MATTSON TECHNOLOGY INC
424B3, 2000-10-10
SPECIAL INDUSTRY MACHINERY, NEC
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<PAGE>

                                                Filed Pursuant to Rule 424(b)(3)
                                                      Registration No. 333-46568

                TO THE STOCKHOLDERS OF MATTSON TECHNOLOGY, INC. AND
                THE SHAREHOLDERS OF CFM TECHNOLOGIES, INC.:

    A BUSINESS COMBINATION AND MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT!

   Mattson Technology, Inc. has agreed to simultaneously combine with CFM
Technologies, Inc. and with the semiconductor equipment division of STEAG
Electronic Systems AG. We are proposing this three-way combination because we
believe the combined company will gain significant advantages in terms of size,
product line breadth, geographic scope and other synergies.

[MATTSON TECHNOLOGY, INC. LOGO]
   When the merger with CFM is completed, CFM shareholders will receive .5233
shares of Mattson common stock for each CFM share they own, and will hold in
the aggregate approximately 11% of the outstanding common stock of the combined
company. STEAG will receive 11,850,000 shares of Mattson common stock, and will
hold approximately 32% of the outstanding common stock of the combined company.
The combined company will continue to operate under the name Mattson
Technology, Inc., and its common stock will continue to be listed on the Nasdaq
National Market System under the symbol "MTSN."


   The board of directors of Mattson has approved the transactions and
unanimously recommends that its stockholders vote FOR the proposed share
issuance and increase in the option plan share reserve to complete the
transactions. Likewise, the board of directors of CFM has approved the merger
agreement and merger with a Mattson subsidiary and unanimously recommends that
CFM's shareholders vote FOR the approval of the merger agreement. Detailed
information about the transactions is contained in this joint proxy statement-
prospectus. The boards of directors of both Mattson and CFM urge you to read
this document, including the section describing the risk factors that begins on
page 13.

   The dates, times and places of the two special meetings are as follows:

             November 8, 2000, 10:00 a.m.        November 8, 2000, 1:00 p.m.
  For Mattson stockholders:
                                       For CFM shareholders:
             Newark Hilton                       Sheraton Great Valley Hotel


             39900 Balentine Drive               707 East Lancaster Avenue
             Newark, California 94560            Frazer, Pennsylvania 19355

   Your vote is very important, regardless of the number of shares you own.
Whether or not you plan to attend either special meeting, please vote as soon
as possible to make sure that your shares are represented at the meeting.

   We strongly support the proposed transactions and join with our boards of
directors in enthusiastically recommending that you vote in favor of the
proposals presented to you for approval.

  /S/ BRAD MATTSON
                                       /S/ ROGER A. CAROLIN


  Brad Mattson
  Chairman and Chief Executive         Roger A. Carolin
  Officer                              President and Chief Executive Officer
  Mattson Technology, Inc.             CFM Technologies, Inc.

   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of Mattson common stock to
be issued in connection with the transactions nor determined whether this joint
proxy statement-prospectus is adequate or accurate. Any representation to the
contrary is a criminal offense.

   This joint proxy statement-prospectus is dated October 9, 2000, and is first
being mailed to stockholders of Mattson and shareholders of CFM on or about
October 11, 2000.
<PAGE>

   Under the Strategic Business Combination Agreement (the "Combination
Agreement") dated as of June 27, 2000 with STEAG Electronic Systems AG
("STEAG"), Mattson will acquire STEAG's semiconductor equipment division (the
"STEAG Semiconductor Division"), consisting of eleven subsidiaries (the "STEAG
Semiconductor Subsidiaries") in exchange for issuing 11,850,000 shares of
Mattson common stock to STEAG. At the closing, Mattson will also grant options
to purchase 850,000 shares of common stock to employees of the STEAG
Semiconductor Division. Mattson, STEAG, and Brad Mattson have also agreed to
enter into a Stockholder Agreement (the "Stockholder Agreement") providing for,
among other things, the expansion of Mattson's board of directors from five
members to seven, the election of two persons designated by STEAG to Mattson's
board of directors, restrictions on future acquisitions or dispositions of
Mattson common stock by STEAG, and registration rights in favor of STEAG. The
terms of the transaction with STEAG are more fully described in this joint
proxy statement-prospectus and in the Combination Agreement and Stockholder
Agreement, which are attached hereto as Annex A and Annex B, and are
incorporated herein by reference.

   Under the Agreement and Plan of Merger (the "Merger Agreement") dated as of
June 27, 2000 with CFM, Mattson will acquire CFM in a stock-for-stock merger in
which Mattson will issue 0.5223 shares of Mattson's common stock for each share
of CFM common stock outstanding at the closing (which would represent
approximately 4,115,000 shares of Mattson common stock as of October 4, 2000).
The merger with CFM is intended to qualify as a tax-free reorganization for
purposes of U.S. tax law. In addition to the share issuance, Mattson will
assume all outstanding CFM stock options, based on the same 0.5223 exchange
ratio. As of October 4, 2000, CFM had options to purchase approximately
1,782,000 shares of CFM common stock outstanding, which would become options to
purchase approximately 930,740 shares of Mattson common stock upon completion
of the merger. Mattson has agreed, at the closing, to issue additional options
to purchase 500,000 shares of its common stock to employees of CFM. The terms
of the transaction with CFM are more fully described in this joint proxy
statement-prospectus and in the Merger Agreement which is attached hereto as
Annex C and incorporated herein by reference.

   The transactions with STEAG and CFM (together referred to as the
"Transactions") are mutually conditioned on one another and are required to
close simultaneously. The closing of the Transactions is expected to occur in
early January 2001. The parties agreed not to close the Transactions until
after January 1, 2001 because of German tax and accounting considerations.
Mattson will account for the Transactions as purchases.

                             ADDITIONAL INFORMATION

   This joint proxy statement-prospectus incorporates important business and
financial information about Mattson and CFM from other documents that are not
included in or delivered with the joint proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this joint
proxy statement-prospectus by requesting them in writing or by telephone or
over the Internet from the appropriate company at one of the following
addresses:

  Mattson Technology, Inc.             CFM Technologies, Inc.
  Peter Brown, Corporate Marketing     Jeff Randall, Chief Financial Officer
  Manager                              150 Oaklands Boulevard
  2800 Bayview Drive                   Exton, Pennsylvania 19341
  Fremont, California 94538            Phone: (610) 280-8509
  Phone: (510) 657-5900                E-Mail: [email protected]
  E-Mail: [email protected]      Web Address: http://www.cfmtech.com
  Web Address: http://www.mattson.com

   If you would like to request any documents, please do so by October 27, 2000
in order to receive them before the special meetings. See "Where You Can Find
More Information" on page 192.


   This joint proxy statement-prospectus does not constitute an offer to sell,
or a solicitation of an offer to purchase, common stock of Mattson, or the
solicitation of a proxy, in any jurisdiction, to or from any person, to whom or
from whom it is unlawful to make such offer, solicitation of an offer, or proxy
solicitation in such jurisdiction. Neither the delivery of this joint proxy
statement-prospectus nor any distribution of securities pursuant to this joint
proxy statement-prospectus shall, under any circumstances, create any
implication that there has been no change in the information set forth or
incorporated by reference herein, or in the affairs of Mattson, the STEAG
semiconductor equipment division, or CFM, since the date hereof. This joint
proxy statement-prospectus contains forward-looking statements. See "Risk
Factors-Special Note Regarding Forward Looking Statements" on page 13.
<PAGE>

                       [LOGO OF MATTSON TECHNOLOGY, INC.]

                            MATTSON TECHNOLOGY, INC.

                               2800 Bayview Drive
                           FREMONT, CALIFORNIA 94538

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                          TO BE HELD NOVEMBER 8, 2000

TO THE STOCKHOLDERS OF MATTSON TECHNOLOGY, INC.:

   A Special Meeting of the stockholders of Mattson Technology, Inc.
("Mattson") will be held on Wednesday, November 8, 2000, beginning at 10:00
A.M., local time, at the Newark Hilton, 39900 Balentine Drive, Newark,
California 94560, to consider and vote upon the following proposals:

     1. To approve the issuance by Mattson of an aggregate of approximately
  16,890,000 shares of common stock, and an amendment to Mattson's Amended
  and Restated 1989 Stock Option Plan (the "Stock Option Plan") to increase
  the number of shares reserved for issuance thereunder by 1,350,000 shares
  in order to complete the business combination transactions contemplated by
  the Strategic Business Combination Agreement (the "Combination Agreement")
  between Mattson and STEAG Electronic Systems AG ("STEAG") under which
  Mattson will acquire the subsidiaries comprising the semiconductor
  equipment division of STEAG, and the Agreement and Plan of Merger (the
  "Merger Agreement") among Mattson, M2C Acquisition Corporation, a wholly
  owned subsidiary of Mattson, and CFM Technologies, Inc. ("CFM"), under
  which CFM will become a wholly owned subsidiary of Mattson.

     2. To approve an amendment to the Stock Option Plan to further increase
  the number of shares reserved for issuance thereunder by 750,000 shares (in
  addition to the Stock Option Plan reserve increase included in proposal 1).

     3. To approve an amendment to Mattson's 1994 Employee Stock Purchase
  Plan (the "Purchase Plan") to increase the number of shares reserved for
  issuance thereunder by 250,000 shares.

     4. To approve an amendment to Mattson's Certificate of Incorporation to
  increase the authorized number of shares of common stock available for
  issuance from 60 million shares to 120 million shares.

     5. To approve an amendment to Mattson's Certificate of Incorporation to
  increase the number of directors on Mattson's board from five to seven and
  to change the procedure for filling board vacancies.

     6. To act upon such other matters as may properly come before the
  meeting.

   The board of directors of Mattson unanimously recommends that stockholders
vote FOR the approval of the issuance of shares and increase in the Stock
Option Plan share reserve needed to complete the transactions contemplated by
the Combination Agreement and the Merger Agreement, FOR the additional
amendment of the Stock Option Plan, FOR the amendment of the Purchase Plan, FOR
the proposed increase in the authorized number of shares under Mattson's
Certificate of Incorporation, and FOR the proposed increase in the size of
Mattson's board and change in the procedure for filling board vacancies as set
forth in Mattson's Certificate of Incorporation.

   Only stockholders of record at the close of business on October 4, 2000 will
be entitled to vote at the meeting. A complete list of stockholders entitled to
vote on the above matters at the meeting, arranged in alphabetical order,
indicating the respective address of each such stockholder, and the number of
shares
<PAGE>

registered in the name of each such stockholder, will be open to the
examination of any stockholder during ordinary business hours, at the offices
of Mattson, for a period of ten (10) days prior to the date of the meeting.
Such list shall also be produced and kept at the time and place of the meeting,
for the duration of such, and may be inspected by any stockholder who is
present at the meeting. Each of the stockholders of record is cordially invited
to be present and vote at the meeting in person.

                                          By order of the board of directors,

                                          /S/ BRAD MATTSON
                                          Brad Mattson
                                          Chief Executive Officer

Fremont, California
October 11, 2000

 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>

                        [LOGO OF CFM TECHNOLOGIES, INC.]

                             CFM TECHNOLOGIES, INC.

                               150 Oaklands Blvd.
                                EXTON, PA 19341

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                          TO BE HELD NOVEMBER 8, 2000

TO OUR SHAREHOLDERS:

   You are invited to be present either in person or by proxy at the Special
Meeting of Shareholders of CFM Technologies, Inc. to be held at the Sheraton
Great Valley Hotel, 707 East Lancaster Avenue, Frazer, Pennsylvania 19355, on
Wednesday, November 8, 2000, beginning at 1:00 P.M., local time, for the
following purposes:

     1. To consider and vote on a proposal to approve and adopt the Agreement
  and Plan of Merger, dated as of June 27, 2000, by and among Mattson
  Technology, Inc., M2C Acquisition Corporation, a wholly owned subsidiary of
  Mattson, and CFM Technologies, Inc.

     2. To act upon such other matters as may properly come before the
  meeting.

   The board of directors of CFM unanimously recommends that the shareholders
vote FOR the proposal to approve and adopt the Agreement and Plan of Merger,
dated as of June 27, 2000, by and among Mattson Technology, Inc., M2C
Acquisition Corporation, and CFM Technologies, Inc.

   The board of directors of CFM has fixed the close of business on October 4,
2000 as the record date for determining shareholders entitled to notice of and
to vote at the meeting and any adjournments or postponements thereof.

   The board of directors of CFM hopes that you will find it convenient to
attend the meeting in person, but whether or not you plan to attend, please
sign, date, and return the enclosed proxy promptly to ensure your shares are
represented at the meeting. Shareholders who execute proxies retain the right
to revoke them (in writing) at any time prior to the voting thereof. A return
envelope, which requires no postage if mailed in the United States, is enclosed
for your convenience.

                                          By order of the board of directors,
                                          /s/ LORIN J. RANDALL

                                          Lorin J. Randall
                                          Secretary

Exton, Pennsylvania
October 11, 2000


                            YOUR VOTE IS IMPORTANT.

              PLEASE COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY.
HOLDERS OF CFM COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY
                                     CARDS.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS..............................   1
SUMMARY OF THE JOINT PROXY STATEMENT-PROSPECTUS...........................   5
  The Companies...........................................................   5
  The Structure of the Transactions.......................................   6
  Treatment of STEAG and CFM Stock Options................................   7
  Relative Percentages of Ownership.......................................   7
  Tax Consequences........................................................   7
  Board Composition.......................................................   7
  Reasons for the Transactions............................................   7
  Recommendation of the Boards of Directors...............................   8
  Fairness Opinions of Financial Advisors.................................   8
  Stockholder Approvals...................................................   8
  The Special Meetings....................................................   9
  Interests of Directors and Officers of Mattson, STEAG, and CFM in the
   Transactions...........................................................   9
  Accounting Treatment....................................................  10
  Regulatory Approvals....................................................  10
  Dissenters' Rights......................................................  11
  Comparative Per Share Data .............................................  12
RISK FACTORS..............................................................  13
  Special Note Regarding Forward-Looking Statements.......................  13
  Risks Related to the Transactions.......................................  13
  Risks Relating to Mattson's Business Following Consummation of the
   Transactions...........................................................  18
MATTSON SELECTED HISTORICAL FINANCIAL INFORMATION.........................  26
STEAG SEMICONDUCTOR DIVISION SELECTED HISTORICAL FINANCIAL INFORMATION....  27
CFM SELECTED HISTORICAL FINANCIAL INFORMATION.............................  28
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION........................  29
  Unaudited Pro Forma Combined Condensed Balance Sheet....................  30
  Unaudited Pro Forma Combined Condensed Statement of Operations..........  31
  Unaudited Pro Forma Combined Condensed Consolidated Statement of
   Operations.............................................................  32
  Notes to Unaudited Combined Condensed Pro Forma Financial Information...  33
MARKET PRICE DATA AND DIVIDEND POLICY.....................................  34
THE MATTSON SPECIAL MEETING...............................................  35
  Date, Time and Place of Meeting.........................................  35
  Purpose of the Mattson Special Meeting..................................  35
  Record Date and Outstanding Shares......................................  35
</TABLE>
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
  Share Ownership of Management and Certain Stockholders.................   35
  Vote Required..........................................................   35
  Quorum; Abstentions....................................................   36
  Solicitation of Proxies; Expenses......................................   36
  Voting of Proxies......................................................   36
  Recommendation of the Board of Directors...............................   37
THE CFM SPECIAL MEETING..................................................   38
  Date, Time and Place of Meeting........................................   38
  Purpose of the CFM Special Meeting.....................................   38
  Record Date and Outstanding Shares.....................................   38
  Share Ownership of Management and Certain Shareholders.................   38
  Vote Required..........................................................   38
  Quorum; Abstentions....................................................   38
  Solicitation of Proxies; Expenses......................................   39
  Voting of Proxies......................................................   39
  Rights of Dissenting Shareholders......................................   39
  Recommendation of the Board of Directors...............................   40
PROPOSAL NO. 1...........................................................   41
  (FOR MATTSON STOCKHOLDERS):
  APPROVAL OF ISSUANCE OF SHARES AND INCREASE IN OPTION PLAN SHARE
   RESERVE IN CONNECTION WITH THE TRANSACTIONS...........................   41
  (FOR CFM SHAREHOLDERS):
  APPROVAL OF ADOPTION OF THE MERGER AGREEMENT...........................   41
  Background of the Transactions.........................................   41
  Mattson's Reasons for the Transactions.................................   47
  Recommendation of Mattson's Board of Directors.........................   49
  Opinion of Mattson's Financial Advisor.................................   50
  Interests of Mattson's Directors, Officers, and Affiliates in the
   Transactions..........................................................   54
  CFM's Reasons for the Merger...........................................   55
  Recommendation of CFM's Board of Directors.............................   58
  Opinion of CFM's Financial Advisor, UBS Warburg LLC....................   58
  Interests of CFM's Directors, Officers, and Affiliates in the
   Transactions..........................................................   64
  Material Federal Income Tax Consequences...............................   65
  Anticipated Accounting Treatment of the Transactions...................   66
  Regulatory Filings and Approvals Required to Complete the
   Transactions..........................................................   67
  Appraisal or Dissenters' Rights........................................   67
  Restrictions on Sales of Shares by Affiliates..........................   68
THE STRATEGIC BUSINESS COMBINATION AGREEMENT.............................   69
  Result of Business Combination.........................................   69
  Organization of New German Corporation.................................   69
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
  Closing of the Business Combination; Consideration.....................  69
  Time of Closing........................................................  69
  Post-Closing Cash Adjustments..........................................  70
  Conditions to The Business Combination.................................  71
  Representations and Warranties.........................................  72
  Covenants; Conduct of Business Prior To The Business Combination.......  72
  Limitation on Other Negotiations.......................................  76
  Additional Agreements and Covenants....................................  76
  Termination............................................................  78
  Indemnification........................................................  80
AGREEMENTS RELATED TO THE BUSINESS COMBINATION...........................  81
  Stockholder Agreement..................................................  81
  Voting Agreement Between STEAG and Brad Mattson........................  84
  Transition Services Agreement..........................................  85
THE MERGER AGREEMENT.....................................................  86
  Effective Time of the Merger...........................................  86
  Closing of the Merger..................................................  86
  Merger Consideration...................................................  86
  Conditions to the Merger...............................................  86
  Representations and Warranties.........................................  88
  Covenants; Conduct of Business Prior to the Merger.....................  88
  Limitation on Discussing or Negotiating Other Acquisition Proposals....  91
  Indemnification by CFM.................................................  92
  Employee Agreements and Benefit Plans..................................  92
  Termination of the Merger Agreement....................................  93
AGREEMENTS RELATED TO THE MERGER AGREEMENT...............................  96
  Stock Option Agreement.................................................  96
  Voting Agreements......................................................  97
COMPARISON OF RIGHTS OF HOLDERS OF MATTSON COMMON STOCK AND CFM COMMON
 STOCK...................................................................  99
  Fiduciary Duties of Directors.......................................... 106
  Anti-Takeover Laws..................................................... 108
MANAGEMENT OF MATTSON AFTER THE TRANSACTIONS............................. 110
  Board of Directors of Mattson.......................................... 110
  Board Meetings and Committees.......................................... 111
  Compensation of Directors.............................................. 112
  Executive Officers..................................................... 113
DESCRIPTION OF MATTSON CAPITAL STOCK..................................... 115
  Common Stock........................................................... 115
  Preferred Stock........................................................ 115
PROPOSALS RELATING TO AMENDING MATTSON EQUITY COMPENSATION PLANS......... 116
  Historical Executive Compensation...................................... 116
  Stock Options Granted During Fiscal 1999............................... 117
</TABLE>
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
  Option Exercises in Last Fiscal Year and Fiscal Year-End Option
   Values................................................................  118
  Compensation Committee Interlocks and Insider Participation............  118
  Allocation of Benefits Under Stock Option and Stock Purchase Plans.....  119
PROPOSAL NO. 2 (FOR MATTSON STOCKHOLDERS ONLY): APPROVAL OF INCREASE IN
 SHARES RESERVED FOR ISSUANCE UNDER THE AMENDED AND RESTATED 1989 STOCK
 OPTION PLAN.............................................................  120
  General................................................................  120
  Description of Plan....................................................  120
  Summary of United States Federal Income Tax Consequences...............  123
   Incentive Stock Options...............................................  123
   Non-Statutory Stock Options...........................................  124
  Vote Required and Recommendation of the Board of Directors.............  124
PROPOSAL NO. 3 (FOR MATTSON STOCKHOLDERS ONLY): APPROVAL OF INCREASE IN
 SHARES RESERVED FOR ISSUANCE UNDER 1994 EMPLOYEE STOCK PURCHASE PLAN....  125
  General................................................................  125
  Description of Plan....................................................  125
  Summary of United States Federal Income Tax Consequences...............  126
  Vote Required and Recommendation of the Board of Directors.............  127
PROPOSALS RELATING TO AMENDING MATTSON'S CERTIFICATE OF INCORPORATION....  128
PROPOSAL NO. 4 (FOR MATTSON STOCKHOLDERS ONLY): APPROVAL OF AMENDMENT TO
 THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
 SHARES OF COMMON STOCK..................................................  128
  Background.............................................................  128
  Purpose and Effect of The Amendment....................................  128
  Vote Required and Recommendation of Board of Directors ................  129
PROPOSAL NO. 5 (FOR MATTSON STOCKHOLDERS ONLY): APPROVAL OF AMENDMENT TO
 THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF DIRECTORS AND
 CHANGE THE PROCEDURE FOR FILLING BOARD VACANCIES .......................  130
  Background.............................................................  130
  Purpose and Effect of the Amendment....................................  130
  Vote Required and Recommendation of the Board of Directors ............  130
BUSINESS OF MATTSON......................................................  132
  Overview...............................................................  132
</TABLE>

                                       ii
<PAGE>

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
  Industry Background.................................................... 132
  The Mattson Strategy................................................... 134
  Markets and Applications............................................... 135
  Products and Technology................................................ 137
  Customer Support....................................................... 141
  Sales and Marketing.................................................... 141
  Customers.............................................................. 142
  Backlog................................................................ 142
  Research, Development, and Engineering................................. 142
  Competition............................................................ 143
  Manufacturing.......................................................... 144
  Intellectual Property.................................................. 144
  Employees.............................................................. 145
  Properties............................................................. 145
  Legal Proceedings...................................................... 146
MATTSON MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS................................................... 147
  Overview............................................................... 147
  Results of Operations.................................................. 148
  Years Ended December 31, 1999 and 1998................................. 148
  Years Ended December 31, 1998, 1997.................................... 150
  Quarterly Results of Operations........................................ 151
  Three and Six Months Period Ended June 30, 2000 and 1999............... 152
  Liquidity and Capital Resources........................................ 152
  Recent Accounting Pronouncements....................................... 154
  Quantitative and Qualitative Disclosures Regarding Market Risk......... 154
PRINCIPAL STOCKHOLDERS OF MATTSON........................................ 155
BUSINESS OF THE STEAG SEMICONDUCTOR DIVISION............................. 156
  General................................................................ 156
  Products and Technology................................................ 156
  Customers.............................................................. 160
  Sales and Support...................................................... 160
  Suppliers.............................................................. 161
  Competition............................................................ 161
  Intellectual Property.................................................. 162
  Litigation............................................................. 162
  Employees.............................................................. 163
  Properties............................................................. 163
STEAG SEMICONDUCTOR DIVISION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................... 164
  Overview............................................................... 164
  Recent Developments.................................................... 166
  Results of Operations.................................................. 167
  Fiscal Year Ended December 31, 1999 Compared to Fiscal Year Ended
   December 31, 1998..................................................... 167
  Liquidity and Capital Resources........................................ 169
  Six Months Ended June 30, 2000 Compared to Six Months Ended June 30,
   1999.................................................................. 171
  Qualitative and Quantitative Disclosures About Market Risk............. 172
</TABLE>
<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
  Security Ownership.....................................................  172
BUSINESS OF CFM..........................................................  173
  General................................................................  173
  Industry Background....................................................   73
  The CFM Solution.......................................................  175
  Strategy...............................................................  176
  Products...............................................................  176
  Customers..............................................................  178
  Sales and Marketing....................................................  179
  Customer Satisfaction..................................................  179
  Backlog................................................................  179
  Research, Development and Engineering..................................  179
  Competition............................................................  180
  Manufacturing..........................................................  180
  Regulatory Matters.....................................................  181
  Intellectual Property..................................................  181
  Employees..............................................................  181
  Litigation.............................................................  182
CFM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS...................................................  184
  Overview...............................................................  184
  Results of Operations..................................................  185
  Years Ended October 31, 1999, 1998, and 1997...........................  185
  Three Month and Nine Month Period Ended July 31, 2000 and 1999.........  186
  Backlog................................................................  188
  Liquidity and Capital Resources........................................  188
  Impact of Recently Issued Accounting Standards.........................  190
PRINCIPAL SHAREHOLDERS OF CFM............................................  191
REGULATORY MATTERS AFFECTING MATTSON, STEAG AND CFM......................  191
LEGAL MATTERS............................................................  191
EXPERTS..................................................................  192
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING.............  192
WHERE YOU CAN FIND MORE INFORMATION......................................  192
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................  193
MATTSON INDEX TO FINANCIAL STATEMENTS....................................  F-1
STEAG SEMICONDUCTOR INDEX TO FINANCIAL STATEMENTS........................ F-29
CFM INDEX TO CONSOLIDATED FINANCIAL STATEMENTS........................... F-56
APPENDIX:
  Annex A--Strategic Business Combination Agreement......................  A-1
  Annex B--Stockholder Agreement.........................................  B-1
  Annex C--Agreement and Plan of Merger..................................  C-1
  Annex D--Fairness Opinions.............................................  D-1
  Annex E--Pennsylvania Dissenters' Rights...............................  E-1
  Annex F--Article Sixth of Mattson's Certificate of Incorporation.......  F-1
</TABLE>

                                      iii
<PAGE>

                  QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

   Q: Why are Mattson, STEAG, and CFM engaging in the Transactions?

   A: Mattson, STEAG, and CFM are engaging in the Transactions because they
believe the resultant synergy and combined strengths of their three companies's
semiconductor equipment businesses will enable them to build one of the world's
leading suppliers of semiconductor manufacturing process equipment. The
combined enterprise, which will continue to operate under the name Mattson
Technology, Inc., will become one of the world's top 15 semiconductor industry
equipment suppliers, based on pro forma 2000 annual sales, thereby attaining a
size or "critical mass" that is becoming increasingly important to successfully
compete in the semiconductor equipment industry. The integration of the
semiconductor equipment businesses of Mattson, STEAG, and CFM will also give
Mattson a leadership position in more than one product line: the STEAG
Semiconductor Division, which already ranks second worldwide in annual sales of
rapid thermal process (RTP) equipment systems, will add to Mattson's No. 1
worldwide market position in strip equipment systems, and the combination of
the wet processing businesses of the STEAG Semiconductor Division and CFM will
place Mattson in the first tier of suppliers in the market for semiconductor
wet processing equipment.

   Q: What will I receive in the Transactions?

   A: In connection with the merger, shareholders of CFM will receive 0.5223
shares of Mattson common stock for each share of CFM common stock they hold at
closing, which will result in their holding in the aggregate approximately 11%
of the outstanding common stock of Mattson following the Transactions. In
addition, Mattson will assume all outstanding CFM stock options, based on the
same 0.5223 exchange ratio. As of October 4, 2000, CFM had 7,878,866
outstanding shares of common stock and 1,782,000 outstanding options to
purchase shares of CFM common stock. At the time of closing, Mattson has agreed
to issue additional options to purchase 500,000 shares of Mattson common stock
to employees of CFM.

   Stockholders of Mattson will retain their existing shares of Mattson common
stock. As a result of the Transactions, current Mattson stockholders will hold
in the aggregate approximately 57% of the outstanding common stock of Mattson.

   As a result of the business combination, STEAG, the sole owner of the STEAG
Semiconductor Division, will hold approximately 32% of the outstanding common
stock of Mattson, and will become the largest Mattson stockholder.

   Q: What stockholder approvals are needed for the Transactions?

   A: For Mattson, the affirmative vote of the holders of a majority of the
votes present or represented by proxy and entitled to a vote at the special
meeting, at which a quorum is present, is required for approval of the share
issuance and the option plan reserve increase needed to complete the
Transactions. Each holder of common stock is entitled to one vote per share. As
of the record date, Mattson directors and officers and their affiliates owned
in the aggregate approximately 18.9% of the outstanding shares, and Brad
Mattson individually owned approximately 17.7% of the outstanding shares of
Mattson. Pursuant to the voting agreements with each of STEAG and CFM, Brad
Mattson has agreed to vote all of his shares in favor of the share issuances
under the Transactions.

   For CFM, the affirmative vote of a majority of the votes cast by all
shareholders of CFM's common stock is required to adopt the Merger Agreement.
No vote shall be taken unless a quorum is present, in person or by proxy. If a
quorum is not present, however, those present may vote to adjourn the meeting
to such time and place as they may determine, at which time if a quorum is not
then present, and at least 15 days has elapsed since the adjournment for lack
of a quorum, those present shall constitute a quorum for the purpose of voting
upon the CFM proposal set forth in this joint proxy statement-prospectus. CFM
common shareholders are entitled to one vote per share. As of the record date,
CFM directors and officers and their affiliates owned in the aggregate
approximately 20.3% of the outstanding shares, and Christopher McConnell,
Chairman of CFM's board of directors, individually owned approximately 14.7% of
the outstanding shares. Pursuant to a voting agreement

                                       1
<PAGE>

with Mattson, Christopher McConnell has agreed to vote all of his shares in
favor of adoption of the Merger Agreement and approval of the merger.

   Because STEAG is a privately-held corporation organized under the laws of
the Federal Republic of Germany, approval by STEAG's sole shareholder, STEAG
AG, is not required in order to effect the business combination. In accordance
with German law, the Supervisory Board (Aufsichtsrat) and the Management Board
(Vorstand) of STEAG previously approved the business combination.

   Q: Are Mattson stockholders and CFM shareholders voting on the same thing?

   A: No. Mattson stockholders are being asked to approve the proposed issuance
by Mattson of approximately 16.9 million shares and a 1,350,000 share increase
in the share reserve under the Stock Option Plan in connection with the
Transactions. Such approval is required because Mattson is proposing to issue
in aggregate approximately 43% of its total outstanding shares (based on the
total number of shares outstanding following the share issuance). Under Nasdaq
rules, Mattson is required to obtain stockholder approval to issue such a large
number of its shares as part of a business combination and to reserve shares
under any compensation plans in which officers of Mattson may participate. CFM
is not a party to the Combination Agreement between Mattson and STEAG, and
therefore CFM shareholders are not required to vote to approve the business
combination. CFM shareholders will be voting only on the proposed Merger
Agreement with Mattson. However, because the Transactions are mutually
conditioned on one another and are required to close simultaneously, the
failure to approve the Merger Agreement between Mattson and CFM by the CFM
shareholders would also result in termination of the proposed business
combination between Mattson and the STEAG Semiconductor Division.

   Q: Are Mattson stockholders voting on any other proposals in addition to the
Transactions?

   A: Yes. Mattson stockholders (but not CFM shareholders) are also being asked
to approve a second proposal to increase the number of shares reserved for
issuance under Mattson's Stock Option Plan by 750,000 shares (in addition to
the 1,350,000 share reserve increase to be approved in connection with the
Transactions), to approve a third proposal to increase the number of shares
reserved for issuance under Mattson's Purchase Plan by 250,000 shares, to
approve a fourth proposal to amend Mattson's Certificate of Incorporation to
increase the number of authorized shares of common stock from 60 million to 120
million shares, and to approve a fifth proposal to amend Mattson's Certificate
of Incorporation to increase the number of directors of Mattson from five to
seven and to change the procedure for filling board vacancies. However, it is
important to note that approval of these four additional proposals is not
required in order for the proposed share issuance and Stock Option Plan share
reserve increase in connection with the Transactions to be approved or for the
Transactions to be consummated. The further increase in the number of shares
reserved for issuance under the Stock Option Plan and Purchase Plan will allow
Mattson, on a going-forward basis, to continue to provide meaningful equity
incentives to attract, motivate, and retain employees and officers. The
amendment of Mattson's Certificate of Incorporation to increase the number of
authorized shares will provide the board of directors of Mattson increased
flexibility to issue shares for various corporate purposes, including stock
splits (which usually take the form of a stock dividend), issuances of shares
in connection with acquisitions of other businesses or the raising of
additional capital through the sale of equity securities, actions that would be
significantly constrained under Mattson's current Certificate of Incorporation.
However, Mattson's board of directors has no current intent, plans,
arrangements, or agreements to issue any of the proposed additional authorized
shares of common stock. The amendment of Mattson's Certificate of Incorporation
to increase the number of directors from five to seven and to change the
procedure for filling board vacancies is consistent with the terms of the
Transactions and will allow room on Mattson's board for the two director-
nominees of STEAG.

   Q: What do I need to do now?

   A: After carefully reading and considering the information contained in this
joint proxy statement-prospectus, please respond by completing, signing, and
dating your proxy card and returning it in the enclosed postage paid envelope
as soon as possible so that your shares may be represented at your company's
special meeting.
                                       2
<PAGE>

   Q: What if I do not vote?

   A: If a Mattson stockholder fails to respond, the risk is increased that a
quorum, which is a majority of the outstanding voting shares of Mattson common
stock, may not be obtained. If a quorum is not obtained at the special meeting
or any continuation of the special meeting, the share issuance to complete the
Transactions will not be approved.

   If a CFM shareholder fails to respond, it will have the same effect as a
vote against the Merger Agreement.

   Q: Can I change my vote after I have delivered my proxy?

   A: Yes. You can change your vote at any time before your proxy is voted at
the relevant special meeting. You can do this in one of three ways. First, you
can revoke your proxy. Second, you can submit a new proxy. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy to the Secretary of Mattson or CFM, as appropriate, before the relevant
special meeting. If your shares are held in an account at a brokerage firm or
bank, you should contact your brokerage firm or bank to change your vote.
Third, if you are a holder of record, you can attend the special meeting and
vote in person.

   Q: If I am a CFM shareholder, should I send in my stock certificates to be
exchanged now?

   A: No. After the merger between Mattson and CFM is completed, you will
receive written instructions from the exchange agent on how to exchange your
CFM stock certificates for shares of Mattson. Please do not send in your CFM
stock certificates with your proxy.

   Q: Who is the exchange agent for the merger?

   A: Chase Mellon Shareholder Services LLP is the exchange agent. Its address
and phone number is:

     85 Challenger Road
     Ridgefield Park, NJ 07660
     (201) 329-8285

   Q: Where will my shares of Mattson common stock be listed?

   A. Shares of Mattson common stock will continue to be listed on the Nasdaq
under the symbol "MTSN."

   Q: When do you expect the Transactions to be completed?

   A: The actual closing of the Transactions is expected to occur in early
January 2001. The parties agreed that the closing would occur no earlier than
January 1, 2001 because of certain German tax and accounting considerations
applicable to STEAG. However, in order to reduce the risk that the Transactions
will not close if approval by Mattson stockholders and CFM shareholders has
been obtained and all other closing conditions that are beyond the parties'
control have been satisfied by December 1, 2000, the parties will take a pre-
closing step at which all remaining conditions, other than the exchange of the
Mattson shares, the absence of litigation, and the arrival of January 1, 2001,
will either be considered fulfilled or irrevocably waived. This pre-closing
step could take place as early as November 15, 2000.

                                       3
<PAGE>

   Q. Who can help answer my questions?

   A. If you have any questions about either of the Transactions or how to
submit your proxy, or if you need additional copies of this joint proxy
statement-prospectus or the enclosed proxy card or voting instructions, you
should contact the individuals listed below:

   If you are a Mattson stockholder, you should contact:

     Mattson Technology Inc.
     2800 Bayview Drive
     Fremont, California 94538
    Attention: Peter Brown, Corporate Marketing Manager
     Phone Number: (510) 657-5900

   If you are a CFM shareholder, you should contact:

     CFM Technologies, Inc.
     150 Oaklands Boulevard
     Exton, Pennsylvania 19341
     Attention: Jeff Randall, Chief Financial Officer
     Phone Number: (610) 280-8509

   If you have additional questions about the solicitation of your proxy, you
should contact:

                       [Logo of MacKenzie Partners, Inc.]

                                156 Fifth Avenue
                            New York, New York 10010
                         (212) 929-5500 (call collect)
                         Call Toll Free (800) 322-2885

   Mattson, the Mattson logo, Aspen, Aspen CVD, Aspen RTPFR\\3\\, Aspen
LiteEtch, ICPSM, and EpiPro are trademarks of Mattson used in this joint proxy
statement-prospectus. MARANGONI(R), Starfire(R), Poseidon STT(R), and
ElectroDep 2000(R) are registered trademarks of the STEAG Semiconductor
Subsidiaries used in this joint proxy statement-prospectus. Other product and
brand names are trademarks or registered trademarks of their respective
holders.

                                       4
<PAGE>


                SUMMARY OF THE JOINT PROXY STATEMENT-PROSPECTUS

   This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
Transactions fully and for a more complete description of the legal terms of
the Transactions, you should read carefully this entire document and the other
available information referred to in "Where You Can Find More Information" on
page 192 of this joint proxy statement-prospectus. The Combination Agreement
and the Merger Agreement are attached to this joint proxy statement-prospectus
as Annex A and Annex C, respectively, and are incorporated herein by reference.
Whether you are a stockholder of Mattson or a shareholder of CFM, both Mattson
and CFM encourage you to read both the Combination Agreement and the Merger
Agreement, as they are the main legal documents that govern the Transactions.

   Mattson has provided the information in this joint proxy statement-
prospectus about Mattson, CFM has provided the information in this joint proxy
statement-prospectus about CFM, and STEAG has provided the information in this
joint proxy statement-prospectus about the STEAG Semiconductor Division.

   The risk factors beginning on page 13 of this joint proxy statement-
prospectus should be considered carefully by the Mattson stockholders and the
CFM shareholders in evaluating whether to approve, in the case of Mattson's
stockholders, the share issuance and Stock Option Plan share reserve increase
in connection with the Transactions, and, in the case of CFM's shareholders,
the Merger Agreement and merger. These factors should be considered along with
any additional risk factors in documents incorporated by reference in this
joint proxy statement-prospectus and any other information included or
incorporated by reference herein, including in conjunction with forward-looking
statements made herein.

The Companies

 Mattson (page 132)

   Mattson is a leading supplier of semiconductor process equipment for
photoresist strip/etch, chemical vapor deposition, epitaxial and rapid thermal
processing. Mattson's products combine advanced process technology on a high
productivity platform. In addition, through Mattson's international technical
support organization and comprehensive warranty program, Mattson provides world
class customer support. Nearly all of Mattson's tools are built on a single
platform, known as the Aspen system. Each tool in the Aspen system shares the
same principal architecture, including the main mechanical design, robotics,
systems software, wafer handling interfaces, and wafer flow design. Mattson's
Aspen platform is designed to deliver high throughput and low cost of
ownership, enhancing the ability of manufacturers to achieve productivity
gains.

   Mattson's product offerings include:

  . photoresist stripping systems that remove photoresist and residue from
    semiconductor wafers after photolithography and other processing steps
    such as etch;

  . isotropic etching systems that perform a variety of etch processes on
    semiconductor wafers;

  . plasma enhanced chemical vapor deposition (CVD) systems that deposit
    insulating or conducting films on semiconductor wafers;

  . rapid thermal processing (RTP) systems that heat semiconductor wafers
    during the manufacturing process; and

  . epitaxial processing systems that deposit a thin silicon film onto
    semiconductor wafers.

   Mattson's principal executive offices are located at 2800 Bayview Drive,
Fremont, California 94538. Mattson's telephone number is (510) 657-5900.

 CFM (page 173)

   CFM is a leading manufacturer of advanced cleaning equipment for the
semiconductor industry. Its systems provide superior contamination control and
processing capabilities using a totally enclosed

                                       5
<PAGE>

processing chamber. Watermarks and other drying defects are eliminated through
CFM's Direct-Displace(TM) IPA vapor drying technology. CFM believes that its
patented Full-Flow(TM) technology and direct-displacement drying enable it to
provide wet processing systems that address a variety of limitations inherent
in conventional semiconductor wet processing systems, including wet benches and
spray tools, resulting in significantly lower cost of ownership.

   CFM's principal executive offices are located at 150 Oaklands Boulevard,
Exton, Pennsylvania 19341. CFM's telephone number is (610) 280-8300.

 STEAG (page 156)

   Through the STEAG Semiconductor Division, STEAG is one of the world's
leading suppliers of capital equipment for the semiconductor industry. The
STEAG Semiconductor Division's broad technology portfolio includes rapid
thermal processing (RTP), clean process, chemical vapor deposition (CVD), and
copper plating. The STEAG Semiconductor Subsidiaries own manufacturing, sales,
and support facilities located throughout the United States, Asia, and Europe.
STEAG is also engaged in the optical storage and photomask businesses, neither
of which is included in the business combination with Mattson. STEAG is a
wholly owned subsidiary of STEAG AG, a power generation and electronics company
based in Essen, Germany.

   STEAG's principal executive offices are located at Ruttenscheider Strasse 1-
3, 45128 Essen, Germany. STEAG's telephone number is 011-49-201-801-0.

The Structure of the Transactions (page 69)

   Under the Combination Agreement, Mattson will acquire the stock of those
eleven subsidiaries comprising the STEAG Semiconductor Division. In
consideration for all the equity interests in the STEAG Semiconductor
Subsidiaries, Mattson will issue 11,850,000 shares of common stock to STEAG
upon the closing. As a result, STEAG will become Mattson's largest stockholder.
Mattson and STEAG have agreed to enter into a Stockholder Agreement on or
before the Closing Date providing for, among other things, the expansion of
Mattson's board of directors from five members to seven, the election of two
persons designated by STEAG to Mattson's board of directors (Dr. Jochen
Melchior, who will serve as initial Chairman of the Board of the combined
company, and Dr. Hans-Georg Betz), certain restrictions on future acquisitions
or dispositions of Mattson common stock by STEAG, and registration rights in
favor of STEAG. The terms of the transaction with STEAG are more fully
described in the Combination Agreement, which is attached hereto as Annex A,
and in the Stockholder Agreement, which is attached hereto as Annex B.

   Under the Merger Agreement with CFM, Mattson will acquire CFM in a stock-
for-stock merger in which Mattson will issue 0.5223 shares of Mattson common
stock for each share of CFM common stock issued and outstanding at the closing
(which would represent approximately 4,115,000 shares of Mattson common stock
as of October 4, 2000). A representative of CFM, James J. Kim, will join
Mattson's board of directors at closing. The terms of the transaction with CFM
are more fully described in the Merger Agreement, which is attached hereto as
Annex C.

   The Transactions are mutually conditioned on one another and are required to
close simultaneously. The Transactions are subject to, among other things, the
approval of the share issuance and Stock Option Plan share reserve increase in
connection with the Transactions by the stockholders of Mattson, the approval
of the Merger Agreement and merger by the shareholders of CFM, clearance under
the U.S. and German antitrust laws (each of which has already been obtained),
and other customary closing conditions. The closing of the Transactions is
expected to occur in early January 2001. The parties agreed that the closing
would take place no earlier than January 1, 2001 because of certain German tax
and accounting considerations applicable to STEAG. However, in order to reduce
the risk that the transactions will not close if approval by Mattson
stockholders and CFM shareholders has been obtained and all the other closing
conditions beyond the control of the parties have been satisfied prior to
December 1, 2000, the parties will take a pre-closing step at which all
remaining conditions, other than the exchange of

                                       6
<PAGE>

the Mattson shares, the absence of litigation, and the arrival of January 1,
2001, either will be irrevocably waived or deemed fulfilled. This pre-closing
step could take place as early as November 15, 2000.

Treatment of STEAG and CFM Stock Options

   None of the STEAG Semiconductor Subsidiaries has any outstanding stock
options, and thus no stock options of any STEAG Semiconductor Subsidiary will
be assumed by Mattson pursuant to the business combination. Pursuant to the
merger, Mattson will assume all outstanding CFM stock options, based on the
same merger exchange ratio of 0.5223. As of October 4, 2000, CFM had
outstanding options to purchase approximately 1,782,000 shares of CFM common
stock.

   At the closing, Mattson has agreed to issue options to purchase 850,000
shares of Mattson common stock to employees of the STEAG Semiconductor
Division. Mattson has also agreed at the closing to issue options to purchase
500,000 shares of common stock to employees of CFM. Therefore, as an integral
part of the approval by Mattson stockholders of the share issuance in
connection with the Transactions, Mattson is also requesting that stockholders
approve an increase in the number of shares reserved for issuance under the
Stock Option Plan by 1,350,000 shares.

Relative Percentages of Ownership

   Once the Transactions close, STEAG will hold approximately 32% of the
outstanding common stock of Mattson on a non-diluted basis, and shareholders of
CFM prior to the closing will hold in the aggregate approximately 11% of the
outstanding common stock of Mattson on a non-diluted basis. Mattson
stockholders prior to the closing will hold in the aggregate the remaining
approximately 57% of the outstanding common stock on a non-diluted basis after
the closing.

Tax Consequences (page 65)

   The parties have structured the merger so that CFM and its shareholders who
exchange their shares solely for shares of Mattson common stock will not
recognize gain or loss for United States federal income tax purposes in
connection with the merger. Mattson's stockholders also will not recognize gain
or loss for United States federal income tax purposes in connection with the
Transactions.

Board Composition (page 110)

   Following the Transactions, Mattson's board of directors will be composed of
four of the five current directors of Mattson, with two new additional
directors to be designated by STEAG (Dr. Jochen Melchior, who will serve as the
initial Chairman of the Board of the combined company, and Dr. Hans-Georg
Betz), and one of the existing directors of Mattson to be replaced by a
director designated by CFM (James J. Kim), for a total of seven directors.
Senior management of Mattson will be comprised of personnel from each of
Mattson, the STEAG Semiconductor Division, and CFM.

Reasons for the Transactions (pages 47 and 55)

   Mattson, STEAG, and CFM have agreed to engage in the Transactions because of
the synergy and market strength that would result by their combining their
businesses. Following the consummation of the Transactions, Mattson would
immediately become one of the top 15 semiconductor industry equipment
suppliers, based on pro forma 2000 annual sales. This would represent the
attainment of a critical mass that semiconductor equipment buyers are
increasingly demanding from their vendors.

   In addition, Mattson would hold a market leadership position in multiple
product lines. The STEAG Semiconductor Division currently ranks second
worldwide in rapid thermal process (RTP) equipment systems. Mattson ranks first
worldwide in plasma-based strip process equipment systems, and fifth in RTP.
The combination of the wet processing businesses of the STEAG Semiconductor
Division and CFM would also place Mattson in the first tier of suppliers in the
market for semiconductor wet processing equipment. Thus, Mattson would become a
multi-product, multi-technology company providing "one-stop shopping" to
semiconductor equipment buyers. These complementary product lines will give
Mattson the opportunity to gain market share in each. Mattson intends to become
a "vendor of choice" to customers who are among the Top 20 semiconductor
equipment buyers.

                                       7
<PAGE>


   Further, the consummation of the Transactions would give Mattson a truly
global presence and reach. Both Mattson and CFM have a significant presence in
Asia, and the STEAG Semiconductor Division has a strong presence in Asia and
Europe.

   Finally, the settlement in connection with the proposed Transactions of the
ongoing patent litigation between one of the STEAG Semiconductor Subsidiaries
and CFM relating to one of CFM's patents relieves the combined wet processing
business of the costs of that lawsuit and opens opportunities for sales of wet
processing products of the STEAG Semiconductor Division in the U.S.

Recommendation of the Boards of Directors (pages 49 and 58)

   To Mattson stockholders: The Mattson board of directors believes that the
proposed issuance of shares pursuant to the Transactions is fair to you and in
your best interest and voted to approve the terms and provisions of both the
Combination Agreement and the Merger Agreement, and unanimously recommends that
you vote FOR the approval of the issuance of shares and increase in the Stock
Option Plan share reserve in connection with the Combination Agreement and the
Merger Agreement. The Mattson board of directors also unanimously recommends
that you vote FOR the approval of the amendment to Mattson's Stock Option Plan
and Purchase Plan to further increase the number of shares reserved for
issuance thereunder by 750,000 shares and by 250,000 shares, respectively, FOR
the amendment of Mattson's Certificate of Incorporation to increase the
authorized number of shares of common stock available for issuance from 60
million shares to 120 million shares, and FOR the amendment of Mattson's
Certificate of Incorporation to increase the designated number of directors of
Mattson from five to seven and change the procedure for filling board
vacancies.

   To CFM shareholders: The CFM board of directors believes that the merger is
fair to you and in your best interest and unanimously voted to approve the
Merger Agreement, and unanimously recommends that you vote FOR the adoption of
the Merger Agreement.

Fairness Opinions of Financial Advisors (pages 50 and 58)

   Opinion of Mattson's Financial Advisor. In deciding to approve the
Transactions, the Mattson board of directors considered the opinion of its
financial advisor, Alliant Partners, that, as of the date of its opinion, and
subject to and based on the considerations referred to in its opinion, the
total consideration to be provided by Mattson in connection with the
Transactions is fair, from a financial point of view, to Mattson's
stockholders. The full text of this opinion is attached as Annex D-1 to this
joint proxy statement-prospectus. Mattson urges its stockholders to read the
opinion of Alliant Partners in its entirety.

   Opinion of CFM's Financial Advisor. In deciding to approve the merger, the
CFM board of directors considered the opinion of its financial advisor, UBS
Warburg LLC (formerly known as Warburg Dillon Read LLC), that, as of the date
of its opinion, and subject to and based on the considerations referred to in
its opinion, the ratio to exchange CFM common stock for Mattson common stock is
fair, from a financial point of view, to the holders of CFM common stock. The
full text of this opinion is attached as Annex D-2 to this joint proxy
statement-prospectus. CFM urges its shareholders to read the opinion of UBS
Warburg LLC in its entirety.

Stockholder Approvals

   For Mattson, the affirmative vote of the holders of a majority of the shares
present or represented by proxy and entitled to vote at the special meeting, at
which a quorum is present and voting, by proxy or in person, is required for
approval of the proposed share issuance and the increase in the reserve under
the Stock Option Plan needed to complete the Transactions, and for approval of
the separate proposals to amend the Stock Option Plan and the Purchase Plan to
increase the number of shares reserved for issuance thereunder by 750,000
shares and 250,000 shares, respectively. The affirmative vote of a majority of
the outstanding shares of common stock is required for approval of the
amendment of Mattson's Certificate of Incorporation to increase the authorized
number of shares available for issuance from 60 million shares to 120 million
shares. The affirmative vote of at least two-thirds of the outstanding shares
of common stock is required for approval of the amendment of Mattson's
Certificate of Incorporation to increase the

                                       8
<PAGE>

designated number of directors from five to seven and to change the procedure
for filling board vacancies. Each holder of common stock is entitled to one
vote per share. As of the record date, Mattson directors and officers and their
affiliates owned in the aggregate approximately 18.9% of the outstanding
shares, and Brad Mattson individually owned approximately 17.7% of the
outstanding shares. Pursuant to voting agreements with each of STEAG and CFM,
Brad Mattson has agreed to vote all of his shares in favor of the share
issuance under the Transactions.

   For CFM, the affirmative vote of a majority of the votes cast by all
shareholders of CFM's common stock is required to adopt the Merger Agreement.
No vote shall be taken unless a quorum is present, in person or by proxy.
However, if a quorum is not present, those present may vote to adjourn the
meeting to such time and place as they may determine, at which time if a quorum
is not then present and at least 15 days has passed since the adjournment for
lack of a quorum, those present shall constitute a quorum for the purpose of
voting upon the CFM proposals set forth herein. CFM common shareholders are
entitled to one vote per share. As of the record date, the directors and
executive officers of CFM owned in the aggregate approximately 20.3% of the
outstanding shares, and Christopher McConnell individually owned approximately
14.7% of the outstanding shares. Pursuant to a voting agreement with Mattson,
Christopher McConnell has agreed to vote all of his shares in favor of the
adoption of the Merger Agreement.

   Because STEAG is a privately-held corporation organized under the laws of
the Federal Republic of Germany, approval of STEAG's sole shareholder, STEAG
AG, is not required in order to effect the business combination. In accordance
with German law, both the Supervisory Board (Aufsichtsrat) and the Management
Board (Vorstand) of STEAG previously approved the business combination.

The Special Meetings (pages 35 and 38)

   The special meeting of the stockholders of Mattson will be held on
Wednesday, November 8, 2000, at 10:00 am, local time, at the Newark Hilton,
39900 Balentine Drive, Newark, California 94560.

   The special meeting of the shareholders of CFM will be held on Wednesday,
November 8, 2000, at 1:00 pm, local time, at the Sheraton Great Valley Hotel,
707 East Lancaster Avenue, Frazer, Pennsylvania 19355.

Interests of Directors and Officers of Mattson, STEAG, and CFM in the
Transactions (pages 54 and 64)

   As of the record date, Brad Mattson, the Chief Executive Officer and current
chairman of the board of Mattson, held options to purchase 21,163 shares of CFM
common stock exercisable within 60 days. These options were granted in
connection with Mr. Mattson's previous service on the board of directors of
CFM. These options will become options to purchase Mattson common stock under
the terms of the Merger Agreement. Mr. Mattson took no part in the
deliberations of the CFM board regarding the proposed merger, and Mr. Mattson
resigned from the CFM board effective April 26, 2000.

   John Savage, a director of Mattson, is also a partner at Alliant Partners,
the technology merger and acquisition advisory firm that has provided Mattson
with its opinion regarding the fairness of the proposed Transactions to
Mattson's stockholders from a financial point of view. Mattson has entered into
a Financial Advisory Agreement with Alliant Partners, dated as of May 17, 2000,
(the "Alliant Partners Agreement"), providing for Alliant Partners to act as
financial advisor in connection with the Transactions. Under the Alliant
Partners Agreement, Mattson has agreed to pay Alliant Partners a fee of
$300,000 to render an opinion as to the fairness from a financial point of view
to Mattson and its stockholders of the consideration to be provided by Mattson
in connection with the Transactions. The Alliant Partners Agreement further
provides for a "success fee" of $2 million in the event the Transactions close,
with the $300,000 fairness opinion fee being applied against such amount. Under
the terms of the Alliant Partners Agreement, Mattson has also agreed to
reimburse Alliant Partners reasonable expenses, and to indemnify Alliant
Partners against any losses, claims, damages, or liabilities to which Alliant
Partners may become subject in connection with its use of information that is
provided to Alliant Partners by Mattson that is

                                       9
<PAGE>

inaccurate in any respect or any other aspect of its rendering such services,
unless it is finally judicially determined that such losses, claims, damages,
or liabilities relating thereto arose only out of the gross negligence or
willful misconduct of Alliant Partners. The Alliant Partners Agreement was
determined based on arm's length negotiation and Mattson believes the terms of
the Alliant Partners Agreement are no less favorable than could have been
obtained from third party consultants and investment bankers.

   Christopher F. McConnell, the Chairman of the Board of CFM, is party to a
Change of Control and Severance Agreement dated as of April 10, 2000 with CFM
(the "McConnell Severance Agreement"). In connection with the proposed merger,
the Severance Agreement of Roger Carolin, the President and Chief Executive
Officer of CFM, dated April 10, 2000 was amended pursuant to Amendment No. 1,
Change of Control and Severance Agreement dated as of June 27, 2000 (as
amended, the "Carolin Severance Agreement" and collectively the "Severance
Agreements"). The Severance Agreements provide, among other things, that
following any Change of Control Event (as defined therein), if employment is
terminated by the employer Without Cause or by employee for a Good Reason Event
(as such terms are defined in the Severance Agreements): any options to
purchase common stock of the employer shall vest immediately as of the date of
such termination; the employer shall pay the employee his annual target bonus
for the then-current fiscal year on a pro rata basis and 24 monthly payments
equal to one-twelfth of the employee's then-current annual base salary plus
annual target bonus.

   Lorin J. Randall, the Secretary and Chief Financial Officer of CFM, is a
party to an Employment Agreement with CFM dated October 25, 1999 which was
amended by Amendment No. 1 dated as of April 10, 2000 (as amended, the
"Employment Agreement"). The Employment Agreement provides, among other things,
that following any Change of Control Event (as defined therein), if Mr.
Randall's employment is terminated (1) by the employer Without Cause (as
defined in the Employment Agreement): the employer will pay Mr. Randall twelve
monthly payments equal to one-twelfth of Mr. Randall's then current annual base
salary plus annual target bonus; his annual target bonus for the current fiscal
year on a pro rata basis; monthly compensation equal to one-twelfth of
Mr. Randall's then current annual base salary plus annual target bonus for a
period of 18 months following the date of termination; and if the change of
control occurs within a year following termination, fully vested options to
purchase a number of shares of common stock of the employer equal to the number
of unvested options held by Mr. Randall and cancelled at the time of
termination; or (2) by Mr. Randall upon a Good Reason Event: any options to
purchase common stock of the employer and held by Mr. Randall shall vest
immediately as of the date of such termination; and the employer will pay Mr.
Randall his annual target bonus for the current fiscal year on a pro rata
basis.

Accounting Treatment (Page 66)

   Mattson will account for the Transactions as purchases of the STEAG
Semiconductor Subsidiaries and CFM by Mattson under the purchase method of
accounting. Under purchase accounting, Mattson will record the fair value of
the consideration given for the stock of the STEAG Semiconductor Subsidaries,
as well as the fair value of the consideration given for the CFM common stock
and for options to purchase CFM common stock assumed by Mattson, plus the
amount of direct transaction costs, as the cost of acquiring the STEAG
Semiconductor Subsidaries and CFM. Mattson will allocate these costs to the
individual assets and liabilities of the companies being acquired, including
various identifiable intangible assets such as acquired technology, acquired
trademarks and trade names and acquired workforce, and to in-process research
and development, based on their respective fair values. Intangible assets,
including goodwill, will be generally amortized over a three- to seven-year
period.

Regulatory Approvals (page 67)

   Mattson, STEAG, and CFM have already received the required clearances with
respect to the Transactions under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") and

                                       10
<PAGE>

the German Act Against Restraints on Competition of 1958 (Gesetz gegen
Wettbewerbs-beschraenkungen) (the "German Cartel Act").

Dissenters' Rights (page 67)

   Delaware corporate law, which governs Mattson as a Delaware corporation,
does not afford dissenters' or appraisal rights to holders of shares that are
quoted on Nasdaq, as are Mattson's shares. In addition, Delaware law does not
provide dissenters' or appraisal rights to stockholders of a surviving
corporation in a merger if the surviving corporation's stockholders were not
required to approve the merger. Mattson's stockholders are not required to
approve the Transactions, but rather are required to approve the issuance of
shares that are proposed to be issued in connection with the Transactions.
Therefore, Mattson stockholders shall have no dissenters' or appraisal rights
with respect to the Transactions.

   Pennsylvania corporate law, which governs CFM as a Pennsylvania corporation,
entitles CFM shareholders to dissent from the merger and instead demand payment
from CFM of the fair value of their shares.

   To claim dissenters' rights, a CFM shareholder must deliver to CFM prior to
the vote written notice of the shareholder's intent to demand payment for the
shareholder's shares if the merger is effected and not vote the shareholder's
shares in favor of the merger at the CFM special meeting. CFM will then send
the shareholder written notice after the completion of the merger, indicating
when and how to demand payment for the shareholder's shares. After receiving
the notice, the shareholder must demand payment for the shareholder's shares in
the manner required by the notice sent by CFM. The shareholder must also
certify to CFM the date the shareholder acquired beneficial ownership of the
shareholder's shares. If the shareholder does not comply with the requirements
outlined above, the shareholder will not be entitled to receive payment for the
shareholder's shares under the dissenters' rights provisions of Pennsylvania
law and will be entitled to 0.5223 shares of Mattson common stock for each of
the shareholder's shares of CFM common stock. If the shareholder complies with
the outlined requirements, promptly following the later of the date of
effectiveness of the merger or the date CFM received the shareholder's demand
for payment, CFM will pay to the shareholder the amount CFM estimates to be the
fair value of the shareholder's shares of CFM common stock. Within 30 days of
the shareholder's receipt of CFM's remittance or estimate of fair value, if the
shareholder believes CFM's estimate of the fair value of the shareholder's
shares is incorrect, the shareholder may notify CFM in writing of the
shareholder's own estimate of the fair value of the shareholder's shares of CFM
common stock and demand payment of the shareholder's estimate. Within 60 days
of the later to occur of the effectuation of the merger, timely receipt of the
shareholder's demand for payment and timely receipt of an estimate of fair
value from the shareholder, if the demand for payment of the shares remains
unsettled, CFM may request the fair value be determined by a court. The
shareholder's dissenters' rights are set out in their entirety in Sections
1571-1580 of the Pennsylvania Business Corporation Law, which is attached to
this joint proxy statement-prospectus as Annex E.

                                       11
<PAGE>


Comparative Per Share Data

   Set forth below are the net income and book value per common share data for
Mattson on an historical basis and on a combined pro forma basis, and certain
equivalent pro forma per share data for CFM. The Mattson combined pro forma
data was derived by combining historical consolidated financial information of
Mattson, the STEAG Semiconductor Division and CFM using the purchase method of
accounting. The equivalent combined pro forma per share data for CFM was
calculated by multiplying the Mattson combined pro forma per common share data
by the exchange ratio of 0.5223.

   The information in the table below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of Mattson and CFM either incorporated by reference or included elsewhere
in this joint proxy statement-prospectus.

<TABLE>
<CAPTION>
                                              Fiscal Year Ended Six Months Ended
                                              December 31, 1999  June 25, 2000
                                              ----------------- ----------------
<S>                                           <C>               <C>
Historical--Mattson
Net income (loss) per share:
 Basic......................................       $(0.05)           $0.57
 Diluted....................................       $(0.05)           $0.51
Book value per share(1).....................       $ 3.19            $9.41
</TABLE>
--------
(1) Historical book value per share is computed by dividing shareholders'
    equity by the number of shares of common stock outstanding at the end of
    each period presented.

<TABLE>
<CAPTION>
                                             Fiscal Year Ended Nine Months Ended
                                             October 31, 1999    July 31, 2000
                                             ----------------- -----------------
<S>                                          <C>               <C>
Historical--CFM
Net income (loss) per share:
 Basic.....................................       $(1.34)           $(2.85)
 Diluted...................................       $(1.34)           $(2.85)
Book value per share(1)....................       $ 8.30            $ 5.54
</TABLE>
--------
(1) Historical book value per share is computed by dividing shareholders'
    equity by the number of shares of common stock outstanding at the end of
    each period presented.

<TABLE>
<CAPTION>
                                              Fiscal Year Ended Six Months Ended
                                              December 31, 1999  June 25, 2000
                                              ----------------- ----------------
<S>                                           <C>               <C>
Unaudited Pro Forma Combined
 Net Income (Loss) Per Share
Pro forma net loss per Mattson share (2):
 Basic......................................       $(4.48)           $(1.75)
 Diluted....................................       $(4.48)           $(1.75)
Equivalent pro forma net loss per CFM share:
 Basic......................................       $(2.34)           $(0.91)
 Diluted....................................       $(2.34)           $(0.91)
</TABLE>
--------
(2) Pro forma net loss per Mattson share is computed by dividing the unaudited
    pro forma combined condensed net loss by the pro forma number of weighted
    average outstanding shares for the period presented.

<TABLE>
<CAPTION>
                                                                        June 25,
                                                                          2000
                                                                        --------
<S>                                                                     <C>
Unaudited Pro Forma Combined Book Value Per Share
 Pro forma book value per Mattson share(3):...........................   $22.24
 Equivalent pro forma book value per CFM share:.......................   $11.62
</TABLE>
--------
(3) Pro forma book value per Mattson share is computed by dividing unaudited
    pro forma shareholders' equity by the pro forma number of weighted average
    outstanding shares for the period.

   The following table sets forth the closing per share sales price of Mattson
common stock and CFM common stock, as reported on Nasdaq, and the estimated
equivalent per share price, as explained below, of Mattson common stock on June
27, 2000, the last trading day before the public announcement of the
Transactions, and on October 4, 2000:

<TABLE>
<CAPTION>
                                                                      Estimated
                                                                      Equivalent
                                                                      Per Share
                                                       MTSN    CFMT     Price
                                                     -------- ------- ----------
<S>                                                  <C>      <C>     <C>
June 27, 2000....................................... $39.4375 $14.375  $20.5982
October 4, 2000.....................................    13.75   7.125    7.1816
</TABLE>

   The estimated equivalent per share price of a share of CFM common stock
based on a Mattson share price of $39.4375 equals the exchange ratio of 0.5223
multiplied by the price of a share of Mattson common stock. If the merger had
occurred on June 27, 2000, CFM shareholders would have received a fraction of a
share of Mattson common stock worth approximately $20.5982 per share for each
share of CFM common stock CFM shareholders owned. If the merger had occurred on
October 4, 2000, CFM shareholders would have received a fraction of a share of
Mattson common stock worth approximately $7.1816 per share for each share of
CFM common stock CFM shareholders owned. The actual equivalent per share price
of a share of Mattson common stock that CFM shareholders would receive if the
merger closes may be different from these prices because the per share price of
Mattson common stock on the Nasdaq fluctuates continuously.

   Following the merger, Mattson common stock will continue to be quoted on the
Nasdaq, and there will be no further market for the CFM common stock. Mattson
has never paid cash dividends on its common stock and has no present plans to
do so. CFM has never paid cash dividends on its common stock.

                                       12
<PAGE>

                                  RISK FACTORS

   You should carefully consider the risks described below regarding the
Transactions and Mattson's business following the Transactions, together with
all of the other information included in or annexed to this joint proxy
statement-prospectus, before making a decision about how to vote on the
proposals submitted for your consideration.

   By voting in favor of the Merger Agreement, CFM shareholders will be
choosing to exchange their current investment in CFM common stock for an
investment in Mattson common stock. By voting in favor of the share issuance
and Stock Option Plan share reserve increase in connection with the
Transactions, Mattson stockholders will be choosing to permit Mattson to engage
in the Transactions, which will affect the risks to Mattson's business. An
investment in Mattson common stock involves a high degree of risk.

   If any of the following risks actually occur, Mattson's business, financial
condition, or results of operations could be materially harmed. If Mattson's
business is harmed, the trading price of Mattson's common stock could decline,
and Mattson stockholders (including former CFM shareholders following the
Transactions) may lose all or part of their investment.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   Some of the information in this joint proxy statement-prospectus and in the
documents that are incorporated by reference, including the risk factors in
this section, contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or Mattson's future
financial performance. In many cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue,"
or the negative of these terms and other comparable terminology. These
statements are only predictions. Mattson's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including, but not limited to, the risks faced
by Mattson following completion of the Transactions described below, elsewhere
in this joint proxy statement-prospectus, and in Mattson's periodic filings
incorporated herein by reference.

   Mattson believes it is important to communicate its expectations to
investors. However, there may be events in the future that it is not able to
predict accurately or over which it has no control. The risk factors listed
below, as well as any cautionary language in this joint proxy statement-
prospectus, provide examples of risks, uncertainties, and events that may cause
Mattson's actual results to differ materially from the expectations it
describes in its forward-looking statements. Before making your decision
regarding the Transactions, you should be aware that the occurrence of the
events described in these risk factors and elsewhere in this joint proxy
statement-prospectus could have a material adverse effect on Mattson's
business, operating results, and financial condition.

RISKS RELATED TO THE TRANSACTIONS

The ability of Mattson to integrate successfully the businesses of the STEAG
Semiconductor Division and CFM with each other and with its own business is
uncertain.

   After the Transactions, Mattson, the STEAG Semiconductor Division, and CFM,
each of which had previously operated independently of each other, will need to
integrate their operations. The integration of the three businesses will be
complex, time consuming, and expensive. The integration will require
significant efforts from each company, including the coordination of their
research and development and sales and marketing efforts. Mattson may find it
difficult to integrate the operations of the STEAG Semiconductor Division and
CFM, and vice versa. The combined company will have a large number of employees
in widely dispersed operations in California, Germany, Pennsylvania, and other
locations, which will increase the difficulty of integrating operations.
Current personnel may leave Mattson, the STEAG Semiconductor Division, or CFM

                                       13
<PAGE>

because of the business combination or the merger. The challenges involved in
this integration include, but are not limited to, the following:

  . Retaining existing customers of each company;

  . Retaining and integrating management and other key employees of each of
    Mattson, the STEAG Semiconductor Division, and CFM;

  . Coordinating research and development activities to enhance introduction
    of new products and technologies;

  . Integrating purchasing and procurement operations in multiple locations;

  . Combining product offerings and product lines effectively and quickly;

  . Integrating sales and marketing efforts so that customers can understand
    and do business easily with the combined company;

  . Coordinating manufacturing operations in a rapid and efficient manner;

  . Transitioning all world-wide facilities to common accounting and
    information technology systems;

   It is not certain that Mattson, the STEAG Semiconductor Division, and CFM
can be successfully integrated in a timely manner or at all or that any of the
anticipated benefits will be realized. Risks from unsuccessful integration of
the companies include:

  . The impairment of relationships with employees, customers, and suppliers;

  . The potential disruption of the combined company's ongoing business and
    distraction of its management;

  . Delay in introducing new product offerings by the combined company; and

  . Unanticipated expenses related to integration of the three companies.

   The combined company may not succeed in addressing these risks. Further,
neither Mattson nor CFM can assure you that the growth rate of the combined
company will equal the historical growth rates experienced by Mattson, the
STEAG Semiconductor Division, or CFM, individually.

The Transactions between Mattson, STEAG, and CFM may fail to achieve beneficial
synergies.

   The managements of Mattson, STEAG, and CFM have entered into the
Transactions with the expectation that they will result in beneficial synergies
between and among the three parties' semiconductor equipment businesses.
Achieving these anticipated synergies and the potential benefits underlying
their reasons for entering into the Transactions will depend on a number of
factors, some of which include:

  . Mattson's ability to timely develop new products and integrate the
    products and sales efforts of the combined company;

  . The risk that the customers of Mattson, the STEAG Semiconductor Division,
    or CFM may defer purchasing decisions;

  . The risk that it may be more difficult to retain key management,
    marketing, and technical personnel after the Transactions; and

  . Competitive conditions and cyclicality in the semiconductor manufacturing
    process equipment market.

   Even if the companies are able to integrate operations, there can be no
assurance that the anticipated synergies will be achieved. The failure to
achieve such synergies could have a material adverse effect on the business,
results of operations, and financial condition of the combined company.

                                       14
<PAGE>

The STEAG Semiconductor Subsidiaries and CFM have experienced financial losses
and may require significant financial support from Mattson.

   The STEAG Semiconductor Subsidiaries and CFM have suffered losses from
operations in recent periods. After consummation of the Transactions, the
acquired businesses may experience further losses, which would affect the
financial results of Mattson, reduce Mattson earnings per share, and require
funding by Mattson to sustain their operations. If losses continue at historic
levels for the STEAG Semiconductor Subsidiaries and CFM, the Transactions may
require Mattson to use a significant portion of its cash balances.

The ratio for the exchange of CFM shares for Mattson shares is fixed.

   The ratio of the number of shares of Mattson common stock to be exchanged
for each share of CFM common stock will not change. Upon completion of the
merger, each share of CFM common stock will be exchanged for 0.5223 shares of
Mattson common stock. There will be no adjustment to this exchange ratio for
changes in the market price of either Mattson common stock or CFM common stock.
In addition, neither Mattson nor CFM may terminate the Merger Agreement or
"walk away" from the merger solely because of changes in the market price of
either company's common stock. Therefore, if the market value of Mattson common
stock or CFM common stock changes relative to the market value of the other,
there will be no change, either upward or downward, in the aggregate number of
shares of Mattson common stock to be issued to CFM shareholders in the merger.
The share prices of Mattson common stock and CFM common stock are by nature
subject to the general price fluctuations in the market for publicly traded
equity securities, and in particular fluctuations in the market prices of
equity securities of semiconductor equipment companies have experienced
significant volatility. You should obtain recent market quotations for Mattson
common stock and CFM common stock in order to accurately assess the market
value of the Mattson shares that will be issued in exchange for the CFM shares.
Mattson cannot predict or give any assurances as to the relative market prices
of Mattson or CFM common stock before the closing of the merger.

The combined company's reported financial results will suffer as a result of
purchase accounting treatment and the impact of amortization of goodwill and
other intangibles, and restructuring charges relating to the Transactions.

   Mattson will account for the Transactions as purchases of the STEAG
Semiconductor Subsidiaries and CFM by Mattson under the purchase method of
accounting. Under purchase accounting, Mattson will record the fair value of
the consideration given to STEAG in exchange for the stock of the STEAG
Semiconductor Subsidiaries, as well as the fair value of the consideration
given in exchange for the outstanding CFM common stock and for the outstanding
options to purchase CFM common stock assumed by Mattson, plus the amount of
direct transaction costs, as the cost of acquiring the STEAG Semiconductor
Subsidiaries and CFM. Mattson will allocate these costs to the individual
assets and liabilities of the companies being acquired, including various
identifiable intangible assets such as acquired technology, acquired trademarks
and trade names and acquired workforce, and to in-process research and
development, based on their respective fair values. Intangible assets,
including goodwill, will be generally amortized over a three- to seven-year
period.

   As described in the Unaudited Pro Forma Condensed Combined Financial
Statements, the amount of purchase cost allocated to goodwill and other
intangibles is estimated to be approximately $400 million. Assuming goodwill
and other intangible assets were amortized in equal quarterly amounts over 5
years following completion of the Transactions, the accounting charge
attributable to these items would be approximately $20 million per quarter or
$80 million per fiscal year. As a result, purchase accounting treatment of the
Transactions could have a material adverse effect on the market value of
Mattson common stock following completion of the Transactions.

   Mattson may incur restructuring costs in order to achieve desired synergies
after the Transactions, which would adversely impact future financial results.
These restructuring costs could be a result of, but not limited to, the
following:

  . Severance costs associated with possible headcount reductions due to
    duplication; and

  . Asset write-offs associated with manufacturing and facility
    consolidations.

                                       15
<PAGE>

Uncertainty related to the Transactions could harm the combined company.

   In response to the announcement of the Transactions, customers or suppliers
of Mattson, the STEAG Semiconductor Division, and CFM may delay or defer
product purchase or other decisions. Any delay or deferral in product purchase
or other decisions by customers or suppliers could have a material adverse
effect on the business of the relevant party, regardless of whether the
Transactions are ultimately completed. Similarly, current and prospective
Mattson, STEAG Semiconductor Division, and/or CFM employees may experience
uncertainty about their future roles with Mattson until the Transactions are
completed and Mattson's strategies with regard to the integration of operations
of Mattson, the STEAG Semiconductor Division, and CFM are announced or
executed. This may adversely affect Mattson's, the STEAG Semiconductor
Division's, and/or CFM's ability to attract and retain key management, sales,
marketing, and technical personnel.

The Transactions could adversely affect combined financial results.

   Mattson, the STEAG Semiconductor Division, and CFM are expected to incur
direct transaction costs of approximately $4.7 million in connection with the
Transactions. If the benefits of the Transactions do not exceed the costs
associated with the Transactions, including any dilution to Mattson
stockholders and CFM shareholders resulting from the issuance of shares in
connection with the Transactions, the combined company's financial results,
including earnings per share, could be adversely affected.

The rights of holders of CFM common stock will be changed as a result of the
merger.

   Following the merger, holders of CFM common stock outstanding on the date of
the merger will become holders of Mattson common stock. Certain differences
exist between the rights of Mattson stockholders under Mattson's Certificate of
Incorporation, Bylaws and the corporate law of Delaware, Mattson's state of
incorporation and the rights of CFM shareholders under CFM's Articles of
Incorporation, Bylaws and the corporate law of Pennsylvania, CFM's state of
incorporation. See "Comparison of Rights of Holders of Mattson Common Stock and
CFM Common Stock" beginning on page 99 of this joint proxy statement-
prospectus. Certain rights that CFM shareholders currently have under CFM's
Articles of Incorporation, Bylaws, and under Pennsylvania law may cease to
exist following the merger.

Officers and directors of Mattson and CFM have certain conflicts of interest
that may influence them to support or approve the Transactions.

   Some of the directors and officers of Mattson and CFM participate in
arrangements and have continuing indemnification against liabilities that give
them interests in the Transactions that are different from the interests of
other Mattson stockholders or CFM shareholders interests, including the
following:

  . John Savage, a director of Mattson, is also a partner at Alliant
    Partners, the technology merger and acquisition advisory firm that
    provided Mattson with its opinion regarding the fairness of the proposed
    Transactions, from a financial point of view, to Mattson's stockholders.
    Mattson has paid Alliant Partners a fee of $300,000 for rendering an
    opinion as to the fairness from a financial point of view to Mattson's
    stockholders of the consideration to be provided by Mattson in connection
    with the Transactions. Mattson has agreed to pay Alliant Partners a
    success fee of $2,000,000 in the event the Transactions close, against
    which the fairness opinion fee will be credited.

  . Brad Mattson was formerly a member of the board of directors of CFM. As
    of the record date, Brad Mattson held options to purchase 21,163 shares
    of CFM common stock exercisable within 60 days. These options will become
    options to purchase Mattson common stock under the terms of the Merger
    Agreement.

  . Some officers of CFM will be entitled to severance payments and
    additional accelerated vesting of options if they are terminated or
    constructively terminated by Mattson after completion of the merger.

  . Mattson and CFM have agreed that Mr. James Kim will be designated by CFM
    to serve on Mattson's board of directors upon completion of the
    Transactions.

   For the above reasons, the directors and officers of Mattson and CFM could
be more likely to vote to approve the terms of the Transactions than if they
did not have these interests. Mattson stockholders and CFM

                                       16
<PAGE>

shareholders should consider whether these interests may have influenced these
directors and officers to support or recommend the Transactions.

Failure to complete the Transactions could have a negative impact on Mattson's
and/or CFM's stock price, future business and operations, or financial results.

   If the Transactions are not completed for any reason, Mattson and CFM may be
subject to a number of material risks, including the following:

  . Depending on the reasons for termination, Mattson may be required to pay
    CFM, or CFM may be required to pay Mattson, a termination fee of
    $7,110,000;

  . Depending on the reasons for termination, Mattson may be required to pay
    STEAG either a termination fee of $20,000,000, STEAG's fees and expenses
    in connection with the Combination Agreement up to $5,000,000, or one-
    half of a $40,000,000 lump sum payment which may be required to be made
    by STEAG to CFM under the interim patent license agreement dated June 28,
    2000 between CFM, CFMT, Inc., and STEAG;

  . The price of Mattson and/or CFM common stock may decline to the extent
    that the relevant current market price reflects a market assumption that
    the Transactions will be completed;

  . Some costs related to the Transactions, such as legal, accounting,
    financial advisor, and financial printing fees, must be paid even if the
    Transactions are not completed; and

  . There may be substantial disruption to the businesses of Mattson and CFM
    and distraction of their workforces and management teams.

The Transactions may be challenged by regulatory authorities.

   Mattson, STEAG, and CFM have obtained regulatory clearance under both the
HSR Act and the German Cartel Act with respect to the Transactions. However,
even though these regulatory clearances have been obtained, any federal, state,
or foreign governmental agency or private person may still challenge the
Transactions at any time before, or even after, their completion. The transfers
of certain STEAG Semiconductor Subsidiaries require local governmental or
regulatory approvals. There can be no assurance that such approvals will be
obtained or that they will be obtained on a timely basis.

STEAG may terminate the business combination, and therefore the Transactions,
if Mattson's common stock is trading at less than $20.00 at the time of
closing.

   As set forth in the Combination Agreement, STEAG may terminate the
Combination Agreement if the average closing price of Mattson's common stock
over a 20-trading-day period measured two business days prior to the proposed
closing of the business combination is below $15.78 per share. In addition,
STEAG may terminate the Combination Agreement if the 20-trading-day average
closing price of Mattson's common stock measured two business days prior to the
proposed closing of the business combination is above $15.78 but below $20.00
per share, unless Mattson elects to pay, in the form of a 3-year promissory
note, the product obtained by multiplying 11,850,000 by the difference between
$20.00 and such 20-trading-day average common stock closing price. The
principal amount of any such note will not exceed $50 million. See "The
Strategic Business Combination Agreement--Termination" that begins on page 78
of this joint proxy statement-prospectus. On October 4, 2000, the closing sales
price of Mattson common stock as reported on Nasdaq was $13.75.

   Because the Transactions are mutually conditioned on each other, in the
event the Combination Agreement is terminated, the Merger Agreement will
automatically be terminated as well.

                                       17
<PAGE>

RISKS RELATING TO MATTSON'S BUSINESS FOLLOWING CONSUMMATION OF THE TRANSACTIONS

   In addition to the risk factors set forth above with respect to the
Transactions, following the consummation of the Transactions, Mattson's
combined business will be subject to risk factors including the following:

The combined companies' sales have reflected the cyclicality of the
semiconductor industry. Such continued cyclicality following the consummation
of the Transactions may cause Mattson's operating results to fluctuate
significantly and could cause Mattson to fail to achieve anticipated sales.

   The business of each of Mattson, the STEAG Semiconductor Division, and CFM
has depended in significant part upon capital expenditures by manufacturers of
semiconductor devices, including manufacturers that are opening new or
expanding existing fabrication facilities. Mattson will continue to depend on
these factors after the consummation of the Transactions. The level of capital
expenditures by these manufacturers of semiconductor devices depends upon the
current and anticipated market demand for such devices and the products
utilizing such devices. The semiconductor industry is highly cyclical. The
industry has in the past, and will likely in the future, experience periods of
oversupply that result in significantly reduced demand for capital equipment,
including Mattson's systems in each of the post-combination product lines. When
these periods occur, Mattson's operating results and financial condition may be
adversely affected. Mattson anticipates that a significant portion of new
orders will continue to depend upon demand from semiconductor manufacturers and
independent foundries that build or expand large fabrication facilities. If
existing fabrication facilities are not expanded or new facilities are not
built, demand for Mattson's systems may not develop or increase, and Mattson
may be unable to generate significant new orders for Mattson's systems. If
Mattson is unable to develop new orders for Mattson's systems, Mattson will not
achieve anticipated net sales levels. Any future downturns or slowdowns in the
semiconductor industry will materially and adversely affect Mattson's net sales
and operating results. Following the Transactions, Mattson will be a larger,
more geographically diverse company and may be less able to react quickly to
the cyclicality of the semiconductor business, particularly in Europe and in
other regions with restrictive laws relating to termination of employees.

Most of Mattson's revenue will come from a small number of large sales, and any
delay in the timing of individual sales could cause Mattson's operating results
to fluctuate from quarter to quarter.

   A delay in a shipment near the end of a quarter may cause net sales in that
quarter to fall below Mattson's expectations and the expectations of market
analysts or investors. Currently, each of Mattson, the STEAG Semiconductor
Division, and CFM derives most of its revenues from the sale of a relatively
small number of expensive systems and Mattson will continue to depend on a
small number of sales after the consummation of the Transactions. The list
prices on these systems range from $500,000 to over $4 million. Following the
Transactions, each sale, or failure to make a sale, could have a material
effect on Mattson. Mattson's lengthy sales cycle for each of its systems,
coupled with customers' competing capital budget considerations, make the
timing of customer orders uneven and difficult to predict. In addition,
Mattson's backlog at the beginning of a quarter is not expected to include all
orders required to achieve Mattson's sales objectives for that quarter. As a
result, Mattson's net sales and operating results for a quarter depend on
Mattson's shipping orders as scheduled during that quarter as well as obtaining
new orders for systems to be shipped in that same quarter. Any delay in
scheduled shipments or in shipments from new orders would materially adversely
affect Mattson's operating results for that quarter, which could cause
Mattson's stock price to decline.

   In the past, Mattson has experienced cancellation of orders, and there can
be no assurance that further order cancellations or reductions in order growth
or the level of overall orders for semiconductor capital equipment will not
have a further material adverse effect upon Mattson's business or results of
operations. The need for continued investment in research, development and
engineering, marketing, and customer satisfaction activities may limit
Mattson's ability to reduce expenses in response to continued or future
downturns in the semiconductor industry. Mattson's net sales and results of
operations could be materially adversely affected if other downturns or
slowdowns in the semiconductor markets occur in the future.


                                       18
<PAGE>

Mattson's quarterly financial results fluctuate significantly and may fall
short of anticipated levels, which could cause Mattson's stock price to
decline.

   Mattson intends to base its operating expenses on anticipated revenue
levels, and a substantial percentage of Mattson's expenses may be fixed in the
short term. As a result, any delay in generating or recognizing revenues could
cause Mattson's operating results to be below the expectations of market
analysts or investors, which could cause the price of Mattson's common stock to
decline. Mattson's quarterly revenue and operating results have varied
significantly in the past and may vary significantly in the future due to a
number of factors, including: market acceptance of Mattson's systems and the
products of Mattson's customers; substantial changes in revenues from
significant customers; increased manufacturing overhead expenses due to
reductions in the number of systems manufactured; timing of announcement and
introduction of new systems by Mattson and its competitors; sudden changes in
component prices or availability; changes in product mix; delays in orders due
to customer financial difficulties; manufacturing inefficiencies caused by
uneven or unpredictable order patterns, reducing Mattson's gross margins; and
higher fixed costs due to increased levels of research and development or
patent litigation costs and expansion of Mattson's worldwide sales and
marketing organization. Due to the foregoing factors, Mattson believes that
period-to-period comparisons of Mattson's operating results should not be
relied upon as an indicator of Mattson's future performance.

   Moreover, in December 1999, the Securities and Exchange Commission staff
issued Staff Accounting Bulletin No. 101--Revenue Recognition in Financial
Statements ("SAB 101"). SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 does not become applicable to Mattson until the
fourth quarter of 2000. While Mattson's management believes that its revenue
recognition policies conform with the generally accepted accounting principles
that have been used consistently in practice in the capital equipment industry,
certain issues raised in SAB 101, including installation and acceptance
criteria, could be interpreted to cause a change in accounting principles by
Mattson and many other companies in the capital equipment industry. Such a
change could cause added fluctuations in Mattson's revenues and profits. At
this time, the effect of SAB 101 on Mattson's operating results in any future
period cannot be fully determined; however, such a change could materially
adversely affect Mattson's financial position and results of operations.

Each of Mattson, the STEAG Semiconductor Division, and CFM has incurred net
operating losses for the prior two years. After consummation of the
Transactions, Mattson may not achieve or maintain profitability on an annual
basis, and if it does not, it may not utilize deferred tax assets.

   Mattson incurred net losses of approximately $800,000 for the year ended
December 31, 1999 and $22.4 million for the year ended December 31, 1998; the
STEAG Semiconductor Division incurred losses of approximately $51.5 million for
the year ended December 31, 1999 and $22.3 million for the year ended December
31, 1998; and CFM incurred net losses of approximately $10.5 million for the
year ended October 31, 1999 and $11.8 million for the year ended October 31,
1998. Mattson expects to continue to incur significant research and development
and selling, general and administrative expenses. Mattson will need to generate
significant increases in net sales to achieve and maintain profitability on an
annual basis, and it may not be able to do so. In addition, because of these
factors, through December 31, 1999, Mattson had not been in a position to
utilize its deferred tax assets. Mattson's ability to realize its deferred tax
assets in future periods will depend on its ability to achieve and maintain
profitability on an annual basis. See "Mattsons Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on
page 147 for a further discussion of Mattson's net operating losses.

Year-to-year changes in Mattson's list of major customers make it difficult to
forecast Mattson's revenue and achieve Mattson's sales goals.

   During 1999, one customer, Samsung, accounted for approximately 20% of
Mattson's net sales. During 1998, Mattson had no individually significant
customers, although sales to Mattson's Japanese distributor,

                                       19
<PAGE>

Marubeni, constituted 16% of Mattson's net sales. For the year ended December
31, 1999, sales to the STEAG Semiconductor Division's top three customers
accounted for approximately 24% of net sales; no customer accounted for more
than 10% of the STEAG Semiconductor Division's net sales. For the year ended
December 31, 1998, sales to one customer accounted for approximately 13% of the
STEAG Semiconductor Division's net sales; sales to the STEAG Semiconductor
Division's top three customers accounted for approximately 29% of net sales.
UMC Microelectronics accounted for approximately 25% and 20% of CFM's net sales
during fiscal 1999 and 1998, respectively. During 1999 and 1998, one and four
customers, respectively, accounted for more than 10% but less than 15% of CFM's
net sales. Although the composition of the group comprising Mattson's largest
customers has varied from year to year, Mattson's top ten customers accounted
for 63% of Mattson's net sales in 1999 and 56% in 1998. Each of Mattson's, the
STEAG Semiconductor Division's, and CFM's systems have represented major
capital investments for its customers, thus the customers and potential
customers of each of Mattson, the STEAG Semiconductor Division, and CFM
purchase or replace the equipment infrequently. Therefore, Mattson's list of
major customers changes substantially from year to year, and Mattson cannot
predict that a major customer in one year will make significant purchases from
it in future years. Accordingly, it is difficult for Mattson to accurately
forecast its revenues and operating results from year to year. While Mattson
will continue to actively pursue new customers, if Mattson is unable to
successfully make significant sales to new customers or sell additional systems
to existing customers, it may not achieve anticipated net sales levels and
Mattson's business and operating results would suffer.

Mattson's lengthy sales cycle increases its costs and reduces the
predictability of its revenue.

   Sales of the systems of Mattson, the STEAG Semiconductor Division, and CFM
have depended upon the decision of a prospective customer to increase or
replace manufacturing capacity. That decision typically involves a significant
capital commitment. Accordingly, the purchase of Mattson's, the STEAG
Semiconductor Division's, and CFM's systems typically involves time consuming
internal procedures associated with the evaluation, testing, implementation,
and introduction of new technologies into their customers' manufacturing
facilities. For many potential customers, an evaluation as to whether new
semiconductor manufacturing equipment is needed typically occurs infrequently.
Following an evaluation by the customer as to whether these systems meet their
qualification criteria, each of Mattson, the STEAG Semiconductor Division, and
CFM have experienced in the past and expects to continue to experience in the
future delays in finalizing system sales while their customers evaluate and
receive approval for the purchase of systems and construct new facilities or
expand existing facilities. Due to these factors, the systems of Mattson, the
STEAG Semiconductor Division, and CFM typically have lengthy sales cycles
during which they may have had to expend substantial funds and management
effort. The time between Mattson's first contact with a customer regarding a
specific potential purchase and the customer's placing its first order
typically lasts from nine to twelve months and is often even longer. This
lengthy sales cycle is expected to continue after the consummation of the
Transactions, thus making it difficult to accurately forecast future sales and
potentially causing Mattson's quarterly and annual revenue and operating
results to fluctuate significantly from period to period. If anticipated sales
from a particular customer are not realized in a particular period due to this
lengthy sales cycle, Mattson's operating results may be adversely affected.

Mattson is highly dependent on its international sales, particularly sales in
Asian countries, and if it is unable to sustain and increase its international
sales, Mattson may not achieve anticipated revenue growth.

   Asia has been a particularly important region for the businesses of Mattson,
the STEAG Semiconductor Division, and CFM and is expected to continue to be
important for Mattson following the consummation of the Transactions. Sales by
Mattson to Taiwan, Japan, and other Asian countries accounted for 59% of
Mattson's total net sales in 1999, and 50% in 1998, and all international sales
of Mattson accounted for 71% of Mattson's total net sales in 1999 and 67% in
1998. Sales to customers located outside the United States accounted for
approximately 33% of CFM's net sales in fiscal 1999 and 46% in fiscal 1998.
Sales by the STEAG Semiconductor Division to Taiwan, Japan, Singapore, and
Korea together accounted for 41% and 24% of its

                                       20
<PAGE>

net sales in 1999 and 1998, respectively. Mattson anticipates that, following
the consummation of the Transactions, international sales will continue to
account for a significant portion of Mattson's net sales. Because of Mattson's
anticipated continuing dependence upon international sales in general and on
sales to Taiwan, Japan, and other Asian countries in particular, Mattson is
expected to be subject to risk from the effects of regional economic problems.
Asian economies have been highly volatile and prone to recession in recent
years. Mattson's international sales are expected to continue to be subject to
a number of additional risks, including: unexpected changes in law or
regulations resulting in more burdensome governmental controls, tariffs,
restrictions, embargoes, or export license requirements; exchange rate
volatility; political and economic instability, particularly in Asia;
difficulties in accounts receivable collections; extended payment terms beyond
those customarily used in the United States; difficulties in managing
distributors or representatives; difficulties in staffing and managing foreign
subsidiary operations; and potentially adverse tax consequences. The sales to
date of Mattson and CFM have been denominated in U.S. dollars. The sales to
date of the STEAG Semiconductor Division have been denominated in various
currencies, primarily U.S. dollars and German marks. If it becomes necessary
for Mattson to make sales in the future denominated in foreign currencies,
Mattson will become more exposed to the risk of currency fluctuations. With
prices set in U.S. dollars, Mattson's products become less price competitive in
countries with currencies that are declining in value in comparison to the
dollar. This could cause Mattson to lose sales or force Mattson to lower its
prices, which would reduce Mattson's gross margins.

Mattson may not achieve anticipated revenue growth if it is not selected as
"vendor of choice" for new or expanded fabrication facilities and if its
systems and products do not achieve broader market acceptance.

   Because semiconductor manufacturers must make a substantial investment to
install and integrate capital equipment into a semiconductor fabrication
facility, these manufacturers will tend to choose semiconductor equipment
manufacturers based on established relationships, product compatibility, and
proven financial performance. Once a semiconductor manufacturer selects a
particular vendor's capital equipment, the manufacturer generally relies for a
significant period of time upon equipment from this "vendor of choice" for the
specific production line application. In addition, the semiconductor
manufacturer frequently will attempt to consolidate its other capital equipment
requirements with the same vendor. Accordingly, Mattson may face narrow windows
of opportunity to be selected as the "vendor of choice" by substantial new
customers. It may be difficult for Mattson to sell to a particular customer for
a significant period of time once that customer selects a competitor's product,
and Mattson may not be successful in obtaining broader acceptance of Mattson's
systems and technology. If Mattson is unable to achieve broader market
acceptance of Mattson's systems and technology, Mattson may be unable to grow
its business and Mattson's operating results and financial condition will be
adversely affected.

Unless Mattson can continue to develop and introduce new systems that compete
effectively on the basis of price and performance following completion of the
Transactions, it may lose future sales and customers, its business may suffer,
and its stock price may decline.

   Because of continual changes in the markets in which Mattson, the STEAG
Semiconductor Division, and CFM and their customers compete, Mattson's future
success following completion of the Transactions will depend in part upon its
ability to continue to improve its systems and technologies. These markets are
characterized by rapidly changing technology, evolving industry standards, and
continuous improvements in products and services. Due to the continual changes
in these markets, Mattson's success will also depend upon its ability to
develop new technologies and systems that compete effectively on the basis of
price and performance and that adequately address customer requirements. In
addition, Mattson must adapt its systems and processes to technological changes
and to support emerging target market industry standards. The success of any
new systems Mattson introduces is dependent on a number of factors. These
factors include timely completion of new system designs and market acceptance.
Mattson may not be able to improve its existing systems or develop new
technologies or systems in a timely manner. In particular, the transition of
the market

                                       21
<PAGE>

to 300 millimeter wafers will present Mattson with both an opportunity and a
risk. To the extent that Mattson is unable to introduce 300 millimeter systems
which meet customer requirements on a timely basis, its business could be
harmed. See "Business of Mattson," beginning on page 132 of this joint proxy
statement-prospectus.

   The success of new system introductions is dependent on a number of factors,
including timely completion of new system designs, system performance, and
market acceptance, and may be adversely affected by manufacturing
inefficiencies associated with the start up of such new introductions and the
challenge of producing systems in volume which meet customer requirements.
Because it is generally not possible to predict the time required and costs
involved in reaching certain research, development and engineering objectives,
actual development costs could exceed budgeted amounts and estimated product
development schedules may require extension. Any delays or additional
development costs could have a material adverse effect on Mattson's business
and results of operations. There can be no assurance that Mattson will
successfully develop and introduce new products or enhancements to its existing
products on a timely basis or in a manner which satisfies potential customers
or achieves widespread market acceptance.

   Because of the complexity of Mattson's, the STEAG Semiconductor Division's,
and CFM's systems, significant delays can occur between the introduction of
systems or system enhancements and the commencement of commercial shipments.
From time to time, Mattson, the STEAG Semiconductor Division, and CFM have
experienced delays in the introduction of, and certain technical and
manufacturing difficulties with, certain systems and enhancements, and may
experience such delays and technical and manufacturing difficulties in future
introductions or volume production of new systems or enhancements. Mattson's
inability to overcome such difficulties, to meet the technical specifications
of any new systems or enhancements, or to manufacture and ship these systems or
enhancements in volume and in a timely manner following consummation of the
Transactions, would materially adversely affect its business and results of
operations, as well as its customer relationships. In addition, Mattson from
time to time may incur unanticipated costs to ensure the functionality and
reliability of Mattson's products early in their life cycles, which costs can
be substantial. If, following consummation of the Transactions, new products or
enhancements experience reliability or quality problems, Mattson could
encounter a number of difficulties, including reduced orders, higher
manufacturing costs, delays in collection of accounts receivable, and
additional service and warranty expenses, all of which could materially
adversely affect Mattson's business and results of operations.

Mattson may not be able to continue to successfully compete in the highly
competitive semiconductor industry.

   The semiconductor equipment industry is both highly competitive and subject
to rapid technological change. Significant competitive factors include the
following: system performance; cost of ownership; size of installed base;
breadth of product line; and customer support. The following characteristics of
Mattson's major competitors' systems give them a competitive advantage over
Mattson: broader product lines; longer operating history; greater experience
with high volume manufacturing; broader name recognition; substantially larger
customer bases; and substantially greater financial, technical, and marketing
resources. In addition, to expand its sales Mattson must often replace the
systems of its competitors or sell new systems to customers of its competitors.
Mattson's competitors may develop new or enhanced competitive products that
will offer price or performance features that are superior to Mattson's
systems. Mattson's competitors may also be able to respond more quickly to new
or emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion, and sale of their product
lines. Mattson may not be able to maintain or expand its sales if competition
increases and Mattson is unable to respond effectively.

Mattson depends upon a limited number of suppliers for many components and
subassemblies, and supply shortages or the loss of these suppliers could result
in increased cost or delays in manufacture and sale of its products.

   After the consummation of the Transactions, Mattson may rely to a
substantial extent on outside vendors to manufacture many of the components and
subassemblies of its systems. Mattson may obtain many of these

                                       22
<PAGE>

components and subassemblies from a sole source or a limited group of
suppliers. Because of its anticipated reliance on outside vendors generally,
and on a sole or a limited group of suppliers in particular, Mattson may be
unable to obtain an adequate supply of required components. In addition,
Mattson may have reduced control over pricing and timely delivery of
components. Mattson often quotes prices to its customers and accepts customer
orders for its products prior to purchasing components and subassemblies from
its suppliers. If Mattson's suppliers increase the cost of components or
subassemblies, Mattson may not have alternative sources of supply and may not
be able to raise the cost of the system being evaluated by its customers to
cover all or part of the increased cost of components. The manufacture of some
of these components and subassemblies is an extremely complex process and
requires long lead times. As a result, Mattson, the STEAG Semiconductor
Division, and CFM have in the past and Mattson may in the future experience
delays or shortages. If Mattson is unable to obtain adequate and timely
deliveries of Mattson's required components or subassemblies, it may have to
seek alternative sources of supply or manufacture such components internally.
This could delay Mattson's ability to manufacture or timely ship its systems,
causing it to lose sales, incur additional costs, delay new product
introductions, and harm its reputation.

To effectively manage its growth and greatly expanded operations following the
completion of the Transactions, Mattson will need to improve existing and
implement new systems, procedures, and controls.

   After the consummation of the Transactions, Mattson will experience a period
of rapid growth and expansion, including operations in new geographic
locations, that may place a significant strain on its management information
systems and its administrative, financial, and operational resources. Mattson
is currently undertaking a significant expansion of its operations to support
increased sales levels of its strip, CVD, and RTP products as a result of the
recent economic improvement in the semiconductor industry, including the
expansion of Mattson's international operations and a transition to direct
sales operations in Japan. Mattson is making additional significant investments
in research and development to support product development, and intends to
continue to do so following completion of the Transactions. This expansion will
continue to result in substantial demands on Mattson's management resources. To
accommodate continued anticipated growth and expansion following completion of
the Transactions, Mattson will be required to: improve existing, and implement
new, operational and financial systems, procedures, and controls; hire, train,
manage, retain, and motivate qualified personnel; and obtain additional
facilities and suppliers. These measures may place additional burdens on
Mattson's management and internal resources.

If Mattson does not have sufficient CVD evaluation systems available to its
customers, it may miss sales opportunities.

   Mattson has experienced increased interest in evaluation of its CVD
products. In the past, during periods of high growth, Mattson has been
constrained by a lack of available CVD evaluation units for timely delivery to
prospective customers. If Mattson is not able to make a sufficient number of
evaluation systems available when requested, potential customers may not be
able to evaluate Mattson's products before making equipment purchase decisions
and Mattson may miss opportunities to make sales, causing Mattson's growth to
be adversely affected.

Mattson is highly dependent on its key personnel to manage its business and
their knowledge of Mattson's business, management skills, and technical
expertise would be difficult to replace.

   Mattson's success after completion of the Transactions will depend to a
large extent upon the efforts and abilities of Brad Mattson, Mattson's current
chairman and chief executive officer, current Mattson management and technical
staff, as well as key managerial and technical employees of the STEAG
Semiconductor Division and CFM who will join Mattson in connection with the
Transactions, any of whom would be difficult to replace. The loss of Mr.
Mattson or other key employees could limit or delay Mattson's ability to
develop new products and adapt existing products to Mattson's customers'
evolving requirements and result in lost sales and diversion of management
resources. Other than Roger Carolin, following consummation of the merger, none
of Mattson's executive officers are bound by a written employment agreement and
Mattson's relationships with its officers are at will.

                                       23
<PAGE>

Because of competition for additional qualified personnel, Mattson may not be
able to recruit or retain necessary personnel, which could impede development
or sales of its products.

   Mattson's growth after completion of the Transactions will depend on its
ability to attract and retain qualified, experienced employees. There is
substantial competition for experienced engineering, technical, financial,
sales, and marketing personnel in Mattson's industry. In particular, Mattson
must attract and retain highly skilled design and process engineers.
Competition for such personnel is intense in every Mattson location, but
particularly in the San Francisco Bay Area where Mattson's headquarters is
located. If Mattson is unable to retain existing key personnel, including key
personnel of the STEAG Semiconductor Division and CFM, or attract and retain
additional qualified personnel, Mattson may from time to time experience
inadequate levels of staffing to develop and market its products and perform
services for its customers. As a result, Mattson's growth could be limited due
to its lack of capacity to develop and market its products to its customers, or
Mattson could fail to meet its delivery commitments or experience deterioration
in service levels or decreased customer satisfaction.

If Mattson is unable to protect its intellectual property, it may lose a
valuable asset and experience reduced market share. In the effort to protect
its proprietary technology, Mattson may fail to prevail in existing litigation
or experience additional costly litigation, including pending litigation
involving CFM.

   Mattson will rely on a combination of patents, copyrights, trademark and
trade secret laws, non-disclosure agreements, and other intellectual property
protection methods to protect its proprietary technology. Despite Mattson's
efforts to protect its intellectual property, Mattson's competitors may be able
to legitimately ascertain the non-patented proprietary technology embedded in
Mattson's systems. If this occurs, Mattson may not be able to prevent the use
of such technology. Mattson's means of protecting its proprietary rights may
not be adequate and its patents may not be sufficiently broad to protect its
technology. In addition, any other patents owned by Mattson could be
challenged, invalidated, or circumvented and any rights granted under any
patent may not provide adequate protection to Mattson. Furthermore, Mattson may
not have sufficient resources to protect its rights. Mattson's competitors may
independently develop similar technology, duplicate Mattson's products, or
design around patents that may be issued to Mattson. In addition, the laws of
some foreign countries may not protect Mattson's proprietary rights to as great
an extent as do the laws of the United States and it may be more difficult to
monitor the use of Mattson's products in such foreign countries. As a result of
these threats to Mattson's proprietary technology, Mattson may have to resort
to additional costly litigation to enforce its intellectual property rights.

   CFM is currently litigating three ongoing cases involving CFM's intellectual
property. See "Business of CFM--Litigation," beginning on page 182 of this
joint proxy statement-prospectus. If these litigation matters are still ongoing
at the time of closing of the merger, Mattson will succeed to such litigation.
As a result of such litigation, Mattson may incur significant and ongoing legal
costs. There can be no assurance as to the outcome of such litigation. Defenses
or counterclaims in these proceedings could result in the nullification of any
or all of the subject CFM patents.

Mattson might face intellectual property infringement claims that may be costly
to resolve and could divert management attention, including the potential for
patent infringement litigation as a result of Mattson's increased market
strength in RTP and entry into the wet processing market.

   Mattson may from time to time be subject to claims of infringement of other
parties' proprietary rights. Certain STEAG Semiconductor Subsidiaries have in
the past been sued by competitors alleging infringement of such competitors'
patents. See "Business of the STEAG Semiconductor Division--General--
Litigation," beginning on page 162 of this joint proxy statement-prospectus.
Although all of such lawsuits have been settled or terminated, the risk of
further intellectual property litigation for Mattson may be increased following
the completion of the Transactions. Mattson's involvement in any patent dispute
or other intellectual property dispute or action to protect trade secrets, even
if the claims are without merit, could be very expensive to defend and could
divert the attention of Mattson's management.

                                       24
<PAGE>

Adverse determinations in any litigation could subject Mattson to significant
liabilities to third parties, require Mattson to seek costly licenses from
third parties, and prevent Mattson from manufacturing and selling Mattson's
products. Any of these situations could have a material adverse effect on
Mattson's business and operating results in one or more countries.

Mattson's failure to comply with environmental regulations could result in
substantial liability.

   Following the consummation of the Transactions, Mattson will continue to be
subject to a variety of federal, state, local, and foreign laws, rules, and
regulations relating to environmental protection. These laws, rules, and
regulations govern the use, storage, discharge, and disposal of hazardous
chemicals during manufacturing, research and development and sales
demonstrations. If Mattson fails to comply with present or future regulations,
Mattson could be subject to substantial liability for clean up efforts,
personal injury, and fines or suspension or cessation of Mattson's operations
and, after the Transactions, Mattson may be exposed to liability if there are
past or future violations by CFM or the STEAG Semiconductor Subsidiaries.
Restrictions on Mattson's ability to expand or continue to operate its, CFM's
or the STEAG Semiconductor Division's present locations could be imposed upon
Mattson or Mattson could be required to acquire costly remediation equipment or
incur other significant expenses.

The price of Mattson's common stock has fluctuated in the past and may continue
to fluctuate significantly in the future, which may lead to losses by investors
or to securities litigation.

   The market price of Mattson's common stock has been highly volatile in the
past, and Mattson's stock price may decline in the future. Mattson believes
that a number of factors could cause the price of its common stock to
fluctuate, perhaps substantially, including: general conditions in the
semiconductor industry or in the worldwide economy; announcements of
developments related to Mattson's business; fluctuations in Mattson's operating
results and order levels; announcements of technological innovations by Mattson
or by its competitors; new products or product enhancements by Mattson or by
its competitors; developments in patent litigation or other intellectual
property rights; or developments in Mattson's relationships with its customers,
distributors, and suppliers. In addition, in recent years the stock market in
general, and the market for shares of high technology stocks in particular,
have experienced extreme price fluctuations. These fluctuations have frequently
been unrelated to the operating performance of the affected companies. Such
fluctuations could adversely affect the market price of Mattson's common stock.
In the past, securities class action litigation has often been instituted
against a company following periods of volatility in its stock price. This type
of litigation, if filed against Mattson, could result in substantial costs and
divert Mattson's management's attention and resources.

Any future business acquisitions may disrupt Mattson's business, dilute
stockholder value, or distract management attention.

   As part of Mattson's ongoing business strategy, Mattson may consider
additional acquisitions of, or significant investments in, businesses that
offer products, services, and technologies complementary to its own. Such
acquisitions could materially adversely affect Mattson's operating results
and/or the price of Mattson's common stock. Acquisitions also entail numerous
risks, including: difficulty of assimilating the operations, products, and
personnel of the acquired businesses; potential disruption of Mattson's ongoing
business; unanticipated costs associated with the acquisition; inability of
management to manage the financial and strategic position of acquired or
developed products, services, and technologies; inability to maintain uniform
standards, controls, policies, and procedures; and impairment of relationships
with employees and customers which may occur as a result of integration of the
acquired business. To the extent that shares of Mattson's stock or other rights
to purchase stock are issued in connection with any future acquisitions,
dilution to Mattson's existing stockholders will result and Mattson's earnings
per share may suffer. Any future acquisitions may not generate additional
revenue or provide any benefit to Mattson's business, and Mattson may not
achieve a satisfactory return on its investment in any acquired businesses.

                                       25
<PAGE>

               MATTSON SELECTED HISTORICAL FINANCIAL INFORMATION

   The following table presents selected historical financial information for
Mattson for each of the fiscal years ended December 31, 1995 through 1999 and
for the unaudited six months ended June 27, 1999 and June 25, 2000. The
information for the fiscal year ended December 31, 1999 has been derived from
Mattson's consolidated financial statements, which have been audited by Arthur
Andersen, independent public accountants. The information for each of the
fiscal years ended December 31, 1995 through 1998 has been derived from
Mattson's consolidated financial statements which have been audited by
PricewaterhouseCoopers LLP, independent public accountants, through 1998. For
additional information regarding plans and objectives of management for future
operations and financial condition and results of operations, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Mattson's annual report on Form 10-K for the fiscal year ended
December 31, 1999 and its quarterly reports on Form 10-Q for the quarters ended
March 31, 2000 and June 30, 2000, incorporated by reference in this joint proxy
statement-prospectus. The information set forth below has been derived from,
and is qualified by reference to, and should be read in conjunction with, the
consolidated financial statements and related notes included in Mattson's
annual report on Form 10-K for the fiscal year ended December 31, 1999 and its
quarterly reports on Form 10-Q for the quarters ended March 31, 2000 and June
30, 2000 incorporated by reference in this joint proxy statement-prospectus.
Historical results are not necessarily indicative of results to be expected in
any future period.

<TABLE>
<CAPTION>
                                                                          Six Months
                                                                           Ended(1)
                                  Year Ended December 31,(1)              (unaudited)
                          -------------------------------------------  ------------------
                                                                       June 27,  June 25,
                            1995    1996    1997     1998      1999      1999      2000
                          -------- ------- ------- --------  --------  --------  --------
                            (in thousands, except per share data)
<S>                       <C>      <C>     <C>     <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT
 OF OPERATIONS DATA:
Net sales...............  $ 55,342 $73,260 $76,730 $ 59,186  $103,458  $38,448   $92,711
Cost of sales...........    24,958  33,231  37,130   37,595    53,472   19,824    46,170
                          -------- ------- ------- --------  --------  -------   -------
Gross profit............    30,384  40,029  39,600   21,591    49,986   18,624    46,541
                          -------- ------- ------- --------  --------  -------   -------
Operating expenses:
 Research, development
  and engineering.......     6,330  11,507  14,709   16,670    19,547    8,423    13,165
 Selling, general and
  administrative........    11,416  20,900  24,495   24,542    31,784   13,137    23,630
 Acquired in-process
  research and
  development...........        --      --      --    4,220        --       --
                          -------- ------- ------- --------  --------  -------   -------
   Total operating
    expenses............    17,746  32,407  39,204   45,432    51,331   21,560    36,795
                          -------- ------- ------- --------  --------  -------   -------
Income (loss) from
 operations.............    12,638   7,622     396  (23,841)   (1,345)  (2,936)    9,746
Interest and other
 income, net............     1,906   2,027   1,486    1,811       743      426     1,909
                          -------- ------- ------- --------  --------  -------   -------
Income (loss) before
 provision for income
 taxes..................    14,544   9,649   1,882  (22,030)     (602)  (2,510)   11,655
Provision for income
 taxes..................     4,052   3,184     451      337       247      117     1,165
                          -------- ------- ------- --------  --------  -------   -------
Net income (loss).......  $ 10,492 $ 6,465 $ 1,431 $(22,367) $   (849) $(2,627)  $10,490
                          ======== ======= ======= ========  ========  =======   =======
Net income (loss) per
 share:
 Basic..................  $   0.80 $  0.46 $  0.10 $  (1.52) $  (0.05) $ (0.17)  $  0.57
 Diluted................  $   0.71 $  0.42 $  0.09 $  (1.52) $  (0.05) $ (0.17)  $  0.51
Shares used in computing
 net income loss per
 share:
 Basic..................    13,109  13,997  14,117   14,720    15,730   15,512    18,370
 Diluted................    14,854  15,275  15,311   14,720    15,730   15,512    20,422
</TABLE>
--------
(1) Mattson paid no cash dividends during the five-year period and six months
    interim periods.

<TABLE>
<CAPTION>
                                   As of December 31,            As of June 25,
                         ---------------------------------------      2000
                          1995    1996    1997    1998    1999    (unaudited)
                         ------- ------- ------- ------- ------- --------------
                                     (in thousands)
<S>                      <C>     <C>     <C>     <C>     <C>     <C>
CONSOLIDATED BALANCE
 SHEET DATA:
Cash and cash
 equivalents............ $14,310 $21,547 $25,583 $11,863 $16,965    $125,493
Working capital.........  56,425  56,780  56,996  31,034  37,009     174,064
Total assets............  74,089  84,489  84,443  68,120  81,148     221,208
Total stockholders'
 equity.................  61,076  69,115  68,184  49,880  52,019     189,435
</TABLE>

                                       26
<PAGE>

     STEAG SEMICONDUCTOR DIVISION SELECTED HISTORICAL FINANCIAL INFORMATION

   The following table presents selected historical financial data for the
STEAG Semiconductor Division for each of the years ended December 31, 1995
through 1999 and for the six month periods ended June 30, 1999 and 2000. The
information with respect to the years ended December 31, 1998 and 1999 has been
derived from the Combined Financial Statements of the STEAG Semiconductor
Division, which have been audited by Arthur Andersen, LLP, independent public
accountants, and which appear elsewhere in this joint proxy statement-
prospectus. The information with respect to the years ended December 31, 1995,
1996, and 1997 has been derived from the unaudited financial statements of the
STEAG Semiconductor Subsidiaries incorporated or organized in the U.S. or
Germany and does not include the financial results of the STEAG Semiconductor
Division's foreign sales and service subsidiaries during such periods. In
addition, the information with regard to such earlier years was prepared in
accordance with German generally accepted accounting principles and,
accordingly, is not directly comparable to the other financial information for
the STEAG Semiconductor Division presented elsewhere in this joint proxy
statement-prospectus, all of which was prepared in accordance with U.S.
generally accepted accounting principles. The information with respect to the
six months ended June 30, 1999 and 2000 has been derived from the unaudited
Combined Financial Statements of the STEAG Semiconductor Division for such
periods, which appear elsewhere in this joint proxy statement-prospectus.
Historical results are not necessarily indicative of results to be expected in
any future period.

<TABLE>
<CAPTION>
                                                                                  Six Months Ended
                                         Year Ended December 31,                      June 30,
                                             (in thousands)                        (in thousands)
                          ------------------------------------------------------  ------------------
                             1995        1996        1997       1998      1999      1999      2000
                          ----------- ----------- ----------- --------  --------  --------  --------
                          (unaudited) (unaudited) (unaudited)                        (unaudited)
<S>                       <C>         <C>         <C>         <C>       <C>       <C>       <C>
Net sales ..............    $95,072    $151,012    $174,292   $108,865  $146,847  $ 56,000  $115,271
Income (loss) from
 continuing operations..      1,368      12,166     (10,938)   (22,751)  (51,462)  (34,656)  (10,850)

<CAPTION>
                                           As of December 31,                      As of June 30,
                                             (in thousands)                        (in thousands)
                          ------------------------------------------------------  ------------------
                             1995        1996        1997       1998      1999      1999      2000
                          ----------- ----------- ----------- --------  --------  --------  --------
                          (unaudited) (unaudited) (unaudited)                        (unaudited)
<S>                       <C>         <C>         <C>         <C>       <C>       <C>       <C>
Total assets............     88,554     131,842     130,065    144,806   198,105   189,814   260,719
Long-term obligations
 (including long-term
 debt, capital leases,
 and redeemable
 preferred stock).......      7,957      12,652      10,895      9,685    19,424    24,107     1,034
</TABLE>

                                       27
<PAGE>

                 CFM SELECTED HISTORICAL FINANCIAL INFORMATION

   The following table presents selected historical consolidated financial
information for CFM for each of the fiscal years ended October 31, 1995 through
1999 and for the unaudited nine months ended July 31, 1999 and 2000. The
consolidated statement of operations data for the fiscal years ended October
31, 1997, 1998 and 1999 and the consolidated balance sheet data as of October
31, 1998 and 1999 have been derived from the CFM consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere herein. The
consolidated statement of operations data for the fiscal years ended October
31, 1995 and 1996 and the consolidated balance sheet data as of October 31,
1995, 1996 and 1997 have been derived from the CFM consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports not included herein. The
consolidated statement of operations data for the nine months ended July 31,
1999 and 2000 and the consolidated balance sheet data as of July 31, 2000 have
been derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting only of normal adjustments, that
CFM considers necessary for a fair presentation of the financial position and
results of operations for such periods. For additional information regarding
plans and objectives of management for future operations and financial
condition and results of operations, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in CFM's annual
report on Form 10-K for the fiscal year ended October 31, 1999 and its
quarterly reports on Form 10-Q for the quarters ended January 31, 2000, April
30, 2000, and July 31, 2000 incorporated by reference in this joint proxy
statement-prospectus. The information set forth below has been derived from and
is qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes included in CFM's annual
report on Form 10-K for the fiscal year ended October 31, 1999 and its
quarterly reports on Form 10-Q for the quarters ended January 31, 2000, April
30, 2000, and July 31, 2000 incorporated by reference in this joint proxy
statement-prospectus. Historical results are not necessarily indicative of
results to be expected in any future period.

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                   Year Ended October 31,               ------------------
                          --------------------------------------------  July 31,  July 31,
                           1995     1996     1997     1998      1999      1999      2000
                          -------  -------  ------- --------  --------  --------  --------
                            (in thousands, except per share data)          (unaudited)
<S>                       <C>      <C>      <C>     <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT
 OF OPERATIONS DATA:
Net sales...............  $23,430  $44,013  $75,772 $ 33,155  $ 31,563  $22,396   $ 37,678
Cost of sales...........   13,463   23,317   40,072   24,426    20,997   15,169     23,923
                          -------  -------  ------- --------  --------  -------   --------
Gross Profit............    9,967   20,696   35,700    8,729    10,566    7,227     13,755
                          -------  -------  ------- --------  --------  -------   --------
Operating expenses:
 Research, development
  and engineering.......    1,717    4,375    9,334   11,496    10,040    7,674      7,181
 Selling, general and
  administrative........    5,972   11,679   19,360   17,568    17,812   12,738     18,169
                          -------  -------  ------- --------  --------  -------   --------
   Total operating
    expenses............    7,689   16,054   28,694   29,064    27,852   20,412     25,350
                          -------  -------  ------- --------  --------  -------   --------
Income (loss) from
 operations.............    2,278    4,642    7,006  (20,335)  (17,286) (13,185)   (11,595)
Interest income, net....     (173)    (157)   1,882    1,806     1,409    1,106        565
                          -------  -------  ------- --------  --------  -------   --------
Income (loss) before
 provision for income
 taxes..................    2,105    4,485    8,888  (18,529)  (15,877) (12,079)   (11,030)
Income tax provision
 (benefit)..............      703    1,525    2,666   (6,746)   (5,398)  (4,107)    11,397
                          -------  -------  ------- --------  --------  -------   --------
Net income (loss).......  $ 1,402  $ 2,960  $ 6,222 $(11,783) $(10,479) $(7,972)  $(22,427)
                          =======  =======  ======= ========  ========  =======   ========
Net income (loss) per
 share:
 Basic..................  $  0.37   $ 0.64  $  0.85 $  (1.49) $  (1.34) $ (1.01)  $  (2.85)
 Diluted................  $  0.35  $  0.61  $  0.80 $  (1.49) $  (1.34) $ (1.01)  $  (2.85)
Shares used in computing
 net income (loss) per
 share:
 Basic..................    3,802    4,624    7,318    7,908     7,849    7,859      7,865
 Diluted................    3,994    4,831    7,764    7,908     7,849    7,859      7,865
</TABLE>

<TABLE>
<CAPTION>
                                      As of October 31,               As of
                            --------------------------------------  July 31,
                             1995   1996    1997    1998    1999      2000
                            ------ ------- ------- ------- ------- -----------
                                        (in thousands)             (unaudited)
<S>                         <C>    <C>     <C>     <C>     <C>     <C>
CONSOLIDATED BALANCE SHEET
 DATA:
Cash, cash equivalents and
 short-term investments.... $  408 $12,254 $46,181 $41,394 $24,216   $13,814
Working capital............  8,136  27,525  81,796  64,266  45,070    32,279
Total assets............... 18,454  44,251 109,496  89,813  82,086    58,326
Long-term debt, less
 current portion...........  3,005   2,525   2,571   2,186   1,628     1,252
Total shareholders'
 equity....................  9,775  32,711  89,868  77,782  66,693    44,708
</TABLE>

                                       28
<PAGE>

               PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

Overview

   As of June 27, 2000, Mattson reached a definitive agreement to acquire from
STEAG the STEAG Semiconductor Division and entered into a merger agreement to
acquire CFM. Both Transactions are to be accounted for using the purchase
method of accounting. Mattson will issue 11,850,000 shares of Mattson common
stock for the purchase of the STEAG Semiconductor Division. Mattson will issue
0.5223 shares of Mattson common stock for each issued and outstanding share of
CFM common stock on the closing date and assume all outstanding CFM stock
options based on the same exchange ratio. Mattson also anticipates incurring
approximately $4.7 million in acquisition expenses, including financial
advisory and legal fees and other direct transaction costs, which will also be
included as a component of the purchase price. The allocation of the aggregate
purchase price of approximately $423.7 million for the STEAG Semiconductor
Division and $154.6 million for CFM will be finalized following receipt of the
closing balance sheet and a final independent appraisal of certain tangible and
intangible assets of both companies. It is expected that a portion of the
purchase price will be allocated to in-process research and development, which
will be expensed at the time of acquisition as a one time charge. The
allocation to in-process research and development, which will be made by
independent appraisal, is not included in the accompanying unaudited pro forma
combined condensed balance sheet or statements of operations.

   The accompanying unaudited pro forma combined condensed balance sheet gives
effect to Mattson's business combination with the STEAG Semiconductor Division,
and its merger with CFM as if the Transactions occurred on June 25, 2000. The
unaudited pro forma combined condensed balance sheet combines the unaudited
consolidated balance sheet of Mattson as of June 25, 2000, the unaudited
combined balance sheet of the STEAG Semiconductor Division as of June 30, 2000,
and the unaudited consolidated balance sheet of CFM as of July 31, 2000.

   The accompanying unaudited pro forma combined condensed statements of
operations present the results of operations of Mattson for the year ended
December 31, 1999 and the six-month period ended June 25, 2000, combined with
the combined statements of operations of the STEAG Semiconductor Division for
the year ended December 31, 1999 and the six-month period ended June 30, 2000
(unaudited), and statements of operations of CFM for the year ended October 31,
1999 and the six-month period ended July 31, 2000 (unaudited). The unaudited
pro forma combined condensed statements of operations give effect to the
Transactions as if they had occurred as of January 1, 1999.

   The unaudited pro forma combined condensed balance sheet and statements of
operations are not necessarily indicative of the financial position and
operating results that would have been achieved had the Transactions been in
effect as of the dates indicated and should not be construed as being a
representation of financial position or future operating results of the
combined companies.

   The unaudited pro forma combined condensed financial information should be
read in conjunction with the consolidated financial statements and related
notes of Mattson and CFM and the combined financial statements and related
notes of the STEAG Semiconductor Division, which are included and/or
incorporated in this joint proxy statement-prospectus by reference.

                                       29
<PAGE>

              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                 (in thousands)

<TABLE>
<CAPTION>
                                   Historical            Pro forma adjustments
                         ------------------------------- -----------------------
                                       STEAG
                                   Semiconductor
                          Mattson    Division      CFM
                         --------- ------------- -------
                                                  As of
                           As of                  July       STEAG                    Pro
                         June 25,   As of June     31,   Semiconductor               forma
                           2000      30, 2000     2000   Division (A)   CFM (C)     combined
                         --------- ------------- ------- -------------  --------    --------
<S>                      <C>       <C>           <C>     <C>            <C>         <C>
         ASSETS
         ------

Current assets:
  Cash and cash
   equivalents.......... $ 125,493   $ 23,992    $10,149   $     --     $     --    $159,634
  Short-term
   investments..........        --         --      3,665         --           --       3,665
  Receivables, net of
   allowances...........    41,432     77,434     14,940         --           --     133,806
  Inventories...........    36,516     66,510     15,210         --           --     118,236
  Prepaid expenses and
   other current
   assets...............     2,396     10,385        681         --          184(C)   13,646
                         ---------   --------    -------   --------     --------    --------
    Total current
     assets.............   205,837    178,321     44,645         --          184     428,987
Property and equipment,
 net....................    11,450     29,859     13,367         --           --      54,676
  Goodwill & Other
   intangible assets....     3,674     51,538         --   (51,538)      109,942(D)  399,609
                                                            285,993(B)
  Other long term
   assets...............       247      1,001        314         --           --       1,562
                         ---------   --------    -------   --------     --------    --------
    Total Assets........ $ 221,208   $260,719    $58,326   $234,455     $110,126    $884,834
                         =========   ========    =======   ========     ========    ========

    LIABILITIES AND
  STOCKHOLDERS' EQUITY
  --------------------
Current liabilities:
  Accounts payable...... $  10,193   $ 22,642    $ 2,845   $     --     $     --    $ 35,680
  Accrued liabilities...    21,580     33,788      8,976      3,304(E)     1,416(E)   69,064
  Current portion of
   long-term debt.......        --      7,481        545         --           --       8,026
  Deferred revenue......        --      6,464         --         --           --       6,464
                         ---------   --------    -------   --------     --------    --------
    Total current
     liabilities........    31,773     70,375     12,366      3,304        1,416     119,234
  Total long term
   liabilities..........        --      1,034      1,252         --           --       2,286
                         ---------   --------    -------   --------     --------    --------
    Total liabilities...    31,773     71,409     13,618      3,304        1,416     121,520
                         ---------   --------    -------   --------     --------    --------
Total stockholders'
 equity.................   189,435    189,310     44,708    231,151      108,710     763,314
                         ---------   --------    -------   --------     --------    --------
                         $ 221,208   $260,719    $58,326   $234,455     $110,126    $884,834
                         =========   ========    =======   ========     ========    ========
</TABLE>


   See accompanying notes to unaudited pro forma combined condensed financial
        information on page 33 of this joint proxy statement-prospectus.

                                       30
<PAGE>

                     UNAUDITED PRO FORMA COMBINED CONDENSED
                            STATEMENT OF OPERATIONS
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
                                    Historical
                                 Six Months Ended
                          ------------------------------
                                      STEAG
                                  Semiconductor
                          Mattson   Division      CFM
                          ------- ------------- --------  Pro forma Adjustments
                                                          ------------------------
                           June                               STEAG
                            25,     June 30,    July 31,  Semiconductor                Combined
                           2000       2000        2000      Division        CFM        Pro forma
                          ------- ------------- --------  -------------   --------     ---------
<S>                       <C>     <C>           <C>       <C>             <C>          <C>
Net sales...............  $92,711   $115,271    $ 24,972    $     --      $     --     $232,954
Cost of sales...........   46,170     58,308      16,143          --            --      120,621
                          -------   --------    --------    --------      --------     --------
Gross profit............   46,541     56,963       8,829          --            --      112,333
Operating expenses:
  Research, development
   & engineering........   13,165     20,629       4,684          --            --       38,478
  Selling, general &
   administrative.......   23,280     34,372      12,000          --            --       69,652
  Amortization of
   goodwill and
   intangibles..........      350      8,210          --      28,599 (F)    10,994 (F)   48,153
                          -------   --------    --------    --------      --------     --------
    Total operating
     expenses...........   36,795     63,211      16,684      28,599        10,994      156,283
                          -------   --------    --------    --------      --------     --------
Income (loss) from
 operations.............    9,746     (6,248)     (7,855)    (28,599)      (10,994)     (43,950)
Interest and other
 income (expense), net..    1,909     (1,400)        299          --            --          808
                          -------   --------    --------    --------      --------     --------
Income (loss) before
 income taxes...........   11,655     (7,648)     (7,556)    (28,599)      (10,994)     (43,142)
Provision for income
 taxes..................    1,165      3,202      12,578          --            --       16,945
                          -------   --------    --------    --------      --------     --------
Net income (loss).......  $10,490   $(10,850)   $(20,134)   $(28,599)     $(10,994)    $(60,087)
                          =======   ========    ========    ========      ========     ========
Net income (loss) per
 share:
  Basic.................  $  0.57         --    $  (2.56)                              $  (1.75)
                          =======   ========    ========                               ========
  Diluted...............  $  0.51         --    $  (2.56)                              $  (1.75)
                          =======   ========    ========                               ========
Weighted average shares
 outstanding:
  Basic.................   18,370         --       7,865      11,850         4,100       34,320
                          =======   ========    ========    ========      ========     ========
  Diluted...............   20,422         --       7,865      11,850         4,100       34,320
                          =======   ========    ========    ========      ========     ========
</TABLE>

   See accompanying notes to unaudited pro forma combined condensed financial
        information on page 33 of this joint proxy statement-prospectus.

                                       31
<PAGE>

                     UNAUDITED PRO FORMA COMBINED CONDENSED
                            STATEMENT OF OPERATIONS
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
                                        Historical
                                        Year Ended
                          --------------------------------------
                                           STEAG
                                       Semiconductor
                            Mattson      Division        CFM
                          ------------ ------------- -----------  Proforma Adjustments
                                                                 -----------------------
                                                                     STEAG
                          December 31, December 31,  October 31, Semiconductor              Combined
                              1999         1999         1999       Division       CFM       Pro forma
                          ------------ ------------- ----------- -------------  --------    ---------
<S>                       <C>          <C>           <C>         <C>            <C>         <C>
Net sales...............    $103,458     $146,847     $ 31,563     $     --     $     --    $ 281,868
Cost of sales ..........      53,472      109,352       20,997           --           --      183,821
                            --------     --------     --------     --------     --------    ---------
Gross profit ...........      49,986       37,495       10,566           --           --       98,047
Operating expenses:
  Research, development
   & engineering .......      19,547       30,642       10,040           --           --       60,229
  Selling, general &
   administrative ......      31,084       46,470       17,812           --           --       95,366
  Amortization of
   goodwill and
   intangibles..........         700       13,279           --       57,198(F)    21,988(F)    93,165
                            --------     --------     --------     --------     --------    ---------
    Total operating
     expenses ..........      51,331       90,391       27,852       57,198       21,988      248,760
                            --------     --------     --------     --------     --------    ---------
Loss from operations ...      (1,345)     (52,896)     (17,286)     (57,198)     (21,988)    (150,713)
Interest and other
 income (expense), net
 .......................         743       (4,376)       1,409           --           --       (2,224)
                            --------     --------     --------     --------     --------    ---------
Loss before income taxes
 .......................        (602)     (57,272)     (15,877)     (57,198)     (21,988)    (152,937)
Provision for (benefit
 from) income taxes ....         247       (5,810)      (5,398)          --           --      (10,961)
                            --------     --------     --------     --------     --------    ---------
Net loss................    $   (849)    $(51,462)    $(10,479)    $(57,198)    $(21,988)   $(141,976)
                            ========     ========     ========     ========     ========    =========
Net loss per share:
  Basic ................    $  (0.05)    $    --      $  (1.34)                             $   (4.48)
                            ========     ========     ========                              =========
  Diluted                   $  (0.05)    $    --      $  (1.34)                             $   (4.48)
                            ========     ========     ========                              =========
Weighted average shares
 outstanding:
  Basic.................      15,730          --         7,849       11,850        4,100       31,680
                            ========     ========     ========     ========     ========    =========
  Diluted...............      15,730          --         7,849       11,850        4,100       31,680
                            ========     ========     ========     ========     ========    =========
</TABLE>


   See accompanying notes to unaudited pro forma combined condensed financial
        information on page 33 of this joint proxy statement-prospectus.

                                       32
<PAGE>

                     NOTES TO UNAUDITED COMBINED CONDENSED
                        PRO FORMA FINANCIAL INFORMATION

   (A) For purposes of these unaudited pro forma financial statements, the
purchase price of the STEAG Semiconductor Division acquisition was calculated
based on the average closing market price of Mattson common stock from June 23,
2000 through July 1, 2000. The total purchase price includes consideration of
11,850,000 shares of Mattson common stock and estimated direct acquisition
related costs of the STEAG Semiconductor Division purchase.

   The total purchase price of the STEAG Semiconductor Division acquisition is
calculated as follows (in thousands):

<TABLE>
   <S>                                                               <C>
   Value of Mattson common shares issued (11,850,000 shares at
    $35.48 per share)............................................... $420,461
   Estimated direct acquisition related costs.......................    3,304
                                                                     --------
   Total purchase price............................................. $423,765
                                                                     ========
</TABLE>

   (B) The preliminary calculation of the excess cost over fair value of the
net assets acquired (goodwill) for the STEAG Semiconductor Division is as
follows (in thousands):

<TABLE>
   <S>                                                                 <C>
   Total purchase price of the STEAG Semiconductor Division:           $423,765
   Estimated fair value of net assets acquired:
     historical net book value at June 30, 2000 (excluding historical
      goodwill of $51,538)...........................................  (137,772)
                                                                       --------
   Estimated goodwill................................................  $285,993
                                                                       ========
</TABLE>

   (C) For purposes of these unaudited pro forma financial statements, the
purchase price of the CFM acquisition was calculated based on the average
closing market price of Mattson common stock from June 23, 2000 through July 1,
2000. The total purchase price includes consideration of 0.5223 shares of
Mattson common stock for each share of CFM common stock outstanding, fair value
associated with the assumption of CFM stock options using the same exchange
ratio, and estimated direct acquisition related costs of the CFM purchase, less
the intrinsic value of assumed unvested CFM stock options, which will be
accounted for as prepaid compensation.

   The total purchase price of the CFM acquisition is calculated as follows (in
thousands):

<TABLE>
   <S>                                                              <C>
   Value of Mattson common shares issued (4,100,000 shares at
    $35.48 per share).............................................. $145,924
   Fair value associated with assumption of vested CFM stock
    options........................................................    6,547
   Fair value associated with assumption of unvested CFM stock
    options........................................................      947
   Less: intrinsic value of assumed unvested CFM stock options.....     (184)
   Estimated direct acquisition related costs......................    1,416
                                                                    --------
   Total estimated purchase price.................................. $154,650
                                                                    ========
</TABLE>

   (D) The preliminary calculation of the excess cost over fair value of the
net assets acquired (goodwill) for CFM is as follows:

<TABLE>
   <S>                                                                  <C>
   Total purchase price of CFM:                                         $154,650
     Estimated fair value of net assets acquired:
       historical net book value at July 31, 2000......................  (44,708)
                                                                        --------
   Estimated goodwill.................................................. $109,942
                                                                        ========
</TABLE>

   (E) Preliminary purchase accounting adjustment to reflect estimated direct
acquisition related costs.

   (F) To record amortization of goodwill using an estimated average
amortization period of 5 years.

                                       33
<PAGE>

                     MARKET PRICE DATA AND DIVIDEND POLICY

   Mattson common stock and CFM common stock are included in the National
Association of Securities Dealers Automated Quotation System and designated on
the Nasdaq under the symbols "MTSN" and "CFMT," respectively. This table sets
forth, for the calendar quarters indicated, the range of high and low per share
sales prices for Mattson common stock and CFM common stock as reported by
Nasdaq. Each STEAG Semiconductor Subsidiary is directly or indirectly wholly
owned by STEAG, which is a privately held German corporation whose shares are
not publicly traded or listed on any stock exchange.

<TABLE>
<CAPTION>
                                                       MTSN            CFMT
                                                  --------------- --------------
                                                    High    Low    High    Low
                                                  -------- ------ ------- ------
<S>                                               <C>      <C>    <C>     <C>
2000
First Quarter.................................... $45.6875 $15.75 $ 15.75 $8.875
Second Quarter...................................    50.50  27.00   17.00   6.75
1999
First Quarter.................................... $ 10.125 $ 5.50 $ 13.00 $ 7.00
Second Quarter...................................   13.375   5.75  11.125  6.625
Third Quarter....................................   15.375  10.00   11.00   7.00
Fourth Quarter...................................    18.25  11.00   12.50 7.8125
1998
First Quarter.................................... $  10.00 $ 6.00 $19.375 $10.75
Second Quarter...................................   7.8125  5.125   15.00   8.25
Third Quarter....................................   6.1875 2.9062   15.00   5.50
Fourth Quarter...................................    7.750   2.75   11.25   6.25
1997
First Quarter.................................... $  12.00 $9.125 $ 41.75 $20.75
Second Quarter...................................   11.125   7.25  38.625  25.75
Third Quarter....................................    16.25  10.25  40.875 22.625
Fourth Quarter...................................    15.00 6.9375  39.750  13.50
</TABLE>

   The following table sets forth the closing per share sales price of Mattson
common stock and CFM common stock, as reported on Nasdaq, and the estimated
equivalent per share price, as explained below, of Mattson common stock on June
27, 2000, the last trading day before the public announcement of the
Transactions, and on October    , 2000:

<TABLE>
<CAPTION>
                                                                      Estimated
                                                                      Equivalent
                                                                      Per Share
                                                       MTSN    CFMT     Price
                                                     -------- ------- ----------
<S>                                                  <C>      <C>     <C>
June 27, 2000....................................... $39.4375 $14.375  $20.5982
October 4, 2000..................................... $  13.75 $ 7.125  $ 7.1816
</TABLE>

   The estimated equivalent per share price of a share of CFM common stock
based on a Mattson share price of $39.4375 equals the exchange ratio of 0.5223
multiplied by the price of a share of Mattson common stock. If the merger had
occurred on June 27, 2000, CFM shareholders would have received a fraction of a
share of Mattson common stock worth approximately $20.5982 per share for each
share of CFM common stock CFM shareholders owned. If the merger had occurred on
October 4, 2000, CFM shareholders would have received a fraction of a share of
Mattson common stock worth approximately $7.1816 per share for each share of
CFM common stock CFM shareholders owned. The actual equivalent per share price
of a share of Mattson common stock that CFM shareholders would receive if the
merger closes may be different from these prices because the per share price of
Mattson common stock on the Nasdaq fluctuates continuously.

   Following the merger, Mattson common stock will continue to be quoted on the
Nasdaq, and there will be no further market for the CFM common stock.

   Mattson has never paid cash dividends on its common stock and has no present
plans to do so.

   CFM has never paid cash dividends on its common stock.

                                       34
<PAGE>

                          THE MATTSON SPECIAL MEETING

DATE, TIME, AND PLACE OF MEETING

   This joint proxy statement-prospectus is being furnished to stockholders of
Mattson as part of the solicitation of proxies by the Mattson board of
directors for use at a special meeting of stockholders to be held Wednesday,
November 8, 2000, beginning at 10:00 A.M., local time, at the Newark Hilton,
39900 Balentine Drive, Newark, California, or any adjournment or postponement
of the special meeting. This joint proxy statement-prospectus is first being
mailed to Mattson stockholders on or about October 11, 2000.

PURPOSE OF THE MATTSON SPECIAL MEETING

   The purpose of the Mattson special meeting is to vote upon a proposal to
permit Mattson to issue in the aggregate approximately 16,890,000 shares of its
common stock and increase the Stock Option Plan share reserve by 1,350,000
shares in order to effect the Transactions, to approve an amendment to
Mattson's Stock Option Plan to increase the number of shares available for
grant thereunder by 750,000 shares, to approve an amendment to Mattson's
Purchase Plan to increase the number of shares available for grant thereunder
by 250,000 shares, to approve an amendment to Mattson's Certificate of
Incorporation to increase the authorized number of shares available for
issuance from 60 million shares to 120 million shares, and to approve an
amendment to Mattson's Certificate of Incorporation to increase the initial
number of directors of Mattson from five to seven and to change the procedure
for filling board vacancies.

   Representatives of Arthur Andersen LLP, Mattson's independent public
accountants, are expected to be present at the special meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.

RECORD DATE AND OUTSTANDING SHARES

   The close of business on October 4, 2000 has been fixed by the Mattson board
of directors as the record date for determination of the stockholders of
Mattson entitled to notice of, and to vote at, the Mattson special meeting or
any postponement or adjournment of the Mattson special meeting. Holders of
record of the Mattson common stock at the close of business on the record date
are entitled to notice of, and to vote at, the Mattson special meeting. As of
the record date, there were approximately 143 stockholders of record holding an
aggregate of approximately 20,956,157 shares of Mattson common stock. See
"Principal Stockholders of Mattson" on page 155 of this joint proxy statement-
prospectus.

SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS

   As of the record date, the directors and executive officers of Mattson owned
in the aggregate approximately 18.9% of the outstanding shares, and Brad
Mattson individually owned approximately 17.7% of the outstanding shares.
Pursuant to voting agreements with each of STEAG and CFM, Brad Mattson has
agreed to vote all of his shares in favor of the share issuance and Stock
Option Plan share reserve increase in connection with the Transactions.

VOTE REQUIRED

   Approval of Proposal No. 1 seeking authorization to issue in the aggregate
approximtely 16,890,000 shares of common stock and to increase the Stock Option
Plan share reserve in connection with the Transactions, approval of Proposal
No. 2 seeking approval of the further amendment of Mattson's Stock Option Plan,
and approval of Proposal No. 3 seeking approval of the amendment of Mattson's
Purchase Plan, each require the affirmative vote of the holders of a majority
of the shares present or represented by proxy and entitled to a vote at the
special meeting, at which a quorum is present and voting. Approval of Proposal
No. 4 seeking approval of the amendment of Mattson's Certificate of
Incorporation to increase the authorized number

                                       35
<PAGE>

of shares of common stock requires the affirmative vote of the holders of a
majority of the shares of Mattson common stock outstanding as of the record
date. Approval of Proposal No. 5 seeking approval of the amendment of Mattson's
Certificate of Incorporation to increase the number of directors from five to
seven and to change the procedure for filling board vacancies requires the
affirmative vote of holders of at least two thirds of the shares of Mattson
common stock outstanding as of the record date. Each stockholder of record of
Mattson common stock on the record date is entitled to cast one vote per share,
exercisable in person or by properly executed proxy, on each matter properly
submitted for the vote of the stockholders of Mattson at the Mattson special
meeting. As of the record date, Mattson directors and officers and their
affiliates in the aggregate owned approximately 18.9% of the outstanding
shares, and Brad Mattson owned approximately 17.7% of the outstanding shares.

QUORUM; ABSTENTIONS

   The presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding voting shares of Mattson common stock will
constitute a quorum for the transaction of business at the special meeting and
any continuation or adjournment thereof. Both broker non-votes (i.e. shares
held by brokers or nominees which are represented at the meeting, but with
respect to which such broker or nominee is not empowered to vote on a
particular proposal) and abstentions will be counted in determining whether a
quorum is present at the special meeting. Broker non-votes will not be counted
in determining the number of votes necessary for approval of Proposal Nos. 1,
2, and 3 and thus will have no effect on those proposals. However, broker non-
votes will have the same effect as a negative vote on Proposal Nos. 4 and 5
pertaining to the amendment of Mattson's Certificate of Incorporation, and
abstentions will have the same effect as a negative vote on all proposals.

SOLICITATION OF PROXIES; EXPENSES

   Regardless of whether Mattson and CFM consummate the Transactions, each of
Mattson and CFM will pay its own costs and expenses incurred in connection with
the Transactions. Mattson and CFM will equally share the expenses incurred in
connection with the printing and mailing of this joint proxy statement--
prospectus. Mattson and CFM have jointly retained MacKenzie Partners, Inc. at a
fee not to exceed $13,000 plus reimbursement of expenses to assist in the
solicitation of proxies. Mattson, CFM and MacKenzie Partners, Inc. also will
request banks, brokers and other intermediaries holding shares beneficially
owned by others to send this joint proxy statement-prospectus and related
materials to and obtain voting instructions from the beneficial owners and will
reimburse the holders for their reasonable expenses in doing so.

   Subject to the foregoing, Mattson will bear the cost of the solicitation of
proxies from its stockholders and all related costs. In addition, Mattson may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Certain directors, officers, or other employees of Mattson
may supplement the original solicitation of proxies by mail with telephone,
facsimile, or personal solicitation, without payment of additional
compensation.

VOTING OF PROXIES

   The proxy accompanying this joint proxy statement-prospectus is solicited on
behalf of the Mattson board of directors for use at the meeting. Please
complete, date, and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to MacKenzie Partners at the address
specified on page 4 of this joint proxy statement-prospectus under "Who can
help answer my questions." All properly signed proxies that Mattson receives
prior to the vote at the meeting and that are not revoked will be voted at the
meeting according to the instructions indicated on the proxies or, if no
direction is indicated, will be voted FOR the issuance of shares and Stock
Options Plan share reserve increase in connection with the Transactions, FOR
the amendments of the Stock Option Plan and Purchase Plan to increase the
number of shares reserved for grant thereunder, and FOR the amendments of
Mattson's Certificate of Incorporation to increase the authorized

                                       36
<PAGE>

number of shares of common stock available for issuance, and to increase the
number of directors of Mattson from five to seven and change the procedure for
filling board vacancies. You may revoke your proxy at any time before it is
exercised at the meeting by taking any of the following actions:

  . Delivering a written notice to the Secretary of Mattson by any means,
    including facsimile, bearing a date later than the date of the proxy,
    stating that the proxy is revoked.

  . Signing and delivering a proxy relating to the same shares and bearing a
    later date prior to the vote at the meeting.

  . Attending the meeting and voting in person, although attendance at the
    meeting will not, by itself, revoke a proxy. Please note, however, that
    if your shares are held of record by a broker, bank, or other nominee and
    you wish to vote at the meeting, you must bring to the meeting a letter
    from the broker, bank, or other nominee confirming your beneficial
    ownership of the shares.

   Mattson's board of directors does not know of any matter that is not
referred to in this joint proxy statement-prospectus to be presented for action
at the meeting. If any other matters are properly brought before the meeting,
the persons named in the proxies will have discretion to vote on such matters
in accordance with their best judgment.

RECOMMENDATION OF THE BOARD OF DIRECTORS

   The Mattson board of directors has unanimously determined (with director
John Savage abstaining) that the terms of the Transactions are fair to and in
the best interests of Mattson and the Mattson stockholders. Accordingly, the
Mattson board of directors unanimously recommends that Mattson stockholders
vote FOR the proposal to issue the shares and increase the Stock Option Plan
share reserve in connection with the Transactions. In addition, the Mattson
board of directors also unanimously recommends that Mattson stockholders vote
FOR the proposal to further increase the number of shares reserved for issuance
under Mattson's Stock Option Plan by 750,000 shares, FOR the proposal to
increase the number of shares reserved for issuance under Mattson's Purchase
Plan by 250,000 shares, FOR the proposal to amend Mattson's Certificate of
Incorporation to increase the number of authorized shares of common stock from
60 million shares to 120 million shares, and FOR the proposal to amend
Mattson's Certificate of Incorporation to increase the number of directors from
five to seven and to change the procedure for filling board vacancies.

   Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented
at the meeting. To vote your shares, please complete, date, and sign the
enclosed proxy and mail it promptly in the postage-paid envelope provided,
whether or not you plan to attend the meeting. You may revoke your proxy at any
time before it is voted. If you are a holder of record, you may also cast your
vote in person at the special meeting. If your shares are held in an account at
a brokerage firm or bank, you must instruct them on how to vote your shares. If
you do not vote, it may jeopardize Mattson's ability to obtain a quorum,
thereby resulting in a disapproval of the Transactions and the other proposals.

                                       37
<PAGE>

                            THE CFM SPECIAL MEETING

DATE, TIME, AND PLACE OF MEETING

   This joint proxy statement-prospectus is being furnished to shareholders of
CFM as part of the solicitation of proxies by the CFM board of directors for
use at a special meeting of shareholders to be held Wednesday,
November 8, 2000, beginning at 1:00 p.m., local time, at the Sheraton Great
Valley Hotel, 707 East Lancaster Avenue, Frazer, Pennsylvania 19355, or any
adjournment or postponement of the special meeting. This joint proxy statement-
prospectus is first being mailed to CFM shareholders on or about October 11,
2000.

PURPOSE OF THE CFM SPECIAL MEETING

   The purpose of the CFM special meeting is to vote upon a proposal to adopt
and approve the Merger Agreement pursuant to which CFM will become a wholly
owned subsidiary of Mattson.

RECORD DATE AND OUTSTANDING SHARES

   The close of business on October 4, 2000 has been fixed by the CFM board of
directors as the record date for determination of the shareholders of CFM
entitled to notice of, and to vote at, the CFM special meeting or any
postponement or adjournment of the CFM special meeting. Holders of record of
the CFM common stock at the close of business on the record date are entitled
to notice of, and to vote at, the CFM special meeting. As of the record date,
there were approximately 175 shareholders of record holding an aggregate of
approximately 7,878,866 shares of CFM common stock. See "Principal Shareholders
of CFM" on page 191 of this joint proxy statement-prospectus. Except for the
shareholders identified herein under "Principal Shareholders of CFM," as of the
record date, to the knowledge of CFM, no other person beneficially owned more
than 5% of the outstanding CFM common stock.

   This joint proxy statement-prospectus was mailed to all CFM shareholders of
record as of the record date and constitutes notice of the CFM special meeting
in conformity with the requirements of the Pennsylvania Business Corporation
Law.

SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS

   As of the record date, the directors and executive officers of CFM owned in
the aggregate approximately 20.3% of the outstanding shares, and Christopher
McConnell individually owned approximately 14.7% of the outstanding shares.
Pursuant to a voting agreement with Mattson, Christopher McConnell has agreed
to vote all of his shares in favor of the Merger Agreement.

VOTE REQUIRED

   Adoption and approval of the Merger Agreement requires the affirmative vote
of holders of a majority of the votes cast by all shareholders of CFM common
stock outstanding as of the record date at a meeting at which a quorum is
present. If a quorum is not present, those holders present, in person or by
proxy, may vote to adjourn the meeting to such time and place as they may
determine. Upon any reconvening of any adjournment thereof, if a quorum is not
then present and at least 15 days has passed since the initial adjournment for
lack of a quorum, those present shall constitute a quorum for the purpose of
voting upon the CFM proposals set forth herein. Each shareholder of record of
CFM common stock on the record date is entitled to cast one vote per share,
exercisable in person or by properly executed proxy, on each matter properly
submitted for the vote of the shareholders of CFM at the CFM special meeting.

QUORUM; ABSTENTIONS

   The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of CFM common stock entitled to vote at the
CFM special meeting, is necessary to constitute a quorum. Abstentions will be
counted for purposes of determining a quorum, but will have no effect on the
vote to appove the Merger Agreement. If a broker holding shares in street name
returns an executed proxy that indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more

                                       38
<PAGE>

matters, such shares will be considered represented at the CFM special meeting
for purposes of determining a quorum, but will have no effect on the vote to
approve the Merger Agreement.

SOLICITATION OF PROXIES; EXPENSES

   Regardless of whether CFM and Mattson consummate the merger, each of CFM and
Mattson will pay its own costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated by the Merger Agreement,
except that CFM and Mattson will share equally the fees and expenses (other
than attorneys' and accounting fees) incurred in connection with the printing,
filing, and mailing of this joint proxy statement-prospectus.

   CFM and Mattson have jointly retained MacKenzie Partners, Inc., at a fee not
to exceed $13,000. See "The Mattson Special Meeting-Solicitation of Proxies;
Expenses" on page 36 of this joint proxy statement-prospectus.

   Subject to the foregoing, CFM will bear the cost of the solicitation of
proxies from its shareholders and all related costs. In addition, CFM may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Certain directors, officers, or other employees of CFM may
supplement the original solicitation of proxies by mail with telephone,
facsimile, or personal solicitation, without payment of additional
compensation.

VOTING OF PROXIES

   The proxy accompanying this joint proxy statement-prospectus is solicited on
behalf of the CFM board of directors for use at the meeting. Please complete,
date, and sign the accompanying proxy and promptly return it in the enclosed
envelope or otherwise mail it to CFM. All properly signed proxies that CFM
receives prior to the vote at the meeting and that are not revoked will be
voted at the meeting according to the instructions indicated on the proxies or,
if no direction is indicated, will be voted FOR adoption and approval of the
Merger Agreement. You may revoke your proxy at any time before it is exercised
at the meeting by taking any of the following actions:

  .  Delivering a written notice to the Secretary of CFM by any means,
     including facsimile, bearing a date later than the date of the proxy,
     stating that the proxy is revoked.

  .  Signing and delivering a proxy relating to the same shares and bearing a
     later date prior to the vote at the meeting.

  .  Attending the meeting and voting in person, although attendance at the
     meeting will not, by itself, revoke a proxy. Please note, however, that
     if your shares are held of record by a broker, bank, or other nominee
     and you wish to vote at the meeting, you must bring to the meeting a
     letter from the broker, bank, or other nominee confirming your
     beneficial ownership of the shares.

   CFM's board of directors does not know of any matter that is not referred to
in this joint proxy statement-prospectus to be presented for action at the
meeting. If any other matters are properly brought before the meeting, the
persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.

   YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXIES. A
TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES FOR
SHARES OF CFM WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION OF
THE MERGER.

RIGHTS OF DISSENTING SHAREHOLDERS

   Under Pennsylvania law, CFM shareholders are entitled to dissent from the
merger and instead demand payment from CFM of the fair value of their shares.
To claim dissenters' rights, you must comply with the following requirements:

  . Before the shareholder vote on the Merger Agreement is taken, you must
    deliver to CFM written notice of your intent to demand payment for your
    shares if the merger is effected.

                                       39
<PAGE>

  . You must not vote your shares in favor of the Merger Agreement at the CFM
    shareholder meeting.

  . If you properly notify CFM of your intent to demand dissenters' rights,
    CFM will send you written notice after the completion of the merger,
    indicating when and how to demand payment for your shares. After
    receiving the notice, you must demand payment for your shares in the
    manner required by the notice sent by CFM.

   You must certify to CFM as to the date you acquired beneficial ownership of
your shares.

   You must deposit the certificates representing your shares in the manner
required by the notice you receive from CFM.

   If you do not comply with the requirements outlined above, you will not be
entitled to receive payment for your shares under the dissenters' rights
provisions of Pennsylvania law.

   If you comply with the outlined requirements, promptly following the later
of the date of effectiveness of the merger or the date CFM received your demand
for payment, CFM will pay to you the amount CFM estimates to be the fair value
of your shares of CFM common stock. Within 30 days of your receipt of CFM's
remittance of the payment or estimate of the fair value, if you believe CFM's
estimate of the fair value of your shares is incorrect, you may notify CFM in
writing of your own estimate of the fair value of your shares of CFM common
stock and demand payment of your estimate. Within 60 days of the later to occur
of the effectuation of the merger, timely receipt of your demand for payment
and timely receipt of an estimate of fair value from you, if the demand for
payment of the shares remains unsettled, CFM may request the fair value be
determined by a court. YOUR DISSENTERS' RIGHTS ARE SET OUT IN THEIR ENTIRETY IN
SECTIONS 1571-1580 OF THE PENNSYLVANIA BUSINESS CORPORATION LAW, WHICH IS
ATTACHED TO THIS JOINT PROXY STATEMENT-PROSPECTUS AS ANNEX E.

RECOMMENDATION OF THE BOARD OF DIRECTORS

   The CFM board of directors has unanimously determined that the terms of the
Merger Agreement are fair to and in the best interests of CFM and the CFM
shareholders. Accordingly, the CFM board of directors recommends that CFM
shareholders vote FOR the proposal to approve the Merger Agreement.

   Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented
at the meeting. To vote your shares, please complete, date and sign the
enclosed proxy and mail it promptly in the postage-paid envelope provided,
whether or not you plan to attend the meeting. You may revoke your proxy at any
time before it is voted. If you are a holder of record, you may also cast your
vote in person at the special meeting. If your shares are held in an account at
a brokerage firm or bank, you must instruct them on how to vote your shares. If
you do not vote or do not instruct your broker or bank how to vote, it will
have the same effect as voting against approval of the Merger Agreement.

                                       40
<PAGE>

                                 PROPOSAL NO. 1

                           FOR MATTSON STOCKHOLDERS:

  APPROVAL OF ISSUANCE OF SHARES AND INCREASE IN OPTION PLAN SHARE RESERVE IN
                        CONNECTION WITH THE TRANSACTIONS

                             FOR CFM SHAREHOLDERS:

                  APPROVAL OF ADOPTION OF THE MERGER AGREEMENT

BACKGROUND OF THE TRANSACTIONS

   A patent lawsuit was brought by CFM against a U.S. subsidiary of STEAG,
STEAG Electronic Systems, Inc. ("SES"), in July of 1995 asserting infringement
of a U.S. patent owned by CFM by certain wet processing products of SES. After
a trial, SES was held to have infringed the CFM patent and a judgment was
entered against SES. In June 1998, an injunction was issued prohibiting SES
from selling the infringing products in the United States. From time to time
throughout the pendency of the lawsuit and various appeals, STEAG and CFM held
discussions concerning resolution of the dispute. During March and April of
1999, STEAG and CFM held substantive discussions about a possible combination
of the wet processing business of STEAG's semiconductor equipment division with
CFM. Those discussions ended in April 1999 as a result of an inability to agree
upon relative valuation.

   Brad Mattson, Chairman and Chief Executive Officer of Mattson, became a
member of the board of directors of CFM in December 1995. As a director of CFM,
Mr. Mattson had ongoing contact with CFM and was familiar with CFM's products,
market position, and management. He was also familiar with the lawsuit between
CFM and SES and the effect that ongoing dispute had on each of those companies.

   In late August 1999, Mr. Mattson and Roger Carolin, President and Chief
Executive Officer of CFM, discussed the potential for a business combination
between Mattson and CFM. Mr. Carolin and Mr. Mattson exchanged emails and
letters in September of 1999 regarding valuation methodologies and possible
transaction structures, and requesting financial and other information needed
to evaluate the potential for a transaction. On October 5, 1999, Mr. Mattson
and Mr. Carolin met with other executives from Mattson and CFM to pursue
discussion of the advantages and possible terms of a combination of Mattson and
CFM. Following this meeting, Mr. Carolin conferred with other members of the
board of directors of CFM (excluding Mr. Mattson) on the potential combination.
On October 5, 1999, Mr. Carolin and Mr. Mattson met and agreed that their
relative valuation discussions did not support further pursuing a combination
of the two companies.

   On November 4, 1999, Mr. Mattson sent by email a letter to Dr. Jochen
Melchior, Chief Executive Officer of STEAG's parent company, STEAG AG, and Dr.
Hans-Georg Betz, Chief Executive Officer of STEAG, suggesting that it might be
mutually beneficial to explore the possibility for a business combination
between Mattson and the semiconductor equipment division of STEAG. On November
22, 1999, Dr. Betz responded positively to Mr. Mattson, indicating interest in
a transaction involving STEAG's wet processing business and suggesting the
involvement of CFM.

   In mid-January 2000, Mr. Carolin and Mr. Lorin J. Randall, Chief Financial
Officer of CFM, met with the President and the Chief Financial Officer of a
third party which was an alternative potential acquisition partner for CFM (the
"Alternate Partner"), along with legal and financial advisors representing the
Alternate Partner. The representatives of the Alternate Partner made a
presentation concerning proposed terms of a possible combination between CFM
and the Alternate Partner, including a relative valuation for CFM in that
combination. CFM management had held a series of discussions with management
and representatives of the Alternate Partner during July, October, November,
and December of 1999 concerning the advantages and potential terms of a
business combination with the Alternate Partner. CFM and the Alternate Partner
had previously engaged in discussions of a business combination between May and
September of 1998, which were formally terminated in October of 1998.

                                       41
<PAGE>

   On January 17, 2000, Michael A. Fink, Chief Executive Officer of STEAG
MicroTech GmbH, a German subsidiary of STEAG engaged in the wet processing
business, telephoned Mr. Carolin to renew discussions of a possible combination
of STEAG's wet processing business with CFM and a settlement of the pending
patent litigation between the companies.

   On January 27, 2000, a representative of UBS Warburg LLC (formerly known as
Warburg Dillon Read LLC), financial advisor to CFM, met with representatives of
STEAG to discuss possible structures and scenarios for a potential transaction
involving STEAG's wet processing business and CFM, including the possible
involvement of Mattson.

   On January 31, 2000, Mr. Mattson sent an email to Mr. Carolin noting that
the recent increase in the share price of Mattson common stock could create an
opportunity for a business combination with Mattson at an attractive relative
valuation. Mr. Mattson suggested that they renew discussions about a possible
combination.

   On February 7, 2000, Mr. Mattson sent Mr. Carolin an outline of a valuation
model, and proposed further discussions after Mr. Carolin had time to evaluate
CFM's situation. Later that day, the board of directors of CFM met, except for
Mr. Mattson who was excused. During the meeting, a Special Committee for
Mergers and Acquisitions was formed with Mr. John Osborne, Chairman, and Mr.
Milton S. Stearns, Jr., member, to review all matters related to business
combination proposals and to report their findings and recommendations to the
board. The board directed Mr. Carolin to pursue the discussions with Mattson
and also to conduct due diligence on the Alternate Partner and take steps as
necessary to assess and validate the value of the offer received from the
Alternate Partner.

   Representatives of CFM and the Alternate Partner conducted their respective
due diligence reviews during February of 2000.

   On February 9, 2000, Mr. Fink sent Mr. Carolin an outline of possible terms
for a combination of the wet processing business of CFM and STEAG.

   On February 10, 2000, Mr. Carolin contacted Dr. Melchior at STEAG and Mr.
Mattson at Mattson, suggesting a meeting in New York City among Messrs. Carolin
and Mattson and Dr. Melchior to discuss the potential for a trilateral business
combination among CFM, Mattson, and the STEAG Semiconductor Division. Dr.
Melchior indicated that he would be unable to attend such a meeting, but that
he would send appropriate STEAG representatives to the proposed meeting.

   On February 15, 2000, Mr. Mattson, Mr. Carolin, Dr. Berthold Luetke-Daldrup,
Director of Strategic Planning for STEAG, and Mr. Fink, met in New York City
where they participated in a video conference with Dr. Melchior and a telephone
conference with Dr. Betz. The business advantages of combining the Mattson and
STEAG rapid thermal processing businesses and the STEAG and CFM semiconductor
wet processing businesses were discussed. It was agreed that such a combination
could offer significant benefits to each of the participating companies and
their shareholders, and that further meetings to pursue discussion of a
possible combination of the three businesses should be scheduled.

   During the following week, the parties held several discussions regarding
further steps and requested basic financial and other information from each
other. Mattson, STEAG and CFM entered into a Mutual Non-Disclosure Agreement on
February 25, 2000.

   On February 27, 2000, a group including Mr. Carolin, Mr. Randall, Mr.
Ferdinand Seemann, a Vice President of Mattson, Mr. John Savage representing
Alliant Partners, financial advisor to Mattson (and a director of Mattson), Dr.
Luetke-Daldrup, Dr. Rolf Thaler, Chief Financial Officer of STEAG, Mr. Fink and
representatives of Morgan Stanley & Co., Incorporated ("Morgan Stanley"),
financial advisor to STEAG, met in New York City to discuss the potential for a
combination of the parties' businesses, and to identify structural and other
issues.

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<PAGE>

   On February 28, 2000, Mr. Carolin, Mr. Randall, Mr. Fink, Dr. Luetke-
Daldrup, and Dr. Thaler met again in New York City, without representatives of
Mattson, to continue discussion of the potential for a business combination
involving Mattson, the STEAG Semiconductor Division, and CFM, including
relative valuation.

   On March 9, 2000, Mr. Seemann, Mr. Savage, and the Corporate Controller of
Mattson met in New York City with Mr. Fink, Dr. Luetke-Daldrup, Dr. Thaler, and
representatives of Morgan Stanley to continue discussion of a potential
combination of the semiconductor business of STEAG with Mattson and CFM,
including relative valuations for the companies. Later that day, Mr. Seemann,
Mr. Savage, and the Coporate Controller of Mattson also met with Mr. Carolin
and Mr. Randall. The discussions ended with CFM in disagreement with Mattson
over relative valuation. The representatives of Mattson and STEAG met again on
March 10, 2000.

   On March 15, 2000, a videoconference was held among Mr. Savage, Mr. Seemann,
Mr. Brian McDonald, Chief Financial Officer of Mattson, Dr. Thaler, Mr. Fink,
Dr. Luetke-Daldrup and representatives of Morgan Stanley. It was agreed during
the meeting to move ahead with bilateral discussions between STEAG and Mattson.

   On March 20, 2000, a meeting was held in Germany among Dr. Melchior, Dr.
Betz, Dr. Luetke-Daldrup, Mr. Mattson and Mr. Seemann. A general outline of
terms for a proposed transaction was discussed and issues were identified. The
parties confirmed a valuation for the STEAG Semiconductor Division and
preliminarily agreed on a price of 12 million newly issued Mattson shares. The
parties also agreed to exchange more detailed due diligence information.

   On March 21, Mr. Carolin, Mr. McConnell and Mr. Mattson met and discussed
the conditions under which the two companies might continue their discussions.
Mr. Carolin and Mr. Mattson subsequently exchanged a number of email messages
discussing possible valuation scenarios.

   On March 24, 2000, Mr. Seemann, Mr. Savage, the Corporate Controller of
Mattson, and Mattson's outside legal counsel met by videoconference with Dr.
Luetke-Daldrup, Dr. Thaler, Mr. Fink, and Dr. Peter Lockowandt, STEAG's general
counsel, representatives of Morgan Stanley, and representatives of STEAG's U.S.
outside legal advisor, to review a draft term sheet for a possible business
combination. From time to time thereafter, the parties continued to exchange
comments and revised drafts.

   On March 28, 2000, the Special Committee on Mergers and Acquisitions of the
board of directors of CFM met and reviewed the status of due diligence and the
negotiation of a definitive merger agreement with the Alternate Partner.

   Between March 30 and April 6, 2000, Mattson's due diligence team met in
Germany with representatives from STEAG and visited various STEAG Semiconductor
Division facilities in Germany, Israel, and Slovakia.

   On April 7, 2000, the Alternate Partner's President met with Mr. Carolin.
The Alternate Partner's President informed Mr. Carolin that the Alternate
Partner would not proceed with the proposed combination at the relative
valuation previously discussed, but was authorized to continue negotiations
based on a reduced valuation.

   On April 8, 2000, Mr. Carolin conveyed to Mr. Mattson that CFM might soon
conclude an agreement to combine with another company. Following a series of
telephone discussions, Mr. Mattson proposed to increase the consideration
previously offered with respect to a merger of CFM and Mattson to approximately
4.85 million shares of Mattson common stock, with additional shares of Mattson
common stock to be set aside to cover existing options to purchase shares of
CFM common stock.

   Between April 8 and April 10, 2000, Mr. Seemann and Mr. Savage communicated
by telephone and email with Dr. Betz, Dr. Luetke-Daldrup, and Dr. Thaler
regarding the negotiations between Mattson and CFM and the relative valuations
of the companies. As a result of these discussions, STEAG agreed to accept a
reduced number of Mattson shares for its semiconductor equipment business,
subject to completion of a merger between Mattson and CFM, and resolution of
the patent litigation between CFM and SES, at the same time.

                                       43
<PAGE>

   On April 11, 2000, the Special Committee on Mergers and Acquisitions of the
board of directors of CFM met and reviewed the status of discussions with the
Alternate Partner and Mattson. It was agreed that the new Mattson proposal
represented an excellent alternative to the reduced proposal of the Alternate
Partner, and should be pursued in parallel with the proposal of the Alternate
Partner. The Committee requested that all due diligence and negotiation of a
form of definitive merger agreement with Mattson should be concluded by April
18, 2000, the scheduled date for the CFM board of directors to meet and take
action on the Alternate Partner merger proposal.

   Representatives of Mattson and CFM proceeded to negotiate the terms of a
form of definitive merger agreement and to complete a due diligence review of
the respective companies.

   During the week of April 11, 2000, a due diligence team for STEAG met with
Mattson representatives in California.

   On April 12, 2000, Mr. Mattson, Mr. Seemann, Dr. Melchior, and Dr.
Lockowandt participated in a videoconference to further discuss the proposed
terms of a combination of the STEAG Semiconductor Division and Mattson.

   On April 17, 2000, the Mattson board of directors met by conference call,
along with members of Mattson management, outside legal counsel, and Mr.
Savage, as representative of Alliant Partners. The Mattson board of directors
reviewed the status of discussions with STEAG and negotiations with CFM. The
Mattson board approved entering into a binding no-shop agreement and making a
termination fee commitment to CFM based on the negotiated form of merger
agreement, and authorized Mr. Mattson to pursue both the proposed STEAG
Semiconductor Division business combination and the proposed merger with CFM.

   On April 18, 2000, the board of CFM (excluding Mr. Mattson) met and
considered the merger proposals from Mattson and from the Alternate Partner,
each of which included a form of a fully-negotiated definitive merger
agreement. The board approved the Mattson merger offer and the entering into of
a binding no-shop agreement which obligated the parties to either enter into
the proposed definitive merger agreement within 60 days, the time Mattson
estimated it would take to enter into a Combination Agreement with STEAG, or
pay substantial termination penalties, subject to certain termination
provisions.

   Later on April 18, 2000, Mattson and CFM executed a binding no-shop
agreement which obligated the parties to either enter into the attached form of
definitive merger agreement within 60 days or pay substantial termination
penalties, consistent with the terms approved by the CFM and Mattson boards of
directors.

   On April 20, 2000, the Mattson board of directors met and received an update
and discussed the potential business combination with the STEAG Semiconductor
Division and the merger with CFM.

   Effective April 26, 2000, Mr. Mattson resigned from the CFM board of
directors.

   On April 26 and 27, 2000, Dr. Betz, Dr. Luetke-Daldrup, other
representatives of STEAG, Mr. Mattson, Mr. Seemann, other executives of
Mattson, and Mr. Carolin met in San Jose, California to continue discussion of
a trilateral business combination. A number of structural, timing, and
integration issues were discussed without resolution.

   On May 3 and 4, 2000, Mr. Mattson, Mr. Seemann, other representatives of
Mattson, and Mr. Carolin, met in Germany with Dr. Melchior, Dr. Betz, Dr.
Luetke-Daldrup, Mr. Ludger Viefhues, Chief Financial Officer of STEAG RTP
Systems, Dr. Thaler, and other representatives of STEAG, to continue discussion
of open issues.

   On May 17, 2000, the Mattson board of directors was updated concerning the
status of discussions with STEAG and CFM.

   On May 18 and 19, 2000, Mr. Mattson and Dr. Melchior exchanged email
messages seeking to revive the discussions, which had previously stalled as a
result of structural, timing, and integration issues.

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<PAGE>

   On May 22 and 23, 2000, video conference meetings took place between Dr.
Melchior, Dr. Betz, representatives of Morgan Stanley, Mr. Mattson, Mr.
Seemann, Mr. Savage, and other representatives of Mattson, seeking resolution
of open issues.

   On May 23, 2000, the Supervisory Board of STEAG approved the proposed
combination of the STEAG Semiconductor Division with Mattson based on the
proposed terms.

   On May 25 and 26, 2000, Mattson and STEAG executed a binding no-shop
agreement and a non-binding outline of terms for the proposed business
combination. Representatives of Mattson and STEAG proceeded with their
respective due diligence reviews and prepared definitive agreements relating to
the business combination.

   On June 2 and 3, 2000, Mr. Mattson, Mr. McDonald, and Mr. Savage met in
Essen, Germany with Dr. Betz, Dr. Luetke-Daldrup, Dr. Thaler, Dr. Lockowandt,
and other representatives of STEAG, representatives of Morgan Stanley,
representatives of U.S. and German outside counsel to Mattson, and
representatives of U.S. outside counsel to STEAG, to negotiate the terms of
definitive agreements relating to the business combination.

   On June 8, 2000, Mr. Savage and Mr. McDonald held a conference call with Mr.
Carolin and Mr. Randall to discuss CFM's financial performance in the quarter
ended April 30, 2000, updated financial projections for CFM, and issues related
to the change of control vesting feature of the CFM stock option plans. The
Mattson representatives proposed a reduction in the number of Mattson shares to
be issued to the CFM shareholders and optionholders in the merger.

   On June 12, 2000, the Special Committee for Mergers and Acquisitions of the
board of directors of CFM met to receive an update from Mr. Carolin and to
discuss the new Mattson proposal.

   During June 13, 14, and 15, 2000, numerous telephone conversations took
place between representatives of Mattson and CFM to clarify each party's
position on valuation, stock options needed to retain key CFM employees, and
the termination provisions under the merger agreement.

   On June 15, 2000, the Special Committee for Mergers and Acquisitions of the
board of directors of CFM received an update regarding the discussions with
Mattson. Mattson and CFM agreed to extend their binding no-shop agreement until
June 30, 2000, and to continue negotiation of a definitive merger agreement.

   On June 16, 2000, Mr. Mattson and Mr. Carolin spoke by telephone and agreed
to adjusted consideration in the CFM merger based on approximately 4.1 million
Mattson shares, plus the assumption of outstanding CFM options.

   Between June 21 and 23, 2000, Dr. Betz, Dr. Luetke-Daldrup, Dr. Thaler, Dr.
Lockowandt, and other representatives of STEAG, met daily with Mr. Mattson, Mr.
McDonald, Mr. David Dutton, Chief Operating Officer of Mattson, and Mr. Savage
in Newark, California, along with representatives of Morgan Stanley,
representatives of U.S. outside counsel to Mattson, and representatives of U.S.
outside counsel to STEAG, to finalize the definitive agreements relating to the
business combination. During these meetings, in light of the decreased price
Mattson had agreed to pay for CFM, Mattson agreed to increase the consideration
to be paid for the semiconductor equipment division of STEAG to 11,850,000
shares.

   During the period in which STEAG and Mattson were discussing the terms of
the proposed business combination of the STEAG Semiconductor Division and
Mattson, the German Parliament (Bundestag) was reported to be considering
adopting legislation that would eliminate capital gains tax on the sale of
shares in German companies and that would lower corporate tax rates. It was
expected that such legislation would be adopted during the summer of 2000 and
would become effective on January 1, 2001. Partly in anticipation of such
changes in the German tax law, and partly because certain profit and loss
absorption agreements between

                                       45
<PAGE>

STEAG and the STEAG Semiconductor Subsidiaries organized in Germany could not,
under applicable German law, be terminated prior to the end of the year, the
parties agreed that, regardless of when the conditions to closing were
satisfied, the closing of the business combination would not occur earlier than
January 1, 2001. As the merger of CFM and Mattson was structured to occur
concurrently with the business combination, a similar provision was added to
the Merger Agreement. However, in order to reduce the uncertainty that the
actual closing will occur, Mattson agreed with STEAG and CFM in the Combination
Agreement and the Merger Agreement, respectively, that, if the requisite
approvals of Mattson's stockholders and CFM's shareholders have been obtained
and all other closing conditions that are beyond the parties' control have been
satisfied prior to December 1, 2000, the parties will hold a pre-closing at
which all remaining conditions to closing (other than the arrival of January 1,
2000, the absence of litigation, and delivery of the Mattson shares) will
either be fulfilled or irrevocably waived.

   Between June 24 and June 26, 2000, Mr. Fink and other representatives of
STEAG, and Mr. Carolin and other representatives of CFM, agreed upon terms of
an interim patent license agreement granting STEAG rights to certain CFM
patents relating to the wet processing business and terms of a settlement of
the lawsuit between CFM and SES, under which SES would withdraw its pending
appeal of the lower court decision in favor of CFM, and STEAG would cause
certain foreign proceedings seeking to invalidate CFM's foreign patent right to
be dismissed.

   On June 26, 2000, at a special meeting of the Mattson board of directors,
management and Mattson's outside legal counsel reviewed the principal terms of
the draft Combination Agreement, Merger Agreement and related agreements, as
revised, including the mutual dependency of the Transactions, other conditions
to the Transactions, the no-shop commitments of each party and the amount and
timing of fees that might be payable in connection with termination of the
Transactions, as well as the resolution of previously open issues, and reviewed
with Mattson management and advisors the strategic rationale for the merger and
the business combination, and the potential benefits and risks of the proposed
Transactions to Mattson. Mr. Savage, as representative of Alliant Partners,
reviewed with the Mattson board of directors financial analyses related to the
proposed Transactions.

   On June 26, 2000, at a meeting of CFM's Special Committee on Mergers and
Acquisitions of the board of directors, management described to the committee
the termination provisions of the interim patent license agreement to be
entered into with STEAG. In the early hours of June 28, 2000, at a special
meeting of the board of directors of CFM, management and CFM's outside legal
counsel reviewed the due diligence that had been completed during the preceding
week and discussed risks involved, and the protection afforded CFM, upon
entering into a merger agreement with Mattson, the closing of which was
conditioned on the simultaneous closing of the business combination between
Mattson and STEAG. Following the discussion, the board considered other
conditions to the closing, as well as the resolution of previously open issues.
The financial advisor reviewed with the board the financial analyses related to
the proposed merger and delivered an opinion that the merger was fair to CFM
shareholders from a financial point of view. After consideration of the
presentations and the benefits of the transaction, along with a consideration
of the risks, the board unanimously voted to approve the merger and related
agreements, concluding that the merger was in the best interests of the CFM
shareholders.

   On June 27, 2000, Mr. Mattson and Mr. Carolin spoke by telephone and, based
on the aggregate number of shares and options of CFM common stock to be
exchanged for the agreed upon number of Mattson shares, concurred in the
formulation of a fixed exchange ratio of 0.5223 shares of Mattson common stock
for each share of common stock of CFM.

   Also on June 27, 2000, at a special meeting of the Mattson board of
directors, management and outside legal counsel to Mattson reported on the
finalized terms of the Combination Agreement, the Merger Agreement, and related
agreements. Representatives of Alliant Partners reviewed their financial
analyses with respect to the proposed Transactions and delivered an oral
opinion (subsequently confirmed in writing) that the number of Mattson shares
to be issued in the Transactions was fair to the Mattson stockholders from a
financial point of view. After consideration of these presentations, the
Mattson board of directors (other than

                                       46
<PAGE>

Mr. Savage, who abstained from voting) unanimously approved the Transactions
and the related agreements, concluding that the Transactions were in the best
interests of the Mattson stockholders.

   During the night of June 27, 2000, Mattson, M2C Acquisition Corporation, and
CFM executed the definitive Merger Agreement and Mattson and STEAG executed the
definitive Combination Agreement. Concurrently with the execution of the Merger
Agreement and the Combination Agreement, STEAG, SES, and CFM entered into a
settlement agreement with regard to the patent lawsuit and CFM, STEAG, and
CFMT, Inc. entered into an interim patent license agreement.

MATTSON'S REASONS FOR THE TRANSACTIONS

   In reaching its determination to approve and adopt both the Combination
Agreement and the Merger Agreement, the Mattson board of directors consulted
with Mattson's management and its financial and legal advisors, and considered
a number of factors. The Mattson board did not assign any relative or specific
weights to the factors considered in reaching such determination, and
individual directors may have given differing weights to different factors. In
its decision to recommend and approve the issuance of shares needed to complete
the Transactions, the most important benefits identified by the board of
directors of Mattson were the following:

  .  The combination of the three parties' semiconductor equipment businesses
     will provide the critical mass required for Mattson to compete in the
     long term. As a result of the Transactions, Mattson will become a top
     tier process equipment supplier that will be better able to meet the
     needs of the larger customers in the industry.

  .  To reduce the risk of being dependent on a single product line in a
     rapidly changing technology market, one of Mattson's strategies has been
     to become a multi-product, multi-technology company. Mattson's board
     believes that the combined companies will address this strategy by
     offering leading products with strong market share position in three
     major market segments: dry strip, RTP, and wet processing.

  .  Mattson will become a truly global company with operations located
     around the world. As a result, Mattson will be able to leverage
     resources from around the world to improve operating costs, while
     providing better support to its customers.

  .  The Transactions will improve Mattson's positioning at the top 20
     equipment purchasers, which purchasers account for more than 70% of the
     total world market for semiconductor equipment.

  .  Given the complementary nature of the product lines of Mattson, the
     STEAG Semiconductor Division, and CFM, Mattson's board believes that the
     Transactions will enhance the opportunity for the potential realization
     of Mattson's strategic objectives;

  .  Mattson's stockholders would have the opportunity to participate in the
     potential for growth of the combined company after the Transactions;

  .  The combination of the complementary distribution strategies of Mattson,
     the STEAG Semiconductor Division, and CFM will allow the combined
     company to distribute its products more widely;

  .  Combined technological resources may allow the combined company to
     compete more effectively and to develop new products at lower price
     points with greater functionality than existing products; and

  .  The broader customer base of the combined company will allow it to
     mitigate the risk of customer concentration to which Mattson is
     currently exposed.

   The Mattson board of directors consulted with management and its outside
legal and financial advisors as part of the process of approving the
Transactions. In its evaluation the Mattson board considered the following
factors among others:

  .  The potential strategic benefits of the Transactions;

  .  The complementary product lines of Mattson, the STEAG Semiconductor
     Division, and CFM;

                                       47
<PAGE>

  .  Historical information concerning the respective businesses, prospects,
     financial performance and condition, operations, technologies,
     managements, and competitive positions of Mattson, the STEAG
     Semiconductor Division, and CFM;

  .  Mattson management's view of the financial condition, results of
     operations, and businesses of Mattson, the STEAG Semiconductor Division,
     and CFM before and after giving effect to the Transactions;

  .  The increased value of the wet processing businesses of the STEAG
     Semiconductor Division and CFM if their ongoing patent dispute could be
     quickly resolved;

  . Current financial market conditions and historical market prices,
    volatility and trading information with respect to Mattson's common stock
    and CFM's common stock;

  . The consideration to be provided by Mattson in the Transactions and the
    relationship between the current and historical market values of
    Mattson's common stock and CFM's common stock and a comparison of similar
    business combination and merger transactions;

  . The belief that the terms of the Combination Agreement and the Merger
    Agreement, including the CFM exchange ratio and the parties'
    representations, warranties, and covenants, and the conditions to their
    respective obligations, are reasonable. The Mattson board of directors
    also considered the provisions in the Combination Agreement and the
    Merger Agreement that prohibited solicitation of third-party bids and the
    acceptance, approval, or recommendation of any unsolicited third-party
    bids, and the provisions which require the payment of substantial fees
    upon certain termination events. The Mattson board of directors
    considered that the provisions in the Combination Agreement and the
    Merger Agreement for the benefit of Mattson reasonably protected the
    interests of Mattson stockholders, and those for the benefit of STEAG and
    CFM did not present any significant impediments to proceeding with the
    Transactions considering all of the circumstances;

  . The target closing date after January 1, 2001;

  . The prospects of Mattson as an independent company;

  . The potential for other third parties to enter into strategic
    relationships with or to acquire Mattson, the STEAG Semiconductor
    Division, or CFM;

  . Detailed financial analyses and pro forma and other information with
    respect to the companies presented to the board, including the opinion of
    Alliant Partners that the total consideration provided by Mattson under
    the Transactions is fair, from a financial point of view, to Mattson's
    stockholders. The Mattson board viewed the analyses and opinion of an
    independent, nationally recognized financial advisor such as Alliant
    Partners to be an important factor in reaching a determination that the
    Transactions and the issuance of shares under the Transactions should be
    approved.

  . The expectation that the merger will be treated as a tax-free
    reorganization for federal income tax purposes;

  . The expected impact of the Transactions on Mattson's customers and
    employees;

  . Reports from management, legal and financial advisors as to the results
    of the due diligence investigation of both the STEAG Semiconductor
    Division and CFM; and

  . The interests of the officers and directors of Mattson in the
    Transactions, including the matters disclosed under "Interests of
    Mattson's Directors, Officers, and Affiliates in the Transactions"
    beginning on page 54 of this joint proxy statement-prospectus.

   Potential risks or other negative factors identified by the Mattson board
of directors include the following:

  . The risk that the potential benefits of the Transactions may not be
    realized;

  . The challenges of integrating the management teams, products, strategies,
    cultures and organizations of the three companies, especially in light of
    the physical distance between Mattson's headquarters in Fremont,
    California, the STEAG Semiconductor Division's two headquarters in
    Germany, and CFM's headquarters in Exton, Pennsylvania;

                                      48
<PAGE>

  . The risk of disruption of sales momentum and potential delay or reduction
    in orders as a result of uncertainties created by the announcement of the
    Transactions;

  . The risk that the parties' agreement to close after January 1, 2001 meant
    there would be a significant period of uncertainty for customers,
    employees and stockholders in the face of rapidly changing market
    conditions;

  . The significant challenge and added risk of effecting two concurrent
    business combinations;

  . The risk that the Transactions might not be consummated despite the
    parties' efforts, even if the required stockholders' approvals are
    obtained;

  . The significant adverse impact to the net income of the combined company
    that will arise due to non-cash charges for the amortization of goodwill
    and other intangibles in light of the impact of purchase accounting for
    the Transactions;

  . The substantial charges to be incurred in connection with the
    Transactions, including costs of integrating the businesses and
    transaction expenses arising from the Transactions;

  . The possibility that the Transactions might not be consummated and the
    effect of public announcement of the Transactions on (a) Mattson's sales
    and operating results, (b) Mattson's ability to attract and retain key
    management, marketing and technical personnel and (c) progress of certain
    development projects;

  . The risk that, despite the efforts of the combined company, other key
    technical and management personnel might not remain employed by the
    combined company; and

  . Other risks described above under "Risk Factors" beginning on page 13 of
    this joint proxy statement-prospectus.

   The foregoing discussion of the information and factors considered by the
Mattson board of directors is not intended to be exhaustive but includes the
material factors considered by the Mattson board of directors. In view of the
complexity and wide variety of information and factors, both positive and
negative, considered by the Mattson board of directors, it did not find it
practical to quantify, rank, or otherwise assign relative or specific weights
to the factors considered. In addition, the Mattson board did not reach any
specific conclusion with respect to each of the factors considered, or any
aspect of any particular factor. Instead, the Mattson board of directors
conducted an overall analysis of the factors described above, including
discussions with Mattson's management and legal, financial and accounting
advisors. In considering the factors described above, individual members of the
Mattson board of directors may have given different weight to different
factors. The Mattson board considered all these factors as a whole and believed
the factors supported its determination to approve the Transactions. After
taking into consideration all of the factors set forth above, Mattson's board
of directors concluded that the Transactions were fair to, and in the best
interests of, Mattson and its stockholders and that Mattson should proceed with
the Transactions.

RECOMMENDATION OF MATTSON'S BOARD OF DIRECTORS

   After careful consideration, the Mattson board of directors has determined
that the Transactions are fair to and in the best interests of Mattson's
stockholders, has approved the Transactions, and recommends that Mattson
stockholders vote in favor of the issuance of shares and the increase in the
Stock Option Plan share reserve in connection with the Transactions.

   In considering the recommendation by Mattson's board of directors of the
Transactions, you should be aware that some directors and officers of Mattson
have interests in the Transactions that are different from, or are in addition
to, the interests of Mattson's stockholders generally. Please see the section
entitled "Interests of Mattson's Directors, Officers, and Affiliates in the
Transactions" on page 54 of this joint proxy statement-prospectus.

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OPINION OF MATTSON'S FINANCIAL ADVISOR

   Pursuant to approval by the board of directors of Mattson on May 17, 2000,
Mattson retained Alliant Partners to render an opinion regarding the fairness,
from a financial point of view, of the consideration to be provided by Mattson
pursuant to the proposed Transactions with STEAG and CFM.

   On June 27, 2000, Alliant Partners delivered to the Mattson board of
directors by teleconference, its opinion (the "Alliant Partners Opinion") that
as of June 27, 2000, and based on the matters described therein, the total
consideration provided in the Transactions by Mattson to STEAG and to CFM is
fair, from a financial point of view, to the stockholders of Mattson. Alliant
Partners noted that its presentation reflected the closing stock prices and
general market conditions as of June 26, 2000. No limitations were imposed by
Mattson on the scope of Alliant Partners' investigations or the procedures to
be followed by Alliant Partners in rendering the Alliant Partners Opinion. The
number of shares to be issued were determined through negotiations between the
managements of Mattson, STEAG, and CFM.

   The full text of the Alliant Partners Opinion, which sets forth, among other
things, assumptions made, matters considered, and limitations on the review
undertaken, is attached hereto as Annex D-1, and is incorporated herein by
reference. Stockholders of Mattson are urged to read the Alliant Partners
Opinion in its entirety. The Alliant Partners Opinion was prepared for the
benefit and use of the Mattson board in its consideration of the Transactions
and does not constitute a recommendation to stockholders of Mattson as to how
they should vote at the special meeting in connection with the Transactions.
The Alliant Partners Opinion does not address the relative merits of the
Transactions and any other transactions or business strategies discussed by the
Mattson board of directors as alternatives to the Transactions. The Alliant
Partners Opinion does not address the underlying business decision of the
Mattson board to proceed with or effect the Transactions. The summary of the
Alliant Partners Opinion set forth in this joint proxy statement-prospectus is
qualified in its entirety by reference to the full text of the Alliant Partners
Opinion.

   In connection with the preparation of the Alliant Partners Opinion, Alliant
Partners, among other things: reviewed the terms of the Combination Agreement
and the associated exhibits thereto, and the terms of the Merger Agreement, and
the associated exhibits thereto; reviewed the Mattson Form 10-K for the fiscal
years ended December 31, 1998 and 1999, including the audited financial
statements included therein; reviewed the Mattson Form 10-Q for the quarter
ended March 26, 2000; reviewed certain internal financial and operating
information relating to Mattson prepared by Mattson management; participated in
discussions with Mattson management concerning the operations, business
strategy, financial performance, and prospects for Mattson; reviewed the recent
reported closing prices and trading activity for Mattson common stock; reviewed
the CFM Form 10-K for the fiscal years ended October 31, 1998 and 1999,
including the audited financial statements included therein; reviewed the CFM
Form 10-Q for the quarters ended January 31, 2000 and April 30, 2000, including
the financial statements included therein; reviewed certain internal financial
and operating information relating to CFM prepared by CFM management;
participated in discussions with CFM management concerning the operations,
business strategy, financial performance, and prospects for CFM; participated
in discussions related to the merger with CFM among CFM, Mattson, and their
financial and legal advisors; considered the effect of the merger with CFM on
the future financial performance of the consolidated entity; reviewed the
recent reported closing prices and trading activity for CFM common stock;
compared certain aspects of the financial performance and business strategy of
Mattson and CFM with comparable public companies; reviewed recent equity
analyst reports covering CFM; reviewed the financial statements for the year
ended December 31, 1999; reviewed certain internal financial and operating
information relating to the STEAG Semiconductor Division prepared by STEAG
Semiconductor Division management; participated in discussions with STEAG
Semiconductor Division management concerning the operations, business strategy,
financial performance, and prospects for the STEAG Semiconductor Division;
participated in discussions related to the business combination with the STEAG
Semiconductor Division among STEAG, Mattson, and their financial and legal
advisors; considered the effect of the business combination with the STEAG
Semiconductor Division on the future financial performance of the consolidated
entity; compared certain aspects of the financial performance and business
strategy of Mattson and the STEAG Semiconductor Division with comparable public
companies;

                                       50
<PAGE>

analyzed available information, both public and private, concerning other
mergers and acquisitions comparable in whole or in part to the Transactions;
and conducted such other financial studies, analyses and investigations as
Alliant Partners deemed appropriate for purposes of rendering its opinion.

   In conducting its review and arriving at the Alliant Partners Opinion,
Alliant Partners relied upon and assumed the accuracy and completeness of the
financial statements and other information provided by Mattson, STEAG, and CFM
or otherwise made available to Alliant Partners and did not assume
responsibility to verify such information independently. Alliant Partners
further relied upon the assurances of Mattson's, the STEAG Semiconductor
Division's and CFM's respective managements that the information provided was
prepared on a reasonable basis in accordance with industry practice; with
respect to financial planning data, that such data reflected the best currently
available estimates and good faith judgments of the respective managements of
Mattson, the STEAG Semiconductor Division, and CFM as to the expected future
financial performance of Mattson, the STEAG Semiconductor Division, and CFM;
and that such parties were not aware of any information or facts that would
make the information provided to Alliant Partners incomplete or misleading.
Without limiting the generality of the foregoing, for the purpose of the
Alliant Partners Opinion, Alliant Partners assumed that none of Mattson, CFM,
and the STEAG Semiconductor Division was a party to any pending transaction,
including external financing, recapitalizations, acquisitions or merger
discussions, other than the Transactions or in the ordinary course of business.
Alliant Partners also assumed that the Transactions would be free of federal
tax to the Mattson stockholders.

   In arriving at the Alliant Partners Opinion, Alliant Partners did not
perform any appraisals or valuations of specific assets or liabilities of
Mattson, the STEAG Semiconductor Division, or CFM and was not furnished with
any such appraisals or valuations.

   Without limiting the generality of the foregoing, Alliant Partners did not
undertake any independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities to which Mattson,
the STEAG Semiconductor Division or CFM or any of their respective affiliates
was a party or may be subject and, at Mattson's direction and with its consent,
the Alliant Partners Opinion made no assumption concerning and therefore did
not consider the possible assertion of claims, outcomes, or damages arising out
of any such matters. Although developments following the date of the Alliant
Partners Opinion may affect the Alliant Partners Opinion, Alliant Partners
assumed no obligation to update, revise, or reaffirm the Alliant Partners
Opinion.

   The following is a summary explanation of the various sources of information
and valuation methodologies employed by Alliant Partners in conjunction with
rendering its opinion to the Mattson board.

Comparable Company Analysis

   Alliant Partners compared certain financial information and valuation ratios
relating to both the STEAG Semiconductor Division and CFM to corresponding
publicly available data and ratios from a group of selected publicly traded
companies deemed comparable to both the STEAG Semiconductor Division and CFM.

   For CFM, the comparable companies selected included eight publicly traded
companies in the semiconductor equipment sector. Financial information reviewed
by Alliant Partners included each company's: Enterprise Value, calculated as
the market capitalization of the selected company, plus such company's debt,
less such company's cash; Trailing Twelve Months Revenue, calculated as the
most recent four quarters revenue as filed with the SEC; Trailing Twelve Months
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA);
Trailing Twelve Months Earnings, adjusted to exclude non-recurring charges;
Trailing Twelve Months EBITDA Margin; Trailing Twelve Months Earnings Margin;
Trailing Twelve Months Return on Equity; Trailing Twelve Months Return on
Assets; Prior Fiscal Year Revenue; Prior Year Revenue Growth Rate; Last Five
Year Revenue Growth Rate; Current Year Earnings per Share Growth Rate; and Next
Year's Projected Earnings per Share Growth Rate. Companies included: FSI
International Inc.; Genus, Inc.; GaSonics International Corporation; Lam
Research, Inc.; Mattson Technology, Inc., Novellus Systems, Inc.; Semitool,
Inc.; and Veeco Instruments, Inc.

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<PAGE>

   The comparable companies had an Enterprise Value/TTM Revenue ratio range of
2.8x to 9.5x with a weighted narrow average (narrow average excludes the
highest and lowest estimates) of 4.9x. After making certain adjustments for
differences in performance, control, and intellectual property, this analysis
yielded an implied CFM equity value of $307.7 million.

   Alliant Partners compared certain financial information and valuation ratios
relating to the STEAG Semiconductor Division to corresponding publicly
available data and ratios from a group of selected publicly traded companies
deemed comparable to the STEAG Semiconductor Division. The comparable companies
selected included nine publicly traded companies in the semiconductor equipment
sector. The companies selected included the same companies used in the
comparable company analysis for CFM with the addition of CFM as a comparable
company. The information reviewed by Alliant Partners included the same
financial information reviewed in the CFM analysis.

   The comparable companies had an Enterprise Value/TTM Revenue ratio range of
1.7x to 9.5x with a weighted narrow average of 4.6x. After making certain
adjustments for differences in performance, control, and intellectual property,
this analysis yielded an implied STEAG Semiconductor Division equity value of
$658.0 million.

   No company utilized as a comparison in the comparable company analysis is
identical to CFM, the STEAG Semiconductor Division, or Mattson. In evaluating
the comparable companies, Alliant Partners made judgments and assumptions with
regard to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
CFM, the STEAG Semiconductor Division, or Mattson.

Comparable Transaction Analysis

   Alliant Partners reviewed seven comparable merger and acquisition
transactions from April 1999 through the present which involve sellers sharing
many characteristics with both the STEAG Semiconductor Division and CFM
including revenue size, products offered, and business model. These comparable
transactions of companies in the semiconductor equipment sector are: Speedfam
International's acquisition of Integrated Process Equipment Corp.; STEAG
Electronic Systems AG's acquisition of AG Associates, Inc.; FSI International,
Inc.'s acquisition of Yieldup International Corp.; Veeco Instruments Inc.'s
acquisition of Ion Tech, Inc.; Oerlikon-Buehrle Holding AG's acquisition of
Plasma-Therm, Inc.; Applied Materials, Inc.'s acquisition of Etec Systems,
Inc.; and Veeco Instruments, Inc.'s acquisition of CVC, Inc.

   The Price/Revenue multiples of the seven transactions range from 0.7x to
13.0x with an average of 3.8x. The comparable transaction analysis yielded an
implied equity value of $165.3 million for CFM and $629.7 million for the STEAG
Semiconductor Division.

   Estimated multiples paid in the comparable transactions were based on
information obtained from public filings, public company disclosures, press
releases, industry and popular press reports, research reports, databases, and
other sources. No company, transaction, or business used in the comparable
transaction analysis as a comparison is identical to CFM, the STEAG
Semiconductor Division, or the Transactions. Accordingly, an analysis of the
foregoing results is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading, and other values of the comparable companies, comparable transactions,
or the business segment, company, or transactions to which they are being
compared.

Discounted Cash Flow

   Alliant Partners estimated the present value of the projected future cash
flows of both the STEAG Semiconductor Division and CFM on a stand-alone basis
using internal financial planning data prepared by the respective management
teams.

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<PAGE>

   Alliant Partners analyzed the financial projections for CFM for the years
ended December 31, 2001 through 2007 and the financial projections for the
STEAG Semiconductor Division for the years ended December 31, 2001 through
2004. Alliant Partners obtained a terminal valuation based on the average for
three terminal value methods: Average Revenue Multiple derived from the
comparable companies analysis applied to 2007 revenue; Average Revenue multiple
derived from the comparable transactions analysis applied to 2007 revenue; and
the Gordon Growth Model which assumed a long-term growth rate of 17%. In all
cases, Alliant Partners used a discount rate of 22%. This analysis yielded
estimated present values of equity for the STEAG Semiconductor Division and CFM
of $861.1 million and $292.3 million, respectively.

Relative Contribution

   Alliant Partners analyzed the respective contributions of Mattson and CFM to
the estimated total revenue for calendar years 1998 and 1999 and based on
management's projections for 2000 and 2001. Alliant Partners also evaluated
certain Balance Sheet contributions including cash, working capital, total
assets, and stockholder's equity. Alliant Partners applied a weighting to the
Income Statement and Balance Sheet analysis of 80% and 20%, respectively. Based
on the above analysis, the relative contribution of Mattson and CFM is 75.52%
and 24.48%, respectively, and when applied to the Adjusted Market
Capitalization of Mattson produced an estimated equity value of CFM of $207.9
million.

   Alliant Partners analyzed the respective contributions of Mattson and the
STEAG Semiconductor Division to the estimated total revenue and gross margin
for calendar years 1999 and 2000 and based on management's projections for
2001. Alliant Partners also evaluated certain Balance Sheet contributions
including cash, working capital, total assets, and stockholder's equity.
Alliant Partners applied a weighting to the Income Statement and Balance Sheet
analysis of 80% and 20%, respectively. Based on the above analysis, the
relative contribution of the STEAG Semiconductor Division and Mattson is 51.93%
and 48.07%, respectively, and when applied to the Adjusted Market
Capitalization of Mattson, produced an estimated equity value of the STEAG
Semiconductor Division of $701.6 million.

Pro Forma Transactions Analysis

   A pro forma merger analysis calculates the EPS accretion/(dilution) of the
pro forma combined entity taking into consideration various financial effects
which will result from consummation of the Transactions. This analysis relies
upon certain financial and operational assumptions provided by equity research
analysts, publicly available data about Mattson and CFM, and financial
information for Mattson, the STEAG Semiconductor Division, and CFM prepared by
their respective managements. Based on forecasts for Mattson and financial and
operating information for the STEAG Semiconductor Division and CFM, the pro
forma pooling analysis indicates EPS accretion, before amortization, for the
combined company.

Conclusion

   While the foregoing summary describes certain analyses and factors that
Alliant Partners deemed material in its presentation to the Mattson board of
directors, it is not a comprehensive description of all analyses and factors
considered by Alliant Partners. The preparation of a fairness opinion is a
complex process that involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of such methods
to particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Alliant Partners believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
would create an incomplete view of the evaluation process underlying the
Alliant Partners Opinion. Several analytical methodologies were employed and no
one method of analysis should be regarded as critical to the overall conclusion
reached by Alliant Partners. Each analytical technique has inherent strengths
and weaknesses, and the nature of the available information may further affect
the value of particular techniques. The conclusions reached by Alliant Partners
are based on all analyses and factors taken as a whole and also on

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<PAGE>

application of Alliant Partners' own experience and judgment. Such conclusions
may involve significant elements of subjective judgment and qualitative
analysis. Alliant Partners therefore gives no opinion as to the value or merit
standing alone of any one or more parts of the analysis it performed. In
performing its analyses, Alliant Partners considered general economic, market,
and financial conditions and other matters, many of which are beyond the
control of Mattson, the STEAG Semiconductor Division, and CFM. The analyses
performed by Alliant Partners are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than those
suggested by such analyses. Accordingly, analyses relating to the value of a
business do not purport to be appraisals or to reflect the prices at which the
business actually may be purchased. Furthermore, no opinion is being expressed
as to the prices at which shares of Mattson common stock may trade at any
future time.

   Pursuant to the approval by the board of directors of Mattson on May 17,
2000, Alliant Partners has received a fee of $300,000 for the fairness opinion
rendered to the Mattson board. For its financial advisory and investment
banking services on the Transactions, Alliant Partners will also receive a
success fee, in the event of the closing of the Transactions, of $2,000,000,
against which Mattson will receive credit for the $300,000 fairness opinion
fee. Mattson has also agreed to reimburse Alliant Partners for its out-of-
pocket expenses and to indemnify and hold harmless Alliant Partners and its
affiliates and any person, director, employee, or agent acting on behalf of
Alliant Partners or any of its affiliates, or any person controlling Alliant
Partners or its affiliates for certain losses, claims, damages, expenses, and
liabilities relating to or arising out of services provided by Alliant Partners
as financial advisor to Mattson. The terms of the fee arrangement with Alliant
Partners, which Mattson and Alliant Partners believe are customary in
transactions of this nature, were negotiated at arm's length between Mattson
and Alliant Partners, and the Mattson board was aware of such fee arrangements.

   As part of its investment banking business, Alliant Partners is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, sales and divestitures, joint ventures and strategic
partnerships, private financings, and other specialized studies. Alliant
Partners was retained based on Alliant Partners' experience as a financial
advisor in connection with mergers and acquisitions and in securities
valuations generally, as well as Alliant Partners' investment banking
relationship and familiarity with Mattson. Alliant Partners provided financial
advisory and investment banking services on the Transactions and will be
provided fees in accordance with the engagement letter covering these services
as described above.

INTERESTS OF MATTSON'S DIRECTORS, OFFICERS, AND AFFILIATES IN THE TRANSACTIONS

   When considering the recommendation of Mattson's board of directors, Mattson
stockholders should be aware that Mattson directors and officers have interests
in the Transactions that are different from, or are in addition to, your
interests. The Mattson board of directors was aware of these potential
conflicts and considered them.

   As of the record date, Brad Mattson, the Chief Executive Officer and
chairman of the board of Mattson, held options to purchase 21,163 shares of
common stock of CFM exercisable within 60 days. These options were granted in
connection with Mr. Mattson's service on the board of directors of CFM. These
options will be converted into options for Mattson common stock under the terms
of the Merger Agreement. Mr. Mattson took no part in the deliberations of the
CFM board regarding the proposed merger transaction, and Mr. Mattson resigned
from the CFM board effective April 26, 2000.

   John Savage, a director of Mattson, is also a partner at Alliant Partners,
the technology merger and acquisition advisory firm that has provided Mattson
with its opinion regarding the fairness of the proposed Transactions to
Mattson's stockholders from a financial point of view. Mattson has entered into
the Alliant Partners Agreement providing for Alliant Partners to act as
financial advisor in connection with the Transactions. Under the Alliant
Partners Agreement, Mattson has paid to pay Alliant Partners a fee of $300,000
to render an opinion as to the fairness from a financial point of view to
Mattson's stockholders of the consideration to be provided by Mattson in
connection with the Transactions. The Alliant Partners Agreement

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<PAGE>

further provides for a "success fee" of $2 million in the event the
Transactions close, with the $300,000 fairness opinion fee being applied
against such amount. Under the terms of the Alliant Partners Agreement, Mattson
has also agreed to reimburse Alliant Partners reasonable expenses, and to
indemnify Alliant Partners against any losses, claims, damages, or liabilities
to which Alliant Partners may become subject in connection with its use of
information that is provided to Alliant Partners by Mattson that is inaccurate
in any respect or any other aspect of its rendering such services, unless it is
finally judicially determined that such losses, claims, damages, or liabilities
relating thereto arose only out of the gross negligence or willful misconduct
of Alliant Partners. The Alliant Partners Agreement was determined based on
arm's length negotiation and Mattson believes the terms of the Alliant Partners
Agreement are no less favorable than could have been obtained from third party
consultants and investment bankers.

CFM'S REASONS FOR THE MERGER

   The CFM board of directors believes that, despite CFM's success to date,
increasing competition and industry consolidation has made it important for CFM
to gain critical mass in order to compete with larger companies with
substantially greater resources and broader, integrated product offerings.
CFM's customers have made it clear that they prefer to deal exclusively with
large equipment suppliers. As such, CFM's management has considered a number of
alternatives for enhancing its size and competitive position, including
additional sales of conventional wet bench products coupled with significant
growth in the penetration of full-flow platforms, the acquisition of smaller
companies that could extend CFM's product offerings and enhance the
distribution of CFM's products and services, or a merger with a larger company.
After approximately two years of trying to increase access to conventional "wet
bench" equipment through strategic combinations, the board decided it was
necessary for CFM to become part of a larger, higher-profile enterprise
offering additional types of semiconductor manufacturing equipment in order to
place CFM in the arena of large companies preferred by its customers. In the
industry environment referred to above, the CFM board of directors identified
several potential benefits for the CFM shareholders, employees and customers
that it believes could result from a merger with Mattson. These potential
benefits include:

  . providing CFM shareholders with shares of Mattson (which following the
    business combination with the STEAG Semiconductor Division will be one of
    the largest companies in the semiconductor processing equipment industry
    with annual sales expected to be over $500 million) in a tax-free
    exchange at a substantial premium over the prevailing market price for
    CFM common stock immediately prior to the announcement of the merger;

  . mitigating the risk of large changes in CFM's stock price due to
    significant variations in CFM's shipments from quarter to quarter;

  . dampening the magnitude of swings in the semiconductor chip market;

  . enabling the combined company, including the STEAG Semiconductor
    Division, to offer complementary product lines, which presents the
    opportunity to increase the breadth of products offered;

  . enabling the combined company to expand the utilization of CFM"s
    proprietary Direct-Displacement(TM) drying technology through application
    of that technology to complementary product lines;

  . eliminating the cost of continued litigation with certain STEAG
    Semiconductor Subsidiaries.

   The board of directors of CFM believes that the exchange ratio will result
in a significant financial premium to the CFM shareholders. Based upon the
$39.4375 per share closing price of Mattson common stock on June 27, 2000, the
last trading day before the public announcement of the proposed merger, the
merger implied a $20.5982 share price for CFM, representing a premium of 43.3
percent over CFM's closing price on June 27, 2000, of $14.375. The share prices
of Mattson and CFM common stock have generally fluctuated in tandem since the
announcement of the proposed merger.

   Historically, one of the greatest risks to CFM shareholders has been the
extreme quarter to quarter fluctuations in operating results. CFM has derived
substantially all of its net sales from the sale of a limited

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<PAGE>

number of wet processing systems which typically have list prices, before
customer configurations, ranging from approximately $1.1 million to $3.0
million per system. Systems with custom configurations can be priced in excess
of $4.1 million per system. At CFM's current revenue level, each sale or
failure to make a sale can have a material effect on CFM. A cancellation,
rescheduling or delay in a shipment near the end of a particular quarter may
cause net sales in the quarter to fall significantly below CFM's expectations
and thus may materially adversely affect CFM's operating results for such
quarter. Events causing a shortfall in units sold during a particular quarter
may also include a general downturn in the semiconductor chip or semiconductor
equipment industry, a delay in acceptance of a unit by a customer for technical
reasons, or other special circumstances. Such variations of a few units can
cause relatively large swings in reported operating results and make the CFM
stock price inherently more volatile and unpredictable than that of other
companies that sell a much larger number of units at lower average selling
prices in a quarter. The board of directors of CFM believes that a merger with
Mattson, a much larger company, especially following consummation of the
business combination with the STEAG Semiconductor Division, will significantly
mitigate the effects of variation in CFM's revenue pattern.

   Mattson also participates in the semiconductor chip equipment market. Both
Mattson's and CFM's businesses depend, in significant part, upon capital
expenditures by manufacturers of semiconductor devices, which in turn depend
upon the current and anticipated market demand for such devices and the
products utilizing such devices. The semiconductor industry has been highly
volatile and historically has experienced periods of oversupply, resulting in
significantly reduced demand for capital equipment, including wet processing
systems. Worldwide demand for semiconductor chips may grow more or less quickly
or suffer a downturn. The board of directors of CFM believes that the
combination of the two companies should serve to dampen the magnitude of swings
in the semiconductor chip market, as larger companies have historically enjoyed
financial returns superior to those of smaller companies in both up and down
markets.

   Additionally, CFM expects the business combination between Mattson and the
STEAG Semiconductor Division to expand its business among customers who have
expressed a historical preference for conventional wet bench processing
systems. CFM believes that the STEAG Semiconductor Division produces finely-
engineered products which are well regarded in the industry with excellent
customer acceptance. CFM expects to benefit through a combination of the
efforts and know-how between CFM and the STEAG Semiconductor Division in wet
bench processing equipment.

   In the course of its deliberations, the CFM board of directors reviewed with
CFM's management and outside advisors a number of factors relevant to the
merger, including the strategic overview and prospects for CFM. The CFM board
of directors also considered the following potentially positive factors, among
others, in connection with its review and analysis of the merger. The
conclusion reached by the CFM board of directors with respect to each of the
factors supported its determination that the Merger Agreement and the merger
were fair to, and in the best interests of, CFM and its shareholders:

  . historical information concerning Mattson's and CFM's respective
    businesses, financial performance and condition, operations, technology,
    management and competitive position;

  . CFM management's view as to the financial condition, results of
    operations and businesses of Mattson and CFM before and after giving
    effect to the merger based on management due diligence and publicity,
    available earnings estimates and, in particular, the view that, in light
    of, among other things, market and industry conditions, the potential
    synergy and compatibility between CFM, the STEAG Semiconductor Division
    and Mattson, the financial strength of Mattson and the ability to
    leverage STEAG Semiconductor and Mattson sales network to increase sales
    of CFM's products, the long-term financial condition, results of
    operations, prospects and competitive position of the combined company
    would be better than the long-term financial condition, results of
    operations, prospects and competitive position of CFM on a stand-alone
    basis;

  . current financial market conditions and historical market prices,
    volatility and trading information with respect to Mattson common stock
    and CFM common stock, which supported a favorable view of Mattson's stock
    market presence and positive reputation with investors, as well as the
    greater liquidity of an investment in Mattson common stock compared to an
    investment in CFM common stock;

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  . the belief that the terms of the Merger Agreement, including the parties'
    representations, warranties and covenants, and the conditions to the
    parties' respective obligations, are reasonable;

  . the analyses prepared by UBS Warburg LLC and presented to the CFM board
    of directors, and the oral opinion of UBS Warburg LLC subsequently
    confirmed in writing, that as of June 28, 2000 and based upon and subject
    to certain considerations set forth in UBS Warburg's opinion (the full
    text of which is attached as Annex D-2 to this joint proxy statement-
    prospectus), the exchange ratio was fair, from a financial point of view,
    to the holders of CFM common stock, as described more fully under
    "Opinion of CFM's Financial Advisor;"

  . the impact of the merger on CFM's customers and employees; and

  . reports from management, legal advisors and financial advisors as to the
    results of their due diligence investigations of Mattson.

   The CFM board of directors also considered a number of potentially negative
factors in its deliberations concerning the merger. The potentially negative
factors considered by the CFM board of directors included:

  . the risk that, because the exchange ratio will not be adjusted for
    changes in the market price of either Mattson common stock or CFM common
    stock, the per share value of the consideration to be received by CFM
    shareholders might be less than the price per share implied by the
    exchange ratio immediately before the announcement of the merger due to
    fluctuations in the market value of Mattson common stock and CFM common
    stock;

  . the risk that the merger might not be completed in a timely manner or at
    all;

  . the negative impact of any customer or supplier confusion after
    announcement of the proposed merger;

  . the challenges relating to the integration of the three companies;

  . the loss of control over the future operations of CFM following the
    merger;

  . the possibility of management and employee disruption associated with the
    potential merger and integrating the operations of the companies, and the
    risk that, despite the efforts of the combined company, key management,
    marketing, technical and administrative personnel of CFM might not
    continue with the combined company;

  . certain terms of the Merger Agreement and related agreements that
    prohibit CFM and its representatives from soliciting third party bids or
    from entering into discussions regarding, accepting, approving or
    recommending unsolicited third party bids except in very limited
    circumstances, which terms would reduce the likelihood that a third party
    would make a bid for CFM;

  . the termination fee payable by CFM in certain circumstances (see "
    Termination of the Merger Agreement," beginning on page 93 of this joint
    proxy statement-prospectus);

  . the negative impact of the stock option agreement on CFM's ability to
    attract a higher bid from a third party;

  . the risks relating to Mattson's business and how they would affect the
    operations of the combined company;

  . the risk that the combined company will not be able to successfully
    integrate with the STEAG Semiconductor Division; and

  . the other risks described above under "Risk Factors" beginning on page 13
    of this joint proxy statement-prospectus.

   CFM's board of directors believed that these risks were outweighed by the
potential benefits of the merger.

                                       57
<PAGE>

   The foregoing discussion, information and factors considered by the CFM
board of directors is not intended to be exhaustive but is believed to include
all material factors considered by the CFM board of directors. In view of the
wide variety of factors considered by the CFM board of directors, the CFM board
of directors did not find it practicable to quantify or otherwise assign
relative weight to the specific factors considered. In addition, the CFM board
did not reach any specific conclusions on each factor considered, or any aspect
of any particular factor, but conducted an overall analysis of these factors.
Individual members of the CFM board may have given different weight to
different factors. However, after taking into account all of the factors set
forth above, the CFM board of directors unanimously agreed that the Merger
Agreement and the merger were fair to, and in the best interests of, CFM and
its shareholders and that CFM should proceed with the merger.

RECOMMENDATION OF CFM'S BOARD OF DIRECTORS

   The CFM board of directors believes that the merger is fair to CFM
shareholders and in their best interest and, after careful consideration,
unanimously approved and adopted the Merger Agreement and the merger
contemplated thereunder. Therefore, CFM's board of directors unanimously
recommends that CFM shareholders vote in favor of approval and adoption of the
Merger Agreement.

OPINION OF CFM'S FINANCIAL ADVISOR, UBS WARBURG LLC

   On June 28, 2000, at a meeting of the CFM board held to evaluate the
proposed merger, UBS Warburg delivered to the board a written opinion to the
effect that, as of that date and based on and subject to various assumptions,
matters considered and limitations described in the opinion, the exchange ratio
provided for in the merger was fair, from a financial point of view, to the
holders of CFM common stock.

   The full text of UBS Warburg's opinion describes the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken by UBS Warburg. This opinion is attached as Annex D-2 and is
incorporated into this joint proxy statement-prospectus by reference. UBS
Warburg's opinion is directed only to the fairness, from a financial point of
view, of the exchange ratio provided for in the merger and does not address any
other aspect of the merger or any related transaction. The opinion does not
address the underlying business decision of CFM to effect the merger or
constitute a recommendation to any holder of CFM common stock as to how to vote
with respect to any matters relating to the merger. Holders of CFM common stock
are encouraged to read this opinion carefully in its entirety. The summary of
UBS Warburg's opinion described below is qualified in its entirety by reference
to the full text of its opinion.

   In arriving at its opinion, UBS Warburg:

  . reviewed certain publicly available business and historical financial
    information relating to CFM, Mattson, and the subsidiaries comprising the
    STEAG Semiconductor Division;

  . reviewed certain internal financial information and other data relating
    to the business and financial prospects of CFM, including estimates and
    financial forecasts prepared by management of CFM, that were provided to
    UBS Warburg by CFM and not publicly available;

  . reviewed certain internal financial information and other data relating
    to the businesses and financial prospects of each of Mattson and the
    STEAG Semiconductor Division, including estimates and financial forecasts
    prepared by the managements of each of Mattson and STEAG Semiconductor,
    that were provided to UBS Warburg by Mattson and the STEAG Semiconductor
    Division, respectively, and not publicly available;

  . conducted discussions with members of the senior managements of CFM,
    Mattson, and the STEAG Semiconductor Division;

  . reviewed publicly available financial and stock market data with respect
    to certain other companies in lines of business UBS Warburg believed to
    be generally comparable to those of CFM, Mattson, and the STEAG
    Semiconductor Division;

                                       58
<PAGE>

  . compared the financial terms of the merger with CFM and the business
    combination with the STEAG Semiconductor Division with the publicly
    available financial terms of certain other transactions which UBS Warburg
    believed to be generally relevant;

  . considered certain pro forma effects of the merger with CFM and the STEAG
    Semiconductor Division acquisition on the Mattson financial statements;

  . performed an analysis of the contributions of CFM, Mattson, and the STEAG
    Semiconductor Division to certain historical and projected financial
    results of the combined companies;

  . performed a discounted cash flow analysis of the pro forma combined
    Mattson, CFM, and the STEAG Semiconductor Division;

  . reviewed drafts of the Merger Agreement, the Combination Agreement and
    related agreements; and

  . conducted such other financial studies, analyses, and investigations, and
    considered such other information, as UBS Warburg deemed necessary or
    appropriate.

   In connection with its review, at CFM's direction, UBS Warburg did not
assume any responsibility for independent verification of any of the
information that UBS Warburg was provided or reviewed for the purpose of its
opinion and, at CFM's direction, UBS Warburg relied on that information being
complete and accurate in all material respects. In addition, at CFM's
direction, UBS Warburg did not make any independent evaluation or appraisal of
any of the assets or liabilities, contingent or otherwise, of CFM, Mattson, or
the STEAG Semiconductor Division, and was not furnished with any evaluation or
appraisal.

   With respect to the financial forecasts, estimates and pro forma effects
related thereto that it reviewed, UBS Warburg assumed, at the direction of CFM,
that they were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the managements of CFM, Mattson, and the
STEAG Semiconductor Division as to the future financial performance of their
respective companies and the potential incremental revenue and other financial
benefits (including the amount, timing and achievability thereof) resulting
from the merger and the business combination. UBS Warburg also assumed, with
CFM's consent, that the merger will be treated as a tax-free reorganization for
federal income tax purposes. UBS Warburg's opinion is necessarily based on
economic, monetary, market and other conditions existing, and information made
available to UBS Warburg, on the date of its opinion.

   At CFM's direction, UBS Warburg was not asked to, and it did not, offer any
opinion as to the material terms of the Merger Agreement, the form of the
merger, or any related agreement to be entered into by CFM, including the
interim patent license agreement between CFM, CFMT, Inc., and STEAG. In
rendering its opinion, UBS Warburg assumed, with CFM's consent, that Mattson,
M2C Acquisition Corporation, and CFM will comply with all the material terms of
the Merger Agreement and that the merger will be validly consummated in
accordance with its terms. At CFM's direction, UBS Warburg also assumed that
the closing under the Combination Agreement, pursuant to which Mattson will
acquire the STEAG Semiconductor Division, will occur contemporaneously with the
effective time of the merger, that Mattson and STEAG will comply with all the
material terms of the Combination Agreement, and that the transactions
contemplated by the Combination Agreement will be validly consummated in
accordance with its terms. UBS Warburg expressed no opinion as to the value of
the Mattson common stock when issued in the merger or the prices at which the
Mattson common stock will trade or otherwise be transferable after the
announcement or consummation of the merger.

   In connection with rendering its opinion to CFM's board of directors, UBS
Warburg performed a variety of financial analyses which are summarized below.
The following summary is not a complete description of all of the analyses
performed and factors considered by UBS Warburg in connection with its opinion.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. With respect to the analysis of selected publicly traded companies
and the analysis of selected transactions summarized below, no company or
transaction used as a

                                       59
<PAGE>

comparison is either identical or directly comparable to CFM, Mattson or the
merger. These analyses necessarily involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the public trading or acquisition values of the companies concerned.

   UBS Warburg believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying UBS Warburg's
analyses and opinion. None of the analyses performed by UBS Warburg was
assigned greater significance by UBS Warburg than any other. UBS Warburg
arrived at its ultimate opinion based on the results of all the analyses
undertaken by it and assessed as a whole. UBS Warburg did not draw, in
isolation, conclusions from or with regard to any one factor or method of
analysis.

   The estimates of CFM's, Mattson's, and the STEAG Semiconductor Division's
future performance provided by these companies' respective managements in or
underlying UBS Warburg's analyses are not necessarily indicative of future
results or values, which may be significantly more or less favorable than those
estimates. In performing its analyses, UBS Warburg considered industry
performance, general business and economic conditions and other matters, many
of which are beyond CFM's, Mattson's and the STEAG Semiconductor Division's
control. Estimates of the financial value of companies do not necessarily
purport to be appraisals or reflect the prices at which companies actually may
be sold.

   The exchange ratio provided for in the merger was determined through
negotiation between CFM and Mattson and the decision to enter into the merger
was solely that of CFM's board of directors. UBS Warburg's opinion and
financial analyses were only one of many factors considered by CFM's board of
directors in its evaluation of the merger and should not be viewed as
determinative of the views of CFM's board of directors or management with
respect to the merger or the exchange ratio provided for in the merger.

   The following is a brief summary of the material financial analyses
performed by UBS Warburg and reviewed with CFM's board of directors in
connection with its opinion. The financial analyses summarized below include
information presented in tabular format. In order to fully understand UBS
Warburg's financial analyses, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data below without considering the full
narrative description of the financial analyses, including the methodologies
and assumptions underlying the analyses, could create a misleading or
incomplete view of UBS Warburg's financial analyses.

Analysis of Selected Public Companies

   UBS Warburg compared selected financial information and operating statistics
for CFM and Mattson with corresponding financial information and operating
statistics of the following ten selected publicly held companies in the
semiconductor capital equipment industry:

<TABLE>
<CAPTION>
      Comparable Companies                              Comparable Large-Cap Companies
      --------------------                              ------------------------------
      <S>                                               <C>
      --ASM International N.V.                            --Lam Research Corporation
      --Dainippon Screen Mfg. Co., Ltd.                   --Novellus Systems, Inc.
      --FSI International, Inc.
      --Gasonics International Corporation
      --Semitool, Inc.
      --SEZ Holdings AG
      --Speedfam-IPEC, Inc.
      --
       Varian Semiconductor Equipment Associates, Inc.
</TABLE>

                                       60
<PAGE>

   UBS Warburg reviewed common equity market prices per share as multiples of
latest twelve months earnings per share and estimated calendar years 2000 and
2001 earnings per share. UBS Warburg also reviewed enterprise values,
calculated as equity value, plus debt, less cash, as multiples of latest twelve
months revenue and estimated calendar years 2000 and 2001 revenue. UBS Warburg
then compared the multiples derived from the selected companies with
corresponding multiples for CFM and Mattson based on the closing prices of
their common stock on June 23, 2000, as well as the multiples implied for CFM
based on the exchange ratio provided for in the merger and the closing price of
Mattson common stock on June 23, 2000. Multiples for the selected companies
also were based on closing stock prices on June 23, 2000. Estimated financial
data for the selected companies were based on publicly available research
analyst estimates, and estimated financial data for CFM and Mattson were based
on internal estimates of CFM's and Mattson's managements. This analysis
indicated the following implied low, mean, median and high equity value and
enterprise value multiples for the selected comparable companies and implied
mean equity value and enterprise value multiples for the comparable large-cap
companies, as compared to the multiples implied for CFM and Mattson based on
the closing prices of their common stock on June 23, 2000 and the multiples
implied for CFM based on the exchange ratio provided for in the merger and the
closing price of Mattson common stock on June 23, 2000:

<TABLE>
<CAPTION>
                                                                                         Implied
                                                                                       Multiples of
                                                    Mean                                   CFM
                          Multiples of Selected  Multiple of                           Technologies
                           Comparable Companies  Comparable  Multiples of                Based on
                          ----------------------  Large-cap      CFM      Multiples of   Exchange
                          Low  Mean Median High   Companies  Technologies   Mattson       Ratio
                          ---- ---- ------ ----- ----------- ------------ ------------ ------------
<S>                       <C>  <C>  <C>    <C>   <C>         <C>          <C>          <C>
Equity Values as
 Multiple of:
Latest 12 months EPS....  32.0 93.7  82.2  157.4    49.5         NM(1)       119.3         NM(1)
Estimated 2000 EPS......  20.0 57.8  30.5  188.8    26.4         NM(1)        36.7         NM(1)
Estimated 2001 EPS......  13.9 21.7  20.5   38.9    20.3         NM(1)        22.4         NM(1)
Enterprise Value as a
 Multiple of:
Latest 12 Months
 Revenue................  2.13 5.17  3.11  18.32    7.42         1.77         4.95         3.66
Estimated 2000 Revenue..  1.51 3.42  2.26  10.69    4.77         1.34         3.32         2.75
Estimated 2001 Revenue..  1.24 2.56  1.78   7.05    3.55         1.10         2.32         2.26
</TABLE>
--------
(1) Not meaningful because CFM did not have or is not projected to have, as the
    case may be, earnings for the applicable period.

Analysis of Selected Precedent Transactions

   UBS Warburg reviewed implied enterprise values in the following eleven
selected transactions in the semiconductor capital equipment industry:

<TABLE>
<CAPTION>
      Acquiror                               Target
      --------                               ------
      <S>                                    <C>
      --Veeco Instruments, Inc.              --CVC, Inc.
      --Oerlikon-Buehrle Holding AG          --Plasma-Therm, Inc.
      --Photronics, Inc.                     --Align-Rite International, Inc.
      --STEAG Electronic Systems AG          --AG Associates, Inc.
      --FEI Company                          --Micrion Corporation
      --Speedfam International, Inc.         --Integrated Process Equipment, Corp.
      --Advanced Energy Industries, Inc.     --RF Power Products, Inc.
      --Eaton Corporation                    --Fusion Systems Corporation
      --LAM Research Corporation             --OnTrak Systems Corporation
      --Millipore Corporation                --Tylan General, Inc.
      --Plasma and Materials                 --Electrotech Equipment
</TABLE>

   UBS Warburg reviewed enterprise values as multiples of latest twelve months
revenues and estimated calendar year 2000 revenues. UBS Warburg then compared
the implied multiples derived from the selected

                                       61
<PAGE>

transactions with corresponding multiples for CFM based on the exchange ratio
provided for in the merger and the closing price of the Mattson common stock on
June 23, 2000. All multiples were based on publicly available information at
the time of announcement of the relevant transaction. This analysis indicated
the following implied low, mean, median and high enterprise value multiples for
the selected transactions, as compared to the multiples implied for CFM based
on the exchange ratio provided for in the merger and the closing price of the
Mattson common stock on June 23, 2000:

<TABLE>
<CAPTION>
                                                                        Implied
                                                     Multiples of      Multiples
                                                  Selected Precedent    of CFM
                                                     Transactions      Based on
                                                 --------------------- Exchange
                                                 Low  Mean Median High   Ratio
                                                 ---- ---- ------ ---- ---------
<S>                                              <C>  <C>  <C>    <C>  <C>
Enterprise Values as a Multiple of:
Latest 12 Months Revenue........................ 0.85 2.36  2.10  4.69   3.66
Estimated 2000 Revenue.......................... 1.20 2.66  2.22  4.95   2.75
</TABLE>

   UBS Warburg also analyzed the premium to be paid per share of CFM common
stock over selected periods based on the Mattson common stock closing price on
June 23, 2000 and compared it to the premiums paid in the selected precedent
transactions over similar time periods. The following table summarizes the
results of this analysis:

<TABLE>
<CAPTION>
                                                           Premium Based On
                                                          Stock Prices Prior
                                                           to Announcement
                                                         ----------------------
                                                         30 Days 7 Days   1 Day
                                                         ------- ------   -----
<S>                                                      <C>     <C>      <C>
Low.....................................................   16.4%  (0.6)%  (2.9)%
Mean....................................................   56.9%  32.5 %  27.0 %
Median..................................................   42.1%  30.0 %  20.7 %
High....................................................  151.2% 105.5 %  94.9 %
CFM(1)..................................................  156.4%  77.8 %  84.0 %
</TABLE>
--------
(1) Based on the closing price of the CFM common stock thirty days, seven days,
    and one day prior to June 23, 2000.

Discounted Cash Flow Analysis

   UBS Warburg performed a discounted cash flow analysis of the pro forma
combined Mattson, CFM, and the STEAG Semiconductor Division using operating
projections provided by the respective companies' managements. In performing
its discounted cash flow analysis, UBS Warburg considered various assumptions
and applied valuation parameters that it deemed appropriate. Utilizing the
projections provided by such managements, UBS Warburg calculated the
theoretical discounted present value per share for CFM (based on the exchange
ratio in the merger) after giving effect to the merger by adding together (a)
the projected future stream of unleveraged free cash flow through December 31,
2004 and (b) the projected continuing value of the combined company at December
31, 2004, defined as the terminal value. The terminal value was calculated
based on earnings before interest, taxes, depreciation and amortization
multiples of 12x to 14x. The cash flow streams and the terminal values were
then discounted to present values using a range of discount rates from 15% to
21%. By adding the present value of the cash flow streams and terminal value
and subtracting the net debt, a range of implied equity values was determined.
Based on the analysis above, UBS Warburg arrived at an implied equity value per
share valuation range of CFM (based on the exchange ratio in the merger) after
giving effect to the merger of $20.43 to $29.78 per share.

Contribution Analysis

   UBS Warburg reviewed the contributions of CFM, Mattson, and the STEAG
Semiconductor Divsion to the combined company's fiscal 1999 revenues, estimated
calendar year 2000 revenue and estimated calendar year 2001 revenues, EBIT and
net income (such estimates based on internal estimates of the respective
companies'

                                       62
<PAGE>

managements), as well as book value at 1999 fiscal year end. Based on the
exchange ratio provided for in the merger and the closing price of Mattson
common stock on June 23, 2000, this analysis indicated the following relative
contributions of CFM, Mattson, and the STEAG Semiconductor Division, as
compared to the percentages that CFM, Mattson, and the STEAG Semiconductor
Division would each constitute of the combined company's equity value and
enterprise value:

<TABLE>
<CAPTION>
                                                     Percentage Contribution to
                                                          Combined Company
                                                     ---------------------------
                                                                       STEAG
                                                                   Semiconductor
                                                     Mattson CFM     Division
                                                     ------- ----  -------------
<S>                                                  <C>     <C>   <C>
Equity Value........................................  56.0%  12.2%     31.9%
Enterprise Value....................................  50.1%  12.2%     37.7%
Revenue 1999 .......................................  34.7%  10.6%     54.7%
      2000E.........................................  39.0%  11.5%     49.6%
      2001E.........................................  39.6%   9.9%     50.5%
Estimated 2001 EBIT.................................  58.8%   0.5%     40.7%
Estimated 2001 Net Income...........................  64.2%   1.2%     34.6%
Fiscal 1999 Book Value..............................  71.7%  27.9%      0.3%
</TABLE>

Other Factors

   In rendering its opinion, UBS Warburg also reviewed and considered other
factors, including:

  . that, based upon the internal estimates of the managements of CFM and
    Mattson and excluding any expense associated with the amortization of
    goodwill or other intangibles arising from the merger, the merger is
    expected to be dilutive to Mattson's earning per share for calendar year
    2000 and accretive to Mattson's earnings per share for calendar year
    2001;

  . that, based upon the internal estimates of the managements of Mattson,
    CFM, and the STEAG Semiconductor Division and excluding any expenses
    associated with the amortization of goodwill or other intangibles arising
    from the Transactions are expected to be dilutive to Mattson's earning
    per share for calendar year 2000 and accretive to Mattson's earning per
    share for calendar year 2001; and

  . historical market prices and volumes for the CFM common stock and Mattson
    common stock and the relationship between movements in the CFM common
    stock and movements in the Mattson common stock.

Miscellaneous

   CFM paid to UBS Warburg a fee of $350,000 in connection with the delivery of
the UBS Warburg opinion, and has agreed to pay to UBS Warburg for its financial
advisory services upon completion of the merger a transaction fee equal to
1.25% of transaction value, determined at closing. In addition, CFM has agreed
to reimburse UBS Warburg for its reasonable expenses, including reasonable fees
and disbursements of its counsel, and to indemnify UBS Warburg and related
parties against liabilities, including liabilities under federal securities
laws, relating to, or arising out of, its engagement.

   CFM selected UBS Warburg as its financial advisor in connection with the
merger because UBS Warburg is an internationally recognized investment banking
firm with substantial experience in similar transactions. UBS Warburg is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities and private placements.

   In the ordinary course of business, UBS Warburg, its successors and
affiliates may actively trade the securities of CFM and Mattson for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in these securities.

                                       63
<PAGE>

INTERESTS OF CFM'S DIRECTORS, OFFICERS, AND AFFILIATES IN THE TRANSACTIONS

   When considering the recommendation of CFM's board of directors, CFM
shareholders should be aware that CFM directors and officers have interests in
the Transactions that are different from, or are in addition to, your
interests. The CFM board of directors was aware of these potential conflicts
and considered them.

 Stock Options

   As of the record date, Brad Mattson, the Chief Executive Officer and
Chairman of the board of Mattson, held 21,163 options in CFM exercisable within
60 days. These options were granted in connection with Mr. Mattson's service on
the board of directors of CFM. These options will be converted into options for
Mattson common stock under the terms of the Merger Agreement. Mr. Mattson took
no part in the deliberations of the CFM board regarding the proposed merger
transaction, and Mr. Mattson resigned from the CFM board effective April 26,
2000.

 Employment Arrangements

   Under the terms of the Merger Agreement, certain members of CFM's board of
directors and executive management team will become officers and/or members of
the board of directors of Mattson, as follows:

   James J. Kim will become a member of the board of directors of Mattson.

   Roger A. Carolin will serve as the President of Mattson's Wet Processing
Group.

   Christopher F. McConnell, the Chairman of the Board of CFM, is party to the
McConnell Severance Agreement. Roger Carolin is party to the Carolin Severance
Agreement. The McConnell Severance Agreement provides, among other things, that
for 5 years from the date of its execution, unless earlier terminated by the
mutual agreement of the parties, following any Change of Control Event (as
defined therein), if Mr. McConnell's employment is terminated by the employer
Without Cause or by Mr. McConnell for a Good Reason Event (as such terms are
defined in McConnell Severance Agreement):

  .  any options to purchase common stock of the employer shall vest
     immediately as of the date of such termination;

  .  the employer shall pay the employee his annual target bonus for the
     then-current fiscal year on a pro rata basis;

  .  the employer shall pay the employee 24 monthly payments equal to one-
     twelfth of the employee's then-current annual base salary plus annual
     target bonus.

   Additionally, if Mr. McConnell's employment is terminated for a Good Reason
Event, the employer shall be entitled to 26 days of consulting time from the
employee during the 6 months following termination and for any additional days
agreed to by Mr. McConnell, the employer shall pay Mr. McConnell $3,500 a day.

   The Carolin Severance Agreement provides, among other things, that for 5
years from the date of its execution or two years following a Change in Control
Event (as defined therein), whichever is longer, unless earlier terminated by
the mutual agreement of the parties, following a Change in Control Event, if
Mr. Carolin's employment is terminated by the employer Without Cause or by Mr.
Carolin for a Good Reason Event (as such terms are defined in the Carolin
Severance Agreement):

  .  any options to purchase common stock of the employer shall vest
     immediately as of the date of such termination;

  .  the employer shall pay the employee his annual target bonus for the
     then-current fiscal year on a pro rata basis;

                                       64
<PAGE>

  .  the employer shall pay the employee 24 monthly payments equal to one-
     twelfth of the employee's then-current annual base salary plus annual
     target bonus.

   Additionally, if Mr. Carolin's employment is terminated for a Good Reason
Event, the employer shall be entitled to 26 days of consulting time during the
6 months following termination and for any additional days agreed to by Mr.
Carolin, the employer shall pay Mr. Carolin $3,100 a day.

   Lorin J. Randall, the Secretary and Chief Financial Officer of CFM, is a
party to the Employment Agreement. The Employment Agreement provides, among
other things, that for 5 years from the date of its execution, unless earlier
terminated by the mutual agreement of the parties, following any Change of
Control Event (as defined therein), if Mr. Randall's employment is terminated:

   (1) by the employer Without Cause (as defined in the Employment Agreement):

  .  if the termination occurs within 18 months of a Change of Control Event
     the employer will pay Mr. Randall:

    .  his annual target bonus for the current fiscal year on a pro rata
       basis;

    .  monthly compensation equal to one-twelfth of Mr. Randall's then-
       current annual base salary plus annual target bonus for a period of
       18 months following the date of termination.

  .  If a Change of Control Event occurs during the one-year period following
     Mr. Randall's termination, the employer shall pay Mr. Randall:

    .  his annual target bonus for the then-current fiscal year on a pro
       rata basis;

    .  monthly compensation equal to one-twelfth of Mr. Randall's then-
       current annual base salary plus annual target bonus for a period of
       18 months following the date of termination;

    .  fully vested options to purchase a number of shares of common stock
       of the employer equal to the number of unvested options held by Mr.
       Randall and cancelled at the time of termination. The purchase price
       of each such share shall equal the lowest share purchase price of
       any of the cancelled options or the fair market value of a share of
       common stock of the employer on the date of the Change of Control
       Event, whichever is lower. All other terms of the newly granted
       option shall be similar to the terms of the cancelled options.

   (2) by Mr. Randall upon a Good Reason Event:

  .  any options to purchase common stock of the employer and held by Mr.
     Randall shall vest immediately as of the date of such termination;

  .  the employer will pay Mr. Randall his annual target bonus for the
     current fiscal year on a pro rata basis;

  .  Mr. Randall shall agree to serve as a consultant to CFM for up to 26
     days during the 6 months after his termination; and

  .  the employer will pay Mr. Randall 18 monthly payments equal to one-
     twelfth of his then-current annual base salary plus annual target bonus
     and the amount of $3,000 for each day of consulting Mr. Randall agrees
     to in excess of 26 days.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

   The following discussion summarizes material federal income tax consequences
of the merger to holders of CFM common stock, and to Mattson, M2C Acquisition
Corporation, and CFM. The discussion is based on the current provisions of the
Internal Revenue Code of 1986, as amended (the Code), existing and proposed
Treasury Regulations, interpretive rulings of the Internal Revenue Service and
court decisions, all of which are subject to change at any time, possibly with
retroactive effect. Any such change could affect the continuing validity of
this summary.

                                       65
<PAGE>

   Holders of CFM common stock should be aware that this discussion does not
deal with federal income tax considerations that may be relevant to individual
shareholders in light of their particular circumstances or to shareholders who
are subject to special treatment under the Code. Thus, for example, the
discussion may not be applicable to tax-exempt organizations, financial
institutions, nonresident alien individuals or foreign entities. Other
shareholders also may have special considerations, including those who are
subject to alternative minimum tax provisions of the Code, who own, or are
deemed to own, a significant amount of Mattson common stock prior to the
merger, who do not hold their shares of CFM common stock as capital assets or
who acquired their shares in connection with stock option plans or in other
compensatory transactions. In addition, the following discussion does not
address the tax consequences of the merger under foreign, state or local tax
laws, the tax consequences to holders of options to acquire CFM common stock
and to holders of CFM common stock exercising dissenters rights, or the tax
consequences of transactions effectuated before, after or concurrently with the
merger, including any transactions in which shares of CFM common stock are
acquired or shares of Mattson common stock are sold, exchanged or otherwise
disposed of.

   It is expected that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
that Mattson, M2C Acquisition Corporation, and CFM will each be a party to a
reorganization within the meaning of Section 368(b) of the Code and that no
gain or loss will be recognized by a stockholder of CFM as a result of the
merger with respect to the shares of CFM common stock that are converted solely
into Mattson common stock. However, a shareholder of CFM may recognize gain or
loss with respect to the receipt of cash in lieu of the issuance of fractional
shares of Mattson common stock. Neither Mattson nor CFM will request a ruling
from the Internal Revenue Service in connection with the merger.

   The Merger Agreement provides that the obligation of CFM to complete the
merger is subject to the receipt of a written opinion from its counsel, Ballard
Spahr Andrews & Ingersoll, LLP, that the tax consequences of the merger shall
be as set forth above. CFM does not have any current intention to waive this
condition regarding the tax opinion. However, CFM shareholders should be aware
that such opinion of counsel will not bind the IRS or any court, and that the
IRS may assert a contrary position. This tax opinion will be made subject to
assumptions and qualifications, including the truth and accuracy of
representations made by CFM and Mattson in certificates to be delivered to
counsel by the respective managements of CFM and Mattson.

   If the merger were to fail to qualify as a reorganization under section
368(a) of the Code, then CFM shareholders would recognize taxable gain or loss
with respect to each share of CFM common stock surrendered equal to the
difference between the shareholders basis in the share and the fair market
value, as of the effective time of the merger, of the Mattson common stock
received in exchange for such share.

   The preceding discussion is not a complete analysis or discussion of all
potential tax effects relevant to the merger. Holders of CFM common stock are
urged to consult their own tax advisers as to the specific consequences of the
merger to them, including tax return reporting requirements, the applicability
and effect of federal, state, local, and other tax laws and the effects of any
proposed changes in the tax laws.

ANTICIPATED ACCOUNTING TREATMENT OF THE TRANSACTIONS

   Mattson intends to account for the Transactions as a "purchase" of the STEAG
Semiconductor Division and CFM by Mattson for financial reporting and
accounting purposes, in accordance with generally accepted accounting
principles. The purchase accounting treatment of the transactions will result
in a purchase price in excess of net assets acquired. This number is expected
to be in the $350 to $450 million range based on the market price of Mattson
stock at the time of announcement of the Transactions and the current value of
the net assets. The allocation of the purchase price among net assets acquired,
in-process research and development, goodwill and other intangibles will be
determined using independent appraisers. It is anticipated that the goodwill
and other intangibles will be amortized by Mattson over a period of three to
seven years.

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REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE TRANSACTIONS

   The Transactions are subject to the requirements of the HSR Act which
prevents reportable transactions from being completed until statutory waiting
periods expire or are terminated. During such waiting periods, the Antitrust
Division of the Department of Justice or the Federal Trade Commission may
request the parties to provide, voluntarily or otherwise, certain information
relevant to their review. Mattson, STEAG and CFM have already received the
required clearances under both the HSR Act and the German Cartel Act with
respect to the Transactions.

   The requirements of the HSR will be satisfied if the Transactions are
completed within one year from the termination of the waiting period. During or
after the statutory waiting periods, and even after completion of the
Transactions, either the Antitrust Division of the Department of Justice or the
Federal Trade Commission could challenge or seek to block the Transactions
under the antitrust laws, as it deems necessary or desirable in the public
interest. Foreign competition agencies with jurisdiction over the Transactions
could also initiate action to challenge or block the Transactions. In addition,
a competitor, customer, or other third party could initiate a private action
under the antitrust laws challenging or seeking to enjoin the Transactions,
before or after they are completed. Mattson, STEAG, and CFM cannot be sure that
a challenge to the Transactions will not be made or that, if a challenge is
made, Mattson, STEAG, and CFM will prevail. If either of the Transactions is
blocked, then neither can be completed.

   None of Mattson, STEAG, or CFM is aware of any other material governmental
or regulatory approval required for completion of the Transactions, other than
the effectiveness of the registration statement of which this joint proxy
statement-prospectus is a part, and compliance with applicable corporate laws
of Delaware, Pennsylvania, the Federal Republic of Germany, and the corporate
laws of the countries in which any of the STEAG Semiconductor Subsidiaries may
be located.

APPRAISAL OR DISSENTERS' RIGHTS

   Under Section 262 of the Delaware General Corporation Law, Mattson
stockholders who do not vote in favor of or consent to a merger are not
entitled to appraisal rights if the stock subject to such merger is designated
as a National Market System Security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. and the consideration to be
received in such merger consists of stock listed on a national securities
exchange or designated as a National Market System Security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
Because Nasdaq is designated as such a system and the Mattson common stock is
and will continue to be quoted on Nasdaq, holders of Mattson common stock are
not entitled to appraisal rights with respect to the merger.

   Under Pennsylvania law, CFM shareholders are entitled to dissent from the
merger and instead demand payment from CFM of the fair value of their shares.
To claim dissenters' rights, CFM shareholders must comply with the following
requirements:

  . Before the shareholder vote on the Merger Agreement is taken, CFM
    shareholders must deliver to CFM written notice of their intent to demand
    payment for their shares if the merger is effected.

  . CFM shareholders must not vote their shares in favor of the merger and
    the Merger Agreement at the CFM shareholder meeting.

  . If CFM shareholders notify CFM of their intent to demand dissenters'
    rights, CFM will send them written notice after the completion of the
    merger, indicating when and how to demand payment for their shares. After
    receiving the notice, they must demand payment for their shares in the
    manner required by the notice sent by CFM.

  . CFM shareholders must certify to CFM the date they acquired beneficial
    ownership of their shares.

  . CFM shareholders must deposit the certificates representing their shares
    in the manner required by the notice they receive from CFM.

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   If CFM shareholders do not comply with the requirements outlined above, they
will not be entitled to receive payment for their shares under the dissenters'
rights provisions of Pennsylvania law.

   If CFM shareholders comply with the outlined requirements, promptly
following the later of the date of effectiveness of the merger or the date CFM
received demand for payment, CFM will pay to dissenting CFM shareholders the
amount CFM estimates to be the fair value of their shares of CFM common stock.
Within 30 days of receipt of CFM's remittance of payment or estimate of the
fair value, if CFM shareholders believe CFM's estimate of the fair value of
their shares is incorrect, CFM shareholders may notify CFM in writing of their
own estimate of the fair value of their shares of CFM common stock and demand
payment of their estimate. Within 60 days of the later to occur of the
effectuation of the merger, timely receipt of the shareholder's demand for
payment and timely receipt of an estimate of fair value from the shareholder,
if demand for payment of the shares remains unsettled, CFM may request the fair
value be determined by a court. YOUR DISSENTERS' RIGHTS ARE SET OUT IN THEIR
ENTIRETY IN SECTIONS 1571-1580 OF THE PENNSYLVANIA BUSINESS CORPORATION LAW,
WHICH IS ATTACHED TO THIS JOINT PROXY STATEMENT-PROSPECTUS AS ANNEX E.

RESTRICTIONS ON SALES OF SHARES BY AFFILIATES

   The shares of Mattson common stock to be issued to CFM shareholders in the
merger will be registered under the Securities Act. These shares will be freely
transferable under the Securities Act, except for shares of Mattson common
stock issued to any person who is an affiliate of Mattson. Persons who may be
deemed to be affiliates include individuals or entities that control, are
controlled by, or are under common control of Mattson and may include some of
their respective officers and directors, as well as their respective principal
shareholders. Affiliates may not sell their shares of Mattson common stock
acquired in the Transactions except pursuant to (1) an effective registration
statement under the Securities Act covering the resale of those shares, (2) an
exemption under paragraph (d) of Rule 145 under the Securities Act or (3) any
other applicable exemption under the Securities Act.

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                  THE STRATEGIC BUSINESS COMBINATION AGREEMENT

   This section of the joint proxy statement-prospectus describes the material
terms of the Strategic Business Combination Agreement between Mattson and STEAG
dated as of June 27, 2000 (the "Combination Agreement"). While Mattson and CFM
believe this description covers the material terms of the Combination
Agreement, this summary may not contain all of the information that is
important to you. This description is qualified in its entirety by reference to
the Combination Agreement attached as Annex A hereto, which Mattson and CFM
urge you to read carefully.

Result of Business Combination

   Pursuant to the Combination Agreement, Mattson will directly or indirectly
acquire 100% of the issued and outstanding capital stock, equity ownership, or
its equivalent, of the following STEAG Semiconductor Subsidiaries which
comprise the STEAG Semiconductor Division: STEAG RTP Systems GmbH, STEAG
MicroTech GmbH, STEAG RTP Systems, Inc., STEAG CVD Systems Ltd., STEAG CVD
Systems, Inc., STEAG Cutek, Inc., STEAG Electronic Systems Inc., STEAG
Electronic Systems (UK) Ltd., STEAG Electronic Systems South East Asia PTE
Ltd., STEAG Electronic Systems Korea Ltd., and STEAG Electronic Systems Japan
Co., Ltd.

Organization of New German Corporation

   In connection with the Combination Agreement, STEAG has recently organized
under German law a new corporation, STEAG Electronic Systems Semiconductor GmbH
("Newco"). Prior to the closing, STEAG will transfer all of the capital stock
it owns in each STEAG Semiconductor Subsidiary organized or incorporated
outside of Germany and the United States to Newco and, at STEAG's option, may
also transfer to Newco all of the capital stock STEAG owns in the STEAG
Semiconductor Subsidiaries incorporated in the United States. At the closing,
STEAG will transfer to Mattson all of the capital stock of Newco, each of the
STEAG Semiconductor Subsidiaries organized in Germany, and each of the STEAG
Semiconductor Subsidiaries incorporated in the United States not previously
transferred to Newco.

Closing of The Business Combination; Consideration

   At the closing of the business combination, Mattson will receive all of the
shares of Newco and the other STEAG Semiconductor Subsidiaries, and will in
exchange issue and deliver to STEAG 11,850,000 shares of Mattson common stock
and US$100,000. Mattson, at its option, may elect to increase the consideration
paid to STEAG by also delivering to STEAG a promissory note if STEAG would
otherwise have a right to terminate the Combination Agreement due to the market
price of Mattson common stock at the time for closing. See "Termination--
Optional Termination" beginning on page 78 of this joint proxy statement-
prospectus. Mattson shall also assume certain obligations of STEAG and STEAG
AG, and will grant options to purchase 850,000 shares of Mattson common stock
to directors, officers, and employees of the STEAG Semiconductor Division under
existing Mattson stock option plans, with an exercise price equal to the fair
market value of Mattson common stock on the date of the closing and under terms
consistent with outstanding Mattson stock options.

Time of Closing

   If all of the conditions to the business combination contained in the
Combination Agreement are satisfied or waived, the Combination Agreement
provides that the closing will occur as soon as practicable following January
1, 2001.

   If prior to December 1, 2000, all of the mutual closing conditions have been
satisfied, Brad Mattson has executed and delivered the Stockholder Agreement,
and all of the other closing conditions (other than those conditions which, by
their nature, can only be satisfied by delivery of securities, documents, or
other

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<PAGE>

instruments on the closing date) would have been either satisfied or waived by
the relevant party were the closing to occur at such time, and simultaneously,
the same situation applies under the Merger Agreement with CFM, then the
parties will take the following pre-closing steps prior to the actual closing:

  . Mattson and STEAG will each deliver or cause to be delivered to the other
    the closing certificates and legal opinions that would otherwise be
    required at the closing;

  . Mattson and STEAG will each execute and deliver the Stockholder
    Agreement, and will also execute and deliver the Transition Services
    Agreement (described in further detail below) and such other agreements
    as would have been required at the closing;

  . Mattson will execute and deliver to STEAG an irrevocable acknowledgement
    and waiver of the satisfaction or waiver of the closing conditions
    applicable to Mattson and the waiver of Mattson's termination rights
    under the Combination Agreement and STEAG will execute and deliver to
    Mattson an irrevocable acknowledgement and waiver of the satisfaction or
    waiver of the closing conditions applicable to STEAG and the waiver of
    STEAG's termination rights under the Combination Agreement.

   However, despite taking these pre-closing steps, the actual closing shall
not occur, and STEAG shall not sell or transfer to Mattson, and Mattson shall
not acquire ownership of the STEAG Semiconductor Subsidiaries, prior to January
1, 2001.

Post-Closing Cash Adjustments

   The following adjustments will be made with regard to the profits and
losses, cash position, and working capital of the STEAG Semiconductor Division
following the closing:

  . As promptly as practicable, but in no event more than 60 days following
    the closing date, Mattson will prepare and deliver to STEAG (i) audited
    income statements of STEAG RTP Systems GmbH and STEAG MicroTech GmbH for
    the year ended December 31, 2000 (the "Year 2000 Income Statements"), and
    (ii) a statement of the aggregate cash and cash equivalents of the
    combined STEAG Semiconductor Subsidiaries as of December 31, 2000 (the
    "Closing Cash Statement" and, together with the Year 2000 Income
    Statements, the "Closing Financial Statements"). The Year 2000 Income
    Statements shall be prepared in accordance with German GAAP. The Closing
    Cash Statement shall be certified by PricewaterhouseCoopers.

  . Within 5 days after the Closing Financial Statements become final in
    accordance with the Combination Agreement, in accordance with certain
    profit transfer and loss absorption agreements between STEAG, on the one
    hand, and each of STEAG RTP Systems GmbH and STEAG MicroTech GmbH, on the
    other hand, (i) Mattson will cause each of STEAG RTP Systems GmbH and
    STEAG MicroTech GmbH to transfer its net profit, if any, for fiscal year
    2000 to STEAG, or (ii) STEAG will reimburse each of STEAG RTP Systems
    GmbH and STEAG MicroTech GmbH for its net loss, if any, for fiscal year
    2000, as the case may be.

  . If, after taking into account any profit and loss reimbursement as
    provided above, the aggregate cash balance of the combined STEAG
    Semiconductor Subsidiaries would exceed $10,075,000, Mattson shall cause
    the additional cash in excess of $10,075,000 to be transferred to STEAG
    at the time of any payments as provided above; provided, that Mattson
    shall not be obligated to transfer more than DM20,000,000 of such excess
    cash. If, after taking into account any profit and loss reimbursement as
    provided above, the aggregate cash balance of the combined STEAG
    Semiconductor Subsidiaries would be less than $10,075,000, STEAG shall
    contribute to the STEAG Semiconductor Subsidiaries (allocated among the
    STEAG Semiconductor Subsidiaries as agreed by the parties) cash in the
    amount of such deficit at the time of any payments as provided above;
    provided, that STEAG shall not be obligated to contribute more than
    DM20,000,000 of such deficit.

  . Under certain circumstances, at the time of any contribution or
    reimbursement to or from the STEAG Semiconductor Subsidiaries pursuant to
    the post-closing adjustments described above, as the case may be, STEAG
    may be required to contribute to the STEAG Semiconductor Subsidiaries (or
    the profit to be transferred to STEAG shall be reduced by) an amount
    equal to $12,300,000.


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Conditions to The Business Combination

 Conditions to the Obligations of Each Party.

   The obligations of Mattson and STEAG to complete the business combination
are subject to the following conditions:

  . approval by the stockholders of Mattson of the proposed issuance of
    shares of Mattson common stock pursuant to the Combination Agreement;

  . the absence of any legal proceeding, action, law, or regulation
    challenging, prohibiting or making the business combination illegal;

  . receipt of all consents and approvals of governmental entities necessary
    to consummate the business combination;

  . listing on Nasdaq of the Mattson common stock to be issued in the
    business combination;

  . Newco being the owner of the outstanding capital stock of all of the
    STEAG Semiconductor Subsidiaries incorporated or organized outside the
    U.S. and Germany; and

  . concurrent closing of the merger between Mattson and CFM.

 Conditions to the Obligations of Mattson.

   The obligations of Mattson to complete the business combination are also
subject to the following conditions:

  . compliance by STEAG and the STEAG Semiconductor Subsidiaries with their
    obligations under the Combination Agreement and the representations and
    warranties made by STEAG in the Combination Agreement being true and
    correct in all material respects as of the date of the Combination
    Agreement and the closing date of the business combination;

  . receipt by Mattson from STEAG of a certificate certifying that the
    closing conditions that apply to STEAG under the Combination Agreement
    have been satisfied;

  . all required consents and approvals for the contemplated transactions
    shall have been obtained and all required filings shall have been made;

  . no material adverse effect shall have occurred or be reasonably likely to
    occur with respect to the business, operations, assets, liabilities,
    results of operations, cash flows or condition of the STEAG Semiconductor
    Subsidiaries taken as a whole;

  . STEAG shall have executed the Stockholder Agreement (described in further
    detail below);

  . counsel for STEAG in the United States shall have delivered to Mattson a
    legal opinion in the form agreed to by the parties;

  . STEAG shall have executed a Transition Services Agreement;

  . Mattson shall have received the written resignations, effective as from
    the closing date, of the directors of all STEAG Semiconductor
    Subsidiaries, except for those employee/directors whom the parties have
    mutually agreed to retain immediately following the closing; and

  . Mattson shall have received the share certificates evidencing the
    outstanding capital stock of Newco, each of the STEAG Semiconductor
    Subsidiaries incorporated or organized in Germany and each of the STEAG
    Semiconductor Subsidiaries incorporated in the U.S. that STEAG has not
    previously transferred to Newco, the documents and instruments required
    for the notarization and transfer of the outstanding Newco and German and
    U.S. STEAG Semiconductor Subsidiary shares and such other closing and
    transfer documents as Mattson shall reasonably request to effect and
    consummate the business

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<PAGE>

   combination and the transactions contemplated thereby, in each case in
   form and substance reasonably satisfactory to Mattson and its counsel.

 Conditions to the Obligations of STEAG.

   The obligations of STEAG to complete the business combination are also
subject to the following conditions:

  .  compliance by Mattson with its obligations under the Combination
     Agreement and the representations and warranties made by Mattson in the
     Combination Agreement being true and correct in all material respects as
     of the date of the Combination Agreement and the closing date of the
     business combination;

  .  receipt by STEAG from Mattson of a certificate certifying that the
     closing conditions that apply to Mattson under the Combination Agreement
     have been satisfied;

  .  all required consents and approvals for the contemplated transactions
     shall have been obtained and all required filings shall have been made;

  .  no material adverse effect shall have occurred or be reasonably likely
     to occur with respect to the business, operations, assets, liabilities,
     results of operations, cash flows, or condition of Mattson and its
     subsidiaries, taken as a whole, on a consolidated basis;

  .  delivery by Mattson to STEAG of the share certificates evidencing the
     11,850,000 Mattson shares and such other documents and instruments as
     STEAG shall reasonably request to effect and consummate the business
     combination and the transactions contemplated thereby, in each case in
     form and substance reasonably satisfactory to STEAG and its counsel;

  .  Mattson and Brad Mattson's execution and delivery to STEAG of the
     Stockholder Agreement, and the taking of the actions required under the
     Stockholder Agreement;

  .  Mattson's execution and delivery to STEAG of the Transition Services
     Agreement;

  .  STEAG's receipt of a written opinion from Mattson's legal counsel in the
     form to be agreed to by the parties; and

  .  grant by Mattson of the 850,000 stock options granted to directors,
     officers, and employees of the STEAG Semiconductor Division with an
     exercise price equal to the fair market value of Mattson common stock on
     the closing date.

Representations and Warranties

   The Combination Agreement contains customary representations and warranties
of Mattson, STEAG, and the STEAG Semiconductor Subsidiaries relating to, among
other things, aspects of the respective businesses of the companies and other
matters. The representations and warranties expire upon the termination of the
Combination Agreement or closing of the business combination.

Covenants; Conduct of Business Prior To The Business Combination

 Affirmative Covenants of STEAG.

   STEAG has agreed that, prior to the closing, STEAG will:

  .  carry on the business of the STEAG Semiconductor Subsidiaries in the
     ordinary course of business in substantially the same manner as before;

  .  pay and cause to be paid the debts and taxes of the STEAG Semiconductor
     Subsidiaries when due, and pay and perform other obligations when due;
     and


                                      72
<PAGE>

  .  use all reasonable efforts to preserve intact the business organizations
     and keep available the services of the present officers, employees, and
     consultants of the STEAG Semiconductor Subsidiaries, and preserve the
     STEAG Semiconductor Subsidiaries' relationships with customers,
     suppliers, distributors, licensors, licensees, and others having
     business dealings with the STEAG Semiconductor Subsidiaries.

 Negative Covenants of STEAG.

   STEAG has agreed that, prior to the closing, except with the prior written
consent of Mattson or as expressly contemplated by the Combination Agreement or
previously disclosed to Mattson, STEAG shall not allow any of the STEAG
Semiconductor Subsidiaries to do or permit any of the following:

  .  cause or permit any amendments to any of their organizational or charter
     documents;

  .  declare or pay any dividends;

  .  accelerate, amend, or change the period of exercisability or vesting of
     options;

  .  issue, deliver, or sell any shares of their capital stock other than
     issuances pursuant to the exercise of stock options outstanding as of
     the date of the Combination Agreement;

  .  transfer to any person or entity any intellectual property rights other
     than in the ordinary course of business consistent with past practice;

  .  enter into or amend any agreements pursuant to which any party is
     granted exclusive marketing or other exclusive rights of any type;

  .  sell, lease, license, or otherwise dispose of or encumber any of their
     material properties or assets except in the ordinary course of business
     consistent with past practice;

  .  incur any indebtedness for borrowed money or guarantee any such debt
     other than intercompany loans which loans will be cancelled at or prior
     to the closing;

  .  enter into, amend or terminate certain agreements which would adversely
     affect the business of the STEAG Semiconductor Subsidiaries;

  .  pay, discharge, or satisfy any claim or liability in excess of
     $2,000,000 arising other than in the ordinary course of business;

  .  make any capital expenditures or capital improvements in excess of
     $2,000,000 beyond the amounts provided in the operations plans for the
     STEAG Semiconductor Subsidiaries in effect as of the date of the
     Combination Agreement;

  .  materially reduce the amount of any material insurance coverage other
     than in the ordinary course of business;

  .  terminate or waive any right of substantial value other than in the
     ordinary course;

  .  amend any STEAG Semiconductor Subsidiary employee benefit plan or adopt
     any plan that would constitute an employee benefit plan, or hire any new
     executive officer-level employee or hire additional employees such that
     the number of worldwide employees of the STEAG Semiconductor
     Subsidiaries exceeds, in the aggregate, 120% of the worldwide aggregate
     number of such employees on the date of the Combination Agreement, pay
     any special bonus, or increase the benefits, salaries, or wage rates of
     employees except in the ordinary course of business;

  .  grant any severance or termination pay or benefits to any director or
     officer or to any other employee of a U.S. STEAG Semiconductor
     Subsidiary except payments made pursuant to any written agreement
     outstanding as of the date of the Combination Agreement or previously
     disclosed to Mattson;

  .  acquire or agree to acquire by merging into or consolidating with, or by
     purchasing a substantial portion of the assets of, any business or
     corporation;


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<PAGE>

  .  make or change any material tax election, or adopt or change any
     material accounting method with respect to taxes other than in the
     ordinary course; and

  .  revalue any assets, including writing down the value of inventory other
     than in the ordinary course.

 Affirmative Covenants of Mattson.

   Mattson has agreed that, prior to the closing,

  .  Mattson shall carry on its business in the ordinary course and in
     substantially the same manner as before, pay the debts and taxes of
     itself and its subsidiaries when due, pay and perform other obligations
     when due, and use all reasonable efforts to preserve intact its business
     organizations, keep available the services of its present officers, key
     employees, and consultants, and preserve its relationships with
     customers, suppliers, distributors, licensors, licensees, and others
     having business dealings with Mattson, to the end that its good will and
     ongoing businesses shall be unimpaired at the time of the closing.

  .  Mattson shall prepare and file with the SEC, at its own expense, a joint
     proxy statement-prospectus relating to the Mattson stockholder proposal
     to be presented for voting and adoption at meetings of the Mattson
     stockholders and CFM shareholders. Mattson shall duly call, give notice
     of, convene, and hold the Mattson stockholders' meeting as promptly as
     practicable to consider and vote on the Mattson stockholder proposal.
     Subject to its fiduciary obligations under applicable law, the board of
     directors of Mattson shall recommend to its stockholders the approval of
     the Mattson stockholder proposal.

  .  For a period of two years following the closing, Mattson shall provide
     or cause benefits to be provided to all employees of the STEAG
     Semiconductor Subsidiaries who were employees of U.S. STEAG
     Semiconductor Subsidiaries immediately prior to the closing that are no
     less favorable in the aggregate to the benefits provided to such STEAG
     Semiconductor Subsidiaries employees on the date of the Combination
     Agreement, and thereafter shall provide such STEAG Semiconductor
     Subsidiaries employees with benefits comparable to those provided to
     similarly-situated and located employees of Mattson. Time of service
     with the STEAG Semiconductor Subsidiaries shall be credited for all
     purposes, other than benefit accrual, under any comparable plans
     maintained by Mattson, except to the extent such credit would result in
     a duplication of benefits.

  .  Mattson shall use reasonable commercial efforts to cause the Mattson
     shares issuable pursuant to the terms of the Combination Agreement to be
     listed on Nasdaq, subject to official notice of issuance, as promptly as
     practicable after the date of the Combination Agreement and in any event
     prior to the closing.

 Negative Covenants of Mattson.

   Mattson has agreed that, prior to the closing, except with the prior written
consent of STEAG or as expressly contemplated by the Combination Agreement or
previously disclosed to STEAG, it shall not:

  .  cause or permit any amendments to its Certificate of Incorporation or
     Bylaws;

  .  declare or pay any dividends;

  .  sell, transfer, convey, assign, or otherwise dispose of any of its
     material assets or properties except sales of inventory in the ordinary
     course of business and consistent with past practice;

  .  waive, release, or cancel any claims against third parties, debts owing
     to it, or rights valued in excess of $5,000,000;

  .  make any change to its accounting systems, policies, principles, or
     practices, except as required by law or by any change in generally
     accepted accounting principles;

  .  authorize or make any capital expenditures in excess of $25,000,000 in
     the aggregate;


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  .  make or change any tax election or accounting method, settle or
     compromise any material tax dispute, or waive or extend the statute of
     limitations on any tax liability except in filing for extensions of tax
     returns or in the ordinary course of business and consistent with past
     practice;

  .  sell, lease, license, or otherwise dispose of any material properties or
     assets, except in the ordinary course of business;

  .  settle or compromise any suit or claim involving payment of more than
     $10,000,000;

  .  issue, sell, transfer, or pledge any of its shares, or securities
     convertible into its shares, or options, or warrants exercisable for its
     shares, other than issuances of common stock pursuant to the exercise of
     options previously granted, the issuance of up to 4,500,000 shares of
     Mattson common stock, plus the assumption of unexercised options to
     purchase shares of CFM common stock, in the merger with CFM, additional
     options to acquire Mattson common stock granted under the terms of any
     employee or director stock option plan in the ordinary course, or the
     issuance of up to 2,000,000 shares of Mattson common stock in connection
     with acquisitions of assets or businesses; and

  .  adopt a plan or agreement of complete or partial liquidation, merger, or
     reorganization.


 Mutual Covenants of Mattson and STEAG.

   Mattson and STEAG have agreed that from the date of the Combination
Agreement, each party shall:

  .  use its reasonable commercial efforts to take all action required of it
     to satisfy the conditions set forth in the Combination Agreement, and
     otherwise fulfill its respective obligations under the terms of the
     Combination Agreement and facilitate the consummation of the
     transactions contemplated by the Combination Agreement;

  .  cooperate in the preparation of the joint proxy statement-prospectus;

  .  each of the parties and their respective counsel and advisors shall have
     reasonable access during normal business hours to all books, records,
     assets, and contracts of or relating to the other party, in each case to
     complete such party's respective diligence investigation;

  .  confer on a regular and frequent basis with one or more representatives
     of the other party to report material operational matters and the
     general status of ongoing operations;

  .  continue to abide by the terms of the previously executed Mutual Non-
     Disclosure Agreement dated February 25, 2000;

  .  consult with each other before issuing any press release or otherwise
     making any public statement or making any other public (or non-
     confidential) disclosure (whether or not in response to an inquiry)
     regarding the terms of the Combination Agreement and the transactions
     contemplated by the Combination Agreement;

  .  use all reasonable efforts to file, as promptly as practicable, all
     notices, reports, and other documents required to be filed by such party
     with any governmental entity with respect to the Combination Agreement
     and the transactions contemplated by the Combination Agreement and to
     submit promptly any additional information requested by any such
     governmental entity;

  .  use all reasonable efforts to resolve any objections that may be
     asserted by any governmental entity with respect to the transactions
     contemplated by the Combination Agreement under any U.S. or foreign
     antitrust law;

  . each party shall, and shall cause their respective subsidiaries to, take
    all reasonable actions necessary to comply promptly with all of the legal
    requirements which may be imposed on them with respect to the
    consummation of the transactions contemplated by the Combination
    Agreement; and

  . cooperate in the preparation, execution, and filing of all tax returns
    and other tax documents in connection with the transactions contemplated
    by the Combination Agreement.

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Limitation on Other Negotiations

   Prior to the termination of the Combination Agreement (the "Exclusivity
Period"), STEAG will not take any action to solicit, initiate, seek, encourage,
or support any inquiry, proposal, or offer (whether written or oral) from,
furnish any information to, or participate in any negotiations with, any
corporation, partnership, person, or other entity or group (other than
discussions with Mattson) regarding any acquisition of STEAG or the STEAG
Semiconductor Subsidiaries, any merger or consolidation with or involving STEAG
or the STEAG Semiconductor Subsidiaries, or any acquisition of any material
portion of the stock or assets of STEAG or any of the STEAG Semiconductor
Subsidiaries. STEAG agrees that any such negotiations in progress as of the
date of the Combination Agreement will be terminated or suspended during the
Exclusivity Period. During the Exclusivity Period, STEAG will immediately
notify Mattson regarding any contact by any third party regarding any offer,
proposal or inquiry regarding any such acquisition or financing of STEAG or any
of the STEAG Semiconductor Subsidiaries. In no event will STEAG or any of the
STEAG Semiconductor Subsidiaries accept or enter into an agreement concerning
any such third party transaction during the Exclusivity Period. During the
Exclusivity Period, STEAG will immediately notify Mattson regarding any contact
by any third party regarding any offer proposal or inquiry regarding any such
acquisition.

   During the Exclusivity Period, Mattson will not take any action to solicit,
initiate, seek, or encourage any inquiry, proposal or offer (whether written or
oral) from any corporation, partnership, person or other entity or group (other
than discussions with STEAG), or, except in response to an unsolicited inquiry,
proposal or offer (whether written or oral) from any such person, furnish any
information to, or participate in any negotiations with any such person,
regarding (i) any merger or consolidation with or involving Mattson which would
result in the stockholders of Mattson prior to such transaction owning less
than 50% of the capital stock of the surviving corporation, or any acquisition
of any material portion of the stock or assets of Mattson, or (ii) any
acquisition, whether by merger, stock acquisition, asset acquisition, joint
venture, partnership or otherwise, by Mattson of any business which competes
with STEAG or the STEAG Semiconductor Subsidiaries in the RTP, CVD, wet
processing or copper-plating businesses. Mattson agrees that any such
negotiations in progress as of the date of the Combination Agreement will be
terminated or suspended during the Exclusivity Period. In no event will Mattson
accept or enter into an agreement concerning any such third party transaction
during the Exclusivity Period. During the Exclusivity Period, Mattson will
immediately notify STEAG regarding any contact by any third party regarding any
offer, proposal or inquiry regarding any such acquisition.

Additional Agreements and Covenants

 Integration Committee.

   To facilitate transition and integration planning, Mattson, STEAG, and CFM
will maintain an integration committee consisting of the Chief Executive
Officers of Mattson, STEAG, and CFM, Ludger Viefhues (a STEAG Semiconductor
Division executive), and the future head of integration planning for Mattson,
which will continue to develop the organization and staffing plan prior to
closing. As of the closing, in accordance with the procedures for establishing
committees set forth in Mattson's Bylaws, the Mattson board of directors will
establish and appoint an "Executive Staffing Committee" consisting of Dr.
Jochen Melchior and Brad Mattson (and, if agreed by Mattson and STEAG, one
additional representative of each of STEAG and Mattson), which will remain in
place for one year following closing, and will be responsible during that
period for making key personnel decisions (including the hiring and firing of
Mattson's Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, and division general managers). A mutually acceptable independent
Mattson board member will be appointed by Mattson and STEAG as a tiebreaker in
the event the Executive Staffing Committee reaches deadlock on an issue.

 Regulatory Approvals.

   Each party shall use all reasonable efforts to file, as promptly as
practicable after the date of the Combination Agreement, all notices, reports,
and other documents required to be filed by such party with any

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governmental entity with respect to the business combination and the other
transactions contemplated by the Combination Agreement, and to submit promptly
any additional information requested by any such governmental entity. STEAG and
Mattson shall, promptly after the date of the Combination Agreement, prepare
and file the notifications required under the HSR Act in connection with the
business combination, and such filings as are required under the German Cartel
Act. Each party shall use all reasonable efforts to furnish to each other all
information required for any application or other filing to be made in
connection with the business combination and the other transactions
contemplated by the Combination Agreement. The parties have already obtained
the required clearance under the HSR Act and the German Cartel Act.

 STEAG Intercompany Indebtedness.

   Prior to the closing, STEAG will take such action as is reasonably necessary
to cause all indebtedness of any of the STEAG Semiconductor Subsidiaries to
STEAG or any of its affiliates (other than another STEAG Semiconductor
Subsidiary), other than certain excluded indebtedness, to be cancelled without
any payment on the part of such STEAG Semiconductor Subsidiary. As of the date
of the Combination Agreement, the amount of indebtedness of the STEAG
Semiconductor Subsidiaries to STEAG that will be forgiven pursuant to this
provision was approximately DM200,000,000.

 Non-Solicitation of Employees.

   Each of Mattson and STEAG agree that, without the prior written consent of
the other, they will not, and will cause their controlled affiliates not to,
during the term of the Combination Agreement and for a period of one year from
the date of termination of the Combination Agreement, directly or indirectly
(including through instruction to its agents) solicit for employment any person
who is now employed by the other; provided, however, that neither Mattson nor
STEAG nor any of their respective affiliates is prohibited from making general,
public solicitations for employment for any position or from employing any
current employee of the other party who contacts the party on his or her own
initiative and without impermissible solicitation by such party.

 Directors; Nominating Committee; Officers.

   Mattson shall cause the actions required to be taken as of closing under
Section 1 of the Stockholder Agreement to be taken on or prior to the closing
date, including (a) causing the board of directors of Mattson to be expanded
from five to seven members; (b) causing two persons designated by STEAG to be
appointed to the board of directors of Mattson; (c) causing one of the STEAG
designees to be named Chairman of the board of directors of Mattson; and (d)
causing Mattson's Bylaws to be amended.

 Company Name.

   The name of the company after the consummation of the transactions
contemplated by the Combination Agreement will be Mattson or such other name,
if any, which the parties, acting through the Integration Committee, mutually
determine to be more beneficial to the company's business, such determination
to be made in a timely manner. In the event that a different name is agreed
upon, Mattson shall take such corporate and other action as is reasonably
necessary to effect such name change. Within one year after the closing date,
Mattson will cause the names of each of the STEAG Semiconductor Subsidiaries to
be changed so as to no longer include the name "STEAG," and from and after the
first anniversary of the closing date, Mattson shall, and shall cause its
subsidiaries to, otherwise discontinue the use of the name "STEAG."
Notwithstanding the foregoing, Mattson and its subsidiaries may continue to use
any current product names and trademarks containing the name "STEAG" to the
extent associated with any products currently manufactured and sold by the
STEAG Semiconductor Division, as well as modified, but otherwise substantially
similar, versions of such products.

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Termination

 Optional Termination.

   The Combination Agreement may be terminated at any time prior to the closing
by action taken or authorized by the board of directors or the supervisory
board, as applicable, of the terminating party or parties and, except as
provided below, whether before or after approval of the Mattson stockholder
proposal by the stockholders of Mattson:

  . by mutual written consent of Mattson, STEAG and CFM;

  . by either Mattson or STEAG, if the closing shall not have occurred on or
    before February 28, 2001 (the "Termination Date"); provided, however,
    that the right to terminate the Combination Agreement shall not be
    available to any party whose failure to fulfill any obligation under the
    Combination Agreement has been the cause of, or resulted in, the failure
    of the closing to occur on or before the Termination Date;

  . by either Mattson or STEAG, if any governmental entity (i) shall have
    issued an order, decree or ruling or taken any other action permanently
    restraining, enjoining, or otherwise prohibiting the transactions
    contemplated by the Combination Agreement, and such order, decree,
    ruling, or other action shall have become final and nonappealable or (ii)
    shall have failed to issue an order, decree, or ruling or to take any
    other action, and such denial of a request to issue such order, decree,
    ruling or take such other action shall have become final and
    nonappealable, in the case of each of (i) and (ii) which is necessary to
    fulfill the conditions set forth in Article VII of the Combination
    Agreement, as applicable; provided, however, that the right to terminate
    the Combination Agreement under this provision shall not be available to
    any party whose failure to use their reasonable commercial efforts has
    been the cause of such action or inaction;

  . by either Mattson or STEAG, if the approval of the stockholders of
    Mattson contemplated by the Combination Agreement shall not have been
    obtained by reason of the failure to obtain the required vote at a duly
    held meeting of Mattson stockholders (including any adjournment or
    postponement thereof) at which the vote was taken; provided, however,
    that a party shall not be permitted to terminate the Combination
    Agreement pursuant to this provision if the failure to obtain such
    approval is attributable to a failure on the part of such party to
    perform any material obligation required to be performed by such party;

  . by STEAG, if (i) Mattson shall have materially breached its obligations
    under the Combination Agreement by reason of a failure to call the
    Mattson stockholders meeting in accordance with the Combination Agreement
    or a failure to prepare and mail to its stockholders the proxy statement,
    (ii) Mattson's board of directors shall have failed to recommend that
    Mattson's stockholders vote in favor of approval of the proposal to issue
    the shares under the Combination Agreement or shall have withdrawn,
    modified, or changed in a manner adverse to STEAG such recommendation,
    whether or not permitted by the terms of the Combination Agreement (iii)
    Mattson shall have entered into a definitive acquisition agreement for an
    acquisition transaction involving Mattson, (iv) an acquisition
    transaction involving Mattson shall have occurred, (v) Mattson shall have
    materially breached its obligations to not solicit or enter into an
    acquisition transaction, or (vi) Brad Mattson shall have materially
    breached his obligations under the voting agreement;

  . by STEAG if (i) any of Mattson's representations and warranties shall
    have been inaccurate as of the date of the Combination Agreement or shall
    have become inaccurate as of a date subsequent to the date of the
    Combination Agreement (as if made on such subsequent date), such that the
    closing condition with respect to Mattson's representations and
    warranties would not be satisfied or (ii) any of Mattson's covenants
    contained in the Combination Agreement shall have been breached such that
    the closing condition with respect to Mattson's covenants would not be
    satisfied; provided, however, that if an inaccuracy in Mattson's
    representations and warranties arising as of a date subsequent to the
    date of the

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<PAGE>

   Combination Agreement is curable by Mattson by the Termination Date and
   Mattson is continuing to exercise all reasonable efforts to cure such
   inaccuracy, then STEAG may not terminate the Combination Agreement under
   this provision on account of such inaccuracy;

  . by STEAG, if the 20-trading day average closing stock price immediately
    preceding the date two business days prior to the time of satisfaction of
    the closing conditions is less than $20.00. However, STEAG shall not be
    permitted to terminate the Combination Agreement pursuant to this
    provision if the 20-trading day average closing stock price is at least
    $15.78, provided that Mattson, in its sole discretion, elects to deliver
    to STEAG at the closing a note (as described below) as additional
    consideration for the sale of the STEAG Semiconductor Subsidiaries shares
    by STEAG to Mattson, which note is in a principal amount equal to the
    product obtained by multiplying 11,850,000 by the shortfall between
    $20.00 and such 20-trading day average closing stock price, and in any
    event up to a maximum principal amount of approximately $50 million. The
    note will be an unsecured promissory note payable by Mattson with a term
    of three years, with simple interest payable annually at LIBOR plus 2%;

  . by Mattson if (i) Mattson shall have entered into a definitive
    acquisition agreement for an acquisition transaction or (ii) an
    acquisition transaction involving Mattson shall have occurred;

  . by Mattson, if STEAG shall have materially breached its obligations to
    not solicit or enter into an acquisition transaction, but only if such
    breach results in STEAG entering into a third party acquisition agreement
    prohibited by such provision or otherwise materially adversely affects
    Mattson's ability to consummate the transactions contemplated by the
    Combination Agreement; or

  . by Mattson if (i) any of STEAG's representations and warranties shall
    have been inaccurate as of the date of the Combination Agreement or shall
    have become inaccurate as of a date subsequent to the date of the
    Combination Agreement (as if made on such subsequent date), such that the
    condition to closing with respect to STEAG's representations and
    warranties would not be satisfied or (ii) any of STEAG's covenants
    contained in the Combination Agreement shall have been breached such that
    the condition to closing with respect to STEAG's covenants would not be
    satisfied; provided, however, that if an inaccuracy in the
    representations and warranties of STEAG arising as of a date subsequent
    to the Combination Agreement is curable by STEAG by the Termination Date
    and STEAG is continuing to exercise all reasonable efforts to cure such
    inaccuracy, then Mattson may not terminate the Combination Agreement
    under this provision on account of such inaccuracy.

   In the event of termination of the Combination Agreement and abandonment of
the business combination, neither party (or any of its directors or officers)
shall have any liability or further obligation to any other party to the
Combination Agreement, except as provided below with respect to the effect of
termination, and except that (i) nothing herein will relieve any party from
liability for any material breach of the Combination Agreement and (ii) the
agreements regarding the listing of the Mattson shares on Nasdaq, the
provisions regarding the effect of termination, and the provisions regarding
certain payments by Mattson, shall survive.

 Automatic Termination.

   Upon the termination for any reason of the Merger Agreement prior to the
consummation of the business combination, the Combination Agreement shall
automatically terminate without any further action on the part of either party.

   If the Combination Agreement automatically terminates by reason of the
termination of the Merger Agreement by Mattson under certain circumstances ,
then Mattson shall promptly, but in no event later than three business days
following the date of such termination (or such later date as STEAG shall
request), make a nonrefundable cash payment to STEAG in an amount equal to the
aggregate amount of all actual and documented fees and expenses (including all
attorneys' fees, accountants' fees, financial advisory fees and filing fees)
that have been paid by or on behalf of STEAG in connection with the preparation
and negotiation of the Combination Agreement or otherwise in connection with
the business combination, provided that in no event shall such amount exceed
$5,000,000, such amount to be payable by wire transfer of immediately available
funds to an account designated by STEAG.

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<PAGE>

   If the Combination Agreement automatically terminates by reason of the
termination of the Merger Agreement by Mattson or CFM under circumstances
obligating (or potentially obligating) CFM to pay Mattson the termination fee
specified in the Merger Agreement, then Mattson shall, within three business
days of receipt of such termination fee or any portion thereof, remit to STEAG
one-half of the amount actually received by Mattson from CFM.

 Effect of Termination.

   If STEAG shall terminate the Combination Agreement because of a breach by
Mattson in relation to obtaining the stockholder approval or as result of
Mattson materially breaching its obligations to not solicit or enter into an
acquisition transaction or Brad Mattson having materially breached his
obligations under the voting agreement, or if Mattson shall terminate the
Combination Agreement as a result of entering into an acquisition transaction,
then Mattson shall promptly, but in no event later than the date of such
termination, pay STEAG a nonrefundable fee in an amount equal to $20,000,000,
payable by wire transfer of immediately available funds to an account
designated by STEAG.

   If Mattson shall terminate the Combination Agreement because STEAG has
entered into a third party acquisition transaction prohibited by the
Combination Agreement, then STEAG shall promptly, but in no event later than
the date of such termination, pay Mattson a nonrefundable fee in an amount
equal to $20,000,000, payable by wire transfer of immediately available funds
to an account designated by Mattson.

   If the Combination Agreement is terminated by Mattson because of a
misrepresentation or a breach of covenant by STEAG and, as a result of such
termination, STEAG is required to pay CFM the $40 million fee specified in the
Interim Patent License Agreement dated June 28, 2000 between CFM, CFM, Inc., a
subsidiary of CFM, and STEAG, Mattson shall, immediately upon request from
STEAG, provide written notice that it is required to make or has made such
payment to CFM, remit to CFM or STEAG, as the case may be, one-half of the
amount to be paid as so paid by STEAG to CFM, provided that Mattson shall not
be required to make any payment in advance of, or in an amount greater than, a
payment by STEAG.

Indemnification

   Subject to certain limitations, STEAG will indemnify and hold harmless
Mattson, its affiliates and its and their respective officers, directors,
agents, attorneys, and employees from and against any and all losses, costs,
damages, liabilities, and expenses arising from claims, demands, actions, and
causes of action, including, without limitation, legal fees, arising out of any
misrepresentation or breach of the representations and warranties by STEAG
regarding due incorporation, due authorization, non-contravention, capital
structure, and taxes. Subject to certain limitations, Mattson will indemnify,
defend and hold harmless STEAG, its affiliates and its and their respective
officers, directors, agents, attorneys and employees from and against any and
all damages arising out of any misrepresentation or breach of the
representations and warranties by Mattson regarding due incorporation, non-
contravention, and capitalization.

   The representations and warranties of STEAG pertaining to due incorporation,
due authorization, noncontravention, and its capital structure, and the
representations and warranties of Mattson pertaining to due incorporation, due
authorization, its capital structure and noncontravention, shall survive the
closing and continue in full force and effect for a period of one year
following the closing. The representation and warranty by STEAG that at the
closing Mattson will receive good and valid title to all the shares of Newco
and each STEAG Semiconductor Subsidiary incorporated or organized in Germany
and each STEAG Semiconductor Subsidiary incorporated in the U.S. that STEAG
does not contribute or otherwise transfer to Newco, and that Newco will hold
good and valid title to each STEAG Semiconductor Subsidiary that STEAG
contributes or transfers to Newco, free and clear of any encumbrances, and the
representation and warranty by Mattson that all of the shares of Mattson, and
all the shares to be issued to STEAG, when issued in accordance with the
Combination Agreement, will be duly and validly authorized and issued and
outstanding, fully paid, and nonassessable, shall both survive indefinitely.
Finally, the representations and warranties of STEAG pertaining to its tax
liability shall survive for 30 days after the expiration of the applicable
statute of limitations.

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                 AGREEMENTS RELATED TO THE BUSINESS COMBINATION

Stockholder Agreement

   The following describes the material terms of the Stockholder Agreement
between Mattson, STEAG, and Brad Mattson. The full text of the Stockholder
Agreement is attached as Annex B to this joint proxy statement-prospectus and
is incorporated by this reference. Mattson encourages you to read the entire
Stockholder Agreement.

 Board Representation, Executive Staffing, Nominating Committee, and Voting
 Arrangements

   As of the closing of the business combination and during the term of the
Stockholder Agreement:

  . Mattson's board of directors will consist of seven members, two of whom
    will be STEAG board designees, one of whom will be the Chief Executive
    Officer of Mattson, and the remaining four of whom will be incumbent
    independent directors (or their successors, at least three of whom shall
    be independent directors), Mattson may also cause one designee of CFM to
    serve on the Mattson board of directors in place of an incumbent director
    to the extent required under the Merger Agreement with CFM;

  . Dr. Jochen Melchior, a STEAG board designee, will serve as Chairman of
    the board of Mattson;

  . Brad Mattson will be Vice Chairman of the board and Chief Executive
    Officer of Mattson;

  . Ludger Viefhues will be Chief Operating Officer/President of Mattson;

  . an Executive Staffing Committee comprised of Brad Mattson, Dr. Melchior
    and, subject to the mutual consent of Mattson and STEAG, one additional
    representative of each of Mattson and STEAG, will be established and
    remain in place for one year and be responsible for key personnel
    decisions (including hiring and firing of Mattson's Chief Executive
    Officer, Chief Operating Officer, Chief Financial Officer, and division
    general managers). One independent director may be appointed by Mattson
    and STEAG to serve as tiebreaker in the event the committee reaches
    deadlock;

  . a STEAG designee will be nominated by Mattson to fill the seat of any
    STEAG board designee or any successor thereto if such designee or
    successor for any reason ceases to be a director of Mattson at any time
    prior to the expiration of its designated term as director, as well as at
    each annual meeting of Mattson's stockholders at which the term of a
    STEAG board designee will expire;

  . Mattson's Bylaws will establish a nominating committee to evaluate and
    propose nominees for directors to succeed the board designee of CFM, any
    independent director or any vacancies not provided for above. The
    committee will be comprised of three board members, at least one of whom
    must be a STEAG board designee. For a period of three years from the date
    of closing, the committee can only nominate nominees by unanimous
    approval. The board of directors may act to elect and appoint a nominee
    if the committee fails to nominate a nominee within four months after a
    board seat becomes vacant;

  . Brad Mattson and STEAG agree to be present and vote affirmatively for the
    election of nominees as described above at each meeting of the Mattson
    stockholders where directors are to be elected; and

  . whenever a proposed transaction between Mattson and STEAG (or any of its
    affiliates) is submitted to Mattson stockholders for approval, STEAG will
    vote its shares of voting stock regarding the proposal in the same
    proportion as all shares of voting stock not owned by STEAG and
    represented and voting with regard to the proposal. This voting
    arrangement does not apply to proposed transactions between Mattson and
    Mattson stockholders generally or transactions otherwise provided for in
    the Stockholder Agreement.

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 Standstill Restrictions Regarding STEAG Purchases of Additional Mattson Voting
 Stock and Restrictions Regarding STEAG Participation in Solicitations

   STEAG and its majority-owned and controlled affiliates will not directly or
indirectly acquire, agree to acquire or make a tender or exchange offer to
acquire any additional shares of Mattson voting stock except:

  . if prior disinterested director approval has been obtained for the
    acquisition;

  . if the acquisition is necessary to maintain STEAG's aggregate percentage
    of beneficial ownership of Mattson's outstanding voting stock (as of the
    closing of the business combination) following an additional issuance of
    voting stock by Mattson;

  . if the acquisition is pursuant to a stock issuance by Mattson in respect
    of a stock split, stock dividend, recapitalization or similar corporate
    transaction, or upon exercise of securities issued pursuant to rights
    distributed to common stockholders generally; and

  . transfers of voting stock between STEAG and any affiliate that agrees to
    be bound by the terms and conditions of the Stockholder Agreement and to
    hold such voting stock subject to all obligations and restrictions
    applicable to STEAG under the Stockholder Agreement. If such affiliate
    ceases to be an affiliate of STEAG, then such affiliate shall transfer
    the voting stock back to STEAG or an affiliate of STEAG.

   Without prior disinterested director approval, STEAG and its majority-owned
and controlled affiliates may not:

  . solicit or in any way participate, directly or indirectly, in a
    solicitation of proxies with respect to any Mattson voting stock (except
    in connection with the election of directors as set forth above);

  . make any public announcement regarding any acquisition proposal, as
    defined in the Stockholder Agreement, not solicited or approved by
    Mattson's board of directors;

  . deposit shares of voting stock in a voting trust or subject such shares
    to any other voting arrangement or agreement with any other person or
    group aside from Mattson or others within STEAG's control group; or

  . form or join any group with any person other than those within STEAG's
    control group for the purpose of voting, holding, purchasing or disposing
    of Mattson voting stock or taking any of the prohibited actions regarding
    voting stock set forth above.

   The above prohibitions and restrictions shall be suspended, but not
terminated, when any person or group (other than Mattson, STEAG or an affiliate
of STEAG), without the prior approval of Mattson's board of directors:

  . commences a tender offer for purposes of Rule 14d-2 under the Securities
    Exchange Act of 1934;

  . acquires beneficial ownership of more than 20% of the outstanding shares
    of Mattson voting stock; or

  . acquires beneficial ownership of more than 10% of the outstanding shares
    of Mattson voting stock and also commences or publicly announces an
    intent to effect a change of control of Mattson.

   The prohibitions and restrictions described above will terminate upon the
earlier of (i) five years from the closing of the business combination or (ii)
the termination of the Stockholder Agreement as described below.

 Right of First Offer to Purchase Additional Common Stock

   Prior to any sale or issuance by Mattson of any shares of Mattson common
stock, STEAG shall have a right of first offer to purchase its proportional
share of such common stock on terms which are at least as favorable to STEAG as
the terms on which Mattson proposes to sell such common stock to any other

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prospective investor. This right of first offer is subject to certain
exceptions including, among others, sales and issuances by Mattson of common
stock in an amount up to 1.0% of the outstanding common stock as of the date of
the Stockholder Agreement, in the case of any single transaction, or up to 2.5%
of the outstanding common stock as of the date of the Stockholder Agreement, in
the aggregate, in connection with any equipment financing in excess of
$10,000,000 or any technology licensings, research or development agreements or
asset acquisitions approved by Mattson's board of directors.

   This right of first offer terminates upon the closing of any acquisition
transaction resulting in a change of control of Mattson, the sale of all or
substantially all of Mattson's assets or the termination of the Stockholder
Agreement as described below, whichever occurs first.

 Restrictions on Transfers of Common Stock by STEAG

   For a one-year lockup period following the date of the closing of the
business combination, STEAG shall not directly or indirectly transfer or
dispose of any common stock of Mattson except: (i) with prior disinterested
director approval, or (ii) transfers to affiliates of STEAG permitted under
certain terms and conditions as set forth in the Stockholder Agreement.

   Following the initial one-year lockup period described above, STEAG shall
not directly or indirectly transfer or dispose of any common stock of Mattson
without first giving Mattson the chance to purchase such common stock pursuant
to Mattson's right of first refusal as set forth in the Stockholder Agreement,
except: (i) pursuant to a bona fide public offering registered under the
Securities Act and conducted through an underwriter or otherwise so as not to
result in the transfer of 5% or more beneficial ownership of Mattson's
outstanding common stock to a single person or group other than a qualified
institutional buyer purchasing securities for investment purposes; (ii)
pursuant to Rule 144 (but not 144A) under the Securities Act; or
(iii) transfers to affiliates of STEAG permitted under certain terms and
conditions as set forth in the Stockholder Agreement.

   Also following the one-year lockup period, STEAG shall not directly or
indirectly sell or transfer more than 2.4 million shares of Mattson common
stock in a transaction or series of related transactions to a single person or
group, except: (i) with disinterested director approval; (ii) as permitted
under the exceptions listed in the preceding paragraph; (iii) pursuant to an
acquisition transaction (as defined in the Stockholder Agreement) that will
result in a change of control and has received disinterested director approval
or approval by a majority of Mattson stockholders, excluding STEAG; (iv) after
the third anniversary of the date of closing of the business combination, or
(v) in response to any tender or exchange offer made by another person or group
(other than Mattson, STEAG or an affiliate of STEAG) to purchase or exchange
for consideration all outstanding voting stock of Mattson if such person or
group has acquired beneficial ownership of more than 20% of the outstanding
Mattson common stock.

 Registration Rights

   STEAG is entitled to the following registration rights under the Stockholder
Agreement:

  . the right to include its shares of Mattson common stock in a registration
    of common stock effected by Mattson under the Securities Act for sale
    after the one-year lockup period; and

  . the right, up to once every 12 months, to request registrations of its
    shares of Mattson common stock on Form S-3 for sale after the one year
    lockup period.

   The Stockholder Agreement contains customary provisions regarding expenses
of registration, indemnification, Exchange Act reporting, assignment of
registration rights, "market stand-off" agreements, termination of registration
rights and limitations on subsequent registration rights.

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 Notice of Common Stock Transfers by Brad Mattson

   With certain limited exceptions, Brad Mattson is obligated to give prior
notice to STEAG of any sale or transfer of Mattson common stock by Brad
Mattson.

 Effective Date and Termination of the Stockholder Agreement

   The Stockholder Agreement is effective upon the closing of the business
combination.

   Except with respect to: (i) rights and obligations of the parties with
respect to registration rights which by their terms expressly survive
termination of the Stockholder Agreement, and (ii) general provisions contained
in Section 8 of the Stockholder Agreement entitled "Miscellaneous", the
Stockholder Agreement shall terminate upon termination of the Combination
Agreement or the earliest to occur of:

  . STEAG's beneficially owning less than 20% of the outstanding common stock
    of Mattson;

  . STEAG's beneficially owning 50% or more of the outstanding common stock
    of Mattson, but not as a result of STEAG's violation of standstill
    restrictions on the acquisition of common stock or prohibitions regarding
    participation in solicitations; or

  . material breach by Mattson of any of its material obligations under the
    Stockholder Agreement.

Voting Agreement Between STEAG and Brad Mattson

   The following describes the material terms of the voting agreement between
STEAG and Brad Mattson. The voting agreement was entered into as an inducement
to STEAG to enter into the Combination Agreement with Mattson.

 Voting of Shares

   From the date of the voting agreement through the earlier of the date when
the Combination Agreement is terminated or the business combination becomes
effective, Brad Mattson agrees that:

  . at any meeting of Mattson stockholders, he will be present and voting and
    cause the Mattson securities owned by him as of the record date to be
    voted in favor of the proposals to Mattson stockholders that are a
    condition to consummation of the business combination;

  . in the event written consents are solicited for the proposals described
    above, he will execute, with respect to the Mattson securities owned by
    him as of the record date, a written consent or written consents to such
    proposed actions; and

  . he will not cause or permit the Mattson securities owned by him as of the
    applicable record date to be voted in favor of, and will not cause or
    permit the execution of written consents with respect to such securities
    consenting to a transaction by Mattson which would cause Mattson to
    breach or allow STEAG to terminate the Combination Agreement.

 Restrictions on Transfer of Securities and Voting Rights

   Brad Mattson also agrees that during that same period, he will not cause or
permit any of the Mattson securities owned by him as of the date of the voting
agreement (i) to be transferred unless any such transferee agrees to be bound
by and to hold such securities subject to the same terms and provisions of the
voting agreement or (ii) to be deposited into a voting trust. He also agrees
not to grant any proxy and not to enter into any other voting or similar
agreement with respect to such securities.

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 Waiver of Appraisal Rights

   Brad Mattson irrevocably and unconditionally waives and agrees to prevent
the exercise of any rights of appraisal, dissenters' rights and similar rights
relating to the business combination and related transactions that he or any
other person may hold by virtue of ownership of any Mattson securities owned by
Brad Mattson.

 No Solicitation

   Brad Mattson agrees that from the date of the voting agreement through the
earlier of the date when the Combination Agreement is terminated or the
business combination becomes effective, he and his representatives will not
directly or indirectly solicit, initiate, seek or encourage any inquiry,
proposal or offer (whether written or oral) from any third person, or, except
in response to an unsolicited inquiry, proposal or offer (whether written or
oral) from any third person, furnish any information to or negotiate with any
third person regarding:

  . any acquisition of Mattson;

  . any merger or consolidation involving Mattson which results in Mattson
    stockholders prior to such transaction owning less than 50% of the
    surviving corporation;

  . any acquisition of a material portion of the stock or assets of Mattson;
    or

  . any acquisition by Mattson of any business which competes with STEAG in
    any of the RTP, CVD, wet processing or copper businesses, with certain
    limited exceptions.

   The foregoing restrictions apply to Brad Mattson in his capacity as a
stockholder and not to Brad Mattson in his capacity as an officer or director
of Mattson.

 Representations and Warranties

   The voting agreement contains customary representations and warranties of
the parties.

Transition Services Agreement

   STEAG and Mattson have agreed to enter into a Transition Services Agreement
on or prior to the date of closing, for an initial term of one year following
the closing, pursuant to which STEAG shall make available to Mattson at market
rates:

  . information technology services for the STEAG Semiconductor Subsidiaries
    organized in Germany,

  . intellectual property administration services,

  . payroll services for the STEAG Semiconductor Subsidiaries organized in
    Germany, and

  . certain supplies.

   At its option, Mattson may elect to terminate such services upon 90 days
prior written notice.


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                              THE MERGER AGREEMENT

   This section of the joint proxy statement-prospectus describes the material
terms of the Agreement and Plan of Merger by and among Mattson, M2C Acquisition
Corporation, and CFM dated as of June 27, 2000 (the "Merger Agreement"). While
Mattson and CFM believe that the description covers the material terms of the
Merger Agreement, this summary may not contain all of the information that is
important to you. The Merger Agreement is attached to this joint proxy
statement-prospectus as Annex C, and Mattson and CFM urge you to read it
carefully.

Effective Time of the Merger

   The merger will become effective when the articles of merger are filed with
the Pennsylvania Department of State and the certificate of merger is filed
with the Secretary of State of the State of Delaware. If all the conditions to
the merger contained in the Merger Agreement are satisfied or waived, the
Merger Agreement provides that the closing will occur as soon as practicable
after January 1, 2001.

Closing of the Merger

   If prior to December 1, 2000, all of the mutual closing conditions have been
satisfied and all of the other closing conditions (other than those conditions
which, by their nature, can only be satisfied by delivery of documents or other
instruments on the closing date) would have been either satisfied or waived by
the relevant party were the closing to occur at such time, and simultaneously,
the same situation applies under the Combination Agreement with STEAG, then the
parties may conduct a pre-closing step by taking the following actions:

   Mattson and CFM will each deliver or cause to be delivered to the other the
closing certificates and other documents that would have been required at the
closing; and

   Mattson shall execute and deliver to CFM an irrevocable acknowledgement and
waiver of the satisfaction or waiver of the closing conditions applicable to
Mattson and the waiver of Mattson's termination rights, and CFM shall execute
and deliver to Mattson an irrevocable acknowledgement and waiver of the
satisfaction or waiver of the closing conditions applicable to CFM and the
waiver of CFM's termination rights.

   However, despite conducting this pre-closing step, the actual closing shall
not occur, and Mattson shall not acquire ownership of any the shares of CFM
under the merger, prior to January 1, 2001.

Merger Consideration

   At the effective time of the merger, Mattson will issue 0.5223 shares of
Mattson common stock for each outstanding share of CFM common stock. In
addition, Mattson will assume all outstanding CFM stock options, based on the
same exchange ratio, and Mattson will issue additional options to purchase
500,000 shares of common stock to employees of CFM.

Conditions to the Merger

 Conditions to the Obligations of Each Party

   The obligations of Mattson and CFM to complete the merger are subject to the
following conditions:

  . adoption of the Merger Agreement and approval of the merger by the
    shareholders of CFM;

  . approval by Mattson stockholders of the issuance of Mattson common stock
    pursuant to the Merger Agreement and the approval by Mattson stockholders
    of any increase to the amount of shares reserved under the Mattson stock
    option plans pursuant to the Merger Agreement;

  . the absence of any legal action, law or regulation prohibiting or making
    the merger illegal;

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  . receipt of all material consents and approvals of governmental entities
    necessary to consummate the merger;

  . the registration statement of which this joint proxy statement-prospectus
    is a part is declared effective under the Securities Act;

  . receipt of all approvals or other authorizations required by applicable
    state securities laws for the issuance and trading of Mattson common
    stock to be issued pursuant to the merger;

  . authorization for listing by Nasdaq of the Mattson common stock to be
    issued in the merger and upon exercise of CFM stock options assumed by
    Mattson; and

  . concurrent closing of the business combination between Mattson and STEAG.

 Conditions to the Obligations of Mattson and M2C Acquisition Corporation

   The obligations of Mattson and M2C Acquisition Corporation to complete the
merger are subject to the following conditions:

  . compliance by CFM with its obligations under the Merger Agreement and the
    representations and warranties made by CFM in the Merger Agreement being
    true and correct in all material respects as of the date of the Merger
    Agreement and the closing date of the merger;

  . receipt by Mattson of CFM's officers' certificate certifying that the
    closing conditions that apply to CFM under the Merger Agreement have been
    satisfied;

  . all required consents and approvals for the contemplated transactions
    have been obtained and all required filings have been made;

  . no material adverse effect has occurred or is reasonably likely to occur
    with respect to the business, operations, assets, liabilities, results of
    operations, cash flows, condition or prospects of CFM and its
    subsidiaries taken as a whole, on a consolidated basis. This does not
    include any failure by CFM to meet revenue or earnings projections or
    expectations after the date of the Merger Agreement, any disruption of
    customer relationships caused by the pendency of the Merger Agreement, or
    any litigation, claim or other action relating to infringement of CFM's
    intellectual property rights or the validity or enforceability of CFM's
    patents, except for any relating to U.S. Patent Number 4,911,761;

  . shares of CFM common stock held by dissenting shareholders represent no
    more than 5% of the total issued and outstanding CFM common stock just
    prior to closing;

  . no action or proceeding has been threatened or instituted which could
    prohibit any integration of CFM's operations with those of Mattson or any
    Mattson subsidiary;

  . Mattson's receipt of the written resignations of all officers and
    directors of CFM's subsidiaries; and

  . Mattson's receipt of a copy of the executed articles of merger to be
    filed with the Pennsylvania Department of State and any other agreements
    and instruments reasonably requested by Mattson.

 Conditions to the Obligations of CFM

   The obligation of CFM to complete the merger is subject to the following
conditions:

  . compliance by Mattson and M2C Acquisition Corporation with their
    obligations under the Merger Agreement and the representations and
    warranties made by each in the Merger Agreement being true and correct in
    all material respects as of the date of the Merger Agreement and the
    closing date of the merger;

  . receipt by CFM of Mattson's officers' certificate certifying that the
    closing conditions that apply to Mattson under the Merger Agreement have
    been satisfied;

  . all required consents and approvals for the contemplated transactions
    have been obtained and all required filings have been made;

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<PAGE>

  . no material adverse effect has occurred or is reasonably likely to occur
    with respect to the business, operations, assets, liabilities, results of
    operations, cash flows, condition or prospects of Mattson and its
    subsidiaries taken as a whole, on a consolidated basis;

  . CFM's receipt of a written opinion from its legal counsel to the effect
    that the merger will be a reorganization under Internal Revenue Code
    Section 368(a) and that CFM and the shareholders of CFM who exchange
    their shares solely for Mattson common stock in the merger will recognize
    no gain or loss for federal income tax purposes as a result;

  . no action or proceeding has been threatened or instituted which could
    prohibit any integration of Mattson's operations with those of CFM or any
    CFM subsidiary; and

  . CFM's receipt of a copy of the executed certificate of merger to be filed
    with the Secretary of State of the State of Delaware and any other
    agreements and instruments reasonably requested by CFM.

   There can be no assurance that all of the conditions to the merger will be
satisfied.

Representations and Warranties

   The Merger Agreement contains customary representations and warranties of
Mattson, M2C Acquisition Corporation, and CFM relating to, among other things,
aspects of the respective businesses of the companies and other matters. The
representations and warranties expire upon termination of the Merger Agreement
or the effective time of the merger.

Covenants; Conduct of Business Prior to the Merger

 Affirmative Covenants of CFM

   CFM has agreed that, prior to the effective time, CFM and its subsidiaries
will:

  . operate in the ordinary and usual course of business consistent with past
    practice; and

  . use commercially reasonable efforts to preserve intact their business
    organization, preserve goodwill and advantageous relationships with
    customers, suppliers, independent contractors, employees and others who
    are material to its business operations, and not permit any
    representations and warranties contained in the Merger Agreement to
    become inaccurate or any of the covenants to be breached.

 Negative Covenants of CFM

   CFM has agreed that, prior to the effective time, except with the prior
written consent of Mattson or as may reasonably be required to consummate the
transactions described in the Merger Agreement and the Combination Agreement
and certain other exceptions, CFM and its subsidiaries will not:

  . enter into any contract requiring payment or payments by any party in
    excess of $3,000,000, requiring delivery of goods or services valued in
    excess of $500,000, having a term or requiring performance of any
    obligations over a period in excess of 6 months, or involving payment or
    receipt by CFM or any CFM subsidiary of more than $100,000 (not including
    customer purchase orders for less than $3,000,000);

  . take any action outside the ordinary course of business and inconsistent
    with past practice;

  . sell, transfer, convey, assign or otherwise dispose of any of their
    assets or properties except sales of inventory in the ordinary course and
    consistent with past practice;

  . waive, release or cancel any claims against third parties, debts owing to
    it or rights valued in excess of $100,000;

  . make any change to their accounting systems, policies, principles or
    practices, except as required by law or by any change in generally
    accepted accounting principles;

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  . except for continuation of their normal stock option and employee stock
    purchase program in a manner consistent with Mattson's compensation
    guidelines, stock option plan and standard stock option agreements, (i)
    issue, sell, or deliver, or agree to issue, sell, or deliver any shares
    of its capital stock or any other securities, (ii) amend any terms of
    such securities, (iii) grant any stock option or right to acquire stock,
    (iv) enter into, adopt, amend or terminate any bonus, profit-sharing,
    compensation, termination, stock option, stock appreciation right,
    restricted stock, performance unit, pension, retirement, deferred
    compensation, employment, severance or other employee benefit agreements,
    trusts, plans, funds or other arrangements for the benefit of any
    director or employee, (v) increase any compensation or benefits of any
    director or employee, or (vi) pay any benefit not required under any
    existing plan or arrangement;

  . except for distributions to shareholders in accordance with past
    practice, (i) split, combine or reclassify any shares of their capital
    stock, (ii) declare, set aside or pay any dividend or other distribution,
    or (iii) redeem or otherwise acquire any of their securities;

  . except for trade payables incurred in the ordinary course of business,
    incur or otherwise become liable for any debt or make unscheduled
    payments of long term debt;

  . make new investments in or loans, advances or capital contributions to
    any other person other than advances or loans to or from subsidiaries in
    the normal course of business;

  . except for aggregate capital expenditures of less than $500,000 per
    quarter, authorize or make any capital expenditure or acquire, lease or
    encumber any assets outside the ordinary course of business or any
    material assets;

  . make any tax election, settle or compromise any tax liability or waive or
    extend the statute of limitations on any tax liability except in filing
    for extensions of tax returns or in the ordinary course of business and
    consistent with past practice;

  . settle or compromise any suit or claim involving payment of more than
    $100,000; and

  . change the term of any contract or pay any amount in excess of $100,000
    not required by law or contract other than changes to purchase orders
    done in the ordinary course of business and not in excess of $300,000.

 Affirmative Covenants of Mattson

   Mattson has agreed that, prior to the effective time, Mattson and its
subsidiaries will use commercially reasonable efforts to preserve intact its
business organization, preserve goodwill and advantageous relationships with
customers, suppliers, independent contractors, employees and others who are
material to its business operations, and not permit any representations and
warranties contained in the Merger Agreement to become inaccurate or any of the
covenants to be breached.

   Mattson also agreed to use its reasonable commercial efforts to cause the
Mattson common stock being issued pursuant to the Merger Agreement to be listed
on Nasdaq prior to the closing date. Additionally, as of the effective time,
Mattson shall cause a nominee designated by CFM to be appointed to Mattson's
board of directors.

 Negative Covenants of Mattson

   Mattson has agreed that, prior to the effective time, except with the prior
written consent of CFM or as may reasonably be required to consummate the
transactions described in the Merger Agreement and the Combination Agreement,
Mattson and its subsidiaries will not:

  . sell, transfer, convey, assign or otherwise dispose of any of its
    material assets or properties except sales of inventory in the ordinary
    course and consistent with past practice;

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  . waive, release or cancel any claims against third parties, debts owing to
    it or rights valued in excess of $5,000,000;

  . make any change to its accounting systems, policies, principles or
    practices, except as required by law or by any change in generally
    accepted accounting principles;

  . except for distributions to stockholders in accordance with past
    practice, (i) split, combine or reclassify any shares of its capital
    stock, (ii) declare, set aside or pay any dividend or other distribution,
    or (iii) redeem or otherwise acquire any of its securities;

  . authorize or make any capital expenditures in excess of $25,000,000 in
    the aggregate;

  . make any tax election, settle or compromise any tax liability or waive or
    extend the statute of limitations on any tax liability except in filing
    for extensions of tax returns or in the ordinary course of business and
    consistent with past practice; and

  . settle or compromise any suit or claim involving payment of more than
    $10,000,000.

 Mutual Covenants of Mattson and CFM

   Mattson and CFM have agreed that from the date of the Merger Agreement, each
party will:

  . permit the other party to have access to its facilities, properties and
    records during normal business hours and make available its officers and
    employees and furnish the other party with information upon reasonable
    request;

  . use reasonable commercial efforts to satisfy those conditions that apply
    to it in the Merger Agreement to fulfill its obligations under the Merger
    Agreement and to facilitate consummation of the transactions in the
    Merger Agreement;

  . as soon as practicable, prepare and file a joint proxy statement-
    prospectus with the other party containing the proposals to be presented
    at the CFM shareholders meeting and the proposals to be presented at the
    Mattson stockholders meeting. The two meetings are to be convened as soon
    as practicable after the registration statement containing the joint
    proxy statement-prospectus registering the issuance of Mattson common
    stock pursuant to the merger is deemed effective.

  . use all reasonable efforts to have the Registration Statement declared
    effective as soon as practicable and recommend to its shareholders or
    stockholders that the required proposals be approved;

  . use reasonable commercial efforts to obtain all consents and approvals
    and to take other actions necessary to consummate the transactions under
    the Merger Agreement;

  . until the effective time of the merger and subject to applicable laws,
    furnish the other party with all filings to be made to the SEC and all
    materials to be mailed to its shareholders or stockholders and solicit
    comments from the other party at least 48 hours before filing or mailing;

  . subject to applicable laws, consult with the other party and allow the
    other party the opportunity to review any public announcement concerning
    the merger or the business combination and any filing with any
    governmental entity or securities exchange regarding the same;

  . not willfully take any action to breach any provision of the Merger
    Agreement or the Combination Agreement or cause any of the party's
    representations or warranties to be untrue as of the closing date;

  . obtain all necessary state securities law permits and approvals;

  . if any antitakeover statute is applicable to the merger, take such
    actions as are required to consummate the transactions contemplated by
    the Merger Agreement as soon as practicable;

  . use its reasonable commercial efforts to overturn or lift any order or
    injunction prohibiting the consummation of the transactions contemplated
    by the Merger Agreement, provided that no party is

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   required to enter into any commitment to divest itself or any of its
   subsidiaries of assets, to hold separate any assets or to take any other
   action that would have a material adverse effect on the business,
   operations, assets, liabilities, results of operations, cash flows,
   condition or prospects of such party and its subsidiaries taken as a
   whole, on a consolidated basis;

  . use its reasonable commercial efforts to cause the merger to be, and not
    knowingly take or omit to take any action to prevent the merger from
    being, a reorganization within the meaning of Internal Revenue Code
    Section 368(a); and

  . use its reasonable commercial efforts to have its independent public
    accountants deliver to the other party comfort letters customarily
    delivered in connection with similar Registration Statements, with one
    letter dated within two business days prior to the date on which the
    Registration Statement goes effective and the other dated the closing
    date.

Limitation on Discussing or Negotiating Other Acquisition Proposals

   CFM has agreed that neither it nor any of its subsidiaries will, directly or
indirectly:

  . initiate, solicit, encourage or knowingly facilitate any inquiries or the
    making of any offer, proposal, inquiry or indication of interest
    regarding an acquisition transaction (as defined below) involving CFM or
    any of its significant subsidiaries;

  . provide any nonpublic information to any third party or engage in any
    discussions or negotiations with any third party regarding an acquisition
    transaction;

  . approve, endorse or recommend any acquisition transaction, or publicly
    propose to take such actions; or

  . execute or enter into any letter of intent, agreement in principle,
    Merger Agreement, acquisition agreement, option agreement or other
    similar agreement regarding an acquisition transaction, or approve,
    endorse or recommend, or propose to approve, endorse or recommend, any
    such agreement.

   As used in the Merger Agreement, the term "acquisition transaction" means
any single or series of transactions involving (i) a merger, consolidation,
reorganization, share exchange, business combination, issuance of securities
representing more than 20% of any class of outstanding voting securities,
recapitalization, acquisition of securities representing more than 20% of any
class of outstanding voting securities, tender offer, exchange offer, or other
similar transaction, (ii) any sale, lease, exchange, transfer, exclusive
license, acquisition, or disposition of any business or assets representing 20%
or more of consolidated net revenues, net income, or assets, or (iii) any
liquidation or dissolution;

   CFM has also agreed:

  . that its officers, directors, key employees, agents and representatives
    will be informed of these obligations and will cease and terminate any
    activities, negotiations or discussions existing as of the date of the
    Merger Agreement with any third parties regarding an acquisition
    transaction; and

  . not to submit to the vote of its shareholders any proposal for an
    acquisition transaction.

   However, these clauses and the other clauses of the Merger Agreement do not
prohibit CFM or its board of directors from:

  . complying with Rule 14e-2 and 14d-9 of the Securities Exchange Act of
    1934; or

  . changing its recommendation that the shareholders of CFM vote in favor of
    the merger or engaging in discussions or negotiations with, or providing
    nonpublic information to, any third party, if and only to the extent that
    (i) the foregoing restrictions are not violated, (ii) the meeting of
    CFM's shareholders has not occurred, (iii) a third party makes an
    unsolicited superior proposal (as defined below), (iv) the board of
    directors, after consultation with outside counsel, determines in good
    faith that such action is required

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   in order for the board to comply with its fiduciary duties, (v) prior to
   taking such action, such third party executes and delivers to the board a
   confidentiality agreement containing customary provisions which are no
   less restrictive than those contained in the confidentiality agreement
   between Mattson and CFM, (vi) at least two business days prior to
   providing any information or data to such third party, or entering into
   discussions or negotiations with such third party, CFM notifies Mattson of
   the inquiries, proposals or offers received by, any information requested
   from, or any discussions or negotiations sought with, such third party
   indicating the third party's name and material terms and conditions of any
   inquiries, proposals or offers and also furnishing Mattson any non-public
   information to be provided to the third party, and (vii) promptly keeps
   Mattson informed of the status and terms of any proposals, offers,
   discussions or negotiations.

   As used in the Merger Agreement, the term "superior proposal" means a bona
fide written proposal from a third party for a merger, reorganization,
consolidation, share exchange, business combination or similar transaction
involving CFM and a third party as a result of which the third party or its
shareholders will own 40% or more of the combined voting power of the resulting
entity, or a tender offer for all outstanding CFM shares. Further, a superior
proposal must be on terms which the CFM board of directors concludes in good
faith, after consultation with financial advisors and outside counsel and
taking into account all relevant factors, would be more favorable to CFM
shareholders and is reasonably likely to be consummated.

Indemnification by CFM

   As of the effective time of the merger, CFM will indemnify, defend and hold
harmless, to the full extent permitted under Pennsylvania law, each person who
is, or has been or becomes prior to the effective time of the merger, an
officer or director of CFM against all losses, claims (not including claims of
gross negligence or willful misconduct), damages, costs, expenses, liabilities,
judgments or amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation (i) to the extent based on or arising out of
the fact that such person is or was an officer, director or employee of CFM or
(ii) pertaining to the Merger Agreement or the contemplated transactions. All
rights to indemnification held by any current or former directors, officers or
employees of CFM as of the date of the Merger Agreement will also continue in
effect following the effective time of the merger.

   For a period of six years following the effective time, (i) the certificate
of incorporation and bylaws of CFM will contain provisions no less favorable
regarding indemnification of officers, directors and employees as those in
effect on the date of the Merger Agreement unless otherwise required by law,
and (ii) CFM shall maintain the existing policies of directors' and officers'
liability insurance, or policies with comparable coverage, covering matters
occurring prior to the effective time to the extent reasonably obtainable for
premiums not greater than 1.5 times the amount paid by CFM as of the date of
the Merger Agreement.

Employee Agreements and Benefit Plans

   After the effective time, CFM will continue to honor all agreements and
commitments that apply to any current or former employees of CFM.

   Each employee of CFM or any of its subsidiaries who continues employment
with CFM, Mattson or any of their subsidiaries after the effective time and who
is not covered by a collective bargaining agreement will be provided with
credit under the applicable employee benefit plan providing benefits after the
effective time, for all purposes other than benefit accrual, for such
employee's years of service with CFM or its subsidiaries before the effective
time to the extent the employee was entitled to such a credit under a
comparable employee benefit plan before the effective time. Duplication of
benefits is not allowed.

   Each continuing employee will also be eligible to participate immediately in
any employee benefit plans replacing coverage under comparable plans in which
the employee participated immediately prior to the effective time and to roll
over any amounts held under the previous plans. With respect to any new
medical,

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dental, pharmaceutical and vision plan for continuing employees, all pre-
existing condition exclusions and actively-at-work requirements will be waived
and all eligible expenses incurred during the unexpired plan year of the
previous plan will be taken into account for purposes of deductible,
coinsurance and maximum out-of-pocket requirement.

   The above provisions do not apply for purposes of determining eligibility to
participate in any Mattson sabbatical plan.

   With respect to severance benefits, any continuing employee, with a few
exceptions, may choose to receive certain benefits described in the Merger
Agreement instead of any benefits to which they were previously entitled in the
event that the employee is involuntarily terminated without cause within four
months following the effective time of the merger.

   Unless Mattson provides written notice to the contrary, the 401(k) plans of
CFM and its subsidiaries will be terminated immediately prior to the closing
date.

Termination of the Merger Agreement

   The Merger Agreement may be terminated at any time prior to the effective
time as follows:

  . by mutual written consent of Mattson, STEAG and CFM;

  . by either party if the effective time of the merger has not occurred by
    February 28, 2001, assuming the failure of the effective time to occur by
    that date is not the result of the terminating party's breach of the
    Merger Agreement;

  . by either party if any governmental entity shall have issued or denied a
    request to issue an order, decree or ruling or taken any other action
    prohibiting the transactions contemplated by the Merger Agreement or
    preventing the fulfillment of the conditions to the merger, assuming the
    issuance or denial described above is not the result of the terminating
    party's failure to use reasonable commercial efforts to oppose it;

  . by either party if the required shareholder or stockholder approvals have
    not been obtained, assuming the failure to obtain such approval is not
    attributable to the terminating party's failure to perform any material
    obligation under the Merger Agreement;

  . by CFM if Mattson has failed to recommend the approval of the proposals
    to Mattson stockholders required under the Merger Agreement or has
    withdrawn, modified or resolved to take such actions regarding its
    recommendation in a manner adverse to CFM;

  . by CFM if Mattson has failed to call the required stockholders meeting or
    to prepare and mail the joint proxy statement to its stockholders;

  . by Mattson if (i) CFM has failed to call the required shareholders
    meeting or to prepare and mail the joint proxy statement to its
    shareholders, (ii) CFM's board of directors has failed to recommend the
    approval of the proposals to CFM shareholders required under the Merger
    Agreement or has withdrawn or modified its recommendation or resolved to
    take such actions regarding its recommendation in a manner adverse to
    Mattson, (iii) CFM has failed to include in its joint proxy statement to
    shareholders the board's recommendation and statement that the merger is
    in the best interests of the CFM shareholders, (iv) CFM's board of
    directors has failed within five business days of Mattson's written
    request to reaffirm, without qualification, the board's recommendation or
    has failed to publicly state, without qualification, that the merger is
    in the best interests of the CFM shareholders, (v) CFM's board of
    directors has approved, endorsed, recommended or entered into an
    agreement regarding a proposal for an alternative transaction (as
    described above), (vi) a tender or exchange offer for CFM securities has
    been commenced and CFM has not, within ten business days of such
    commencement, sent its securityholders a statement that the board
    recommends rejection of the tender or exchange offer, (vii) an

                                       93
<PAGE>

   alternative transaction is publicly announced and CFM has failed to issue
   a press release in opposition within ten business days, or (viii) CFM has
   breached any of its covenants regarding discussing or negotiating
   alternative transactions.

  . by Mattson if any of CFM's representations or warranties under the Merger
    Agreement have been inaccurate as of the date of the Merger Agreement or
    the closing date of the merger (assuming CFM is not exercising all
    reasonable efforts to cure such inaccuracies if they are curable prior to
    February 28, 2001) or if any of CFM's covenants under the Merger
    Agreement have been breached as of the closing date;

  . by CFM if any of Mattson's representations or warranties under the Merger
    Agreement have been inaccurate as of the date of the Merger Agreement or
    the closing date of the merger (assuming Mattson is not exercising all
    reasonable efforts to cure such inaccuracies if they are curable prior to
    February 28, 2001) or if any of Mattson's covenants under the Merger
    Agreement have been breached as of the closing date;

  . by Mattson if since the date of the Merger Agreement, there has occurred
    or there is reasonably likely to occur any material adverse effect
    regarding CFM as described in the above section entitled "Conditions to
    the Obligations of Mattson and M2C Acquisition Corporation;"

  . by CFM if since the date of the Merger Agreement, there has occurred or
    there is reasonably likely to occur any material adverse effect regarding
    Mattson as described in the above section entitled "Conditions to the
    Obligations of CFM" beginning on page 87 of this joint proxy statement-
    prospectus; or

  . by automatic termination upon termination of the Combination Agreement.

   In the event of termination of the Merger Agreement as set forth above,
neither of the parties nor any of their officers or directors shall have any
liability or further obligation under the Merger Agreement except as set forth
below:

  . liability for willful breach of the Merger Agreement;

  . obligations under the Merger Agreement to bear their own expenses, except
    that expenses relating to printing the joint proxy statement-prospectus
    and filing the Registration Statement, including the filing fee, shall be
    shared equally between Mattson and CFM;

  . if Mattson or CFM terminates the Merger Agreement because the required
    Mattson stockholder approvals have not been obtained, assuming the
    failure to obtain such approval is not attributable to the terminating
    party's failure to perform any material obligation under the Merger
    Agreement and further assuming CFM does not otherwise receive a
    termination fee as set forth below, then Mattson will pay CFM an amount
    equal to one percent of the Mattson common stock to be issued and the
    cash to be paid in lieu of fractional shares of Mattson common stock as
    contemplated to consummate the merger;

  . if Mattson or CFM terminates the Merger Agreement because the required
    CFM shareholder approvals have not been obtained, assuming the failure to
    obtain such approval is not attributable to the terminating party's
    failure to perform any material obligation under the Merger Agreement and
    further assuming Mattson does not otherwise receive a termination fee as
    set forth below, then CFM will pay Mattson an amount equal to one percent
    of the Mattson common stock to be issued and the cash to be paid in lieu
    of fractional shares of Mattson common stock as contemplated to
    consummate the merger;

  . if (A) (i) Mattson or CFM terminates the Merger Agreement because the
    required Mattson stockholder approvals have not been obtained, assuming
    the failure to obtain such approval is not attributable to the
    terminating party's failure to perform any material obligation under the
    Merger Agreement, (ii) before such termination a proposal regarding an
    acquisition transaction (defined below) with respect to Mattson has been
    publicly announced or communicated to its senior management, board of
    directors or stockholders and such proposal is not withdrawn prior to the
    vote of Mattson's stockholders on the proposal, and (iii) within twelve
    months of such termination, Mattson or any of its subsidiaries enters

                                      94
<PAGE>

   into a definitive agreement regarding or consummates the acquisition
   transaction, or (B) CFM terminates the Merger Agreement because (i)
   Mattson has failed to recommend the approval of the proposals to Mattson
   stockholders required under the Merger Agreement or has withdrawn,
   modified or resolved to take such actions regarding its recommendation in
   a manner adverse to CFM or (ii) Mattson has failed to call the required
   stockholders meeting or to prepare and mail the joint proxy statement to
   its stockholders, then Mattson will pay CFM $7,110,000; and

  . if (A) (i) Mattson or CFM terminates the Merger Agreement because the
    required CFM shareholder approvals have not been obtained, assuming the
    failure to obtain such approval is not attributable to the terminating
    party's failure to perform any material obligation under the Merger
    Agreement, (ii) before such termination a proposal regarding an
    acquisition transaction (defined below) with respect to CFM has been
    publicly announced or communicated to its senior management, board of
    directors or shareholders and such proposal is not withdrawn prior to the
    vote of CFM's shareholders on the proposal, and (iii) within twelve
    months of such termination, CFM or any of its subsidiaries enters into a
    definitive agreement regarding or consummates the acquisition
    transaction, or (B) Mattson terminates the Merger Agreement because (i)
    CFM has failed to call the required shareholders meeting or to prepare
    and mail the joint proxy statement to its shareholders, (ii) CFM's board
    of directors has failed to recommend the approval of the proposals to CFM
    shareholders required under the Merger Agreement or has withdrawn,
    modified or resolved to take such actions regarding its recommendation in
    a manner adverse to Mattson, (iii) CFM has failed to include in its joint
    proxy statement to shareholders the board's recommendation and statement
    that the merger is in the best interests of the CFM shareholders, (iv)
    CFM's board of directors has failed within five business days of
    Mattson's written request to reaffirm, without qualification, the board's
    recommendation or has failed to publicly state, without qualification,
    that the merger is in the best interests of the CFM shareholders, (v)
    CFM's board of directors has approved, endorsed, recommended or entered
    into an agreement regarding a proposal for an acquisition transaction (as
    described above in the section entitled "Limitation on Discussing or
    Negotiating Other Acquisition Proposals" beginning on page 91 of this
    joint proxy statement-prospectus), (vi) a tender or exchange offer for
    CFM securities has been commenced and CFM has not, within ten business
    days of such commencement, sent its securityholders a statement that the
    board recommends rejection of the tender or exchange offer, (vii) an
    acquisition transaction is publicly announced and CFM has failed to issue
    a press release in opposition within ten business days, or (viii) CFM has
    breached any of its covenants regarding discussing or negotiating
    acquisition transactions, then CFM will pay Mattson $7,110,000.

   Where the term "acquisition transaction" is used in the preceding two
subparagraphs regarding effects of termination of the Merger Agreement (except
where the term specifically refers to the definition contained in the above
section entitled "Limitation on Discussing or Negotiating Other Acquisition
Proposals"), an acquisition transaction means any single or series of
transactions involving (i) a merger, consolidation, reorganization, share
exchange, business combination, issuance of securities representing more than
40% of any class of outstanding voting securities, recapitalization,
acquisition of securities representing more than 40% of any class of
outstanding voting securities, tender offer, exchange offer or other similar
transaction, (ii) any sale, lease, exchange, transfer, exclusive license,
acquisition or disposition of any business or assets representing 40% or more
of consolidated net revenues, net income or assets, or (iii) any liquidation or
dissolution.

   If either party fails to pay the termination fee for which it is obligated
as set forth above and the other party brings suit resulting in a judgment
against the non-paying party for the termination fee, the non-paying party
shall pay to the other party its attorneys' fees, costs and expenses in
connection with the suit, in addition to interest on the termination fee. The
parties also agreed that the specific remedies relating to payment of
termination fees are not exclusive.

                                       95
<PAGE>

                   AGREEMENTS RELATED TO THE MERGER AGREEMENT

Stock Option Agreement

   The following describes the material terms of the stock option agreement
between Mattson and CFM. The stock option agreement was entered into as an
inducement to Mattson to enter into the Merger Agreement with CFM. Under the
Merger Agreement, CFM agreed to grant Mattson an option to acquire up to 19.9%
of CFM common stock issued and outstanding as of the date of the agreement on
the terms and conditions summarized below.

  Right to Exercise; Exercise Price

   Mattson's option is exercisable, in whole or in part, following the
occurrence of any of the specified trigger events regarding CFM as described in
the Merger Agreement with CFM. However, Mattson's option may not be exercised
if Mattson is in material breach of any of its representations, warranties,
covenants or agreements contained in the stock option agreement or Merger
Agreement.

   The exercise price for CFM common stock pursuant to the option is payable at
Mattson's option in cash or in shares of Mattson common stock. In the event of
a cash exercise, the per share exercise price is equal to the average of the
last sales prices of CFM common stock on the ten trading days prior to
announcement of the merger between Mattson and CFM. In the event of a stock
exercise, the per share exercise price shall be a number of shares or fraction
of a share of Mattson common stock with a value (based on the average of the
last sales prices of Mattson common stock on the 10 trading days prior to the
applicable closing) equal to the cash exercise price.

  Conditions To Closing

   The closing of purchases pursuant to the option is subject to the expiration
or termination of the applicable waiting period under the HSR Act and other
conditions as set forth in the agreement.

  Representations And Warranties

   The agreement contains customary representations and warranties of Mattson
and CFM.

  Mattson's "Put" Right and CFM's Right of Repurchase

   Subject to the dollar value limits described below, Mattson has the right:
(i) prior to termination of the option, to have CFM repurchase all or any
portion of the option at a repurchase price calculated based on a formula set
forth in the agreement, and (ii) prior to the expiration of 24 months following
the first exercise of the option, to have CFM repurchase all or any portion of
the shares of CFM common stock purchased by Mattson pursuant to the option (the
repurchase price to be calculated based on a formula set forth in the stock
option agreement).

   Also subject to the dollar value limits described below and except to the
extent that Mattson has exercised its "put" right as described above, CFM has
the right to repurchase from Mattson all (but not less than all) of the shares
of CFM common stock purchased by Mattson pursuant to Mattson's option. This
repurchase right is subject to certain other limitations as set forth in the
stock option agreement. The repurchase price will be calculated according to a
formula as set forth in the stock option agreement.

   The maximum aggregate amount payable by CFM to Mattson and its affiliates
pursuant to the above "put" and repurchase rights and the termination fees
payable under the Merger Agreement cannot exceed

                                       96
<PAGE>

(i) $8,000,000 plus (ii) the aggregate exercise price, if any, paid upon
exercise of Mattson's right to have CFM repurchase all or any portion of the
shares of CFM common stock purchased by Mattson pursuant to Mattson's option
(as described above). This dollar limit does not apply to any amounts
receivable by Mattson from persons other than CFM.

  Restrictions On Transfer And Rights Of First Refusal

   The agreement imposes restrictions on the ability of each party to transfer
shares of capital stock of the other party acquired pursuant to the agreement.
In addition, each party holds limited rights of first refusal with respect to
the shares of its capital stock acquired by the other party pursuant to the
agreement.

  Registration Rights

   Following termination of the Merger Agreement, either party that owns shares
of capital stock of the other party acquired pursuant to the agreement may
request that the other party register all or any part of those shares under the
Securities Act pursuant to a bona fide firm commitment underwritten public
offering (as more fully set forth in the agreement). Neither party is entitled
to demand more than an aggregate of two effective registration statements under
the agreement. The agreement contains customary provisions relating to
registration rights including, among others, expenses of registration,
indemnification and information obligations.

  Termination Of Option

   With certain limited exceptions, Mattson's option terminates upon the
earliest to occur of: (i) the effective time of the merger, (ii) termination of
the Merger Agreement other than upon a trigger event as referred to above, or
(iii) 12 months following Mattson's receipt of CFM's notice that a trigger
event has occurred. The termination of Mattson's option will not terminate the
rights of Mattson with respect to the "put" rights and registration rights of
Mattson as described above.

Voting Agreements

   The following describes the material terms of the voting agreement between
Mattson and Christopher McConnell, and the voting agreement between CFM and
Brad Mattson. The voting agreements were entered into as an inducement to each
of Mattson and CFM to enter into the Merger Agreement.

  Voting Of Shares

   From the date of the applicable voting agreement through the earlier of the
date when the Merger Agreement is terminated or the merger becomes effective:

  . Brad Mattson agrees that: (i) at any meeting of Mattson stockholders, he
    will cause the Mattson securities owned by him as of the record date to
    be voted in favor of the proposals submitted to Mattson stockholders that
    are a condition to consummation of the merger, and (ii) in the event
    written consents are solicited for the same proposals, he will execute,
    with respect to the Mattson securities owned by him as of the record
    date, a written consent or written consents to such proposed action; and

  . Christopher McConnell agrees that: (i) at any meeting of CFM
    shareholders, he will cause the CFM securities owned by him as of the
    record date to be voted in favor of the proposals submitted to CFM
    shareholders that are a condition to consummation of the merger, and (ii)
    in the event written consents are solicited for the same proposals, he
    will execute, with respect to the CFM securities owned by him as of the
    record date, a written consent or written consents to such proposed
    action.

                                       97
<PAGE>

  Restrictions on Transfer of Securities and Voting Rights

   Each of these individuals also agrees that during that same period, he will
not allow any of the subject securities owned by him as of the date of the
voting agreement (i) to be transferred unless any such transferee agrees to be
bound by and to hold such securities subject to the same terms and provisions
of the applicable voting agreement, or (ii) to be deposited into a voting
trust. Each also agrees not to grant any proxy and not to enter into any other
voting or similar agreement with respect to such securities.

  Waiver of Appraisal Rights

   Both individuals also irrevocably and unconditionally waive and agree to
prevent the exercise of any rights of appraisal, dissenters' rights and similar
rights relating to the merger and related transactions that they or any other
person may hold by virtue of their ownership of the applicable securities.

  No Solicitation

   Each individual agrees that from the date of the applicable voting agreement
through the earlier of the date when the Merger Agreement is terminated or the
merger becomes effective, he and his representatives will not:

  . solicit, initiate, encourage or induce the making, submission or
    announcement of any offer, proposal, inquiry or indication of interest
    regarding an alternative transaction to the merger or the business
    combination between Mattson and STEAG;

  . furnish any information to any person regarding the applicable company or
    any of its direct or indirect subsidiaries regarding an alternative
    transaction; or

  . engage in discussions with any person regarding an alternative
    transaction.

   Each also agrees that he and his representatives will immediately cease any
existing discussions regarding an alternative transaction. The foregoing
restrictions, however, do not apply to either of these individuals in his
capacity as an officer or director of the applicable company.

  Representations and Warranties

   The agreements contain customary representations and warranties of the
parties.

  Termination

   The voting agreement between Mattson and Christopher McConnell further
provides that the agreement will terminate immediately prior to Mattson's
exercise of its option pursuant to the stock option agreement between Mattson
and CFM, described above.

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<PAGE>

            COMPARISON OF RIGHTS OF HOLDERS OF MATTSON COMMON STOCK
                              AND CFM COMMON STOCK

   This section of the joint proxy statement-prospectus describes material
differences between the rights of stockholders of Mattson and the rights of
shareholders of CFM. The rights compared are those found in the respective
companies' charter documents and corporate law provisions for the state in
which each is incorporated. While Mattson believes that these descriptions
address the material differences, this summary may not contain all of the
information that is important to the stockholders of Mattson and CFM. Mattson
and CFM stockholders should read this entire document and the documents
referred to in this summary carefully for a more complete understanding of the
differences between the rights of Mattson stockholders, on the one hand, and
the rights of CFM shareholders, on the other.

   Mattson is incorporated under the laws of the State of Delaware. The rights
of Mattson stockholders are currently governed by the Delaware General
Corporation Law and the Certificate of Incorporation and Bylaws of Mattson. CFM
is incorporated under the laws of the Commonwealth of Pennsylvania. As a result
of the merger, current shareholders of CFM will become stockholders of Mattson
and their rights will be governed by the Delaware General Corporation Law and
the Certificate of Incorporation and Bylaws of Mattson. The following is a
summary of the principal differences between the rights of Mattson stockholders
and the current rights of CFM shareholders. This summary is not intended to be
complete and is qualified in its entirety by reference to the relevant
provisions of the Certificate of Incorporation and Bylaws of Mattson, the
Articles of Incorporation and Bylaws of CFM, and Delaware and Pennsylvania law.

<TABLE>
<CAPTION>
                         Mattson                            CFM
                         -------                            ---
<S>                      <C>                                <C>
Board of Directors

Size of board........... Currently fixed by the             Currently has six directors.
                         certificate of incorporation at
                         five.

Classification.......... Divided into three classes, with   Not classified.
                         each class serving a staggered
                         three year term.

Removal of Directors.... Bylaws provide that directors may  Pennsylvania law provides that
                         be removed only for cause by       shareholders may remove
                         holders of a majority of the       directors, with or without cause,
                         outstanding shares which would be  by a vote of the majority of
                         entitled to vote at an election    votes cast by those shareholders
                         of directors.                      entitled to vote for the election
                                                            of directors.

Vacancies............... Bylaws provide that any vacancies  CFM's bylaws provide that
                         on the Mattson board may be        vacancies are to be filled only
                         filled only by the majority of     by a majority vote of the
                         remaining directors.               remaining directors, or by the
                                                            sole remaining director.

Limitation of Director
 Liability.............. Delaware law permits a             Pennsylvania law permits a
                         corporation to limit or eliminate  corporation to limit a director's
                         a director's personal liability,   personal liability, with certain
                         with certain specified             specified exceptions. The
                         exceptions. The corporation's      corporation's articles of
                         certificate of incorporation must  incorporation and bylaws must set
                         set forth any such limitation.     forth any such limitation, and
                                                            the limitation must have been
                                                            approved by shareholder action.
</TABLE>

                                       99
<PAGE>

<TABLE>
<CAPTION>
                                      Mattson                              CFM
                                      -------                              ---
<S>                      <C>                                <C>
Certificate of
 Incorporation/Articles
 of Incorporation......  The Certificate of Incorporation   The articles of incorporation and
                         of Mattson specifically            bylaws of CFM eliminate a
                         eliminates a director's personal   director's liability to the
                         liability for monetary damages     fullest extent permitted by
                         unless the director has breached   Pennsylvania law. Under
                         his or her duty of loyalty to the  Pennsylvania law, this means that
                         corporation or its stockholders,   a director will not be liable for
                         or has taken actions, or failed    any action taken or omitted
                         to take actions, which were not    unless the director breaches or
                         in good faith or which involved    fails to perform his or her
                         intentional misconduct or a        duties and the breach or failure
                         knowing violation of the law. In   to perform constitutes self-
                         addition, the limitation of        dealing, willful misconduct or
                         liability will not apply to a      recklessness. Under Pennsylvania
                         declaration of an improper         law, a director also remains
                         dividend, to an improper           personally liable where the
                         redemption of stock or to any      responsibility or liability is
                         transaction from which the         under any criminal statute or is
                         director derived an improper       for the non-payment of taxes
                         personal benefit.                  under federal, state or local
                                                            law.

Indemnification of
 Directors and
 Officers..............  Delaware law permits a             The relevant provisions of
                         corporation to indemnify any       Pennsylvania law are essentially
                         person involved in a third party   the same as those of Delaware
                         action because of such person's    law.
                         service as an officer, director,
                         employee, or agent of the
                         corporation against expenses
                         incurred and amounts paid in such
                         an action (and against expenses
                         incurred in any derivative
                         action) if such person acted in
                         good faith and reasonably
                         believed that his actions were
                         in, or not opposed to, the best
                         interests of the corporation. In
                         a criminal proceeding, such
                         person is also required not to
                         have had reasonable cause to
                         believe that his conduct was
                         unlawful. A corporation may
                         advance expenses incurred in
                         defending any action so long as
                         the person agrees to repay the
                         amount advanced if it is
                         ultimately determined that such
                         person is not entitled to
                         indemnification.
</TABLE>


                                      100
<PAGE>

<TABLE>
<CAPTION>
                                      Mattson                              CFM
                                      -------                              ---
<S>                      <C>                                <C>
Expenses in Derivative
 Actions................ In general, Delaware law does not  The relevant provisions of
                         permit a corporation to indemnify  Pennsylvania law are essentially
                         a person for expenses in a         the same as those of Delaware
                         derivative action if the person    law.
                         has been adjudged liable to the
                         corporation, unless a court finds
                         such person entitled to such
                         indemnification. If, however, the
                         person has successfully defended
                         a third party or derivative
                         action, the corporation is
                         required to provide
                         indemnification for expenses
                         incurred.

Exclusion of Other
 Rights................. The statutory provisions for       The relevant provisions of
                         indemnification do not exclude     Pennsylvania law are essentially
                         any other rights a person seeking  the same as those of Delaware
                         indemnification may have under     law.
                         any bylaw, agreement, vote of
                         stockholders, vote of
                         disinterested directors or
                         otherwise.

Charter and Bylaw
 Provisions............. The Certificate of Incorporation   The articles of incorporation and
                         of Mattson contains specific       bylaws of CFM provide for
                         indemnification provisions that    indemnification of its directors
                         generally track the provisions of  and officers to the fullest
                         Delaware law, except that the      extent permitted by Pennsylvania
                         Bylaws also provide that, if an    law.
                         officer, director, or employee
                         initiates a proceeding, the
                         corporation will generally
                         indemnify such person only if the
                         board had authorized the
                         proceeding or such
                         indemnification is expressly
                         required to be made by law.

Amendments to Charter...
                         Delaware law provides that the     Unless a corporation's articles
                         holders of a majority of the       of incorporation require a
                         outstanding shares of each class   greater percentage, Pennsylvania
                         of stock entitled to vote must     law only requires the affirmative
                         approve any charter amendment.     vote by the holders of a majority
                                                            of the votes of each class of
                         The Certificate of Incorporation   shares actually cast on a
                         of Mattson requires a two-thirds   proposed amendment at a meeting
                         vote of the then outstanding       at which a quorum is present.
                         shares in order to amend or        Pennsylvania law also does not
                         repeal charter provisions with     require shareholder approval of
                         respect to, among other things,    certain non-material amendments
                         no stockholder action by written   to the articles of incorporation.
                         consent, the number of directors
                         and classification of the board
                         into three classes, or amendment
                         of the company's bylaws.
</TABLE>

                                      101
<PAGE>

<TABLE>
<CAPTION>
                                      Mattson                              CFM
                                      -------                              ---
<S>                      <C>                                <C>
Mergers and Other
 Fundamental
 Transactions........... Delaware law provides that the     Pennsylvania law requires the
                         holders of a majority of the       approval by the holders of a
                         shares entitled to vote must       majority of the votes actually
                         approve any fundamental corporate  cast by the shareholders at a
                         transactions such as mergers,      meeting at which a quorum is
                         sales of all or substantially all  present.
                         of the corporation's assets,
                         dissolutions, etc.                 A corporation may increase the
                                                            minimum percentage vote required,
                         A corporation may increase the     but the articles of incorporation
                         minimum percentage vote required,  of CFM do not contain any super-
                         but the Certificate of             majority vote requirements to
                         Incorporation of Mattson does not  approve any fundamental
                         contain any super-majority vote    transaction.
                         requirements to approve any
                         fundamental transaction.

Authorized Capital
 Stock.................. The Certificate of Incorporation   The CFM articles of incorporation
                         of Mattson authorizes the          authorize the issuance of up to
                         issuance of up to 60,000,000       30,000,000 shares of common
                         shares of common stock, par value  stock, no par value per share, up
                         $0.001 per share, 2,000,000        to 1,000,000 shares of preferred
                         shares of preferred stock, par     stock, of which 300,000 shares
                         value $0.001 per share. As of      are designated as Series A Junior
                         October 4, 2000, 20,956,157        Participating Preferred Stock, no
                         shares of common stock and no      par value per share. As of
                         shares of preferred stock were     October 4, 2000, approximately
                         issued and outstanding.            7,878,866 shares of common stock,
                                                            no shares of preferred stock, and
                                                            no shares of Series A Junior
                                                            Participating Preferred Stock,
                                                            were outstanding.

Dividends............... Delaware law permits a             Pennsylvania law permits a
                         corporation to pay dividends out   corporation to pay dividends
                         of surplus, which is the excess    unless doing so would make the
                         of net assets of the corporation   corporation unable to pay its
                         over capital, or, if the           debts as they become due in the
                         corporation does not have          usual course of business, or
                         adequate surplus, out of net       unless, as a result of paying
                         profits for the current or         such dividends, the corporation's
                         immediately preceding fiscal       total assets would be less than
                         year, unless the net assets are    its total liabilities plus the
                         less than the capital of any       amount that would be needed to
                         outstanding preferred stock.       pay the holders of shares having
                                                            a liquidation preference if the
                                                            corporation were dissolved.
</TABLE>


                                      102
<PAGE>

<TABLE>
<CAPTION>
                                       Mattson                              CFM
                                       -------                              ---
<S>                       <C>                                <C>
Stock Repurchases.......  Under Delaware law, a corporation  Pennsylvania law permits a
                          may not purchase or redeem its     corporation to redeem any and all
                          own shares if its capital is       classes of its shares and treats
                          impaired or if the purchase or     such redemption or repurchase
                          redemption would cause its         like a dividend, subject to the
                          capital to be impaired. However,   same limitations described under
                          a Delaware corporation may         "Dividends" on page 102 of this
                          purchase or redeem preferred       joint proxy-statement prospectus
                          shares out of capital if the       above.
                          shares will then be retired,
                          reducing the capital of the
                          corporation.

Election of Directors...  Delaware law permits stockholders  Pennsylvania law automatically
                          to cumulate their votes and        gives shareholders cumulative
                          either cast them for one           voting rights unless a
                          candidate or distribute them       corporation's articles of
                          among two or more candidates in    incorporation provide otherwise.
                          the election of directors only if  The CFM articles of incorporation
                          expressly authorized in a          expressly prohibit cumulative
                          corporation's charter. The         voting.
                          Certificate of Incorporation of
                          Mattson does not expressly
                          authorize cumulative voting.

Appraisal or Dissenters'
 Rights.................  Delaware law does not afford       Pennsylvania law with respect to
                          appraisal rights to holders of     dissenters' rights is similar to
                          shares that are either listed on   Delaware law with respect to
                          a national securities exchange,    appraisal rights, except that
                          quoted on Nasdaq or held of        Pennsylvania law currently does
                          record by more than 2,000          not deny dissenters' rights to
                          stockholders, provided that such   holders of shares which are
                          shares will be converted solely    quoted on Nasdaq.
                          into cash in lieu of fractional
                          shares, or into stock of the       The definition of "fair value" in
                          surviving corporation or another   payment for shares upon exercise
                          corporation, which corporation in  of appraisal or dissenters'
                          either case must also be listed    rights is substantially similar
                          on a national securities           under both states' laws. Any
                          exchange, quoted on Nasdaq or      valuation methods that are
                          held of record by more than 2,000  generally acceptable in the
                          stockholders. In addition,         financial community may be used.
                          Delaware law denies appraisal
                          rights to stockholders of the
                          surviving corporation in a merger
                          if the surviving corporation's
                          stockholders were not required to
                          approve the merger.
</TABLE>

                                      103
<PAGE>

<TABLE>
<CAPTION>
                                      Mattson                              CFM
                                      -------                              ---
<S>                      <C>                                <C>
Amendments to Bylaws....
                         If the certificate of              Pennsylvania law limits the
                         incorporation of a Delaware        board's power to adopt or amend
                         company gives the board of         bylaw provisions on specified
                         directors the power to amend the   subjects absent a contrary
                         bylaws, which the Mattson          provision in the articles. There
                         certificate of incorporation       is no such contrary provision in
                         does, Delaware law does not limit  the articles of incorporation of
                         the board's power to make changes  CFM, so the Mattson board has
                         in the bylaws.                     broader authority to amend the
                                                            Mattson bylaws than the board of
                         Under Delaware law, stockholders   directors of CFM has to amend
                         may amend a corporation's bylaws   CFM's bylaws.
                         at any meeting, without the
                         consent of the board of            Under Pennsylvania law, a copy or
                         directors. However, Article VI of  summary of any proposed amendment
                         Mattson's bylaws provides that     must be included with the notice
                         stockholders may only amend        of the meeting.
                         Mattson's bylaws by a two-thirds
                         vote of the then outstanding
                         shares voting together as a
                         single class.

Action by Written
 Consent................ Delaware law permits a majority    Under Pennsylvania law,
                         of stockholders to act by written  shareholders of a registered
                         consent, without a meeting,        corporation such as CFM may act
                         unless a corporation's charter     without a meeting by less than
                         provides otherwise. The            unanimous consent only if
                         Certificate of Incorporation of    permitted by the corporation's
                         Mattson expressly prohibits the    articles of incorporation. CFM's
                         stockholders from acting by        articles currently do not permit
                         written consent.                   such action.

Annual Meeting.......... Held on the date fixed by the      Held on the date fixed by the
                         board of directors or president    board of directors, or if not
                         and chief executive officer. If    fixed, on the first day in May of
                         an annual meeting for the          each year. Under Pennsylvania
                         election of directors is not held  law, if the annual meeting for
                         on a designated date, Delaware     the election of directors is not
                         law requires the directors to      called and held within six months
                         cause the meeting to be held as    after the designated time, any
                         soon thereafter as convenient. If  shareholder may call such meeting
                         they fail to do so for a period    at any time thereafter without
                         of 30 days after the designated    application to any court.
                         date, or if no date has been
                         designated for a period of
                         13 months after the organization
                         of the corporation or after its
                         last annual meeting, then, upon
                         application of any stockholder or
                         director, the Court of Chancery
                         may order a meeting to be held.
</TABLE>


                                      104
<PAGE>

<TABLE>
<CAPTION>
                                      Mattson                              CFM
                                      -------                              ---
<S>                      <C>                                <C>
Special Meeting of
 Stockholders........... Delaware law permits the board of  Pennsylvania law permits the
                         directors or any other person      board of directors, the
                         authorized by a corporation's      president, any vice president,
                         charter or bylaws to call a        the secretary, the holders of at
                         special meeting of stockholders.   least 20% of a corporation's
                         The Mattson bylaws permit the      outstanding shares, or any other
                         board of directors, the chairman   person authorized by a
                         of the board, the president, or    corporation's articles or bylaws,
                         the chief executive officer to     to call a special meeting of
                         call a special meeting of          shareholders. Pennsylvania law,
                         stockholders.                      however, explicitly states that
                                                            shareholders of a registered
                                                            corporation, such as CFM, do not
                                                            have a statutory right to call
                                                            special meetings, except that an
                                                            interested shareholder may call a
                                                            meeting in order to seek approval
                                                            of a business combination between
                                                            the corporation and such
                                                            interested shareholder.

Advance Notice
 Requirements of
 Stockholder Nominations
 and Other Business.....
                         A stockholder wishing to nominate  Pennsylvania law and CFM's
                         directors or bring other business  Articles of Incorporation and
                         before an annual meeting of        bylaws do not specify any advance
                         Mattson stockholders must give     notice for a shareholder wishing
                         notice at least 120 days before    to nominate directors at an
                         the first anniversary of the day   annual meeting of CFM
                         written notice of the previous     shareholders.
                         year's meeting was given.

Rights of Inspection.... Under Delaware law, a stockholder  Under Pennsylvania law, a
                         may inspect a corporation's books  shareholder may inspect a
                         and records during normal          corporation's books and records
                         business hours as long as such     during normal business hours as
                         inspection is for a proper         long as such inspection is for a
                         purpose, and as long as the        proper purpose, and as long as
                         stockholder has made proper        the shareholder has made proper
                         written demand stating the         written demand stating the
                         purpose of the inspection. A       purpose of the inspection. A
                         proper purpose is any purpose      proper purpose is any purpose
                         reasonably related to the          reasonably related to the
                         interests of the inspecting        interests of the inspecting
                         person as a stockholder.           person as a shareholder.

Case Law................ There is a substantial body of     Pennsylvania does not have a
                         case law in Delaware interpreting  comparable body of judicial
                         the corporation laws of that       interpretation.
                         state.

Court Systems........... Delaware has established a system  Pennsylvania has not established
                         of Chancery Courts to adjudicate   an equivalent court system and
                         matters arising under the          matters arising under the
                         Delaware General Corporation Law.  Pennsylvania Business Corporation
                                                            Law are adjudicated by general
                                                            state courts.
</TABLE>

                                      105
<PAGE>

Fiduciary Duties of Directors

 General

   Both Delaware and Pennsylvania law provide that the business and affairs of
a corporation are managed under the direction of the board of directors. In
discharging this function, directors of Pennsylvania and Delaware corporations
owe fiduciary duties of care and loyalty to the corporations they serve.
Directors of Delaware corporations also owe fiduciary duties of care and
loyalty to stockholders.

   The fiduciary duty provisions included in the Pennsylvania law, which apply
to CFM, may provide significantly broader discretion, and increased protection
from liability, to directors in exercising their fiduciary duties, particularly
in the context of a change in control.

   The following summarizes certain aspects of Delaware and Pennsylvania law as
they relate to fiduciary duties of directors.

 Standard of Care

   Delaware courts have held that the directors of a Delaware corporation are
required to exercise an informed business judgment in performing their duties.
An informed business judgment means that the directors have informed themselves
of all material information reasonably available to them. Delaware courts have
also imposed a heightened standard of conduct on directors in matters involving
a contest for control of the corporation.

   A director of a Pennsylvania business corporation stands in a fiduciary
relationship to the corporation (unlike in Delaware, where a director also
stands in a fiduciary relationship to stockholders) and must perform his or her
duties as a director in good faith, in a manner he or she reasonably believes
to be in the best interests of the corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence would
use under similar circumstances.

 Justifiable Reliance

   A director of a Delaware corporation, in performing his or her duties, is
fully protected in relying, in good faith, upon the records of the corporation
and upon such information, opinions, reports, or statements presented to the
corporation by any of the corporation's officers or employees, or by committees
of the board of directors, or by any other person as to matters the director
reasonably believes are within such other person's professional or expert
competence. Such person must also have been selected with reasonable care by or
on behalf of the corporation.

   In performing his or her duties, a director of a Pennsylvania business
corporation is entitled to rely, in good faith, on information, opinions,
reports, or statements (including financial statements and other financial
data), prepared or presented by any of the following:

  . officers or employees of the corporation, so long as the director
    reasonably believes them to be reliable and competent in the matters
    presented;

  . counsel, public accountants, investment bankers, or other persons as to
    matters which the director reasonably believes to be within the
    professional or expert competence of such persons; and

  . a duly designated committee of the board which the director reasonably
    believes merits confidence and upon which the director does not serve,
    but only as to matters within the committee's designated authority.

   However, a director will not be considered to be acting in good faith if he
or she has knowledge concerning the matter in question which would cause such
reliance to be unwarranted.

                                      106
<PAGE>

 Consideration of Factors

   Delaware law does not contain any statutory provision permitting the board
of directors, committees of the board, and individual directors, when
discharging their duties, to consider the interests of any constituencies other
than the corporation or its stockholders.

   Pennsylvania law, on the other hand, provides that in discharging their
duties, the board of directors, committees of the board and individual
directors shall, in considering what is in the best interests of the
corporation, consider, to the extent they deem appropriate, all pertinent
factors, including the following:

  . the effects of any action upon any groups affected by such action,
    including shareholders, employees, suppliers, customers, and creditors of
    the corporation, and on communities served by the corporation;

  . the corporation's short-term and long-term interests, including benefits
    which may accrue to the corporation from its long-term plans and the
    possibility that these interests may be best served by the corporation's
    continued independence; and

  . the resources, intent, and conduct (past, stated and potential) of any
    person seeking to acquire control of the corporation.

   Under current Delaware law it is unclear whether the board of directors,
committees of the board, and individual directors of a Delaware corporation may
take into account, in considering what is in the corporation's best interests
or what the effects of any action on the corporation may be, the interests of
any constituency other than the corporation's stockholders. In contrast to
Delaware law, Pennsylvania law provides that a director owes a duty only to the
corporation (and not to the shareholders), and in considering what is in the
best interests of the corporation, may choose to subordinate the interests of
shareholders to the interests of employees, suppliers, customers, or creditors
of the corporation or to the interests of the communities served by the
corporation.

   In addition, the duty of the board of directors, committees of the board,
and individual directors of a Delaware corporation may be enforced directly by
the corporation, or may be enforced by a stockholder, as such, by an action in
the right of the corporation, or may be enforced directly by a stockholder or
by any other person or group. In contrast, the duty of the board of a
Pennsylvania corporation may not be enforced directly by a shareholder, but may
be enforced by a shareholder in a derivative action.

 Specific Applications

   Delaware courts have imposed a heightened standard of conduct upon directors
of a Delaware corporation who take any action designed to defeat a threatened
change in control of the corporation. The heightened standard has two elements.
First, the board must demonstrate some basis for concluding that a proper
corporate purpose is served by implementation of any defensive measure, and,
second, that measure must be reasonable in relation to the perceived threat
posed by the change in control.

   The fiduciary duty of directors of a Pennsylvania corporation does not
require them to act solely because of the effect such action might have on an
acquisition or potential or proposed acquisition of control of the corporation
or on the consideration which might be offered or paid to shareholders in such
an acquisition. In particular, directors of a Pennsylvania corporation are not
required to redeem rights under any shareholder rights plan.

   In addition, under Delaware law, unlike under Pennsylvania law, when the
board of directors approves the sale of a corporation, the board of directors
may have a duty to obtain the highest value reasonably available to the
stockholders.

 Presumption

   Under Delaware law, it is presumed that the directors of a Delaware
corporation acted on an informed basis, in good faith and in the honest belief
that their actions were in the best interest of the corporation. This

                                      107
<PAGE>

presumption may be overcome, however, if a preponderance of the evidence shows
that the directors' decision involved a breach of fiduciary duty such as fraud,
overreaching, lack of good faith, failure of the board to inform itself
properly or actions by the board to entrench itself in office.

   Under Pennsylvania law, unless there is a breach of fiduciary duty, a lack
of good faith or self-dealing (in other words, entering into a contract or
transaction with a director or an entity in which a director has a financial or
other interest), any act of the board of directors, any committee of the board
or any individual director is presumed to be in the corporation's best
interest. No higher burden of proof or greater obligation to justify applies to
any act relating to or affecting an acquisition or a potential or proposed
acquisition of control of the corporation than to any other action.

   Under Pennsylvania law, any board action relating to an acquisition or
potential or proposed acquisition of control which a majority of the
corporation's "disinterested directors" approve is presumed to satisfy the
statutory duty of care under Pennsylvania law, unless it is proven by clear and
convincing evidence that the disinterested directors did not assent to such act
in good faith, after reasonable investigation. Disinterested directors are
those who are not affiliated with the person seeking control and, in certain
circumstances, are not officers or employees of the corporation.

Anti-Takeover Laws

   Section 203 of the Delaware General Corporation Law contains certain "anti-
takeover" provisions that apply to a Delaware corporation unless, among other
things, the corporation elects not to be governed by such provisions in its
certificate of incorporation or bylaws. Neither the Certificate of
Incorporation nor the Bylaws of Mattson contain such an election. Thus, Mattson
is governed by Section 203, which precludes a corporation from engaging in any
"business combination" with any person that owns 15% or more of its outstanding
voting stock for a period of three years following the time that such
stockholder obtained ownership of more than 15% of the outstanding voting stock
of the corporation. A business combination includes, among other things, any
merger, consolidation, or sale of ten percent or more of a corporation's
assets.

   The three-year waiting period does not apply, however, if any of the
following conditions are met:

  . the board of directors of the corporation approved either the business
    combination or the transaction which resulted in such stockholder owning
    more than 15% of such stock before the stockholder obtained ownership of
    more than 15% of the corporation's stock;

  . once the transaction which resulted in the stockholder owning more than
    15% of the outstanding voting stock of the corporation is completed, such
    stockholder owns at least 85% of the voting stock of the corporation
    outstanding at the time that the transaction commenced; or

  . at or after the time the stockholder obtains more than 15% of the
    outstanding voting stock of the corporation, the business combination is
    approved by the board of directors and authorized at an annual or special
    meeting of stockholders (and not by written consent) by the affirmative
    vote of at least 66 2/3% of the outstanding voting stock that is not
    owned by the acquiring stockholder.

   In addition, Section 203 does not apply to any person who became the owner
of more than 15% of a corporation's stock if it was as a result of action taken
solely by the corporation. Section 203 also does not apply to the corporation
itself or to any of the corporation's majority-owned subsidiaries.

   Chapter 25 of the Pennsylvania Business Corporation Law contains several
anti-takeover provisions that apply to registered corporations such as CFM.
Section 2538 of the Pennsylvania Business Corporation Law, which is similar to
Section 203 of the Delaware General Corporation Law, requires shareholder
approval for certain transactions between a registered corporation and a
shareholder. Section 2538 applies if an interested shareholder (together with
anyone acting jointly with such shareholder and any affiliates of such
shareholder):

  . is to be a party to a merger or consolidation, a share exchange or
    certain sales of assets involving the corporation or one of its
    subsidiaries;

                                      108
<PAGE>

  . is to receive a disproportionate amount of any of the securities of any
    corporation which survives or results from a division of the corporation;

  . is to be treated differently from others holding shares of the same class
    in a voluntary dissolution of such corporation; or

  . is to have his or her percentage of voting or economic share interest in
    such corporation materially increased relative to substantially all other
    shareholders in a reclassification.

   In such a case, the proposed transaction must be approved by the affirmative
vote of the holders of shares representing at least a majority of the votes
that all shareholders are entitled to cast with respect to such transaction.
Shares held by the interested shareholder are not included in calculating the
number of shares entitled to be cast, and the interested shareholder is not
entitled to vote on the transaction. This special voting requirement does not
apply if the proposed transaction has been approved in a prescribed manner by a
majority of the corporation's disinterested directors or if certain other
conditions (including conditions relating to the amount of consideration to be
paid to certain shareholders) are satisfied.

   Section 2555 of the Pennsylvania Business Corporation Law may also apply to
a business combination between a registered corporation and an interested
shareholder, even if Section 2538 also applies. Section 2555 prohibits a
corporation from engaging in a business combination with an interested
shareholder unless one of the following conditions is met:

  . the board of directors has previously approved either the proposed
    transaction or the interested shareholder's acquisition of shares;

  . the interested shareholder owns at least 80% of the stock entitled to
    vote in an election of directors and, no earlier than three months after
    the interested shareholder reaches the 80% level, the majority of the
    remaining shareholders approve the proposed transaction, the shareholders
    receive a minimum "fair price" for their shares in the transaction and
    the other conditions of Section 2556 of the Pennsylvania Business
    Corporation Law are met;

  . holders of all outstanding common stock approve the transaction;

  . no earlier than five years after the interested shareholder became an
    interested shareholder, a majority of the remaining shares entitled to
    vote in an election of directors approve the transaction; or

  . no earlier than five years after the interested shareholder became an
    interested shareholder, a majority of all the shares approve the
    transaction, all shareholders receive a minimum fair price for their
    shares, and certain other conditions are met.

   Neither of Sections 2538 or 2555 apply to the merger because a majority of
the CFM board, including a majority of disinterested directors of the CFM
board, has previously approved of the merger. The articles of incorporation of
CFM also provide that CFM may not repurchase any stock from an interested
shareholder at prices greater than the current fair market value.

   Pennsylvania law deems a person (or group of persons acting in concert) that
holds 20% of the shares of a registered corporation entitled to vote in the
election of directors to be a control group. A shareholder who objects to the
"control transaction" that makes the control group a control group can, under
procedures set forth in the statute, require the control group to purchase for
cash his or her shares at "fair value," as defined under Pennsylvania law.

   Pennsylvania law also contains certain provisions that apply to a registered
corporation such as CFM which, under certain circumstances, permit a
corporation to redeem "control shares," as defined under Pennsylvania law,
restore the voting rights of control shares, and require the disgorgement of
profits by a "controlling person," as defined under Pennsylvania law.

                                      109
<PAGE>

                  MANAGEMENT OF MATTSON AFTER THE TRANSACTIONS

Board of Directors of Mattson

   Upon completion of the Transactions, the board of directors of Mattson will
be comprised of seven individuals, four of whom have been designated by
Mattson, two of whom will be designated by STEAG, and one of whom will be
designated by CFM. Mattson will have a classified board of directors consisting
of two Class I directors (Brad Mattson and Kenneth Kannappan), two Class II
directors (Kenneth G. Smith and Dr. Hans-Georg Betz), and three Class III
directors (Shigeru Nakayama, Dr. Jochen Melchior, and James J. Kim). One
incumbent member of the Mattson board of directors, John Savage, has agreed to
step down from the board immediately prior to the closing. Class I, II, and III
directors will serve until the Annual Meetings of Stockholders to be held in
2001, 2002, and 2003, respectively, and until their respective successors are
duly elected and qualified. At each Annual Meeting of Stockholders, directors
will be elected for a full term of three years to succeed those directors whose
terms expire on the Annual Meeting dates.

   To date, Mattson, STEAG, and CFM have designated the following individuals
to be directors of Mattson upon completion of the Transactions:

<TABLE>
<CAPTION>
                                                                                   Director
          Name            Age              Position With the Company                Since
          ----            ---              -------------------------               --------
<S>                       <C> <C>                                                  <C>
Class I directors whose
 terms expire at the
 2001 Annual Meeting of
 Stockholders:

Brad Mattson............   45 Director (Vice Chairman) and Chief Executive Officer   1988

Kenneth Kannappan.......   40 Director                                               1998

Class II directors whose
 terms expire at the
 2002 Annual Meeting of
 Stockholders:

Kenneth G. Smith........   50 Director                                               1994

Dr. Hans-Georg Betz.....   54 Director                                                 --

Class III director whose
 term expires at the
 2003 Annual Meeting of
 Stockholders:

Shigeru Nakayama........   65 Director                                               1996

Dr. Jochen Melchior.....   58 Director (Chairman)                                      --

James J. Kim............   64 Director                                                 --
</TABLE>

   Brad Mattson, age 45, founded Mattson in November 1988 and has served as
Chief Executive Officer and Chairman since its inception, and as President from
inception until January 1997. 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. and LFE Corporation,
semiconductor equipment companies.

   Dr. Jochen Melchior, age 58, became a member of the Management Board of
STEAG AG in June 1987 and became Chairman of the Management Board and Chief
Executive Officer of STEAG AG in November 1995. Since November 1995, Dr.
Melchior has also served as Chairman of the Supervisory Board of STEAG. From
April 1992 to July 1993, Dr. Melchior served as Chairman of the Management
Board and Chief Executive Officer of STEAG. Dr. Melchior also currently serves
as a member of the Supervisory Boards of Nationalbank AG, Vinci Deutschland AG,
Saarberg AG, TUV Mitte AG, and Colonia Nordstern

                                      110
<PAGE>

Versicherungs-Management AG. He also serves as Vice-Chairman of the Supervisory
Board of Westfalische Hypothekenbank AG and Chairman of the Supervisory Board
of STEAG HamaTech AG, and STEAG Walsum Immobilien AG.

   Dr. Hans-Georg Betz, age 54, has served as Chairman of the Management Board
and Chief Executive Officer of STEAG since January 1996 and became a member of
the Management Board of STEAG in October 1992. Dr. Betz has also served as a
member of the Management Board of STEAG AG since January 1997. Dr. Betz also
currently serves as Vice-Chairman of the Supervisory Board of STEAG HamaTech
AG.

   Kenneth Kannappan, age 40, joined Mattson as a member of its board of
directors in July 1998. In March 1998, Mr. Kannappan was appointed the
President and Chief Executive Officer of Plantronics, Inc., a
telecommunications equipment manufacturer. From February 1995 to 1998, Mr.
Kannappan held various positions at Plantronics, Inc. From 1991 to 1995 Mr.
Kannappan was Senior Vice President of Kidder, Peabody & Co. Incorporated, an
investment banking company. Mr. Kannappan is a member of the Compensation
Committee and the Audit Committee of the board of directors.

   James J. Kim, age 64, has been a director of CFM since December 1991. Mr.
Kim is the founder, Chairman and Chief Executive Officer of Amkor Technology,
Inc. Amkor, headquartered in West Chester, Pennsylvania, is a leader in
semiconductor assembly, test, packaging, and technology, utilizing the
facilities of Anam Industrial Co., Ltd., of Seoul, and Amkor/Anam Pilipinas,
Inc., in Manila. Mr. Kim received his BS and MA in Economics from the
University of Pennsylvania.

   Shigeru Nakayama, age 65, joined Mattson as a member of its board of
directors in May 1996. Since 1996, Mr. Nakayama has been a business consultant
to Semiconductor Equipment and Materials International, an international
association of semiconductor equipment manufacturers and materials suppliers.
From 1984 to 1994, Mr. Nakayama was the President of SEMI Japan, a member of
Semiconductor Equipment and Materials International.

   Kenneth G. Smith, age 50, joined Mattson as a member of its board of
directors in August 1994. Since May 1996, Mr. Smith has been President, Chief
Operating Officer and a director of WaferTech, a semiconductor manufacturer.
From 1991 to 1995, Mr. Smith was Vice President of Operations at Micron
Semiconductor, Inc., a semiconductor manufacturer, and from 1989 to 1991, Mr.
Smith was a Fabrication Manager at Micron Semiconductor. Mr. Smith is a member
of the Audit Committee and the Compensation Committee of the board of
directors.

Board Meetings and Committees

   Upon completion of the Transactions, the board of directors of Mattson will
initially have four committees: an Audit Committee, a Compensation Committee, a
newly formed Nominating Committee and a newly formed Executive Staffing
Committee.

   The Audit Committee oversees Mattson'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 public accountants. Prior to completion of the
Transactions, the Audit Committee consists of Messrs. Smith, Savage, and
Kannappan.

   The principal functions of the Compensation Committee are to recommend to
the board the compensation of directors and officers of Mattson, to oversee the
administration of Mattson'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. Prior to completion of the Transactions, the Compensation
Committee consists of Messrs. Smith, Savage, and Kannappan.

                                      111
<PAGE>

   Effective as of the completion of the business combination, and in
accordance with the terms of the Stockholder Agreement, Mattson's Bylaws will
be amended to establish a Nominating Committee to evaluate and propose nominees
to serve as directors to succeed the CFM representative or any independent
director who leaves office, or to fill additional vacancies on the board not
otherwise provided for. During the term of the Stockholder Agreement, the
Nominating Committee will consist of three board members, at least one of whom
will be a STEAG representative. For a period of three years following the date
of completion of the business combination, the Nominating Committee will only
nominate nominees who have received the unanimous approval of the Nominating
Committee members. The Mattson Bylaws will provide that in the event the
Nominating Committee fails to nominate a nominee within four months after a
board seat becomes vacant, the board may act to elect and appoint a nominee to
fill the vacancy.

   As of the closing, the Mattson Board of Directors will establish and appoint
in accordance with the procedures for establishing committees set forth in
Mattson's By-laws an Executive Staffing Committee, consisting of Dr. Jochen
Melchior and Brad Mattson (and, if agreed by Mattson and STEAG, one additional
representative of each of STEAG and Mattson), which will remain in place for
one year following closing, and will be responsible during that period for
making key personnel decisions (including the hiring and firing of the chief
executive officer, the chief financial officer, and the chief operating
officer, and the general managers for divisions). A mutually acceptable
independent Mattson board member will be appointed as a tiebreaker in the event
the Executive Staffing Committee reaches deadlock on an issue.

Compensation of Directors

   In accordance with existing practice of Mattson, following the completion of
the Transactions, Mattson will reimburse each of its outside directors for out-
of-pocket expenses associated with attending meetings of the board of
directors, but otherwise will not provide any cash compensation to outside
directors for their services as such. On December 16, 1999, the Mattson board
of directors approved a proposal under which non-employee directors are to be
reimbursed $5,000 per board of directors meeting attended, up to a maximum of
four meetings per year. This policy will continue following completion of the
Transactions.

   In addition, Mattson's Amended and Restated 1989 Stock Option Plan (the
"Stock Option Plan") provides for the automatic grant of options to Mattson's
non-employee directors, and before December 16, 1999, each non-employee
director elected or appointed after July 24, 1997 had been granted an option to
purchase 12,500 shares on the date of appointment or election. In addition,
each non-employee director was thereafter granted an option to purchase 5,000
shares on the date immediately after each annual meeting of stockholders
following which he remains a non-employee director of Mattson, as long as such
director has continuously served on the board for six months as of the date of
such annual meeting. On December 16, 1999, the board of directors increased the
number of options to be granted to non-employee directors upon appointment from
12,500 to 30,000 and approved an increase in the number of options to be
granted to non-employee directors from 5,000 shares per year to 10,000 shares
per year. In addition, the board of directors approved the grant of options to
purchase 17,500 shares to the non-employee directors for fiscal year 2000.
These options were granted to the non-employee directors on January 3, 2000.
Thereafter, non-employee directors will be granted options to purchase 10,000
shares per year. See Proposal No. 2, "APPROVAL OF INCREASE IN SHARES RESERVED
FOR ISSUANCE UNDER THE AMENDED AND RESTATED 1989 STOCK OPTION PLAN" on page 120
of this joint proxy statement-prospectus.

                                      112
<PAGE>

Executive Officers

   The principal executive officers of Mattson upon completion of the
Transactions will be as follows:

<TABLE>
<CAPTION>
   NAME                     AGE POSITION
   ----                     --- --------
   <S>                      <C> <C>
   Brad Mattson............  45 Vice Chairman of the Board and Chief Executive Officer

   Ludger Viefhues.........  58 President and Chief Operating Officer

   David Dutton............  39 President, Plasma Products Division

   Brian McDonald..........  43 Executive Vice President, Finance and Chief Financial Officer

   Walter Kasianchuk.......  50 Executive Vice President, Thermal Products Division

   Roger Carolin...........  45 President, Wet Processing Division
</TABLE>
--------

   Brad Mattson founded Mattson in November 1988 and has served as Chief
Executive Officer and Chairman since its inception, and until January 1997
served as its President. Mr. Mattson was the founder of Novellus Systems, Inc.
and formerly served as its President, Chief Executive Officer and Chairman. He
has held previous executive positions at Applied Materials and LFE Corporation,
semiconductor equipment companies.

   Ludger Viefhues joined STEAG RTP Systems GmbH, a STEAG Semiconductor
Subsidiary, as Chief Financial Officer in December 1999. From August 1996 to
August 1999, Mr. Viefhues served as Chief Executive Officer and member of the
Board of Directors of MEMC Electronic Materials Inc. From October 1993 to July
1996, Mr. Viefhues served as a member of the Management Board of Huels AG, and
Chairman of the Board of Directors of MEMC Electronic Materials Inc. Mr.
Viefhues also served as a member of the Supervisory Board of STEAG from July
1999 to December 1999.

   David Dutton joined Mattson as General Manager in the Strip/Plasma Etch
division in 1994. In March 1998, Mr. Dutton became Executive Vice President and
Chief Operating Officer of Mattson. From 1984 to 1993, Mr. Dutton served as an
engineer and then manager in plasma etch processing and yield enhancement at
Intel Corp. From 1993 to 1994, Mr. Dutton was Engineering Manager for Thin
Films Processing at Maxim Integrated Products.

   Brian McDonald joined Mattson as Vice President, Finance and Chief Financial
Officer in April 1999. From 1993 to July 1998, Mr. McDonald was Vice President
of Finance for the Central Technology and Manufacturing division of National
Semiconductor Corporation. Mr. McDonald previously held senior finance
positions at National Semiconductor, Read-Rite Corporation and Micro Linear
Corporation.

   Walter Kasianchuk joined Mattson as General Manager and Vice President,
Epitaxial Product Division in September 1999. From 1995 to 1999, Mr. Kasianchuk
was Executive Vice President of Engineering and Technology at Mitsubishi
Silicon America. From 1983 to 1995, Mr. Kasianchuk held senior management
positions with Siltec Corp., and from 1977 to 1982, Mr. Kasianchuk held
management positions with Monsanto.

   Roger Carolin, age 45, has served CFM as a director since its inception in
1984 and as President and Chief Executive Officer since April 1991. From
October 1990 to April 1991, he served as a marketing and sales consultant to
CFM. From June 1984 to October 1990, Mr. Carolin was Senior Vice President of
The Mills Group, Inc., a real estate development firm. Previously, Mr. Carolin
worked for The General Electric Company and Honeywell, Inc. in a variety of
technical positions. Mr. Carolin received his BS in Electrical Engineering from
Duke University and his MBA from Harvard Business School.

                                      113
<PAGE>

   Additional officers will be appointed by the Mattson board of directors
immediately after completion of the Transactions.

  Compensation of Executive Officers

   For information concerning the compensation paid to, and the employment
agreements with, the chief executive officer and the other four most highly
compensated officers of Mattson for the 1999 fiscal year, see "Proposals
Relating to Amendment of Mattson's Equity Compensation Plans -- Historical
Executive Compensation" on page 116 of this joint proxy statement-prospectus.
For information concerning the compensation paid to, and the employment
agreements with, the chief executive officer and the other four most highly
compensated executive officers of CFM for the 1999 fiscal year, see CFM's proxy
statement used in connection with its 2000 annual meeting of stockholders, the
relevant portions of which are incorporated by reference into CFM's annual
report on Form 10-K for the fiscal year ended October 31, 1999.

                                      114
<PAGE>

                      DESCRIPTION OF MATTSON CAPITAL STOCK

   Mattson's authorized capital stock consists of 60,000,000 shares of common
stock and 2,000,000 shares of preferred stock. As of October 4, 2000, there
were 20,956,157 shares of common stock and no shares of preferred stock
outstanding.

Common Stock

   Subject to preferences that may be applicable to any outstanding preferred
stock, holders of common stock are entitled to receive ratably dividends as may
be declared by Mattson's board of directors out of the funds legally available
therefor. Each holder of common stock is entitled to one vote for each share
held of record by the holder. If Mattson liquidates, dissolves, or wind ups the
company, holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding preferred stock. The outstanding shares of common stock have no
preemptive, subscription, redemption or conversion rights. Cumulative voting
for the election of directors is not authorized by Mattson's Certificate of
Incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. All of the
outstanding shares of common stock are, and the shares to be outstanding upon
completion of this offering will be, fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of any series of
preferred stock which Mattson may designate and issue in the future.

Preferred Stock

   The board of directors is authorized, without further action by the
stockholders, subject to any limitations prescribed by law, to designate and
issue up to 2,000,000 shares of preferred stock in one or more series. The
board of directors can fix the rights, preferences and privileges of the shares
of each series and any qualifications, limitations or restrictions on these
shares.

   The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes could, under some circumstances, has the effect of delaying,
deferring or preventing a change in control of Mattson. Mattson has no current
plans to issue any shares of preferred stock.


                                      115
<PAGE>

                     PROPOSALS RELATING TO AMENDING MATTSON
                           EQUITY COMPENSATION PLANS

   Proposals No. 2 and No. 3 below relate to proposed amendments to increase
the shares reserved for issuance under Mattson's existing 1989 Stock Option
Plan and 1994 Employee Stock Purchase Plan. These proposals are being made at
this time because Mattson anticipates needing additional shares to support the
compensation requirements of a substantially increased number of employees
following completion of the Transactions. However, approval of these proposals
is not required as a condition to the Transactions, and the vote to approve
each of these proposals is independent of the vote to approve Proposal No. 1.
Only Mattson stockholders are voting upon Proposals No. 2 and No. 3.

Historical Executive Compensation

   The following table sets forth information concerning the compensation of
Chief Executive Officer and the four highest compensated executive officers of
Mattson 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                                    Options
        Function          Year Salary($) Bonus($)(4)   Granted(#)
   ------------------     ---- --------- -----------  ------------
<S>                       <C>  <C>       <C>          <C>
Brad Mattson............. 1999  313,272    201,000(5)   100,000
 Chief Executive Officer  1998  273,134     87,000           --
                          1997  299,134     79,000      116,500

Brian McDonald(2)........ 1999  136,924     70,750(5)    83,750
 Vice President, Finance,
  Chief
 Financial Officer and
  Secretary

David Dutton............. 1999  194,692    119,000       37,500
 Executive Vice
  President,              1998  167,722     34,000           --
 Chief Operating Officer  1997  155,999     32,000       45,500

Yasuhiko Morita(1)....... 1999  200,936     81,000(5)    20,000
 Executive Vice
  President, Global Sales 1998  114,141     44,000           --
                          1997  172,985     39,000       37,000

Walter Kasianchuk(3)..... 1999   53,570     20,000(5)    30,000
 General Manager and Vice
  President,
 Epitaxial Product
  Division
</TABLE>

--------
(1) Mr. Morita's salary was denominated in Japanese yen and converted to US
    dollars.

(2) Mr. McDonald joined Mattson in April 1999.

(3) Mr. Kasianchuk joined Mattson in September 1999.

(4) 1997 bonus figures represent bonuses accrued at the end of the 1997 fiscal
    year but paid in the succeeding fiscal year.

(5) 1999 bonus figures represent bonuses accrued at the end of the 1999 fiscal
    year but paid in the 2000 fiscal year.



                                      116
<PAGE>

Stock Options Granted During Fiscal 1999

   The following table provides the specified information concerning grants of
options to purchase Mattson common stock made during the fiscal year ended
December 31, 1999, to the persons named in the Summary Compensation Table.

                    STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                            Potential
                                                                        Realizable Value
                                                                        at Assumed Annual
                                                                         Rates of Stock
                                                                              Price
                                                                        Appreciation for
                                Individual Grants in Fiscal 1999         Option Term(2)
                         ---------------------------------------------- -----------------
                         Number of   % of Total
                         Securities   Options
                         Underlying  Granted to  Exercise or
                           Options  Employees in Base Price  Expiration
Name                     Granted(1) Fiscal Year    ($/Sh)       Date     5% (8)  10% (9)
----                     ---------- ------------ ----------- ---------- -------- --------
<S>                      <C>        <C>          <C>         <C>        <C>      <C>
Brad Mattson............   14,269       1.56%      $ 7.77     05/20/04  $ 18,000 $ 51,000
                           35,731       3.90%      $ 7.77     05/20/04  $ 44,000 $129,000
                              768       0.08%      $16.78     12/16/04  $  2,000 $  6,000
                           49,232       5.38%      $16.78     12/16/04  $132,000 $383,000


Brian McDonald..........   49,105       5.36%      $ 7.00     04/21/09  $216,000 $548,000
                           25,895       2.83%      $ 7.00     04/21/09  $114,000 $289,000
                            3,688       0.40%      $15.25     12/16/09  $ 35,000 $ 90,000
                            5,062       0.55%      $15.25     12/16/09  $ 49,000 $123,000

David Dutton............    6,100       0.67%      $ 7.06     05/20/09  $ 27,000 $ 69,000
                           16,392       1.79%      $ 7.06     05/20/09  $ 73,000 $185,000
                            6,557       0.72%      $15.25     12/16/09  $ 63,000 $159,000
                            8,443       0.92%      $15.25     12/16/09  $ 81,000 $205,000

Yasuhiko Morita.........   14,192       1.55%      $ 7.06     05/20/09  $ 63,000 $160,000
                              808       0.09%      $ 7.06     05/20/09  $  4,000 $  9,000
                            2,091       0.23%      $ 7.06     05/20/09  $  9,000 $ 24,000
                            2,909       0.32%      $ 7.06     05/20/09  $ 13,000 $ 33,000

Walter Kasianchuk.......   28,468       3.11%      $12.75     09/09/09  $228,000 $578,000
                            1,532       0.17%      $12.75     09/09/09  $ 12,000 $ 31,000
</TABLE>
--------
(1) Options granted in fiscal 1999 under the 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 Mattson. Under
    the Stock Option Plan, the Board retains discretion to modify the terms,
    including the price, of outstanding options.

(2) 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 Mattson'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 $7.00 in fiscal 1999 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. One share of stock
    purchased at $7.06 in fiscal 1999 would yield profits of approximately
    $4.44 per share at 5% appreciation over ten years, or approximately $11.25
    per share at 10% appreciation over the same period. One share of stock
    purchased at $7.77 in fiscal 1999 would yield profits of approximately
    $4.89 per share at 5% appreciation over ten years, or approximately $12.38
    per share at 10% appreciation over the same period. One share of stock
    purchased at $12.75 in fiscal 1999 would yield profits of approximately
    $8.02 per share at 5% appreciation over ten years, or approximately $20.32
    per

                                      117
<PAGE>

   share at 10% appreciation over the same period. One share of stock
   purchased at $15.25 in fiscal 1999 would yield profits of approximately
   $9.59 per share at 5% appreciation over ten years, or approximately $24.30
   per share at 10% appreciation over the same period. One share of stock
   purchased at $16.78 in fiscal 1999 would yield profits of approximately
   $10.55 per share at 5% appreciation over ten years, or approximately $26.74
   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, 1999 by the persons named in the
Summary Compensation Table and the fiscal 1999 year-end option values.

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

<TABLE>
<CAPTION>
                                                      Number of Securities Underlying        Value of Unexercised
                                                           Unexercised Options at           In-The-Money Options at
                                                                 FY-End(#)                       Yr-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............     124,000       705,720        141,499          175,001         889,107        1,077,941

Brian McDonald..........          --            --             --           83,750              --          775,781

David Dutton............          --            --         36,900           68,000         350,369          544,625

Yasuhiko Morita.........          --            --         51,998           42,502         477,128          401,185

Walter Kasianchuk.......          --            --             --           30,000              --          131,250
</TABLE>
--------
(1) Options granted in fiscal 1999 under the Stock Option Plan generally vest
    and become exercisable as follows: one-quarter of the shares vest after
    one year and thereafter the remaining shares vest monthly over a period of
    three years, with vesting conditioned upon continued employment with
    Mattson. Under the Stock Option 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 $17.13, as reported on the Nasdaq National Market
    on December 31, 1999, less the exercise price.

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

(4) Based on the closing price of $17.13, as reported on the Nasdaq National
    Market on December 31, 1999, less the exercise price.

Compensation Committee Interlocks and Insider Participation

   During 1999, Mattson sold approximately $3.4 million in systems to
WaferTech. Kenneth Smith is the President, Chief Operating Officer and a
Director of WaferTech. Mr. Smith is a member of Mattson's Board of Directors
and serves on both the Audit Committee and the Compensation Committee of
Mattson's Board of Directors. Each transaction was determined based on arm's
length negotiations and Mattson believes the terms of these transactions were
no more favorable to WaferTech than would have been offered to third party
customers.

   During 1999, Mattson paid Alliant Partners for investment banking services.
John Savage is a Partner of Alliant Partners. Mr. Savage is a member of the
Audit Committee of Mattson's Board of Directors and served on the Compensation
Committee of Mattson's Board of Directors during part of 1999. The agreement
for services with Alliant Partners was determined based on arm's length
negotiation and Mattson believes the terms of the agreement were no less
favorable than could have been obtained from third party consultants

                                      118
<PAGE>

and investment bankers. Mattson has engaged Alliant Partners to provide
financial advisory services in connection with acquisition transactions.

Allocation of Benefits Under Stock Option and Stock Purchase Plans

   Mattson has proposed the amendments of the Stock Option Plan to increase the
maximum aggregate number of shares of the Mattson's common stock issuable under
the Stock Option Plan by a total of 2,100,000 shares from 6,575,000 shares to
8,675,000 shares and to increase the maximum aggregate number of shares of
Mattson common stock issuable under the 1994 Employee Stock Purchase Plan (the
"Purchase Plan") from 1,925,000 shares to 2,175,000 shares. As of October 4,
2000, no grant of options conditioned on stockholder approval of an increase in
the share reserve under the Stock Option Plan had been made to any employee.
Grants under the Stock Option Plan are made at the discretion of the
compensation committee or the board of directors. Participation and purchase
levels under the Purchase Plan depend upon investment decisions by individual
eligible employees. Accordingly, future grants under the Stock Option Plan and
future purchases under the Purchase Plan are not yet determinable. See
Proposal No. 2, "APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE
AMENDED AND RESTATED 1989 STOCK OPTION PLAN" immediately below.

                                      119
<PAGE>

                                 PROPOSAL NO. 2

                         FOR MATTSON STOCKHOLDERS ONLY:

                  APPROVAL OF INCREASE IN SHARES RESERVED FOR
         ISSUANCE UNDER THE AMENDED AND RESTATED 1989 STOCK OPTION PLAN

General

   Mattson's Stock Option Plan became effective on September 29, 1989 and was
restated in August 1994. Mattson obtained stockholder approval of the restated
Stock Option Plan in August 1994. A reserve of 1,200,000 shares of Mattson's
common stock was originally established for issuance under the restated Stock
Option Plan. In March 1995, the number of shares reserved for issuance under
the Stock Option Plan was increased to 1,500,000 by the board of directors and
such increase was approved by Mattson's stockholders in May 1995. In March
1996, the number of shares reserved for issuance under the Stock Option Plan
was increased by 1,000,000 to 4,000,000 (post stock split effective September
1995) by the board of directors and such increase was approved by Mattson's
stockholders in May 1996. In April 1997, the board of directors amended and
restated the Stock Option 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 Mattson's stockholders in July 1997. In March
1998, the number of shares reserved for issuance under the Stock Option Plan
was increased to 4,550,000 by the board of directors and such increase was
approved by Mattson's stockholders in May 1998. In April 1999, the number of
shares reserved for issuance under the Stock Option Plan was increased to
5,675,000 by the board of directors and such increase was approved by Mattson's
stockholders in May 1999. In April 2000, the number of shares reversed for
issuance under the Stock Option Plan was increased to 6,575,000 by the board of
directors and such increase was approved by Mattson's stockholders in May 2000.

   At the special meeting, the stockholders are being requested to approve an
increase in the number of shares authorized for issuance under the Stock Option
Plan by 750,000 shares (in addition to the share reserve increase under
Proposal One). The affirmative vote of the holders of a majority of the shares
of Mattson'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 Stock Option Plan is
necessary to enable Mattson 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 Stock Option Plan is qualified in its entirety
by the specific language of the Stock Option Plan, a copy of which is available
to any stockholders upon request.

   General. The Stock 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 Stock Option Plan also provides for the automatic grant of
nonstatutory stock options to non-employee directors of Mattson.

   Shares Subject to Plan. The stockholders have previously authorized the
reservation of an aggregate of 6,675,000 shares of Mattson's common stock for
issuance upon the exercise of options granted under the Stock Option Plan. As
of October 4, 2000, a total of 2,974,088 shares were subject to outstanding
options granted under the Stock Option Plan, 674,951 shares were available for
future grant under the Stock Option Plan (without taking the proposed amendment
into account) and options to purchase 2,025,961 shares of common stock granted
under the Stock Option Plan had been exercised. The maximum number of
authorized but unissued or reacquired shares of Mattson's common stock
available for issuance under the Stock Option Plan, is 6,575,000. The Stock
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

                                      120
<PAGE>

made to the shares subject to the Stock Option Plan, to the Grant Limit, to the
automatic non-employee 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 Mattson. To the extent that any outstanding option
under the Stock 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 Stock Option Plan and become available for future grant. The Stock
Option Plan also provides that if shares issued upon exercise of an option are
repurchased by Mattson, the repurchased shares are returned to the Stock Option
Plan and become available for future grant.

   Administration. The Stock Option Plan is administered by the board of
directors or a duly appointed committee of the board. With respect to the
participation of individuals whose transactions in Mattson's equity securities
are subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Stock 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 Stock 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 Mattson upon the exercise of each option,
the duration of each option, and all other terms and conditions of the options.
The Stock Option Plan also authorizes the board to delegate to an officer of
Mattson 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 Mattson.

   The Stock Option Plan authorizes the board to amend, reprice, 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 Mattson. The Stock Option Plan also
provides, subject to certain limitations, for indemnification by Mattson 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 Stock Option Plan. The
board will interpret the Stock 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 Stock Option Plan or any option.

   Eligibility. The Stock Option Plan permitted the grant of options to
employees, consultants and directors of Mattson or of any present or future
parent or subsidiary corporations of Mattson. Options may also be granted 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. While any person
eligible under the Stock Option Plan may be granted a nonstatutory option, only
employees may be granted incentive stock options. In addition, only non-
employee directors of Mattson are eligible to receive non-employee director
options.

   Terms and Conditions of Options. Each option granted under the Stock Option
Plan is evidenced by a written agreement between Mattson 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 Stock
Option Plan must equal at least the fair market value of a share of Mattson's
common stock on the date of grant and the exercise price per share of each
nonstatutory stock option granted under the Stock Option Plan must equal at
least 85% of the fair market value of a share of Mattson's common stock on the
date of grant. In addition, any incentive stock option granted to a person who
at the time of grant owns stock equal to more than 10% of the total combined
voting power of all classes of stock of Mattson or any parent or subsidiary
corporation of Mattson (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

                                      121
<PAGE>

date of grant. As of October 4, 2000, the closing price of a share of Mattson's
common stock as reported on Nasdaq was $13.75.

   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 Stock Option Plan also authorizes (i) Mattson to withhold
from shares otherwise issuable upon the exercise of an option or (ii) to accept
the tender of shares of Mattson's common stock in full or partial payment of
any tax withholding obligations.

   Options granted under the Stock Option Plan become exercisable and vested at
such times and subject to such conditions as specified by the board. Generally,
options granted under the Stock 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 Mattson. The Stock Option Plan provides
that the maximum term of an incentive stock 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 Stock Option Plan does not limit the term of a
nonstatutory stock option. Options are generally 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
Stock Option Plan 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 Non-employee Director Options. The Stock Option Plan
provides for the automatic grant of options to non-employee directors of
Mattson. The Stock Option Plan further provides that each non-employee 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 non-
employee director option granted on the Effective Date or on the date of
initial appointment or election as a non-employee director is referred to
herein as an "Initial Option." The Stock Option Plan also provides for the
automatic annual grant, on the day following each annual meeting of the
stockholders of Mattson which occurs after the Effective Date, of an additional
option to purchase 5,000 shares of common stock to each non-employee director
who continues to serve in such capacity. However, a non-employee director who
has not continuously served on the board for at least six months as of the date
of such annual meeting will not receive an annual option on such date. On
December 16, 1999, the board of directors approved for an increase in the
initial grant of options to non-employee directors from 12,500 shares to 30,000
shares. In addition, the annual options granted to non-employee directors were
increased from 5,000 shares per year to 10,000 shares per year. Lastly, the
board of directors approved a grant of 17,500 shares of options to each non-
employee director during 2000. For 2000, the non-employee directors were each
granted 17,500 shares on January 3, 2000 in lieu of the options which were
originally to be granted on May 17, 2000. The exercise price per share of each
non-employee director option will be equal to the fair market value of a share
of Mattson's common stock on the date of grant and each non-employee director
option will have a term of 10 years.

   Non-employee director options are exercisable only to the extent that the
shares subject to the option are vested. In general, initial options granted
after the Effective Date will vest as follows: 5,000 shares will vest one year
after the date of grant, 3,750 shares will vest two years after the date of
grant, 2,500 shares will vest three years after the date of grant and 1,250
shares will vest four years after the date of grant. Effective December 16,
1999 based on the approved initial grant of 30,000 shares, 12,000 shares will
vest one year after the date of grant, 9,000 shares will vest two years after
the date of grant, 6,000 shares will vest three years after the date of grant
and 3,000 shares will vest four 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 four anniversaries of the date of grant. Vesting of
shares subject to a non-employee director option is subject to the optionee's
continued service through the relevant date.

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   Transfer of Control. As restated, the Stock 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 Mattson's voting stock, (ii) a
merger or consolidation in which Mattson is a party, (iii) the sale, exchange,
or transfer of all or substantially all of the assets of Mattson, or (iv) a
liquidation or dissolution of Mattson wherein, upon any such event, the
stockholders of Mattson 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 Mattson, its
successor, or the corporation to which the assets of Mattson 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 Mattson'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 Stock Option Plan are not
assumed, substituted for, or exercised prior to the Transfer of Control, they
will terminate.

   Termination or Amendment. The Stock 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 Stock Option Plan have been issued and
all restrictions on such shares under the terms of the Stock 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 board may terminate or
amend the Stock 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 Stock 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 Mattson'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.

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 Stock 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, Mattson 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 exercise date 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
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% 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 Mattson for federal income tax purposes,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder.

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   The difference between the option exercise price and the fair market value
of the shares on the exercise date of an incentive stock option 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 exercise date. If the optionee is an employee, such ordinary income
generally is subject to withholding of income and employment taxes. 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 exercise 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 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% and
short-term capital gains are subject to taxation at ordinary rates. No tax
deduction is available to Mattson with respect to the grant of a nonstatutory
stock option or the sale of the stock acquired pursuant to such grant. Mattson
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 special meeting of stockholders, at which a
quorum representing a majority of all outstanding shares of common stock of
Mattson is present, is required for approval of this proposal. Abstentions and
broker nonvotes will each be counted as present for purposes of determining
whether a quorum is present. Abstentions will have the same effect as a
negative vote on this proposal. Broker won-votes will have no effect on the
outcome of this vote.

   The board of directors believes that the proposed 750,000 share increase in
the number of shares reserved for issuance under Mattson's Stock Option Plan
(in addition to the 1,350,000 share reserve increase proposed in connection
with the Transactions is important if Mattson is to be able to attract and
retain qualified directors, officers, and employees to Mattson.

   The board unanimously recommends a vote FOR approval of the amendment of the
Stock Option Plan to increase the number of shares reserved for issuance by
750,000 shares for the reasons stated above.

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                                 PROPOSAL NO. 3

                         FOR MATTSON STOCKHOLDERS ONLY:

                    APPROVAL OF INCREASE IN SHARES RESERVED
              FOR ISSUANCE UNDER 1994 EMPLOYEE STOCK PURCHASE PLAN

General

   In August 1994, the board of Mattson adopted the 1994 Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan provides a means by
which employees may purchase common stock of Mattson through payroll
deductions. The Purchase Plan originally authorized Mattson to issue up to
200,000 shares of common stock under the plan. In March, 1995, the board of
directors of Mattson 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 May 1997. In March 1998, the board of directors increased the number of
shares authorized for issuance under the Purchase Plan by 450,000 shares and
the stockholders approved the increase. In April 1999, the board of directors
increased the number of shares authorized for issuance under the Purchase Plan
by 475,000 to 1,925,000 shares.

   At the special meeting, the stockholders are being requested to approve the
increase in the number of shares authorized under the Purchase Plan from
1,925,000 shares to 2,175,000 shares. The affirmative vote of the holders of a
majority of the shares of Mattson'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 Mattson 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 Mattson (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 1,925,000 shares of
Mattson'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 Mattson's capital structure
or in the event of any merger, sale of assets, or other reorganization of
Mattson. The board of directors has amended the Purchase Plan, subject to
stockholder approval, to increase by 250,000 shares the maximum number of
shares of common stock issuable thereunder to an aggregate of 2,175,000 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 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 Mattson or of any subsidiary corporation of
Mattson designated by the board for inclusion in the Purchase Plan is eligible
to participate in an Offering Period under the plan so long

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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 Mattson or of any
subsidiary corporation of Mattson is entitled 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 Mattson's
common stock having a fair market value exceeding $25,000 in any calendar year
(measured by the fair market value of Mattson'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, Mattson issues to each participant in the Offering Period
the number of shares of Mattson'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 Mattson'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 Mattson, 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
Mattson, or the merger or consolidation of Mattson 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 Purchase Plan have been issued. The board may at any time amend or
terminate the Purchase Plan, except that the approval of Mattson'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.

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<PAGE>

   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
Mattson 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
Mattson.

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 special meeting of stockholders, at which a
quorum representing a majority of all outstanding shares of common stock of
Mattson is present, is required for approval of this proposal. Abstentions and
broker nonvotes will each be counted as present for purposes of determining
whether a quorum is present. Abstentions will have the same effect as a
negative vote on this proposal. Broker non-votes will have no effect on the
outcome of this vote.

   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 Mattson, and that stock ownership is important to
providing such persons with incentive to perform in the best interest of
Mattson.

   The board unanimously recommends a vote FOR approval of the increase in the
number of shares reserved for issuance under the Purchase Plan by 250,000
shares.

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     PROPOSALS RELATING TO AMENDING MATTSON'S CERTIFICATE OF INCORPORATION

   Proposals No. 4 and No. 5 below relate to proposed amendments to the Mattson
Certificate of Incorporation. These proposals are being made at this time
because of the additional shares of common stock anticipated to be issued and
the changes in the composition of the Mattson board of directors as a result of
the Transactions. However, approval of these proposals is not required as a
condition to the Transactions, and the vote to approve each of these proposals
is independent of the vote to approve Proposal No. 1. Only Mattson stockholders
are voting upon Proposals No. 4 and No. 5.

                                 PROPOSAL NO. 4

                         FOR MATTSON STOCKHOLDERS ONLY:

           APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
          TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

Background

   Under Delaware law, Mattson may only issue shares of common stock to the
extent such shares have been authorized for issuance under Mattson's
Certificate of Incorporation. The Certificate of Incorporation currently
authorizes the issuance by Mattson of up to 60,000,000 shares of common stock.
However, as of October 4, 2000, 20,956,157 shares of Mattson's common stock
were issued and outstanding, 6,575,000 unissued shares of common stock were
reserved for issuance under Mattson's Stock Option Plan (proposed to be
increased to 8,675,000 under Proposal Nos. 1 and 2 taken together), and
approximately 16,890,000 shares of common stock are proposed to be issued
pursuant to the Transactions. As a result, assuming approval of Proposal Nos. 1
and 2, approximately 13,478,843 shares of common stock will be unissued and
unreserved under Mattson's Certificate of Incorporation, an amount that the
board believes to be inadequate for future purposes. In order to ensure
sufficient shares of common stock will be available for issuance by Mattson,
the board of directors has approved, subject to stockholder approval, an
amendment to Mattson's Certificate of Incorporation to increase the number of
shares of common stock authorized for issuance to 120,000,000 shares.

Purpose and Effect of the Amendment

   The purpose of the proposed amendment to the Certificate of Incorporation is
to authorize additional shares of common stock which will be available in the
event the board of directors determines that it is necessary or appropriate to
issue additional shares in connection with a stock dividend, raising additional
capital, acquiring other businesses, establishing strategic relationships with
corporate partners or providing equity incentives to employees and officers or
for other corporate purposes. The availability of additional shares of common
stock is particularly important in the event that Mattson needs to undertake
any of the foregoing actions on an expedited basis and wishes to avoid the time
and expense of seeking stockholder approval in connection with the contemplated
issuance of common stock. Mattson has no present agreement or arrangement to
issue any of the shares for which approval is sought. If the amendment is
approved by the stockholders, the board of directors does not intend to solicit
further stockholder approval prior to the issuance of any additional shares of
common stock, except as may be required by applicable law or the requirements
of the Nasdaq Stock Market.

   The increase in authorized common stock will not have any immediate effect
on the rights of existing stockholders. However, the board will have the
authority to issue common stock without requiring future stockholder approval
of such issuances, except as may be required by applicable law. To the extent
that additional shares are issued in the future, they may decrease the existing
stockholders' percentage equity ownership and, depending on the price at which
they are issued, could be dilutive to the existing stockholders.

   The increase in the authorized number of shares of common stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of Mattson without further action by the
stockholders. Shares of authorized and unissued common stock could, within the
limits imposed by

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<PAGE>

applicable law, be issued in one or more transactions which would make a
change in control of Mattson more difficult, and therefore less likely. Any
such issuance of additional stock could have the effect of diluting the
earnings per share and book value per share of outstanding shares of common
stock, and such additional shares could be used to dilute the stock ownership
or voting rights of a person seeking to obtain control of Mattson. The board
of directors is not currently aware of any attempt to take over or acquire
Mattson. While it may be deemed to have potential anti-takeover effects, the
proposed amendment to increase the authorized common stock is not prompted by
any specific effort or takeover threat currently perceived by management.

   If the proposed amendment is approved by the stockholders, Article Fourth,
A. of Mattson's Certificate of Incorporation will be amended to read as
follows:

   A. The total number of shares of all classes of stock which the Corporation
   shall have authority to issue is One Hundred Twenty-Two Million
   (122,000,000) Shares consisting of:

     1. One Hundred Twenty Million (120,000,000) 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").

   (Mattson's Certificate of Incorporation currently authorizes two million
shares of Preferred Stock, and therefore the proposed amendment would result
in no change to Article Fourth, A.2.)

Vote Required and Recommendation of the Board of Directors

   The affirmative vote of a majority of the shares of outstanding common
stock is required for approval of this proposal. Abstentions and broker non-
votes will each be counted as present for purposes of determining if a quorum
is present but will both have the same effect as a negative vote on this
proposal.

   The board of directors unanimously recommends that the stockholder vote FOR
approval of the amendment to the Certificate of Incorporation to increase the
number of authorized shares of common stock from 60,000,000 shares to
120,000,000 shares.


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                                PROPOSAL NO. 5

                        FOR MATTSON STOCKHOLDERS ONLY:

           APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
              TO INCREASE THE NUMBER OF DIRECTORS AND CHANGE THE
                     PROCEDURE FOR FILLING BOARD VACANCIES

Background

   Article Sixth, A. of Mattson's Certificate of Incorporation provides that
the number of directors of Mattson shall be five, subject to adjustment 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. Article
Sixth, B. of Mattson's Certificate of Incorporation sets forth the manner in
which vacancies on the board of directors are filled. A copy of Article Sixth
of Mattson's Certificate of Incorporation is attached hereto as Annex F.
Mattson's board of directors is currently composed of five directors.

   The Stockholder Agreement to be entered into between Mattson, STEAG, and
Brad Mattson will provide that, at the closing of the business combination,
Mattson's board of directors will consist of seven members, two of whom shall
be designees of STEAG. The Stockholders Agreement further provides that
Mattson's Bylaws shall establish a nominating committee to evaluate and
propose nominees to serve as directors, to succeed any Independent Director
(as defined in the Stockholder Agreement) who leaves office, or to fill
additional vacancies on the board. Mattson has agreed to effect an amendment
to its Bylaws so that they comport with the terms of the Stockholder Agreement
prior to or simultaneously with the closing of the business combination.

Purpose and Effect of the Amendment

   The purpose of the proposed amendment to the Certificate of Incorporation
is to explicitly increase the authorized number of directors of Mattson from
five to seven, consistent with the terms of the Stockholder Agreement. Such
increase in the size of Mattson's board will ensure that there is sufficient
room for the appointment of the two director-nominees designated by STEAG. The
change in procedure by which directors are nominated and elected and by which
vacancies are filled will also reflect the terms of the Stockholder Agreement.

   If the proposed amendment is approved by the stockholders, Article Sixth of
Mattson's Certificate of Incorporation will be amended to read as follows:

   A. The number of directors shall be seven (7) or such other number as may
   from time to time be established, and directors shall be nominated and
   elected, in accordance with the Delaware General Corporation Law and the
   Bylaws of the Corporation. The directors shall be divided into three
   classes with the term of office of the first class to expire at the annual
   meeting of the stockholders to be held in 2001, the term of office of the
   second class to expire at the annual meeting of stockholders to be held in
   2002, the term of office of the third class to expire at the annual meeting
   of stockholders to be held in 2003, 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.

   B. 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 in accordance with
   the Delaware General Corporation Law and the Bylaws of the Corporation.

Vote Required and Recommendation of Board of Directors

   Pursuant to the requirements of Article Ninth of Mattson's Certificate of
Incorporation, the affirmative vote of at least two-thirds of the outstanding
shares of common stock is required for approval of this proposal.

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<PAGE>

Abstentions and broker non-votes will each be counted as present for purposes
of determining if a quorum is present but will both have the same effect as a
negative vote on this proposal.

   The board of directors unanimously recommends that the stockholders vote FOR
approval of the amendment to the Certificate of Incorporation to increase the
number of directors of Mattson from five to seven and to change the procedures
for filling board vacancies.

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                              BUSINESS OF MATTSON

Overview

   Mattson is a leading supplier of advanced, high productivity semiconductor
processing equipment used in the fabrication of integrated circuits. Mattson
provides its customers with semiconductor manufacturing equipment that delivers
higher productivity and advanced process capability. In addition, through
Mattson's international technical support organization and comprehensive
warranty program, Mattson provides world class customer support. Nearly all of
Mattson's tools are built on a single platform, known as the Aspen platform.
Each Aspen system shares the same principal architecture, including the main
mechanical design, robotics, systems software, wafer handling interfaces and
wafer flow design. Mattson's Aspen platform is designed to deliver high
throughput and low cost of ownership, enhancing the ability of manufacturers to
achieve productivity gains. Mattson's products include strip, etch, deposition,
rapid thermal processing and Epi systems. Mattson's customers include nine of
the top ten semiconductor manufacturers worldwide.

Industry Background

   The manufacture of an integrated circuit, commonly called a chip, requires a
number of complex steps and processes. Most integrated circuits are built on a
base of silicon, called a wafer, and consist of two main structures. The lower
structure is made up of components, typically transistors or capacitors, and
the upper structure consists of the circuitry that connects the components.
Building an integrated circuit requires the deposition of a series of film
layers, which may be conductors, dielectrics (insulators), or semiconductors.
The deposition of these film layers is interspersed with numerous other
processes that create circuit patterns, remove portions of the film layers, and
perform other functions such as heat treatment, measurement, and inspection.
Each step of the manufacturing process for integrated circuits requires
specialized manufacturing equipment. The overall growth of the semiconductor
industry and the increasing complexity of integrated circuits has led to
increasing demand for advanced semiconductor capital equipment.

 History of Increasing Semiconductor Manufacturing Productivity

   The growth of computer markets and the emergence and growth of new markets
such as wireless communication and digital consumer electronics have
contributed to recent growth in the semiconductor industry. This increase also
has been fueled by the semiconductor industry's ability to supply increasingly
complex, higher performance integrated circuits, while continuing to reduce
cost. The more complex integrated circuits and the accompanying reductions in
feature size require more advanced and expensive wafer fabrication equipment
and increase the average cost of advanced wafer fabrication facilities. For
example, the average cost in 1984 for a 64 kilobit dynamic random access memory
integrated circuit, called a DRAM, fabrication facility was approximately $60.0
million. Today the cost for a 64 megabit DRAM fabrication facility can range
from $1.0 billion to $2.0 billion. As the semiconductor industry has matured
and pricing has become more competitive, it has become increasingly difficult
to achieve manufacturing efficiencies to offset these increased costs.

   Technological advances in semiconductor manufacturing equipment have
historically enabled integrated circuit manufacturers to increase productivity
dramatically by:

  . reducing feature size of integrated circuits;

  . increasing manufacturing yields;

  . improving the utilization of wafer fabrication equipment; and

  . increasing the wafer size.

   Reducing feature sizes. Smaller feature sizes allow more circuits to fit on
one wafer. Due to this reduction in feature size, the semiconductor industry
has historically been able to double the number of

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transistors on a given space of silicon every 18 to 24 months. These reductions
have contributed significantly to reducing the manufacturing cost per chip.
Continued innovation in equipment technology would be required, however, to
maintain this trend in device size reduction.

   Higher manufacturing yields. In the last fifteen years, manufacturing
yields, or the percentage of good integrated circuits per wafer, have increased
substantially, while the time to reach maximum yield levels during a production
lifecycle has decreased significantly. For example, the percentage of good
DRAMs per wafer during initial production has increased from 20% fifteen years
ago to over 80% at present. Given this high yield, the potential for further
yield improvement per wafer is limited.

   Improved equipment utilization. The utilization of semiconductor
manufacturing lines has improved in the last ten years. Manufacturing lines now
operate continuously. In addition, equipment is typically run at utilization
rates of greater than 90%, leaving limited room for further improvement in
equipment utilization.

   Larger wafer sizes. By increasing the wafer size, integrated circuit
manufacturers can produce more circuits per wafer, thus reducing the overall
manufacturing costs per chip. Leading edge wafer fabrication lines are
currently using 200 millimeter diameter wafers, up from the 100 millimeter
diameter wafers used ten to fifteen years ago. Currently, some integrated
circuit makers are commencing pilot production lines using 300 millimeter
diameter wafers. Mattson believe that many more manufacturers will add 300
millimeter production capabilities within the next two to five years.

 Equipment Productivity Has Declined

   While the semiconductor manufacturing industry has achieved significant
productivity gains through technological advances during the last ten to
fifteen years, equipment productivity has actually declined in favor of
improved process control. Demands from integrated circuit manufacturers for
better process quality control, reduced feature sizes and larger wafer sizes
have resulted in a shift from batch processing, where multiple wafers are
processed simultaneously, to single wafer processing, where one wafer is
processed at a time. Although this shift has enhanced semiconductor quality, it
has reduced total wafer throughput and increased overall equipment cost.

   Semiconductor equipment manufacturers initially responded to the problem of
declining equipment productivity by developing cluster tools, which attempt to
increase throughput by employing multiple single wafer processing chambers on a
common handling platform. This architecture provides customers the precision
and control of a single wafer system together with the benefits of increased
productivity. However, compared to batch processing, cluster tools are highly
complex systems, requiring redundant hardware systems that often result in
lower reliability. In addition, cluster tools have only modestly improved upon
the wafer throughput of single wafer processing and have not fully met the
productivity needs of semiconductor manufacturers.

   Faced with diminishing productivity gains and increasing equipment costs,
integrated circuit manufacturers have challenged equipment manufacturers to
provide more cost-effective, higher productivity fabrication equipment. This
challenge has led to the use of cost of ownership to measure productivity. Cost
of ownership measures the costs associated with the operation of equipment in a
fabrication line. Mattson calculates the cost of ownership by first estimating
the total costs to operate a system including depreciation, overhead, and labor
and materials, and then dividing those costs by the total wafer production by
the system.

   The focus by semiconductor manufacturers on cost of ownership and the high
cost of expanding integrated circuit manufacturing facilities has led many of
them to outsource their manufacturing to independent foundries. These foundries
have responded to rapidly growing demand by producing integrated circuits for
semiconductor companies that do not own fabrication lines or manufacturing
facilities or for semiconductor manufacturers which have decided to outsource
some of their manufacturing. Since foundries operate a volume business and
produce different integrated circuits for each manufacturer, they require
equipment that can be modified to suit multiple requirements and are even more
focused on productivity and low cost of ownership.

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<PAGE>

 The Mattson Solution

   Mattson provides its semiconductor manufacturing customers with equipment
that delivers higher productivity and advanced process capability, together
with world class support. The unique multi-station, multi-chamber architecture
of Mattson's Aspen systems integrates all of Mattson's common wafer handling
functions into two core platforms, which serve as the foundation for nearly all
of Mattson's products. These platforms are designed to deliver high throughput,
low cost of ownership, and savings of expensive cleanroom space, enhancing the
ability of manufacturers to achieve productivity gains.

   The key benefits of Mattson's solution are:

   High productivity. Mattson's systems offer semiconductor manufacturers
improvements in wafer manufacturing productivity and throughput over
conventional single wafer systems and cluster tools. Mattson's unique multi-
station, multi-chamber architecture improves process precision and control
while increasing throughput. In contrast to typical cluster tools, Mattson's
systems process multiple wafers in each process chamber, resulting in
correspondingly higher throughput. For example, Mattson's Aspen III platform
can have three process modules, each with two process stations, resulting in
six wafer processing stations on one system. In this way, Mattson's platform
allows multiple process chambers that support various applications or increased
capacity for any one application. By processing multiple wafers concurrently in
one process chamber and using multiple process chambers, Mattson is able to
significantly increase throughput without sacrificing process quality.

   Further productivity gains are achieved by reducing the time during which
the system is not actually processing wafers. For example, Mattson's Aspen
platform robotics handle multiple wafers simultaneously. In addition, by using
a vacuum loadlock and handling wafers under vacuum, Mattson's Aspen system
eliminates the overhead time required to pump down the process chambers to
vacuum and backfill the chambers to atmospheric pressure after processing. With
higher throughput, Mattson's customers require fewer systems, and, accordingly,
realize substantial savings in capital outlay and cleanroom space.

   Innovative technology. Mattson's systems provide innovative solutions that
address technical or manufacturing problems of the semiconductor equipment
industry, where traditional technologies have been unable to satisfy emerging
process requirements. For example, when using traditional stripping systems,
submicron etching results in residues that can require multiple acid processing
steps for removal. Using Mattson's proprietary inductively coupled plasma strip
source technology, Mattson's Aspen Strip's plasma processes are capable of
removing many of these residues without the need for the acid steps. Mattson's
Aspen III CVD system has one of the first process chambers that can process
either 200 or 300 millimeter wafers with only minor modifications. In addition,
Mattson's Aspen RTP system employs susceptor-based heating which provides the
uniformity and thermal budget control of a rapid thermal processing system with
the reliability and low cost of ownership of a batch furnace.

   World class customer support. Mattson delivers superior customer support and
service to enhance its long term customer relationships. Mattson offers an
extensive warranty, provides broad access to training, and maintains an
international customer support infrastructure with local support personnel to
install systems, perform warranty and out-of-warranty service, and sales
support. Mattson offers a comprehensive standard warranty of up to 36 months in
most geographic regions of the world.

The Mattson Strategy

   Mattson's objective is to enhance its market position as a leading supplier
of advanced, high productivity manufacturing equipment to the worldwide
semiconductor industry. The key elements of Mattson's strategy include:

   Deliver high productivity, cost-effective systems. Mattson intends to
continue to be a leading provider of high productivity, low cost of ownership
semiconductor manufacturing equipment. Leveraging the unique

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benefits of its Aspen platform and its multi-station process chamber, Mattson
intends to continue developing systems that enable high throughput while
maintaining high precision and control, at a manufacturing cost advantage.

   Leverage innovative technologies to provide product differentiation. Mattson
intends to apply its design expertise to provide new solutions that combine
advanced technology with higher productivity. Mattson will leverage its
innovative process chamber design to develop new products that address
specific, unmet needs in the semiconductor manufacturing industry. When Mattson
entered the rapid thermal processing (RTP), it developed a unique process
chamber design that utilized a susceptor-based heater to eliminate the problems
associated with traditional lamp-based rapid thermal processing heating.
Similarly, with Mattson's strip system it offers one of the only inductively
coupled plasma (ICP) sources.

   Increase global market penetration. Mattson plans to increase the
penetration of Mattson's products on a worldwide basis and to expand Mattson's
customer base by leveraging its position as a global supplier of
technologically advanced semiconductor manufacturing solutions. Mattson
believes the Asia-Pacific region, where it has had a long-standing presence and
commitment, offers one of the best growth opportunities due to the
proliferation of independent foundries located in this region. Mattson believes
its global commitment, its extensive customer support, and the high
productivity and low cost of ownership of Mattson's products, make its
solutions particularly well-suited to independent foundries seeking increased
efficiency and reliability.

   Capitalize on Mattson's diversified product line and rapid time to
market. Mattson intends to leverage its leadership position with the Aspen
Strip products to sell additional products that share Mattson's common
platform, including Mattson's CVD, RTP, and etch products. Mattson believes
that its success with its strip products has created an installed base of
existing customers and highlighted the productivity and cost of ownership
advantages of Mattson's products. In addition, the modular design of its Aspen
platform enables Mattson to develop new systems by adding different process
chambers to the same platform. By focusing its internal development efforts on
the process module rather than on an overall system, Mattson reduces
development time for new products, reduces time to market, and lowers
development costs. Mattson intends to develop new products to meet the evolving
requirements of existing customers and to penetrate into new customer markets.

   Pursue leadership in the emerging 300 millimeter market. Mattson seeks to
take a leading role in the emerging 300 millimeter market and have designed its
Aspen III CVD system to be compatible with both 200 millimeter and 300
millimeter wafers. Mattson has sold more than twenty 300 millimeter compatible
Aspen III Strip and CVD systems, with systems running at production volumes on
both 200 millimeter and 300 millimeter wafers. Mattson's 300 millimeter
compatible tools include the Aspen III Strip, Aspen III LiteEtch, and Aspen III
CVD systems.

   Provide world class customer support. Mattson believes that its
international customer support organization is an important element in
establishing and maintaining long term customer relationships that are often
the basis upon which a semiconductor manufacturer selects an equipment vendor.
Further, Mattson intends to enhance the benefits provided by its products by
continuing to build customer loyalty through the quality of Mattson's service
and support. Mattson intends to continue to offer leading all-inclusive
warranties, unlimited training, and regional field and process support.

Markets And Applications

 Photoresist Stripping Market

   A stripping system removes photoresist and post-etch film residues from a
wafer between every step before further film deposition or diffusion
processing. Methods for stripping photoresist include wet chemistries and dry,
or plasma, technologies. Wet chemical stripping removes photoresist by
immersing the wafer into acid or solvent baths. See description of products of
CFM under "Business of CFM" beginning on page 173 of this

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joint proxy statement-prospectus. Dry stripping systems, such as Mattson's
Aspen Strip, create gaseous atomic oxygen to which the wafer is exposed to
remove the photoresist and residue while maintaining device integrity.

   The demand for photoresist strip equipment has grown as the complexity and
number of strip steps required for each wafer have increased. Complex
integrated circuits require multiple additional photoresist stripping steps,
which increase cost and cycle time, create environmental concerns, increase
cleanroom space requirements, and reduce yield. The increase in strip steps in
the integrated circuit manufacturing process has led to a need for
semiconductor manufacturers to increase their photoresist strip capacity and to
place greater emphasis on low damage results and residue-free photoresist
stripping. The added complexity of the strip process has also contributed to
higher average selling prices of such equipment.

   Fabrication of advanced integrated circuits with feature sizes under 0.18
micron requires advanced dry strip technologies such as Mattson's Aspen Strip.
In addition, faster devices require new interconnect materials, such as low
capacitance, or low k dielectric films and copper for conducting materials. The
use of these new materials creates new challenges for photoresist stripping
equipment. The resist or residues must be removed from these materials without
degrading the low k materials and without oxidizing any exposed copper.

   According to Dataquest, the dry strip market was projected to grow from $163
million in 1999 to more than $300 million by the year 2002. Mattson entered
this market in 1991 with its Aspen Strip system.

 Chemical Vapor Deposition Market

   Chemical vapor deposition processes are used to deposit dielectric and
conducting films on wafers. These films are the basic material used to form the
resistors, capacitors, and transistors of an integrated circuit. These
materials are also used for the wiring and insulation between these electrical
components.

   Plasma enhanced chemical vapor deposition is a type of chemical vapor
deposition process used to deposit insulating films. Plasma enhanced chemical
vapor deposition allows the system to process wafers at a relatively low
temperature, reducing the risk of damage to aluminum metalization layers during
processing. Film stress and density can be controlled independently of process
chemistry.

   As feature sizes continue to decrease, chemical vapor deposition processing
equipment must meet increasingly stringent requirements. Particles or defect
densities must be minimized and controlled to achieve the desired yields. Film
properties such as stress must also be improved and more tightly controlled.
Compatibility with metallization steps, such as aluminum and copper deposition,
are critical. Finally, as process complexity increases with the use of low k
and dual damascene processing solutions, the number of plasma enhanced chemical
vapor deposition steps increases significantly and system productivity
increases in importance.

   Dataquest estimates that the segments of the CVD market for CVD dielectrics
in which Mattson competes was approximately $1.1 billion in 1999 and would grow
to more than $2.5 billion in the year 2002. Mattson entered this market in 1994
with the introduction of Mattson's second system, Aspen CVD.

 Rapid Thermal Processing Market

   Rapid thermal processing is the process by which annealing or heating of
semiconductor wafers is accomplished with minimum thermal exposure.
Historically, diffusion furnaces have been used to heat-treat large batches of
wafers. As device features have become smaller, the total temperature exposure
of the wafer, or the thermal budget, has decreased. Diffusion furnaces have
long processing times, which is unacceptable for many annealing processes.
Rapid thermal processing subjects the wafer to much shorter processing times,
thus reducing the thermal budget. Individual wafers are rapidly heated to
process temperature, held for a few seconds, and rapidly cooled. Traditional
rapid thermal processing systems use heat lamps, located outside the process
area, and heat the wafer by radiant energy that passes through transparent
windows.

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   As device geometries and thermal budgets shrink, rapid thermal processing is
emerging as a key semiconductor processing technology. As the number of layers
on semiconductor wafers has increased, the demand for rapid thermal processing
equipment specific to applications in the fabrication process has also
increased. As with chemical vapor deposition technology, rapid thermal
processing systems are continuing to be subject to increasingly stringent
processing demands and must maintain uniformity and repeatability to ensure the
integrity of the integrated circuit.

   Dataquest estimated that the combined rapid thermal processing and furnace
market was $553 million in 1999 and projected that the market would increase to
more than $1.2 billion in the year 2002.

 Isotropic Etch Market

   The etching process selectively removes patterned material from the surface
of a wafer to create the device structures. With the development of sub-micron
integrated circuit feature sizes, dry, or plasma etching, has become one of the
most frequently used processes in semiconductor manufacturing. Today, chemical
dry etch processes are applicable to a broad range of critical and non-critical
applications throughout the wafer manufacturing process.

   An isotropic, or multi-directional, etch system performs a variety of etch
processes on semiconductor wafers that can be used in several steps in a
typical 0.18 micron chip fabrication. As device feature sizes continue to
decrease, processes used to remove films from wafers must be ever more
selective to prevent damage to the films in the underlying layers. This process
capability and control is necessary to produce reliable and yielding devices.
As device geometries shrink below 0.18 micron, the ability to maintain process
control with wet chemicals will be limited.

 Epi Market

   Epitaxial, or Epi, deposition systems grow a layer of extremely pure silicon
on a wafer in a uniform crystalline structure to form a high quality base for
building certain types of chips. The silicon properties of the epitaxy produce
a more controlled silicon growth than do manufactured silicon wafers and offer
features that differentiate it from manufactured silicon wafers. The use of
epitaxy can result in significant increases in yield during the manufacturing
process and can enable the manufacture of novel structures. In addition, device
manufacturers are able to manipulate and tightly control the quality and
conductivity of the silicon.

   The market is broken into two segments: applications that require thin Epi,
which are typically less than five microns thick, and applications that require
thicker Epi film layers, including analog and power devices, sometimes as thick
as 100 microns. Mattson's EpiPro series uses a dual chamber batch system that
addresses the thick Epi market. Mattson's EpiPro series was introduced in 1998.

Products And Technology

   Nearly all of Mattson's tools are built on a common platform, known as the
Aspen System. The Aspen II platform was introduced in 1993 and is used for four
product lines, accounting for the majority of Mattson's historical revenue.
This platform processes wafers from 100 millimeter to 200 millimeter in
diameter. The Aspen Strip, Aspen CVD, Aspen RTP, and LiteEtch products are all
based on the Aspen II platform, which includes wafer handling robotics, dual
loadlocks, control electronics, and system software.

   Mattson's Aspen III platform was introduced in 1998 and is targeted for
advanced design features on 300 millimeter and some 200 millimeter wafers. This
next generation platform is designed to improve productivity and throughput.
All of Mattson's 300 millimeter systems are built using this platform. In 1998,
Mattson developed the Aspen III Strip and Aspen III CVD equipment for 300
millimeter strip and chemical vapor deposition processes based on the new Aspen
III platform.

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   The chart below summarizes Mattson's product offerings and applications and
the platforms used for each product line.

<TABLE>
<CAPTION>
Product Name             Applications                    System Platform
------------             ------------                    ---------------
<S>                      <C>                             <C>
ASPEN II STRIP           Using dry chemistry, this       Aspen II for 100-200mm
ASPEN III STRIP          inductively coupled plasma      Aspen III for 300mm
                         strip system removes
                         photoresist and post-etch
                         residues before further film
                         deposition or diffusion
                         processing while maintaining
                         device integrity.

ASPEN II CVD             Plasma enhanced chemical vapor  Aspen II for 100-200mm
ASPEN III CVD            deposition system deposits      Aspen III for 200-300mm
                         insulating dielectric films on
                         wafers.

ASPEN RTP(FR3)           Rapid thermal processing using  Aspen II for 100-200mm
                         a susceptor-based heater used   Aspen III for 300 mm under
                         for implant anneals, silicide   development
                         formations, high and low k
                         development dielectric anneals,
                         glass reflow, and copper
                         anneal.

ASPEN II LITEETCH        Isotropic etch system using a   Aspen II for 100-200mm
ASPEN III LITEETCH       proprietary inductively coupled Aspen III for 300mm
                         plasma source, designed for a
                         variety of etch processes used
                         in several steps in a typical
                         0.18 micron chip fabrication.

EPIPRO SERIES            Dual chamber, batch reactor     Non-Aspen platform for 75-200mm
                         deposits a wide range of
                         epitaxial silicon film
                         thickness with tight process
                         control.
</TABLE>

 The Aspen Strip

   The Aspen II Strip consists of the standard Aspen II platform together with
one or two processing chambers. Each chamber processes two wafers at a time.
System throughput varies with the photoresist thickness and is approximately 90
to 130 wafers per hour with one chamber and 110 to 160 wafers per hour with two
chambers for most applications. The residue removal capability of this system
reduces the need for wet chemical steps, which allows a greater reduction in
cost of ownership by decreasing the number of wet stations required.

   The Aspen III Strip consists of the standard Aspen III platform together
with one, two or three processing chambers. Each chamber processes two wafers
at a time. System throughput varies with the resist thickness and is
approximately 140 to 180 wafers per hour with one chamber, 160 to 200 wafers
per hour with two chambers, and greater than or equal to 200 wafers per hour
with three chambers for most applications. The innovative system design exceeds
the current throughput, cost of ownership, and footprint requirements set by
industry consortia for 300 millimeter strip equipment. Mattson believes the two
chamber Aspen III Strip offers a substantial reduction in cost of ownership
relative to conventional 300 millimeter single wafer systems.

   Each of Mattson's Aspen II and Aspen III Strip systems use one of Mattson's
two proprietary inductively coupled plasma, or ICP, source technologies to
remove photoresist and residue from the wafer. Mattson's ICP technology was
introduced in 1997 to further extend the capability for removal of the most
difficult residues

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formed during semiconductor processing. The ICP's thorough residue removal
capability reduces the need for wet chemical steps. This physically remote
plasma source generates a gentle, low energy plasma that achieves advanced
photoresist stripping and residue removal and low contamination while
maintaining device integrity and without additional chemical processing. The
ICP source was specifically designed for advanced semiconductor device
manufacturing processes of 0.18 micron and below. When combined with an Aspen
II or Aspen III platform, Mattson believes that the Aspen Strip system provides
significant cost of ownership advantages.

   Mattson's second source technology, Mattson's Aspen ICPSM, with selectable
mode, offers manufacturers advanced low temperature strip capabilities and
allows the user to select the plasma mode for each step in the process. The
Aspen ICPSM system is applicable to a variety of advanced applications,
including high dose implant strip, via residue removal, post metal etch residue
removal, and surface cleaning for advanced silicide applications, as well as
cleaning low k trenches or vias.

   Mattson has also developed a strip solution for low k cleaning that is
currently being used in production. Mattson's new strip capability provides
advanced processing recipes that enable interconnect technology for 0.18 micron
and smaller geometries using a wide range of hydrogen and fluorine chemistries.
This Aspen Strip feature enables manufacturers to clean vias or trenches with
exposed low k materials while maintaining low k film integrity. In addition, it
enables effective cleaning of copper films. The low k strip feature can be
ordered as an option with ICP and/or ICPSM chambers.

 The Aspen CVD

   The Aspen II CVD system is based on the Aspen II platform. The Aspen II CVD
system can be configured with one or two process chambers, and each chamber can
process four wafers at a time. The second chamber can be used to increase
throughput with a minimal increase in footprint.

   The Aspen III CVD system is based on the Aspen III platform and can be
configured with one, two, or three process chambers, where each chamber can
process two wafers at a time. The Aspen III CVD system deposits dielectric film
and silane-based films, and Mattson offers a number of plasma enhanced chemical
vapor deposition applications. Depending on the type of film deposited, the
Aspen III CVD has the capability to process up to 180 wafers per hour,
affording a cost of ownership advantage not found on competitive systems. The
Aspen III CVD features a small volume chamber design that allows shortened
automatic clean times for increased system availability and uptime. The smaller
chamber also permits higher deposition rates. The resulting higher throughput
permits the use of slower, more consistent and less damaging process
technologies than are economically feasible in conventional single wafer
systems.

   Mattson's plasma enhanced chemical vapor deposition technology allows the
system to process wafers at the relatively low temperature of 400 degrees
Celsius or less required for processing after aluminum metallization layers are
deposited on the wafer. Film stress and density can be controlled independently
of process chemistry by the use of a low frequency radio frequency bias.
Mattson's dual loadlocks isolate the process chamber from pressure and
temperature fluctuations. This isolation of the process chamber reduces
particulates and improves film quality and repeatability.

   The Aspen III CVD system is one of the first chemical vapor deposition
bridge systems in the industry that is capable of handling both 200 millimeter
and 300 millimeter wafer production with minor modifications to the platform.
Other 200 millimeter systems cannot convert to 300 millimeter production, or
may require completely new process chambers to convert to 300 millimeter
production. The flexible system design addresses the needs of large volume
manufacturing where cost is a major consideration. Aspen III CVD has one of the
smallest footprints available in 200 and 300 millimeter plasma enhanced
chemical vapor deposition tools and provides a throughput advantage for
selected thin film applications.

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   Mattson believes that the Aspen III CVD system is well positioned for dual
damascene processing applications, where more plasma enhanced chemical vapor
deposition layers are required. Dual damascene applications require two to
three thin dielectric layers.

 The Aspen RTP (FR3)

   Based on the Aspen II platform, the Aspen RTP(FR3) is designed to meet the
requirements for advanced sub 0.18 micron processing while satisfying the
demands of high volume manufacturing. It handles up to 110 wafers per hour for
selected processes. The simple design of the process chamber has no moving
parts and no consumables, which contributes to its low preventive maintenance
requirements. Because the system uses a susceptor instead of conventional lamp
rapid thermal processing technology, power consumption has been minimized,
further reducing maintenance requirements, consumables costs and cost of
ownership.

   Mattson's Aspen RTP(FR3) system employs susceptor-based heating technology
for temperature stability, uniformity and repeatability in a wide operating
range of 100 to 1200 degrees Celsius to handle both rapid thermal processing
and many furnace applications. The system provides a number of leading edge
applications. Mattson's Aspen RTP(FR3) system features thermal isolation to
keep the uniformity of the wafer temperature independent of the process
temperature. Uniformity can be achieved over a wide range of process
temperatures for both long and short process times. Proprietary wafer handling
techniques are used to remove wafers from the chamber at process temperature,
eliminating the cool-down time required by other systems. Mattson's wafer
handling also achieves high throughput that results in lower thermal budgets.
After processing, the system can also perform chamber cleaning without operator
intervention.

 The Aspen LiteEtch

   Mattson's isotropic etch products, the Aspen II LiteEtch and Aspen III
LiteEtch, use Mattson's proprietary ICP source, the same source used in
Mattson's Aspen Strip product. This physically remote ICP source uses a high
pressure plasma process to produce a low energy plasma that achieves high etch
rates with better etch rate uniformity, greater profile control and selectivity
and low wafer damage, while minimizing electrically charged particles that can
damage sensitive semiconductor devices. With the transition from wet to dry
processing for key application steps, Mattson believes that Aspen LiteEtch
offers enabling technological capabilities with the benefits of dry etch tools.
These benefits include lower cost of ownership than wet stations and lower
capital outlay than anisotropic etchers, savings in cleanroom floorspace and
greater process automation for ease of use, as well as reduced chemical waste.

   The Aspen LiteEtch system is available on Mattson's standard Aspen II
platform, together with one or two process chambers, or Mattson's Aspen III
platform, together with one, two or three process chambers. Each chamber
processes two wafers at a time, while retaining single wafer process control.
For most applications, system throughput typically varies with the process from
40 to 80 wafers per hour for a single chamber system and from 70 to 110 wafers
per hour for a dual chamber system.

 EpiPro Systems

   The EpiPro series is Mattson's next-generation, cost-effective Epi reactor
for epitaxial deposition. This high capacity system is capable of depositing a
wide range of film thicknesses on 75 millimeter to 200 millimeter silicon
wafers, while simultaneously reducing the cost of Epi processing. By improving
throughput, the customer is able to reduce the cost of depositing Epi layers.
This is a primary purchasing consideration of Mattson's targeted market
segment, manufacturers of semiconductors with thick Epi layers.

   The EpiPro epitaxy reactor is specifically designed for growing Epi layers
on silicon wafers. The system supports long processing times at high
temperatures with a high degree of thickness and resistivity uniformity across
the wafer and achieves customer specifications for silicon lattice defects.

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Customer Support

   Mattson believes that its customer support organization is critical to
establishing and maintaining the long term customer relationships that often
are the basis upon which semiconductor manufacturers select their equipment
vendor. Mattson's customer support organization is headquartered in Fremont,
California, with additional employees located domestically in Arizona, Idaho,
Maryland, Massachusetts, New Jersey, Oregon, Texas, and Virginia and
internationally in Germany, Italy, France, Japan, Korea, Singapore, Taiwan and
the United Kingdom. Mattson's support personnel have technical backgrounds,
with process, mechanical, and electronics training, and are supported by
Mattson's engineering and applications personnel. Support personnel install
systems, perform warranty and out-of-warranty service, and provide sales
support.

   Mattson was the first in the industry to offer a standard 24 month warranty,
and in 1996, the first to offer a standard 36 month warranty. Mattson offers a
36 month warranty on all of its systems sold after January 1996, other than
Mattson's EpiPro 5000 system and other than systems sold in Japan. Mattson's 36
month warranty, designed to differentiate its service from other semiconductor
equipment suppliers, includes preventive maintenance during warranty as well as
installation support. Mattson's 36 month warranty also specifies no consumables
costs, which can be a significant factor in cost of ownership calculations.
Mattson offers a 12 month warranty in Japan and on its EpiPro 5000 system.
Mattson also offers unlimited access to no-cost training at Mattson's
headquarters, maintains spare parts depots in every region for four hour parts
turnaround, and provides regional field and process support.

Sales And Marketing

   Mattson sells its systems primarily through its direct sales force. In
addition to the direct sales force at its headquarters in Fremont, California,
Mattson has domestic regional sales offices located in Arizona, Maryland, New
Jersey, Oregon, and Texas. Mattson also maintains sales support offices in
Germany, Italy, Japan, Korea, Singapore, Taiwan, and the United Kingdom.
Mattson is continuing to increase the size of its sales force both domestically
and internationally.

   Mattson has completed its establishment of a direct sales force in Japan and
terminated its distribution relationship with its distributor, Marubeni. By
establishing its own direct sales force, Mattson believes it can continue to
increase its sales in Japan and provide its customers with improved customer
service. Although Mattson intends to invest significant resources in Mattson's
sales efforts in Japan, including hiring additional personnel to support its
direct sales effort, Mattson may not be able to maintain or increase its sales
to the Japanese semiconductor industry. Mattson may miss sales opportunities or
lose competitive sales as a result of this transition in its sales
organization. When it makes sales directly to customers in Japan, Mattson
expects payment terms to be as long as 180 days from shipment, and Mattson may
incur currency risk if sales are denominated in Japanese Yen.

   International sales accounted for 71% of total net sales in 1999, 67% in
1998, and 65% in 1997. Mattson anticipates that international sales will
continue to account for a significant portion of net sales. International sales
are subject to certain risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and other barriers, political and
economic instability, difficulties in accounts receivable collections, extended
payment terms, difficulties in managing distributors or representatives,
difficulties in staffing and managing foreign subsidiary operations, and
potentially adverse tax consequences. Because of its dependence upon
international sales in general, and on sales to Japan and Pacific Rim countries
in particular, Mattson is particularly at risk to effects from developments
such as the recent Asian economic problems. Mattson's foreign sales are also
subject to certain governmental restrictions, including the Export
Administration Act and the regulations promulgated under this Act. For a
discussion of the risks associated with Mattson's international sales, see
"Risk Factors," beginning on page 13 of this joint proxy statement-prospectus.

                                      141
<PAGE>

Customers

   The following is a representative list of Mattson's major semiconductor
manufacturing customers:

<TABLE>
   <S>                           <C>                           <C>
   Advanced Micro Devices        Microchip Technology          Sony
   Hitachi                       NEC Corporation               STMicroelectronics
   IBM Microelectronics          Samsung                       Texas Instruments
</TABLE>

   The following is a representative list of Mattson's major foundry customers:

   Chartered Semiconductor Manufacturing/Silicon Manufacturing Partners Pte.
Ltd.
   Taiwan Semiconductor Manufacturing Company
   Silicon Integrated Systems
   UMC Group
   WaferTech

   In 1999, one customer, Samsung, accounted for approximately 20% of Mattson's
net sales, and in 1997, one customer, Taiwan Semiconductor Manufacturing
Company, accounted for approximately 11% of Mattson's net sales. Although the
composition of the group comprising its largest customers has varied from year
to year, Mattson's top ten customers accounted for 63% of its net sales in
1999, 56% in 1998, and 60% in 1997. For a discussion of risks associated with
changes in Mattson's customer base, see "Risk Factors" beginning on page 13 of
this joint proxy statement-prospectus.


Backlog

   Mattson schedules production of its systems based on both backlog and
regular sales forecasts. Mattson includes in backlog only those systems for
which it has accepted purchase orders and assigned shipment dates within the
next 12 months. All orders are subject to cancellation or delay by the customer
with limited or no penalty. Mattson's backlog was approximately $56.1 million
as of December 31, 1999, $22.7 million as of December 31, 1998, and $41.5
million as of December 31, 1997. The year-to-year fluctuation is due primarily
to the cyclical nature of the semiconductor industry. Because of possible
changes in delivery schedules and cancellations of orders, Mattson's backlog at
any particular date is not necessarily representative of actual sales for any
succeeding period and Mattson's actual sales for the year may not meet or
exceed the backlog represented. In particular, during periods of industry
downturns, Mattson has experienced significant delays relating to orders that
were previously booked and included in backlog.

Research, Development, and Engineering

   Mattson's research, development, and engineering efforts are focused upon
Mattson's multi-product strategy. During recent periods, Mattson has devoted a
significant amount of resources to Mattson's Aspen III platform, the Aspen III
CVD system, improvements to Mattson's Aspen RTP(FR3) system, and the EpiPro
5000 system. Mattson expects to focus its future efforts on Mattson's Aspen III
RTP system for 300 millimeter applications, development of a low k chemical
vapor deposition film using Mattson's Aspen CVD system, development of advanced
resist and residue cleaning capabilities, and additional features on Mattson's
Aspen III platform.

   Mattson has been actively involved in the development of advanced low k
plasma enhanced chemical vapor deposition processing with various customers
around the world. By using standard hardware with gas changes, Mattson has been
able to deposit stable films with k values as low as 2.6. These low k values
will become increasingly important as device feature sizes continue to be
reduced and line-to-line capacitance becomes a limiter to the speed of
integrated circuit devices.

   Mattson maintains an applications laboratory in Fremont to test new systems
and customer-specific equipment designs. By basing products on the Aspen
platform, Mattson believes that it can focus its development activities on the
process chamber and develop new products quickly and at relatively low cost.
For example, Mattson believes it was able to reduce new product development
time on Mattson's CVD, RTP, and LiteEtch products.

                                      142
<PAGE>

   The markets in which Mattson and its customers compete are characterized by
rapidly changing technology, evolving industry standards, and continuous
improvements in products and services. Because of continual changes in these
markets, Mattson believes that its future success will depend upon its ability
to continue to improve its existing systems and process technologies, and to
develop systems and new technologies that compete effectively. In addition,
Mattson must adapt its systems and processes to technological changes and to
support emerging industry standards for target markets. Mattson cannot be sure
that it will complete its existing and future development efforts within its
anticipated schedule or that its new or enhanced products will have the
features to make them successful. Mattson may experience difficulties that
could delay or prevent the successful development, introduction, or marketing
of new or improved systems or process technologies. In addition, these new and
improved systems and process technologies may not meet the requirements of the
marketplace and achieve market acceptance. Furthermore, despite testing by
Mattson, difficulties could be encountered with its products after shipment,
resulting in loss of revenue or delay in market acceptance and sales, diversion
of development resources, injury to Mattson's reputation, or increased service
and warranty costs. The success of new system introductions is dependent on a
number of factors, including timely completion of new system designs and market
acceptance. If Mattson is unable to improve its existing systems and process
technologies or to develop new technologies or systems, it may lose sales and
customers.

   Mattson's research, development, and engineering expenses were $19.5 million
for the year ended December 31, 1999, $16.7 million for the year ended December
31, 1998, and $14.7 million for the year ended December 31, 1997, representing
18.9% of net sales in 1999, 28.2% in 1998, and 19.2% in 1997.

Competition

   The global semiconductor fabrication equipment industry is intensely
competitive and is characterized by rapid technological change and demanding
customer service requirements. Mattson's ability to compete depends upon its
ability to continually improve its products, processes, and services and its
ability to develop new products that meet constantly evolving customer
requirements.

   A substantial capital investment is required by semiconductor manufacturers
to install and integrate new fabrication equipment into a semiconductor
production line. As a result, once a semiconductor manufacturer has selected a
particular supplier's products, the manufacturer often relies for a significant
period of time upon that equipment for the specific production line application
and frequently will attempt to consolidate its other capital equipment
requirements with the same supplier. Accordingly, it is difficult for Mattson
to sell to a particular customer for a significant period of time after that
customer has selected a competitor's product, and it may be difficult for
Mattson to unseat an existing relationship that a potential customer has with
one of Mattson's competitors in order to increase sales of Mattson's products
to that customer.

   Each of Mattson's product lines competes in markets defined by the
particular wafer fabrication process it performs. In each of these markets
Mattson has multiple competitors. At present, however, no single competitor
competes with Mattson in all of the same market segments in which Mattson
competes. Competitors in a given technology tend to have different degrees of
market presence in the various regional geographic markets. Competition is
based on many factors, primarily technological innovation, productivity, total
cost of ownership of the systems, including yield, price, product performance,
and throughput capability, quality, contamination control, reliability, and
customer support. Mattson believe that its competitive position in each of its
markets is based on the ability of Mattson's products and services to address
customer requirements related to these competitive factors.

   Mattson's principal competitors in the dry strip market include Alcan
Technology, Axcelis Corporation, GaSonics International, Hitachi, KEM, Matrix
Integrated Systems, and Plasma Systems. Mattson believes that it competes
favorably on each of the competitive elements in this market and estimate that
it is the leading provider of dry strip products. The market in which Mattson's
Aspen LiteEtch products compete is a relatively small niche market with no
dominant competitors. Principal competitors for Mattson's Aspen LiteEtch
systems

                                      143
<PAGE>

include GaSonics, Lam Research, Shibaura Mechatronics, and Tegal. Principal
competitors for Mattson's Aspen CVD systems include Applied Materials, ASM
International, and Novellus Systems, with Applied Materials and Novellus
representing a major share of the market. Principal competitors for Mattson's
Aspen RTP systems include Applied Materials. Principal competitors for
Mattson's EpiPro systems include Advanced Semiconductor Manufacturing, LPE
Products, Moore Technology, and Toshiba.

   Mattson may not be able to maintain its competitive position against current
and potential competition. New products, pricing pressures, rapid changes in
technology, and other competitive actions from both new and existing
competitors could materially affect Mattson's market position. Some of
Mattson's competitors have substantially greater installed customer bases and
greater financial, marketing, technical, and other resources than Mattson does
and may be able to respond more quickly to new or changing opportunities,
technologies, and customer requirements. Mattson's competitors may introduce or
acquire competitive products that offer enhanced technologies and improvements.
In addition, some of Mattson's competitors or potential competitors have
greater name recognition and more extensive customer bases that could be
leveraged to gain market share to Mattson's detriment. Mattson believe that the
semiconductor equipment industry will continue to be subject to increased
consolidation, which will increase the number of larger, more powerful
companies and increase competition.

Manufacturing

   Mattson's manufacturing operations are based in Mattson's Fremont facility
and consist of procurement, subassembly, final assembly, test, and reliability
engineering. Mattson's current Strip, CVD, RTP, and LiteEtch systems are based
on the Aspen platform, enabling Mattson to use a large number of common
subassemblies and components. Many of the major assemblies are procured
complete from outside sources. Mattson focuses its internal manufacturing
efforts on those precision mechanical and electro-mechanical assemblies that
differentiate Mattson's systems from those of its competitors.

   Some of Mattson's components are obtained from a sole supplier or a limited
group of suppliers. Mattson generally acquires these components on a purchase
order basis and not under long term supply contracts. Mattson's reliance on
outside vendors generally, and a limited group of suppliers in particular,
involves several risks, including a potential inability to obtain an adequate
supply of required components and reduced control over pricing and timely
delivery of components. Because the manufacture of certain of these components
and subassemblies is an extremely complex process and can require long lead
times, Mattson could experience delays or shortages caused by suppliers.
Historically, Mattson has not experienced any significant delays in
manufacturing due to an inability to obtain components, and Mattson is not
currently aware of any specific problems regarding the availability of
components that might significantly delay the manufacturing of Mattson's
systems in the future. However, any inability to obtain adequate deliveries or
any other circumstance that would require Mattson to seek alternative sources
of supply or to manufacture such components internally could delay its ability
to ship its systems and could have a material adverse effect on Mattson.

   Mattson is subject to a variety of federal, state, and local laws, rules and
regulations relating to the use, storage, discharge, and disposal of hazardous
chemicals used during its sales demonstrations and research and development.
Public attention has increasingly been focused on the environmental impact of
operations which use hazardous materials. Failure to comply with present or
future regulations could result in substantial liability to Mattson, suspension
or cessation of its operations, restrictions on its ability to expand at its
present locations, or requirements for the acquisition of significant equipment
or other significant expense. To date, compliance with environmental rules and
regulations has not had a material effect on Mattson's operations.

Intellectual Property

   Mattson relies on a combination of patent, copyright, trademark, and trade
secret laws, non-disclosure agreements, and other intellectual property
protection methods to protect its proprietary technology. Mattson

                                      144
<PAGE>

holds eight United States patents and more than 20 patent applications pending
in the United States as well as several foreign patents and patent applications
covering various aspects of its products and processes. Where appropriate,
Mattson intends to file additional patent applications on inventions resulting
from its ongoing research, development, and manufacturing activities to
strengthen its intellectual property rights.

   Although Mattson attempts to protect its intellectual property rights
through patents, copyrights, trade secrets, and other measures, it cannot be
sure that it will be able to protect its technology adequately, and Mattson's
competitors could independently develop similar technology, duplicate Mattson's
products, or design around Mattson's patents. To the extent Mattson wishes to
assert its patent rights, Mattson cannot be sure that any claims of its patents
will be sufficiently broad to protect its technology or that its pending patent
applications will be approved. In addition, there can be no assurance that any
patents issued to Mattson will not be challenged, invalidated, or circumvented,
that any rights granted under these patents will provide adequate protection to
Mattson, or that Mattson will have sufficient resources to protect and enforce
its rights. In addition, the laws of some foreign countries may not protect
Mattson's proprietary rights to as great an extent as do the laws of the United
States.

   As is customary in Mattson's industry, from time to time it receives or
makes inquiries regarding possible infringement of patents or other
intellectual property rights. Although there are no pending claims against
Mattson regarding infringement of any existing patents or other intellectual
property rights or any unresolved notices that Mattson is infringing
intellectual property rights of others, such infringement claims could be
asserted against Mattson or its suppliers by third parties in the future. Any
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays, subject Mattson to significant
liabilities to third parties, require Mattson to enter into royalty or
licensing agreements, or prevent Mattson from manufacturing and selling its
products. If Mattson's products were found to infringe a third party's
proprietary rights, Mattson could be required to enter into royalty or
licensing agreements in order to continue to be able to sell its products.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to Mattson or at all, which could seriously harm Mattson's business.
Mattson's involvement in any patent dispute or other intellectual property
dispute or action to protect trade secrets and know-how could have a material
adverse effect on its business.

Employees

   As of December 31, 1999, Mattson had 443 employees. There were 104 employees
in manufacturing operations, 96 in research, development and engineering, 200
in sales, marketing, field service, and customer support, and 43 in general,
administrative, and finance.

   The success of Mattson's future operations depends in large part on
Mattson's ability to recruit and retain qualified employees, particularly those
highly skilled design, process, and test engineers involved in the manufacture
of existing systems and the development of new systems and processes. The
competition for such personnel is intense, particularly in the San Francisco
Bay Area, where Mattson's headquarters are located. At times, Mattson has
experienced difficulty in attracting new personnel and Mattson may not be
successful in retaining or recruiting sufficient key personnel in the future.
None of Mattson's employees is represented by a labor union and Mattson has
never experienced a work stoppage, slowdown, or strike. Mattson considers its
relationships with its employees to be good.

Properties

   Mattson maintains its headquarters in Fremont, California. Mattson has
leases for two facilities of 61,000 and 60,000 square feet which expire in
February 2001 and April 2003, respectively. Mattson's future growth may require
that it secure additional facilities or expand its current facilities further
before the term of its headquarters lease expires. Any move to new facilities
or expansion could be disruptive and cause Mattson to incur significant
unexpected expense. Mattson also leases sales support offices in Japan,
Singapore, Korea, Taiwan, and Germany with expiration dates from August 2000
through January 2001.

                                      145
<PAGE>

Legal Proceedings

   Mattson is not aware of any pending legal proceedings against Mattson that,
individually or in the aggregate, would have a material adverse effect on
Mattson's business, operating results, or financial condition. Mattson may in
the future be party to litigation arising in the course of Mattson's business,
including claims that it allegedly infringed third party trademarks and other
intellectual property rights. Such claims, even if not meritorious, could
result in the expenditure of significant financial and managerial resources.


                                      146
<PAGE>

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

   The following discussion and analysis of Mattson's financial condition and
results of operations should be read in conjunction with its consolidated
financial statements and related notes included elsewhere in this joint proxy
statement-prospectus. In addition to historical information, this discussion
contains certain forward-looking statements that involve risks and
uncertainties. Mattson's actual results could differ materially from those
anticipated by these forward-looking statements due to factors, including but
not limited to, those set forth under "Risk Factors" and elsewhere in this
joint proxy statement-prospectus.

Overview

   Mattson is a leading supplier of advanced, high-productivity semiconductor
processing equipment used in the fabrication of integrated circuits. Mattson
currently offers Aspen Strip, CVD, RTP, LiteEtch and EpiPro products. Mattson
began operations in 1989 and in 1991 shipped its first product, the Aspen
Strip, a photoresist removal system. Mattson's current Aspen Strip, CVD, RTP
and LiteEtch product lines are based on a common Aspen platform with a modular,
multi-station, multi-chamber architecture, designed to deliver high
productivity, low cost of ownership and savings of cleanroom space.

   Until 1999, Mattson derived a substantial majority of its sales from its
Aspen Strip systems, with its remaining sales derived from its CVD, RTP,
LiteEtch and Epi systems, as well as spare parts and maintenance services.
During 1999, Mattson's sales of CVD systems increased significantly, comprising
27% of its net sales, while its Aspen Strip sales accounted for 60% of its net
sales. In July 1999, Mattson introduced its next generation rapid thermal
processing system, RTPFR3, and the EpiPro 5000 epitaxial silicon deposition
system.

   Mattson generally recognizes sales upon shipment of a system. From time to
time, however, Mattson allows customers to evaluate systems, and since
customers can return such systems any time with limited or no penalty, Mattson
does not recognize the associated revenue until the evaluation system is
accepted by the customer. Service and maintenance contract revenue, which to
date has been insignificant, is recognized on a straight-line basis over the
service period of the related contract. A provision for the estimated future
cost of system installation and warranty is recorded at the time revenue is
recognized.

   International sales, predominantly to customers based in Europe, Japan and
the Pacific Rim, including Taiwan, Singapore and Korea, accounted for 71% of
total net sales for 1999, 67% of total net sales for 1998 and 65% of total net
sales for 1997. To date, all sales have been denominated in U.S. dollars.
Mattson anticipates that international sales will continue to account for a
significant portion of sales, primarily due to orders from customers in Japan
and the Pacific Rim.

   The local currency is the functional currency for all foreign operations
except those in Japan, where the U.S. dollar is the functional currency. Gains
or losses from translation of foreign operations where the local currencies are
the functional currency are included as a component of stockholders' equity.
Foreign currency transaction gains and losses are recognized in the statement
of operations and have not been material.

   Mattson's business depends upon capital expenditures by manufacturers of
semiconductor devices. The level of capital expenditures by these manufacturers
depends upon the current and anticipated market demand for such devices. The
semiconductor industry suffered a significant downturn beginning in 1998, as a
result of several factors including the economic crisis in Asia, semiconductor
industry over-capacity and reduced profitability for semiconductor
manufacturers resulting from the decreasing prices of personal computers.
Accordingly, many semiconductor manufacturers delayed planned new equipment
purchases until 1999, which significantly impacted Mattson's 1998 sales. From
the fourth quarter of 1998 through 1999, the industry began to improve, and
during that time Mattson's sales increased sequentially from quarter to
quarter. The cyclicality and uncertainties regarding overall market conditions
continue to present significant challenges to Mattson and impair Mattson's
ability to forecast near term revenue. Mattson's ability to quickly modify its
operations in response to changes in market conditions is limited.

                                      147
<PAGE>

   In order to support long term growth in its business, Mattson has continued
to increase research and development expenses from previous years. In addition,
selling, general and administrative costs in 1999 increased from 1998 as sales
continued to increase. Mattson is still dependent upon increases in sales in
order to achieve profitability. If Mattson's sales do not increase, its current
operating expenses could both prevent it from increasing profitability and
adversely affect its financial results.

   On July 24, 1998, Mattson completed its acquisition of Concept Systems
Design, Inc., a supplier of epitaxial systems. The merger was accounted for as
a purchase at a price of $4,689,000, which included $650,000 of estimated
acquisition-related costs. In connection with the merger, Mattson issued
795,138 shares of its common stock to the former stockholders of Concept. The
purchase price was allocated to assets acquired and liabilities assumed based
on the fair value of Concept's current assets and liabilities, which Mattson
believes approximated their book value, the estimated fair value of property
and equipment and an independent appraisal for all other identifiable assets.
The excess of the purchase price over the net tangible and intangible assets
acquired and liabilities assumed was allocated to goodwill.

   In the first quarter of 1999, a preacquisition contingency was resolved
which reduced the liabilities assumed from Concept by approximately $2.2
million. Under the provisions of Statement of Financial Accounting Standards
No. 38, this has been recorded by Mattson in the first quarter of 1999 on a
prospective basis as an elimination of previously recorded goodwill and a pro-
rata reduction of the balance to the acquired developed technology, workforce
and property and equipment. The acquired developed technology and workforce are
recorded on the balance sheet as other assets and will be amortized on a
straight-line basis over periods ranging from three to seven years. The
acquired in-process research and development was expensed at the time of
acquisition as a one-time charge.

Results of Operations

   The following table sets forth selected consolidated financial data for the
periods indicated, expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                            Year Ended            Three Months        Six Months
                           December 31,               Ended              Ended
                         --------------------   -----------------  -----------------
                                                June 25, June 27,  June 25, June 27,
                         1997   1998    1999      2000     1999      2000     1999
                         -----  -----   -----   -------- --------  -------- --------
<S>                      <C>    <C>     <C>     <C>      <C>       <C>      <C>
Net sales............... 100.0% 100.0 % 100.0 %  100.0%   100.0 %   100.0%   100.0 %
Cost of sales...........  48.4%  63.5 %  51.7 %   49.0%    52.8 %    49.8%    51.6 %
                         -----  -----   -----    -----    -----     -----    -----
Gross margin............  51.6%  36.5 %  48.3 %   51.0%    47.2 %    50.2%    48.4 %
                         =====  =====   =====    =====    =====     =====    =====
Operating expenses:
  Research, development
   and engineering......  19.2%  28.2 %  18.9 %   13.7%    18.8 %    14.2%    21.9 %
  Selling, general and
   administrative.......  31.9%  41.5 %  30.7 %   26.0%    29.5 %    25.5%    34.2 %
  Acquired in-process
   research and
   development..........    --    7.1 %    --
    Total operating
     expenses...........                          39.7%    48.2 %    39.7%    56.1 %
Income (loss) from
 operations.............    .5% (40.3)%  (1.3)%   11.3%    (1.0)%    10.5%    (7.6)%
Interest and other
 income, net............   2.0%   3.1 %   0.7 %    3.0%     0.6 %     2.1%     1.1 %
Income (loss) before
 provision for income
 taxes..................   2.5% (37.2)%   (.6)%   14.3%    (0.5)%    12.6%    (6.5)%
Net income (loss).......   1.9% (37.8)%   (.8)%   12.9%    (0.8)%    11.3%    (6.8)%
</TABLE>

Years Ended December 31, 1999 And 1998

   Net Sales. Mattson's net sales for the year ended December 31, 1999 were
$103.5 million, representing an increase of $44.3 million, or 74.8%, over net
sales of $59.2 million for the year ended December 31, 1998. Net sales
increased in 1999 primarily as a result of a 53.1% increase in unit shipments
and a 16.2% increase in average selling prices.

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<PAGE>

   Until 1999, Mattson's sales consisted principally of single and dual chamber
Aspen Strip products and to a lesser extent, CVD, RTP and LiteEtch systems,
spare parts and service revenue. During 1999, sales of Mattson's Aspen CVD
accounted for 26.6% of net sales. The increase in average selling prices has
resulted primarily from a change in sales mix to CVD, RTP and LiteEtch systems,
which generally carry higher selling prices than the Aspen Strip systems.

   Gross Margin. Gross profit was $50.0 million for the year ended December 31,
1999, representing 48.3% of net sales, up from $21.6 million, or 36.5% of net
sales, for the year ended December 31, 1998. Mattson's cost of sales includes
labor, materials and overhead. Gross margin increased in 1999 primarily due to
favorable manufacturing overhead efficiencies, as the number of systems shipped
increased 53.1% in 1999 compared to 1998.

   Mattson's gross margin has varied over the years and will continue to vary
based on multiple factors including its product mix, economies of scale,
overhead absorption levels, and costs associated with the introduction of new
products. Mattson's gross margin on international sales, other than sales to
Marubeni, have been substantially the same as domestic sales. Sales to Marubeni
typically carry a lower gross margin, as Marubeni has been primarily
responsible for sales and support costs in Japan. Mattson has recently
terminated its distribution agreement with Marubeni and has shifted to a direct
sales model in Japan.

   Research, Development and Engineering. Research, development and engineering
expenses were $19.5 million, or 18.9% of net sales, for the year ended December
31, 1999, compared to $16.7 million, or 28.2% of net sales, for the year ended
December 31, 1998. The increase was primarily due to compensation and related
benefits, which increased to $9.8 million in 1999 from $8.6 million in 1998,
and depreciation expense, which increased to $2.3 million in 1999 from $1.9
million in 1998. The increase in compensation and related benefits expense was
due to increased personnel required to support Mattson's anticipated long term
future growth. The increase in depreciation expense was due to additional fixed
assets as a result of Mattson's acquisition of Concept in July 1998. The
decrease in research, development and engineering expense as a percentage of
net sales in 1999 compared to 1998 was primarily attributable to increased
sales in 1999.

   Selling, General and Administrative. Selling, general and administrative
expenses were $31.8 million, or 30.7% of net sales, for the year ended December
31, 1999, compared with $24.5 million, or 41.5% of net sales, for the year
ended December 31, 1998. The increase was primarily due to compensation and
related benefits, which increased to $22.4 million in 1999 from $15.2 million
in 1998 due to increased personnel during 1999 and the reimplementation during
the first quarter of 1999 of compensation programs that had been reduced or
eliminated as part of the overall cost cutting measures implemented by
management in the second quarter of 1998. The decrease in selling, general and
administrative expenses as a percentage of net sales in 1999 compared to 1998
was primarily attributable to increased net sales in 1999.

   Acquired In-Process Research and Development. In 1998, in connection with
Mattson's acquisition of Concept, it allocated $4.2 million to in-process
research and development, which Mattson expensed as a one-time charge, and $6.9
million to other intangible assets.

   The value assigned to in-process research and development was determined by
identifying research projects in areas for which technological feasibility had
not been established. These included the Concept EpiPro 5000 system and a
single wafer Epi system. The value was determined by estimating the expected
cash flows from the projects, taking into consideration an estimate of future
obsolescence of the technology once commercially viable, applying a percentage
of completion and then discounting the net cash flows to their present value.
Mattson believes that its efforts to complete its in-process research and
development projects will consist of internally staffed engineers and will be
completed in 2001. The estimated costs to complete the research and development
is approximately $1.7 million. There is substantial risk associated with the
completion of each project and Mattson cannot be certain that any of the
projects will meet with technological or commercial success.

                                      149
<PAGE>

   The percentage of completion for each project was determined using
management estimates of time and dollars spent as compared to time and dollars
that were expected to be required to complete the project. The degree of
difficulty of the portion of each project completed as of July 24, 1998 was
also compared to the estimated remaining research and development to be
completed to bring each project to technical feasibility. At July 24, 1998, the
percentage of completion for the Concept EpiPro 5000 was estimated at 80% and
the percentage of completion for the single wafer Epi system was estimated at
50%.

   Tax Provision. Mattson recorded a tax provision of $247,000 for the year
ended December 31, 1999 compared to $337,000 for the year ended December 31,
1998. Mattson recognized provision for income taxes at an effective tax rate of
(41.0)% during 1999 and (1.5)% during 1998. In 1999 and 1998 Mattson did not
recognize any tax benefits from its operating losses. The 1999 and 1998 income
tax provision primarily relates to foreign income tax. FASB Statement No. 109
provides for the recognition of deferred tax assets if realization of such
assets is more likely than not. Based upon available data, which includes
Mattson's historical operating performance and the reported cumulative net
losses in prior years, Mattson has provided a full valuation allowance against
its net deferred tax assets as the future realization of the tax benefit is not
sufficiently assured. Mattson intends to evaluate the realization of the
deferred tax assets on a quarterly basis.

Years Ended December 31, 1998 And 1997

   Net Sales. Mattson's net sales of $59.2 million for the year ended December
31, 1998 represented a decrease of $17.5 million, or 22.8%, from net sales of
$76.7 million for the year ended December 31, 1997. The decrease was primarily
the result of a 32.7% decrease in unit shipments, partially offset by a 6.6%
increase in average selling prices.

   Gross Margin. Gross profit was $21.6 million for the year ended December 31,
1998, representing 36.5% of net sales, compared to gross profit of $39.6
million, representing 51.6% of net sales, for the year ended December 31, 1997.
The lower gross margin in 1998 compared to 1997 was primarily attributable to
overhead inefficiencies caused by lower production volumes, as well as a one-
time inventory write-down.

   Research, Development and Engineering. Research, development and engineering
expenses for the year ended December 31, 1998 were $16.7 million, or 28.2% of
net sales, and increased from $14.7 million, or 19.2% of net sales, for the
year ended December 31, 1997. The increase was primarily due to compensation
and benefits, which increased to $8.6 million in 1998 from $7.9 million in
1997, engineering project materials, which increased to $3.3 million in 1998
from $3.1 million in 1997, and depreciation, which increased to $1.9 million in
1998 from $1.4 million in 1997. The increase in compensation expense was
primarily due to increased personnel required to support Mattson's anticipated
long term future growth, including the support of its multi-product strategy.
The increase in engineering project materials was due to ongoing and new
product development. The increase in depreciation expense was due to the
additional fixed assets acquired from the Concept acquisition. The increase in
research, development and engineering expense as a percentage of net sales in
1998 compared to 1997 was primarily attributable to lower sales in 1998.

   Selling, General and Administrative. Selling, general and administrative
expenses for the year ended December 31, 1998 were $24.5 million, or 41.5% of
net sales, compared to expenses of $24.5 million, or 31.9% of net sales, for
the year ended December 31, 1997. Cost cutting measures implemented in the
second quarter of 1998 were offset by increased expenditures relating to the
acquired Concept workforce and related overhead. Salaries, commissions and
related expenses remained constant at $15.2 million in 1997 and 1998. Building
and utilities expenses increased to $3.1 million in 1998 from $2.0 million in
1997. The increase in building and utilities expenses was due to an additional
31,000 square foot facility leased at the end of 1997, which was vacated in the
third quarter of 1998. The increase in building and utilities charges was
offset by nominal decreases in advertisement and promotion and travel and
entertainment expenses in 1998.

   Tax provision. Mattson recorded a tax provision of $337,000 for the year
ended December 31, 1998 compared to $451,000 for the year ended December 31,
1997. Mattson recognized provision for income taxes at an effective rate of
(1.5)% during 1998 and 24.0% during 1997. The provision for income taxes in
1998

                                      150
<PAGE>

consists primarily of foreign taxes. FASB Statement No. 109 provides for the
recognition of deferred tax assets if realization of such assets is more likely
than not. Based upon available data, Mattson has provided a full valuation
allowance against its December 31, 1998 net deferred tax assets as the future
realization of the tax benefit is not sufficiently assured. Mattson intends to
evaluate the realization of the deferred tax assets on a quarterly basis. The
1997 tax rate is less than the federal statutory rate as a result of benefits
from Mattson's foreign sales corporation and the research and development tax
credit.

Quarterly Results Of Operations

   The following tables set forth Mattson's unaudited consolidated statement of
operations data for each of the eight quarterly periods ended December 31,
1999. You should read this information in conjunction with Mattson's
consolidated financial statements and related notes appearing elsewhere in this
prospectus. Mattson has prepared this unaudited consolidated information on a
basis consistent with its audited consolidated financial statements, reflecting
all normal recurring adjustments that it considers necessary for a fair
presentation of its financial position and operating results for the quarters
presented. You should not draw any conclusions about Mattson's future results
from the operating results for any quarter.

<TABLE>
<CAPTION>
                                                   Quarter Ended
                          ----------------------------------------------------------------------
                           Mar.     June               Dec.              June     Sept.   Dec.
                            29,      28,     Sept.      31,    Mar. 28    27,      26,     31,
                           1998     1998    27, 1998   1998     1999     1999     1999    1999
                          -------  -------  --------  -------  -------  -------  ------- -------
                                                   (in thousands)
<S>                       <C>      <C>      <C>       <C>      <C>      <C>      <C>     <C>
Consolidated Statement
 Of Operations
Net sales...............  $20,248  $15,649  $  9,420  $13,869  $14,320  $24,128  $29,189 $35,821
Cost of sales...........   11,173    8,448     8,920    9,054    7,076   12,748   15,171  18,477
                          -------  -------  --------  -------  -------  -------  ------- -------
Gross profit............    9,075    7,201       500    4,815    7,244   11,380   14,018  17,344
                          -------  -------  --------  -------  -------  -------  ------- -------
Operating expenses:
  Research, development
   and engineering......    4,501    3,770     4,107    4,292    3,898    4,525    5,297   5,827
  Selling, general and
   administrative.......    6,725    5,643     6,294    5,880    6,031    7,106    8,567  10,080
  Acquired in-process
   research and
   development..........       --       --     4,220       --       --       --       --      --
                          -------  -------  --------  -------  -------  -------  ------- -------
    Total operating
     expenses...........   11,226    9,413    14,621   10,172    9,929   11,631   13,864  15,907
                          -------  -------  --------  -------  -------  -------  ------- -------
Income (loss) from
 operations.............   (2,151)  (2,212)  (14,121)  (5,357)  (2,685)    (251)     154   1,437
Interest and other
 income, net............      481      508       431      391      293      133      221      96
                          -------  -------  --------  -------  -------  -------  ------- -------
Income (loss) before
 provision for Income
 taxes..................   (1,670)  (1,704)  (13,690)  (4,966)  (2,392)    (118)     375   1,533
Provision for (benefit
 from) Income taxes.....     (450)    (459)    1,109      137       49       68       59      71
                          -------  -------  --------  -------  -------  -------  ------- -------
Net income (loss).......  $(1,220) $(1,245) $(14,799) $(5,103) $(2,441) $  (186) $   316 $ 1,462
                          =======  =======  ========  =======  =======  =======  ======= =======
Net income (loss) per
 share:
  Basic.................  $  (.09) $  (.09) $  (1.00) $  (.33) $  (.16) $  (.01) $   .02 $   .09
  Diluted...............  $  (.09) $  (.09) $  (1.00) $  (.33) $  (.16) $  (.01) $   .02 $   .08
Shares used in computing
 Net income (loss) per
 share:
  Basic.................   14,254   14,474    14,839   15,315   15,423   15,601   15,887  16,055
  Diluted...............   14,254   14,474    14,839   15,315   15,423   15,601   17,191  17,552
</TABLE>

                                      151
<PAGE>

Three And Six Month Periods Ended June 30, 2000 And 1999

   Net Sales. Net sales for the second quarter of 2000 increased 108% to $50.1
million from $24.1 million for the same quarter last year. The increase in
quarterly sales reflects a 136% increase in unit sales for the second quarter
of 2000 compared to the second quarter of 1999. This increase was partially
offset by a different product mix and a resulting per unit average sales price
for products sold during the second quarter of 2000 as compared to the same
quarter last year.

   Second quarter bookings were $65.7 million, an increase of 122% compared to
bookings of $29.6 million in the second quarter of 1999, resulting in a book to
bill ratio of 1.3 to 1.0 for the second quarter of 2000. Backlog increased by
$51.5 million to $86.5 million in the second quarter 2000 from $35 million in
the second quarter of 1999.

   International sales, which are predominantly to customers based in Japan and
the Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for 66%
and 70% of net sales for the second quarter of 2000 and 1999, respectively. In
1999, Mattson shifted its strategy in Japan to a direct sales model, and it
completed this transition during the second quarter of 2000. Mattson
anticipates that international sales will continue to account for a significant
portion of total net sales for 2000.

   Gross Margin. Mattson's gross margin for the second quarter of 2000
increased to 51% from 47% for the second quarter of 1999. This increase in
gross margins was due to fixed cost absorption over higher sales volume,
partially-offset by a different product mix sold during the second quarter of
2000 as compared to the same period last year.

   Mattson's gross margin may continue to be affected by a variety of factors.
Although Mattson has not offered substantial discounts on its systems to date,
there can be no assurance that it will not experience pricing pressures in the
future. Mattson's gross margin on international sales is substantially the same
as domestic sales.

   Research, Development and Engineering. Research, development and engineering
expenses for the second quarter of 2000 were $6.9 million, or 14% of net sales,
as compared to $4.5 million, or 19% of net sales, for the second quarter of
1999. The increase was primarily due to compensation and related benefits,
which increased to $3.1 million in the second quarter of 2000 from $2.1 million
in the second quarter of last year and engineering materials, which increased
to $1.7 million in the second quarter of 2000 from $0.7 million in the second
quarter of 1999. The increase in compensation and related benefits expense was
due to increased personnel required to support Mattson's anticipated growth.
The increase in engineering materials is due to ongoing and new product
development. The decrease in research, development and engineering materials as
a percentage of net sales during the second quarter of 2000 as compared to the
same period last year is due to higher sales during the second quarter of 2000.

   Selling, General and Administrative. Selling, general and administrative
expenses for the second quarter of 2000 were $13.0 million, or 26% of net
sales, as compared to $7.1 million, or 29% of net sales, for the second quarter
of 1999. The increase was comprised primarily of $2.7 million in compensation
and related benefits, $1.9 million in professional fees, advertising and
promotion, and travel and entertainment. These increases in selling, general
and administrative expenses are the result of higher spending levels required
to support the increased sales activity incurred during the second quarter of
2000 over the previous year and the transition in Japan from a distributorship
to direct sales. The decrease in selling, general and administrative expenses
as a percentage of net sales during the second quarter of 2000 as compared to
the same period last year is due to higher net revenues.

   Provision for Income Taxes. During the second quarter of 2000, Mattson
provided for taxes at an effective tax rate of 10%. The 2000 tax rate is less
than the federal statutory rate primarily as a result of the planned
utilization of net operating loss and credit carryforwards that would partially
offset the Company's tax liability.

Liquidity and Capital Resources

   Mattson's cash and cash equivalents and short term investments were $125
million at June 25, 2000, an increase of $108 million from $17 million at
December 31, 1999. Mattson did not have an outstanding balance on its line of

                                      152
<PAGE>

credit and had no long term debt at June 25, 2000. Stockholders' equity at June
25, 2000 was approximately $189 million.

   Net cash used in operating activities was $12.9 million during the six
months ended June 25, 2000 as compared to $8.7 million during the same period
last year. The net cash used in operating activities during the six months
ended June 25, 2000 was primarily due to an increase in accounts receivable and
inventories of $19.9 million and $11.1 million, respectively. The increase in
accounts receivable and inventories was partially offset by Mattson's net
income of $10.5 million and depreciation and amortization expense of $2.7
million.

   Net cash used in investing activities was $2.5 million during the six months
ended June 25, 2000 as compared to net cash provided by investing activities of
$7.3 million during the same period of 1999. The net cash used in investing
activities during the six months ended June 25, 2000 is attributable to the
purchase of property and equipment of $2.5 million. The net cash provided by
investing activities during the same period last year was attributable to the
sale of short term investments of $8.1 million offset by purchases of property
and equipment of $0.9 million.

   Net cash provided by financing activities was $124 million during the six
months ended June 25, 2000 as compared to $0.7 million during the same period
last year. The net cash provided by financing activities during the six months
ended June 25, 2000 is primarily attributable to the completion of Mattson's
follow-on public offering of 3,000,000 shares of common stock on March 8, 2000.
The public offering price was $42.50 per share before offering costs. This
increase was offset by a $3.0 million repayment against Mattson's line of
credit.

   Mattson's Board of Directors authorized the repurchase by Mattson, through
the year 2000, of up to 1,000,000 shares of its Common Stock in the open market
from time to time. As of June 25, 2000, 274,800 of such shares have been
repurchased. Mattson does not intend to repurchase any additional shares of its
stock under this repurchase program.

   During 1999 Mattson entered into a one-year revolving line of credit with a
bank in the amount of $15.0 million. This line of credit expired in July 2000.
All borrowings under this line of credit bore interest at a per annum rate
equal to the lender's prime rate, which was 9.75% at June 25, 2000. Mattson
borrowed $3.0 million under this line of credit during the third quarter of
1999 and repaid the balance in full during the first quarter of 2000. The line
of credit required Mattson to maintain certain financial covenants, including a
minimum quick ratio and minimum tangible net worth. Mattson was in compliance
with all of its financial covenants at June 25, 2000.

   On March 8, 2000 Mattson completed its public offering of 3,000,000 shares
of our common stock. The public offering price was $42.50 per share. On March
16, 2000, the underwriters exercised a right to purchase an additional 90,000
shares to cover over-allotments. Mattson expects to use the net proceeds for
general corporate purposes, principally working capital and capital
expenditures. Mattson currently anticipates that the net proceeds from the
offering discussed above, together with its current cash, cash equivalents and
available credit facilities, will be sufficient to meet its anticipated cash
needs for working capital and capital expenditures for at least the next 12
months. However, Mattson may need to raise additional funds in future periods
through public or private financings, or other sources, to fund its operations
and any potential acquisitions. Mattson may not be able to obtain adequate or
favorable financing when needed. Failure to raise capital when needed could
harm Mattson's business. If Mattson raises additional funds through the
issuance of equity securities, the percentage ownership of its stockholders
will be reduced. Furthermore, these equity securities may have rights,
preferences or privileges senior to Mattson's common stock.

   As of December 31, 1999, Mattson had no short term investments and thus no
exposure to changes in market values for investments.

   Mattson has international facilities and is, therefore, subject to foreign
currency exposure. The local currency is the functional currency for all
foreign sales operations except those in Japan, where the U.S. dollar

                                      153
<PAGE>

is the functional currency. To date, Mattson's exposure related to exchange
rate volatility has not been significant. Due to the short term nature of
Mattson's investments, Mattson does not believe that it has a material risk
exposure with respect to financial instruments.

Recent Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. SFAS 133 is effective for fiscal
years beginning after June 15, 2000 and cannot be applied retroactively. The
effect of SFAS 133 is not expected to be material to Mattson's financial
statements.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. Among other
things, SAB 101 would result in a change from the established practice in many
industries of recognizing revenue at the time of shipment of a system, and
instead delay revenue recognition until the time of installation or customer
acceptance. Because of the cyclical nature of the semiconductor equipment
industry and Mattson's dependence on a small number of comparatively large
sales, a change in revenue recognition practices could have a material affect
on revenue in any particular reporting period. Mattson is currently evaluating
the effect that such adoption may have on its consolidated results of
operations. Mattson will be required to adopt SAB 101 in the fourth quarter of
2000.

Quantitative And Qualitative Disclosures Regarding Market Risk

   As of December 31, 1999 and June 25, 2000, Mattson had no short term
investments and thus no exposure to changes in market values for investments.

   Mattson has international facilities and is, therefore, subject to foreign
currency exposure. The local currency is the functional currency for all
foreign sales operations except those in Japan, where the U.S. dollar is the
functional currency. To date, Mattson's exposure related to exchange rate
volatility has not been significant. Due to the short term nature of its
investments, Mattson does not believe that it has a material risk exposure with
respect to financial instruments.

                                      154
<PAGE>

                       PRINCIPAL STOCKHOLDERS OF MATTSON

   The following table sets forth certain information regarding the beneficial
ownership of Mattson's common stock as of October 4, 2000 by (i) each director,
director-nominee, and executive officer of Mattson; (ii) all current executive
officers and directors of Mattson as a group; and (iii) all persons known by
Mattson to own beneficially 5% or more of the outstanding shares or voting
power of Mattson's voting securities. The table is based upon information
supplied by directors, officers and principal stockholders. 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
Beneficial Owner(1)                              Beneficially Owned Percentage
-------------------                              ------------------ ----------
<S>                                              <C>                <C>
Brad Mattson....................................     3,701,192(2)      17.7%

Dimensional Fund Advisors Inc. .................       830,400(3)       5.4%
1299 Ocean Avenue, 11th Floor
 Santa Monica, California 90401

John C. Savage..................................        35,500(4)        *

Shigeru Nakayama................................        24,792(5)        *

Kenneth G. Smith................................        43,125(6)        *

Kenneth S. Kannappan............................         7,250(7)        *

Yasuhiko Morita.................................        58,895(8)        *

David Dutton....................................        50,045(9)        *

Brian McDonald..................................        22,293(10)       *

Walter Kasianchuk(11)...........................           --            *

Dr. Jochen Melchior.............................           --            *

Dr. Hans-Georg Betz.............................           --            *

James J. Kim....................................           --            *

All directors, director nominees, and executive
 officers as a group (12 persons)...............     3,943,092(12)     18.9%
</TABLE>
--------
  * Less than 1%

 (1) Except as set forth herein the address of the directors and executive
     officers set forth in the table is 2800 Bayview Drive, Fremont, California
     94538.

 (2) Includes 165,676 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (3) According to a Schedule 13G filed February 3, 2000 by Dimensional Fund
     Advisers Inc. ("Dimensional") with the Securities and Exchange Commission,
     Dimensional may be deemed to beneficially own an aggregate of 830,400
     shares of Mattson's common stock, has sole voting power with respect to
     830,400 shares of Mattson's common stock and has sole dispositive power
     over 830,400 shares of Mattson's common stock.

 (4) Includes 35,500 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (5) Includes 24,792 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (6) Includes 43,125 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (7) Includes 6,250 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (8) Includes 58,541 shares subject to options exercisable within 60 days of
     October 4, 2000.

 (9) Includes 42,819 shares subject to options exercisable within 60 days of
     October 4, 2000.

(10) Includes 20,312 shares subject to options exercisable within 60 days of
     October 4, 2000.

(11) This individual is not an executive officer or director but is deemed to
     be a significant employee who makes or is expected to make a significant
     contribution to Mattson's business.

(12) Includes 397,015 shares subject to options exercisable within 60 days of
     October 4, 2000.

                                      155
<PAGE>

                  BUSINESS OF THE STEAG SEMICONDUCTOR DIVISION

General

   Through its semiconductor equipment division, STEAG is one of the leading
suppliers of capital equipment for the global semiconductor industry. The
division is comprised of the following business units:

  . Rapid thermal processing--STEAG RTP Systems

  . Chemical vapor deposition--STEAG CVD Systems

  . Automatic wet cleaning equipment--STEAG MicroTech

  . Copper plating--STEAG CuTek

   The STEAG Semiconductor Division's strategy has been to address the
stringent requirements associated with the manufacture of increasingly smaller,
faster and higher-performance semiconductors by offering a comprehensive
portfolio of integrated processing solutions.

   The STEAG Semiconductor Division has manufacturing facilities in the United
States, Germany, and Israel and sells its products primarily through a direct
sales force and wholly-owned sales and service subsidiaries. In 2000, the STEAG
Semiconductor Division was ranked as one of the 10 best small suppliers of
wafer processing equipment by the VLSI Research Incorporated based on its
customer satisfaction survey. The STEAG Semiconductor Division consists of
eleven wholly owned subsidiaries of STEAG, which is a wholly owned subsidiary
of STEAG AG, based in Essen, Germany.

Products and Technology

 Rapid Thermal Processing (RTP)

   In March 1999, STEAG acquired AG Associates, Inc. and combined its
operations with the former AST Elektronik, which it acquired in 1996, to form
STEAG RTP Systems. AG Associates was the first company to introduce products
utilizing rapid thermal processing technology. The STEAG Semiconductor Division
is now the second largest supplier of RTP products in the world, with over
2,000 RTP tools delivered worldwide and has, STEAG believes, the largest number
of installed systems in the industry.

   Traditionally, silicon wafers were thermally treated in large furnaces that
handled large batches at a time with heating cycles that would take several
hours. This process provides very limited process control and results in the
wafer experiencing a long thermal cycle (high thermal budget) which can cause
yield loss and the inability to perform next generation processes. Rapid
thermal processing is the process by which semiconductor wafers are heated to
extremely high temperatures in a very short period of time. The RTP systems
produced by STEAG RTP Systems heat silicon wafers to temperatures of over
1,000(degrees)C in just a few seconds (low thermal budget). This technology
enables the development of smaller, faster and more power-efficient chips that
are used in everything from computers to cell phones. The STEAG Semiconductor
Division's RTP systems have enabled its customers to overcome the limitations
of traditional thermal processing and to process today's complex devices by:

  . Meeting thermal budget limitations. RTP permits the thermal processing of
    advanced integrated circuits to be completed within their limited thermal
    budgets. By heating and cooling a wafer more rapidly than a furnace, RTP
    permits processing at higher temperatures for a shorter duration than a
    furnace. This reduces thermal budget demands and improves performance
    characteristics at approximately the same cost of ownership.

  . Providing superior contamination control. The small size and ambient
    purge capabilities of RTP processing chambers permit the removal of
    unwanted gases from the wafer-processing environment, thereby reducing
    the possibility of contamination. For the past several years, RTP has
    been used

                                      156
<PAGE>

   extensively to heat wafers with metal layers that are sensitive to
   residual oxygen. Such precise contamination control is impractical in a
   batch furnace.

  . Improving wafer process flow.  RTP's single wafer technology is well
    matched to the single wafer cassette processes used in modern wafer
    fabrication facilities. Since most other integrated circuit process steps
    are single wafer processes, RTP streamlines the process flow of wafers,
    avoiding bottlenecks in production, and enables users to reduce work-in-
    progress.

  . Reducing cost of processing errors.  RTP's single wafer processing
    technology has dramatically reduced the cost of processing errors. In the
    event of a malfunction, self-tests and interlock mechanisms shut down the
    processing equipment, generally limiting losses to one or two wafers. The
    reduced wafer loss also enables cost-efficient testing of new
    technologies.

   With over 12 years experience in the RTP industry, STEAG RTP Systems is
recognized for its significant contributions to RTP technology development. Its
products include the following:

  . The 2800 RTP system is the STEAG Semiconductor Division's workhorse for
    mainstream applications. Over 500 have been installed worldwide.
    Applications include silicide/barrier formation, BPSG reflow and
    densification, shallow junction formation, thin gate dielectrics, thermal
    donor annihilation and multilayer annealing.

  . The 2800cs RTP system, which is based on the 2800 platform, is designed
    for the high volume production of compound semiconductor devices.
    Applications include contact alloying and implant anneal.

  . The 8800 RTP system is a workhorse RTP tool developed specifically to
    address 0.25 micron process requirements. This advanced 200 mm single
    wafer RTP tool incorporates a number of proprietary design features that
    dramatically improve temperature uniformity and repeatability, while
    significantly improving throughput.

  . The 2900 RTP system addresses 0.25-0.13 micron RTP applications at, what
    STEAG believes to be, the best cost of ownership in the industry. It
    incorporates the advanced capabilities of the 3000 RTP tool and the field
    proven capabilities of the 2800 and 8800 systems. Applications include
    silicide/barrier formation, BPSG reflow and densification, thin gate
    dielectrics, thermal donor annihilation and multilayer annealing.

  . The 3000 RTP system is the advanced generation RTP tool available with
    dual side heating to minimize pattern induced thermal non-uniformity and
    to achieve fast ramp rates of up to 250(degrees)C per second. The 3000
    RTP system can be configured for both 200 mm and 300 mm wafers and its
    applications include ultra-shallow junction formation, implant annealing,
    cobalt silicide formation and oxinitride formation.

  . The STEAMpulse(TM) was developed in anticipation of the need for thinner
    gate oxides, delivering superior control of oxide thickness and quality
    for sub 0.25 micron steam-based applications. STEAG believes it is the
    industry's first RTP system that offers catalytic processing capability
    to deliver a full range of high-quality thin and thick oxide films, as
    well as low temperature metal annealing.

  . The 3000 Steam is an advanced 200 mm and 300 mm RTP system with pyrogenic
    H2- and 02- rich steam capabilities for shallow trench isolation (STI)
    and selective oxidation applications. The 3000 Steam's unique steam-based
    pyrogenic capability grows thin oxide layers at low temperatures and
    offers superior edge rounding and step coverage without sacrificing
    uniformity, repeatability, throughput or quality.

   In addition to its advances in RTP technology, STEAG RTP Systems is well
prepared for the industry transition to 300 mm wafers. Its 3000 RTP system,
which is compatible for 200 mm and 300 mm wafers, puts the STEAG Semiconductor
Division on the leading edge of modern wafer processing technology as the
industry converts from 200 mm to 300 mm technology. The 3000 RTP system can
handle both straight 200/300

                                      157
<PAGE>

mm and combined 200 mm and 300 mm wafers and contains an excellent temperature
control system. STEAG believes the 3000 RTP system has the fastest ramp rate in
the industry and is the only RTP tool with two-sided heating. Several RTP
systems for processing of the next generation 300 mm wafers have been shipped
to customers, including Semiconductor 300, a joint venture of Infineon and
Motorola, in Dresden, Germany.

 Chemical Vapor Deposition (CVD)

   STEAG acquired AG Associates (Israel) Ltd. at the beginning of 1999, and
subsequently changed the name of the company to STEAG CVD Systems. The company
is a supplier of integrated RTP-based chemical vapor deposition (CVD) systems
("RTCVD" systems) for semiconductor production. CVD is the process by which
dielectric and conducting films are deposited on wafers. These films are the
basic material used to form the resistors, capacitators and transistors of an
integrated circuit. These films are also used to form the wiring and insulation
between these electrical components.

   STEAG CVD Systems designs and manufactures the IntegraPro(TM), an advanced
cluster tool with application-specific configuration of processing modules for
pilot line and production applications. This single wafer thermal CVD tool
offers significant feature advantages over conventional batch and mini-batch
technologies such as clean ambient between critical deposition steps and low
defect density, precise heating and deposition control, and a flexible platform
to configure the tool to meet the optimal processing requirements. Processing
capabilities include CVD using precision RTP heating for stack gate and
capacitor applications, and vapor phase-dry clean technology for effective in-
situ wafer surface preparation.

   Its unique processing capabilities, including the precision control of an
RTP-based CVD system, ultra high vacuum capability and clustered dry clean
capability, distinguish the IntegraPro(TM) system from the performance
limitations of conventional CVD technologies that dominate production fabs
today.

  . Utilizing STEAG CVD Systems' Selective HSG technology, the IntegraPro(TM)
    system provides advanced dynamic random access memory integrated circuit
    (DRAM) processing capability and dramatically increases capacitance over
    conventional bottom electrode technologies. By seeding the surface with a
    high density of silicon nuclei then quickly ramping to a higher annealing
    temperature optimized for the HSG grain morphology, STEAG believes that
    the IntegraPro(TM) is the first tool to offer the advantages of precise
    RTP heating in conjunction with the vapor phase cleaning module. Grain
    density and shape is optimized for a guaranteed area enhancement factor
    of 2.2X over conventional technology.

  . At device generations of 0.13mm and below, incorporation of new materials
    in the transistor stack is one of the challenges chip makers currently
    face. The transistor performance is limited by both the new material
    integration and the desired low leakage performance. IntegraPro(TM),
    because of the vacuum cluster capability, has demonstrated superior
    interfaces and higher quality dielectric deposition which results in
    excellent transistor circuit performance.

  . For advanced logic applications in the 0.13 / 0.10mm device generations,
    STEAG CVD Systems developed the CVD nitride film with the lowest leakage
    current for 1.5nm equivalent oxide thickness (EOT) film. This CVD nitride
    is processed in an integrated configuration for advanced gate stack
    applications. Development has been initiated on high dielectric constant
    (high K) materials for 0.7nm EOT applications.

   With its processing capabilities, flexible platform and Modular Equipment
Standards Committee (MESC) compatible architecture, the IntegraPro(TM) also
offers the flexibility for an R&D effort to explore new transistor and cell
architectures.

 Wet Cleaning Systems

   Acquired by STEAG in 1991, STEAG MicroTech successfully managed the
transition to become a leading supplier of advanced surface preparation
equipment and is a respected developer of innovative cleaning and drying
solutions for the semiconductor industry. Based on a patent licensed from
Koninklijke Philips

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Electronics N.V., STEAG believes that STEAG MicroTech was the first equipment
supplier to introduce real surface tension gradient drying technology, often
referred to as MARANGONI(R) drying to the market. Today, this drying method is
recognized as the key enabling technology for the manufacture of high
performance semiconductor devices.

   By establishing a broad product portfolio covering all key applications and
processes in semiconductor wet processing today, STEAG MicroTech has succeeded
in positioning itself among the leading equipment suppliers in this particular
market segment.

   STEAG MicroTech's product offerings include traditional multi-bath wet
benches, advanced single-bath processing systems and combinations thereof (so
called "Hybrids"), and drying systems. The drying systems are sold to end users
and to major competitors as original equipment manufacturer (OEM) modules. In
addition, most advanced single wafer cleaning technology is in an early stage
of the product cycle. Wet bench, single-bath and Hybrid systems are also
available for the new 300mm wafer generation and have proven their production
viability at Semiconductor 300 in Dresden, Germany, from whom STEAG MicroTech
received a "TopSupplier" award. Apart form these more standardized systems,
STEAG MicroTech also excels in making custom designed equipment for special wet
deposition, cleaning, and etching applications.

   STEAG MicroTech's products include:

  . The AWP-Gen III 200 wet bench, a high performance work horse of the
    industry with high throughput and a large installed base. Its
    applications cover all typical critical and non-critical front end
    cleaning, etching and stripping applications, such as pre-deposition and
    pre-diffusion cleans, polymer removal and nitride etch. In addition,
    special new processes are available to address the necessity for reduced
    CoO, such as processes using diluted chemistries and ozone instead of
    expensive concentrated chemicals.

  . Poseidon STT(R), the STEAG Semiconductor Division's the most advanced
    single-bath processing technology, provides the lowest CoO based on an
    innovative and proprietary tank design with the industry's smallest bath
    volume. It also features an integrated MEGAsonic cleaning support and the
    option to flexibly reuse or discard the diluted processing chemicals.
    This product is available for 200 mm and 300 mm wafer sizes.

  . STEAG MicroTech's "Double-Tank-Technology" (DTT) overcomes the natural
    throughput restrictions of the Poseidon STT(R) single-bath processing
    approach and provides a high throughput, maximum flexibility
    manufacturing tool. This product line, introduced in 1999, addresses the
    requirements of today's most advanced semiconductor volume manufacturers
    for efficiency and performance.

  . The AWP 300 mm is designed to service the full scope of 300 mm production
    requirements without sacrificing high performance, reliability and
    maintainability. During the past two years, it has proven it's viability
    in a real production environment at Semiconductor 300, the first 300 mm
    wafer pilot line.

  . The Hybrid 300 is based on wet bench and single-bath technology. The
    Hybrid 300 combines the benefits of conventional AWP and the single-bath
    tank technology of the Poseidon STT(R), i.e. high throughput, a small
    footprint, maximum process flexibility and minimized CoO. It covers the
    entire front-end application range as described above.

  . A 200 mm single wafer cleaning system has been developed and is under
    beta-evaluation at a customer site. This system is equipped with fully
    modular cleaning and drying units, providing maximized flexibility and
    employing highly innovative cleaning technology as well as STEAG
    MicroTech's exclusive MARANGONI(R) drying technology.

  . The proprietary MARANGONI(R) dryer developed by STEAG MicroTech based on
    a Koninklijke Philips Electronics N.V. patent has become the industry
    standard for advanced substrate drying. This product provides a particle
    neutral and watermark free drying process combined with minimized media
    consumption. MARANGONI(R) dryers are available for various substrate
    sizes up to 300 mm and are sold in the STEAG Semiconductor Division's own
    products, as stand-alone systems to end users, and as OEM-modules to
    competitors.

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   Concurrently with the execution of the Combination Agreement, STEAG entered
into a license agreement with CFM and CFMT, Inc. which allows the STEAG
Semiconductor Division to market and sell its MARANGONI(R) dryer in the United
States, both as a stand-alone product and as a component of wet bench systems.

 Copper Plating

   STEAG CuTek, which was acquired by STEAG in February 2000, provides advanced
solutions for interconnect technology applications through metal plating. The
interconnect is a complex matrix of microscopic wires that carry electrical
signals to connect the transistor and capacitor components of an integrated
circuit. STEAG CuTek's ElectroDep 2000(R) system, available in 200 mm and 300
mm configurations, offers unique plating technology, excellent gap filling
capability, process and chemical stability, and the flexibility of a cluster
tool. Its advanced, patented anode technology enables face-up wafer processing.
STEAG believes the ElectroDep 2000(R) is the first cluster-based manufacturing
system for copper electroplating in the industry. This unique system design
simplifies operation by using an insoluble anode electrolyte cell and standard
cluster tool process modules. Dry-wafers-in and dry-wafers-out capability is
delivered from a single process module. The ElectroDep 2000(R) will be utilized
by semiconductor manufacturers to deposit copper and fill trenches and via
holes down to 0.10 micron. While specializing in damascene and copper
application, ElectroDep 2000(R) has also proven successful for other metal
depositions in the backend area.

   Copper is replacing aluminum as interconnect material in advanced generation
integrated circuits, because copper offers lower resistivity and increased
electromigration resistance compared to aluminum. As the density of transistors
per chip increases, so does the number of metal layers. This drives the
transition to new process flows such as damascene and to electroplating
processes for copper deposition. The introduction of copper in IC processing is
a new cornerstone and STEAG CuTek's plating capability stands to play a vital
role in the years to come both as a standalone plating tool as well as a
cluster tool that is capable of delivering superior performance beyond 0.1mm
feature sizes. STEAG CuTek continues to pursue advanced development in related
areas such as electropolishing, passivation, and anneal in order for it to be
able to deliver other associated processes in overall damascene flow in
addition to the basic plating technology.

Customers

   The STEAG Semiconductor Division's customers include the top semiconductor
manufacturers worldwide. Sales to the STEAG Semiconductor Division's top three
customers accounted for approximately 24% of net sales in fiscal 1999; no
single customer accounted for more than 10% of net sales. In 1998, sales to one
customer accounted for approximately 13% of net sales while the top three
customers accounted for approximately 29% of net sales.

Sales and Support

   The STEAG Semiconductor Division markets its products worldwide primarily
through in-house sales personnel, complemented by independent sales
representatives. In Japan, the STEAG Semiconductor Division has a relationship
with an independent distributor, primarily for RTP sales and service, in
addition to its own sales and service subsidiary. The STEAG Semiconductor
Division and its independent sales representatives and distributor have sales
and support centers located in the United States, Germany, Japan, Korea,
Taiwan, Singapore, United Kingdom, France and Israel. When a higher level of
technical expertise is needed, the sales effort is supported by product
marketing managers and process engineers who work closely with customers and
potential customers to find solutions to their current and future processing
challenges. The STEAG Semiconductor Division's distributor in Japan provides
essential pre- and post-sale support for his products and accounts for a
significant percentage of sales worldwide. Certain STEAG Semiconductor
Subsidiaries have volume purchase agreements with large domestic customers. In
addition, many customer sales are made using purchase orders.

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Suppliers

   Certain components and subassemblies included in the products manufactured
by the STEAG Semiconductor Division are obtained from a single source or a
limited group of suppliers and subcontractors in order to assure overall
quality and timeliness of delivery. The STEAG Semiconductor Division's reliance
on a sole or a limited group of suppliers involves several risks, including a
potential inability to obtain adequate supplies of certain components and
reduced control over pricing and timely delivery of components. Although the
timeliness, quality and pricing of deliveries to date from suppliers have been
acceptable and STEAG believes that additional sources of supply will be
available to the STEAG Semiconductor Division should one or more of the STEAG
Semiconductor Division's suppliers be unable to meet its needs, supplies may
not continue to be available on an acceptable basis. Inability to obtain
adequate supplies of components or to manufacture such components internally
could delay the ability of the STEAG Semiconductor Division to ship its
products, which could result in the loss of customers that may seek alternative
sources of supply.

   The STEAG Semiconductor Division purchases certain subassemblies from STEAG
Electronic Systems spol. s r.o., Slovakia, a wholly owned subsidiary of STEAG
that is not included in the STEAG Semiconductor Subsidiaries. The current
supply arrangements are based on agreed hourly rates for assembly operations
performed.

Competition

   The global semiconductor capital equipment industry is highly competitive
and characterized by rapid technological change, product obsolescence and
increased competition in many markets. The STEAG Semiconductor Division
competes with several major domestic and international companies in supplying a
complete line of RTP, wet-process, CVD and electroplating tools.

   Competition in a given technology is based on factors including
technological innovation, productivity, and total cost of the systems. A
system's total cost is based on factors such as yield, price, product
performance and throughput capability, quality, contamination control,
reliability and customer support. STEAG believes that the STEAG Semiconductor
Division maintains a competitive position in each of its markets through its
ability to develop new products to meet customer requirements and continuously
improve its existing products, processes and services.

   Applied Materials, Inc. ("Applied Materials"), the world's largest
manufacturer of semiconductor manufacturing equipment located in the United
States, holds the number one position in the RTP segment of the thermal
processing market. Other manufacturers have also announced their intention to
enter the RTP market. The STEAG Semiconductor Division also competes with
manufacturers of batch diffusion furnaces for application of their differing
technologies in various steps of the integrated circuit fabrication process.

   Principal competitors in the market for wet cleaning systems include Tokyo
Electron Ltd., the world's second largest manufacturer of semiconductor
manufacturing equipment, Dainippon Screen Mfg. Co., Ltd., S.E.S. Co., Ltd,
Kaijo Corporation, all located in Japan, and SCP Global Technologies located in
the United States.

   In copper plating, principal competitors include Applied Materials, Novellus
Systems, Inc., and Semitool, Inc. Principal competitors for the STEAG
Semiconductor Division's RTCVD equipment include Applied Materials, Tokyo
Electron, ASM International N.V., and Jusung Engineering Co. Ltd.

   STEAG believes that the STEAG Semiconductor Division's continued competitive
performance depends on its ability to successfully develop and introduce new
products, features and processes meeting future customer requirements and to
continuously improve existing products, processes and services. Broadening
process capability and flexibility, reducing the overall cost of ownership and
protecting its proprietary technology will also play an important role in its
ability to compete.

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Intellectual Property

   The STEAG Semiconductor Division relies on a combination of patent,
copyright, trademark and trade secret laws, non-disclosure agreements and other
intellectual property protection methods to protect its proprietary technology.
STEAG believes that the duration of the STEAG Semiconductor Division's patents
generally exceeds the life cycles of the technologies disclosed and claimed
therein. Though the STEAG Semiconductor Division has additional patent
applications pending in various foreign countries, no patents may result from
these applications. The STEAG Semiconductor Division restricts access to its
technology and enters into confidentiality agreements with its employees and
consultants.

   Currently, the STEAG Semiconductor Subsidiaries own more than 60 inventions
protected by patents. Patent applications for more than 90 additional
inventions are currently pending and under examination in various countries. It
is the STEAG Semiconductor Division's policy to protect its enabling technology
by seeking patent protection in the countries where the STEAG Semiconductor
Division's R&D centers and production sites are located as well as in its major
markets, such as the United States, Europe, Taiwan, Singapore, Japan and Korea.
Accordingly, most of its patent applications are filed in more than one
country, and the STEAG Semiconductor Subsidiaries have patents and pending
patent applications in at least 13 countries. The STEAG Semiconductor Division
routinely monitors the works of its engineers and has implemented procedures
designed to assure that applications for patents to protect its intellectual
property are filed as early as possible. In addition, the STEAG Semiconductor
Division also screens the patents and patent applications of certain
competitors to ensure that its products do not infringe the intellectual
property rights of third parties.

   Patents and other means of intellectual property protection, including
confidentiality agreements and applicable trade secret laws, may not provide
adequate protection for the STEAG Semiconductor Division's intellectual
property rights. Further, it is possible that others will develop, copyright or
patent similar technology or reverse engineer its products. In addition, the
laws of certain territories in which the STEAG Semiconductor Division's
products are or may be developed, manufactured or sold, including Asia and
Europe, may not protect its products and intellectual property rights to the
same extent as the laws of the United States. While the STEAG Semiconductor
Division intends to continue to seek patent, copyright, trademark and trade
secret protection for its products and manufacturing technology where
appropriate, it believes that its success depends more on the technical
expertise and innovative abilities of its personnel, rather than the
protections that these laws can provide.

   There can be no assurance that other third parties will not assert claims
against STEAG Semiconductor Subsidiaries with respect to existing or future
products or technologies or that, in case of a dispute, licenses will be
available on commercially reasonable terms, or at all, with respect to disputed
third-party technology.

Litigation

   In April 1997, Applied Materials initiated lawsuits against both AST
Elektronik USA, Inc. (which was merged into STEAG Electronic Systems, Inc.) and
AST Elektronik GmbH (now STEAG RTP Systems GmbH), which were then subsidiaries
of STEAG, and AG Associates, Inc. (now STEAG RTP Systems, Inc.), which was
subsequently acquired by STEAG in 1999, alleging infringement of certain
patents concerning rapid thermal processing. The companies filed counterclaims
and, in August 1998, AG Associates filed two lawsuits against Applied Materials
alleging that Applied Materials was infringing certain RTP patents. In February
1999, Applied Materials and AST reached a settlement of the litigation between
them, which settlement included cross-licenses of certain technology and a
covenant by Applied Materials not to sue AST subject to certain conditions. In
December 1999, Applied Materials and AG Associates mutually agreed to dismiss
their respective lawsuits against each other. As a result of Mattson's
acquisition of STEAG RTP and its resulting increased market strength and higher
profile in RTP, Applied Materials may again assert the same patent infringement
claims against Mattson.

   On July 10, 1995, CFM filed an action against a STEAG subsidiary, STEAG
Electronic Systems, Inc. ("SES") in the United States District Court for the
District of Delaware alleging infringement, inducement of

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infringement, and contributory infringement of U.S. Patent No. 4,911,761 (the
"761 patent"). CFM sought damages and a permanent injunction to prevent further
infringement. SES denied infringement and asserted, among other things, that
the "761 patent is invalid and unenforceable. On December 12, 1997, following a
two-week trial, the jury returned a verdict that SES willfully infringed the
"761 patent and that the patent was not invalid. The jury awarded CFM damages
of $3,105,000. The District Court subsequently upheld the jury's verdict and
entered final judgment and a permanent injunction in CFM's favor. SES appealed
the verdict and various rulings by the District Court to the Court of Appeals
for the Federal Circuit. On May 13, 1999, the Appeals Court vacated the
judgment solely with regard to infringement and remanded the case to the
District Court for reconsideration of its holding of literal infringement; the
Appeals Court affirmed the District Court judgment in all other respects. On
November 8, 1999 the District Court issued an opinion that upheld the finding
of literal infringement and reinstated the judgment and injunction in favor of
CFM. SES subsequently filed an appeal of this November 8, 1999 decision.

   Concurrently with the execution of the Combination Agreement and the Merger
Agreement, STEAG and CFM entered into a settlement agreement pursuant to which
SES withdrew its appeal of the District Court judgment that it infringed the
"761 patent, and confirmed the District Court's judgment that the patent is
valid and enforceable, and CFM waived all damages. STEAG also has taken action
to cause nullification proceedings against CFM's drying patent rights in
Germany, France, Netherlands, Ireland and Japan to be withdrawn. At the same
time, CFM, CFMT, Inc. and STEAG entered into a licensing agreement with respect
to the "761 patent and related patent rights pursuant to which CFM licenses the
"761 patent and such other patent rights to the STEAG Semiconductor Division
worldwide.

Employees

   As of June 30, 2000, the STEAG Semiconductor Division employed 1,123 full-
time employees. There were 319 employees in manufacturing operations, 330 in
research, development and engineering, 57 in sales and marketing, 261 in
customer service and field support and 156 in general administrative and
finance functions.

Properties

   The STEAG Semiconductor Division's main manufacturing facilities are located
in Dornstadt, Pliezhausen and Donaueschingen, Germany, San Jose, California and
Migdal Ha'Emek, Israel. STEAG Semiconductor Subsidiaries also lease properties
with regard to foreign sales and service operations in Scotland, Singapore,
Korea, Taiwan, Japan, and France.

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                          STEAG SEMICONDUCTOR DIVISION
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   The following discussion and analysis of the financial condition and results
of operations of the STEAG Semiconductor Division should be read in conjunction
with "STEAG Semiconductor Division Selected Historical Financial Information"
and the STEAG Semiconductor Division's combined financial statements and
related notes included elsewhere in this proxy statement/prospectus. In
addition to historical information, the discussion in this proxy
statement/prospectus contains certain forward-looking statements that involve
risks and uncertainties. The STEAG Semiconductor Division's actual results
could differ materially from those anticipated by these forward-looking
statements due to various factors, including but not limited to, those set
forth under "Risk Factors" and elsewhere in this proxy statement/prospectus.

Overview

   The STEAG Semiconductor Division develops, manufactures, markets and
supports fabrication equipment for the worldwide semiconductor and wafer
manufacturing industry. Its products include advanced rapid thermal processing
(RTP), chemical vapor deposition (CVD), automatic wet cleaning and copper
plating equipment used in the manufacture of integrated circuits. The STEAG
Semiconductor Division has manufacturing facilities in the United States,
Germany, and Israel and sells its products primarily through a direct sales
force and wholly-owned sales and service subsidiaries.

   In 1998 and 1999, nearly all revenues of the STEAG Semiconductor Division
were derived from the wet cleaning and RTP businesses. The CVD business unit,
acquired in early 1999, did not significantly contribute to revenue during that
fiscal year, as it was still introducing its advanced tools to the market.
Compared with 1998, the RTP business unit increased its share of total sales in
fiscal 1999, primarily as a result of the acquisition of STEAG RTP Systems,
Inc.

   At the beginning of 1999, STEAG purchased 100% of each of STEAG RTP Systems,
Inc. and STEAG CVD Systems Ltd. for $35.2 million and $22.8 million,
respectively. The acquisitions were accounted for using the purchase method.
The purchase price was allocated to assets and liabilities based on their
respective estimated fair values at the time of the respective acquisitions. In
each case, the excess of the purchase price over the net tangible and
intangible assets acquired and liabilities assumed was allocated to goodwill.
The results of operations and the assets and liabilities of each entity were
combined in the STEAG Semiconductor Division's financial statements from the
date the respective acquisitions became effective. The combination resulted in
an increase in goodwill of $37.1 million for the two companies. Goodwill is
amortized on a straight line basis over five years.

   The STEAG Semiconductor Division recorded an unusual charge of $12.4 million
in 1999 for various charges incurred by STEAG RTP Systems, Inc., consisting of
$5.2 million for costs associated with the discontinuance of Starfire(R)
machines; $2.8 million for costs associated with the write-off of fixed assets
used for the production of Starfire(R) machines; $1.7 million for Starfire(R)
inventory write-offs; $1.9 million for stay bonuses as compensation for the
cancellation of employee stock option plans as a result of the acquisition of
STEAG RTP Systems, Inc., and $0.8 million for other costs, relating primarily
to lay-offs and management severance packages.

   On December 12, 1997, a jury in Delaware district court found that STEAG
Electronic Systems, Inc. ("SES"), a STEAG Semiconductor Subsidiary, had
willfully infringed upon a patent held by CFM and awarded CFM damages of $3.1
million. In June 1998, the district court upheld the jury's verdict and entered
a final judgement and a permanent injunction in CFM's favor. Concurrently with
the execution of the Combination Agreement and the Merger Agreement, STEAG, SES
and CFM entered into a settlement agreement pursuant to which SES withdrew its
appeal before the Federal Circuit Court of Appeals, and confirmed the Delaware
district court's judgment. At the same time, CFM, CFMT, Inc. and STEAG entered

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into a licensing agreement with respect to U.S. Patent No. 4,911,761 and
related patent rights pursuant to which CFM licenses such patent rights to the
STEAG Semiconductor Division worldwide.

   As a result of the settlement and licensing agreements with CFM, the STEAG
Semiconductor Division will be able to sell MARANGONI(R) dryers in the United
States which will impact its domestic sales. As customers upgrade their
fabrication equipment and expand their operations, they prefer to acquire
equipment that is compatible with their systems on a worldwide basis.
Consequently, the STEAG Semiconductor Division's ability to sell MARANGONI(R)
dryers into the U.S. market will improve its ability to sell to those same
customers in the international market as well. Pursuant to the licensing
agreement and subject to adjustment under certain circumstances, CFM is
entitled to royalty payments on sales of stand alone dryers and wet cleaning
equipment by the STEAG Semiconductor Division in the United States.

   Domestic (U.S.) sales accounted for approximately 25% of total net sales for
1999 and approximately 41% of total net sales in 1998. STEAG anticipates that
domestic sales will increase, primarily due to the settlement and licensing
agreements with CFM which are expected to result in a significant increase in
sales of wet cleaning equipment. Sales to customers based in Taiwan, Singapore,
Japan, and Korea represented 41% and 24% of total net sales in 1999 and 1998,
respectively. European sales accounted for 27% of total net sales in 1999, down
from 32% in 1998. STEAG anticipates that international (non-U.S.) sales will
continue to account for a significant portion of sales, primarily due to orders
from customers in Asia and Europe.

   The STEAG Semiconductor Division participates in a dynamic, technology-
driven industry and STEAG believes that changes in any of the following areas
could have a material adverse effect on the STEAG Semiconductor Division's
future financial position or results of operations:

   Rapid Technological Change and Development Risks. The STEAG Semiconductor
Division derives substantially all of its revenue from a relatively small line
of products. The semiconductor industry is subject to rapid technological
change, and the STEAG Semiconductor Division and its competitors continuously
seek to introduce new products that provide improved process results and
manufacturing performance at prices acceptable to customers. There can be no
assurance that the STEAG Semiconductor Division can develop new products more
quickly than its competitors or that its products will have better
price/performance characteristics than competitors' products. The failure of
the STEAG Semiconductor Division to timely develop new products, the failure of
new products to meet customer expectations regarding performance and cost or
the failure of new products to achieve market acceptance following product
introduction would each have a material adverse effect on the STEAG
Semiconductor Division's business, results of operations and financial
condition of the STEAG Semiconductor Division.

   Semiconductor Industry Volatility. The semiconductor industry has
historically been cyclical and subject to unexpected periodic downturns
associated with sudden changes in supply and demand. During fiscal 1998, the
STEAG Semiconductor Division's business, financial condition and operating
results were adversely impacted by a sudden downturn in the semiconductor
equipment industry caused, in part, by economic instability in Asia. This
recession had an adverse effect on the volume of the STEAG Semiconductor
Division's orders. The industry began to recover and improve towards the end of
1998 and through 1999 during which time the STEAG Semiconductor Division's
orders have steadily increased. STEAG cannot predict future industry cycles or
their effect on the market.

   Foreign Operations. The STEAG Semiconductor Division's foreign operations
are subject to certain risks common to international operations, such as
government regulations, import restrictions, currency exchange rate
fluctuations, repatriation restrictions and, in certain jurisdictions, reduced
protection for copyrights and trademarks and economic volatility. Gains and
losses from foreign currency exchange transactions in 1999 and 1998 were not
material. Germany, the location of STEAG's international headquarters, is one
of the European countries that participate in the use of the Euro. This new
currency unit has been available since January 1, 1999 and was adopted by
Germany as a second legal currency in addition to the German Mark. The Euro
will become the sole currency in 2002. The exchange rate of the German Mark
(DM)

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to the Euro has been permanently fixed at 1 Euro to 1.95583 DM by the European
Economic and Monetary Union. While STEAG does not expect an adverse effect on
the business of the STEAG Semiconductor Division as a result of the
introduction of the Euro, the transition to the Euro will require availability
of reliable software for accounting, payroll and other internal functions.

   Competition. The ability of the STEAG Semiconductor Division to compete
depends upon its ability to successfully develop and introduce new products,
features and processes that meet future customer requirements such as
broadening process capability and flexibility and reducing cost of ownership.
In addition, the STEAG Semiconductor Division needs to continuously improve
existing products, processes and services in order to remain competitive. The
STEAG Semiconductor Division's competitors, many of whom have substantially
greater resources than the STEAG Semiconductor Division, also seek to compete
in these areas. In addition, STEAG expects to see increased competition from
batch furnace vendors as those companies increase functionality available in
such machines. Some competitors, such as Applied Materials, have made
significant gains in the STEAG Semiconductor Division's markets by offering
certain functionality that the STEAG Semiconductor Division was not previously
able to provide with its products, allowing such competitors to capture
significant customers. There are also larger foreign and domestic companies
that possess the technical resources to enter segments of the semiconductor
equipment market the STEAG Semiconductor Division serves.

   Potential Fluctuations in Operating Results. The STEAG Semiconductor
Division's operating results are subject to quarterly and other fluctuations
due to a variety of factors, including the volume and timing of orders
received, potential cancellation or rescheduling of orders, and competitive
pricing pressures. In addition, operating results are subject to the STEAG
Semiconductor Division's ability to manage costs during periods of low or
negative earnings growth, the availability and cost of component parts and
materials from the STEAG Semiconductor Division's suppliers, the adequate
forecasting of the mix of product demand due to production lead times and
capacity constraints, the timing of new product introductions by the STEAG
Semiconductor Division or its competitors, changes in the mix of products sold,
research and development expenses associated with new product introductions,
the timing and level of development costs, market acceptance of new or enhanced
versions of the STEAG Semiconductor Division's products, seasonal customer
demand, the cyclical nature of the semiconductor industry, the impact of the
STEAG Semiconductor Division's efforts to implement its evolving long-term
strategy, the uncertainties of ongoing negotiations and economic conditions
generally or in various geographic areas. Further, because of the relatively
high selling prices of the STEAG Semiconductor Division's products, a
significant portion of the STEAG Semiconductor Division's net sales in any
given period is derived from the sale of a relatively small number of units,
and even a minor change in the number of units sold during a quarter can result
in a large fluctuation in net sales and operating results for the quarter.

Recent Developments

   On June 27, 2000, STEAG entered into the Combination Agreement to sell the
STEAG Semiconductor Division to Mattson in exchange for approximately 32% of
Mattson's outstanding shares. The transaction is conditioned on the merger of
Mattson and CFM pursuant to the Merger Agreement. Concurrently with the
execution of the Combination Agreement and the Merger Agreement, STEAG, SES and
CFM entered into a settlement agreement pursuant to which SES withdrew its
appeal before the Federal Circuit Court of Appeals, and confirmed the Delaware
district court's judgment. At the same time, CFM, CFMT, Inc. and STEAG entered
into a licensing agreement with respect to U.S. Patent No. 4,911,761 and
related patent rights pursuant to which CFM licenses such patent rights to the
STEAG Semiconductor Division worldwide.

   In February, 2000, STEAG completed its acquisition of CuTek Research, Inc.,
a manufacturer of copper plating systems. The merger was accounted for as a
purchase at a price of $15.4 million. The purchase price was allocated to
assets acquired and liabilities assumed based on the estimated fair value at
the time of the acquisition. The excess of the purchase price over the net
tangible and intangible assets acquired and liabilities assumed was allocated
to goodwill. Goodwill is being amortized over five years.

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<PAGE>

Results of Operations

   The following table sets forth selected consolidated financial data for the
periods indicated, expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                               For the Six
                                             For the Year        Months
                                                 Ended         Ended June
                                             December 31,          30,
                                             ---------------   -------------
                                              1999     1998    2000    1999
                                             ------   ------   -----   -----
<S>                                          <C>      <C>      <C>     <C>
Net sales...................................  100.0 %  100.0 % 100.0 % 100.0 %
Cost of sales...............................   74.5 %   74.6 %  50.6 %  68.7 %
Gross Profit................................   25.5 %   25.4 %  49.4 %  31.3 %
Operating expenses:
  Research and Development..................   20.9 %   16.6 %  17.9 %  29.1 %
  Selling, general and administrative
   expenses.................................   31.6 %   27.0 %  29.8 %  45.9 %
  Goodwill amortization.....................    9.0 %    6.0 %   7.1 %  11.3 %
Loss from operations........................  (36.0)%  (24.2)%  (5.4)% (54.9)%
Other income (expense)......................   (3.0)%   (3.2)%  (1.2)%  (7.1)%
Loss from continuing operations before
 income tax provisions......................  (39.0)%  (27.4)%  (6.6)% (62.0)%
Net loss....................................  (35.0)%  (20.5)%  (9.4)% (61.9)%
</TABLE>

Fiscal Year Ended December 31, 1999 Compared to Fiscal Year Ended December 31,
1998

   Net sales increased to $146.8 million in fiscal 1999 from $108.9 million in
fiscal 1998, an increase of approximately 34.8%. The increase in net sales in
the current fiscal year was primarily due to the acquisition in 1999 of STEAG
RTP Systems Inc. as well as to the recovery of the Asian markets.

   Domestic (U.S.) sales decreased to $36.0 million in fiscal 1999 from $44.8
million in fiscal 1998. The decrease in domestic sales was primarily due to
lower sales of wet cleaning equipment. This was mainly a consequence of the
STEAG Semiconductor Division being prevented from selling its MARANGONI(R)
drying technology, a key component of its wet benches, to customers in the U.S.
following a court ruling that SES was infringing a patent held by CFM. The
lower domestic wet cleaning sales were in part offset by increased domestic RTP
sales resulting from the acquisition of STEAG RTP Systems, Inc. The increase in
international sales was primarily due to higher sales in Japan, Taiwan, Korea,
Singapore and Europe. Compared with fiscal 1998, sales to Japanese customers
increased by more than 500% in fiscal 1999, primarily as a result of the
acquisition of STEAG RTP Systems Inc. in early 1999. Based upon the geographic
locations of semiconductor manufacturers, STEAG anticipates that international
sales in general will continue to account for a significant portion of net
sales in fiscal 2000. However, international sales as a percentage of net sales
will vary on a quarterly basis depending on the impact of the economic
condition in Asia, the timing of orders and the relative strength of domestic
sales.

   International sales by the STEAG Semiconductor Division are settled mainly
in U.S. dollars, which is the functional currency for the STEAG Semiconductor
Division. As a result, changes in foreign currency exchange rates had a direct
impact on the STEAG Semiconductor Division's operating results. In order to
limit the STEAG Semiconductor Division's exposure to exchange rate
fluctuations, the STEAG Semiconductor Division enters into forward contracts
which are only intended to secure receivables in foreign currency and are not
entered into for speculative or trading purposes.

   The STEAG Semiconductor Division's end-user customers include most of the
leading semiconductor manufacturers worldwide. For the year ended December 31,
1999, sales to the top three customers accounted for approximately 24% of net
sales; no customer accounted for more than 10% of net sales. For the year ended
December 31, 1998, sales to one customer accounted for approximately 13% of net
sales; sales to the top three customers accounted for approximately 29% of net
sales. There can be no assurance that the STEAG Semiconductor Division will be
able to retain its strategic customers or that such customers will not cancel,

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reschedule or significantly reduce the volume of orders or, in the event orders
are canceled, that such orders will be replaced by other sales. The loss of any
significant end-user customer, even if replaced by a different significant end-
user customer, could have a material adverse effect on the STEAG Semiconductor
Division's business, results of operations and financial conditions.

   Gross profit increased to $37.5 million in fiscal 1999 from $27.7 million in
the prior fiscal year, an increase of approximately 35.4%. Gross profit as a
percentage of net sales was approximately 25.5% in fiscal 1999, up from
approximately 25.4% in fiscal 1998. Gross profit increased from fiscal 1998 to
fiscal 1999 primarily because of improvements in efficiency, in part resulting
from higher production volumes, and a more favorable product mix. The increase
was partially offset by unusual charges of $9.7 million in 1999 following the
acquisition of STEAG RTP Systems, Inc., consisting of $5.2 million for costs
associated with the discontinuance of Starfire(R) machines; $2.8 million for
costs associated with the write-off of fixed assets used for the production of
Starfire(R) machines and $1.7 million for Starfire(R) inventory write-offs.

   Research and Development ("R&D") expenses increased to $30.6 million in
fiscal 1999 from $18.1 million in the prior fiscal year, an increase of
approximately 69.0%. As a percentage of net sales, R&D expenses increased to
approximately 20.9% in fiscal 1999 from approximately 16.6% in fiscal 1998,
reflecting the STEAG Semiconductor Division's commitment to bring new products
in wet cleaning, RTP and, through the acquisition of STEAG CVD Systems Ltd.,
CVD to market. R&D efforts are focused on STEAG Semiconductor Division's multi-
product strategy. Significant resources have been devoted to develop
production-ready systems for processing next generation 300 mm wafers,
including the 3000 RTP system and the AWP 300, a wet cleaning tool. The Hybrid
300 wet cleaning tool and a new vacuum cluster tool combining CVD and RTP
technologies are being developed. Additional R&D efforts have been made to
further improve existing products and to introduce new tools, such as the
2900 RTP system and the DTT wet cleaning system, addressing the requirements of
today's most advanced semiconductor volume manufacturers for throughput,
performance, and low cost of ownership. The STEAG Semiconductor Division also
maintains application labs in the U.S. and Germany to test new equipment and
processes. The STEAG Semiconductor Division continues to believe that
significant investment in R&D is required to remain competitive, particularly
during semiconductor market downturns, when reduced customer orders may result
in additional capacity.

   Selling, general and administrative ("SG&A") expenses increased to $46.5
million in fiscal 1999 from $29.4 million in fiscal 1998, an increase of
approximately 58.2%. As a percentage of net sales, SG&A expenses increased to
approximately 31.6% in fiscal 1999 from approximately 27.0% in fiscal 1998. The
increase is mainly due to additional SG&A expenses resulting from the
acquisitions of STEAG RTP Systems Inc. ($7.8 million) and STEAG CVD Systems
Ltd. ($2.2 million) and to unusual charges related to these acquisitions of
$1.9 million for stay bonuses as compensation for the cancellation of employee
stock option plans, and $0.8 million for other costs, relating primarily to
lay-offs and management severance packages. In addition, SG&A expenses
increased as a result of higher sales volumes, primarily in the sales and
service subsidiaries in Asia. In fiscal 2000, SG&A spending in absolute dollars
is expected to increase as a result of the expenses incurred for legal and
financial advisers in connection with the proposed business combination with
Mattson.

   Goodwill amortization increased to $13.3 million in fiscal 1999 from $6.5
million in fiscal 1998. The increase in goodwill amortization from 1998 to 1999
reflects the acquisitions of STEAG RTP Systems, Inc. (formerly AG Associates,
Inc.) and STEAG CVD Systems Ltd. (formerly AG Associates (Israel) Ltd.) in
1999. The goodwill represents the excess of cost over the fair value of assets
acquired and liabilities assumed related to the acquisitions. Goodwill is being
amortized using the straight-line method over the life of the underlying
assets, generally 5 years.

   Other expense was $4.4 million in fiscal 1999 and $3.5 million in fiscal
1998. Other expense is mainly interest expense, net of interest income, of $4.5
million in fiscal 1999 and $3.2 million in fiscal 1998. This interest expense
is primarily due to financing provided by STEAG to the STEAG Semiconductor
Division by inter-company loans.

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<PAGE>

   For fiscal 1999, the STEAG Semiconductor Division recorded an income tax
benefit of $5.8 million compared to an income tax benefit of $7.1 million in
fiscal 1998. These tax benefits derive from the existing tax sharing unity
between the German STEAG Semiconductor Subsidiaries, STEAG RTP Systems GmbH and
STEAG MicroTech GmbH, on one side, and STEAG on the other side. This tax
sharing unity is achieved through profit and loss absorption agreements each of
the two German STEAG Semiconductor Subsidiaries has entered into with STEAG. As
a consequence of this tax sharing unity, no separate tax returns are prepared
for the subsidiaries but a consolidated tax return is filed at the parent
company level. Income and losses incurred by STEAG RTP Systems GmbH and STEAG
MicroTech GmbH are used for tax purposes at the STEAG level. STEAG either
charges the subsidiaries for its use of their taxable income or reimburses them
for use of their taxable loss, in each case using the "separate return method"
to calculate the hypothetical tax amount to be charged or reimbursed. In
addition, STEAG charges or reimburses, as the case may be, STEAG RTP Systems
GmbH and STEAG MicroTech GmbH for the remaining part of the subsidiary's income
or loss, respectively. At tax rates of 49% and 53% (corporate income tax plus
trade tax) in 1999 and 1998, respectively, the tax benefit from tax sharing
(without taking into account provisions for current taxes in Germany) amounted
to $5.6 million and $8.8 million in 1999 and 1998, respectively. As a result of
the proposed business combination agreement with Mattson, the profit and loss
absorption agreements will be canceled at the end of fiscal year 2000. New tax
legislation recently passed by the German Parliament (Bundestag) will
significantly lower the effective tax rate for fiscal year 2001. The STEAG
Semiconductor Division will be subject to an applicable tax rate of 39% for
fiscal 2001.

   For the non-German STEAG Semiconductor Subsidiaries, realization of the tax
benefits related to the group's deferred tax assets is dependent upon the
generation of future taxable income. Due to significant net losses incurred
through December 31, 1999 and uncertainty surrounding the utilization of
deferred tax assets, management has evaluated its deferred tax assets and
provided a full valuation allowance at December 31, 1999 and 1998.

   The STEAG Semiconductor Division's systems backlog as of December 31, 1999
was approximately $49.8 million, as compared to $19.6 million at December 31,
1998. The increase in backlog was mainly a result of increased orders for wet
processing products and the acquisition of STEAG RTP Systems, Inc. The STEAG
Semiconductor Division includes in its backlog customer purchase orders that
have been accepted and to which shipment dates have been assigned within the
next twelve months. All orders are subject to cancellation or delay with
limited or no penalty. Because of possible changes in the delivery schedules
and additions or cancellations of orders, the STEAG Semiconductor Division's
backlog at any particular date is not necessarily indicative of actual sales
for any succeeding period.

Liquidity and Capital Resources

   As of June 30, 2000, the STEAG Semiconductor Division had cash and cash
equivalents of $24.0 million compared to $7.0 million as of June 30, 1999.
During the six month period ended June 30, 2000, cash and cash equivalents
increased by $13.8 million. Shareholder's equity at June 30, 2000 was $189.3
million, up from $68.6 million as of June 30, 1999. The increase in
shareholder's equity is primarily due to a conversion of intercompany debt into
equity by STEAG, effective June 30, 2000. Working capital at June 30, 2000 was
$108.0 million, up from $3.4 million at June 30, 1999.

   Net cash used in operating activities was $30.6 million during the six
months ended June 30, 2000 as compared to $0.9 million during the same period
of last year. The net cash used in operating activities during
the six months ended June 30, 2000 was primarily due to the net loss of $10.8
million, an increase in accounts receivable of $18.8 million, and an increase
in inventories of $18.1 million. These were partially offset by depreciation
and amortization expense of $12.3 million and an increase of accrued
liabilities of $10.5 million.

   Net cash used in investing activities was $16.6 million during the six
months ended June 30, 2000 and $53.4 million during the corresponding period in
1999. Capital expenditures of $2.9 million in the first half of fiscal year
2000 were partially offset by proceeds from sales of equipment of $1.1 million.
In addition, $14.7 million, net of cash acquired, was spent for the acquisition
of STEAG CuTek Inc. during the six months

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<PAGE>

ended June 30, 2000. The net cash used in investing activities during the first
half of fiscal year 1999 consisted of $50.2 million for the acquisition of
STEAG RTP Systems Inc. and STEAG CVD Systems Ltd. and capital expenditures of
$3.7 million, offset by proceeds from sales of equipment of $0.4 million.

   Net cash provided by financing activities was $61.3 million during the six
months ended June 30, 2000 as compared to $45.5 million during the
corresponding period in 1999. The net cash provided by financing activities
during the six months ended June 30, 2000 is primarily attributable to an
increase in short term borrowings and a capital increase of $45.9 million and
$15.4 million, respectively. Effective June 30, 2000, intercompany debt
totaling $100.9 million was converted into equity by STEAG.

   The STEAG Semiconductor Division was dependent on STEAG for financial
support in order to meet its obligations as they became due. STEAG has provided
to management of the STEAG Semiconductor Division assurance of continued
financial support at least through December 31, 2000.

   As of December 31, 1999, the STEAG Semiconductor Division had cash, cash
equivalents and short-term investments of $10.2 million compared to $16.0
million as of December 31, 1998. The decrease of $5.8 million from fiscal 1998
to 1999 was primarily attributable to cash used in operations and capital
expenditures, offset in part by short-term borrowings. Working capital
increased to $18.9 million at December 31, 1999 from $2.9 million at
December 31, 1998, caused by the acquisitions of STEAG RTP Systems, Inc., and
STEAG CVD Systems Ltd. and by the market recovery during 1999.

   As described above, the two German STEAG Semiconductor Subsidiaries, STEAG
MicroTech GmbH and STEAG RTP Systems GmbH, are parties to profit and loss
absorption agreements, pursuant to which the subsidiaries transfer profits, if
any, at the end of the fiscal year to STEAG and in return STEAG compensates the
subsidiaries for any losses that the subsidiaries may suffer at the end of the
fiscal year. The profit and loss absorption agreements enable STEAG to file tax
returns in Germany on a consolidated basis. In connection with the proposed
business combination with Mattson, the profit and loss absorption agreements
will be terminated as of December 31, 2000. The net losses reimbursed by STEAG
to the two German STEAG Semiconductor Subsidiaries pursuant to such agreements
were $11.5 million and $16.7 million in 1999 and 1998, respectively, and were
offset against intercompany loans from STEAG.

   Substantially all of the STEAG Semiconductor Division's financing
requirements are provided by loans from STEAG. In connection with the
Transactions, the existing balances on these loans as of June 30, 2000, are
being converted into equity investments by STEAG. This will lead to
significantly lower interest expenses in fiscal year 2000. The STEAG
Semiconductor Division was dependent on STEAG for financial support in order to
meet its obligations as they became due. STEAG has provided to management of
the STEAG Semiconductor Division assurance of continued financial support at
least through December 31, 2000.

   STEAG Electronic Systems Japan Co., Ltd., a STEAG Semiconductor Subsidiary,
has a Yen 700 million line of credit agreement with the Bank of Yokohama, Ltd.
(Japan), dated August 19, 1997, which is guaranteed by STEAG's parent company,
STEAG AG. The interest rate on the line of credit is TIBOR + 1.88% and the
STEAG Semiconductor Subsidiary had an outstanding balance as of June 30, 2000,
of Yen 513.2 million. The STEAG Semiconductor Subsidiary has negotiated a Yen
500 million line of credit with another bank in order to replace the Bank of
Yokohama line of credit which expires on September 30, 2000. The interest rate
on the new line of credit is TIBOR + 1.5% and it expires on September 30, 2002.

   Capital expenditures decreased from $13.6 million in fiscal 1998 to $10.9
million in fiscal 1999. An amount of $6.8 million was spent in 1998 for wet
processing demonstration tools. In 1999, $3.5 million was spent by the newly
acquired STEAG RTP Systems, Inc.

   The STEAG Semiconductor Division's operating activities used cash of $30.8
million during fiscal 1999. The net loss of $51.5 million, increases in
accounts receivable of $11.1 million and inventories of $2.7 million, were
offset by depreciation and amortization of $25.5 million, increases in accounts
payable of $5.3 million and an increase in accrued liabilities of $2.2 million.

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   The STEAG Semiconductor Division's operating activities generated cash of
$3.2 million during fiscal 1998. The net loss of $22.3 million and a decrease
in accrued liabilities of $23.5 million were offset by depreciation and
amortization of $13.8 million, a decrease in inventories of $17.8 million, a
decrease of accounts receivables of $12.2 million and an increases in accounts
payable of $4.9 million.

   Cash used in investing activities was $59.2 million in fiscal 1999 and $12.9
million in fiscal 1998. Capital expenditures of $10.9 million in fiscal 1999
were partially offset by proceeds from sales of equipment of $1.9 million. An
amount of $50.2 million was spent for the acquisitions of STEAG RTP Systems
Inc. and STEAG CVD Systems Ltd. Capital expenditures totaling $13.6 million
were the principal uses of cash in investment activities in fiscal 1998. This
amount was partially offset by proceeds from sales of equipment of $0.6
million. STEAG expects that capital expenditures will be approximately $10
million in fiscal 2000, principally to support facilities and new product
development.

   Financing activities provided cash of $84.1 million in fiscal 1999,
primarily from a capital increase of $54.8 million and borrowings under a line
of credit provided by STEAG to the STEAG Semiconductor Division. Financing
activities provided cash of $17.8 million in fiscal 1998, primarily from short
term borrowings of $19.7 million, offset in part by repayment of loans from
STEAG.

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

   Net sales for the six month period ended June 30, 2000 were $115.3 million
and increased 106% from $56.0 million in the corresponding period in fiscal
year 1999. The increase in net sales in the first half of 2000 was a result of
the strong recovery of the semiconductor equipment market.

   Bookings in the first half of fiscal year 2000 were $163.9 million, an
increase of 82.1% compared to bookings of $90.0 million in the first half of
fiscal year 1999, resulting in a book to bill ratio of 1.42 to 1.0 in the first
half of fiscal year 2000. As of June 30, 2000, backlog was $93.1 million, as
compared to $56.9 million at June 30, 1999.

   Gross profit as a percentage of net sales improved to 49.4% for the six
month period ended June 30, 2000 from 31.3% in the same period of the prior
year. The increase in gross profit is in part due to fixed cost absorption over
higher sales volumes and efficiency improvements. In addition, the gross profit
in the six month period ended June 30, 1999 was negatively affected by certain
charges following the acquisition of STEAG RTP Systems, Inc.; no such charges
have been recorded in the first half of fiscal 2000.

   R&D expenses in the first half of fiscal year 2000 were $20.6 million or
17.9% of net sales, as compared to $16.3 million, or 29.1% of net sales for the
corresponding period in fiscal year 1999. The increase in absolute dollars in
2000 is in part due to the acquisition of STEAG CuTek ($1.2 million) and to the
consolidation of STEAG RTP Systems, Inc. for the whole six-month period in
fiscal year 2000, compared with a consolidation over 4 months in the first half
of fiscal year 1999.

   SG&A expenses increased to $34.4 million in the six month period ended June
30, 2000 from $25.7 million in the corresponding prior year period, an increase
of approximately 33.9%. As a percentage of net sales, SG&A expenses decreased
to approximately 29.8% in the first half of fiscal year 2000 from approximately
45.9% in the first six months of fiscal year 1999. The increase in absolute
dollars reflects mainly higher sales volumes. In the remainder of fiscal year
2000, SG&A spending in absolute dollars is expected to further increase as a
result of the expenses incurred for auditors, legal and financial advisers in
connection with the proposed business combination with Mattson.

   Goodwill amortization increased from $6.3 million in the first half of
fiscal year 1999 to $8.2 million in the first half of fiscal year 2000. This
increase is due to the acquisition in the first quarter of fiscal year 1999
(STEAG RTP Systems, Inc.) and in February 2000 (STEAG CuTek, Inc.).

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<PAGE>

   Other expense was $1.4 million and $4.0 million in the period ended June 30,
2000 and 1999, respectively. Interest expense, net of interest income,
increased to $2.4 million in the first half of fiscal year 2000 from $1.8
million in the corresponding prior year period. This interest expense is
primarily due to financing STEAG provided to the STEAG Semiconductor Division
by inter-company loans.

   For the six month period ended June 30, 2000, the STEAG Semiconductor
Division recorded income taxes of $3.2 million, compared to an income tax
benefit of $0.1 million in the corresponding period of fiscal year 1999. The
income taxes are mainly caused by the profits of STEAG RTP Systems GmbH. Income
taxes and tax benefits are affected by the existing tax sharing unity resulting
from the profit and loss absorption agreements between the two German STEAG
Semiconductor Subsidiaries, STEAG RTP Systems GmbH and STEAG MicroTech GmbH, on
one side, and STEAG, on the other side, described above.

   For the non-German STEAG Semiconductor Subsidiaries, realization of the tax
benefit related to the group's deferred tax assets is dependent upon the
generation of future taxable income. Despite profits generated in some entities
through June 30, 2000 and due to uncertainty surrounding the utilization of
deferred tax assets, management has evaluated its deferred tax assets and
provided a full valuation allowance at June 30, 2000 and 1999.

Qualitative and Quantitative Disclosures About Market Risk

   Due to the STEAG Semiconductor Division's international business activities,
the STEAG Semiconductor Division settles numerous purchase orders in foreign
currency, which, because of changes in foreign currency exchange rates, may
adversely affect the results of operations and financial position of the STEAG
Semiconductor Division. In order to limit these risks, the STEAG Semiconductor
Division enters into forward contracts. These forward contracts serve only to
secure receivables in foreign currency and are not for speculative or trading
purposes. As of December 31, 1999, the STEAG Semiconductor Division had forward
contracts with nominal values of $52,928 and fair values of $56,018,
respectively. Other than such forward contracts, the STEAG Semiconductor
Division does not hold derivative instruments or other investments subject to
market risks.

Security Ownership

   The STEAG Semiconductor Division is comprised of eleven companies. All of
the issued and outstanding share capital of each of the STEAG Semiconductor
Subsidiaries is beneficially owned by STEAG. All of the outstanding shares of
STEAG are beneficially owned by STEAG AG, a power generation and electronics
company based in Essen, Germany.

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                                BUSINESS OF CFM

General

   CFM and its subsidiaries design, manufacture and market advanced wet
processing equipment for sale to the worldwide semiconductor industry. CFM
believes that its patented Full-Flow(TM) Technology and Direct-Displacement(TM)
drying enable it to provide wet processing systems that address a variety of
limitations inherent in conventional semiconductor wet processing systems,
including wet benches and spray tools, resulting in significantly lower cost of
ownership. CFM's customers include: Agilent Technology, Anam Semiconductor
Company, Infineon Technology, International Business Machines, Macronix,
Microchip Semiconductor, Motorola, National Semiconductor, STMicroelectronics,
Texas Instruments, Tower Semiconductor and United Microelectronics.

Industry Background

 Market Overview

   Over the past two decades, increasing demand for integrated circuits ("ICs")
has resulted primarily from the growth of the personal computer and data
communication markets, as well as the emergence of new markets such as wireless
communications, mobile computing and multimedia and the addition of
microprocessor control to many common consumer products such as automobiles,
kitchen appliances and audio/video equipment. In large part, this demand has
been driven by the semiconductor industry's ability to provide increasingly
complex, higher performance ICs while steadily reducing the cost per function
along with lower power consumption. These improvements in the ratio of price to
performance have been driven by advancements in semiconductor process
technology, which have enabled the cost-effective production of high density
ICs with linewidths well below 0.25 micron.

   As demand for ICs has grown, semiconductor manufacturers have increased
capacity by expanding and updating existing fabrication facilities ("fabs") and
constructing new fabs. This expansion has historically exhibited strong
cyclical characteristics, and continues to do so. For example, in 1997 a
significant overcapacity situation developed in the semiconductor device
market, especially in dynamic random access memory ("DRAM") chips. This,
together with the Asian financial crisis, led to a reduction in the
semiconductor capital equipment demand as semiconductor manufacturers cancelled
or postponed capacity expansions. This situation continued into 1998.

   The increasing complexity of ICs has resulted in an increase in both the
number and cost of process tools (such as steppers, etchers, furnaces and wet
processors) required to manufacture semiconductors. In a typical fab in the
1980s, the cost of equipment represented approximately 50-55% of the total
facility costs.

   Today, the total cost of an advanced fab exceeds $1 billion, of which
equipment costs can account for over 80%. Semiconductor manufacturers place
great pressure on process equipment manufacturers to decrease the cost of
ownership of their products. The principal elements of cost of ownership are
yield, throughput, capital costs and direct costs. Yield is primarily
determined by contamination levels and process uniformity.

   Throughput is primarily a function of the time required to complete a
process cycle, the number of wafers processed in a single cycle and the
handling time between process cycles. Capital costs include the cost of
acquisition and installation of the process equipment. Direct costs primarily
include consumables used in the manufacturing process and costs of cleanroom
space occupied by the equipment. Semiconductor device manufacturers must also
address environmental costs such as water usage and costs related to the
control and disposal of chemical waste and atmospheric emissions associated
with operating a fab. Measuring and maintaining an acceptable level of cost of
ownership becomes increasingly challenging as manufacturing processes become
more complex and process tolerances narrow.


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 Wet Processing in Semiconductor Manufacturing

   The manufacture of semiconductors requires a large number of complex process
steps during which transistors are formed and layers of electrically insulating
or conducting materials are created or deposited on the surface of a silicon
wafer. Before and after many of these steps, it is necessary to clean, etch,
strip or otherwise condition the surface of the wafer in order to remove
unwanted material or surface contamination in preparation for a subsequent
process step. SEMATECH, a consortium of semiconductor manufacturers, has
estimated that over 400 fabrication steps are required to manufacture advanced
logic ICs, and that approximately 55 of these steps are accomplished by wet
processing.

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

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

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

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

   Large Physical Size. The cost of cleanroom space is a significant component
in the overall cost of ownership calculation for a specific piece of equipment.
Wet benches configured for the multiple-step wet processes required by many
manufacturers can be over 30 feet in length. Recently, manufacturers of wet
benches have begun to develop products which use more than one processing fluid
in a single bath in an effort to reduce the size of their products. These
"reduced bath" or "single bath" wet bench products use more expensive cleanroom
space than a Full-Flow platform and retain the other disadvantages of this
conventional wet processing method.

   Environmental Impact. Due to the large volume of the open baths which
comprise a wet bench and the need for multiple step wet processes to
manufacture increasingly complex ICs, wet benches typically consume large
quantities of water during processing. Water costs represent a significant
portion of the total cost of cleaning. Additionally, in many wet bench
processes, large amounts of chemicals are utilized. The open nature of the
baths in a typical wet bench necessitates expensive ventilation and air
filtration systems in order to remediate chemical fume emissions. As a result,
municipalities and environmental authorities are increasingly concerned about
water consumption and chemical fume emissions by fabs. Due to the continuing
reduction of semiconductor device geometries and the escalating cost of leading
edge fabs, CFM believes that semiconductor manufacturers are becoming
increasingly sensitive to the foregoing limitations inherent in conventional
wet processing methods.

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<PAGE>

The CFM Solution

   CFM's systems are based on its proprietary Full-Flow wet processing
technology and are used to perform various cleaning, stripping and etching
process steps in the manufacture of semiconductors. In CFM's OMNI wet
processing systems, up to 150 wafers automatically load into an enclosed, flow-
optimized vessel that has a lower fluid inlet and an upper fluid outlet. The
system process chamber is fabricated to conform to the size of silicon wafers
used by the customer. Once a selected process is begun, the vessel is
completely filled with process fluid at all times, with fluids displacing one
directly after another without exposing the wafers to air.

   CFM believes that its patented Full-Flow and Direct-Displacement drying
technologies result in superior process performance and lower cost of ownership
by offering the following advantages over conventional wet processing systems:

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

   Substantial Elimination of Watermark Defects and Native Oxide Growth. The
formation of watermarks is substantially eliminated through the prevention of
water evaporation from the wafer surface. Once the chemical treatment of the
wafers is completed, drying is accomplished using CFM's patented Direct-
Displacement drying technology. With this technique, the final rinse water is
directly displaced with isopropyl alcohol ("IPA") vapor and substantially all
water is forced off the surface of the wafer before it is exposed to an air
environment. Additionally, native oxide growth is suppressed by deoxygenating
the water immediately before it enters the vessel. Since the vessel itself is
totally enclosed, the ultra pure water in the vessel is not able to absorb
oxygen, carbon dioxide and other gases from the cleanroom environment. As a
result, the gas content of the water at the surface of the wafers is controlled
to a degree not possible in a wet bench or spray tool.

   Tight Process Control. Process precision and repeatability result in large
part from the ability to control accurately the physical and chemical
properties of the processing liquids as well as transitions between process
steps.

   CFM's processes are performed in an enclosed vessel, thereby substantially
reducing variability of the processing fluid such as water and chemical
evaporation and absorption of atmospheric gases. Additionally, because one
process liquid directly displaces the previous one, there is no exposure to the
cleanroom atmosphere between process steps.

   Cleanroom Space Savings. OMNI systems have been designed to consume a
minimum amount of cleanroom space. System support modules can be located
outside the cleanroom and away from the vessel module. In many fabs, this means
that these support modules can be located on a separate level, further reducing
the amount of footprint that is required on the main floor of the fab where
floor space is most expensive. One of CFM's products, a shared-module OMNI
system capable of processing 100 8-inch wafers in each of two vessels requires
approximately 13 linear feet of cleanroom wall space and makes no direct usage
of cleanroom floor space when flush-mounted. This is significantly less than
the space requirements of a wet bench with a similar processing capacity, which
CFM believes can require up to 350 square feet of total cleanroom floor space
and approximately 35 linear feet of cleanroom wall space.

   Environmental Advantages. CFM believes that its OMNI systems utilize less
than one-half of the water required by traditional wet bench systems performing
similar processing steps. Additionally, most of the water in wet bench systems
flows around the wafer carrier rather than across the surface of the wafers. In
CFM's

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flow-optimized OMNI systems, substantially no water is lost as bypass flow.
These enclosed systems also reduce the amount of process chemicals consumed and
the equipment and related costs of remediation of chemical fume emissions
associated with traditional wet processing.

Strategy

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

   Increase Current Market Share. CFM seeks to continue to expand its share of
the semiconductor critical cleaning and etching wet processing market through
expansion of its sales and marketing and customer satisfaction efforts.
Significant effort has been expended to increase CFM's responsiveness to
customer needs. CFM believes that the customer community has responded
positively to these efforts. CFM also intends to continually improve its
existing OMNI platform in order to offer enhanced technical capabilities and
lower cost of ownership benefits for currently served critical wet processing
applications. Following an analysis of the size of the FPD wet processing
equipment market, the potential for successful market penetration and the
volatility of that market, CFM will offer for sale only those FPD system
configurations that have already been developed and tested and does not
anticipate significant continuing sales to manufacturers of FPD's.

   Broaden Semiconductor Market Penetration. CFM intends to leverage its OMNI
products to address additional wet processing applications in the semiconductor
manufacturing process where it believes its proprietary technology can provide
important benefits over competing wet processing technologies. By basing new
process applications on these platforms, CFM will focus primarily on the
development and optimization of each application's process recipes. CFM
believes this approach will reduce the time and cost associated with supporting
new wet processing applications. CFM has completed a joint development project
with a major customer to qualify an OMNI system to perform aqueous cleaning
during copper interconnect formation, which is a new process application for
CFM's systems.

   Focus on Customer Satisfaction. CFM believes that its commitment to customer
satisfaction has been a critical factor in its success to date. To ensure a
high level of customer satisfaction, CFM provides comprehensive customer
service and support, thorough customer training and ongoing process
consultation. CFM has already developed a comprehensive customer service and
support organization, and has invested in this area by locating direct sales
and service staff in Europe in 1996 and in East Asia in 1997. CFM also intends
to continue to increase the utilization of its applications laboratory to
design and test new processes and equipment features. Finally, CFM has provided
an OMNI system completely dedicated to training CFM's customers and employees
at its West Chester training facility. In 1999 and again in 2000, CFM was
chosen as one of the 10 best customer rated companies in the VLSI Research
Incorporated Customer Satisfaction Companies report for wafer processing
equipment suppliers with sales of less than $300 million.

   Continue Commitment to Worldwide Markets. CFM believes that its long-term
success is substantially dependent on its ability to compete on a worldwide
basis. As such, CFM intends to continue to focus on expanding its sales
activities in the primary worldwide market for semiconductor capital equipment.
To date, CFM has achieved considerable success in selling to customers outside
the United States, with international sales accounting for over 60% of total
sales in 1996 and 1997, 46% of total sales in 1998, and 33% of total sales in
1999.

Products

   CFM's systems are based on its proprietary wet processing technology and are
used to perform various cleaning and etching process steps in the manufacture
of semiconductors.

   The Full-Flow Platform. CFM's proprietary Direct-Displacement drying
technology is embodied in its OMNI products, which principally consist of a
fully-enclosed processing vessel incorporating megasonic

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technology and associated systems software, hardware and control electronics.
Megasonic technology utilizes high frequency sonic energy to enhance particle
removal from the surface of semiconductor wafers during wet processing,
enabling a quicker process cycle and a significant reduction in the quantity of
process chemicals used. CFM believes that its OMNI products offer significant
improvements in process performance and a lower cost of ownership relative to
competing technologies. Conventional wet bench processes used for many wet
processing applications rely on a succession of open chemical baths and
extensive robotic automation to move semiconductor wafers from one chemical
bath to the next, which exposes them to contamination.

   In CFM's OMNI systems, wafers are loaded automatically into a enclosed flow-
optimized processing vessel. They are isolated from cleanroom air and
accompanying contaminants as a succession of process fluids are introduced into
the processing vessel one directly after another, flowing over the wafers to
complete the desired process application. Once processing is completed, wafers
are dried in situ using CFM's patented Direct-Displacement drying process. With
this technique, the final rinse water is directly displaced with IPA vapor and
substantially all water is removed from the surface of the wafers before they
are exposed to the environment.

   This process substantially eliminates evaporative drying defects such as
watermarks, inhibits native oxide growth and significantly reduces particle
contamination. In competing technologies, wafers are exposed to intermediate
evaporative drying within the cleanroom atmosphere prior to the completion of
the final drying process. The optimized flow characteristics of the OMNI
processing vessels and their advanced process control and monitoring
capabilities provide process uniformity and repeatability. Also, CFM's systems
can be flush-mounted in the cleanroom wall, with the majority of the floor
space needed by the system components located outside the cleanroom
environment. Due to this flush-mounting and the OMNI system's comparatively
smaller size, it requires significantly less cleanroom floor space than
competing wet bench systems. CFM's OMNI system is based on a modular design and
can be configured to accomplish a broad range of wet processing applications
using a variety of process and support modules. By basing new process
applications on its proprietary OMNI platform, CFM can focus primarily on the
development and optimization of each application's process recipes.

   CFM believes this approach significantly reduces the time and cost
associated with developing new products to address additional market
opportunities.

   The following tables list CFM's product offerings:

                        CFM OMNI PLATFORM CONFIGURATIONS

<TABLE>
<CAPTION>
       Configuration                 Capacity                           List Price Range
       -------------               ------------                         -----------------
       <S>                         <C>                                  <C>
       Single Vessel               50-150 wafer                         $1.1-$1.9 million
       Shared Module               50-150 wafer                         $1.8-$3.0 million
</TABLE>

 Semiconductor Manufacturing Applications

   CFM first introduced its wet processing systems for use in semiconductor
manufacturing research and development facilities in 1988, and shipped its
first system for use in semiconductor production in 1990. To date, CFM has sold
over 240 vessels to more than 30 manufacturers. OMNI systems can currently be
configured with either one or two vessels, each of which can be designed to
accommodate 150mm, 200mm or 300mm wafers.

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<PAGE>

   The following table identifies the typical wet processing steps in
semiconductor manufacturing and indicates those which CFM's OMNI systems
currently perform in capital letters.


<TABLE>
<CAPTION>
                                                                 Photoresist Strip
Critical Cleaning Applications   Critical Etching Applications   Applications
------------------------------   ------------------------------  -----------------
<S>                              <C>                             <C>
INITIAL WAFER CLEAN              SILICON OXIDE ETCH              CONCENTRATED ACID CHEMISTRY
PRE-DIFFUSION CLEAN              POLYSILICON ETCH                RESIST
PRE-OXIDATION CLEAN              Silicon nitride etch            STRIP/POST-ASH
PRE-THIN FILMS DEPOSITION CLEAN  SILICIDE ETCH                   CLEAN (FRONT-END)
                                 Solvent chemistry resist
                                 strip/post-ash clean (back end)
</TABLE>

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

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

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

   Photoresist Strip Applications. Photoresist stripping operations involve the
removal of either ashed photoresist residue or un-ashed photoresist from the
surface of wafers after a patterning step has been completed. Resist stripping
is performed in both the front-end and the back-end, and CFM believes that this
process represents approximately 40% of all wet processing operations. Front-
end cleans and resist strips are generally performed with aqueous chemistries.
However, back-end cleans and resist strips presently must be accomplished with
different chemistries that often utilize solvents, as front-end water-based
chemistries are incompatible with aluminum, which is often present on wafers in
the back-end.

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

Customers

   CFM sells its systems to leading semiconductor manufacturers located in the
United States, Europe and East Asia. Sales to IBM and Macronix accounted for
approximately 25.1% and 14.3%, respectively, of net sales in fiscal 1999. Sales
to Agilent Technology, Anam Semiconductor Company, IBM, Infineon and National
Semiconductor accounted for approximately 10.3%, 14.8%, 19.6%, 13.3% and 10.4%,
respectively, of net sales in fiscal 1998.

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<PAGE>

   While CFM actively pursues new customers, there can be no assurance that CFM
will be successful in its efforts, and any significant weakening in customer
demand would have a material adverse effect on CFM.

Sales And Marketing

   CFM sells its systems through a combination of a direct sales force and East
Asian sales agents. CFM's field service personnel support its sales force. In
addition to the direct sales force at CFM's headquarters in Exton,
Pennsylvania, CFM has direct sales personnel located in Georgia, Texas, Arizona
and California. CFM supports the European market through its North American
direct sales force. CFM covers the Asian market with a director of sales and
marketing and a direct salesperson based in Singapore. CFM signed agreements
with Ampoc Far East Company Limited ("AMPOC") a sales agent in Taiwan in 1996,
Silicon International Ltd ("Silicon International") CFM's sales distributor in
the Peoples Republic of China in 1997, and Aneric Enterprise Pte Ltd.
("Aneric") CFM's sales agent in other areas of southeast Asia in 1997.

Customer Satisfaction

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

   CFM's customer satisfaction organization is headquartered in Exton,
Pennsylvania, with additional employees and consultants located in Arizona,
Colorado, Texas, Vermont, France, Germany, Taiwan and the United Kingdom.

   Generally, CFM's support personnel have prior technical backgrounds in the
mechanical, electronic or chemical processing industries and prior experience
or training in semiconductor manufacturing processes. Field support personnel
also perform warranty and after-warranty service and sales support. CFM's
products are typically sold with a 12 month warranty covering all parts and
labor, which commences upon completion of installation and final acceptance.

Backlog

   CFM manages its production forecast using both backlog and projected system
orders. CFM includes in backlog only customer purchase orders which have been
accepted by CFM and for which shipment dates have been assigned within the
following 12 months. Orders are generally subject to delay without penalty, but
may contain cancellation penalties. As of October 31, 1999, CFM's backlog was
approximately $10.6 million. As of October 31, 1998, CFM's backlog was
approximately $8.8 million. It has been the experience of CFM that neither the
backlog nor the pattern of receipt of orders is necessarily indicative of
future orders or revenues.

Research, Development And Engineering

   CFM utilizes its applications and component testing laboratories in West
Chester, Pennsylvania to test new equipment and processes, design new features
and train customer and Company personnel. By basing new applications on its
proprietary OMNI platform, CFM can reduce substantially the time and cost
required to develop new process applications by focusing primarily on the
optimization of each application's process recipe. CFM is currently focusing
its research, development and engineering efforts on equipment to support
additional wet process applications, to extend the productivity of the current
platform and to improve system reliability. In April 1998, CFM shipped its
first 300mm system. In November 1999 CFM received a follow-on 300mm order based
upon the success of the initial system. See "Risk Factors" beginning on page 13
of this joint proxy statement-prospectus.

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<PAGE>

   The markets in which CFM and its customers compete are characterized by
rapidly changing technology, evolving industry standards and continuous
improvements in products and services. Because of continual changes in these
markets, CFM believes that its future success will depend, in part, upon its
ability to continue to improve its systems and its process technologies and to
develop new system applications which compete effectively on the basis of COO,
including yield, throughput, capital and direct costs and system performance.
In addition, CFM must adapt its systems and processes to technological changes
in order to support the standards required by emerging target markets.

   CFM's research, development and engineering expenses for the 1999, 1998 and
1997 fiscal years were $10.0 million, $11.5 million and $9.3 million,
respectively, representing 31.8%, 34.6% and 12.3% of net sales, respectively.
Research, development and engineering expenses were net of reimbursements of
$0, $0 and $890,000, respectively, for the 1999, 1998 and 1997 fiscal years.

Competition

   CFM faces substantial competition in its markets from both established
competitors and potential new entrants. CFM believes that the primary
competitive factors in the markets in which it competes are customer
satisfaction, yield, throughput, capital and direct costs, system performance,
size of installed base and breadth of product line. CFM believes that it
competes favorably with respect to each of these factors. CFM also faces the
challenge posed by the commitment of most semiconductor manufacturers to
entrenched, competing technologies.

   Most of CFM's competitors have been in business longer than CFM, offer
traditional wet processing technology, and have broader product lines, more
experience with high volume manufacturing, broader name recognition,
substantially larger installed bases and significantly greater financial,
technical and marketing resources than CFM. In the semiconductor wet processing
market, CFM competes primarily with Dainippon Screen, FSI International, SCP
Global Technologies, Akrion, Semitool, Tokyo Electron Limited and Verteq. There
can be no assurance that these competitors will not also develop enhancements
to or future generations of competitive products that will offer price or
performance features that are superior to CFM's systems or that CFM's products
will gain market acceptance.

   CFM believes that in order to remain competitive, it must invest significant
financial resources in developing new product features and enhancements,
defending its intellectual property and in maintaining customer satisfaction
worldwide. In marketing its products, CFM will face competition from suppliers
employing new technologies in order to extend the capabilities of competitive
products beyond their current limits or increase their productivity. Once a
manufacturer has selected a particular vendor's capital equipment, CFM believes
that the manufacturer generally relies upon that equipment and frequently will
attempt to consolidate related capital equipment requirements with the same
vendor, to the degree that such consolidation is possible. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and margins, which would materially
adversely affect CFM's business and results of operations.

Manufacturing

   CFM's primary manufacturing operations are based in Exton, Pennsylvania, and
consist of procurement, assembly and test engineering. CFM also has operations
in a Company owned facility in West Chester, Pennsylvania, where it
manufactures certain subassemblies. CFM leases a 60,000 square foot production
facility in Exton, Pennsylvania. The facility more than doubled the previous
production capacity and was substantially completed as of October 31, 1998.
Occupancy of this new production facility took place in February 1999.

   CFM's OMNI systems are based upon a common set of modules, enabling CFM to
reduce manufacturing costs by using a large number of common subassemblies and
components. Many of the major subassemblies

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<PAGE>

are purchased complete from outside sources. CFM focuses its manufacturing
efforts on carefully documented assembly and integration activities which CFM
has determined to be critical to the successful operation of its products.

   In 1994, as a result of adoption of SEMATECH measurement and improvement
methodologies, CFM began a concerted effort to meet the requirements of ISO
9001, the international standard for quality systems. In February 1997, CFM
received ISO 9001 certification, which it continues to maintain. In 2000, CFM
received certification under ISO 14001, the international standard for
environmental management systems.

   Certain of CFM's components and subassemblies are obtained from sole
suppliers or limited groups of suppliers, which are often small, independent
companies. Moreover, CFM believes that certain of these components and
subassemblies can only be obtained from its current suppliers. CFM generally
acquires such components on a purchase order basis and has supply contracts of
up to one year in duration. CFM's reliance on outside vendors generally, and on
sole suppliers in particular, involves several risks which are discussed in
"Forward Looking Statements and Risk Factors--Sole or Limited Sources of
Supply." However, historically CFM has not experienced any significant delays
in manufacturing due to an inability to obtain components, and CFM is not
currently aware of any specific problems regarding the availability of
components which might significantly delay the manufacturing of its systems in
the future.

Regulatory Matters

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

Intellectual Property

   CFM relies on a combination of patent, copyright, trademark, trade secret
laws, nondisclosure agreements, and other forms of intellectual property
protection to protect its proprietary technology. CFM currently holds thirteen
patents in the United States, eight patents in Japan, three patents in Korea,
one patent in Singapore, and thirteen patents in various European countries.
CFM also has multiple patent applications pending in the United States and
various foreign jurisdictions.

   The technology covered in the existing patents includes CFM's Full-Flow
process and Direct-Displacement drying technologies upon which CFM's current
product offerings are based. While CFM recognizes that these patents have
significant value, CFM also believes that the innovative skills, technical
expertise and know-how of its personnel in applying the art reflected in these
patents would be difficult, costly, and time consuming to reproduce.

Employees

   As of October 31, 1999, CFM had 258 employees, of which 221 were full-time
and the balance part-time employees. There were 76 employees in manufacturing
operations, 56 in research, development and engineering, 22 in sales and
marketing, 78 in customer satisfaction and field support and 26 in general
administrative and finance positions. Of the 258 total full-time employees, 10
were located in Asia and 16 were located in Europe.

   While CFM has generally been able to find qualified candidates to fill new
positions, personnel shortages occasioned by the strong economy and low
unemployment continue to make it more difficult to recruit

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<PAGE>

qualified candidates for certain positions in design, field support, testing
and process engineering. Once replacement personnel are recruited, CFM then
faces the task of training and integrating these new employees. There can be no
assurance that CFM will be successful in retaining, recruiting, training and
integrating the necessary key personnel following the end of the downturn in
the semiconductor equipment sector, and any failure to expand these areas in an
efficient manner could have a material effect on CFM's results of operations.

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

Litigation

   CFM is currently litigating three ongoing cases involving the CFM's
intellectual property. CFM has asserted claims of its U.S. Patent No. 4,911,761
(the "761 patent") against a defendant in CFM and CFM Technologies, Inc. v.
YieldUP International Corp., Civil Action No. 95-549-RRM, alleging
infringement, inducement of infringement, and contributory infringement. CFM
further asserted claims of U.S. Patent Nos. 4,778,532 (the "532 patent") and
4,917,123 (the "123 patent") against this defendant in a subsequent action,
CFM, Inc. and CFM Technologies. v. YieldUP International Corp., Civil Action
No. 98-790-RRM. In addition, CFM is also both a defendant and a counterclaim
plaintiff in a third litigation, Dainippon Screen Manufacturing Co., Ltd. and
DNS Electronics, LLC v. CFM, Inc. and CFM Technologies, Inc., Civil Action No.
97-20270 JW. In this action, the plaintiffs seek a declaratory judgment of
invalidity and unenforceability of the "761 patent and U.S. Patent No.
4,984,597 (the "597 patent"), and a declaratory judgment of non-infringement of
the "761 patent. CFM has counterclaimed alleging infringement, inducement of
infringement, and contributory infringement of certain claims of each of the
"761 patent, the "532 patent, the "123 patent, and the "597 patent. Dainippon
Screen Manufacturing Co., Ltd. and DNS Electronics, LLC have also filed an
antitrust count against CFM charging improper use of patents known to be
invalid.

   On September 11, 1995, CFM brought an action against YieldUP International
Corp. ("YieldUP") in the United States District Court for the District of
Delaware. CFM seeks damages and a permanent injunction to prevent further
infringement. YieldUP has denied infringement and has asserted, among other
things, that the subject patent is invalid and unenforceable. On October 14,
1997, the District Court issued a decision granting summary judgment in favor
of YieldUP on the grounds that the process used in YieldUP processing equipment
does not infringe the "761 patent. The District Court subsequently granted
CFM's request for reargument of the decision, and CFM and YieldUP have
submitted additional briefs on the issue. The District Court has not issued a
decision on the reargued summary judgment motion.

   On December 30, 1998, CFM filed an additional lawsuit in the United States
District Court for the District of Delaware charging patent infringement of the
"123 and "532 patents by YieldUP. CFM is seeking a permanent injunction
preventing YieldUP from using, making or selling equipment that violates these
patents and requests damages for past infringement. YieldUP amended its Answer
to CFM's Complaint, asserting counterclaims for alleged tortious interference
with prospective economic advantage and defamation, a declaratory judgment that
the patents are unenforceable due to applicants' alleged inequitable conduct in
obtaining the patents, and seeking compensatory and punitive damages. Fact
discovery in this lawsuit closed on December 10, 1999. A claims construction
and pre-trial hearing for this action was held on March 15, 2000. On April 4,
2000, the District Court issued an Order granting a YieldUP motion for summary
judgment and denying CFM's cross-motion for summary judgment. In this Order,
the District Court found that the "532 and "123 patents were both invalid due
to lack of enablement. In this same Order, the District Court construed the
claims of the "532 and "123 patents. CFM filed a motion seeking reconsideration
and re-argument of the summary judgment ruling, which the District Court denied
on August 10, 2000. YieldUP has agreed to withdraw with prejudice the tortious
interference and defamation counts. A bench trial on the remaining inequitable
conduct count was held on July 28, 2000. The District Court has not yet ruled
on the inequitable conduct count nor entered final judgment that the "532 and
"123 patents are invalid for lack of enablement.

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   In March, 1997, another competitor, Dainippon Screen Mfg. Co. Ltd. and DNS
Electronics LLC (collectively "DNS"), filed a suit against CFM in the United
States District Court for the Northern District of California. In this action,
DNS requested the Court to declare that DNS does not infringe the "761 patent
and that the patent is invalid and unenforceable. DNS also sought monetary
damages and injunctive relief for alleged violations of the Lanham Act, unfair
competition, tortious interference with prospective economic advantage, and
unfair advertising. The Court dismissed the patent counts on the grounds of
lack of personal jurisdiction and absence of an indispensable party. DNS
appealed this ruling and the appellate court reversed the district court
decision on April 29, 1998. The causes of action relating to the Lanham Act,
unfair competition, tortious interference with prospective economic advantage,
and unfair advertising were dismissed without prejudice. The remainder of the
case has been returned to the district court.

   CFM answered DNS's Complaint and counterclaimed, alleging infringement by
DNS of the "532, "123, and "761 patents. A claims construction hearing was held
on November 12, 1999, and an initial Claims Construction Order issued on
December 9, 1999, and two subsequent claims construction Orders were issued on
July 12, 2000. In February, 2000, DNS added two additional counts to this
litigation: one for antitrust violations and additional declaratory judgment
counts that the "597 patent was invalid and unenforceable. The antitrust count
asserts that CFM knowingly brought causes of action against competitors with
patents--the "761 patent and the "597 patent--that CFM knew were invalid or
unenforceable. In the new declaratory judgment count, DNS has asked the court
to declare that DNS does not infringe the "597 patent and that this patent is
invalid and unenforceable. CFM counterclaimed asserting infringement,
inducement of infringement, and contributory infringement of the "597 patent. A
Markman (i.e., Claims Construction) hearing on the "597 patent was held on July
21, 2000, and there has been subsequent briefing as to the proper construction
of the asserted claims of the "597 patent. No claims construction ruling has
issued yet as to the "597 patent. As a result of the additional new counts, the
liability trial now is scheduled for February 2001.

   DNS has recently moved the court for permission to update its antitrust
count, and to add new counts for unfair competition, interference with business
relations, and trade libel into the case. That motion is still pending.
Furthermore, as a result of the Summary Judgment finding of invalidity due to
lack of enablement of the "532 and "123 patents in the YieldUP case, DNS has
requested that the counts concerning these two patents be stayed pending
further results in the YieldUP case. The damages issues for all patent and
antitrust counts have been bifurcated, and will be tried only after liability
issues have been resolved.

   CFM has recently settled actions with a third competitor, STEAG, as a result
of the pending mergers involving STEAG, CFM, and Mattson. These settled actions
include an infringement case brought by CFM and CFMT, Inc. against STEAG
Electronic Systems, Inc. (formerly STEAG MicroTech, Inc.) in the United States
District Court for the District of Delaware involving the "761 patent, CFMT,
Inc. and CFM Technologies, Inc. v. STEAG MicroTech, Inc., Civil Action No. 95-
CV442, as well as nullification proceedings brought by a subsidiary of STEAG
against CFM's drying patents in Germany (DE68921757.8), France (EP428,784),
Netherlands (23184), Ireland (66389) and Japan (2,135,270).

   As a result of the transaction, STEAG Electronic Systems, Inc. withdrew its
appeal of a federal district court judgment that it infringed a CFM patent
covering Direct-DisplaceTM Drying, and confirmed the court's judgment that the
patent is valid and enforceable. This settled the companies' patent dispute
with all complaints withdrawn and the validity of the relevant CFM patent
upheld. The CFM patent is also a subject of pending suits against Dainippon
Screen Manufacturing and FSI International Corp.

                                      183
<PAGE>

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

Overview

   CFM designs, manufactures and markets advanced wet processing equipment for
sale to the worldwide semiconductor manufacturing industry. CFM was founded in
1984 and began commercial operations in 1990 following a period of technology
and product development, during which time CFM's patented Full-Flow(TM)
enclosed processing and Direct-Displacement(TM) drying technologies
were developed.

   CFM has derived substantially all of its revenues from the sale of a
relatively small number of its systems, recent sales of which have ranged in
price from approximately $1.1 million to $3.0 million. As of October 31, 1999,
CFM has shipped over 220 processing vessels (some shared-module systems have
two processing vessels) to more than 30 manufacturers worldwide. During fiscal
year 1999, CFM's net sales declined slightly from fiscal year 1998 and CFM
realized a net loss of $10.5 million. Fiscal year 1998 net sales declined
significantly from fiscal year 1997 and CFM realized a net loss of $11.8
million. Both fiscal years 1999 and 1998 losses were the result of lower net
sales because of continued excess production capacity in the semiconductor
manufacturing industry. Prior to fiscal year 1998, CFM had been undergoing a
period of rapid growth with net sales during fiscal year 1997 increasing by 72%
over net sales for fiscal year 1996. Net sales of Full-Flow systems to
companies in the Flat Panel Display ("FPD") manufacturing industry represented
0%, 6% and 24% of total net sales, primarily international sales, in fiscal
years 1999, 1998 and 1997, respectively. Following an analysis of the size of
the FPD wet processing equipment market, the potential for successful market
penetration and the volatility of that market, CFM will offer for sale only
those FPD system configurations that have already been developed and tested and
does not anticipate significant continuing sales to manufacturers of FPD's.

   CFM sells its systems worldwide and records a significant portion of its
sales to customers outside the United States. In fiscal year 1999,
international sales constituted approximately 33% of net sales, down from 46%
in fiscal year 1998 and 65% in fiscal year 1997.

   Sales to customers in East Asia represented 29%, 28% and 47% of total sales
in fiscal years 1999, 1998 and 1997, respectively. Beginning in the fall of
1997 and continuing through most of 1999, the currencies and economies of
certain Asian countries, including Korea, were distressed. Some of these Asian
countries subsequently experienced changes in currency valuation, received
external financial support and agreed to certain economic reorganization
programs anticipated to reduce growth and credit demand.

   CFM reduced its staff in fiscal year 1998 by approximately 30% in response
to reductions in demand for its products and services. CFM adopted a strategy
of continued investment in new product and process development and the
retention of field and customer support personnel necessary to improve customer
satisfaction. The significant decline in overall demand for CFM's products in
the global marketplace resulted in significant losses. Future results will
depend upon a variety of factors, including the timing of significant orders,
the ability of CFM to bring new systems to market, the timing of new product
releases by CFM's competitors, the timing of the recovery from the downturn in
capital spending by CFM's customers, the impact of economic controls in
countries where CFM does business, market acceptance of new or enhanced
versions of CFM's systems, changes in pricing by CFM or its competitors and the
volatility of the semiconductor industry and of the markets served by CFM's
customers.

   CFM's gross margin has been and will continue to be affected by a variety of
factors including underabsorption of manufacturing overhead and fixed costs,
the mix and average selling prices of systems and the mix of sales to domestic
and international markets. CFM pays significant commissions and service and
support fees to agents on sales in East Asia. As a result, gross margin and
selling, general and administrative expenses as a percentage of net sales, have
in the past and will continue in the future, to fluctuate with significant
changes in the proportion of net sales in East Asia.

                                      184
<PAGE>

Results of Operations

   The following table sets forth the components of CFM's statements of
operations for the fiscal years ended October 31, 1999, 1998 and 1997,
expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                Fiscal Year Ended
                                   October 31,
                                ---------------------
                                1999    1998    1997
                                -----   -----   -----
   <S>                          <C>     <C>     <C>
   Net sales................... 100.0 % 100.0 % 100.0 %
   Cost of sales...............  66.5    73.7    52.9
                                -----   -----   -----
       Gross profit............  33.5    26.3    47.1
                                -----   -----   -----
   Operating expenses:
     Research, development and
      engineering..............  31.8    34.6    12.3
     Selling, general and
      administrative...........  56.4    53.0    25.6
                                -----   -----   -----
       Total operating
        expenses...............  88.2    87.6    37.9
                                -----   -----   -----
   Operating income (loss)..... (54.8)  (61.3)    9.2
   Interest (income) expense,
    net........................  (4.5)   (5.4)   (2.5)
                                -----   -----   -----
   Income (loss) before income
    taxes...................... (50.3)  (55.9)   11.7
   Income tax provision
    (benefit).................. (17.1)  (20.4)    3.5
                                -----   -----   -----
       Net income (loss)....... (33.2)% (35.5)%   8.2 %
                                =====   =====   =====
</TABLE>

Years Ended October 31, 1999, 1998 and 1997

   Net Sales. Net sales decreased 5% to $31.6 million in fiscal year 1999 from
$33.2 million in fiscal year 1998. Net sales for fiscal year 1998 decreased 56%
from $75.8 million in fiscal year 1997. The decrease in net sales in both
fiscal years 1999 and 1998 resulted primarily from a reduction in overall
demand for semiconductor manufacturing equipment as semiconductor device
manufacturers curtailed expansion plans because of industry-wide overcapacity.
Net sales for fiscal years 1998 and 1997 included sales of Full-Flow systems to
companies in the FPD manufacturing industry representing approximately 6% and
24%, respectively, of net sales. CFM will continue to offer for sale only those
FPD system configurations that have already been developed and tested, which it
believes will constitute a small portion of net sales in fiscal year 2000 and
thereafter.

   International sales represented 33%, 46% and 65% of total net sales in
fiscal years 1999, 1998 and 1997, respectively. CFM expects international sales
to continue to represent a significant portion of its net sales. See the
section entitled "Risk Factors."

   Gross Profit. Gross profit as a percentage of net sales was 33.5%, 26.3% and
47.1% in fiscal years 1999, 1998 and 1997, respectively. Gross profit in fiscal
year 1999, and more so in fiscal year 1998, declined as a result of
underabsorption of manufacturing overhead and fixed costs because of low
production levels relative to fiscal year 1997 and because of price competition
from competitors with underutilized production capacity. CFM occupied a new
60,000 square foot production facility in February of 1999 which more than
doubled its previous production capacity. This new facility has generated
operating efficiencies through improved material flow. Such efficiencies are
anticipated to increase with increasing production volume. Gross profit will
continue to be affected by sales prices, product mix and production levels.

   Research, Development and Engineering. Research, development and engineering
expenses decreased to $10.0 million or 31.8% of net sales in fiscal year 1999
from $11.5 million or 34.6% of net sales in fiscal year 1998. Fiscal year 1998
expenses increased over fiscal year 1997, which were $9.3 million or 12.3% of
net sales. In fiscal year 1998, CFM funded a portion of the costs of a joint
development agreement with Semiconductor 300 which and engineering is critical
to maintaining a strong technological position and, therefore, competitive
advantage and accordingly expects such expenses in fiscal year 2000 will
continue at approximately the fiscal year 1999 level.

                                      185
<PAGE>

   Selling, General and Administrative. Selling, general and administrative
expenses remained relatively constant in fiscal year 1999 at $17.8 million or
56.4% of net sales from $17.6 million or 53.0% of net sales in fiscal year
1998. Fiscal year 1998 expenses decreased from $19.4 million or 25.6% of net
sales in fiscal year 1997 as a result of reduced sales and sales commission
expenses. Fiscal year 1999 expenses include approximately $2.9 million of
litigation expenses undertaken to protect CFM's patents compared to
$2.2 million in fiscal year 1998. Litigation expenses are expected to be $1.0
to 1.5 million per quarter in fiscal year 2000 as a result of two scheduled
jury trials. CFM believes that, subject to improved demand in the markets which
it serves, selling, general and administrative expenses will increase in fiscal
year 2000, as increased personnel and sales and support expenses are
anticipated in connection with CFM's efforts to increase its net sales and as
CFM continues to invest in developing and protecting its patents and other
intellectual property rights.

   Interest (Income) Expense, Net. Interest income, net of interest expense, of
$1.4 million in fiscal year 1999 represented 4.5% of net sales, compared to
$1.8 million or 5.4% of net sales in fiscal year 1998 and $1.9 million or 2.5%
of net sales in fiscal year 1997. Net interest income for fiscal years 1999,
1998 and 1997 was earned as a result of the investment of funds not immediately
required for CFM's operations which were available as a result of CFM's follow-
on offering completed in February 1997. Net interest income declined in fiscal
years 1999 and 1998 as a result of lower invested balances and lower interest
rates.

   Income Tax Provision (Benefit). CFM's effective tax benefit rate was 34.0%
in fiscal year 1999 compared to a benefit rate of 36.4% for fiscal year 1998.
The effective income tax benefit rate primarily reflects the absence of any tax
impact from CFM's foreign sales corporation based on the loss incurred for both
fiscal years 1999 and 1998. The effective tax rate for fiscal year 1997 was
30.0%. The rate for fiscal year 1997 reflected tax benefits from a
reinstitution of the research and development tax credit along with significant
tax benefits from CFM's foreign sales corporation.

   Approximately $2.2 million of income tax benefits were realized as a refund
in fiscal year 1999 from the carryback of fiscal year 1998 losses to prior
years' tax returns. The remainder of the tax benefits from fiscal year 1998 and
all of fiscal year 1999 have been recorded as deferred tax assets. Based on an
assessment of CFM's taxable earnings history and expected future taxable income
at the end of fiscal 1999, management determined that it was more likely than
not that the net deferred tax assets would be realized in future periods. CFM
did subsequently provide a valuation allowance for these assets as it became
clear during the quarter ended April 30, 2000 that it was no longer more likely
than not that CFM would generate sufficient taxable income as planned.
Additionally, the ultimate realization of these assets could be negatively
impacted by market conditions other variables not known or anticipated at this
time. See additional discussion below in the income taxes section related to
the three and nine month periods ended July 31, 2000 and 1999 related to the
realizability of the deferred tax assets.

Three Month and Nine Month Periods Ended July 31, 2000 and 1999

   The following table sets forth certain financial data for the periods
indicated, expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                              Three Month
                                                Period         Nine Month
                                                 Ended        Period Ended
                                               July 31,         July 31,
                                              -------------   ---------------
                                              2000    1999     2000     1999
                                              -----   -----   ------   ------
   <S>                                        <C>     <C>     <C>      <C>
   Net sales................................. 100.0 % 100.0 %  100.0 %  100.0 %
   Gross profit..............................  36.1 %  37.0 %   36.5 %   32.3 %
   Research, development and engineering.....  19.4 %  25.9 %   19.1 %   34.3 %
   Selling, general and administrative.......  45.9 %  50.1 %   48.2 %   56.9 %
   Operating loss............................ (29.2)% (39.1)%  (30.8)%  (58.9)%
   Loss before income taxes.................. (28.0)% (36.1)%  (29.3)%  (53.9)%
   Net Loss.................................. (28.0)% (23.8)%  (59.5)%  (35.6)%
</TABLE>

                                      186
<PAGE>

   Net Sales. Net sales for the three month period ended July 31, 2000 of $13.0
million increased 34.6% from $9.6 million in the corresponding period in fiscal
year 1999. International sales represented 32.3% and 40.1% of total net sales
for the three months ended July 31, 2000 and 1999, respectively. Net sales in
the second quarter of fiscal year 2000 were $12.0 million. The increase in net
sales for the third quarter of 2000 was the result of the continuing impact of
the broad semiconductor industry upturn.

   For the nine months ended July 31, 2000, net sales of $37.7 million
increased 68% from $22.4 million during the nine months ended July 31, 1999.
International sales represented 53.7% and 36.8% of total net sales for the nine
months ended July 31, 2000 and 1999, respectively. The increase in net sales
for nine months ended July 31, 2000, is primarily the result of the
semiconductor industry upturn.

   Gross Profit. Gross profit as a percentage of net sales was slightly lower
at 36.1% for the three-month period ended July 31, 2000 compared to 37.0% for
the same corresponding period in fiscal year 1999. Gross profit was 34.5% in
the second quarter of fiscal year 2000.

   During the first nine months of fiscal year 2000, gross profit increased to
36.5% from 32.3% for the corresponding nine months of fiscal year 1999. The
increase in the gross profit percentage is attributable to increased
manufacturing production in fiscal year 2000. CFM's gross margins have varied
significantly from quarter to quarter and will continue to be affected by a
variety of factors. These factor include sales volumes, the mix and average
selling prices of systems, sales of OEM automation equipment which yield
relatively lower gross margins and the customization of systems.

   Research, Development and Engineering. Research, development and engineering
expenses for the quarter ended July 31, 2000, compared to the corresponding
period of fiscal year 1999, remained stable at $2.5 million. Research,
development and engineering expenses were $2.2 million in the second quarter of
fiscal year 2000. CFM anticipates that research, development and engineering
spending in the coming quarters will continue at the current level.

   Research, development and engineering expenses for the nine months ended
July 31, 2000 decreased slightly to $7.2 million from $7.7 million for the
corresponding period during fiscal year 1999. During the nine month period
ended July 31, 2000, CFM continued its support of the joint development project
with Semiconductor 300 (a joint venture of Infineon and Motorola) in Dresden,
Germany. As part of this joint development program, Semiconductor 300 and CFM
have qualified the CFM system's performance for a broad spectrum of production
processes using 300mm silicon wafers. CFM continues to develop new processes
for existing and new equipment and to invest in its applications laboratory,
which is used for process development and demonstrations.

   Selling, General and Administrative. Selling, general and administrative
expenses increased to $5.9 million or 45.9% of net sales in the quarter ended
July 31, 2000 from $4.8 million or 50.1% of net sales in the quarter ended July
31, 1999. Selling, general and administrative expenses were $6.1 million for
the second quarter of fiscal year 2000. Selling, general and administrative
expenses for the third quarter of fiscal year 1999 reflects higher patent
litigation costs compared to the same period in the prior year. See
"Litigation" below. CFM anticipates that selling, general and administrative
expenses will continue at current levels.

   For the nine months ended July 31, 2000, selling, general and administrative
expenses were $18.2 million, or 48.2% of net sales, compared to $12.7 million,
or 56.9% of net sales, for the nine months ended July 31, 1999. During the nine
months ended July 31, 2000, expenses included approximately $4.1 million
related to CFM's ongoing efforts to protect its intellectual property compared
to $1.7 million in the comparable prior year period. Sales commission expenses
were higher in both the three and nine month period of fiscal year 2000 and
fiscal year 1999 as a result of higher net sales.

   Interest (Income) Expense, Net. Interest income, net of interest expense,
was $149,000 and $283,000 for the quarters ended July 31, 2000 and 1999,
respectively.

                                      187
<PAGE>

   Interest income, net of interest expense, for the nine months ended July 31,
2000 and 1999 was $565,000 and $1,106,000, respectively. The net interest
income recorded during these periods was the result of interest income earned
by CFM from investment of funds not immediately needed to support CFM's
operations.

   Income Taxes. CFM's effective tax rate was 34% for the three and nine month
periods ended July 31, 1999. The income tax benefit recorded in 1999 was
recorded as a deferred income tax asset. Based on an assessment of CFM's recent
earnings history and uncertainties related to expected future taxable income,
management has determined that it can no longer make the assertion that it is
more likely than not that any of the net deferred tax assets recorded as of
January 31, 2000 totaling $12,578,000 will be realized in future periods. As a
result, CFM recorded a full valuation allowance against its net deferred tax
assets in the fiscal quarter ended April 30, 2000. The valuation allowance was
recorded in the income tax provision (benefit) in the accompanying statements
of operations for the nine months ended July 31, 2000. In addition, based on
the factors noted above, CFM has recorded a full valuation allowance against
the income tax benefit for the quarter ended July 31, 2000.

Backlog

   As of July 31, 2000, CFM's backlog of orders was $9.9 million, compared to
$10.7 million as of July 31, 1999. Customer orders for the third quarter of
fiscal 2000 were $14.1 million and $37.0 million for the first nine months of
fiscal 2000. Orders from the U.S. accounted for 80% of total orders for the
third quarter, 18% were from Asia and the remainder were from Europe. For the
nine months ended July 31, 2000, U.S. orders accounted for 44.9% of the total
orders, 50.7% were from Asia and the remainder were from Europe. It has been
the experience of CFM that neither reported backlog at a particular date nor
the pattern of receipt of orders is necessarily indicative of future orders or
revenues.

Liquidity and Capital Resources

   Since its inception, CFM has funded its capital requirements through funding
from two research and development limited partnerships, the private sale of
equity securities, CFM's initial public offering of common stock completed in
June 1996, a follow-on offering of common stock completed in February 1997 and,
to a lesser extent, bank borrowings and equipment leases. At July 31, 2000, CFM
had $10.1 million in cash and cash equivalents, $3.7 million in short-term
investments and $32.3 million in working capital. At October 31, 1999 CFM had
$14.0 million in cash and cash equivalents, $10.2 million in short-term
investments and $45.1 million in working capital.

   Net cash used in operating activities was $10.2 and $12.1 million for fiscal
years 1999 and 1997, respectively, while net cash of $0.3 million was provided
by operating activities in fiscal year 1998, predominantly as a result of
significant net collections of accounts receivable. CFM had a net loss of
$10.5 million in fiscal year 1999 and a net loss of $11.8 in fiscal year 1998.
Accounts receivable increased $0.8 million in fiscal year 1999 and decreased
$19.4 million in fiscal year 1998. Inventories increased $3.4 million in fiscal
year 1999 and decreased $2.4 million in fiscal year 1998. Inventories increased
in fiscal year 1999 to meet forecasted fiscal year 2000 sales. Fiscal year 1999
inventory balances also include equipment at a customer site for joint process
development in anticipation of a subsequent customer purchase.

   Approximately $8.4 million was used in operating activities during the nine
months ended July 31, 2000, as compared with $11.6 million used in operating
activities during the nine months ended July 31, 1999. The cash used in
operating activities during the nine months ended July 31, 2000 was primarily
the result of the net loss of $22.4 million and a decrease in accounts payable
of $1.1 million. Cash provided by operating activities was derived from a
decrease in inventories of $1.1 million and non-cash charges of $2.2 million of
depreciation and amortization and $11.4 million related to deferred taxes.

   The cash used in operating activities during the nine months ended July 31,
1999 was primarily the result of the net loss of $8.0 million and an increase
in accounts receivable of $5.2 million. Cash provided by

                                      188
<PAGE>

operating activities was derived from the receipt of income tax payments of
$2.5 million related to the carry back of net operating losses to prior
periods, an increase in accounts payable of $2.3 million and non-cash charges
of $1.6 million of depreciation and amortization.

   Purchases of property, plant and equipment were $5.7 million and $3.9
million in fiscal years 1999 and 1998, respectively. During fiscal year 1999,
capital expenditures were primarily related to equipment for and improvements
to CFM's new leased manufacturing and office facilities occupied during 1999.
In addition, CFM constructed and capitalized one of its systems for development
and testing of new hardware and software under production conditions. In fiscal
year 1998, capital expenditures primarily were for continued investment in
CFM's applications laboratory and improvements to the leased facilities
occupied by CFM during fiscal year 1999.

   Acquisitions of property, plant and equipment were $2.0 million for the
first nine months of fiscal year 2000 and $3.9 million for the first nine
months of fiscal 1999. Acquisitions during the first nine months of fiscal year
2000 were primarily for the purchase of systems control software while
acquisitions in the first nine months of fiscal year 1999 were related to the
acquisition of leasehold improvements for CFM's production and administrative
facilities.

   During fiscal year 1998, production activities were consolidated and leased
premises in the same industrial park as CFM's owned manufacturing and leased
administrative facilities were reduced to 8,000 square feet, and were
subsequently vacated in March 1999. CFM's new 60,000 square foot production
facility was occupied in February 1999 and its new 80,000 square foot office
facility was occupied in April 1999; both facilities are located in Exton,
Pennsylvania adjacent to each other. During fiscal year 1998, CFM leased 32,000
square feet of temporary prototype laboratory and storage facility which was
vacated during fiscal year 1999. CFM has retained its owned facility in West
Chester, Pennsylvania for use in manufacturing, customer and employee training
and research. All other functions are now located in Exton. CFM also has a
lease on its vacated former office facility in West Chester, Pennsylvania,
which will expire in November of 2000. Since August 1999, CFM has had tenants
that sublease approximately 70% of this building.

   CFM has a relationship with a commercial bank which includes a mortgage on
one of CFM's manufacturing facilities in the amount of $0.6 million and a $7.5
million unsecured revolving demand line of credit with an interest rate equal
to the bank's prime rate. The mortgage bears interest at an annual rate of
8.56%. As of July 31, 2000, no balance was outstanding under CFM's line of
credit.

   CFM also has mortgage notes payable to the Pennsylvania Industrial
Development Authority in the amount of $0.4 million bearing interest at 2.0%
and to the Chester County Development Council in the amount of $0.05 million
bearing interest at 5.0%. In addition, CFM has outstanding capital lease
obligations in the amount of $.8 million bearing interest at rates ranging from
7% to 12% per annum.

   CFM had outstanding accounts receivable of approximately $14.9 million and
$14.8 million as of July 31, 2000 and October 31, 1999, respectively. CFM has
recorded an allowance for doubtful accounts of $13,000 as of July 31, 2000.
Management believes that no additional allowance for doubtful accounts
receivable is needed at this time as CFM believes that such accounts receivable
are fully realizable. Management performs an ongoing evaluation of the status
of accounts receivable balances in order to determine if any additional
allowances or any write-offs are necessary. CFM may be required to record
significant additional allowances in future periods should it determine that
any of its accounts receivable become uncollectible.

   CFM believes that existing cash, cash equivalents and short-term investment
balances and its available line of credit will be sufficient to meet CFM's cash
requirements during the next 12 months. However, depending upon its rate of
growth and profitability, CFM may require additional equity or debt financing
to meet its working capital requirements or capital expenditure needs. There
can be no assurance that additional financing, if needed, will be available
when required or, if available, will be on terms satisfactory to CFM. It is
management's expectation that the announced transaction with Mattson will take
place on or shortly after January 1, 2001, at which point CFM will be acquired
by Mattson. See "Merger Agreement with Mattson Technology," beginning on page
86 of this joint proxy statement-prospectus.

                                      189
<PAGE>

Impact of Recently Issued Accounting Standards

   In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101--Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
CFM is reviewing these views and assessing whether any of these interpretations
of generally accepted accounting principles may cause CFM to report a change in
accounting principle. In compliance with SAB 101, CFM is required to and will
make such a determination and report the impact of such a change, if any, no
later than the fourth quarter of fiscal year 2001. While management believes
that its revenue recognition policies conform with the generally accepted
accounting principles that have been used consistently in practice in the
capital equipment industry, certain issues raised in SAB 101, including
delivery and performance revenue recognition criteria, could be interpreted to
cause a change in accounting principle by CFM and many other companies in the
capital equipment industry. At this time, the effect of SAB 101 on CFM's
operating results in any future period cannot be fully determined; however,
such a change could materially adversely affect CFM's financial position and
results of operations.

                                      190
<PAGE>

                         PRINCIPAL SHAREHOLDERS OF CFM

   The following table sets forth certain information as of October 4, 2000,
with respect to the beneficial ownership of CFM's common stock by (i) all
persons known by CFM to be the beneficial owners of more than 5% of the
outstanding common stock of CFM, (ii) each director of CFM, (iii) the Chief
Executive Officer and the three other executive officers of CFM as of October
4, 2000 whose salary and bonus for the year ended December 31, 2000 exceeded
$100,000, and (iv) all executive officers and directors of CFM as a group.

<TABLE>
<CAPTION>
                                                        Shares Owned(2)
                                                      ------------------------
                                                      Number of     Percentage
Name and Address of Beneficial Owners(1)               Shares        of Class
----------------------------------------              ---------     ----------
<S>                                                   <C>           <C>
Christopher F. McConnell............................. 1,135,095 (3)    14.7
Roger A. Carolin.....................................   269,134 (4)     3.3
James J. Kim.........................................    36,743 (5)      *
John F. Osborne......................................    13,041 (6)      *
Milton S. Stearns, Jr. ..............................    55,006 (7)      *
Lorin J. Randall.....................................    85,054 (8)     1.0
Executive officers and directors as a group (6
 persons)............................................ 1,594,073        20.3%
</TABLE>
--------
 * Less than 1%

(1) Except as otherwise indicated, the address of each beneficial owner is c/o
    CFM Technologies, Inc., 150 Oaklands Boulevard, Exton, Pennsylvania 19341.

(2) Except as indicated in the footnotes to this table, the persons named in
    the table have sole voting and investment power with respect to all shares
    of common stock shown as beneficially owned by them, subject to community
    property laws, where applicable.

(3) Includes vested options to purchase 35,000 shares of common stock.

(4) Includes vested options to purchase 217,428 shares of common stock.

(5) Includes vested options to purchase 7,763 shares of common stock.

(6) Includes vested options to purchase 5,041 shares of common stock.

(7) Includes vested options to purchase 19,806 shares of common stock.

(8) Includes vested options to purchase 76,216 shares of common stock.

              REGULATORY MATTERS AFFECTING MATTSON, STEAG, AND CFM

   Mattson, STEAG Semiconductor, and CFM have received the required clearances
under both the HSR Act and the German Cartel Act.

                                 LEGAL MATTERS

   The validity of the shares of Mattson common stock to be issued in the
Transactions will be passed upon for Mattson by Gray Cary Ware & Freidenrich
LLP, Palo Alto, California. The tax consequences of the merger will be passed
upon for CFM by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania.

                                      191
<PAGE>

                                    EXPERTS

   The consolidated financial statements of Mattson Technology Inc. as of
December 31, 1999 and for the year then ended included and incorporated by
reference in this joint proxy statement-prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.

   The combined financial statements of STEAG Semiconductor as of December 31,
1999 and 1998 and for the years then ended, included in this joint proxy
statement-prospectus and elsewhere in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

   The consolidated financial statements of CFM Technologies, Inc. as of
October 31, 1999 and 1998, and for the three years ended October 31, 1999
included in and incorporated by reference in this joint proxy statement-
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

   The financial statements of Mattson as of December 31, 1998 and for each of
the two years ended December 31, 1998 included in this joint proxy statement-
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

      STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT MATTSON ANNUAL MEETING

   Mattson has an advance notice provision under its bylaws for stockholder
business to be presented at meetings of stockholders. Such provision states
that in order for stockholder business to be properly brought before a meeting
by a stockholder, such stockholder must have given timely notice thereof in
writing to the Secretary of Mattson. A stockholder proposal, to be timely, must
be received at the Mattson's principal executive offices not less than 120
calendar days in advance of the one year anniversary of the date the Mattson's
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders; except that (i) if no annual meeting was
held in the previous year, (ii) if the date of the annual meeting has been
changed by more than thirty calendar days from the date contemplated at the
time of the previous year's proxy statement, or (iii) in the event of a special
meeting, then notice must be received not later than the close of business on
the tenth day following the day on which notice of the date of the meeting was
mailed or public disclosure of the meeting date was made.

   Proposals of stockholders intended to be presented at the next annual
meeting of stockholders of Mattson (i) must be received by Mattson at its
offices no later than December 18, 2000, and (ii) must satisfy the conditions
established by the Securities and Exchange Commission for stockholder proposals
to be included in Mattson's proxy statement for that meeting.

                      WHERE YOU CAN FIND MORE INFORMATION

   Mattson and CFM each file annual, quarterly, and special reports, proxy
statements, and other information with the United States Securities and
Exchange Commission (the "SEC"). Mattson's common stock is traded on the Nasdaq
National Market ("Nasdaq") under the symbol "MTSN." CFM's common stock is
traded on the Nasdaq under the symbol "CFMT." You may read and copy any
document filed by Mattson or CFM at the SEC's public reference facilities or on
the SEC's website at http://www.sec.gov, as discussed in more detail below.

   Neither STEAG nor any of the STEAG Semiconductor Subsidiaries is a reporting
company and therefore no additional reports or financial information about
STEAG or any of the STEAG Semiconductor Subsidiaries are publicly available.

                                      192
<PAGE>

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   The SEC allows Mattson and CFM to "incorporate by reference" the
information they file with the SEC, which means that they can disclose
important information by referring you to documents previously filed with the
SEC. The information incorporated by reference is considered a part of this
joint proxy statement-prospectus, and any later information that Mattson or
CFM file with the SEC, including any reports filed pursuant to Section 13(a)
or 15(d) the Securities Exchange Act, will automatically update and supersede
this information. This joint proxy statement-prospectus is part of a
registration statement on Form S-4 filed by Mattson with the SEC.

   Mattson incorporates by reference the documents listed below, and any
additional documents filed by Mattson with the SEC between the date of this
joint proxy statement-prospectus and the date of the Mattson special meeting.
The documents Mattson incorporates by reference are:

   Mattson's annual report on Form 10-K for the fiscal year ended December 31,
1999;

   Mattson's quarterly report on Form 10-Q for the quarter ended March 31,
2000; and

   Mattson's quarterly report on Form 10-Q for the quarter ended June 30,
2000.

   CFM incorporates by reference the documents listed below and any documents
that CFM may file with the SEC between the date of this joint proxy statement-
prospectus and the date of the CFM special meeting. The documents CFM
incorporates by reference are:

   CFM's annual report on Form 10-K for the fiscal year ended October 31,
1999;

   CFM's quarterly report on Form 10-Q for the quarter ended January 31, 2000;

   CFM's amended quarterly report on Form 10-Q/A for the quarter ended January
31, 2000;

   CFM's quarterly report on Form 10-Q for the quarter ended April 30, 2000;
and

   CFM's quarterly report on Form 10-Q for the quarter ended July 31, 2000.

   Documents incorporated by reference are available without charge, excluding
all exhibits unless such exhibits have been specifically incorporated by
reference in this joint proxy statement-prospectus. You may obtain documents
incorporated by reference by requesting them in writing or by telephone from
the appropriate company as follows:

  Mattson Technology, Inc.                  CFM Technologies, Inc.
  2800 Bayview Drive                        150 Oaklands Boulevard
  Fremont, California 94538                 Exton, Pennsylvania 19341
  Attention: Peter Brown, Corporate Marketing Manager
                                            Attention: Jeff Randall, Chief
  Phone Number: (510) 657-5900              Financial Officer
                                            Phone Number: (610) 280-8509

   In order to ensure timely delivery of the documents, any requests should be
made by October 27, 2000.

   In addition, copies of the documents incorporated by reference may be
inspected and copied at the following public reference facilities maintained
by the SEC:

  Judiciary Plaza          Citicorp Center        Seven World Trade Center
  Room 1024                500 West Madison       13th Floor
  450 Fifth Street,        Street                 New York, New York 10048
  N.W.                     Suite 1400
  Washington, D.C.         Chicago, Illinois
  20549                    60661

                                      193
<PAGE>

   Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements, and other
information regarding each of Mattson and CFM. The address of the SEC website
is http://www.sec.gov. Reports, proxy statements, and other information
concerning Mattson and CFM can also be inspected at the Nasdaq National Market,
Operations, 1735 K Street, N.W., Washington, D.C.

   Mattson has filed a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), with the SEC with respect to the Mattson
common stock to be issued under the Merger Agreement with CFM. This joint proxy
statement-prospectus constitutes the prospectus of Mattson filed as part of the
registration statement. This joint proxy statement-prospectus does not contain
all of the information set forth in the registration statement because certain
parts of the registration statement are omitted as provided by the rules and
regulations of the SEC. You may inspect and copy the registration statement at
any of the addresses listed above.

                                      194
<PAGE>

               MATTSON INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        Page
                                                                      ---------
<S>                                                                   <C>
ANNUAL AUDITED FINANCIAL STATEMENTS

  Report of Independent Public Accountants (Arthur Andersen LLP).....    F-2

  Report of Independent Accountants (PricewaterhouseCoopers LLP).....    F-3

  Consolidated Balance Sheets as of December 31, 1999 and 1998.......    F-4

  Consolidated Statements of Operations for the years ended December
   31, 1999, 1998 and 1997...........................................    F-5

  Consolidated Statements of Stockholders' Equity for the three years
   ended December 31, 1999...........................................    F-6

  Consolidated Statements of Cash Flows for the years ended December
   31, 1999, 1998 and 1997...........................................    F-7

  Notes to Consolidated Financial Statements.........................  F-8-F-21

UNAUDITED INTERIM FINANCIAL STATEMENTS

  Condensed Consolidated Balance Sheets..............................   F-22

  Condensed Consolidated Statements of Operations....................   F-23

  Condensed Consolidated Statements of Cash Flows....................   F-24

  Notes to Condensed Consolidated Financial Statements............... F-25-F-28
</TABLE>

                                      F-1
<PAGE>

         REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (ARTHUR ANDERSEN LLP)

To Mattson Technology, Inc.:

   We have audited the accompanying consolidated balance sheet of Mattson
Technology, Inc. and subsidiaries (a Delaware corporation) as of December 31,
1999 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mattson Technology, Inc.
and subsidiaries as of December 31, 1999 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.

                                          Arthur Andersen LLP

San Jose, California
January 21, 2000

                                      F-2
<PAGE>

         REPORT OF INDEPENDENT ACCOUNTANTS (PRICEWATERHOUSECOOPERS LLP)

To the Board of Directors and Stockholders of
Mattson Technology, Inc.:

   In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Mattson Technology, Inc. and its subsidiaries at December 31, 1998 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

San Jose, California
February 9, 1999

                                      F-3
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                             As of December
                                                                   31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
                          ------

Current assets:
  Cash and cash equivalents................................ $ 16,965  $ 11,863
  Short-term investments...................................       --     8,128
  Accounts receivable, net of allowances for doubtful
   accounts of $141 in 1999 and 1998.......................   21,500     9,614
  Inventories..............................................   25,374    10,924
  Refundable income taxes..................................       --     3,300
  Note receivable from stockholder.........................       --     3,129
  Prepaid expenses and other current assets................    2,299     2,316
                                                            --------  --------
    Total current assets...................................   66,138    49,274
Property and equipment, net................................   11,260    12,090
Goodwill, intangibles and other assets.....................    3,750     6,756
                                                            --------  --------
                                                            $ 81,148  $ 68,120
                                                            ========  ========

           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------

Current liabilities:
  Line of credit........................................... $  3,000  $     --
  Accounts payable.........................................    8,494     3,399
  Accrued liabilities......................................   17,635    14,841
                                                            --------  --------
    Total current liabilities..............................   29,129    18,240
                                                            --------  --------
Commitments and contingencies (Note 13)
Stockholders' equity:
  Common Stock, par value $0.001, 60,000 shares authorized;
   16,591 issued, 16,216 outstanding in 1999 and 15,772
   shares issued and 15,397 outstanding in 1998............       16        16
  Additional paid in capital...............................   66,280    63,239
  Accumulated other comprehensive loss.....................     (191)     (138)
  Treasury stock, 375 shares in 1999 and 1998 at cost......   (2,987)   (2,987)
  Retained earnings (deficit)..............................  (11,099)  (10,250)
                                                            --------  --------
    Total stockholders' equity.............................   52,019    49,880
                                                            --------  --------
                                                            $ 81,148  $ 68,120
                                                            ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                   ---------------------------
                                                     1999      1998     1997
                                                   --------  --------  -------
<S>                                                <C>       <C>       <C>
Net sales......................................... $103,458  $ 59,186  $76,730
Cost of sales.....................................   53,472    37,595   37,130
                                                   --------  --------  -------
Gross profit......................................   49,986    21,591   39,600
                                                   --------  --------  -------
Operating expenses:
  Research, development and engineering...........   19,547    16,670   14,709
  Selling, general and administrative.............   31,784    24,542   24,495
  Acquired in-process research and Development....       --     4,220       --
                                                   --------  --------  -------
    Total operating expenses......................   51,331    45,432   39,204
                                                   --------  --------  -------
Income (loss) from operations.....................   (1,345)  (23,841)     396
Interest and other income, net....................      743     1,811    1,486
                                                   --------  --------  -------
Income (loss) before provision for income taxes...     (602)  (22,030)   1,882
Provision for income taxes........................      247       337      451
                                                   --------  --------  -------
Net income (loss)................................. $   (849) $(22,367) $ 1,431
                                                   ========  ========  =======
Net income (loss) per share:
  Basic........................................... $  (0.05) $  (1.52) $  0.10
                                                   ========  ========  =======
  Diluted......................................... $  (0.05) $  (1.52) $  0.09
                                                   ========  ========  =======
Shares used in computing net income (loss) per
 share:
  Basic...........................................   15,730    14,720   14,117
                                                   ========  ========  =======
  Diluted.........................................   15,730    14,720   15,311
                                                   ========  ========  =======
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                          Common Stock                      Accumulated
                             Capital     Additional            Other     Treasury Stock  Retained
                          --------------  Paid in          Comprehensive --------------  Earnings
                          Shares  Amount  Capital   Other     (Loss)     Shares Amount   (Deficit)   Total
                          ------  ------ ---------- -----  ------------- ------ -------  ---------  --------
<S>                       <C>     <C>    <C>        <C>    <C>           <C>    <C>      <C>        <C>
Balance at December 31,
 1996...................  14,197   $ 14   $57,566   $(13)      $ (77)        -  $     -  $ 11,625   $ 69,115
Repurchase of Common
 Stock, net.............    (335)     -    (2,197)     -           -      (100)  (1,075)     (939)    (4,211)
Exercise of stock
 options................     183      -       261      -           -         -        -         -        261
Shares issued under
 employee stock purchase
 plan...................     244      -     1,598      -           -         -        -         -      1,598
Income tax benefits
 realized from activity
 in employee stock
 plans..................       -      -       190      -           -         -        -         -        190
Amortization of deferred
 compensation...........       -      -         -     13           -         -        -         -         13
Net unrealized gain on
 investments............       -      -         -      -          23         -        -         -          -
Cumulative translation
 adjustments............       -      -         -      -        (236)        -        -         -          -
Net income..............       -      -         -      -           -         -        -     1,431          -
Total comprehensive
 income.................       -      -         -      -           -         -        -         -      1,218
                          ------   ----   -------   ----       -----      ----  -------  --------   --------
Balance at December 31,
 1997...................  14,289     14    57,418      -        (290)     (100)  (1,075)   12,117     68,184
Repurchase of Common
 Stock, net.............       -      -         -      -                  (275)  (1,912)              (1,912)
Exercise of stock
 options................     380      -       163      -           -         -        -         -        163
Shares issued under
 employee stock purchase
 plan...................     308      1     1,620      -           -         -        -         -      1,621
Shares issued for
 acquisition of Concept
 Systems Design, Inc....     795      1     4,038      -           -         -        -         -      4,039
Cumulative translation
 adjustments............       -      -         -      -         152         -        -         -          -
Net loss................       -      -         -      -           -         -        -   (22,367)         -
Total comprehensive
 loss...................       -      -         -      -           -         -        -         -    (22,215)
                          ------   ----   -------   ----       -----      ----  -------  --------   --------
Balance at December 31,
 1998...................  15,772     16    63,239      -        (138)     (375)  (2,987)  (10,250)    49,880
Exercise of stock
 options, net...........     456      -     1,431      -           -         -        -         -      1,431
Shares issued under
 employee stock purchase
 plan...................     363      -     1,610      -           -         -        -         -      1,610
Cumulative translation
 adjustments............       -      -         -      -         (53)        -        -         -          -
Net loss................       -      -         -      -           -         -        -      (849)         -
Total comprehensive
 loss...................       -      -         -      -           -         -        -         -       (902)
                          ------   ----   -------   ----       -----      ----  -------  --------   --------
Balance at December 31,
 1999...................  16,591   $ 16   $66,280   $  -       $(191)     (375) $(2,987) $(11,099)  $ 52,019
                          ======   ====   =======   ====       =====      ====  =======  ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                   ----------------------------
                                                     1999      1998      1997
                                                   --------  --------  --------
<S>                                                <C>       <C>       <C>
Cash flows from operating activities:
  Net income (loss)............................... $   (849) $(22,367) $  1,431
  Adjustments to reconcile net income (loss) to
   net cash provided by (used in) operating
   activities:
    Depreciation and amortization.................    4,801     4,441     2,856
    Acquired in-process research and development..       --     4,220        --
    Deferred taxes................................       --     4,222       (25)
    Deferred compensation related to stock
     options......................................       --        --        13
  Changes in assets and liabilities:
    Accounts receivable...........................  (11,886)    5,509     1,170
    Inventories...................................  (14,822)   10,714    (6,114)
    Refundable income taxes.......................    3,300    (2,748)       --
    Prepaid expenses and other current assets.....     (603)   (1,183)     (118)
    Other assets..................................       39        72     2,962
    Accounts payable..............................    5,095    (4,468)    2,109
    Accrued liabilities...........................    5,415    (3,771)   (1,224)
                                                   --------  --------  --------
      Net cash provided by (used in) operating
       activities.................................   (9,510)   (5,359)    3,060
                                                   --------  --------  --------
Cash flows from investing activities:
  Acquisition of property and equipment...........   (3,250)   (1,726)   (4,671)
  Note receivable from stockholder................    3,749    (3,129)       --
  Purchases of short term investments.............       --   (13,606)  (16,468)
  Sales and maturities of short term investments..    8,128    14,090    24,513
  Repayment of debt acquired in acquisition.......       --    (4,000)       --
                                                   --------  --------  --------
      Net cash provided by (used in) investing
       activities.................................    8,627    (8,371)    3,374
                                                   --------  --------  --------
Cash flows from financing activities:
  Borrowings against line of credit...............    3,000        --        --
  Proceeds from the issuance of Common Stock......    3,041     1,784     2,049
  Net repurchase of common Stock..................       --    (1,912)   (4,211)
                                                   --------  --------  --------
      Net cash provided by (used in) financing
       activities.................................    6,041      (128)   (2,162)
                                                   --------  --------  --------
Effect of exchange rate changes...................      (56)      138      (236)
                                                   --------  --------  --------
Net increase (decrease) in cash and cash
 equivalents......................................    5,102   (13,720)    4,036
Cash and cash equivalents, beginning of year......   11,863    25,583    21,547
                                                   --------  --------  --------
Cash and cash equivalents, end of year............ $ 16,965  $ 11,863  $ 25,583
                                                   ========  ========  ========
Supplemental disclosures:
  Cash paid for interest.......................... $     58  $     --  $     --
  Cash paid for income taxes...................... $    224  $    280  $    629
  Common stock issued for acquisition of Concept.. $     --  $  4,039  $     --
  Non-cash adjustment to goodwill and
   intangibles.................................... $  2,200  $     --  $     --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Mattson Technology, Inc. (the "Company") was incorporated in California on
November 18, 1988. In September 1997, the Company was reincorporated in the
State of Delaware. As part of the reincorporation, each outstanding share of
the California corporation, no par value common stock, was converted
automatically to one share of the new Delaware corporation, $0.001 par value
common stock.

   The Company designs, manufactures and markets advanced fabrication equipment
to the semiconductor manufacturing industry worldwide.

 BASIS OF PRESENTATION

   The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reported periods. Actual results could differ from those estimates.

   The Company's fiscal year ends on December 31. The Company's fiscal quarters
end on the last Sunday in the calendar quarter.

 CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

   For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or less to
be cash equivalents. Cash equivalents consist primarily of money market funds.
Short term investments consist of commercial paper and U.S. Treasury securities
with maturities of more than three months. The Company classifies its
investments in commercial paper and U.S. Treasury securities as "available for
sale" and the investments are reported at fair market value. As of December 31,
1998, the fair value of the investments in commercial paper and U.S. Treasury
securities approximated amortized cost and, as such, unrealized holding gains
and losses were insignificant. The fair value of the Company's investments was
determined based on quoted market prices at the reporting date for those
instruments.

 INVENTORIES

   Inventories are stated at the lower of standard cost, which approximates
actual cost, using the first-in, first-out method, or market, and include
material, labor and manufacturing overhead costs.

 WARRANTY COSTS

   Upon shipment of product, the Company accrues the estimated cost of
warranty. The Company offers a 36 month warranty on all of its systems sold
after January 1996, other than the EpiPro 5000 system and any systems sold in
Japan, and a 12 month warranty in Japan and on its EpiPro products.

 PROPERTY AND EQUIPMENT

   Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets,
which range from three to five years. Leasehold improvements are amortized
using the straight-line method over the term of the related lease or the
estimated useful lives of the improvements, whichever is less.

                                      F-8
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 GOODWILL AND INTANGIBLE ASSETS

   Purchased technology, workforce and goodwill are presented at cost, net of
accumulated amortization, and are being amortized using the straight-line
method over their estimated useful lives of three to seven years.

 STOCK-BASED COMPENSATION

   In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." As allowed by the provisions of SFAS No. 123, the Company has
continued to apply APB Opinion No. 25 in accounting for its stock option plans
and, accordingly, does not recognize compensation cost because the exercise
price equals the market price of the underlying stock at the date of grant. The
Company has adopted the disclosure only provisions of SFAS No. 123 and Note 6
to the Consolidated Financial Statements contains a summary of the pro forma
effects to reported net income (loss) and earnings (loss) per share for 1999,
1998 and 1997 for compensation cost based on the fair value of the options
granted at the grant date as prescribed by SFAS No. 123.

 REVENUE RECOGNITION

   System sales are generally recognized upon shipment. However, in certain
circumstances, the Company allows customers to evaluate systems, and since
customers can return such systems to the Company at any time with limited or no
penalty, the Company does not recognize the associated revenue until an
evaluation system is accepted by the customer. Sales to our distributor in
Japan are recognized upon shipment with reserves provided for limited rights of
return (see Note 10). Service and maintenance contract revenue, which to date
has been insignificant, is recognized on a straight-line basis over the service
period of the related contract. A provision for the estimated future cost of
system installation and warranty is recorded at the time revenue is recognized.

 COMPREHENSIVE INCOME

   In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for disclosure and financial statement
display for reporting total comprehensive income and its individual components.
Comprehensive income, as defined, includes all changes in equity during a
period from non-owner sources. The Company's comprehensive income includes net
income, foreign currency translation adjustments and unrealized gains and
losses on investments and is displayed in the statement of stockholders'
equity.

 FOREIGN CURRENCY ACCOUNTING

   The local currency is the functional currency for all foreign operations
except those in Japan, where the U.S. dollar is the functional currency. Gains
or losses from translation of foreign operations where the local currencies are
the functional currency are included as a component of stockholders' equity.
Foreign currency transaction gains and losses are recognized in the statements
of operations and have not been material.

 NET INCOME (LOSS) PER SHARE

   Basic earnings per share (EPS) is computed by dividing income available to
common stockholders (numerator) by the weighted average number of common shares
outstanding (denominator) for the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period. The computation
of diluted EPS uses the average market prices during the period.

 SEGMENT REPORTING

   In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 changes the way companies
report selected segment information in annual

                                      F-9
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

financial statements and also requires companies to report selected segment
information in interim financial reports. The Company operates in one
reportable segment. Note 11 of the Consolidated Financial Statements contains a
summary table of industry segment, geographic and customer information.

 SFAS NO. 133 "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"

   In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS No. 133 requires that all derivatives
be recognized at fair value in the statement of financial position, and that
the corresponding gains or losses be reported either in the statement of
operations or as a component of comprehensive income, depending on the type of
hedging relationship that exists. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000 and cannot be applied retroactively. The effect
of adopting SFAS No. 133 is not expected to be material to the Company's
financial statements.

2. ACQUISITION OF CONCEPT SYSTEMS DESIGN

   On July 24, 1998, the Company acquired Concept Systems Design. The
transaction was achieved through the merger of a wholly owned subsidiary of the
Company with and into Concept. In connection with the merger, the Company
issued 795,138 shares of Common Stock to the former shareholders of Concept.

   In addition to the issuance of the 795,138 shares mentioned above, the
agreement for the acquisition of Concept also includes the contingent issuance
and distribution of 100,000 shares of Mattson Common Stock to the Concept
shareholders if Concept achieves net revenues of at least $16,667,000 during
the first 24 full calendar months following the acquisition date. Additional
shares issued, if any, will be valued at the fair value of the shares at the
date of issue and will result in additional goodwill.

   The merger has been accounted for as a purchase and the results of
operations of Concept were included in the consolidated statement of operations
of the Company from the date of acquisition. The purchase price of the
acquisition of $4,689,000, which included $650,000 of estimated acquisition
related costs, was used to acquire the net assets of Concept. The purchase
price was allocated to assets acquired and liabilities assumed based on the
fair value of Concept's current assets and liabilities, which management
believed approximated their book value, the estimated fair value of property
and equipment, based on management's estimates of fair value, and an
independent appraisal for all other identifiable assets. The excess of the
purchase price over the net tangible and intangible assets acquired and
liabilities assumed was allocated to goodwill. The allocation of the purchase
price was as follows (in thousands):

<TABLE>
     <S>                                                               <C>
     Property and equipment........................................... $  3,055
     Current and other assets.........................................    4,041
     Liabilities assumed..............................................  (13,570)
     Acquired developed technology and workforce......................    5,300
     Goodwill.........................................................    1,643
     Acquired in-process research and development.....................    4,220
                                                                       --------
                                                                       $  4,689
                                                                       ========
</TABLE>

   In the first quarter of 1999, a preacquisition contingency was resolved
which reduced the liabilities assumed from Concept by approximately $2.2
million. Under the provisions of Statement of Financial Accounting Standards
No. 38, this has been recorded by the Company in the first quarter of 1999 on a
prospective basis as an elimination of previously recorded goodwill and a pro-
rata reduction of the balance to

                                      F-10
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the acquired developed technology, workforce and property and equipment. The
acquired developed technology and workforce are recorded on the balance sheet
as long term assets and will be amortized on a straight line basis over periods
ranging from 3 to 7 years. The acquired in-process research and development was
expensed at the time of acquisition as a one time charge.

   The original amount allocated to in-process research and development and
other intangible assets in the third quarter of 1998 of $5.7 million and $5.4
million, respectively, relating to the acquisition of Concept, was made in a
manner consistent with widely recognized appraisal practices that were being
utilized at the time of acquisition. Subsequent to the acquisition, in a letter
dated September 15, 1998 to the American Institute of Certified Public
Accountants, the Chief Accountant of the Securities and Exchange Commission
expressed views of the SEC staff that took issue with certain appraisal
practices employed in the determination of the fair value of the in-process
research and development that was the basis for the Company's measurement of
its in-process research and development charge. Accordingly, the Company
resolved to adjust the amount originally allocated to acquired in-process
research and development and other intangible assets in a manner to reflect the
SEC staff's views and restated its third quarter 1998 consolidated financial
statements and filed an amended Form 10-Q. The revised amount of in-process
research and development and other intangible assets that resulted from this
change was $4.2 million and $6.9 million, respectively.

   The value assigned to in-process research and development was determined by
identifying research projects in areas for which technological feasibility had
not been established. These included the Concept EpiPro 5000 system and a
single wafer Episystem. The value was determined by estimating the expected
cash flows from the projects (taking into consideration an estimate of future
obsolescence of the technology) once commercially viable, applying a percentage
of completion and then discounting the net cash flows back to their present
value. The Company believes the efforts to complete the in-process research and
development projects will consist of internally staffed engineers and will be
completed in 2001. The estimated costs to complete the research and development
is approximately $1.7 million. There is substantial risk associated with the
completion of each project and there is no assurance that any of the projects
will meet with technological or commercial success.

   The percentage of completion for each project was determined using
management estimates of time and dollars spent as of the acquisition date as
compared to time and dollars that were expected to be required to complete the
projects. The degree of difficulty of the portion of each project completed as
of July 24, 1998 was also compared to the remaining research and development to
be completed to bring each project to technical feasibility. At July 24, 1998,
the percentage of completion for the Concept EpiPro 5000 was estimated at 80%
and for the single wafer Episystem at 50%.

   If the projects discussed above are not successfully developed, the sales
and profitability of the combined company may be adversely affected in future
periods. Additionally, the value of other intangible assets acquired may become
impaired. Company management believes that the restated in-process research and
development charge of $4.2 million is valued consistently with the SEC staff's
current views regarding valuation methodologies. There can be no assurance,
however, that the SEC staff will not take issue with any assumptions used in
the Company's valuation model and require the Company to further revise the
amount allocated to in-process research and development.

   The following pro forma summary is provided for illustrative purposes only
and is not necessarily indicative of the consolidated results of operations for
future periods or that actually would have been realized had the Company and
Concept been a consolidated entity during the periods presented. The summary
combines the results of operations as if Concept had been acquired as of the
beginning of the periods presented.

                                      F-11
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The summary includes the impact of certain adjustments such as goodwill
amortization and changes in depreciation. Additionally, the non-recurring in-
process research and development charge of $4.2 million has been excluded from
the periods presented.

   The following table represents unaudited pro forma information assuming that
the acquisition took place at the beginning of the periods presented:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     --------------------------
                                                         1998         1997
                                                     ------------  ------------
                                                           (unaudited)
                                                      (in thousands, except
                                                         per share data)
   <S>                                               <C>           <C>
   Net sales........................................ $     62,503  $    83,040
   Net loss......................................... $    (32,632) $    (8,694)
   Basic and diluted loss per share................. $      (2.25) $     (0.58)
</TABLE>

3. LINE OF CREDIT

   In July 1999, the Company entered into a revolving line of credit agreement
with a bank under which it can borrow up to $15 million. The line of credit
bears interest at the Company's option of a per annum rate of 200 percentage
points above LIBOR or a per annum rate equal to the lender's Prime Rate. At
December 31, 1999, the interest rate was 8.5%. The line of credit expires on
July 8, 2000. At December 31, 1999 the Company had $3.0 million outstanding
under the line of credit agreement. The line of credit is secured by the
Company's accounts receivable and other tangible assets and contains certain
financial covenants determined on a quarterly basis.

4. NOTES RECEIVABLE FROM STOCKHOLDER

   During the third quarter of 1998, the Company extended a one year loan to
its Chief Executive Officer in the amount of $3.1 million. The loan was
collateralized by 2.2 million shares of the Company's Common Stock owned by the
Chief Executive Officer and was a full recourse note bearing interest at 8%.
Interest was payable at the end of the one year loan. During 1999, the Company
extended the loan for an additional six months and increased the note to $3.7
million. The $3.7 million includes accrued interest of $0.3 million and an
additional $0.3 million loaned to the Chief Executive Officer. During the
fourth quarter of 1999, the Chief Executive Officer fully repaid the note and
all accrued interest.

                                      F-12
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


5. BALANCE SHEET DETAIL

<TABLE>
<CAPTION>
                                                               As of December
                                                                    31,
                                                              -----------------
                                                                1999     1998
                                                              --------  -------
                                                               (in thousands)
   <S>                                                        <C>       <C>
   INVENTORIES:
     Purchased parts and raw materials....................... $ 13,656  $ 7,128
     Work-in-process.........................................    9,433    2,586
     Finished goods..........................................       --    1,147
     Evaluation systems......................................    2,285       63
                                                              --------  -------
                                                              $ 25,374  $10,924
                                                              ========  =======
   PROPERTY AND EQUIPMENT, NET:
     Machinery and equipment................................. $ 13,544  $12,487
     Furniture and fixtures..................................    5,509    4,583
     Leasehold improvements..................................    3,705    2,880
     Construction-in-progress................................    1,738      740
                                                              --------  -------
                                                                24,496   20,690
     Less: accumulated depreciation and amortization.........  (13,236)  (8,600)
                                                              --------  -------
                                                              $ 11,260  $12,090
                                                              ========  =======
   GOODWILL, INTANGIBLES AND OTHER ASSETS:
     Developed technology.................................... $  3,897  $ 4,340
     Purchased workforce.....................................      875      960
     Goodwill................................................       --    1,643
     Other...................................................      334      375
                                                              --------  -------
                                                                 5,106    7,318
     Less: accumulated amortization..........................   (1,356)    (562)
                                                              --------  -------
                                                              $  3,750  $ 6,756
                                                              ========  =======
   ACCRUED LIABILITIES:
     Warranty and installation reserve....................... $  7,371  $ 5,820
     Accrued compensation and benefits.......................    5,041    1,214
     Income taxes............................................    1,392    1,131
     Commissions.............................................    1,045      539
     Customer deposits.......................................      253    2,690
     Deferred income.........................................    1,308    1,437
     Other...................................................    1,225    2,010
                                                              --------  -------
                                                              $ 17,635  $14,841
                                                              ========  =======
</TABLE>

6. CAPITAL STOCK

 COMMON STOCK

   In 1996, the Board of Directors authorized the Company to repurchase up to
500,000 shares of the Company's Common Stock in the open market. As of December
31, 1997, all 500,000 shares had been repurchased by the Company for funding
the Company's Employee Stock Purchase Plan. Of the shares purchased, 400,000
shares were purchased prior to the Company's reincorporation in Delaware in
September

                                      F-13
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1997, and were retired. The 100,000 shares repurchased after the
reincorporation in Delaware are held as treasury stock. In 1998, the Board of
Directors authorized the Company to repurchase up to 1,000,000 shares of the
Company's Common Stock in the open market. As of December 31, 1999, the Company
had repurchased 274,800 of these shares. The total cost of share repurchases
was $2,987,000 and these shares are held as treasury stock.

 STOCK OPTION PLAN

   In September 1989, the Company adopted an incentive and non-statutory stock
option plan under which a total of 4,300,000 shares of Common Stock have been
reserved for future issuance, including increases of 1,000,000 shares in 1996,
300,000 shares in 1997, 250,000 shares in 1998 and 1,125,000 shares in 1999.
Options granted under this Plan are for periods not to exceed ten years.
Incentive stock option and non-statutory stock option grants under the Plan
must be at prices at least 100% and 85%, respectively, of the fair market value
of the stock on the date of grant. The options generally vest 25% one year from
the date of grant, with the remaining vesting 1/36th per month thereafter.

   A summary of the status of the Company's stock option plans at December 31,
1999, 1998 and 1997 and changes during the years then ended is presented in the
following tables and narrative. Share amounts are shown in thousands.

<TABLE>
<CAPTION>
                                       Year Ended December 31,
                          -----------------------------------------------------
                                1999              1998              1997
                          ----------------- ----------------- -----------------
                                  Weighted-         Weighted-         Weighted-
                                   Average           Average           Average
                                  Exercise          Exercise          Exercise
        Activity          Shares    Price   Shares    Price   Shares    Price
        --------          ------  --------- ------  --------- ------  ---------
<S>                       <C>     <C>       <C>     <C>       <C>     <C>
Outstanding at beginning
 of year................  3,084     $6.19   3,067     $6.82   2,544     $5.62
Granted.................    881      9.97   1,337      5.71     926      9.66
Exercised...............   (489)     3.59    (380)     0.57    (182)     1.43
Forfeited...............   (333)     6.98    (940)     9.85    (221)     9.48
                          -----             -----             -----
Outstanding at end of
 year...................  3,143      7.57   3,084      6.19   3,067      6.82
                          =====             =====             =====
Exercisable, end of
 year...................  1,353      6.85   1,138      5.35   1,361      3.97
                          =====             =====             =====
Weighted-average fair
 value per option
 granted................            $6.13             $3.53             $4.67
                                    =====             =====             =====
</TABLE>

   In November 1998, the Board of Directors approved a proposal under which all
employees, other than executive officers, could elect to cancel certain options
in exchange for grants of new options with exercise prices which were equal to
the fair value of the Company's Common Stock on the date of the Board's
approval and for which a new four year vesting period commenced as of the new
date of grant. Employees canceled options for the purchase of a total of
681,315 shares at exercise prices ranging from $3.41 to $24.50, in exchange for
newly issued options with an exercise price of $6.00 per share, which was the
fair market value on the date of the Board's approval.

                                      F-14
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table summarizes information about stock options outstanding
at December 31, 1999 (amounts in thousands except exercise price and
contractual life):

<TABLE>
<CAPTION>
                                                                    Options
                                        Options Outstanding       Exercisable
                                     -------------------------- ----------------
                                            Weighted- Weighted-        Weighted-
                                             Average   Average          Average
                                            Remaining Exercise         Exercise
Range Of Exercise Prices             Number   Years     Price   Number   Price
------------------------             ------ --------- --------- ------ ---------
<S>                                  <C>    <C>       <C>       <C>    <C>
 $0.20-$ 5.09.......................   555     6.5     $ 3.45     407   $ 2.94
 $5.13-$ 5.88.......................   171     8.7     $ 5.54      51   $ 5.50
 $6.00-$ 6.00.......................   664     8.1     $ 6.00     267   $ 6.00
 $6.06-$ 7.31.......................   530     9.1     $ 7.04      30   $ 7.02
 $7.50-$ 9.38.......................   564     6.4     $ 8.90     338   $ 9.08
 $9.75-$23.00.......................   659     6.8     $12.48     260   $11.19
                                     -----     ---     ------   -----   ------
                                     3,143     7.5     $ 7.57   1,353   $ 6.85
                                     =====     ===     ======   =====   ======
</TABLE>

   Compensation cost under SFAS No. 123 for the fair value of each incentive
stock option grant is estimated on the date of grant using the Black-Scholes
option-pricing model for the multiple option approach with the following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                        1999     1998     1997
                                                       -------  -------  ------
     <S>                                               <C>      <C>      <C>
     Expected dividend yield..........................      --       --      --
     Expected stock price volatility..................      80%      80%     60%
     Risk-free interest rate..........................     5.8%     4.5%    6.0%
     Expected life of options......................... 2 years  2 years  1 year
</TABLE>

 EMPLOYEE STOCK PURCHASE PLAN

   In August 1994, the Company adopted an employee stock purchase plan under
which 1,925,000 shares of Common Stock have been reserved for future issuance,
including an increase of 65,000 in 1996, 400,000 shares in 1997, 450,000 shares
in 1998 and 475,000 shares in 1999. The Purchase Plan is administered generally
over offering periods of 24 months, with each offering period divided into four
consecutive six-month purchase periods beginning May 1 and November 1 of each
year. Eligible employees may designate not more than 15% of their cash
compensation to be deducted each pay period for the purchase of Common Stock
under the employee stock purchase plan and participants may not purchase more
than $25,000 worth of Common Stock in any calendar year or 10,000 shares in any
offering period. On the last business day of each purchase period, shares of
Common Stock are purchased with the employees' payroll deductions accumulated
during the six months, at a price per share of 85% of the market price of the
Common Stock on the date immediately preceding the offering date or the date
immediately preceding the purchase date, whichever is lower.

   The weighted average fair value on the grant date of rights granted under
the employee stock purchase plan was approximately $3.15 in 1999, $3.42 in 1998
and $2.96 in 1997.

   Compensation cost under SFAS No. 123 is calculated for the estimated fair
value of the employees' stock purchase rights using the Black-Scholes option-
pricing model with the following average assumptions:

<TABLE>
<CAPTION>
                                                       1999     1998     1997
                                                      -------  ------  --------
     <S>                                              <C>      <C>     <C>
     Expected dividend yield.........................      --      --        --
     Expected stock price volatility.................      80%     80%       60%
     Risk-free interest rate.........................     5.8%    4.5%      6.0%
     Expected life of options........................ 2 years  1 year  6 months
</TABLE>

                                      F-15
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 PRO FORMA EFFECT OF STOCK BASED COMPENSATION PLANS

   In accordance with the provisions of SFAS No. 123, the Company applies APB
Opinion No. 25 in accounting for its incentive stock option and employee stock
purchase plans, and accordingly, does not recognize compensation cost in the
statement of operations because the exercise price of the stock options equals
the market price of the underlying stock on the date of grant. If the Company
had elected to recognize compensation cost based on the fair value of the
options granted at grant date as prescribed by SFAS No. 123, net income (loss)
and earnings (loss) per share would have been adjusted to the pro forma amounts
indicated in the table below:

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    --------------------------
                                                     1999      1998     1997
                                                    -------  --------  -------
                                                     (in thousands, except
                                                       per share amounts)
   <S>                                              <C>      <C>       <C>
   Net income (loss):
     As reported................................... $  (849) $(22,367) $ 1,431
     Pro forma..................................... $(5,430) $(25,471) $(2,154)
   Diluted earnings (loss) per share:
     As reported................................... $ (0.05) $  (1.52) $  0.09
     Pro forma..................................... $ (0.35) $  (1.73) $ (0.15)
</TABLE>

   Since SFAS No. 123 method of accounting has not been applied to options
granted prior to July 1995, the resulting pro forma compensation cost may not
be representative of that to be expected in future years.

7. INCOME TAX PROVISION

   The components of income (loss) before provision for income taxes are as
follows:

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                      -------------------------
                                                       1999      1998     1997
                                                      -------  --------  ------
                                                          (in thousands)
   <S>                                                <C>      <C>       <C>
   Domestic income (loss)............................ $(1,065) $(22,467) $1,347
   Foreign income....................................     463       437     535
                                                      -------  --------  ------
     Income (loss) before provision for income
      taxes.......................................... $  (602) $(22,030) $1,882
                                                      =======  ========  ======
</TABLE>

   The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                               Year Ended
                                                              December 31,
                                                           -------------------
                                                           1999  1998    1997
                                                           ---- -------  -----
                                                             (in thousands)
   <S>                                                     <C>  <C>      <C>
   Current:
     Federal.............................................. $ -- $(3,589) $ 237
     State................................................   --    (633)     2
     Foreign..............................................  247     337    237
                                                           ---- -------  -----
       Total Current......................................  247  (3,885)   476
                                                           ---- -------  -----
   Deferred:
     Federal..............................................   --   3,589    180
     State................................................   --     633   (205)
                                                           ---- -------  -----
       Total Deferred.....................................   --   4,222    (25)
                                                           ---- -------  -----
   Provision for income taxes............................. $247 $   337  $ 451
                                                           ==== =======  =====
</TABLE>

                                      F-16
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The provision for income taxes reconciles to the amount computed by
multiplying income (loss) before income tax by the U.S. statutory rate of 35%
as follows:

<TABLE>
<CAPTION>
                                                          Year Ended December
                                                                  31,
                                                          ---------------------
                                                          1999    1998    1997
                                                          -----  -------  -----
                                                            (in thousands)
   <S>                                                    <C>    <C>      <C>
   Provision (benefit) at statutory rate................. $(211) $(7,710) $ 659
   Research and development tax credits..................  (499)      --   (307)
   State taxes, net of federal benefit...................     2       --     51
   Foreign earnings taxed at higher rates................    85      184     81
   Benefit of foreign sales corporation..................    --       --    (51)
   Deferred tax asset valuation allowance................   816    7,863     --
   Other.................................................    54       --     18
                                                          -----  -------  -----
     Total provision for income taxes.................... $ 247  $   337  $ 451
                                                          =====  =======  =====
</TABLE>

   Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
                                                              As of December
                                                                    31,
                                                             ------------------
                                                               1999      1998
                                                             --------  --------
                                                              (in thousands)
   <S>                                                       <C>       <C>
   Reserves not currently deductible........................ $  6,600  $  4,824
   Deferred income..........................................      603       985
   Net operating loss and credit carryforwards..............    6,905     6,682
   Other....................................................      961     1,245
                                                             --------  --------
   Total net deferred taxes.................................   15,069    13,736
   Deferred tax assets valuation allowance..................  (15,069)  (13,736)
                                                             --------  --------
                                                             $     --  $     --
                                                             ========  ========
</TABLE>

   The deferred tax assets valuation allowance at December 31, 1999 and 1998 is
attributable to federal and state deferred tax assets. Management believes that
sufficient uncertainty exists with regard to the realizability of these tax
assets such that a full valuation allowance is necessary. These factors include
the lack of a significant history of consistent profits and the lack of
carryback capacity to realize these assets. Based on this absence of objective
evidence, management is unable to assert that it is more likely than not that
the Company will generate sufficient taxable income to realize the Company's
net deferred tax assets. At December 31, 1999, the Company had Federal net
operating loss carryforwards of approximately $11.5 million which expire in
2019. This amount includes approximately $2.5 million of net operating loss
carryforwards from the acquisition of Concept which are generally limited to a
utilization of approximately $0.2 million per year. The net operating loss
carryforward also includes approximately $0.7 million resulting from employee
exercises of non qualified stock options or disqualifying dispositions, the tax
benefits of which, when realized, will be accounted for as an addition to
additional paid in capital rather than as a reduction of the provision for
income taxes. The deferred tax assets related to the acquisition of Concept,
approximately $2.5 million as of December 31, 1999, if and when realized will
be used to reduce the amount of goodwill and intangibles recorded at the date
of acquisition. Federal and state research and development credit carryforwards
of approximately $1.7 million are also available to reduce future Federal and
state income taxes and expire in 2011 to 2019. If certain substantial changes
in the Company's ownership occur, there would be an additional annual
limitation on the amount of the net operating loss carryforwards which can be
utilized.

                                      F-17
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


8. EMPLOYEE BENEFIT PLANS

 RETIREMENT/SAVINGS PLAN

   The Company has a retirement/savings plan, which qualifies as a thrift plan
under section 401(k) of the Internal Revenue Code. All employees who are
twenty-one years of age or older are eligible to participate in the Plan. The
Plan allows participants to contribute up to 20% of the total compensation that
would otherwise be paid to the participant, not to exceed the amount allowed by
applicable Internal Revenue Service guidelines. The Company may make a
discretionary matching contribution equal to a percentage of the participant's
contributions. In 1999, the Company made a matching contribution of $226,000
and in 1998, the Company made a matching contribution of $197,000. There were
no matching contributions in 1997.

 PROFIT SHARING PLAN

   The Company has a profit sharing plan, wherein, as determined by the board
of directors, a percentage of income from operations is accrued and distributed
to all employees excluding management. The total charge to operations under the
profit sharing plan was approximately $80,000 for the year ended December 31,
1999, $0 for 1998, and $85,000 for 1997.

9. NET INCOME (LOSS) PER SHARE

   SFAS No. 128 requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic EPS is computed by dividing
income (loss) available to common stockholders (numerator) by the weighted
average number of common shares outstanding (denominator) for the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS uses the average market
prices during the period. All amounts in the following table are in thousands
except per share data.

<TABLE>
<CAPTION>
                                                        Year Ended December
                                                                31,
                                                       ------------------------
                                                        1999     1998     1997
                                                       ------  --------  ------
<S>                                                    <C>     <C>       <C>
NET INCOME............................................ $ (849) $(22,367) $1,431
BASIC EARNINGS (LOSS) PER SHARE:
  Income available to common shareholders............. $ (849) $(22,367) $1,431
  Weighted average common shares outstanding.......... 15,730    14,720  14,117
                                                       ------  --------  ------
  Basic earnings (loss) per share..................... $(0.05) $  (1.52) $ 0.10
                                                       ======  ========  ======
DILUTED EARNINGS (LOSS) PER SHARE:
  Income available to common shareholders............. $ (849) $(22,367) $1,431
  Weighted average common shares outstanding.......... 15,730    14,720  14,117
  Diluted potential common shares from stock options..     --        --   1,194
                                                       ------  --------  ------
  Weighted average common shares and dilutive
   potential common shares............................ 15,730    14,720  15,311
                                                       ------  --------  ------
  Diluted earnings (loss) per share................... $(0.05) $  (1.52) $ 0.09
                                                       ======  ========  ======
</TABLE>

   Total stock options outstanding at December 31, 1999 of 3,143,000 and at
December 31, 1998 of 3,084,000 and options to purchase 221,000 weighted shares
outstanding during 1997 were excluded from the computations of diluted earnings
(loss) per share because of their anti-dilutive effect on diluted earnings
(loss) per share.

                                      F-18
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


10. CERTAIN TRANSACTIONS

   The Company has a distribution agreement with Marubeni Solutions Corp., a
Japanese distributor. The Company formed a subsidiary in Japan in October 1995
in which Marubeni has a 19% minority interest. In 1999, the Company shifted its
strategy to a direct sales model. The Company is in the process of terminating
its distribution relationship with Marubeni and establishing its own sales
force in Japan.

   The following is a summary of the Company's transactions with Marubeni (in
thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December
                                                                 31,
                                                        -----------------------
                                                         1999     1998    1997
                                                        -------  ------  ------
<S>                                                     <C>      <C>     <C>
Net sales to the distributor for the period............ $10,706  $9,289  $9,987
Percentage of net sales................................    10.3%   15.7%   13.0%
Accounts receivable at period end...................... $   803  $2,103  $1,555
Deferred income at period end.......................... $   591  $  591  $  591
Minority interest in joint venture at period end....... $   159  $  180  $  200
</TABLE>

   Upon termination of the distribution agreement, the Company may be required
to repurchase up to a maximum of $1,000,000 of inventory related to the
Company's sales to Marubeni. The Company recorded deferred income at the time
of sale to cover this right of return. At December 31, 1999 and 1998, deferred
income of $591,000 related to this agreement resulted from deferred revenue of
$1,000,000, less the estimated inventory value to the Company of $409,000.

   The Company purchases certain inventory parts from a supplier company, which
is majority owned by the Chief Executive Officer of the Company. Net purchases
were $680,000 for the year ended December 31, 1999, $363,000 for 1998 and
$739,000 for 1997.

11. REPORTABLE SEGMENTS

   SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. SFAS No. 131 establishes standards for reporting
information about operating segments in financial statements. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or chief decision making group, in deciding how to
allocate resources and in assessing performance. Brad Mattson, Chairman and
Chief Executive Officer of the Company, is the Company's chief decision maker.
As the Company's business is completely focused on one industry segment,
design, manufacturing and marketing of advanced fabrication equipment to the
semiconductor manufacturing industry, management believes that the Company has
one reportable segment. The Company's revenues and profits are generated
through the sale and service of products for this one segment.

                                      F-19
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following is net sales information by geographic area for the years
ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                          1999    1998    1997
                                                        -------- ------- -------
   <S>                                                  <C>      <C>     <C>
   United States....................................... $ 30,428 $19,395 $26,831
   Japan...............................................   10,706   9,289   9,987
   Taiwan..............................................   20,173  14,057  21,634
   Korea...............................................   22,081   2,247   2,798
   Singapore...........................................    8,441   3,845  10,961
   Europe..............................................   11,629  10,353   4,519
                                                        -------- ------- -------
                                                        $103,458 $59,186 $76,730
                                                        ======== ======= =======
</TABLE>

   The net sales above have been allocated to the geographic areas based upon
the installation location of the systems.

   For the purposes of determining sales to significant customers, the Company
includes sales to customers through its distributor (at the sales price to the
distributor) and excludes the distributor as a significant customer. The
Company had sales to one customer of 11% of net sales in 1997 and 20% of net
sales to another customer in 1999. In 1998, no sales to a single customer
exceeded 10% of net sales.

12. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

 CURRENCY SWAP CONTRACTS

   Currency swap contracts are entered into primarily to hedge against the
short term impact of fluctuations in the Yen-denominated monetary assets of the
Company's subsidiary in Japan. At December 31, 1999, the Company had a contract
to sell 21.0 million Yen ($200,000) which matures in 2000. Because the impact
of movements in currency exchange rates on currency swap contracts offsets the
related impact on the underlying items being hedged, these financial
instruments do not subject the Company to speculative risk that would otherwise
result from changes in currency exchange rates. Net foreign currency unrealized
transaction gains and losses as of December 31, 1999 and realized transaction
gains and losses to date have not been material.

 CONCENTRATION OF CREDIT RISK

   Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash equivalents, short
term investments, trade accounts receivable and financial instruments used in
hedging activities.

   The Company invests in a variety of financial instruments such as
certificates of deposit, corporate bonds and treasury bills. The Company limits
the amount of credit exposure to any one financial institution or commercial
issuer.

   The fair values of the Company's cash and cash equivalents and short term
investments are not significantly different than cost. All short term
investments mature within one year.

   The Company's trade accounts receivable are derived from sales in the United
States, Japan, other Pacific Rim countries and Europe. The Company performs
ongoing credit evaluations of its customers (semiconductor manufacturers and
its Japanese distributor) and to date has not experienced any material losses.

   The Company is exposed to credit loss in the event of non performance by
counterparties on the currency swap contracts used in hedging activities. The
Company does not anticipate nonperformance by these counterparties.

                                      F-20
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


13. COMMITMENTS AND CONTINGENCIES

   The Company leases its facilities under operating leases, which expire at
various dates through 2003, with minimum annual rental commitments as follows
(in thousands):

<TABLE>
     <S>                                                                  <C>
     2000................................................................ $1,722
     2001................................................................    856
     2002................................................................    709
     2003................................................................    236
     2004................................................................     --
                                                                          ------
                                                                          $3,523
                                                                          ======
</TABLE>

   Rent expense was $1,932,000 for 1999, $2,009,000 for 1998, and $1,755,000
for 1997.

   The Company is party to certain claims arising in the ordinary course of
business. While the outcome of these matters is not presently determinable,
management believes that they will not have a material adverse effect on the
financial position or results of operations of the Company.

14. SUBSEQUENT EVENTS (UNAUDITED)

   On January 28, 2000, the Company filed a registration statement with the
Securities and Exchange Commission ("SEC") relating to a proposed underwritten
public offering of up to 3.45 million shares of the Company's common stock. The
net proceeds of approximately $100 million are expected to be used for general
corporate purposes, principally working capital and capital expenditures.

                                      F-21
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                             June 25,  Dec. 31,
                                                               2000      1999
                                                             --------  --------
<S>                                                          <C>       <C>
                           ASSETS
                           ------

Current assets:
  Cash and cash equivalents................................. $125,493  $ 16,965
  Accounts receivable, net..................................   41,432    21,500
  Inventories...............................................   36,516    25,374
  Prepaid expenses and other current assets.................    2,396     2,299
                                                             --------  --------
    Total current assets....................................  205,837    66,138
Property and equipment, net.................................   11,450    11,260
Goodwill, intangibles and other assets......................    3,921     3,750
                                                             --------  --------
                                                             $221,208  $ 81,148
                                                             ========  ========

            LIABILITIES AND STOCKHOLDERS' EQUITY
            ------------------------------------

Current liabilities:
  Line of credit............................................ $     --  $  3,000
  Accounts payable..........................................   10,193     8,494
  Accrued liabilities.......................................   21,580    17,635
                                                             --------  --------
    Total current liabilities...............................   31,773    29,129
                                                             --------  --------
Stockholders' equity:
  Common stock..............................................       20        16
  Additional paid in capital................................  193,235    66,280
  Retained earnings (deficit)...............................     (609)  (11,099)
  Treasury stock............................................   (2,987)   (2,987)
  Accumulated other comprehensive loss......................     (224)     (191)
                                                             --------  --------
    Total stockholders' equity..............................  189,435    52,019
                                                             --------  --------
                                                             $221,208  $ 81,148
                                                             ========  ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                      F-22
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                  (unaudited)

<TABLE>
<CAPTION>
                                              Three Months      Six Months
                                                  Ended            Ended
                                             ---------------  ---------------
                                              June    June     June    June
                                               25,     27,      25,     27,
                                              2000    1999     2000    1999
                                             ------- -------  ------- -------
<S>                                          <C>     <C>      <C>     <C>
Net sales................................... $50,130 $24,128  $92,711 $38,448
Cost of sales...............................  24,564  12,748   46,170  19,824
                                             ------- -------  ------- -------
Gross profit................................  25,566  11,380   46,541  18,624
                                             ------- -------  ------- -------
Operating expenses:
  Research, development and engineering.....   6,867   4,525   13,165   8,423
  Selling, general and administrative.......  13,020   7,106   23,630  13,137
                                             ------- -------  ------- -------
    Total operating expenses................  19,887  11,631   36,795  21,560
                                             ------- -------  ------- -------
Income (loss) from operations...............   5,679    (251)   9,746  (2,936)
Interest and other income, net..............   1,511     133    1,909     426
                                             ------- -------  ------- -------
Income (loss) before income taxes...........   7,190    (118)  11,655  (2,510)
Provision for income taxes..................     719      68    1,165     117
                                             ------- -------  ------- -------
Net income (loss)........................... $ 6,471 $  (186) $10,490 $(2,627)
                                             ======= =======  ======= =======
Net income (loss) per share:
  Basic..................................... $  0.33 $ (0.01) $  0.57 $ (0.17)
                                             ======= =======  ======= =======
  Diluted................................... $  0.30 $ (0.01) $  0.51 $ (0.17)
                                             ======= =======  ======= =======
Shares used in computing net income (loss)
 per share:
  Basic.....................................  19,877  15,601   18,370  15,512
                                             ======= =======  ======= =======
  Diluted...................................  21,929  15,601   20,422  15,512
                                             ======= =======  ======= =======
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                      F-23
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                            ------------------
                                                            June 25,  June 27,
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
Cash flows from operating activities:
  Net income (loss)........................................ $ 10,490  $ (2,627)
  Adjustments to reconcile net income (loss) to net cash
   used in operating activities:
    Depreciation and amortization..........................    2,264     2,360
    Amortization of intangibles............................      451       207
Changes in assets and liabilities:
    Accounts receivable....................................  (19,932)  (10,729)
    Inventories............................................  (11,142)   (4,598)
    Prepaid expenses and other current assets..............      (97)    4,153
    Goodwill, intangibles and other assets.................     (622)       --
    Accounts payable.......................................    1,699     1,527
    Accrued liabilities....................................    3,945     1,041
                                                            --------  --------
      Net cash used in operating activities................  (12,944)   (8,666)
                                                            --------  --------
Cash flows from investing activities:
  Acquisition of property and equipment....................   (2,454)     (861)
  Sales and maturities of short-term investments...........       --     8,128
                                                            --------  --------
      Net cash (used in) provided by investing activities..   (2,454)    7,267
                                                            --------  --------
Cash flows from financing activities:
  Repayment of line of credit..............................   (3,000)       --
  Increase in offering costs...............................   (8,536)       --
  Proceeds from the issuance of Common Stock, net..........  135,495       741
                                                            --------  --------
      Net cash provided by financing activities............  123,959       741
                                                            --------  --------
Effect of exchange rate changes on cash and cash
 equivalents...............................................      (33)      (50)
                                                            --------  --------
Net increase (decrease) in cash and cash equivalents.......  108,528      (708)
Cash and cash equivalents, beginning of period.............   16,965    11,863
                                                            --------  --------
Cash and cash equivalents, end of period................... $125,493  $ 11,155
                                                            ========  ========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                      F-24
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 BASIS OF PRESENTATION

   The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included.

   The financial statements should be read in conjunction with the audited
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999.

   The results of operations for the three month and six month periods ended
June 25, 2000 are not necessarily indicative of results that may be expected
for the entire year ending December 31, 2000.

NOTE 2 BALANCE SHEET DETAIL (in thousands):

<TABLE>
<CAPTION>
                                                                 June    Dec.
                                                                  25,     31,
                                                                 2000    1999
                                                                ------- -------
   <S>                                                          <C>     <C>
   Inventories:
     Purchased parts and raw materials......................... $22,459 $13,656
     Work-in-process...........................................  10,829   9,433
     Evaluation systems........................................   3,228   2,285
                                                                ------- -------
                                                                $36,516 $25,374
                                                                ======= =======
   Accrued liabilities:
     Warranty and installation reserve......................... $ 9,510 $ 7,371
     Accrued compensation and benefits.........................   5,464   5,041
     Income taxes..............................................   1,830   1,392
     Commissions...............................................   1,357   1,045
     Deferred income and customer deposits.....................   1,769   1,561
     Other.....................................................   1,650   1,225
                                                                ------- -------
                                                                $21,580 $17,635
                                                                ======= =======
</TABLE>

NOTE 3 ACQUISITION OF CONCEPT SYSTEMS DESIGN, INC.

   On July 24, 1998, we acquired Concept Systems Design. The transaction was
achieved through the merger of a wholly owned subsidiary of the Company with
and into Concept and has been accounted for as a purchase. In connection with
the merger, the Company issued 795,138 shares of Common Stock to the former
shareholders of Concept.

   In addition to the issuance of the 795,138 shares mentioned above, the
agreement for the acquisition of Concept also includes the contingent issuance
and distribution of 100,000 shares of Mattson Common Stock to the Concept
shareholders if Concept achieves net revenues of at least $16,667,000 during
the first 24 full calendar months following the acquisition date. These revenue
goals were not achieved by Concept during the specified period, and no such
additional shares will be issued.

                                      F-25
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In the first quarter of 1999, a preacquisition contingency was resolved
which reduced the liabilities assumed from Concept by approximately $2.2
million. Under the provisions of Statement of Financial Accounting Standards
No. 38, this has been recorded by the Company in the first quarter of 1999 on a
prospective basis as an elimination of previously recorded goodwill and a pro-
rata reduction of the balance to the acquired developed technology, workforce
and property and equipment.

NOTE 4 NET INCOME (LOSS) PER SHARE

   SFAS No. 128 requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic EPS is computed by dividing
income (loss) available to common stockholders (numerator) by the weighted
average number of common shares outstanding (denominator) for the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS uses the average market
prices during the period. All amounts in the following table are in thousands
except per share data.

<TABLE>
<CAPTION>
                                               Three Months      Six Months
                                                   Ended            Ended
                                             ----------------- ---------------
                                                                June    June
                                             June 25, June 27,   25,     27,
                                               2000     1999    2000    1999
                                             -------- -------- ------- -------
<S>                                          <C>      <C>      <C>     <C>
NET INCOME (LOSS)...........................  $6,471   $ (186) $10,490 $(2,627)
BASIC EARNINGS (LOSS) PER SHARE:
  Income (loss) available to common
   shareholders.............................  $6,471   $ (186) $10,490 $(2,627)
  Weighted average common shares
   outstanding..............................  19,877   15,601   18,370  15,512
                                              ------   ------  ------- -------
  Basic earnings (loss) per share...........  $ 0.33   $(0.01) $  0.57 $ (0.17)
                                              ======   ======  ======= =======
DILUTED EARNINGS (LOSS) PER SHARE:
  Income (loss) available to common
   shareholders.............................  $6,471   $ (186) $10,490 $(2,627)
  Weighted average common shares
   outstanding..............................  19,877   15,601   18,370  15,512
  Diluted potential common shares from stock
   options..................................   2,052       --    2,052      --
                                              ------   ------  ------- -------
  Weighted average common shares and
   dilutive potential common shares.........  21,929   15,601   20,422  15,512
                                              ------   ------  ------- -------
  Diluted earnings (loss) per share.........  $ 0.30   $(0.01) $  0.51 $ (0.17)
                                              ======   ======  ======= =======
</TABLE>

   Options to purchase 101,725 shares during the three months ended June 25,
2000 were excluded from the computation of diluted EPS because these options'
exercise price were greater than the average market price of the Company's
common stock during the period. Total stock options outstanding at June 27,
1999 of 2,920,933 were excluded from the computation of diluted EPS because the
effect of including them would have been anitdilutive due to the loss available
to common stockholders.

NOTE 5 COMPREHENSIVE INCOME

   SFAS 130 establishes rules for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no
impact on the Company's net income or stockholders' equity.

                                      F-26
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following are the components of comprehensive income (loss):

<TABLE>
<CAPTION>
                                             Three Months      Six Months
                                                 Ended            Ended
                                           ----------------- ----------------
                                                              June     June
                                           June 25, June 27,   25,      27,
                                             2000     1999    2000     1999
                                           -------- -------- -------  -------
                                                    (in thousands)
   <S>                                     <C>      <C>      <C>      <C>
   Net income (loss)......................  $6,471   $(186)  $10,490  $(2,627)
   Foreign currency translation
    adjustments...........................     (26)     38       (33)     (50)
                                            ------   -----   -------  -------
   Comprehensive income (loss)............  $6,445   $(148)  $10,457  $(2,677)
                                            ======   =====   =======  =======
</TABLE>

   The components of accumulated other comprehensive income, net of related tax
are as follows:

<TABLE>
<CAPTION>
                                                               June 25, Dec. 31,
                                                                 2000     1999
                                                               -------- --------
                                                                (in thousands)
   <S>                                                         <C>      <C>
   Cumulative translation adjustments.........................  $(224)   $(191)
                                                                =====    =====
</TABLE>

NOTE 6 REPORTABLE SEGMENTS

   SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. SFAS No. 131 establishes standards for reporting
information about operating segments in financial statements. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or chief decision making group, in deciding how to
allocate resources and in assessing performance. Brad Mattson, Chairman and
Chief Executive Officer of the Company, is the Company's chief decision maker.
As the Company's business is completely focused on one industry segment,
design, manufacturing and marketing of advanced fabrication equipment to the
semiconductor manufacturing industry, management believes that the Company has
one reportable segment. The Company's revenues and profits are generated
through the sale and service of products for this one segment. As a result, no
additional operating segment information is required to be disclosed.

NOTE 7 LINE OF CREDIT

   During 1999 we entered into a one-year revolving line of credit with a bank
in the amount of $15.0 million. This line of credit expired in July 2000. All
borrowings under this line of credit bore interest at a per annum rate equal to
the lender's prime rate, which was 9.75% at June 25, 2000. The line of credit
was secured by our accounts receivable and other tangible assets. During the
third quarter of 1999 we had borrowed $3.0 million against this revolving line
of credit. The outstanding balance was fully repaid during the first quarter of
2000. Our revolving credit line required us to maintain certain quarterly
financial covenants, including a minimum quick ratio and minimum tangible net
worth. We were in compliance with all of our financial covenants at June 25,
2000. At this time the Company is reviewing further line of credit
requirements.

NOTE 8 REVENUE RECOGNITION

   We generally recognize sales upon shipment of a system. From time to time,
however, we allow customers to evaluate systems, and since customers can return
such systems any time with limited or no penalty, we do not recognize the
associated revenue until the evaluation system is accepted by the customer.
Service and maintenance contract revenue, which to date has been insignificant,
is recognized on a straight-line basis over

                                      F-27
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the service period of the related contract. A provision for the estimated
future cost of system installation and warranty is recorded at the time revenue
is recognized.

NOTE 9 RECENT ACCOUNTING PRONOUNCEMENTS

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. SFAS 133 is effective for fiscal
years beginning after June 15, 2000 and cannot be applied retroactively. The
effect of SFAS 133 is not expected to be material to our financial statements.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. Among other
things, SAB 101 would result in a change from the established practice in many
industries of recognizing revenue at the time of shipment of a system, and
instead delay revenue recognition until the time of installation or customer
acceptance. Because of the cyclical nature of the semiconductor equipment
industry, and our dependence on a small number of comparatively large sales, a
change in revenue recognition practices could have a material affect on revenue
in any particular reporting period. We are currently evaluating the effect that
such adoption may have on our consolidated results of operations and financial
position and may be required to adopt SAB 101 in the fourth quarter of 2000.

                                      F-28
<PAGE>

           STEAG SEMICONDUCTOR DIVISION INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
ANNUAL AUDITED FINANCIAL STATEMENTS

  Report of Independent Public Accountants................................. F-30

  Combined Balance Sheets.................................................. F-31

  Combined Statements of Operations........................................ F-32

  Combined Statements of Shareholders' Equity.............................. F-33

  Combined Statements of Cash Flows........................................ F-34

  Notes to Combined Financial Statements................................... F-35

UNAUDITED INTERIM FINANCIAL STATEMENTS

  Combined Balance Sheets.................................................. F-48

  Combined Statements of Operations........................................ F-49

  Combined Statements of Cash Flows........................................ F-50

  Notes to Combined Financial Statements................................... F-51
</TABLE>

                                      F-29
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of STEAG Electronic Systems AG, Essen, Germany, the
shareholder of the STEAG Semiconductor Division:

   We have audited the accompanying combined balance sheets of the STEAG
Semiconductor Division identified in Note 1.1 as of December 31, 1999 and 1998,
and the related combined statements of operations, shareholder's equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the STEAG Semiconductor
Division as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.

                                          Arthur Andersen LLP

Dusseldorf, Germany
August 31, 2000

                                      F-30
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                            COMBINED BALANCE SHEETS
                   (all amounts in thousands of U.S. Dollars)

<TABLE>
<CAPTION>
                                                             As of December
                                                                   31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
                          ------
Current Assets:
  Cash and cash equivalents................................ $ 10,181  $ 15,950
  Accounts receivables net of allowance for doubtful
   accounts of 2,265 and 1,507 at December 31, 1999 and
   1998, respectively .....................................   52,298    33,205
  Receivables from related parties.........................    3,914     5,771
  Notes and other receivables..............................    1,141       605
  Inventories..............................................   46,765    36,454
  Prepaid expenses.........................................    1,382       594
  Other current assets.....................................    2,975     1,468
                                                            --------  --------
    Total current assets...................................  118,656    94,047
                                                            --------  --------
Noncurrent Assets
  Property, plant and equipment less accumulated
   depreciation............................................   33,648    29,060
  Intangible assets less accumulated amortization..........      976       923
  Goodwill less accumulated amortization of 25,857 and
   12,578 at December 31, 1999 and 1998, respectively .....   43,915    20,102
  Other noncurrent assets..................................      910       674
                                                            --------  --------
    Total noncurrent assets................................   79,449    50,759
                                                            --------  --------
    Total assets........................................... $198,105  $144,806
                                                            ========  ========

                        LIABILITIES
                        -----------
Current liabilities
  Short term borrowings and current portion of long-term
   debt.................................................... $ 46,223  $ 50,620
  Accounts payable.........................................   27,536    18,627
  Accrued liabilities......................................   24,396    20,710
  Other current liabilities................................    1,599     1,202
                                                            --------  --------
    Total current liabilities..............................   99,754    91,159
                                                            --------  --------
Noncurrent liabilities
  Long-term debt...........................................   16,107     7,322
  Other noncurrent liabilities.............................    3,317     2,363
                                                            --------  --------
    Total noncurrent liabilities...........................   19,424     9,685
                                                            --------  --------
    Total liabilities...................................... $119,178  $100,844
                                                            --------  --------

Commitments and contingencies (Note 10, 11 and 13)
Shareholders' equity
  Common stock.............................................   63,418    16,979
  Additional paid-in capital...............................   82,856    39,284
  Accumulated other comprehensive income/(loss)............   (1,970)    1,614
  Accumulated deficit......................................  (65,377)  (13,915)
                                                            --------  --------
    Total shareholders' equity.............................   78,927    43,962
                                                            --------  --------
    Total liabilities and shareholders' equity............. $198,105  $144,806
                                                            ========  ========
</TABLE>

 Note: The accompanying notes are an integral part of these combined financial
                                  statements.

                                      F-31
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                       COMBINED STATEMENTS OF OPERATIONS
                   (all amounts in thousands of U.S. Dollars)

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     ------------------------
                                                        1999         1998
                                                     -----------  -----------
<S>                                                  <C>          <C>
Net sales........................................... $   146,847  $   108,865
Cost of sales.......................................     109,352       81,164
                                                     -----------  -----------
Gross profit........................................      37,495       27,701
                                                     -----------  -----------
Operating expenses:
  Research and development..........................      30,642       18,116
  Selling, general and administrative expenses......      46,470       29,432
  Goodwill amortization.............................      13,279        6,536
                                                     -----------  -----------
    Total operating expenses........................     (90,391)     (54,084)
                                                     -----------  -----------
Loss from operations................................     (52,896)     (26,383)
                                                     -----------  -----------
Other income (expense):
  Interest income...................................         161          267
  Interest expense..................................      (4,662)      (3,484)
  Other income and expense..........................         125         (265)
                                                     -----------  -----------
  Other income (expense)............................      (4,376)      (3,482)
                                                     -----------  -----------
Loss from continuing operations before income
 taxes..............................................     (57,272)     (29,865)
                                                     -----------  -----------
Income tax benefit..................................       5,810        7,114
                                                     -----------  -----------
Loss from continuing operations.....................     (51,462)     (22,751)
                                                     -----------  -----------
Income from discontinued operations
Net of income taxes of $91 in 1998..................          --          424
                                                     -----------  -----------
Net loss............................................ $   (51,462) $   (22,327)
                                                     ===========  ===========
</TABLE>


 Note: The accompanying notes are an integral part of these combined financial
                                  statements.

                                      F-32
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                  COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
                 for the years ended December 31, 1999 and 1998
                   (all amounts in thousands of U.S. Dollars)

<TABLE>
<CAPTION>
                                                           Accumulated
                                   Additional Accumulated     Other         Total
                           Common   Paid-in   (Deficit)/  Comprehensive Shareholders'
                           Stock    Capital    Earnings   Income/(Loss)    Equity
                          -------- ---------- ----------- ------------- -------------
<S>                       <C>      <C>        <C>         <C>           <C>
Balance, January 1,
 1998...................  $ 16,372  $30,217    $  8,412      $   (21)     $ 54,980
                          --------  -------    --------      -------      --------
Net loss................        --       --     (22,327)          --       (22,327)
Foreign currency
 translation gain.......        --       --          --        1,635         1,635
                          --------  -------    --------      -------      --------
Net loss and changes in
 other comprehensive
 income (loss)..........        --       --     (22,327)       1,635       (20,692)
Shares issued...........       607       --          --           --           607
Capital contribution....        --    9,067          --           --         9,067
                          --------  -------    --------      -------      --------
Balance, December 31,
 1998...................    16,979   39,284     (13,915)       1,614        43,962
                          --------  -------    --------      -------      --------
Net loss................        --       --     (51,462)          --       (51,462)
Foreign currency
 translation loss.......        --       --          --       (3,584)       (3,584)
                          --------  -------    --------      -------      --------
Net loss and changes in
 other comprehensive
 income (loss)..........        --       --     (51,462)      (3,584)      (55,046)
Inclusion of new
 companies into group ..    36,439   25,677          --           --        62,116
Conversion of debt to
 equity.................    10,000   12,000          --           --        22,000
Capital contribution....        --    5,895          --           --         5,895
                          --------  -------    --------      -------      --------
Balance, December 31,
 1999...................  $663,418  $82,856    $(65,377)     $(1,970)     $ 78,927
                          ========  =======    ========      =======      ========
</TABLE>



 Note: The accompanying notes are an integral part of these combined financial
                                  statements.

                                      F-33
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                       COMBINED STATEMENTS OF CASH FLOWS
                 for the years ended December 31, 1999 and 1998
                   (all amounts in thousands of U.S. Dollars)

<TABLE>
<CAPTION>
                                                               Year ended
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
<S>                                                         <C>       <C>
Cash flows from operating activities:
  Net loss................................................. $(51,462) $(22,327)
  Reconciliation to net cash provided (used in) operating
   activities:
    Depreciation and amortization..........................   25,532    13,799
    Loss (gain) on disposal of fixed assets................    2,701      (169)
    Deferred income taxes..................................       --     1,641
  Other changes in net cash from operating assets and
   liabilities
    Accounts receivables...................................  (11,112)   12,158
    Inventories............................................   (2,704)   17,776
    Prepaid expenses and other assets......................      (28)      577
    Accounts payable.......................................    5,270     4,949
    Accrued liabilities....................................    2,240   (23,521)
    Other current liabilities..............................   (1,261)   (1,649)
                                                            --------  --------
      Net cash (used in) provided by operating activities..  (30,824)    3,234
                                                            --------  --------
Cash flows from investing activities:
  Inclusion of net assets less cash of subsidiaries
   acquired by parent......................................  (50,192)       --
  Capital expenditures.....................................  (10,939)  (13,589)
  Proceeds from sales of equipment.........................    1,935       644
                                                            --------  --------
      Net cash used in investing activities................  (59,196)  (12,945)
                                                            --------  --------
Cash flows from financing activities:
    Borrowings under line of credit........................       --    19,674
    Repayments to line of credit...........................  (6,462)        --
    Borrowings from stockholders...........................   35,952       159
    Repayment of loans from stockholders...................   (1,545)   (2,275)
    Other long term liabilities............................    1,346       240
  Capital contribution.....................................    4,602        --
  Addition of equity of subsidiaries acquired by parent....   50,192        --
                                                            --------  --------
      Net cash provided by financing activities............   84,085    17,798
                                                            --------  --------
Effect of foreign exchange rate changes on cash and cash
 equivalents...............................................      166      (553)
                                                            --------  --------
Net (decrease) increase in cash and cash equivalents.......   (5,769)    7,534
Cash and equivalents at beginning of year..................   15,950     8,416
                                                            --------  --------
Cash and equivalents at end of year........................ $ 10,181  $ 15,950
                                                            ========  ========
Supplemental schedule of noncash investing and financing
 activities:
  Conversion of debt to equity............................. $ 22,000  $     --
Supplemental disclosure of cash flow information:
  Cash paid for interest................................... $  3,780  $  2,739
  Cash paid for income taxes............................... $    232  $  5,043
</TABLE>

 Note: The accompanying notes are an integral part of these combined financial
                                  statements.

                                      F-34
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)

1. ORGANIZATION, PURPOSE AND BASIS OF PRESENTATION

 1.1. Organization

   The combined financial statements of the semiconductor equipment division
(the "STEAG Semiconductor Division" or the "Company") of STEAG Electronic
Systems AG, Essen, Germany ("STEAG") include the accounts of certain direct and
indirect wholly-owned subsidiaries of STEAG. The STEAG subsidiaries included in
this combination are STEAG MicroTech GmbH, Pliezhausen, Germany; STEAG
Electronic Systems Inc., Austin, USA; STEAG RTP Systems GmbH, Dornstadt,
Germany; STEAG Electronic Systems Korea Ltd., Seoul, Korea; STEAG Electronic
Systems Japan Co., Kawasaki, Japan; STEAG Electronic Systems UK Ltd., Renfrew,
UK and STEAG Electronic Systems South East Asia Pte. Ltd., Singapore, for both
years reported herein.

   Effective March 1, 1999, STEAG purchased 100 percent of STEAG RTP Systems
Inc., San Jose, USA (formerly AG Associates, Inc.). Effective January 1, 1999,
STEAG purchased STEAG CVD Systems Ltd., Migdal Ha'Emek, Israel (formerly AG
Associates (Israel) Ltd.). The purchase prices amounted to $35,200 and $22,800,
respectively. The acquisitions were accounted for using the purchase method.

   The results of operations and their respective assets and liabilities were
combined in the financial statements of the Company since the respective
acquisition dates. The goodwill for these companies was accounted for using the
push down method, resulting in an increase in goodwill of $37.1 million.
Goodwill is amortized on a straight line basis over five years.

   The Company develops, manufactures, markets and supports fabrication
equipment for the worldwide semiconductor and wafer manufacturing industry. The
Company's products include advanced rapid thermal processing (RTP), wet
processing, and chemical vapor deposition (CVD) equipment used in the
manufacture of integrated circuits. The Company has manufacturing facilities in
the United States, Germany and Israel and sells its products primarily through
a direct sales force and wholly-owned sales and service subsidiaries. The
Company was dependent on STEAG for financial support in order to meet its
obligations as they became due. STEAG has provided to management of the Company
assurance of continued financial support at least through December 31, 2000.

 1.2. Purpose and basis of presentation

   Solely for purposes of this presentation, these combined financial
statements have been prepared as if the above mentioned wholly-owned
subsidiaries of STEAG were combined into one reporting entity. The purchase
price paid by STEAG for the acquisition of each entity has been pushed down.
The portion of the purchase price not allocated to assets or liabilities has
been recorded as goodwill.

   The statements are presented in thousands of U.S. Dollars translated from
different local currencies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 2.1. Combination

   The investment of STEAG in the STEAG semiconductor equipment business has
been shown as combined equity of the STEAG Semiconductor Division. It comprises
the equity of the above mentioned entities. All significant intercompany
balances and transactions have been eliminated.

                                      F-35
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


 2.2. Concentration of credit risk

   Financial instruments that potentially subject the Company to a
concentration of credit risk consist primarily of cash, cash equivalents and
short-terms investments, as well as accounts receivable. The Company
has placed the majority of its cash, cash equivalent and short-term investments
with high-quality financial institutions.

   The Company sells its products primarily to large companies in the
semiconductor industry. Credit risk is further mitigated by the Company's
credit evaluation process. The Company does not require collateral or other
security to support receivables. The Company maintains allowances for potential
credit losses.

   As of December 31, 1998 the Company had receivables from two significant
customers in amounts of $4,881 and $3,586. The Company had significant sales to
one customer amounting to $14,479 for the year ended December 31, 1998. The
Company had no significant customers as of and for the year ended December 31,
1999.

 2.3. Financial statement estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Such estimates include the allowance for
potentially uncollectible receivables, inventory reserves for obsolete, slow-
moving or non-salable inventory, analysis of impairment of long-lived assets,
certain accruals and estimated costs for litigation, installation, warranty and
other customer support obligations. Actual results could significantly differ
from these estimates.

 2.4. Significant risks and uncertainties

   The Company participates in the dynamic high technology industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's future financial position or results of
operations: advances and trends in new technologies; competitive pressures in
the form of new products or price reductions on current products; changes in
product mix; changes in the overall demand for products and services offered by
the Company; changes in certain strategic partnerships or customers
relationships; litigation or claims against the Company based on intellectual
property, patent, products, regulatory or other factors; risks associated with
changes in domestic and international economic and/or political conditions or
regulations; availability of necessary components, and the Company's ability to
attract and retain employees necessary to support its growth.

 2.5. Fair value of financial instruments

   The estimated fair value of financial instruments has been determined by the
Company, using available market information and valuation methodology
considered to be appropriate. However, considerable judgement is required in
interpreting market data to develop the estimates of fair value. The use of
different market assumptions and/or estimation methodologies could have a
material effect on estimated fair value amounts. The estimated fair value of
the Company's financial instruments at December 31, 1999 and 1998 was not
materially different from the values presented in the combined balance sheets.

 2.6. Cash equivalents

   Cash equivalents are highly liquid debt instruments acquired with a maturity
of three months or less at date of purchase.

                                      F-36
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


 2.7. Inventories

   Inventories are stated at the lower of cost (first-in, first-out) or market.
The Company reviews the levels of its inventories in light of current and
forecasted demand to identify and provide reserves for obsolete, slow-moving,
or non-salable inventory.

 2.8. Property and equipment

   Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:

<TABLE>
   <S>                                                            <C>
   Buildings..................................................... 39 to 40 years
   Machinery.....................................................  5 to 10 years
   Automobiles...................................................   4 to 7 years
   Furniture, fixtures and equipment.............................  3 to 16 years
   Computers and software........................................   3 to 5 years
</TABLE>

 2.9. Goodwill

   The goodwill represents the excess of cost over the fair value of assets
acquired and liabilities assumed related to the acquisitions by the Company.
Goodwill is being amortized using the straight-line method over the life of the
underlying assets, generally 5 years. Accumulated amortization of the goodwill
for the years ended December 31, 1999 and 1998 was $25,857 and $12,578,
respectively.

 2.10. Long-lived asset impairment

   The Company periodically reviews the recorded values of its long-lived
assets and associated intangible assets to determine if future cash flows to be
derived from these assets will be sufficient to recover the remaining recorded
values. Recognition of asset impairment write downs has not had a material
impact on the Company's financial statements for the years ended December 31,
1999 or 1998.

 2.11. Revenue recognition

   Sales are generally recognized upon shipment. Estimated costs for
installation, warranty and other customer support obligations, which are
considered significant, are accrued in the period that sales are recognized.
Revenue related to services provided to customers outside the warranty period
are generally recognized when the services are performed.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. Among other
things, SAB 101 would result in a change from the established practice in many
industries of recognizing revenue at the time of shipment of a system, and
instead delay revenue recognition until the time of installation or customer
acceptance. Because of the cyclical nature of the semiconductor equipment
industry, and our dependence on a small number of comparatively large sales, a
change in revenue recognition practices could have a material effect on revenue
in any particular reporting period. Although the Company is not a U.S.
reporting company, as a result of the proposed business combination with
Mattson Technology, Inc. (See Note 17), we may be required to adopt SAB 101 in
the future.

                                      F-37
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


 2.12. Research and development

   All research and development costs are expensed as incurred. The Company's
products include certain software applications. The costs to develop such
software have not been capitalized as the Company believes its current software
development process is essentially completed concurrent with the establishment
of the technological feasibility of the software and/or development of the
related hardware.

 2.13. Translation of foreign currencies

   Assets and liabilities of foreign subsidiaries are translated at current
exchange rates, and revenues and expenses are translated at average exchange
rates for the year into United States Dollars. The effects of these translation
adjustments are reported as a component of accumulated other comprehensive
income in shareholders' equity.

 2.14. Income taxes

   The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes". SFAS No. 109 requires recognition of
deferred tax liabilities and assets of the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

   See Note 14 for a description of the tax sharing arrangements.

 2.15. Financial instruments

   Financial instruments, including derivatives (especially currency futures),
which are not designated as hedges of specific assets, liabilities, or firm
commitments are marked to market and any resulting unrealized gains or losses
are recognized as income. If there is a direct connection between a derivative
financial instrument and an underlying transaction and derivative is so
designated, a valuation unit is formed. Once allocated, gains and losses from
these valuation units, which are used to manage interest rate and currency
risks of identifiable assets, liabilities, or firm commitments, do not affect
income until the underlying transaction is realized.

   The Company uses derivative financial instruments for hedging purposes. The
contracts are discussed in Note 15 "Derivative financial instruments".

 2.16. Recently issued accounting standards

   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognizes all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. For a derivative not designated as a hedging
instrument, changes in the fair value of the derivative are recognized in
earnings in the period of change. This statement, as amended by SFAS 137, will
be effective for fiscal years beginning after June 15, 2000 and cannot be
applied retroactively. Adoption of this statement is not expected to have a
material effect on the Company's financial position or results of operations.

                                      F-38
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)

3. Inventories

   Inventories consist of:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                 ---------------
                                                                  1999    1998
                                                                 ------- -------
   <S>                                                           <C>     <C>
   Raw materials................................................ $20,475 $17,788
   Work-in-process..............................................  16,832   7,371
   Finished goods...............................................   9,458  11,295
                                                                 ------- -------
                                                                 $46,765 $36,454
                                                                 ======= =======
</TABLE>

   Inventories are shown net of reserves for obsolete, slow-moving, and non-
salable inventory of $12,805 and $7,646 at December 31, 1999 and 1998,
respectively.

4. Property and equipment

   Property, plant and equipment consist of:

<TABLE>
<CAPTION>
                                                               December 31,
                                                             ------------------
                                                               1999      1998
                                                             --------  --------
   <S>                                                       <C>       <C>
   Land..................................................... $    702  $    700
   Buildings................................................   10,732    10,823
   Leasehold improvements...................................    2,858        53
   Furniture, fixtures and equipment........................   46,076    39,538
   Construction in progress.................................    1,075        51
   Accumulated depreciation.................................  (27,795)  (22,105)
                                                             --------  --------
   Property, plant and equipment, net....................... $ 33,648  $ 29,060
                                                             ========  ========
</TABLE>

   Depreciation expenses amounted to $12,253 and $7,263 for the years ended
December 31, 1999 and 1998, respectively.

5. Short term borrowings and current portion of long term debt

   The Company entered into several credit agreements as listed below:

<TABLE>
<CAPTION>
                                                                December 31,
                                                               ---------------
                                                                1999    1998
                                                               ------- -------
   <S>                                                         <C>     <C>
   Line of credit from STEAG.................................. $43,526 $36,970
   Loan from STEAG, expiration not before January 2000,
    LIBOR.....................................................   2,031     --
   Bank loans.................................................     666  13,650
                                                               ------- -------
                                                               $46,223 $50,620
                                                               ======= =======
</TABLE>

   STEAG has granted a credit facility of $124,000 to the Company. Draws under
the line of credit bear interest at LIBOR (3.87% and 3.21% on December 31, 1999
and 1998, respectively). This credit facility is negotiated with STEAG each
year in February.


                                      F-39
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


6. ACCOUNTS PAYABLE

   The Company acquires materials and supplies to be used in the production of
goods or in conjunction with the providing of services from third parties and
from related parties. The accounts payable are summarized below:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                ---------------
                                                                 1999    1998
                                                                ------- -------
   <S>                                                          <C>     <C>
   Accounts payable--third parties............................. $22,134 $ 8,741
   Accounts payable--related parties...........................   5,402   9,886
                                                                ------- -------
                                                                $27,536 $18,627
                                                                ======= =======
</TABLE>

7. ACCRUED LIABILITIES

   Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                ---------------
                                                                 1999    1998
                                                                ------- -------
   <S>                                                          <C>     <C>
   Warranty reserve............................................ $ 5,561 $ 6,094
   Product replacement reserve.................................   4,900      --
   Employee related liabilities:
     Compensated absence.......................................   1,483   1,032
     Employee bonus............................................   1,128     956
     Other.....................................................   2,351     798
   Accrued federal and state/local income tax..................     715   3,426
   Other accruals..............................................   8,258   8,404
                                                                ------- -------
                                                                $24,396 $20,710
                                                                ======= =======
</TABLE>

8. LONG-TERM DEBT

   Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                 --------------
                                                                  1999    1998
                                                                 ------- ------
   <S>                                                           <C>     <C>
   Loan from STEAG: Expiration 2001, LIBOR...................... $ 3,100 $   --
   Expiration September 2001 or earlier, LIBOR..................   1,189  4,357
   Expiration December 2007, bearing interest 5.8%..............   2,225  2,965
   Expiration December 2001, bearing interest of 4.55%..........     605     --
   Expiration December 2001, bearing interest of 4.55%..........     795     --
   Expiration December 2001, LIBOR..............................   4,809     --
   Expiration December 2002, bearing interest of 4.0%...........   3,384     --
                                                                 ------- ------
                                                                 $16,107 $7,322
                                                                 ======= ======
</TABLE>

   LIBOR on December 31, 1999 and 1998 amounted to 3.87% and 3.21%,
respectively.

                                      F-40
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


9. DISCONTINUED OPERATIONS

   On December 21, 1998, and amended March 9, 1999, STEAG Electronic Systems,
Inc. entered into an asset purchase agreement with STEAG HamaTech USA, Inc.
STEAG Electronic System, Inc.'s Mask/CD division net liabilities were sold to
and the liabilities assumed by STEAG HamaTech USA, Inc. The amount of
liabilities in excess of assets assumed by STEAG HamaTech USA, Inc. has been
credited as capital contribution in the amount of $1,256 in 1998 as this
represents a transaction between commonly controlled entities. The Mask/CD
operations are reflected as discontinued operation in 1998. Mask/CD net
revenues were $ 16,033 in 1998. Net liabilities of the Mask/CD division are
excluded from the combined balance sheet as of December 31, 1998.

10. CONTINGENCIES

   In April 1997, Applied Materials, Inc. ("Applied Materials") initiated
separate lawsuits in the Northern District of California against AST Elektronik
GmbH (now known as STEAG RTP Systems GmbH) and AST Elektronik USA, Inc.
(subsequently merged into STEAG Electronic Systems, Inc.), (collectively "AST")
and AG Associates, Inc. (now known as STEAG RTP Systems, Inc.) ("AG"), alleging
infringement of certain patents concerning rapid thermal processing technology.
In October 1997, AST and AG each filed counterclaims alleging infringement by
Applied Materials of patents concerning related technology. In addition, on
August 5, 1998, AG filed a lawsuit in California against Applied Materials
alleging infringement of another patent relating to rapid thermal processing
technology and, on August 13, 1998, AG filed a lawsuit in Delaware against
Applied Materials alleging infringement of two other patents concerning related
technology. The Delaware case was subsequently transferred to California.
Management believed Applied Materials' claims were without merit, and that the
Company's claims against Applied Materials were meritorious.

   In February 1999, Applied Materials and AST resolved their dispute on
mutually acceptable terms and conditions. In addition, in December 1999,
Applied Materials and AG agreed on a stipulation of mutual dismissal without
prejudice, whereby all current claims and contingencies are dismissed, each
party having to bear its own and attorneys fees. The mutual dismissal was filed
with the Northern District Court of California, San Jose Division. All such
legal costs have been accrued by the Company as of December 31, 1999.

   There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor industry. General Signal
Corporation has made a claim against at least two manufacturers of cluster
tools that has resulted in litigation to the effect that certain of their
cluster tool technologies infringe on General Signal patents. In 1991, at the
time that General Signal first raised patent claims in the cluster tool area,
the predecessor to STEAG RTP Systems Inc. joined with six major manufacturers
of semiconductor process tool equipment in forming an "Ad Hoc Committee for
Defense against General Signal Cluster Tool Patents" (the "Ad Hoc Committee").
Based in part on an opinion of patent counsel, the members of the Ad Hoc
Committee notified General Signal that the member companies were of the opinion
that the General Signal patents were invalid based on (a) prior art, (b)
inequitable conduct before the Patent & Trademark Office and (c) estoppel as a
result of General Signal's activities in establishing standards for cluster
tools and interfaces within the semiconductor industry. The Company believes
that the position taken by the Ad Hoc Committee remains valid. Based upon a
review of the subject patents, the Company believes, based on advice from
outside patent counsel, that the subject patents are invalid or, if somehow
found to be valid, that the Company's cluster tool technology does not
infringe. In 1997, the General Signal Patents were acquired by Applied
Materials. One of the patents has expired.

                                      F-41
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


   On December 12, 1997, a jury in Delaware district court found that STEAG
Electronic Systems, Inc., Austin, Texas, USA, had willfully infringed upon a
patent held by CFM Technologies, Inc. ("CFM"). STEAG Electronic Systems, Inc.
reserved an amount sufficient to cover damages of $ 3.1 million plus attorneys'
fees and certain reserves for assets related to the technology. In early 1998,
STEAG Electronic Systems, Inc. appealed the jury verdict to the Federal Circuit
Court. In May 1999, the Federal appeals court remanded the case back to the
District Court for further consideration of the jury's findings. In November
1999, the District Court reaffirmed its earlier ruling. STEAG Electronic
Systems, Inc. appealed this District Court ruling once again to the Federal
Circuit Court, and also requested that the injunction issued in the initial
jury trial be stayed. In January 2000, the Federal Appeals Court issued a
ruling that did not grant the stay motion. The lawsuit has subsequently been
settled. As part of the settlement, STEAG Electronic Systems, Inc. was not
required to pay any damages to CFM. Additionally, as part of the settlement,
STEAG entered into a patent license agreement with CFM (see Note 11).

   From time to time, the Company may receive or initiate claims or inquiries
against third parties for infringement of the Company's proprietary rights or
to establish the validity of the Company's proprietary rights. Such claims or
inquiries may result in litigation and could result in significant expense to
the Company and divert the effort of the Company's technical and management
personnel from other tasks, whether or not such claims or inquiries are
determined in favor of the Company. In the event of an adverse ruling in any
such litigation, the Company might be required to pay substantial damages,
cease the manufacture, use and sale of infringing products, discontinue the use
of certain processes or expend significant resources to develop non-infringing
technology or obtain licenses to the infringing technology.

11. COMMITMENTS

   On June 27, 2000, in connection with its strategic business combination
agreement to sell the STEAG Semiconductor Division to Mattson Technology, Inc.
("Mattson") (see note 17) and the settlement of its patent litigation with CFM,
STEAG entered an interim patent license agreement with CFM, pursuant to which
CFM granted the Company a non-exclusive, non-transferable worldwide license to
certain patent rights with respect to drying technologies and wet bench
products (including U.S. Patent No. 4,911,761).

   Under the terms of the license agreement, STEAG is required to pay CFM
royalties on net sales in the United States both for stand-alone dryers and
dryer modules, and for wet processing systems that include dryers. In the event
the strategic business combination agreement and the CFM merger agreement are
terminated due to CFM's failure to obtain shareholders' approval or due to a
Mattson material adverse effect, the royalty payments will be permanently
reduced by 50%. STEAG's obligation to pay royalties terminates upon expiration
or a final, non-appealable judicial determination of unenforceability or
invalidity of U.S. Patent No. 4,911,761 or if the strategic business
combination agreement and the CFM merger agreement are terminated under certain
circumstances involving voluntary termination or intentional breach by CFM. In
the event that the strategic business combination agreement is terminated
voluntarily by STEAG under certain circumstances or by Mattson due to certain
breaches by STEAG, STEAG is required to pay to CFM a one-time lump sum royalty
payment and all other royalty payments will cease. Due to uncertainty
management has not recorded an accrual for the potential one-time lump sum
royalty.

   The license agreement terminates (i) when the last of the licensed patents
expires or is determined to be unenforceable by a final, non-appealable court
judgment, (ii) upon termination of the strategic business combination agreement
resulting from certain intentional breaches by STEAG, or (iii) if, within 24
months after the strategic business combination agreement and the CFM merger
agreement are terminated under certain circumstances, Mattson and STEAG enter
into a similar transaction including STEAG's wet processing

                                      F-42
<PAGE>

                         STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)

business but not involving CFM (unless CFM has entered into an alternative
transaction prior to such new transaction between Mattson and STEAG).

12. LEASES

   Future minimum annual non-cancelable operating lease commitments at
December 31, 1999 are as follows:

<TABLE>
     <S>                                                                <C>
     2000                                                               $ 4,859
     2001                                                                 4,749
     2002                                                                 3,613
     2003                                                                 1,820
     2004                                                                 1,576
     2005 and thereafter...............................................   4,582
                                                                        -------
       Total minimum lease payments.................................... $21,199
                                                                        =======
</TABLE>

   Rent expense for operating leases for the years ended December 31, 1999 and
1998 was $4,395 and $2,429, respectively.

13. SHAREHOLDERS' EQUITY

   Shareholders' equity comprises the net investment of STEAG in the STEAG
Semiconductor Division.

   STEAG acquired 100% of STEAG RTP Systems, Inc. under the agreement and plan
of merger of January 18, 1999 between STEAG, MIG Acquisition Corporation and
STEAG RTP Systems, Inc. Pursuant to the merger agreement, the stock option
plan for the directors was terminated. The employee stock option plan was
terminated by agreements with each employee. Each employee's vested options
were replaced by a stay bonus, which became due twelve months after the
effective date (March 2000). The amount was limited to an aggregate amount of
$2,040. An accrual amounting to $1.2 million was set-up as of December 31,
1999 and was paid in March and April 2000.

   Ownership of 25% of STEAG CVD Systems Ltd. is held by STEAG RTP Systems,
Inc. STEAG acquired directly the additional 75% of STEAG CVD Systems Ltd.
under the share purchase agreement of January 15, 1999 between STEAG, Clal
Electronics Industries and additional holders of preferred shares. The
employee stock option plan was terminated by agreements with each employee.
The options (authorized and vested) were replaced by a stay bonus, which was
due in three portions, to be paid by STEAG. The portion due at the closing and
after the first anniversary of the closing have already been paid. The third
portion is due at the second anniversary of the closing, which took place on
March 23, 1999. Depending on the employees still employed in March 2001, there
will be an amount to be paid of up to $680.

   Furthermore, STEAG paid $282 into an escrow account as an additional cash
stay bonus. Only certain key employees are entitled to this bonus. The
payments are due according to the regular stay bonus. If there is money left
after the second anniversary, it will be paid to the sellers and to the
general manager of STEAG CVD Systems Ltd.

   The capital contributions in the amount of $5,895 and $9,067 in 1999 and
1998 result from the profit and loss absorption agreement ($5,895 and $7,895
in 1999 and 1998, respectively) with STEAG (reference is made to Note 14
"Income taxes") including the reimbursement of discontinued operations by
STEAG (reference is made to Note 9 "Discontinued operations").

                                     F-43
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


14. INCOME TAXES

   The pre-tax income (loss) of the Company is as follows:

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
   <S>                                                      <C>       <C>
     Germany............................................... $(26,918) $(20,559)
     Foreign...............................................  (30,354)   (9,306)
                                                            --------  --------
                                                            $(57,272) $(29,865)
                                                            ========  ========

   The provision (benefits) for taxes on earnings consists of:

<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
   <S>                                                      <C>       <C>
   Current:
     Germany............................................... $    113  $  5,272
     Foreign...............................................       78    (1,002)
                                                            --------  --------
                                                                 191     4,270
   Deferred:
     Tax benefit...........................................   (8,699)   (4,897)
     Valuation allowance...................................    8,298     2,341
     Tax benefit from tax sharing..........................   (5,600)   (8,828)
                                                            --------  --------
                                                              (6,001)  (11,384)
                                                            --------  --------
   Total tax benefit....................................... $ (5,810) $ (7,114)
                                                            ========  ========
   Deferred tax assets:
     Net operating loss carry-forward...................... $ 31,705  $  1,468
     Accruals and other reserves...........................    5,469       883
     Depreciation..........................................      701        --
     Inventory.............................................      997       490
     General business credits..............................    2,490        --
     Non-current--accrued warranty.........................      473       568
     Valuation allowance...................................  (41,835)   (3,409)
                                                            --------  --------
       Total deferred tax assets........................... $     --  $     --
                                                            ========  ========
</TABLE>

   STEAG RTP Systems GmbH and STEAG MicroTech GmbH entered into a profit and
loss absorption agreement with their parent company, STEAG. As part of this
agreement, STEAG RTP Systems GmbH and STEAG MicroTech GmbH formed a tax sharing
unity with STEAG. As a consequence thereof no separate tax returns are prepared
for those entities but a consolidated tax return is filed at the STEAG level.

   Income and losses incurred by STEAG RTP Systems GmbH and STEAG MicroTech
GmbH are used at the STEAG level. STEAG charges or reimburses STEAG RTP Systems
GmbH and STEAG MicroTech GmbH for the use of their taxable income or loss,
respectively, using the separate return method to calculate the charged or
reimbursed tax amount. In addition, STEAG charges or reimburses STEAG RTP
Systems GmbH and STEAG MicroTech GmbH for the remaining part of the income or
loss, respectively. The net operating losses were $11,496 and $16,724 in 1999
and 1998, respectively. Using a tax rate of 49% and 53% (corporate income tax
plus trade tax) in 1999 and 1998, the tax benefit for the Company amounts to
$5,600 and $8,828 in 1999 and 1998, respectively.

                                      F-44
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


   Realization of the tax benefit related to the Company's deferred tax assets
is dependent upon the generation of future taxable income. Due to significant
net losses incurred through December 31, 1999 and uncertainty surrounding the
utilization of deferred tax assets, management has evaluated its deferred tax
assets and provided a full valuation allowance at December 31, 1999 and 1998.

   The net operating loss carry-forwards expire on various dates through the
year 2019. At December 31, 1999, the Company also had general business credits
for income tax purposes of $2,490, available to offset future taxable income.
The credits expire on various dates through the year 2018. The extent to which
the loss and the credit carryforward can be used to offset future taxable
income and tax liabilities, respectively, may be limited depending on the
extent of ownership change within any three-year period.

   In 1999, retained corporate income in Germany is initially subject to a
federal corporation income tax of 40 percent (1998: 45 percent). Effective
January 1, 1995 a solidarity surcharge of 7.5 percent on the federal corporate
tax rate was introduced which was reduced to 5.5 percent, effective as of
January 1, 1998. Upon distribution of retained earnings to stockholders, the
corporate tax rate on the distributed earnings is adjusted to 30 percent
through the receipt of a refund for taxes previously paid in excess of 30
percent on income. This refund is passed on to stockholders resident in Germany
through a gross up of the dividend from the corporation.

15. DERIVATIVE FINANCIAL INSTRUMENTS

   One of the results of the international business activities of the Company
is the settlement of numerous orders in foreign currency, which, because of the
changes in foreign currency exchange rates, has a direct impact on the results
of operations and financial position of the Company. In order to limit these
risks, the Company enters into forward contracts as hedging instruments. This
serves only to secure receivables in foreign currency and is not for
speculation or trading purposes.

   The nominal and fair values of the forward contracts as of the respective
balance sheet dates are as follows:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                 ---------------
                                                                  1999    1998
                                                                 ------- -------
   <S>                                                           <C>     <C>
   Nominal value................................................ $52,928 $29,752
   Fair value................................................... $56,018 $30,065
</TABLE>

16. RELATED PARTY TRANSACTIONS

   The following is a summary of the transactions between the Company, STEAG
and the Company's affiliates included in the financial statements for the years
ended December 31:

<TABLE>
<CAPTION>
                                                                   1999   1998
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Purchases from affiliates..................................... $1,830 $  754
   Sales to affiliates...........................................    781     86
   Rental payments to affiliated parties.........................  1,924  1,724
   Insurance premiums to affiliates..............................    576    609
   Patent services from affiliates...............................    207    110
   Interest expense to affiliates................................  4,001  2,880
   Services concerning labor and environmental safety............     23     --
</TABLE>

                                      F-45
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


   Purchases from and sales to affiliates relate to subassemblies that are
manufactured by STEAG Electronic Systems spol. sr.o, a Slovak Republic based
subsidiary of STEAG which is not part of the STEAG Semiconductor Division.
STEAG AG, the parent company of STEAG, provides certain patent skeleton and
several agreements for insurances for the Company. Additionally, the Company
makes use of insurance services provided by RAG Versicherungs-Dienst GmbH, an
affiliate of RAG Aktiengesellschaft which is the parent company of STEAG AG.
Facilities in Dornstadt and Pliezhausen are leased from STEAG Walsum Immobilien
AG, a subsidiary of STEAG AG.

   The Company leases real estate from related parties. Future minimum annual
operating lease commitments at December 31, 1999 are as follows:

<TABLE>
   <S>                                                                  <C>
   2000................................................................ $ 2,019
   2001................................................................   2,019
   2002................................................................   1,576
   2003................................................................   1,576
   2004................................................................   1,576
   2005................................................................   4,582
                                                                        -------
   Total minimum lease payments........................................ $13,348
                                                                        =======
</TABLE>

   The amounts are included in the minimum lease payments in Note 12 "Leases".

17. SUBSEQUENT EVENTS (UNAUDITED)

   Effective in February 2000, STEAG acquired all of the shares of CuTek
Research, Inc., San Jose, USA, for a purchase price of $15,400. CuTek Research,
Inc. was subsequently renamed STEAG CuTek, Inc. Currently, STEAG CuTek is
primarily engaged in the development and marketing of electroplating equipment
for depositing copper and other conductive films.

   On June 27, 2000, STEAG and Mattson entered into a strategic business
combination agreement. STEAG will transfer ownership of all of its subsidiaries
comprising the STEAG Semiconductor Division to Mattson. In exchange, STEAG will
receive 11,850,000 shares of Mattson common stock. As a result of the
transaction, and the CFM Merger described below, STEAG will hold approximately
32% of the outstanding Mattson common stock. The closing is planned to occur on
or about January 1, 2001.

   On June 27, 2000 Mattson also entered into an agreement and plan of merger
with CFM Technologies, Inc. ("CFM"). Mattson is to acquire CFM in a stock-for-
stock merger in which Mattson will issue 0.5223 shares of its common stock for
each share of CFM stock outstanding at the closing. In addition, Mattson will
assume all outstanding CFM stock options, based on the same exchange ratio. The
business combination with STEAG and the merger with CFM are each conditioned
upon the closing of the other.

   Simultaneously, STEAG and STEAG Electronic Systems, Inc. entered into a
settlement agreement with CFM with respect to the patent litigation and STEAG,
CFM and CFMT, Inc. entered into a license agreement (reference is made to Note
11 "Commitments"). STEAG Electronic Systems, Inc. withdrew the pending appeal
with respect to the patent litigation and STEAG agreed to cause the withdrawal
or termination of five invalidity lawsuits against the foreign counterpart
patents of the CFM 761 patent.

                                      F-46
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


18. Debt to equity conversion

   Effective June 30, 2000, STEAG has increased its investment in the STEAG
Semiconductor Division in accordance with the above mentioned strategic
business combination agreement between STEAG and Mattson Technology Inc. by a
capital contribution in kind. The capital increase amounted to $100.9 million
and was made by a conversion of intercompany loans to equity.

<TABLE>
<CAPTION>
                                                                      Debt to
                                                                     additional
                                                                      paid-in
                                                                      capital
                                                                     ----------
   <S>                                                               <C>
   STEAG MicroTech GmbH, Pliezhausen, Germany.......................  $ 38,657
   STEAG Electronic Systems Inc., Austin, USA.......................     4,800
   STEAG RTP Systems GmbH, Dornstadt, Germany.......................    27,180
   STEAG RTP Systems Inc., San Jose, USA............................    17,400
   STEAG CVD Systems Ltd., Migdal Ha'Emek, Israel...................     7,000
   STEAG Electronic Systems South East Asia Pte. Ltd., Singapore....     4,454
   STEAG Electronic Systems Korea Ltd., Seoul, Korea................       759
   STEAG Electronic Systems UK Ltd., Renfrew, UK....................       724
                                                                      --------
     Total..........................................................  $100,974
                                                                      ========
</TABLE>

                                      F-47
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                            COMBINED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                June 30,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
                          ------

Current Assets:
  Cash and cash equivalents................................ $ 23,992  $  7,017
  Accounts and notes receivable, net.......................   74,932    41,165
  Receivables from related parties.........................      288       376
  Notes and other receivables..............................    2,214       182
  Inventories..............................................   66,510    47,422
  Prepaid expenses and other...............................   10,385     4,321
                                                            --------  --------
    Total current assets...................................  178,321   100,483
  Net property, plant and equipment........................   29,859    36,938
  Intangible assets and deferred charges, less accumulated
   amortization............................................    1,033       833
  Goodwill, net of accumulated amortization................   50,505    50,892
  Other non current assets, net of accumulated
   amortization............................................    1,001       668
                                                            --------  --------
                                                            $260,719  $189,814
                                                            ========  ========

           LIABILITIES AND SHAREHOLDER'S EQUITY
           ------------------------------------

Current Liabilities:
  Current portion of long-term debt and short term
   borrowings.............................................. $  7,481  $ 22,079
  Accounts payable.........................................   22,642    46,782
  Accrued liabilities......................................   33,788    26,541
  Other current liabilities................................    6,464     1,679
                                                            --------  --------
    Total current liabilities..............................   70,375    97,081
                                                            --------  --------
  Long-term debt...........................................    1,034    13,388
  Loans from shareholders and other non current
   liabilities.............................................      --     10,719
                                                            --------  --------
    Total liabilities......................................   71,409   121,188
                                                            --------  --------
Shareholder's equity:
  Subscribed capital/common stock..........................   82,100    53,715
  Additional paid-in capital...............................  186,829    64,961
  Accumulated other comprehensive income (loss)............   (3,392)   (1,478)
  Retained earnings (deficit)..............................  (76,227)  (48,572)
                                                            --------  --------
    Total shareholders' equity.............................  189,310    68,626
                                                            --------  --------
                                                            $260,719  $189,814
                                                            ========  ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-48
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                       COMBINED STATEMENTS OF OPERATIONS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                            Six months ended
                                                                June 30,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
Net sales.................................................. $115,271  $ 56,000
Cost of sales..............................................   58,308    38,486
                                                            --------  --------
Gross profit...............................................   56,963    17,514
                                                            --------  --------
Operating expenses:
  Research, development and engineering....................   20,629    16,299
  Selling, general and administrative......................   34,372    25,676
  Goodwill amortization....................................    8,210     6,302
                                                            --------  --------
    Total operating expenses...............................   63,211    48,277
                                                            --------  --------
Operating income (loss)....................................   (6,248)  (30,763)
Interest income............................................      215       130
Interest expense...........................................   (2,656)   (1,906)
Other income (expense).....................................    1,041    (2,179)
                                                            --------  --------
Loss before income taxes...................................   (7,648)  (34,718)
Income tax provision (benefit).............................    3,202       (62)
                                                            --------  --------
Net loss from continuing operations........................ $(10,850) $(34,656)
                                                            ========  ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-49
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                       COMBINED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                           Six months ended
                                                               June 30,
                                                           ------------------
                                                             2000      1999
                                                           --------  --------
<S>                                                        <C>       <C>
Cash flows from operating activities:
  Net loss................................................ $(10,850) $(34,656)
  Reconciliation to net cash provided (used in) operating
   activities:
    Depreciation and amortization.........................   12,287    12,993
    Gain on disposal of fixed assets......................     (192)     (113)
    Deferred income taxes.................................
  Other changes in net cash from operating assets and
   liabilities............................................
    Accounts receivables..................................  (18,838)     (528)
    Inventories...........................................  (18,060)   (4,333)
    Prepaid expenses and other assets.....................   (6,335)       (2)
    Accounts payable......................................   (4,019)   24,022
    Accrued liabilities...................................   10,518     3,020
    Other current liabilities.............................    4,916    (1,268)
                                                           --------  --------
      Net cash used in operating activities...............  (30,573)     (865)
                                                           --------  --------
Cash flows from investing activities:
  Acquisition of businesses, net of cash acquired.........  (14,740)  (50,192)
  Capital expenditures....................................   (2,931)   (3,656)
  Proceeds from sales of equipment........................    1,063       431
                                                           --------  --------
      Net cash used in investing activities...............  (16,608)  (53,417)
                                                           --------  --------
Cash flows from financing activities:
  Increase (decrease) of
    Short term borrowings.................................   45,940   (32,431)
    Borrowings from stockholders..........................    2,055     3,897
    Other long term liabilities...........................   (2,166)   11,608
  Capital increase........................................   15,438    62,411
                                                           --------  --------
      Net cash provided by financing activities...........   61,267    45,485
                                                           --------  --------
Effect of foreign exchange rate changes on cash and cash
 equivalents..............................................     (275)     (136)
                                                           --------  --------
Net increase (decrease) in cash and cash equivalents......   13,811    (8,933)
Cash and cash equivalents at beginning of period..........   10,181    15,950
                                                           --------  --------
Cash cash and equivalents at end of period................ $ 23,992  $  7,017
                                                           ========  ========
Supplemental schedule of noncash investing and financing
 activities:
  Conversion of debt to equity............................  100,974        --
                                                           ========  ========
Supplemental disclosure of cash flow information:
  Cash paid for interest..................................    1,720     1,533
                                                           ========  ========
  Cash paid for income taxes..............................    3,202        49
                                                           ========  ========
</TABLE>

    The accompanying notes are an integral part of these combined financial
                                  statements.

                                      F-50
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

                   NOTES TO THE COMBINED FINANCIAL STATEMENTS
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)
                                  (unaudited)

1. ORGANIZATION, PURPOSE AND BASIS OF PRESENTATION

 1.1. Organization

   The combined financial statements of the STEAG semiconductor equipment
division (the "STEAG Semiconductor Division" or the "Company") include the
accounts of certain direct and indirect wholly-owned subsidiaries of STEAG
Electronic Systems AG, Essen, Germany (STEAG). The STEAG subsidiaries included
in this combination are STEAG MicroTech GmbH, Pliezhausen, Germany; STEAG
Electronic Systems Inc., Austin, USA; STEAG RTP Systems GmbH, Dornstadt,
Germany; STEAG Electronic Systems Korea Ltd., Seoul, Korea; STEAG Electronic
Systems Japan Co., Kawasaki, Japan; STEAG Electronic Systems UK Ltd., Renfrew,
UK and STEAG Electronic Systems South East Asia Pte. Ltd., Singapore, for both
six months periods reported herein.

   Effective March 1, 1999, STEAG purchased 100 percent of STEAG RTP Systems
Inc., San Jose, USA (formerly AG Associates, Inc.). Effective January 1, 1999,
STEAG purchased STEAG CVD Systems Ltd., Migdal Ha'Emek, Israel (formerly AG
Associates (Israel) Ltd.). The purchase prices amounted to $ 35.2 million and $
22.8 million, respectively. Effective February 2000, STEAG acquired CuTek
Research, Inc., San Jose, USA, for a purchase price of $ 15.4 million. CuTek
Research, Inc. was subsequently renamed STEAG CuTek, Inc. The acquisitions were
accounted for using the purchase method.

   The results of operations and their respective assets and liabilities were
combined in the financial statements of the Company since the respective
acquisition dates. The goodwill for these companies was accounted for using the
push down method, resulting in an increase in goodwill of $ 51.9 million.
Goodwill is amortized on a straight line basis over five years.

   The Company develops, manufactures, markets and supports fabrication
equipment for the worldwide semiconductor and wafer manufacturing industry. The
Company's products include advanced rapid thermal processing (RTP), wet
processing, chemical vapor deposition (CVD) and copper plating equipment used
in the manufacture of integrated circuits. The Company has manufacturing
facilities in the United States, Germany and Israel and sells its products
primarily through a direct sales force and wholly-owned sales and service
subsidiaries.

 1.2. Purpose and basis of presentation

   Solely for purposes of this presentation, these combined financial
statements have been prepared as if the above mentioned wholly-owned
subsidiaries of STEAG were combined into one reporting entity. The purchase
price paid by STEAG for the acquisition of each entity has been pushed down.
The portion of the purchase price not allocated to assets or liabilities has
been recorded as goodwill.

   The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included.

   The financial statements should be read in conjunction with the audited
financial statements included in the STEAG Semiconductor Division Combined
Financial Statements for the years ended December 31, 1999 and 1998.

                                      F-51
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


   The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 2000.

   The statements are presented in thousands of U.S. Dollars translated from
different local currencies.

2. INVENTORIES

   Inventories consist of:

<TABLE>
<CAPTION>
                                                                    June 30,
                                                                 ---------------
                                                                  1999    1998
                                                                 ------- -------
   <S>                                                           <C>     <C>
   Raw materials................................................ $18,616 $21,008
   Work-in-process..............................................  24,662  12,987
   Finished goods...............................................  23,231  13,427
                                                                 ------- -------
                                                                 $66,510 $47,422
                                                                 ======= =======
</TABLE>

   Inventories are shown net of reserves for obsolete, slow-moving, and non-
salable inventory.

3. ACCRUED LIABILITIES

   Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                   June 30,
                                                                ---------------
                                                                 2000    1999
                                                                ------- -------
   <S>                                                          <C>     <C>
   Warranty reserve............................................ $ 7,390 $ 6,306
   Accrued compensation and benefits...........................   3,941   5,678
   Accrued federal and state/local income tax..................   4,063     898
   Other accruals..............................................  18,394  13,659
                                                                ------- -------
                                                                $33,788 $26,541
                                                                ======= =======
</TABLE>

4. DEBT TO EQUITY CONVERSION

   Effective June 30, 2000, STEAG has increased its investment in the STEAG
Semiconductor Division by a capital contribution in kind. The capital increase
amounted to $100.9 million and was made by a conversion of intercompany loans
to equity. The capital increase consists of:

<TABLE>
<CAPTION>
                                                                      Debt to
                                                                     additional
                                                                      paid-in
                                                                      capital
                                                                     ----------
   <S>                                                               <C>
   STEAG MicroTech GmbH, Pliezhausen, Germany.......................  $ 38,657
   STEAG Electronic Systems Inc., Austin, USA.......................     4,800
   STEAG RTP Systems GmbH, Dornstadt, Germany.......................    27,180
   STEAG RTP Systems Inc., San Jose, USA............................    17,400
   STEAG CVD Systems Ltd., Migdal Ha'Emek, Israel...................     7,000
   STEAG Electronic Systems South East Asia Pte. Ltd., Singapore....     4,454
   STEAG Electronic Systems Korea Ltd., Seoul, Korea................       759
   STEAG Electronic Systems UK Ltd., Renfrew, UK....................       724
                                                                      --------
     Total..........................................................  $100,974
                                                                      ========
</TABLE>

                                      F-52
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


5. CONTINGENCIES

   In April 1997, Applied Materials, Inc. ("Applied Materials") initiated
separate lawsuits in the Northern District of California against AST Elektronik
GmbH (now known as STEAG RTP Systems GmbH) and AST Elektronik U.S.A, Inc.
(subsequently merged into STEAG Electronic Systems, Inc.) (collectively "AST")
and AG Associates, Inc. (now known as STEAG RTP Systems, Inc.) ("AG"), alleging
infringement of certain patents concerning rapid thermal processing technology.
In October 1997, AST and AG each filed counterclaims alleging infringement by
Applied Materials of patents concerning related technology. In addition, on
August 5, 1998, AG filed a lawsuit in California against Applied Materials
alleging infringement of another patent relating to rapid thermal processing
technology and, on August 13, 1998, AG filed a lawsuit in Delaware against
Applied Materials alleging infringement of two other patents concerning related
technology. The Delaware case was subsequently transferred to California.
Management believed Applied Materials' claims were without merit, and that the
Company's claims against Applied Materials were meritorious.

   In February 1999, Applied Materials and AST resolved their dispute on
mutually acceptable terms and conditions. In addition, in December 1999,
Applied Materials and AG agreed on a stipulation of mutual dismissal without
prejudice, whereby all current claims and contingencies are dismissed, each
party having to bear its own and attorneys fees. The mutual dismissal was filed
with the Northern District Court of California, San Jose Division. All such
legal costs have been accrued by the Company as of December 31, 1999.

   There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor industry. General Signal
Corporation has made a claim against at least two manufacturers of cluster
tools that has resulted in litigation to the effect that certain of their
cluster tool technologies infringe on General Signal patents. In 1991, at the
time that General Signal first raised patent claims in the cluster tool area,
the predecessor to STEAG RTP Systems Inc. joined with six major manufacturers
of semiconductor process tool equipment in forming an "Ad Hoc Committee for
Defense against General Signal Cluster Tool Patents" (the "Ad Hoc Committee").
Based in part on an opinion of patent counsel, the members of the Ad Hoc
Committee notified General Signal that the member companies were of the opinion
that the General Signal patents were invalid based on (a) prior art, (b)
inequitable conduct before the Patent & Trademark Office and (c) estoppel as a
result of General Signal's activities in establishing standards for cluster
tools and interfaces within the semiconductor industry. The Company believes
that the position taken by the Ad Hoc Committee remains valid. Based upon a
review of the subject patents, the Company believes, based on advice from
outside patent counsel, that the subject patents are invalid or, if somehow
found to be valid, that the Company's cluster tool technology does not
infringe. In 1997, the General Signal Patents were acquired by Applied
Materials. One of the patents has expired.

   On December 12, 1997, a jury in Delaware district court found that STEAG
Electronic Systems, Inc., Austin, Texas, USA, had willfully infringed upon a
patent held by CFM Technologies, Inc. ("CFM"). STEAG Electronic Systems, Inc.
reserved an amount sufficient to cover damages of $ 3.1 million plus attorneys'
fees and certain reserves for assets related to the technology. In early 1998,
STEAG Electronic Systems, Inc. appealed the jury verdict to the Federal Circuit
Court. In May 1999, the Federal appeals court remanded the case back to the
District Court for further consideration of the jury's findings. In November
1999, the District Court reaffirmed its earlier ruling. STEAG Electronic
Systems, Inc. appealed this District Court ruling once again to the Federal
Circuit Court, and also requested that the injunction issued in the initial
jury trial be stayed. In January 2000, the Federal Appeals Court issued a
ruling that did not grant the stay motion. The lawsuit has subsequently been
settled. As part of the settlement, STEAG Electronic Systems, Inc. was not
required to pay any damages to CFM. Additionally, as part of the settlement,
STEAG entered into a patent license agreement with CFM (See Note 6).

                                      F-53
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


   From time to time, the Company may receive or initiate claims or inquiries
against third parties for infringement of the Company's proprietary rights or
to establish the validity of the Company's proprietary rights. Such claims or
inquiries may result in litigation and could result in significant expense to
the Company and divert the effort of the Company's technical and management
personnel from other tasks, whether or not such claims or inquiries are
determined in favor of the Company. In the event of an adverse ruling in any
such litigation, the Company might be required to pay substantial damages,
cease the manufacture, use and sale of infringing products, discontinue the use
of certain processes or expend significant resources to develop non-infringing
technology or obtain licenses to the infringing technology.

6. COMMITMENTS

   On June 27, 2000, in connection with its strategic business combination
agreement to sell the STEAG Semiconductor Division to Mattson Technology, Inc.
("Mattson") (see note 8) and the settlement of its patent litigation with CFM,
STEAG entered an interim patent license agreement with CFM, pursuant to which
CFM granted the Company a non-exclusive, non-transferable worldwide license to
certain patent rights with respect to drying technologies and wet bench
products (including U.S. Patent No. 4,911,761).

   Under the terms of the license agreement, STEAG is required to pay CFM
royalties on net sales in the United States both for stand-alone dryers and
dryer modules, and for wet processing systems that include dryers. In the event
the strategic business combination agreement and the CFM merger agreement are
terminated due to CFM's failure to obtain shareholders' approval or due to a
Mattson material adverse effect, the royalty payments will be permanently
reduced by 50%. STEAG's obligation to pay royalties terminates upon expiration
or a final, non-appealable judicial determination of unenforceability or
invalidity of U.S. Patent No. 4,911,761 or if the strategic business
combination agreement and the CFM merger agreement are terminated under certain
circumstances involving voluntary termination or intentional breach by CFM. In
the event that the strategic business combination agreement is terminated
voluntarily by STEAG under certain circumstances or by Mattson due to certain
breaches by STEAG, STEAG is required to pay to CFM a one-time lump sum royalty
payment and all other royalty payments will cease. Due to uncertainty
management has not recorded an accrual for the potential one-time lump sum
royalty.

   The license agreement terminates (i) when the last of the licensed patents
expires or is determined to be unenforceable by a final, non-appealable court
judgment, (ii) upon termination of the strategic business combination agreement
resulting from certain intentional breaches by STEAG, or (iii) if, within 24
months after the strategic business combination agreement and the CFM merger
agreement are terminated under certain circumstances, Mattson and STEAG enter
into a similar transaction including STEAG's wet processing business but not
involving CFM (unless CFM has entered into an alternative transaction prior to
such new transaction between Mattson and STEAG).

7. SHAREHOLDERS' EQUITY

   Shareholders' equity comprises the net investment of STEAG in the STEAG
Semiconductor Division.

   The capital increase in 2000 results mainly from a debt to equity conversion
(see note 4) and one capital contribution in kind in the amount of $25.5
million.

   Furthermore equity was increased in the amount of $15.4 million for the
purchase of STEAG CuTek Inc. (push down of the purchase price).

                                      F-54
<PAGE>

                          STEAG SEMICONDUCTOR DIVISION

            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(Continued)
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
   (all amounts in thousands of U.S. Dollars, except as otherwise indicated)


8. IMPORTANT EVENTS

   On June 27, 2000, STEAG and Mattson entered into a strategic business
combination agreement. STEAG will transfer ownership of all of its subsidiaries
comprising the STEAG Semiconductor Division to Mattson. In exchange, STEAG will
receive 11,850,000 shares of Mattson common stock. As a result of the business
combination and the CFM merger described below, STEAG will hold approximately
32% of the outstanding Mattson common stock. The closing is planned to occur on
or about January 1, 2001.

   On June 27, 2000 Mattson also entered into an agreement and plan of merger
with CFM. Mattson is to acquire CFM in a stock-for-stock merger in which
Mattson will issue 0.5223 shares of its common stock for each share of CFM
stock outstanding at the closing. In addition, Mattson will assume all
outstanding CFM stock options, based on the same exchange ratio. The business
combination with STEAG and the merger with CFM are each conditioned upon the
closing of the other.

   Simultaneously, STEAG and STEAG Electronic Systems, Inc. entered into a
settlement agreement with CFM with respect to the patent litigation and STEAG,
CFM, and CFMT, Inc. entered into a license agreement (reference is made to note
6 "Commitments"). STEAG Electronic Systems, Inc. withdrew the pending appeal
with respect to the patent litigation and STEAG agreed to cause the withdrawal
or termination of five invalidity lawsuits against the foreign counterpart
patents of the CFM 761 patent.

                                      F-55
<PAGE>

                 CFM INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
AUDITED ANNUAL FINANCIAL STATEMENTS

  Report of Independent Public Accountants................................ F-57

  Consolidated Balance Sheets as of October 31, 1999 and 1998............. F-58

  Consolidated Statements of Operations for the years ended October 31,
   1999, 1998 and 1997.................................................... F-59

  Consolidated Statements of Shareholders' Equity for the years ended
   October 31, 1999, 1998 and 1997........................................ F-60

  Consolidated Statements of Cash Flows for the years ended October 31,
   1999, 1998 and 1997.................................................... F-61

  Notes to Consolidated Financial Statements.............................. F-62

UNAUDITED INTERIM FINANCIAL STATEMENTS

  Consolidated Balance Sheets (unaudited) as of July 31, 2000 and October
   31, 1999............................................................... F-75

  Consolidated Statements of Operations (unaudited) for the Three and Six
   months ended July 31, 2000 and 1999.................................... F-76

  Consolidated Statements of Cash Flows (unaudited) for the Nine months
   ended July 31, 2000 and 1999........................................... F-77

  Notes to Consolidated Financial Statements.............................. F-78
</TABLE>

                                      F-56
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CFM Technologies, Inc.:

   We have audited the accompanying consolidated balance sheets of CFM
Technologies, Inc. (a Pennsylvania corporation) and subsidiaries as of October
31, 1999 and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CFM Technologies, Inc. and
subsidiaries as of October 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1999, in conformity with generally accepted accounting principles.

                                          Arthur Andersen LLP

Philadelphia, Pennsylvania
December 10, 1999

                                      F-57
<PAGE>

                    CFM TECHNOLOGIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                               October 31,
                                                             -----------------
                                                               1999     1998
                                                             --------  -------
<S>                                                          <C>       <C>
                           ASSETS
                           ------
Current Assets:
  Cash and cash equivalents................................. $ 13,967  $31,649
  Short-term investments....................................   10,249    9,745
  Accounts receivable.......................................   14,826   14,040
  Inventories...............................................   17,039   13,657
  Prepaid expenses and other................................      796    3,209
  Deferred income taxes.....................................    1,958    1,811
                                                             --------  -------
    Total current assets....................................   58,835   74,111
                                                             --------  -------

Property, plant and equipment:
  Land......................................................      540      540
  Building and improvements.................................    5,932    5,981
  Machinery and equipment...................................   14,239    9,599
  Furniture and fixtures....................................    1,565    1,423
                                                             --------  -------
                                                               22,276   17,543
Less--Accumulated depreciation and amortization.............   (8,739)  (6,377)
                                                             --------  -------
Net property, plant and equipment...........................   13,537   11,166