MATTSON TECHNOLOGY INC, DEF 14A, 1998-04-08

MATTSON TECHNOLOGY INC
DEF 14A, 1998-04-08
SPECIAL INDUSTRY MACHINERY, NEC

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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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

MATTSON TECHNOLOGY, INC.
(Name of Registrant as Specified In Its Charter)

MATTSON TECHNOLOGY, INC.
(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:

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2) Aggregate number of securities to which transaction applies:

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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):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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/ / 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:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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<PAGE>

[Mattson Technology, Inc. Logo]
3550 WEST WARREN AVENUE
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998

-----------

The Annual Meeting of Stockholders of Mattson Technology, Inc. (the
"Company") will be held at the Newark Hilton, 39900 Balentine Drive, Newark,
California 94560 on May 20, 1998, at 9:30 a.m. local time for the following
purposes:

1. To elect one (1) Class I director of the Company to hold office for a
three-year term and until his successor is elected and qualified.

2. To approve an amendment to the Company's 1989 Amended and Restated
Stock Option Plan to increase the number of shares reserved for
issuance thereunder by 250,000 shares.

3. To approve an increase in the number of shares reserved for issuance
under the Company's 1994 Employee Stock Purchase Plan by 450,000
shares.

4. To ratify the selection of Price Waterhouse LLP as independent
accountants for the fiscal year ending December 31, 1998.

5. To transact such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.

Only stockholders of record at the close of business on April 2, 1998
will be entitled to vote at the meeting. Each of these stockholders is cordially
invited to be present and vote at the meeting in person.

By Order of the Board of Directors,

/s/ Richard S. Mora

Richard S. Mora, Secretary

Fremont, California
April 8, 1998

- -------------------------------------------------------------------------------
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>

MATTSON TECHNOLOGY, INC.
3550 WEST WARREN AVE.
FREMONT, CALIFORNIA 94538

-----------

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998

-----------

GENERAL INFORMATION

Your proxy in the enclosed form is solicited by the directors of Mattson
Technology, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on May 20, 1998 (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 April 8,
1998, the approximate date on which this Proxy Statement and accompanying form
of proxy were first sent or given to stockholders.

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 stockholder 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.

<PAGE>

SHARES OUTSTANDING AND VOTING RIGHTS

Only holders of shares of Common Stock of record as of the close of
business on April 2, 1998 are entitled to vote at the meeting. On this record
date there were issued and outstanding 14,470,729 shares of Common Stock. Each
share of Common Stock is entitled to one vote on all matters to be voted upon.

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 Meeting and any continuation or adjournment
thereof. Broker non-votes (i.e. shares held by broker or nominee which are
represented at the 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 Meeting. Directors are elected by a plurality
of votes of the shares present in person or represented by proxy at the 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 stockholders 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 Meeting. In determining whether such proposals have
been approved, abstentions and broker non-votes are not counted as votes for or
against the proposal.

Your execution of the enclosed proxy will not affect your right as a
stockholder to attend the Meeting and to vote in person. Any stockholder 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 Meeting, or (iii) attendance at the Meeting and voting in person.

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 27, 1998 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.

<PAGE>

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
BENEFICIAL OWNER (1) OWNED PERCENTAGE
- -------------------- ------------ ----------
<S> <C> <C>
Brad Mattson 3,393,272 (2) 21.7%

Boston Group Holdings, Inc.
c/o Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258 1,110,000 (3) 7.1%

Stephen J. Ciesinski 68,391 (4) *

John C. Savage 24,479 (5) *

Shigeru Nakayama 10,937 (6) *

Kenneth G. Smith 30,625 (7) *

Ralph S. Martin 271,659 (8) 1.7%

Richard S. Mora 79,501 (9) *

Yasuhiko Morita 29,136 (10) *

All directors and executive
officers as a group (8 persons) 3,908,000 (11) 25.0%
</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 326,584 shares subject to options exercisable within 60 days of
February 27, 1998.

(3) According to a Schedule 13G jointly filed January 22, 1998 by Mellon Bank
Corporation ("Mellon"), the Boston Company, Inc. ("BC") and Boston Group
Holdings, Inc. ("BH") with the Securities and Exchange Commission, Mellon
may be deemed to beneficially own 1,110,000 shares of Common Stock of the
Company, has sole voting power with respect to 1,042,000 shares of Common
Stock of the Company and has sole dispositive power over 1,110,000 shares
of Common Stock of the Company. Also, BC may be deemed to beneficially own
817,500 shares of Common Stock of the Company, has sole voting power with
respect to 749,700 shares of Common Stock of the Company and has sole
dispositive power over 817,500 shares of Common Stock of the Company. In
addition, BH may be deemed to beneficially own 817,500 shares of Common
Stock of the Company, has sole voting power with respect to 749,700 shares
of Common Stock of the Company, and has sole dispositive power over 817,500
shares of Common Stock of the Company.

(4) Includes 36,750 shares subject to options exercisable within 60 days of
February 27, 1998.

(5) Includes 24,479 shares subject to options exercisable within 60 days of
February 27, 1998.

(6) Includes 10,937 shares subject to options exercisable within 60 days of
February 27, 1998.

(7) Includes 30,625 shares subject to options exercisable within 60 days of
February 27, 1998.

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<PAGE>

(8) Includes 159,911 shares subject to options exercisable within 60 days of
February 27, 1998.

(9) Includes 73,416 shares subject to options exercisable within 60 days of
February 27, 1998.

(10) Includes 27,782 shares subject to options exercisable within 60 days of
February 27, 1998.

(11) Includes 690,484 shares subject to options exercisable within 60 days of
February 27, 1998.

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<PAGE>

PROPOSAL ONE

ELECTION OF DIRECTORS

The Company has a classified Board of Directors consisting of one Class I
director (Brad Mattson), two Class II directors (John C. Savage and Kenneth G.
Smith) and two Class III directors (Stephen J. Ciesinski and Shigeru Nakayama),
who will serve until the Annual Meetings of Stockholders to be held in 1998,
1999 and 2000, respectively, and until their respective successors are duly
elected and qualified. At each Annual Meeting of Stockholders, directors are
elected for a full term of three (3) years to succeed those directors whose
terms expire on the Annual Meeting dates.

Unless otherwise directed by stockholders, the proxyholders will vote all
shares represented by proxies held by them for the election of the nominee, Brad
Mattson. The Company is advised that Mr. Mattson has indicated his availability
and willingness to serve if elected. In the event that Mr. Mattson becomes
unavailable or unable to serve as a director of the Company prior to the voting,
the proxyholders will refrain from voting for the unavailable nominee and will
vote for a substitute nominee in the exercise of their best judgment. If a
quorum is present and voting, the nominee for director receiving the highest
number of votes will be elected as a director. Absentees and shares held by
brokers that are present, but not voted because the brokers were prohibited from
exercising discretionary authority, i.e., "broker non-votes," will be counted as
present for purposes of determining if a quorum is present.

DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ----------------------------- ----- ---------------------------- --------
<S> <C> <C> <C>

CLASS I DIRECTOR TO BE ELECTED AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS:

Brad Mattson 43 Chairman and Chief 1988
Executive Officer

CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:

John C. Savage 50 Director 1992

Kenneth G. Smith 49 Director 1994

CLASS III DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING OF
STOCKHOLDERS:

Stephen J. Ciesinski 49 Director 1989

Shigeru Nakayama 62 Director 1996
</TABLE>

Brad Mattson, age 43, founded the Company in November 1988 and has served
as the Company's Chief Executive Officer and Chairman since its 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.

John C. Savage, age 50, 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 Managing
Director in Redwood Partners LLC, 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, an electronic
document management company, 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 49, 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 held various positions at Micron Semiconductor, Inc., a semiconductor
manufacturer. From

5
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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 49, 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 62, joined the Company's Board of Directors in March
1996. Mr. Nakayama is currently a business consultant to Semiconductor Equipment
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, 1997, the Board of Directors held
six meetings. Each director attended at least 75% of the meetings of the Board
and of the Committees on which he served during fiscal 1997 which occurred on or
after the initiation of his term as a director.

During fiscal 1997, 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 1997, the Audit Committee
consisted of Messrs. Ciesinski, Smith and Savage. The Audit Committee held four
meetings during fiscal 1997.

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 1997, the Compensation Committee
consisted of Messrs. Ciesinski and Savage. The Compensation Committee held three
meetings during fiscal 1997.

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's 1989 Amended and Restated Stock Option Plan (the "Option
Plan") provides for the automatic grant of options to the Company's nonemployee
directors. Nonemployee directors elected or appointed after July 24, 1997 (the
"Effective Date") are each granted an option to purchase 12,500 shares on the
date of appointment or election. In addition, each nonemployee director is
thereafter granted an option to purchase 5,000 shares on the date immediately
after each annual meeting of stockholders 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 Option Plan to Mr.
Nakayama in 1998, will be an option for 3,855 shares. See Proposal Two,
"APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE 1989 AMENDED AND
RESTATED STOCK OPTION PLAN."

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<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 Stockholders, 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 NOMINEE LISTED HEREIN.

ADDITIONAL INFORMATION

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 42 President and Chief Operating Officer

Richard S. Mora 51 Vice President, Finance, Chief Financial
Officer & Secretary

Yasuhiko Morita 56 President, Mattson Technology Center, K.K.
</TABLE>

Ralph S. Martin, age 42, 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.

Richard S. Mora, age 51, 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, age 56, 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.

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<PAGE>

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 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>
LONG-TERM
---------
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND PRINCIPAL FUNCTION YEAR SALARY($) BONUS($)(2) OPTIONS GRANTED (#)
- --------------------------- ---- --------- ----------- -------------------
<S> <C> <C> <C> <C>
Brad Mattson 1997 $ 299,140 $79,000 116,500
Chief Executive Officer 1996 317,308 0 100,000
1995 203,221 0 0

Ralph S. Martin 1997 250,000 66,000 20,000
President and Chief Operating 1996 187,922 0 125,000
Officer 1995 153,512 0 0

Richard S. Mora 1997 158,791 32,000 37,500
Vice President Finance, 1996 142,595 0 0
Chief Financial Officer & 1995 126,544 0 0
Secretary

Yasuhiko Morita(1) 1997 172,985 39,000 37,000
President, Mattson 1996 179,931 14,000 25,000
Technology Center, K.K. 1995 0 0 0
</TABLE>

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

(1) Mr. Morita was appointed President of Mattson Technology Center, K.K. in
February 1996. His salary was denominated in Japanese yen and converted to
US dollars.
(2) Represents bonuses accrued at the end of the stated fiscal year, but paid
in the succeeding fiscal year.

8
<PAGE>

STOCK OPTIONS GRANTED DURING FISCAL 1997

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, 1997, to the persons named in the Summary Compensation Table.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS IN FISCAL 1997 TERM (3)
------------------------------------------------------- -------------------------------
NUMBER OF % OF TOTAL EXERCISE OR EXPIRATION 5% ($) 10% ($)
SECURITIES OPTIONS GRANTED BASE PRICE (2) DATE
UNDERLYING OPTIONS TO EMPLOYEES IN ($/Sh)
NAME GRANTED (1) FISCAL YEAR
- ------------------------ ------------------ --------------- -------------- ---------- ------------- ------------

<S> <C> <C> <C> <C> <C>
Brad Mattson 66,500 7.5% $10.31 06/17/02 $110,000 $318,000
50,000 5.6% 7.70 12/31/02 62,000 179,000

Ralph S. Martin 7,500 0.8% 9.38 06/17/07 44,000 112,000
12,500 1.4% 7.00 12/31/07 55,000 139,500

Richard S. Mora 22,500 2.5% 9.38 06/17/07 133,000 336,000
15,000 1.7% 7.00 12/31/07 66,000 167,000

Yasuhiko Morita 22,000 2.5% 9.38 06/17/07 130,000 329,000
15,000 1.7% 7.00 12/31/07 66,000 167,000
</TABLE>

(1) Options granted in fiscal 1997 under the Company's 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. Consistent with the provisions of the Company's Option Plan, Brad
Mattson, as a greater than 10% stockholder of the Company, was granted an
option to purchase shares of the Company's Common Stock with a term of five
years at 110% of fair market value on the date of grant.

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<PAGE>

(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 $9.38 in fiscal 1997 would yield profits of
approximately $5.90 per share at 5% appreciation over ten years, or
approximately $14.95 per share at 10% appreciation over the same period.
One share purchased at $7.00 per share in fiscal 1997 would yield profits
of approximately $4.40 per share at 5% appreciation over ten years, or
approximately $11.16 per share at 10% appreciation over the same period.
In addition, one share of stock with a fair market value of $9.38 purchased
at $10.32 in fiscal 1997 would yield profits of approximately $1.65 per
share at 5% appreciation over five years, or approximately $4.79 per share
at 10% appreciation over the same period. One share of stock with a fair
market value of $7.00 purchased at $7.70 in fiscal 1997 would yield profits
of approximately $1.23 per share at 5% appreciation over five years, or
approximately $3.57 per share at 10% appreciation over the same period.

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, 1997 by the persons named in the
Summary Compensation Table and the fiscal 1997 year-end option values.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION VALUES

VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FY-END (#) AT FY-END ($)(1)
--------------------------------- ----------------
SHARES ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED($) EXERCISABLE (1)(2) UNEXERCISABLE (3) EXERCISABLE (2) UNEXERCISABLE (4)
---- --------------- ----------------- ----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Brad Mattson 0 0 309,258 211,242 1,611,118 32,002

Ralph S. Martin 25,000 355,950 169,286 132,964 792,219 54,631

Richard S. Mora 0 0 65,083 67,417 240,082 79,918

Yasuhiko Morita 0 0 21,872 52,628 52,080 10,420
</TABLE>

(2) Represents shares which are immediately exercisable and/or vested. Based
on the closing price of $7.00, as reported on the Nasdaq National Market,
on December 31, 1997, less the exercise price.

(3) Represents shares which are unvested and not immediately exercisable.

(4) Based on the closing price of $7.00, as reported on the Nasdaq National
Market, on December 31, 1997, less the exercise price.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 1997, the Company purchased certain inventory parts from R.F.
Services, Inc. in the amount of $739,000. 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.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent shareholders were complied
with, except that, due to administrative errors, a statement of a change in
beneficial ownership for Ralph S. Martin was not timely filed for one exempt
transaction.

CHANGES TO BENEFIT PLANS

OPTION PLAN. The Company has proposed the amendment of the Company's
Option Plan to increase the maximum aggregate number of shares of the Company's
Common Stock issuable under the Option Plan by 250,000 shares from 4,300,000
shares to 4,550,000 shares. As of February 27, 1998, no grant of options
conditioned on stockholder approval of an increase in the share reserve under
the Option Plan had been made to any employee. Grants under the Option Plan are
made at the discretion of the Compensation Committee or the Board of Directors.
Accordingly, future grants under the Option Plan are not yet determinable. See
Proposal Two, "APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE
1989 AMENDED AND RESTATED 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 450,000 shares from 1,000,000
shares to 1,450,000 shares. As of February 27, 1998, no grant of purchase
rights conditioned on stockholder approval of an increase in the share reserve
under the Purchase Plan had been made to any employee. 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. See Proposal
Three, "APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER 1994 EMPLOYEE
STOCK PURCHASE PLAN."

11
<PAGE>

COMPARISON OF STOCKHOLDER 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, 1997.

[GRAPH]

9/27/94 12/30/94 12/29/95 12/31/96 12/31/97
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Mattson Technology, Inc. 100 160 250 158 117
Nasdaq Stock Market
Index- US 100 100 141 174 213
Nasdaq Electronic Components
Index 100 104 172 298 312
</TABLE>

- ----------------------------
(1) Assumes that $100.00 was invested in the Company's Common Stock and in each
index at market closing prices on September 27, 1994, and that all dividends
were reinvested. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.

12
<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 Option Plan.

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
stockholder 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 stockholder
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 can experience
significant slowdowns and declines in financial performance and stock price
which are not related to the performance of management. As an example, the
recent Asian economic problems have had a material adverse affect upon the
Company's results of operations with a corresponding effect on the Company's
stock price.

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. In
particular, the plan focuses on performance relative to plan in revenues,
operating profit and market share.

OPTIONS. The purpose of the Company's Option Plan is to provide employees
of the Company with an opportunity to share, along with stockholders 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.

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 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, no employee may receive in any fiscal year options to
purchase in excess of 500,000 shares. However, the

13
<PAGE>

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 stockholder value.

COMPENSATION COMMITTEE

Stephen J. Ciesinski
John C. Savage

April 8, 1998

14
<PAGE>

PROPOSAL TWO

APPROVAL OF INCREASE IN SHARES RESERVED FOR
ISSUANCE UNDER THE 1989 AMENDED AND RESTATED 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
STOCKHOLDER APPROVAL OF THE RESTATED 1989 PLAN IN AUGUST 1994. A RESERVE OF
1,200,000 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 1,500,000 BY THE
BOARD OF DIRECTORS AND APPROVED BY THE COMPANY'S STOCKHOLDERS IN MAY 1995. IN
MARCH 1996, THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE 1989 PLAN WAS
INCREASED BY 1,000,000 TO 4,000,000 (POST STOCK SPLIT EFFECTIVE SEPTEMBER 1995)
BY THE BOARD OF DIRECTORS AND APPROVED BY THE COMPANY'S STOCKHOLDERS IN MAY
1996. IN APRIL 1997, THE BOARD OF DIRECTORS AMENDED AND RESTATED THE 1989 PLAN
TO MAKE CERTAIN TECHNICAL CHANGES AND INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER BY 300,000 TO 4,300,000 AND SUCH CHANGES WERE APPROVED BY
THE COMPANY'S STOCKHOLDERS IN JULY 1997 AS THE COMPANY'S 1989 AMENDED AND
RESTATED STOCK OPTION PLAN (THE "OPTION PLAN"). IN MARCH 1998, SUBJECT TO
STOCKHOLDER APPROVAL, THE BOARD AMENDED THE OPTION PLAN TO INCREASE THE NUMBER
OF SHARES RESERVED FOR ISSUANCE TO 4,550,000.

AT THE ANNUAL MEETING, THE STOCKHOLDERS ARE BEING REQUESTED TO RATIFY THE
APPROVAL OF 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 BY PROXY 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 STOCKHOLDERS 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, a copy of which is available to any
stockholders upon request.

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").

15
<PAGE>

SHARES SUBJECT TO PLAN. The stockholders have previously authorized the
reservation of an aggregate of 4,300,000 shares of the Company's Common Stock
for issuance upon the exercise of options granted under the Option Plan. As of
February 27, 1998, a total of 2,939,467 shares were subject to outstanding
options granted under the Option Plan, 398,812 shares were available for future
grant under the Option Plan and options to purchase 961,721 shares of Common
Stock granted under the Option Plan had been exercised. 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
stockholder approval, to 4,550,000. 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.

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, as amended (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
25,000 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 Option 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 February 27, 1998, the Company had
approximately 372 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.

16
<PAGE>

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 Option 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 Stockholder") 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 Option Plan imposes this requirement only on the grant
of incentive stock options. As of February 27, 1998 the closing price of a
share of the Company's Common Stock as reported on the Nasdaq National Market
was $9.375.

The option exercise price may be paid in cash, by check, or in cash
equivalent, 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 thereof. The Board may
nevertheless restrict the forms of payment permitted in connection with any
option grant. The Option Plan also authorizes (i) the Company to withhold from
shares otherwise issuable upon the exercise of an option or (ii) 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. The Option Plan provides that
the maximum term of an option is ten years unless granted to a Ten Percent
Stockholder, 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. The Option Plan
provides for the automatic grant of options to nonemployee directors of the
Company. The Option Plan further provides that each nonemployee director first
elected or appointed to the Board after July 24, 1997 (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 stockholders 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 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.

17
<PAGE>

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 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 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 stockholders 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 stockholders 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 Option Plan
after September 29, 1999. 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 stockholder 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 stockholders 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.

18
<PAGE>

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 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 18 months,
mid-term if the optionee's holding period is more than 12 months but not more
than 18 months and short-term if the optionee's holding period is 12 months or
less. Long-term capital gains are currently subject to a maximum tax rate of
20%, mid-term capital gains are subject to a maximum tax rate of 28% and short-
term capital gains are subject to taxation at ordinary rates. 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.

19
<PAGE>

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 18 months, mid-term if the optionee's holding period is more than 12
months but not more than 18 months and short-term if the optionee's holding
period is 12 months or less. Long-term capital gains are currently subject to a
maximum tax rate of 20%, mid-term capital gains are subject to a maximum tax
rate of 28% and short-term capital gains are subject to taxation at ordinary
rates. 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 shares present or represented by
proxy and entitled to a vote at the Annual Meeting of Stockholders, 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 OF
THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY
250,000 SHARES FOR THE REASONS STATED ABOVE.

20
<PAGE>

PROPOSAL THREE

APPROVAL OF INCREASE IN SHARES RESERVED
FOR ISSUANCE UNDER THE 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 (600,000 post stock split effective September 1995) and the stockholders
approved the increase in May 1995. In April 1997, the Board increased the
number of shares authorized for issuance under the Purchase Plan by 400,000 to
1,000,000 shares and the stockholders approved the increase in July 1997. In
March 1998, subject to stockholder approval, the Board increased the number of
shares authorized for issuance under the Purchase Plan by 450,000 to 1,450,000
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 February 27, 1998, the Company has repurchased 500,000 shares
which have been used to offset shares issued under the Purchase Plan. In
addition, in February 1998, the Board of Directors of the Company authorized the
repurchase of up to 1,000,000 shares of the Company's Common Stock from time to
time, which they intend to use to offset shares issued under the Purchase Plan.

AT THE ANNUAL MEETING, THE STOCKHOLDERS 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 STOCKHOLDERS 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
stockholder 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 1,000,000 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 stockholder approval, to increase by 450,000 shares the maximum number of
shares of Common Stock issuable thereunder to an aggregate of 1,450,000 shares.

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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 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 February 27, 1998, approximately
355 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.

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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 at any time amend or terminate
the Purchase Plan, except that the approval of the Company's stockholders 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 18 months, mid-term if the participant holds the shares for
more than 12 months but not more than 18 months and short-term if the
participant holds the shares for 12 months or less. Long-term capital gains are
currently subject to a maximum tax rate of 20%, mid-term capital gains are
subject to a maximum tax rate of 28% and short-term capital gains are subject to
taxation at ordinary rates.

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.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS.

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<PAGE>

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 450,000 SHARES.

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PROPOSAL FOUR

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, 1998, and
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Meeting. Its representatives are
expected to be present at the Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.

Stockholder 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 stockholders for ratification as a matter of good
corporate practice. In the event the stockholders 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 stockholders.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS 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, 1998.

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STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING

Proposals of stockholders intended to be presented at the next annual
meeting of stockholders of the Company (i) must be received by the Company at
its offices no later than December 9, 1998, and (ii) must satisfy the conditions
established by the Securities and Exchange Commission for stockholder 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 1998 Annual Meeting of Stockholders
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,

/s/ Richard S. Mora

Richard S. Mora, Secretary

April 8, 1998

<PAGE>

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 April 2, 1998, at the Annual Meeting of
Stockholders to be held on May 20, 1998 or any adjournment thereof.

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<PAGE>

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

1. To elect the following director as Class I director of the Company to
hold office for a three-year term and until his successor is elected
and qualified.

/ / FOR the nominee listed below / / WITHHOLD AUTHORITY
except as marked to the contrary to vote for the nominee
below listed below

Brad Mattson

2. To approve an amendment to the Company's 1989 Amended and Restated Stock
Option Plan to increase the number of shares reserved for issuance
thereunder by 250,000 shares.

/ / FOR / / AGAINST / / ABSTAIN

3. To approve an increase in the number of shares reserved for issuance
under the Company's 1994 Employee Stock Purchase Plan by 450,000 shares.

/ / FOR / / AGAINST / / ABSTAIN

4. To ratify the appointment of Price Waterhouse LLP as the independent
accountants of the Company for the fiscal year ending December 31, 1998.

/ / FOR / / AGAINST / / ABSTAIN

5. 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 stockholder. If no direction is made, the Proxy will be
voted FOR Proposals 1, 2, 3 and 4.

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.

Dated: ___________________________________________________________________ 1998

_______________________________________________________________________________
Signature

_______________________________________________________________________________
Signature if held jointly

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.

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