally vest one-quarter of the number of shares granted one year after
    commencement of employment or grant and continue to vest thereafter monthly
    over a period of three years, conditioned upon continued employment with the
    Company. Under the Option Plan, the Board retains discretion to modify the
    terms, including the price of outstanding options.
   
(2) All options were granted at no less than fair market value on the date of
    grant.
    
(3) Potential gains are net of exercise price, but before taxes associated with
    exercise. These amounts represent certain assumed rates of appreciation
    only, in accordance with the Securities and Exchange Commission's rules.
    Actual gains, if any, on stock option exercises are dependent on the future
    performance of the Company's Common Stock, overall market conditions and the
    optionholders' continued employment through the vesting period. The amounts
    reflected in this table may not necessarily be achieved. One share of stock
    purchased at $10.50 in fiscal 1996 would yield profits of approximately
    $6.60 per share at 5% appreciation over ten years, or approximately $16.73
    per share at 10% appreciation over the same period. One share purchased at
    $8.75 per share in Fiscal 1996 would yield profits of approximately $3.75
    per share at 5% appreciation over ten years, or approximately $12.20 per
    share at 10% appreciation over the same period.
 
                                       8
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
 
    The following table sets forth information concerning the option exercises
during the fiscal year ended December 31, 1996 by the persons named in the
Summary Compensation Table and the Fiscal 1996 year-end option values.
 
                 AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                                 VALUE OF UNEXERCISED
                                                          NUMBER OF SECURITIES UNDERLYING        IN-THE-MONEY OPTIONS
                                                          UNEXERCISED OPTIONS AT FY-END(#)         AT FY-END($)(1)
                       SHARES ACQUIRED       VALUE        --------------------------------  ------------------------------
NAME                   ON EXERCISE(#)     REALIZED($)     EXERCISABLE(1)(2) UNEXERCISABLE(3) EXERCISABLE(2) UNEXERCISABLE(4)
- ---------------------  ---------------  ----------------  ---------------  ---------------  -------------  ---------------
<S>                    <C>              <C>               <C>              <C>              <C>            <C>
Brad Mattson.........       100,000           753,000          257,333          146,667        2,194,451        208,669
 
Ralph S. Martin......         9,750            86,238          126,061          181,189        1,101,743        445,732
 
Richard S. Mora......             0                 0           40,083           54,917          240,290        317,211
 
Yasuhiko Morita......         6,250            81,250            4,166           33,334           31,245         62,505
</TABLE>
 
- ------------------------
 
(1) Options granted in Fiscal 1996 under the Company's 1989 Plan generally vest
    one-quarter of the number of shares granted one year after commencement of
    employment or grant and continue to vest thereafter monthly over a period of
    three years, conditioned upon continued employment with the Company. Under
    the 1989 Plan, the Board retains discretion to modify the terms including
    the price of outstanding options.
 
(2) Represents shares which are immediately exercisable and/or vested. Based on
    the closing price of $9.50, as reported on the Nasdaq National Market, on
    December 31, 1996, less the exercise price.
 
(3) Represents shares which are unvested and not immediately exercisable.
 
(4) Based on the closing price of $9.50, as reported on the Nasdaq National
    Market, on December 31, 1996, less the exercise price.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    During Fiscal 1996, the Company purchased RF generators from R.F. Services,
Inc. in the amount of $991,000. Brad Mattson owns a majority of the outstanding
shares of R.F. Services, Inc. and serves as a director of that corporation. Each
purchase was determined based on arm's length negotiations and the Company
believes the terms of these purchases were no less favorable than could have
been obtained from third party suppliers.
 
    In November 1990, the Company appointed Marubeni as its exclusive
distributor of the Aspen Strip system to customers located in Japan for
installation and use in Japan. Marubeni has a right of first refusal with
respect to the distribution of other systems offered by the Company in Japan.
The initial term of the Japanese distribution agreement was three years, which
automatically renews for successive periods of one year unless terminated by
either party. Upon termination of the Japanese distribution agreement, the
Company is obligated to repurchase the inventory from Marubeni, up to a maximum
purchase price of $1,000,000. Mr. Morita, a former director of the Company, was
a Vice President of Marubeni prior to January 1996. In January and February
1996, Mr. Morita left Marubeni and the Company's board of directors,
respectively, to accept a position with the Company's recently-formed Japanese
subsidiary, Mattson Technology Center, K.K. ("Mattson K.K."). As of December 31,
1996, Marubeni owned approximately 4% of the Company's outstanding Common Stock
and a minority interest in Mattson K.K. Sales of the Company's systems through
Marubeni during Fiscal 1996 were approximately $22.8 million or approximately
31% of the Company's total net sales.
 
                                       9
<PAGE>
CHANGES TO BENEFIT PLANS
 
    1989 PLAN.  The Company has proposed the amendment and restatement of the
Company's 1989 Plan which includes an increase in the maximum aggregate number
of shares of the Company's Common Stock issuable under the 1989 Plan by 300,000
shares from 4,000,000 shares to 4,300,000 shares.
   
    The proposed amended and restated 1989 Plan includes a provision for the
automatic grant of options to the Company's nonemployee directors. Subject to
approval by the Company's shareholders of the amended and restated 1989 Plan,
Messrs. Ciesinski, Savage and Smith will be granted options to purchase 11,500,
10,500 and 13,125 shares, respectively, as of July 24, 1997 (the "Effective
Date"). Mr. Nakayama will not receive an option grant in connection with the
amendment and restatement of the 1989 Plan. Nonemployee directors elected or
appointed after the Effective Date will be granted an option to purchase 12,500
shares on the date of appointment or election. In addition, each nonemployee
director (including Messrs. Ciesinski, Savage, Smith and Nakayama) will
thereafter be granted an option to purchase 5,000 shares on the date immediately
after each annual meeting of shareholders occurring after the Effective Date
following which he remains a nonemployee director of the Company, as long as
such director has continuously served on the Board for six months as of the date
of such annual meeting. However, the annual grant under the amended and restated
1989 Plan to Mr. Nakayama in 1998, if any, will be an option for 3,855 shares.
See Proposal Four, "AMENDMENT AND RESTATEMENT OF THE 1989 STOCK OPTION PLAN."
    
   
    PURCHASE PLAN.  The Company also has proposed the approval of an increase in
the number of shares reserved for issuance under the Company's 1994 Employee
Stock Purchase Plan (the "Purchase Plan") by 400,000 shares from 600,000 shares
to 1,000,000 shares. See Proposal Five, "APPROVAL OF INCREASE IN SHARES RESERVED
FOR ISSUANCE UNDER 1994 EMPLOYEE STOCK PURCHASE PLAN." Purchases of stock under
the Purchase Plan are made at the discretion of participants. Accordingly,
future purchases under the Purchase Plan are not determinable. Non-employee
directors are not eligible to participate in the Purchase Plan.
    
                                       10
<PAGE>
                      COMPARISON OF SHAREHOLDER RETURN(1)
 
    Set forth below is a line graph comparing the annual percentage change in
the cumulative total return of the Company's Common Stock with the cumulative
total return of the Nasdaq Stock Market Index--US and the Nasdaq Electronic
Components Index for the period commencing September 27, 1994, the date
immediately prior to the date of the Company's initial public offering, and
ending December 31, 1996.
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
  DOLLARS
<S>          <C>                              <C>                             <C>
                    MATTSON TECHNOLOGY, INC.        NASDAQ STOCK MARKET-- US             NASDAQ ELECTRONIC COMPONENTS
9/27/94                                $ 100                           $ 100                                    $ 100
12/94                                    160                             100                                      104
12/95                                    250                             141                                      172
12/96                                    158                             174                                      298
</TABLE>
 
<TABLE>
<CAPTION>
                                                                               9/27/94     12/30/94     12/29/95     12/31/96
                                                                             -----------  -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>          <C>
Mattson Technology, Inc....................................................         100          160          250          158
Nasdaq Stock Market Index--US..............................................         100          100          141          174
Nasdaq Electronic Components Index.........................................         100          104          172          298
</TABLE>
 
- ------------------------
 
(1) Assumes that $100.00 was invested in the Company's Common Stock at the
    initial price to the public and in each index at market closing prices on
    September 27, 1994, and that all dividends were reinvested. Shareholder
    returns over the indicated period should not be considered indicative of
    future shareholder returns.
 
                                       11
<PAGE>
         REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
 
    The Compensation Committee (the "Committee") recommends to the Company's
Board of Directors compensation of Company directors and officers and oversees
the administration of the Company's employee stock option plans.
 
COMPENSATION PHILOSOPHY
 
    In structuring the Company's compensation programs, the Committee's goals
are to align compensation with the Company's business objectives and performance
and to enable it to attract, retain and reward executive officers and other key
employees who contribute to the long-term success of the Company. The Committee
also seeks to link executive compensation with the creation of long-term
shareholder value. Consistent with these goals, the Company's compensation
programs include a mix of salary, bonus and stock options. In particular, stock
options are used to link executive incentives and the creation of shareholder
value.
 
    In addressing compensation issues, the Committee is influenced by several
factors which arise from the Company's current position and industry. The
Company competes against many companies which are substantially larger than the
Company and sells primarily to very large customers. The Company must be in a
position to attract and maintain a management team with sufficient experience
and credibility with customers to compete. Moreover, as the Company's goal is to
return to the aggressive growth which it experienced prior to the most recent
industry slowdown, the Company must have a management team which has the ability
to address such growth and successfully manage a much larger business. The
Company also is involved in a highly cyclical industry which, as has happened
recently, can experience significant slowdowns and declines in financial
performance and stock price which are not related to the performance of
management.
 
    BASE SALARY.  The Committee reviews annually each executive officer's base
salary. When reviewing base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and competitive pay practices. Consistent with the competitive factors
relative to competing against much larger companies described above, the
Committee believes current executive salaries are in the appropriate range as
compared to the salaries offered by competitive companies.
 
    BONUS.  The Company's bonus plan provides for bonuses to be awarded to key
employees based on specific goals achieved by the Company and the level of
contribution to achievement of the goals by the key employees. The bonus plan is
designed such that bonuses when combined with salaries create total compensation
which is competitive with other companies against which the Company competes in
hiring and retaining key employees. Bonus awards depend on the extent to which
Company and individual performance objectives are achieved. The Company's
performance objectives include operating, strategic and financial goals
considered critical to the Company's short and long term goals. Given the
Company's financial performance during fiscal 1996, as of December 31, 1996 no
bonuses were awarded to officers for that fiscal year.
 
    OPTIONS.  The purpose of the Company's 1989 Plan is to provide employees of
the Company with an opportunity to share, along with shareholders of the
Company, in the long-term performance of the Company. The Committee makes
periodic grants of stock options to eligible employees, generally upon
commencement of employment or following a significant change in job
responsibilities. Stock options generally vest over a four year period and
expire ten years from the date of grant. The exercise price of options is
generally 100% of fair market value of the underlying stock on the date of
grant. In awarding stock options, the Committee considers individual
performance, overall contribution to the Company, retention, the number of
unvested stock options and the total number of stock options to be awarded.
 
                                       12
<PAGE>
    Section 162(m) of the Internal Revenue Code (the "Code") imposes limitations
on the deductibility for federal income tax purposes of compensation over $1
million paid to certain executive officers in a taxable year. Compensation above
$1 million may be deducted if it is "performance-based compensation" within the
meaning of the Code. The Committee believes that at the present time it is quite
unlikely that the compensation paid to any executive officer in a taxable year
which is subject to the deduction limit will exceed $1 million. In addition,
under the proposed amendment and restatement of the 1989 Plan, no employee may
receive in any fiscal year options to purchase in excess of 500,000 shares.
However, the Compensation Committee has not yet established a policy for
determining which forms of incentive compensation awarded to its executive
officers shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any fiscal Treasury regulations and to comply with Code Section
162(m) in the future to the extent consistent with the best interests of the
Company.
 
CHIEF EXECUTIVE OFFICER COMPENSATION
 
    The Committee uses the same procedures described above in setting the annual
salary, bonus and stock option awards for the Chief Executive Officer ("CEO").
The CEO's salary is determined based on comparisons with competitive companies
as described above. In awarding stock options, the Committee considers the CEO's
performance, overall contribution to the Company, retention, the number of
unvested options and the total number of options to be granted. The Committee
believes that the CEO's salary, bonus and options are in the appropriate range
as compared to the compensation arrangements offered to CEOs of competitive
companies.
 
CONCLUSION
 
    As a significant portion of the Company's compensation program is linked to
Company performance, the Committee believes that compensation is closely tied to
increases in long-term shareholder value.
 
                                          COMPENSATION COMMITTEE
 
                                          Stephen J. Ciesinski
                                          John C. Savage
   
June 23, 1997
    
                                       13
<PAGE>

   
                                  PROPOSAL TWO
    
                  REINCORPORATION IN THE STATE OF DELAWARE AND
                 RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
 
GENERAL
 
    The Company's Board of Directors (the "Board of Directors" or the "Board")
has unanimously approved a proposal to change the Company's state of
incorporation from California to Delaware. The Board of Directors believes the
change in domicile to be in the best interests of the Company and its
shareholders for several reasons. Principally, the Board of Directors believes
that reincorporation will enhance the Company's ability to attract and retain
qualified members of the Company's Board of Directors as well as encourage
directors to continue to make independent decisions in good faith on behalf of
the Company. To date, the Company has not experienced difficulty in retaining
directors. However, as a result of the significant potential liability and
relatively small compensation associated with service as a director, it may
become increasingly difficult for the Company to find and retain talented and
experienced directors and officers. As a result, the Company believes that the
more favorable corporate environment afforded by Delaware will enable it to
compete more effectively with other public companies, most of which are
incorporated in Delaware, to retain its current directors and officers and to
attract and retain new directors and officers.
 
   
    Reincorporation in Delaware will allow the Company the increased flexibility
and predictability afforded by Delaware law. Concurrent with the
reincorporation, the Board of Directors proposes to include certain measures
designed to protect shareholder interests in the event of hostile takeover
attempts against the Company. The Board believes that these measures will enable
it to more effectively consider any proposed takeover attempt and to negotiate
terms that maximize the benefit to the Company and its shareholders, as
discussed in more detail below. See Proposal Three, "ADDITIONAL ANTI-TAKEOVER
MEASURES."
    
 
IMPLEMENTATION OF REINCORPORATION
 
    The proposed reincorporation will be accomplished by merging the Company
into Mattson Technology, Inc., Delaware, a newly-formed Delaware corporation
which, just before the merger, will be a wholly-owned subsidiary of the Company
(the "Delaware Company"), pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") attached as Appendix A to this Proxy Statement. Upon the
effective date of the merger (the "Reincorporation Effective Date"), the
Delaware Company's name will be changed to Mattson Technology, Inc. The
reincorporation will not result in any change in the Company's business, assets
or liabilities, will not cause its corporate headquarters to be moved and will
not result in any relocation of management or other employees. The incumbent
officers and directors of the Company will also be the officers and directors of
the Delaware Company on the Reincorporation Effective Date.
 
    The Company's capital stock consists of 60,000,000 authorized shares of
Common Stock, without par value, of which         shares were issued and
outstanding as of June 16, 1997, and 2,000,000 authorized shares of undesignated
Preferred Stock, without par value, none of which were outstanding as of June
16, 1997. Upon the Reincorporation Effective Date, the Delaware Company will
have the same number of outstanding shares of Common Stock that the Company had
outstanding immediately prior to the reincorporation.
 
    The Delaware Company's capital stock will consist of 60,000,000 authorized
shares of Common Stock, $0.001 par value, and 2,000,000 shares of Preferred
Stock, $0.001 par value, consistent with maintaining adequate capitalization for
the current needs of the Company. The Delaware Company's authorized but unissued
shares of Preferred Stock will be available for future issuance.
 
    Under the Delaware Company's Certificate of Incorporation (the "Delaware
Certificate"), as under the Company's Articles of Incorporation (the "California
Articles"), the Board of Directors has the
 
                                       14
<PAGE>
authority to determine or alter the rights, preferences, privileges and
restrictions to be granted to or imposed upon any wholly unissued series of
Preferred Stock and to fix the number of shares constituting any such series and
to determine the designation thereof.
 
   
    On the Reincorporation Effective Date, each outstanding share of Common
Stock of the Company will automatically convert into one share of Common Stock
of the Delaware Company, and shareholders of the Company will automatically
become shareholders of the Delaware Company. On the Reincorporation Effective
Date, the number of outstanding shares of Common Stock of the Delaware Company
will be equal to the number of shares of Common Stock of the Company outstanding
immediately prior to the Reincorporation Effective Date. In addition, each
outstanding option or right to acquire shares of Common Stock of the Company
will be converted into an option or right to acquire an equal number of shares
of Common Stock of the Delaware Company, under the same terms and conditions as
the original options or rights. All of the Company's employee benefit plans,
including the proposed amended and restated 1989 Stock Option Plan and the 1994
Employee Stock Purchase Plan will be adopted and continued by the Delaware
Company following the reincorporation. SHAREHOLDERS SHOULD RECOGNIZE THAT
APPROVAL OF THE PROPOSED REINCORPORATION WILL CONSTITUTE APPROVAL OF THE
ADOPTION AND ASSUMPTION OF THOSE PLANS BY THE DELAWARE COMPANY.
    
 
   
    NO ACTION NEED BE TAKEN BY SHAREHOLDERS TO EXCHANGE THEIR STOCK CERTIFICATES
NOW; THIS WILL BE ACCOMPLISHED AT THE TIME OF THE NEXT TRANSFER BY THE
SHAREHOLDER. Certificates for shares in the Company will automatically represent
an equal number of shares in the Delaware Company upon completion of the merger.
The Company intends to apply for the listing and registration of the Common
Stock of the Delaware Company on the Nasdaq National Market upon the
Reincorporation Effective Date.
    
 
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal. If
approved by the shareholders, it is anticipated that the reincorporation would
be completed as soon thereafter as practicable. The reincorporation may be
abandoned or the Merger Agreement may be amended, either before or after
shareholder approval has been obtained, if in the opinion of the Board of
Directors, circumstances arise that make such action advisable; provided that
any amendment that would effect a material change from the charter provisions
discussed in this Proxy Statement would require further approval by the holders
of a majority of the outstanding voting shares.
    
 
SIGNIFICANT CHANGES CAUSED BY THE REINCORPORATION
 
   
    In general, the Company's corporate affairs are governed at present by the
corporate law of California, the California Articles and the Company's Bylaws
(the "California Bylaws"), which have been adopted pursuant to California law.
The California Articles and Bylaws are available for inspection during business
hours at the principal executive offices of the Company. In addition, copies may
be obtained by writing to the Company at Mattson Technology, Inc., 3550 West
Warren Avenue, Fremont, California 94538, Attention: Corporate Secretary.
    
 
   
    If the reincorporation proposal is adopted, the Company will merge into, and
its business will be continued by, the Delaware Company. Following the merger,
issues of corporate governance and control would be controlled by Delaware law,
rather than California law (however, see "Other Key Differences Between
California and Delaware Law--Application of California Law After
Reincorporation"). The California Articles and Bylaws, will, in effect, be
replaced by the Delaware Certificate and the Delaware Company's Bylaws (the
"Delaware Bylaws"), copies of which are attached as Appendix A-1 and Appendix
A-2 to the Merger Agreement. In the event any of the separate proposals for
additional anti-takeover measures are approved by the requisite vote of
shareholders, the Delaware Certificate and the Delaware
    
 
                                       15
<PAGE>
Bylaws will make provision for such measures, as set forth in the Merger
Agreement and exhibits thereto. See Proposal Three, "ADDITIONAL ANTI-TAKEOVER
MEASURES."
 
REASONS FOR THE REINCORPORATION
 
    In recent years, a number of public companies have obtained the approval of
their shareholders to reincorporate in Delaware and this trend continues
currently. For the reasons detailed below, the Company believes it is beneficial
and important that the Company likewise avail itself of Delaware law.
 
    GREATER PREDICTABILITY AND RESPONSIVENESS TO CORPORATE NEEDS.  Delaware has
adopted comprehensive corporate laws which are revised regularly to meet
changing business circumstances. The Delaware Legislature is particularly
sensitive to issues regarding corporate law and is especially responsive to
developments in modern corporate law. The Delaware courts have developed
considerable expertise in dealing with corporate issues as well as a substantial
body of case law construing Delaware's corporate law. As a result of these
factors, it is anticipated that Delaware law will provide greater predictability
in the Company's legal affairs than is presently available under California law.
 
   
    MORE CERTAINTY REGARDING INDEMNIFICATION AND LIMITATION OF LIABILITY FOR
DIRECTORS.  In 1986, Delaware amended its corporate law to allow corporations to
limit the personal monetary liability of its directors for their conduct as
directors under certain circumstances. Delaware law does not permit a Delaware
corporation to limit or eliminate the liability of its directors for intentional
misconduct, bad faith conduct or any transaction from which the director derives
an improper personal benefit or for violations of federal laws such as the
federal securities laws. In 1987, California amended its corporate law in a
manner similar to Delaware to permit a California corporation to limit the
personal monetary liability of its directors for their conduct as directors
under certain circumstances. Nonetheless, the Board of Directors believes that
the protection from liability for directors is somewhat more certain under the
Delaware law than under the California law and therefore that the Company's
objectives in adopting this type of provision can be better achieved by
reincorporation in Delaware. The directors have elected to adopt such a
provision in the Delaware Certificate and Bylaws. The Board believes that
Delaware reincorporation will enhance the Company's ability to recruit and
retain directors in the future; however, the shareholders should be aware that
such a provision inures to the benefit of the directors, and the interest of the
Board in recommending the reincorporation may therefore be in conflict with the
interests of the shareholders. See subsections entitled, "Limitations on
Director Liability" and "Indemnification of Officers and Directors" below for a
more complete discussion of these issues.
    
 
    The interests of the Board of Directors, management and affiliated
shareholders in voting on the reincorporation proposal may not be the same as
those of unaffiliated shareholders. Delaware law does not afford minority
shareholders some of the rights and protections available under California law.
Reincorporation of the Company in Delaware may make it more difficult for
minority shareholders to elect directors and influence Company policies. A
discussion of the principal differences between California and Delaware law as
they affect shareholders begins on page [    ] of this Proxy Statement.
 
   
    CHARTER PROVISIONS DETERRING HOSTILE TAKEOVERS.  Reincorporation in Delaware
may have the effect of deterring hostile takeover attempts. The Board has
proposed the revision of the Delaware Certificate and Bylaws to include certain
provisions available to certain public companies under Delaware law which deter
hostile take-over attempts, such as the elimination of cumulative voting,
exclusive right of the Board of Directors to set the number of directors, a
classified board of directors, limitations on the right to remove directors, the
exclusive right of the Board of Directors to fill vacancies on the Board, blank
check preferred, the elimination of the right of shareholders to act by written
consent, the elimination of shareholder rights to call special meetings, advance
notice requirements and super-majority voting provisions requiring that any
amendment of the above provisions contained in the Delaware Certificate be
approved by two-thirds vote of the outstanding shares, entitled to vote
generally in the election of directors and a provision requiring two-thirds vote
for shareholder amendment of the Delaware Bylaws. Several of
 
                                       16
<PAGE>
these measures are not included in the California Articles and are not
applicable to the Company under California law at the present time. Accordingly,
these matters are presented for separate consideration and vote by the
shareholders. Certain disadvantages of anti-takeover measures generally are also
reviewed below. See Proposal Three, "ADDITIONAL ANTI-TAKEOVER MEASURES."
    
 
   
    DELAWARE CORPORATION LAW COMPARED TO CALIFORNIA CORPORATION LAW.  The
following chart is only a summary of the more important differences in the
corporation laws of Delaware and California and does not purport to be an
exhaustive discussion. It is qualified in its entirety by reference to the
California Corporations Code, the Delaware General Corporation Law, the
California Articles and Bylaws and the Delaware Certificate and Bylaws. Both
California and Delaware law provide that some of the statutory provisions as
they affect various rights of holders of shares may be modified by provisions in
the charter or Bylaws of the corporation. Shareholders are requested to read the
following chart in conjunction with the discussion following the chart and the
Merger Agreement, the Delaware Certificate and the Delaware Bylaws attached to
this Proxy Statement. In addition, the Board is proposing additional
anti-takeover measures for separate consideration and vote by the shareholders.
See Proposal Three, "ADDITIONAL ANTI-TAKEOVER MEASURES."
    
 
   
<TABLE>
<CAPTION>
         ISSUE                             DELAWARE                                   CALIFORNIA
- ------------------------  ------------------------------------------  ------------------------------------------
<S>                       <C>                                         <C>
Limitation of Liability   Delaware law permits the limitation of      California law contains additional
of Directors and          liability of directors and officers to a    exceptions to the liability limitations of
Officers                  company except in connection with (i)       directors and officers. Please see
                          breaches of the duty of loyalty; (ii) acts  discussion below.
                          or omissions not in good faith or
                          involving intentional misconduct or
                          knowing violations of law; (iii) the
                          payment of unlawful dividends or unlawful
                          stock purchases or redemptions; or (iv)
                          transactions in which a director received
                          an improper personal benefit.
 
Indemnification of        Delaware law could result in                California law permits indemnification
Directors and Officers    indemnification of directors and officers   under certain circumstances, subject to
                          in circumstances where California law       certain limitations.
                          would not permit indemnification and
                          provides more certainty as a result of
                          extensive case law on indemnification.
 
Number of Directors       Determined solely by resolution of the      Determined by Board within the range set
                          Board pursuant to the Delaware              in the California Bylaws. Changes in the
                          Certificate.                                authorized range must be approved by the
                                                                      shareholders.
</TABLE>
    
 
                                       17
<PAGE>
   
<TABLE>
<CAPTION>
         ISSUE                             DELAWARE                                   CALIFORNIA
- ------------------------  ------------------------------------------  ------------------------------------------
<S>                       <C>                                         <C>
Filling Board Vacancies   Delaware law provides for the Delaware      California law permits (a) any holder of
                          Court of Chancery to order an election to   5% or more of the corporation's Voting
                          fill vacancies or newly created             Stock or (b) the superior court of the
                          directorships upon the application of the   appropriate county to call a special
                          holders of 10% of the outstanding shares    meeting of shareholders to elect the
                          having a right to vote for such directors,  entire board if, after filling any
                          if at the time of filling such vacancies    vacancy, the directors then in office who
                          or directorships, the directors then in     have been elected by the shareholder
                          office constitute less than a majority of   constitute less than a majority of the
                          the entire board as constituted             directors then in office.
                          immediately prior to any increase.
 
                          The Delaware Certificate and Bylaws         The California Articles are silent on
                          provide vacancies may be filled only by a   filling vacancies. The California Bylaws
                          majority vote of the directors then in      provide vacancies may be filled by a
                          office, though less than a quorum, or by a  majority vote of the directors then in
                          sole remaining director.                    office, though less than a quorum, or by a
                                                                      sole remaining director except that a
                                                                      vacancy created by the removal of a
                                                                      director, by the vote or written consent
                                                                      of the shareholders or by court order may
                                                                      be filled only by the vote of a majority
                                                                      of outstanding voting shares.
 
Blank Check Preferred     The Delaware Certificate provides for the   The California Articles provide for the
                          issuance of preferred stock with terms set  issuance of preferred stock with terms set
                          by the Board of Directors.                  by the Board of Directors.
 
Advance Notice            There are no specific statutory             There are no specific statutory
Requirement               regulations. The Delaware Bylaws require    regulations.
                          timely notice which is not less than 120
                          days in advance of the date the proxy
                          statement was released to shareholders in
                          connection with the previous year's annual
                          meeting.
 
Tender Offer Statute      Restricts mergers in two step takeovers,    Restricts mergers in two step takeovers
                          without Board approval of first step.       unless common stock issued, unanimous
                                                                      affirmative vote of shareholders or
                                                                      Department of Corporations approval.
 
Loans to Officers and     Board may authorize if the loans may        Loans may be made only with shareholder
Directors                 reasonably be expected to benefit the       approval unless Bylaws permitting loans by
                          Company.                                    Board approval only are approved by the
                                                                      shareholders.
</TABLE>
    
 
                                       18
<PAGE>
   
<TABLE>
<CAPTION>
         ISSUE                             DELAWARE                                   CALIFORNIA
- ------------------------  ------------------------------------------  ------------------------------------------
<S>                       <C>                                         <C>
Class Vote for            Generally not required unless a             A reorganization transaction must
Reorganization            reorganization adversely affects a          generally be approved by a majority vote
                          specific class of shares.                   of each class of shares outstanding.
 
Right of Shareholders to  Permitted for any purpose reasonably        Permitted for any purposes reasonably
Inspect Shareholder List  related to a shareholder's interest as a    related to a shareholder's interest as a
                          shareholder.                                shareholder. Also, an absolute right to 5%
                                                                      shareholders and certain 1% shareholders.
 
Appraisal Rights          Generally available if shareholders         Available in certain circumstances if the
                          receive cash in exchange for their shares   holders of 5% of the class assert such
                          and in certain other circumstances.         rights.
 
Dividends                 Paid from surplus (including paid-in and    Generally limited to the greater of (i)
                          earned surplus or net profits).             retained earnings or (ii) an amount which
                                                                      would leave the Company with assets of
                                                                      125% of liabilities and current assets of
                                                                      100% of current liabilities.
 
Other                     Responsive legislature and larger body of
                          corporate case law in Delaware provides
                          more predictable corporate legal
                          environment in Delaware.
</TABLE>
    
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
    LIMITATIONS ON DIRECTOR LIABILITY.  Both California and Delaware permit a
corporation to limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of certain duties as a
director. The California and Delaware laws adopt a self-governance approach by
enabling a corporation to take advantage of these provisions only if an
amendment to the charter limiting such liability is approved by a majority of
the outstanding shares or such language is included in the original charter.
 
    The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (i) intentional misconduct or knowing and culpable violation of
law; (ii) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (iii) receipt of an improper personal
benefit; (iv) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders; (v) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation and its shareholders; (vi) interested
transactions between the corporation and a director in which a director has a
material financial interest; or (vii) liability for improper distributions,
loans or guarantees.
 
                                       19
<PAGE>
    The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for: (i) breaches of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
 
    Shareholders should recognize that the proposed reincorporation and
associated measures are designed to shield a director from suits by the Delaware
Company or its shareholders for monetary, damages for negligence or gross
negligence by the director in failing to satisfy the director's duty of care. As
a result, an action for monetary damages against a director predicated on a
breach of the duty of care would be available only if the Delaware Company or
its shareholders were able to establish that the director was disloyal in his
conduct, failed to act in good faith, engaged in intentional misconduct,
knowingly violated the law, derived an improper personal benefit or approved an
illegal dividend or stock repurchase. Consequently, the effect of such measures
may be to limit or eliminate an effective remedy which might otherwise be
available to a shareholder who is dissatisfied with Board of Directors'
decisions. Although an aggrieved shareholder could sue to enjoin or rescind an
action taken or proposed by the Board of Directors, such remedies may not be
timely or adequate to prevent or redress injury in all cases.
 
    The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors and
officers to the Company and its shareholders.
 
    INDEMNIFICATION OF OFFICERS AND DIRECTORS.  The California Articles and the
Delaware Certificate and Bylaws relating to indemnification similarly require
that the California Company and the Delaware Company, respectively, indemnify
its directors and its executive officers to the fullest extent permitted by the
respective state law, provided, that the Company may modify the extent of such
indemnification by individual contracts with its directors and executive
officers, and, provided, further, that the Company will not be required to
indemnify any director or executive officer in connection with a proceeding
initiated by such person, with certain exceptions. Such charter documents and
Bylaws permit the California Company and the Delaware Company, respectively, to
provide indemnification to its other officers, employees and agents as set forth
in the respective state law. Such indemnification is intended to provide the
full flexibility available under such laws. The Delaware Bylaws contain a
provision with respect to advances in that the Company is required to advance
expenses related to any proceeding contingent on such persons' commitment to
repay any advances unless it is determined ultimately that such persons are
entitled to be indemnified.
 
    California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. There are
nonetheless certain differences between the laws of the two states.
 
    Indemnification is permitted by both California and Delaware law, provided
the requisite standard of conduct is met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party) or the court
handling the action. California law requires indemnification when the individual
has successfully defended the action on the
 
                                       20
<PAGE>
merits, as opposed to Delaware law which requires indemnification relating to a
successful defense on the merits or otherwise.
 
    Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation.
 
   
    California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (i) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (ii) no indemnification
may be made under California law, without court approval, in respect of amounts
paid or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Delaware law allows
indemnification of expenses actually and reasonably incurred, subject to the
same limitations set forth in (ii) above. Delaware law is silent on the right of
indemnification regarding settlements of derivative actions.
    
 
    California corporations may include in their Articles of Incorporation a
provision which extends the scope of indemnification through agreements, Bylaws
or other corporate action beyond that specifically authorized by statute. The
California Articles include such a provision. The Company, following shareholder
approval, entered into indemnification agreements with its officers and
directors providing for indemnification beyond that expressly mandated by the
California Corporations Code.
 
   
    Under Delaware law, rights to indemnification and expenses are
non-exclusive, in that they need not be limited to those expressly provided by
statute. Under Delaware law and the Delaware Certificate and Bylaws, the
Delaware Company is permitted to indemnify its directors, officers, employees
and other agents, within the limits established by law and public policy,
pursuant to an express contract, bylaw provision, shareholder vote or otherwise,
any or all of which could provide indemnification rights broader than those
currently available under the California Bylaws or the California
indemnification statutes. The Delaware Bylaws provide: (i) the Delaware Company
is required to indemnify its officers and directors to the fullest extent
permitted by law, including those circumstances in which indemnification would
otherwise be discretionary; (ii) the Delaware Company is required to advance
expenses to its officers and directors as incurred, including expenses related
to obtaining a determination that such officers and directors are entitled to
indemnification, provided that they undertake to repay the amount advanced if it
is ultimately determined that they are not entitled to indemnification; (iii) an
officer or director may bring suit against the Delaware Company if a claim for
indemnification is not timely paid; (iv) the Delaware Company is authorized to
enter into indemnification agreements with its officers and directors; and (v)
the Delaware Company may not retroactively amend the Indemnification provision
in its Bylaws in a way which is adverse to its officers or directors or former
officers or directors The Company has entered into indemnification agreements
with its officers and directors. The Delaware Company plans to enter into
similar agreements with its officers and directors upon completion of the
proposed reincorporation in the form attached as Appendix B to this Proxy
Statement (the "Delaware Indemnity Agreement"). The Delaware Indemnity Agreement
contains certain additional limitations on indemnification for expenses in suits
against the Company not contained in the indemnification agreements currently in
effect.
    
 
                                       21
<PAGE>
    PRINCIPAL TERMS OF THE DELAWARE INDEMNITY AGREEMENTS
 
    1.  Indemnification rights may be provided under the Delaware Indemnity
Agreement to a person in his capacity as a present or former director, officer,
employee or other Agent (as such, term is defined in the Delaware Indemnity
Agreement) of the Company (the "Indemnitee") in connection with a threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative. Indemnification rights are also provided to an Indemnity's heirs,
executors and administrators to the same extent they would be provided to the
Indemnitee were he or she still alive.
 
    2.  The Company must maintain in effect directors' and officers' liability
insurance naming the Indemnitee as an insured in reasonable amounts from
established and reputable insurers, unless such insurance is not available on
reasonable terms.
 
    3.  The Company must indemnify against all expenses reasonably incurred by
an Indemnitee to the extent he or she has been successful in the defense of any
proceeding (including an action by or in the right of the Company such as a
derivative action).
 
    4.  The Company is required to indemnify against any expenses and
liabilities (including judgments, fines, ERISA excise taxes and penalties, and
amounts paid in settlement) actually and reasonably incurred by an Indemnitee in
connection with any proceeding (other than an action by or in the right of the
Company), provided the Indemnitee's actions met the required standard of
conduct.
 
    5.  In connection with proceedings brought by or in the right of the Company
against the Indemnitee (including derivative actions), the Company is required
to indemnify against expenses actually and reasonably incurred by the
Indemnitee, provided that his or her actions met the required standard of
conduct. However, no indemnification is required in such proceeding to the
extent the Indemnitee is finally adjudged liable to the Company unless the court
determines that, in view of all the circumstances, the Indemnitee is fairly and
reasonably entitled to indemnification.
 
    6.  The Company is required to advance expenses incurred by the Indemnitee
in connection with the investigation, defense, settlement or appeal of any
proceeding, provided that the Indemnitee undertakes to repay any amounts for
which he or she is ultimately determined not to be entitled to indemnification.
This provision of the Delaware Indemnity Agreement expands upon Section 145,
which is silent on advances of expenses incurred in connection with
investigation, settlement and appeal.
 
    7.  The Indemnitee may enforce in court any right to indemnification or
advances granted by the Indemnity Agreement if (i) his or her claim is denied in
whole or in part, or (ii) no disposition of his or her claim is made within 90
days of his or her request therefor. If successful in an enforcement action, the
Indemnitee is entitled to be paid the expenses of prosecuting his or her claim.
 
    If the proposed reincorporation is approved, the indemnification agreements
also will be approved by the Company's shareholders. THUS A VOTE IN FAVOR OF THE
PROPOSED REINCORPORATION WILL ALSO RATIFY AND APPROVE THE INDEMNIFICATION
AGREEMENTS IN SUBSTANTIALLY THE FORM ATTACHED AS APPENDIX B TO THIS PROXY
STATEMENT. Although the law in this regard is not certain, shareholders who vote
in favor of the reincorporation proposal, and thereby approve the indemnity
contracts, may be prevented from challenging the validity of the indemnity
contracts in a subsequent court proceeding.
 
    The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the California Company made prior to the proposed reincorporation.
Nevertheless, the Board has recognized in considering this reincorporation
proposal that the individual directors have a personal interest in obtaining the
application of Delaware law to such indemnity and limitation of liability issues
affecting them and the Company in the event they arise from a potential future
case, and that the application of Delaware law, to the extent that any director
or officer is actually indemnified in circumstances where indemnification would
not be available under California law, would result in expense to the Company
which the Company would not incur if the Company were not
 
                                       22
<PAGE>
reincorporated. The Board believes, however, that the overall effect of
reincorporation is to provide a corporate legal environment that enhances the
Company's ability to attract and retain high quality outside directors and thus
benefits the interests of the Company and its shareholders.
 
    There is no pending or, to the Company's knowledge, threatened litigation to
which any of its directors is a party in which the rights of the Company or its
shareholders would be affected if the Company currently were subject to the
provisions of Delaware law rather than California law.
 
    California and Delaware corporate law, the California Certificate and the
Delaware Certificate and Bylaws, as well as any indemnity agreements, may permit
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors has been advised that, in
the opinion of the Securities and Exchange Commission, indemnification for
liabilities arising under the Securities Act and the Exchange Act may be
contrary to public policy and therefore may be unenforceable, absent a decision
to the contrary by a court of appropriate jurisdiction.
 
ANTI-TAKEOVER MEASURES
 
   
    GENERAL.  Delaware law has been widely viewed to permit a corporation
greater flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Certain of such measures are either not currently permitted or are
more narrowly drawn under California law. Among these measures are those
described below and under Proposal Three, "ADDITIONAL ANTI-TAKEOVER MEASURES."
    
 
   
    In addition, certain types of "poison pill" defenses (such as shareholder
rights plans) have been upheld by Delaware courts, while California courts have
yet to decide on the validity of such defenses, thus rendering their
effectiveness in California less certain. The Company does not have a rights
plan in place, and although the Board may consider adopting such a plan in the
future, the Board has no present intention to adopt such a plan. The Company
does not have any present intention of adopting any further anti-takeover
measures, nor does the Board of Directors have knowledge that any attempt to
gain control of the Company is being contemplated.
    
 
   
    The measures described below are either included in the California Articles
or provided for under California Law and applicable to the Company currently, in
substantially similar terms. The Board of Directors is proposing certain
additional anti-takeover measures not currently applicable to the Company for
separate consideration and vote by the shareholders. See Proposal Three,
"ADDITIONAL ANTI-TAKEOVER MEASURES."
    
 
    NUMBER OF DIRECTORS.  California law allows the number of persons
constituting the board of directors of a corporation to be fixed by the Bylaws
or the Articles of Incorporation, or permits the Bylaws to provide that the
number of directors may vary within a specified range. California law further
provides that, in the case of a variable board, the maximum number of directors
may not exceed two times the minimum number minus one. The California Bylaws
provide for a board of directors of five members. California law also requires
that any change in a fixed number of directors and any change in the range of a
variable board of directors specified in the Articles of Incorporation and
Bylaws must be approved by a majority in interest of the outstanding shares
entitled to vote (or such greater proportion of the outstanding shares as may be
required by the Articles of Incorporation), provided that a change reducing the
minimum number of directors to less than five cannot be adopted if votes cast
against adoption are equal to more than 16 2/3% of the outstanding shares
entitled to vote. The California Bylaws require the vote of a majority in
interest of the voting power of all of the then outstanding shares to change the
range of the Company's variable Board of Directors.
 
                                       23
<PAGE>
    Delaware law permits a board of directors to change the authorized number of
directors by amendment to the Bylaws unless the number of directors is fixed in
the certificate of incorporation or the manner of fixing the number of directors
is set forth in the Certificate of Incorporation, in which case the number of
directors may be changed only by amendment of the certificate of incorporation
or consistent with the manner specified in the certificate of incorporation, as
the case may be. The Delaware Certificate provides that the exact number of
directors shall be fixed from time to time exclusively by the Board of Directors
by resolution.
 
    FILLING BOARD VACANCIES.  Under California law, if, after the filling of any
vacancy by the directors of a corporation, the directors then in office who have
been elected by the corporation's shareholders constitute less than a majority
of the directors then in office, then: (i) any holder of more than 5% of the
corporation's voting stock may call a special meeting of shareholders, or (ii)
the superior court of the appropriate county may order a special meeting of the
shareholders to elect the entire board of directors of the corporation. Delaware
law provides that if, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the entire board of directors as constituted immediately prior to any increase,
the Delaware Court of Chancery may, upon application of any shareholder or
shareholder's holding at least 10% of the total number of shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office. The proposed
Delaware Certificate and Bylaws provide that vacancies shall be filled only by
the affirmative vote of a majority of directors then in office, even if such
directors comprise less than a quorum of the Board of Directors, or by the sole
remaining director, unless the Board of Directors determines by resolution that
any such vacancies be filled by the shareholders, or as otherwise provided by
law. The California Articles are silent on filling vacancies. The California
Bylaws provide vacancies may be filled by a majority vote of the directors then
in office, though less than a quorum, or by a sole remaining director except
that a vacancy created by the removal of a director, by the vote or written
consent of the shareholders or by court order may be filled only by the vote of
a majority of outstanding voting shares.
 
    BLANK CHECK PREFERRED.  After the reincorporation, the Delaware Company
would retain the rights currently available to the Company under California law
to issue shares of its authorized but unissued capital stock. Following the
Reincorporation Effective Date, shares of authorized and unissued Common Stock
and Preferred Stock of the Delaware Company could (within the limits imposed by
applicable law) be issued in one or more transactions, or Preferred Stock could
be issued with terms, provisions and rights which would make more difficult and,
therefore, less likely, a takeover of the Delaware Company. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of existing shares of Common Stock and Preferred Stock, and
such additional shares could be used to dilute the stock ownership of persons
seeking to obtain control of the Delaware Company.
 
    It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Delaware Board. Accordingly, if the Delaware Board so
authorizes, the holders of Delaware Preferred Stock may be entitled to vote
separately as a class in connection with approval of certain extraordinary
corporate transactions in circumstances where Delaware law does not ordinarily
require such a class vote, or might be given a disproportionately large number
of votes. Such Delaware Preferred Stock could also be convertible into a large
number of shares of Common Stock of the Delaware Company under certain
circumstances or have other terms which might make acquisition of a controlling
interest in the Delaware Company more difficult or more costly, including the
right to elect additional directors to the Delaware Board. Potentially, the
Delaware Preferred Stock could be used to create voting impediments or to
frustrate persons seeking to effect a merger or otherwise to gain control of the
Delaware Company. Also, the Delaware Preferred Stock could be privately placed
with purchasers who might side with the management of the Delaware Company in
opposing a hostile tender offer or other attempt to obtain control.
 
                                       24
<PAGE>
   
    Future issuances of Delaware Preferred Stock as an anti-takeover device
might preclude shareholders from taking advantage of a situation which might
otherwise be favorable to their interests. In addition (subject to the
considerations referred to above as to applicable law), the Delaware Board could
authorize issuance of shares of Common Stock of the Delaware Company ("Delaware
Common Stock") or Delaware Preferred Stock to a holder who might thereby obtain
sufficient voting power to ensure that any proposal to alter, amend or repeal
provisions of the Delaware Certificate unfavorable to a suitor would not receive
the necessary vote of a majority of the voting stock required for certain of the
proposed amendments (as described herein).
    
 
   
    If the reincorporation is approved, it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation. Frequently, opportunities arise that require prompt action, and it
is the belief of the Board of Directors that the delay necessary for shareholder
approval of a specific issuance would be a detriment to the Delaware Company and
its shareholders. The Board of Directors does not intend to issue any Preferred
Stock except on terms which the Board of Directors deems to be in the best
interests of the Delaware Company and its then existing shareholders. The Board
currently has the right to issue Preferred Stock without shareholder approval
under the California Articles.
    
 
    ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS.  There is no specific statutory requirement under either California
or Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at the annual meeting.
However, federal securities laws generally provide that shareholder proposals
that the proponent wishes to include in the Company's proxy materials must be
received not less than 120 days in advance of the date of the proxy statement
released in connection with the previous year's annual meeting.
 
    The California Bylaws have no provisions regarding advance notice of
director nominations and shareholder proposals. The Delaware Bylaws provide that
in order for director nominations or shareholder proposals to be properly
brought before the meeting, the shareholder must have delivered timely notice to
the Secretary of the corporation. To be timely under the Delaware Bylaws, a
shareholder proposal to be presented at an annual meeting shall be received at
the Delaware Company's principal executive offices not less than 120 days in
advance of the date that the Company's (or Company's predecessor's) proxy
statement was released to shareholders in connection with the previous year's
annual meeting of shareholders, except that if no annual meeting was held in the
previous year or the date of the annual meeting has been advanced by more than
30 calendar days from the date contemplated at the time of the previous year's
proxy statement, notice by the shareholders to be timely must be received not
later than the close of business on the tenth day following the day on which the
date of the annual meeting is publicly announced.
 
    These provisions are designated to prevent a hostile acquirer from
nominating directors or presenting proposals to the shareholders without giving
adequate notice, thereby permitting the Board of Directors to consider and
prepare a response to such proposals. These provisions do not give the Board of
Directors any power to approve or disapprove shareholder proposals. They may
have the effect, however, of precluding the consideration of such business at a
meeting if the procedures established are not followed.
 
    TENDER OFFER STATUTES.  A Delaware statute regulates tender offers and is
intended to limit coercive takeovers of companies incorporated in that state.
The Delaware law, Section 203, provides that a corporation may not engage in any
business combination with any interested shareholder for a period of three years
following the date that such shareholder became an interested shareholder unless
(i) prior to the date the shareholder became an interested shareholder the Board
of Directors approved the business combination or the transaction which resulted
in the shareholder becoming an interested shareholder, or (ii) upon consummation
of the transaction which resulted in the shareholder becoming an interested
shareholder, the interested shareholder owned at least 85%, of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of
 
                                       25
<PAGE>
shares outstanding those shares owned by person who are directors and also
officers and employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or (iii) the business combination is
approved by the Board of Directors and authorized by 66 2/3% of the outstanding
voting stock which is not owned by the interested shareholder. An interested
shareholder means any person that is the owner of 15% or more of the outstanding
voting stock; however, the statute provides for certain exceptions to parties
who otherwise would be designated interested shareholders. Any corporation may
decide to opt out of the statute in its original Certificate of Incorporation or
at any time by action of its shareholders. The Company has not opted out of the
statute.
 
    In contrast, California law requires that holders of a California
corporation's Common Stock receive nonredeemable Common Stock in a merger of the
corporation with the holder (or an affiliate of the holder) of more than 50% but
less than 90% of its Common Stock, unless all of the holders of its Common Stock
consent to the merger or the merger has been approved by the California
Commissioner of Corporations at a "fairness-hearing." This provision of
California law may have the effect of making a cash "freezeout" merger by a
majority shareholder more difficult to accomplish. A cash freezeout merger is a
transaction whereby a minority shareholder is forced to relinquish his share
ownership in a corporation in exchange for cash, subject in certain instances to
dissenters' rights. Delaware law has no comparable provision.
 
   
OTHER KEY DIFFERENCES BETWEEN CALIFORNIA AND DELAWARE LAW
    
 
    LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES.  California law provides that
any loan or guaranty (other than loans to permit the purchase of shares under
certain stock purchase plans) for the benefit of any officer or director, or any
employee benefit plan authorizing such loan or guaranty (except certain employee
stock purchase plans), must be approved by the shareholders of a California
corporation. However, a bylaw approved by the shareholders may provide that the
Board alone may approve such loan, guaranty or plan by a vote sufficient without
counting the vote of any interested director or directors if the Board
determines that such loan, guaranty or plan may reasonably be expected to
benefit the corporation. The California Bylaws do not provide for such loans.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest.
 
    CLASS VOTE FOR CERTAIN REORGANIZATIONS.  With certain exceptions, California
law requires that mergers, reorganizations, certain sales of assets and similar
transactions be approved by a majority vote of each class of shares outstanding.
Delaware law generally does not require class voting for such transactions,
except in certain situations involving an amendment to the Certificate of
Incorporation which adversely affects a specific class of shares.
 
    INSPECTION OF SHAREHOLDER LISTS.  California law provides for an absolute
right of inspection of the shareholder list for shareholders holding 5% or more
of a corporation's outstanding voting shares or shareholders holding 1% or more
of such shares who have filed a Schedule 14B with the SEC. Delaware law provides
no such absolute right of shareholder inspection. However, both California and
Delaware law permit any shareholder of record to inspect the shareholder list
for any purpose reasonably related to that person's interest as a shareholder.
 
    APPRAISAL RIGHTS.  Under both California law and Delaware law, a shareholder
of a corporation participating in certain mergers and reorganizations may be
entitled to receive cash in the amount of the "fair value" (Delaware) or "fair
market value" (California) of its shares, as determined by a court, in lieu of
the consideration it would otherwise receive in the transaction. The limitations
on such dissenters' appraisal rights are somewhat different in California and
Delaware.
 
                                       26
<PAGE>
    Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares assert the appraisal right. In any reorganization in which
one corporation or the shareholders of one corporation own more than 5/6 of the
voting power of the surviving or acquiring corporation, shareholders are denied
dissenters' rights under California law. For this reason, appraisal rights will
not be available to shareholders in connection with the Reincorporation
Proposal.
 
    Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders receive shares of the surviving
corporation or shares of any other corporation which are similarly listed or
dispersed, and the shareholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under Delaware law to shareholders of a corporation surviving a
merger if no vote of those shareholders is required to approve the merger
because, among other things, the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation outstanding
immediately before the merger and certain other conditions are met.
 
    In addition, Delaware law does not provide shareholders with voting or
appraisal rights when a corporation acquires another business through the
issuance of its stock, whether in exchange for assets or stock or in a merger
with a subsidiary. California law treats these kinds of acquisitions in the same
manner as a merger of the corporation directly with the business to be acquired
and provides appraisal rights in the circumstances described in the preceding
paragraph.
 
    DIVIDENDS.  Under California law, any dividends or other distributions to
shareholders, such as redemptions, are limited to the greater of (i) retained
earnings or (ii) an amount which would leave the corporation with assets
(excluding certain intangible assets) equal to at least 125% of its liabilities
(excluding certain deferred items) and current assets equal to at least 100%
(or, in certain circumstances, 125%) of its current liabilities. Delaware law
allows the payment of dividends and redemption of stock out of surplus
(including paid-in and earned surplus) or out of net profits for the current and
immediately preceding fiscal years.
 
    The Company has never paid a cash dividend, and the Delaware Company does
not anticipate paying any cash dividends in the foreseeable future.
 
    APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION.  California law
provides that if (i) the average of certain property, payroll and sales factors
results in a finding that more than 50% of the Delaware Company's business is
conducted in California, and in a particular fiscal year more than 50% of the
Delaware Company's outstanding voting securities are held of record by persons
having addresses in California, and (ii) the Company's shares are traded on the
Nasdaq National Market and are held by fewer than 800 shareholders, as of its
most recent annual meeting of shareholders, then the Delaware Company would
become subject to certain provisions of California law regardless of its state
of incorporation.
 
    Because the Company's Common Stock is traded on the Nasdaq National Market
and the Company's shares are held by at least 800 shareholders as of its most
recent annual meeting of shareholders, California law will not apply to the
Delaware Company if the reincorporation is approved. The Company would not be
subject to California law as long as it continued to meet both of these
requirements.
 
    If the Delaware Company were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Instead, the
Delaware Company could be governed by certain California laws, including those
regarding liability of directors for breaches of the duty of care,
indemnification of directors, dissenters' rights of appraisal, removal of
directors as well as certain other provisions discussed above, to the exclusion
of Delaware law. The effects
 
                                       27
<PAGE>
of applying both Delaware and California laws to a Delaware corporation whose
principal operations are based in California have not yet been determined.
 
SUMMARY OF FEDERAL TAX CONSEQUENCES OF THE REINCORPORATION
 
    The reincorporation is intended to be a reorganization under the Internal
Revenue Code of capital stock of 1986, as amended. Generally, for federal income
tax purposes, no gain or loss should be recognized by holders of the Company as
a result of the reincorporation and no gain or loss should be recognized by the
Company or the Delaware Company.
 
    Each former holder of Common Stock of the Company should have the same basis
in the Common Stock of the Delaware Company received pursuant to the
reincorporation as such shareholder had in the Common Stock of the Company held
by such shareholder at the time of consummation of the reincorporation. A
shareholder's holding period with respect to the Common Stock of the Delaware
Company received in the reincorporation should include the period during which
the shareholder held the corresponding shares of Common Stock of the Company;
provided that the shares of Common Stock of the Company were held by the
shareholder as capital assets at the time of consummation of the
reincorporation. Tax provisions are complex and subject to change and this
summary does not purport to be a complete discussion of all the possible tax
consequences of the reincorporation under federal laws. The Company has not
obtained a ruling from the Internal Revenue Service or an opinion of legal or
tax counsel with respect to the consequences of the reincorporation.
 
   
    EACH SHAREHOLDER SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF
THE LAWS OF ANY STATE OR OTHER JURISDICTION.
    
 
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
 
    The Board of Directors believes that the proposed reincorporation of the
Company in Delaware and all related matters is in the best interests of the
shareholders of the Company and the Company for the reasons stated above.
 
   
    THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL
OF THIS PROPOSAL TO REINCORPORATE IN DELAWARE AND CERTAIN RELATED MATTERS. A
VOTE FOR THE REINCORPORATION PROPOSAL WILL CONSTITUTE APPROVAL OF THE MERGER,
THE DELAWARE CERTIFICATE (WITHOUT ANTI-TAKEOVER MEASURES SET FORTH UNDER
PROPOSAL THREE UNLESS SEPARATELY APPROVED BY THE SHAREHOLDERS), THE DELAWARE
BYLAWS (WITHOUT ANTI-TAKEOVER MEASURES SET FORTH UNDER PROPOSAL THREE UNLESS
SEPARATELY APPROVED BY THE SHAREHOLDERS), THE FORM OF THE INDEMNIFICATION
AGREEMENTS, THE ADOPTION AND ASSUMPTION BY THE DELAWARE COMPANY OF THE COMPANY'S
1989 STOCK OPTION PLAN (AND AMENDMENT AND RESTATEMENT THEREOF IF SEPARATELY
APPROVED BY THE SHAREHOLDERS), 1994 EMPLOYEE STOCK PURCHASE PLAN AND ALL OTHER
ASPECTS OF THIS PROPOSAL TWO.
    
 
                                       28
<PAGE>
   
                                 PROPOSAL THREE
                       ADDITIONAL ANTI-TAKEOVER MEASURES
    
   
    As described under Proposal Two, "REINCORPORATION IN THE STATE OF DELAWARE
AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS," the Board of Directors has
unanimously approved a proposal to change the Company's state of incorporation
from California to Delaware. In addition, if Proposal Two is approved, the Board
has also proposed the inclusion in the Delaware Certificate and Bylaws of
certain provisions available to public companies under Delaware law that deter
hostile take-over attempts, as more particularly described below. These measures
are not included in the California Articles and are not applicable to the
Company under California Law currently. Accordingly, these matters are presented
for separate consideration and vote by the shareholders.
    
   
    In considering the proposals, shareholders should be aware that the overall
effect of certain of the proposed provisions is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors and to remove existing management in
circumstances where a majority of the shareholders may be dissatisfied with the
performance of the incumbent directors or otherwise desire to make changes.
These provisions, if included in the Company's new charter documents, could make
a proxy contest a less effective means of removing or replacing existing
directors or could make it more difficult to make a change in control of the
Company which is opposed by the Board of Directors. This strengthened tenure and
authority of the Board of Directors could enable the Board of Directors to
resist change and otherwise thwart the desires of a majority of the
shareholders. Because these provisions may have the effect of continuing the
tenure of the current Board of Directors, the Board has recognized that the
individual directors have a personal interest in this provision that may differ
from those of the shareholders. However, the Board believes that these
provisions' primary purpose is to ensure that the Board will have sufficient
time to consider fully any proposed takeover attempt in light of the short and
long-term benefits and other opportunities available to the Company and, to the
extent the Board determines to proceed with the takeover, to effectively
negotiate terms that would maximize the benefits to the Company and its
shareholders.
    
   
    A hostile takeover attempt may have a positive or a negative effect on the
Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a Board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
In addition, in the case of a proposal which is presented to the Board of
Directors, there is a greater opportunity for the Board to analyze the proposal
thoroughly, to develop and evaluate alternatives, to negotiate for improved
terms and to present its recommendations to the shareholders in the most
effective manner.
    
   
    The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to shareholders, providing all shareholders with
considerable value for their shares. However, the Board of Directors believes
that the potential disadvantages of unapproved takeover attempts are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts are in the best interests of the Company and its shareholders.
Accordingly, the Board has separately proposed certain measures for inclusion in
the Delaware Certificate or the Delaware Bylaws that may have the effect of
discouraging or deterring hostile takeover attempts.
    
                                       29
<PAGE>
   
    Notwithstanding the belief of the Board as to the benefits to shareholders
of the changes, shareholders should recognize that one of the effects of such
changes may be to discourage a future attempt to acquire control of the Company
which is not presented to and approved by the Board of Directors, but which a
substantial number, and perhaps even a majority, of the Company's shareholders
might believe to be in their best interests or in which shareholders might
receive a substantial premium for their shares over the current market price. As
a result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so.
    
   
    In addition, by increasing the probability that any person or group seeking
control of the Delaware Company would be forced to negotiate directly with the
Board of Directors, the proposed takeover defenses could discourage takeover
bids by means of a hostile tender offer, proxy contest or otherwise without the
approval of the Board. Thus, the principal disadvantages to the shareholders
which result from discouraging such hostile takeover bids would be to (i) reduce
the likelihood that any acquiror would make a hostile tender offer for the
outstanding shares of stock of the Company at a premium over the market rate and
(ii) increase the difficulty of removing the existing Board of Directors and
management even if, in a particular case, removal would be beneficial to
shareholders generally.
    
   
    It should be noted, however, that the Board of Directors has a fiduciary
duty to the shareholders to negotiate for the best interests of the shareholders
and not for its own interests. Further, while the proposed takeover defenses may
discourage hostile takeover attempts, these provisions would not prevent a
hostile acquisition of the Delaware Company.
    
   
    The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions described below outweigh
the possible disadvantages. In particular, the Board believes that the benefits
associated with enabling the Board to fully consider and negotiate proposed
takeover attempts make these proposals beneficial to the Company and its
shareholders.
    
   
    The proposal to include these anti-takeover provisions as part of the
proposed reincorporation does not reflect knowledge on the part of the Board of
Directors or management of any proposed takeover or other attempt to acquire
control of the Company. Management may in the future propose or adopt other
measures designed to discourage takeovers apart from those proposed in this
Proxy Statement, if warranted from time to time in the judgment of the Board of
Directors, although the Board has no such intention at the present time.
    
   
SUMMARY OF ADDITIONAL ANTI-TAKEOVER MEASURES.
    
   
    The separate proposals are summarized in the chart below. The following
chart does not purport to be an exhaustive discussion. It is qualified in its
entity by reference to the California Corporations Code, the Delaware General
Corporation Law, the California Articles and Bylaws and the Delaware Certificate
and Bylaws. Shareholders are requested to read the following chart in
conjunction with the discussion following the chart and the Merger Agreement,
the Delaware Certificate and Bylaws attached to this Proxy Statement.
Shareholders should note that each of these measures is proposed for separate
consideration and vote by the shareholders.
    
   
<TABLE>
<CAPTION>
               ISSUE                                DELAWARE                             CALIFORNIA
- ------------------------------------  ------------------------------------  ------------------------------------
<S>                                   <C>                                   <C>
Cumulative Voting for Directors       Cumulative voting is not available    California law permits Nasdaq
                                      unless it is provided for in the      National Market corporations with
                                      Certificate of Incorporation; the     over 800 shareholders to eliminate
                                      Board proposes that the Delaware      cumulative voting. The California
                                      Certificate NOT provide for           Articles do not eliminate cumulative
                                      cumulative voting.                    voting.
</TABLE>
    
                                       30
<PAGE>
   
<TABLE>
<CAPTION>
               ISSUE                                DELAWARE                             CALIFORNIA
- ------------------------------------  ------------------------------------  ------------------------------------
<S>                                   <C>                                   <C>
Classified Board                      Delaware law permits the adoption of  California law permits the Company
                                      a classified board with staggered     to adopt a classified board with
                                      terms. The Board proposes that the    staggered terms with shareholder
                                      Delaware Certificate and Bylaws       approval. The California Bylaws do
                                      provide for a classified Board with   not provide for a classified Board.
                                      three classes of directors, each      
                                      with a three year term.

                                      Delaware law permits the removal of   California law permits the removal  
                                      a director on a classified board      of a director with or without cause 
                                      only for cause, unless otherwise      by affirmative vote of a majority of
                                      specified in the Certificate of       the outstanding shares.
                                      Incorporation. The Board proposes
                                      that the Delaware Certificate and
                                      Bylaws permit removal of directors
                                      only for cause by affirmative vote
                                      of the majority of the outstanding
                                      shares of voting stock entitled to
                                      vote at an election of directors.
 
Action by Written Consent of          The Board proposes that actions by    Actions by written consent are
Shareholders in lieu of a             written consent not be permitted      permitted by the California Articles
Shareholder vote at a Shareholder     under the Delaware Certificate. All   and Bylaws.
Meeting                               shareholder action would take place
                                      by a shareholder vote at a meeting
                                      of shareholders.
 
Call of Special Meetings by           Special meetings may be called only   Special meetings may be called by
Shareholders                          by the Board or any person as may be  the Board, the Chairman, the
                                      designated in the Certificate of      President, holders of 10% or more of
                                      Incorporation or Bylaws. The Board    the outstanding voting power and
                                      proposes that the Delaware            such other persons as may be
                                      Certificate and Bylaws provide        designated in the Articles of
                                      special meetings may be called only   Incorporation or Bylaws. The
                                      by the Board, the Chairman, the       California Bylaws provide special
                                      President or the Chief Executive      meetings may be called by the Board,
                                      Officer.                              the Chairman, the President or
                                                                            holders of 10% or more of the
                                                                            outstanding voting power.

Amendment of Certificate and Bylaws   The Board proposes that amendments    Amendments of the California
                                      of certain provisions or the          Articles require approval by a
                                      Delaware Certificate require          majority of the outstanding voting
                                      approval by two-thirds of the voting  shares. The Bylaws can be amended by
                                      stock and a majority of the voting    the Board or the holders of a
                                      stock for certain provisions, and     majority of the outstanding voting
                                      that the Delaware Bylaws could be     shares, except that the Board may
                                      amended by the Board or by the        not amend the range of authorized
                                      holders of two-thirds of the          directors.
                                      outstanding voting shares.
</TABLE>
    
                                       31
<PAGE>
   
                                PROPOSAL THREE A
                 ELIMINATION OF CUMULATIVE VOTING FOR DIRECTORS
    
   
    Concurrent with the reincorporation proposal described above, the Board of
Directors has proposed the adoption of certain additional measures designed to
protect shareholder interests in the event of hostile takeover attempts against
the Company. The Board believes that these measures will enable it to more
effectively consider any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders. The elimination of
cumulative voting for directors is one such measure.
    
   
    Cumulative voting permits the holder of each share of stock entitled to vote
in the election of directors to cast that number of votes which equal the number
of directors to be elected. The holder may allocate all votes represented by a
share to a single candidate or may allocate those votes among as many candidates
as he chooses. Thus, a shareholder with a significant minority percentage of the
outstanding shares may be able to elect one or more directors if voting is
cumulative. In contrast, the holder or holders of a majority of the shares
entitled to vote in an election of directors are able to elect all the directors
in the absence of cumulative voting.
    
   
    Under California law, cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholders' meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes. However, California law permits a company, by amending
its Articles of Incorporation or Bylaws, to eliminate cumulative voting when the
Company's shares are listed on a national stock exchange or traded on the Nasdaq
National Market and are held by at least 800 shareholders. The California
Articles have not been amended to eliminate cumulative voting.
    
   
    Cumulative voting is not available under Delaware law unless so provided in
the corporation's Certificate of Incorporation. The Board of Directors has
proposed to eliminate cumulative voting by not including it in the Delaware
Certificate.
    
   
    The elimination of cumulative voting could deter investors from acquiring a
minority block in the Company, with a view toward obtaining a board seat and
influencing Company policy. It is also conceivable that the absence of
cumulative voting might deter efforts to seek control of the Company on a basis
which some shareholders might deem favorable.
    
   
    In the event this proposal is not approved by the requisite vote of
shareholders, the Delaware Certificate will provide for cumulative voting in the
election of directors. In the event this proposal is approved, the provision
regarding cumulative voting of directors will not be included in the Delaware
Certificate.
    
   
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
    
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
    
   
    THE BOARD BELIEVES THAT THE PROPOSED PROVISION REGARDING THE ELIMINATION OF
CUMULATIVE VOTING UNDER THE DELAWARE CERTIFICATE IS IN THE BEST INTEREST OF THE
SHAREHOLDERS AND THE COMPANY FOR THE REASONS STATED ABOVE. THEREFORE, THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
    
                                       32
<PAGE>
   
                                PROPOSAL THREE B
             CLASSIFIED BOARD OF DIRECTORS REMOVABLE ONLY FOR CAUSE
    
   
    Concurrent with the reincorporation proposal, the Company has proposed the
inclusion in its charter documents of certain measures designed to protect
shareholder interests in the event of hostile takeover attempts against the
Company. The Board believes that these measures will enable it to more
effectively consider any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders. A classified board of
directors removable only for cause is another such measure.
    
   
    A classified Board provides directors to be divided into two or three
"classes" elected for staggered "terms" of two or three years. The
classification system of electing directors may tend to maintain the incumbency
of the Board as it generally enables it more difficult for shareholders to
change a majority of the directors. A classified board may also contribute to
the continuity and stability of leadership and policy. Classification of the
Board of Directors might make it more difficult for a person acquiring shares to
take immediate control of the Board of Directors.
    
   
    Delaware law permits the adoption of a classified Board of Directors with
staggered terms. A maximum of three classes of directors is permitted by
Delaware law, with members of one class to be elected each year for a maximum
term of three years. The Board of Directors has proposed the inclusion in the
Delaware Certificate and Bylaws of certain provisions establishing a classified
Board of Directors removable only for cause, as discussed below (the "Classified
Board Provisions").
    
   
    The directors of the California Company, who will also be the directors of
the Delaware Company if the reincorporation proposal is approved, are set forth
in Proposal One. Under the Classified Board Provisions, the Board of Directors
will be divided into three classes, designated Class I, Class II and Class III,
on the Reincorporation Effective Date. The director in Class I, Brad Mattson,
will hold office until the first annual meeting of shareholders following the
Reincorporation Effective Date; the directors in Class II, John C. Savage and
Kenneth G. Smith, will hold office until the second annual meeting of
shareholders following the Reincorporation Effective Date; and the directors in
Class III, Stephen J. Ciesinski and Shigeru Nakayama, will hold office until the
third annual meeting of shareholders following the Reincorporation Effective
Date (and, in each case, until their successors are duly elected and qualified
or until their earlier resignation, removal from office or death). After each
such election, the directors shall then serve in succeeding terms of three years
and until their successors are duly elected and qualified.
    
   
    Under California law, a director may be removed with or without cause by the
affirmative vote of a majority of the outstanding shares. Under Delaware law, a
director on a classified board of directors can be removed from office during
his term by shareholders only for cause unless the Certificate of Incorporation
provides otherwise. The Board of Directors has proposed that the Delaware
Certificate provide that the Company's directors may be removed from office only
for cause by the affirmative vote of the holders of a majority of the voting
power of the then outstanding shares of voting stock of the Company entitled to
vote in the election of directors.
    
   
    California law generally requires that directors be elected annually but
does permit a "classified" Board of Directors if (i) a corporation is listed on
a national stock exchange or (ii) the corporation's shares are traded on the
Nasdaq National Market and are held by at least 800 shareholders. California law
also allows the election of one or more directors by the holders of a particular
class or series of shares. The California Articles currently do not provide for
a classified Board of Directors.
    
   
    With the Classified Board Provisions proposed for inclusion in the Delaware
Certificate and Bylaws, unless directors are removed for cause, it will require
at least two annual meetings of shareholders for a majority of shareholders to
make a change in control of the Board of Directors, since only a portion of the
directors will be elected at each meeting. A significant effect of a classified
Board of Directors may be to deter hostile takeover attempts because an acquirer
would experience delay in replacing a majority of the directors. However, a
classified Board of Directors also makes it more difficult for shareholders to
effect a

                                       33
<PAGE>

change in control of the Board of Directors, even if such a change in control is
sought due to dissatisfaction with the performance of the Company's directors.
    
   
    In the event this proposal is not approved, all directors of the Company
will be elected at each annual meeting. In the event this proposal is approved,
the Delaware Certificate and Bylaws will include the Classified Board Provisions
as set forth in Exhibit 1 to the Merger Agreement.
    
   
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
    
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
    
   
    THE BOARD BELIEVES THAT THE CLASSIFIED BOARD PROVISIONS PROPOSED FOR
INCLUSION IN THE DELAWARE CERTIFICATE AND BYLAWS ARE IN THE BEST INTEREST OF THE
SHAREHOLDERS AND THE COMPANY FOR THE REASONS STATED ABOVE. THEREFORE, THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
    
                                       34
<PAGE>

   
                                PROPOSAL THREE C
    
   
                    ELIMINATION OF ACTION BY WRITTEN CONSENT
    
 
   
    Concurrent with the reincorporation proposal, the Company has proposed the
inclusion in its charter documents of certain measures designed to protect
shareholder interests in the event of hostile takeover attempts against the
Company. The Board believes that these measures will enable it to more
effectively consider any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders. The elimination of
action by written consent of the shareholders is another such measure.
    
 
   
    Under California and Delaware law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. Both California and Delaware
law permit a corporation to eliminate such actions by written consent in its
charter. The California Articles do not eliminate the ability of shareholders to
act by written consent. The Board of Directors proposes to include a provision
in the Delaware Certificate and a corresponding provision in the Delaware
Bylaws, which would eliminate the right of shareholders to act by written
consent of shareholders.
    
 
   
    Elimination of such shareholders' right to act by written consent may
lengthen the amount of time required to take shareholder actions because certain
actions by written consent are not subject to the minimum notice requirement of
a shareholders' meeting. The elimination of shareholders' right to act by
written consent may deter hostile takeover attempts because of the lengthened
shareholder approval process. Without the ability to act by written consent, a
holder or group of holders controlling a majority in interest of the Delaware
Company's capital stock will not be able to amend the Delaware Bylaws or remove
directors pursuant to a written consent. Any such holder or group of holders
would have to wait until a shareholders' meeting was held to take any such
action. The Board believes this provision would enhance the Board's and
shareholders' opportunity to fully consider shareholder proposals at a meeting
where all views can be heard.
    
 
   
    In the event this proposal is not approved by the requisite vote of the
shareholders, the Delaware Certificate and Bylaws will provide for action by
written consent by the shareholders. In the event the proposal is approved, the
Delaware Certificate and the Delaware Bylaws will include a provision which
eliminates the shareholders' right to act by written consent as set forth in
Exhibit 2 to the Merger Agreement.
    
 
   
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
    
 
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
    
 
   
    THE BOARD BELIEVES THAT THE PROPOSED PROVISIONS UNDER THE DELAWARE
CERTIFICATE AND BYLAWS REGARDING THE ELIMINATION OF ACTION BY WRITTEN CONSENT IS
IN THE BEST INTEREST OF THE SHAREHOLDERS AND THE COMPANY FOR THE REASONS STATED
ABOVE. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF THIS PROPOSAL.
    
 
                                       35
<PAGE>

   
                                PROPOSAL THREE D
    
   
                 LIMITATION ON ABILITY TO CALL SPECIAL MEETINGS
    
 
   
    Concurrent with the reincorporation proposal, the Company has proposed the
inclusion in its charter documents of certain measures designed to protect
shareholder interests in the event of hostile takeover attempts against the
Company. The Board believes that these measures will enable it to more
effectively consider any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders. Limiting the manner in
which special meetings are called is another such measure.
    
 
   
    Under California law, special meetings of shareholders may be called by the
Board, the Chairman of the Board, the President, the holders of 10% or more of
the outstanding voting power and such other persons as may be designated in the
Articles of Incorporation or Bylaws of a company. The California Bylaws provide
special meetings may be called by the Board, the Chairman of the Board, the
President or the holders of 10% or more of the outstanding voting power.
    
 
   
    Delaware law, however, provides that special meetings of shareholders may
only be called by the Board or by any other person as may be designated in the
Certificate of Incorporation or Bylaws. The Board of Directors has proposed a
provision in the Delaware Certificate and the Delaware Bylaws providing that
special meetings of shareholders may be called only by the Board of Directors,
the Chairman of the Board or the President and Chief Executive Officer. Such a
provision precludes a shareholder from mounting a proxy contest or taking action
to amend charter documents until the next annual meeting. Such a provision could
have the affect of deterring efforts to seek control of the Company on a basis
which some shareholders might deem favorable.
    
 
   
    In the event this proposal is not approved by the requisite vote of the
shareholders, the Delaware Bylaws will provide that special meetings of
shareholders may be called by the Board of Directors, the Chairman of the Board,
the President, the Chief Executive Officer or the holders of 10% or more of the
outstanding voting power. In the event this proposal is approved, the Delaware
Certificate and Bylaws will provide that special meetings of shareholders may be
called only by the Board of Directors, the Chairman of the Board, the President
and the Chief Executive Officer as set forth in Exhibit 3 to the Merger
Agreement.
    
 
   
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
    
 
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
    
 
   
    THE BOARD BELIEVES THAT THE PROPOSED PROVISIONS REGARDING THE LIMITATION ON
THE ABILITY TO CALL SPECIAL MEETINGS BY THE SHAREHOLDERS UNDER THE DELAWARE
CERTIFICATE AND BYLAWS IS IN THE BEST INTEREST OF THE SHAREHOLDERS AND THE
COMPANY FOR THE REASONS STATED ABOVE. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
    
 
                                       36
<PAGE>

   
                                PROPOSAL THREE E
    
   
                SUPER-MAJORITY VOTE REQUIREMENT FOR AMENDMENT OF
                        DELAWARE CERTIFICATE AND BYLAWS
    
 
   
    Concurrent with the reincorporation proposal, the Company has proposed the
inclusion in its charter documents of certain measures designed to protect
shareholder interests in the event of hostile takeover attempts against the
Company. The Board believes that these measures will enable it to more
effectively consider any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders. Super-majority vote
requirements for amendments to the Delaware Certificate and Bylaws are such
measures.
    
 
   
    Both Delaware and California law permit super-majority voting requirements
on most matters which may be voted upon by shareholders or directors. California
law permits super-majority voting requirements for corporations if (i) the
corporation is listed on a national stock exchange or the corporation's shares
are traded on the Nasdaq National Market and are held by at least 800
shareholders, on most matters which may be voted upon by shareholders and
directors, provided that such provisions are included in the Company's Articles
of Incorporation after shareholder approval. However, shareholders of a
California corporation must vote to renew such provisions every two years.
Delaware law does not provide similar restrictions on super-majority voting
provisions.
    
 
   
    The California Articles may be amended following the approval by the Board
of Directors and by a majority of the outstanding shares. The Board has proposed
that the Delaware Certificate include a provision under which the Delaware
Certificate may be amended by action of the Board of Directors with the
affirmative vote of a majority of outstanding shares, provided that for the
following provisions, two-thirds of the outstanding shares would be required for
amendment of the Delaware Certificate, subject, where indicated, to the separate
approval of the inclusion of such provisions in the Delaware Certificate under
Proposals Three A through Three D above: (i) the establishment of a Classified
Board, the terms of office of directors, and restrictions on removal of
directors only for cause (subject to the separate approval of the shareholders
of the Classified Board Provisions set forth in Proposal Three B, described
above); (ii) the exclusive right of the directors to change the number of
authorized directors and to fill vacancies on the Board; (iii) the percentage of
shares necessary to amend certain provisions of the Delaware Certificate; (iv)
the authority of the Board of Directors and the shareholders to amend the
Delaware Bylaws; (v) the elimination of the right of shareholders to act without
a meeting (subject to the separate approval of the shareholders of the
elimination of the right of shareholders to act without a meeting under Proposal
Three C above); (vi) the elimination of the right of shareholders to call a
special shareholders meeting (subject to the separate approval of the
shareholders of the elimination of the right of shareholders to call a special
meeting under Proposal Three D above); and (vii) the elimination of directors'
personal liability for monetary damages arising from their negligence or gross
negligence.
    
 
   
    The California Bylaws may be amended or repealed either by the Board of
Directors or by the holders of a majority in interest of the outstanding stock
of the Company, except that the Board of Directors may not change the authorized
range of directors. The Board has proposed that the Delaware Bylaws include a
provision under which the Delaware Bylaws may be adopted, amended or repealed by
the Board or by the affirmative vote of the holders of at least two-thirds of
the shares of the capital stock of the Delaware Company. This provision would
have the effect of making it more difficult for shareholders to amend the
Delaware Bylaws.
    
 
   
    In the event this proposal is not approved by the requisite vote of the
shareholders, any provision of the Delaware Certificate may be amended by action
of the Board of Directors, with the affirmative vote of a majority of
outstanding shares, and the Delaware Bylaws may be adopted, amended or repealed
by the Board or by the affirmative vote of the holders of at least a majority of
the shares of capital stock of the Delaware Company.
    
 
                                       37
<PAGE>

   
    In the event this proposal is approved by the shareholders, the Delaware
Certificate and Bylaws will include the super-majority provisions, as set forth
in Exhibit 4 to the Merger Agreement.
    
 
   
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
    
 
   
    The affirmative vote of a majority of the voting power of all outstanding
capital stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each have the same effect as a negative
vote on this proposal.
    
 
   
    THE BOARD BELIEVES THAT THE PROPOSED PROVISIONS REGARDING SUPER-MAJORITY
VOTING FOR THE AMENDMENT OF THE DELAWARE CERTIFICATE AND BYLAWS IS IN THE BEST
INTEREST OF THE SHAREHOLDERS AND THE COMPANY FOR THE REASONS STATED ABOVE.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THIS PROPOSAL.
    
 
                                       38
<PAGE>

   
                                 PROPOSAL FOUR
    
                        AMENDMENT AND RESTATEMENT OF THE
                             1989 STOCK OPTION PLAN
 
GENERAL
 
    THE COMPANY'S 1989 STOCK OPTION PLAN (THE "1989 PLAN") BECAME EFFECTIVE ON
SEPTEMBER 29, 1989 AND WAS RESTATED IN AUGUST 1994. THE COMPANY OBTAINED
SHAREHOLDER APPROVAL OF THE RESTATED 1989 PLAN IN AUGUST 1994. A RESERVE OF
2,400,000 SHARES OF THE COMPANY'S COMMON STOCK WAS ORIGINALLY ESTABLISHED FOR
ISSUANCE UNDER THE RESTATED 1989 PLAN. IN MARCH 1995, THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE 1989 PLAN WAS INCREASED TO 3,000,000 BY THE
BOARD OF DIRECTORS AND APPROVED BY THE COMPANY'S SHAREHOLDERS IN MAY 1995. IN
MARCH 1996, THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE 1989 PLAN WAS
INCREASED TO 4,000,000 BY THE BOARD OF DIRECTORS AND APPROVED BY THE COMPANY'S
SHAREHOLDERS IN MAY 1996. IN APRIL 1997, SUBJECT TO SHAREHOLDER APPROVAL, THE
BOARD AMENDED AND RESTATED THE 1989 PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE TO 4,300,000 AND TO INCORPORATE OTHER CHANGES DESCRIBED
BELOW (THE "OPTION PLAN").
 
    AT THE ANNUAL MEETING, THE SHAREHOLDERS ARE BEING REQUESTED TO RATIFY THE
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 1989 PLAN IN THE FORM OF THE
OPTION PLAN DESCRIBED BELOW, INCLUDING AN INCREASE IN THE NUMBER OF SHARES
AUTHORIZED UNDER THE OPTION PLAN. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK PRESENT, OR REPRESENTED AND
ENTITLED TO VOTE AT THE MEETING, WILL BE REQUIRED TO RATIFY THE SHARE RESERVE
INCREASE. THE BOARD OF DIRECTORS BELIEVES THAT THE INCREASE UNDER THE OPTION
PLAN IS NECESSARY TO ENABLE THE COMPANY TO PROVIDE MEANINGFUL EQUITY INCENTIVES
TO ATTRACT, MOTIVATE AND RETAIN EMPLOYEES AND RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR APPROVAL OF THIS INCREASE.
 
DESCRIPTION OF PLAN
 
   
    The following summary of the Option Plan is qualified in its entirety by the
specific language of the Option Plan, the form of which is attached as Appendix
C.
    
 
    GENERAL.  The Option Plan provides for the discretionary grant of incentive
stock options within the meaning of section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and nonstatutory stock options. In addition, the
Option Plan also provides for the automatic grant of nonstatutory stock options
to nonemployee directors of the Company ("Nonemployee Director Options").
 
    SHARES SUBJECT TO PLAN.  The shareholders have previously authorized the
reservation of an aggregate of 4,000,000 shares of the Company's Common Stock
for issuance upon the exercise of options granted under the 1989 Plan. As of May
30, 1997, a total of        shares were subject to outstanding options granted
under the 1989 Plan,        shares were available for future grant under the
1989 Plan and options to purchase        shares of Common Stock granted under
the 1989 Plan had been exercised. As restated, the maximum number of authorized
but unissued or reacquired shares of the Company's Common Stock available for
issuance under the Option Plan has been increased, subject to shareholder
approval, to 4,300,000. The Option Plan imposes a grant limit under which no
employee may receive in any fiscal year options to purchase in excess of 500,000
shares (the "Grant Limit"). Appropriate adjustments will be made to the shares
subject to the Option Plan, to the Grant Limit, to the automatic Nonemployee
Director Option grant provisions (discussed below) and to outstanding options
upon any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of the
Company. To the extent that any outstanding option under the Option Plan expires
or terminates prior to exercise in full, the shares of Common Stock for which
such option is not exercised are returned to the Option Plan and become
available for future grant. As restated, the Option Plan also provides that if
shares issued upon exercise of an option are repurchased by the Company, the
repurchased shares are returned to the Option Plan and become available for
future grant.
 
                                       39
<PAGE>
    ADMINISTRATION.  The Option Plan is administered by the Board of Directors
or a duly appointed committee of the Board (hereinafter referred to as the
"Board"). With respect to the participation of individuals whose transactions in
the Company's equity securities are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Option Plan must be administered
in compliance with the requirements of Rule 16b-3 under the Exchange Act, if
any. Subject to the provisions of the Option Plan, the Board determines the
persons to whom options are to be granted, the number of shares to be covered by
each option, whether an option is to be an incentive stock option or a
nonstatutory stock option, the timing and terms of exercisability of each option
or the vesting of shares acquired upon the exercise of an option, including the
effect thereon of an optionee's termination of service, the exercise price of
and the type of consideration to be paid to the Company upon the exercise of
each option, the duration of each option, and all other terms and conditions of
the options. The Option Plan also authorizes the Board to delegate to an officer
of the Company the power to grant options for up to        shares per fiscal
year to any eligible person other than an officer or director of the Company.
 
    The Option Plan authorizes the Board to amend, re-price, modify, extend,
renew, or grant a new option in substitution for, any option, to waive any
restrictions or conditions applicable to any option or any shares acquired upon
the exercise thereof, and to accelerate, continue, extend or defer the
exercisability of any option or the vesting of any shares acquired upon the
exercise of an option, including with respect to the period following an
optionee's termination of service with the Company. As restated, the Option Plan
provides, subject to certain limitations, for indemnification by the Company of
any director, officer or employee against all reasonable expenses, including
attorneys' fees, incurred in connection with any legal action arising from such
person's action or failure to act in administering the Option Plan. The Board
will interpret the Option Plan and options granted thereunder, and all
determinations of the Board will be final and binding on all persons having an
interest in the Option Plan or any option.
 
    ELIGIBILITY.  The 1989 Plan permitted the grant of options to employees and
consultants of the Company or of any present or future parent or subsidiary
corporations of the Company. As restated, options may also be granted under the
Option Plan to directors of the Company or of any present or future parent or
subsidiary corporations of the Company, as well as to prospective employees,
consultants and directors in connection with written offers of employment or
engagement, provided that such options may not become exercisable prior to the
individual's commencement of service. As of May 30, 1997, the Company had
approximately     employees, including 4 executive officers, and 5 directors.
While any person eligible under the Option Plan may be granted a nonstatutory
option, only employees may be granted incentive stock options. In addition, only
nonemployee directors of the Company are eligible to receive Nonemployee
Director Options.
 
    TERMS AND CONDITIONS OF OPTIONS.  Each option granted under the Option Plan
is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the plan. The
exercise price per share of each incentive stock option granted under the Option
Plan must equal at least the fair market value of a share of the Company's
Common Stock on the date of grant and the exercise price per share of each
nonstatutory stock option granted under the Option Plan must equal at least 85%
of the fair market value of a share of the Company's Common Stock on the date of
grant. While the 1989 Plan provides that any option granted to a person who at
the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (a "Ten Percent Shareholder") must have an exercise
price equal to at least 110% of the fair market value of a share of Common Stock
on the date of grant, the restated Option Plan imposes this requirement only on
the grant of incentive stock options. As of May 30, 1997, the closing price of a
share of the Company's Common Stock as reported on the Nasdaq National Market
was $        .
 
                                       40
<PAGE>
    The option exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, by means
of a promissory note, by any other lawful consideration approved by the Board,
or by any combination of thesethereof. The Board may nevertheless restrict the
forms of payment permitted in connection with any option grant. The Option Plan
also authorizes the Company to withhold from shares otherwise issuable upon the
exercise of an option or to accept the tender of shares of the Company's Common
Stock in full or partial payment of any tax withholding obligations.
 
   
    Options granted under the Option Plan become exercisable and vested at such
times and subject to such conditions as specified by the Board. Generally,
options granted under the Option Plan become exercisable in installments over a
period of time specified by the Board at the time of grant, subject to the
optionee's continued service with the Company. Currently and as restated, the
1989 Plan provides that the maximum term of an option is ten years unless
granted to a Ten Percent Shareholder, in which case the maximum term is five
years. Consistent with the Code, the Option Plan does not limit the term of a
nonstatutory stock option. Options are nontransferable by the optionee other
than by will or by the laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee. However, the Option Plan,
as restated, provides that a nonstatutory stock option may be assignable or
transferable to the extent permitted by the Board and set forth in the option
agreement.
    
 
    TERMS AND CONDITIONS OF NONEMPLOYEE DIRECTOR OPTIONS.  As restated, the
Option Plan provides for the automatic grant of options to nonemployee directors
of the Company. Subject to shareholder approval, Nonemployee Director Options
will be granted to Messrs. Ciesinski, Savage and Smith on the Effective Date for
11,500 shares, 10,500 shares and 13,125 shares, respectively, provided such
person continues to serve as a nonemployee director of the Company on the
Effective Date. Mr. Nakayama will not receive an option grant in connection with
the restated Option Plan. The Option Plan further provides that each nonemployee
director first elected or appointed to the Board after the Effective Date will
be granted automatically, on the date of such initial election or appointment,
an option to purchase 12,500 shares of Common Stock. A Nonemployee Director
Option granted on the Effective Date or on the date of initial appointment or
election as a nonemployee director is referred to herein as an "Initial Option".
The Option Plan also provides for the automatic annual grant, on the day
following each annual meeting of the shareholders of the Company which occurs
after the Effective Date, of an additional option to purchase 5,000 shares of
Common Stock (an "Annual Option") to each nonemployee director who continues to
serve in such capacity. However, a nonemployee director who has not continuously
served on the Board for at least 6 months as of the date of such annual meeting
will not receive an Annual Option on such date. In addition, the Annual Option,
if any, granted to Mr. Nakayama following the 1998 annual meeting will be an
option to purchase 3,855 shares. The exercise price per share of each
Nonemployee Director Option will be equal to the fair market value of a share of
the Company's Common Stock on the date of grant and each Nonemployee Director
Option will have a term of 10 years.
 
    Nonemployee Director Options are exercisable only to the extent that the
shares subject to the option are vested. Shares subject to the Initial Option
granted to Mr. Ciesinski shall vest as follows: 4,000 shares will vest 1 year
after the Effective Date, 3,750 shares will vest 2 years after the Effective
Date, 2,500 shares will vest 3 years after the Effective Date and 1,250 shares
will vest 4 years after the Effective Date. Shares subject to the Initial Option
granted to Mr. Savage shall vest as follows: 3,000 shares will vest 1 year after
the Effective Date, 3,750 shares will vest 2 years after the Effective Date,
2,500 shares will vest 3 years after the Effective Date and 1,250 shares will
vest 4 years after the Effective Date. Shares subject to the Initial Option
granted to Mr. Smith shall vest as follows: 7,500 shares will be vested on the
Effective Date, 1,875 shares will vest 2 years after the Effective Date, 2,500
shares will vest 3 years after the Effective Date and 1,250 shares will vest 4
years after the Effective Date. In general, Initial Options granted after the
Effective Date will vest as follows: 5,000 shares will vest 1 year after the
date of grant, 3,750 shares will vest 2 years
 
                                       41
<PAGE>
after the date of grant, 2,500 shares will vest 3 years after the date of grant
and 1,250 shares will vest 4 years after the date of grant. Annual Options
become vested cumulatively for 25% of the shares initially subject to the option
on each of the first 4 anniversaries of the date of grant, although the 1998
Annual Option, if any, granted to Mr. Nakayama will vest as follows: 105 shares
will vest 2 years after the date of grant, 2,500 shares will vest 3 years after
the date of grant and 1,250 shares will vest 4 years after the date of grant.
Vesting of shares subject to a Nonemployee Director Option is subject to the
optionee's continued service through the relevant date.
 
    TRANSFER OF CONTROL.  As restated, the Option Plan provides that, in the
event of (i) a sale or exchange by the shareholders in a single or series of
related transactions of more than 50% of the Company's voting stock, (ii) a
merger or consolidation in which the Company is a party, (iii) the sale,
exchange or transfer of all or substantially all of the assets of the Company,
or (iv) a liquidation or dissolution of the Company wherein, upon any such
event, the shareholders of the Company immediately before such event do not
retain, in substantially the same proportions as their ownership of shares
immediately before the transaction, direct or indirect beneficial ownership of
more than 50% of the total combined voting power of the voting stock of the
Company, its successor, or the corporation to which the assets of the Company
were transferred (a "Transfer of Control"), any unexercisable or unvested
portion of the outstanding options will become immediately exercisable and
vested in full prior to the Transfer of Control unless the acquiring or
successor corporation assumes the Company's rights and obligations under the
outstanding options or substitutes substantially equivalent options for such
corporation's stock. To the extent that the options outstanding under the Option
Plan are not assumed, substituted for, or exercised prior to the Transfer of
Control, they will terminate.
 
    TERMINATION OR AMENDMENT.  No options may be granted under the 1989 Plan
after September 29, 1999. As restated, subject to shareholder approval, the
Option Plan will continue in effect until the earlier of its termination by the
Board or the date on which all shares available for issuance under the Option
Plan have been issued and all restrictions on such shares under the terms of the
Option Plan and the option agreements have lapsed, provided that all incentive
stock options must be granted within ten years of April 24, 1997. The Option
Plan further provides that the period for granting incentive stock options will
be extended to a period of ten years following any subsequent approval of an
increase in the maximum number of shares issuable under the Option Plan. The
Board may terminate or amend the Option Plan at any time. However, subject to
changes in the law that would permit otherwise, without shareholder approval,
the Board may not adopt an amendment to the Option Plan which would increase the
total number of shares of Common Stock issuable thereunder, change the class of
persons eligible to receive incentive stock options, or otherwise require
approval of the Company's shareholders under any applicable law, regulation or
rule. No amendment may adversely affect an outstanding option without the
consent of the optionee, unless the amendment is required to preserve the
option's status as an incentive stock option or is necessary to comply with any
applicable law.
 
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
 
    The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
 
    INCENTIVE STOCK OPTIONS.  An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction
 
                                       42
<PAGE>
for federal income tax purposes. If an optionee disposes of shares within two
years after the date of grant or within one year from the date of exercise (a
"disqualifying disposition"), the difference between the fair market value of
the shares on the determination date (see discussion under "Nonstatutory Stock
Options" below) and the option exercise price (not to exceed the gain realized
on the sale if the disposition is a transaction with respect to which a loss, if
sustained, would be recognized) will be taxed as ordinary income at the time of
disposition. Any gain in excess of that amount will be a capital gain. If a loss
is recognized, there will be no ordinary income, and such loss will be a capital
loss. A capital gain or loss will be long-term if the optionee's holding period
is more than 12 months. Any ordinary income recognized by the optionee upon the
disqualifying disposition of the shares generally should be deductible by the
Company for federal income tax purposes, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations thereunder.
 
    The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
 
    NONSTATUTORY STOCK OPTIONS.  Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is the date
on which the option is exercised unless the shares are subject to a substantial
risk of forfeiture and are not transferable, in which case the determination
date is the earlier of (i) the date on which the shares are transferable or (ii)
the date on which the shares are not subject to a substantial risk of
forfeiture. If the determination date is after the exercise date, the optionee
may elect, pursuant to Section 83(b) of the Code, to have the exercise date be
the determination date by filing an election with the Internal Revenue Service
not later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. A capital gain or
loss will be long-term if the optionee's holding period is more than 12 months.
No tax deduction is available to the Company with respect to the grant of a
nonstatutory stock option or the sale of the stock acquired pursuant to such
grant. The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of a nonstatutory stock option, except to the extent such deduction is limited
by applicable provisions of the Code or the regulations thereunder.
 
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    The affirmative vote of a majority of the votes present or represented by
proxy and entitled to a vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, is required for approval of this proposal.
Abstentions and broker nonvotes will each be counted present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on this proposal.
 
    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE 1989 PLAN, INCLUDING AN INCREASE IN THE NUMBER OF SHARES
RESERVED FOR ISSUANCE BY 300,000 SHARES FOR THE REASONS STATED ABOVE.
 
                                       43
<PAGE>
   
                                 PROPOSAL FIVE
                    APPROVAL OF INCREASE IN SHARES RESERVED
              FOR ISSUANCE UNDER 1994 EMPLOYEE STOCK PURCHASE PLAN
    
GENERAL

    In August 1994, the Board adopted the 1994 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan provides a means by which employees may
purchase Common Stock of the Company through payroll deductions. The Purchase
Plan originally authorized the Company to issue up to 200,000 shares of Common
Stock under the plan. In March, 1995, the Board of Directors of the Company
increased the number of shares authorized under the Purchase Plan to 300,000 and
the shareholders approved the increase in May 1995. In March 1996, the Board of
Directors of the Company increased the number of shares authorized under the
Purchase Plan to 600,000 and the shareholders approved the increase in May 1996.
In April 1997, subject to shareholder approval, the Board increased the number
of shares authorized for issuance under the Purchase Plan by 400,000 to
1,000,000 shares.
 
    In July 1996, the Board of Directors of the Company authorized the
repurchase of up to 500,000 shares of the Company's Common Stock from time to
time. Through May 1, 1997, the Company has repurchased 400,000 shares which have
been used to offset shares issued under the Purchase Plan.
 
    AT THE ANNUAL MEETING, THE SHAREHOLDERS ARE BEING REQUESTED TO APPROVE THE
INCREASE IN THE NUMBER OF SHARES AUTHORIZED UNDER THE PURCHASE PLAN. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE COMPANY'S
COMMON STOCK PRESENT, OR REPRESENTED AND ENTITLED TO VOTE AT THE MEETING, WILL
BE REQUIRED TO APPROVE THE INCREASE. THE BOARD OF DIRECTORS BELIEVES THAT THE
INCREASE UNDER THE PURCHASE PLAN IS NECESSARY TO ENABLE THE COMPANY TO PROVIDE
MEANINGFUL EQUITY INCENTIVES TO ATTRACT, MOTIVATE AND RETAIN EMPLOYEES AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THIS INCREASE.
 
DESCRIPTION OF PLAN
   
    The following summary of the Purchase Plan is qualified in its entirety by
the specific language of the Purchase Plan, a copy of which is available to any
shareholder upon request.
    
    GENERAL.  The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under section 423 of the Code. Each participant in the Purchase
Plan is granted at the beginning of each Offering Period under the plan (an
"Offering Period") an option to purchase through accumulated payroll deductions
up to a number of shares of the Common Stock of the Company (an "Option")
determined on the first day of the Offering Period. The Option is automatically
exercised on the last day of each six-month purchase period during the Offering
Period unless the participant has withdrawn from participation prior to such
date. The Committee will determine the length of each Offering Period and may
vary the duration of a purchase period.
 
    SHARES SUBJECT TO PLAN.  Currently, a maximum of 600,000 shares of the
Company's Common Stock may be issued under the Purchase Plan, subject to
appropriate adjustment in the event of a stock dividend, stock split,
recapitalization, combination, or similar change in the Company's capital
structure or in the event of any merger, sale of assets or other reorganization
of the Company. The Board of Directors has amended the Purchase Plan, subject to
shareholder approval, to increase by 400,000 shares the maximum number of shares
of Common Stock issuable thereunder to an aggregate of 1,000,000 shares.
 
    ADMINISTRATION.  The Purchase Plan is administered by a duly appointed
committee of the Board of Directors (hereinafter referred to as the
"Committee"). Subject to the provisions of the Purchase Plan, the Committee
determines the terms and conditions of Options granted under the plan. The
Committee will
 
                                       44
<PAGE>
interpret the Purchase Plan and Options granted thereunder, and all
determinations of the Board will be final and binding on all persons having an
interest in the Purchase Plan or any Options.
 
    ELIGIBILITY.  Any employee of the Company or of any subsidiary corporation
of the Company designated by the Board for inclusion in the Purchase Plan is
eligible to participate in an Offering Period under the plan so long as the
employee is customarily employed for more than 20 hours per week and more than
five months in any calendar year. However, no employee who owns or holds options
to purchase, or as a result of participation in the Purchase Plan would own or
hold options to purchase, five percent or more of the total combined voting
power or value of all classes of stock of the Company or of any subsidiary
corporation of the Company is entitled to participate in the Purchase Plan.
Based upon the number of employees as of May 30, 1997, approximately
employees were eligible to participate in the Purchase Plan.
 
    PARTICIPATION AND PURCHASE OF SHARES.  Participation in an Offering Period
under the Purchase Plan is limited to eligible employees who authorize payroll
deductions prior to the first day of the Offering Period (an "Entry Date").
Payroll deductions may not exceed 15% (or such other rate as the Board
determines) of an employee's compensation for any pay period during the Offering
Period.
 
    No participant may purchase under the Purchase Plan shares of the Company's
Common Stock having a fair market value exceeding $25,000 in any calendar year
(measured by the fair market value of the Company's Common Stock on the first
day of the Offering Period in which the shares are purchased), and the maximum
number of shares subject to any Option may not exceed the limit set by the Board
prior to the beginning of the Offering Period.
 
    On the last business day of each purchase period (an "Exercise Date") during
an Offering Period, the Company issues to each participant in the Offering
Period the number of shares of the Company's Common Stock determined by dividing
the amount of payroll deductions accumulated for the participant during that
Purchase Period by the purchase price, limited in any case by the number of
shares subject to the participant's Option for that Offering Period. The price
per share at which shares are sold at the end of a Purchase Period generally
equals 85% of the lesser of the fair market value per share of the Company's
Common Stock on the Entry Date or on the Exercise Date. The fair market value of
the Common Stock on any relevant date generally will be the closing price per
share on such date as reported on the Nasdaq National Market. Any payroll
deductions under the Purchase Plan not applied to the purchase of shares will be
returned to the participant, unless the amount remaining is less than the amount
necessary to purchase a whole share of Common Stock, in which case the remaining
amount may be applied to the next purchase period.
 
    MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.  In the event of the
proposed liquidation or dissolution of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed transaction,
unless otherwise provided by the Committee in its sole discretion, and all
outstanding options shall automatically terminate and the amounts of all payroll
deductions will be refunded without interest to the participants. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another corporation,
then in the sole discretion of the Committee, (1) each Option shall be assumed
or an equivalent option shall be substituted by the successor corporation or
parent or subsidiary of such successor corporation, (2) a date established by
the Committee on or before the date of consummation of such merger,
consolidation or sale shall be treated as an Exercise Date, and all outstanding
Options shall be deemed exercisable on such date or (3) all outstanding Options
shall terminate and the accumulated payroll deductions shall be returned to the
participants.
 
    TERMINATION OR AMENDMENT.  The Purchase Plan will continue until August 31,
2004, terminated by the Board or until all of the shares reserved for issuance
under the plan have been issued. The Board may
 
                                       45
<PAGE>
at any time amend or terminate the Purchase Plan, except that the approval of
the Company's shareholders is required for any amendment which materially
increases the number of shares authorized for issuance under the Purchase Plan,
materially modifies the requirements as to eligibility for participation in the
Plan, materially increases the benefits accruing to participants, reduces the
purchase price of Options, or extends the term of the Plan beyond August 31,
2004.
 
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
 
    The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Purchase Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
 
    Generally, there are no tax consequences to an employee of either becoming a
participant in the Purchase Plan or purchasing shares under the Purchase Plan.
The tax consequences of a disposition of shares vary depending on the period
such stock is held before its disposition. If a participant disposes of shares
within two years after the Purchase Date or within one year after the Purchase
Date on which the shares are acquired (a "disqualifying disposition"), the
participant recognizes ordinary income in the year of disposition in an amount
equal to the difference between the fair market value of the shares on the
Purchase Date and the purchase price. Such income may be subject to withholding
of tax. Any additional gain or resulting loss recognized by the participant from
the disposition of the shares is a capital gain or loss. If the participant
disposes of shares at least two years after the Purchase Date and at least one
year after the Purchase Date on which the shares are acquired, the participant
recognizes ordinary income in the year of disposition in an amount equal to the
lesser of (i) the difference between the fair market value of the shares on the
date of disposition and the purchase price or (ii) 15% of the fair market value
of the shares on the Purchase Date. Any additional gain recognized by the
participant on the disposition of the shares is a capital gain. If the fair
market value of the shares on the date of disposition is less than the purchase
price, there is no ordinary income, and the loss recognized is a capital loss.
If the participant owns the shares at the time of the participant's death, the
lesser of (i) the difference between the fair market value of the shares on the
date of death and the purchase price or (ii) 15% of the fair market value of the
shares on the Purchase Date is recognized as ordinary income in the year of the
participant's death.
 
    If the exercise of an Option does not constitute an exercise pursuant to an
"employee stock purchase plan" under section 423 of the Code, the exercise of
the Option will be treated as the exercise of a nonstatutory stock option. The
participant would therefore recognize ordinary income on the Purchase Date equal
to the excess of the fair market value of the shares acquired over the purchase
price. Such income is subject to withholding of income and employment taxes. Any
gain or loss recognized on a subsequent sale of the shares, as measured by the
difference between the sale proceeds and the sum of (i) the purchase price for
such shares and (ii) the amount of ordinary income recognized on the exercise of
the Option, will be treated as a capital gain or loss, as the case may be.
 
    A capital gain or loss will be long-term if the participant holds the shares
for more than 12 months and short-term if the participant holds the shares for
12 months or less. Both long-term and short-term capital gains are at present
generally subject to the same tax rates as ordinary income, except that
long-term capital gains are currently subject to a maximum tax rate of 28%.
 
    If the participant disposes of the shares in a disqualifying disposition the
Company should be entitled to a deduction equal to the amount of ordinary income
recognized by the participant as a result of the disposition, except to the
extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder. In all other cases, no deduction is allowed the Company.
 
                                       46
<PAGE>
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS.
 
    The affirmative vote of a majority of the votes present or represented by
proxy and entitled to a vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, is required for approval of this proposal.
Abstentions and broker nonvotes will each be counted present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on this proposal.
 
    The Board of Directors believes that the availability of an opportunity to
purchase shares under the Purchase Plan at a discount from market price is
important to attracting and retaining qualified officers and employees essential
to the success of the Company, and that stock ownership is important to
providing such persons with incentive to perform in the best interest of the
Company.
 
    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE INCREASE IN THE
NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE 1994 EMPLOYEE STOCK PURCHASE
PLAN BY 400,000 SHARES.
 
                                       47
<PAGE>
                                  PROPOSAL SIX
                    RATIFICATION OF INDEPENDENT ACCOUNTANTS
 
    The Board of Directors has selected Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997, and
further directed that management submit the selection of independent accountants
for ratification by the shareholders at the Annual Meeting. Its representatives
are expected to be present at the Annual Meeting, will have the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
 
    Shareholder ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants is not required by the Company's Bylaws or
otherwise. The Board of Directors is submitting the selection of Price
Waterhouse LLP to the shareholders for ratification as a matter of good
corporate practice. In the event the shareholders fail to ratify the selection,
the Board of Directors will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Board of Directors in its discretion may
direct the appointment of a different independent accounting firm at any time
during the year if the Board of Directors determines that such a change could be
in the best interests of the Company and its shareholders.
 
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS.
 
    The affirmative vote of a majority of the votes present or represented by
proxy and entitled to a vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, is required for approval of this proposal.
Abstentions and broker nonvotes will each be counted present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on this proposal.
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP TO SERVE AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1997.
 
                                       48
<PAGE>
                     SHAREHOLDER PROPOSALS TO BE PRESENTED
                             AT NEXT ANNUAL MEETING
 
    Proposals of shareholders intended to be presented at the next annual
meeting of shareholders of the Company (i) must be received by the Company at
its offices no later than February 22, 1998, and (ii) must satisfy the
conditions established by the Securities and Exchange Commission for shareholder
proposals to be included in the Company's Proxy Statement for that meeting.
 
                         TRANSACTION OF OTHER BUSINESS
 
    At the date of this Proxy Statement, the Board of Directors knows of no
other business that will be conducted at the 1997 Annual Meeting of shareholders
other than as described in this Proxy Statement. If any other matter or matters
are properly brought before the meeting, or any adjournment thereof, it is the
intention of the persons named in the accompanying form of Proxy to vote the
Proxy on such matters in accordance with their best judgment.
 
                                          By Order of the Board of Directors,
 
                                          Richard S. Mora, SECRETARY
   
June 23, 1997
    
                                       49
<PAGE>
                                   APPENDIX A
                          AGREEMENT AND PLAN OF MERGER
 
    THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into
as of this   day of June, 1997 by and between Mattson Technology, Inc., a
California corporation ("Mattson California"), and Mattson Technology, Inc.,
Delaware, a Delaware corporation ("Mattson Delaware").
 
                                  WITNESSETH:
 
    WHEREAS, Mattson Delaware is a corporation duly organized and existing under
the laws of the State of Delaware;
 
    WHEREAS, Mattson California is a corporation duly organized and existing
under the laws of the State of California;
 
    WHEREAS, on the date of this Merger Agreement, Mattson Delaware has
authority to issue 1,000 shares of Common Stock, par value $.001 per share (the
"Mattson Delaware Common Stock"), of which 100 shares are issued and outstanding
and owned by Mattson California;
   
    WHEREAS, as of June 16, 1997, the record date of the 1997 Annual Meeting of
Shareholders (the "Annual Meeting"), Mattson California has authority to issue
(i) 60,000,000 shares of Common Stock (the "Mattson California Common Stock"),
of which         shares are issued and outstanding and (ii) 2,000,000 shares of
undesignated Preferred Stock, of which no shares are issued and outstanding;
    
    WHEREAS, the respective Boards of Directors for Mattson Delaware and Mattson
California have determined that, for the purpose of effecting the
reincorporation of Mattson California in the State of Delaware, it is advisable
and to the advantage of said two corporations and their shareholders that
Mattson California merge with and into Mattson Delaware upon the terms and
conditions herein provided; and
 
    WHEREAS, the respective Boards of Directors of Mattson Delaware and Mattson
California, the shareholders of Mattson California, and the sole stockholder of
Mattson Delaware have adopted and approved this Merger Agreement;
 
    NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Mattson California and Mattson Delaware hereby agree to merge as
follows:
 
    1.  MERGER.  Mattson California shall be merged with and into Mattson
Delaware, and Mattson Delaware shall survive the merger ("Merger"), effective
upon the date when this Merger Agreement is made effective in accordance with
applicable law (the "Effective Date").
   
    2.  GOVERNING DOCUMENTS.  The Certificate of Incorporation of Mattson
Delaware shall be amended and restated as in the form attached hereto as
Appendix A-1, and shall be the Certificate of Incorporation of the surviving
corporation. The Bylaws of Mattson Delaware shall be amended and restated as in
the form attached hereto as Appendix A-2 and shall be the Bylaws of the
surviving corporation; provided, however, that (i) in the event Proposal Three A
is approved by the requisite vote of the shareholders of Mattson California at
the Annual Meeting, Article TENTH of the Certificate of Incorporation attached
as Appendix A-1 shall be deleted; (ii) in the event Proposal Three B is approved
by the requisite vote of the shareholders of Mattson California at the Annual
Meeting, Article SIXTH, Section A of the Certificate of Incorporation attached
as Appendix A-1 and Sections 2.2 and 2.12 of the Delaware Bylaws shall read in
their entirety as set forth on Exhibit 1 hereto; (iii) in the event Proposal
Three C is approved by the requisite vote of the shareholders of Mattson
California at the Annual Meeting, a new Article FIFTH, Section C (as set forth
on Exhibit 2 hereto) shall be added to the Certificate of Incorporation attached
as Appendix A-1 and Article 1, Section 1.12 of the Delaware Bylaws shall read in
its entirety as set forth on Exhibit 2 hereto; (iv) in the event Proposal Three
D is approved by the requisite vote of the shareholders of Mattson California at
the Annual Meeting, a new Article FIFTH, Section D (as set forth as Exhibit 3

                                      A-1
<PAGE>
hereto) shall be added to the Certificate of Incorporation attached as Appendix
A-1 and Article 1, Section 1.3 of the Delaware Bylaws shall read in its entirety
as set forth on Exhibit 3 hereto; and (v) in the event Proposal Three E is
approved by the requisite vote of the shareholders of Mattson California at the
Annual Meeting, Article SEVENTH and Article NINTH of the Certificate of
Incorporation attached as Appendix A-1, and Article 6, Section 6.2 of the
Delaware Bylaws shall read as set forth in Exhibit 4 hereto.
    
    3.  DIRECTORS AND OFFICERS.  The directors and officers of Mattson
California shall become the directors and officers of Mattson Delaware upon the
Effective Date.
 
    4.  SUCCESSION.  On the Effective Date, Mattson Delaware shall succeed to
Mattson California in the manner of and as more fully set forth in Section 259
of the General Corporation Law of the State of Delaware.
 
    5.  FURTHER ASSURANCES.  From time to time, as and when required by Mattson
Delaware or by its successors and assigns, there shall be executed and delivered
on behalf of Mattson California such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest, perfect or confirm, of
record or otherwise, in Mattson Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Mattson California, and otherwise to carry out the purposes of
this Merger Agreement and the officers and directors of Mattson Delaware are
fully authorized in the name and on behalf of Mattson California or otherwise to
take any and all such action and to execute and deliver any and all such deeds
and other instruments.
 
    6.  STOCK OF MATTSON CALIFORNIA.  Upon the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Mattson California Common Stock outstanding immediately prior thereto shall be
changed and converted into one fully paid and nonassessable share of Mattson
Delaware Common Stock.
 
    7.  STOCK CERTIFICATES.  On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of Mattson
California stock shall be deemed for all purposes to evidence ownership of and
to represent the shares of Mattson Delaware stock into which the shares of
Mattson California stock represented by such certificates have been converted as
herein provided. The registered owner on the books and records of Mattson
Delaware or its transfer agent of any such outstanding stock certificate shall,
until such certificate shall have been surrendered for transfer or otherwise
accounted for to Mattson Delaware or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to and to receive any dividend
and other distributions upon the shares of Mattson Delaware stock evidenced by
such outstanding certificate as above provided.
 
    8.  OPTIONS.  Upon the Effective Date, each outstanding option or other
right to purchase shares of Mattson California stock, including those options
granted under the 1989 Stock Option Plan (the "1989 Plan") and the 1994 Employee
Stock Purchase Plan (the "Purchase Plan") of Mattson California, shall be
converted into and become an option or right to purchase the same number of
shares of Mattson Delaware stock at a price per share equal to the exercise
price of the option or right to purchase Mattson California stock and upon the
same terms and subject to the same conditions as set forth in the 1989 Plan and
the Purchase Plan, respectively, and other agreements entered into by Mattson
California pertaining to such options or rights. A number of shares of Mattson
Delaware stock shall be reserved for purposes of such options and rights equal
to the number of shares of Mattson California stock so reserved as of the
Effective Date. As of the Effective Date, Mattson Delaware shall assume all
obligations of Mattson California under agreements pertaining to such options
and rights, including the 1989 Plan, and the outstanding options or other
rights, or portions thereof, granted pursuant thereto.
 
    9.  OTHER EMPLOYEE BENEFIT PLANS.  As of the Effective Date, Mattson
Delaware hereby assumes all obligations of Mattson California under any and all
employee benefit plans in effect as of said date or with respect to which
employee rights or accrued benefits are outstanding as of said date.
 
                                      A-2
<PAGE>
    10.  OUTSTANDING COMMON STOCK OF MATTSON DELAWARE.  Forthwith upon the
Effective Date, the One Hundred (100) shares of Mattson Delaware Common Stock
presently issued and outstanding in the name of Mattson California shall be
canceled and retired and resume the status of authorized and unissued shares of
Mattson Delaware Common Stock, and no shares of Mattson Delaware Common Stock or
other securities of Mattson Delaware shall be issued in respect thereof.
 
    11.  COVENANTS OF MATTSON DELAWARE.  Mattson Delaware covenants and agrees
that it will, on or before the Effective Date:
 
        a.  Qualify to do business as a foreign corporation in the State of
    California, and in all other states in which Mattson California is so
    qualified and in which the failure so to qualify would have a material
    adverse impact on the business or financial condition of Mattson Delaware.
    In connection therewith, Mattson Delaware shall irrevocably appoint an agent
    for service of process as required under the provisions of Section 2105 of
    the California Corporations Code and under applicable provisions of state
    law in other states in which qualification is required hereunder.
 
        b.  File any and all documents with the California Franchise Tax Board
    necessary to the assumption by Mattson Delaware of all of the franchise tax
    liabilities of Mattson California.
 
    12.  BOOK ENTRIES.  As of the Effective Date, entries shall be made upon the
books of Mattson Delaware in accordance with the following:
 
        a.  The assets and liabilities of Mattson California shall be recorded
    at the amounts at which they were carried on the books of Mattson California
    immediately prior to the Effective Date, with appropriate adjustments to
    reflect the retirement of the one hundred (100) shares of Mattson Delaware
    Common Stock presently issued and outstanding.
 
        b.  There shall be credited to the capital stock of Mattson Delaware the
    aggregate amount of the par value of all shares of Mattson Delaware stock
    resulting from the conversion of the outstanding California Common Stock
    pursuant to the Merger.
 
        c.  There shall be credited to the capital surplus account of Mattson
    Delaware the aggregate of the amounts shown in the capital stock and capital
    surplus accounts of Mattson California immediately prior to the Effective
    Date, less the amount credited to the common stock account of Mattson
    Delaware pursuant to Paragraph (b) above.
 
        d.  There shall be credited to the retained earnings account of Mattson
    Delaware an amount equal to that carried in the retained earning account of
    Mattson California immediately prior to the Effective Date.
 
    13.  CONDITIONS.  It shall be a condition precedent to the consummation of
the Merger and the other transactions contemplated by this Merger Agreement that
(i) the shares of Delaware Common Stock to be issued by Mattson Delaware shall,
upon official notice of issuance, be listed on the Nasdaq National Market prior
to or on the Effective Date and (ii) the shareholders of Mattson California
approve the Merger.
 
    14.  AMENDMENT.  At any time before or after approval and adoption by the
shareholders of Mattson California, this Merger Agreement may be amended in any
manner as may be determined in the judgment of the respective Boards of
Directors of Mattson Delaware and Mattson California to be necessary, desirable
or expedient in order to clarify the intention of the parties hereto or to
effect or facilitate the purposes and intent of this Merger Agreement.
 
    15.  ABANDONMENT.  At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either Mattson California or Mattson Delaware or both,
notwithstanding approval of this Merger Agreement by the sole stockholder of
Mattson Delaware and the shareholders of Mattson California.
 
                                      A-3
<PAGE>
    16.  COUNTERPARTS.  In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
 
    IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by resolution of the Board of Directors of Mattson California and Mattson
Delaware, is hereby executed on behalf of each of said two corporations by their
respective officers thereunto duly authorized.
 
                                          Mattson Technology, Inc., Delaware,
                                          a Delaware corporation
                                          By:_________________________________
                                            Brad Mattson,
                                            PRESIDENT
 
ATTEST:
 
_________________________________
Richard Mora, SECRETARY
 
                                          Mattson Technology, Inc.,
                                          a California corporation
 
                                          By:_________________________________
                                            Brad Mattson,
                                            PRESIDENT
 
ATTEST:
 
_________________________________
Richard Mora, SECRETARY
 
                                      A-4
<PAGE>
   
                                   EXHIBIT 1
    
   
             CLASSIFIED BOARD OF DIRECTORS REMOVABLE ONLY FOR CAUSE
    
   
                               (PROPOSAL THREE B)
    

   
    In the event Proposals Two and Three B are approved by the requisite vote of
the shareholders, Article Sixth, Section A of the Delaware Certificate shall
read in its entirety as follows:
    
 
   
    The number of directors shall initially be five (5) and thereafter shall be
    fixed from time to time exclusively by the Board of Directors pursuant to a
    resolution adopted by a majority of the total number of authorized directors
    (whether or not there exist any vacancies in previously authorized
    directorships at the time any such resolution is presented to the Board for
    adoption). Upon the effective date of the merger of Mattson Technology,
    Inc., a California corporation, with and into the Corporation (the
    "Effective Date") the directors shall be divided into three classes with the
    term of office of the first class to expire at the first annual meeting of
    the stockholders following the Effective Date, the term of office of the
    second class to expire at the second annual meeting of stockholders held
    following the Effective Date, the term of office of the third class to
    expire at the third annual meeting of stockholders following the Effective
    Date, and thereafter for each such term to expire at each third succeeding
    annual meeting of stockholders after such election. All directors shall hold
    office until the expiration of the term for which elected, and until their
    respective successors are elected, except in the case of the death,
    resignation, or removal of any director."; and
    
 
   
    Article 2, Sections 2.2. and 2.12. of the Delaware Bylaws shall read their
    entirety as follows:
    
 
   
    "2.2. NUMBER AND TERM OF OFFICE. The number of directors shall initially be
    five (5) and, thereafter, shall be fixed from time to time exclusively by
    the Board of Directors pursuant to a resolution adopted by a majority of the
    total number of authorized directors (whether or not there exist any
    vacancies in previously authorized directorships at the time any such
    resolution is presented to the Board for adoption). Upon the effective date
    of the Agreement and Plan of Merger between the Corporation and Mattson
    Technology, Inc., a California corporation (the "Effective Date"), the
    directors shall be divided into three classes, with the term of office of
    the first class to expire at the first annual meeting of stockholders held
    after the Effective Date; the term of office of the second class to expire
    at the second annual meeting of stockholders held after the Effective Date;
    the term of office of the third class to expire at the third annual meeting
    of stockholders held after the Effective Date; and thereafter for each such
    term to expire at each third succeeding annual meeting of stockholders after
    such election. All directors shall hold office until the expiration of the
    term for which elected and until their respective successors are elected,
    except in the case of the death, resignation or removal of any director."
    
 
                                    * * * *
 
   
    "2.12. REMOVAL. Subject to the rights of the holders of any series of
    Preferred Stock then outstanding, any directors, or the entire Board of
    Directors, may be removed from office at any time, but only for cause and
    only by the affirmative vote of the holders of at least a majority of the
    voting power of all of the outstanding shares of capital stock entitled to
    vote generally in the election of directors, voting together as a single
    class."
    
 
                                      A-5
<PAGE>

   
                                   EXHIBIT 2
    
   
                    ELIMINATION OF ACTION BY WRITTEN CONSENT
    
   
                               (PROPOSAL THREE C)
    
 
   
    In the event Proposals Two and Three C are approved by the requisite vote of
the shareholders, Article Fifth, Section C of the Delaware Certificate shall
read in its entirety as follows:
    
 
   
    "C.  Any action required or permitted to be taken by the stockholders of the
    Corporation must be effected at a duly called annual or special meeting of
    stockholders of the Corporation and may not be effected by any consent in
    writing by such stockholders."; and
    
 
   
    Article 1, Section 1.12. of the Delaware Bylaws shall read in its entirety
as follows:
    
 
   
    "1.12.  NO STOCKHOLDER ACTION WITHOUT MEETING.  Any action required or
    permitted to be taken by the stockholders of the Corporation must be
    effected at a duly called annual or special meeting of stockholders of the
    Corporation and may not be effected by any consent in writing by such
    stockholders."
    
 
                                      A-6
<PAGE>

   
                                   EXHIBIT 3
    
   
           LIMITATION ON THE ABILITY TO CALL SPECIAL MEETINGS
    
   
                               (PROPOSAL THREE D)
    

   
    EXHIBIT 3(A):
    
 
   
    In the event Proposals Two and Three D are approved by the requisite vote of
the shareholders, Article Fifth, Section D of the Delaware Certificate will read
in its entirety as follows:
    
 
   
    "D.  Special meetings of stockholders of the Corporation may be called only
    by the Board of Directors, the Chairman of the Board of Directors, the
    President or the Chief Executive Officer."; and
    
 
   
    EXHIBIT 3(B):
    
 
   
    Article 1, Section 1.3. of the Delaware Bylaws shall read in its entirety as
follows:
    
 
   
    "1.3.  SPECIAL MEETINGS.  Special meetings of Stockholders may be called at
    any time only by the Board of Directors, the Chairman of the Board, the
    President or the Chief Executive Officer."
    
 
                                      A-7
<PAGE>

   
                                   EXHIBIT 4
    
   
              SUPER-MAJORITY VOTE REQUIREMENT FOR AMENDMENT OF THE
    
   
                        DELAWARE CERTIFICATE AND BYLAWS
    
   
                               (PROPOSAL THREE E)
    

   
    In the event Proposals Two and Three E are approved by the requisite vote of
the shareholders, Article Ninth of the Delaware Certificate shall read in its
entirety as follows:
    
 
   
    "The Corporation reserves the right to amend or repeal any provision
    contained in this Certificate of Incorporation in the manner prescribed
    by the laws of the State of Delaware and all rights conferred upon
    stockholders are granted subject to this reservation; PROVIDED, HOWEVER,
    that, notwithstanding any other provision of this Certificate of
    Incorporation or any provision of law which might otherwise permit a
    lesser vote or no vote, but in addition to any vote of the holders of
    any class or series of the stock of this Corporation required by law or
    by this Certificate of Incorporation, the affirmative vote of the
    holders of at least sixty-six and two thirds percent (66 2/3%) of the
    voting power of all of the then outstanding shares of the capital stock
    of the Corporation entitled to vote generally in the election of
    directors, voting together as a single class, shall be required to amend
    or repeal this Article NINTH, Article FIFTH, Article SIXTH, Article
    SEVENTH or Article EIGHTH."; and
    
 
   
    Article Seventh of the Delaware Certificate shall read in its entirety
    as follows:
    
 
   
    "The Board of Directors is expressly empowered to adopt, amend or repeal
    Bylaws of the Corporation. The stockholders shall also have power to
    adopt, amend or repeal the Bylaws of the Corporation. Any adoption,
    amendment or repeal of Bylaws of the Corporation by the stockholders
    shall require, in addition to any vote of the holders of any class or
    series of stock of the Corporation required by law or by this
    Certificate of Incorporation, the affirmative vote of the holders of at
    least sixty-six and two thirds percent (66 2/3%) of the voting power of
    all of the then outstanding shares of the capital stock of the
    Corporation entitled to vote generally in the election of directors,
    voting together as a single class."; and
    
 
   
    Article 6, Section 6.2. of the Delaware Bylaws shall read in its
    entirety as follows:
    
 
   
    "6.2. BY THE STOCKHOLDERS. Except as otherwise set forth in these
    Bylaws, these Bylaws may be altered, amended or repealed or new Bylaws
    may be adopted by the affirmative vote of the holders of at least
    sixty-six and two-thirds percent (66-2/3%) of the shares of the capital
    stock of the corporation issued and outstanding and entitled to vote at
    any annual meeting of stockholders, or at any special meeting of
    stockholders, provided notice of such alteration, amendment, repeal or
    adoption of new Bylaws shall have been stated in the notice of such
    special meeting."
    
 
                                      A-8
<PAGE>
                                  APPENDIX A-1
                     RESTATED CERTIFICATE OF INCORPORATION
                     OF MATTSON TECHNOLOGY, INC., DELAWARE
<TABLE>
<S>         <C>
FIRST:      The name of the Corporation is Mattson Technology, Inc. (hereinafter sometimes
            referred to as the "Corporation").
 
SECOND:     The address of the registered office of the Corporation in the State of
            Delaware is Incorporating Services, Ltd., 15 East North Street, in the City of
            Dover, County of Kent. The name of the registered agent at that address is
            Incorporating Services, Ltd.
 
THIRD:      The purpose of the Corporation is to engage in any lawful act or activity for
            which a corporation may be organized under the General Corporation Law of
            Delaware.
 
FOURTH:
 
        A.  The total number of shares of all classes of stock which the Corporation shall
            have authority to issue is Sixty-Two Million Shares (62,000,000) consisting of:
 
            1.  Sixty Million (60,000,000) shares of Common Stock, par value one-tenth of
            one cent ($.001) per share (the "Common Stock"); and
 
            2.  Two Million (2,000,000) shares of Preferred Stock, par value one-tenth of
            one cent ($.001) per share (the "Preferred Stock").
 
        B.  The Board of Directors is authorized, subject to any limitations prescribed by
            law, to provide for the issuance of shares of Preferred Stock in series and, by
            filing a certificate pursuant to the applicable law of the State of Delaware,
            to establish from time to time the number of shares to be included in each such
            series, and to fix the designation, powers, preferences and rights of the
            shares of each such series and any qualifications, limitations or restrictions
            thereon. The number of authorized shares of Preferred Stock may be increased or
            decreased (but not below the number of shares thereof then outstanding) by the
            affirmative vote of the holders of a majority of the Common Stock without a
            vote of the holders of the Preferred Stock, or of any series thereof, unless a
            vote of any such holders is required pursuant to the certificate or
            certificates establishing the series of Preferred Stock.
 
FIFTH:      The following provisions are inserted for the management of the business and
            the conduct of the affairs of the Corporation, and for further definition,
            limitation and regulation of the powers of the Corporation and of its directors
            and stockholders:
 
        A.  The business and affairs of the Corporation shall be managed by or under the
            direction of the Board of Directors. In addition to the powers and authority
            expressly conferred upon them by statute or by this Certificate of
            Incorporation or the Bylaws of the Corporation, the directors are hereby
            empowered to exercise all such powers and do all such acts and things as may be
            exercised or done by the Corporation.
 
        B.  The directors of the Corporation need not be elected by written ballot unless
            the Bylaws so provide.

SIXTH:

   
        A.  The number of directors shall initially be five (5) and thereafter shall be
            fixed from time to time exclusively by the Board of Directors pursuant to a
            resolution adopted by a majority of the total number of authorized directors
            (whether or not there exist any vacancies in previously authorized
            directorships at the time any such resolution is presented to the Board for
            adoption). All directors shall hold office until the expiration of the term for
            which elected, and until their respective successors are elected, except in the
            case of the death, resignation, or removal of any director.
    
</TABLE>
                                     A-1-1
<PAGE>

<TABLE>
<S>         <C>
        B.  Subject to the rights of the holders of any series of Preferred Stock then
            outstanding, newly created directorships resulting from any increase in the
            authorized number of directors or any vacancies in the Board of Directors
            resulting from death, resignation or other cause (including removal from office
            by a vote of the stockholders) may be filled only by a majority vote of the
            directors then in office, though less than a quorum, or by sole remaining
            director, and directors so chosen shall hold office for a term expiring at the
            next annual meeting of stockholders at which the term of office of the class to
            which they have been elected expires, and until their respective successors are
            elected, except in the case of the death, resignation, or removal of any
            director.
 
   
SEVENTH:    The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws
            of the Corporation. The stockholders shall also have power to adopt, amend or
            repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of
            Bylaws of the Corporation by the stockholders shall require, in addition to any
            vote of the holders of any class or series of stock of the Corporation required
            by law or by this Certificate of Incorporation, the affirmative vote of the
            holders of a majority of the voting power of all of the then outstanding shares
            of the capital stock of the Corporation entitled to vote generally in the
            election of directors, voting together as a single class.
    
 
EIGHTH:     A director of the Corporation shall not be personally liable to the Corporation
            or its stockholders for monetary damages for breach of fiduciary duty as a
            director, except for liability (i) for any breach of the director's duty of
            loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
            in good faith or which involved intentional misconduct or a knowing violation
            of law, (iii) under Section 174 of the Delaware General Corporation Law, or
            (iv) for any transaction from which the director derived an improper personal
            benefit.
 
            If the Delaware General Corporation Law is hereafter amended to authorize the
            further elimination or limitation of the liability of a director, then the
            liability of a director of the Corporation shall be eliminated or limited to
            the fullest extent permitted by the Delaware General Corporation Law, as so
            amended.
 
            Any repeal or modification of the foregoing provisions of this Article EIGHTH
            by the stockholders of the Corporation shall not adversely affect any right or
            protection of a director of the Corporation existing at the time of such repeal
            or modification.
 
   
NINTH:      The Corporation reserves the right to amend or repeal any provision contained
            in this Certificate of Incorporation in the manner prescribed by the laws of
            the State of Delaware and all rights conferred upon stockholders are granted
            subject to this reservation; PROVIDED, HOWEVER, that, notwithstanding any other
            provision of this Certificate of Incorporation or any provision of law which
            might otherwise permit a lesser vote or no vote, but in addition to any vote of
            the holders of any class or series of the stock of this Corporation required by
            law or by this Certificate of Incorporation, the affirmative vote of the
            holders of a majority of the voting power of all of the then outstanding shares
            of the capital stock of the Corporation entitled to vote generally in the
            election of directors, voting together as a single class, shall be required to
            amend or repeal this Certificate of Incorporation.
    
 
   
TENTH:      Every stockholder entitled to vote at any election of directors of this company
            may cumulate his votes and give one candidate a number of votes equal to the
            number of directors to be elected multiplied by the number of votes to which
            his shares are entitled, or distribute his votes on the same principle among as
            many candidates as he thinks fit. The candidates receiving the highest number
            of votes up to the number of directors to be elected are elected.
    
</TABLE>
                                     A-1-2
<PAGE>
                                  APPENDIX A-2
                       BYLAWS OF MATTSON TECHNOLOGY, INC.
 
ARTICLE 1.  STOCKHOLDERS
 
    1.1  PLACE OF MEETINGS.  All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President and Chief Executive Officer or,
if not so designated, at the registered office of the corporation.
 
    1.2  ANNUAL MEETING.  The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President and Chief Executive Officer at the time and place to
be fixed by the Board of Directors or the President and stated in the notice of
the meeting. If no annual meeting is held in accordance with the foregoing
provisions, the Board of Directors shall cause the meeting to be held as soon
thereafter as convenient.
   
    1.3  SPECIAL MEETINGS.  Special meetings of stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President
and Chief Executive Officer or the holders of 10% or more of the outstanding
voting power of the Corporation. Business transacted at any special meeting of
stockholders shall be confined to the purpose or purposes stated in the notice
of meeting.
    
    1.4  NOTICE OF MEETINGS.  Written notice of each meeting of stockholders,
whether annual or special, shall be given not less than ten (10) nor more than
sixty (60) days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting, except as otherwise provided
herein or as required by law (meaning here and hereafter, as required from time
to time by the Delaware General Corporation Law or the Certificate of
Incorporation). The notices of all meetings shall state the place, date and hour
of the meeting. The notice of a special meeting shall state, in addition, the
purpose or purposes for which the meeting is called. If mailed, notice is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
 
    1.5.  VOTING LIST.  The officer who has charge of the stock ledger of the
corporation shall prepare, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time of the meeting, and may be inspected by any stockholder who is
present. This list shall preemptively determine the identity of the stockholders
entitled to vote at the meeting and the number of shares held by each of them.
 
    1.6.  QUORUM.  Except as otherwise provided by law or these Bylaws, the
holders of a majority of the shares of the capital stock of the corporation
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date or time.
 
    If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
 
    1.7  ADJOURNMENTS.  Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Bylaws by the holders of a majority
 
                                     A-2-1
<PAGE>
of the shares of stock present or represented at the meeting and entitled to
vote, although less than a quorum, or, if no stockholder is present, by any
officer entitled to preside at or to act as Secretary of such meeting. When a
meeting is adjourned to another place, date or time, written notice need not be
given of the adjourned meeting if the place, date and time thereof are announced
at the meeting at which the adjournment is taken; provided, however, that if the
date of any adjourned meeting is more than thirty (30) days after the date for
which the meeting was originally noticed, or if a new record date is fixed for
the adjourned meeting, written notice of the place, date, and time of the
adjourned meeting shall be given in conformity herewith. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.
 
    1.8  VOTING AND PROXIES.  Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by law. Each stockholder of record entitled to vote at a meeting of
stockholders, may vote in person or may authorize any other person or persons to
vote or act for him by written proxy executed by the stockholder or his
authorized agent or by a transmission permitted by law and delivered to the
Secretary of the corporation. No stockholder may authorize more than one proxy
for his shares. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this Section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile transmission or other reproduction shall be a
complete reproduction of the entire original writing or transmission.
 
    1.9  ACTION AT MEETING.  When a quorum is present at any meeting, any
election shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the election, and all other matters shall be
determined by a majority of the votes cast affirmatively or negatively on the
matter (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, a majority of each such
class present or represented and voting affirmatively or negatively on the
matter) shall decide such matter, except when a different vote is required by
express provision of law, the Certificate of Incorporation or these Bylaws.
 
    All voting, including on the election of directors, but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting. The corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
corporation may designate one or more persons as an alternate inspector to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the person presiding at the meeting may, and
to the extent required by law, shall, appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability.
 
    1.10.  NOTICE OF STOCKHOLDER BUSINESS.  At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) properly brought before an annual meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder proposal to be presented at an
annual meeting shall be received at the Corporation's principal executive
offices not less than 120 calendar days in advance of the date that the
Corporation's (or the Corporation's
 
                                     A-2-2
<PAGE>
predecessor's) proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
advanced by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholders to be timely
must be received not later than the close of business on the tenth day following
the day on which the date of the annual meeting is publicly announced.
 
    A stockholder's notice to the Secretary of the Corporation shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business.
 
    1.11  CONDUCT OF BUSINESS.  At every meeting of the stockholders, the
Chairman of the Board, if there is such an officer, or if not, the person
appointed by the Board of Directors, shall act as Chairman. The Secretary of the
corporation or a person designated by the Chairman of the meeting shall act as
Secretary of the meeting. Unless otherwise approved by the Chairman of the
meeting, attendance at the stockholders' meeting is restricted to stockholders
of record, persons authorized in accordance with Section 1.8 of these Bylaws to
act by proxy, and officers of the corporation.
 
    The Chairman of the meeting shall call the meeting to order, establish the
agenda, and conduct the business of the meeting in accordance therewith or, at
the Chairman's discretion, it may be conducted otherwise in accordance with the
wishes of the stockholders in attendance. The date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at
the meeting shall be announced at the meeting.
 
    The Chairman shall also conduct the meeting in an orderly manner, rule on
the precedence of, and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 1.11 and
Section 1.10 above. The Chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that any proposed item of business was not
brought before the meeting in accordance with the provisions of this Section
1.11 and Section 1.10, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
   
    1.12.  STOCKHOLDER ACTION BY WRITTEN CONSENT.  Any action which may be taken
at any annual or special meeting of stockholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the actions so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes which would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. All such consents shall be filed with the secretary of the
Corporation and shall be maintained in the corporate records. Prompt notice of
the taking of a corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
    
ARTICLE 2.  BOARD OF DIRECTORS
 
    2.1.  GENERAL POWERS.  The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
 
                                     A-2-3
<PAGE>
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
   
    2.2.  NUMBER AND TERM OF OFFICE.  The number of directors shall initially be
five (5) and, thereafter, shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board for adoption). All directors shall hold office until the expiration
of the term for which elected and until their respective successors are elected,
except in the case of the death, resignation or removal of any director.
    
    2.3.  VACANCIES AND NEWLY CREATED DIRECTORSHIPS.  Subject to the rights of
the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (including removal from office by a
vote of the stockholders) may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders at which
the term of office of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
 
    2.4.  RESIGNATION.  Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
 
    2.5.  REGULAR MEETINGS.  Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
 
    2.6.  SPECIAL MEETINGS.  Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, the President and Chief Executive
Officer, two or more directors, or by one director in the event that there is
only a single director in office.
 
    2.7.  NOTICE OF SPECIAL MEETINGS.  Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone or
electronic voice message system at least 24 hours in advance of the meeting,
(ii) by sending a telegram, telecopy or telex, or delivering written notice by
hand, to his last known business or home address at least 24 hours in advance of
the meeting, or (iii) by mailing written notice to his last known business or
home address at least three (3) day in advance of the meeting. A notice or
waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
 
    2.8.  PARTICIPATION IN MEETINGS BY TELEPHONE CONFERENCE CALLS.  Directors or
any members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
 
    2.9.  QUORUM.  A majority of the total number of authorized directors shall
constitute a quorum at any meeting of the Board of Directors. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present
 
                                     A-2-4
<PAGE>
may adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or at a meeting of a committee which authorizes a
particular contract or transaction.
 
    2.10  ACTION AT MEETING.  At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these Bylaws.
 
    2.11.  ACTION BY CONSENT.  Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing. Any such
written consents shall be filed with the minutes of proceedings of the Board or
committee.
 
    2.12.  REMOVAL.  Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the outstanding shares of capital stock entitled to vote
generally in the election of directors, voting together as a single class.
 
    2.13.  COMMITTEES.  The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation, with such lawfully delegated powers and duties as it therefor
confers, to serve at the pleasure of the Board. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors and subject to the provisions of the
General Corporation Law of the State of Delaware, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Each such
committee shall keep minutes and make such reports as the Board of Directors may
from time to time request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
Board of Directors.
 
    2.14.  COMPENSATION OF DIRECTORS.  Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to the determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
 
    2.15.  NOMINATION OF DIRECTOR CANDIDATES.  Subject to the rights of holders
of any class or series of Preferred Stock then outstanding, nominations for the
election of Directors may be made by the Board of Directors or a proxy committee
appointed by the Board of Directors or by any stockholder entitled to vote in
the election of Directors generally. However, any stockholder entitled to vote
in the election of Directors generally may nominate one or more persons for
election as Directors at a meeting only if timely notice of such stockholder's
intent to make such nomination or nominations has been given in writing to the
Secretary of the Corporation. To be timely, a stockholder nomination for a
director to be elected at an annual meeting shall be received at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date that the Corporation's (or the Corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy
 
                                     A-2-5
<PAGE>
statement, or in the event of a nomination for director to be elected at a
special meeting, notice by the stockholders to be timely must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of the special meeting was mailed or such public
disclosure was made. Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote for the election of
directors on the date of such notice and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Corporation if
so elected.
 
    In the event that a person is validly designated as a nominee in accordance
with this Section 2.15 and shall thereafter become unable or unwilling to stand
for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee, of a written notice to the
Secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 2.15 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each such substitute nominee.
 
    If the chairman of the meeting for the election of Directors determines that
a nomination of any candidate for election as a Director at such meeting was not
made in accordance with the applicable provisions of this Section 2.15, such
nomination shall be void; provided, however, that nothing in this Section 2.15
shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.
 
ARTICLE 3.  OFFICERS
 
    3.1.  ENUMERATION.  The officers of the corporation shall consist of a Chief
Executive Officer, a President, a Secretary, a Chief Financial Officer and such
other officers with such other titles as the Board of Directors shall determine,
including, at the discretion of the Board of Directors, a Chairman of the Board,
and one or more Vice Presidents and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
 
    3.2.  ELECTION.  Officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of stockholders.
Officers may be appointed by the Board of Directors at any other meeting.
 
    3.3.  QUALIFICATION.  No officer need be a stockholder. Any two or more
offices may be held by the same person.
 
    3.4.  TENURE.  Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote appointing him, or until his earlier death, resignation or removal.
 
    3.5.  RESIGNATION AND REMOVAL.  Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event. Any officer may be removed at any time, with or without cause, by
the Board of Directors.
 
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<PAGE>
    3.6.  CHAIRMAN OF THE BOARD.  The Board of Directors may appoint a Chairman
of the Board. If the Board of Directors appoints a Chairman of the Board, he
shall perform such duties and possess such powers as are assigned to him by the
Board of Directors. Unless otherwise provided by the Board of Directors, he
shall preside at all meetings of the stockholders, and, if he is a director, at
all meetings of the Board of Directors.
 
    3.7.  CHIEF EXECUTIVE OFFICER.  The Chief Executive Officer shall, subject
to the direction of the Board of Directors, have responsibility for the general
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him or her by the Board of
Directors. The Chief Executive Officer shall perform such other duties and shall
have such other powers as the Board of Directors may from time to time
prescribe. He or she shall have power to sign stock certificates, contracts and
other instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation, other than the Chairman of the Board.
 
    3.8.  PRESIDENT.  Should there exist an office of President which is held by
a person other than the Chief Executive Officer and which differs from the
office of Chief Executive Officer, the President shall have the responsibilities
delegated to him or her by the Board of Directors.
 
    3.9.  VICE PRESIDENTS.  Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the President, the Vice President (or if there shall be more than one,
the Vice Presidents in the order determined by the Board of Directors) shall
perform the duties of the Chief Executive Officer and when so performing shall
have at the powers of and be subject to all the restrictions upon the Chief
Executive Officer. The Board of Directors may assign to any Vice President the
title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.
 
    3.10.  SECRETARY AND ASSISTANT SECRETARIES.  The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the Secretary, including, without limitation, the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to keep a record of the proceedings of all meetings of stockholders and the
Board of Directors, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
 
    Any Assistant Secretary shall perform such duties and possess such powers as
the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
 
    In the absence of the Secretary or any Assistant Secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary secretary to keep a record of the meeting.
 
    3.11.  CHIEF FINANCIAL OFFICER.  Unless otherwise designated by the Board of
Directors, the Chief Financial Officer shall be the Treasurer. The Chief
Financial Officer shall perform such duties and shall have such powers as may
from time to time be assigned to him by the Board of Directors or the Chief
Executive Officer. In addition, the Chief Financial Officer shall perform such
duties and have such powers as are incident to the office of chief financial
officer, including without limitation, the duty and power to keep and be
responsible for all funds and securities of the corporation, to maintain the
financial records of the Corporation, to deposit funds of the corporation in
depositories as authorized, to disburse such funds
 
                                     A-2-7
<PAGE>
as authorized, to make proper accounts of such funds, and to render as required
by the Board of Directors accounts of all such transactions and of the financial
condition of the corporation.
 
    3.12.  SALARIES.  Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
 
    3.13.  DELEGATION OF AUTHORITY.  The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
 
ARTICLE 4.  CAPITAL STOCK
 
    4.1.  ISSUANCE OF STOCK.  Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
 
    4.2.  CERTIFICATES OF STOCK.  Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Chief Financial
Officer, or the Secretary or an Assistant Secretary of the corporation. Any or
all of the signatures on the certificate may be a facsimile.
 
    Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable
securities laws or any agreement among any number of shareholders or among such
holders and the corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
 
    4.3.  TRANSFERS.  Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or authenticity of signature
as the corporation or its transfer agent may reasonably require. Except as may
be otherwise required by law, by the Certificate of Incorporation or by the
Bylaws, the corporation shall be entitled to treat the record holder of stock as
shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to vote with respect to such stock,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been transferred on the books of the corporation in accordance with
the requirements of these Bylaws.
 
    4.4.  LOST, STOLEN OR DESTROYED CERTIFICATES.  The corporation may issue a
new certificate of stock in place of any previously saved certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
 
    4.5.  RECORD DATE.  The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, concession or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action to which such record date relates.
 
                                     A-2-8
<PAGE>
    If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.
 
    A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
 
ARTICLE 5.  GENERAL PROVISIONS
 
    5.1.  FISCAL YEAR.  The fiscal year of the corporation shall be as fixed by
the Board of Directors.
 
    5.2.  CORPORATE SEAL.  The corporate seal shall be in such form as shall be
approved by the Board of Directors.
 
    5.3.  WAIVER OF NOTICE.  Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Bylaws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telecopy, telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
 
    5.4.  ACTIONS WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.  Except as
the Board of Directors may otherwise designate, the President or any officer of
the corporation authorized by the President shall have the power to vote and
otherwise act on behalf of the corporation, in person or proxy, and may waive
notice of, and act as, or appoint any person or persons to act as, proxy or
attorney-in-fact to this corporation (with or without power of substitution) at
any meeting of stockholders or shareholders (or with respect to any action of
stockholders) of any other corporation or organization, the securities of which
may be held by this corporation and otherwise to exercise any and all rights and
powers which this corporation may possess by reason of this corporation's
ownership of securities in such other corporation or other organization.
 
    5.5.  EVIDENCE OF AUTHORITY.  A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
 
    5.6.  CERTIFICATE OF INCORPORATION.  All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
 
    5.7.  SEVERABILITY.  Any determination that any provision of these Bylaws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these Bylaws.
 
    5.8.  PRONOUNS.  All pronouns used in these Bylaws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
 
    5.9.  NOTICES.  Except as otherwise specifically provided herein or required
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram,
mailgram, telecopy or commercial courier service. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation. The
time
 
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<PAGE>
when such notice shall be deemed to be given shall be the time such notice is
received by such stockholder, director, officer, employee or agent, or by any
person accepting such notice on behalf of such person, if hand delivered, or the
time such notice is dispatched, if delivered through the mails or be telegram or
mailgram.
 
    5.10.  RELIANCE UPON BOOKS, REPORTS AND RECORDS.  Each director, each member
of any committee designated by the Board of Directors, and each officer of the
Corporation shall, in the performance of his duties, be fully protected in
relying in good faith upon the books of account or other records of the
Corporation, including reports made to the Corporation by any of its officers,
by an independent certified public accountant, or by an appraiser selected with
reasonable care.
 
    5.11.  TIME PERIODS.  In applying any provision of these Bylaws which
require that an act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified number of days prior
to an event, calendar days shall be used, the day of the doing of the act shall
be excluded, and the day of the event shall be included.
 
    5.12.  FACSIMILE SIGNATURES.  In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
 
ARTICLE 6.  AMENDMENTS
 
    6.1.  BY THE BOARD OF DIRECTORS.  Except as is otherwise set forth in these
Bylaws, these Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by the affirmative vote of a majority of the directors present at any
regular or special meeting of the Board of Directors at which a quorum is
present.
   
    6.2.  BY THE STOCKHOLDERS.  Except as otherwise set forth in these Bylaws,
these Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the affirmative vote of the holders of a majority of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote at any
annual meeting of stockholders, or at any special meeting of stockholders,
provided notice of such alteration, amendment, repeal or adoption of new Bylaws
shall have been stated in the notice of such special meeting.
    
ARTICLE 7.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
    7.1.  RIGHT TO INDEMNIFICATION.  Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer or employee or in any other capacity while serving as a
director, officer or employee, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by Delaware Law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said Law permitted the Corporation to provide prior
to such amendment) against all expenses, liability and loss reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that, except as provided in Section 7.2 of
this Article 7, the Corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if (a) such indemnification is expressly required
to be made by law, (b) the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation, (c) such
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the
 
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<PAGE>
powers vested in the Corporation under the Delaware General Corporation Law, or
(d) the action, suit or proceeding (or part thereof) is brought to establish or
enforce a right to indemnification under an indemnity agreement or any other
statute or law or otherwise as required under Section 145 of the Delaware
General Corporation Law. Such right shall be a contract right and shall include
the right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, unless
the Delaware General Corporation Law then so prohibits, the payment of such
expenses incurred by a director or officer of the Corporation in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is tendered by such person while a director or officer,
including, without limitation. service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
 
    7.2.  RIGHT OF CLAIMANT TO BRING SUIT.  If a claim under Section 7.1 is not
paid in full by the Corporation within ninety (90) days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if such suit is not frivolous or brought in bad faith, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other then an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to this
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
 
    7.3.  INDEMNIFICATION OF EMPLOYEES AND AGENTS.  The Corporation may, to the
extent authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of related expenses, to any employee or
agent of the Corporation to the fullest extent of the provisions of this Article
with respect to the indemnification of and advancement of expenses to directors
and officers of the Corporation.
 
    7.4.  NON-EXCLUSIVITY OF RIGHTS.  The rights conferred on any person in
Sections 7.1 and 7.2 shall not be exclusive of any other right which such
persons may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
 
    7.5.  INDEMNIFICATION CONTRACTS.  The Board of Directors is authorized to
enter into a contract with any director, officer, employee or agent of the
Corporation, or any person serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including employee benefit plans, providing
for indemnification rights equivalent to or, if the Board of Directors so
determines, greater than, those provided for in this Article 7.
 
    7.6.  INSURANCE.  The Corporation shall maintain insurance to the extent
reasonably available, at its expense, to protect itself and any such director,
officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
 
                                     A-2-11
<PAGE>
    7.7.  EFFECT OF AMENDMENT.  Any amendment, repeal or modification of any
provision of this Article 7 by the stockholders and the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
 
                                     A-2-12
<PAGE>
                                   APPENDIX B
                              INDEMNITY AGREEMENT
 
    This Indemnity Agreement, dated as of         , 199  , is made by and
between Mattson Technology, Inc., a Delaware corporation (the "Company"), and
            (the "Indemnitee").
 
                                    RECITALS
 
    A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
 
    B.  The statutes and judicial decisions regarding the duties of directors
and officers are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
 
    C.  Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
 
    D. The Company believes that it is unfair for its directors, officers and
agents and the directors, officers and agents of its subsidiaries to assume the
risk of huge judgments and other expenses which may occur in cases in which the
director, officer or agent received no personal profit and in cases where the
director, officer or agent was not culpable.
 
    E.  The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.
 
    F.  Based upon their experience as business managers, the Board of Directors
of the Company (the "Board") has concluded that, to retain and attract talented
and experienced individuals to serve as directors, officers and agents of the
Company and its subsidiaries and to encourage such individuals to take the
business risks necessary for the success of the Company and its subsidiaries, it
is necessary for the Company to contractually indemnify its directors, officers
and agents and the directors, officers and agents of its subsidiaries, and to
assume for itself maximum liability for expenses and damages in connection with
claims against such directors, officers and agents in connection with their
service to the Company and its subsidiaries, and has further concluded that the
failure to provide such contractual indemnification could result in great harm
to the Company and its subsidiaries and the Company's stockholders.
 
    G. Section 145 of the General Corporation Law of Delaware, under which the
Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
 
                                      B-1
<PAGE>
    H. The Company desires and has requested the Indemnitee to serve or continue
to serve as a director, officer or agent of the Company and/or one or more
subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
 
    I.  Indemnitee is willing to serve, or to continue to serve, the Company
and/or one or more subsidiaries of the Company, provided that he is furnished
the indemnity provided for herein.
 
                                   AGREEMENT
 
    NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
 
    1.  DEFINITIONS.
 
    (a)  AGENT.  For the purposes of this Agreement, "agent" of the Company
means any person who is or was a director, officer, employee or other agent of
the Company or a subsidiary of the Company; or is or was serving at the request
of, for the convenience of, or to represent the interests of the Company or a
subsidiary of the Company as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
 
    (b)  EXPENSES.  For purposes of this Agreement, "expenses" include all
out-of-pocket costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to indemnification under this Agreement or Section 145 or otherwise;
provided, however, that "expenses" shall not include any judgments, fines, ERISA
excise taxes or penalties, or amounts paid in settlement of a proceeding.
 
    (c)  PROCEEDING.  For the purposes of this Agreement, "proceeding" means any
threatened, pending, or completed action, suit or other proceeding, whether
civil, criminal, administrative, or investigative.
 
    (d)  SUBSIDIARY.  For purposes of this Agreement, "subsidiary" means any
corporation of which more than 50% of the outstanding voting securities is owned
directly or indirectly by the Company, by the Company and one or more other
subsidiaries, or by one or more other subsidiaries.
 
    2.  AGREEMENT TO SERVE.  The Indemnitee agrees to serve and/or continue to
serve as agent of the Company, at its will (or under separate agreement, if such
agreement exists), in the capacity Indemnitee currently serves as an agent of
the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment by Indemnitee.
 
    3.  LIABILITY INSURANCE.
 
    (a)  MAINTENANCE OF D&O INSURANCE.  The Company hereby covenants and agrees
that, so long as the Indemnitee shall continue to serve as an agent of the
Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
 
    (b)  RIGHTS AND BENEFITS.  In all policies of D&O Insurance, the Indemnitee
shall be named as an insured in such a manner as to provide the Indemnitee the
same rights and benefits as are accorded to the most favorably insured of the
Company's directors, if the Indemnitee is a director; or of the Company's
 
                                      B-2
<PAGE>
officers, if the Indemnitee is not a director of the Company but is an officer;
or of the Company's key employees, if the Indemnitee is not a director or
officer but is a key employee.
 
    (c)  LIMITATION ON REQUIRED MAINTENANCE OF D&O INSURANCE.  Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain D&O
Insurance if the Company determines in good faith that such insurance is not
reasonably available, the premium costs for such insurance are disproportionate
to the amount of coverage provided, the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or the
Indemnitee is covered by similar insurance maintained by a subsidiary of the
Company.
 
    4.  MANDATORY INDEMNIFICATION.  Subject to Section 9 below, the Company
shall indemnify the Indemnitee as follows:
 
    (a)  SUCCESSFUL DEFENSE.  To the extent the Indemnitee has been successful
on the merits or otherwise in defense of any proceeding (including, without
limitation, an action by or in the right of the Company) to which the Indemnitee
was a party by reason of the fact that he is or was an Agent of the Company at
any time, against all expenses of any type whatsoever actually and reasonably
incurred by him in connection with the investigation, defense or appeal of such
proceeding.
 
    (b)  THIRD PARTY ACTIONS.  If the Indemnitee is a person who was or is a
party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
 
    (c)  DERIVATIVE ACTIONS.  If the Indemnitee is a person who was or is a
party or is threatened to be made a party to any proceeding by or in the right
of the Company by reason of the fact that he is or was an agent of the Company,
or by reason of anything done or not done by him in any such capacity, the
Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
 
    (d)  ACTIONS WHERE INDEMNITEE IS DECEASED.  If the Indemnitee is a person
who was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that he is or was an agent of the Company, or by reason of
anything done or not done by him in any such capacity, and if prior to, during
the pendency of after completion of such proceeding Indemnitee becomes deceased,
the Company shall indemnify the Indemnitee's heirs, executors and administrators
against any and all expenses and liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes and penalties, and
amounts paid in settlement) actually and reasonably incurred to the extent
Indemnitee would have been entitled to indemnification pursuant to Sections
4(a), 4(b), or 4(c) above were Indemnitee still alive.
 
    (e) Notwithstanding the foregoing, the Company shall not be obligated to
indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA
 
                                      B-3
<PAGE>
excise taxes and penalties, and amounts paid in settlement) for which payment is
actually made to or on behalf of Indemnitee under a valid and collectible
insurance policy of D&O Insurance, or under a valid and enforceable indemnity
clause, by-law or agreement.
 
    5.  PARTIAL INDEMNIFICATION.  If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
 
    6.  MANDATORY ADVANCEMENT OF EXPENSES.  Subject to Section 8(a) below, the
Company shall advance all expenses incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.
 
    7.  NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
 
    (a) Promptly after receipt by the Indemnitee of notice of the commencement
of or the threat of commencement of any proceeding, the Indemnitee shall, if the
Indemnitee believes that indemnification with respect thereto may be sought from
the Company under this Agreement, notify the Company of the commencement or
threat of commencement thereof.
 
    (b) If, at the time of the receipt of a notice of the commencement of a
proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
 
    (c) In the event the Company shall be obligated to pay the expenses of any
proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, with counsel approved by the
Indemnitee, upon the delivery to the Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee shall have the right to employ his
counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the
employment of counsel by the Indemnitee has been previously authorized by the
Company, (B) the Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and the Indemnitee in the conduct of
any such defense, or (C) the Company shall not, in fact, have employed counsel
to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
 
    8.  EXCEPTIONS.  Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
 
    (a)  CLAIMS INITIATED BY INDEMNITEE.  To indemnify or advance expenses to
the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion,
 
                                      B-4
<PAGE>
pursuant to the powers vested in the Company under the General Corporation Law
of Delaware or (iv) the proceeding is brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as
required under Section 145.
 
    (b)  LACK OF GOOD FAITH.  To indemnify the Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
 
    (c)  UNAUTHORIZED SETTLEMENTS.  To indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement, which consent shall not be unreasonably withheld.
 
    9.  NON-EXCLUSIVITY.  The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the Indemnitee may have under any provision of law, the Company's
Certificate of Incorporation or Bylaws, the vote of the Company's stockholders
or disinterested directors, other agreements, or otherwise, both as to action in
his official capacity and to action in another capacity while occupying his
position as an agent of the Company, and the Indemnitee's rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
 
    10.  ENFORCEMENT.  Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 4 and 8 hereof. Neither the failure of the Corporation
(including its Board of Directors or its stockholders) to have made a
determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors or its
stockholders) that such indemnification is improper, shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
 
    11.  SUBROGATION.  In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
 
    12.  SURVIVAL OF RIGHTS.
 
    (a) All agreements and obligations of the Company contained herein shall
continue during the period Indemnitee is an agent of the Company and shall
continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee was serving in the capacity referred to herein.
 
    (b) The Company shall require any successor to the Company (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.
 
                                      B-5
<PAGE>
    13.  INTERPRETATION OF AGREEMENT.  It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
 
    14.  SEVERABILITY.  If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, (i)
the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
 
    15.  MODIFICATION AND WAIVER.  No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
 
    16.  NOTICE.  All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.
 
    17.  GOVERNING LAW.  This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
 
    The parties hereto have entered into this Indemnity Agreement effective as
of the date first above written.
 
                                          THE COMPANY:
                                          MATTSON TECHNOLOGY, INC.
 
                              By
                                    ------------------------------
 
                              Title
                                    ------------------------------
 
                              Address:
                                      ----------------------------
 
                                      ----------------------------
 
                              INDEMNITEE:
 
                              [Indemnitee's Printed Name]
 
                              Address:
                                      ----------------------------
 
                                      ----------------------------
 
                                      B-6
<PAGE>

   
                                   APPENDIX C
                            MATTSON TECHNOLOGY, INC.
                  AMENDED AND RESTATED 1989 STOCK OPTION PLAN
 
    1.  ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
 
    1.1  ESTABLISHMENT.  The Mattson Technology, Inc. 1989 Stock Option Plan was
initially established effective September 29, 1989 (the "INITIAL PLAN"). The
Initial Plan is hereby amended and restated in its entirety as the Mattson
Technology, Inc. Amended and Restated 1989 Stock Option Plan (the "PLAN")
effective as of the date of its approval by the shareholders of the Company (the
"EFFECTIVE DATE").
 
    1.2  PURPOSE.  The purpose of the Plan is to advance the interests of the
Participating Company Group and its shareholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
 
    1.3  TERM OF PLAN.  The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.
 
    2.  DEFINITIONS AND CONSTRUCTION.
 
    2.1  DEFINITIONS.  Whenever used herein, the following terms shall have
their respective meanings set forth below:
 
    (a) "BOARD" means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, "BOARD" also
means such Committee(s).
 
    (b) "CODE" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.
 
    (c) "COMMITTEE" means the Compensation Committee or other committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
 
    (d) "COMPANY" means Mattson Technology, Inc., a California corporation, or
any successor corporation thereto.
 
    (e) "CONSULTANT" means any person, including an advisor, engaged by a
Participating Company to render services other than as an Employee or a
Director.
 
    (f) "DIRECTOR" means a member of the Board or of the board of directors of
any other Participating Company.
 
    (g) "DISABILITY" means the permanent and total disability of the Optionee
within the meaning of Section 22(e)(3) of the Code.
 
    (h) "EMPLOYEE" means any person treated as an employee (including an officer
or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
    

                                      C-1
<PAGE>

   
    (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
 
    (j) "FAIR MARKET VALUE" means, as of any date, the value of a share of Stock
or other property as determined by the Board, in its sole discretion, or by the
Company, in its sole discretion, if such determination is expressly allocated to
the Company herein, subject to the following:
 
        (i) If, on such date, there is a public market for the Stock, the Fair
    Market Value of a share of Stock shall be the closing sale price of a share
    of Stock (or the mean of the closing bid and asked prices of a share of
    Stock if the Stock is so quoted instead) as quoted on the Nasdaq National
    Market, the Nasdaq Small-Cap Market or such other national or regional
    securities exchange or market system constituting the primary market for the
    Stock, as reported in the WALL STREET JOURNAL or such other source as the
    Company deems reliable. If the relevant date does not fall on a day on which
    the Stock has traded on such securities exchange or market system, the date
    on which the Fair Market Value shall be established shall be the last day on
    which the Stock was so traded prior to the relevant date, or such other
    appropriate day as shall be determined by the Board, in its sole discretion.
 
        (ii) If, on such date, there is no public market for the Stock, the Fair
    Market Value of a share of Stock shall be as determined by the Board without
    regard to any restriction other than a restriction which, by its terms, will
    never lapse.
 
    (k) "INCENTIVE STOCK OPTION" means an Option intended to be (as set forth in
the Option Agreement) and which qualifies as an incentive stock option within
the meaning of Section 422(b) of the Code.
 
    (l) "INSIDER" means an officer or a Director of the Company or any other
person whose transactions in Stock are subject to Section 16 of the Exchange
Act.
 
    (m) "NONEMPLOYEE DIRECTOR" means a Director of the Company who is not an
Employee.
 
    (n) "NONEMPLOYEE DIRECTOR OPTION" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) granted to a Nonemployee Director
pursuant to the terms and conditions of the Plan. Nonemployee Director Options
shall be Nonstatutory Stock Options.
 
    (o) "NONSTATUTORY STOCK OPTION" means an Option not intended to be (as set
forth in the Option Agreement) or which does not qualify as an Incentive Stock
Option.
 
    (p) "OPTION" means a right to purchase Stock (subject to adjustment as
provided in Section 4.2) pursuant to the terms and conditions of the Plan,
including a Nonemployee Director Option. An Option may be either an Incentive
Stock Option or a Nonstatutory Stock Option.
 
    (q) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee setting forth the terms, conditions and restrictions of the Option
granted to the Optionee and any shares acquired upon the exercise thereof.
 
    (r) "OPTIONEE" means a person who has been granted one or more Options.
 
    (s) "PARENT CORPORATION" means any present or future "parent corporation" of
the Company, as defined in Section 424(e) of the Code.
 
    (t) "PARTICIPATING COMPANY" means the Company or any Parent Corporation or
Subsidiary Corporation.
 
    (u) "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.
 
    (v) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation.
 
    (w) "SECTION 162(m)" means Section 162(m) of the Code.
    

                                      C-2
<PAGE>

   
    (x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
 
    (y) "SERVICE" means an Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. An Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. Furthermore, an Optionee's Service
with the Participating Company Group shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and instead shall be treated thereafter as a Nonstatutory
Stock Option unless the Optionee's right to return to Service with the
Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining vesting under the Optionee's Option Agreement. An Optionee's
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Optionee performs Service ceasing
to be a Participating Company. Subject to the foregoing, the Company, in its
sole discretion, shall determine whether an Optionee's Service has terminated
and the effective date of such termination.
 
    (z) "STOCK" means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.2.
 
    (aa) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
 
    (bb) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the time an
Option is granted to the Optionee, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
 
    2.2  CONSTRUCTION.  Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term "or" is
not intended to be exclusive, unless the context clearly requires otherwise.
 
    3.  ADMINISTRATION.
 
    3.1  ADMINISTRATION BY THE BOARD.  The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
 
    3.2  ADMINISTRATION WITH RESPECT TO INSIDERS.  With respect to participation
by Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b-3.
 
    3.3  COMMITTEE COMPLYING WITH SECTION 162(m).  If a Participating Company is
a "publicly held corporation" within the meaning of Section 162(m), the Board
may establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Option which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).
    
                                      C-3
<PAGE>

   
    3.4  POWERS OF THE BOARD.  In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Board shall have the full
and final power and authority, in its sole discretion:
 
    (a) to determine the persons to whom, and the time or times at which,
Options shall be granted and the number of shares of Stock to be subject to each
Option;
 
    (b) to designate Options as Incentive Stock Options or Nonstatutory Stock
Options;
 
    (c) to determine the Fair Market Value of shares of Stock or other property;
 
    (d) to determine the terms, conditions and restrictions applicable to each
Option (which need not be identical) and any shares acquired upon the exercise
thereof, including, without limitation, (i) the exercise price of the Option,
(ii) the method of payment for shares purchased upon the exercise of the Option,
(iii) the method for satisfaction of any tax withholding obligation arising in
connection with the Option or such shares, including by the withholding or
delivery of shares of stock, (iv) the timing, terms and conditions of the
exercisability of the Option or the vesting of any shares acquired upon the
exercise thereof, (v) the time of the expiration of the Option, (vi) the effect
of the Optionee's termination of Service with the Participating Company Group on
any of the foregoing, and (vii) all other terms, conditions and restrictions
applicable to the Option or such shares not inconsistent with the terms of the
Plan;
 
    (e) to approve one or more forms of Option Agreement;
 
    (f) to amend, modify, extend, cancel, renew, reprice or otherwise adjust the
exercise price of, or grant a new Option in substitution for, any Option or to
waive any restrictions or conditions applicable to any Option or any shares
acquired upon the exercise thereof;
 
    (g) to accelerate, continue, extend or defer the exercisability of any
Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;
 
    (h) to delegate to any proper officer of the Company the authority to grant
one or more Options, without further approval of the Board, to any person
eligible pursuant to Section 5, other than a person who, at the time of such
grant, is an Insider; provided, however, that (i) such Options shall not be
granted to any one person within any fiscal year of the Company for more than
              shares in the aggregate, (ii) the exercise price per share of each
such Option shall be equal to the Fair Market Value per share of the Stock on
the effective date of grant (or, if the Stock has not traded on such date, on
the last day preceding the effective date of grant on which the Stock was
traded), and (iii) each such Option shall be subject to the terms and conditions
of the appropriate standard form of Option Agreement approved by the Board and
shall conform to the provisions of the Plan and such other guidelines as shall
be established from time to time by the Board;
 
    (i) to prescribe, amend or rescind rules, guidelines and policies relating
to the Plan, or to adopt supplements to, or alternative versions of, the Plan,
including, without limitation, as the Board deems necessary or desirable to
comply with the laws of, or to accommodate the tax policy or custom of, foreign
jurisdictions whose citizens may be granted Options; and
 
    (j) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
 
    4.  SHARES SUBJECT TO INITIAL PLAN AND PLAN.
 
    4.1  MAXIMUM NUMBER OF SHARES ISSUABLE.  Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Initial Plan and the Plan shall be four million three hundred
thousand (4,300,000) and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof. If an outstanding Option for any
reason expires or
    

                                      C-4
<PAGE>

   
is terminated or canceled, or if shares of Stock acquired, subject to
repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option or such
repurchased shares of Stock shall again be available for issuance under the
Plan.
 
    4.2  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the share limit set forth in
Section 3.4(h), in the Section 162(m) Grant Limit set forth in Section 5.4, to
the automatic Nonemployee Director Option grant provisions set forth in Section
7.1 and in the exercise price per share of any outstanding Options. If a
majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event, as defined in
Section 9.1) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded up or
down to the nearest whole number, as determined by the Board, and in no event
may the exercise price of any Option be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments determined by
the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
 
    5.  ELIGIBILITY AND OPTION LIMITATIONS.
 
    5.1  PERSONS ELIGIBLE FOR OPTIONS.  Options may be granted only to
Employees, Consultants and Directors. For purposes of the foregoing sentence,
"Employees", "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of employment or other service relationship with
the Participating Company Group. Eligible persons may be granted more than one
(1) Option.
 
    5.2  OPTION GRANT RESTRICTIONS.  Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service as an Employee with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1. Nonemployee Director Options may be granted only to
a person who at the time of grant is a Nonemployee Director.
 
    5.3  FAIR MARKET VALUE LIMITATION.  To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having an
aggregate Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
    

                                      C-5
<PAGE>

   
    5.4  SECTION 162(m) GRANT LIMIT.  Subject to adjustment as provided in
Section 4.2, at any such time as a Participating Company is a "publicly held
corporation" within the meaning of Section 162(m), no Employee shall be granted
one or more Options within any fiscal year of the Company which in the aggregate
are for the purchase of more than five hundred thousand (500,000) shares (the
"SECTION 162(M) GRANT LIMIT").
 
    6.  TERMS AND CONDITIONS OF OPTIONS.  Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. No Option or purported
Option shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Option Agreement. Option Agreements may incorporate all or
any of the terms of the Plan by reference and, except as otherwise set forth in
Section 7 with respect to Nonemployee Director Options, shall comply with and be
subject to the following terms and conditions:
 
    6.1  EXERCISE PRICE.  The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
 
    6.2  EXERCISE PERIOD.  Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance
criteria, and restrictions as shall be determined by the Board and set forth in
the Option Agreement evidencing such Option; provided, however, that (a) no
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such Option, (b) no Incentive Stock
Option granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences Service with a Participating Company. Subject to the foregoing,
unless otherwise specified by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date of
the grant of the Option.
 
    6.3  PAYMENT OF EXERCISE PRICE.
 
    (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check, or cash equivalent,
(ii) by tender to the Company of shares of Stock owned by the Optionee having a
Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not
less than the exercise price, (iii) by the assignment of the proceeds of a sale
or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a "CASHLESS
EXERCISE"), (iv) provided that the Optionee is an Employee, by the Optionee's
promissory note in a form approved by the Company, (v) by such other
consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (vi) by any combination thereof. The Board may
at any time or from time to time, by adoption of or by amendment to the standard
forms of Option Agreement described in Section 8, or by other means, grant
Options which do not permit all of the foregoing forms of
    

                                      C-6
<PAGE>

   
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.
 
    (b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company of shares of Stock to the extent such tender
of Stock would constitute a violation of the provisions of any law, regulation
or agreement restricting the redemption of the Company's stock. Unless otherwise
provided by the Board, an Option may not be exercised by tender to the Company
of shares of Stock unless such shares either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company.
 
    (c) CASHLESS EXERCISE. The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.
 
    (d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be permitted if the
exercise of an Option using a promissory note would be a violation of any law.
Any permitted promissory note shall be on such terms as the Board shall
determine at the time the Option is granted. The Board shall have the authority
to permit or require the Optionee to secure any promissory note used to exercise
an Option with the shares of Stock acquired upon the exercise of the Option or
with other collateral acceptable to the Company. Unless otherwise provided by
the Board, if the Company at any time is subject to the regulations promulgated
by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations.
 
    6.4  TAX WITHHOLDING.  The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock until the Participating
Company Group's tax withholding obligations have been satisfied by the Optionee.
 
    6.5  EFFECT OF TERMINATION OF SERVICE.
 
    (a) OPTION EXERCISABILITY. Subject to earlier termination of the Option as
otherwise provided herein, an Option shall be exercisable after an Optionee's
termination of Service as follows:
 
        (i) DISABILITY. If the Optionee's Service with the Participating Company
    Group is terminated because of the Disability of the Optionee, the Option,
    to the extent unexercised and exercisable on the date on which the
    Optionee's Service terminated, may be exercised by the Optionee (or the
    Optionee's guardian or legal representative) at any time prior to the
    expiration of twelve (12) months (or such longer or shorter period of time
    as determined by the Board, in its sole discretion) after the date on which
    the Optionee's Service terminated, but in any event no later than the date
    of expiration of the Option's term as set forth in the Option Agreement
    evidencing such Option (the "OPTION EXPIRATION DATE").
 
        (ii) DEATH. If the Optionee's Service with the Participating Company
    Group is terminated because of the death of the Optionee, the Option, to the
    extent unexercised and exercisable on the date on which the Optionee's
    Service terminated, may be exercised by the Optionee's legal representative
    or other person who acquired the right to exercise the Option by reason of
    the Optionee's death
    

                                      C-7
<PAGE>

   
    at any time prior to the expiration of twelve (12) months (or such longer or
    shorter period of time as determined by the Board, in its sole discretion)
    after the date on which the Optionee's Service terminated, but in any event
    no later than the Option Expiration Date. The Optionee's Service shall be
    deemed to have terminated on account of death if the Optionee dies within
    three (3) months after the Optionee's termination of Service.
 
       (iii) OTHER TERMINATION OF SERVICE. If the Optionee's Service with the
    Participating Company Group terminates for any reason, except Disability or
    death, the Option, to the extent unexercised and exercisable by the Optionee
    on the date on which the Optionee's Service terminated, may be exercised by
    the Optionee within three (3) months (or such longer or shorter period of
    time as determined by the Board, in its sole discretion) after the date on
    which the Optionee's Service terminated, but in any event no later than the
    Option Expiration Date.
 
    (b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the foregoing,
if the exercise of an Option within the applicable time periods set forth in
Section 6.5(a) is prevented by the provisions of Section 12 below, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
 
    (c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section
6.5(a) of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
 
    7.  TERMS AND CONDITIONS OF NONEMPLOYEE DIRECTOR OPTIONS.  Nonemployee
Director Options shall be evidenced by Option Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish. Such Option Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
 
    7.1  AUTOMATIC GRANT.  Subject to execution by a Nonemployee Director of an
appropriate Option Agreement, Nonemployee Director Options shall be granted
automatically and without further action of the Board, as follows:
 
    (a) INITIAL OPTION. A Nonemployee Director shall be granted a Nonemployee
Director Option (an "INITIAL OPTION") as follows:
 
        (i) On the Effective Date, each person listed on EXHIBIT A attached
    hereto who remains on such date a Nonemployee Director shall be granted a
    Nonemployee Director Option to purchase the number of shares of Stock shown
    opposite his name on EXHIBIT A.
 
        (ii) Each person who first becomes a Nonemployee Director after the
    Effective Date shall be granted on the date he or she first becomes a
    Nonemployee Director a Nonemployee Director Option to purchase twelve
    thousand five hundred (12,500) shares of Stock. Notwithstanding anything
    herein to the contrary, an Initial Option shall not be granted to a Director
    who previously did not qualify as a Nonemployee Director but subsequently
    becomes a Nonemployee Director as a result of the termination of his or her
    status as an Employee.
 
    (b) ANNUAL OPTION. Except as otherwise provided in EXHIBIT B, each
Nonemployee Director (including any Director who previously did not qualify as a
Nonemployee Director but who subsequently becomes a Nonemployee Director) shall
be granted on the date of each annual meeting of the shareholders of the Company
which occurs after the Effective Date (an "ANNUAL MEETING") following which such
person remains a Nonemployee Director an Option to purchase five thousand
(5,000) shares of Stock (an "ANNUAL OPTION"). Notwithstanding the foregoing, a
Nonemployee Director who has not served continuously as a

    

                                      C-8
<PAGE>

   
Director of the Company for at least six (6) months as of the date of such
Annual Meeting shall not receive an Annual Option on such date.
 
    (c) RIGHT TO DECLINE NONEMPLOYEE DIRECTOR OPTION. Notwithstanding the
foregoing, any person may elect not to receive a Nonemployee Director Option by
delivering written notice of such election to the Board no later than the day
prior to the date such Nonemployee Director Option would otherwise be granted. A
person so declining a Nonemployee Director Option shall receive no payment or
other consideration in lieu of such declined Nonemployee Director Option. A
person who has declined a Nonemployee Director Option may revoke such election
by delivering written notice of such revocation to the Board no later than the
day prior to the date such Nonemployee Director Option would be granted pursuant
to Section 7.1(a) or (b), as the case may be.
 
    7.2  EXERCISE PRICE.  The exercise price per share of Stock subject to a
Nonemployee Director Option shall be the Fair Market Value of a share of Stock
on the date the Nonemployee Director Option is granted.
 
    7.3  EXERCISE PERIOD.  Each Nonemployee Director Option shall terminate and
cease to be exercisable on the date ten (10) years after the date of grant of
the Nonemployee Director Option unless earlier terminated pursuant to the terms
of the Plan or the Option Agreement.
 
    7.4  RIGHT TO EXERCISE NONEMPLOYEE DIRECTOR OPTIONS.
 
    (a) INITIAL OPTIONS.
 
        (i) An Initial Option granted pursuant to Section 7.1(a)(i) shall become
    vested and exercisable in accordance with the vesting provisions set forth
    opposite the Optionee's name in EXHIBIT A, subject to the Optionee's
    continued Service.
 
        (ii) Except as otherwise provided in the Plan or in the Option Agreement
    and provided that the Optionee's Service has not terminated prior to the
    respective date set forth below, an Initial Option granted pursuant to
    Section 7.1(a)(ii) shall become vested and exercisable cumulatively as
    follows: (A) no shares prior to the date occurring one (1) year after the
    date of grant; (B) 5,000 shares on and after the date occurring one (1) year
    after the date of grant; (C) 3,750 shares on and after the date occurring
    two (2) years after the date of grant; (D) 2,500 shares on and after the
    date occurring three (3) years after date of grant; and (E) 1,250 shares on
    and after the date occurring four (4) years after the date of grant.
 
    (b) ANNUAL OPTIONS. Except as otherwise provided in the Plan or in the
Option Agreement and provided the Optionee's Service has not terminated prior to
the relevant date, each Annual Option shall become vested and exercisable
cumulatively for 25% of the shares of Stock initially subject to the Option on
each of the first four (4) anniversaries of the date on which the Annual Option
was granted.
 
    (c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. The number of shares
becoming vested and exercisable as set forth on EXHIBIT A, on EXHIBIT B, and in
this Section 7.4 shall be adjusted proportionately pursuant to the provisions of
Section 4.2 in the event of a change in the Company's capital structure.
 
    8.  STANDARD FORMS OF OPTION AGREEMENT.
 
    8.1  INCENTIVE STOCK OPTIONS.  Unless otherwise provided by the Board at the
time the Option is granted, an Option designated as an "Incentive Stock Option"
shall comply with and be subject to the terms and conditions set forth in the
form of Incentive Stock Option Agreement adopted by the Board concurrently with
its adoption of the Plan and as amended from time to time.
 
    8.2  NONSTATUTORY STOCK OPTIONS (OTHER THAN NONEMPLOYEE DIRECTOR
OPTION).  Unless otherwise provided by the Board at the time the Option is
granted, an Option designated as a "Nonstatutory Stock Option" (other than a
Nonemployee Director Option) shall comply with and be subject to the terms and
    

                                      C-9
<PAGE>

   
conditions set forth in the form of Nonstatutory Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
 
    8.3  NONEMPLOYEE DIRECTOR OPTION.  Each Nonemployee Director Option shall
comply with and be subject to the terms and conditions set forth in the
appropriate form of Nonstatutory Stock Option Agreement (Nonemployee Director
Option) adopted by the Board concurrently with its adoption of the Plan and as
amended from time to time.
 
    8.4  AUTHORITY TO VARY TERMS.  The Board shall have the authority from time
to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 8 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan. Such authority shall include, but not
by way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by an Optionee upon the exercise of an Option in the event such
Optionee's Service with the Participating Company Group is terminated for any
reason, with or without cause.
 
    9.  CHANGE IN CONTROL.
 
    9.1  DEFINITIONS.
 
    (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any of
the following occurs with respect to the Company:
 
        (i) the direct or indirect sale or exchange in a single or series of
    related transactions by the shareholders of the Company of more than fifty
    percent (50%) of the voting stock of the Company;
 
        (ii) a merger or consolidation in which the Company is a party;
 
       (iii) the sale, exchange, or transfer of all or substantially all of the
    assets of the Company; or
 
        (vi) a liquidation or dissolution of the Company.
 
    (b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event or a series
of related Ownership Change Events (collectively, the "TRANSACTION") wherein the
shareholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Company's voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company
were transferred (the "TRANSFEREE CORPORATION(S)"), as the case may be. For
purposes of the preceding sentence, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting stock of
one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
 
    9.2  EFFECT OF CHANGE IN CONTROL ON OPTIONS.   In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. For purposes of this Section 9.2, an Option shall
be deemed assumed if, following the Change in Control, the Option confers the
right to purchase in accordance with its terms and conditions, for each share of
Stock subject to the Option immediately prior to the Change in Control, the
consideration (whether stock, cash or other securities or property) to which a
holder of a share of Stock on the effective
    

                                      C-10
<PAGE>

   
date of the Change in Control was entitled. In the event the Acquiring
Corporation elects not to assume or substitute for outstanding Options in
connection with a Change in Control, any unexercisable or unvested portion of
the outstanding Options shall be immediately exercisable and vested in full as
of the date ten (10) days prior to the date of the Change in Control. The
exercise or vesting of any Option that was permissible solely by reason of this
Section 9.2 shall be conditioned upon the consummation of the Change in Control.
Any Options which are neither assumed or substituted for by the Acquiring
Corporation in connection with the Change in Control nor exercised as of the
date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control. Furthermore, notwithstanding
the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in
Section 9.1(a)(i) constituting a Change in Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate unless the Board otherwise provides in its sole discretion.
 
    10.  PROVISION OF INFORMATION.  Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common shareholders.
 
    11.  TRANSFERABILITY OF OPTIONS.  During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or the Optionee's guardian or
legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, a Nonstatutory Stock Option shall be assignable
or transferable to the extent permitted by the Board and set forth in the Option
Agreement evidencing such Option.
 
    12.  COMPLIANCE WITH SECURITIES LAW.  The grant of Options and the issuance
of shares of Stock upon exercise of Options shall be subject to compliance with
all applicable requirements of federal, state or foreign law with respect to
such securities. Options may not be exercised if the issuance of shares of Stock
upon exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any
stock exchange or market system upon which the Stock may then be listed. In
addition, no Option may be exercised unless (a) a registration statement under
the Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (b) in the opinion
of legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of any
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
 
    13.  INDEMNIFICATION.  In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a
    

                                      C-11
<PAGE>

   
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.
 
    14.  TERMINATION OR AMENDMENT OF PLAN.  The Board may terminate or amend the
Plan at any time. However, subject to changes in applicable law, regulations or
rules that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Company's shareholders under any applicable law,
regulation or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option or any unexercised portion thereof,
without the consent of the Optionee, unless such termination or amendment is
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.
 
    15.  CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING OPTIONS.  Any other
provision of the Plan to the contrary notwithstanding, the Initial Plan shall
remain in effect and apply to all Options granted under the Initial Plan.
 
    16.    IN WITNESS WHEREOF, the undersigned Secretary of the Company
certifies that the foregoing Mattson Technology, Inc. Amended and Restated 1989
Stock Option Plan was duly adopted by the Board on               , 1997.
    

                                      C-12
<PAGE>
   
                                   EXHIBIT A
                      NONEMPLOYEE DIRECTOR OPTIONS GRANTED
                      EFFECTIVE AS OF THE EFFECTIVE DATE*
    
   
<TABLE>
<CAPTION>
                         NUMBER OF
         NAME             SHARES                       VESTING OF SHARES SUBJECT TO OPTION
- ----------------------  -----------  ------------------------------------------------------------------------
<S>                     <C>          <C>
Stephen J. Ciesinski        11,500   4,000 shares will vest 1 year after the date of grant, 3,750 shares will
                                     vest 2 years after the date of grant, 2,500 shares will vest 3 years
                                     after the date of grant and 1,250 shares will vest 4 years after the
                                     date of grant
 
John C. Savage              10,500   3,000 shares will vest 1 year after the date of grant, 3,750 shares will
                                     vest 2 years after the date of grant, 2,500 shares will vest 3 years
                                     after the date of grant and 1,250 shares will vest 4 years after the
                                     date of grant
 
Kenneth G. Smith            13,125   7,500 shares will be vested as of the date of grant, 1,875 shares will
                                     vest 2 years after the date of grant, 2,500 shares will vest 3 years
                                     after the date of grant and 1,250 shares will vest 4 years after the
                                     date of grant
</TABLE>
    
- ------------------------
   
* The number of shares of Stock set forth in this Exhibit A shall be adjusted
  pursuant to Section 4.2 of the Plan to reflect changes in the capital
  structure of the Company. Vesting of the shares subject to the Nonemployee
  Director Options set forth in this Exhibit A shall be subject to the
  Optionee's continued Service.
    
                                      C-13
<PAGE>
   
                                   EXHIBIT B
                               1998 ANNUAL OPTION
                             FOR SHIGERU NAKAYAMA*
    
   
<TABLE>
<CAPTION>
 NUMBER OF SHARES                                VESTING OF SHARES SUBJECT TO OPTION
- -------------------  --------------------------------------------------------------------------------------------
<C>                  <S>
         3,855       105 Shares will vest 2 years after the date of grant, 2,500 shares will vest 3 years after
                     the date of grant and 1,250 shares will vest 4 years after the date of grant.
</TABLE>
    
- ------------------------
   
* Notwithstanding the provisions of Section 7.1(b), the Annual Option, if any,
  granted to Shigeru Nakayama following the 1998 Annual Meeting shall be an
  Option to purchase the number of shares set forth in this Exhibit B and such
  shares shall vest and become exercisable as described above. The number of
  shares of Stock set forth in this Exhibit B shall be adjusted pursuant to
  Section 4.2 of the Plan to reflect changes in the capital structure of the
  Company. Vesting of the shares subject to the Nonemployee Director Option set
  forth in this Exhibit B shall be subject to the Optionee's continued Service.
    
                                      C-14
<PAGE>


                               PRELIMINARY COPY
                                   PROXY
                           MATTSON TECHNOLOGY, INC.
              3550 West Warren Avenue, Fremont, California 94538

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

 The undersigned hereby appoints Brad Mattson and Richard S. Mora (the 
"Proxies"), and each of them, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all 
the shares of Common Stock of Mattson Technology, Inc. (the "Company") held of 
record by the undersigned on June 16, 1997, at the Annual Meeting of 
Shareholders to be held on July 24, 1997 or any adjournment thereof.

<PAGE>

                                                            Please mark
                                                            your votes as  /X/
                                                            indicated in 
                                                             this example

1. ELECTION OF DIRECTORS

       / / FOR all nominees listed below           / / WITHHOLD AUTHORITY
           (except as marked to the contrary           to vote for all nominees
           below)                                      listed below

        INSTRUCTION:  To withhold authority to vote for any individual
                      nominee strike a line through the nominee's name below.

                      Brad Mattson
                      John C. Savage
                      Shigeru Nakayama
                      Kenneth G. Smith
                      Stephen J. Ciesinski
   
2. To approve the reincorporation of the Company in the State of Delaware and 
   other related changes to the rights of shareholders.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
3. Subject to the approval of Proposal Two, to approve certain additional 
   anti-takeover measures under the Company's Delaware Certificate of 
   Incorporation and Delaware Bylaws as follows:
    
   
A. To approve the elimination of cumulative voting for the election of 
   directors.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
B. To approve a classified board of directors removable only for cause.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
C. To approve the elimination of action by written consent.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
D. To approve certain limitations on the ability to call special meetings.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
E. To approve super-majority vote requirements for certain amendments to the 
   Delaware Certificate and Delaware Bylaws.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
4. To approve an amendment and restatement of the Company's 1989 Stock Option 
   Plan with an increase in the number of shares reserved for issuance 
   thereunder by 300,000 shares.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
5. To approve an increase in the number of shares reserved for issuance under 
   the Company's 1994 Employee Stock Purchase Plan by 400,000 shares.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
6. To ratify the appointment of Price Waterhouse LLP as the independent 
   accountants of the Company for the fiscal year ending December 31, 1997.
    
   
            / / FOR                 / / AGAINST                 / / ABSTAIN
    
   
7. To transact such other business as may properly come before the meeting.
    
   
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder.  If no direction is made, the Proxy
will be voted FOR Proposals 1, 2, 3A, 3B, 3C, 3D, 3E, 4, 5 and 6.
    
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO 
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED TO 
ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. IF YOU ATTEND THE 
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO EVEN THOUGH YOU HAVE 
SENT IN YOUR PROXY.


Signature ___________________________________________   Dated: ____________1997

Signature if held jointly ___________________________


Please sign exactly as your name appears on your stock certificates.  When 
shares are held by joint tenants, both should sign.  When signing as an 
attorney, as executor, administrator, trustee or guardian, please give your full
title.  If a corporation, please sign in full corporate name, by President or 
other authorized officer.  If a partnership, please sign in partnership name by 
authorized person.



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