UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549~~

~~FORM~~SECURITIES AND ~~10-K~~EXCHANGE COMMISSION

~~[X]~~Washington, D.C. ~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~20549

~~For the Fiscal Year Ended September 30, 2004~~FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

~~[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)~~ OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the Transition Period From ___ to ___~~

~~Commission~~For the ~~File~~Fiscal ~~Number~~Year ~~0-25424~~Ended September 30, 2009

~~SEMITOOL, INC.(Exact Name of Registrant as Specified in Its Charter)~~ OR

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

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

~~Semitool,~~OF THE ~~Inc.655~~SECURITIES ~~West~~EXCHANGE ~~Reserve~~ACT ~~Drive,~~OF ~~Kalispell, Montana 59901 (406) 752-2107 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)~~ 1934

~~Securities~~For the ~~registered~~Transition ~~pursuant~~Period toFrom ~~Section~~___ ~~12(b)~~to ~~of the Act: None~~ ___

~~Securities~~Commission File ~~registered~~Number ~~pursuant to Section 12(g) of the Act: Common Stock, no par value~~ 0-25424

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)SEMITOOL, ~~and (2) has been subject to such filing requirements for the past 90 days~~ INC. ~~Yes [X] No [ ]~~

~~Indicate~~(Exact byName ~~check mark if disclosure~~ of Registrant ~~delinquent~~as ~~filers~~Specified ~~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~~Its ~~proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]~~ Charter)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Montana	81-0384392
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

~~The approximate aggregate market value of the voting stock held by non-affiliates of the registrant on March 31~~Semitool, ~~2004 (based on the last reported sale price on the Nasdaq National Market as of such date) was $210,485,780~~ Inc.

~~The~~655 West ~~number~~Reserve ~~of shares of the registrant’s Common Stock~~Drive, ~~no par value~~Kalispell, ~~outstanding as of December 1, 2004 was 28,690,507.~~ Montana 59901

~~DOCUMENTS INCORPORATED BY REFERENCE~~(406) 752-2107

~~There~~(Address, isincluding zip ~~incorporated~~code, byand ~~reference~~telephone ~~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 16~~number, ~~2005.~~ including

~~SEMITOOL~~area code, ~~INC.~~of registrant’s principal executive offices)

~~Index~~Securities toregistered ~~Annual~~pursuant ~~Report~~to Section 12(b) onof ~~Form~~the ~~10-K Year Ended September 30, 2004~~Act:

~~PART~~Title Iof Each Class Name of Each Exchange on Which Registered Common Stock, no par value NASDAQ Global Select Market

~~ITEM~~Securities registered 1.pursuant ~~ITEM~~to ~~2.ITEM~~Section 12(g) ~~3.ITEM~~of 4.the ~~INTRODUCTION - FORWARD-LOOKING STATEMENTS BUSINESS EXECUTIVE OFFICERS OF THE REGISTRANT PROPERTIES LEGAL PROCEEDINGS SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~Act:

~~PART II~~ None

~~ITEM~~Indicate 5.by ~~ITEM~~check mark 6.if ~~ITEM~~the 7.registrant ~~ITEM~~is ~~7A.ITEM~~a 8.well-known ~~ITEM~~seasoned 9.issuer, ~~ITEM~~as ~~9A.ITEM~~defined ~~9B.~~in ~~MARKET~~Rule ~~FOR~~405 of ~~OUR~~the ~~COMMON~~Securities STOCK AND RELATED SHAREHOLDER MATTERS SELECTED FINANCIAL DATA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES CONTROLS AND PROCEDURES OTHER INFORMATIONAct. Yes o No x

~~PART~~Indicate ~~III~~by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

~~ITEM~~Indicate ~~10.ITEM~~by ~~11.ITEM~~check mark ~~12.ITEM~~whether the registrant (1) has filed all reports required to be filed by Section 13~~.ITEM~~ ~~14.~~or ~~EXECUTIVE~~15(d) ~~OFFICERS~~of ~~AND~~the ~~DIRECTORS~~Securities ~~EXECUTIVE~~Exchange ~~COMPENSATION~~Act ~~SECURITY~~of ~~OWNERSHIP~~1934 OFduring ~~CERTAIN~~the ~~BENEFICIAL~~preceding 12 ~~OWNERS~~months ~~AND~~(or ~~MANAGEMENT~~for ~~CERTAIN~~such ~~RELATIONSHIPS~~shorter ~~AND~~period ~~RELATED~~that ~~TRANSACTIONS~~the ~~PRINCIPAL~~registrant ~~ACCOUNTANT~~was ~~FEES~~required ~~AND~~to ~~SERVICES~~file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

~~PART~~Indicate IVby check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes o No o

~~ITEM~~Indicate ~~15.~~by ~~EXHIBITS~~check mark ~~AND~~if ~~FINANCIAL~~disclosure ~~STATEMENT~~of ~~SCHEDULES~~delinquent ~~SIGNATURES~~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. o

~~PART~~Indicate Iby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

~~Introduction~~Large -accelerated ~~Forward~~filer o Accelerated filer x Non-~~Looking~~accelerated ~~Statements~~filer o Smaller reporting company o

~~Statements~~Indicate ~~contained~~by incheck mark ~~this~~whether ~~Annual Report on Form 10-K which are not purely historical facts are forward-looking statements within~~ the ~~meaning~~registrant ofis ~~Section~~a ~~27A~~shell ofcompany ~~the Securities Act of 1933,~~ (as ~~amended,~~defined ~~and~~in ~~Section~~Rule ~~21E~~12b-2 of the ~~Securities~~ Exchange Act ~~of 1934~~). These forward-looking statements are based on management's estimates, projections and assumptions that underlie such statements at the time they are made. Forward-looking statements in the discussion of our business, properties and legal matters include, without limitation, statements regarding: Yes o No x

~~trends~~The inapproximate aggregate market value of the ~~semiconductor~~voting ~~industry~~stock ~~that~~held ~~are~~by ~~driving~~non-affiliates ~~growth~~of the registrant on March 31, ~~including~~2009 ~~whether~~(based on the ~~industry~~last ~~will~~reported ~~continue~~sale ~~torecover~~price inon ~~fiscal~~the NASDAQ ~~2005~~Global Select Market as of such date) was $63, 113,197.

~~Semitool's~~The ~~solutions~~number ~~and~~of shares ~~strategies~~of ~~for~~the ~~electrochemical~~registrant’s ~~deposition~~Common ~~and~~Stock, ~~wafer~~no ~~surface~~par ~~preparation~~value, ~~including~~outstanding ~~our~~as ~~intent~~of December to1, ~~continue~~2009 ~~investing~~was ~~in research and development to maintain and expand our position as a technology leader~~32, 873,266.

~~the~~DOCUMENTS INCORPORATED ~~performance~~BY ~~and acceptance of our products, including the continued technological improvement of our tools and the success of our Raider platform,~~ REFERENCE

~~manufacturing strategy, including our vertical manufacturing structure and manufacturing strategies for increasing performance reliability and yields while reducing the cost of ownership of our tools,~~ None

~~the pursuit of new and growing markets~~SEMITOOL, ~~including our strategy for increased sales in Asia and long-term growth potential there,~~ INC.

~~competition, including our ability~~ Index to ~~compete~~Annual ~~favorably~~Report ~~with~~on ~~companies significantly larger than us,~~ Form 10-K

~~patent~~Year Ended ~~filings and our efforts to protect our intellectual property portfolio~~September 30, 2009

the adequacy of our existing manufacturing facilities,

PART I
		PAGE

	INTRODUCTION – FORWARD-LOOKING STATEMENTS	3

ITEM 1.	BUSINESS	4

	EXECUTIVE OFFICERS OF THE REGISTRANT	11

ITEM 1A.	RISK FACTORS	11

ITEM 1B.	UNRESOLVED STAFF COMMENTS	19

ITEM 2.	PROPERTIES	20

ITEM 3.	LEGAL PROCEEDINGS	20

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20

PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21

ITEM 6.	SELECTED FINANCIAL DATA	22

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	63

ITEM 9A.	CONTROLS AND PROCEDURES	63

ITEM 9B.	OTHER INFORMATION	63

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	64

ITEM 11.	EXECUTIVE COMPENSATION	65

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	74

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	75

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	76

PART IV

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	77

	SIGNATURES	80

~~the~~Table ~~ability~~of ~~to maintain our worldwide sales, service and customer support organizations, and~~ Contents

~~the impact of litigation on our business.~~ PART I

~~Other~~Introduction ~~forward~~– Forward-~~looking~~Looking ~~statements made below under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere include statements relating to:~~ Statements

~~accounting~~Statements contained ~~policies~~in this Annual Report on Form 10-K which are not purely historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are all statements other than those of historical fact, and sometimes can be identified by the use of prospective or presumptive language such as “intend,” “plan,” “expect,” “will,” “may,” “should,” “could,” and words of similar meaning or context. These forward-looking statements are based on management’s estimates, projections and assumptions based on information known to management at the ~~effects~~time the statements are made. Forward-looking statements in the discussion of ~~new~~our business, ~~accounting~~properties ~~standards~~and legal matters include, without limitation, statements regarding:

~~research~~• trends in the semiconductor industry that are driving demand for our products, including the adoption of single-wafer 300mm processing, adoption of copper as an interconnect material, spray processing supplanting immersion technologies and ~~development~~the ~~expenses~~continued expansion of the wafer level packaging market; • Semitool’s solutions and strategies for electrochemical deposition, surface preparation and wafer level packaging, including ~~expected~~our ~~fluctuations~~intent into ~~such~~continue ~~expenses~~investing in ~~absolute~~research ~~dollar~~and ~~amounts~~development to maintain and expand our position as a ~~percentage~~technology ofleader ~~net~~in ~~sales~~those markets; • our plan to develop new technologies, including porous silicon, 3-D packaging, wafer thinning and solar market applications for our processes and equipment, to enable us to enter emerging markets and provide innovative solutions; • our plan to leverage our Raider platform with both our current and potential new customers and in new markets and our expectation that revenue from our Raider platform will continue to account for a significant portion of our revenue; • our plan to enhance our relationships with our major customers and identify opportunities to develop similar relationships with other semiconductor device manufacturers; • our intent to match our sales and support organization to market opportunities in Asia, and the potential for growth in those markets; • the performance and acceptance of our products, including the continued ~~funding~~technological improvement of ~~research~~our tools and ~~development~~the success of our Raider platform; • manufacturing strategy, including our vertical manufacturing structure and manufacturing strategies for increasing performance reliability and yields while reducing the cost of ownership of our tools; • competition, including our ability to ~~attain~~compete ~~technology~~favorably ~~leadership~~with incompanies significantly larger than we are; • our ~~industry~~efforts to protect our intellectual property portfolio and intent to continue to file patent applications to protect that intellectual property; • the adequacy of our existing manufacturing facilities; • the ability to maintain our worldwide sales, service and customer support organizations; • the impact of litigation on our business, including patent disputes; and • the impact of the recent turmoil in the world’s economies on our business.

~~the~~Other forward-looking ~~expected~~statements ~~geographic~~made ~~sales~~below ~~mix~~under ofthe ~~our~~heading ~~products,~~“Management’s ~~including~~Discussion and ~~our~~Analysis ~~anticipation~~ of ~~larger~~Financial ~~contributions~~Condition toand ~~sales~~Results ~~from~~of ~~Europe~~Operations” and ~~Asia~~elsewhere include instatements ~~fiscal~~relating ~~2005,~~ to:

• accounting policies and estimates and the effects of new accounting standards; • research and development expenses, including expected fluctuations in such expenses in absolute dollar amounts and as a percentage of net sales, and our expectation of continued funding of research and development to attain technology leadership in our industry; • estimates of capital expenditures and the sufficiency of funds and sources of financing to make expected capital expenditures through fiscal ~~2005~~2010; • the sufficiency of funds and the ability to finance activities, including sources of liquidity and the availability of the funds for borrowing under the debt covenants contained in our revolving credit line; • our expectation that existing debt financing arrangements and cash flows generated from operating activities will be sufficient to fund operations and planned capital expenditures through fiscal 2010; and • our estimated effective tax rate.

~~the~~Management ~~impact~~cautions that forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. Some of ~~various~~these ~~factors~~risks onand ~~gross~~uncertainties ~~margin~~are described under the heading “Risk Factors” (refer to Part I, Item 1A) and elsewhere in this Annual Report on Form 10-K. We undertake no obligation to update forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events.

~~inventory management, and~~ Important Note

On November 16, 2009, Semitool, Inc., entered into a definitive agreement to be acquired by Applied Materials, Inc. If the ~~sufficiency~~transactions ofcontemplated by ~~funds~~the agreement are completed, the Company’s status as a reporting company will cease and the ~~ability~~Company towill ~~finance~~have ~~activities,~~merged ~~including~~into ~~sources~~a wholly-owned subsidiary of Applied ~~liquidity~~Materials. Except as otherwise expressly noted, all statements and information in this filing presume our continuation as an independent company which will not be the case if we are acquired by Applied Materials.

Management cautions that forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties are detailed under the heading “Factors That Might Affect Our Future Financial Results and Stock Price” and elsewhere in this Annual Report on Form 10-K. We undertake no obligation to update forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events. 3

~~Item~~Table 1.of ~~Business~~Contents

~~Overview~~Item 1. Business

We design, manufacture, install and service highly-engineered equipment for use in the fabrication of semiconductor devices. Our products are focused on the wet chemical process steps in integrated circuit, or IC, manufacturing and include systems for wafer surface preparation and electrochemical deposition, or ECD, applications. Our surface preparation systems are designed for wet cleaning, stripping and etching processes, including photoresist and polymer removal and metal etching. Our ECD systems are used for copper and gold plating for the IC’s internal wiring, or interconnects; solder and gold bumps for wafer level packaging applications; and other metals for various semiconductor and related applications. Our products address critical applications within the semiconductor manufacturing process, and help enable our customers to manufacture more advanced semiconductor devices that feature higher levels of performance. The fabrication of semiconductor devices typically requires several hundred manufacturing steps, with the number of steps continuing to increase for advanced devices. Due to the breadth of our product portfolio and advanced technology capabilities, our solutions address over 100 of these manufacturing steps. As we have completed our final audit for ISO certification, we expect to be ISO 9001:2000 certified by the end of December 2004. Overview

~~Semitool~~We design, ~~Inc.~~manufacture, ainstall ~~Montana~~and ~~corporation,~~service ~~was~~highly-engineered ~~founded~~equipment for use in the ~~1979~~fabrication ~~and~~of issemiconductor ~~headquartered~~devices. Our products are focused on the wet chemical process steps in ~~Kalispell~~integrated circuit, ~~Montana.~~or ~~Our~~IC, ~~mailing~~manufacturing ~~address~~and include issystems ~~655~~for ~~West~~wafer ~~Reserve~~surface ~~Drive~~preparation and electrochemical deposition, ~~Kalispell~~or ECD, MTapplications. Our ~~59901~~surface ~~and~~preparation ~~our~~systems ~~telephone~~are ~~number~~designed isfor Front ~~406-752-2107.~~End ~~Additional~~of ~~information~~Line ~~about~~(FEOL), ~~the~~Back ~~Company~~End isof ~~available~~Line on(BEOL) ~~our~~and ~~website~~wafer atlevel ~~http://www~~packaging of ICs processes.~~semitool.com.~~ Our Onsingle-wafer ~~our~~FEOL ~~Investor~~surface ~~Relations~~preparation ~~page~~systems onare used ~~our~~for ~~website~~photoresist stripping, we post ~~the~~etch ~~following~~and ~~filings~~pre-diffusion ascleans. ~~soon~~Our asBEOL surface ~~practicable~~preparation ~~after~~systems ~~they~~ are ~~electronically~~used ~~filed~~for ~~with~~polymer orremoval ~~furnished~~and packaging applications. Our ECD systems are used to ~~the~~plate ~~Securities~~copper and ~~Exchange~~other ~~Commission:~~metals, ~~our~~which are ~~annual~~used ~~report~~for onthe ~~Form~~IC’s ~~10-K~~internal wiring, ~~our~~or ~~quarterly~~interconnects; ~~reports~~to onplate ~~Form~~solder ~~10-Q,~~and lead ~~our~~free ~~current~~solder ~~reports~~bumps onfor ~~Form~~wafer ~~8-K~~level ~~and~~packaging ~~any~~applications; ~~amendments~~and to ~~those~~plate other ~~reports~~metals ~~filed~~for orvarious ~~furnished~~semiconductor ~~pursuant~~and torelated applications. Also, ~~Sections~~our ~~13(a)~~surface orpreparation ~~15(d)~~systems ofare ~~the~~used ~~Securities~~for cleaning ~~Exchange~~and ~~Act~~etching ofprocesses ~~1934~~for wafer level packaging. Our ~~All~~primary product ~~such~~for ~~filings~~all onof ~~our~~these ~~own~~processes ~~Investor~~is ~~Relations~~the ~~web~~Raider ~~page~~platform, ~~are~~which ~~available~~is toa multi-chamber besingle-wafer ~~viewed~~tool. Our onproducts ~~this~~address ~~page~~critical applications ~~free~~within ofthe ~~charge.~~semiconductor ~~Information~~manufacturing ~~contained~~process, onand help enable our customers ~~website~~to ismanufacture ~~not~~more ~~part~~advanced ofsemiconductor ~~this~~devices ~~annual~~that feature higher ~~report~~levels onof ~~Form~~performance. The ~~10-K~~fabrication orof ~~our~~semiconductor ~~other~~devices typically ~~filings~~requires several hundred manufacturing steps, with the ~~Securities~~number ~~and~~of ~~Exchange~~steps continuing ~~Commission~~to increase for advanced devices. Due ~~Our~~to ~~Form~~the ~~10-K~~breadth ~~and~~of our ~~other~~product ~~filings~~portfolio ~~also~~and ~~are~~advanced ~~available~~technology atcapabilities, ~~the~~our ~~Securities~~solutions address ~~and~~over ~~Exchange~~150 ~~Commission’s~~of ~~website~~these atmanufacturing ~~http://www~~steps.~~sec.gov.~~

~~Industry~~Semitool, ~~Background~~Inc., a Montana corporation, was founded in 1979 and is headquartered in Kalispell, Montana. Our mailing address is 655 West Reserve Drive, Kalispell, MT 59901 and our telephone number is 406-752-2107. Additional information about the Company is available on our website at http://www.semitool.com. On our Investor Relations page on our website, we post our filings as soon as practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). All such filings on our own Investor Relations web page are available to be viewed free of charge. Information contained on our website is not part of, and is not incorporated into, this annual report on Form 10-K or our other filings with the Securities and Exchange Commission. Our filings also are available at the Securities and Exchange Commission’s website at http://www.sec.gov. Any materials the Company files with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330.

Growth in the semiconductor industry is driven by the global demand for semiconductor devices that are incorporated in a broad array of electronics devices such as personal computers, servers, digital televisions, audio systems, personal digital assistants, or PDAs, cellular phones and other wireless communications devices. The market for semiconductor equipment used to fabricate semiconductor devices has also experienced significant growth, driven by greater demand for, and increasingly higher performance of, semiconductor devices. Though subject to a high degree of cyclicality due to periods of excess supply or demand for semiconductor devices, the market for semiconductor equipment is characterized by rapid technological development and product innovation. As a result, to meet new technological advancements, semiconductor device manufacturers may purchase new semiconductor equipment despite theIndustry ~~timing of the market cycle.~~ Background

~~Semiconductor~~Growth ~~Manufacturing~~in ~~Process~~the semiconductor ~~Overview~~industry is driven by the global demand for semiconductor devices that are incorporated in an ever increasing array of electronic devices such as netbooks, smart phones, network servers, digital televisions, MP3 players, video game players, GPS devices and digital cameras to name a few. The market for semiconductor equipment used to fabricate semiconductor devices has also experienced significant growth, driven by greater demand for, and increasingly higher performance of, semiconductor devices. Though subject to a high degree of cyclicality due to periods of excess supply or demand for semiconductor equipment, semiconductor devices and semiconductor fab capacity utilization, the market for semiconductor equipment is characterized by rapid technological development and product innovation. As a result, to meet new technological advancements, semiconductor device manufacturers may purchase new semiconductor equipment despite the timing of the market cycle. Likewise, capital expenditures can be delayed or cancelled quickly due to market or macro-economic conditions.

Semiconductor devices consist of millions of microscopic transistors and other components that store information and allow the execution of instructions used to operate electronic devices. Fabrication of ICs involves hundreds of complex and repetitive process steps, involving an array of sophisticated manufacturing equipment and chemical media. The fabrication process includes, among others, the deposition of multiple layers of dielectric or insulating films and electrically conducting metal films. After the deposition of each film layer, the fabrication process continues with repeated cleaning, stripping and etching processes to prepare the surface for the next step. When completed, the wafer may contain several hundred ICs, which are then separated by a dicing process. The ICs are then packaged by connecting them to pins using metal wires or contacts and encapsulating the ICs in a polymer. In an ~~effort~~Manufacturing toProcess reduce the size of packaged ICs, some manufacturers are using newer packaging processes such as wafer level packaging, which allows for packaging of ICs before they are separated from the wafer. The packaged semiconductor devices are then placed into an electronic product, such as a cellular phone or other portable electronic device. Overview

~~Cleaning,~~Semiconductor devices ~~stripping,~~can ~~etching~~consist orof ~~otherwise~~over ~~preparing~~a ~~the~~billion ~~wafer~~nanometric ~~surface~~transistors ~~are~~and ~~steps~~other components ~~repeated~~that ~~throughout~~electronically store information and allow the ~~semiconductor~~execution ~~fabrication~~of instructions ~~process.~~used ~~These~~to ~~processes~~operate ~~are~~electronic ~~important,~~devices. Fabrication ~~since~~of ~~the~~ICs involves ~~integrity~~hundreds of ~~the~~complex ~~next~~and ~~step~~repetitive ~~depends~~process onsteps, ~~the~~involving ~~effectiveness~~an array of sophisticated ~~prior~~manufacturing ~~cleaning~~equipment, ~~stripping~~chemical media, orand materials. The ~~etching~~fabrication ~~steps.~~process ~~Immersion~~includes, among others, the deposition of multiple layers of dielectric or insulating films and ~~spray~~electrically conducting ~~are~~metal ~~two~~films. After ~~fundamental~~the ~~means~~deposition byof ~~which~~each ~~surface~~film ~~preparation~~layer, ~~wet~~the fabrication process ~~steps~~continues ~~are~~with ~~performed.~~repeated ~~Immersion~~cleaning, stripping and etching processes, orto ~~wet~~prepare ~~benches~~the surface for the next process. When completed, ~~use~~the awafer ~~series~~may ofcontain ~~liquid-filled~~several ~~tanks~~hundred inICs, which, ~~wafers~~traditionally, are then ~~immersed.~~separated by a dicing process. The ~~wafers~~ICs are ~~transported~~then ~~from~~packaged ~~one~~by connecting ~~tank~~them to ~~another~~pins ~~tank~~using bymetal ~~robots~~wire orcontacts ~~human~~and ~~operators.~~encapsulated ~~Spray~~in ~~delivery~~a ~~systems~~polymer plastic ~~subject~~case. In ~~wafers~~an effort to ~~sequential~~reduce ~~spray~~the ~~applications~~size of ~~chemicals~~packaged ~~inside~~ICs, ansome manufacturers ~~enclosed~~are ~~process~~using ~~chamber~~newer wafer level packaging techniques, ~~where~~which ~~the~~allow ~~chemical~~for attaching iseach ~~brought~~IC to ~~the~~its ~~wafers~~package ~~while~~prior ~~the~~to ~~wafers~~dicing ~~are~~the ~~spun~~wafer. With ~~Spray~~the use ~~systems~~of Through Silicon Vias (TSVs), chips can be ~~configured~~stacked upon each other to provide ~~process~~more ~~wafers~~computing process in a ~~batch~~compact space. Once diced, the packaged semiconductor device can then be used in electronic products, such as cellular phones or ~~single-wafer~~other ~~mode.~~electronic devices.

~~An IC’s internal wiring~~Cleaning, stripping, etching or ~~interconnect,~~otherwise ~~establishes~~preparing the ~~connections~~wafer ~~between~~surface, ~~transistors within an IC. Interconnects~~ are ~~formed~~steps byrepeated throughout the ~~deposition~~semiconductor offabrication ~~metal~~process ~~film~~as ~~layers,~~well ~~such~~ as ~~aluminum,~~in on the ~~surface~~wafer oflevel packaging ~~a wafer~~process. These ~~The~~processes ~~deposition~~are ~~step~~important, ~~occurs~~since ~~numerous~~the ~~times~~integrity of ~~throughout~~ the ~~manufacturing~~next process, ~~with~~depends ~~advanced~~on ~~ICs~~the ~~possessing~~effectiveness ~~seven~~of orprior ~~more~~cleaning, ~~metal~~stripping, or ~~film~~etching ~~layers~~steps. Immersion Asand ~~device~~spray ~~dimensions~~are ~~continue~~two tofundamental ~~shrink,~~means ~~the~~by which ~~connections~~surface ~~between~~preparation ~~transistors~~wet ~~add~~process ~~noticeably~~steps ~~more~~are ~~delay~~performed. toImmersion ICprocesses, or ~~processing~~wet ~~speeds~~benches, ~~due~~are toa ~~the~~series ~~intrinsic~~of ~~resistance~~chemical ~~and~~baths ~~capacitance~~in ofwhich ~~the~~wafers ~~interconnect material~~are immersed. The Inwafers anare ~~effort~~transported tofrom ~~increase~~a ICwet ~~speeds~~chemical ~~and~~tank ~~provide~~to another ~~lower~~tank ~~power~~by ~~operation,~~robots ~~copper~~or ishuman ~~increasingly~~operators. In ~~being~~contrast, ~~used~~spray delivery assystems ~~the~~subject ~~interconnect~~wafers ~~material, due~~ to ~~its~~sequential ~~lower~~spray ~~intrinsic~~applications ~~resistivity.~~of ~~However,~~chemicals inside ~~copper,~~an ~~unlike~~enclosed ~~aluminum~~process chamber, iswhere ~~difficult~~the tochemical ~~handle~~is ~~due~~brought to athe ~~negative~~wafers which ~~reaction~~are inspinning ~~direct~~on ~~contact~~axis. Spray ~~with~~systems ~~silicon,~~can ~~which~~be ~~leads~~configured to ~~lower yield and potentially contaminates~~ ~~other~~process ~~manufacturing~~wafers ~~processes.~~in As a ~~result,~~batch ~~copper-based~~or ~~manufacturing~~single ~~requires~~wafer ~~more~~mode. Single-wafer processor ~~critical~~systems ~~surface~~can ~~preparation steps and special processing techniques to~~ provide ~~complete~~a ~~isolation~~combination of ~~the~~spray ~~copper~~and ~~material~~immersion processes.

~~Trends in Semiconductor Manufacturing~~4

~~There~~Table ~~are~~of ~~several key trends in the semiconductor manufacturing industry driving growth in demand for wafer surface preparation, ECD and other advanced semiconductor equipment:~~ Contents

~~Smaller~~An IC’s ~~Device~~interconnect ~~Features~~wiring ~~for~~provides ~~Lower~~the ~~Cost~~means ~~and~~for ~~Higher~~electric ~~Performance.~~current ~~The~~to ~~increasing~~flow ~~trend towards more advanced electronics applications has spurred~~ from the ~~industry~~IC’s ~~transition~~transistors to ~~smaller~~external ~~device~~devices. Interconnects ~~features,~~are ~~enabling~~formed ~~lower~~by the ~~cost~~deposition ~~per~~of ~~IC,~~metal orfilm ~~die~~layers, such as ~~more~~copper, ~~die~~into ~~can~~trenches beand ~~fabricated~~vias on the asurface ~~single~~of a wafer. The ~~Additionally,~~deposition ~~smaller~~step ~~device~~occurs ~~features~~numerous ~~lead~~times throughout tothe ~~more~~manufacturing process, with advanced ~~semiconductor~~ICs ~~devices~~possessing ~~that~~ten ~~feature~~or ~~higher~~more metal ICfilm ~~speeds~~layers. As ~~However,~~device asdimensions continue to shrink, the connections ~~industry~~between ~~moves~~transistors toadd 90noticeably ~~nanometer~~more ~~features~~delay ~~sizes~~to ~~and~~IC ~~below~~processing speeds, due to the ICintrinsic ~~fabrication~~resistance ~~process~~and ~~becomes~~capacitance ~~significantly~~of ~~more~~the ~~complex,~~interconnect material. Copper ~~requiring~~is ~~more~~the ~~stringent~~material ~~manufacturing~~of ~~specifications~~choice in such situations and practically ~~lower~~all ~~acceptable~~300mm ~~margins~~fabs ofuse ~~error~~copper plating equipment. However, copper, Inunlike ~~particular~~aluminum, is difficult to handle and must be kept from direct contact with the ~~fabrication~~silicon ~~process~~wafer ~~becomes~~as ~~more~~it ~~susceptible~~will todiffuse ~~ever~~into ~~smaller~~the silicon. This ~~particles,~~will ~~requiring~~ruin the ~~use~~devices ofon ~~more~~the ~~advanced~~wafer ~~surface~~and ~~preparation~~could potentially ~~equipment~~contaminate an entire fab. As ~~Also~~a result, copper-based manufacturing ~~with~~requires ~~smaller~~more ICcritical ~~interconnects~~surface ~~requires~~preparation ~~the~~steps ~~use~~and ofspecial processing ~~ECD~~techniques ~~equipment~~ to ~~form~~provide ~~smaller~~complete ICisolation ~~interconnects.~~of the copper material.

~~New~~Trends in ~~Materials to Fabricate More Advanced~~ Semiconductor Devices. The need to fabricate increasingly advanced semiconductor devices has led to more complex manufacturing processes that use new materials, such as low-k dielectrics and copper to form an IC’s interconnect. The use of copper, in particular, presents significant processing challenges to prevent copper contamination of the wafer at the atomic level. To address these challenges, dedicated processes have been developed to provide better isolation of copper materials in an IC, including dual-damascene, barrier layer formation, and seed layer enhancement. These complex, dedicated processes require the use of ECD equipment for the precise deposition of copper material. Additionally, the introduction of new materials requires a higher number of surface preparation steps, as well as more advanced cleaning processes that are tailored to handle these new materials. Manufacturing

~~Increased~~There ~~Use of 300mm Wafers to Reduce Manufacturing Costs. Leading semiconductor device manufacturers~~ are ~~investing~~several key intrends ~~300mm wafer fabs. The increase~~ in ~~surface~~the ~~area~~semiconductor ~~over 200mm has led to higher~~ manufacturing ~~efficiency~~industry ~~and~~driving ~~lower~~growth ~~cost~~in ~~per~~demand for ~~IC due to the economies of scale that IC manufacturers achieve by processing additional die per~~ wafer. ~~Processing a larger~~ surface ~~area~~preparation, ~~requires~~ECD ~~an additional level of control~~ and ~~precision,~~other ~~which~~advanced ~~necessitates the purchase of next generation~~ semiconductor equipment ~~that is specifically targeted for the processing of 300mm wafers.~~ :

~~Move~~Smaller Device Features for Lower Cost and Higher Performance. Semiconductor devices have historically followed Moore’s Law which states that approximately every two years the amount of transistors on a device doubles, allowing semiconductor manufacturers to build ~~Spray~~twice ~~Processing~~the ~~Technologies~~computing ~~for~~power ~~Enhanced~~into ~~Surface~~the ~~Preparation~~same space. The ~~industry~~inexorable ~~shift~~goal ~~towards~~of creating more advanced electronics applications drives the industry’s transition to smaller device ~~dimensions~~features, ~~new~~enabling ~~materials~~lower ~~and~~cost, ~~300mm~~as ~~wafer~~more ~~processing~~ICs ~~has~~can ~~driven~~be fabricated on each wafer. As the ~~need~~industry ~~for~~moves ~~more~~to ~~advanced~~32 ~~surface~~nanometer ~~preparation~~feature ~~technologies~~sizes and below, the IC fabrication process ~~equipment.~~becomes ~~For~~significantly ~~example~~more complex, ~~spray~~requiring ~~processing~~more stringent ismanufacturing ~~increasingly~~specifications ~~being~~and ~~used~~reducing ~~instead~~acceptable margins of error. In ~~immersion~~particular, ~~due~~the tofabrication ~~its~~process ~~greater~~becomes ~~process~~more susceptible ~~control~~to ever smaller particles, ~~reduced~~requiring ~~footprint~~the ~~and~~use ~~reduced~~of ~~chemical~~more ~~consumption~~advanced surface preparation equipment to reach acceptable yields. Also, manufacturing smaller IC interconnects requires the use of equipment specifically designed for copper deposition.

~~Wafer~~New ~~Level~~Materials ~~and~~to ~~Other~~Fabricate More Advanced ~~Packaging~~Semiconductor Devices. The need to ~~Enable~~fabricate ~~Smaller~~increasingly advanced ~~Portable~~semiconductor ~~Products.~~devices ~~New~~has ~~packaging~~led ~~technologies,~~to ~~including~~more ~~wafer~~complex ~~level~~manufacturing ~~packaging~~processes that use new materials, ~~are~~such ~~being~~as ~~developed~~low-k bydielectrics ~~the~~and ~~industry~~copper to ~~enable~~form ~~smaller~~an ~~portable~~IC’s interconnect ~~products~~wiring. The ~~such~~use asof ~~PDAs~~copper, ~~MP3~~in ~~players~~particular, ~~mobile~~presents significant ~~phones~~processing ~~and~~challenges ~~radio~~to ~~frequency~~prevent ~~identification,~~copper orcontamination ~~RFID,~~which ~~tags.~~reduces yield ~~Advanced~~even ~~packaging~~when ismeasured anin ~~enabling~~parts ~~technology~~per ~~for~~billion. To ~~the~~address ~~semiconductor industry~~these challenges, asspecialized itprocesses ~~allows~~have ~~the~~been ~~integration~~developed to provide better isolation of ~~more~~copper ~~computing~~materials ~~and~~on ~~information~~the ~~processing~~wafer, ~~power~~including indual-damascene, abarrier layer ~~smaller~~formation, ~~space~~and ~~than~~new ~~conventional~~cleaning ~~packaging~~processes ~~technology~~to remove unwanted copper. These ~~Advanced~~complex ~~packaging~~processes ~~uses~~require ~~fabrication~~the ~~processes~~use ~~similar~~of tocomputerized automated ICequipment ~~fabrication~~for ~~and~~the ~~includes,~~precise ~~among~~deposition ~~others~~of copper material. Additionally, ~~ECD~~the ~~for~~introduction ~~connective~~of ~~solder~~new ~~and~~materials ~~gold~~requires ~~bumps,~~a higher ~~photoresist~~number ~~stripping~~of ~~and~~surface ~~under-bump~~preparation ~~metal~~steps ~~etching.~~to provide high yields.

~~Semitool~~Move to Single-Wafer Processing Technologies for Enhanced Surface Preparation. The industry shift toward smaller device dimensions, new materials and 300mm wafer processing has driven the need for more advanced surface preparation technologies and process equipment. In particular, 300mm is causing a move to single-wafer processing as the process can be controlled more precisely compared to wet bench technology. For example, single-wafer spray processing is increasingly being used instead of wet benches due to its greater process control, reduced footprint, reduced manufacturing cycle time, reduced chemical consumption and now greater throughput. Fab BEOL processes, where the interconnect wiring is placed on the wafer, have already made the transition from being primarily batch processes to single-wafer processes for the more advanced devices. FEOL processes, which fabricate the devices’s transistors, ~~Solution~~are starting to transition from batch to single wafer.

WeWafer ~~are~~Level aand ~~leading~~Other ~~provider~~Advanced Packaging ofEnable ~~wet~~Smaller ~~chemical~~Portable ~~processing~~Products. ~~equipment,~~Wafer ~~targeting~~level ~~wafer~~packaging, ~~surface~~is being ~~preparation~~deployed ~~and~~by ~~ECD~~the ~~applications.~~industry Asfor the ~~semiconductor~~manufacture ~~manufacturing~~of ~~process~~smaller ~~increases~~portable inproducts such ~~complexity~~as GPS devices, MP3 players and ~~production~~mobile ~~parameters~~phones ~~become~~to ~~increasingly~~name ~~stringent,~~a few. This ~~semiconductor~~advanced ~~manufacturers~~packaging ~~increasingly~~is ~~rely~~an ~~upon~~enabling ~~manufacturers~~technology offor the semiconductor ~~equipment~~industry, toas ~~achieve~~it ~~improved~~allows ~~process~~the ~~control,~~integration ~~provide~~of amore ~~smaller~~computing ~~footprint~~ and information ~~lower~~processing ~~the~~power ~~cost~~in ofa ~~ownership~~smaller ofspace ~~their~~than ~~manufacturing~~conventional ~~processes~~packaging technology. Advanced ~~Our~~packaging ~~solutions~~uses ~~address~~fabrication ~~critical~~processes ~~applications~~similar ~~within~~to IC ~~the~~fabrication ~~semiconductor~~and ~~manufacturing~~includes, ~~process~~among others, ~~and~~ECD ~~enable~~for ~~our~~connective ~~customers~~solder toor ~~manufacture~~gold bumps, ~~more~~photoresist ~~advanced~~stripping ~~semiconductor~~and ~~devices~~under-bump ~~that~~metal ~~feature~~etching. The packaging ~~higher~~method ~~levels~~allows offor ~~performance.~~more ~~Key~~efficient ~~elements~~3-D ofdevice ~~our~~mounting, ~~solution~~or ~~include:~~chipstacking, to further reduce the device’s footprint.

~~Technology~~Emerging ~~Leadership.~~Need Wefor ~~are~~3D ~~able~~Chipstacking Driven toby ~~leverage~~the ~~our~~Demand ~~extensive~~for ~~expertise~~Smaller inPortable ~~wet~~Devices. ~~chemical~~The ~~processing~~desire ~~and~~for smaller, ~~over~~lighter ~~25 years of experience building~~ and ~~supporting~~more ~~production-proven~~power ~~semiconductor~~efficient ~~manufacturing~~devices ~~equipment.~~has Weled ~~utilize~~to ~~our~~stacking ~~advanced, proprietary computational techniques~~ in the same ~~design~~package. The ofdevices ~~our~~are ~~reactors~~electrically connected to ~~address~~provide an integrated, ~~increasingly~~multi-functional ~~complex~~device ~~manufacturing~~in ~~process. We have~~ a ~~strong~~small ~~intellectual property portfolio with 257 U~~footprint.~~S. patents issued and approximately 191 U.S. patents pending.~~

Comprehensive Product Portfolio. We provide a broad suite of advanced, highly-engineered, innovative processing systems that include surface preparation and ECD equipment. Our batch and single-wafer processing systems for wet cleaning, stripping and etching feature our proprietary spray technology, as well as our unique, proprietary process chamber designs. We use computational advanced techniques for a variety of applications, including copper interconnect and seed layer enhancement, and our proprietary Capsule technology for back-side and bevel-edge cleaning. 5

~~Raider~~Table ~~Platform.~~of Our Raider platform is a high-precision, multi-chamber, single-wafer platform that supports surface preparation and ECD applications. Our proprietary linear design, coupled with our own robotic technology, allows for up to 12 interchangeable discrete process chambers. The Raider platform also features no-teach robot technology which results in reduced installation and operating costs. Contents

Vertically-Integrated Manufacturing and Design Capabilities. Our manufacturing operations are selectively vertically-integrated to include metals and plastics fabrication and finishing capabilities, component parts and final product assembly, and extensive product development capabilities. Our manufacturing facilities feature a high-volume manufacturing line that provides short lead time delivery of our products. In addition, we typically perform component manufacturing and product prototyping internally. This strategy reduces our productsSemitool’ ~~time to market and helps lower our design and manufacturing costs.~~ s Solution

~~Strategy~~We are a leading provider of wet chemical processing equipment, targeting wafer surface preparation and ECD plating applications for all areas of wafer fabrication, including device packaging. As the semiconductor manufacturing process increases in complexity and production parameters become even more stringent, semiconductor manufacturers increasingly rely upon manufacturers of semiconductor equipment to achieve improved process control, provide a smaller equipment footprint and lower the cost of ownership of their manufacturing processes. Our solutions address critical applications within the semiconductor manufacturing process, and enable our customers to manufacture more advanced semiconductor devices that feature higher levels of performance. Key elements of our solution include:

~~Our~~Technology ~~objective~~Leadership. isWe are able to beleverage ~~the~~our ~~leading~~extensive ~~worldwide~~expertise ~~provider~~in of wet chemical processing ~~equipment,~~and ~~targeting~~over ~~wafer~~30 years ~~surface~~of ~~preparation~~experience building and ~~ECD~~supporting ~~applications~~production-proven semiconductor manufacturing equipment. We Toutilize ~~achieve~~advanced ~~this~~modeling ~~goal,~~techniques wein the ~~are~~design ~~pursuing~~of ~~the~~our ~~following~~process ~~strategies:~~chambers to address an increasingly complex manufacturing process. We have a strong intellectual property portfolio with 374 U.S. patents issued and approximately 101 U.S. patents pending.

~~Target~~Comprehensive ~~Innovative,~~Product ~~High-Margin, High-Growth Opportunities with Differentiated Products~~Portfolio. We ~~Our~~provide ~~strategy~~a isbroad tosuite beof ~~the~~advanced ~~first~~and toinnovative ~~enter~~processing ~~new,~~chambers for ~~high-growth~~surface ~~markets~~preparation ~~with~~and ~~differentiated~~ECD ~~products~~application. These ~~This~~chambers ~~has~~are incorporated ~~provided~~into usour ~~with~~single-wafer ~~early~~platform ~~market~~ and ~~technology~~into ~~leadership~~our ~~and~~batch ~~enabled us to achieve strong gross margins~~processing tools. We ~~For~~design ~~example,~~a wevariety ~~were~~of ~~among~~chambers ~~the first~~ to ~~target~~optimize ~~the~~performance ~~rapidly-growing~~of each ~~wafer~~of ~~level~~the ~~packaging~~different ~~and~~processes ~~ECD~~we ~~markets~~address.

~~Maintain~~Raider ~~and Expand Technology Leadership~~Platform. WeOur ~~intend~~Raider platform tois ~~continue~~a ~~investing~~high-precision, inmulti-chamber, ~~research~~single-wafer ~~and~~platform ~~development~~that ~~to maintain and expand our position as a technology leader in~~ supports surface preparation and ECD. applications. Our ~~goal~~proprietary platform is configured toin ~~deliver~~a ~~leading-edge~~linear ~~technical~~design, ~~innovation~~coupled towith our ~~customers~~own byrobotic ~~focusing on performance~~technology, ~~improved~~allowing for ~~system~~up ~~reliability,~~to ~~yield~~14 ~~enhancement~~interchangeable ~~and~~process ~~a low cost of ownership~~chambers. The WeRaider ~~believe~~platform also ~~these~~features ~~factors~~no-teach ~~are~~robotic ~~the~~technology ~~most~~which ~~important~~results ~~criteria~~in ~~sought~~reduced byinstallation and ~~our~~maintenance ~~customers~~costs.

~~Leverage~~Vertically-Integrated ~~our~~Manufacturing and ~~Raider~~Design ~~Platform~~Capabilities. toOur ~~Further~~manufacturing ~~Penetrate~~operations ~~New~~are ~~Customer~~selectively vertically ~~and~~integrated ~~Market~~to ~~Opportunities.~~include ~~Our~~metals ~~Raider~~and ~~platform~~plastics ~~features~~fabrication ~~proprietary~~and ~~surface preparation~~finishing capabilities, ~~ECD,~~component manufacturing and ~~wafer~~final ~~handling~~product ~~technologies.~~test Weand ~~continue~~assembly toand extensive ~~enhance~~product ~~the~~development capabilities. Our offacilities ~~our~~feature high-volume ~~Raider~~manufacturing ~~platform~~lines ~~and~~that ~~thus~~provide ~~broaden~~short ~~its~~lead ~~customer~~time ~~appeal~~delivery byof ~~expanding~~our products. In ~~its~~addition, ~~portfolio~~we ofperform ~~wet~~product ~~chemical~~development ~~processing~~and ~~capabilities~~prototyping internally. WeThis ~~plan~~strategy toreduces ~~leverage~~ our ~~Raider~~products’ ~~platform~~time ~~with~~to ~~both~~market ~~our current~~ and ~~potential~~helps ~~new customers, in~~ lower our ~~existing~~design ~~markets,~~and asmanufacturing ~~well as in new markets~~costs.

Integrate Design and Manufacturing Expertise. Our strategy is one of close integration of design and manufacturing, coupled with selective vertical manufacturing to achieve innovative solutions, cost and quality advantages and to reduce the time to market for new products and product enhancements. We believe that the close coordination of our engineering and manufacturing teams provides us with an advantage in developing new products as well as improving the design of our products to increase performance reliability and manufacturing yields while reducing costs. Additionally, our control over selective critical components reduces our dependence on component suppliers. Strategy

~~Leverage~~Our ~~Strategic~~objective ~~Relationships.~~is ~~Throughout~~to be ~~our 25-year history, we have focused on satisfying~~ the ~~needs~~leading of worldwide ~~semiconductor~~provider ~~device~~of ~~manufacturers~~wet ~~and~~chemical ~~establishing~~processing ~~long-term~~equipment, targeting ~~relationships~~wafer ~~with~~surface ~~our~~preparation ~~customers. We work with select customers at the concept~~ and ~~design~~ECD ~~stages to identify and respond to their requests for current and future generations of products~~applications. To ~~These~~achieve this ~~close~~goal, ~~working~~we ~~relationships~~are ~~allow~~pursuing ~~us to understand and address~~ the ~~performance~~following and cost expectations of our customers. We plan to enhance our relationships with our major customers and identify opportunities to develop similar relationships with additional semiconductor device manufacturers. strategies:

~~Expand~~Target ~~Our~~Innovative, ~~Asian~~High-Margin, High-Growth ~~Market~~Opportunities ~~Presence.~~with ~~During~~Differentiated ~~the~~Products. ~~past~~Our ~~several~~strategy ~~years~~is to webe ~~have~~the ~~expanded~~first ~~our~~to ~~presence~~enter ~~in Asia~~new, ~~and~~high-growth ~~revenue~~markets ~~from~~with ~~Asia now comprises a significant percentage of our total net sales~~differentiated products. This Westrategy ~~currently~~has ~~have~~provided ~~sales~~us ~~organizations~~with inearly ~~Singapore,~~market ~~Japan, Taiwan, Korea,~~ and technology ~~China,~~leadership and weenabled ~~intend~~us to ~~continue~~achieve tostrong ~~expand our sales and applications support organization to broaden our customer reach~~gross margins. For ~~We believe that the Asia region~~example, inwe ~~particular~~were ~~China,~~among ~~has~~ the ~~potential~~first ~~for~~to ~~additional~~target ~~significant long~~the rapidly-~~term~~growing ~~growth.~~wafer ~~Our~~level ~~sales,~~packaging ~~marketing~~ and ~~service~~ECD ~~strategy~~markets isand towill ~~expand~~continue ~~our~~to ~~installed~~do ~~base~~so as ofwe ~~equipment~~develop ~~with~~processes ~~existing~~ and ~~potential~~equipment ~~new~~for ~~customers~~3D ~~in these regions~~chipstacking.

Maintain and Expand Technology Leadership. We intend to continue investing in research and development to maintain and expand our position as a technology leader in surface preparation and ECD applications. Our goal is to deliver leading-edge technical innovation to our customers by focusing on performance, improved system reliability, high throughput, yield enhancement and a low cost of ownership. We plan to develop new technologies, such as porous silicon and solar applications, to enable us to enter emerging markets and provide innovative solutions to meet customer needs.

WeLeverage ~~are~~our aRaider ~~leader~~Platform into Further ~~the~~Penetrate ~~design,~~New ~~development~~Customer and ~~manufacturing~~Market ofOpportunities. ~~advanced~~Our Raider platform features proprietary surface preparation, ~~wet~~ECD, ~~chemical~~and ~~processing~~wafer ~~equipment~~handling technologies. We ~~leverage~~continue ~~our~~to 25enhance ~~years~~the capabilities of ~~experience~~our inRaider platform ~~designing~~ and ~~manufacturing~~thus ~~production-proven~~broaden ~~semiconductor~~its ~~manufacturing~~customer ~~equipment~~appeal toby ~~deliver~~expanding ~~solutions~~its ~~that~~portfolio ~~enable~~of ~~the~~wet chemical ~~fabrication~~processing ofcapabilities. We ~~increasingly~~plan ~~higher~~to ~~performance~~leverage ~~semiconductor~~the ~~devices.~~platform with Weboth ~~have~~our ~~several~~current ~~key~~and ~~technological~~potential ~~core~~new ~~competencies~~customers, ~~including~~in ~~advanced~~our ~~computational~~existing ~~modeling~~markets, ~~and~~as well ~~have~~as ~~assembled~~in anew ~~development~~markets. New ~~team~~Raider ~~with~~developments ~~extensive~~will ~~engineering~~strive ~~and~~to provide ~~modeling~~a ~~expertise~~throughput toadvantage ~~capitalize~~with ona ~~these~~reduced ~~competencies.~~footprint compared to batch processing technology.

~~Our~~Integrate ~~surface~~Design ~~preparation~~and ~~systems~~Manufacturing Expertise. ~~incorporate~~Our ~~our~~strategy ~~innovative~~is ~~Capsule~~one ~~technology~~of ~~which~~close ~~features~~integration aof ~~closed~~design ~~rotating~~and manufacturing, ~~process~~coupled ~~chamber.~~with ~~Through~~selective ~~the~~vertically-integrated ~~use~~manufacturing ofto achieve ainnovative ~~closed capsule architecture~~solutions, ~~our~~cost ~~processing~~and ~~chambers~~quality ~~are~~advantages ~~able~~and to ~~process~~reduce athe ~~wafer~~time to inmarket afor ~~more~~new ~~effective~~products and ~~comprehensive~~product ~~fashion~~enhancements. We ~~For~~believe ~~example,~~that the ~~for~~close ~~cleaning~~coordination ~~applications,~~of our ~~solutions~~engineering ~~are~~and ~~able~~manufacturing toteams ~~more~~provides ~~effectively~~us with ~~clean~~an ~~all~~advantage ~~aspects~~in ofquickly ~~the~~developing ~~wafer,~~new ~~including~~products ~~the~~as ~~top,~~well ~~bottom~~as ~~and~~improving ~~wafer~~the design ~~edge~~of ~~using~~ our ~~bevel-edge~~current ~~cleaning~~products ~~capability.~~to Inincrease ~~addition~~performance, ~~our~~reliability ~~closed~~and manufacturing ~~chamber~~yields ~~architecture~~while isreducing ~~able~~costs. Additionally, toour ~~more~~control over ~~efficiently~~selective ~~retain~~critical ~~evaporable~~ components, ~~thus~~reduces ~~reducing~~our ~~chemical~~dependence ~~consumption~~on ~~leading to significant cost savings~~component suppliers.

For electroplating applications, we leverage our advanced techniques in the design of our proprietary multiple anode assemblies. Our multiple anode assemblies enable radially controlled current density during the electroplating process, leading to a more controllable process for depositing copper film on the surface of a wafer. 6

~~Products~~Table of Contents

~~Our~~Leverage ~~broad~~Strategic Relationships. ~~product~~For ~~suite~~over of30 ~~highly-engineered~~years, ~~innovative~~we ~~processing~~have ~~systems~~focused ~~leverages~~on ~~our~~satisfying ~~core~~the ~~wet~~needs of ~~chemical~~worldwide ~~processing~~semiconductor ~~expertise,~~device manufacturers and ~~our~~establishing ~~more~~long-term relationships ~~than~~with 25our ~~years~~customers. We ofwork ~~experience~~with ~~manufacturing~~select customers and other ~~supporting~~suppliers ~~production-proven~~to the semiconductor ~~manufacturing~~ equipment. ~~Our~~industry ~~primary~~at ~~wet~~the ~~chemical~~concept ~~processing~~and design ~~solutions~~stages ~~are~~to ~~single-wafer~~identify ~~cleaning~~ and ~~batch,~~respond ~~stripping~~to ~~and~~customer ~~etching~~requests ~~equipment~~for current and future ~~ECD~~generations ~~equipment,~~of ~~primarily~~products. These ~~for~~close working relationships allow us to understand and address the ~~plating~~performance and cost expectations of ~~copper,~~our customers. We ~~gold~~plan to enhance our relationships with our major customers and ~~solder.~~identify opportunities to develop similar relationships with additional semiconductor device manufacturers.

~~Surface~~Asian ~~Preparation~~Market ~~Products~~Presence. During the past several years we have expanded our presence in Asia. We currently have sales organizations in Singapore, Japan, Taiwan, Korea and China, and long-term, we intend to match our sales and applications support organization to market opportunities in that region. We believe that Asia has the potential for additional significant long-term growth. Our sales, marketing and service strategy is to expand our installed base of equipment with existing and potential new customers in this region.

Our multi-chamber, single-wafer processing systems for wet cleaning, stripping and etching are designed with a linear arrangement of the processing chambers for high volume production and share the Raider platform with our ECD equipment. The platform modularity reduces downtime and increases wafer throughput providing the customer with an overall lower cost of ownership. Our proprietary Capsule process chamber also provides selectable processing for each side of the wafer. These systems are available to accommodate 200mm and 300mm wafer sizes. Selling prices for these systems range from $600,000 to $3.4 million. Technology

~~Our~~We are ~~batch~~a ~~systems~~leader ~~for~~in ~~wet~~the ~~cleaning,~~design ~~stripping~~ and ~~etching~~development ~~applications~~of ~~include~~advanced ~~fully~~wet ~~and~~chemical ~~semi-automated~~processing equipment. We ~~systems~~leverage ~~and use~~ our ~~proprietary~~years ~~spray~~of ~~technology~~experience ~~to deliver the chemicals, deionized water and gases to the wafer surface~~ in andesigning ~~enclosed chamber. The wafers are spun, on axis,~~ and manufacturing ~~exposed~~production-proven tosemiconductor afabrication ~~sequenced~~equipment ~~spray of chemicals and heated nitrogen gas~~ to ~~process~~deliver solutions ~~and~~that ~~dry~~enable the ~~wafers.~~production ~~This technology enables precise and uniform application~~ of ~~process~~increasingly ~~chemicals~~higher ~~and~~performance semiconductor ~~enhances process reliability and cost effectiveness through reduced particle contamination and process cycle time~~devices. We ~~Our~~have ~~cost-effective~~several ~~ozone~~key ~~and~~technological ~~deionized~~core competencies, ~~water-based~~including ~~cleaning~~advanced ~~process,~~computational ~~called HydrOzone~~modeling, ~~is available on selected systems. This environmentally friendly process can replace traditional processes using sulfuric acid~~ and ~~other~~have ~~hazardous~~assembled ~~chemicals resulting in lower costs, reduced process cycle time, water consumption, chemical waste costs~~a ~~and~~development ~~risk.~~team ~~These~~with ~~systems~~extensive ~~are~~engineering ~~available to accommodate 150mm, 200mm~~ and ~~300mm~~modeling ~~wafer~~expertise ~~sizes in up~~ to 50capitalize on ~~wafer batches. Selling prices for~~ these ~~systems range from under $15,000 to $3~~competencies.~~2 million.~~

~~RAIDER~~Our SPsurface preparation systems incorporate our innovative cleaning technology, such as our HiDRIS cleaning chamber used to remove high dose ion implant photoresist from the surface of the wafer. We have also developed porous silicon chambers for use in nano-technology mems devices and solar applications.

~~Our~~For ~~Raider platform is a high-precision~~electroplating applications, ~~multi-chamber,~~we ~~single-wafer~~leverage ~~platform~~our ~~that~~advanced ~~supports~~modeling ~~surface~~techniques ~~preparation~~in ~~and~~the ~~ECD~~design ~~applications.~~of ~~Our~~ our proprietary ~~linear~~copper ~~design,~~pellet ~~coupled~~anode ~~with~~assemblies ~~our~~and ~~robotic~~membrane technology, ~~allows~~to ~~for~~provide low upcost copper to 12the ~~interchangeable~~flash ~~discrete~~and ~~process~~memory ~~chambers~~device markets. Our ~~The~~multiple anode ~~Raider~~assemblies ~~platform~~enable ~~also~~radially ~~features~~controlled ~~no-teach~~current ~~robot~~density ~~technology.~~during ~~This~~the electroplating ~~results~~process, inleading ~~enhanced~~to ~~tool~~a ~~utilization~~more ~~for~~controllable ~~reduced~~process ~~installation~~for ~~and~~depositing copper ~~operating~~film ~~costs.~~on ~~The~~the ~~flexibility~~surface of ~~its~~a ~~linear~~wafer ~~design~~allowing ~~makes~~the itoptimal ~~one~~match of the ~~most~~copper film ~~versatile~~to ~~wet~~the ~~cleaning,~~planarization ~~stripping~~characteristics ~~and~~of ~~etching platforms in~~ the ~~industry.~~downstream ~~The~~CMP ~~tool is equipped with our proprietary Capsule chamber, which allows side-selectable processing~~process step. For ~~In addition,~~ the ~~system~~smallest ~~can~~structure besize ~~equipped with spray~~devices, ~~immersion,~~our ~~megasonic,~~seed orlayer enhancement ~~vapor~~ process ~~chambers.~~enables ~~Applications~~excellent ~~include~~via ~~wafer~~fill ~~backside,~~to ~~bevel-edge~~fix ~~clean~~nonconformities encountered ~~for~~during ~~removal~~the ofPVD ~~unwanted~~ copper ~~and~~seed ~~other~~Iayer ~~contamination, post-etch polymer removal, critical pre-deposition cleans, and metal etching~~process. ~~The Raider SP is available to accommodate 200mm and 300mm wafer sizes.~~

~~SIRIUS~~Products

~~The~~Our ~~Sirius~~broad ~~was~~product suite ~~designed~~of ~~specifically~~innovative toprocessing ~~deliver~~systems leverages our ~~proprietary~~core ~~HydrOzone~~wet ~~process.~~chemical processing ~~HydrOzone,~~expertise ~~using~~and aour ~~minimal~~years ~~amount~~ of ~~deionized~~experience ~~water~~in manufacturing and ~~ozone,~~supporting production-proven issemiconductor amanufacturing ~~low~~equipment. Our ~~cost,~~primary wet ~~low~~chemical ~~environmental~~processing ~~impact~~solutions ~~process~~are ~~option~~multi-chamber insingle-wafer ~~comparison~~and tobatch cleaning, ~~the typical processes used for photoresist~~ stripping, ~~photolithography rework~~ and ~~organic~~etching ~~cleans~~equipment asand itsingle-wafer ~~does~~plating ~~not~~equipment, primarily ~~require~~for the ~~use~~deposition of ~~sulfuric~~copper, ~~acid~~lead ~~with~~or ~~its~~lead-free ~~related~~solder. We operate ~~delivery~~in ~~and~~one ~~disposal~~segment ~~costs.~~with ~~The~~net ~~Sirius~~sales isof a$139.0 ~~manually~~million, ~~loaded~~$238.6 ~~semi-automated~~million ~~system~~and $215.2 ~~with~~million afor 50fiscal ~~wafer~~2009, ~~capacity~~2008 ~~spray~~and ~~processing~~2007, ~~chamber~~respectively. Additional information ~~The~~regarding ~~system~~our isincome ~~available~~and toassets ~~accommodate~~can ~~both~~be ~~200mm~~found ~~and~~in ~~300mm~~the ~~wafer~~financial statements ~~sizes.~~included under Item 8 below.

~~SPECTRUM~~Surface ~~& SPECTRUM HO~~Preparation Products

~~The~~Our ~~Spectrum~~multi-chamber, single-wafer ~~is an advanced automated batch~~ processing ~~system~~systems for wet cleaning, stripping and etching ~~applications.~~are designed ~~Its~~with ~~compact~~a ~~modular~~linear ~~design~~arrangement ~~features~~of ~~high~~the ~~throughput,~~processing ~~flexible~~chambers ~~process~~for ~~formats~~high volume production and, ~~precise~~like ~~control~~our ~~for~~ECD ~~low~~chambers, ~~cost~~utilize ofthe ~~ownership~~Raider platform. The Inplatform ~~addition~~modularity toreduces ~~our~~downtime ~~proprietary~~and ~~spray~~increases wafer ~~processing~~throughput ~~modules,~~providing the ~~Spectrum~~customer ~~can be equipped~~ with ~~immersion~~an ~~and~~overall ~~surface~~lower ~~tension~~cost ~~gradient dry capabilities~~of ownership. These Itsystems ~~can~~are beavailable ~~configured~~ to ~~use~~accommodate ~~either~~200mm ~~corrosives,~~and ~~solvents~~300mm wafer orsizes. Selling ~~our~~prices ~~proprietary~~for ~~HydrOzone~~these ~~(Spectrum~~single-wafer ~~HO)~~surface preparation ~~based~~products ~~processes~~range ~~for~~from ~~polymer~~approximately ~~removal~~$900,000 ~~photoresist strip and critical cleaning applications. The Spectrum is available~~ to ~~accommodate both 200mm and 300mm wafer sizes~~$2. 4 million.

~~Spray~~Our ~~Acid~~batch ~~Tool~~systems for ~~(SAT)~~wet cleaning, ~~Spray~~stripping ~~Solvent~~and ~~Tool~~etching ~~(SST)~~applications include semi- and fully-automated systems and use our proprietary spray technology to deliver chemicals, ~~Spin~~de-ionized ~~Rinser/Dryer~~water ~~(SRD)~~and gases to the wafer surface in an enclosed chamber. The wafers are rotated, ~~SCEPTER~~on axis, and are showered by a sequenced spray of chemicals and de-ionized water followed by heated nitrogen gas to dry the wafers. This technology enables precise and uniform application of process chemicals and enhances process reliability and cost effectiveness through reduced particle contamination and process cycle time. Our cost-effective ozone and de-ionized water-based cleaning process, called HydrOzone, is available on selected systems. This environmentally friendly process can replace traditional processes using sulfuric acid and other hazardous chemicals resulting in lower costs, reduced process cycle time, reduced water consumption, and can minimize chemical disposal costs. These systems are available to accommodate 150mm, 200mm and 300mm wafer sizes in up to 50 wafer batches. Selling prices for these systems range from approximately $20,000 to over $1.6 million.

The SAT and SST are manually loaded semi-automated systems for performing sequential processing of 25 wafers per spray process chamber. They are designed for wafer processing using high purity acidic, alkaline and solvent based chemistries to achieve a wide array of cleaning, stripping and etching applications. These systems can be equipped with up to three 200mm process chambers and are ideal for medium to low production volumes and research and development activity. The SRD is a high efficiency cleaning system utilizing deionized water to remove water-soluble contaminants, chemical residue and particulate matter. It is available to accommodate wafer sizes up to 300mm in diameter. The Scepter series is an advancement of these semi-automated products that offers double the productivity of the 25 wafer capacity tools by processing 50 wafers at a time in nearly the same system footprint. The Scepter can process wafer sizes up to 200mm in diameter. 7

~~Electrochemical~~Table ~~Deposition~~of ~~Systems~~Contents

Our single-wafer ECD systems incorporate proprietary electroplating technology on a multi-chamber platform that processes one wafer per chamber. ECD applications include copper interconnect and seed layer enhancement for logic and power ICs, gold bumps for high speed communication ICs, and solder bumps for advanced wafer level packaging. Our leading single-wafer design is modular, with process chambers arranged in a linear orientation, providing flexibility in system configuration. These systems generally include a combination of ECD and surface preparation process chambers to address a customer’s specific application. These systems are available to accommodate wafer diameters from 100mm to 300mm and can be scaled for customers’ capacity requirements. Selling prices of these systems typically range from approximately $2.0 million to $3.1 million. RAIDER SP

~~RAIDER~~Our ~~ECD~~Raider platform is a multi-chamber, single-wafer platform that provides a high degree of control over surface preparation applications. Our proprietary platform is designed in a linear configuration, coupled with our robotic technology, allowing for up to 14 interchangeable process chambers. The flexibility of its linear design makes it one of the most versatile wet cleaning, stripping and etching platforms in the industry. The tool can be equipped with our proprietary Capsule chambers, which allows side-selectable processing. In addition, the system can also be equipped with spray, immersion, megasonic, or vapor process chambers. Applications include wafer backside, bevel-edge clean for removal of unwanted copper and other contaminates, post-etch polymer removal, critical pre-deposition cleans, metal etching and FEOL cleans. The Raider SP is available to accommodate 200mm and 300mm wafer sizes.

The Raider ECD is an automated multi-chamber, single-wafer processor for high volume ECD. The specific configuration of its multiple processing chambers determines which semiconductor IC and advanced packaging markets the Raider ECD serves. For copper interconnect, several process steps can be integrated onto a single system such as ECD seed layer enhancement, ECD fill, wafer backside clean, bevel-edge clean, film thickness metrology and rapid thermal anneal. Our proprietary concentric anode chamber design, coupled with our model-based plating controller, allows the user to optimize plating profiles for downstream operations such as better matching of film characteristics to planarization (CMP) equipment, resulting in virtually eliminating CMP rework. Our proprietary Capsule cleaning chamber, which is also used in our Raider SP, is integrated into the tool for bevel-edge and backside copper cleaning to eliminate copper contamination. The modularity of the platform provides our customers with the flexibility to configure the chamber mix to meet their specific needs. Additionally, our Advanced Chemical Management System, or ACMS, an automated electroplating bath control unit, can be fully integrated with the Raider ECD systems. The ACMS maintains the desired chemical balance in the plating baths by automatically analyzing and replenishing the chemical constituents using our proprietary technology and typically services two ECD systems. The primary applications for the Raider ECD are copper, gold, nickel, platinum and solder depositions. It is available to accommodate 200mm and 300mm wafer sizes. SPECTRUM

~~Customers~~The Spectrum is an advanced automated batch processing system for cleaning, ~~Sales~~stripping and ~~Marketing~~etching applications. Its compact modular design features high throughput, flexible process formats and precise control combining to provide low cost of ownership. In addition to our proprietary spray processing modules, the Spectrum can be equipped with immersion and surface tension gradient dry capabilities. It can be configured to use either acids, solvents or our proprietary HydrOzone-based processes for polymer removal, photoresist strip and critical cleaning applications. The Spectrum is available to accommodate both 200mm and 300mm wafer sizes.

~~Our~~Spray Acid ~~customers~~Tool ~~include~~(SAT), ~~leading~~Spray ~~worldwide~~Solvent ~~semiconductor~~Tool ~~manufacturers.~~(SST), ~~The~~Spin ~~following~~Rinser/Dryer ~~is a representative list of our largest U.S. and international customers in fiscal 2004:~~ (SRD), SCEPTER

~~Advanced~~The ~~Micro~~SAT ~~DevicesAtmel~~and ~~Cree~~SST ~~Hewlett~~are manually ~~Packard~~loaded ~~IBM~~semi-automated ~~Infineon~~systems ~~Intel~~for ~~Maxim~~performing ~~Integrated~~sequential ~~ProductsMicron~~processing ~~Technology~~of 25 wafers ~~Motorola~~per ~~(Freescale)~~spray ~~NEC~~process ~~Seagate~~chamber. They ~~Semiconductor~~are ~~Mfg~~designed for wafer processing using high purity acidic, alkaline and solvent based chemistries to achieve a wide array of cleaning, stripping and etching applications. These ~~Intl~~systems can be equipped with up to three 200mm process 25 wafer chambers and are ideal for medium to low production volumes and research and development activity. The ~~Corp~~SRD is a high efficiency cleaning system utilizing de-ionized water to remove water-soluble contaminants, chemical residue and particulate matter.~~SkyworksSTMicroelectronicsTexas~~ It ~~InstrumentsUnited~~is ~~Microelectronics~~available ~~CorporationUnitive~~to accommodate ~~(Amkor)~~substrates sizes up to 300mm or larger in diameter. The Scepter series is an advancement of these semi-automated products that offers double the productivity of the 25 wafer capacity tools by processing 50 wafers at a time in nearly the same system footprint. The Scepter can process wafer sizes up to 200mm in diameter.

~~Our~~Electrochemical Deposition top ten customers accounted for 56.9%, 58.4% and 58.6% of net sales in fiscal 2004, 2003 and 2002, respectively. No customer accounted for over 10% of net sales in fiscal 2004. Advanced Micro Devices accounted for 19.4% and 21.2% of our net sales in fiscal 2003 and fiscal 2002, respectively. Systems

~~International~~Our ~~sales,~~single-wafer ECD ~~primarily~~systems inincorporate ~~Europe,~~proprietary ~~Asia~~electroplating ~~and~~technology ~~Japan,~~on ~~accounted~~a ~~for~~multi-chamber Raider ~~approximately~~platform ~~51.8%,~~typically ~~61.4%~~populated ~~and~~with ~~62.6%~~10 ofto ~~net~~14 ~~sales~~chambers. ECD applications ~~for~~include ~~fiscal~~copper ~~2004,~~interconnect ~~2003~~for logic and ~~2002~~memory ICs, ~~respectively.~~gold ~~The~~bumps for ~~relative~~high ~~proportion~~speed ofcommunication ~~international~~ICs, ~~sales~~lead toand ~~total~~lead-free ~~net~~solder ~~sales~~bumps ~~declined~~for inadvanced wafer ~~fiscal~~level ~~2004~~packaging ~~because~~and ~~initial~~Through ~~marketing~~Silicon ~~efforts~~Via ~~and~~plating ~~shipments~~for of3-D ~~the~~chipstacking applications. Our ~~Raider~~leading ~~systems,~~single-wafer ~~and~~design ~~our~~is ~~licensing fees~~modular, ~~were~~with process inchambers ~~North~~arranged ~~America~~ in ~~fiscal~~a ~~2004.~~linear Weorientation, ~~have~~providing ~~direct~~flexibility ~~sales~~in system ~~and~~configuration. These ~~customer~~systems ~~support~~generally ~~organizations~~include ~~located~~a incombination of ~~the~~ECD ~~United~~and ~~States,~~surface ~~Europe,~~preparation ~~Japan,~~process ~~Singapore,~~chambers ~~Korea,~~to ~~Taiwan~~address ~~and~~a ~~China,~~customer’s ~~and~~specific application. These ~~for~~systems ~~some~~are ~~products,~~available anto ~~independent~~accommodate ~~distributor~~wafer diameters ~~serves~~from ~~Japan.~~100mm ~~Additionally,~~to we300mm ~~also~~and ~~utilize~~can ~~independent~~be ~~commissioned~~scaled ~~sales~~for ~~and~~customers’ ~~service~~capacity requirements. Selling ~~representatives~~prices inof ~~Taiwan~~these ~~and~~typically ~~China~~range ~~and~~from approximately ~~selectively~~$500,000 into ~~other markets~~$5.0 million.

Field service personnel and application engineers located in the United States, Europe, Japan and Asia provide warranty service, post-warranty service and equipment installation. We also provide service and maintenance training, as well as process application training for our customers’ personnel, on a fee basis. Spare parts inventories are maintained in outsourced locations throughout the world, which allows us to offer same day or overnight delivery in many instances. RAIDER ECD

~~Backlog~~The Raider ECD is an automated, multi-chambered platform that processes a single wafer per chamber to provide for high volume ECD. The specific configuration of its multiple processing chambers is determined by whether the tool is to be used for interconnects or advanced packaging. For copper interconnect, several process steps can be integrated onto a single system such as ECD seed layer enhancement, ECD plating fill, wafer backside clean, bevel-edge clean, film thickness metrology and ~~Deferred~~rapid ~~Revenue~~thermal anneal. Our proprietary concentric anode chamber design, coupled with our model-based plating controller, allows the user to optimize plating profiles for downstream operations such as better matching of film characteristics to planarization (CMP) equipment, resulting in yield improvements and reducing expensive CMP costs. Our cleaning chambers are integrated into the tool for bevel-edge and backside copper cleaning to eliminate copper contamination. The modularity of the platform provides our customers with the flexibility to configure the chamber mix to meet their specific needs. Additionally, our Advanced Chemical Management System, or ACMS, an automated electroplating bath control unit, can be fully integrated with the Raider ECD systems. The ACMS maintains the desired chemical balance in the plating baths by automatically analyzing and replenishing the chemical constituents using our proprietary technology and typically services two ECD systems. The primary applications for the Raider ECD are copper, gold, nickel, platinum and solder depositions. It is available to accommodate 200mm and 300mm wafer sizes.

Consolidated orders backlog was $37.7 million as of September 30, 2004. We include in backlog those customer orders for which we have written customer authorization and for which shipment is scheduled within the next 12 months. Orders are generally subject to cancellation or rescheduling by customers with limited or no cancellation fees. During periods of downturns in the semiconductor industry, we have experienced significant cancellations and delays. 8

~~Our~~Table ~~deferred revenue relates to equipment shipped to customers that has not been accepted by the customer. Revenue on those shipments will be recognized as sales when acceptance is received. As~~ of ~~September 30, 2004, deferred revenue was $44.0 million.~~ Contents

~~As a result of systems ordered and shipped in the same quarter~~Customers, Sales ~~possible changes in customer delivery dates, cancellations~~ and shipment delays, and acceptances of shipped equipment carried in deferred revenue, the backlog at any particular date and the orders bookings for any particular period are not necessarily indicative of actual revenue for any succeeding period. Marketing

~~Manufacturing~~Our customers include leading global semiconductor manufacturers. The following is a representative list of our largest customers in fiscal 2009:

~~Most~~Advanced ofSemiconductor ~~our~~Engineering ~~manufacturing~~FormFactor isNEC ~~conducted~~Amkor atGlobal ~~our~~Foundries/AMD ~~facility~~Samsung ~~located~~Anadigics inIMEC ~~Kalispell,~~Seagate ~~Montana.~~Bosch ~~Our~~Inotera ~~manufacturing~~Silex ~~operations~~CEA ~~are~~Leti ~~selectively~~Micron ~~vertically~~STATS ~~integrated~~ChipPAC toElpida ~~include~~Memory ~~metals~~Nanya ~~and~~Technology ~~plastics~~Taiwan ~~fabrication~~Semiconductor ~~and finishing capabilities, component parts and final product assembly, and extensive product development capabilities~~Mfg. ~~Manufacturing personnel work closely with product development engineers to enhance manufacturability and facilitate the transition from prototype to full-scale production~~Co. ~~Our~~Fairchild ~~high-volume~~Semiconductor ~~manufacturing~~National ~~line~~Semiconductor ~~provides~~Texas ~~responsive lead time delivery of our products. Component and product prototyping typically is performed internally, reducing the time to market for new products and product enhancements.~~ Instruments

~~Research~~Our top ten customers accounted for 48.2%, 56.0% and ~~Development~~67.8% of net sales in fiscal 2009, 2008 and 2007, respectively. Seagate and Amkor accounted for 11.6% and 10.4%, respectively, of net sales in fiscal 2008. Advanced Micro Devices and Micron/IM Flash accounted for 23.8% and 10.2%, respectively of net sales in fiscal 2007. No single customer accounted for 10% or more of net sales in fiscal 2009.

WeInternational sales, ~~believe~~primarily ~~that~~in ~~timely~~Europe ~~development~~and ofAsia, ~~products~~including isJapan, ~~necessary~~accounted tofor approximately ~~remain~~74.5%, ~~competitive~~71.4 in% ~~an equipment market characterized by rapid technological change~~ and ~~product innovation~~62.5% Weof ~~devote~~net ~~significant~~sales ~~resources~~for tofiscal ~~programs~~2009, ~~directed~~2008 ~~at developing new~~ and ~~enhanced products~~ 2007, ~~as well as new applications for existing products~~respectively. We ~~maintain~~have ~~extensive~~direct ~~demonstration~~sales and ~~process~~customer ~~development~~support organizations ~~laboratories~~located atin ~~our~~the ~~facilities~~United inStates, ~~Montana~~Europe, ~~including~~Japan, ~~two~~Singapore, ~~clean rooms for demonstrating~~Korea, Taiwan, ~~testing~~China and ~~developing~~Philippines ~~products. Research~~ and ~~development~~for ~~personnel~~some ~~work directly with customers~~products, ~~vendors,~~we ~~and~~utilize ~~research~~on ~~institutes~~a toselective basis ~~develop~~both ~~new~~independent ~~processes~~representatives and ~~to design and evaluate new equipment~~distributors.

~~Expenditures~~Field ~~for~~service personnel ~~research~~ and ~~development,~~process ~~which~~engineers ~~are~~located ~~expensed~~in asthe ~~incurred~~United States, ~~were~~Europe, ~~approximately $15.1 million~~Japan, Korea ~~$18.1 million~~ and ~~$23.1~~throughout ~~million~~Southeast inAsia ~~fiscal~~provide ~~2004~~warranty service, ~~2003~~post-warranty service and ~~2002,~~equipment ~~respectively~~installation. We ~~These~~also ~~expenditures~~provide service and maintenance training, as awell ~~percentage~~as ofprocess ~~our~~application ~~net~~training ~~sales~~for our customers’ personnel, ~~represented~~on ~~approximately~~a ~~10.8%,~~fee 15basis.5% Spare ~~and~~parts ~~18.7%~~inventories inare ~~each~~maintained ofin outsourced ~~these~~locations ~~fiscal~~throughout ~~years~~the world, ~~respectively.~~which allows us to offer same day or overnight delivery in many instances.

~~Competition~~Backlog and Deferred Revenue

~~The~~Consolidated ~~semiconductor~~orders backlog ~~equipment~~was ~~industry is an intensively competitive market place marked by constant technological change~~$69.8 ~~Significant~~million ~~competitive~~as ~~factors~~of inSeptember ~~the semiconductor equipment and related markets in which we compete include: system performance~~30, ~~quality~~2009 and ~~reliability,~~$54.5 ~~cost~~million ofas ~~using our equipment, ability to ship products in the time required, timeliness and quality~~ of September ~~technical support service~~30, ~~our success in developing new and enhanced products, pricing and payment terms~~2008. We ~~face~~include ~~substantial~~in ~~competition~~backlog ~~from~~those ~~established~~customer ~~competitors,~~orders ~~some~~for of which we have ~~greater~~written ~~financial,~~customer ~~marketing,~~authorization ~~technical~~ and ~~other~~for ~~resources,~~which ~~broader~~shipment ~~and~~is ~~integrated~~scheduled ~~product~~within the ~~lines,~~next ~~more~~12 ~~extensive~~months. Orders ~~customer~~are ~~support~~subject ~~capabilities,~~to ~~larger~~cancellation ~~sales~~or rescheduling ~~organizations~~by ~~and~~customers ~~greater~~with ~~installed~~limited ~~customer~~or ~~bases~~no cancellation fees. During ~~Our~~periods ~~primary~~of ~~competitors~~downturns in ~~ECD~~the ~~include~~semiconductor ~~Applied Materials~~industry, ~~Inc.,~~we have ~~Novellus~~experienced ~~Systems,~~significant ~~Inc.,~~customer cancellations and ~~Ebara~~requested ~~Corporation.~~delays in delivery.

InOur ~~wet~~deferred revenue ~~surface~~primarily ~~preparation~~relates ~~applications,~~to ~~our~~equipment ~~competition~~shipped ~~includes~~to ~~Dainippon~~customers ~~Screen~~that ~~Manufacturing~~has ~~Co.,~~not ~~FSI~~been accepted ~~International,~~by ~~Inc~~the customer., Revenue ~~SEZ~~on ~~Holding,~~those ~~AG,~~shipments ~~Tokyo~~is ~~Electron,~~recognized ~~Ltd~~as sales when acceptance is received. As ~~and~~of ~~wet~~September ~~bench~~30, ~~manufacturers~~2009, deferred revenue was $4.8 million.

WeAs a ~~believe~~result ~~that~~of wesystems ~~compete~~ordered ~~favorably~~and ~~with~~shipped ~~these~~in ~~manufacturers.~~the Wesame ~~may~~quarter, ~~also~~possible ~~face~~changes ~~competition~~in customer ~~from~~delivery ~~new~~dates, ~~market~~cancellations ~~entrants.~~and shipment delays, and acceptances of shipped equipment carried in deferred revenue, the backlog at any particular date and the orders bookings for any particular period are not necessarily indicative of actual revenue for any succeeding period.

~~Patents and Other Intellectual Property~~Manufacturing

~~The~~Most ~~semiconductor~~of ~~industry~~our manufacturing inis ~~general~~conducted isat ~~very~~our ~~active~~facilities inlocated ~~pursuing~~near ~~patent~~Kalispell, Montana. Our ~~applications~~manufacturing ~~for~~operations ~~both~~are ~~equipment~~selectively vertically integrated to include metals and ~~processes~~plastics ~~used~~fabrication inand ~~the~~finishing capabilities, ~~manufacture~~component ofparts ~~semiconductor~~and ~~devices.~~final ~~Patents~~product ~~are~~assembly, ~~considered~~and ~~important~~extensive toproduct development ~~the~~capabilities. Manufacturing ~~protection~~personnel ofwork ~~intellectual~~closely ~~property~~with product ~~resulting~~development ~~from~~engineers ato ~~company’s~~enhance ~~research~~manufacturability and ~~development~~facilitate ~~programs~~the transition ~~and~~from ~~are~~prototype ~~viewed~~to asfull-scale aproduction. Our ~~means~~high-volume manufacturing oflines ~~gaining~~provide ~~market~~responsive ~~advantages~~lead ~~over~~time ~~competitors~~delivery ~~because~~of ~~the~~our products. Component ~~industry~~and ~~often~~product ~~differentiates~~prototyping ~~competitors~~typically onis performed internally, reducing the ~~basis~~time ofto ~~technological~~market ~~criteria.~~for new products and product enhancements.

WeIn fiscal ~~place a strong emphasis on the innovative features of our products and~~2006, ~~where available,~~ we ~~generally~~increased ~~seek~~our ~~patent~~manufacturing ~~protection~~capacity ~~for those features. We currently hold 257 U.S. patents, some~~ with pending foreign counterparts, have approximately 191 U.S. patent applications pending and intend to file additional patent applications, as we deem appropriate. We have had an active patent program since the ~~Company’s~~purchase ~~inception;~~of ~~consequently~~a 72,000 ~~the~~square ~~duration~~foot offacility ~~our~~near ~~patent portfolio is staggered due to various issuance dates for individual patents~~Kalispell. This ~~Our~~building ~~patent~~contains our ~~portfolio~~fabrication isdepartments ~~not~~and ~~dominated~~provides ~~by any particular patents. We consider the strength of the overall portfolio to be~~ more ~~important~~space ~~than~~for the ~~strength~~assembly ofarea ~~any~~in ~~particular~~our main ~~patent~~facility. In ~~fact~~fiscal 2006, ~~many~~we ~~patents~~also ~~are~~completed ~~part of~~ our ~~“patent~~facility ~~families” and it is difficult~~in Salzburg, ifAustria ~~not~~which ~~impossible,~~has tospace ~~make~~for ~~any~~manufacturing ~~assessment~~and ~~regarding~~upgrading ~~the “materiality” of one patent in that~~used ~~family over another~~products. In ~~Even~~fiscal if2007, awe ~~patent~~completed ~~is not used offensively to prevent~~ a ~~competitor from practicing the same art~~10,000 itsquare ~~may~~foot ~~still~~expansion of ~~provide~~ a ~~defense~~refurbishing ~~against~~facility aat ~~competitor’s~~our ~~potential~~Rhetech ~~patent infringement claim against us~~subsidiary.

There can be no assurance that patents will issue from any of our pending applications or that existing or future patents will be sufficiently broad to protect our technology. While we attempt to protect our intellectual property rights through patents, copyrights Research and ~~non-disclosure~~Development agreements there can be no assurance that we will be able to protect our technology, or that competitors will not be able to develop similar technology independently. In addition, the laws of certain foreign countries may not protect our intellectual property to the same extent as the laws of the United States. Moreover, there can be no assurance that our existing or future patents will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide meaningful competitive advantages to us. In any of such events, our business, financial condition, results of operations and cash flows could be harmed. (R&D)

~~There~~We believe ~~has~~that ~~been~~timely ~~substantial~~development ~~litigation~~of ~~regarding~~products ~~patent~~is ~~and~~necessary ~~other~~to ~~intellectual~~remain ~~property~~competitive in ~~rights~~an inequipment ~~semiconductor-related~~market ~~industries.~~characterized ~~Although~~by werapid ~~are~~technological ~~not~~change ~~aware~~and ofproduct innovation. We ~~any~~devote ~~potential~~significant ~~infringement~~resources byto ~~our~~programs directed at developing new and enhanced products, ofas ~~any~~well ~~patents~~as ornew ~~proprietary~~applications ~~rights~~for ofexisting products. We ~~others,~~maintain ~~further~~extensive ~~commercialization~~demonstration ofand process development laboratories at our ~~technology~~facilities ~~could~~in ~~provoke~~Montana, ~~claims~~including ofthree ~~infringement~~lab ~~from~~areas ~~third~~for demonstrating, ~~parties~~testing and developing products. Research and development personnel work directly with customers, vendors, and research institutes to develop new processes and to design and evaluate new equipment.

In addition, we rely on trade secret protection for our technology, in part through confidentiality agreements with our employees, consultants and third parties. However, these agreements may be breached and we may not have adequate remedies. In any case, others may come to know about or determine our trade secrets through a variety of methods. 9

~~Now~~Table ~~and in the future, litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend us 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 us, which by itself could have a material adverse effect on our financial condition, results of operations and cash flows. Further, adverse determinations in such litigation could result in our loss of proprietary rights, subject us to significant liabilities and damages to third parties, require us to seek licenses from third parties or prevent us from manufacturing or selling our products, any of which could harm our business, financial condition, results of operations and cash flows. Contents

~~Employees~~Research and development, which is expensed as incurred, was approximately $25.6 million, $30.4 million and $27.1 million in fiscal 2009, 2008 and 2007, respectively. As a percentage of our net sales, these expenses represented approximately 18.4%, 12.8% and 12.6% in each of these fiscal years, respectively. We continue to work on a number of leading edge projects including on-going development of porous silicon for the solar industry, flow batteries, FEOL cleaning applications, wafer edge cleaning processes, deep via and Through Silicon Via applications, high volume Through Silicon Via and wafer level packaging production and others.

As of September 30, 2004, we had 958 full-time and temporary employees worldwide. None of our employees are represented by a labor union, and we have never experienced a work stoppage or strike. We consider our employee relations to be good. Competition

~~Environmental~~The ~~Matters~~semiconductor equipment industry is an intensively competitive market place marked by constant technological change. Significant competitive factors in the semiconductor equipment and related markets in which we compete include: system performance, quality and reliability, cost of using our equipment, ability to ship products to meet customer schedules, timeliness and quality of technical support service, our success in developing new and enhanced products, pricing and payment terms. We face substantial competition from established companies, some of which have greater financial, marketing, technical and other resources, broader and integrated product lines, more extensive customer support capabilities, larger sales organizations and greater installed customer bases. Our primary competitor in ECD is Novellus Systems, Inc. In wet surface preparation applications, our competition includes Dainippon Screen Manufacturing Co., LAM Research, Inc. and Tokyo Electron, Ltd.

We believe ~~are~~that subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous waste. Our compliance with federal, state and local provisions regulating the discharge of materials into the environment, and the remedial actions we ~~have~~compete ~~taken~~favorably with ~~respect~~these tomanufacturers. ~~environmental~~We ~~regulations,~~may ~~have~~also ~~not~~face competition ~~had,~~from ~~and~~new ~~are~~market ~~not expected to have, a material effect on our business, financial condition, result of operations and cash flows~~entrants.

~~Executive~~Patents and ~~Officers~~Other ofIntellectual ~~the Registrant~~Property

The ~~following~~semiconductor industry ~~table~~in ~~sets~~general ~~forth~~is ~~certain~~very ~~information~~active ~~with~~in ~~respect~~pursuing patent applications for both equipment and processes used in the manufacture of semiconductor devices. Patents are considered important to the ~~executive~~protection ~~officers~~of intellectual property resulting from a company’s research and development programs and are viewed as a means of gaining market advantages over competitors because the ~~Company:~~industry often differentiates competitors on the basis of technological criteria.

Name	Age	Position
Raymon F. Thompson (1) Timothy C. Dodkin (2) Larry E. Murphy (3) Larry A. Viano (4) Dana R. Scranton (5) Richard P. Schuster (6)	63 55 45 50 49 48	Chairman of the Board, President and Chief Executive OfficerExecutive Vice PresidentChief Operating OfficerVice President, Chief Financial OfficerVice President, Surface Preparation TechnologyVice President, Global Service

We place a strong emphasis on the innovative features of our products and, where available, we generally seek patent protection for those features. We currently hold 374 U.S. patents, some with pending foreign counterparts, have approximately 101 U.S. patent applications pending and intend to file additional patent applications, as we deem appropriate. We have had an active patent program since the Company’s inception; consequently, the duration of our patent portfolio is staggered due to various initial filing dates for individual patents. Our patent portfolio is not dominated by any particular patents. We consider the strength of the overall portfolio to be more important than the strength of any particular patent. In fact, many patents are part of our “patent families” and it is difficult, if not impossible, to make any assessment regarding the “materiality” of one patent in that family over another. Even if a patent is not used offensively to prevent a competitor from practicing the same art, it may still provide a deterrent against a competitor’s potential patent infringement claim against us.

(1) Raymon F. Thompson founded Semitool in 1979 and serves as our Chairman, President and Chief Executive Officer. In 1979, Mr. Thompson designed, patented and introduced the first on-axis spin rinser/dryer for the semiconductor industry.Employees

~~(2) Timothy~~As of C.September ~~Dodkin~~30, ~~has~~2009, ~~been~~we ~~employed~~had by826 usfull-time ~~since 1985~~ and ~~has~~temporary ~~served on our Board of Directors since 1998~~employees worldwide. Our ~~Mr.~~employees ~~Dodkin~~are ~~has~~not ~~held~~represented by a ~~number~~labor ~~of sales-related positions including Senior Vice President~~union, ~~Global Sales~~ and ~~Marketing~~we have ~~and,~~never ~~since~~experienced ~~June~~a ~~2003,~~work ~~has~~stoppage ~~served~~or asstrike. We ~~Executive~~consider ~~Vice~~our employee ~~President.~~relations ~~Prior~~ to ~~joining~~be ~~us, Mr~~good. ~~Dodkin worked at Cambridge Instruments, a semiconductor equipment manufacturer, for ten years in national and international sales.~~

(3) Larry E. Murphy joined us in May 2004, and is our Chief Operating Officer. Prior to joining us, Mr. Murphy worked for 15 years at Tosoh SMD, Inc., a U.S. subsidiary of Tosoh Corporation headquartered in Tokyo, Japan. Mr. Murphy was Tosoh SMD’s President and Chief Executive Officer, as well as Chairman of their Taiwanese, Korean and Singapore subsidiaries. Previously at Tosoh SMD, he held several executive positions, including Chief Operating Officer, Vice President of Sales and Marketing and Global Sales Manager.Environmental Matters

~~(4) Larry~~We are A.subject ~~Viano~~to ~~joined~~a usvariety inof ~~1985~~governmental ~~and~~regulations ~~has~~related ~~held~~to ~~various~~the ~~positions~~discharge ~~with~~or disposal ~~the~~of ~~Company~~toxic, ~~since~~volatile ~~then.~~or Mrotherwise hazardous waste. Our compliance ~~Viano~~with ~~has~~federal, ~~been~~state ~~serving~~and aslocal ~~our~~provisions ~~Vice~~regulating ~~President~~the discharge of materials into the environment, ~~Chief~~and ~~Financial~~the ~~Officer~~remedial ~~since~~actions ~~May~~we ~~2003.~~have Hetaken ~~also~~with respect ~~serves~~to asenvironmental ~~our~~regulations, ~~Principal~~have ~~Accounting~~not ~~Officer.~~had, Heand isare not expected to have, a ~~Certified~~material ~~Public~~effect ~~Accountant~~on our business, financial condition, results of operations and cash flows.

(5) Dana R. Scranton has served as our Vice President, Surface Preparation Technology since September 2001. Dr. Scranton has 12 years of experience with Semitool in the areas of engineering, product management and marketing. He has a total of 17 years experience in the semiconductor capital equipment business.10

~~(6) Richard~~Table ~~P. Schuster joined us in 1984 and has served as our Vice President, Global Service since February 2002. Prior to 2002, Mr. Schuster was our Director~~ of ~~Service for North America.~~Contents

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

~~Item~~The 2.following ~~Properties~~table identifies the current executive officers of Semitool, the positions in which they serve, and the year in which they began serving in their respective capacities.

We have two manufacturing facilities located on sites in Kalispell, Montana with approximately 200,000 square feet in the aggregate. We also own a facility located in Coopersburg, Pennsylvania, which serves as a manufacturing facility for our Rhetech, Inc. subsidiary. We believe that our existing manufacturing facilities will be adequate to meet our requirements for the foreseeable future and that suitable additional or substitute space will be available as needed. We own an office building in Cambridge, UK, which serves as our European headquarters for sales and customer support. During fiscal 2004, we purchased land near Salzburg, Austria for future facilities. We also lease 12 other smaller facilities worldwide, which are used as sales and customer service centers.

Name	Age	Position
			Since
Raymon F. Thompson (1)	68	Chairman and Chief Executive Officer	1979
Larry E. Murphy (2)	50	President and Chief Operating Officer	2004
Larry A. Viano (3)	55	Vice President and Chief Financial Officer	2003
Timothy C. Dodkin (4)	60	Executive Vice President	2003
Richard C. Hegger (5)	53	Vice President, General Counsel and Secretary	2005
Herbert Oetzlinger (6)	42	Vice President, Sales (Europe)	2008
Klaus H. Pfeifer (7)	51	Vice President, Copper Interconnect and BEOL Cleans	2009
Richard P. Schuster (8)	53	Vice President, Global Service	2002
Paul M. Siblerud (9)	50	Vice President, Advanced Packaging	2005
James L. Wright (10)	46	Vice President, Manufacturing	2006

We are subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile, or otherwise hazardous chemicals used on Semitool’s premises. We believe that we are in material compliance with these regulations and that we have obtained all necessary environmental permits to conduct our business. Nevertheless, current or future regulations could require us to purchase expensive equipment or to incur other substantial expenses to comply with environmental regulations. Any failure by us to control the use of, or adequately restrict the discharge or disposal of, hazardous substances could subject us to future liabilities, result in fines being imposed on us, or result in the suspension of production or cessation of our manufacturing operations. ___________

~~Item~~(1) 3Raymon F. ~~Legal~~Thompson ~~Proceedings~~founded Semitool in 1979 and serves as our Chairman and Chief Executive Officer. In 1979, Mr. Thompson designed, patented and introduced the first on-axis spin rinser/dryer for the semiconductor industry.

~~In June 2001, we filed suit against Novellus Systems, Inc.~~ (~~“Novellus”~~2) inLarry ~~the United States District Court for the District of Oregon for infringement of our U~~E.S. ~~Patent~~Murphy ~~No.~~joined ~~6,197,181 (the ‘181 Patent). Novellus counterclaimed against~~ us ~~for~~in May ~~infringement of four of their patents. On October 11,~~ 2004, weas ~~entered~~our ~~into~~Chief aOperating ~~Settlement~~Officer ~~Agreement (the “Settlement Agreement”) with Novellus settling this patent litigation. Pursuant to the Settlement Agreement, Novellus paid us $2.9 million~~ and ~~both~~has ~~parties~~served ~~agreed~~as toour ~~additional~~President ~~covenants~~since April ~~and restrictions related to the patents in dispute in the litigation and the resolution of future patent disputes~~2005.

~~The~~(3) ~~parties~~Larry ~~agreed to dismiss with prejudice their respective claims in the litigation, without either party admitting any liability~~A. InViano ~~addition,~~joined ~~Novellus~~us ~~provided covenants not to sue Semitool at any time~~ in 1985 ~~the~~and ~~future~~has ~~for~~held ~~any infringement~~various ofpositions ~~the~~with ~~four counterclaim patents it asserted in~~ the ~~litigation~~Company ~~based~~since onthen. ~~acts~~Mr. Viano has ~~either~~served ~~prior~~as ~~to,~~our orVice ~~after~~President, ~~the~~Chief ~~effective~~Financial ~~date~~Officer ofsince ~~the~~May Settlement Agreement, and Semitool provided a covenant not to sue Novellus for any infringement of the ‘181 Patent based on acts which occurred prior to the effective date of the Settlement Agreement2003. ~~The parties~~ He also ~~agreed~~serves toas ~~certain~~our ~~dispute~~Principal ~~resolution~~Accounting ~~procedures in the event of any future patent disputes~~Officer.

We(4) ~~are~~Timothy ~~subject~~C. toDodkin ~~other~~has ~~legal~~been employed ~~proceedings~~by ~~and~~us ~~claims~~since ~~which~~1985 ~~have~~and ~~arisen~~has inserved ~~the~~on ~~ordinary~~our ~~course~~Board of ~~our~~Directors ~~business~~since ~~and have not reached final adjudication~~1998. Mr. Dodkin ~~Although~~has ~~there~~held ~~can~~a benumber ~~no assurance as to the ultimate disposition~~ of ~~these~~sales-related ~~matters,~~positions itincluding isSenior Vice ~~the opinion of our management~~President, ~~based~~Global ~~upon~~Sales ~~the~~and ~~information~~Marketing ~~available at this time~~and, ~~that~~since ~~the~~June ~~currently expected outcome of these matters~~2003, ~~individually~~has orserved inas Executive ~~the~~Vice ~~aggregate, will not have a material adverse effect on our business, financial condition, results of operations or cash flows~~President.

~~Item~~(5) 4Richard C. ~~Submission~~Hegger ofjoined ~~Matters~~us in 2000 as our General Counsel and has served as our Secretary since February 2005. Prior to joining the Company, Mr. Hegger worked for a ~~Vote~~major international law firm and specialized in corporate transactions. He is a graduate of ~~Security~~Columbia ~~Holders~~University School of Law and a member of the bars of Montana, New York and Missouri.

No(6) ~~matters~~Herbert ~~were~~Oetzlinger ~~submitted~~joined tous in ~~the~~1988 ~~shareholders~~and ~~for~~has aheld ~~vote~~various ~~during~~positions with the ~~fourth~~Company ~~quarter~~since then. Mr. Oetzlinger has served as our Vice President of ~~the~~Sales ~~fiscal~~(Europe) ~~year.~~since March 2008.

~~PART~~(7) IIKlaus H. Pfeifer joined us in 2006 as our general manager of Copper Interconnect. In June 2009, Mr. Pfeifer was promoted to the position of Vice President of the Copper Interconnect and Back End of Line Cleans division. Prior to joining the Company, Mr. Pfeifer was a program manager for copper low-k integration with the interconnect division of SEMATECH and spent 18 years with Philips Semiconductors where he worked with the SEMATECH consortium as program manager of interconnect in advanced dielectrics and metallization.

~~Item~~(8) 5Richard P. ~~Market~~Schuster ~~for~~joined ~~Our~~us in ~~Common~~1997 ~~Stock~~as ~~and~~Director ~~Related~~of ~~Shareholder~~Global ~~Matters~~Customer Support. Since 2002, Mr. Schuster has served in the role of Vice President, Global Service.

~~Our~~(9) ~~Common~~Paul ~~Stock is traded under the symbol “SMTL” principally on the Nasdaq National Market~~M. ~~The~~Siblerud ~~approximate~~joined ~~number~~us ofin 1998 ~~shareholders~~and ofhas ~~record~~held atvarious ~~December~~positions 1,with ~~2004 was 138 and~~ the ~~reported~~Company ~~last~~since ~~sale~~then. ~~price~~Mr. onSiblerud has ~~that~~served ~~date~~as of our ~~common~~Vice ~~stock~~President, onMarketing ~~the~~since ~~Nasdaq~~2005 ~~National Market was $9.21. The high~~ and ~~low sales prices for~~ our ~~common~~Vice ~~stock~~President, Advanced ~~reported~~Packaging bysince ~~the Nasdaq National Market are shown below~~2008.

~~Common~~(10) ~~Stock~~James ~~Price~~L. ~~RangeFiscal~~Wright ~~YearEnded~~joined ~~September~~us ~~30,~~in 2003 as our Director of Operations and has served as our Vice President of Manufacturing since March 2006.

	2004				2003
	High		Low		High		Low
First Quarter	$	11.72	$	7.99	$	7.29	$	4.29
Second Quarter	$	14.55	$	10.60	$	7.09	$	4.09
Third Quarter	$	13.32	$	10.24	$	6.00	$	3.98
Fourth Quarter	$	10.85	$	6.87	$	9.59	$	4.84

The executive officers are elected each year by the Board of Directors to serve for a one-year term of office. Each of the executive officers identified above is a party to a change of control agreement, and Mr. Murphy is a party to a letter agreement relating to his employment with the Company. Otherwise, none of the executive officers has a contract providing for a term of employment. See Part III for further details on these agreements and arrangements.

~~Since~~Item ~~our initial public offering of common stock in February of 1995, we have never declared or paid any cash dividend and we have no intent to do so in the near future~~1A. Risk Factors

~~Equity~~Set ~~Compensation~~forth ~~Plans~~below are risks and uncertainties that could negatively impact our business, financial condition, results of operations and cash flows, and could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K. These risks and uncertainties could also cause our stock price to decline.

~~The following table summarizes our equity compensation plans as of September 30, 2004:~~ 11

			Number ofsecurities to beissued uponexercise ofoutstanding options			Weighted-averageexercise priceof outstandingoptions			Number of securitiesremaining availablefor future issuanceunder stock optionplans
Equity compensation plans approved by
stockholders				1,634,925		$	7.08			2,984,500

Table of Contents

~~Item~~We have 6.announced ~~Selected~~our ~~Financial~~intention ~~Data~~to be acquired by Applied Materials and if that transaction is not concluded successfully we may face challenges in growing our business and remaining competitive.

~~This~~On November ~~summary~~17, ~~should~~2009 bewe ~~read~~announced inthat ~~conjunction~~we had entered into an agreement with Applied Materials, pursuant to which Applied Materials would acquire Semitool, Inc. in a combination tender offer and merger. We expect the transactions ~~consolidated~~to ~~financial~~close ~~statements~~in the first or second fiscal quarters of fiscal 2010. However, the transactions are subject to a number of closing conditions, including our shareholders having tendered more than two-thirds of our outstanding common stock in the tender offer, the receipt of certain U.S. and foreign ~~related~~governmental ~~notes~~approvals, ~~included~~and ~~elsewhere~~that there be no legal impediment to completing the transactions. Were any of these conditions to fail, and a party were to terminate the merger agreement and abandon the transactions, we would expect to face an immediate and significant reduction in ~~this~~the ~~Annual~~market ~~Report~~price onof ~~Form~~our common 10stock. Moreover, we may face difficulties in establishing and maintaining long-Kterm relationships with our key customers and suppliers, who may question our long-term willingness and ability to remain independent. Additionally, we may face difficulties in attracting financing on terms we deem reasonable, or at all. Any one or more of these events could have a material adverse effect upon our results of operations, financial condition, and cash flows.

~~Summary~~We are ~~Consolidated~~facing ~~Financial~~legal ~~Information~~challenges ~~(in~~over ~~thousands,~~our ~~except~~decision ~~per~~to ~~share~~enter ~~data)~~into the acquisition transactions with Applied Materials.

	Year Ended September 30,
	2004		2003			2002			2001			2000
Statement of Operations Data:
Net sales	$	139,627	$	117,048		$	123,687		$	256,467		$	239,447
Gross profit (1)		77,421		35,254			59,083			128,092			126,701
Gain on sale of subsidiary (2)		--		--			--			31,054			--
Income (loss) from operations (3)		10,876		(35,269	)		(24,463	)		63,563			36,669
Net income (loss) before cumulative effect of
change in accounting principle		7,354		(21,151	)		(14,238	)		43,258			24,426
Cumulative effect of change in accounting
principle (net of tax) (4)		--		--			--			(17,645	)		--
Net income (loss)		7,354		(21,151	)		(14,238	)		25,613			24,426
Basic earnings (loss) per share		0.26		(0.74	)		(0.50	)		0.90			0.87
Diluted earnings (loss) per share		0.25		(0.74	)		(0.50	)		0.89			0.85
Weighted average number of basic common shares		28,570		28,446			28,410			28,333			28,062
Weighted average number of diluted common shares		29,066		28,446			28,410			28,769			28,783
Balance Sheet Data:
Cash, cash equivalents and marketable securities		22,354		27,935			40,840			46,837			6,711
Working capital (1)		78,287		73,108			90,997			106,730			79,498
Total assets		181,300		138,774			183,663			200,090			202,660
Short-term debt		225		228			435			1,192			21,724
Long-term debt and capital leases		2,089		2,322			2,912			3,265			3,653
Shareholders' equity		109,843		100,677			121,422			133,199			108,632

On or about November 19, 2009, November 30, 2009 and December 4, 2009, three purported class action lawsuits related to the tender offer and the merger, captioned Stationary Engineers Local 39 Pension Trust Fund vs. Semitool, Inc., et al. (Cause No. DV-09-1461(B)), Stern vs. Thompson, et al. (Cause No. DV-09-1513(C)), and Marvel v. Thompson, et al., respectively, were filed in the Montana Eleventh Judicial District Court, County of Flathead, against Semitool, each of Semitool’s directors, Applied Materials and Jupiter Acquisition Sub, Inc. (the plaintiff in the Stationary Engineers Local action then filed an amended complaint on or about November 25, 2009). Motions for expedited proceedings were filed by the plaintiffs in the first and second actions, respectively, on November 23, 2009 and December 1, 2009, in each case requesting, among other things, that the Court expedite discovery and schedule a hearing on such plaintiff’s proposed motion for a preliminary injunction no later than December 17, 2009, the currently scheduled Expiration Date of the tender offer. A hearing on the motion for expedited proceedings in the Stationary Engineers Local action took place on December 9, 2009 and, on December 10, 2009, the court issued an order denying the plaintiff’s motion for expedited discovery and issued another order scheduling a hearing on December 15, 2009 in respect of plaintiff’s motion for a preliminary injunction.

The actions, each brought by a purported shareholder of Semitool, seek certification of a class of all holders of Semitool common stock (1except the defendants and their affiliates) Inand allege, among other things, that Semitool’s directors breached their fiduciary duties by (i) failing to maximize shareholder value; (ii) securing benefits for certain defendants at the ~~fourth~~expense ~~quarter~~or to the detriment of ~~fiscal~~Semitool’s ~~2003~~public shareholders; (iii) discouraging and/or inhibiting alternative offers to purchase control of Semitool or its assets; and (iv) failing to disclose material non-public information, weand ~~wrote~~that ~~down~~Applied ~~inventory~~Materials byaided ~~$19~~and abetted such alleged breaches.1 ~~million~~The ~~primarily~~actions ~~due~~seek, among other things, injunctive relief enjoining the defendants from consummating the tender offer and the merger and damages, as well as recovery of the costs of the action, including reasonable attorneys’ and experts’ fees. Semitool believes the claims alleged against it in the actions to abe ~~change~~without merit and intends to defend against them vigorously. In addition, Applied Materials has informed the Company that it also believes the allegations against it in ~~forecasted~~the ~~demand~~actions ~~for~~to ~~certain~~be ofwithout merit, and that it intends to defend against the claims vigorously. However, were a court to disagree with our ~~products~~contention, ~~due~~it may delay the Applied Materials transaction or may award damages to plaintiff shareholders. We also can offer no assurances that other such lawsuits will not be brought, or that if brought, such suits can be timely and effectively defended. Further, the ~~successful~~merger agreement ~~introduction~~contains among other customary conditions a provision that would allow either Semitool or Applied Materials to abandon the tender offer or terminate the merger agreement if any temporary or permanent injunction has been entered that would have the effect of ~~our~~making the transactions unlawful. Because we believe the combination with Applied Materials will enhance Semitool’s ability to compete and expand into new ~~Raider~~product ~~platform~~lines, and that the best value for our shareholders can be obtained by completing these transactions, the delay of or setting aside of these transactions or the abandonment of these transactions by the parties would likely have a material adverse impact upon the market price of our common stock, and may otherwise materially and adversely affect our business strategy and our franchise value. Additionally, shareholder litigation is time-consuming, expensive, and potentially distracting to management, which may cause adverse impacts upon our results of operations or business during the pendency of this lawsuit.

~~(2)~~If Wewe ~~sold~~require ~~our~~additional ~~wholly-owned~~capital ~~subsidiary~~in the future, ~~Semy~~it ~~Engineering~~may not be available, ~~Inc.~~or if available, may not be on ~~February~~terms acceptable ~~16,~~to ~~2001~~us.

~~(3)~~We believe ~~Fiscal~~that ~~2001~~our ~~was~~existing ~~reclassified~~balances of cash, cash equivalents and cash flows from operations will be sufficient to ~~include~~meet our cash needs for working capital and capital expenditures for at least the ~~gain~~next on12 months. ~~sale~~We ofmay, ~~subsidiary~~however, require additional financing to fund our operations in ~~income~~the ~~(loss)~~future. Although we expect cash flows generated from operating activities to be sufficient to fund operations at the current and projected levels in the future, ~~rather~~there ~~than~~is ~~following~~no assurance ~~income~~that ~~(loss)~~our ~~from~~operating ~~operations~~plan will be achieved. We may need to take actions to reduce costs, seek alternative financing arrangements or pursue additional placement of our common stock.

~~(4)~~A significant ~~The~~contraction ~~cumulative~~in ~~effect~~the iscapital markets, particularly in the ~~result~~technology sector, ofmay ~~our~~make ~~adopting~~it ~~the~~difficult ~~Securities~~for ~~and~~us ~~Exchange~~to ~~Commission’s~~raise ~~Staff~~additional ~~Accounting~~capital ~~Bulletin~~in ~~101~~the ~~(SAB~~future, if ~~101)~~and when it is required, ~~“Revenue~~especially ~~Recognition~~if inwe ~~Financial~~are ~~Statements~~unable to maintain profitability.” ~~Data~~If adequate capital is not available to ~~reflect~~us ~~the~~as ~~change~~required, inor ~~accounting~~is ~~principle~~not available inon ~~accordance~~favorable ~~with~~terms, ~~SAB~~our ~~101~~shareholders ~~are~~may ~~not~~be ~~available~~subject to ~~restate~~significant dilution ~~financial~~in ~~information~~their ~~for~~ownership ~~fiscal~~if ~~years~~we ~~prior~~raise additional funds through the issuance of equity securities, or we could be required to ~~2001~~significantly reduce or restructure our business operations.

~~Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations~~12

~~Overview~~Table of Contents

WeThe ~~design~~Company has a $30 million Credit Agreement, ~~manufacture~~renewable annually, ~~install~~with ~~and~~Wells ~~service~~Fargo ~~highly-engineered~~Trade ~~equipment~~Bank (Trade ~~for~~Bank) ~~use~~with an expiration date of March 1, 2010 with $15 million in advances ~~the~~outstanding ~~fabrication~~as of ~~semiconductor~~September ~~devices~~30, 2009. ~~Our~~There ~~products~~is ~~are~~no ~~focused~~assurance onthat ~~the~~this facility ~~wet~~will ~~chemical~~be ~~process~~sufficient ~~steps~~to inmeet ~~integrated~~our ~~circuit,~~cash orneeds. ICIn addition, ~~manufacturing~~the ~~and~~credit facility ~~include~~contains ~~systems~~financial covenants which must be met for ~~wafer~~the ~~surface~~availability ~~preparation~~of funds. ~~and~~We ~~electrochemical~~have ~~deposition,~~been orin ~~ECD,~~discussions ~~applications.~~with ~~Our~~the ~~surface~~Trade ~~preparation~~Bank ~~systems~~regarding ~~are~~our ~~designed~~compliance with ~~for~~the ~~wet~~Funded ~~cleaning~~Debt to EBITDA covenant. There exists an ambiguity in interpretation which is unresolved, ~~stripping~~but ~~and~~which ~~etching~~if ~~processes~~interpreted as noncompliance with the covenant, ~~including~~would ~~photoresist~~allow ~~and~~the ~~polymer~~Trade ~~removal~~Bank ~~and~~to ~~metal~~notify ~~etching.~~us ~~Our~~that ~~ECD~~the non-compliance ~~systems~~constitutes ~~are~~an ~~used~~event ~~for~~of ~~copper~~default under the facility that (i) prevents further borrowings and ~~gold~~(ii) ~~plating~~gives ~~for~~them the ~~IC’s~~right ~~internal~~to ~~wiring,~~accelerate orthe payment ~~interconnects;~~of ~~solder~~all ~~and~~amounts ~~gold~~outstanding ~~bumps~~under ~~for~~the ~~wafer~~loan. ~~level~~The ~~packaging~~bank ~~applications;~~has ~~and~~not ~~other~~provided ~~metals~~us with ~~for~~any ~~various~~notice ~~semiconductor~~of ~~and~~default ~~related~~(which ~~applications.~~is ~~Our~~also ~~products~~subject ~~address~~to ~~critical~~a ~~applications~~right of cure within twenty calendar days of the ~~semiconductor~~notice). ~~manufacturing~~In ~~process~~view of this ambiguity in interpretation, ~~and~~we ~~help~~do ~~enable~~not ~~our~~anticipate ~~customers~~being able to ~~manufacture~~request ~~more~~further ~~advanced~~advances under ~~semiconductor~~the ~~devices~~Credit ~~that~~Agreement ~~feature~~until ~~higher~~this ~~levels~~matter ofis ~~performance~~resolved. ~~The~~If ~~fabrication~~interpreted in favor of the Trade Bank, there would be a Funded Debt to EBIDTA ratio ~~semiconductor~~requirement ~~devices~~of ~~typically~~not ~~requires~~more ~~several~~than ~~hundred~~2:1 ~~manufacturing~~as ~~steps~~of September 30, ~~with~~2009 (EBITDA for the trailing ~~number~~twelve-month ofperiod ~~steps~~ending ~~continuing~~September to30, ~~increase~~2009 ~~for~~was ~~advanced~~a ~~devices~~negative number). We ~~Due~~continue to ~~the~~discuss ~~breadth~~credit offacility ~~our~~requirements ~~product~~with ~~portfolio~~the ~~and~~Trade ~~advanced~~Bank ~~technology~~with ~~capabilities,~~a view ~~our~~toward ~~solutions~~arranging ~~address~~a ~~over~~facility ~~100~~that ofresolves ~~these~~any ~~manufacturing~~issues ~~steps.~~regarding borrowing limits and outstanding advances.

~~There~~Further, we ~~are~~do ~~several~~not ~~key~~currently ~~trends~~have a plan to replace the Trade Bank credit facility when it matures in March 2010. If the ~~semiconductor~~Applied ~~manufacturing~~Materials ~~industry~~transaction ~~driving~~has ~~growth~~not been consummated prior to that time, we may require additional borrowing capacity in order ~~demand~~to ~~for~~meet ~~wafer~~our ~~surface~~working ~~preparation~~capital needs and to fund certain capital expenditures. If we cannot secure adequate borrowing capacity on acceptable terms, ~~ECD~~we may face limitations on our ability to grow our business or expand into other product lines, and we may face shortfalls in working capital, which could require us to reduce our sales, slow down our product development, or take other ~~advanced~~measures ~~semiconductor~~that ~~equipment:~~would be harmful to our results of operation or financial condition.

~~smaller~~We ~~device~~have ~~features~~incurred ~~for~~significant ~~lower~~net losses ~~cost~~in ~~and~~the ~~higher~~past, ~~performance;~~our future revenues are inherently unpredictable, and we may be unable to maintain profitability.

~~new~~We have ~~materials~~incurred significant net losses in the past. Our operating results for future periods are subject to ~~build~~numerous ~~more~~uncertainties, ~~advanced~~and ~~semiconductor~~we ~~devices;~~cannot assure that we will be able to maintain profitability. It is possible that in future quarters our operating results will decrease from the previous quarter or fall below the expectations of securities analysts and investors. In this event, the trading price of our common stock could significantly decline. Further, exacerbated or continuing declines in net income or increases in net losses could affect our liquidity, results of operations, or financial conditions.

~~increased~~Our ~~use~~quarterly ofoperating ~~300mm~~results ~~wafers~~have varied in the past and will continue to ~~reduce~~vary ~~manufacturing~~significantly ~~costs;~~in the future, potentially causing volatility in our stock price.

~~move~~Our toquarterly operating ~~spray~~results ~~processing~~have varied significantly in the past and ~~single-wafer~~will ~~processing~~continue ~~technologies~~to ~~for~~do so ~~enhanced~~in ~~surface~~the ~~preparation;~~future, which we anticipate will continue to cause our common stock price to fluctuate in the future. Some of the factors that may influence our operating results and subject our common stock to price and volume fluctuations include:

~~wafer~~• ~~level~~changes in customer demand for our systems, which is influenced by economic conditions, technological developments in the semiconductor industry, and ~~other~~the ~~advanced~~announcement ~~packaging~~or ~~enabling~~release ~~smaller~~of ~~portable~~enhancements to existing products. or new product offerings by our competitors; • demand for products that use semiconductors; • market acceptance of our systems and changes in our product offerings; • size and timing of orders from customers; • customer cancellations or delays in orders, shipments, and installations; • customer delays or rejections of final acceptance of our shipments; • changes in average selling price and product mix; • failure to ship an anticipated number of systems in the quarter; • product development costs, including research, development, engineering and marketing expenses associated with our introduction of new products and product enhancements; • sudden changes in component prices or availability; • manufacturing inefficiencies caused by uneven or unpredictable order patterns, reducing our gross margins; • costs associated with protecting our intellectual property; • level of our fixed expenses relative to our net sales; and • fluctuating costs associated with our international organization and international sales, including currency exchange rate fluctuations.

AsDuring ~~the~~any ~~semiconductor manufacturing process increases in complexity and production parameters become more stringent~~quarter, a ~~semiconductor~~significant ~~manufacturers~~portion ~~have increasingly relied upon providers~~ of ~~semiconductor~~our ~~equipment~~net ~~that~~sales ~~features~~may ~~improved~~be ~~process~~derived ~~control,~~from ~~smaller~~the ~~footprint~~sale ~~and a lower cost~~ of ~~ownership of their manufacturing processes. We provide~~ a relatively ~~broad~~small ~~suite~~number of ~~advanced,~~high ~~highly-engineered,~~priced ~~innovative processing~~ systems ~~that include surface preparation and ECD equipment~~. The ~~Our~~selling ~~batch~~prices ~~and~~of our ~~single-wafer processing~~ systems ~~for~~range ~~wet~~from ~~cleaning,~~approximately ~~stripping and etching feature our proprietary spray technology~~$20,000 asto ~~well~~in asexcess ~~our~~of ~~unique process chamber designs~~$5.0 million. Accordingly, ~~Our~~a ~~ECD~~small ~~equipment~~change ~~leverages~~in ~~our~~the ~~advanced~~number ~~computational techniques~~ and/or ~~Capsule~~mix ~~technology for a variety~~ of tools ~~applications~~we ~~including~~sell ~~copper~~may ~~interconnect,~~cause ~~seed~~significant ~~layer~~changes ~~enhancement~~in ~~and~~our ~~gold and solder bumps for advanced packaging~~operating results.

~~Key~~Our ~~Performance~~results ~~Indicators~~also may fluctuate because of the terms on which we deliver certain of our systems, which in some instances allow customers an extended period of acceptance before becoming obligated to pay for products we have delivered. We follow authoritative accounting guidance regarding revenue recognition for sales that involve contractual customer acceptance provisions and product installation commitments. Timing of revenue recognition from the sale of new systems, sales to new customers and installation services is subject to the length of time required to achieve customer acceptance after shipment, which could cause our operating results to vary from period to period.

Our management focuses on revenues, gross margin, operating expenses and profitability in managing our business. In addition to these financial measures found in our financial statements, we also use bookings, backlog and shipments as key performance indicators. Bookings are firm orders for which we have received written customer authorization in the fiscal period. Backlog is the balance of undelivered orders at the end of a fiscal period. In order to be included in bookings or backlog, an order must be scheduled to ship within the next 12 months. Backlog and forecasted orders drive our production schedule. Shipments measure how well we have met our production plan and are viewed as a primary measure of factory output. 13

ATable ~~summary~~ of ~~key factors that impacted our financial performance during fiscal year 2004 includes:~~ Contents

~~Our~~In light ~~fiscal~~of ~~2004~~these ~~bookings~~factors ~~were~~and ~~$195.4~~the ~~million~~cyclical asnature ~~compared~~of the semiconductor industry, we expect to ~~$91.5~~continue ~~million~~to inexperience ~~fiscal~~significant ~~2003~~fluctuations in quarterly and annual ~~include~~operating ~~over~~results. Moreover, ~~$75~~many ~~million~~of our expenses are fixed in the ~~bookings~~short-term which, together with the need for continued investment in research and development, marketing and customer support, limits our ~~new~~ability ~~Raider~~to reduce ~~platform~~expenses quickly in response to declines in sales. As a result, net sales could decline and harm our business, financial condition, results of operations and cash flows, which could cause our operating results to be below the public market analysts’ or investors’ expectations and the market price of our stock could decline.

~~Shipments~~Cyclicality in ~~fiscal~~the ~~2004~~semiconductor industry ~~were~~and ~~$173.0~~the ~~million,~~semiconductor upequipment ~~from~~industry ~~$95.9~~has ~~million~~historically led to substantial variations in ~~fiscal~~demand ~~2003.~~for our products and consequently our operating results, and will continue to do so.

~~Net~~Our operating ~~income~~results ~~was~~are $7subject to significant variation due to the cyclical nature of the semiconductor industry’s business cycles, the timing, length and volatility of which are difficult to predict.4 Our ~~million~~business ondepends upon ~~net~~the ~~sales~~capital spending of ~~$139~~semiconductor manufacturers, which, in turn, depends upon the current and anticipated market demand for semiconductors and products using semiconductors.6 The ~~million~~semiconductor industry has historically been cyclical because of sudden changes in ~~fiscal~~demand ~~2004~~for semiconductors ~~after~~and ~~two~~manufacturing ~~consecutive~~capacity, ~~years~~including capacity utilizing the latest technology. The rate of ~~net~~changes ~~losses~~in demand, including end-user demand, is accelerating, and the effect of these changes on us is occurring sooner, exacerbating the volatility of these cycles. These changes have affected the timing and amounts of customers’ capital equipment purchases and investments in new technology, and continue to affect our net sales, gross margin and results of operations.

~~Our~~During ~~gross~~downturns, the ~~margin~~semiconductor ~~increased~~equipment toindustry 55typically experiences a more pronounced percentage decrease in revenues than the semiconductor industry.4% A prolonged ofdownturn can seriously affect our net sales, upgross ~~from~~margin 30and results of operations.1% In inaddition, ~~fiscal~~during ~~2003.~~downturns, ~~Fiscal~~it ~~2004~~is ~~margin~~critical ~~was~~to appropriately ~~favorably~~align ~~impacted~~our bycost structure with prevailing market conditions, to minimize the ~~receipt~~effect of ~~$10~~such downturns on our operations, and in particular, to continue to maintain our core research and development programs.8 If we ~~million~~are unable to align our cost structure in ~~license~~response ~~initiation~~to ~~fees~~such ~~while~~downturns ~~fiscal~~on ~~2003~~a timely ~~margin~~basis, ~~was~~or if such implementation has an adverse impact on our business, then our financial condition, results of operations and cash flows may be negatively ~~impacted~~affected byto aan ~~$19.1~~even ~~million~~larger ~~inventory~~extent ~~write-down.~~during industry downturns.

WeConversely, ~~licensed~~during an ~~our~~upturn ~~seed~~or ~~layer~~periods ~~enhancement~~of ~~patents~~increasing todemand ~~Applied~~for ~~Materials~~semiconductor manufacturing equipment, ~~Inc.~~we may not have sufficient manufacturing capacity and ~~Ebara,~~inventory ~~Inc~~to meet customer demand. During ~~during~~an upturn we would be unable to predict the ~~fiscal~~sustainability ~~year~~of ~~and~~a ~~received~~recovery, ~~license~~if ~~initiation~~any, ~~fees~~and/or ~~totaling~~the ~~$10.8~~industry’s ~~million~~rate of growth in ~~fiscal~~such ~~2004.~~a ~~The~~recovery, ~~license~~both ~~initiation~~of ~~fees~~which will be affected by many factors. If we are ~~included~~unable into ~~the~~effectively ~~bookings~~manage our resources and production capacity during an industry upturn, ~~shipments~~we may fail to plan for increasing demand, ~~net~~or ~~sales~~we may overestimate the potential demand, ~~gross~~in ~~margin~~either ~~and~~of which ~~net~~cases ~~income~~there ~~figures~~could ~~discussed~~be ~~above.~~a material adverse effect on our business, financial condition, results of operations and cash flows.

~~Cash,~~We ~~cash~~have ~~equivalents~~experienced ~~and~~periods ~~marketable~~of ~~securities~~rapid growth ~~were~~and ~~$22.4~~decline ~~million~~in atoperating ~~September 30~~levels, ~~2004,~~and aif ~~decrease~~we ofare ~~$5.5~~not ~~million~~able ~~from~~to ~~$27.9~~successfully manage ~~million~~these atsignificant ~~September 30~~fluctuations, ~~2003~~our business, ~~reflecting~~financial ~~increased~~condition ~~trade receivables from higher shipment levels~~ and results ~~increased~~of ~~inventory~~operations ascould webe ~~built~~significantly ~~inventory for future shipments~~harmed.

~~Results~~We have experienced periods of ~~Operations~~significant growth and decline in net sales. Our net sales decreased approximately 41.7% from $238.6 million in fiscal 2008 to $139.0 million in fiscal 2009 and increased approximately 11.0% from $215.2 million in fiscal 2007 to $238.6 million in fiscal 2008. However, there have been periods of even more significant declines in net sales; for example, our net sales decreased 51.8% from approximately $256.5 million for fiscal 2001 to approximately $123.7 million for fiscal 2002. In addition, our consolidated orders backlog decreased 30.9% from approximately $85.3 million at September 30, 2006 to $58.9 million at September 30, 2007. If we are unable to effectively manage periods of rapid decline or sales growth, our business, financial condition, results of operations and cash flows could be significantly harmed.

~~The~~Our ~~following~~deferred ~~table~~revenue ~~sets~~and ~~forth~~orders backlog ~~our~~may ~~consolidated~~not ~~results~~result ofin ~~operations~~future ~~for the periods indicated as a percentage of~~ net sales: .

	Year Ended September 30,
	2004			2003			2002
Net sales		100.0	%		100.0	%		100.0	%
Cost of sales		44.6			69.9			52.2
Gross profit		55.4			30.1			47.8
Operating expenses:
Selling, general and administrative		36.8			44.8			48.9
Research and development		10.8			15.5			18.7
Total operating expenses		47.6			60.3			67.6
Income (loss) from operations		7.8			(30.2	)		(19.8	)
Other income (expense), net		(0.1	)		0.5			1.2
Income (loss) before income taxes		7.7			(29.7	)		(18.6	)
Income tax provision (benefit)		2.4			(11.6	)		(7.1	)
Net income (loss)		5.3	%		(18.1	)%		(11.5	)%

Revenue recognition guidance requires that revenue and the associated profit from the sale of newly introduced systems, systems sales into new customer environments and substantive installation obligations that are subject to contractual customer acceptance provisions are deferred until the customer has acknowledged their acceptance of the system. If the system does not meet the agreed specifications and the customer refuses to accept the system, the deferred revenue and associated deferred profit will not be realized and we may be required to refund any cash payments previously received from the customer, which may harm our business, financial condition, results of operations and cash flows.

~~Fiscal~~Order ~~2004~~backlog ~~Compared~~does not ~~with~~necessarily ~~Fiscal~~include ~~2003~~all sales needed to achieve net revenue expectations for a subsequent period. We schedule the production of our systems based in part upon order backlog. Due to possible customer changes in delivery schedules and ~~Fiscal~~cancellations ~~2002~~of orders, our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period. In addition, while we evaluate each customer order to determine qualification for inclusion in backlog, there can be no assurance that amounts included in backlog will ultimately result in future sales. A reduction in backlog during any particular period, or the failure of our backlog to result in future sales, could harm our business, financial condition, results of operations and cash flows. For example, in the fourth quarter of fiscal 2008, we experienced an abnormally high amount of customer cancellations.

~~Net Sales~~14

	Year Ended September 30,
	2004			2003			2002
	(Dollars in millions)
Net Sales	$	139.6		$	117.0		$	123.7
By Product Line:
Semiconductor equipment	$	128.8		$	117.0		$	123.7
License fees		10.8			--			--
By Geographical Distribution, percentage of net tool sales:
North America		46.4	%		38.8	%		37.5	%
Europe		27.7	%		31.4	%		37.1	%
Asia, including Japan		25.9	%		29.8	%		25.4	%

Table of Contents

~~Net~~Our ~~sales~~continued ~~increased~~high ~~$22.6~~spending ~~million~~levels inon research ~~fiscal 2004 as compared with fiscal 2003. The increase in net sales reflects the improved state of the semiconductor~~ and ~~semiconductor~~development ~~equipment industries. All product lines showed improvement in fiscal 2004, particularly surface preparation applications~~ and ~~spare~~the ~~parts.~~need ~~Surface~~to ~~preparation~~maintain ~~net~~a ~~sales~~high ~~were~~level ~~favorably impacted by customer purchases~~ of ~~our new Raider systems for single-wafer cleaning applications as well as by~~ customer service ~~purchases~~and ofsupport ~~our batch tools~~may, ~~both~~under ofcertain ~~which~~circumstances, ~~expanded~~harm our ~~customers’~~results ~~manufacturing capacity. ECD net sales are primarily sales~~ of ~~our new Raider systems for plating applications~~ operations. ~~Fiscal 2004 was also benefited by the receipt of $10.8 million in license initiation fees for our seed layer enhancement patents.~~

~~Both~~In order ~~fiscal~~to ~~2003~~remain ~~and~~competitive, ~~fiscal~~we ~~2002~~must ~~net~~maintain ~~sales~~a ~~were~~high ~~adversely~~level ~~impacted~~of byinvestment ~~the downturn~~ in research ~~the semiconductor~~ and ~~semiconductor equipment industries. Customer purchases in both years were primarily focused on newer technology products~~development, ~~especially~~marketing ~~single-wafer~~and ~~cleaning~~customer ~~tools,~~service ~~rather~~while ~~than~~controlling operating ~~on tools that enhanced manufacturing capacity~~expenses. ~~Product sales in both years continued trends to 300mm equipment and single-wafer platforms.~~

~~Geographically,~~Our ~~approximately~~industry ~~half~~is characterized by the need for continued investment in research and development as well as a high level of ~~our~~worldwide ~~fiscal~~customer ~~2004~~service ~~net~~and ~~sales~~support. As a ~~were~~result ~~derived~~of ~~from~~our ~~North~~need ~~America~~to maintain spending levels in these areas, ~~which~~our ~~correlates~~operating results ~~with~~could be materially harmed if our ~~first~~net ~~shipments~~sales fall below expectations. In addition, because of ~~the~~our ~~Raider~~emphasis ~~platform.~~on ~~Europe~~research and development ~~Asia~~and ~~each~~technological ~~accounted~~innovation, ~~for~~our ~~approximately~~operating ~~25%~~costs ofmay ~~our~~increase further ~~remaining~~in ~~sales.~~the Wefuture, ~~anticipate~~which could have a ~~larger~~negative ~~contribution~~impact ~~from~~on ~~both~~our ~~Europe~~results of operations and ~~Asia~~cash flow in ~~fiscal~~any ~~2005.~~given period.

~~Gross~~There can ~~Profit~~be no assurance that we will have sufficient resources to continue to make a high level of investment in research and development, marketing and customer service while controlling operating expenses or that our products will continue to be viewed as competitive as a result of technological advances by competitors or changes in semiconductor processing technology. Such competitive pressures may necessitate significant price reductions by us or result in lost orders, which could harm our business, financial condition, results of operations and cash flows.

	Year Ended September 30,
	2004			2003			2002
	(Dollars in thousands)
Gross profit	$	77,421		$	35,254		$	59,083
Percentage of net sales		55.4	%		30.1	%		47.8	%

We depend on our key customers with which we do not have long-term contracts. Any loss, cancellation, reduction or delay in purchases by, or failure to collect receivables from, these customers could harm our business.

~~Gross~~Typically, ~~profit~~we ~~increased~~do not ~~$42.2~~have ~~million~~long-term orcontracts ~~119~~with our customers.6% As ina ~~fiscal~~result, ~~2004~~our agreements ~~compared~~with toour ~~fiscal~~customers ~~2003.~~do ~~Fiscal~~not ~~2003~~provide ~~gross~~any ~~profit~~assurance ~~decreased~~of ~~$23~~future sales.8 Sales ~~million~~are ormade ~~40.3%~~pursuant ~~compared~~to ~~with~~purchase ~~fiscal~~orders, ~~2002~~which ~~gross~~can ~~profit~~be cancelled ofor ~~$59.1~~delayed ~~million.~~by Weour ~~recorded~~customers aat ~~$19~~any time.1 Our ~~million~~customers ~~inventory~~are not ~~write-down~~required into ~~fiscal~~make ~~2003~~minimum ~~due~~purchases from us, or make purchases at any particular time; our customers are free to ~~obsolescence~~purchase ~~caused~~products byfrom ~~the~~our competitors; ~~introduction~~and ofour customers can stop purchasing our ~~new~~products ~~Raider~~at ~~product.~~any time without penalty.

~~Inventory~~In addition, ~~reserves~~customer ~~were~~cancellations ~~lower~~and inrequests ~~fiscal~~for ~~2004~~delayed asdeliveries ~~compared~~can tocreate a ~~fiscal~~material ~~2003~~adverse ~~because~~effect ofon ~~the~~our ~~inventory~~business, ~~write-down~~financial incondition, ~~fiscal~~results ~~2003.~~of operations Ofand ~~the~~cash 25flows.3 During ~~percentage~~the ~~point~~recent ~~difference~~economic inturmoil affecting ~~gross~~the ~~margin~~world’s ineconomies, ~~fiscal~~we ~~2004~~experienced asa ~~compared~~significantly ~~with~~higher ~~fiscal~~amount ~~2003,~~of customer ~~the~~cancellations ~~inventory~~and ~~write-down~~requests ~~in fiscal 2003 accounted~~ for 11delays ~~percentage~~in ~~points~~delivery. While ~~The receipt of $10.8 million~~ in some ~~license~~cases ~~initiation~~we ~~fees~~have ~~for~~contractual ~~our~~protections ~~seed~~against ~~layer~~such ~~enhancement~~cancellations ~~patents~~or requests ~~also~~for ~~contributed~~delayed ~~over~~shipments, ~~six~~there ~~points~~is tono ~~the~~assurance ~~increase~~ in ~~margin~~the infuture ~~fiscal~~that ~~2004.~~we ~~Improved~~will be ~~absorption~~able ~~of manufacturing costs also contributed~~ to ~~the~~collect ~~improved~~amounts ~~margin~~due inunder ~~fiscal~~those ~~2004 because our factory operated at higher levels of output~~provisions.

~~The~~Our ~~margin~~ten ~~decrease~~largest customers inaccounted ~~fiscal~~for ~~2003~~approximately ~~from~~48.2%, ~~fiscal~~56.0% ~~2002~~and is67.8% ~~primarily~~of ~~attributable~~net tosales ~~the~~in fiscal ~~$19~~2009, 2008 and 2007, respectively.1 There ~~million~~are ~~inventory~~a ~~write-down~~limited ~~discussed~~number of ~~above.~~large Incompanies ~~fiscal~~operating ~~2002~~in the ~~semiconductor~~highly ~~and~~concentrated, capital intensive semiconductor ~~equipment~~industry. Accordingly, ~~industries~~we ~~were~~expect inthat we will continue to depend on a ~~downturn~~relatively small number of large companies for a significant portion of our net sales. Although ~~The~~the ~~impact~~composition onof the ~~Company~~group ~~was~~of largest ~~lower~~customers ~~operating~~may ~~levels~~change infrom year to year, the ~~factory~~loss of, ~~which~~or ~~resulted~~a insignificant curtailment ~~reduced~~of ~~manufacturing~~purchases ~~overhead~~by, ~~absorption~~one ~~and~~or ~~higher~~more ~~inventory~~of ~~obsolescence~~our ~~than~~key incustomers ~~fiscal~~or ~~2001.~~the ~~Changes~~delay inor cancellation of a large order could cause our net sales ~~mix~~to ~~also~~decline significantly, ~~contributed~~which towould ~~the~~harm ~~margin~~our ~~change~~business, infinancial ~~fiscal~~condition, ~~2002~~results of operations and cash flows. Similarly, delays in payments by large customers could have a significant impact on our cash flows.

~~Fiscal~~Intense ~~2004~~competition ~~gross~~in ~~margin was minimally impacted by sales of tools containing parts, valued at their written down cost basis. Fiscal 2004 gross margin was favorably impacted by approximately 1.0 percentage point due to~~ the ~~sale~~markets ofin which ~~tools~~we ~~that~~operate ~~contained~~may ~~certain~~adversely ~~parts~~affect ~~valued~~our atmarket ~~their~~share ~~written-down~~and ~~cost~~reduce ~~basis.~~demand ~~Revenues~~for ~~on those sales totaled $9~~our products.~~0 million.~~

~~Selling~~We face substantial competition from established competitors, ~~General~~some ~~and~~of ~~Administrative~~which have:

	Year Ended September 30,
	2004			2003			2002
	(Dollars in thousands)
Selling, general and administrative	$	51,398		$	52,439		$	60,454
Percentage of net sales		36.8	%		44.8	%		48.9	%

	•	greater financial, marketing, technical and other resources;
	•	broader and integrated product lines;
	•	more extensive customer support capabilities; and
	•	larger sales organizations and customer bases.

~~Selling,~~We may ~~general~~also ~~and~~face ~~administrative~~competition ~~(SG&A)~~from ~~expenses~~new ~~include~~market employment costs for sales, marketing, customer support and administrative personnel as well as travel, communications, professional fees and expenses related to sales and service offices at North American and international locationsentrants. Our ~~SG&A~~ability ~~expenses decreased $1.0 million in fiscal 2004 as compared with fiscal 2003~~ to compete ~~36.8%~~successfully ~~of net sales and $8.0 million~~ in ~~fiscal~~the ~~2003~~future ~~from~~depends ~~fiscal~~on ~~2002~~a tonumber ~~44.8%~~ of ~~net sales.~~ factors, including:

~~Legal~~• ~~expenses~~system ~~decreased~~performance, ~~more~~quality ~~than~~and ~~50%~~reliability; in• ~~fiscal~~upfront ~~2004~~price ~~compared~~and tomaintenance ~~fiscal~~costs ~~2003 as a result~~ of ~~our~~using ~~efforts to bring~~ our ~~plaintiff~~products; ~~litigation~~• toability ~~conclusion and~~ to ~~manage~~ship ~~our~~products ~~legal~~on ~~costs.~~time ~~Costs related~~ to ~~worldwide~~meet ~~marketing~~customers’ ~~and~~demands; ~~customer~~• ~~support~~timeliness ~~efforts increased by approximately 38% as a result of increased business opportunity~~ and ~~activity.~~quality ~~Professional fees increased by over 70% primarily as a result~~ of ~~additional~~technical ~~accounting and legal~~ support ~~expense~~service; ~~related~~and to• ~~the~~our ~~current~~success ~~financial regulatory environment. Commission expense declined~~ in ~~fiscal~~developing ~~2004~~new ~~as compared to fiscal 2003 reflecting the change in our geographic sales mix from Asia to North America. Generally, commission expense is directly variable with sales~~ and isenhanced ~~also dependent on the geographic region of the sale as commission rates vary from region to region~~products.

~~The~~Due ~~downward~~to ~~trend~~intense competitive conditions in ~~SG&A~~the ~~expenses~~semiconductor inequipment ~~absolute~~industry, ~~dollars~~we have from time ~~fiscal 2002~~ to ~~fiscal~~time ~~2003~~selectively ~~was~~reduced ~~the~~prices ~~result~~on ofour ~~continued~~systems ~~cost~~in ~~control~~order ~~during~~to ~~the~~protect ~~industry~~our market ~~downturn.~~share, ~~Reduced staffing~~ and ~~related~~competitive ~~expenses~~pressures ~~resulted~~may innecessitate ~~cost~~further price reductions. Periodically, ~~which~~our ~~were~~competitors ~~partially~~announce ~~offset by increased legal expenses related to patent litigation. Fiscal 2002 SG&A expenses also reflected~~ the ~~impact~~ introduction of ~~cost~~new ~~reductions,~~products ~~including~~or ~~manpower~~lower ~~reductions~~prices ~~and~~which ~~lower~~can ~~sales~~affect ~~commissions.~~our ~~Those~~customers’ ~~decreases~~decisions ~~were~~to purchase ~~partially~~our ~~offset~~systems, bythe aprices ~~$4.4~~we ~~million~~can ~~increase~~charge infor ~~legal~~our ~~expenses~~systems ~~related~~and to the ~~protection~~level of discounts ~~our~~we ~~intellectual~~grant ~~property.~~our customers.

~~Research and Development~~15

	Year Ended September 30,
	2004			2003			2002
	(Dollars in thousands)
Research and development	$	15,147		$	18,084		$	23,092
Percentage of net sales		10.8	%		15.5	%		18.7	%

Table of Contents

~~Research~~Moreover, ~~and~~there ~~Development~~has been ~~(R&D)~~significant ~~expense~~merger ~~consists~~and ofacquisition ~~salaries,~~activity ~~project~~among ~~materials,~~our ~~laboratory~~competitors ~~costs,~~and potential ~~consulting~~competitors. These ~~fees~~combinations ~~and~~may ~~other~~provide ~~costs~~our ~~associated~~competitors and potential competitors with ~~our~~a ~~product~~competitive ~~development~~advantage ~~efforts.~~over ~~R&D~~us ~~expense~~by ~~decreased~~enabling ~~$2.9~~them to ~~million~~more inrapidly ~~fiscal~~expand ~~2004~~their asproduct ~~compared~~offerings and service capabilities to ~~fiscal~~meet a ~~2003.~~broader Itrange ~~decreased~~of $5customer needs.0 Many ~~million~~of inour ~~the~~customers ~~fiscal~~and potential ~~2003~~customers toare ~~fiscal~~relatively ~~2002~~large ~~comparison~~companies that require global support and service for their semiconductor manufacturing equipment. Our larger competitors have more extensive infrastructures, which could place us at a disadvantage when competing for the business of global semiconductor device manufacturers.

~~R&D~~We expect ~~depreciation~~our ~~expense~~competitors ~~declined~~to ~~46%~~continue into ~~fiscal~~improve ~~2004~~the asdesign ~~compared~~and ~~with~~performance ~~fiscal 2003, as assets placed in service earlier reached the end~~ of their ~~estimated useful lives~~products. We ~~Prototype~~cannot ~~expense~~assure ~~also~~you ~~declined~~that ~~in fiscal 2004 because~~ our ~~focus~~competitors ~~has~~will ~~been~~not develop ~~meeting~~enhancements ~~new~~to, ~~customer~~or ~~requirements~~future ~~for~~generations ~~the Raider platform whereas in the prior year we were engaged in the development~~ of ~~this new platform. These decreases were partially offset by increases in other operating expenses as a result of a general increase in business activity. In fiscal 2004~~, ~~our~~competitive ~~R&D~~products ~~projects~~that will ~~focused~~offer onsuperior ~~development of our single-wafer megasonics processing chamber to improve particle removal for the critical cleaning market~~price, ~~development~~performance ~~of the environmentally-friendly HydrOzone cleaning process for critical layers in the transistor-formation step of IC fabrication~~ and/or ~~development~~cost of ~~the~~ownership ~~next-generation Capsule II processing chamber for post-etch cleaning~~features, ~~wafer backside and bevel cleaning.~~or ~~For~~that ~~our~~new ~~plating~~processes ~~technology,~~or wetechnologies ~~also~~will ~~developed~~not aemerge ~~membrane chamber~~ that ~~reduces~~render ~~chemical~~our ~~consumption,~~products ~~which~~less competitive isor ~~critical for cost sensitive chip manufacturing and wafer level packaging applications~~obsolete.

~~The~~As ~~decline~~a result inof ~~fiscal~~the ~~2003~~substantial ~~R&D~~investment ~~expenses~~required ~~as compared~~ to ~~fiscal~~evaluate ~~2002~~and ~~was~~select ~~attributable~~capital equipment ~~to continued cost control in the form of staff reductions~~ and ~~related~~integrate ~~expenses.~~it ~~R&D~~into ~~projects~~a inproduction ~~fiscal~~line, ~~2003~~we ~~included~~believe ~~the~~that ~~further~~once ~~development~~a manufacturer ofhas ~~our~~selected ~~Raider~~certain ~~platform~~capital ~~for~~equipment ~~single-wafer~~from ~~ECD~~a ~~and~~particular ~~single-wafer cleaning~~vendor, there ~~stripping~~is ~~and~~a ~~etching~~tendency infor ~~both~~the ~~200mm~~manufacturer ~~and~~to ~~300mm.~~rely ~~Fiscal~~upon ~~2002~~that ~~R&D~~vendor ~~expenses~~to ~~were~~provide equipment ~~impacted~~for ~~by manpower reductions in response to~~ the ~~industry~~specific ~~downturn.~~production ~~This~~line ~~reduction~~application ~~was partially offset by an increase in depreciation expense as we updated our process development~~ and ~~demonstration~~may ~~laboratories.~~seek ~~Fiscal~~to ~~2002~~rely ~~R&D~~upon that ~~projects~~vendor ~~included enhancements~~ to ~~our~~meet ~~Capsule~~other ~~processor~~capital ~~and ECD products~~equipment requirements. Accordingly, ~~the~~we ~~development~~may ofbe ~~the~~at ~~Sirius~~a ~~system~~competitive ~~and~~disadvantage for ~~other~~a ~~projects~~protracted ~~focused~~period onof ~~the~~time ~~industry~~with ~~technology~~respect ~~trends~~to ~~toward~~a ~~smaller~~particular ~~feature~~customer ~~sizes~~if ~~and~~that customer ~~the~~utilizes ~~transition~~a tocompetitor’s ~~copper,~~manufacturing ~~wafer level packaging and 300mm~~equipment.

Our ~~research~~Raider ~~and~~platform ~~development~~accounts ~~expense~~for ~~has fluctuated from period to period in the past. We expect such fluctuations to continue in the future, both in absolute dollars and as~~ a substantial ~~percentage~~portion of ~~net~~current ~~sales, primarily due to the timing of expenditures~~ and ~~fluctuations~~anticipated ~~in the level of net~~ sales ~~in a given period~~. ~~We expect to continue to fund research and development expenditures with a multi-year perspective and are committed to technology leadership in our sector of the semiconductor equipment industry.~~

~~Other~~We have ~~Income~~leveraged ~~(Expense)~~our Raider platform to address both surface preparation and ECD applications. In fiscal year 2009, ~~Net~~the Raider platform accounted for approximately 80% of our tool revenues. We expect that revenue from our Raider platform will continue to account for a significant portion of our revenue. Accordingly, if the Raider platform were adversely affected by its own performance, price or total cost of ownership, or the availability, functionality and price of competing products and technologies, that could have a material adverse impact on our business, financial condition, results of operations and cash flows.

	Year Ended September 30,
	2004			2003			2002
	(In thousands)
Interest income	$	332		$	590		$	943
Interest expense		(148	)		(205	)		(205	)
Foreign exchange gain (loss)		(422	)		(284	)		364
Other		99			495			396
Total other income (expense), net	$	(139	)	$	596		$	1,498

Rapid technological change could make our products and inventories obsolete or unmarketable.

~~Net~~We operate ~~other~~in ~~income~~an ~~(expense)~~industry ~~declined~~that is subject to aevolving ~~net~~industry ~~expense~~standards, ofrapid technological ~~$139~~changes,~~000~~ rapid changes in ~~fiscal~~customer ~~2004~~demands ~~from~~and ~~net~~the ~~income~~rapid introduction of ~~$596~~new,~~000~~ inhigher ~~fiscal~~performance ~~2003.~~systems ~~Interest~~with ~~income~~shorter ~~declined~~product ~~from~~life cycles. For ~~$590~~example,~~000~~ inrecent ~~fiscal~~trends ~~2003 to $332,000~~ in ~~fiscal~~semiconductor ~~2004,~~manufacturing include ~~reflecting~~the ~~reduced~~move ~~cash~~toward ~~investments.~~smaller Indevice ~~fiscal~~features ~~2004,~~to welower ~~reported~~cost ~~foreign~~and ~~exchange~~improve performance, ~~losses~~the ~~because~~use of ~~fluctuations~~new inmaterials ~~the~~to ~~Yen,~~achieve ~~Euro~~higher speed and ~~the~~performance ~~British~~of an ~~pound.~~integrated Incircuit, ~~fiscal~~and ~~2003,~~the wemigration ~~reported~~to ~~foreign~~300mm ~~exchange~~diameter ~~losses~~wafers ~~because~~from of200mm diameter ~~fluctuations~~wafers into ~~the~~increase ~~Yen~~productivity and ~~the~~reduce ~~Euro~~costs. InAs ~~fiscal~~a ~~2002,~~result weof ~~reported~~these and aother ~~foreign~~trends ~~exchange~~in ~~gain~~our industry, ~~primarily~~we ~~due~~expect to ~~fluctuations~~continue into ~~the~~make ~~Yen.~~significant investments ~~Other income~~ in ~~fiscal~~research ~~2003~~and ~~included~~development. Although, ~~the~~historically, ~~proceeds~~ we have ~~received~~had ~~from~~adequate afunds ~~settlement~~from inoperations ~~connection~~to ~~with~~devote ato ~~patent~~research ~~claim~~and ~~that~~development, there wecan ~~pursued~~be ~~against~~no aassurance ~~German~~that ~~manufacturer~~we ofwill ~~semiconductor~~have ~~equipment.~~funds ~~Other~~available, ~~income~~and in ~~fiscal~~sufficient quantities, ~~2002~~in ~~included~~the afuture ~~gain~~for onsuch ~~the~~research ~~sale~~and ~~of an investment~~development activities.

~~Income~~Introductions ~~Taxes~~of new products by us or our competitors could adversely affect sales of our existing products and may cause these existing products and related inventories to become obsolete or unmarketable, or otherwise cause our customers to defer or cancel orders for existing products. We may be unable to develop and introduce new products or enhancements to our existing products on a timely basis or in a manner which satisfies customer needs or achieves widespread market acceptance. Any significant delay in releasing new systems could adversely affect our reputation, give a competitor a first-to-market advantage or allow a competitor to achieve greater market share. These effects of rapid technological change could harm our business, financial condition, results of operations and cash flows.

	Year Ended September 30,
	2004			2003			2002
	(Dollars in thousands)
Income tax provision (benefit)	$	3,383		$	(13,522	)	$	(8,727	)
Estimated effective tax rate		31.5	%		39.0	%		38.0	%

Our results of operations may suffer if we do not effectively manage our inventories or are required to write down our inventories due to changing market demands for our products.

~~The~~To achieve ~~estimated~~commercial ~~effective~~success ~~tax~~with ~~rate~~our ~~declined~~products, we need to ~~31.5%~~manage inour ~~fiscal~~inventory ~~2004~~of component asparts ~~compared~~and finished goods effectively to ~~fiscal~~meet ~~2003~~changing customer product and volume requirements. Some ~~The~~of ~~difference~~our inproducts ~~the~~and ~~effective~~supplies, ~~tax~~have ~~rate~~in the ~~compared~~past toand may in the ~~prior~~future, ~~years~~become isobsolete, ~~primarily~~while in inventory, due to rapidly ~~the~~changing ~~effect~~customer specifications or slowdowns in demand for existing products ahead of ~~research~~new ~~and~~product ~~development~~introductions ~~credits~~by ~~and~~us or our competitors. If ~~foreign~~we ~~income~~are ~~exclusion~~not successfully able to manage our inventory, including our spare parts inventory, we may need to write off unsaleable or obsolete inventory, which ~~increased~~would adversely affect our results of operations. For example, in the fourth quarter of fiscal ~~2004~~2007, aswe wrote ~~compared~~down inventory by approximately $3.0 million primarily due to ~~fiscal~~product enhancements ~~2003~~that changed the usage of certain component parts, making them obsolete. We have pursued a vertically-integrated manufacturing model and ~~fiscal~~therefore ~~2002~~a ~~because~~significant weportion ~~were~~of ~~profitable~~our insupply ~~fiscal~~chain ~~2004~~is manufactured by Semitool. Consequently, we may be more exposed to having significantly greater inventory on hand than competing companies which rely more heavily on outsourced supply chains.

~~Backlog~~Our dependence on key suppliers could delay shipments and ~~Deferred~~increase ~~Revenue~~our costs.

	September 30,
	2004			2003			2002
	(Dollars in millions)
Backlog	$	37.7		$	19.9		$	27.6
Percentage change in backlog from
prior year-to-date period end		89.4	%		(27.9	)%		(28.9	)%
Deferred revenue	$	44.0		$	10.7		$	38.3
Percentage change in deferred revenue
from prior year-to-date period end		311.2	%		(72.1	)%		0.3	%

Some components and subassemblies included in our products are obtained from a single source or a limited group of suppliers. The loss of, or disruption in, shipments from these sole or limited source suppliers could, in the short-term, adversely affect our business and results of operations. Further, a significant increase in the price of one or more of these components could harm our business, financial condition, results of operations and cash flows.

Approximately 49% of our current backlog is for tools on the Raider platform. Deferred revenue increased $33.3 million at September 30, 2004 as compared with September 30, 2003. In 2003, our deferred revenue pool was decreasing because of reduced activity in the industry. At September 30, 2004, deferred revenue was increasing because of increased shipments of Raiders. 16

WeTable include in backlog those customer orders for which we have written customer authorization and for which shipment is scheduled within the next 12 months. Orders are generally subject to cancellation or rescheduling by customers with limited or no cancellation fees. As the result of systems ordered and shipped in the same quarter, possible changes in customer delivery dates, cancellations and shipment delays, the backlog at any particular date and the bookings for any particular period are not necessarily indicative of actual revenue for any succeeding period. In particular, during periods of downturns in the semiconductor industry we have experienced cancellations and significant shipment delays. Contents

~~Deferred~~Our ~~profit~~future ~~included~~success independs ~~our~~on international current liabilities is derived from deferred revenue, which relates to equipment shipped to customers that has not been accepted by the customer, less the deferred cost of goods sold, including warranty and installation, and commission expensessales. ~~Deferred revenue is not included in orders backlog.~~

~~Liquidity~~Our net sales attributable to customers outside the United States as a percentage of our total net sales were approximately 74.5%, 71.4% and ~~Capital~~62.5% ~~Resources~~for fiscal 2009, 2008 and 2007. We expect net sales outside the United States to continue to represent a significant portion of our future net sales. Sales to customers outside the United States are subject to various risks, including:

~~Selected~~• ~~components~~exposure to currency fluctuations and related derivatives used to hedge such fluctuations; • exposure of ~~cash~~foreign ~~flows~~accounts ~~from~~to ~~operating~~currency ~~activities~~exchange ~~from~~translations; ~~our~~• ~~consolidated~~political ~~cash~~and ~~flows~~economic ~~statements~~instability, ~~follow:~~including terrorism; • unexpected changes in regulatory requirements; • tariffs and other market barriers; • potentially adverse tax consequences; • outbreaks of hostilities, particularly in Israel, Korea, Taiwan or China; • difficulties in managing foreign sales representatives and distributors; and • difficulties in staffing and managing foreign branch operations.

	Year Ended September 30,
	2004			2003			2002
	(In thousands)
Net income (loss)	$	7,354		$	(21,151	)	$	(14,238	)
Income tax refund receivable		19,782			(8,393	)		(11,648	)
Inventories		(24,508	)		(6,789	)		694
Accounts payable		8,790			(3,016	)		4,899
Trade receivables		(34,630	)		16,478			17,453
Deferred profit		19,120			(15,154	)		(1,322	)

A substantial portion of our international sales are denominated in U.S. dollars. Therefore, if the U.S. dollar rises in value in relation to foreign currencies, our systems will become more expensive to customers outside the United States and less competitive with systems produced by competitors outside the United States. Such conditions could negatively impact our international sales.

~~Operating~~Although ~~Activities.~~we endeavor In fiscal 2004, cash provided by operations was $2.9 million. The primary sources of cash from operating activities were the receipt of the $10.8 million in license initiation fees included in income from operations and the receipt of over $16.0 million in income tax refunds. Inventory increased $24.5 million and accounts payable increased $8.8 million as a result of our plan to ~~reduce~~meet ~~manufacturing~~technical ~~cycle~~standards ~~times~~established ~~and provide faster deliveries to our customers~~ by ~~stocking~~foreign ~~components~~standards that will help shorten our lead times. Trade receivables increased due to higher shipment levels in fiscal 2004. The increase in deferred profit was the result of revenue and expenses deferred on our new Raider products pending final customer acceptance. In fiscal 2003setting organizations, ~~our~~there ~~deferred~~can ~~profit~~be ~~pool~~no ~~was~~assurance ~~being~~that ~~relieved as~~ we ~~received~~will ~~customer~~be ~~acceptances~~able ~~on new tools deferred in prior periods. In fiscal 2004, we shipped new tools~~ to ~~new~~comply ~~customers~~with ~~which,~~changes ~~under~~in ~~our~~foreign ~~revenue~~standards ~~recognition~~in ~~policy guided by SAB 104, requires that revenue and~~ the ~~associated expenses be deferred, until customer acceptance is received~~future.

InVariations ~~fiscal 2003, we used cash from operations of $10.1 million. The net loss~~ in ~~fiscal 2003, adjusted for non-cash benefits, most notably~~ the ~~inventory~~amount ~~write-down~~ of ~~$19.1~~time ~~million,~~it takes ~~depreciation~~for ~~and~~us ~~amortization~~to ~~and~~sell ~~decreases~~our insystems ~~tax~~may ~~assets,~~cause ~~was~~fluctuations ~~the primary factor~~ in ~~the~~our ~~use of cash from~~ operating ~~activities in fiscal 2003. Changes in working capital accounts~~ results, ~~notably~~which ~~decreases~~could incause ~~trades~~our ~~receivables,~~stock ~~provided~~price ~~$16.5 million in cash. This was offset by an increase in income tax refund receivable of $8.4 million related~~ to ~~the net operating loss, and reductions in deferred profit of $15~~decline.~~2 million, the result of the receipt of customer acceptances on new tools deferred in prior periods that were not offset by new tool deferrals.~~

~~During~~Variations ~~fiscal~~in ~~2002,~~ the length ~~primary~~of ~~source~~our ofsales ~~cash~~cycles ~~was~~could ~~the~~cause our net ~~collection~~sales, ofand ~~trade~~thus ~~receivables~~our ofbusiness, financial ~~$17.5~~condition, ~~million.~~results Inof ~~fiscal~~operations ~~2002~~and ~~the~~cash ~~semiconductor~~flows, ~~equipment~~to ~~industry~~fluctuate ~~was~~widely from inperiod ato ~~downturn~~period. This Asvariation iscould ~~typical~~cause ~~during~~our stock price to decline. Our customers generally take a ~~downturn,~~long ~~collections~~time ~~exceeded~~to ~~the~~evaluate ~~generation~~many of our ~~new~~products ~~trade~~before ~~receivables~~committing to a purchase. We ~~The~~expend ~~downturn~~significant resources educating and ~~subsequent~~providing ~~declining~~information ~~sales,~~to ~~operating~~our ~~levels~~prospective ~~and~~customers regarding ~~net~~the ~~operating~~uses ~~loss,~~and ~~along~~benefits ~~with~~of ~~the~~our ~~income~~systems. The ~~tax~~length ~~refund~~of ~~receivable,~~time ~~partially~~it takes ~~offset~~us ~~the~~to ~~net~~make ~~increase~~a insale ~~cash~~depends ~~provided~~upon bymany ~~operating~~factors, ~~activities.~~ including:

~~Investing~~• ~~Activities.~~the Inefforts ~~fiscal~~of ~~2004,~~our ~~investing~~sales ~~activities~~force ~~included~~and ~~$8.6~~our ~~million~~independent insales ~~purchases~~representatives ~~of factory equipment~~ and ~~other~~distributors; ~~property~~• ~~and net cash used for~~ the ~~purchase~~complexity of ~~marketable~~our ~~securities~~customers’ offabrication ~~$1.1~~processes; ~~million.~~• Wethe ~~invested~~internal antechnical ~~additional~~capabilities ~~$1.4~~and ~~million~~sophistication inof ~~our~~the ~~development~~customer; and ~~demonstration~~• ~~laboratories~~capital inspending ~~fiscal 2004~~ by ~~transferring finished goods inventory to property, plant and equipment. We also invested $1.4 million in intangible assets, primarily in~~ our ~~patent portfolio~~customers.

WeBecause ~~used~~of ~~$1.3~~the number ~~million~~of tofactors ~~acquire~~influencing ~~property~~the sales cycle, ~~plant~~the ~~and~~period ~~equipment,~~between ~~primarily~~our ~~laboratory~~initial contact ~~equipment~~with ina ~~fiscal~~potential ~~2003.~~customer ~~Consistent~~and ~~with~~the ~~our~~time ~~focus~~when onwe ~~product~~recognize ~~and~~revenue ~~process~~from our ~~development~~customer, weif ~~further~~ever, ~~invested~~varies widely in length. Our sales cycle typically ranges from one month to two years. Occasionally our ~~development~~sales cycle ~~and~~can ~~demonstration~~be ~~laboratories~~even longer, particularly with aour ~~transfer~~international ofcustomers $2and new technologies.6 The ~~million~~subsequent inbuild ~~finished~~cycle, ~~goods~~or ~~inventory~~the time it takes us to build ~~property~~a product to customer specifications after receiving an order, ~~plant~~typically ranges ~~and~~from ~~equipment~~one into ~~fiscal~~six ~~2003~~months. During ~~Cash~~these ~~invested~~cycles, we commit substantial resources to our sales efforts in ~~intangible~~advance ~~assets~~of receiving any revenue, and ~~primarily~~we ~~intellectual~~may ~~property~~never ~~rights,~~receive ~~was~~any ~~approximately~~revenue ~~$1.5~~from ~~million~~a incustomer ~~fiscal~~despite ~~2003.~~our sales efforts.

~~Cash~~When ~~used~~a incustomer purchases ~~investing~~one ~~activities~~of inour ~~fiscal~~systems, ~~2002~~that ~~consisted~~customer ~~mainly~~often ofevaluates the ~~$7.0~~performance ~~million~~of the ~~used~~system tofor ~~purchase~~a ~~property,~~lengthy ~~plant~~period ~~and~~before ~~equipment,~~considering ~~primarily~~the ~~laboratory~~purchase ~~equipment~~of ~~and~~more systems. The anumber ~~new~~of ~~office~~additional ~~building~~products ina ~~Cambridge~~customer may purchase from us, UKif ~~for~~any, ~~our~~depends ~~European~~on ~~headquarters.~~many Wefactors, ~~further~~including ~~invested~~the $5customer’s capacity requirements.1 The ~~million~~period inbetween ~~our~~a ~~development~~customer’s initial purchase and subsequent ~~demonstration~~purchases, ~~laboratories~~if byany, ~~transferring~~often ~~finished~~varies ~~goods~~from two to ~~property,~~twelve ~~plant~~months or longer, and ~~equipment~~variations in ~~fiscal~~length ~~2002.~~of Wethis ~~also~~period ~~invested~~could ~~$1.7~~cause ~~million~~further fluctuations in ~~intangible~~our business, ~~assets~~financial condition, ~~primarily~~results of operations, cash flows, and possibly our ~~patent~~stock ~~portfolio~~price.

~~Financing~~If ~~Activities.~~we ~~Financing~~deliver ~~activities~~systems ~~consist~~with ~~primarily of cash received from stock option exercises of $1.2 million offset by long-term debt repayments of $236~~defects,~~000~~ our ~~during~~credibility ~~fiscal~~may ~~2004.~~be ~~Cash used in financing activities for fiscal 2003 primarily consisted of net repayments on long-term borrowings of $634~~harmed,~~000~~ ~~compared~~sales toand ~~$317,000~~market inacceptance ~~long-term debt repayments in fiscal 2002. The exercise~~ of ~~stock~~our ~~options~~systems inmay decrease ~~fiscal~~and ~~2003~~we ~~provided~~may ~~$69,000~~incur inliabilities ~~cash~~associated ~~compared~~with ~~to $255,000 in fiscal 2002~~those defects.

~~The~~Our ~~following~~systems ~~commitments~~are complex asand ofsometimes ~~September~~have ~~30,~~contained ~~2004~~errors, ~~incurred~~defects inand ~~the~~software ~~normal~~bugs ~~course~~when introduced. If ofwe ~~business,~~deliver ~~have~~systems ~~been~~with ~~included~~errors, indefects ~~the~~or ~~consolidated~~software bugs, ~~financial~~our ~~statements~~credibility ~~with~~and the ~~exception~~market ofacceptance ~~purchase~~and ~~order~~sales ~~commitments~~of ~~and~~our ~~operating~~systems ~~lease~~could be ~~obligations~~harmed. Further, ~~which~~if ~~are~~our ~~properly~~systems ~~excluded~~contain ~~under~~errors, ~~accounting~~defects ~~principles~~or software ~~generally~~bugs, ~~accepted~~we inmay ~~the~~be ~~United~~required ~~States~~to ofexpend ~~America.~~significant ~~They~~capital ~~are~~and ~~disclosed~~resources into alleviate ~~the~~such ~~following~~problems. Defects ~~table~~could inalso ~~order~~lead to ~~provide~~commercial ~~a consolidated picture of our financial position~~ and/or product ~~liquidity.~~liability Weas doa ~~not~~result ~~have~~of ~~any~~lawsuits ~~relationships~~against ~~with~~us ~~unconsolidated entities~~ or ~~financial~~against ~~partnerships,~~our customers. We ~~such~~have asagreed ~~entities often referred~~ to asproduct ~~structured~~liability indemnities. Our ~~finance~~product orand ~~special~~commercial ~~purpose~~liability ~~entities,~~insurance ~~which~~policies currently ~~would~~provide ~~have~~only ~~been~~limited ~~established~~coverage ~~for~~per claim. In the ~~purpose~~event of ~~facilitating~~a successful ~~off-balance~~product ~~sheet~~liability ~~arrangements~~ and/or ~~other~~commercial ~~contractually narrow or limited purposes. As such~~claim, we ~~are~~could ~~not~~be ~~exposed~~obligated to pay ~~the~~damages ~~types~~that ofmay ~~financing,~~not ~~liquidity,~~be ~~market~~covered orby ~~credit~~insurance ~~risks~~or that ~~could~~are ~~arise~~significantly ifin excess weof ~~had~~our ~~engaged~~insurance ~~in such relationships~~limits.

	Payments Due by Period
	Total		Less Than1 Year		1 - 3Years		4 - 5Years		After5 Years
	(In thousands)
Long-term debt	$	2,314	$	225	$	487	$	483	$	1,119
Operating leases		1,062		740		300		6		16
Purchase order commitments		8,145		7,902		243		--		--
Total commitments	$	11,521	$	8,867	$	1,030	$	489	$	1,135

WeTable have agreements with entities owned by Mr. Raymon F. Thompson, our chairman, to lease aircraft and an aircraft hangar. Under these agreements, rent expense was approximately $2,933,600, $2,094,000 and $2,600,000 for the years ended September 30, 2004, 2003, and 2002, respectively. The current rental rate is approximately $274,000 per month for both the aircraft and the hangar; the lease terms are month-to-month and therefore are not included in the above table. In fiscal 2004, we incurred $802,000 of ~~leasehold improvements to leased aircraft. The improvements are being amortized over a three-year period.~~ Contents

AsFailure of ~~September 30, 2004,~~ our ~~principal~~products sources of liquidity consisted of approximately $16.4 million of cash and cash equivalents, $6.0 million in marketable securities and incoming cash generated from operations. In the first quarter of fiscal 2005, we finalized a $15.0 million revolving credit facility which was negotiated in fiscal 2004. We believe that we have sufficient cash and cash equivalents, along with funds expected to begain market ~~generated~~acceptance ~~from~~would ~~operations~~adversely toaffect ~~meet~~our ~~operating~~financial ~~expenses~~condition and planned capital expenditures through fiscal 2005 and into the foreseeable future. We estimate capital expenditures will be between $10.0 million and $12.0 million during the next 12 months. We currently have an effective shelf registration statement, which registers the offer and sale of up to an aggregate $75 million of our ~~securities. If additional financial resources are required in the future, we expect either to issue securities from the shelf registration~~ability ~~statement or~~ to ~~issue~~provide ~~other~~customer ~~financial~~service ~~instruments,~~and ~~whichever management deems advisable~~support. ~~Of course, there can be no assurance that in the future we will be able to issue additional common stock or other financial instruments.~~

~~Critical~~We believe ~~Accounting~~that ~~Policies~~our growth prospects depend upon our ability to gain customer acceptance of our products and ~~Estimates~~technology. Market acceptance of 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 our 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 we will be successful in obtaining broad market acceptance of our systems and technology.

~~The~~We expect ~~preparation~~to ofspend ~~these~~a ~~financial~~significant ~~statements~~amount ~~requires~~of ustime and resources to ~~make~~develop ~~estimates~~new products and ~~judgments~~refine ~~that~~existing ~~affect~~products. In light of the ~~reported~~long ~~amounts~~product development ofcycles ~~assets,~~inherent ~~liabilities~~in our industry, ~~revenues~~these ~~and~~expenditures ~~expenses,~~will ~~and~~be ~~related~~made well ~~disclosure~~in advance of ~~contingent~~the ~~liabilities~~prospect of deriving revenue from the sale of any new systems. Our Onability anto ~~on-going~~commercially ~~basis,~~introduce weand ~~evaluate~~successfully market ~~our~~any ~~estimates,~~new ~~including~~products ~~those~~is ~~related~~subject to ~~revenue~~a ~~recognition,~~wide ~~inventories,~~variety ~~warranty~~of ~~obligations,~~challenges ~~bad~~during ~~debts,~~this development ~~investments~~cycle, ~~intangible~~including ~~assets,~~start ~~income~~up ~~taxes~~delays, ~~financing~~design ~~operations,~~defects ~~contingencies~~ and ~~litigation.~~other Wematters that ~~base~~could ~~our~~delay ~~estimates~~the onintroduction ~~historical~~of ~~experience~~these ~~and~~systems onto ~~various~~the marketplace. As ~~other~~a ~~assumptions~~result, ~~that~~if ~~are~~we ~~believed~~do tonot beachieve ~~reasonable~~market ~~under~~acceptance ~~the~~of new ~~circumstances~~products, ~~the~~we ~~results~~may ofnot ~~which~~be ~~form~~able ~~the~~to ~~basis~~realize ~~for~~sufficient ~~making~~sales ~~judgments~~of ~~about~~our ~~the~~systems ~~carrying~~in order ~~values~~to ofrecoup ~~assets~~research and ~~liabilities~~development ~~that~~expenditures. The ~~are~~failure ~~not~~of any ~~readily~~of ~~apparent~~our ~~from~~new ~~other~~products ~~sources.~~to ~~Actual~~achieve ~~results~~market ~~may~~acceptance ~~differ~~would ~~from~~harm ~~these~~our ~~estimates~~business, financial ~~under~~condition, ~~different~~results ~~assumptions~~of oroperations ~~conditions.~~and cash flows.

We ~~believe~~manufacture ~~the~~substantially ~~following~~all ~~critical~~of our ~~accounting~~equipment ~~policies~~at two facilities and ~~estimates~~any ~~affect~~prolonged ~~our~~disruption ~~more~~in ~~significant~~the ~~judgments~~operations of ~~and~~either ~~estimates~~facility ~~used~~could inhave ~~the~~a ~~preparation~~material ofadverse ~~our~~effect ~~consolidated~~on ~~financial~~our ~~statements~~net sales.

~~Revenue~~We manufacture ~~Recognition.~~substantially ~~Revenue~~all ~~recognition~~of isour ~~significant~~equipment ~~because~~in ~~revenue~~our ismanufacturing afacilities located ~~key~~near ~~component~~Kalispell, ~~of our results of operations~~Montana. Our Wemanufacturing ~~recognize~~processes ~~revenue~~are highly ~~under~~complex ~~the~~and ~~guidance~~require ~~for~~sophisticated ~~Staff~~and ~~Accounting~~costly ~~Bulletin~~equipment ~~No.~~and ~~104~~a ~~(SAB~~specially designed ~~104), “Revenue Recognition~~facility.” ~~Under~~As ~~this~~a ~~method~~result, ~~revenue~~any isprolonged ~~recognized~~disruption ~~only~~in ~~when~~the ~~persuasive~~operations ~~evidence~~of either of anour ~~arrangement~~manufacturing ~~exists~~facilities, ~~delivery~~whether ~~has~~due ~~occurred~~to technical or ~~services have been rendered~~labor difficulties, ~~the~~destruction ~~seller’s price is fixed~~ or ~~determinable~~damage ~~and~~as ~~collectibility~~a isresult ~~reasonably assured. Our product sales generally contain substantive customer acceptance provisions. Sales~~ of ~~new~~a ~~products~~fire ~~to new~~ or ~~existing~~any ~~customers~~other ~~are not recognized until customer acceptance. Likewise~~reason, could ~~sales~~seriously ofharm ~~existing~~our ~~products~~ability to ~~new~~satisfy ~~customer~~our ~~environments are not recognized until~~ customer ~~acceptance~~order deadlines. If ~~multiple~~we ~~elements~~cannot ~~exist,~~provide ~~sales~~timely delivery of ~~existing~~our ~~products~~systems, ~~into~~our business, ~~existing~~financial ~~customer environments are treated as such in accordance with Emerging Issues Task Force Issue No. 00-21~~condition, ~~“Accounting~~ ~~for~~results ~~Revenue Arrangements with Multiple Deliverables.” The amount~~ of ~~revenue~~operations recognized in multiple element arrangements is the lesser of the fair value of the equipment or the contracted amount that was due or payable upon title transfer. The revenue for elements other than equipment is recorded in deferred profit and iscash ~~recognized~~flows ~~when~~would ~~the~~be adversely ~~remaining~~affected ~~goods and/or services are delivered or performed. Revenue related~~ to ~~service~~a issignificant ~~recognized upon completion of performance of the service or ratably over the life of the related service contract~~extent. Spare parts sales are recognized upon shipment when title and risk of loss pass to the customer. Unearned revenue from service contract agreements is included in Customer Advances in the current liability section of the balance sheet.

InCompliance ~~addition,~~with ~~the~~environmental regulations ~~timing~~may ofbe ~~certain~~very ~~expenses~~costly, ~~such as cost of goods sold, including installation~~ and ~~warranty, and commission expenses coincides with~~ the ~~recognition~~failure ofto ~~the~~comply ~~related~~could ~~revenues.~~result ~~We follow specific guidelines~~ in ~~measuring revenue; however~~ liabilities, ~~certain~~fines ~~judgments such as the definition of a new customer environment~~ and ~~new~~cessation ~~acceptance criteria or if installation is perfunctory may be required in the application~~ of our ~~revenue policy~~business.

~~Inventories. Inventories~~ We are ~~valued~~subject atto ~~the~~a ~~lower~~variety of ~~cost~~governmental orregulations ~~market~~related onto ~~a first-in, first-out basis. Accordingly, we write down~~ the ~~carrying~~discharge ~~value~~or disposal of ~~inventories~~toxic, ~~for~~volatile ~~estimated~~or ~~obsolescence~~otherwise ~~and~~hazardous chemicals. Current or future ~~marketability.~~regulations Oncould arequire ~~quarterly~~us ~~basis,~~to wepurchase ~~compare~~expensive ~~historical~~equipment ~~and~~or ~~projected~~to incur ~~sales~~other ~~and~~substantial ~~usage~~expenses ofto ~~raw~~comply ~~materials~~with ~~and~~environmental regulations. Any ~~parts~~failure ~~and~~by ~~our~~us ~~assumptions~~to ~~about~~control ~~future~~the use of ~~raw materials~~, ~~parts~~or ~~and~~adequately restrict ~~finished~~the ~~goods~~discharge ~~with~~or ~~our~~disposal ~~forecast~~of, ~~market~~hazardous ~~demand~~substances ~~and~~could ~~industry~~subject ~~conditions~~us to future ~~determine~~liabilities, ~~potential~~result ~~obsolescence~~in orfines ~~whether~~being ~~the~~imposed ~~inventory~~ on ~~hand~~us, ~~represents~~or ~~excess quantities. As a~~ result ofin ~~our~~the suspension ~~analysis, we record reserves impacting Cost~~ of ~~Goods~~production ~~Sold, if appropriate. If actual future use, demand~~ or ~~market~~cessation ~~conditions~~of ~~are~~our ~~less favorable than those projected by us, additional inventory valuation write-downs may be required~~manufacturing operations.

~~Warranty~~If ~~Obligations. We provide for~~ the ~~estimated~~protection ~~cost~~ of equipment warranties when the related revenue is recognized. We track individual warranties on a tool-by-tool basis and develop estimated rates by equipment class. The rates are used to estimate the warranty accrual for a given specific piece of equipment. These rates are revised periodically to reflect current cost trends due to the current life cycle of that product class. The warranty accrual is reduced by actual costs of providing the warranty or if a balance is remaining at the end of the warranty period, then that amount is also written off. Warranty accrual expense impacts primarily Cost of Goods Sold. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our ~~component~~proprietary rights ~~suppliers, our warranty obligation~~ is ~~affected by product failure rates~~inadequate, ~~material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from~~ our ~~estimates,~~business ~~revisions~~could ~~to the estimated warranty liability would~~ be ~~required~~harmed.

~~Allowance~~We place ~~for~~a ~~Doubtful~~strong ~~Accounts.~~emphasis Weon ~~maintain~~the ~~allowances~~technically ~~for~~innovative ~~doubtful~~features ~~accounts~~of ~~for~~our ~~estimated~~products and, ~~losses~~where ~~resulting~~available, ~~from~~we ~~the~~generally ~~inability~~seek ofpatent ~~our~~protection ~~customers~~for tothose features. We ~~make~~currently ~~required~~hold ~~payments~~374 U.S. patents, Wesome ~~record~~with ~~expense~~pending foreign ascounterparts, ahave ~~component~~approximately of101 ~~selling,~~U.S. patent ~~general~~applications pending and ~~administrative~~intend ~~within~~to ~~the~~file ~~Statements~~additional ofpatent ~~Operations.~~applications, Ifas ~~the~~we ~~financial~~deem appropriate. ~~condition~~There ofcan ~~our~~be ~~customers~~no ~~were~~assurance tothat ~~deteriorate,~~patents ~~due~~will toissue ~~the~~from ~~cyclicality~~any of ~~the~~our pending ~~industries~~applications weor ~~serve~~that existing or ~~for~~future ~~other~~patents ~~reasons,~~will ~~resulting~~be insufficiently broad anto ~~impairment~~protect ofour ~~their~~technology. While ~~ability~~we attempt to ~~make~~protect ~~payments,~~our intellectual ~~additional~~property ~~allowances~~rights through patents, copyrights and ~~expense~~non-disclosure agreements, ~~may~~there can be ~~required.~~no ~~Likewise,~~assurance ifthat we ~~are~~will ~~successfully~~be able to ~~collect~~protect onour technology, anor ~~amount~~that ~~presumed~~competitors towill not be ~~uncollectible~~able to develop similar technology independently. In addition, the ~~allowance~~laws ~~for~~of ~~doubtful~~certain ~~accounts~~foreign ~~and~~countries do not protect our intellectual property to the ~~related~~same ~~expense~~extent ~~may~~as bethe ~~reduced.~~laws Inof ~~general~~the United States. Furthermore, itcertain ~~takes~~types ~~longer~~of tointellectual ~~collect~~property are ~~payment~~country-specific; for example, U.S. patents provide protection in the ~~capital~~U.S. but ~~equipment~~generally ~~industry~~do ~~than~~not inprovide ~~certain~~protection ~~other~~outside ~~industries~~the U.S. Moreover, there ~~Days~~can ~~Sales~~be ~~Outstanding~~no ~~(DSO)~~assurance ofthat our ~~peers~~existing or future patents will not be challenged, ~~ranges~~invalidated ~~between~~or ~~approximately~~circumvented, 60or ~~and~~that ~~115~~the ~~days~~rights ingranted ~~our~~thereunder will ~~industry~~provide meaningful competitive advantages to us. In any of such events, our business, financial condition, results of operations and cash flows could be harmed.

~~Impairment~~There ~~of Investments in Marketable Securities. We record an investment impairment charge when we believe an investment~~ has ~~experienced~~been substantial alitigation ~~decline~~regarding inpatent ~~value~~and ~~that is~~ other ~~than~~intellectual ~~temporary.~~property ~~Future adverse changes~~ rights in ~~market~~semiconductor-related ~~conditions~~industries. Although orwe ~~poor~~are ~~operating~~not ~~results~~aware of ~~underlying~~any potential ~~investments~~infringement ~~could~~by ~~result~~our inproducts ~~losses or an inability to recover the carrying value~~ of ~~the~~any ~~investments~~patents ~~that~~or ~~may~~proprietary ~~not~~rights ~~be reflected in an investment’s current carrying value~~of others, ~~thereby~~further ~~possibly~~commercialization ~~requiring~~of anour ~~impairment~~technology ~~charge~~could inprovoke ~~the~~claims ~~future.~~of infringement ~~Any~~from ~~investment~~third ~~impairment would be recorded in the financial statements as Other Expense~~parties.

~~Deferred~~In addition, ~~Tax~~we ~~Assets.~~rely Weon ~~make~~trade ~~estimates~~secret toprotection ~~determine~~for ~~the amount of~~ our ~~deferred~~technology, ~~tax~~in ~~assets~~part ~~that~~through confidentiality weagreements ~~believe~~with isour ~~more~~employees, ~~likely~~consultants ~~than~~and ~~not to be realized~~third parties. These Weagreements ~~consider~~could ~~future~~be ~~taxable~~breached ~~income~~ and ~~ongoing~~we ~~prudent~~may ~~tax~~not ~~planning~~have adequate ~~strategies~~remedies infor ~~assessing~~any ~~the~~such ~~need~~breach. ~~for~~In aany ~~valuation allowance; however~~case, ~~should~~others wemay ~~determine~~come ~~that we will not be able~~ to ~~realize~~know about ~~all~~ or ~~part~~determine of our ~~net~~trade ~~deferred~~secrets ~~tax~~through ~~asset in the future,~~ a ~~decrease~~variety ~~in the deferred tax asset would negatively impact our results~~ of ~~operations, particularly the income tax provision, in the period such determination was made~~methods.

~~Litigation~~Now and in the future, litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend us 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 cause us to accrue substantial cost or divert our management or resources, which by itself could have a material adverse effect on our financial condition, results of operations and cash flows. Further, adverse determinations in such litigation could result in our loss of proprietary rights, subject us to significant liabilities and damages to third parties, require us to seek licenses from third parties or prevent us from manufacturing or selling our products, any of which could harm our business, financial condition, results of operations and cash flows.

In June 2001, we filed suit against Novellus Systems, Inc. (“Novellus”) in the United States District Court for the District of Oregon for infringement of our U.S. Patent No. 6,197,181 (the ‘181 Patent). Novellus counterclaimed against us for infringement of four of their patents. On October 11, 2004, we entered into a Settlement Agreement (the “Settlement Agreement”) with Novellus settling this patent litigation. Pursuant to the Settlement Agreement, Novellus paid us $2.9 million and both parties agreed to additional covenants and restrictions related to the patents in dispute in the litigation and the resolution of future patent disputes. 18

~~The~~Table parties agreed to dismiss with prejudice their respective claims in the litigation, without either party admitting any liability. In addition, Novellus provided covenants not to sue Semitool at any time in the future for any infringement of the four counterclaim patents it asserted in the litigation based on acts either prior to, or after, the effective date of the Settlement Agreement, and Semitool provided a covenant not to sue Novellus for any infringement of the ‘181 Patent based on acts which occurred prior to the effective date of the Settlement Agreement. The parties also agreed to certain dispute resolution procedures in the event of any future patent disputes. Contents

WeOur ~~are~~efforts ~~subject~~ to ~~other~~protect ~~legal~~our intellectual ~~proceedings~~property ~~and~~may ~~claims~~be ~~which~~less ~~have~~effective ~~arisen~~ in ~~the~~some ~~ordinary~~foreign ~~course~~countries ofwhere intellectual ~~our~~property ~~business~~rights ~~and~~are ~~have~~ not ~~reached~~as ~~final~~well ~~adjudication.~~protected ~~Although there can be no assurance~~ as to the ultimate disposition of these matters, it is the opinion of our management, based upon the information available at this time, that the currently expected outcome of these matters, individually or in the ~~aggregate, will not have a material adverse effect on our business, financial condition, results of operations or cash flows~~United States.

~~FACTORS~~In fiscal ~~THAT~~2009, ~~MIGHT~~approximately ~~AFFECT~~74.5% ~~OUR~~of ~~FUTURE~~our ~~FINANCIAL~~net ~~RESULTS~~sales ~~AND~~were ~~STOCK~~derived ~~PRICE~~from sales in foreign countries, including certain countries in Asia such as Singapore, Taiwan, Japan, China and Korea. The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States, and many U.S. companies have encountered substantial problems in protecting their proprietary rights against infringement in such countries, some of which are countries in which we have sold and continue to sell systems. For example, in many countries other than the U.S., the public disclosure of an invention prior to the filing of a patent application for the invention would invalidate the ability of a company to obtain a patent. Similarly, in contrast to the United States where the contents of patent applications may remain confidential during the patent prosecution process in certain cases, the contents of a patent application may be published before a patent is granted, which provides competitors an advanced view of the contents of applications prior to the establishment of patent rights. For these and other reasons, we also have not filed patent applications in these countries to the same extent that we file in the U.S. There is a risk that our means of protecting our proprietary rights may not be adequate in these countries. Our competitors in these countries may independently develop similar technology or duplicate our systems. If we fail to adequately protect our intellectual property in these countries, it would be easier for our competitors to sell competing products in those countries.

~~Set~~Anti-takeover ~~forth~~provisions ~~below~~in ~~are risks and uncertainties that could negatively impact~~ our charter ~~business,~~documents ~~financial condition, results of operations and cash flows, and~~ could ~~cause~~adversely ~~actual~~affect ~~results to differ materially from~~ the ~~results~~rights ~~contemplated~~of by the ~~forward-looking~~holders ~~statements~~of ~~contained in this Annual Report on Form 10-K. These risks and uncertainties could also cause~~ our common stock ~~price to decline~~.

Our Articles of Incorporation authorize our 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 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. We have ~~incurred~~no present ~~significant~~plans ~~net~~to ~~losses~~issue any preferred stock in order to deter a takeover and/or adopt additional anti-takeover measures. If such actions are taken in the future, they may make a change of control difficult, even if a change of control would be beneficial to our ~~future~~shareholders. Further, ~~revenues~~our Agreement ~~are~~and ~~inherently~~Plan ~~unpredictable~~of Merger with Applied Materials, Inc., dated November 16, 2009, prohibits our soliciting or, with certain exceptions, entertaining, discussions which could lead to a merger with or acquisition by a person other than Applied Materials. Further, the merger agreement provides for certain fees and liquidated damages payments in the event we ~~may~~abandon the merger or take other actions inconsistent with its completion, in the event our board of directors determines in the exercise of their fiduciary duties that the transactions no longer can be ~~unable~~considered to ~~maintain~~be ~~profitability~~in the best interests of the Company and our shareholders. These provisions may have the effect of discouraging competing offers to acquire the Company.

WeAny ~~incurred~~anti-takeover provisions, ~~net~~including ~~losses~~any issuance of ~~$21.2 million~~preferred ~~and~~stock, ~~$14.2 million~~could inhave ~~our~~the ~~fiscal~~effect ~~years~~of discouraging ~~ended~~a ~~September 30,~~third ~~2003,~~party ~~and~~from ~~2002,~~making ~~respectively.~~a ~~Our~~tender ~~operating~~offer ~~results~~or ~~for~~otherwise ~~future~~attempting ~~periods~~to gain ~~are~~control ~~subject~~of tous. In ~~numerous uncertainties~~addition, ~~and~~these weprovisions ~~cannot~~could ~~assure~~limit ~~you~~the price that weinvestors ~~will~~might be ~~able~~willing to ~~maintain~~pay ~~the profitability that we achieved~~ in ~~fiscal~~the ~~2004. It is possible that in~~ future ~~quarters~~for ~~our~~shares ~~operating results will again decrease from the previous quarter or fall below the expectations~~ of ~~securities analysts and investors. In this event, the trading price of~~ our common stock ~~could significantly decline~~.

~~Our~~We ~~quarterly~~must ~~operating~~attract ~~results~~and ~~have~~retain ~~varied~~key personnel into ~~the~~help ~~past~~direct and ~~will~~support ~~continue~~our tofuture ~~vary~~growth. ~~significantly~~Competition infor ~~the~~such personnel ~~future, causing volatility~~ in our ~~stock~~industry ~~price.~~can be high.

Our ~~quarterly~~success ~~operating~~depends to ~~results~~a ~~have~~significant ~~varied~~degree ~~significantly~~upon in the ~~past~~continued contributions of our key management, engineering, sales and ~~will~~marketing, ~~continue~~customer tosupport, dofinance soand inmanufacturing personnel. The ~~the~~loss ~~future~~of any of these key personnel, ~~which~~particularly ~~will~~our Chairman ~~continue~~and toChief ~~cause~~Executive Officer, Raymon F. Thompson, or our ~~common~~President ~~stock~~and Chief ~~price~~Operating toOfficer, ~~fluctuate~~Larry inE. ~~the~~Murphy, ~~future~~could harm our business and operating results. We ~~Some~~do ofnot ~~the~~have ~~factors~~key ~~that~~person ~~may~~life ~~influence~~insurance on any of our executives. ~~operating~~Further, ~~results~~to support future growth, we will need to attract and retain ~~subject~~additional ~~our~~qualified ~~common~~employees. The ~~stock~~pool of qualified applicants is limited and it can be difficult to ~~price~~hire and ~~volume~~relocate ~~fluctuations~~personnel from ~~include:~~other areas. Competition for such personnel can be intense, and we may not be successful in attracting and retaining qualified senior executives and other employees.

~~changes~~Item in1B. Unresolved ~~customer~~Staff demand for our systems, which is influenced by economic conditions, technological developments in the semiconductor industry, and the announcement or release of enhancements to existing products or new product offerings by our competitors; Comments

~~demand for products that use semiconductors;~~ None.

~~market acceptance of our systems and changes in our product offerings;~~ 19

~~size~~Table ~~and timing~~ of ~~orders from customers;~~ Contents

~~customer~~Item ~~cancellations or delays in orders, shipments, and installations;~~ 2. Properties

~~customer~~We own ~~delays~~two ormanufacturing ~~rejections~~facilities oflocated ~~final~~on ~~acceptance~~sites near Kalispell, Montana with approximately 251,000 square feet in the aggregate. Additionally, we own two manufacturing facilities located in Libby, Montana housing approximately 20,000 square feet in the aggregate. We also own a facility located in Coopersburg, Pennsylvania, which serves as a manufacturing facility for our Rhetech, Inc. subsidiary, which we expanded by 10,000 square feet in fiscal 2007 for a total of 32,000 square feet. We constructed and own a 29,000 square-foot production and office building in Salzburg, Austria. We believe that our ~~shipments;~~existing manufacturing facilities will be adequate to meet our requirements for the foreseeable future and that suitable additional or substitute space will be available as needed. We own an office building in Cambridge, UK, which serves as our European headquarters for sales and customer support. We also lease 13 other smaller facilities worldwide, which are used as sales and customer service centers.

~~changes~~We are subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile, or otherwise hazardous chemicals used on Semitool’s premises. We believe that we are in ~~average~~material ~~selling~~compliance ~~price~~with these regulations and ~~product~~that ~~mix;~~we have obtained all necessary environmental permits to conduct our business. Nevertheless, current or future regulations could require us to purchase expensive equipment or to incur other substantial expenses to comply with environmental regulations. Any failure by us to control the use of, or adequately restrict the discharge or disposal of, hazardous substances could subject us to future liabilities, result in fines being imposed on us, or result in the suspension of production or cessation of our manufacturing operations.

~~failure~~Item to3. Legal ~~ship an anticipated number of systems in the quarter;~~ Proceedings

~~product~~On or ~~development~~about ~~costs~~November 19, ~~including~~2009, ~~research~~November 30, ~~development~~2009 and December 4, ~~engineering~~2009, three purported class action lawsuits related to the tender offer and ~~marketing~~the ~~expenses~~merger, captioned ~~associated~~Stationary ~~with~~Engineers ~~our~~Local ~~introduction~~39 Pension Trust Fund vs. Semitool, Inc., et al. (Cause No. DV-09-1461(B)), Stern vs. Thompson, et al. (Cause No. DV-09-1513(C)), and Marvel v. Thompson, et al., respectively, were filed in the Montana Eleventh Judicial District Court, County of ~~new~~Flathead, ~~products~~against Semitool, each of Semitool’s directors, Applied Materials and ~~product~~Jupiter ~~enhancements;~~Acquisition Sub, Inc. (the plaintiff in the Stationary Engineers Local action then filed an amended complaint on or about November 25, 2009). Motions for expedited proceedings were filed by the plaintiffs in the first and second actions, respectively, on November 23, 2009 and December 1, 2009, in each case requesting, among other things, that the Court expedite discovery and schedule a hearing on such plaintiff’s proposed motion for a preliminary injunction no later than December 17, 2009, the currently scheduled Expiration Date of the tender offer. A hearing on the motion for expedited proceedings in the Stationary Engineers Local action took place on December 9, 2009 and, on December 10, 2009, the court issued an order denying the plaintiff’s motion for expedited discovery and issued another order scheduling a hearing on December 15, 2009 in respect of plaintiff’s motion for a preliminary injunction.

~~sudden~~The ~~changes~~actions, ineach brought ~~component~~by ~~prices~~a purported shareholder of Semitool, seek certification of a class of all holders of Semitool common stock (except the defendants and their affiliates) and allege, among other things, that Semitool’s directors breached their fiduciary duties by (i) failing to maximize shareholder value; (ii) securing benefits for certain defendants at the expense or ~~availability~~to the detriment of Semitool’s public shareholders; (iii) discouraging and/or inhibiting alternative offers to purchase control of Semitool or its assets; and (iv) failing to disclose material non-public information, and that Applied Materials aided and abetted such alleged breaches. The actions seek, among other things, injunctive relief enjoining the defendants from consummating the tender offer and the merger and damages, as well as recovery of the costs of the action, including reasonable attorneys’ and experts’ fees. Semitool believes the claims alleged against it in the actions to be without merit and intends to defend against them vigorously. In addition, Applied Materials has informed the Company that it also believes the allegations against it in the actions to be without merit, and that it intends to defend against the claims vigorously.

~~manufacturing~~We ~~inefficiencies~~are ~~caused~~involved byin other ~~uneven~~legal proceedings that arise in the ordinary course of our business, including employment related litigation. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of management, based upon the information available at this time, that the currently expected outcome of these matters, individually or ~~unpredictable~~in ~~order~~the ~~patterns~~aggregate, ~~reducing~~will not have a material adverse effect on our ~~gross~~business, ~~margins;~~financial condition, results of operations or cash flows.

~~costs~~Item ~~associated~~4. Submission ~~with~~of ~~protecting~~Matters ~~our~~to ~~intellectual~~a ~~property;~~Vote of Security Holders

~~level~~No matters ofwere ~~our~~submitted ~~fixed~~to ~~expenses~~the ~~relative~~shareholders tofor ~~our~~a ~~net~~vote ~~sales;~~during ~~and~~the fourth quarter of the fiscal year.

~~fluctuating costs associated with our international organization and international sales; including currency exchange rate fluctuations.~~ 20

~~During~~Table ~~any quarter, a significant portion~~ of our net sales may be derived from the sale of a relatively small number of high priced systems. The selling prices of our systems range from under $100,000 to in excess of $3.4 million. Accordingly, a small change in the number and/or mix of tools we sell may cause significant changes in our operating results. Contents

Variations in the amount of time it takes for our customers to accept our systems may cause our operating results to fluctuate. Securities and Exchange Commission Staff Accounting Bulletin 104 (SAB 104) “Revenue Recognition” provides guidance on the recognition of revenue for sales that involve contractual customer acceptance provisions and product installation commitments. Timing of revenue recognition from the sale of new systems, sales to new customers and installation services is subject to the length of time required to achieve customer acceptance after shipment, which could cause our operating results to vary from period to period. PART II

~~In light of these factors and the cyclical nature of the semiconductor industry, we expect to continue to experience significant fluctuations in quarterly and annual operating results~~Item 5. Market ~~Moreover, many of our expenses are fixed in the short-term which, together with the need~~ for ~~continued~~Registrant’s ~~investment~~Common ~~in research and development~~Equity, ~~marketing~~Related Shareholder ~~and~~Matters ~~customer support, limits our ability to reduce expenses quickly in response to declines in sales. As a result, net sales could decline~~ and ~~harm~~Issuer ~~our~~Purchases ~~business, financial condition, results~~ of ~~operations and cash flows, which could cause our operating results to be below the public market analysts’ or investors’ expectations and the market price of our stock could decline.~~ Equity Securities

~~Cyclicality~~Our inCommon Stock is traded under the ~~semiconductor~~symbol ~~industry~~“SMTL” ~~and~~on the ~~semiconductor~~NASDAQ ~~equipment~~Global ~~industry~~Select Market. The ~~has~~approximate ~~historically~~number ~~led~~of toshareholders ~~substantial~~of ~~variations~~record inat ~~demand~~December 1, ~~for~~2009 ~~our~~was ~~products~~112 and ~~consequently~~the reported last sale price on that date of our ~~operating~~common stock ~~results,~~on ~~and~~the ~~will~~NASDAQ ~~continue~~Global toSelect doMarket sowas $10.99. The high and low sales prices for our common stock reported by the NASDAQ Global Select Market are shown below.

Our operating results are subject to significant variation due to the cyclical nature of the semiconductor industry’s business cycles, the timing, length and volatility of which are difficult to predict. Our business depends upon the capital spending of semiconductor manufacturers, which, in turn, depends upon the current and anticipated market demand for semiconductors and products using semiconductors. The semiconductor industry has historically been cyclical because of sudden changes in demand for semiconductors and manufacturing capacity, including capacity utilizing the latest technology. The rate of changes in demand, including end-user demand, is accelerating, and the effect of these changes on us is occurring sooner, exacerbating the volatility of these cycles. These changes have affected the timing and amounts of customers’ capital equipment purchases and investments in new technology, and continue to affect our net sales, gross margin and results of operations.

	Common Stock Price Range
	Fiscal Year
	Ended September 30,
	2009				2008
	High		Low		High		Low

First Quarter	$	7.86	$	2.35	$	9.95	$	7.95
Second Quarter	$	3.75	$	1.91	$	8.86	$	7.40
Third Quarter	$	5.35	$	2.85	$	9.05	$	7.51
Fourth Quarter	$	8.72	$	4.21	$	9.64	$	6.76

~~During~~Since ~~downturns,~~our ~~the~~initial public ~~semiconductor~~offering ~~equipment~~of ~~industry~~common ~~typically~~stock ~~experiences a more pronounced percentage decrease~~ in ~~revenues~~February ~~than~~of ~~the semiconductor industry. The semiconductor industry recently experienced a downturn that began in fiscal 2001~~1995, ~~which~~we ~~seriously~~have ~~affected~~never ~~our~~declared ~~net~~or paid ~~sales,~~any ~~gross~~cash ~~margin~~dividend and ~~results~~we ofhave ~~operations.~~no Inintent ~~addition, during downturns, it is critical~~ to ~~appropriately~~do ~~align~~so ~~our~~in ~~cost structure with prevailing market conditions, to minimize~~ the ~~effect of such downturns on our operations~~near future. Moreover, ~~and in particular, to continue to maintain~~ our ~~core~~merger ~~research~~agreement ~~and~~with ~~development~~Applied ~~programs~~Materials, Inc. restricts ~~If we are unable to align~~ our ~~cost~~ability ~~structure in response~~ to ~~such~~pay ~~downturns~~dividends onwithout athe ~~timely~~consent ~~basis,~~of orApplied ~~if such implementation has an adverse impact on our business~~Materials, which ~~then~~consent ~~our financial condition or results of operations~~ may be ~~negatively~~withheld ~~affected~~in toApplied anMaterials’ ~~even larger extent during industry downturns~~sole discretion.

~~Conversely,~~Information regarding ~~during~~securities anissued ~~upturn~~by orus ~~periods~~under ofour ~~increasing~~equity ~~demand~~compensation ~~for~~plans ~~semiconductor manufacturing equipment, we~~ may ~~not have sufficient manufacturing capacity and inventory to meet customer demand. During an upturn we would~~ be found ~~unable~~below ~~to predict the sustainability of a recovery, if any, and/or the industry’s rate of growth~~ in ~~such~~Part aIII ~~recovery,~~under ~~both~~Item of11 ~~which will be affected by many factors. If we are unable to effectively manage our resources~~ and ~~production~~Item ~~capacity during an industry upturn, there could be a material adverse effect on our business, financial condition, results of operations and cash flows~~12.

WeSTOCK PERFORMANCE have experienced periods of rapid growth and decline in operating levels, and if we are not able to successfully manage these significant fluctuations, our business, financial condition and results of operations could be significantly harmed. GRAPH

WeThe ~~have~~following ~~experienced~~graph compares ~~periods~~the ofpercentage ~~significant~~change ~~growth~~in ~~and~~the ~~decline~~cumulative intotal ~~net~~shareholder ~~sales.~~return ~~Our~~on ~~net~~the Company’s ~~sales~~Common ~~increased~~Stock ~~19.3%~~ from ~~approximately~~September ~~$117.0~~30, ~~million in fiscal 2003 to approximately $139.6 million in fiscal~~ 2004. ~~However,~~through ~~there~~the ~~have~~end ~~been other periods~~ of ~~significant~~the ~~declines~~Company’s fiscal inyear ~~net~~ended ~~sales;~~September ~~for~~30, ~~example~~2009, ~~our~~with ~~net~~the ~~sales~~percentage ~~decreased~~change ~~51.8%~~in ~~from~~the cumulative ~~approximately~~total ~~$256.5 million~~return for ~~fiscal~~the ~~2001~~NASDAQ toComposite ~~approximately~~Index ~~$123.7 million~~and ~~for~~the ~~fiscal~~RDG ~~2002.~~Semiconductor Composite ~~In addition, our consolidated orders backlog increased 89~~Index.4% The ~~from~~comparison ~~approximately~~assumes ~~$19.9 million~~an atinvestment ~~September 30,~~of ~~2003 to~~ $~~37.7~~100 ~~million at~~ on September 30, 2004. Ifin wethe ~~are~~Company’s ~~unable~~Common toStock ~~effectively~~and ~~manage~~in ~~periods~~each of ~~rapid~~the ~~decline~~foregoing indices orand ~~sales~~assumes ~~growth,~~reinvestment ~~our~~of ~~business,~~dividends. The ~~financial~~stock ~~condition,~~performance ~~results~~shown ofon ~~operations~~the graph ~~and~~below ~~cash~~is ~~flows~~not ~~could~~necessarily beindicative ~~significantly~~of ~~harmed.~~future price performance.

~~Our deferred revenue and orders backlog may not result in future net sales.~~ 21

~~Revenue~~Table ~~recognition guidance requires that revenue and the associated profit from the sale~~ of newly introduced systems, systems sales to new customers and substantive installation obligations that are subject to contractual customer acceptance provisions are deferred until the customer has acknowledged its acceptance of the system. If the system does not meet the agreed specifications and the customer refuses to accept the system, the deferred revenue and associated deferred profit will not be realized and we may be required to refund any cash payments previously received from the customer, which may harm our business, financial condition, results of operations and cash flows. Contents

~~Order~~Item ~~backlog does not necessarily include all sales needed to achieve net revenue expectations for a subsequent period~~6. Selected WeFinancial schedule the production of our systems based in part upon order backlog. Due to possible customer changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period. In addition, while we evaluate each customer order on a case-by-case basis to determine qualification for inclusion in backlog, there can be no assurance that amounts included in backlog will ultimately result in future sales. A reduction in backlog during any particular period, or the failure of our backlog to result in future sales, could harm our business, financial condition, results of operations and cash flows. Data

~~Our~~This ~~continued~~summary ~~high~~should be ~~spending~~read ~~levels~~in onconjunction ~~research~~with ~~and development and~~ the ~~need~~consolidated tofinancial ~~maintain~~statements ~~a high level of customer service~~ and ~~support~~related notes ~~may,~~included ~~under~~elsewhere ~~certain~~in ~~circumstances,~~this ~~harm~~Annual ~~our~~Report ~~results~~on ofForm ~~operations~~10-K.

InSummary Consolidated ~~order~~Financial ~~to remain competitive, we must maintain a high level of investment in research and development, marketing and customer service while controlling operating expenses.~~ Information

~~Our industry is characterized by the need for continued investment~~ (in ~~research and development as well as a high level of worldwide customer service and support. As a result of our need to maintain spending levels in these areas~~ thousands, ~~our~~except ~~operating~~per ~~results~~share could be materially harmed if our net sales fall below expectations. In addition, because of our emphasis on research and development and technological innovation, our operating costs may increase further in the future, which could have a negative impact on our results of operations and cash flow in any given period. data)

There can be no assurance that we will have sufficient resources to continue to make a high level of investment in research and development, marketing and customer service while controlling operating expenses or that our products will continue to be viewed as competitive as a result of technological advances by competitors or changes in semiconductor processing technology. Such competitive pressures may necessitate significant price reductions by us or result in lost orders, which could harm our business, financial condition, results of operations and cash flows.

	Year Ended September 30,
	2009			2008		2007		2006		2005

Statement of Operations Data:
Net sales	$	139,040		$	238,604	$	215,220	$	243,218	$	190,373
Gross profit (1)		59,088			117,395		101,491		112,919		96,969
Income (loss) from operations (2)		(18,907	)		10,026		2,633		14,770		10,714
Net income (loss)		(11,428	)		6,037		5,231		9,836		10,050
Diluted earnings (loss) per share		(0.35	)		0.19		0.16		0.31		0.35

Balance Sheet Data:
Cash, cash equivalents and marketable securities		44,642			12,821		16,090		17,347		7,032
Working capital (1)		125,359			135,515		123,370		114,863		83,620
Total assets		231,014			252,812		226,329		232,396		178,680
Short-term debt		1,214			4,437		1,158		3,680		292
Long-term debt and capital leases		9,260			10,417		10,027		4,699		3,111
Shareholders’ equity (3)		169,370			178,357		168,853		161,024		120,421

We(1 ~~depend~~) onIn ~~our~~the ~~key~~fourth ~~customers~~quarter ~~with~~of ~~whom~~fiscal 2007, we dowrote ~~not~~down ~~have~~inventory ~~long-term~~by ~~contracts~~approximately $3.0 ~~Any~~million ~~loss,~~primarily ~~cancellation,~~due ~~reduction~~to orproduct ~~delay~~enhancements inthat ~~purchases~~changed ~~by,~~the orusage ~~failure~~of tocertain ~~collect~~component ~~receivables from~~parts, ~~these~~making ~~customers~~them ~~could harm our business~~obsolete.

~~Typically,~~(2 we) doIncludes ~~not~~downsizing ~~have~~costs ~~long-term contracts with our customers. As a result, our agreements with our customers do not provide any assurance~~ of ~~future sales~~$2.6 ~~Sales~~million ~~are~~in ~~made~~fiscal ~~pursuant~~2009 toand ~~purchase orders~~$677,000 ~~which~~in ~~can~~fiscal ~~be cancelled or delayed by our customers at any time~~2007. Our customers are not required to make minimum purchases from us, or make purchases at any particular time; our customers are free to purchase products from our competitors; and our customers can stop purchasing our products at any time without penalty.

~~Our~~(3 ~~ten~~) ~~largest~~In ~~customers~~conjunction ~~accounted~~with ~~for~~an ~~approximately~~equity ~~56.9%,~~offering ~~58.4% and 58.6%~~ of ~~net~~common ~~sales~~stock in ~~fiscal~~December ~~2004~~2005, ~~2003~~the ~~and~~Company ~~2002,~~issued ~~respectively.~~three ~~There~~million isshares ~~a limited number~~ of ~~mostly~~common ~~large~~stock ~~companies~~resulting ~~operating~~ in ~~the~~approximately ~~highly concentrated, capital intensive semiconductor industry~~$28.0 ~~Accordingly,~~million wein ~~expect that we will continue to depend on a relatively small number of large companies for a significant portion of our~~ net sales. Although the composition of the group of largest customers may change from year to year, the loss of, or a significant curtailment of purchases by, one or more of our key customers or the delay or cancellation of a large order could cause our net sales to decline significantly, which would harm our business, financial condition, results of operations and cash ~~flows~~proceeds. ~~Similarly, delays in payments by large customers could have a significant impact on our cash flows.~~

~~Intense competition in the markets in which we operate may adversely affect our market share and reduce demand for our products.~~ 22

WeTable ~~face substantial competition from established competitors, some~~ of ~~which have:~~ Contents

~~greater~~Item ~~financial,~~7. Management’s ~~marketing,~~Discussion ~~technical~~and Analysis of Financial Condition and ~~other~~Results ~~resources;~~of Operations

~~broader and integrated product lines;~~ Overview

~~more~~We design, ~~extensive~~manufacture, ~~customer~~install ~~support~~and ~~capabilities~~service highly-engineered equipment for use in the fabrication of semiconductor devices. Our products are focused on the wet chemical process steps in integrated circuit, or IC, manufacturing and include systems for wafer surface preparation and electrochemical deposition, or ECD, applications. Our surface preparation systems are designed for Front End of Line (FEOL), Back End of Line (BEOL) and wafer level packaging of ICs processes. Our single-wafer FEOL surface preparation systems are used for photoresist stripping, post etch and pre-diffusion cleans. Our BEOL surface preparation systems are used for polymer removal and packaging applications. Our ECD systems are used to plate copper and other metals, which are used for the IC’s internal wiring, or interconnects; to plate solder and lead free solder bumps for wafer level packaging applications; and to plate other metals for various semiconductor and related applications. Also, our surface preparation systems are used for cleaning and etching processes for wafer level packaging. Our primary product for all of these processes is the Raider platform, which is a multi-chamber single-wafer tool. Our products address critical applications within the semiconductor manufacturing process, and help enable our customers to manufacture more advanced semiconductor devices that feature higher levels of performance. The fabrication of semiconductor devices typically requires several hundred manufacturing steps, with the number of steps continuing to increase for advanced devices. Due to the breadth of our product portfolio and advanced technology capabilities, our solutions address over 150 of these manufacturing steps.

~~larger~~There ~~sales~~are ~~organizations~~several key trends in the semiconductor manufacturing industry driving growth in demand for wafer surface preparation, ECD and ~~customer~~other ~~bases.~~advanced semiconductor equipment:

We• ~~may~~smaller ~~also~~device ~~face~~features ~~competition~~for ~~from~~lower cost and higher performance; • new ~~market~~materials ~~entrants.~~to ~~Our~~fabricate ~~ability~~more advanced semiconductor devices; • move to ~~compete~~single-wafer ~~successfully~~processing intechnologies ~~the~~for ~~future~~enhanced ~~depends~~surface onpreparation; a• ~~number~~wafer oflevel ~~factors,~~and ~~including:~~other advanced packaging to enable smaller portable products; and • emerging need for 3D chipstacking driven by the demand for smaller portable devices.

~~system~~As the ~~performance~~semiconductor manufacturing process increases in complexity and production parameters become even more stringent, ~~quality~~semiconductor manufacturers increasingly rely upon manufacturers of semiconductor equipment to achieve improved process control, provide a smaller equipment footprint and ~~reliability;~~lower the cost of ownership of their manufacturing processes. Key elements of our solution include technological leadership, a comprehensive product portfolio, including our Raider platform and vertically-integrated manufacturing and design capabilities.

~~upfront price and maintenance costs of using our products;~~ Key Performance Indicators

~~ability~~Our management focuses on revenues, gross margin, operating expenses and profitability in managing our business. In addition to ~~ship~~these ~~products~~financial onmeasures ~~time~~found in our consolidated financial statements, we also use bookings, backlog, shipments, deferred revenue and shipment-based results of operations. Bookings are firm orders for which we have received written customer authorization in the fiscal period. Backlog is the balance of undelivered orders at the end of a fiscal period. In order to ~~meet~~be included ~~customers'~~in ~~demands;~~bookings or backlog, an order must be scheduled to ship within the next 12 months. Backlog and forecasted orders drive our production schedule. Shipments measure how well we have met our production plan and are viewed as a primary measure of factory output. Deferred revenue primarily represents tool shipments for which we are awaiting final customer acceptance.

~~timeliness~~Our results of operations in fiscal 2009 were impacted by the weak global economy. Many of our customers slowed their capital spending with the onset of the credit crisis and the ~~quality~~resulting uncertainty in the worldwide economy. Customers delayed capital expenditure decisions and also pushed out delivery dates for tools already ordered. Our results of ~~technical~~operations ~~support~~were ~~service;~~also impacted by the announcement that a customer owing approximately $3.5 million filed for insolvency in a German court in late January 2009. We responded to the current economic crisis by reducing our workforce by approximately 35% and implementing other cost cutting measures. In the fourth quarter of fiscal 2009, the economy showed signs of improvement as our customers placed orders to meet capacity requirements with bookings reaching $71.7 million as compared with $32.6 million in the third quarter of fiscal 2009 and $24.6 million in the second quarter of fiscal 2009.

~~our~~On November ~~success~~16, 2009, we entered in ~~developing~~a ~~new~~definitive agreement to be acquired by Applied Materials, Inc., a Delaware corporation. Pursuant to the merger agreement, Applied Materials commenced a tender offer to purchase all of the outstanding shares of the Company’s common stock at a price of $11 per share, net to seller in cash, without interest thereon and ~~enhanced~~less ~~products~~any required withholding tax. The tender offer was commenced on November 19, 2009 and the initial expiration date is 12:00 midnight, Eastern Standard Time, on December 17, 2009, subject to extension as described in the offer materials and the related merger agreement. Subsequent to the completion of the tender offer and the satisfaction of certain other conditions set forth in the merger agreement, the Company will merge with a wholly-owned subsidiary of Applied Materials.

Due to intense competitive conditions in the semiconductor equipment industry, we have from time to time selectively reduced prices on our systems in order to protect our market share, and competitive pressures may necessitate further price reductions. Periodically, our competitors announce the introduction of new products or lower prices which can affect our customers’ decisions to purchase our systems, the prices we can charge for our systems and the level of discounts we grant our customers. 23

~~Moreover,~~Table there has been significant merger and acquisition activity among our competitors and potential competitors. These combinations may provide our competitors and potential competitors with a competitive advantage over us by enabling them to more rapidly expand their product offerings and service capabilities to meet a broader range of customer needs. Many of our customers and potential customers are relatively large companies that require global support and service for their semiconductor manufacturing equipment. Our larger competitors have more extensive infrastructures, which could place us at a disadvantage when competing for the business of global semiconductor device manufacturers. Contents

WeA ~~expect~~summary ~~our competitors to continue to improve the design and performance~~ of ~~their~~key factors ~~products. We cannot assure you~~ that impacted our ~~competitors~~financial ~~will not develop enhancements to, or future generations of, competitive products that will offer superior price,~~ performance ~~and/or~~during ~~cost~~fiscal ofyear ~~ownership features, or that new processes or technologies will not emerge that render our products less competitive or obsolete.~~ 2009 includes:

As• aOur ~~result~~fiscal of2009 ~~the~~bookings ~~substantial~~were ~~investment~~$151.0 ~~required~~million toand ~~evaluate~~include ~~and~~$104.6 ~~select~~million ~~capital~~in ~~equipment~~bookings for our Raider platform. Fourth quarter fiscal 2009 net bookings were $71.7 million. Our consolidated orders backlog of $69.8 million and ~~integrate~~deferred itrevenue ~~into~~of $4.8 million resulted in a ~~production~~revenue ~~line~~backlog of $74.6 million at September 30, we2009. ~~believe~~• ~~that~~Shipments ~~once~~in afiscal ~~manufacturer~~2009 ~~has~~were ~~selected~~$135.8 ~~certain~~million ~~capital~~including ~~equipment~~$84.0 million from aRaider ~~particular~~shipments. ~~vendor,~~• ~~there~~Net isloss awas ~~tendency~~$11.4 ~~for~~million ~~the~~on ~~manufacturer~~net tosales ~~rely~~of ~~upon~~$139.0 ~~that~~million ~~vendor~~in tofiscal ~~provide~~2009 ~~equipment~~compared ~~for~~with ~~the~~net ~~specific~~income ~~production~~of ~~line~~$6.0 ~~application~~million ~~and~~on ~~may~~net ~~seek~~sales toof ~~rely~~$238.6 ~~upon~~million ~~that~~in ~~vendor~~fiscal to2008. ~~meet~~• ~~other~~Our ~~capital~~gross ~~equipment~~margin ~~requirements~~decreased to 42.5% ~~Accordingly~~of net sales, wedown ~~may~~from be49.2% atin afiscal ~~competitive~~2008. ~~disadvantage~~• ~~for~~Cash aand ~~protracted~~cash ~~period~~equivalents, ofincluding ~~time~~restricted ~~with~~cash, ~~respect~~were to$44.6 amillion ~~particular~~at ~~customer~~September if30, ~~that~~2009, ~~customer~~an ~~utilizes~~increase aof ~~competitor’s~~$31.8 ~~manufacturing~~million ~~equipment~~from $12.8 million at September 30, 2008.

WeResults of ~~have recently introduced our new Raider platform, which may fail to gain market acceptance from the market.~~ Operations

WeThe ~~have~~following ~~recently~~table sets ~~introduced~~forth our ~~new~~consolidated ~~Raider~~results ~~platform~~of ~~and~~operations intend to leverage this core technology platform, which is based on our prior platforms, to expand our product portfolio and increase market opportunities. We expect that revenue from this new product platform will account for ~~a significant portion of our revenue in~~ the ~~future.~~periods ~~Accordingly,~~indicated ~~acceptance~~as ofa percentage ~~this product platform is critical to our future success. Factors that may affect the market acceptance~~ of ~~this~~net product include the performance, price and total cost of ownership of the product, and the availability, functionality and price of competing products and technologies. Failure of this new product to maintain and achieve widespread market acceptance would significantly impair our revenue growth. sales:

Rapid technological change could make our products and inventories obsolete or unmarketable for specific applications.

	Year Ended September 30,
	2009		2008		2007

Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	57.5	%	50.8	%	52.8	%
Gross profit	42.5	%	49.2	%	47.2	%

Operating expenses:
Selling, general and administrative	36.1	%	32.2	%	33.3	%
Research and development	18.4	%	12.8	%	12.6	%
Downsizing costs	1.8	%	--	%	0.3	%
Gain on sale of assets	(0.3	)%	--	%	(0.3	)%
Total operating expenses	56.0	%	45.0	%	45.9	%

Income (loss) from operations	(13.5	)%	4.2	%	1.2	%
Other income (expense)	(0.8	)%	(0.5	)%	0.3	%
Income (loss) before income taxes	(14.3	)%	3.7	%	1.5	%
Income tax provision (benefit)	(6.1	)%	1.2	%	(0.9	)%

Net income (loss)	(8.2	)%	2.5	%	2.4	%

WeFiscal 2009 ~~operate~~Compared ~~in an industry that is subject to evolving industry standards, rapid technological changes, rapid changes in customer demands and the rapid introduction of new, higher performance systems~~ with ~~shorter~~Fiscal ~~product~~2008 ~~life cycles. For example, recent trends in semiconductor manufacturing include the move towards smaller device features to lower cost~~ and ~~improve~~Fiscal performance, the use of new materials, such as copper, to achieve higher speed and performance of an integrated circuit, and the migration to 300mm diameter wafers from 200mm diameter wafers to increase productivity and reduce costs. As a result of these and other trends in our industry, we expect to continue to make significant investments in research and development. Although, historically, we have had adequate funds from operations to devote to research and development, there can be no assurance that we will have funds available, and in sufficient quantities, in the future for such research and development activities. 2007

Introductions of new products by us or our competitors could adversely affect sales of our existing products and may cause these existing products and related inventories to become obsolete or unmarketable, or otherwise cause our customers to defer or cancel orders for existing products. We may be unable to develop and introduce new products or enhancements to our existing products on a timely basis or in a manner which satisfies customer needs or achieves widespread market acceptance. Any significant delay in releasing new systems could adversely affect our reputation, give a competitor a first-to-market advantage or allow a competitor to achieve greater market share. These effects of rapid technological change could harm our business, financial condition, results of operations and cash flows. Net Sales

Our results of operations may suffer if we do not effectively manage our inventories or are required to write-down our inventories due to changing market demands for our products.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in millions)

Net Sales		$	139.0		$	238.6		$	215.2

By Product Line:
Semiconductor equipment		$	138.4		$	237.4		$	214.0
License fees		$	0.6		$	1.2		$	1.2

By Geographical Distribution, percentage of net tool sales:
North America			18.4	%		22.6	%		30.4	%
Europe			31.0	%		22.9	%		43.5	%
Asia, including Japan			50.6	%		54.5	%		26.1	%

ToNet ~~achieve~~sales ~~commercial~~consist ~~success~~of ~~with~~revenues ~~our~~from sales ~~products,~~of wesemiconductor ~~need~~equipment, tospare ~~manage our inventory of component~~ parts and ~~finished~~service ~~goods~~and ~~effectively~~royalties. toOur revenue ~~meet~~recognition ~~changing~~policy ~~customer~~provides ~~product~~that ~~and~~a ~~volume~~portion ~~requirements. Some~~ of ~~our~~revenue ~~products~~from ~~and~~sales ~~supplies,~~of semiconductor ~~have~~equipment inmay ~~the~~be ~~past~~recognizable ~~and~~upon ~~may~~shipment inif the ~~future,~~tool incorporates ~~become~~proven ~~obsolete,~~technology ~~while~~(“existing intool”) ~~inventory,~~and ~~due~~is shipped to ~~rapidly~~a ~~changing~~ customer environment ~~specifications~~in orwhich ~~slowdowns~~we inhave ~~demand~~already ~~for~~successfully ~~existing~~installed ~~products~~and ~~ahead~~gained acceptance of ~~new product introductions by us or~~ our ~~competitors.~~products Ifand weother ~~are~~revenue ~~not~~recognition ~~successfully~~criteria ~~able~~in authoritative toaccounting ~~manage~~guidance ~~our~~have ~~inventory,~~been ~~including~~met. ~~our spare parts inventory~~Alternatively, werevenue ~~may~~will ~~need~~be 100% todeferred ~~write~~and ~~off~~only ~~unsaleable~~recognized orupon ~~obsolete~~final ~~inventory,~~customer ~~which~~acceptance ~~would~~for ~~adversely~~tools ~~affect~~that are ~~our~~new ~~results~~technology ofproducts ~~operations.~~(“new ~~For~~tools”) ~~example,~~or inwhere ~~the~~an ~~fourth~~existing ~~quarter~~tool ofis ~~fiscal~~sold ~~2003,~~into a wenew ~~wrote~~customer ~~down inventory by $19~~environment.~~1 million~~ ~~primarily~~Revenue ~~due~~for toelements aother ~~change~~than inequipment, ~~forecasted~~such ~~demand~~as installation ~~for~~revenue, ~~certain~~is ofincluded ~~our~~in ~~products~~tool ~~due~~acceptance revenue. License tofee ~~the~~revenue ~~introduction~~represents royalties ofgenerated from our ~~new~~anode ~~Raider platform~~technology.

~~Our dependence on key suppliers could delay shipments and increase our costs.~~ 24

~~Some~~Table ~~components and subassemblies included in our products are obtained from a single source or a limited group~~ of suppliers. The loss of, or disruption in, shipments from these sole or limited source suppliers could, in the short-term, adversely affect our business and results of operations. Further, a significant increase in the price of one or more of these components could harm our business, financial condition, results of operations and cash flows. Contents

Our ~~future~~products ~~success~~are highly ~~depends~~customized. Each customer has specific technical requirements for the performance of the equipment in the fabrication of semiconductor devices. Consequently, the specific terms of the acceptance provisions are negotiated with each customer on ~~international~~a ~~sales~~tool-specific basis in order to reflect the technical specifications that will be used to determine whether the tool passes the applicable acceptance tests. These acceptance specifications are lengthy, technically complex and vary greatly from customer to customer and product to product.

~~Our~~We ~~net~~have ~~sales~~a ~~attributable~~proven totrack ~~customers~~record ~~outside~~of obtaining customer acceptances within a reasonable timeframe. In the rare ~~United~~event ~~States~~when acceptance does not occur because the customer does not believe that the tool has met the applicable technical specifications, the parties treat the matter as a ~~percentage~~contractual ofissue ~~our~~that ~~total~~needs ~~net~~to ~~sales~~be ~~were~~resolved ~~approximately~~before ~~51.8%,~~the ~~61.4%~~customer accepts ~~and~~the 62equipment.6% That inresolution ~~fiscal~~can ~~2004,~~take ~~2003~~many ~~and~~different ~~2002~~forms, including ~~respectively.~~re-testing Wethe ~~expect~~equipment, ~~net~~making ~~sales~~technical ~~outside~~modifications to resolve the ~~United~~disagreement ~~States~~or toextending ~~continue~~the warranty to ~~represent~~accommodate a ~~significant~~delayed acceptance. Whether ~~portion~~or ofnot ~~our~~a ~~future~~customer ~~net~~may ~~sales.~~have ~~Sales~~any tofurther ~~customers~~remedy where ~~outside~~a resolution cannot be agreed between the ~~United~~parties, ~~States~~including ~~are~~any ~~subject~~right toof return ~~various~~of ~~risks~~the equipment, ~~including:~~would be a question of contract interpretation that ultimately would have to be adjudicated in accordance with applicable law.

~~exposure~~Net sales decreased $99.6 million or approximately 42%, in fiscal 2009 as compared with fiscal 2008. Fiscal 2009 revenues were significantly impacted by the current worldwide economic crisis, which resulted in customer delays in placing orders and customers pushing out delivery dates for tools already ordered and scheduled for delivery. Raiders contributed almost 60% to ~~currency~~net ~~fluctuations~~sales in fiscal 2009. Wafer level packaging, BEOL and ~~related~~FEOL ~~derivatives~~Raider ~~used~~revenues declined from fiscal 2008 levels while revenues from copper damascene Raiders improved slightly in the year-over-year comparison. Approximately 60% of Raider revenues in fiscal 2009 were related to ~~hedge~~wafer ~~such~~level ~~fluctuations;~~packaging applications while copper damascene Raiders accounted for almost 20% of Raider revenues. Spare parts, service and revenue from our Rhetech subsidiary contributed approximately 25% to net sales.

~~exposure~~Net sales increased $23.4 million, or approximately 11% in fiscal 2008 as compared with fiscal 2007 levels. Despite the downturn in the semiconductor industry, our business activity levels increased in the second quarter of ~~foreign~~fiscal ~~accounts~~2008 and those higher levels continued through the duration of the fiscal year with average quarterly revenues of approximately $63 million per quarter in the last three quarters of the fiscal year. Revenues from Raiders for wafer level packaging applications improved more than 90% from fiscal 2007 levels as customers made capacity purchases and we penetrated key customers in Asia and North America. Spending for ECD Raiders for copper interconnect declined 64% in fiscal 2008 from fiscal 2007 levels and revenue from our BEOL surface preparation Raiders declined 38% as customers for those applications cut back their capital spending. Sales of our single-wafer surface preparation Raiders for FEOL applications more than doubled as the industry continued to ~~foreign~~benefit ~~exchange~~from ~~translations;~~the move away from batch processing to single-wafer processing to enable cleaning applications for sub-nanometer structures. The revenue contribution from spare parts, service and from our Rhetech subsidiary was approximately 20% of our net sales.

~~political~~Geographically, our sales mix was weighted toward Asia in both fiscal 2009 and ~~economic~~fiscal 2008. In ~~instability~~late fiscal 2009, ~~including~~buying ~~terrorism;~~activities increased as the Asian market began making capacity purchases in the wafer level packaging market. European tool sales increased 8.1 percentage points, contributing 31.0% to total tool sales as one of our key customers in Europe resumed limited capital spending after a significant cutback in fiscal 2008. North American tool sales declined 4.2 percentage points in fiscal 2009 as compared with fiscal 2008 and contributed 18.4% to total tool sales.

~~unexpected changes in regulatory requirements;~~ Gross Profit

tariffs and other market barriers;

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Gross profit		$	59,088		$	117,395		$	101,491
Percentage of net sales			42.5	%		49.2	%		47.2	%

~~potentially~~Gross ~~adverse~~profit decreased ~~tax~~$58.3 ~~consequences;~~million in absolute dollars or 49.7% in fiscal 2009 as compared to fiscal 2008. Gross profit increased $15.9 million or 15.7% in fiscal 2008 compared to fiscal 2007 gross profit.

~~outbreaks~~Gross profit decreased in absolute dollars in fiscal 2009 because of ~~hostilities~~lower sales volumes brought on by the worldwide economic downturn. On a percentage basis, gross ~~particularly~~margin declined 6.7 percentage points. Higher than normal levels of under-absorbed overhead costs because of under-utilized plant capacity and increased inventory reserves taken in ~~Israel~~response to the current economic slowdown were the primary drivers of the decrease in gross margin percentage. Installation revenue which typically carries high margins decreased in fiscal 2009 and the contribution to the gross margin from lower margin tools increased. Partially offsetting these decreases, ~~Korea~~spare parts and services margins, ~~Taiwan~~which orhistorically ~~China;~~carry higher gross margins than tools, contributed more to the overall gross margin than in fiscal 2008. Gross margin also benefited from reduced warranty costs as warranty expirations exceeded warranty additions.

~~difficulties in managing foreign sales representatives and distributors; and~~ 25

~~difficulties~~Table inof ~~staffing and managing foreign branch operations.~~ Contents

AGross ~~substantial~~profit increased ~~portion~~in ofabsolute ~~our~~dollars ~~international~~in ~~sales~~fiscal ~~are~~2008 ~~denominated~~because inof Uhigher sales volumes.~~S. dollars.~~ On ~~Therefore~~a percentage basis, ifgross margin improved two percentage points. Tool margins declined slightly year-over-year but contributed approximately one percentage point to the Umargin increase because of higher sales volumes.~~S. dollar~~ Warranty ~~rises~~and ininstallation ~~value~~expense decreased in ~~relation~~fiscal 2008, contributing approximately one percentage point to ~~foreign~~the ~~currencies,~~margin increase. Margins ~~our~~improved ~~systems~~on ~~will~~wafer ~~become~~level ~~more~~packaging ~~expensive~~tools primarily due to ~~customers~~a ~~outside~~higher ~~the~~percentage ~~United~~of ~~States~~installation ~~and~~revenue ~~less~~than ~~competitive~~in ~~with~~fiscal ~~systems~~2007 ~~produced~~but declined byon ~~competitors~~BEOL ~~outside~~Raiders ~~the~~due ~~United~~to ~~States~~product mix and on copper interconnect tools. Geographically, ~~Such~~margins ~~conditions~~improved ~~could~~in ~~negatively~~North ~~impact~~America ~~our~~but ~~international~~declined slightly ~~sales.~~in Asia, primarily due to product mix.

~~Although we endeavor to meet technical standards established by foreign standards setting organizations~~Selling, General ~~there~~and ~~can be no assurance that we will be able to comply with changes in foreign standards in the future.~~ Administrative

Variations in the amount of time it takes for us to sell our systems may cause fluctuations in our operating results, which could cause our stock price to decline.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Selling, general and administrative		$	50,271		$	76,929		$	71,749
Percentage of net sales			36.2	%		32.2	%		33.3	%

~~Variations~~Selling, ingeneral and ~~the~~administrative ~~length~~(SG&A) ofexpenses ~~our~~include ~~sales~~employment ~~cycles~~costs ~~could~~for ~~cause our net~~ sales, ~~and thus our business~~ marketing, ~~financial~~customer ~~condition,~~support ~~results~~and ofadministrative ~~operations~~personnel ~~and~~as ~~cash~~well ~~flows~~as travel, communications, toprofessional ~~fluctuate~~fees ~~widely~~and ~~from~~expenses ~~period~~related to ~~period.~~sales ~~This~~and ~~variation~~service offices ~~could~~at ~~cause~~ our ~~stock~~global ~~price to decline~~locations. ~~Our~~SG&A ~~customers~~expenses ~~generally~~decreased ~~take a long time to evaluate many of our products before committing to a purchase~~$26.7 Wemillion ~~expend~~in fiscal ~~significant~~2009 ~~resources~~as ~~educating~~compared ~~and~~with ~~providing~~fiscal ~~information~~2008 ~~to our prospective customers regarding the uses~~ and ~~benefits~~increased ~~of our systems~~$5.2 ~~The~~million ~~length~~in offiscal 2008 ~~time~~as itcompared ~~takes us~~ to ~~make~~fiscal ~~a sale depends upon many factors, including:~~ 2007.

Throughout fiscal 2009, we took measures to realign our cost structure to expected business levels by reducing our staffing worldwide and implementing management pay cuts and mandatory leave. In the ~~efforts~~first quarter of fiscal 2009, we also shut down our facilities ~~sales~~for ~~force~~three weeks. Because of these cost management measures, net employment costs decreased approximately $16.5 million in fiscal 2009 as compared with fiscal 2008 and ~~our~~travel ~~independent~~expenses declined $5.4 million in fiscal 2009 from fiscal 2008 levels. Primarily as a result of decreased sales ~~representatives~~volume, commission expense decreased $3.4 million in the annual comparison. All other major expense categories have also declined year-over-year as a result of our cost saving measures. These savings were somewhat offset by the write-off of two customer accounts receivable, totaling approximately $3.5 million and ~~distributors;~~which included the write-off of a major tool sale to a customer that filed for insolvency protection in a German court.

~~the~~Employment ~~complexity~~costs and travel expense increased approximately $4.4 million in fiscal 2008 as compared with fiscal 2007. In fiscal 2008, we increased our service support staff in Asia to better support our increasing Asian customer base. Employment costs in certain of these regions are typically higher than in the United States. Travel expense related to supporting our Asian customers' ~~fabrication~~also ~~processes;~~increased year-over-year. Commission expense increased approximately $1.5 million in the annual comparison related to increased revenues in fiscal 2008.

~~the internal technical capabilities~~ Research and ~~sophistication of the customer; and~~ Development

capital spending by our customers.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Research and development		$	25,563		$	30,440		$	27,080
Percentage of net sales			18.4	%		12.8	%		12.6	%

~~Because~~Research ofand Development ~~the~~(R&D) ~~number~~expense consists of ~~factors~~salaries, ~~influencing~~project ~~the~~materials, laboratory ~~sales cycle~~costs, ~~the~~consulting ~~period~~fees ~~between~~and ~~our~~other ~~initial~~costs ~~contact~~associated with ~~a potential customer and the time when we recognize revenue from~~ our ~~customer,~~product development ~~if ever, varies widely in length~~efforts. ~~Our~~R&D ~~sales~~expense ~~cycle~~decreased ~~typically ranges from one month to two years~~$4.9 ~~Occasionally~~million ~~our~~in ~~sales~~fiscal ~~cycle~~2009 ~~can~~as compared ~~be even longer, particularly~~ with ~~our~~fiscal ~~international~~2008 ~~customers~~ and ~~new~~increased ~~technologies~~$3.4 ~~The~~million subsequent build cycle, or the time it takes us to build a product to customer specifications after receiving an order, typically ranges from one to six months. During these cycles, we commit substantial resources to our sales efforts in ~~advance~~fiscal of2008 ~~receiving~~as ~~any~~compared with ~~revenue,~~fiscal ~~and we may never receive any revenue from a customer despite our sales efforts~~2007.

~~When~~Employment acosts decreased ~~customer~~approximately ~~purchases~~$4.3 ~~one~~million ofin ~~our~~fiscal ~~systems,~~2009 ~~that~~as ~~customer~~compared ~~often~~with ~~evaluates~~fiscal ~~the~~2008 as ~~performance~~we ofimplemented ~~the~~cost ~~system~~savings ~~for~~measures ain ~~lengthy~~response ~~period~~to ~~before~~the ~~considering~~worldwide ~~the~~economic crisis ~~purchase~~and ofour ~~more~~corresponding ~~systems~~declines in production and sales. Depreciation ~~The~~expense ~~number~~increased ofby ~~additional~~approximately ~~products~~$1.3 amillion in ~~customer~~the ~~may~~year-over-year ~~purchase~~comparison ~~from~~as ~~us,~~we ifreplaced ~~any,~~older ~~depends~~technology ontools ~~many~~in ~~factors,~~our demonstration ~~including~~laboratories ~~the~~with ~~customer’s~~new ~~capacity~~technology ~~requirements.~~tools ~~The~~in ~~period~~order ~~between~~to asupport ~~customer~~our customers’s ~~initial~~development ~~purchase~~efforts. Prototype ~~and~~expense ~~subsequent~~increased ~~purchases~~by approximately $369,000 ifin ~~any,~~fiscal ~~often~~2009 ~~varies~~as ~~from~~we wrote-down two toexperimental ~~twelve~~tools from ~~months~~our orwork-in-process ~~longer,~~inventory. We ~~and~~continue ~~variations~~to inwork ~~length~~on a number of ~~this~~leading ~~period~~edge ~~could~~projects ~~cause~~including ~~further~~on-going ~~fluctuations~~development inof ~~our~~porous ~~business~~silicon for the solar industry, ~~financial~~flow ~~condition~~batteries, ~~results~~FEOL ofcleaning ~~operations~~applications, ~~cash~~wafer ~~flows~~edge cleaning processes, deep via and ~~possibly~~Through ~~our~~Silicon ~~stock~~Via ~~price.~~applications, high volume Through Silicon Via and wafer level packaging production and others.

IfEmployment wecosts increased ~~deliver~~approximately ~~systems~~16% in fiscal 2008 as compared with ~~defects,~~fiscal 2007 as we increased our ~~credibility~~staff ~~may~~to beimprove ~~harmed~~our wafer process engineering capabilities for our customers and due to merit increases, ~~sales~~stock-based compensation and recruiting ~~market~~costs. ~~acceptance~~Depreciation expense increased by approximately $700,000 as we updated our demonstration laboratories with new technology tools to support our customers’ development efforts. Other expenses increased because of developmental work being completed at our ~~systems~~Austrian ~~may~~facility ~~decrease~~to ~~and~~develop Cintillio, wea ~~may~~batch ~~incur~~tool ~~liabilities~~designed ~~associated~~for ~~with~~electroless ~~those~~plating ~~defects~~applications. We continued to work on a number of leading edge projects including on-going development of porous silicon for the solar industry, FEOL cleaning applications, wafer edge cleaning processes, deep via and Through Silicon Via applications and others.

Our systems are complex and sometimes have contained errors, defects and software bugs when introduced. If we deliver systems with errors, defects or software bugs, our credibility and the market acceptance and sales of our systems could be harmed. Further, if our systems contain errors, defects or software bugs, we may be required to expend significant capital and resources to alleviate such problems. Defects could also lead to commercial and/or product liability as a result of lawsuits against us or against our customers. We have agreed to product liability indemnities. Our product and commercial liability insurance policies currently provide only limited coverage per claim. In the event of a successful product liability and/or commercial claim, we could be obligated to pay damages that may not be covered by insurance or that are significantly in excess of our insurance limits. 26

~~Failure~~Table of ~~our products to gain market acceptance would adversely affect our financial condition and our ability to provide customer service and support.~~ Contents

WeOur ~~believe~~research ~~that~~and development ~~our~~expense ~~growth~~has ~~prospects~~fluctuated ~~depend~~from ~~upon~~period ~~our ability~~ to ~~gain~~period ~~customer~~in ~~acceptance of our products and technology~~the past. We ~~Market~~expect ~~acceptance~~such offluctuations ~~products~~to ~~depends~~continue ~~upon~~in ~~numerous~~the ~~factors~~future, ~~including~~both ~~compatibility~~in absolute ~~with~~dollars ~~existing manufacturing processes~~ and ~~products,~~as ~~perceived~~a ~~advantages~~percentage ~~over competing products and the level~~ of ~~customer~~net ~~service available to support such products. Moreover~~sales, ~~manufacturers~~primarily ~~often~~due ~~rely on a limited number of equipment vendors~~ to ~~meet~~the ~~their manufacturing equipment needs. As a result, market acceptance~~ timing of ~~our~~expenditures ~~products~~and ~~may~~fluctuations bein ~~adversely affected to~~ the ~~extent~~level ~~potential~~of ~~customers~~net ~~utilize~~sales in a ~~competitor’s manufacturing equipment~~given period. We ~~There~~expect ~~can~~to becontinue noto ~~assurance~~fund ~~that~~R&D ~~growth~~expenditures inwith ~~sales~~a multi-year ofperspective ~~new~~and ~~products~~are ~~will~~committed ~~continue~~to ortechnology ~~that~~leadership ~~we will be successful~~ in ~~obtaining~~our ~~broad market acceptance~~ sector of ~~our~~the ~~systems~~semiconductor ~~and~~equipment ~~technology~~industry.

We expect to spend a significant amount of time and resources to develop new products and refine existing products. In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of the prospect of deriving revenue from the sale of any new systems. Our ability to commercially introduce and successfully market any new products is subject to a wide variety of challenges during this development cycle, including start up delays, design defects and other matters that could delay the introduction of these systems to the marketplace. As a result, if we do not achieve market acceptance of new products, we may not be able to realize sufficient sales of our systems in order to recoup research and development expenditures. The failure of any of our new products to achieve market acceptance would harm our business, financial condition, results of operations and cash flows. Downsizing Costs

We manufacture substantially all of our equipment at a single facility and any prolonged disruption in the operations of that facility could have a material adverse effect on our net sales.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Downsizing costs		$	2,566		$	--		$	677
Percentage of net sales			1.8	%		--	%		0.3	%

WeIn November ~~manufacture~~2008 ~~substantially~~and ~~all~~January of2009, ~~our~~we ~~equipment~~announced inand ~~our~~implemented ~~primary~~plans ~~manufacturing~~to ~~facility~~align ~~located~~our cost instructure ~~Kalispell,~~closer ~~Montana.~~to ~~Our~~then-current ~~manufacturing~~business ~~processes~~activity ~~are~~levels. ~~highly~~On ~~complex~~a ~~and~~combined basis, ~~require~~the ~~sophisticated~~cost ~~and~~reduction ~~costly~~plans ~~equipment~~consisted ~~and~~primarily aof ~~specially designed facility. As~~ a ~~result,~~35% ~~any~~reduction ~~prolonged disruption~~ in ~~the operations of~~ our worldwide ~~manufacturing~~work ~~facility~~force, ~~whether~~salaried ~~due~~staff topay ~~technical~~cuts, orreduced ~~labor~~working ~~difficulties~~hours and overtime, ~~destruction~~mandatory orleave, ~~damage~~temporary assuspension ~~a result~~ of acompany-paid ~~fire~~401(k) orplan matching ~~any~~and ~~other~~a ~~reason,~~three-week ~~could~~facilities ~~seriously~~shutdown ~~harm~~in ~~our~~December ~~ability~~2008. toOne-time involuntary ~~satisfy~~termination ~~our~~costs ~~customer~~of ~~order deadlines~~$2.6 Ifmillion wewere ~~cannot~~reported ~~provide~~as ~~timely~~a ~~delivery~~separate component of ~~our~~operating ~~systems,~~expenses in our ~~business,~~fiscal ~~financial~~2009 ~~condition,~~ operating results. All ofcosts ~~operations~~related ~~and~~to ~~cash~~the ~~flows~~downsizing ~~would~~plan behave ~~adversely~~been ~~affected~~incurred and ~~to a significant extent~~paid.

IfCompared to the fourth quarter of fiscal 2008, we ~~require~~are ~~additional~~saving ~~capital~~approximately in$13 ~~the~~million ~~future,~~to it$14 million ~~may~~per ~~not~~quarter. beNet ~~available~~of downsizing costs, orwe ifhave ~~available,~~realized onsavings ~~terms~~of approximately ~~acceptable~~$44 tomillion usin fiscal 2009. These cost savings are reported in gross margin and operating expenses in the Condensed Consolidated Statements of Operations. We will continue to monitor the need for additional cost savings and implement cost reduction measures as needed.

WeIn April ~~believe that our existing balances of cash~~2007, ~~cash~~we ~~equivalents~~announced and ~~marketable~~implemented ~~securities, our cash flow from operations, and~~ a ~~revolving~~plan ~~credit facility we finalized in November 2004 will be sufficient~~ to ~~meet~~align our ~~cash~~cost ~~needs~~structure ~~for~~with then-current ~~working~~business ~~capital~~activity ~~and capital expenditures for at least the next 12 months~~levels. The Wecost ~~may,~~reduction ~~however,~~plan consisted ~~require~~primarily ~~additional~~of ~~financing~~a toseven ~~fund~~percent ~~our~~reduction ~~operations~~ in ~~the~~our ~~future.~~worldwide ~~The~~work ~~significant~~force, management ~~contraction~~pay incuts, ~~the~~mandatory ~~capital~~leave ~~markets,~~and ~~particularly~~reduced inovertime. Severance costs ~~the~~of ~~technology sector~~$677,000 ~~may~~were ~~make~~reported itas ~~difficult~~a ~~for~~separate uscomponent toof ~~raise~~operating ~~additional~~expenses ~~capital~~ in our ~~the~~fiscal ~~future,~~third ifquarter. All ~~and~~costs ~~when~~related itto isthe ~~required,~~downsizing ~~especially~~plan were iffully weincurred ~~are~~in ~~unable~~the tothird ~~maintain profitability~~quarter. Net Ifof ~~adequate~~the ~~capital is not available to us as required~~downsizing costs, orwe issaved ~~not~~approximately ~~available~~$5 onmillion ~~favorable~~in ~~terms~~employment, ~~our~~travel ~~shareholders~~and ~~may~~general business beexpenses ~~subject to significant dilution~~ in ~~their ownership if we raise additional funds through~~ the ~~issuance~~second half of ~~equity~~fiscal ~~securities,~~2007 oras wecompared ~~could~~with bespending ~~required~~in the tofirst ~~significantly~~half ~~reduce~~of orfiscal ~~restructure our business operations~~2007.

~~The~~Gain on ~~above~~Sale ~~mentioned~~of ~~revolving credit facility provides for up to $15 million in borrowings. There is no assurance that this facility will be sufficient to meet our cash needs.~~ Assets

Compliance with environmental regulations may be very costly, and the failure to comply could result in liabilities, fines and cessation of our business.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Gain on sale of assets		$	(405	)	$	--		$	(648	)
Percentage of net sales			(0.3	)%		--	%		(0.3	)%

We sold ~~are~~an ~~subject~~aircraft toduring ~~a variety of governmental regulations related to~~ the ~~discharge~~third orquarter ~~disposal~~ of ~~toxic,~~fiscal ~~volatile~~2009 orfor ~~otherwise~~approximately ~~hazardous chemicals~~$1.5 million ~~Current~~and orrecognized ~~future~~a ~~regulations~~gain ~~could~~on ~~require~~the ussale toof ~~purchase expensive equipment or to incur other substantial expenses to comply with environmental regulations~~approximately $253,000. We ~~Any~~also ~~failure~~sold bya usstorage tofacility ~~control~~located ~~the~~near ~~use of~~Kalispell, Montana orduring ~~adequately restrict~~ the ~~discharge~~third orquarter ~~disposal~~ of, ~~hazardous~~fiscal ~~substances~~2009 ~~could~~for ~~subject~~approximately ~~us to future liabilities~~$200,000 ~~result~~and recognized ina ~~fines~~gain ~~being imposed~~ on ~~us, or result in~~ the ~~suspension~~sale of ~~production~~approximately ~~or cessation of our manufacturing operations~~$152,000.

IfWe sold a manufacturing facility located near Kalispell, Montana during the ~~protection~~first quarter of ~~our~~fiscal ~~proprietary~~2007 ~~rights~~for isapproximately ~~inadequate,~~$1.9 ~~our~~million ~~business~~and ~~could~~recognized bea ~~harmed.~~gain on the sale of approximately $648,000.

We place a strong emphasis on the technically innovative features of our products and, where available, we generally seek patent protection for those features. We currently hold 257 U.S. patents, some with pending foreign counterparts, have approximately 191 U.S. patent applications pending and intend to file additional patent applications, as we deem appropriate. There can be no assurance that patents will issue from any of our pending applications or that existing or future patents will be sufficiently broad to protect our technology. While we attempt to protect our intellectual property rights through patents, copyrights and non-disclosure agreements, there can be no assurance that we will be able to protect our technology, or that competitors will not be able to develop similar technology independently. In addition, the laws of certain foreign countries do not protect our intellectual property to the same extent as the laws ofOther ~~the~~Income United States. Moreover, there can be no assurance that our existing or future patents will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide meaningful competitive advantages to us. In any of such events, our business, financial condition, results of operations and cash flows could be harmed. (Expense)

There has been substantial litigation regarding patent and other intellectual property rights in semiconductor-related industries. Although we are not aware of any potential infringement by our products of any patents or proprietary rights of others, further commercialization of our technology could provoke claims of infringement from third parties.

	Year Ended September 30,
	2009			2008			2007
	(In thousands)

Interest income	$	101		$	240		$	352
Interest expense		(790	)		(488	)		(649	)
Foreign exchange gain (loss)		(347	)		(414	)		233
Other		(46	)		(381	)		770

Total other income (expense)	$	(1,082	)	$	(1,043	)	$	706

In addition, we rely on trade secret protection for our technology, in part through confidentiality agreements with our employees, consultants and third parties. However, employees may breach these agreements, and we may not have adequate remedies for any breach. In any case, others may come to know about or determine our trade secrets through a variety of methods. 27

~~Now~~Table ~~and in the future, litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend us 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 cause us to accrue substantial cost or divert our management or resources, which by itself could have a material adverse effect on our financial condition, results of operations and cash flows. Further, adverse determinations in such litigation could result in our loss of proprietary rights, subject us to significant liabilities and damages to third parties, require us to seek licenses from third parties or prevent us from manufacturing or selling our products, any of which could harm our business, financial condition, results of operations and cash flows. Contents

~~Our~~In the ~~efforts~~fourth toquarter ~~protect~~of ~~our~~fiscal ~~intellectual~~2008, ~~property~~based ~~may~~on bean ~~less~~analysis ~~effective~~that inconsidered ~~some~~general economic ~~foreign~~conditions ~~countries~~and ~~where~~company-specific ~~intellectual~~conditions, ~~property~~we ~~rights~~determined ~~are~~that ~~not~~the asone million ~~well~~shares ~~protected~~acquired as an investment security in exchange for certain thermal assets in the ~~United~~first ~~States~~quarter of fiscal 2008, had experienced an other-than-temporary impairment under authoritative accounting guidance and accordingly, we revised our cost basis in the investment by writing off $900,000 to Other expense. In fiscal 2009, based on similar analyses, we wrote off the remaining $380,000 related to the investment. In both years, these losses were partially offset by recycling income from our Kalispell facilities and rental income from a portion of our Cambridge facility.

InInterest ~~fiscal~~income declined ~~2004~~to $101,000 ~~approximately 51.8% of our net sales were derived~~ from ~~sales in foreign countries~~$240,000 ~~including certain countries~~ in ~~Asia~~fiscal ~~such~~2008 ~~as Singapore, Taiwan, Japan, China~~ and ~~Korea. The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States~~$352,000 ~~and many U.S. companies have encountered substantial problems~~ in ~~protecting~~fiscal ~~their~~2007 because ~~proprietary rights against infringement in such countries, some~~ of ~~which~~lower ~~are~~investment ~~countries in which we have sold and continue to sell systems~~levels. ~~For~~Interest ~~example,~~expense ~~Taiwan~~increased ~~and China are not signatories~~ to ~~the Patent Cooperation Treaty~~$790,000 which is designed to specify rules and methods for defending intellectual property internationally. In Taiwan and China, the publication of a patent prior to its filing would invalidate the ability of a company to obtain a patent. Similarly, in ~~contrast to the United States where the contents of patent applications remain confidential~~ ~~during~~fiscal ~~the~~2009 ~~patent~~because ~~prosecution process, the contents~~ of aincreased ~~patent~~use ~~are published upon filing which provides competitors an advanced view~~ of ~~the contents of applications prior to the establishment of patent rights. There is a risk that~~ our ~~means~~line of ~~protecting our proprietary rights may not be adequate in these countries~~credit. Interest expense ~~Our~~had ~~competitors~~declined in ~~these~~fiscal ~~countries~~2008 ~~may~~because ~~independently~~of ~~develop~~lower ~~similar~~bank ~~technology~~interest orrates ~~duplicate~~and decreased ~~our~~use ~~systems.~~of ~~If we fail to adequately protect~~ our ~~intellectual~~line ~~property~~of ~~in these countries, it would be easier for our competitors to sell competing products in those countries~~credit.

~~Anti-takeover~~We reported ~~provisions~~a foreign exchange loss of $347,000 in ~~our~~fiscal ~~charter~~2009 ~~documents~~as ~~could~~compared ~~adversely~~with ~~affect~~a foreign ~~the~~exchange ~~rights~~loss of ~~the~~$414,000 ~~holders~~in fiscal 2008 and an exchange gain of $233,000 in fiscal 2007 related to foreign exchange gains and losses on unhedged intercompany sales with our ~~common~~Japanese, ~~stock.~~Korean, Austrian and other subsidiaries.

~~Our~~Beginning ~~Articles~~in ofApril 2007, ~~Incorporation~~due ~~authorize our Board of Directors~~ to ~~issue~~a ~~preferred~~change ~~stock~~ in ~~one~~how orwe ~~more~~conduct ~~series~~business and tofollowing ~~fix~~an evaluation of the ~~rights,~~scope ~~preferences,~~of ~~privileges~~our operations and ~~restrictions~~business ~~granted~~practices, towe orconcluded ~~imposed~~that ~~upon~~the ~~any~~Euro is ~~unissued~~the ~~shares~~currency of ~~preferred~~the ~~stock~~primary ~~and~~economic toenvironment ~~fix~~in ~~the~~which ~~number~~Semitool ofAustria operates ~~shares~~and, ~~constituting~~consequently, ~~any~~changed ~~series and~~ the ~~designations~~functional ofcurrency ~~such~~for ~~series,~~Semitool ~~without~~Austria to ~~further~~the ~~vote~~Euro. Semitool orAustria ~~action~~invoices byits ~~the~~customers ~~shareholders.~~in WeEuros ~~have~~and noits financing ~~present~~and ~~plans~~operating toactivities ~~issue~~are ~~any~~denominated ~~preferred~~in ~~stock~~the Euro. Accordingly, infrom ~~order~~April to1, ~~deter~~2007, aall ~~takeover~~assets and~~/or~~ ~~adopt~~liabilities ~~additional~~of Semitool ~~anti-takeover~~Austria ~~measures.~~are Iftranslated ~~such~~at ~~actions~~period-end ~~are~~exchange ~~taken~~rates inand ~~the~~all ~~future,~~revenues and ~~they~~expenses ~~may~~are ~~make~~re-measured aat ~~change~~average ofrates ~~control~~prevailing ~~difficult,~~during ~~even~~the period. Translation ifadjustments aare ~~change~~reported ofas ~~control~~a ~~would~~separate becomponent of ~~beneficial~~accumulated toother ~~our~~comprehensive ~~shareholders.~~income (loss).

Any anti-takeover provisions, including any issuance of preferred stock, could have the effect of discouraging a third party from making a tender offer or otherwise attempting to gain control of us. In addition, these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. Income Taxes

We must attract and retain key personnel to help direct and support our future growth. Competition for such personnel in our industry can be high.

	Year Ended September 30,
		2009			2008			2007
	(Dollars in thousands)

Income tax provision (benefit)		$	(8,561	)	$	2,946		$	(1,892	)
Effective tax rate			(43	)%		33	%		(57	)%

Our ~~success~~estimated effective ~~depends~~tax torate for fiscal 2009 is a ~~significant~~benefit ~~degree~~of ~~upon~~43% ~~the~~as ~~continued~~compared ~~contributions~~to a provision of ~~our~~33% ~~key~~for ~~management,~~fiscal ~~engineering,~~2008. The ~~sales~~fiscal ~~and~~year ~~marketing,~~2009 ~~customer~~tax ~~support,~~rate ~~finance~~is lower ~~and~~than ~~manufacturing~~in ~~personnel.~~fiscal ~~The~~2008 ~~loss~~based ofon ~~any~~a combination of ~~these~~the ~~key~~extension ~~personnel,~~of ~~particularly~~the ~~our~~Federal Research ~~Chairman,~~and ~~President~~Experimentation ~~and~~Credit ~~Chief~~(R&E ~~Executive~~Credit) ~~Officer,~~in ~~Raymon~~fiscal F.2009 ~~Thompson,~~for ~~who~~fiscal 2008 ~~would~~and bethe ~~extremely~~decline ~~difficult~~in toour ~~replace,~~net ~~could~~income ~~harm~~before ~~our~~taxes ~~business~~from ~~and~~a ~~operating~~net ~~results.~~income Weof approximately do$9 ~~not~~million ~~have~~in ~~key~~fiscal ~~person~~2008 ~~life~~to ~~insurance~~a onnet ~~any~~loss before taxes of approximately ~~our~~$20 ~~executives~~million in fiscal 2009. ~~Further,~~The toR&E ~~support~~Credit ~~future~~(which ~~growth,~~had previously weexpired) ~~will~~was ~~need~~extended toon ~~attract~~October 3, 2008 and ~~retain~~accordingly ~~additional~~no ~~qualified~~benefit was ~~employees.~~realized ~~Competition~~in fiscal year 2008 for ~~such~~the ~~personnel~~portion ~~can~~attributable beto ~~intense~~expenses incurred after December 31, ~~and~~2007. weThis ~~may~~portion ~~not~~of bethe ~~successful~~R&E Credit was realized in ~~attracting~~the ~~and~~first ~~retaining~~quarter ~~qualified~~of ~~senior~~fiscal ~~executives~~2009 and ~~other~~resulted ~~employees.~~in a discrete benefit of approximately $1 million that quarter.

~~New~~Our ~~Accounting~~estimated effective ~~Pronouncements~~tax rate for fiscal 2008 was 33% as compared to a benefit of 57% as of September 30, 2007. Our fiscal year 2008 tax rate was higher than in fiscal 2007 due to the expiration of the R&E Credit on December 31, 2007 which reduced the R&E Credit realized in fiscal year 2008.

InOur ~~March~~future effective ~~2004,~~tax ~~the~~rate ~~Emerging~~is ~~Issues~~based ~~Task Force (“EITF”) reached a consensus~~ on ~~Issue~~our ~~No.~~continued ~~03-1,~~investments “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” EITF 03-1 provides guidance on other-than-temporary impairment models for marketable debt and equity securities accounted for under SFAS No. 115, “Accounting for Certain Investments in ~~Debt~~research and development ~~Equity~~programs ~~Securities,”~~qualifying ~~and SFAS No. 124, “Accounting~~ for ~~Certain Investments Held by Not-for-Profit Organizations,” and non-marketable equity securities accounted for under~~ the ~~cost~~R&E ~~method.~~Credit The EITF developed a basic three-step model to evaluate whether an investment is other-than-temporarily impaired. On September 30, 2004, the FASB approved the issuance of FASB Staff Position (FSP) EITF 03-1-1, which delays the effective date until additional guidance is issued for the application of the recognition and ~~measurement~~our ~~provisions~~expectation of ~~EITF 03-1~~ toearnings ~~investments~~from operations in ~~securities~~jurisdictions ~~that~~with ~~are~~lower ~~impaired.~~tax Werates dothroughout ~~not expect~~ the ~~adoption of EITF 03-1 to have a material effect our results of operations or financial condition~~ world.

OnEffective ~~March 31~~October 1, ~~2004~~2007, ~~the~~we ~~FASB~~recognize ~~issued~~and anmeasure ~~Exposure~~our ~~Draft,~~uncertain ~~“Share-Based~~income ~~Payment~~tax —positions Anfollowing the ~~Amendment~~two-step ofapproach ~~FASB~~defined ~~Statement~~in ~~No.~~authoritative ~~123 and 95~~accounting literature.” The ~~proposed~~first ~~Statement~~step ~~addresses~~is ~~the~~to ~~accounting~~evaluate ~~for~~the ~~transactions~~tax inposition ~~which an enterprise receives employee services in exchange~~ for recognition ~~(a)~~by ~~equity~~determining ~~instruments~~if of the ~~enterprise~~weight ~~or (b) liabilities that are based on the fair value~~ of ~~the~~available ~~enterprise’s~~evidence ~~equity~~indicates ~~instruments or~~ that ~~may~~it is bemore ~~settled~~likely bythan ~~the~~not ~~issuance~~that ~~of such equity instruments. The proposed Statement would eliminate~~ the ~~ability~~position towill ~~account for share-based compensation transactions using APB No. 25, and generally would require instead that such transactions~~ be ~~accounted~~sustained ~~for~~on ~~using a fair-value based method. As proposed~~audit, ~~companies~~including resolution ~~would~~of ~~be required to recognize an expense for compensation cost~~ related toappeals ~~share-based~~or ~~payment~~litigation ~~arrangements including stock options and employee stock purchase plans. As proposed~~processes, ~~the~~if ~~new rules would be applied on a modified~~any. The ~~prospective~~second ~~basis~~step asis ~~defined~~to inmeasure the ~~Exposure~~tax ~~Draft,~~benefit ~~and~~as ~~would be effective for public companies for periods beginning after June 15, 2005. We are currently evaluating option valuation methodologies and assumptions in light of~~ the ~~evolving~~largest ~~accounting~~amount ~~standards~~that ~~related~~is tomore than ~~employee~~50% ~~stock~~likely ~~options. Current estimates~~ of ~~option~~being ~~values~~realized ~~using~~upon ~~the~~ultimate ~~Black-Scholes method may not be indicative of results from valuation methodologies ultimately adopted in the final rules~~settlement.

InAs a ~~September~~result ~~2004,~~of the ~~EITF~~implementation ~~reached~~of aits ~~consensus~~accounting onfor ~~Issue~~uncertain ~~No.~~income ~~04-8~~tax positions, ~~“The~~we ~~Effect~~increased our estimate of ~~Contingently~~net ~~Convertible~~unrecognized ~~Debt~~tax onbenefits ~~Diluted~~and accounted ~~Earnings~~for ~~per~~the ~~Share.”~~increase ~~EITF~~as ~~04-8~~a ~~requires~~cumulative ~~that~~effect ~~all~~of ~~issued~~a ~~securities~~change ~~that~~in ~~have~~accounting principle ~~embedded conversion features~~ that ~~are~~resulted ~~contingently~~in ~~exercisable upon the occurrence of~~ a ~~market-price~~$671,000 ~~condition~~decrease ~~should~~to bebeginning inretained earnings. Total ~~the~~unrecognized ~~calculation~~tax ofbenefits ~~diluted~~at ~~earnings~~October ~~per~~1, ~~share~~2007, ~~regardless~~if recognized, ofwould ~~whether~~impact ~~the~~our ~~market~~tax ~~price~~rate. We ~~trigger~~anticipate ~~has~~that ~~been~~the ~~met.~~amount of ~~EITF~~unrecognized ~~04-8~~tax ~~will~~benefits ~~become~~could ~~effective~~change in the ~~period~~next ~~when~~twelve ~~the~~months ~~proposed~~but ~~amendment~~do tonot expect ~~SFAS~~those ~~No.~~changes ~~128,~~to ~~“Earnings per Share”, becomes effective. We currently~~ have noa ~~contingently~~significant ~~convertible~~impact ~~debt~~on ~~and~~our ~~the~~results ~~adoption~~ of ~~EITF~~operations or financial ~~04-8 is not expected to materially impact diluted earnings per share~~position.

~~Item 7A. Quantitative and Qualitative Disclosures About Market Risk~~28

~~Market~~Table ~~Risks~~of Contents

~~Market~~During ~~risks~~fiscal ~~relating~~2009 and tofiscal ~~our~~2008 ~~operations~~the ~~result~~total ~~primarily~~amount ~~from~~of ~~changes~~unrecognized intax ~~interest~~benefits ~~rate~~was ~~and changes in foreign currency exchange rates.~~ as follows:

As of September 30, 2004, we had approximately $2.3 million in long-term debt and no short-term debt. Our long-term debt bears interest at a fixed rate. As a result, changes in the fixed rate interest market would change the estimated fair value of the fixed rate long-term debt. However, we believe that a 10% change in the long-term interest rate would not have a material effect on our business, financial condition, results of operations or cash flows.

	Year Ended September 30,
		2009			2008
	(In thousands)

Unrecognized tax benefits and interest, beginning of year		$	2,223		$	2,421
Year-to-date net changes for unrecognized benefits and interest			(161	)		(198	)
Unrecognized tax benefits and interest, end of year		$	2,062		$	2,223

~~All~~ As of ~~our~~September ~~international~~30, ~~operations~~2009, we are potentially subject to ~~inherent~~U.S. ~~risks~~federal inincome ~~conducting~~tax examinations ~~business~~for ~~abroad, including fluctuation in~~ the ~~relative~~fiscal ~~value~~tax ofyears ~~currencies.~~2005 Wethrough ~~manage~~2008 ~~this risk~~ and ~~attempt~~ to ~~reduce~~non-U.S. ~~such~~income tax ~~exposure~~examinations ~~through~~for anfiscal ~~economic~~tax ~~hedge~~years ~~using~~2003 ~~short-term~~through ~~forward exchange contracts~~2008. In ~~At September 30~~addition, ~~2004,~~ we ~~held~~are ~~forward~~potentially ~~contracts~~subject to ~~sell~~state ~~Japanese~~income ~~Yen~~tax ~~with~~examinations afor ~~total~~fiscal ~~face~~tax ~~value~~years 2005 ofthrough $82008.8 Although ~~million~~they ~~and~~have anot ~~total~~been ~~market~~assessed, we included ~~value~~potential ofinterest ~~$8.8~~and ~~million.~~penalties ~~The~~related ~~impact of movements in currency exchange rates on forward contracts is offset~~ to ~~the~~unrecognized ~~extent~~tax ofbenefits within ~~receivables~~our ~~denominated~~provision infor ~~Japanese Yen~~taxes. The ~~effect~~accrued ofpotential ainterest ~~10% change in foreign exchange rates on hedged transactions involving Japanese Yen forward exchange contracts~~ and ~~the~~penalties related ~~underlying~~to ~~transactions~~unrecognized ~~would~~tax ~~not~~benefits bewere ~~material~~approximately ~~to our financial condition~~$24,000 ~~results~~as of ~~operations~~September 30, ~~or cash flows~~2009. ~~We do not hold or issue derivative financial instruments for trading or speculative purposes.~~

~~Item~~As of 8September 30, 2008, we were potentially subject to U.S. ~~Financial~~federal ~~Statements~~income tax examinations for the fiscal tax years 2005 through 2007 and ~~Supplementary~~to ~~Data~~non-U.S. income tax examinations for fiscal tax years 2002 through 2007. In addition, we were potentially subject to state income tax examinations for fiscal tax years 2004 through 2007. We included potential interest and penalties related to unrecognized tax benefits within our provision for taxes, although they have not been assessed. As of the date of implementation, we had $283,000 of accrued potential interest and penalties related to unrecognized tax benefits. The accrued potential interest and penalties related to unrecognized tax benefits decreased approximately $170,000 in the year ended September 30, 2008

~~SEMITOOL, INC.CONSOLIDATED BALANCE SHEETS September 30, 2004~~ Backlog and ~~2003~~Deferred ~~(Amounts in Thousands, Except Share Amounts)~~ Revenue

ASSETS
	Year Ended September 30,
		2004		2003
	2009			2008			2007
Current assets:
	(Dollars in millions)
Cash and cash equivalents		$	16,368	$	23,018
Backlog	$	69.8		$	54.5		$	58.9
Marketable securities			5,986		4,917
Percentage change in backlog
Trade receivables, less allowance for doubtful accounts
year over year		28.1	%		(7.5	)%		(30.9	)%
of $271 and $319 in 2004 and 2003			52,307		17,630
Deferred revenue	$	4.8		$	13.6		$	15.4
Inventories			55,432		32,263
Percentage change in deferred revenue
Income tax refund receivable			1,261		21,043
year over year		(64.7	)%		(11.7	)%		6.9	%
Prepaid expenses and other current assets			2,564		1,433
Deferred income taxes			10,851		6,578
Total current assets			144,769		106,882
Property, plant and equipment, net			29,203		24,923
Intangibles, less accumulated amortization of $1,030 and $612 in 2004 and 2003			6,857		6,522
Other assets, net			471		447
Total assets		$	181,300	$	138,774

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	21,834		$	13,078
Accrued commissions		4,025			1,722
Accrued warranty		3,713			4,634
Accrued payroll and related benefits		5,147			3,925
Income taxes payable		2,984			--
Other accrued liabilities		1,808			1,554
Customer advances		2,277			3,355
Deferred profit		24,469			5,278
Long-term debt and capital leases, due within one year		225			228
Total current liabilities		66,482			33,774
Long-term debt and capital leases, due after one year		2,089			2,322
Deferred income taxes		2,886			2,001
Total liabilities		71,457			38,097
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, no
shares issued and outstanding		--			--
Common stock, no par value, 75,000,000 shares authorized,
28,668,357 and 28,455,777 shares issued and outstanding in 2004 and 2003		49,222			47,445
Retained earnings		61,013			53,659
Accumulated other comprehensive loss		(392	)		(427	)
Total shareholders' equity		109,843			100,677
Total liabilities and shareholders' equity	$	181,300		$	138,774

Approximately 87% of our backlog at September 30, 2009 was for Raider tools. Deferred revenue decreased $8.8 million at September 30, 2009 as compared with September 30, 2008 primarily due to lower business volumes and because there were no deferrals of Raider shipments into new customer environments as of September 30, 2009. Shipments into new customer environments require full deferral of tool revenue until final customer acceptance in accordance with our revenue recognition policy. One SAT tool was fully deferred at the end of fiscal 2009 due to extended payment terms. Current deferrals include all or a part of 28 Raiders as compared with 30 Raiders at September 30, 2008 and 17 Raiders at September 30, 2007.

~~The~~We include ~~accompanying~~in ~~notes~~backlog those customer orders for which we have written customer authorization and for which shipment is scheduled within the next 12 months. Orders are ansubject ~~integral~~to ~~part~~cancellation or rescheduling by customers with limited or no cancellation fees. As the result of systems ordered and shipped in the ~~consolidated~~same ~~financial~~quarter, ~~statements~~possible changes in customer delivery dates, cancellations and shipment delays and acceptances of shipped equipment carried in deferred revenue, the backlog at any particular date and the bookings for any particular period are not necessarily indicative of actual revenue for any succeeding period. In particular, during periods of downturns in the semiconductor industry we have experienced customer cancellations and requested delays in delivery.

~~SEMITOOL, INC.CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended September 30, 2004, 2003 and 2002 (Amounts in Thousands, Except Per Share Amounts)~~ 29

	2004			2003			2002
Net sales	$	139,627		$	117,048		$	123,687
Cost of sales		62,206			81,794			64,604
Gross profit		77,421			35,254			59,083
Operating expenses:
Selling, general and administrative		51,398			52,439			60,454
Research and development		15,147			18,084			23,092
Total operating expenses		66,545			70,523			83,546
Income (loss) from operations		10,876			(35,269	)		(24,463	)
Other income (expense):
Interest income		332			590			943
Interest expense		(148	)		(205	)		(205	)
Other, net		(323	)		211			760
Total other income (expense)		(139	)		596			1,498
Income (loss) before income taxes		10,737			(34,673	)		(22,965	)
Income tax provision (benefit)		3,383			(13,522	)		(8,727	)
Net income (loss)	$	7,354			(21,151	)	$	(14,238	)
Earnings (loss) per share:
Basic	$	0.26		$	(0.74	)	$	(0.50	)
Diluted	$	0.25		$	(0.74	)	$	(0.50	)
Weighted average common shares:
Basic		28,570			28,446			28,410
Diluted		29,066			28,446			28,410

Table of Contents

~~The~~Deferred ~~accompanying~~profit included ~~notes~~in ~~are~~current anliabilities ~~integral~~is ~~part~~derived offrom deferred revenue, which primarily relates to equipment shipped to customers that has not been accepted by the ~~consolidated~~customer, ~~financial~~less ~~statements~~the deferred cost of sales, including warranty and installation, and commission expenses. Deferred revenue is not included in orders backlog. The components of deferred profit are as follows:

SEMITOOL, INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the years ended September 30, 2004, 2003 and 2002 (Amounts in Thousands)

	Year Ended September 30,
	2009			2008
	(Dollars in thousands)

Deferred revenue	$	4,833		$	13,570
Deferred cost of sales – manufacturing costs		(379	)		(4,605	)
Deferred cost of sales – warranty and installation costs		(905	)		(1,125	)
Deferred SG&A expense – commissions		--			(114	)
Deferred profit	$	3,549		$	7,726

	Common Stock
	NumberofShares		Amount		RetainedEarnings			AccumulatedOtherComprehensiveIncome (Loss)			Total
Balance September 30, 2001		28,380	$	45,181	$	89,048		$	(1,030	)	$	133,199
Net loss		--		--		(14,238	)		--			(14,238	)
Exercise of stock options		48		255		--			--			255
Income tax effect of nonqualified
stock options		--		1,940		--			--			1,940
Other comprehensive income		--		--		--			266			266
Balance September 30, 2002		28,428		47,376		74,810			(764	)		121,422
Net loss		--		--		(21,151	)		--			(21,151	)
Exercise of stock options		28		69		--			--			69
Other comprehensive income		--		--		--			337			337
Balance September 30, 2003		28,456		47,445		53,659			(427	)		100,677
Net income		--		--		7,354			--			7,354
Exercise of stock options		212		1,218		--			--			1,218
Income tax effect of nonqualified
stock options		--		276		--			--			276
Compensation expense recognized under
employee stock option plans		--		283		--			--			283
Other comprehensive income		--		--		--			35			35
Balance September 30, 2004		28,668	$	49,222	$	61,013		$	(392	)	$	109,843

Stock-Based Compensation

~~The~~Stock-based compensation ~~accompanying~~cost ~~notes~~is ~~are~~measured anat ~~integral~~the ~~part~~grant date, based on the fair value of the award ~~consolidated~~and ~~financial~~is ~~statements~~recognized as expense over the employees’ requisite service period. The fair value of each stock option grant is estimated using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Our employee stock options have characteristics that differ from those of publicly traded options.

~~SEMITOOL~~Total compensation cost recorded in fiscal 2009, ~~INC.CONSOLIDATED~~2008 ~~STATEMENTS~~and OF2007 ~~CASH~~was ~~FLOWS~~$1.1 ~~For~~million, ~~the~~$1.8 ~~years~~million ~~ended~~and $1.1 ~~September 30~~million pre-tax, ~~2004~~respectively, ~~2003~~or $678,000, $1.2 million and ~~2002~~$1.1 ~~(Amounts~~million after tax, respectively, in ~~Thousands)~~each period, an impact of approximately $0.02, $0.04 and $0.03 per basic and diluted share.

	2004			2003			2002
Operating activities:
Net income (loss)	$	7,354		$	(21,151	)	$	(14,238	)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Non-cash inventory write-down and other charges		--			19,523			--
Gain on sale of marketable securities		--			--			(318	)
Loss on disposition of assets		618			229			1,243
Depreciation and amortization		5,606			8,304			9,073
Deferred income taxes		(3,384	)		4,830			(777	)
Income tax effect of nonqualified stock options exercised		276			--			1,940
Compensation expense recognized under employee stock options plans		283			--			--
Change in:
Trade receivables		(34,630	)		16,478			17,453
Inventories		(24,508	)		(6,789	)		694
Income tax refund receivable		19,782			(8,393	)		(11,648	)
Prepaid expenses and other current assets		(1,128	)		376			1,119
Other assets, net		(25	)		(159	)		238
Accounts payable		8,790			(3,016	)		4,899
Accrued commissions		2,303			(1,601	)		181
Accrued warranty		(921	)		(1,562	)		(2,971	)
Accrued payroll and related benefits		1,217			(2,055	)		(118	)
Income taxes payable		2,984			(180	)		(2,460	)
Other accrued liabilities		253			(78	)		(963	)
Customer advances		(1,080	)		309			(42	)
Deferred profit		19,120			(15,154	)		(1,322	)
Net cash provided by (used in) operating activities		2,910			(10,089	)		1,983
Investing activities:
Purchases of marketable securities		(12,418	)		(14,553	)		(21,452	)
Proceeds from sale and maturities of marketable securities		11,343			16,196			23,104
Purchases of property, plant and equipment		(8,568	)		(1,262	)		(7,024	)
Increases in intangible assets		(1,358	)		(1,479	)		(1,722	)
Proceeds from sale of property, plant and equipment		447			310			384
Net cash used in investing activities		(10,554	)		(788	)		(6,710	)
Financing activities:
Proceeds from exercise of stock options		1,218			69			255
Borrowings under line of credit and short-term debt		--			--			386
Repayments under line of credit and short-term debt		--			(53	)		(1,165	)
Repayments of long-term debt and capital leases		(236	)		(634	)		(317	)
Net cash provided by (used in) financing activities		982			(618	)		(841	)
Effect of exchange rate changes on cash and cash equivalents		12			248			(57	)
Net decrease in cash and cash equivalents		(6,650	)		(11,247	)		(5,625	)
Cash and cash equivalents at beginning of year		23,018			34,265			39,890
Cash and cash equivalents at end of year	$	16,368		$	23,018		$	34,265

Liquidity and Capital Resources

~~SEMITOOL~~As of September 30, ~~INC~~2009, our principal sources of liquidity consisted of approximately $44.~~CONSOLIDATED~~6 ~~STATEMENTS~~million OFof ~~CASH~~cash ~~FLOWS~~and cash equivalents, ~~CONTINUED~~including ~~For~~$15.0 million drawn on our $30.0 million revolving line of credit. The credit facility is with Wells Fargo Trade Bank (Trade Bank) and bears interest at the ~~years~~bank’s prime ~~ended~~lending rate, 3.25% as of September 30, ~~2004~~2009, ~~2003~~or at our option, LIBOR plus 2.25%, or 2.54% as of that date. The credit agreement has various restrictive covenants including a prohibition against pledging real, fixed or intangible assets during the term of the agreement and ~~2002~~the ~~(Amounts~~maintenance inof various ~~Thousands~~financial covenants. If we were to default on the credit agreement, the bank could accelerate payment of any advances outstanding under the credit agreement. In addition, the availability of funds requires compliance with certain financial covenants, including a maximum borrowing limit based on a Funded Debt to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) ratio, and a maximum borrowing limit based on trade receivables.

	2004			2003		2002
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest	$	149		$	206	$	227
Income taxes		(15,900	)		723		4,100
Supplemental disclosures of non-cash financing and investing activity:
Inventory transferred to equipment	$	1,354		$	2,636	$	5,081

However, although we have received no notice of default, an ambiguity in the credit agreement may be construed to suggest that we are in compliance with the loan’s funded-debt-to-EBITDA covenant, and until this ambiguity is resolved, we do not anticipate being able to make additional draws on the Trade Bank loan. We have been in discussions with the Trade Bank regarding our compliance with this covenant. If interpreted as noncompliance with the covenant, Trade Bank may notify us that the non-compliance constitutes an event of default under the facility that (i) prevents further borrowings and (ii) gives them the right to accelerate the payment of all amounts outstanding under the loan. If interpreted in favor of the Trade Bank, there would be a Funded Debt to EBIDTA ratio requirement of not more than 2:1 as of September 30, 2009 (EBITDA for the trailing twelve-month period ending September 30, 2009 was a negative number). We continue to discuss credit facility requirements with the Trade Bank with a view toward arranging a facility that resolves any issues regarding borrowing limits and outstanding advances. Were the Trade Bank to assert that we were in violation of the covenant and begin to exercise its remedies, we could be required to retire the entire balance of the loan, and while our working capital is more than adequate to repay the entire debt, repayment would limit our ability to deploy our resources as we might otherwise consider desirable or appropriate. Further, the revolving credit line now expires on March 1, 2010, and we do not anticipate that the loan will be extended or renewed.

~~The~~We believe ~~accompanying~~that ~~notes~~we ~~are~~have ansufficient ~~integral~~cash ~~part~~and cash equivalents, along with funds expected to be generated from operations with or without amounts drawn on the line of credit to meet operating expenses and planned capital expenditures through the ~~consolidated~~next twelve months. Historically we have generated sufficient funds from operations during industry downturns to meet our liquidity needs. If the bank could accelerate the current balance due on the loan, our liquidity could be adversely impacted. To the extent that timing of the collection of trade receivables does not meet our cash outflow requirements, we could require access to credit arrangements, which may or may not be available at the desired times or on terms that management would deem appropriate or acceptable. In the past, we have typically required access to a credit facility when our business is growing. As discussed above, we are working with the Trade Bank to resolve any issues regarding our borrowing limits and outstanding advances prior to the time we have a need to access the credit facility. We estimate capital expenditures will be between $6.0 million and $8.0 million during the next twelve months. If additional financial ~~statements~~resources are required in the future, we may need to issue additional common stock or other financial instruments whichever management deems advisable. There can be no assurance that in the future we will be able to issue additional common stock or other financial instruments on acceptable terms or that, if so issued, the sale of our common stock would not be dilutive to existing shareholders.

~~SEMITOOL, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the years ended September~~ 30~~, 2004, 2003 and 2002 (Amounts in Thousands)~~

	2004			2003			2002
Net income (loss)	$	7,354		$	(21,151	)	$	(14,238	)
Net gain (loss) on cash flow hedges		(56	)		(61	)		53
Unrealized gain (loss) on available-for-sale securities		(7	)		(17	)		603
Foreign currency translation adjustments		98			415			(390	)
Total comprehensive income (loss)	$	7,389		$	(20,814	)	$	(13,972	)

Table of Contents

~~The accompanying notes are an integral part of the consolidated financial statements.~~ Fiscal 2009

~~SEMITOOL,~~Cash ~~INC~~provided by operating activities was $22.0 ~~NOTES~~million TOin ~~CONSOLIDATED~~fiscal ~~FINANCIAL~~2009. The ~~STATEMENTS~~key components of the change in cash provided by operating activities were as follows:

~~1. Company Organization and Summary~~ Sources of ~~Significant Accounting Policies~~Cash:

~~Semitool,~~••• ~~Inc.~~Trade ~~(Semitool)~~receivables ~~designs,~~provided ~~manufactures, installs and services highly-engineered equipment for use in the fabrication of semiconductor devices~~$31.7 ~~The~~million ~~Company’s products are focused on the wet chemical process steps~~ in ~~integrated~~cash ~~circuit,~~as orcollections ~~IC,~~outpaced manufacturing and include systems for wafer surface preparation and electrochemical deposition, or ECD, applications. Semitool’s surface preparation systems are designed for wet cleaning, stripping and etching processes, including photoresist and polymer removal and metal etching. The Company’s ECD systems are used for copper and gold plating for the IC’s internal wiring, or interconnectsshipments; ~~solder~~ and gold bumps for wafer level packaging applications; and other metals for various semiconductor and related applications. The Company’s products address critical applications within the semiconductor manufacturing process, and help enable its customers to manufacture more advanced semiconductor devices that feature higher levels of performance. The fabrication of semiconductor devices typically requires several hundred manufacturing steps, with the number of steps continuing to increase for advanced devices. Due to the breadth of the Company’s product portfolio and advanced technology capabilities, Semitool’s solutions address over 100 of these manufacturing steps.

~~Significant~~••• ~~accounting~~Inventories ~~policies~~declined ~~followed~~$19.4 bymillion ~~the~~as ~~Company~~we ~~are:~~focused our efforts on using on-hand inventory and slowed down spending for raw materials in response to current business volumes.

~~Principles~~ Uses of ~~Consolidation~~Cash:

~~The~~••• ~~consolidated~~Accounts ~~financial~~payable ~~statements~~decreased ~~include the accounts of Semitool and its wholly-owned subsidiaries: Semitool Austria GmbH, Semitool Europe Ltd~~$9.,3 ~~(United~~million ~~Kingdom);~~as ~~Semitool~~we ~~Halbleitertechnik~~continued ~~Vertriebs~~our ~~GmbH,~~regular ~~(Germany);~~pay ~~Semitool~~down ~~France~~of ~~SARL;~~payables ~~Semitool~~while ~~Israel~~also ~~Ltd.,~~slowing ~~Semitool~~down ~~Italia~~our ~~SRL;~~inventory ~~Semitool Japan Inc~~purchases.; ~~Semitool~~Inventory ~~Korea,~~purchases ~~Inc.;~~increased ~~Semitool~~in ~~(Asia)~~the ~~Pte~~fourth ~~Ltd.,~~quarter ~~(Singapore);~~as ~~Semitool~~result ~~FSC,~~of ~~Inc.;~~increased ~~and~~business ~~Rhetech, Inc.~~activity;

~~All~~••• ~~significant~~Net ~~intercompany~~loss ~~accounts~~and non-cash operating activities, including depreciation and ~~transactions~~deferred ~~are~~income ~~eliminated~~taxes intotaled ~~consolidation~~$7.5 million;

~~Estimates~~••• Deferred profit decreased $4.2 million as a result of lower business volumes and because there were no deferrals of Raider shipments into new customer environments at September 30, 2009;

~~The~~••• ~~preparation~~Accrued ofpayroll ~~these financial statements requires the Company to make estimates~~ and ~~judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and~~ related ~~disclosure~~benefits ofdecreased ~~contingent liabilities~~$3.3 ~~Routinely,~~million ~~the~~as ~~Company~~a ~~evaluates~~result its estimates, including those related to revenue recognition, bad debts, inventories, investments, intangible assets, income taxes, financing operations, warranty obligations, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of ~~which~~our ~~form~~cost ~~the~~reduction ~~basis~~measures; ~~for making judgments about the carrying values of assets~~ and ~~liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.~~

~~Cash~~••• ~~Equivalents~~Accrued warranty decreased $2.9 million as a result of lower business volumes.

~~The~~Investing activities ~~Company~~in ~~considers~~fiscal ~~all~~2009 ~~highly~~included ~~liquid~~$735,000 ~~debt~~in ~~instruments~~purchases ~~with~~of ~~original~~factory ~~maturities~~equipment and other property. We also invested an additional $4.0 million in our development and demonstration laboratories by transferring finished goods inventory to property, plant and equipment. We sold an aircraft for approximately $1.5 million and a building for approximately $200,000 in fiscal 2009. We also invested a net amount of ~~ninety~~$425,000 ~~days~~in orour ~~less~~patent portfolio, primarily related to bepending ~~cash~~patent ~~equivalents~~applications.

~~Marketable~~Financing activities ~~Securities~~provided $10.4 million in fiscal 2009 and included a net $11.8 million draw on our revolving line of credit which was partially offset by repayments on long-term debt of $1.4 million.

The Company classifies its marketable securities as available-for-sale in accordance with the provision of the Statement of Financial Accounting Standard (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Securities classified as available-for-sale are reported at fair market value with the related unrealized gains and losses included, net of tax, in accumulated other comprehensive income (loss) (“OCI”). Realized gains and losses and declines in value of securities judged to be other than temporary are included in earnings.Fiscal 2008

~~Trade~~Cash ~~Receivables~~used ~~and~~by operating ~~Allowance~~activities ~~for~~was ~~Doubtful~~$4.8 ~~Accounts~~million in fiscal 2008. The key components of the change in cash used by operating activities were as follows:

Trade receivables are recorded at the invoice amount and do not bear interest. Past due accounts are determined based on contractual terms. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability Sources of ~~its customers to make required payments based on its experience and knowledge of the current financial condition of its customers.~~Cash:

~~Derivatives~~••• Net income and non-cash operating activities, including depreciation and stock-based compensation expenses were $6.0 million and $11.2 million, respectively; and

~~The~~••• ~~Company~~Accounts ~~uses~~payable ~~derivative~~increased ~~instruments to manage some of its exposures to foreign currency risks~~$5.4 ~~The~~million ~~objective~~although ~~for~~our ~~holding~~inventory ~~derivatives~~spending islevels todecreased ~~minimize these risks using the most effective methods to eliminate or reduce the impact of these exposures. The Company uses cash flow hedge accounting~~ in ~~accordance~~response ~~with SFAS 133~~ to ~~account~~lower ~~for~~fourth ~~hedges.~~quarter ~~At the inception of the hedge, the hedging relationship to a forecasted transaction, risk management objective and the strategy for undertaking the hedge is documented~~bookings. Quarterly, forward rates are used to evaluate hedging effectiveness. If the derivative no longer meets hedge accounting criteria, or the terms of the hedged item change so the derivative no longer qualifies for hedge accounting, the derivative is marked-to-market. Any amounts in OCI relating to a derivative that no longer qualifies for hedge accounting are transferred out of OCI and reported in earnings during the period in which hedge accounting no longer applies. At maturity or termination the gain or loss on the derivative is calculated and reported in earnings.

~~Certain forecasted transactions and assets are exposed to foreign currency risk. The Company monitors foreign currency exposures regularly to maximize the overall effectiveness~~ Uses of the foreign currency hedge positions. The only currency hedged is the Japanese Yen. Forward contracts used to hedge forecasted international sales on credit for up to 18 months in the future are designated as cash flow hedging instruments. Derivative gains and losses included in OCI are reclassified when forecasted transactions become receivables. During the fiscal year ended September 30, 2004, the amount transferred from OCI to Other income (expense), net, was not material. The Company estimates that all $111,000 of net derivative losses, currently included in OCI, will be reclassified into earnings within the next 12 months.Cash:

~~All~~••• ~~derivatives,~~Inventory ~~whether~~grew ~~designated in hedging relationships or not, are recorded on the balance sheet at fair value~~$16.2 Ifmillion ~~the~~primarily ~~derivative~~related isto ~~designated~~an aincrease ~~fair value hedge, the changes~~ in the ~~fair~~number ~~value~~ of ~~the~~tools ~~derivative~~placed ~~and~~with ofcustomers ~~the~~for ~~hedged~~evaluation ~~item~~and ~~attributable~~with totechnology ~~the hedged risk are recognized in earnings~~partners. ~~If the derivative is designated as a cash flow hedge, the effective portions of changes~~ Work-in-process ~~the~~grew ~~fair~~to ~~value~~support ofhigher ~~the~~order ~~derivative~~volumes; ~~are recorded in OCI~~ and ~~are recognized in earnings when the cash flow hedge ceases.~~

~~Ineffective~~••• ~~portions~~Trade ofreceivables ~~changes~~increased in$15.3 ~~the~~million ~~fair~~primarily ~~value~~related ofto ~~cash~~a ~~flow hedges are recognized in earnings~~$17.1 ~~Hedge~~million ~~ineffectiveness,~~increase ~~determined~~ in ~~accordance with SFAS 133~~shipments, ~~had~~the notiming ~~impact~~of onthose ~~earnings~~shipments ~~for~~and the ~~fiscal~~timing ~~years~~of ~~ended~~customer ~~September~~payments ~~30,~~in ~~2004~~fiscal ~~and 2003~~2008. ~~Two~~In ~~cash~~October ~~flow~~and ~~hedges~~early ~~were~~November ~~discontinued during the fiscal year ended September 30~~2008, ~~2002,~~we ~~with~~collected anapproximately ~~impact~~$36 onmillion ~~earnings~~in oftrade ~~($3,275)~~receivables.

~~Inventories~~Investing activities included $5.1 million in purchases of factory and laboratory equipment and the acquisition of land adjacent to our Salzburg, Austria facility. Additionally, we invested $6.2 million in our development and demonstration laboratories by transferring finished goods inventory to property, plant and equipment. We also invested approximately $790,000 in our patent portfolio, primarily related to pending patent applications.

~~Inventories~~Financing activities ~~are~~provided ~~carried~~$6.0 atmillion ~~the~~in ~~lower~~cash ~~of first-~~in, ~~first-out~~fiscal ~~(FIFO)~~2008 ~~cost~~and orconsisted ~~market~~primarily of $1.6 ~~The~~million ~~Company~~in ~~periodically~~borrowings ~~reviews~~under ~~its~~long-term ~~inventories~~debt to ~~identify~~purchase ~~slow~~land ~~moving~~adjacent ~~and obsolete inventories and~~ to our ~~record~~Salzburg, ~~such~~Austria ~~inventories~~facility atand a net ~~realizable values~~$3.2 Itmillion isdraw ~~reasonably~~on ~~possible~~our ~~that~~revolving ~~the~~line of ~~Company’s~~credit. Stock ~~estimates~~option ofexercises ~~net~~provided ~~realizable~~$2.1 ~~values~~million ~~could~~in befiscal 2008. Offsetting ~~revised~~these insources ~~the~~of ~~near~~cash, ~~term~~we ~~due~~repaid to$1.2 ~~technological~~million ~~and~~on ~~other~~our long-term ~~changes~~debt.

~~Property~~Off-Balance Sheet Arrangements. We do not have any relationships with unconsolidated entities or financial partnerships, ~~Plant~~such ~~and~~as ~~Equipment~~entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to the types of financing, liquidity, market or credit risks that could arise if we had engaged in such relationships.

~~Property, plant and equipment is stated at cost. Depreciation and amortization is provided using the straight-line method with estimated useful lives as follows:~~31

~~Buildings~~Table ~~and improvements Machinery and equipment Furniture and fixtures Vehicles and aircraft Leasehold improvements 10-40 years 2-5 years 3-7 years 5-10 yearsThe lesser~~ of ~~the expected life of the lease or useful life of the improvement~~Contents

~~Major~~The ~~additions~~following commitments ~~and~~as ~~betterments~~of ~~are~~September ~~capitalized.~~30, ~~Costs~~2009, ofincurred ~~maintenance~~in ~~and~~the ~~repairs~~normal ~~which~~course doof ~~not~~business, have ~~improve~~been orincluded ~~extend~~in the ~~lives~~consolidated offinancial ~~the~~statements ~~respective~~with ~~assets~~the ~~are~~exception of ~~expensed~~purchase ~~when~~order ~~incurred.~~commitments ~~When~~and ~~items~~operating ~~are~~lease ~~disposed of~~obligations, ~~the~~which ~~related~~are properly ~~costs~~excluded ~~and~~under ~~accumulated~~accounting ~~depreciation~~principles ~~are~~generally ~~removed~~accepted ~~from~~in the ~~accounts~~United States ~~and~~of ~~any gain or loss is recognized~~America.

Long-Lived Assets

	Payments Due by Period
				Less Than		1 – 3		4 – 5		After
		Total		1 Year		Years		Years		5 Years
	(In thousands)

Long-term debt		$	10,474	$	1,215	$	2,550	$	2,648	$	4,061
Operating leases			1,854		1,150		639		65		--
Purchase order commitments			8,988		8,988		--		--		--

Total commitments		$	21,316	$	11,353	$	3,189	$	2,713	$	4,061

~~The~~Semitool ~~Company~~has agreements ~~evaluates~~with limited liability companies wholly-owned by Mr. Raymon F. Thompson, the ~~carrying~~Company’s ~~value~~chairman ofand ~~its~~chief ~~long-lived~~executive ~~assets~~officer, ~~whenever~~to ~~events~~lease oraircraft and ~~changes~~an inaircraft ~~circumstances~~hangar. Under ~~indicate~~these ~~that~~agreements, ~~the~~rent ~~carrying~~expense ~~value~~was approximately of$1.9 million for the ~~asset~~year ~~may~~ended beSeptember ~~impaired~~30, in2009, ~~accordance~~$2.4 ~~with~~million for the ~~provisions~~year ofended ~~Statement~~September of30, ~~Financial~~2008 ~~Accounting~~and ~~Standard~~$2.8 Nomillion for the year ended September 30, 2007. The ~~144~~rental rate for fiscal 2010 is currently $34,100 ~~“Accounting~~per month for both the ~~Impairment~~aircraft orand ~~Disposal~~the ofhangar; ~~Long~~the lease terms are month-~~Lived~~to-month. The ~~Assets~~lease amounts were reduced in response to market conditions affecting our need for the aircraft.” The Anamended ~~impairment~~rates ~~loss~~are isbelow-market ~~recognized~~for ~~when~~the ~~estimated~~aircraft ~~future~~leased ~~cash~~and, consequently, ~~flows~~are ~~expected~~on terms more favorable to ~~result~~us than could have been obtained from an unaffiliated party. Because the ~~use~~term of the ~~asset~~leases ~~including disposition~~are month-to-month, it is ~~less~~not ~~than~~expected ~~the~~that ~~carrying~~we ~~value~~will ofbe able to continue leasing the ~~asset~~aircraft at those below-market rates as economic conditions improve.

~~Intangible~~Critical Accounting ~~Assets~~Policies and Estimates

~~Intangible~~The ~~assets~~preparation ~~include~~of consolidated ~~legal~~financial ~~costs~~statements ~~associated~~in conformity with ~~obtaining~~accounting ~~patents.~~principles generally ~~The~~accepted ~~cost~~in the United States of ~~patents~~America isrequires ~~amortized~~us onto amake ~~straight~~estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-~~line~~going basis, ~~over~~we ~~seven~~evaluate ~~years~~our estimates, including those related to revenue recognition, inventories, warranty obligations, bad debts, investments, intangible assets, income taxes, financing operations, employee benefits, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Revenue~~We believe ~~Recognition~~the following critical accounting policies and estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

InRevenue ~~December 1999, the staff of the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No~~Recognition. ~~101 (SAB 101), “~~Revenue recognition ~~Recognition~~is insignificant ~~Financial~~because ~~Statements”~~revenue ~~which~~is ~~has~~a ~~been~~key ~~subsequently~~component ~~updated~~of byour ~~Staff~~results ~~Accounting Bulletin No~~of operations. ~~104 (SAB 104), “~~ Revenue ~~Recognition.” Under this method, revenue~~ is recognized only when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price is fixed or determinable and ~~collectibility~~collectability is reasonably assured. Our ~~The Company’s~~ product sales generally contain substantive customer acceptance provisions. Sales of new products to new or existing customers are not recognized until customer acceptance. Likewise, sales ~~sale~~ of existing products to new customer environments are not recognized until customer acceptance. For ~~Sales~~sales of existing products into existing customer environments ~~are treated as multiple element arrangements in accordance with Emerging Issues Task Force Issue No. 00-21~~, ~~“Accounting for Revenue Arrangements with Multiple Deliverables”,~~ if multiple elements exist., ~~The~~the amount of revenue recognized ~~in multiple element arrangements~~ is the lesser of the fair value of the equipment or the contracted amount that was due or payable upon title transfer. The revenue for elements other than equipment is recorded in deferred profit and is recognized when the remaining goods and/or services are delivered or performed. Revenue related to service is recognized upon completion of performance of the service or ratably over the life of the related service contract. Spare parts sales are recognized upon shipment when title and risk of loss pass to the customer. Unearned revenue from service contract agreements is included in Customer Advances in the current liabilities section of the Consolidated Balance Sheets.

~~Warranty~~In addition, ~~Obligations~~the timing of certain expenses, such as cost of sales, including installation and warranty, and commission expenses coincides with the recognition of the related revenues. We follow specific guidelines in measuring revenue; however, certain judgments such as the definition of a new customer environment and new acceptance criteria or if installation is perfunctory may be required in the application of our revenue recognition policy.

~~The~~Inventories. ~~Company’s~~Inventories ~~obligations for warranty~~ are valued ~~accrued~~at ~~concurrently~~the ~~with~~lower ~~the~~of ~~revenue~~cost ~~recognized~~or market on ~~the~~a ~~related~~first-in, ~~equipment~~first-out basis. Accordingly, ~~The~~we ~~Company~~write ~~makes~~down ~~provisions~~the carrying value of inventories for ~~its~~estimated ~~warranty~~obsolescence ~~obligations~~and ~~based~~future ~~upon~~marketability. On a quarterly basis, we compare historical ~~costs~~and ~~incurred~~projected ~~for~~sales ~~such~~and ~~obligations~~usage ~~adjusted,~~of asraw ~~necessary~~materials and parts and our assumptions about future use of raw materials, ~~for~~parts ~~current~~and ~~conditions~~finished goods with our forecast, market demand and ~~factors.~~industry ~~Due~~conditions to determine potential obsolescence or whether the ~~significant~~inventory ~~uncertainties~~on ~~and~~hand ~~judgments~~represents ~~involved~~excess quantities. As ina ~~estimating~~result ~~the~~of ~~Company’s~~our ~~warranty~~analysis, ~~obligations~~we record reserves impacting Cost of Sales, ~~including~~if ~~changing~~appropriate. These ~~product~~reserves ~~designs~~are subject to management judgment and ~~specifications,~~if ~~the~~actual ~~ultimate~~future ~~amount~~use, ~~incurred~~demand ~~for~~or ~~warranty~~market ~~costs~~conditions ~~could~~are less ~~change~~favorable inthan ~~the~~those ~~near~~projected ~~term~~by ~~from~~us, ~~the~~additional ~~Company’s~~inventory ~~current~~valuation write-downs ~~estimate~~may be required.

~~Foreign Currency~~32

~~The~~Table ~~functional currency for most~~ of the Company’s foreign subsidiaries is the U.S. Dollar. For these foreign operations, 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 operations.Contents

~~Semitool~~Warranty ~~Japan Inc~~Obligations., ~~has~~We provide for the ~~Yen~~estimated ascost ~~its~~of ~~functional~~equipment ~~currency~~warranties when the related revenue is recognized. We track individual warranties on a tool-by-tool basis and develop ~~invoices~~estimated ~~its~~rates ~~customers~~by inequipment ~~Yen~~class based on this history. ~~Transaction~~The ~~losses~~rates ofare used ~~$1,500~~to ~~and~~estimate ~~$49,000~~the warranty accrual for ~~fiscal~~a ~~2004~~given ~~and~~specific ~~fiscal~~piece ~~2003,~~of equipment. These ~~and~~rates are revised periodically to reflect current cost trends due to the current life cycle of that product class. The warranty accrual is reduced by actual costs of providing the warranty or if a balance ~~gain~~is remaining at the end of ~~$5,000~~the inwarranty ~~fiscal~~period, ~~2002~~then ~~are~~that ~~included~~amount inis ~~Other~~also written ~~income~~off. Warranty (accrual expense) impacts primarily Cost of Sales. While we engage in ~~the~~extensive ~~Consolidated~~product ~~Statements~~quality programs and processes, including actively monitoring and evaluating the quality of ~~Operations.~~our component ~~Unrealized~~suppliers, ~~gains~~our warranty obligation is affected by product failure rates, material usage and ~~losses~~service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from ~~remeasurement~~our ofestimates, revisions to the ~~financial~~estimated warranty ~~statements~~liability ~~are~~would ~~reflected~~be required and would be recorded as aan ~~component~~increase in cost of ~~Accumulated~~sales ~~other~~and ~~comprehensive~~operating ~~loss~~expenses in the period in which the revision is deemed necessary.

~~Research~~Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We record expense as a component of Selling, General and Administrative ~~Development~~within ~~Costs~~the Consolidated Statements of Operations. If the financial condition of our customers were to deteriorate, due to the cyclicality of the industries we serve or for other reasons, resulting in an impairment of their ability to make payments, additional allowances and expense may be required as occurred in fiscal 2009 when we wrote off approximately $3.5 million to Selling, General and Administrative expense for two customer accounts receivable, including a write off of a major tool sale to a customer who filed for insolvency protection in a German court. Likewise, if we are successfully able to collect on an amount presumed to be uncollectible, the allowance for doubtful accounts and the related expense may be reduced. In general, it takes longer to collect payment in the capital equipment industry than in certain other industries.

~~Costs~~Deferred Tax Assets. We make estimates to determine the amount of ~~research~~our deferred tax assets that we believe is more likely than not to be realized. We consider future taxable income and ~~development~~ongoing ~~are~~prudent ~~expensed~~tax asplanning ~~incurred~~strategies in assessing the need for a valuation allowance; however, should we determine that we will not be able to realize all or part of our net deferred tax asset in the future, a decrease in the deferred tax asset would negatively impact our results of operations, particularly the income tax provision, in the period such determination was made.

~~New~~Stock-Based ~~Accounting~~Compensation. Stock-based ~~Pronouncements~~compensation cost is estimated at the grant date based on the fair-value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair-value model and calculating the fair value of stock-based awards requires considerable judgment, including estimating stock price volatility, expected option life and forfeiture rates. We develop our estimates based on historical data and market information which can change significantly over time. A small change in the estimates used can have a relatively large change in the estimated valuation.

InConsistent ~~March~~with authoritative ~~2004~~accounting guidance, we use the ~~Emerging~~Black-Scholes ~~Issues~~option ~~Task~~valuation model ~~Force~~to ~~(“EITF”)~~value ~~reached~~employee astock ~~consensus~~options. We onestimate ~~Issue~~stock ~~No.~~price volatility ~~03-1,~~based ~~“The~~on ~~Meaning~~a blended rate of ~~Other-Than-Temporary~~historical ~~Impairment~~volatility and ~~Its~~the ~~Application~~implied volatility toderived ~~Certain~~from ~~Investments~~traded options on our stock.” Estimated ~~EITF~~option life ~~03-1~~and ~~provides~~forfeiture ~~guidance~~rate onassumptions ~~other~~are derived from historical data. For stock-~~than-temporary~~based ~~impairment~~compensation ~~models~~awards ~~for~~with ~~marketable~~graded ~~debt~~vesting ~~and~~that were ~~equity~~granted ~~securities~~after ~~accounted~~fiscal ~~for~~2005, ~~under~~we ~~SFAS~~recognize Nocompensation expense using the straight-line amortization method. Beginning ~~115~~in fiscal 2008, ~~“Accounting~~most stock-based ~~for~~compensation ~~Certain~~awards ~~Investments~~have been in ~~Debt~~the ~~and~~form ~~Equity~~of ~~Securities,”~~restricted ~~and~~stock awards. As ~~SFAS~~of ~~No.~~September ~~124~~30, ~~“Accounting~~2009, ~~for~~$437,000 ~~Certain~~of ~~Investments~~total ~~Held~~unrecognized compensation bycost ~~Not-for-Profit~~related ~~Organizations,”and~~to non-~~marketable~~vested ~~equity~~stock ~~securities~~option ~~accounted~~awards ~~for~~is ~~under~~expected ~~the~~to ~~cost~~be recognized ~~method~~over a weighted average period of 0.9 ~~The~~years. Additionally as ~~EITF~~of ~~developed~~September a30, ~~basic~~2009, ~~three-step~~$857,000 ~~model~~of tototal ~~evaluate~~unrecognized ~~whether~~compensation ancost related ~~investment~~to restricted stock awards is ~~other-than-temporarily~~expected ~~impaired~~to be recognized over a weighted average period of 1.3 Onyears. All ~~September~~stock 30options, ~~2004~~whether vested or unvested, and restricted stock units, to the ~~FASB~~extent ~~approved~~not previously vested and settled in full, that are outstanding immediately prior to the ~~issuance~~first time of acceptance ~~FASB~~of ~~Staff~~shares ~~Position~~for ~~(FSP)~~payment ~~EITF~~in ~~03-1-1~~Applied Materials’ tender offer, ~~which~~or ~~delays~~the acceptance time, will be cancelled, with the ~~effective~~holder ~~date~~thereof ~~until~~being ~~additional~~entitled ~~guidance~~to receive isa ~~issued~~lump ~~for~~sum ~~the~~cash ~~application~~payment ofper share based on the ~~recognition~~$11 ~~and~~per ~~measurement~~share ~~provisions~~tender offer ofconsideration ~~EITF~~in ~~03-1~~accordance towith ~~investments~~the inmerger ~~securities~~agreement with Applied Materials. All restricted stock awards that are ~~impaired.~~outstanding ~~The~~prior ~~Company~~to such ~~does~~acceptance ~~not~~time ~~expect~~will ~~the~~vest ~~adoption~~in full as of ~~EITF~~such ~~03-1~~acceptance time, with the holder thereof being entitled to ~~have~~receive a ~~material~~lump ~~effect~~sum oncash ~~its~~payment ~~results~~per ofshare ~~operations~~equal to orthe ~~financial~~$11 ~~condition~~per share tender offer consideration.

On March 31, 2004, the FASB issued an Exposure Draft, “Share-Based Payment — An Amendment of FASB Statement No. 123 and 95.” The proposed Statement addresses the accounting for transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. The proposed Statement would eliminate the ability to account for share-based compensation transactions using APB No. 25, and generally would require instead that such transactions be accounted for using a fair-value based method. As proposed, companies would be required to recognize an expense for compensation cost related to share-based payment arrangements including stock options and employee stock purchase plans. As proposed, the new rules would be applied on a modified prospective basis as defined in the Exposure Draft, and would be effective for public companies for periods beginning after June 15, 2005. The Company is currently evaluating option valuation methodologies and assumptions in light of the evolving accounting standards related to employee stock options. Current estimates of option values using the Black-Scholes method may not be indicative of results from valuation methodologies ultimately adopted in the final rules.Litigation

InOn or ~~September~~about ~~2004~~November 19, 2009, November 30, 2009 and December 4, 2009, three purported class action lawsuits related to the ~~EITF~~tender ~~reached~~offer aand ~~consensus~~the onmerger, captioned ~~Issue~~Stationary Engineers Local 39 Pension Trust Fund vs. Semitool, Inc., et al. (Cause No. 04DV-809-1461(B)), ~~“The~~Stern ~~Effect~~vs. ofThompson, ~~Contingently~~et ~~Convertible~~al. ~~Debt~~(Cause onNo. DV-09-1513(C)), ~~Diluted~~and ~~Earnings~~Marvel ~~per~~v. ~~Share~~Thompson, et al.”, ~~EITF~~respectively, ~~04-8~~were ~~requires~~filed ~~that~~in ~~all~~the Montana ~~issued~~Eleventh ~~securities~~Judicial ~~that~~District ~~have~~Court, ~~embedded~~County ~~conversion~~of ~~features~~Flathead, ~~that~~against ~~are~~Semitool, each ~~contingently~~of ~~exercisable~~Semitool’s ~~upon~~directors, ~~the~~Applied ~~occurrence~~Materials ofand aJupiter ~~market-price~~Acquisition ~~condition~~Sub, Inc. ~~should~~(the beplaintiff in the ~~calculation~~Stationary ofEngineers ~~diluted~~Local ~~earnings~~action ~~per~~then ~~share~~filed an amended complaint on or about November 25, ~~regardless~~2009). Motions offor expedited ~~whether~~proceedings were filed by the ~~market~~plaintiffs ~~price~~in ~~trigger~~the ~~has~~first ~~been~~and ~~met.~~second actions, ~~EITF~~respectively, ~~04-8~~on ~~will~~November ~~become~~23, ~~effective~~2009 and December 1, 2009, in ~~the~~each ~~period~~case requesting, ~~when~~among other things, that the Court expedite discovery and schedule a hearing on such plaintiff’s proposed ~~amendment~~motion tofor ~~SFAS~~a ~~No.~~preliminary ~~128,~~injunction ~~“Earnings~~no later ~~per~~than ~~Share”~~December 17, ~~becomes~~2009, ~~effective~~the currently scheduled Expiration Date of the tender offer. A ~~The~~hearing ~~Company~~on ~~currently~~the ~~has~~motion nofor ~~contingently~~expedited ~~convertible~~proceedings ~~debt~~in the Stationary Engineers Local action took place on December 9, 2009 and, on December 10, 2009, the ~~adoption~~court ofissued ~~EITF~~an ~~04-8~~order isdenying ~~not~~the ~~expected~~plaintiff’s tomotion ~~materially~~for expedited ~~impact~~discovery ~~diluted~~and ~~earnings~~issued ~~per~~another ~~share~~order scheduling a hearing on December 15, 2009 in respect of plaintiff’s motion for a preliminary injunction.

~~Stock-Based Compensation~~33

~~The~~Table Company accounts for stock-based employee compensation using the intrinsic value method under Accounting Principles Board Opinion No. 25 (APB No. 25), “Accounting for Stock Issued to Employees” and has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (SFAS No. 123) “Accounting for Stock-Based Compensation” as amended by SFAS No 148 (SFAS No. 148) “Accounting for Stock-Based Compensation Transition and Disclosure.” APB No. 25 provides that compensation expense relative to employee stock options is measured based on the intrinsic value of the stock options granted. Compensation expense is recognized in the statement of operations in the case where the stock options are granted at exercise prices below fair market value on the date of grant. If the stock options are granted at market value, no compensation expense is recorded. SFAS No. 123 provides for a fair value based method of accounting for an employee stock option. For stock options, fair value is determined using an option pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the underlying stock and the expected dividends on it, and the risk-free rate over the expected life of the option. SFAS No. 123 requires entities continuing to use an intrinsic value based method of accounting prescribed by APB No. 25 to provide pro forma disclosures of net income and earnings per share as if the fair value method of accounting had been used. SFAS No. 148 requires prominent disclosure of the method used to value options and the effect of the method used on reported results in both annual and interim financial statements.Contents

~~For~~The ~~options granted at market value~~actions, ~~the~~each brought ~~Company~~by ~~does~~a ~~not~~purported ~~recognize~~shareholder anof ~~expense. However~~Semitool, ~~for~~seek ~~options~~certification ~~granted~~of ata ~~exercise~~class ~~prices~~of all ~~below~~holders ~~fair~~of ~~market~~Semitool ~~value~~common onstock (except the ~~date~~defendants ofand ~~grant~~their affiliates) and allege, weamong ~~recognize~~other ~~compensation~~things, ~~expense~~that ~~and~~Semitool’s ~~amortize~~directors ~~deferred~~breached their ~~stock-based~~fiduciary ~~compensation~~duties onby ~~the~~(i) ~~accelerated~~failing ~~vesting~~to ~~method~~maximize ~~described~~shareholder invalue; ~~FASB~~(ii) securing ~~Interpretation~~benefits ~~Number~~for 28certain ~~over~~defendants at the ~~vesting~~expense ~~periods~~or ofto the ~~applicable~~detriment ~~stock~~of Semitool’s ~~options~~public ~~(normally~~shareholders; ~~five years~~(iii). ~~The~~discouraging ~~Company~~and/or ~~estimates~~inhibiting ~~the~~alternative offers ~~fair~~to ~~value~~purchase control of Semitool or its ~~stock-based~~assets; ~~awards~~and to(iv) ~~employees~~failing ~~using~~to disclose amaterial ~~Black~~non-~~Scholes~~public ~~option~~information, ~~pricing~~and ~~model~~that Applied Materials aided and abetted such alleged breaches. ~~See~~The ~~Note~~actions 7seek, ~~for~~among ~~detailed~~other ~~assumptions~~things, ~~used~~injunctive relief byenjoining the ~~Company~~defendants tofrom ~~compute~~consummating the ~~fair~~tender ~~value~~offer ofand ~~stock-based~~the merger ~~awards~~and ~~for~~damages, ~~purposes~~as ofwell ~~pro~~as ~~forma~~recovery ~~disclosures~~of ~~under~~the ~~SFAS~~costs ~~No.~~of ~~123.~~the ~~Had~~action, ~~compensation~~including reasonable ~~cost~~attorneys’ ~~for~~and ~~the~~experts’ ~~Option~~fees. ~~Plan~~We ~~been~~believe ~~determined~~the ~~based~~claims onalleged against us in the ~~fair~~actions ~~value~~are ~~consistent~~without ~~with~~merit ~~the~~and ~~provisions~~intend ofto ~~SFAS~~defend Noagainst them vigorously. ~~123~~In addition, ~~the~~Applied ~~Company’s~~Materials ~~net~~has ~~income~~informed ~~(loss)~~us ~~and~~that ~~earnings~~it ~~(loss)~~also ~~per~~believes the ~~share~~allegations ~~would~~against ~~have~~it ~~been~~in ~~changed~~the actions to ~~the~~be ~~pro~~without ~~forma~~merit, ~~amounts~~and ~~shown~~that ~~below~~it intends ~~(in~~to ~~thousands,~~defend ~~except~~against ~~for~~the ~~per~~claims ~~share amounts):~~vigorously.

	2004			2003			2002
Net income (loss), as reported	$	7,354		$	(21,151	)	$	(14,238	)
Add: Compensation expense recorded under APB No. 25,
net of related tax effects		194			--			--
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects		(841	)		(712	)		(859	)
Pro forma net income (loss)	$	6,707		$	(21,863	)	$	(15,097	)
Basic earnings (loss) per share:
As reported	$	0.26		$	(0.74	)	$	(0.50	)
Pro forma	$	0.23		$	(0.77	)	$	(0.53	)
Diluted earnings (loss) per share:
As reported	$	0.25		$	(0.74	)	$	(0.50	)
Pro forma	$	0.23		$	(0.77	)	$	(0.53	)

We are involved in legal proceedings that arise in the ordinary course of our business, including employment related litigation. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of management, based upon the information available at this time, that the currently expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~Computation~~New Accounting ~~of Earnings (Loss) Per Share~~Pronouncements

~~The~~In June ~~computation~~2009, ofthe ~~basic~~Financial ~~and~~Accounting ~~diluted~~Standards ~~earnings~~Board (~~loss~~FASB) ~~per~~issued ~~share~~authoritative guidance isto ~~based~~establish on the ~~following~~FASB Accounting Standards Codification (ASC) as the source of authoritative accounting principles and the framework for selecting the principles used in ~~thousands):~~the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. This guidance is effective for us in the fiscal year reporting period ended on September 30, 2009 and only impacts references for accounting guidance.

	2004		2003			2002
Numerator:
Net income (loss) used for basic and diluted
earnings (loss) per share	$	7,354	$	(21,151	)	$	(14,238	)
Denominator:
Weighted average common shares used for
basic earnings (loss) per share		28,570		28,446			28,410
Effects of dilutive stock options		496		--			--
Denominator for diluted earnings (loss) per share		29,066		28,446			28,410

In October 2009, the FASB’s Emerging Issues Task Force (EITF) issued authoritative guidance addressing revenue arrangements with multiple deliverables. The authoritative guidance eliminates the criterion for objective and reliable evidence of fair value for the undelivered products or services. Instead, revenue arrangements with multiple deliverables should be divided into separate units of accounting provided the deliverables meet certain criteria. This guidance also eliminates the use of the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables based on their relative selling price. The guidance provides a hierarchy for estimating the selling price of each of the deliverables. The guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. Accordingly, we will adopt this guidance in fiscal 2011. We are currently evaluating the impact of adopting this guidance on our results of operations and financial condition.

~~Diluted~~In April ~~earnings~~2009, ~~(loss)~~the ~~per~~FASB ~~share~~issued ~~excludes~~authoritative ~~the~~guidance ~~effects~~to ofaddress ~~antidilutive~~application ~~stock~~issues on ~~options~~initial ofrecognition ~~194,250,~~and 1measurement,~~531,115~~ subsequent measurement and 1accounting and disclosure of assets and liabilities arising from contingencies in a business combination. We are required to adopt this guidance in the first annual reporting period beginning on or after December 15,~~396~~ 2008. Accordingly,~~235~~ inwe have adopted this guidance effective at the beginning of fiscal ~~2004~~2010, ~~2003~~although ~~and~~it will ~~2002,~~only ~~respectively~~impact us if we are involved in a business combination as an acquirer.

2In April 2008, the FASB issued authoritative guidance amending the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ~~Securities~~ The intent ~~Available-For-Sale:~~of this guidance is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset as provided for under separate accounting guidance topics. This guidance is effective for fiscal years beginning after December 15, 2008 and for interim periods within those years with early adoption prohibited. Accordingly, we will adopt this guidance in fiscal 2010 and it will only impact us if we acquire assets for which we need to develop renewal or extension assumptions to determine the useful life of a recognized intangible asset

~~Securities~~In December ~~available-~~2007, the FASB issued authoritative guidance retaining the purchase method of accounting for acquisitions, but requiring a number of changes, including changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-~~sale~~process ~~consist~~research and development at fair value, and requires the expensing of acquisition-related costs as incurred. This guidance applies prospectively to business combinations for which the ~~following~~acquisition (date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and early adoption is prohibited. Accordingly, we will adopt this guidance in ~~thousands):~~the first quarter of fiscal 2010 and the guidance will only impact us if we are involved in a business combination as an acquirer.

	AmortizedCost		GrossUnrealizedGain		GrossUnrealizedLoss		MarketValue
September 30, 2004
U.S. government agencies	$	250	$	--	$	--	$	250
U.S. corporate obligations		1,449		--		--		1,449
Non-taxable municipal		8,042		--		6		8,036
Other		--		--		--		--
	$	9,741	$	--	$	6	$	9,735
September 30, 2003
U.S. government agencies	$	3,686	$	1	$	--	$	3,687
U.S. corporate obligations		2,551		--		--		2,551
Non-taxable municipal		--		--		--		--
Other		1,432		--		1		1,431
	$	7,669	$	1	$	1	$	7,669

~~Cash~~Table ~~and cash equivalents included investments in debt instruments and other securities~~ of ~~$3.7 million and $2.8 million at September 30, 2004 and September 30, 2003, respectively.~~Contents

~~Contractual~~In September ~~maturities~~2006, ofthe ~~short-term~~FASB ~~investments~~issued atauthoritative ~~September~~guidance ~~30,~~clarifying ~~2004~~the definition of fair value and ~~2003~~establishing ~~were~~a ~~all~~framework ~~due~~for measuring fair value in ~~less~~generally accepted ~~than~~accounting ~~one~~principles ~~year~~and expanding disclosures about fair value measurements. We ~~Gross~~adopted ~~realized~~this ~~gains~~guidance orfor ~~losses~~financial ~~were~~assets ~~immaterial~~and liabilities onin ~~sales~~the first quarter of ~~available-~~fiscal 2009 and as permitted by the authoritative guidance, we expect to adopt its provisions for non-~~sale~~financial assets ~~securities~~and ~~for~~liabilities ~~fiscal~~in ~~2004~~the ~~and~~first quarter of fiscal ~~2003~~2010. In ~~Semitool~~August 2009, ~~manages~~the ~~its~~FASB ~~cash~~issued ~~equivalents~~additional ~~and~~guidance ~~short-term~~providing ~~investments~~clarification asfor measuring fair value when a ~~single~~quoted ~~portfolio~~price ofin ~~highly~~an ~~liquid~~active ~~securities~~market for the identical liability is not available. This supplemental guidance also clarifies that when estimating the fair value of a liability, a reporting entity is ~~intended~~not required to include bea ~~available~~separate input or adjustment to ~~meet~~other inputs relating to the ~~Company's~~existence of ~~current~~a ~~cash~~restriction ~~requirements~~that prevents the transfer of the liability. The supplemental guidance is effective for fiscal periods beginning with the first reporting period after issuance. Accordingly, we will adopt this guidance in the first quarter of fiscal 2010. We do not expect the adoption of this guidance to materially impact our results of operations or financial condition.

3Item 7A. ~~Inventories:~~ Quantitative and Qualitative Disclosures About Market Risk

~~Inventories at September 30, 2004 and 2003 are summarized as follows (in thousands):~~Market Risks

	2004		2003
Parts and raw materials	$	29,498	$	14,324
Work-in-process		19,368		10,182
Finished goods		6,566		7,757
	$	55,432	$	32,263

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates.

4As of September 30, 2009, we had approximately $10. ~~Property~~5 million in long-term debt and $15.0 million in short-term debt. As of September 30, ~~Plant~~2008, we had approximately $11.6 million in long-term debt and ~~Equipment:~~$3.2 million in short term debt. Our long-term debt bears interest at a fixed rate. As a result, changes in the fixed rate interest market would change the estimated fair value of the fixed rate long-term debt. Our short-term debt bears interest at the bank’s prime lending rate, 3.25% as of September 30, 2009, or at our option, LIBOR plus 2.25%, or 2.54% as of that date. We believe that a 10% change in the long-term or the short-term interest rates would not have a material effect on our business, financial condition, results of operations or cash flows. See Note 9 – Long-Term Debt and Capital Leases.

~~Property~~All of our international operations are subject to inherent risks in conducting business abroad, ~~plant~~including fluctuation in the relative value of currencies. We manage this risk and ~~equipment~~attempt atto reduce such exposure through an economic hedge using short-term forward exchange contracts. At September 30, ~~2004~~2008, we held forward contracts to sell Japanese Yen with a total face value of $5.5 million and ~~2003~~a total market value of $5.6 million and a total unrealized future loss of approximately $100,000. At September 30, 2009, we held no forward contracts. The impact of movements in currency exchange rates on forward contracts is ~~summarized~~offset asto ~~follows~~the (extent of receivables denominated in ~~thousands):~~Japanese Yen. The effect of a 10% change in foreign exchange rates on hedged transactions involving Japanese Yen forward exchange contracts and the underlying transactions would not be material to our financial condition, results of operations or cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes.

	2004			2003
Buildings and improvements	$	19,706		$	17,811
Machinery and equipment		28,644			28,378
Furniture, fixtures and leasehold improvements		8,876			7,509
Vehicles and aircraft		8,756			6,408
		65,982			60,106
Less accumulated depreciation and amortization		(40,882	)		(38,337	)
		25,100			21,769
Land and land improvements		4,103			3,154
	$	29,203		$	24,923

~~Equipment~~Table ~~under capital leases and accumulated amortization thereon was approximately $132,000 and $73,000 as~~ of ~~September 30, 2003. There was no equipment under capital lease as of September 30, 2004.~~Contents

~~Depreciation~~Item ~~expense~~8. Financial ~~was~~Statements ~~$4,638,000, $7,240,000,~~ and ~~$7,677,000 for fiscal 2004, 2003 and 2002, respectively.~~Supplementary Data

5SEMITOOL, INC. ~~Intangible Assets:~~

~~Amortization~~CONSOLIDATED BALANCE expense was $418,000, $717,000 and $192,000 for fiscal 2004, 2003 and 2002, respectively. Based on patent rights granted and recorded at September 30, 2004, and assuming no subsequent impairment of the underlying assets, the annual estimated amortization expense is expected to be as follows (in thousands):SHEETS

Year EndingSeptember 30,	Total
2005	$	473
2006		469
2007		446
2008		418
2009		336
Thereafter		254

September 30, 2009 and 2008

~~Accumulated~~(Amounts ~~amortization was $1~~in Thousands,~~030,000~~ ~~and~~Except ~~$612,000~~Share ~~at September 30, 2004 and 2003, respectively.~~Amounts)

6. Long-Term Debt and Capital Leases:


	2009		2008

ASSETS

Current assets:
Cash and cash equivalents	$	44,617	$	11,624
Restricted cash		25		817
Marketable securities		--		380
Trade receivables, less allowance for doubtful accounts of $259 in both periods		44,266		73,695
Inventories		65,810		88,773
Income tax refund receivable		1		472
Prepaid expenses and other current assets		3,602		4,371
Deferred income taxes		14,888		14,175
Total current assets		173,209		194,307
Property, plant and equipment, net		43,255		49,909
Intangibles, less accumulated amortization of $5,398 and $4,341 in 2009 and 2008		6,625		7,861

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