SEMITOOL INC, 10-K, 1996-12-27

SEMITOOL INC
10-K, 1996-12-27
SPECIAL INDUSTRY MACHINERY, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended September 30, 1996
Commission File Number 0-25424

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

Montana 81-0384392
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

655 West Reserve Drive, Kalispell, Montana 59901
(406) 752-2107
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
Common Stock, no par value Nasdaq National Market

Securities registered to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No [ ]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant on December 11, 1996 (based on the last reported sale price on the
Nasdaq National Market as of such date) was $75,888,198.

The number of shares of the registrant's Common Stock, no par value, outstanding
as of December 11, 1996 was 13,659,777.

DOCUMENTS INCORPORATED BY REFERENCE

There is incorporated by reference in Part III of this Annual Report on Form
10-K the information contained in the registrant's definitive proxy statement
for its annual meeting of shareholders to be held February 13, 1997.

<PAGE>

PART I

Item 1. Business

Introduction

Statements contained in this Report on Form 10-K which are not historical facts
are forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to the safe harbor
provisions created by that statute. A forward-looking statement may contain
words such as "will continue to be," "will be," "continue to," "expect to,"
"anticipates that," "to be" or "can impact." Management cautions that
forward-looking statements are subject to risks and uncertainties that could
cause Semitool, Inc.'s ("Semitool" or the "Company") actual results to differ
materially from those projected in such forward-looking statements. These risks
and uncertainties include, but are not limited to, the cyclical nature of the
semiconductor industry in general, lack of market acceptance for new products,
decreasing demand for the Company's existing products, impact of competitive
products and pricing, product development, commercialization and technological
difficulties, capacity and supply constraint difficulties and other risks
detailed under the heading "Risk Factors" and elsewhere herein. The Company's
future results will depend on its ability to continue to enhance its existing
products and to develop and manufacture new products and to finance such
activities. There can be no assurance that the Company will be successful in the
introduction, marketing and cost-effective manufacture of any new products or
that the Company will be able to develop and introduce in a timely manner new
products or enhancements to its existing products and processes which satisfy
customer needs or achieve widespread market acceptance.

The Company undertakes no obligation to release revisions to forward-looking
statements to reflect subsequent events, changed circumstances, or the
occurrence of unanticipated events.

The Company

Semitool, a Montana corporation organized in 1979, designs, manufactures,
markets and services equipment used in the fabrication of semiconductors. The
Company's products include batch and single substrate chemical processing tools,
thermal processing equipment, including thermal process control systems, and
wafer carrier cleaning systems. These products incorporate proprietary designs
and technologies to enable customers to perform advanced semiconductor
fabrication processes. The process steps performed by the Company's products
occur repeatedly throughout the fabrication cycle, and constitute an integral
part of the manufacturing process for virtually every semiconductor produced
today. The Company's products are also used to manufacture materials and devices
fabricated with similar processes, including thin film heads, flat panel
displays, multichip modules, ink jet print heads, compact disc masters, and hard
disk media. The Company's products are designed to provide improved yields
through higher process uniformity and reduced contamination, increased
throughput through advanced processes which reduce cycle times, and lower direct
costs through reduced consumables usage and smaller footprints, thereby
providing lower overall cost of ownership. The Company markets and sells its
products to customers worldwide.

Industry Background

Overview

The fabrication of semiconductor devices is a complex process involving several
distinct phases repeated numerous times during the fabrication process. Each
production phase requires different processing technology and equipment, and no
one semiconductor equipment supplier currently produces an entire
state-of-the-art fabrication system. Rather, semiconductor device manufacturers
typically construct fabrication facilities by combining manufacturing equipment
produced by several different suppliers, each of which performs specific
functions in the manufacturing process.

The thin film head, flat panel display, multichip module and ink jet print head
fabrication processes utilize many of the same basic technological building
blocks as does the semiconductor manufacturing industry, in that certain
production equipment provides the same basic function or applications for a
substrate as semiconductor manufacturing equipment does for a silicon wafer. The
flat panel display and thin film head markets, while not as large as the
semiconductor device market, have over the past few years experienced
significant growth.

Industries that use semiconductors are demanding increasingly complex, higher
performance devices. Fabrication of these devices requires increasing the number
of process steps and reducing feature sizes, necessitating narrower process
tolerances which makes it more difficult to maintain acceptable yields. These
factors, together with the industry migration to larger wafer sizes, have led to
a substantial increase in the manufacturers' per wafer investment, which in turn
has caused these manufacturers to intensify their efforts to maintain acceptable
yields. As a result, manufacturers demand equipment that provides superior
process results and yields and can accommodate larger wafers.

The Company believes that semiconductor device manufacturers are asking
equipment suppliers to take an increasingly active role in meeting the
manufacturers' technology requirements and cost constraints by developing and
supporting the products and processes required to fabricate advanced products.
Certain manufacturers are seeking strategic relationships with equipment
suppliers for specific process steps on existing and new products. As a result,
equipment companies are being asked to provide advanced process expertise,
superior product performance, reduced overall cost of ownership, and worldwide
customer support to better meet the needs of manufacturers.

Chemical Processing

The fabrication of semiconductors involves numerous distinct processes which
can, depending on the complexity of the device, exceed 250 steps. The chemical
processing steps involved can include cleaning, developing, stripping, etching,
milling, plating and coating. Such chemical processes have traditionally been
performed using wet-benches which consist of open chemical and rinse tanks, into
which cassettes of wafers are immersed, either manually or automatically.
Multiple process steps are performed by transferring wafers from one chemical
bath to another. There are significant disadvantages relating to process
uniformity and contamination control inherent in wet-bench processing, which are
becoming increasingly problematic as process tolerances narrow. Wet-benches also
lack the flexibility to readily change processes, and are relatively costly to
operate because they consume large amounts of process chemicals and have large
footprints that use valuable clean room space.

Thermal Processing

Thermal processing generally addresses the oxidation/diffusion and low pressure
chemical vapor deposition (LPCVD) steps of the semiconductor fabrication
process. Conventional vertical furnaces require loading a batch of wafers into a
rack which is then lifted into an open, heated process chamber. The inability to
control and vary the environment within the process chamber prior to exposing
the wafers to heat can result in unintended oxide growth. Moreover, conventional
vertical furnaces are not capable of performing multiple processes in a single,
continuously controlled environment, making it necessary to move wafers from
furnace to furnace to perform sequential processing. This requires purchasing
and operating multiple furnaces, which constrains throughput and increases the
risk of wafer contamination. Conventional vertical furnaces also create
variances in process exposure times of individual wafers (the first wafer into
the furnace is the last wafer out), causing non-uniformity of process among
wafers. In addition, the vibration caused by loading the rack of wafers into the
process chamber can create particulate contamination that reduces yield.

Cost of Ownership

As a result of the increasing cost of equipping fabrication facilities,
semiconductor manufacturers are placing greater importance on the overall cost
of ownership of each piece of process equipment. The principal elements of cost
of ownership are yield, throughput and direct costs. Yield, or the number of
good die per wafer, is primarily determined by contamination levels and process
uniformity. Achieving high yields becomes more critical to manufacturers as
their per wafer investment increases. Throughput, or the number of wafers
processed by a particular tool in a given period, is primarily a function of the
time required to complete a process cycle and the handling time between process
steps. Major components of direct cost include the amount of consumables used in
the manufacturing process, the cost of the clean room space occupied by the
equipment (i.e., the "footprint") and the purchase price of the equipment. The
ability to maintain acceptable cost of ownership levels becomes increasingly
challenging as manufacturing processes become more complex and process
tolerances narrow.

The Semitool Solution

The Company has developed a broad range of products that enables its customers
to perform advanced fabrication processes. The Company's products are designed
to provide improved yields through higher process uniformity and reduced
contamination, increased throughput through advanced processes which reduce
cycle times, and lower direct costs through reduced usage of consumables and
smaller footprints, thereby providing lower overall cost of ownership. The
process steps performed by the Company's products occur repeatedly throughout
the fabrication cycle and constitute an integral part of the manufacturing
process for virtually every semiconductor produced today. The Company's products
include chemical processing tools, thermal processing equipment and wafer
carrier cleaning systems.

Chemical Processing Equipment

The Company's batch and single substrate processing equipment employs chemical
spray multi-processing within a self-cleaning, enclosed process chamber. These
tools enable customers to conduct sequential chemical processing steps, and then
rinse and centrifugally dry substrates, within the same chamber, thereby
reducing contamination during and between process steps. Spray technology avoids
non-uniformity of process inherent in traditional wet-bench immersion processing
by applying the process chemicals via spray manifolds. This technique enhances
chemical reaction on the substrate surface, which increases process reliability
and shortens process cycle times. The enclosed process chamber technology also
allows for more efficient use and disposal of process chemicals (through
reclamation, filtration and recirculation) as well as increased operator safety.
The Company's spin rinser/dryer also utilizes the spray and centrifugal drying
technologies to remove chemical residue from the wafer surface. The Company has
developed fully automated platforms for both silicon wafers and the glass
substrates used in the fabrication of flat panel displays, that cluster multiple
chemical processing modules, thereby further increasing yield and throughput,
and providing a total process solution in a single unit with a smaller footprint
than conventional wet-benches.

Thermal Processing Equipment

The Company's vertical furnace employs a patented "double lift" process chamber
design which provides a continuously controlled process environment that allows
for sequential processing steps to be performed in the same enclosed chamber.
This design enables the customer to control and vary the environment within the
sealed process chamber, thereby avoiding unintended oxide growth and minimizing
the non-uniformity of process resulting from varying exposure times of
individual wafers. In addition, the Company's vertical furnace reduces
contamination by employing a fixed quartz process tower that remains stationary
throughout loading and processing. The double lift design permits the heating
element to be lifted away from the sealed process chamber, allowing wafers to
cool more rapidly in a controlled environment, thereby improving the overall
cycle time of the thermal process. The Company has recently developed a vertical
furnace with fast ramp technology which provides a shortened period to reach
desired processing temperature thereby allowing increased throughput.

Wafer Carrier Cleaning System

The Company has developed sophisticated cleaning systems for the cassettes and
boxes used to carry and store finished and in-process substrates. The Company's
wafer carrier cleaning systems allow its customers to increase yields by
reducing particulate contamination. In contrast to traditional cleaning and
drying methods, the Company's cleaning systems employ centrifugal drying
technology, which eliminates the carrier deformation that can result from
conventional drying and reduces the contamination that results from residues
left on heat dried surfaces. The double door design allows contaminated carriers
to be loaded outside the clean room. Once cleaned and dried, the carriers are
then moved into the clean room environment. In this manner, neither the clean
room nor the carriers are contaminated.

The Semitool Strategy

The key elements of the Company's business strategy are as follows:

Develop Innovative Solutions. The Company is committed to developing new
products, new applications for existing products and enhancing existing products
to address evolving process requirements. Accordingly, the Company devotes
substantial resources to product innovation and collaborative development
efforts. Recent products developed through independent innovation efforts
include the Magnum and Centurium, fully automated tools which cluster multiple
process modules into a single unit to provide a total chemical processing
solution. Products developed through collaborative efforts include the Company's
EXPRESS vertical furnace, which provides faster thermal ramping , and the
Company's wafer carrier cleaning system, which increases yields by reducing
contamination.

Offer a Broad Range of Products to Customers in Diverse Markets. The Company
focuses on offering a broad range of products, including chemical processing
tools, thermal processing equipment and wafer carrier cleaning systems, to
semiconductor manufacturers for use in diverse process applications. The Company
leverages its technology and expertise to provide solutions to manufacturers of
other products that are fabricated using similar processes, such as thin film
heads, flat panel displays, multichip modules, ink jet print heads, compact disc
masters, and hard disk media . Some of these other applications involve
substrates with surfaces larger than the current typical semiconductor
substrates. By providing solutions for applications involving larger substrates,
the Company believes it gains valuable expertise which can be later applied to
the semiconductor industry as semiconductor substrates continue to increase in
size. By addressing diverse markets, the Company seeks to increase its product
sales and reduce its reliance on the semiconductor industry.

Capitalize on Manufacturing Expertise. The Company's manufacturing strategy is
to identify and perform internally those manufacturing functions which add value
to the Company's products. The Company believes it achieves a number of
competitive advantages from its vertically integrated manufacturing operations,
including the ability to achieve cost and quality benefits, to quickly bring new
products and product enhancements to market and the ability to produce
sophisticated component parts not available from other sources. The Company
encourages an entrepreneurial atmosphere by maintaining semi-autonomous business
units that are empowered to respond quickly and directly to customer needs.

Focus on Overall Cost of Ownership. The Company designs and manufactures
equipment solutions that provide its customers with low overall cost of
ownership. The technologies employed by the Company's chemical processing tools
provide higher yield, greater throughput, more efficient use of consumables and
smaller footprints than conventional wet- benches. The Magnum and Centurium
cluster multiple process modules into a single automated tool, thereby providing
further cost of ownership advantages. The Company's thermal processing equipment
also provides cost of ownership advantages by enhancing process uniformity and
reducing contamination that results in corresponding increases in yields.

Address Worldwide Markets. The Company markets and sells its products worldwide
with emphasis on Europe and Asia as its principal international markets. The
Company believes the strength of its international sales and service
organizations is important to its continued success in these markets. To
facilitate its worldwide marketing strategy, the Company has dedicated European
sales and support organizations in England, France, Germany and Italy. The
Company intends to continue to aggressively pursue the Asian market. In addition
to its office in Japan, the Company recently opened an office in Korea and
stationed service personnel in Taiwan. See Note 10 of Notes to the Consolidated
Financial Statements for a breakdown between domestic and foreign sales.

Products

The Company designs, manufactures and sells batch and single substrate chemical
processing tools, thermal processing equipment and wafer carrier cleaning
systems.

The mix of products sold by the Company may vary significantly from year to
year. The following table sets forth, for the periods indicated, the amount of
net sales and approximate percentages of the Company's total net sales
contributed by the Company's principal products (dollars in thousands):

Fiscal Year Ended September 30, 1996 September 30, 1995 September 30, 1994
------------------ ------------------ ------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$ % $ % $ %
Chemical Processing:
Manual Batch ....... 68,469 39.3% 59,340 46.2% 34,877 55.7%
Automated Batch .... 24,664 14.2% 9,124 7.1% -- --
Single Substrate ... 21,119 12.1% 6,263 4.9% 2,814 4.5%
Thermal Processing ... 35,822 20.6% 34,300 26.8% 15,696 25.1%
Wafer Carrier Cleaning 8,141 4.6% 6,343 4.9% 802 1.3%
Spare Parts & Service 15,989 9.2% 12,956 10.1% 8,408 13.4%
------- ----- ------- ----- ------ -----
Total ................ 174,204 100.0% 128,326 100.0% 62,597 100.0%
======= ===== ======= ===== ====== =====
</TABLE>

Chemical Processing

Batch Chemical Processing. The Company's batch chemical processing tools
incorporate centrifugal spray technology to process wafers and substrates by
exposing them to a user-programmable, sequenced spray of chemicals inside an
enclosed chamber. Utilizing these tools, cassettes filled with wafers are loaded
into a rotating fixture mounted in a process chamber. The process chamber is
then sealed and chemicals are sequentially dispensed into the chamber via spray
manifolds in a closed-loop system. As the rotating fixture turns the cassette, a
chemical spray is applied to the wafer surfaces. This technique enhances
chemical reaction on the substrate surface, which increases process reliability
and shortens process cycle times. After application of the process chemicals,
deionized ("DI") water can be sprayed into the chamber to stop the chemical
reaction and to remove chemical residues. The wafers, cassette and chamber are
then dried by centrifugal spinning coupled with a flow of warm nitrogen, either
in the same process chamber or in an adjacent rinser/dryer module. The Company
believes its batch spray chemical processing tools offer significant advantages
over conventional wet-benches. These advantages include higher yields (by
providing better process uniformity and lower particulate contamination),
increased throughput (by providing shorter process cycle times) and reduced
direct costs (by providing more effective use of chemicals and smaller
footprints), thereby providing lower overall cost of ownership.

The Company's manually loaded batch spray chemical processing products include
the Spray Acid Tool and the Spray Solvent Tool. The surfaces of the Spray Acid
Tool that are exposed to acids are made entirely of Teflon and other
acid-resistant materials. This tool addresses applications that include
resist-stripping, pre-diffusion cleaning, oxide etching, polymer removal and
chemical milling. The Company's Spray Solvent Tool is primarily made out of
stainless steel and addresses processes which use solvents to dissolve and strip
the lithographic media from substrate surfaces, remove polymer residues and
develop lithographic images on substrate surfaces. In addition to customary
semiconductor applications, the Spray Acid Tools and Spray Solvent Tools are
being used to manufacture a variety of other products including flat panel
displays and thin film heads, and are used with substrates as large as 500
millimeters square. The closed-loop/closed-chamber system of the Company's batch
spray processing tools allows for reclamation, filtration and recirculation of
chemicals, resulting in reduced chemical consumption, better environmental
control and enhanced operator safety. The purchase prices of the Company's batch
chemical processing tools range from $150,000 to $750,000, depending on
configuration.

The Company's manually loaded Spin Rinser/Dryer is used primarily for removing
chemical residues from substrate surfaces with DI water, and utilizes the same
enclosed chamber, spray processing and centrifugal drying technologies employed
in the Company's Spray Acid Tools and Spray Solvent Tools. The Spin Rinser/Dryer
incorporates a DI water resistivity monitor to ensure the required level of
cleanliness. The Company introduced the Spin Rinser/Dryer in 1979 and, as of
September 30, 1996 had delivered over 21,000 units to customers. The purchase
price of the Spin Rinser/Dryer ranges from $10,000 to $150,000, depending on
configuration.

The Magnum is a multimodule chemical processing tool which clusters the
Company's solvent, acid and spin rinser/dryer capabilities into a single
automated unit. The Magnum incorporates a Company-designed advanced robot which
employs fiber optic communications, absolute positioning and a linear motor
track to ensure precise, reliable and particle-free automated wafer handling.
The Magnum also offers standard mechanical interface ("SMIF") loading
capabilities and a touch screen computer interface for ease of operation. The
Magnum provides the customer with the flexibility to mix and match process
modules, including immersion modules as appropriate, thereby providing them with
a complete chemical processing solution to meet their particular process
requirements. The Magnum possesses significant competitive advantages over both
stand-alone tools and other automated products, including the ability to replace
two or more wet-benches with a single, smaller footprint tool as well as
increased yields and increased throughput per square foot of clean room space.
Magnum's latest innovations include the "Revolver" random access WIP station,
carrierless fault tolerant loading, concentration control monitoring, and 50
wafer payloads. The Company believes that the installed base of its widely
accepted chemical processing tools has facilitated market acceptance of the
Magnum. The purchase price of the Magnum ranges from $900,000 to over $2.0
million, depending on configuration. The Company, during fiscal 1996, built its
first Centurium, an enlarged Magnum, that is used to process large glass
substrates.

Single Substrate Processing. The Company's Equinox addresses the needs of
customers employing single substrate processing for specialized applications.
The Equinox utilizes a variety of processes, including immersion, spray,
hydrofluoric acid vapor and infrared heating, to address cleaning, stripping,
etching, developing and plating applications. All such processes are performed
with the substrate suspended device side down in an enclosed process chamber.
This face down positioning allows for enhanced liquid or gas delivery of the
process chemicals to the substrate, and results in greater process uniformity
and reduced contamination. The Equinox is a flexible platform which may contain
multiple process chambers, allowing the customer to cluster multiple process
technologies into a single tool to perform sequential processes. The Equinox has
been used to process ceramic substrates, thin film heads and photo masks in
addition to its customary silicon and gallium arsenide wafer applications. In
addition to offering complete Equinox tools, the Company also offers Equinox
technologies to original equipment manufacturers for integration into other
upstream or downstream process equipment, including thermal technologies. The
price of the Equinox ranges from $150,000 to $1.2 million, depending on
configuration.

Thermal Processing

The Company's VTP 1500 and EXPRESS vertical furnaces employ a patented design
which provides a continuously controlled process environment that allows for
oxidation/diffusion and LPCVD processing steps such as gate oxide/poly,
oxide/nitride and oxide/nitride/oxide to be performed sequentially in the same
processing chamber. The Company's furnaces feature a stationary base plate and
quartz process tower with a patented double lift system which allows the process
chamber and heating element to each be raised and lowered independently over the
process tower. The furnace's quartz tower is loaded with wafers by a simple pick
and place robot (thereby avoiding the risk of particle contamination caused by
loading the wafers in batches) and the process chamber is then lowered over the
wafers. The atmosphere within the process chamber is removed by vacuum purging,
creating an inert environment. The heating element is then lowered over the
sealed process chamber. The inert environment prevents chemical reactions from
occurring until the heating element is fully in place, at which time processing
can be conducted by injecting the process tube with the appropriate active gas.
This design avoids variances in process exposure times of individual wafers,
preventing the non-uniformity inherent in traditional vertical furnace
processing. Because the process tube may be purged and alternative active gases
introduced in a sequential manner, wafers can remain in a continuously
controlled environment for multiple discrete thermal processing steps. The
Company believes that this sequential, or "in situ," processing capability is a
significant competitive advantage of its furnaces. The double lift design also
permits the heating element to be lifted away from the sealed process chamber,
allowing wafers to cool more rapidly in a controlled environment, thereby
improving overall thermal processing cycle time of the thermal process. In
addition, the furnaces have the flexibility to be quickly reconfigured for
varying processes and can be easily upgraded to accommodate larger wafer sizes.
The Company believes its furnaces produce higher quality film with fewer
impurities and increased electrical properties, and have been designed to meet
manufacturers' requirements for the production of semiconductor devices with
line geometries as small as .18 micron. The prices of the VTP 1500 and EXPRESS
range from $600,000 to $1.3 million, depending on configuration.

The Company, through its Semy Engineering, Inc. (Semy) subsidiary, manufactures
process control computers that upgrade diffusion and low pressure chemical
deposition furnaces with state-of-the-art control features. The Company has also
recently introduced a family of cell workstations that interface to a variety of
wafer processing equipment produced by Semitool and other semiconductor
equipment manufacturers. The cell workstations collect and store data generated
by the processing equipment and provide statistical process control, inventory
control data and process flow control to the user in a graphical interface.

Wafer Carrier Cleaning

Silicon wafers are stored, handled and processed in cassettes. Cassettes filled
with wafers are placed in plastic boxes for transportation and storage.
Significant increases in yields may be attained through effective cleaning of
these cassettes and boxes. Wafer carriers have commonly been cleaned using
commercial dishwasher or conveyor type methods in which they are spray washed
and then dried using hot compressed gases. Because boxes and cassettes are made
of plastics, the drying process can distort the boxes and cassettes and result
in subsequent wafer damage or contamination. The Company's Storm wafer carrier
cleaning system cleans and dries the wafer carriers in a unique rinsing/spinning
process that occurs inside an enclosed chamber. Solution is sprayed, cleaning
both the boxes and cassettes and the inside of the chamber, followed by a DI
water rinse. The boxes and cassettes are then dried using centrifugal force and
warm filtered ambient air. The Storm monitors the humidity inside the enclosed
process chamber to ensure consistent drying results. The Company believes the
Storm removes particles more effectively than conventional technology and has
the lowest cost of ownership of any commercially available cleaning system. The
Storm also has a patented loading feature that allows through-the-wall
installation whereby unwashed boxes and cassettes can be loaded into the Storm
from outside the clean room and then unloaded directly into the clean room after
the cleaning cycle has been completed. This feature enables customers to avoid
bringing contaminated boxes and cassettes into the clean room. The price of a
Storm ranges from $190,000 to $400,000, depending on configuration.

Spare Parts and Service

The Company sells spare part kits and spare part components for its equipment.
The Company employs customer service and process engineers to assist and train
the Company's customers in performing preventive maintenance and service on
Semitool equipment and developing process applications for the equipment. The
Company generally provides a one year parts and labor warranty on equipment and
a 90-day warranty on parts. The Company offers a variety of process, service,
and maintenance programs that may be purchased for a fee. A number of customers
have purchased maintenance contracts whereby the Company's service employees
work full-time at the customer's facility, and provide service and maintenance
support for Semitool equipment.

Customers, Sales and Marketing

The Company's customers include leading semiconductor manufacturers worldwide as
well as major manufacturers of thin film heads, flat panel displays, multichip
modules, ink jet print heads, compact disc masters, and hard disk media. The
following is a representative list of the Company's largest United States and
international end-user customers, which had purchases in excess of $2,000,000 in
fiscal 1996:

Allegro Microsystems Intel Seagate
Atmel Lucky Goldstar SGS-Thomson
Austria Micro System Micro Chip Corporation Siemens
Cirrus Logic, Inc. Motorola Siltec Silicon
Fraunhofer Institut National Semiconductor Texas Instruments
Hewlett-Packard Philips Semiconductor Thermco Systems
IBM Xerox

The Company believes that its sales, service and customer support organizations
are important to the long-term success of its customer relationships.

International sales, primarily in Europe and Asia accounted for approximately
44%, 40% and 40% of total sales for fiscal years 1996, 1995 and 1994,
respectively. The Company markets and sells its products in North America
through its sales organization which includes direct sales personnel and
independent sales representatives. The Company currently has sales and service
offices located throughout the United States. In Europe, the Company has direct
sales and service personnel in four offices. In Asia, the Company sells through
direct sales personnel and six independent sales representatives as well as
through Tokyo Electron, Limited ("TEL") pursuant to a non-exclusive distribution
agreement, whereby TEL sells the Company's stand-alone batch and single
substrate spray chemical processing products in Japan. To supplement TEL's sales
efforts, the Company has a direct sales and service operation in Japan. Semitool
opened a Korean service office during fiscal 1996. To enhance its sales
capabilities, the Company maintains a demonstration and process development
laboratory and a clean room at its Kalispell, Montana facility.

The Company currently provides a one year warranty on equipment and a 90-day
warranty on parts. The Company has field service personnel and application
engineers servicing customers in the United States, Europe and Asia, who
directly provide warranty service, post-warranty service and equipment
installations. Field service engineers are located in nine sites throughout the
United States, including dedicated site-specific engineers in place at certain
customer locations pursuant to contractual arrangements. To further ensure
customer satisfaction, the Company also provides service and maintenance
training as well as process application training for its customers' personnel on
a fee basis. The Company maintains an extensive inventory of spare parts which
allows the Company to provide overnight delivery for many parts. The Company's
vertically integrated manufacturing allows the Company to quickly manufacture
parts to address customers' service needs.

Backlog

Backlog increased to approximately $85.9 million at September 30, 1996, from
approximately $64.7 million at September 30, 1995. The Company's automated batch
chemical processing tool, first shipped in fiscal 1995, now represents the
largest single component of the backlog with the vertical furnace second. Due
largely to customers rescheduling deliveries, approximately $19.0 million of the
backlog is not scheduled to ship until the fourth quarter of fiscal 1997. The
Company includes in its backlog those customer orders for which it has received
purchase orders or purchase order numbers and for which shipment is scheduled
within the next twelve months. Orders are generally subject to cancellation or
rescheduling by customers with limited or no penalty. As the result of systems
ordered and shipped in the same quarter, possible changes in customer delivery
schedules, cancellations of orders and delays in product shipments, the
Company's backlog at any particular date is not necessarily indicative of actual
sales for any succeeding period.

Manufacturing

Most of the Company's manufacturing is conducted at its facilities located in
Kalispell, Montana. The Company's vertically integrated manufacturing operations
include state-of-the-art metals and plastics fabrication and finishing
capabilities; component part, circuit board and final product assembly; and
extensive product testing capabilities. The Company's manufacturing personnel
work closely with its product development personnel to ensure its products are
engineered for manufacturability, affording a smooth transition from prototype
to full scale production. Component and product prototyping is performed
internally, and design engineers often receive prototypes of newly designed
parts from manufacturing within 24 hours. The Company believes it achieves a
number of competitive advantages from its vertically integrated manufacturing
operations, including the ability to achieve cost and quality advantages, to
quickly bring new products and product enhancements to market, and the ability
to produce sophisticated component parts not available from other sources.

Research and Development

The market for semiconductor equipment is characterized by rapid technological
change and product innovation. The Company believes that continued timely
development of products for both existing and new markets is necessary to remain
competitive. The Company devotes significant resources to programs directed at
developing new and enhanced products, as well as new applications for existing
products. The Company maintains an extensive demonstration and process
development laboratory at its facilities in Montana, including a clean room for
testing and developing its products. Company research and development personnel
work directly with customers to provide process solutions, develop new processes
and to design and evaluate new pieces of equipment.

The Company shipped new models of its vertical furnace, automated batch chemical
processor and single substrate processor during fiscal 1996. The EXPRESS
vertical furnace uses a model based controller to achieve much faster thermal
ramping speeds than furnaces with conventional control systems. The Centurium
automated batch chemical processor can handle the glass substrates used in the
production of flat panel displays and multichip modules. A Magnum automated
batch chemical processor which uses immersion processing was developed and
shipped in fiscal 1996. Equinox single substrate processors for solder bump and
interconnect plating were also developed and shipped during fiscal 1996. All of
this equipment is either in customers' research and development (R&D) labs or
production areas where it is being evaluated. Evaluation periods are expected to
vary by customer, application and equipment type and to continue through fiscal
1997.

Expenditures for R&D, which are expensed as incurred, during fiscal 1996, 1995
and 1994 were approximately $19.5 million, $11.4 million and $6.0 million and
represented 11.2%, 8.9% and 9.5% of net sales, respectively.

Competition

The industry in which the Company competes is highly competitive. The Company
faces substantial competition from both established competitors and from
potential new market entrants. Significant competitive factors in the markets in
which the Company competes include system performance and flexibility, cost of
ownership, the size of each manufacturer's installed customer base, customer
support capabilities and breadth of product line. The primary competition to the
Company's batch chemical spray products is currently from wet-bench chemical
processing equipment. The Company is aware of at least two other manufacturers
of spray chemical processors. As the demand for more precise and reliable
chemical processing increases, the Company anticipates greater competition in
the centrifugal spray technology area. The Company is aware of vertical furnaces
produced by at least four other manufacturers which compete with the Company's
thermal processing equipment. The single substrate processing market in which
the Company's Equinox competes and the wafer carrier cleaning market in which
the Company's Storm competes are highly fragmented markets. In these fragmented
markets, the Company believes that it competes primarily with alternative
technologies.

The Company expects its competitors to continue to improve the design and
performance of their products. There can be no assurance that the Company's
competitors will not develop enhancements to or future generations of
competitive products that will offer superior price or performance features or
that new processes or technologies will not emerge that render the Company's
products less competitive or obsolete. As a result of the substantial investment
required to integrate capital equipment into a production line, the Company
believes that once a manufacturer has selected certain capital equipment from a
particular vendor, the manufacturer generally relies upon that vendor to provide
equipment for the specific production line application and may seek to rely upon
that vendor to meet other capital equipment requirements. Accordingly, the
Company may be at a competitive disadvantage with respect to a particular
customer if that customer utilizes a competitor's manufacturing equipment.
Increased competitive pressure could lead to lower prices for the Company's
products, thereby adversely affecting the Company's business and results of
operations. There can be no assurance that the Company will be able to compete
successfully in the future.

Patents and Other Intellectual Property

The Company currently holds numerous United States patents, some with pending
foreign counterparts, has several United States patent applications pending and
intends to file additional patent applications as appropriate. There can be no
assurance that patents will issue from any of the Company's pending applications
or that existing or future patents will be sufficiently broad to protect the
Company's technology. The Company believes that patents and trademarks are of
less significance in its industry than such factors as product innovation,
technical expertise and its ability to quickly adapt its products to evolving
processing requirements and technologies. While the Company attempts to protect
its intellectual property rights through patents, copyrights and non-disclosure
agreements, there can be no assurance that the Company will be able to protect
its technology, or that competitors will not be able to develop similar
technology independently. In addition, the laws of certain foreign countries may
not protect the Company's intellectual property to the same extent as the laws
of the United States. In this regard, the Company is aware that TEL, one of the
Company's distributors and competitors in Japan, which accounted for the
distribution of approximately 6% of the Company's sales in fiscal 1996, has
filed patent applications in Japan which are based on certain Company-developed
designs in one of the Company's chemical processing tools. The Japanese patent
applications were filed without the authority or approval of the Company and the
Company has demanded that the applications be abandoned or otherwise
relinquished. While the Company believes that the Japanese patent applications
constitute an improper attempt to patent the Company's proprietary designs, no
assurances can be given that the Company will prevail in any negotiations or
litigation the Company may initiate to secure the other party's abandonment or
other relinquishment of the patent applications. If the Company is unsuccessful
in securing the abandonment or relinquishment of the applications, or if the
competitor were to file patent applications on the Company-developed designs,
the Company's competitive position in Japan could be adversely affected although
the Company believes that any such effect should not be material to the overall
results of operations of the Company or materially adversely affect the
Company's relationship with TEL. Moreover, there can be no assurance that the
Company's existing or future patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide meaningful
competitive advantages to the Company.

There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor-related industries. Although the Company is not
aware of any infringement by its products of any patents or proprietary rights
of others, further commercialization of the Company's products could provoke
claims of infringement from third parties. In the future, litigation may be
necessary to enforce patents issued to the Company, to protect trade secrets or
know-how owned by the Company or to defend the Company against claimed
infringement of the rights of others and to determine the scope and validity of
the proprietary rights of others. Any such litigation could result in
substantial cost and diversion of effort by the Company, which by itself could
have a material adverse effect on the Company's financial condition and
operating results. Further, adverse determinations in such litigation could
result in the Company's loss of proprietary rights, subject the Company to
significant liabilities to third parties, require the Company to seek licenses
from third parties or prevent the Company from manufacturing or selling its
products, any of which could have a material adverse effect on the Company's
business and results of operations.

Employees

At September 30, 1996, the Company had 1,214 full time employees and 246
temporary contract employees worldwide. This includes 718 in manufacturing, 372
in marketing, sales and field service, 186 in research and development, and 184
in general administration. The Company believes that the use of temporary
employees allows the Company to respond more rapidly to fluctuations in
manufacturing and product demand and enables the Company to better control the
labor component of its manufacturing costs. None of the Company's employees are
represented by a labor union and the Company has never experienced a work
stoppage or strike. The Company considers its employee relations to be good.

Risk Factors

Introduction

The risks detailed in this section as well as risks and uncertainties discussed
elsewhere in this annual report on Form 10-K and in the Company's other SEC
filings constitute some of the risks common in the semiconductor equipment
industry or risks specific to Semitool. Shareholders or potential shareholders
should read these risks carefully to better understand the potential volatility
of the Company's results and volatility in the Company's share price. The fact
that some of the risk factors may be the same or similar to the Company's past
filings means only that the risks are present in multiple periods. The Company
believes that many of the risks detailed are part of doing business in the
semiconductor equipment industry and will likely be present in all periods
reported. The fact that certain risks are endemic to the industry does not
lessen the significance of the risk.

Cyclical Nature of the Semiconductor Industry

The Company's business depends primarily on the capital expenditures of
semiconductor manufacturers, who correspondingly depend on the demand for final
products or systems that use such devices. The semiconductor industry is
cyclical and has historically experienced periodic downturns characterized by
oversupply and weak demand, which often have had a material adverse effect on
capital expenditures by semiconductor manufacturers. These downturns generally
have adversely affected the business and operating results of semiconductor
equipment suppliers, including the Company. The semiconductor device industry is
presently experiencing a slowdown in terms of product demand and volatility in
terms of product pricing. During 1995, many of the semiconductor device
manufacturers announced plans to expand existing or build new semiconductor
device manufacturing facilities. In early 1996, the average selling price of
memory chips and certain other semiconductor devices significantly decreased.
This has resulted in semiconductor device manufacturers announcing delays in
their expansion plans. This slowdown and volatility has caused the semiconductor
industry to reduce its demand for semiconductor processing equipment and, in
some instances, to delay capital equipment decisions. In some cases, this has
resulted in order cancellations or delays of orders and delays of delivery dates
for the Company's products. No assurance can be given that the Company's
revenues and operating results will not be adversely affected during this and
possible future downturns in the semiconductor industry. In addition, the need
for continued investment in research and development, marketing and customer
support may limit the Company's ability to reduce expenses in response to this
and future downturns in the semiconductor industry.

Fluctuations in Future Operating Results

The Company's business and results of operations have fluctuated significantly
in the past and are expected to fluctuate significantly on a quarterly or annual
basis in the future. During a particular quarter, a significant portion of the
Company's revenues is often derived from the sale of a relatively small number
of high selling price systems. The number of such systems sold in, and the
results for, a particular quarter or year can vary significantly due to a
variety of factors, including the timing of significant orders, the timing of
new product announcements by the Company or its competitors, patterns of capital
spending by customers, market acceptance of new and enhanced versions of the
Company's products, changes in pricing by the Company, its competitors or
suppliers, the mix of products sold and cyclicality in the semiconductor
industry and other industries served by the Company. In addition, the
cancellation or rescheduling of customer orders or any production difficulty
could adversely impact shipments which would negatively impact the Company's
business and results of operations for the period or periods in which such
cancellation or rescheduling occurs. In light of these factors and the cyclical
nature of the semiconductor industry, the Company expects to continue to
experience significant fluctuations in quarterly and annual operating results.
Moreover, many of the Company's expenses are fixed in the short term which,
combined with the need for continued investment in research and development,
marketing and customer support, limits the Company's ability to reduce expenses
quickly. As a result, shortfalls in net revenues could have a material adverse
effect on the Company's business and results of operations.

Dependence on Product Development

Semiconductor equipment is subject to rapid technological change as well as
evolving industry standards. The Company believes that its future success will
depend in part upon its ability to continue to enhance its existing products and
their process capabilities, to continue to decrease the overall cost of
ownership of such products, and to continue to develop and manufacture new
products with improved process capabilities which conform to evolving industry
standards. As a result, the Company expects to continue to make significant
investments in research and development. Although historically the Company has
had adequate funds from its operations to devote to research and development,
there can be no assurance that such funds will be available in the future or, if
available, that they will be adequate. The Company also must manage product
transitions successfully, since announcements or introductions of new products
by the Company or its competitors could adversely affect sales of existing
Company products. There can be no assurance that the Company will be able to
develop and introduce new products or enhancements to its existing products on a
timely basis or in a manner which satisfies customer needs or achieves
widespread market acceptance. The failure to do so could adversely affect the
Company's business and results of operations.

Market Acceptance of New Products

The Company believes that its growth prospects depend in large part upon its
ability to gain customer acceptance of its products and technology. Market
acceptance of new products depends upon numerous factors, including
compatibility with existing manufacturing processes and products, perceived
advantages over competing products and the level of customer service available
to support such products. Moreover, manufacturers often rely on a limited number
of equipment vendors to meet their manufacturing equipment needs. As a result,
market acceptance of the Company's new products may be adversely affected to the
extent potential customers utilize a competitor's manufacturing equipment. There
can be no assurance that growth in sales of new products will continue or that
the Company will be successful in obtaining broad market acceptance of its
systems and technology.

Competition

The industries in which the Company competes are highly competitive. The Company
faces substantial competition from established competitors, certain of which
have greater financial, marketing, technical and other resources, broader
product lines, more extensive customer support capabilities, and larger and more
established sales organizations and customer bases than the Company. The Company
may also face competition from new domestic and overseas market entrants.
Significant competitive factors in the semiconductor equipment market and other
markets in which the Company competes include system performance and
flexibility, cost of ownership, the size of each manufacturer's installed
customer base, customer service and support and breadth of product line. The
Company believes that it competes favorably on the basis of these factors. In
order to remain competitive, the Company must maintain a high level of
investment in research and development, marketing, and customer service while
controlling operating expenses. There can be no assurance that the Company will
have sufficient resources to continue to make such investments or that the
Company's products will continue to be viewed as competitive as a result of
technological advances by competitors or changes in semiconductor processing
technology. The Company's competitors may also increase their efforts to gain
and retain market share through competitive pricing. Such competitive pressures
may necessitate significant price reductions by the Company or result in lost
orders which could adversely affect the Company's business and results of
operations.

The Company expects its competitors to continue to improve the design and
performance of their products. There can be no assurance that the Company's
competitors will not develop enhancements to, or future generations of,
competitive products that will offer superior price or performance features, or
that new processes or technologies will not emerge that render the Company's
products less competitive or obsolete. As a result of the substantial investment
required to integrate capital equipment into a production line, the Company
believes that once a manufacturer has selected certain capital equipment from a
particular vendor, the manufacturer generally relies upon that vendor to provide
equipment for the specific production line application and may seek to rely upon
that vendor to meet other capital equipment requirements. Accordingly, the
Company may be at a competitive disadvantage with respect to a particular
customer if that customer utilizes a competitor's manufacturing equipment. There
can be no assurance that the Company will be able to compete successfully in the
future.

Management of Growth

Semitool has recently undergone a period of rapid growth. In response to the
recent growth, the Company has expanded its facilities in Kalispell, Montana in
each of the last three years, added significantly to its workforce, and
implemented a variety of new and upgraded management information systems. This
recent expansion may significantly strain the Company's management,
manufacturing, engineering, financial and other personnel at its headquarters
location in Kalispell. The Company also merged with Semy, in fiscal 1996. Semy's
product line of controllers and supervisory systems are developed and assembled
in Phoenix, Arizona, and are the first new products made by the Company away
from its headquarters location. Any failure to efficiently manage the Company
and its subsidiaries could adversely effect the Company's business and results
of operations.

Environmental Regulations

The Company is subject to a variety of governmental regulations related to the
discharge or disposal of toxic, volatile or otherwise hazardous chemicals used
on the Company's premises. The Company believes that it is in material
compliance with these regulations and that it has obtained all necessary
environmental permits to conduct its business. Nevertheless, current or future
regulations could require the Company to purchase expensive equipment or to
incur other substantial expenses to comply with environmental regulations. Any
failure by the Company to control the use of, or adequately restrict the
discharge or disposal of, hazardous substances could subject the Company to
future liabilities, result in fines being imposed on the Company, or result in
the suspension of production or cessation of the Company's manufacturing
operations.

International Business

Approximately 44%, 40% and 40% of the Company's sales for fiscal 1996, 1995 and
1994, respectively, were attributable to customers outside the United States.
The Company expects sales outside the United States to continue to represent a
significant portion of its future sales. Sales to customers outside the United
States are subject to various risks, including exposure to currency
fluctuations, the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, and longer
payment cycles typically associated with international sales. The Company's
international sales activities are also subject to the difficulties of managing
overseas distributors or representatives, and difficulties of staffing and
managing foreign subsidiary operations. In addition, because a majority of the
Company's international sales are denominated in United States dollars, the
Company's ability to compete overseas could be adversely affected by a
strengthening United States dollar. Moreover, although the Company endeavors to
meet technical standards established by foreign standards setting organizations,
there can be no assurance that the Company will be able to comply with changes
in foreign standards in the future. The inability of the Company to design
products to comply with foreign standards or any significant or prolonged
decline in the Company's international sales could have a material adverse
effect on the Company's business and results of operations.

Patents and Other Intellectual Property

The Company's success depends in significant part on the technically innovative
features of its products. While the Company attempts to protect its intellectual
property rights through patents, copyrights and non-disclosure agreements, it
believes that its success will depend to a greater degree upon innovation,
technological expertise and its ability to quickly adapt its products to new
technology. There can be no assurance that the Company will be able to protect
its technology or that competitors will not be able to independently develop
similar technology. In addition, the laws of certain foreign countries may not
protect the Company's intellectual property to the same extent as do the laws of
the United States. In this regard, the Company is aware that TEL, one of the
Company's distributors and competitors in Japan, which accounted for the
distribution of approximately 6% of the Company's sales in fiscal 1996, has
filed patent applications in Japan which are based on certain Company-developed
designs in one of the Company's chemical processing tools. Sales of this
equipment accounted for less than $500,000 of the Company's revenue in Japan in
the three year period ended September 30, 1996. The Japanese patent applications
were filed without the authority or approval of the Company and the Company has
demanded that the applications be abandoned or otherwise relinquished. While the
Company believes that the Japanese patent applications constitute an improper
attempt to patent the Company's proprietary designs, no assurances can be given
that the Company will prevail in any negotiations or litigation the Company may
initiate to secure the other party's abandonment or other relinquishment of the
patent applications. If the Company is unsuccessful in securing the abandonment
or relinquishment of the applications, or if the competitors were to file patent
applications on the Company-developed designs, the Company's competitive
position in Japan could be adversely affected although the Company believes that
any such effect should not be material to the overall result of operations of
the Company or materially adversely affect the Company's relationship with TEL.
No assurance can be given that the Company's patents will be sufficiently broad
to protect the Company's technology, nor that any existing or future patents
will not be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide meaningful competitive advantages to the Company. In any
of such events, the Company's business and operating results could be adversely
affected.

There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor-related industries. Although the Company is not
aware of any infringement by its products of any patents or proprietary rights
of others, there can be no assurance that such infringements do not exist or
will not occur in the future. Litigation may be necessary in the future to
enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company, to defend the Company against claimed infringement of the
rights of others or to determine the scope and validity of the proprietary
rights of others. Any such litigation could result in substantial cost and
diversion of effort by the Company, which by itself could adversely affect the
Company's business and results of operations. Moreover, adverse determinations
in such litigation could result in the Company's loss of proprietary rights,
subject the Company to significant liabilities to third parties, require the
Company to seek licenses from third parties or prevent the Company from
manufacturing or selling its products, any of which could adversely affect the
Company's business and results of operations. The Company knows of no threatened
litigation that would adversely affect the Company's intellectual property
rights.

Dependence on Key Personnel

The Company's success depends to a significant extent upon the efforts of
certain senior management and technical personnel, particularly Raymon F.
Thompson, the Company's Chairman, Chief Executive Officer and President. The
Company's future success will depend in large part upon its ability to attract
and retain highly skilled technical, managerial, and marketing personnel.
Competition for such personnel is high and, while to date the Company does not
believe that its geographic location has hindered it in recruiting qualified
personnel, no assurance can be given that the Company's location will not
adversely affect future recruiting of key personnel. The loss of the services of
Mr. Thompson or of one or more other key management or technical personnel, or
the inability to attract and retain additional qualified personnel, could
adversely affect the Company's business and results of operations. The Company
maintains a $2.0 million "key man" life insurance policy on Mr. Thompson.

Dependence on Key Customers

The Company's ten largest customers accounted for 42%, 55% and 58% of the
Company's net sales in fiscal 1996, 1995 and 1994, respectively. Although the
composition of Semitool's largest customers has changed from year to year, the
loss of, or a significant curtailment of purchases by one or more of the
Company's key customers could adversely affect the Company's business and
results of operations.

Dependence on Key Suppliers

Certain components and subassemblies included in the Company's products are
obtained from a single source or a limited group of suppliers. Although the
Company has vertically integrated much of its manufacturing operations, the loss
of, or disruption in shipments from, certain sole or limited source suppliers
could in the short term adversely affect the Company's business and results of
operations. The Company believes that it could either manufacture components or
secure an alternate supplier with no long-term material adverse effect on the
Company's business or operations. Further, a significant increase in the price
of one or more of these components could adversely affect the Company's business
and results of operations.

Effect of Certain Anti-Takeover Provisions

The Company's Articles of Incorporation authorize the Company's Board of
Directors to issue Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of Preferred Stock and to fix the number of shares constituting
any series and the designations of such series, without further vote or action
by the shareholders. Although the Company has no present plans to issue any
Preferred Stock, and views the authorized Preferred Stock as a potential
financing vehicle for the Company, the Board of Directors may issue Preferred
Stock with voting and conversion rights which could adversely affect the voting
power of the holders of Common Stock. Any issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company.

Volatility of Stock Price

The Company's Common Stock has experienced in the past, and could experience in
the future, substantial price volatility as a result of a number of factors,
including quarter to quarter variations in the actual or anticipated financial
results, announcements by the Company, its competitors or its customers,
government regulations, and developments in the industry. In addition, the stock
market has experienced extreme price and volume fluctuations which have affected
the market price of many technology companies in particular and which have at
times been unrelated to the operating performance of the specific companies
whose stock is traded. Broad market fluctuations, as well as economic conditions
generally and in the semiconductor industry specifically, may adversely affect
the market price of the Company's Common Stock.

Securities Litigation

A purported class action lawsuit brought by Dr. Stanley Bierman, IRA (Case No.
DV-96-124A) was filed February 26, 1996, in the Montana Eleventh Judicial
District Court, Flathead County, Kalispell, Montana against the Company and
certain of its officers and directors. The complaint includes allegations that
the Company issued misleading statements concerning its business and prospects.
The suit seeks injunctive relief, damages, costs and other relief as the court
may find appropriate. The Company believes the lawsuit to be without merit and
intends to contest the action vigorously. However, given the inherent
uncertainty of litigation, insurance issues, and the early stage of discovery,
there can be no assurance that the ultimate outcome will be in the Company's
favor, or that if the ultimate outcome is not in the Company's favor, that such
an outcome, the diversion of management's attention, and any costs associated
with the lawsuit, will not have a material adverse effect on the Company's
financial condition or results of operations.

Item 2. Properties

The Company's 170,000 and 21,000 square-foot facilities are located on
Company-owned sites in Kalispell, Montana. The headquarters for the Company's
European sales and customer service is located in Cambridge, England and is also
owned by the Company. The Company believes that its existing manufacturing
facilities, will be adequate to meet its requirements for the foreseeable future
and that suitable additional or substitute space will be available as needed.
The Company also leases various other smaller facilities worldwide which are
used as sales and customer service centers.

The Company is subject to a variety of governmental regulations related to the
discharge or disposal of toxic, volatile, or otherwise hazardous chemicals used
on the Company's premises. The Company believes that it is in material
compliance with these regulations and that it has obtained all necessary
environmental permits to conduct its business. Nevertheless, current or future
regulations could require the Company to purchase expensive equipment or to
incur other substantial expenses to comply with environmental regulations. Any
failure by the Company to control the use of, or adequately restrict the
discharge or disposal of, hazardous substances could subject the Company to
future liabilities, result in fines being imposed on the Company, or result in
the suspension of production or cessation of the Company's manufacturing
operations.

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to the shareholders for a vote during the fourth
quarter of the fiscal year.

<PAGE>

Part II

Item 5. Market for Semitool's Common Stock and Related Shareholder Matters.

The Company's common stock is traded under the symbol "SMTL" principally on the
Nasdaq National Market. The approximate number of shareholders of record at
December 11, 1996 was 229 and the reported last sale price of the Company's
common stock on the Nasdaq National Market was $11.625. The high and low sales
prices for the common stock reported by the Nasdaq National Market for each
quarter that the Company's common stock has traded publicly are shown below.
<TABLE>

Common Stock Price Range
Fiscal Year
Ended September 30,
1996 1995
<S> <C> <C> <C> <C> <C>
High Low High Low
First Quarter ....................... $ 24.50 $ 12.50 NA NA (1)
Second Quarter ...................... $ 17.75 $ 12.50 $ 16.33 $ 8.67 (2)(3)
Third Quarter ....................... $ 17.00 $ 13.00 $ 21.83 $ 13.17 (3)
Fourth Quarter ...................... $ 13.50 $ 10.25 $ 36.75 $ 21.00 (3)

(1) Prior to the Company's Initial Public Offering (IPO) of common stock.
(2) The low price is the IPO price.
(3) Adjusted for the August 1995 three-for-two stock split.
</TABLE>

The Company, prior to its initial public offering of common stock in February
1995, made distributions to shareholders for their share of income taxes related
to the Company's S Corporation status. The Company also made a final
distribution of S Corporation retained earnings prior to the initial public
offering. The Company intends to retain its earnings to fund the development and
growth of its business and therefor, does not anticipate paying any cash
dividends in the foreseeable future.

<PAGE>

Item 6. Selected Financial Data

This summary should be read in conjunction with the consolidated financial
statements and related notes included elsewhere herein.

<TABLE>

Summary Consolidated Financial Information
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>

Year Ended September 30,
1996 1995 1994 1993 1992
Statement of Operations Data:
Net sales ............................................. $174,204 $128,326 $ 62,597 $ 48,532 $ 32,445
Gross profit .......................................... 84,631 65,858 31,957 24,070 17,764
Income from operations ................................ 24,182 20,927 3,020 356 481
Net income (loss) ..................................... 15,136 14,885 2,170 (445) (353)

Pro forma Statement of Operations Data:
Income from operations (1) ............................ 24,182 22,599 6,509 3,126 2,534
Net income (2) ........................................ 15,136 14,403 3,723 1,579 1,110
Net income per share (3) .............................. 1.09 1.15 0.37
Shares used in per share computation (4) .............. 13,858 12,563 9,946

Balance Sheet Data:
Working capital ....................................... 43,797 37,209 6,109 6,223 5,785
Total assets .......................................... 114,954 88,067 39,807 30,744 20,927
Short-term debt ....................................... 4,374 924 7,409 5,164 2,199
Long-term debt ........................................ 3,637 4,011 6,089 1,940 2,287
Shareholders' equity .................................. 68,003 52,813 12,487 2,741 3,519
</TABLE>

(1) Pro forma income from operations has been determined by eliminating for each
period presented payments for technology rights that ceased in February 1995,
upon closing of the initial public offering of the Company's common stock. See
Note 14 of Notes to Consolidated Financial Statements.

(2) Between October 1, 1986 and February 1, 1995, the Company elected to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company had not been subject to federal corporate income
taxation. In connection with the closing of the Company's initial public
offering, the Company terminated its S corporation status. Pro forma net income
has been determined by assuming that the Company had been taxed as a C
corporation for federal income tax purposes for each period presented. The pro
forma provision for income taxes has been calculated by using statutory rates
for federal and state taxes applied to pro forma income before income taxes, net
of actual research and development credits generated in each year. The pro forma
effective tax rates in fiscal 1992 through 1996 were 41.8%, 33.0%, 36.4%, 37.1%
and 37.0%, respectively.

(3) In accordance with Staff Accounting Bulletin No. 55 issued by the Securities
and Exchange Commission, pro forma net income per share data is not presented
prior to fiscal year 1994. Also, prior to the termination of S corporation
status, dividends were paid by the Company only in amounts sufficient to cover
shareholders' tax liabilities other than the final distribution of prior
accumulated S Corporation earnings. The per share dividend information has
therefore not been presented.

(4) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing pro forma net
income per share.

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

CAUTION

Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report which are not
historical facts are forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and are subject to the
safe harbor provisions created by that statute. A forward-looking statement may
contain words such as "will continue to be," "will be," "continue to," "expect
to," "anticipates that," "to be" or "can impact." Management cautions that
forward-looking statements are subject to risks and uncertainties that could
cause the Company's actual results to differ materially from those projected in
such forward-looking statements. These risks and uncertainties include, but are
not limited to, the cyclical nature of the semiconductor industry in general,
lack of market acceptance for new products, decreasing demand for the Company's
existing products, impact of competitive products and pricing, product
development, commercialization and technological difficulties, capacity and
supply constraint difficulties and other risks detailed herein. The Company's
future results will depend on its ability to continue to enhance its existing
products and to develop and manufacture new products and to finance such
activities. There can be no assurance that the Company will be successful in the
introduction, marketing and cost-effective manufacture of any new products or
that the Company will be able to develop and introduce in a timely manner new
products or enhancements to its existing products and processes which satisfy
customer needs or achieve widespread market acceptance.

The Company undertakes no obligation to release revisions to forward-looking
statements to reflect subsequent events, changed circumstances, or the
occurrence of unanticipated events.

OVERVIEW

The Company was incorporated in 1979 to develop, manufacture and market
innovative manufacturing equipment for the semiconductor industry, and shipped
its first product, a spin rinser/dryer, that year. During the 1980s, the Company
introduced several generations of its acid and solvent spray chemical processing
tools and vertical furnaces, and began to market its products to manufacturers
outside the semiconductor industry. Since 1990, the Company has developed its
Equinox single substrate chemical processing system, its Storm wafer carrier
cleaning system, and its Magnum automated multimodule chemical processing
system. In response to increased demand for the Company's established and
recently introduced products, the Company expanded its Montana facility in 1994
and 1995 from approximately 65,000 square feet at the beginning of fiscal 1994
to approximately 170,000 square feet at the end of fiscal 1995. The Company
built a separate 21,000 square foot facility, also in Montana, in fiscal 1996.

The unit selling prices for the Company's products range from $10,000 to
$150,000 for a spin rinser/dryer, to $900,000 to over $2.0 million for the
Magnum. Due to these relatively high unit selling prices, a significant portion
of the Company's revenue in any given period is often derived from the sale of a
relatively small number of units. From time to time, the Company has
experienced, and expects to continue to experience, significant fluctuations in
its results of operations, particularly on a quarterly basis. The Company's
expense levels are based in part, on expectations of future sales. If sales
levels in a particular period do not meet expectations, operating results will
be adversely affected. A variety of factors have an influence on the Company's
operating results in a particular period. These factors include specific
economic conditions in the semiconductor industry, the timing of the receipt of
orders from major customers, customer cancellations or delays of shipments,
specific feature requests by customers, production delays or manufacturing
inefficiencies, management decisions to commence or discontinue product lines,
the Company's ability to design, introduce and manufacture new products on a
cost-effective and timely basis, the introduction of new products by the Company
or its competition, the selection of the Company's or its competitors' products
by semiconductor manufacturers for new generations of fabrication facilities,
the timing of research and development expenditures, exchange rate fluctuations,
and expenses attendant to acquisitions, strategic alliances and the further
development of marketing and service capabilities.

The Company markets and sells its products worldwide with an emphasis on Europe
and Asia as its principal international markets. During fiscal 1996,
approximately 43.9% of the Company's revenues were derived from sales to
customers outside the United States. The Company anticipates that international
sales will continue to account for a significant portion of net sales, although
the percentage of international sales may fluctuate from period to period. The
Company believes its sales, service and support organizations are important to
the long-term success of its customer relationships. The Company provides sales,
service and support worldwide, primarily through direct employees in the United
States and Europe, and through distributors in Asia and elsewhere.

RESULTS OF OPERATIONS

The following table sets forth the Company's actual and pro forma results of
operations for the periods indicated expressed as a percentage of net sales:

Year Ended September 30,
------------------------------------------------------
<S> <C> <C> <C>

1996 1995 1994
------- ------ -------

Statement of Operations Data:
Net sales ........................................................ 100.0 % 100.0 % 100.0 %
Cost of sales .................................................... 51.4 48.7 49.0
------- ------ -------
Gross profit ..................................................... 48.6 51.3 51.0
------- ------ -------

Operating expenses:
Selling, general and administrative ........................... 23.5 24.8 31.1
Research and development ...................................... 11.2 8.9 9.5
Cost of technology rights ..................................... -- 1.3 5.6
------- ------- -------
Total operating expenses .................................. 34.7 35.0 46.2
------- ------- -------
Income from operations ........................................... 13.9 16.3 4.8
Other income (expense), net ...................................... (0.1) 0.2 (1.0)
------- ------- -------
Income before income taxes ....................................... 13.8 16.5 3.8
Provision for income taxes ....................................... 5.1 4.9 0.3
------- ------- -------
Net income ....................................................... 8.7 % 11.6 % 3.5 %
======= ======= =======

Pro Forma Statement of Operations Data:
Income from operations before
pro forma adjustments ......................................... 13.9 % 16.3 % 4.8 %
Elimination of cost of technology
rights ........................................................ -- 1.3 5.6
------- ------- -------
Income from operations ........................................... 13.9 17.6 10.4
Other income (expense), net ...................................... (0.1) 0.2 (1.0)
------- ------- -------
Income before income taxes ....................................... 13.8 17.8 9.4
Provision for income taxes ....................................... 5.1 6.6 3.5
------- ------- -------
Net income ....................................................... 8.7 % 11.2 % 5.9 %
======= ======= =======
</TABLE>

YEARS ENDED SEPTEMBER 30, 1996 AND 1995

Net Sales. Net sales consist of revenues from sales of equipment, spare parts
and service contracts. Net sales increased $45.9 million (35.8%) to $174.2
million in fiscal 1996 from $128.3 million in fiscal 1995. Net sales of the
Company's automated batch chemical processing tools and its single substrate
processor accounted for the majority of the increase. Aggregate sales for these
two tool types increased from $15.4 million in fiscal 1995 to $45.8 million in
fiscal 1996.

The Company shipped a number of new tool models during 1996. New automated batch
chemical processing tools included two models for processing glass substrates
used in the manufacture of flat panel displays and multichip modules, an
immersion tool for processing silicon wafers, and a carrierless spray processing
tool. New single substrate processor models were introduced for plating,
including multilevel interconnect processes for advanced integrated circuit
devices. A vertical furnace with much faster thermal ramp capabilities was
shipped to three different customers. The Company also shipped a new model of
its carrier cleaning system developed late in 1995 and a chemical delivery unit
to interface between bulk chemical storage and the Company's batch and single
substrate chemical processing tools. The adoption of any of these tools for
future widespread production use is dependent on a number of factors including,
but not limited to, performance and pricing competition from other equipment
manufacturers.

In February of 1996, the Company merged with Semy Engineering, Inc. (Semy) in a
transaction accounted for as a pooling-of-interests and consequently, the
Company's financial statements prior to the merger have been restated to include
Semy. Semy accounted for 10.2% of 1995 sales and 8.6% of 1996 sales after
eliminating intercompany transactions.

International sales, predominantly to customers based in Europe and Asia,
accounted for 43.9% of net sales in fiscal 1996 compared to 40.4% in the prior
year. The Company anticipates that international sales will continue to account
for a significant portion of net sales, although the percentage may fluctuate
from period to period.

Gross Profit. Gross margin decreased to 48.6% in fiscal 1996 from 51.3% in the
prior year. The Company's gross margin has been, and will continue to be,
affected by a variety of factors, including the costs to manufacture, service
and support new and enhanced products, as well as the mix and average selling
prices of products sold. The Company believes that the largest single factor in
the 1996 gross margin decline are costs and inefficiencies related to the
manufacturing and servicing of recently developed products. The number of new
tool models introduced in fiscal 1996 was unprecedented in the Company's
history, both as to number and complexity. The Company anticipates that the cost
to manufacture and support the newer tool models will improve over time, but
that it will continue to design and sell additional models of its existing tools
and additional tool types, which may somewhat offset the anticipated improvement
in gross margins.

Selling, General and Administrative. Selling, general and administrative (SG&A)
expenses were $40.9 million or 23.5% of net sales in fiscal 1996 compared to
$31.8 million or 24.8% of net sales in the prior year. The $9.1 million increase
in SG&A expense in 1996 as compared to 1995 reflects higher costs associated
with increased sales volumes, a broader range of equipment to market and
service, costs associated with additional sales and service personnel supporting
the Asian marketplace, and employee severance cost accruals provided at year end
in response to a decline in the Company's fourth quarter bookings, partially
offset by reduced employee bonus costs. The decline in these expenses, as a
percentage of net sales, was primarily due to improved overhead absorption. A
substantial portion of the Company's SG&A expense is fixed in the short term.
While it is the Company's goal to continue to reduce SG&A expense as a
percentage of net sales during periods of rising sales, a decline in net sales
would cause the Company's selling, general and administrative expense to
increase as a percentage of net sales and could have an adverse effect on the
Company's business and results of operations.

Research and Development. Research and development (R&D) expenses consist of
salaries, project materials, laboratory costs, consulting fees and other costs
associated with the Company's research and development efforts. R&D expenses
were $19.5 million or 11.2% of net sales in fiscal 1996 compared to $11.4
million or 8.9% of net sales in the prior year.

Spending on R&D increased 70.8% or $8.1 million in absolute dollars over the
prior year due to the number and complexity of projects undertaken. The Company
is committed to technology leadership in the semiconductor equipment industry
and expects to continue to fund research and development expenditures with a
multiyear perspective. Such funding has resulted in fluctuations in R&D expenses
from period to period in the past. The Company expects such fluctuations to
continue in the future, both in absolute dollars and as a percentage of net
sales, primarily due to the timing of expenditures and changes in the level of
net sales.

Cost of Technology Rights. In 1979, the Company acquired certain technology
rights from Raymon F. Thompson for installment payments equal to 8% of revenues
from the sale of certain of the Company's products that embody the technology.
All expense recognized in fiscal 1995 relates to the period from October 1, 1994
to February 2, 1995. All payments for technology rights ceased in conjunction
with the Company's initial public offering resulting in no cost to the Company
from that point forward, including all of fiscal 1996.

Other Income (Expense). Interest income on short-term investments declined from
$428,000 in fiscal 1995 to $173,000 in 1996 as the funds raised in the Company's
initial public offering have been invested in receivables, inventory and fixed
assets. The Company realized a net loss of $17,000 on the sale of fixed assets
in 1996 compared to a net gain of $191,000 the year before.

Provision for Income Taxes. The provisions for income taxes for 1996 and 1995
were $8.9 million and $6.4 million, respectively. Effective in 1986, the Company
elected to have its United States income taxed under Subchapter S of the Code.
The Company, however, remained a taxpaying entity for Montana state income tax
purposes. Income tax provisions recognized by the Company after 1986 and before
February 1, 1995 relate to state income taxes and taxes imposed by foreign
governments on the Company's foreign operations. The Company terminated its
Subchapter S election as of the close of business on January 31, 1995 and
subsequent to that date became subject to federal income taxation at the
corporate level.

YEARS ENDED SEPTEMBER 30, 1995 AND 1994

Net Sales. Net sales consist of revenues from sales of equipment, spare parts
and service contracts. Net sales increased $65.7 million (105.0%) to $128.3
million in 1995 from $62.6 million in 1994. This increase was primarily
attributable to increased unit volumes of existing products and the continued
market penetration of products with higher average selling prices introduced in
recent years.

The Company's largest product line growth occurred in the Magnum automated
multimodule chemical processing system and the Storm wafer carrier cleaning
system. The Magnum was introduced in the fourth quarter of fiscal 1994 and had
no net sales in that year. Magnum net sales in fiscal 1995 totaled $9.1 million.
Net sales of the Storm totaled $6.3 million and $802,000 in 1995 and 1994,
respectively. Net sales of the VTP 1500 vertical furnace and the Equinox single
substrate processor also grew rapidly in 1995. Each more than doubled net sales
in fiscal 1995 and exceeded the corporate average growth rate. The controllers
and supervisor systems sold by Semy increased 90% from $6.9 million in fiscal
1994 to $13.0 million in fiscal 1995. Net sales of the Company's established
manual batch spray chemical tools increased 70% in 1995 compared to 1994. Net
sales of spare parts and service are related to both current year sales and the
Company's installed base of process tools. Growth in spare parts and service
sales exceeded 50% in 1995 when compared to 1994.

International sales, predominantly to customers based in Europe and Asia,
accounted for 40.4% of net sales in fiscal 1995 compared to 40.0% in the prior
year.

Gross Profit. Gross margin increased to 51.3% in fiscal 1995 from 51.0% in the
prior year. The Company's manufacturing facility was doubled in size from
approximately 65,000 square feet to 130,000 square feet in an expansion
completed mid-year in fiscal 1994. A further 40,000 square foot addition was
completed at the end of the third quarter of fiscal 1995. The manufacturing and
assembly space provided by these two additions enabled the Company to install
improved material flow and assembly systems resulting in improved productivity
and lower costs. Gross margins in both 1995 and 1994 were favorably impacted by
the merger of Semy which, over the two-year period, had margins higher than the
average of the Company's other products.

Selling, General and Administrative. SG&A expenses were $31.8 million or 24.8%
of net sales in fiscal 1995 compared to $19.5 million or 31.1% of net sales in
the prior year. The increase in these costs in absolute dollars reflects the
increased costs associated with a much higher sales volume and, to a lesser
extent, the ongoing costs related to being a public company for eight months of
fiscal 1995. The decline in these expenses, as a percentage of net sales, was
primarily due to improved overhead absorption. The increase in net sales was
105.0% compared to a 63.5% increase in SG&A expense. SG&A expense in both 1995
and 1994 was unfavorably impacted by the merger of Semy which, over the two-year
period, had SG&A expense as a percentage of net sales higher than the Company
average excluding Semy.

Research and Development. R&D expenses consist of salaries, project materials,
laboratory costs, consulting fees and other costs associated with the Company's
research and development efforts. R&D expenses were $11.4 million or 8.9% of net
sales in fiscal 1995 compared to $6.0 million or 9.5% of net sales in the prior
year.

During fiscal 1995, the Company completed the development of the Magnum
multimodule chemical processing system and began work on a larger version of
this tool designed to process flat panel display substrates. New models of the
Equinox single substrate processor were designed as a thick film resist develop
tool, an acid immersion etch tool, a solvent resist strip tool, a solder bump
plating tool, and a metal lift-off tool. The first VTP 1500 Express, fast ramp
vertical furnace, was designed and built in fiscal 1995 in preparation for beta
testing in fiscal 1996. The Storm III wafer carrier cleaning system was designed
and introduced during the year to address the needs of customers with lower
processing throughput needs or customers desiring smaller machines placed at
multiple locations within their facility.

Spending on R&D increased 91.1% or $5.4 million in absolute dollars over the
prior year due to the number and complexity of projects undertaken, but declined
as a percentage of net sales which increased 105.0%. R&D expense, as a
percentage of net sales, was higher in both 1995 and 1994 at Semy than the
Company average excluding Semy.

Other Income (Expense). Other income (expense) includes interest income on
short-term investments and interest expense on bank borrowings. Interest expense
net of interest income declined from $708,000 in fiscal 1994 to $143,000 in
fiscal 1995 primarily as a result of decreased borrowings and increased
investment income subsequent to the Company's public stock offering in February
of 1995. The Company realized a net gain of $191,000 on the sale of fixed assets
in 1995 compared to $7,000 the year before.

Provision for Income Taxes. The provisions for income taxes for 1995 and 1994
were $6.4 million and $194,000, respectively. Effective in 1986, the Company
elected to have its United States income taxed under Subchapter S of the Code.
The Company, however, remained a taxpaying entity for Montana state income tax
purposes. Income tax provisions recognized by the Company after 1986 and before
February 1, 1995 relate to state income taxes and taxes imposed by foreign
governments on the Company's foreign operations. The Company terminated its
Subchapter S election as of the close of business on January 31, 1995 and
subsequent to that date became subject to federal income taxation at the
corporate level.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its growth since its February 1995 initial public
offering primarily through amounts raised in conjunction with that offering and
borrowings on its revolving line of credit. Cash used by operating activities in
fiscal 1996 was $4.2 million as compared to $6.6 million provided by operations
in fiscal 1995. Substantial investments in accounts receivable and inventory
occurred in both years as sales levels increased. As of September 30, 1996, the
Company had $39.2 million of accounts receivable and $36.9 million of inventory,
compared to $28.5 million of accounts receivable and $19.3 million of inventory
at September 30, 1995. As is customary in the semiconductor manufacturing
equipment industry, products are generally built to fill specific customer
orders, with typical order fulfillment times ranging from four to six weeks for
certain products to six months or more for more complex products. Accordingly,
while the Company's finished goods inventory accounts for less than 10% of total
inventory, overall inventory levels tend to fluctuate with the level and type of
orders received. Currently, the tools with the longest average cycle times are
the automated batch chemical tools and the single substrate processor. The
Company expects future receivable and inventory balances to fluctuate with net
sales.

Investing activities consisted primarily of acquisitions of property and
equipment and, in fiscal 1996, $4.0 million of net sales of marketable
securities purchased in the prior year. Property and equipment purchases used
cash of $8.1 million in fiscal 1995 and $10.2 million in fiscal 1996. Capacity
expansions were completed in both fiscal years. In fiscal 1995, approximately
40,000 square feet were added to the Company's main facility in Kalispell,
Montana, resulting in a 170,000 square foot total size. Also in fiscal 1995, the
Company purchased land and buildings in Cambridge, England in support of its
sales and service effort. During fiscal 1996, the Company constructed and put
into service a separate satellite facility in Kalispell totaling approximately
21,000 square feet and refurbished one of the several buildings on the
Cambridge, England site for use as office space and an inventory storage depot.
In connection with the merger of Semy, the Company invested $1.2 million in a
covenant not to compete with certain of the principals of Semy.

Financing activities consisted primarily of $4.0 million of borrowings in excess
of repayments under the Company's revolving line of credit, and $0.9 million of
long-term debt repayments.

As of September 30, 1996, the Company's principal sources of liquidity consisted
of approximately $3.1 million of cash and cash equivalents, $6.0 million
available under the Company's $10 million revolving line of credit, and $15
million under a long-term facility put in place during the fourth quarter of
fiscal 1996. Both credit facilities are with Seafirst Bank and bear interest at
the bank's prime lending rate. The revolving line of credit expires on December
31, 1997 when all principal amounts owing are due. The long-term credit facility
expires on December 31, 1998 with principal amounts outstanding repayable in
monthly principal and interest payments over a five-year period ending December
2003.

The Company believes that cash and cash equivalents, funds generated from
operations, and funds available under its bank lines will be sufficient to meet
the Company's planned capital requirements during the next twelve months
including the spending of approximately $9.0 million to purchase property, plant
and equipment. The Company believes that success in its industry requires
substantial capital in order to maintain the flexibility to take advantage of
opportunities as they arise. The Company may, from time to time, as market and
business conditions warrant, invest in or acquire complementary businesses,
products or technologies. The Company may effect additional equity or debt
financings to fund such activities or to fund greater than anticipated growth.
The sale of additional equity securities or the issuance of equity securities in
a business combination could result in dilution to the Company's shareholders.

LITIGATION

NEW ACCOUNTING PRONOUNCEMENT

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This Statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The Statement encourages all entities to adopt a fair value based method of
accounting, but allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Company must
implement SFAS No. 123 on October 1, 1996. Management does not plan to adopt the
measurement provisions of SFAS No. 123, although the Company will comply with
the pro forma disclosure requirements of the Statement in its 1997 annual
financial statements.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data listed in the Index to
Consolidated Financial Statements at Item 14 of this Form 10-K are incorporated
by reference into this Item 8 of Part II of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

None.

<PAGE>

PART III

Item 10. Executive Officers and Directors

The following table sets forth certain information with respect to the executive
officers and directors of the Company:

Name Age Position
Raymon F. Thompson 55 Chairman of the Board of Directors, Chief
Executive, Officer and President
Robert W. Berner 52 Vice President and General Manager,
Metallization Group
Timothy C. Dodkin 47 Managing Director, Semitool Europe Ltd.
James R. Gordley 45 Vice President, Sales, Thermal Products
Division
Jean B. Hugues 38 Vice President and General Manager, Thermal
Products Division
Gregory L. Perkins 53 Vice President and General Manager
John W. Sullivan 50 Vice President, Finance and Assistant Secretary
Steven R. Thompson 33 Vice President
Howard E. Bateman (1) 62 Director
Richard A. Dasen (2) 54 Director
Daniel J. Eigeman (2) 62 Director
Ryal R. Poppa (2) 63 Director
Calvin S. Robinson (1) 76 Director and Secretary
- -----------

(1) Member of the Compensation and Stock Option Committee.
(2) Member of the Audit Committee.

The following sets forth the background of each of the Company's executive
officers and directors, including the principal occupation of those individuals
for the past five years:

Raymon F. Thompson founded the Company and has served as Chairman, Chief
Executive Officer and President since its inception in 1979. In 1979, Mr.
Thompson designed, patented and introduced the first on-axis rinser/dryer for
the semiconductor industry.

Robert W. Berner joined the Company in 1991 and has served as the Company's
Engineering Manager from October 1991 until August of 1995 when he was appointed
General Manager of the Equinox Divison. In January of 1996, he was appointed
General Manager and Vice President of the Metallization Group. Prior to joining
the Company, Mr. Berner worked for Motorola, a semiconductor manufacturer, for
16 years.

Timothy C. Dodkin joined the Company in 1985 and served as the Company's
European Sales Manager from 1985 to 1986. Since 1986, Mr. Dodkin has served as
Managing Director of Semitool Europe, Ltd. Prior to joining the Company, Mr.
Dodkin worked at Cambridge Instruments, a semiconductor equipment manufacturer,
for ten years in national and international sales.

James R. Gordley joined the Company in 1989 as Vice President, Sales and
Marketing and, in October 1994, was appointed Vice President and Director of
Sales, Thermal Products Division. For twelve years prior to joining the Company,
Mr. Gordley was employed by Minnesota Mining and Manufacturing Corporation, a
manufacturing conglomerate, where he held several sales and management
positions.

Jean B. Hugues joined the Company with the merger of Semy in February of 1996.
In October of 1996, he was appointed Vice President and General Manager, Thermal
Products Division. Prior to joining the Company, Mr. Hugues was Founder and
President of Semy Engineering, Inc., for 11 years.

Gregory L. Perkins joined the Company in 1990 as Vice President, Manufacturing
and, since August 1994, has served as the Company's Vice President and General
Manager. Prior to joining the Company, Mr. Perkins served as General Manager for
Modulair, Inc., a manufacturer of clean rooms, from 1987 to 1990.

John W. Sullivan joined the Company in March 1993 as Vice President, Finance and
was appointed Assistant Secretary in February 1996. From 1974 to 1992, Mr.
Sullivan was employed by United Dominion Industries, a manufacturing and
construction company, most recently as a Group Vice President of Finance. Mr.
Sullivan is a Certified Public Accountant.

Steven R. Thompson joined the Company in 1979 and served as Vice President and
General Manager, Thermal Products Division from 1990 to September of 1996. Prior
to 1990, he served as Engineering Manager, Thermal Products Division from 1988
to 1990 and Manufacturing Manager, Thermal Products Division from 1986 to 1988.
Steven R. Thompson is Raymon F. Thompson's son.

Howard E. Bateman has served on the Company's Board of Directors since 1990. Mr.
Bateman formerly owned and operated Entech, a Pennsylvania company that has been
an independent sales representative for the Company's products since 1979.

Richard A. Dasen has served on the Company's Board of Directors since 1984. From
1974 to 1992, Mr. Dasen owned and managed Evergreen Bancorporation, a multi-bank
holding company. Since 1992, Mr. Dasen has been an independent businessman.

Daniel J. Eigeman has served on the Company's Board of Directors since 1985.
From 1971 to 1993, Mr. Eigeman was President of Eigeman, Hanson & Co., P.C., an
accounting firm, and since 1993 has been Vice President of Junkermier, Clark,
Campanella, Stevens, P.C., CPAs. Mr. Eigeman served as President of the Montana
Society of Certified Public Accountants in 1993.

Ryal R. Poppa has served on the Company's Board of Directors since May of 1995.
Mr. Poppa is the former Chairman of the Board, Chief Executive Officer and a
director of Storage Technology Corporation.

Calvin S. Robinson has served as a director of the Company since 1982 and, since
February 1996 has served as the Company's Secretary. Mr. Robinson has been of
counsel to Murphy, Robinson, Heckathorn & Phillips since 1989. This firm has
provided legal services to the Company since 1979. Mr. Robinson is also a
director of Winter Sports, Inc.

The executive officers are elected each year by the Board of Directors to serve
for a one-year term of office.

The information concerning compliance with Section 16(a) of the Securities and
Exchange Act of 1934, as amended, required under this item is contained in the
Company's Proxy Statement to be filed in connection with its 1997 Annual Meeting
of Shareholders under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated herein by reference.

Item 11. Executive Compensation

The information concerning compensation of executive officers and directors
required under this item is contained in the Company's Proxy Statement to be
filed in connection with its 1997 Annual Meeting of Shareholders under the
caption "Executive Compensation," and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information concerning certain principal holders of securities and security
ownership of executive officers and directors required under this item is
contained in the Company's Proxy Statement to be filed in connection with its
1997 Annual Meeting of Shareholders under the caption "Security Ownership of
Certain Beneficial Owners and Management" and is incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions

The information concerning certain relationships and related transactions
required under this item is contained in the Company's Proxy Statement to be
filed in connection with its 1997 Annual Meeting of Shareholders under the
caption "Certain Transactions," and is incorporated herein by reference.

<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The following documents are filed as a part of this report:

1. Financial Statements:

Report of Independent Accountants

Consolidated Balance Sheets at September 30, 1996 and
September 30, 1995

Consolidated Statements of Income for the Years Ended
September 30, 1996, September 30, 1995, and
September 30, 1994

Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended September 30, 1996, September 30, 1995 and
September 30, 1994

Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, September 30, 1995 and September 30, 1994

Notes to Consolidated Financial Statements

2. Financial Statement Schedules:

Report of Independent Accountants

II - Valuation and Qualifying Accounts

3. Exhibits:

(a) The exhibits listed below are filed as part of this Annual Report on Form
10-K or are incorporated herein by reference:

Exhibit No. Description

2.1 Asset Purchase Agreement and Plan of Reorganization, dated as of
February 19, 1996 between the Company and Semy Engineering, Inc. (1)
3.1 Restated Articles of Incorporation of the Company (2)
3.2 By-laws of the Company dated August 1, 1979 and related amendments
to these By-laws (2)
10.1 Form of Semitool, Inc. S Corporation Termination, Tax Allocation and
Indemnification Agreement between the Company and its current
shareholders (2)
10.2 Form of Indemnification Agreement between the Company and each of its
officers and directors (2)
10.3 Form of Semitool, Inc. 1994 Stock Option Plan (2)
10.4 Form of Agreement and Plan of Merger between the Company and
Semitherm, Inc. (2)
10.5 Aircraft Lease Agreement, dated September 9, 1994, between the Company
and Mr. Thompson (2)
10.6 Aircraft Lease Agreement, dated November 1, 1994, between the Company
and Mr. Thompson (2)
10.7 Agreement, dated June 7, 1983, between the Company and Entech (2)
10.8 Form of Agreement of Cancellation of Sale Agreement between the
Company and Mr. Thompson (2)
10.9 Agreement of Sale of Centrifugal Wafer Processor Invention, dated
August 1, 1979, between the Company and Mr. Thompson (2)
10.10 Articles of Merger, dated September 1, 1993, of Semitool, Inc., a
California corporation, with and into the Company (2)
10.11 Agreement, dated June 1994, among Robert G. Massey, Donald W, Heidt,
Steven R. Thompson, Semitherm, Inc., Semitherm Partnership,
Mr. Thompson and the Company (2)
10.12 Agreement between the Company and the Semitool European Companies (2)
10.13 Aircraft Lease Agreement, dated April 1, 1996, between the Company
and Mr. Thompson (3)
10.14 Business Loan Agreement, dated September 30, 1996, between the Company
and the Bank of America NW, N.A. doing business as Seafirst Bank (3)
10.15 Promissory Note, dated September 30, 1996, between the Company and
the Bank of America NW, N.A. doing business as Seafirst Bank (3)
11.1 Statement Re Computation of Pro Forma per share Earnings (3)
21.1 Subsidiaries of Registrant (3)
27.1 Financial data schedule (3)

(1) Incorporated herein by reference to the identically numbered exhibits to the
Company's Current Report on Form 8-K, date of report February 29, 1996.

(2) Incorporated herein by reference to the identically numbered exhibits to the
Company's Registration Statement on Form S-1 (File No. 33-87548), which became
effective on February 2, 1995.

(b) Reports on Form 8-K. During the fourth quarter of fiscal 1996, there were no
Form 8-K's filed by the Company.
(c) Exhibits. The Exhibits listed in Item 14(a)(3)(a) hereof are filed as part
of this Annual Report on Form 10-K or incorporated herein by reference.
(d) Financial Statement Schedules. See Item 14(a)(2) above.

(3) Filed herewith.

<PAGE>

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: December 27, 1996 SEMITOOL, INC.

By: /s/Raymon F. Thompson
-------------------------
Raymon F. Thompson
Chairman of the Board, President
and Chief Executive Officer

<PAGE>

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

Signature Title Date

/s/Raymon F. Thompson
- ----------------------------------- Chairman of the Board, President and December 27, 1996
Raymon F. Thompson Chief Executive Officer
(Principal Executive Officer)

/s/John W. Sullivan
- ----------------------------------- Vice President-Finance, Assistant December 27, 1996
John W. Sullivan Secretary and
Chief Financial Officer
(Principal Financial
Accounting Officer)

- -----------------------------------
Howard E. Bateman Director December __, 1996

/s/Richard A. Dasen
- ----------------------------------
Richard A. Dasen Director December 27, 1996

/s/Daniel J. Eigeman
- ----------------------------------
Daniel J. Eigeman Director December 27, 1996

- ----------------------------------
Ryal R. Poppa Director December __, 1996

/s/Calvin S. Robinson
- ----------------------------------
Calvin S. Robinson Director and Secretary December 27, 1996

</TABLE>

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders
Semitool, Inc.

We have audited the accompanying consolidated balance sheets of Semitool, Inc.
and subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
years ended September 30, 1996, 1995 and 1994. These consolidated 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Semitool, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended September 30, 1996, 1995 and 1994 in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in fiscal 1994.

Coopers & Lybrand L.L.P.

Spokane, Washington
November 1, 1996

<PAGE>

SEMITOOL, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and 1995
(Amounts in Thousands, Except for Share Amounts)
<S> <C> <C>

ASSETS
1996 1995
Current assets:
Cash and cash equivalents ................................................................... $ 3,058 $ 11,939
Marketable securities ....................................................................... -- 4,010
Trade receivables, less allowance for doubtful accounts of $233 and $213..................... 39,183 28,483
Inventories ................................................................................. 36,909 19,263
Prepaid expenses and other current assets ................................................... 2,323 1,334
Deferred income taxes ....................................................................... 4,373 2,719
-------- --------
Total current assets .................................................................. 85,846 67,748
Property, plant and equipment, net ............................................................. 26,337 18,771
Intangibles, less accumulated amortization of $899 and $481 .................................... 1,581 1,249
Other assets, net .............................................................................. 1,190 299
-------- --------
Total assets .......................................................................... $114,954 $ 88,067
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank ........................................................................ $ 4,000 $ --
Accounts payable ............................................................................ 17,177 6,062
Accrued commissions ......................................................................... 1,751 2,092
Accrued warranty and installation ........................................................... 7,997 4,251
Accrued payroll and related benefits ........................................................ 5,032 9,181
Other accrued liabilities ................................................................... 594 2,021
Customer advances ........................................................................... 3,757 2,949
Income taxes payable ........................................................................ 1,334 2,982
Long-term debt, due within one year ......................................................... 374 924
Payable to shareholders ..................................................................... 33 77
-------- --------
Total current liabilities ............................................................. 42,049 30,539
Long-term debt, due after one year ............................................................. 3,637 4,011
Deferred income taxes .......................................................................... 1,265 704
-------- --------
Total liabilities ..................................................................... 46,951 35,254
Commitments and contingencies (Note 9) -------- --------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, no
shares issued and outstanding ............................................................ -- --
Common stock, no par value, 30,000,000 shares authorized,
13,655,577 and 13,649,902 shares issued and outstanding
in 1996 and 1995 ......................................................................... 39,577 39,523
Retained earnings ........................................................................... 28,426 13,290
-------- --------
Total shareholders' equity ............................................................ 68,003 52,813
-------- --------
Total liabilities and shareholders' equity ............................................ $114,954 $ 88,067
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>

<PAGE>

SEMITOOL, INC.
CONSOLIDATED STATEMENTS OF INCOME
for the years ended September 30, 1996, 1995 and 1994
(Amounts in Thousands, Except for Per Share Amounts)
<S> <C> <C> <C>

1996 1995 1994

Net sales ...................................................... $174,204 $128,326 $ 62,597
Cost of sales .................................................. 89,573 62,468 30,640
-------- -------- --------
Gross profit ................................................... 84,631 65,858 31,957
-------- -------- --------
Operating expenses:
Selling, general and administrative ........................ 40,946 31,843 19,473
Research and development ................................... 19,503 11,416 5,975
Cost of technology rights .................................. -- 1,672 3,489
-------- -------- --------
Total operating expenses ................................ 60,449 44,931 28,937
-------- -------- --------
Income from operations ......................................... 24,182 20,927 3,020
-------- -------- --------
Other income (expense):
Interest income ............................................ 173 428 87
Interest expense, net ...................................... (540) (571) (795)
Other, net ................................................. 211 456 52
-------- -------- --------
(156) 313 (656)
-------- -------- --------
Income before income taxes ..................................... 24,026 21,240 2,364
Provision for income taxes ..................................... 8,890 6,355 194
-------- -------- --------
Net income ..................................................... $ 15,136 $ 14,885 $ 2,170
======== ======== ========
Unaudited pro forma information (Notes 1 and 14):
Income from operations before pro forma
adjustments ............................................. $ 24,182 $ 20,927 $ 3,020
Elimination of cost of technology rights ................... -- 1,672 3,489
-------- -------- --------
Income from operations ..................................... 24,182 22,599 6,509
Other income (expense), net ................................ (156) 313 (656)
-------- -------- --------
Income before income taxes ................................. 24,026 22,912 5,853
Provision for income taxes ................................. 8,890 8,509 2,130
-------- -------- --------
Net income ................................................. $ 15,136 $ 14,403 $ 3,723
======== ======== ========
Net income per share ....................................... $ 1.09 $ 1.15 $ 0.37

Shares used in pro forma calculation ....................... 13,858 12,563 9,946
</TABLE>

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

<PAGE>

SEMITOOL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended
September 30, 1996, 1995 and 1994 (Amounts in Thousands, Except for Per Share Amounts)

Common Stock
-------------------------------------------
Semitool
Semitool, European Semitherm,
Inc. Companies Inc.
-------------------------------------------
Number
of Retained
Shares Amount Amount Amount Earnings Total
<S> <C> <C> <C> <C> <C> <C>

Balance September 30, 1993 ................................... 8,657 $ 1,034 $ 36 $ 100 $ 1,571 $ 2,741
Net income .................................................. -- -- -- -- 2,170 2,170
Dividends on common stock
($.12 per share) ........................................ -- -- -- -- (978) (978)
Note payable converted to stock ............................. -- -- -- 9,300 -- 9,300
Redemption and retirement of stock .......................... -- -- -- (750) -- (750)
Stock compensation .......................................... -- 4 -- -- -- 4
----- -------- -------- -------- -------- --------
Balance September 30, 1994 ................................... 8,657 1,038 36 8,650 2,763 12,487
Net income .................................................. -- -- -- -- 14,885 14,885
Dividends on common stock
($1.08 per share) ....................................... -- -- -- -- (8,665) (8,665)
Proceeds from initial public offering ....................... 4,242 33,414 -- -- -- 33,414
Purchase and merger of Semitherm, Inc. ......................
for Semitool, Inc. stock ................................ 692 -- -- (8,650) 8,650 --
Purchase of the Combined Group of
Semitool European Companies
by Semitool, Inc. ....................................... -- -- (36) -- (170) (206)
Contribution of S corporation
retained earnings with change
to C corporation status ................................. -- 4,173 -- -- (4,173) --
Exercise of stock options ................................... 59 509 -- -- -- 509
Stock compensation .......................................... -- 18 -- -- -- 18
Income tax effect of nonqualified
stock options ........................................... -- 371 -- -- -- 371
------ -------- -------- -------- -------- --------
Balance September 30, 1995 ................................... 13,650 39,523 -- -- 13,290 52,813
Net income .................................................. -- -- -- -- 15,136 15,136
Exercise of stock options ................................... 6 54 -- -- -- 54
------ -------- -------- -------- -------- --------
Balance September 30, 1996 ................................... 13,656 $ 39,577 $ -- $ -- $ 28,426 $ 68,003
====== ======== ======== ======== ======== ========
</TABLE>

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

SEMITOOL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 1996, 1995 and 1994
(Amounts in Thousands)
<S> <C> <C> <C>

1996 1995 1994

Operating activities:
Net income .............................................................. $ 15,136 $ 14,885 $ 2,170
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
(Gain) loss on sale of equipment .................................. 17 (191) (7)
Depreciation and amortization ..................................... 4,002 2,392 1,743
Interest on shareholder note ...................................... -- -- 301
Reduction in patent costs ......................................... 42 50 --
Deferred income tax benefit ....................................... (1,093) (2,138) --
Stock compensation ................................................ -- 18 4
Change in:
Trade receivables ............................................... (10,700) (15,155) (3,456)
Inventories ..................................................... (18,837) (8,343) (2,223)
Prepaid expenses and other current assets ....................... (989) (921) 5
Shareholders receivable/payable ................................. (44) (668) 1,413
Other assets .................................................... 134 (268) 33
Accounts payable ................................................ 11,115 (262) (168)
Accrued commissions ............................................. (341) 846 669
Accrued warranty and installation ............................... 3,746 3,502 467
Accrued payroll and related benefits ............................ (4,149) 6,429 818
Other accrued liabilities ....................................... (1,427) 1,276 152
Customer advances ............................................... 808 2,019 (553)
Income taxes payable ............................................ (1,648) 3,175 92
Net cash provided by (used in) operating -------- -------- -------
activities ................................................... (4,228) 6,646 1,460
-------- -------- -------
Investing activities:
Purchases of marketable securities ...................................... -- (10,015) --
Proceeds from the sale of marketable securities ......................... 4,010 6,005 --
Purchases of property, plant and equipment .............................. (10,194) (8,069) (6,141)
Increase in intangible assets ........................................... (796) (841) (325)
Increase in covenant not to compete ..................................... (1,200) -- --
Proceeds from sale of equipment ......................................... 397 192 25
-------- -------- --------
Net cash used in investing activities ........................ (7,783) (12,728) (6,441)
-------- -------- --------
Financing activities:
Net proceeds from initial public offering ............................... -- 33,414 --
Proceeds from exercise of stock options ................................. 54 509 --
Borrowings under line of credit ......................................... 49,170 12,805 23,208
Repayments under line of credit ......................................... (45,170) (19,045) (20,129)
Proceeds from long-term debt ............................................ -- 71 3,636
Repayments of long-term debt ............................................ (924) (2,394) (1,071)
Net borrowings from shareholder ......................................... -- -- 898
Dividends distributed ................................................... -- (8,871) (978)
Change in bank overdraft ................................................ -- -- (28)
-------- -------- --------
Net cash provided by financing activities .................... 3,130 16,489 5,536
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ...................... (8,881) 10,407 555
Cash and cash equivalents at beginning of year ............................ 11,939 1,532 977
-------- -------- --------
Cash and cash equivalents at end of year .................................. $ 3,058 $ 11,939 $ 1,532
======== ======== ========
</TABLE>

<PAGE>

SEMITOOL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
for the years ended September 30, 1996, 1995 and 1994
(Amounts in Thousands)
<S> <C> <C> <C>

1996 1995 1994
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest, net of amounts capitalized .................................... $ 582 $ 579 $ 491
Income taxes ............................................................ 10,699 5,711 99

Supplemental disclosures of noncash financing and investing activity:
Inventory transferred to equipment ...................................... $ 1,191 $ 994 $ 223
Equipment transferred to inventory ...................................... -- -- 115
Noncurrent deposit reclassified to prepaid expenses ..................... -- -- 71
Conversion of note payable to shareholder into
Semitherm, Inc. common stock ......................................... -- -- 9,300
Purchase of Semitherm, Inc. common stock in exchange
for notes payable .................................................... -- -- 750

</TABLE>

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

<PAGE>

SEMITOOL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Company Organization and Summary of Significant Accounting Policies:

Semitool, Inc. (Semitool) designs, manufactures, markets and services equipment
used in the manufacture of semiconductors as well as other products requiring
similar processes including thin film heads, compact disc masters, flat panel
displays and hard disk media. Semitool has various subsidiaries which operate as
sales and service offices in their respective geographic areas.

Significant accounting policies followed by Semitool, Inc. and its subsidiaries
(the Company) are:

Principles of Consolidation

The 1996 consolidated financial statements include the accounts of Semitool and
its wholly-owned subsidiaries: Semitool Europe Ltd., (United Kingdom); Semitool
Halbleitertechnik Vertriebs GmbH, (Germany); Semitool France SARL; Semitool
Italia SRL; Semitool KK, Japan; Semitool, Inc., Korea; Semitool, Inc., FSC; Semy
Engineering, Inc. (Semy) and Rhetech, Inc. (Rhetech). The British, German, and
French Companies (the "Combined Group of Semitool European Companies") were
acquired by Semitool in connection with the initial public offering (Offering)
in February 1995. Semitool also acquired all the outstanding common shares of
Semitherm, Inc. (Semitherm) in exchange for its common stock in connection with
the Offering and concurrently merged Semitherm into Semitool (see Note 12) in
February 1995.

On February 29, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Semy, in exchange for 600,000 shares of the
Company's common stock. This transaction was accounted for using the
pooling-of-interests method and accordingly all periods presented are restated
to show the effects of this transaction as if it had occurred at the beginning
of each period presented.

Separate net sales and net income of the combined companies are presented in the
following table (in thousands):
<TABLE>

Five Months Year Year
Ended Ended Ended
February 29, September 30, September 30,
<S> <C> <C> <C>
1996 1995 1994
Net sales:
Semitool ....................................... $ 56,957 $115,300 $ 55,742
Semy ........................................... 7,424 13,026 6,855
-------- -------- --------
$ 64,381 $128,326 $ 62,597
======== ======== ========
Net income:
Semitool ....................................... $ 5,392 $ 14,880 $ 2,073
Semy ........................................... 1,331 5 97
-------- -------- --------
$ 6,723 $ 14,885 $ 2,170
======== ======== ========
</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. Company Organization and Summary of Significant Accounting Policies,
continued:

Principles of Consolidation, continued:

All significant intercompany accounts and transactions are eliminated in
consolidation.

The 1994 financial statements represent the combined accounts of Semitool,
Semitherm and the Combined Group of Semitool European Companies. The companies
were under common control of one shareholder and engaged in the same business.
Other companies under the control of this shareholder which were not engaged in
the same business were not combined. All significant intercompany accounts and
transactions were eliminated in the combination.

Estimates

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 dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.

Cash Equivalents

The Company considers cash equivalents to consist of short-term, highly liquid
investments with remaining maturities at time of purchase of three months or
less. Substantially all of its cash and cash equivalents are held by five major
financial institutions.

Marketable Securities

The Company's marketable securities are classified as available-for-sale.
Available-for-sale securities consist primarily of municipal bonds which are
carried at market value. Realized gains and losses on the sale of these
securities are recognized in the statement of income in the period they are sold
on a specific identification basis. The estimated fair value of each investment
approximates the amortized cost, and therefore, there are no unrealized gains or
losses. For other than a temporary decline in the value of an investment below
cost, the investment is reduced to its net realizable value, which becomes the
new cost basis of the investment. The amount of the reduction is reported as a
loss in the statement of income. Any recovery of market value in excess of the
investment's new cost basis is recognized as a realized gain only upon sale or
other disposition of the investment. Factors which the Company evaluates in
determining the existence of any other than temporary decline in value include
the length of time and extent to which market value has been less than cost; the
financial condition and near term prospects of the issuer; and the intent and
ability of the Company to retain its investment for the anticipated period of
time for the recovery in market value.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. Company Organization and Summary of Significant Accounting Policies,
Continued:

Inventories

Inventories are carried at the lower of first-in, first-out (FIFO) cost or net
realizable value. The Company periodically reviews its inventories to identify
slow moving and obsolete inventories to record such inventories at net
realizable values. It is reasonably possible that the Company's estimates
regarding net realizable values could change in the near term due to
technological changes.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation and amortization
is provided using the straight-line method with estimated useful lives as
follows:

Buildings and improvements 10-40 years
Machinery and equipment 2-5 years
Furniture, fixtures and leasehold
improvements 5-7 years
Vehicles and aircraft 5-10 years

Major additions and betterments are capitalized. Costs of maintenance and
repairs which do not improve or extend the lives of the respective assets are
expensed currently. When items are disposed of, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss is
recognized in operations.

Interest Capitalization

The Company capitalizes interest costs during the construction period for
qualifying assets. During the years ended September 30, 1996, 1995 and 1994, the
Company capitalized $9,000, $18,000 and $201,000 of interest costs,
respectively.

Intangible Assets

Intangible assets include, among other things, the cost of internally developed
software and patents.

Costs incurred for internally developed software products and enhancements after
technological feasibility and marketability have been established for the
related product are capitalized and are stated at the lower of cost or net
realizable value. Amortization is provided based on the greater of the amount
computed using (a) the ratio that current gross revenues for a product bears to
the total of current and anticipated future gross revenues for that product or
(b) the straight-line method over the remaining economic life of the product,
estimated at three years.

The cost of patents is amortized on a straight-line basis over the lesser of the
statutory life of 17 years or estimated product life.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. Company Organization and Summary of Significant Accounting Policies,
Continued:

Intangible Assets, continued:

It is reasonably possible that estimates of future gross revenues for software
products, the estimated remaining product life, or both could change in the near
term due to technological advances which would result in a reduction in the
carrying value of capitalized software development costs and patents.

Accrued Payroll and Related Benefits

The Company records the estimated costs of employee severance at the date
management implements a plan of termination. In September 1996, management
implemented a plan which included a planned reduction in the Company's workforce
by approximately 10%.

Foreign Currency

The functional currency for the Company's foreign operations is the U.S. dollar,
in which substantially all sales and purchases are denominated. Realized gains
and losses from foreign currency transactions and unrealized gains and losses
from re-measurement of the financial statements of the foreign operations into
the functional currency are included in the consolidated statements of income.

Revenue Recognition

Revenue from sales of products is generally recognized at the time the product
is shipped.

Accrued Warranty and Installation

The Company's remaining obligations at time of shipment for installation and
warranty are accrued concurrently with the revenue recognized. The Company has
made a provision for its warranty and installation obligations based upon
historical costs incurred for such obligations adjusted, as necessary, for
current conditions and factors. Due to the significant uncertainties and
judgments involved in estimating the Company's warranty and installation
obligations, including changing product designs and specifications, the ultimate
amount incurred for all warranty and installation costs could change in the near
term from the Company's currently recorded provision.

Research and Development Costs

Costs of research and development are expensed as incurred.

Income Taxes

Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
the use of the liability method of computing deferred income taxes. The adoption
of SFAS No. 109 did not have a material effect on the financial condition or
results of operations of the Company.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1.Company Organization and Summary of Significant Accounting Policies,
Continued:

Net Income Per Common Share

Historical net income per common share for the years ended September 30, 1996,
1995 and 1994 has not been presented as it is not meaningful in the presentation
of these consolidated financial statements.

Pro forma net income per common share equals pro forma net income divided by the
weighted average common shares outstanding, after giving effect to dilutive
stock options and common shares issued for the acquisition of Semy.

Pro forma weighted average common shares outstanding has been calculated for the
year ended September 30, 1994 using the sum of: (i) the weighted average
outstanding common shares of Semitool, (ii) the additional common shares of
Semitool issued for the acquisition of Semitherm as if such shares were
outstanding for the entire period, (iii) the 600,000 common shares issued by
Semitool to acquire Semy and (iv) the additional common shares that would need
to be issued in connection with the Offering to fund dividends to shareholders
in excess of net income for the year ended September 30, 1994 (see Notes 13 and
14).

In July 1995, the Board of Directors of Semitool adopted a resolution to split
all common shares of Semitool on a 3-for-2 basis. All share amounts and per
share data presented herein reflect the common stock split.

Reclassifications

Certain prior years' financial statement amounts have been reclassified to
conform to the 1996 presentation. Such reclassifications had no impact on net
income or retained earnings as previously presented.

2. Inventories:

Inventories at September 30, 1996 and 1995 are summarized as follow (in
thousands):

1996 1995

Parts and raw materials $ 18,157 $ 10,080
Work-in-process 15,702 7,834
Finished goods 3,050 1,349
---------- ----------
$ 36,909 $ 19,263
========== ==========

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3. Property, Plant and Equipment:

Property, plant and equipment at September 30, 1996 and 1995 is summarized as
follows (in thousands):

1996 1995

Buildings and improvements $ 12,504 $ 11,037
Machinery and equipment 10,055 6,901
Furniture, fixtures and leasehold improvements 7,892 5,093
Vehicles and aircraft 5,478 2,585
--------- ----------
35,929 25,616
Less accumulated depreciation and amortization (12,072) (9,147)
--------- -----------
23,857 16,469
Land and land improvements 2,480 2,302
--------- ----------
$ 26,337 $ 18,771
========= ==========

4. Note Payable to Bank:

The Company has two uncollateralized lines of credit totaling $25 million under
an agreement with Seafirst Bank (Seafirst) . Borrowings under both of the lines
of credit bear interest at the bank's prime lending rate (8.25% at September 30,
1996) with the first line of $10 million expiring on December 31, 1997 and the
second line of $15 million expiring on December 31, 1998. The lines of credit
require monthly interest payments only, with the $10 million line principal
amount due in full on expiration and the $15 million line principal amount
repayable in monthly principal and interest payments over a five-year period
ending December 2003. At September 30, 1996, there were $4 million of advances
outstanding on the first line of credit. The Company has the option with the
second line of credit to fix the interest rate for specific periods of time
ranging from 30 days to five years in amounts of $500,000 or more. The option,
if exercised, would fix the interest rate at the London Interbank Offered Rate
(LIBOR) plus two percent. The agreement for both lines of credit provides for a
quarterly commitment fee on any unused portion of the lines of credit.
Additionally, the agreement includes various restrictive covenants, the most
significant of which relates to a prohibition against pledging or in any way
encumbering current or operating assets during the term of the agreement and the
maintenance of various financial ratios.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. Long-Term Debt:

Long-term debt at September 30, 1996 is summarized as follows (in thousands):

Mortgage term note payable to Seafirst in monthly installments of
$23 including interest at a blended rate of 5.5%, maturing on
September 1, 2014 (A) $3,102
Mortgage term note payable to Seafirst in monthly installments of
$25 including interest at a blended rate of 4.7%, maturing on
December 1, 1999 (A) 909
------
4,011
Less current portion 374
------
$3,637
======

(A)The mortgage term notes payable are collateralized by a first lien deed of
trust on the Kalispell office and manufacturing facility and by all fixtures and
personal property of Semitool necessary for the operation of the facility. The
Montana State Board of Investments provided 80% of the financing with Seafirst
providing the remaining 20%. The notes are personally guaranteed by Raymon F.
Thompson, the Company's chief executive officer, and are subject to the
restrictive covenants described in Note 4.

Principal maturities for long-term debt outstanding at September 30, 1996, are
summarized by year as follows (in thousands):

Year Ending
September 30,

1997 $ 374
1998 393
1999 412
2000 198
2001 134
Thereafter 2,500
--------
$ 4,011
========

6. Employee Benefit and Stock Option Plans:

Semitool maintains a profit-sharing plan and trust under Section 401(k) of the
Internal Revenue Code. Under the terms of the plan, the U.S. employees of
Semitool, Semy and Rhetech may make voluntary contributions to the plan.
Semitool contributes a matching amount equal to 50% of the employee's voluntary
contribution up to 5% of the employee's compensation. Semitool may also make
non-matching contributions to the plan, which are determined annually by the
Board of Directors. Total profit sharing contribution expense to this plan was
approximately $639,000, $377,000 and $190,000 for the years ended September 30,
1996, 1995 and 1994, respectively.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

6. Employee Benefit and Stock Option Plans, Continued:

Semitool Europe Ltd. maintains a defined contribution pension agreement. This
pension agreement is open to all employees with more than three months of
service. The employer and employee contributions are invested in each individual
member's personal pension plan with a United Kingdom insurance company. The
employer has an obligation to make contributions at one-half of the contribution
rate paid by the employee, subject to a maximum rate of 2.5% of the employee's
salary. However, there is no upper limit on the contributions payable by the
employee. The total pension cost under this plan for the years ended September
30, 1996, 1995 and 1994 approximated $23,000, $15,000 and $11,000, respectively.
The pension agreement does not impose any obligation on the employer to make
contributions for the periods after an individual retires or terminates
employment.

The Company's other foreign subsidiaries do not operate their own pension plans,
but retirement benefits are provided to employees through government plans
operated in their respective countries.

In December 1994, the Board of Directors adopted and the shareholders approved
the Semitool, Inc. 1994 Stock Option Plan (the Option Plan). A total of 900,000
shares of common stock were reserved for issuance under the Option Plan. Options
granted under the Option Plan generally become exercisable at a rate of 5% per
quarter commencing three months after the grant date. Semitool may grant options
which qualify as incentive stock options to employees and nonqualified stock
options to employees, officers, directors, independent contractors and
consultants. The Option Plan also provides for automatic grants of nonqualified
stock options to independent directors. The Option Plan will terminate in
December 2004, unless terminated earlier at the discretion of the Board of
Directors.

Option activity for the years ended September 30, 1996 and 1995 is as
follows:
<TABLE>

Nonqualified Qualified
Number Number Option Price
of Shares of Shares Per Share
<S> <C> <C> <C>
Outstanding, September 30, 1994 ................................................ -- --
Granted ..................................................................... 15,000 561,000 $ 8.67-$15.33
Exercised ................................................................... -- (58,715) $ 8.67
Canceled .................................................................... -- (4,800) $ 8.67
------ ------- -------------
Outstanding, September 30, 1995 ................................................ 15,000 497,485 $ 8.67-$15.33

Granted ..................................................................... 24,700 154,300 $12.00-$16.25
Exercised ................................................................... -- (5,675) $ 8.67-$11.17
Canceled .................................................................... -- (50,000) $ 8.67-$16.25
------ ------- -------------
Outstanding, September 30, 1996 ................................................ 39,700 596,110 $ 8.67-$16.25
====== ======= =============
Exercisable, September 30, 1996 ................................................ 20,520 141,378
====== =======
On September 30, 1996, 199,800 shares were available for grant.
</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

6. Employee Benefit and Stock Option Plans, Continued:

The exercise and sale of certain qualified options resulted in the treatment of
those options as nonqualified options. As a result, the Company received a tax
benefit associated with those options of $371,000 in 1995, which has been
recorded as additional contributed capital.

7. Income Taxes:

The provision for income taxes for the years ended September 30, 1996, 1995 and
1994 consists of the following (in thousands):

1996 1995 1994
Federal:
Current $ 7,882 $ 6,354 $ 14
Deferred (551) (1,966) --
State:
Current 1,776 1,545 146
Deferred (67) (172) --
Foreign:
Current 325 594 34
Deferred (475) -- --
-------- ---------- ---------
$ 8,890 $ 6,355 $ 194
======== ========== =========

Domestic and foreign components of income (loss) before income taxes for the
years ended September 30, 1996, 1995 and 1994 are as follows (in thousands):

1996 1995 1994

Domestic $ 24,277 $ 19,793 $ 2,228
Foreign (251) 1,447 136
---------- ---------- ---------
$ 24,026 $ 21,240 $ 2,364
========== ========== =========

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. Income Taxes, Continued:

Prior to February 1, 1995, Semitool and Semitherm were treated for federal and
state (excluding Montana) income tax purposes as S corporations under Subchapter
S of the Internal Revenue Code. As a result, the companies' earnings for such
period were taxed at the shareholder level. Effective February 1, 1995,
Semitherm was merged into Semitool and Semitool terminated its S corporation
status (see Notes 1 and 12). From February 1, 1995, Semitool's earnings have
been taxed as a C corporation and provisions for income taxes have been
reflected in the consolidated financial statements. Semitool recorded a
nonrecurring net deferred tax benefit of approximately $890,000 associated with
the recognition of a related deferred tax asset due to the termination of the S
corporation status in 1995.

The Company's foreign subsidiaries are subject to the tax regulations that exist
in their respective countries. These subsidiaries provide for deferred taxation
at current rates to take into account temporary differences between the
treatment of certain items for financial statement purposes and the treatment of
those items for corporation tax purposes. The components of the deferred tax
assets and liabilities as of September 30, 1996 and 1995 are as follows (in
thousands):
<TABLE>
<S> <C> <C> <C>

September 30, 1996 ...................................................... Assets Liabilities Total

Accrued liabilities, principally vacation and
health insurance ..................................................... $ 709 $ -- $ 709
Accrued reserves, principally bad debt, warranty
and inventory ........................................................ 2,669 -- 2,669
Inventory capitalization ................................................ 433 -- 433
Depreciation and software amortization .................................. -- (1,265) (1,265)
Covenant not to compete ................................................. 49 -- 49
Foreign net operating loss carryforward ................................. 475 -- 475
Other ................................................................... 38 -- 38
------- ------- -------
Total ................................................................... $ 4,373 $(1,265) $ 3,108
======= ======= =======

September 30, 1995 ...................................................... Assets Liabilities Total

Accrued liabilities, principally vacation and
health insurance .................................................... $ 509 $ -- $ 509
Accrued reserves, principally bad debt, warranty
and inventory ........................................................ 1,724 -- 1,724
Inventory capitalization ................................................ 550 -- 550
Depreciation and software amortization .................................. -- (734) (734)
Other ................................................................... 47 (81) (34)
------- ------- -------
Total ................................................................... $ 2,830 $ (815) $ 2,015
======= ======= =======
</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. Income Taxes, Continued:

The Company does not believe a valuation allowance is necessary at September 30,
1996 to reduce the deferred tax asset as this asset will more likely than not be
realized through the generation of future taxable income.

The differences between the consolidated provision for income taxes and income
taxes computed using income before income taxes and the U.S. federal income tax
rate for the years ended September 30, 1996, 1995 and 1994 are as follows (in
thousands):
<TABLE>

1996 1995 1994

<S> <C> <C> <C>
Amount computed using the statutory rate ............................... $ 8,409 $ 7,434 $ 805
Increase (decrease) in taxes resulting from:
Benefit of recognition of deferred tax asset in
connection with S corporation termination ....................... -- (890) --
State taxes, net of federal benefit ................................. 1,155 893 146
Tax effect of income not subject to federal tax
due to Subchapter S election .................................... -- (793) (720)
Effect of foreign taxes ............................................. (62) 119 (12)
Research and experimentation credit ................................. (355) (140) --
Foreign sales corporation benefit ................................... (695) -- --
Other, net .......................................................... 438 (268) (25)
------- ------- -------
$ 8,890 $ 6,355 $ 194
======= ======= =======
</TABLE>

8. Related Party Transactions:

In August 1979, Semitool entered into an agreement with Raymon F. Thompson, the
Company's chief executive officer and majority shareholder, to acquire all
rights, title to and interest in a centrifugal wafer processor invention. The
agreement called for payments to Mr. Thompson through September 30, 1999
amounting to 8% of all sales of the centrifugal wafer processor, equipment using
the processor's technology and replacement parts. This agreement was terminated
effective with the Offering in February 1995 (see Note 13). Total costs,
pursuant to this agreement, were approximately $1,672,000 and $3,489,000 for the
years ended September 30, 1995 and 1994, respectively.

Semitool also has agreements with Mr. Thompson to lease aircraft. The current
rental rate is $109,500 per month. Under these agreements, rent expense was
approximately $1,158,000, $835,000, and $650,000 for the years ended September
30, 1996, 1995 and 1994, respectively.

Periodically, Semitool advances funds to Mr. Thompson and pays certain expenses
for the benefit of Mr. Thompson. These advances are offset by amounts payable to
Mr. Thompson under the agreements described in the preceding paragraphs. Net
advances to (from) Mr. Thompson are charged interest at the federal funds
short-term rate. Associated with these advances, Mr. Thompson received
approximately $2,000 and $66,000 of interest income in 1996 and 1994,
respectively, and paid the company interest of $31,000 in 1995.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

8. Related Party Transactions, Continued:

During 1994 and prior, Semitherm received advances from its majority
shareholder, Mr. Thompson, and recorded such advances as a note payable to
shareholder. The note bore interest at the federal funds short-term rate. Total
interest expense relating to this note for the year ended September 30, 1994
approximated $301,000. In June 1994, the note payable totaling $9,300,000 was
converted into common stock of Semitherm (see Note 12).

Semitool purchased raw materials approximating $651,000, $570,000, and $179,000
for the years ended September 30, 1996, 1995 and 1994, respectively, from a
company owned by Mr. Thompson.

9. Commitments and Contingencies:

The Company has various operating lease agreements for equipment and office
space that expire through the year 2013. Total rent expense for the years ended
September 30, 1996, 1995 and 1994, exclusive of amounts paid to a related party
as described in Note 8, was approximately $950,000, $648,000, and $592,000,
respectively. At September 30, 1996, future rental payments under these
agreements and the aircraft leases described in Note 8 are as follows (in
thousands):

Year Ending
September 30, Total

1997 2,310
1998 1,852
1999 1,422
2000 697
2001 60
Thereafter 397
--------
$ 6,738
========

A purported class action lawsuit brought by a Company shareholder was filed
February 26, 1996, in the Montana Eleventh Judicial District Court, Flathead
County, Kalispell, Montana against the Company and certain of its officers and
directors. The complaint includes allegations that the Company issued misleading
statements concerning its business and prospects. The suit seeks injunctive
relief, damages, costs and other relief as the court may find appropriate. The
Company believes the lawsuit to be without merit and intends to contest the
action vigorously. However, given the inherent uncertainty of litigation,
insurance issues, and the early stages of discovery, there can be no assurance
that the ultimate outcome will be in the Company's favor or that if the ultimate
outcome is not in the Company's favor that such an outcome, the diversion of
management's attention, and any costs associated with the lawsuit, will not have
a material adverse effect on the Company's financial condition or results of
operations.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

10. Concentration of Credit Risk and Foreign Operations:

At September 30, 1996 and 1995, the trade receivables of the Company were
primarily from companies in the semiconductor industry, and included
approximately $20.5 million and $9.5 million, respectively, of foreign
receivables. Accordingly, the Company is exposed to concentrations of credit
risk. The Company routinely assesses the financial strength of its customers
and, as a consequence, believes that its trade accounts receivable credit risk
exposure is limited.

For the years ended September 30, 1996, 1995 and 1994, consolidated sales to one
major customer represented 3.1%, 13.1% and 8.6% of total consolidated sales,
respectively.

Summarized data for the Company's foreign operations (principally Europe) for
the years ended September 30, 1996, 1995 and 1994 are as follows (in thousands):

1996 1995 1994

Net sales - unaffiliated customers $ 49,197 $ 38,091 $ 14,740
Income (loss) from operations 332 1,677 (304)
Identifiable assets 23,472 13,232 4,702

Export sales from the Company's United States operations were approximately
$27.2 million (16%), $13.7 million (11%) and $10.3 million (17%) for the years
ended September 30, 1996, 1995 and 1994, respectively.

11. Preferred Stock:

The Board of Directors has the authority to issue preferred stock of Semitool in
one or more series and to fix the rights, privileges, preferences and
restrictions granted to or imposed upon any unissued shares of preferred stock,
without further vote or action by the common shareholders.

12. Redemption of Semitherm Common Stock:

In June 1994, the shareholders of Semitherm entered into a reorganization
agreement which resulted in the redemption of all minority shareholders' common
stock leaving all remaining outstanding common stock of Semitherm owned by
Raymon F. Thompson. The agreement also included the conversion of Mr. Thompson's
note payable due from Semitherm aggregating $9.3 million into 46,500 shares of
common stock. The 3,000 shares of common stock held by the minority shareholders
were redeemed and retired by Semitherm at a value of $200 per share aggregating
$600,000. The agreement included an additional payment of $150,000 upon a
successful public offering of a combined Semitherm and Semitool entity which was
disbursed in 1995.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

13. Transactions Associated with the Offering:

The consolidated balance sheet at September 30, 1995 reflects the acquisition of
both Semitherm and the Combined Group of Semitool European Companies for 692,031
shares of Semitool common stock and cash of $206,000, respectively. As these
entities were under common control and the historical financial statements have
been presented on a combined basis, the Semitherm acquisition was accounted for
as if it were a pooling-of-interests, and the cash payment for the acquisition
of the Combined Group of Semitool European Companies was accounted for as a
dividend. The consolidated balance sheet also reflects a distribution of
accumulated S corporation earnings through January 31, 1995 (the date of
termination of S corporation status) of approximately $8.7 million, which had
been distributed as of September 30, 1995 and the contribution of the remaining
S corporation retained earnings to common stock with the change to C corporation
status.

In February 1995, the Company completed its initial public stock offering
through the sale of 4,241,815 shares of its common stock. As a result of the
Offering, the Company received net proceeds of approximately $33.4 million.
Approximately $9.4 million and $8.7 million of the net proceeds were used to
repay debt of the Company and make distributions of dividends to shareholders,
respectively. Also, in connection with the completion of the Company's initial
public offering, payments for technology rights to Mr. Raymon F. Thompson
described in Note 8 ceased.

14. Unaudited Pro Forma Statements of Income Information:

The following pro forma information reflects the effects of certain transactions
that occurred as a result of the Offering which are more completely described in
Notes 7 and 13.

The consolidated pro forma statements of income for the years ended September
30, 1995 and 1994 present the pro forma effects on the historical financial
information to eliminate the cost of technology rights and to recognize a
provision for income taxes at statutory rates applied to pro forma income before
income taxes, net of actual research and development credits generated in each
fiscal year. These adjustments have been made as if they occurred at October 1,
1993.

15. Fair Value of Financial Instruments:

The Company has estimated the fair value of its financial instruments including
cash and cash equivalents, payable to shareholder, note payable to bank and
long-term debt. The fair value estimates are made at a discrete point in time
based on relevant market information and information about the financial
instruments. Fair value estimates are based on judgments regarding current
economic conditions, risk characteristics of various financial instruments and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates. Accordingly, the estimates are not necessarily indicative of what the
Company could realize in a current market exchange.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

15. Fair Value of Financial Instruments, Continued:

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments at September 30, 1996 for which it is
practicable to estimate that value.

Cash and Cash Equivalents - The carrying value of cash and cash equivalents
approximates fair value due to the nature of the cash investments.

Payable to Shareholder - The carrying value of the shareholder payable
approximates fair value.

Note Payable to Bank - The carrying value of the note payable to bank
approximates fair value due to the fact that the terms of the note were
renegotiated in September 1996.

Long-Term Debt - The fair value of notes payable is based on the discounted
value of contractual cash flows using a discount rate which the Company could
currently obtain for debt with similar remaining maturities. At September 30,
1996, the fair value of the notes payable approximates $3,412,000 compared to
the carrying value of approximately $4,011,000.

<PAGE>

Exhibit Index

Exhibit No. Description

2.1 Asset Purchase Agreement and Plan of Reorganization, dated as of
February 19, 1996 between the Company and Semy Engineering,
Inc. (1)
3.1 Restated Articles of Incorporation of the Company (2)
3.2 By-laws of the Company dated August 1, 1979 and related
amendments to these By-laws (2)
10.1 Form of Semitool, Inc. S Corporation Termination, Tax Allocation
and Indemnification Agreement between the Company and its
current shareholders (2)
10.2 Form of Indemnification Agreement between the Company and
each of its officers and directors (2)
10.3 Form of Semitool, Inc. 1994 Stock Option Plan (2)
10.4 Form of Agreement and Plan of Merger between the Company and
Semitherm, Inc. (2)
10.5 Aircraft Lease Agreement, dated September 9, 1994, between the
Company and Mr. Thompson (2)
10.6 Aircraft Lease Agreement, dated November 1, 1994, between the
Company and Mr. Thompson (2)
10.7 Agreement, dated June 7, 1983, between the Company and Entech (2)
10.8 Form of Agreement of Cancellation of Sale Agreement between
the Company and Mr. Thompson (2)
10.9 Agreement of Sale of Centrifugal Wafer Processor Invention, dated
August 1, 1979, between the Company and Mr. Thompson (2)
10.10 Articles of Merger, dated September 1, 1993, of Semitool, Inc., a
California corporation, with and into the Company (2)
10.11 Agreement, dated June 1994, among Robert G. Massey, Donald W,
Heidt, Steven R. Thompson, Semitherm, Inc., Semitherm Partnership,
Mr. Thompson and the Company (2)
10.12 Agreement between the Company and the Semitool European
Companies (2)
10.13 Aircraft Lease Agreement, dated April 1, 1996, between the Company
and Mr. Thompson (3)
10.14 Business Loan Agreement, dated September 30, 1996, between the
Company and the Bank of America NW, N.A. doing business as
Seafirst Bank (3)
10.15 Promissory Note, dated September 30, 1996, between the Company and
the Bank of America NW, N.A. doing business as Seafirst Bank (3)
11.1 Statement Re Computation of Pro Forma per share Earnings (3)
21.1 Subsidiaries of Registrant (3)
27.1 Financial data schedule (3)

(1) Incorporated herein by reference to the identically numbered exhibits to the
Company's Current Report on Form 8-K, date of report February 29, 1996.

(2) Incorporated herein by reference to the identically numbered exhibits to the
Company's Registration Statement on Form S-1 (File No. 33-87548), which became
effective on February 2, 1995.

(3) Filed herewith.

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

Board of Directors and Shareholders
Semitool, Inc.

Our report on the consolidated financial statements of Semitool, Inc. is
included elsewhere in this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed under Item 14(a) of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

Coopers & Lybrand L.L.P.

Spokane, Washington
November 1, 1996

<PAGE>

SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)

Additions
------------------------
Balance Charged Charged Balance
at to Costs to at End
Beginning and Other of
of Period Expenses Accounts Deductions Period

<S> <C> <C> <C> <C> <C>
Year ended September 30, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts ........................ $213 $ 20 $-- $-- $233
Allowance for inventory obsolescence ................... 817 31 -- 300 548
Year ended September 30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts ........................ 81 132 -- -- 213
Allowance for inventory obsolescence ................... 267 550 -- -- 817
Year ended September 30, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts ........................ 63 18 -- -- 81
Allowance for inventory obsolescence ................... -- 267 -- -- 267

</TABLE>

<PAGE>

Exhibit 11.1
Semitool, Inc.
STATEMENT RE COMPUTATION OF PRO FORMA PER SHARE EARNINGS
(Amounts in Thousands, Except for Per Share Amounts)

<S> <C>
Shares outstanding at September 30, 1994 8,657
Additional common shares issued for the acquisition of Semitherm, Inc. 692
Additional shares that are assumed to be issued in the offering to fund
shareholder distributions in excess of net income for the 12 months
ended February 2, 1995 (1) 597
-------
Shares used in pro forma calculation for the year ended September 30, 1994 9,946
=======

Weighted average shares outstanding at September 30, 1995 12,349
Additional shares that are assumed to be issued in the offering to fund shareholder distributions
in excess of net income for the 12 months ended
February 2, 1995 (2) 214
-------
Shares used in pro forma calculation for the year ended September 30, 1995 12,563
=======

Weighted average shares outstanding at September 30, 1996 13,858
-------
Shares used in pro forma calculation for the year ended September 30, 1996 13,858
=======

(1) Computed as follows in accordance with Staff Accounting Bulletin Topic
1.B.3:
Shareholder distributions $ 8,340
Less historical income for the 12 months ended February 2, 1995 3,172
-------
Distributions in excess of net income $ 5,168
=======
Shares assumed to be issued at the $8.67 per share Offering price
to fund distributions in excess of net income 597
=======

(2) Computed as follows in accordance with Staff Accounting Bulletin
Topic 1.B.3:
Shares assumed to be issued September 30, 1994 at at the $8.67
per share Offering price to fund distributions in excess of
net income (See (1) above) 597
Less adjustment to reflect outstanding distributive shares included in
weighted average shares outstanding for the period February 3, 1995
to September 30, 1995 83
-------
Additional shares that are assumed to be outstanding for the period
September 30, 1994 to February 2, 1995 214
=======
</TABLE>

<PAGE>

Exhibit 10.13
AIRCRAFT LEASE

LEASE between RAYMON F. THOMPSON, of Kalispell, Montana, as the "LESSOR", and
SEMITOOL, INC., a Montana corporation, with the principal place of business
place of business at 655 West Reserve Drive, Kalispell, Montana 59901, as the
"LESSEE". In consideration of the promises and covenants hereinafter set forth,
IT IS HEREBY AGREED AS FOLLOWS:

1. Lease. Lessor leases to the Lessee the following-described AIRCRAFT
("AIRCRAFT"):

MAKE AND MODEL: Dessault-Breguet Falcon 50
SERIAL NUMBER: 175
REGISTRATION NUMBER: N 3330 MC (to become N 200 RT)

2. Term. The term of this Lease shall be four (4) years, commencing on April 1,
1996, and ending March 30, 2000 ("LEASE TERM").

3. Rental and Jet Engine Reserve. Rental of the AIRCRAFT shall be at the rate of
SEVENTY-FOUR THOUSAND AND 00/100 DOLLARS ($74,000.00) per month, payable by the
Lessee to the Lessor on or before the first day of each monthly period of the
LEASE TERM. All rental payments shall be paid at the place designated by the
Lessor.

In addition to the above-enumerated rental payments, the Lessee shall pay to the
Lessor the hourly MSP rate of $118.71 per hour per engine ($356.13 per hour for
all three engines), as a jet engine overhead, replacement and jet engine repair
reserve. The parties hereto mutually recognize that the jet engines on this
AIRCRAFT have a finite period of time before major repair and overall work is
necessary, and this reserve, provided for herein, shall be paid by the Lessee to
the Lessor in order to provide for sufficient funds to the Lessor to pay for the
cost of such jet engine overhead, replacement and repair costs as such are
needed.

4. Lessee's Covenants. The Lessee covenants and agrees for the LEASE TERM as
follows:

(a) Conforming Use. To use the AIRCRAFT only for the purposes and in the manner
set forth in any application for insurance executed in connection with the
leased AIRCRAFT, to abide by and conform to, and cause others to abide by and
to, all laws, ordinances, orders, rules and regulations, national, state,
municipal, or otherwise, now existing or hereafter enacted, controlling or in
any way affecting the operation, use or occupancy of the AIRCRAFT or the use of
any airport premises by the AIRCRAFT.

(b) No lien or assignment. To keep safely, and use carefully, the AIRCRAFT, and
not to sell, or assign or dispose of the AIRCRAFT, or of any interest therein,
or of any part thereof, or equipment necessary thereto, or suffer or permit any
charge, lien, or encumbrance of any nature upon the AIRCRAFT, or any part
thereof, or lend or rent the same, or remove or permit the AIRCRAFT to be
removed from its designated home airport for periods in excess of thirty (30)
days, designating the contemplated location of the AIRCRAFT, and not to remove
permanently the AIRCRAFT from its designated home airport without the prior
written consent of the Lessor.

(c) Sublease. Upon written approval of the Lessor, the Lessee shall have the
right to sublease the AIRCRAFT, provided, however, the AIRCRAFT is maintained in
conformance with all applicable rules and regulations pertaining to the use to
which the AIRCRAFT shall be subjected.

(d) Taxes. To pay all taxes, assessments, and charges imposed by any national,
state, municipal, or other public or airport authority on the AIRCRAFT or on its
use during the term of this Lease and until re-delivery of the AIRCRAFT to the
Lessor; and to save the Lessor free and harmless therefrom, and reimburse the
Lessor on a pro rata basis for any such taxes or charges payable subsequent to
the terms of this Lease.

(e) Maintenance. To maintain and keep the AIRCRAFT and all its components in
good order and repair, in accordance with the requirements of the Federal
Aviation Agency, or any other governmental authority having jurisdiction, and
within reasonable time replace in or on the AIRCRAFT any and all parts,
equipment, appliances, instruments, or accessories which may be worn out, lost,
destroyed, confiscated, or otherwise rendered unsatisfactory or unavailable for
use in or on the AIRCRAFT, which replacement shall be (1) in good operating
condition and have a value, utility, and quality, at least equal to that which
the property replaced originally had, and (2) at the time affixed to the
AIRCRAFT and made subject to this Lease, owned by the Lessee free and clear of
all liens and encumbrances, it being understood that the Lessee shall have the
same protection as the Lessor under the standard warranty clause of the
manufacturer of the AIRCRAFT the terms and provisions of said warranty being
incorporated herein; perform all major overhaul on the AIRCRAFT, whenever deemed
necessary and as may be required by the Federal Aviation Agency or any other
governmental authority during the term of this Lease, and all engine overhaul
and inspection and maintenance service.

(f) Indemnification. To be responsible and liable to the Lessor for, and
indemnify the Lessor against, all damage to the AIRCRAFT which occurs in any
manner from any cause or causes during the term of this Lease or until
re-delivery of the AIRCRAFT to the Lessor, and to indemnify and save Lessor
harmless from and against all claims, cost, expenses, damages, and liabilities,
including personal injury, death, or property damage claims arising or in any
manner occasioned by the operation or use of the AIRCRAFT, during the term of
this Lease or until re-delivery of the AIRCRAFT to the Lessor.

(g) Insurance. To keep the AIRCRAFT insured, at Lessee's expense, with companies
acceptable to the Lessor, for such amounts and against such hazards as the
Lessor may require, including, but not limited to, hull damage and liability for
personal injuries, death or property damages, arising from or in any manner
occasioned by the acts or negligence of the Lessee or others in custody
operation or use of AIRCRAFT, with losses under the hull damage policies payable
to the Lessor, in terms satisfactory to the Lessor and deliver the policies, or
evidence of insurance satisfactory to the Lessor, to Lessor with premium
receipts. The Lessee hereby appoints Lessors as the Lessee's attorney-in-fact to
make proof of loss, and claim for, receive payment of, and execute or endorse
all documents, checks or drafts for hull damage or return premium under the
insurance policies.

(h) Licensed Pilotage. To permit the AIRCRAFT to be operated only by a currently
certificated pilot having at least the minimum total pilot hours required by the
applicable insurance.

(i) Lessor's Right of Inspection. To permit the Lessor, or its duly authorized
agent or representative, to inspect the AIRCRAFT at any reasonable time, either
on the land or aloft, and to furnish any information in respect to the AIRCRAFT
and its use that the Lessor may reasonably request.

(j) Delivery Upon Termination. To return, upon demand, at the expiration or
earlier termination of the Lease term, the AIRCRAFT to the Lessor, at such place
as may be designated as when received, excepting only for reasonable wear and
tear, and damage by any cause covered by collectible insurance; provided,
however, that the designated place shall not be more than 150 miles from the
home airport at the outset of this Lease.

(k) Further Assurances. To execute and deliver to the Lessor any additional or
supplemental instruments or documents as may be requested by the Lessor in
connection with the AIRCRAFT of this Lease.

5. Assignment of Warranty. The Lessor hereby assigns to the Lessee, for and
during the Lease term, any warranty of the manufacturer, express or implied,
issued on or relating to the AIRCRAFT, and hereby authorizes the Lessee to
obtain the customary service furnished by the manufacturer in connection with
any warranty, at Lessee's expense. The Lessee acknowledges and agrees that the
AIRCRAFT is of a size, design, capacity, and a manufacturer selected by the
Lessee and suitable for its purposes.

6. No Implied Representations or Warranties. The parties acknowledge that the
Lessor is not a manufacturer or engaged in the sale or distribution of the
AIRCRAFT. IT IS FURTHER AGREED THAT UNDER NO CIRCUMSTANCES SHALL LESSOR BE
LIABLE FOR ANY COSTS, LOSS EXPENSE, DAMAGES, SPECIAL DAMAGES, INCIDENTAL DAMAGES
OR CONSEQUENTIAL DAMAGES ARISING FROM THE USE OF THE AIRCRAFT, WHETHER BASED
UPON WARRANTY, CONTRACT, NEGLIGENCE OR STRICT LIABILITY.

7. Risk of Loss. All risks of loss or damage of the AIRCRAFT leased, from
whatever cause, hereby are assumed by the Lessee during the entire LEASE TERM,
and if the AIRCRAFT is damaged, and is capable of being repaired, the Lessee
shall have the option of either repairing same or replacing same, at the
Lessee's cost.

8. Irrevocability. This Lease is irrevocable for its full LEASE TERM and until
the aggregate rentals have been paid by the Lessee. Rent shall not abate during
the LEASE TERM because the Lessee's right to possession of the AIRCRAFT has
terminated, or for any other reason whatsoever.

9. Lessor's Assumption of Lessee's Obligations. In the event the Lessee fails to
use, preserve, and maintain the AIRCRAFT, discharge all taxes, liens, or
charges, pay all costs and expenses or procure and maintain insurance, in the
manner above provided, the Lessor, at its option, may do so, and all such
advances by the Lessor shall be added to the unpaid balance of the rentals due
under this Lease and shall be repayable by the Lessee to Lessor on demand,
together with interest thereon at the rate of Twelve Percent (12%) per annum,
until the unpaid balance shall have been repaid in full. The Lessor may enter
upon any premises where the AIRCRAFT is located, for the purpose of inspection,
and may remove the AIRCRAFT forthwith, without notice to Lessee, if, in the
opinion of the Lessor, the AIRCRAFT is being improperly used or maintained.

10. Repossession Upon Default. If the Lessee shall fail to pay any rental or any
other amounts payable pursuant to this Lease, when the same is due and payable,
or if the Lessee shall breach any other provision of this Lease, or if the
Lessee becomes insolvent, or files a voluntary, or has filed against him an
involuntary, proceeding in bankruptcy for either discharge of indebtedness or
other protection from creditors or if a receiver is appointed for the Lessee's
property or an arrangement is made with or committee is formed for the Lessee's
creditors, then the Lessor, at its option, and in addition to and without
prejudice to any other remedies, may take possession of and remove the AIRCRAFT,
and all equipment, instruments, accessories, and repairs thereon, which shall be
considered a component part of the AIRCRAFT, and in removing the AIRCRAFT, the
Lessor may, if permitted by law, use any of the Lessee's licenses in respect to
the AIRCRAFT, and/or the Lessor may terminate this Lease. The re-taking of such
possession, however, shall not constitute a termination of this Lease unless the
Lessor so notifies Lessee in writing. The Lessor, at its option, may (a) lease
the repossessed AIRCRAFT, or any part thereof, to any third party upon such
terms and conditions as Lessor may determine, or, (b) sell the AIRCRAFT, or any
part thereof, at public or private sale. The total proceeds, less the Lessor's
expenses incurred in connection therewith, including attorneys' fees, of such
sale or sales, shall be applied to the total unpaid rental. Any deficiency
thereafter shall be paid by the Lessor.

11. Time of Essence. Time is of the essence of this Lease.

12. No Passage of Title. This Agreement is, and is intended to be a Lease, and
the Lessee does not acquire by this Lease any right, title, or amount
whatsoever, legal or equitable, in the AIRCRAFT or to the proceeds of the sale
of the AIRCRAFT, except its interest as the Lessee under this Lease.

13. Miscellaneous.

(a) The Lessor warrants that, if Lessee performs its obligations under this
Lease, the Lessee shall peaceably and quietly hold, possess and use the AIRCRAFT
during the entire Lease term, free of any interference or hindrance.

(b) The relationship between the Lessor and Lessee is only that of Lessor and
Lessee. The Lessee shall never at any time during the term of this lease for any
purpose whatsoever be or become the agent of the Lessor, and the Lessor shall
not be responsible for the acts or omissions of the Lessee or its agents.

(c) The Lessor's rights and remedies with respect to any of the terms and
conditions of this Lease shall be cumulative and not exclusive, and shall be in
addition to all other rights and remedies in its favor.

(d) The Lessor's failure to strictly enforce any provision of this Lease shall
not be construed as a waiver thereof or as excusing the Lessee from past or
future performance obligations.

14. Mortagee's Interest. Lessee hereby acknowledges and agrees that this Lease
and all right, title and interest of Lessee in, to and under this Lease are now
and shall at all times continue to be unconditionally subject and subordinate in
each and every respect to the lien of MetLife Capital Corporation (the
"Mortgagee") in the AIRCRAFT, as said lien may be amended, modified or renewed
from time to time.

15. Separability. The invalidity of any portion of this Lease shall not affect
the remaining valid portions thereof.

16. Performance as Acceptance. Any use or possession of the AIRCRAFT by Lessee
prior to the formal execution of this lease agreement, but during the LEASE TERM
shall constitute acceptance of this Lease by performance and subject Lessee to
all terms, conditions, convenants, warranties and obligations of this Lease.

17. Entire Agreement. This Lease constitutes the entire agreement between the
parties hereto, and any change or modification to this Lease must be in writing
and signed by the parties hereto.

THERE SHALL BE two executed originals of this agreement, one for the Lessee and
one for the Lessor, each of which shall be an original.

IN WITNESS WHEREOF, the Lessee and Lessor have duly executed this Lease at
Kalispell, Flathead County, Montana, to be Effective commencing on April 1,
1996.

LESSEE: LESSOR:

SEMITOOL, INC. RAYMON F. THOMPSON

/s/ John W. Sullivan /s/ R. Thompson
- --------------------- ----------------------
John W. Sullivan Raymon F. Thompson
Vice President-Finance Individually

<PAGE>

FORM 3082 1/87 WP:kh 9/96

Exhibit 10.14

Bank of America NW, N.A. doing business as Seafirst Bank
BUSINESS LOAN AGREEMENT

This Seafirst Business Loan Agreement ("Agreement") is made between
Seattle-First National Bank ("Bank") and Semitool, Inc. ("Borrower") with
respect to the following:
Part A
I. Line of Credit: Subject to the terms of this Agreement, Bank will make loans
to Borrower under a [X] revolving [ ] non- revolving line of credit as follows:

(a) Total Amount Available: $10,000,000.00 [ ] Subject to the provisions of any
accounts receivable and/or inventory borrowing plan required herein; it is
expressly understood that collateral ineligible for borrowing purposes is
determined solely by Bank.
[ ] Subject to(describe) ________N/A_____________.

(b) Availability period: May 20, 1996 through December 31, 1997 . However, if
loans are made and/or new promissory notes executed after the last date, such
advances will be subject to the terms of this Agreement until repaid in full
unless a written statement signed by the Bank and Borrower provides otherwise,
or a replacement loan agreement is executed. The making of such additional
advances alone, however, does not constitute a commitment by the bank to make
any further advances or extend the availability period.

(d) Interest Rate Basis: All interest will be calculated at the per annum
interest rate based on 360-day year and applied to the actual number of days
elapsed.

(e) Repayment: At the times and in amounts as set forth in note(s) required
under Part B Article 1 of this Agreement.

(f) Loan Fee: $ N/A payable on N/A .

(g) Fee on Unutilized Portion of Line: On June 30, 1996 , and every _quarter
thereafter, Borrower shall pay a fee based upon the average daily unused portion
of the line of credit. This fee will be calculated as follows: 1/4 of 1% per
annum on the unused portion of the commitment.

(h) Other fee(s) identify):
_______N/A____________________.

(i) Collateral. This revolving line of credit shall be secured by a security
interest, which is hereby granted, in favor of Bank on the following collateral:
N/A
Also, collateral securing other loans with Bank may secure this loan.

II. Line of Credit #TBA: Subject to the terms of this Agreement, Bank will make
loans to Borrower under a [ X] revolving [ ] non-revolving line of credit as
follows:

(a) Total Amount Available: $15,000,000.00 [ ] Subject to the provisions of any
accounts receivable and/or inventory borrowing plan required herein; it is
expressly understood that collateral ineligible for borrowing purposes is
determined solely by Bank.
[ ] Subject to(describe): ________N/A___________.

(b) Availability period: October 1, 1996 through December 31, 1998 . However, if
loans are made and/or new promissory notes executed after the last date, such
advances will be subject to the terms of this Agreement until repaid in full
unless a written statement signed by the Bank and Borrower provides otherwise,
or a replacement loan agreement is executed. The making of such additional
advances alone, however, does not constitute a commitment by the bank to make
any further advances or extend the availability period.

(c) Interest Rate Options:
1) Prime - Bank publicly announced prime rate adjusted on the date of any Bank
prime rate change. 2) LIBOR - At the option of Borrower, loans within the
approved line of credit may be available, in minimum amounts of $500,000 or more
for specific periods of time ranging from 30 days to 180 days, at LIBOR + 2.0%
per annum. Any LIBOR borrowings shall be requested at least two business days
prior to funding. LIBOR borrowings shall be based on the British Bankers'
Association Interest Settlement Rate (BBAIRS), page 3750 on Telerate. The LIBOR
rate shall be adjusted for reserves, deposit insurance, assessments and/or
taxes. Borrowing periods for the LIBOR rate option may be for 30, 60, 90 or 180
days. Under the LIBOR rate option, any advance which is prepaid prior to
maturity may be subject to a prepayment penalty as described in Exhibit 1 -
Prepayment Fees. 3) Fixed Rate - At the option of Borrower, loans within the
approved facility may be available in one-year increments, up to five years, as
agreed to between Bank and Borrower at the time of funding. Any "Fixed Rate"
borrowings shall be requested at least two business days prior to funding and
shall be adjusted for reserves, deposit insurance, assessments and/or taxes.
Under the Fixed Rate option, any advance which is prepaid prior to maturity may
be subject to a prepayment penalty.

(d) Interest Rate Basis. All interest will be calculated at the per annum
interest rate based on 360-day year and applied to the actual number of days
elapsed.

(e) Repayment: At the times and in amounts as set forth in note(s) required
under Part B Article 1 of this Agreement. Interest only payments will be due
monthly until December 31, 1998 with the then outstanding balance repayable in
monthly principal and interest payments fully amortized over 5 years, not to
extend beyond December 31, 2003. Payments shall be paid monthly on the first day
of each month by automatic deduction from borrower's Checking Account #13629803.

(f) Loan Fee: $ N/A payable on N/A .

(g) Fee on Unutilized Portion of Line: On December 31, 1996 , and every _quarter
thereafter, Borrower shall pay a fee based upon the average daily unused portion
of the line of credit. This fee will be calculated as follows: 1/8 of 1% per
annum.

(h) Other fee(s) identify):
____N/A___________.

<PAGE>

Bank of America NW, N.A. doing business as Seafirst Bank
BUSINESS LOAN AGREEMENT

Part B

1. Promissory Note(s). All loans shall be evidenced by promissory notes in a
form and substance satisfactory to Bank.

2. Conditions to Availability of Loan/Line of Credit. Before Bank is
obligated to disburse/make any advance, or at any time thereafter which
Bank deems necessary and appropriate, Bank must receive all of the
following, each of which must be in form and substance satisfactory to
Bank ("loan documents"):

2.1 Original, executed promissory note(s);
2.2 Original executed security agreement(s) and/or deed(s) of trust
covering the collateral described in Part A; 2.3 All collateral
described in Part A in which Bank wishes to have a possessory security
interest; 2.4 Financing statement(s) executed by Borrower; 2.5 Such
evidence that Bank may deem appropriate that the security interests and
liens in favor of Bank are valid,
enforceable, and prior to the rights and interests of others ex-
cept those consented to in writing by Bank;
+2.6 The following guaranty(ies) in favor of the Bank: N/A
+2.7 Subordination agreement(s) in favor of Bank executed by: N/A
2.8 Evidence that the execution, delivery, and performance by
Borrower of this Agreement and the execution, delivery, and
performance by Borrower and any corporate guarantor or corporate
subordinating creditor of any instrument or agreement required
under this Agreement, as appropriate, have been duly authorized;
2.9 Any other document which is deemed by the Bank to be required
from time to time to evidence loans or to effect the
provisions of this Agreement;
2.10 If requested by Bank, a written legal opinion expressed to Bank,
of counsel for Borrower as to the matters set forth in sections
3.1 and 3.2, and to the best of such counsel's knowledge after
reasonable investigation, the matters set forth in sections 3.3,
3.5, 3.6, 3.7, 3.8 and such other matters as the Bank may
reasonably request;
2.11 Pay or reimburse Bank for any out-of-pocket expenses expended in
making or administering the loans made hereunder including
without limitation attorney's fees (including allocated costs of
in-house counsel);
+2.12 Other (describe): N/A

3. Representations and Warranties. Borrower represents and warrants to Bank,
except as Borrower has disclosed to Bank in writing, as of the date of
this Agreement and hereafter so long as credit granted under this
Agreement is available and until full and final payment of all sums
outstanding under this Agreement and promissory notes that:

+3.1 Borrower is duly organized and existing under the laws of the
state of its organization as a:
General Limited
_X_Corporation ___ Partnership ___ Partnership
Sole
___ Proprietorship ___ dba
Borrower is properly licensed and in good standing in each state
in which Borrower is doing business and Borrower has qualified
under, and complied with, where required, the fictitious or
trade name statutes of each state in which Borrower is doing
business, and Borrower has obtained all necessary government
approvals for its business activities; the execution, delivery,
and performance of this Agreement and such notes and other
instruments required herein are within Borrower's powers, have
been duly authorized, and, as to Borrower and any guarantor, are
not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower, and this Agreement, such notes
and the loan documents are valid and enforceable according to
their terms;
3.2 The execution, delivery, and performance of this Agreement, the
loan documents and any other instruments are not in conflict
with any law or any indenture, agreement or undertaking to which
Borrower is a party or by which Borrower is bound or affected;
3.3 Borrower has title to each of the properties and assets as
reflected in its financial statements (except such assets which
have been sold or otherwise disposed of in the ordinary course
of business), and no assets or revenues of the Borrower are
subject to any lien except as required or permitted by this
Agreement, disclosed in its financial statements or otherwise
previously disclosed to Bank in writing;
3.4 All financial information, statements as to ownership of
Borrower and all other statements submitted by Borrower to Bank,
whether previously or in the future, are and will be true and
correct in all material respects upon submission and are and
will be complete upon submission insofar as may be necessary to
give Bank a true and accurate knowledge of the subject matter
thereof;
3.5 Borrower has filed all tax returns and reports as required by
law to be filed and has paid all taxes and assessments
applicable to Borrower or to its properties which are presently
due and payable, except those being contested in good faith;
3.6 There are no proceedings, litigation or claims (including unpaid
taxes) against Borrower pending or, to the knowledge of the
Borrower, threatened, before any court or government agency, and
no other event has occurred which may have a material adverse
effect on Borrower's financial condition;
3.7 There is no event which is, or with notice or lapse of time,
or both, would be, an Event of Default (as defined in
Section 7) under this Agreement;
3.8 Borrower has exercised due diligence in inspecting Borrower's
properties for hazardous wastes and hazardous substances. Except
as otherwise previously disclosed and acknowledged to Bank in
writing: (a) during the period of Borrower's ownership of
Borrower's properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or hazardous substance by any
person in, on, under or about any of Borrower's properties; (b)
Borrower has no actual or constructive knowledge that there has
been any use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste
or hazardous substance by any person in, on, under or about any
of Borrower's properties by any prior owner or occupant of any
of Borrower's properties; and (c) Borrower has no actual or
constructive notice of any actual or threatened litigation or
claims of any kind by any person relating to such matters. The
terms "hazardous waste(s)," hazardous substance(s)," "disposal,"
"release," and "threatened release" as used in this Agreement
shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq., the Superfund
Amendments and Re authorization Act of 1986, as amended, Pub. L.
No. 99-499, the Hazardous Materials Transportation Act, as
amended, 49 U.S. C. Section 1801, et seq., the Resource
Conservation and Recovery Act, as amended, 49 U.S.C. Section
6901, et seq., or other applicable state or federal laws, rules
or regulations adopted pursuant to any of the foregoing.
+3.9 Each chief place of business of Borrower, and the office or
offices where Borrower keeps its records concerning any of the
collateral, is located at:

4. Affirmative Covenants. So long as credit granted under this Agreement
is available and until full and final payment of all sums
outstanding under this Agreement and promissory note(s) Borrower will:

+4.1 Use the proceeds of the loans covered by this Agreement only in
connection with Borrower's business activities and exclusively
for the following purposes: To finance normal short-term cash
operating needs.
+4.2 Maintain current assets in an amount at least equal to N/A times
current liabilities, and not less than N/A. Current assets and
current liabilities shall be determined in accordance with
generally accepted accounting principles and practices,
consistently applied. Maintain trading assets in an amount at
least equal to 1.4 times trading liabilities. Trading assets are
defined as trade accounts receivable (less allowance for bad
debt) plus inventory. Trading liabilities are defined as all
accounts payable, related party payables and outstanding bank
operating line debt.
+4.3 Maintain a tangible net worth of at least $60,000,000 plus 50%
of net income (excluding losses) measured on an annual
basis at fiscal year-end and not permit Borrower's total indebt-
edness which is not subordinated in a manner satisfactory
to Bank to exceed 1.00 times Borrower's tangible net worth.
"Tangible net worth" means the excess of total assets over
total liabilities, excluding, however, from the determination
of total assets (a) all assets which should be classified
as intangible assets such as goodwill, patents, trademarks,
copyrights, franchises, and deferred charges (including
unamortized debt discount and research and development costs),
(b) treasury stock, (c) cash held in a sinking or other
similar fund established for the purpose of redemption or
other retirement of capital stock, (d) to the extent not
already deducted from total assets, reserves for depreciation,
depletion, obsolescence or amortization of properties and
other reserves or appropriations of retained earnings which
have been or should be established in connection with the
business conducted by the relevant corporation, and (e) any
revaluation or other write-up in book value of assets
subsequent to the fiscal year of such corporation last ended at
the date of this Agreement;

+4.4 Upon request Borrower agrees to insure and to furnish Bank with
evidence of insurance covering the life of Borrower (if an
individual) or the lives of designated partners or officers of
Borrower (if a partnership or corporation) in the amounts stated
below. Borrower shall take such actions as are reasonably
requested by Bank, such as assigning the insurance policies to
Bank or naming Bank as beneficiary and obtaining the insurer's
acknowledgment thereof, to provide that in the event of the
death of any of the named insureds the policy proceeds will be
applied to payment of Borrower's obligations owing to Bank;

Name: N/A Amount: N/A

+4.5 Promptly give written notice to Bank of: (a) all litigation and
claims made or threatened affecting Borrower where the amount is
$250,000 or more; (b) any substantial dispute which may exist
between Borrower and any governmental regulatory body or law
enforcement authority; (c) any Event of Default under this
Agreement or any other agreement with Bank or any other creditor
or any event which become an Event of Default; and (d) any other
matter which has resulted or might result in a material adverse
change in Borrower's financial condition or operations;
+4.6 Borrower shall as soon as available, but in any event within 90
days following the end of each Borrower's fiscal years and
within 45 days following the end of each quarter provide to
Bank, in a form satisfactory to Bank (including audited
statements if required at any time by Bank), such financial
statements and other information respecting the financial
condition and operations of Borrower as Bank may reasonably
request;
4.7 Borrower will maintain in effect insurance with responsible
insurance companies in such amounts and against such risks as is
customarily maintained by persons engaged in businesses similar
to that of Borrower and all policies covering property given as
security for the loans shall have loss payable clauses in favor
of Bank. Borrower agrees to deliver to Bank such evidence of
insurance as Bank may reasonably require and, within thirty (30)
days after notice from Bank, to obtain such additional insurance
with an insurer satisfactory to the Bank;
4.8 Borrower will pay all indebtedness taxes and other obligations
for which the Borrower is liable or to which its income or
property is subject before they shall become delinquent, except
any which is being contested by the Borrower in good faith;
4.9 Borrower will continue to conduct its business as presently
constituted, and will maintain and preserve all rights,
privileges and franchises now enjoyed, conduct Borrower's
business in an orderly, efficient and customary manner, keep all
Borrowers properties in good working order and condition, and
from time to time make all needed repairs, renewals or
replacements so that the efficiency of Borrower's properties
shall be fully maintained and preserved;
4.10 Borrower will maintain adequate books, accounts and records and
prepare all financial statements required hereunder in
accordance with generally accepted accounting principles and
practices consistently applied, and in compliance with the
regulations of any governmental regulatory body having
jurisdiction over Borrower or Borrower's business;
4.11 Borrower will permit representatives of Bank to examine and
make copies of the books and records of Borrower and to
examine the collateral of the Borrower at reasonable times;
4.12 Borrower will perform, on request of Bank, such acts as may be
necessary or advisable to perfect any lien or security interest
provided for herein or otherwise carry out the intent of this
Agreement;
4.13 Borrower will comply with all applicable federal, state and
municipal laws, ordinances, rules and regulations relating to
its properties, charters, businesses and operations, including
compliance with all minimum funding and other requirements
related to any of Borrower's employee benefit plans;
4.14 Borrower will permit representatives of Bank to enter onto
Borrower's properties to inspect and test Borrower's properties
as Bank, in its sole discretion, may deem appropriate to
determine Borrower's compliance with section 5.8 of this
Agreement; provided however, that any such inspections and tests
shall be for Bank's sole benefit and shall not be construed to
create any responsibility or liability on the part of Bank to
Borrower or to any third party.

5. Negative Covenants. So long as credit granted under this Agreement is
available and until full and final payment of all sums
outstanding under this Agreement and promissory note(s):

+5.1 Borrower will not, during any fiscal year, expend or incur in
the aggregate more than $ N/A for fixed assets, nor more than $
N/A for any single fixed asset whether or not payable that
fiscal year or later under any purchase agreement or lease;
5.2 Borrower will not, without the prior written consent of Bank,
purchase or lease under an agreement for acquisition, incur any
other indebtedness for borrowed money, mortgage, assign, or
otherwise encumber any of Borrower's assets, nor sell, transfer
or otherwise hypothecate any such assets except in the ordinary
course of business. Borrower shall not guaranty, endorse,
co-sign, or otherwise become liable upon the obligations of
others, except by the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business. For
purposes of this paragraph, the sale or assignment of accounts
receivable, or the granting of a security interest therein,
shall be deemed the incurring of indebtedness for borrowed
money;
+5.3 The total of salaries, withdrawals, or other forms of
compensation, whether paid in cash or otherwise, by Borrower
shall not exceed the following amounts for the persons
indicated, nor will amounts in excess of such limits be paid to
any other person:

Name: ________N/A_____________________________
Monthly/Yearly Amount: $ __________N/A____________

5.4 Borrower will not liquidate or dissolve or enter into any
consolidation, merger, pool, joint venture, syndicate or other
combination, or sell, lease, or dispose of Borrower's business
assets as a whole or such as in the opinion of Bank constitute a
substantial portion of Borrower's business or assets;
5.5 Borrower will not engage in any business activities or operation
substantially different from or unrelated to present
business activities or operations; and
5.6 Borrower, and Borrower's tenants, contractors, agents or other
parties authorized to use any of Borrower's properties, will not
use, generate, manufacture, store, treat, dispose of, or release
any hazardous substance or hazardous waste in, on, under or
about any of Borrower's properties, except as previously
disclosed to Bank in writing as provided in section 3.8; and any
such activity shall be conducted in compliance with all
applicable federal, state and local laws, regulations and
ordinances, including without limitation those described in
section 3.8.
5.7 Borrower will not engage in any business activities or operation
substantially different from or unrelated to present
business activities or operations; and
5.8 Borrower, and Borrower's tenants, contractors, agents or other
parties authorized to use any of Borrower's properties, will not
use, generate, manufacture, store, treat, dispose of, or release
any hazardous substance or hazardous waste in, on, under or
about any of Borrower's properties, except as previously
disclosed to Bank in writing as provided in section 3.8; and any
such activity shall be conducted in compliance with all
applicable federal, state and local laws, regulations and
ordinances, including without limitation those described in
section 3.8.

6. Waiver, Release and Indemnification. Borrower hereby:
(a) releases and waives any claims against Bank for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any of the applicable federal, state or local laws,
regulations or ordinances, including without limitation those described
in section 3.8, and (b) agrees to indemnify and hold Bank harmless from
and against any and all claims, losses, liabilities, damages, penalties
and expenses which Bank may directly or indirectly sustain or suffer
resulting from a breach of (i) any of Borrower's representations and
warranties with respect to hazardous wastes and hazardous substances
contained in section 3.8, or (ii) section 5.8. The provisions of this
section 6 shall survive the full and final payment of all sums
outstanding under this Agreement and promissory notes and shall not be
affected by Bank's acquisition of any interest in any of the Borrower's
properties, whether by foreclosure or otherwise.

7. Events of Default. The occurrence of any of the following events ("Events
of Default") shall terminate any and all obligations on the part of Bank
to make or continue the loan and/or line of credit and, at the option of
Bank, shall make all sums of interest and principal outstanding under the
loan and/or line of credit immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of non
payment or dishonor, or other notices or demands of any kind or
character, all of which are waived by Borrower, and Bank may proceed with
collection of such obligations and enforcement and realization upon all
security which it may hold and to the enforcement of all rights hereunder
or at law:

7.1 The Borrower shall fail to pay when due any amount payable by
it hereunder on any loans or notes executed in connection
herewith;
7.2 Borrower shall fail to comply with the provisions of any other
covenant, obligation or term of this Agreement for a period of
fifteen (15) days after the earlier of written notice thereof
shall have been given to the Borrower by Bank or Borrower or any
Guarantor has knowledge of an Event of Default or an event that
can become an Event of Default;
7.3 Borrower shall fail to pay when due any other obligation for
borrowed money, or to perform any term or covenant on its part
to be performed under any agreement relating to such obligation
or any such other debt shall be declared to be due and payable
and such failure shall continue after the applicable grace
period;
7.4 Any representation or warranty made by Borrower in this
Agreement or in any other statement to Bank shall prove to have
been false or misleading in any material respect when made;
7.5 Borrower makes an assignment for the benefit of creditors, files
a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions to any court for a receiver or trustee for Borrower or
any substantial part of its property, commences any proceeding
relating to the arrangement, readjustment, reorganization or
liquidation under any bankruptcy or similar laws, or if there is
commenced against Borrower any such proceedings which remain
undismissed for a period of thirty (30) days or, if Borrower by
any act indicates its consent or acquiescence in any such
proceeding or the appointment of any such trustee or receiver;
+7.6 Any judgment attaches against Borrower or any of its properties
for an amount in excess of $100,000 which remains unpaid,
unstayed on appeal, unbonded, or undismissed for a period of
thirty (30) days;
7.7 Loss of any required government approvals, and/or any
governmental regulatory authority takes or institutes action
which, in the opinion of Bank, will adversely affect Borrower's
condition, operations or ability to repay the loan and/or line
of credit;
7.8 Failure of Bank to have a legal, valid and binding first lien
on, or a valid and enforceable prior perfected security interest
in, any property covered by any deed of trust or security
agreement required under this Agreement;
7.9 Borrower dies, becomes incompetent, or ceases to exist as a
going concern;
7.10 Occurrence of an extraordinary situation which gives Bank
reasonable grounds to believe that Borrower may not, or will be
unable to, perform its obligations under this or any other
agreement between Bank and Borrower; or
7.11 Any of the preceding events occur with respect to any guarantor
of credit under this Agreement, or such guarantor dies or
becomes incompetent, unless the obligations arising under the
guaranty and related agreements have been unconditionally
assumed by the guarantor's estate in a manner satisfactory to
Bank.

8. Successors; Waivers. Notwithstanding the Events of Default above, this
Agreement shall be binding upon and inure to the benefit of Borrower and Bank,
their respective successors and assigns, except that Borrower may not assign its
rights hereunder. No consent or waiver under this Agreement shall be effective
unless in writing and signed by the Bank and shall not waive or affect any other
default, whether prior or subsequent thereto, and whether of the same or
different type. No delay or omission on the part of the Bank in exercising any
right shall operate as a waiver of such right or any other right.

9. Arbitration.

9.1 At the request of either Bank or Borrower any controversy or claim between
the Bank and Borrower, arising from or relating to this Agreement or any Loan
Document executed in connection with this Agreement or arising from any alleged
tort shall be settled by arbitration in King County, Washington. The United
States Arbitration Act will apply to the arbitration proceedings which will be
administered by the American Arbitration Association under its commercial rules
of arbitration except that unless the amount of the claim(s) being arbitrated
exceeds $5,000,000 there shall be only one arbitrator. Any controversy over
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of any action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of either party, including plaintiff, to submit the controversy or
claim to arbitration if such action for judicial relief is contested. For
purposes of the application of the statute of limitations the filing of an
arbitration as provided herein is the equivalent of filing a lawsuit and the
arbitrator(s) will have the authority to decide whether any claim or controversy
is barred by the statute of limitations, and if so, to dismiss the arbitration
on that basis. The parties consent to the joinder in the arbitration proceedings
of any guarantor, hypothecator or other party having an interest related to the
claim or controversy being arbitrated. 9.2 Notwithstanding the provisions of
Section 9.1, no controversy or claim shall be submitted to arbitration without
the consent of all parties if at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation secured by real
property; 9.3 No provision of this Section 9 shall limit the right of the
Borrower or the Bank to exercise self-help remedies such as setoff, foreclosure
or sale of any collateral, or obtaining any ancillary provisional or interim
remedies from a court of competent jurisdiction before, after or during the
pendency of any arbitration proceeding. The exercise of any such remedy does not
waive the right of either party to request arbitration. At Bank's option
foreclosure under any deed of trust may be accomplished by exercise of the power
of sale under the deed of trust or judicial foreclosure as a mortgage.

10. Collection Activities, Lawsuits and Governing Law. Borrower agrees to pay
Bank all costs and expenses (including reasonable attorney's fees and the
allocated cost for in-house legal services incurred by Bank), to enforce this
Agreement, any notes or any Loan Documents pursuant to this Agreement, whether
or not suit is instituted. If suit is instituted by Bank to enforce this
Agreement or any of these documents, Borrower consents to the personal
jurisdiction of the Courts of the State of Washington and Federal Courts located
in the State of Washington. Borrower further consents to the venue of this suit,
being laid in King County, Washington. This Agreement and any notes and security
agreements entered into pursuant to this Agreement shall be construed in
accordance with the laws of the State of Washington.

+11. Additional Provisions. Borrower agrees to the additional provisions set
forth immediately following this Section 11 or on any "Exhibit N/A" attached to
and hereby incorporated into Agreement. This Agreement supersedes all oral
negotiations or agreements between Bank and Borrower with respect to the subject
matter hereof and constitutes the entire understanding and Agreement of the
matters set forth in this Agreement.

11.1 If any provision of this Agreement is held to be invalid or unenforceable,
then (a) such provision shall be deemed modified if possible, or if not
possible, such provision shall be deemed stricken, and (b) all other provisions
shall remain in full force and effect. 11.2 If the imposition of or any change
in any law, rule, or regulation guideline or the interpretation or application
of any thereof by any court of administrative or governmental authority
(including any request or policy whether or not having the force of law) shall
impose or modify any taxes (except U.S. federal, state or local income or
franchise taxes imposed on Bank), reserve requirements, capital adequacy
requirements or other obligations which would: (a) increase the cost to Bank for
extending or maintaining any loans and/or line of credit to which this Agreement
relates, (b) reduce the amounts payable to Bank under this Agreement, such notes
and other instruments, or (c) reduce the rate of return on Bank's capital as a
consequence of Bank's obligations with respect to any loan and/or line of credit
to which this Agreement relates, then Borrower agrees to pay Bank such
additional amounts as will compensate Bank therefor, within five (5) days after
Bank's written demand for such payment, which demand shall be accompanied by an
explanation of such imposition or charge and a calculation in reasonable detail
of the additional amounts payable by Borrower, which explanation and
calculations shall be conclusive, absent manifest error. 11.3 Bank may sell
participations in or assign this loan in whole or in part without notice to
Borrower and Bank may provide information regarding the Borrower and this
Agreement to any prospective participant or assignee. If a participation is sold
or the loan is assigned the purchaser will have the right of set off against the
Borrower and may enforce its interest in the Loan irrespective of any claims or
defenses the Borrower may have against the Bank. 11.4 Not permit Borrower's debt
coverage ratio to fall below 1.50 (measured quarterly based upon the immediately
preceding four quarters financial results), and computed as follows:

Debt Net Income + Depreciation + Amortization - Coverage =
Maint. CAPEX ($3,000,000) - Dividends
------------------------------------------------
Ratio Current Portion Long-Term Debt

12. Notices. Any notices shall be given in writing to the opposite party's
signature below or as that party may otherwise specify in writing.

13. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

14. Additional Provisions: Borrower agrees to the additional provisions, if any,
set forth immediately following this section or on an attachment hereto titled
"Exhibit N/A".
14.1 So long as any amounts or obligations of any type are owing by Borrower to
Bank, or Bank is committed to lend to Borrower: (a) Borrower shall not, without
the prior written consent of Bank, create or permit to exist any lien or
encumbrance upon, or transfer any interest in, any of its accounts receivable or
inventory, other than sales of inventory in the ordinary course of business; (b)
Borrower to provide Loan Agreement Compliance Certificates on a quarterly
basis.; and (c) If at any time the principal amount outstanding under Borrower's
revolving line of credit from Bank exceeds the sum of (i) 50% of Borrower's
accounts receivable plus (ii) 25% of the value (based on the lower of cost or
market) of Borrower's inventory, then, upon request by Bank, Borrower shall
grant to Bank a security interest in all of its accounts receivable and
inventory to secure all obligations of Borrower under the revolving line of
credit, pursuant to a security agreement and UCC filings in form satisfactory to
Bank.

This Business Loan Agreement (Parts A and B) executed by the parties on
September 30, 1996. Borrower acknowledges having read all of the provisions of
this Agreement and Borrower agrees to its terms.

SEAFIRST BANK ________Spokane & Eastern______________________
(Branch/Office)

By: _/s/Joe Poole___Title: Vice President
Joe Poole

Address: P.O. Box 1446 City,State, Zip: Spokane, WA 99210

Phone: __(509) 353-1475 Fax: ___(509) 353-1492_________

SEMITOOL, INC.
------------------------------------------------------------
(Borrower Name)

By: /s/Raymon F. Thompson___Title: President
Raymon F. Thompson

Address: 655 West Reserve Drive City,State, Zip: Kalispell, MT 59901

Phone: (406) 752-2107 Fax: (406) 752-5522
<PAGE>

Exhibit 10.15

Promissory Note (SEMITOOL, INC)

DUE: December 31, 1998

PROMISSORY NOTE

SEMITOOL, INC

$15,000,000.00 Dated: September 30, 1996
Seattle, Washington

SEMITOOL, INC, a Montana corporation ("Maker") unconditionally promises to pay
to the order of Bank of America NW, N.A., doing business as SEAFIRST BANK
("Bank"), at its Spokane & Eastern Commercial Team 56 office, on or before
December 31, 1998, in immediately available funds, the principal sum of Fifteen
Million and no/100ths Dollars ($15,000,000.00), or such lesser sum as may be
advanced hereunder. Maker further agrees to pay interest on the daily unpaid
principal balance, in arrears on the 1st day of each month, beginning the 1st
day of November, 1996, in accordance with the terms, conditions, and definitions
of Exhibit A attached, which are incorporated herein. Also incorporated herein
is Exhibit 1 attached hereto, regarding prepayment fees.

All advances under this Note, all conversions between the interest rate options,
and all payments of principal and interest may be reflected on a schedule or a
computer-generated statement which shall become a part hereof. All unpaid
principal and accrued but unpaid interest under this Note shall be paid in full
on December 31, 1998.

Bank is authorized to automatically debit each required installment of interest
from Borrower's checking account number 13629803 at Bank, or such other deposit
account at Bank as Borrower may authorize in the future.

If all or any portion of the principal amount or any installment of interest is
not paid when due, interest shall accrue, at the option of the holder of this
Note, from the date of default at a floating rate per annum three percent (3%)
above the Prime Rate, as the Prime Rate may vary from time to time, and the
entire unpaid principal amount of this Note, together with all accrued interest,
shall become immediately due and payable at the option of the holder hereof.

Advances under this Note may be made by Bank at the oral or written request of
any one acting alone, who are authorized to request advances and direct the
disposition of any such advances until written notice of the revocation of such
authority is received by Bank at its office indicated above. Any such advance
shall be conclusively presumed to have been made to or for the benefit of Maker
when made in accordance with such requests and directions, or when said advances
are deposited to the credit of an account of Maker with Bank, regardless of the
fact that persons other than those authorized under this paragraph may have
authority to draw against such account.

Maker hereby waives presentment, demand, protest, and notice of dishonor hereof.
Each party signing or endorsing this Note signs as maker and principal, and not
as guarantor, surety, or accommodation party; and is estopped from asserting any
defense based on any capacity other than maker or principal.

This Note shall be governed by and construed in accordance with the laws of the
State of Washington.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

SEMITOOL, INC

By:/s/Raymon F. Thompson

Its:President

<PAGE>

Page A-5
Promissory Note (SEMITOOL, INC/gl0930st)
EXHIBIT A
INTEREST PROVISIONS

ARTICLE 1

Definitions
All terms defined below shall have the meaning indicated: Acceptances
shall mean each of the drafts drawn by Borrower on Bank and presented by
Borrower to Bank for acceptance which shall:
.1 Relate to the shipment or domestic storage of goods; .2 Be dated the date of
such drawing; .3 Be payable in a multiple face amount of $100,000;
.4 Not require Bank to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System in effect from time to time, or under
any other law or regulation; .5 Comply with the requirements contained in
paragraph 7 of Section 13 of the Federal Reserve Act (12 U.S.C. Sec. 372)
pertaining to the creation, discount, and subsequent sale of bankers'
acceptances by a member bank; and .6 Mature and be payable on a Business Day
which occurs not less than seven days and not more than 180 days after the date
the draft is drawn. 2 Adjusted LIBOR Rate shall mean for any day that per annum
rate equal to the sum of (a) a margin of 2.00%, (b) the Assessment Rate, and (c)
the quotient of (i) the LIBOR Rate as determined for such day, divided by (ii)
the Reserve Adjustment. The Adjusted LIBOR Rate shall change with any change in
the LIBOR Rate on the first day of each Interest Period and on the effective
date of any change in the Assessment Rate or Reserve Adjustment. 3 Advances
shall mean the disbursement of loan proceeds under the Note. Assessment Rate
shall mean as of any day the minimum annual percentage rate established by the
Federal Deposit Insurance Corporation (or any successor) for the assessment due
from members of the Bank Insurance Fund (or any successor) in effect for the
assessment period during which said day occurs based on deposits maintained at
such members' offices located outside of the United States. 5 Available Amounts
shall mean $15,000,000.00 less the outstanding principal balance of the Note,
less the aggregate amount of outstanding Acceptances. 6 Bank shall mean the
holder of the Note. Banker's Acceptance Rate shall mean the rate equal to: (a)
The competitive bid rate determined at Bank's sole discretion and quoted to
Borrower for the discounting of Acceptances eligible for discount by Federal
Reserve Banks in an amount comparable to and with the same maturity as the
commercial drafts or bills being presented for acceptance by Borrower to Bank as
of 9:30 a.m., Seattle time, on the date such drafts or bills are presented for
acceptance ("Bid Rate"); multiplied by (b) The quotient of the number of days
each draft is outstanding until maturity divided by 360 days, as follows:
(Bid Rate) X (Number of Days Outstanding (PI) 360 days) The
Banker's Acceptance Rate shall be rounded to the next higher 1/100th of 1%.
1 Borrower shall mean the maker of the Note.
2 Business Day shall mean any day other than a Saturday, Sunday, or other day on
which commercial banks in Seattle, Washington, are authorized or required by law
to close. 3 Commencement Date shall mean the first day of any Interest Period as
requested by Borrower. 4 Floating Rate Loans shall mean those portions of
principal of the Note accruing interest at the Floating Rate. 5 Floating Rate
shall mean the Prime Rate plus 0.00% per annum. 6 Interest Period shall mean the
period commencing on the date of any advance at or conversion to an Adjusted
LIBOR Rate and ending on any date thereafter as selected by Borrower, subject to
the restrictions of Section 2.3. If any Interest Period would end on a day which
is not a Business Day, the Interest Period shall be extended to the next
succeeding Business Day, unless the next succeeding Business Day falls in the
next month, in which case the Interest Period shall be shortened to the
preceding Business Day. 7 LIBOR Rate shall mean for any Interest Period the per
annum rate, calculated on the basis of actual number of days elapsed over a year
of 360 days, for U.S. Dollar deposits for a period equal to the Interest Period
appearing on the display designated as "Page 3750" on the Telerate Service (or
such other page on that service or such other service designated by the British
Banker's Association for the display of that Association's Interest Settlement
Rates for U.S. Dollar deposits) as of 11:00 a.m., London time, on the day which
is two London Banking Days prior to the first day of the Interest Period. If
there is no period equal to the Interest Period on the display, the LIBOR Rate
shall be determined by straight-line interpolation to the nearest month (or week
or day if expressed in weeks or days) corresponding to the Interest Period
between the two nearest neighboring periods on the display. 8 LIBOR Rate Loans
shall mean those portions of principal of the Note accruing interest at the
Adjusted LIBOR Rate. 9 London Banking Day shall mean any day other than a
Saturday, Sunday, or other day on which commercial banks in London, England, are
authorized or required by law to close. 10 Note shall mean the promissory note
to which this exhibit is attached. 11 Prime Rate shall mean the floating
commercial loan reference rate of Bank, publicly announced from time to time as
its "prime rate" (calculated on the basis of actual number of days elapsed over
a year of 360 days), with any change in the Prime Rate to be effective on the
date the "prime rate" changes. 12 Reserve Adjustment shall mean as of any day
the remainder of one minus that percentage (expressed as a decimal) which is the
highest of any such percentages established by the Board of Governors of the
Federal Reserve System (or any successor) for required reserves (including any
emergency, marginal, or supplemental reserve requirement) regardless of the
aggregate amount of deposits with said member bank and without benefit of any
possible credit, proration, exemptions, or offsets for time deposits established
at offices of member banks located outside of the United States or for
eurocurrency liabilities, if any. 13 Termination Date shall mean December 31,
1998, or such earlier date upon which Bank makes demand for payment in full
under the Note based on a default under the Note.

<PAGE>

ARTICLE 2

Interest Rate Options
1 Interest Rates and Payment Date. The Note shall bear interest from the date of
Advance on the unpaid principal balance outstanding from time to time at the
Floating Rate or Adjusted LIBOR Rate as selected by Borrower and all accrued
interest shall be payable in arrears as provided in the Note. 2 Procedure.
Borrower may, on any London Banking Day two London Banking Days before a
Commencement Date, request Bank to give an Adjusted LIBOR Rate quote for a
specified loan amount and Interest Period. Bank will then quote to Borrower the
available Adjusted LIBOR Rate. Borrower shall have two hours from the time of
the quote to elect an Adjusted LIBOR Rate by giving Bank irrevocable notice of
such election.

1 Restrictions. Each Interest Period shall be one month or two months or three
months or six months or one year or any other term acceptable to Bank in its
sole discretion. In no event shall an Interest Period extend beyond the
Termination Date. The minimum amount of a LIBOR Rate Loan shall be $500,000. 2
Prepayments. If Borrower prepays all or any portion of a LIBOR Rate Loan prior
to the end of an Interest Period, there shall be due at the time of any such
prepayment the Prepayment Fee, determined in accordance with Form 51-6325 which
is attached as Exhibit 1 to the Note. 3 Reversion to Floating. The Note shall
bear interest at the Floating Rate unless an Adjusted LIBOR Rate is specifically
selected. At the termination of any Interest Period each LIBOR Rate Loan shall
revert to a Floating Rate Loan unless Borrower directs otherwise pursuant to
Section 2.2. 4 Inability to Participate in Market. If Bank in good faith cannot
participate in the Eurodollar market for legal or practical reasons, the
Adjusted LIBOR Rate shall cease to be an interest rate option. Bank shall notify
Borrower of and when it again becomes legal or practical to participate in the
Eurodollar market, at which time the Adjusted LIBOR Rate shall resume being an
interest rate option. 5 Costs. Borrower shall, as to LIBOR Rate Loans, reimburse
Bank for all costs, taxes, and expenses, and defend and hold Bank harmless for
any liabilities, which Bank may incur as a consequence of any changes in the
cost of participating in, or in the laws or regulations affecting, the
Eurodollar market, including any additional reserve requirements, except to the
extent such costs are already calculated into the Adjusted LIBOR Rate. This
covenant shall survive the payment of the Note. 6 Basis of Quotes. Borrower
acknowledges that Bank may or may not in any particular case actually match-fund
a LIBOR Rate Loan. FDIC assessments, and Federal Reserve Board reserve
requirements, if any are assessed, will be based on Bank's best estimates of its
marginal cost for each of these items. Whether such estimates in fact represent
the actual cost to Bank for any particular dollar or Eurodollar deposit or any
LIBOR Rate Loan will depend upon how Bank actually chooses to fund the LIBOR
Rate Loan. By electing an Adjusted LIBOR Rate, Borrower waives any right to
object to Bank's means of calculating the Adjusted LIBOR Rate quote accepted by
Borrower.

<PAGE>

ARTICLE 3

Advances
1 Revolving Loan Facility. Bank shall until the earlier of demand or the
Termination Date make Advances to Borrower from time to time, to the extent of
the Available Amounts, with the aggregate principal amount at any one time
outstanding not to exceed $15,000,000.00 less the aggregate amount of
outstanding Acceptances. Borrower may borrow, prepay, and reborrow the principal
of the Note in whole or in part. 2 Procedure for Advances. Borrower may borrow
on any Business Day. Borrower shall give Bank irrevocable notice (written or
oral) specifying the amount to be borrowed and the requested borrowing date.
Bank must receive such notice on or before 11:30 a.m., Seattle time, on the day
borrowing is requested. All Advances shall be discretionary to the extent
notification by Borrower is given subsequent to that time. 3 Commitment to Issue
Acceptances. Bank shall until the earlier of the Termination Date or demand on
the Note accept for payment drafts drawn on it by Borrower, to the extent of the
Available Amount, in such amounts as Borrower may request, with the maximum
liabilities thereunder at any one time outstanding not to exceed $15,000,000.00
less the outstanding balance under the Note. 4 Manner of Creating Acceptances.
Borrower shall give Bank telephonic or written notice of each request for an
Acceptance, in form acceptable to Bank, prior to 11:30 a.m., Seattle time, on
the Business Day the draft is presented to Bank for acceptance. The notice shall
specify: (a) the date of drawing, maturity date, and face amount of the draft to
be accepted; (b) the description of the goods covered; (c) the date of shipment
and arrival, and point of destination, or place of storage; and (d) that no
other financing has been obtained with respect to the goods covered by the
Acceptance. 1 Creation of Acceptance. On the Business Day specified for the
Acceptance, Bank is authorized by Borrower to: (a) Complete a draft or drafts
with the issuance date, face amount, and maturity date of such drawing as
specified by Borrower; (b) Accept and discount the draft or drafts; and (c) Pay
to Borrower a purchase price equal to the face amount of such Acceptance, less
an amount equal to the Banker's Acceptance Rate times the face amount of such
Acceptance and less all usual and customary charges in connection with the
creation and administration of acceptances. The purchase price shall be paid by
depositing such amount in a deposit account maintained by Borrower with Bank. 1
Payment of Acceptance. Borrower shall pay Bank the face amount of all
Acceptances by 2:30 p.m., Seattle time, on the date of maturity. However, if
Borrower fails to do so, Bank may choose, rather than make demand, to make an
Advance under the Note in the amount of the maturing Acceptance together with
all charges and expenses that may be paid or incurred by Bank for such
Acceptance, whether or not Borrower has requested an Advance, and apply the
proceeds of such Advance to amounts due.

<PAGE>

2 Form 51-6325: Page 3 of 2
Exhibit 1 -- PREPAYMENT FEES

If the principal balance of this note is prepaid in whole or in part, whether by
voluntary prepayment, operation of law, acceleration or otherwise, a prepayment
fee, in addition to any interest earned, will be immediately payable to the
holder of this note.

The amount of the prepayment fee depends on the following:

(1) The amount by which interest reference rates as defined below have changed
between the time the loan is prepaid and either a) the time the loan was made
for fixed rate loans, or b) the time the interest rate last changed (repriced)
for variable rate loans.
(2) A prepayment fee factor (see "Prepayment Fee Factor
Schedule" on reverse).
(3) The amount of principal prepaid.

If the proceeds from a CD or time deposit pledged to secure the loan are used to
prepay the loan resulting in payment of an early withdrawal penalty for the CD,
a prepayment fee will not also be charged under the loan.

Definition of Reference Rate for Variable Rate Loans

The "Reference Rate" used to represent interest rate levels for variable rate
loans shall be the index rate used to determine the rate on this loan having
maturities equivalent to the remaining period to interest rate change date
(repricing) of this loan rounded upward to the nearest month. The "Initial
Reference Rate" shall be the Reference Rate at the time of last repricing and a
new Initial Reference Rate shall be assigned at each subsequent repricing. The
"Final Reference Rate" shall be the Reference Rate at the time of prepayment.

Definition of Reference Rate for Fixed Rate Loans

The "Reference Rate" used to represent interest rate levels on fixed rate loans
shall be the bond equivalent yield of the average U.S. Treasury rate having
maturities equivalent to the remaining period to maturity of this loan rounded
upward to the nearest month. The "Initial Reference Rate" shall be the Reference
Rate at the time the loan was made. The "Final Reference Rate" shall be the
Reference Rate at time of prepayment.

The Reference Rate shall be interpolated from the yields as displayed on Page
119 of the Dow Jones Telerate Service (or such other page or service as may
replace that page or service for the purpose of displaying rates comparable to
said U.S. Treasury rates) on the day the loan was made (Initial Reference Rate)
or the day of prepayment (Final Reference Rate).

An Initial Reference Rate of N/A % has been assigned to this loan to represent
interest rate levels at origination.

CALCULATION OF PREPAYMENT FEE

If the Initial Reference Rate is less than or equal to the Final Reference Rate,
there is no prepayment fee.

If the Initial Reference Rate is greater than the Final Reference Rate, the
prepayment fee shall be equal to the difference between the Initial and Final
Reference Rates (expressed as a decimal), multiplied by the appropriate factor
from the Prepayment Fee Factor Schedule, multiplied by the principal amount of
the loan being prepaid.

<PAGE>

Example of Prepayment Fee Calculation

Variable Rate Loan: A non-amortizing 6-month LIBOR based loan with principal of
$250,000 is fully prepaid with 3 months remaining until next interest rate
change date (repricing). An Initial Reference Rate of 7.0% was assigned to the
loan at last repricing. The Final Reference Rate (as determined by the 3-month
LIBOR index) is 6.5%. Rates therefore have dropped 0.5% since last repricing and
a prepayment fee applies. A prepayment fee factor of 0.31 is determined from
Table 3 below and the prepayment fee is computed as follows:

Prepayment Fee = (0.07 ae 0.065) x (0.31) x ($250,000) = $387.50

Fixed Rate Loan: An amortizing loan with remaining principal of $250,000 is
fully prepaid with 24 months remaining until maturity. An Initial Reference Rate
of 9.0% was assigned to the loan when the loan was made. The Final Reference
Rate (as determined by the current 24-month U.S. Treasury rate on Page 119 of
Telerate) is 7.5%. Rates therefore have dropped 1.5% since the loan was made and
a prepayment fee applies. A prepayment fee factor of 1.3 is determined from
Table 1 below and the prepayment fee is computed as follows:

Prepayment Fee = (0.09 ae 0.075) x (1.3) x ($250,000) = $4,875
<TABLE>
<CAPTION>

PREPAYMENT FEE FACTOR SCHEDULE

TABLE I: FULLY AMORTIZING LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
- --------------------------------------------------------------------------------------------------------------------
90-100% 0 .21 .36 .52 .67 1.3 1.9 2.5 3.1 4.3 5.9 10.3 13.1
60-89% 0 .24 .44 .63 .83 1.6 2.4 3.1 3.9 5.4 7.5 13.2 17.0
30-59% 0 .28 .53 .78 1.02 2.0 3.0 4.0 5.0 7.0 9.9 18.5 24,4
0-29% 0 .31 .63 .92 1.22 2.4 3.7 5.0 6.3 9.0 13.4 28.3 41.8

TABLE II: PARTIALLY AMORTIZING (BALLOON) LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
- --------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
- --------------------------------------------------------------------------------------------------------------------
90-100% 0 .26 .49 .71 .94 1.8 2.7 3.4 4.2 5.6 7.4 11.6 14.0
60-89% 0 .30 .59 .86 1.15 2.2 3.3 4.3 5.3 7.1 9.4 15.0 18.1
30-59% 0 .31 .63 .95 1.27 2.6 3.9 5.3 6.6 9.1 12.6 21.2 26.2
0-29% 0 .31 .63 .95 1.27 2.6 4.0 5.4 7.0 10.2 15.7 33.4 46.0

TABLE III: NONAMORTIZING (INTEREST ONLY) LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
- --------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
- --------------------------------------------------------------------------------------------------------------------
0-100% 0 .31 .61 .91 1.21 2.3 3.4 4.4 5.3 6.9 8.9 13.0 14.8

</TABLE>

1 For the remaining period to maturity/repricing between any two
maturities/repricings shown in the above schedules, interpolate between the
corresponding factors to the closest month.

The holder of this note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury Obligations, or otherwise prove its
actual loss, as a condition to receiving a prepayment fee as calculated above.

<PAGE>
Exhibit 21.1

Subsidiaries of Registrant

Name Jurisdiction of Incorporation
- -------------------------- -----------------------------
Semitool Europe Ltd. United Kingdom

Semitool Halbleitertechnik Vertriebs GmbH Germany

Semitool France SARL France

Samitool Italia SRL Italy

Semitool KK, Japan Japan

Semitool, Inc., Korea Korea

Semitool, Inc., FSC Barbados

Semy Engineering, Inc. Delaware

Rhetech, Inc. Delaware

<ARTICLE> 5
<LEGEND>
Exhibit 27.1

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,058
<SECURITIES> 0
<RECEIVABLES> 39,416
<ALLOWANCES> 233
<INVENTORY> 36,909
<CURRENT-ASSETS> 85,846
<PP&E> 38,409
<DEPRECIATION> 12,072
<TOTAL-ASSETS> 114,954
<CURRENT-LIABILITIES> 42,049
<BONDS> 3,637
0
0
<COMMON> 39,577
<OTHER-SE> 28,426
<TOTAL-LIABILITY-AND-EQUITY> 114,954
<SALES> 171,689
<TOTAL-REVENUES> 174,204
<CGS> 88,949
<TOTAL-COSTS> 89,573
<OTHER-EXPENSES> 19,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 540
<INCOME-PRETAX> 24,026
<INCOME-TAX> 8,890
<INCOME-CONTINUING> 15,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,136
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09

</TABLE>