<PAGE>   1
 
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1999
    
 
   
                                                      REGISTRATION NO. 333-71897
    
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
   
                                AMENDMENT NO. 1
    
   
                                       TO
    
 
                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                          SPEEDFAM INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                <C>                                <C>
                                                  3559                            36-2421613
             ILLINOIS                 (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
     (STATE OF INCORPORATION)         CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)
</TABLE>
 
                             305 NORTH 54TH STREET
                          CHANDLER, ARIZONA 85226-2416
                                 (602) 705-2100
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
                               RICHARD J. FAUBERT
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                             305 NORTH 54TH STREET
                          CHANDLER, ARIZONA 85226-2416
                                 (602) 705-2100
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                          COPIES OF COMMUNICATIONS TO:
 
<TABLE>
<S>                                                 <C>
              JONATHAN A. KOFF, ESQ.                              FRANCIS S. CURRIE, ESQ.
                STATHY DARCY, ESQ.                                  NEIL J. WOLFF, ESQ.
                CHAPMAN AND CUTLER                                  YOICHIRO TAKU, ESQ.
              111 WEST MONROE STREET                               JOHN Y. SASAKI, ESQ.
              CHICAGO, ILLINOIS 60603                        WILSON SONSINI GOODRICH & ROSATI
                  (312) 845-3000                                 PROFESSIONAL CORPORATION
                                                                    650 PAGE MILL ROAD
                                                                PALO ALTO, CALIFORNIA 94304
                                                                      (650) 493-9300
</TABLE>
 
                            ------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  Upon
consummation of the merger described herein.
 
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.  [ ]
 
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
                            ------------------------
                        CALCULATION OF REGISTRATION FEE
 
   
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
                                             AMOUNT           PROPOSED MAXIMUM      PROPOSED MAXIMUM           AMOUNT
       TITLE OF EACH CLASS OF                TO BE             OFFERING PRICE          AGGREGATE                 OF
    SECURITIES TO BE REGISTERED          REGISTERED(1)          PER UNIT(2)        OFFERING PRICE(2)    REGISTRATION FEE(3)
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                   <C>                   <C>                   <C>
Common Stock, without par value.....   13,050,000 shares           $18.25             $238,162,500            $66,210
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
    
 
(1) Represents the number of shares of the common stock of the registrant which
    may be issued to stockholders of Integrated Process Equipment Corp. ("IPEC")
    pursuant to the merger described herein.
 
   
(2) Each outstanding share of common stock and Class A common stock of IPEC will
    be converted into .71 of one share of common stock of the registrant
    pursuant to the merger described herein. Each outstanding share of preferred
    stock of IPEC will be converted into a number of shares of common stock of
    the registrant as described herein. The IPEC common stock is traded on
    Nasdaq. There is no public market for either the Class A common or preferred
    stock of IPEC. Pursuant to rule 457(f) under the Securities Act of 1933, the
    registration fee has been calculated as of February 25, 1999.
    
 
   
(3) A total amount of $70,500 was previously paid in connection with (a) the
    filing by the registrant and IPEC of a preliminary joint proxy
    statement/prospectus related to the proposed merger and (b) the initial
    filing of this registration statement.
    
                            ------------------------
 
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                          SPEEDFAM INTERNATIONAL, INC.
                             305 NORTH 54TH STREET
                            CHANDLER, ARIZONA 85226
 
                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
   
                        TO BE HELD ON APRIL       , 1999
    
 
To the shareholders of SpeedFam International, Inc.:
 
   
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of SpeedFam
International, Inc., an Illinois corporation, will be held on __________, April
     , 1999 at   :00 a.m., local time, at SpeedFam's headquarters at 305 North
54th Street, Chandler, Arizona 85226.
    
 
At the SpeedFam special meeting you will be asked to consider and vote upon the
following matters:
 
        1. The issuance of shares of SpeedFam common stock to the stockholders
           of Integrated Process Equipment Corp., a Delaware corporation,
           pursuant to an agreement and plan of merger, dated as of November 19,
           1998, among SpeedFam, IPEC and SpeedFam, Inc., a wholly-owned
           subsidiary of SpeedFam, providing for the merger of IPEC and
           SpeedFam, Inc., including the issuance of shares of SpeedFam common
           stock pursuant to currently outstanding options, warrants and other
           rights to purchase IPEC common stock that will be assumed by
           SpeedFam. Upon consummation of the merger, IPEC will be a
           wholly-owned subsidiary of SpeedFam;
 
        2. An amendment to the articles of incorporation of SpeedFam to change
           the corporate name of SpeedFam to "SPEEDFAM-IPEC, INC.;"
 
        3. An amendment to the 1995 Stock Plan for Employees and Directors of
           SpeedFam which increases the maximum aggregate number of shares of
           SpeedFam common stock as to which awards of options, restricted
           shares, units or rights may from time to time be issued under the
           plan from 1,800,000 to 3,300,000; and
 
        4. Any other matters that are properly brought before the special
           meeting.
 
Each of these proposals is described more fully in the accompanying joint proxy
statement/ prospectus. The name change and the increase in the number of shares
of SpeedFam common stock available under the stock plan will occur only if the
merger is completed.
 
   
SpeedFam shareholders of record at the close of business on February 16, 1999
are entitled to notice of and to vote at the SpeedFam special meeting and any
adjournments or postponements of the special meeting and are cordially invited
to attend the SpeedFam special meeting in person.
    
 
                                          BY ORDER OF THE BOARD OF DIRECTORS
 
                                          /s/ James N. Farley         
                                          ----------------------------
                                          James N. Farley
                                          Chairman of the Board
 
Chandler, Arizona
   
March      , 1999
    
 
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPEEDFAM SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE THAT YOUR VOTE COUNTS. NO POSTAGE IS NEEDED
IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>   3
 
                       INTEGRATED PROCESS EQUIPMENT CORP.
 
                                 911 BERN COURT
                           SAN JOSE, CALIFORNIA 95112
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
   
                        TO BE HELD ON APRIL       , 1999
    
 
To the stockholders of Integrated Process Equipment Corp.:
 
   
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Integrated
Process Equipment Corp., a Delaware corporation, will be held on        , April
     , 1999 at   :00 a.m., local time, at              ,              , Phoenix,
Arizona 85034.
    
 
At the IPEC special meeting you will be asked to consider and vote on the
following matter:
 
To approve and adopt an agreement and plan of merger by and among IPEC, SpeedFam
International, Inc., an Illinois corporation, and SpeedFam, Inc., a Delaware
corporation and a wholly owned subsidiary of SpeedFam, dated as of November 19,
1998, pursuant to which IPEC will become a wholly owned subsidiary of SpeedFam,
with SpeedFam to be renamed "SPEEDFAM-IPEC, INC." In this merger, if you are an
IPEC regular common or Class A common stockholder, you will receive .71 of one
share of SpeedFam common stock for each share of IPEC regular or Class A common
stock you own. If you are an IPEC Series B-1, B-2 or B-3 preferred stockholder,
you will receive 8.90, 8.10 and 10.65 shares, respectively, of SpeedFam common
stock for each share of IPEC Series B-1, B-2 or B-3 preferred stock you own.
 
This proposal is more fully described in the accompanying joint proxy statement/
prospectus.
 
   
Only IPEC regular common stockholders and Class A common stockholders of record
at the close of business on February 16, 1999 are entitled to notice of and to
vote at the IPEC special meeting and any adjournments or postponements of the
special meeting.
    
 
                                          BY ORDER OF THE BOARD OF DIRECTORS
 
                                          Sanjeev R. Chitre
                                          Chairman of the Board
 
San Jose, California
   
March      , 1999
    
 
WHETHER OR NOT YOU EXPECT TO ATTEND THE IPEC SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE THAT YOUR VOTE COUNTS. NO POSTAGE IS NEEDED IF THE
PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>   4
 
PROXY STATEMENT FOR
SPECIAL MEETING OF SHAREHOLDERS
OF SPEEDFAM INTERNATIONAL, INC.
AND
PROSPECTUS FOR
SPEEDFAM INTERNATIONAL, INC.
COMMON STOCK
 
SpeedFam International, Inc. and Integrated Process Equipment Corp. have agreed
to merge. SpeedFam will issue to holders of IPEC regular and Class A common
stock .71 of one share of SpeedFam common stock for each share they own.
SpeedFam will issue to holders of IPEC Series B-1, B-2 and B-3 preferred stock
8.90, 8.10 and 10.65 shares, respectively, of SpeedFam common stock for each
share they own.
 
   
Based on the number of shares of IPEC stock outstanding as of February 16, 1999,
SpeedFam expects to issue 13,046,791 shares of common stock in the merger. The
SpeedFam board of directors has scheduled a special meeting for SpeedFam
shareholders to vote on the issuance of SpeedFam common stock in connection with
the merger as follows:
    
 
   
April      , 1999
    
 
SpeedFam International, Inc.
305 North 54th Street
Chandler, Arizona 85226
PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
OF INTEGRATED PROCESS
EQUIPMENT CORP.
 
The IPEC board of directors has scheduled a special meeting for IPEC
stockholders to vote on the merger as follows:
 
   
April     , 1999
    
---------------------------------------
---------------------------------------
Phoenix, Arizona 85034
 
ON              , 1999, SPEEDFAM COMMON STOCK CLOSED AT $     PER SHARE AND IPEC
REGULAR COMMON STOCK CLOSED AT $     PER SHARE.
 
PLEASE READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 13 CAREFULLY FOR A
DISCUSSION OF CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE VOTING.
 
   
This joint proxy statement/prospectus and proxy are being mailed to shareholders
of SpeedFam and stockholders of IPEC beginning about March      , 1999.
    
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OR THE SPEEDFAM COMMON STOCK TO BE ISSUED IN CONNECTION
WITH THE MERGER NOR HAVE THEY DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
 
   
    The date of this joint proxy statement/prospectus is March      , 1999.
    
<PAGE>   5
 
                          HOW TO GET MORE INFORMATION
 
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
ARE NOT INCLUDED IN THIS DOCUMENT OR DELIVERED WITH THIS DOCUMENT. A LIST OF THE
DOCUMENTS INCORPORATED IN THIS DOCUMENT APPEARS UNDER "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 113. YOU MAY OBTAIN THESE DOCUMENTS -- OTHER THAN EXHIBITS,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENT -- WITHOUT CHARGE, BY WRITTEN REQUEST OR BY TELEPHONE, IN THE CASE OF
DOCUMENTS RELATING TO SPEEDFAM, AT THE FOLLOWING ADDRESS:
 
SPEEDFAM INTERNATIONAL, INC.
305 NORTH 54TH STREET
CHANDLER, ARIZONA 85226
ATTENTION: INVESTOR RELATIONS
TELEPHONE NUMBER: (602) 705-2100
 
AND IN THE CASE OF DOCUMENTS RELATING TO IPEC, AT THE FOLLOWING ADDRESS:
 
INTEGRATED PROCESS EQUIPMENT CORP.
4717 EAST HILTON AVENUE
PHOENIX, ARIZONA 85034
ATTENTION: INVESTOR RELATIONS
TELEPHONE NUMBER: (602) 517-7200
 
   
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY MARCH   , 1999 IN ORDER
TO RECEIVE THEM BEFORE YOUR SPECIAL MEETING.
    
 
                                        i
<PAGE>   6
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
HOW TO GET MORE INFORMATION.........      i
SUMMARY.............................      1
The Companies.......................      1
Special Meeting of Shareholders of
  SpeedFam..........................      1
Special Meeting of Stockholders of
  IPEC..............................      1
SpeedFam and IPEC Boards Recommend
  Approval..........................      2
Exchange Ratio......................      2
Ownership After the Merger..........      2
Appraisal Rights....................      3
Income Tax Treatment................      3
Risk Factors........................      3
The Merger..........................      3
Regulatory and Other Third Party
  Consents..........................      6
Accounting Treatment................      6
Exchange of Certificates; Don't Send
  in Your IPEC Stock Certificates...      6
Selected Historical and Pro Forma
  Combined Financial and Other
  Data..............................      7
Comparative Per Share Data..........     11
RISK FACTORS........................     13
Risks Related to Merger.............     13
  If SpeedFam's trading price
     decreases, the value received
     by IPEC stockholders will also
     decrease.......................     13
  If SpeedFam and IPEC do not
     integrate their technology and
     operations quickly and
     effectively, the potential
     benefits of the merger may not
     occur..........................     13
  The substantial expenses of the
     merger will have a negative
     impact on results of
     operations.....................     14
  The merger may result in a loss of
     key employees due to downsizing
     and competition................     14
Risks Related to Business and
  Operations........................     14
  The combined company's growth
     depends on continued and
     increased acceptance of CMP
     among semiconductor
     manufacturers..................     14
  The current slowdown in the
     semiconductor industry
     continues to negatively impact
     both companies'
     profitability..................     15
  Both SpeedFam and IPEC have had
     losses recently and expect
     losses in the near future......     15
  The combined company faces intense
     competition, including from
     companies with greater
     resources......................     15
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
  The combined company may not
     develop products in time to
     meet changing technologies.....     16
  Product or process development
     problems could harm the
     combined company's results of
     operations.....................     16
  The combined company's quarterly
     operating results will
     fluctuate for reasons not in
     its control....................     16
  Orders in backlog may not result
     in future revenue if customers
     cancel or reschedule orders....     17
  The combined company will depend
     on a small number of major
     customers......................     17
  The Asian financial crisis is
     harming both SpeedFam's and
     IPEC's business because a large
     portion of the semiconductor
     industry is based in the Far
     East...........................     17
  The combined company's future
     success depends on
     international sales,
     particularly in Asia and
     Europe.........................     17
  If the combined company is unable
     to protect its intellectual
     property, its business could
     suffer.........................     18
  Third parties may prevent the
     combined company from selling
     products that allegedly
     infringe on those third
     parties' intellectual property
     rights.........................     18
  The combined company may
     experience year 2000 computer
     problems that harm its
     business.......................     18
COMPARATIVE MARKET PRICE DATA.......     20
SPEEDFAM SPECIAL MEETING............     20
Date, Time and Place of SpeedFam
  Special Meeting...................     20
Purpose.............................     21
Record Date and Outstanding
  Shares............................     21
Vote Required.......................     21
Proxies.............................     21
Solicitation of Proxies; Expenses...     22
Recommendations of SpeedFam Board of
  Directors.........................     22
IPEC SPECIAL MEETING................     23
Date, Time and Place of IPEC Special
  Meeting...........................     23
Purpose.............................     23
Record Date and Outstanding
  Shares............................     23
Vote Required.......................     23
Proxies.............................     23
Solicitation of Proxies; Expenses...     24
</TABLE>
    
 
                                       ii
<PAGE>   7
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Appraisal Rights....................     24
Recommendations of IPEC Board of
  Directors.........................     25
APPROVAL OF THE MERGER AND RELATED
  TRANSACTIONS......................     25
Joint Reasons for the Merger........     25
SpeedFam's Reasons for the Merger...     26
IPEC's Reasons for the Merger.......     27
Material Contacts and Board
  Deliberations.....................     29
Opinion of SpeedFam's Financial
  Advisor...........................     33
Opinion of IPEC's Financial
  Advisor...........................     41
Material Federal Income Tax
  Considerations....................     49
Governmental and Regulatory
  Approvals.........................     51
Accounting Treatment................     51
TERMS OF THE MERGER.................     51
The Merger..........................     51
Merger Consideration................     52
Exchange of Certificates............     52
IPEC Options........................     52
IPEC Employee Stock Purchase Plan...     52
IPEC Warrants.......................     53
IPEC Convertible Notes..............     53
Stock Ownership Following the
  Merger............................     53
Management of the Combined Company..     54
Conduct of SpeedFam's and IPEC's
  Business Prior to the Merger......     54
No Solicitation.....................     55
Break Up Fees.......................     57
Conditions to the Merger............     58
Termination of the Merger
  Agreement.........................     59
Option Agreements...................     59
Affiliate Agreements................     61
Resale Restrictions.................     61
Interests of Directors and
  Officers..........................     61
Appraisal Rights....................     64
COMPARISON OF CAPITAL STOCK.........     65
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
UNAUDITED PRO FORMA CONDENSED
  COMBINED FINANCIAL STATEMENTS.....     78
ADDITIONAL MATTERS BEING SUBMITTED
  TO A VOTE OF ONLY SPEEDFAM
  SHAREHOLDERS......................     87
PROPOSAL TWO -- AMENDMENT TO
  ARTICLES OF INCORPORATION -- NAME
  CHANGE............................     87
PROPOSAL THREE -- AMENDMENT TO 1995
  STOCK PLAN FOR EMPLOYEES AND
  DIRECTORS OF SPEEDFAM.............     88
SPEEDFAM MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.........     91
IPEC MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.........    102
LEGAL MATTERS.......................    112
EXPERTS.............................    112
SHAREHOLDER PROPOSALS...............    113
WHERE YOU CAN FIND MORE
  INFORMATION.......................    114
FORWARD LOOKING STATEMENTS..........    115
YEAR 2000 READINESS DISCLOSURES.....    115
INDEX TO FINANCIAL STATEMENTS.......    F-1
</TABLE>
    
 
<TABLE>
<S>      <C>  <C>
Annex A  --   Agreement and Plan of Merger,
              dated as of November 19, 1998,
              among SpeedFam, SpeedFam, Inc.
              and IPEC
Annex B  --   Stock Option Agreements dated as
              of November 19, 1998 between
              SpeedFam and IPEC
Annex C  --   Section 262 of the Delaware
              General Corporation Law
Annex D  --   Opinion of Lehman Brothers Inc.
Annex E  --   Opinion of Morgan Stanley & Co.
              Incorporated
</TABLE>
 
                                       iii
<PAGE>   8
 
                                    SUMMARY
 
This summary highlights certain information from this document. To understand
the merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you.
 
THE COMPANIES
 
    SpeedFam International, Inc.
     305 North 54th Street
     Chandler, Arizona 85226
     (602) 705-2100
 
SpeedFam designs, develops, manufactures, markets and services chemical
mechanical planarization, or "CMP," systems used in the fabrication of
semiconductor devices, and other high throughput precision surface processing
systems used in the fabrication of thin film memory disk media, semiconductor
wafers and general industrial components. In addition, SpeedFam markets and
distributes polishing liquids (or slurry) and parts and expendables used in its
customers' manufacturing processes.
 
    Integrated Process Equipment Corp.
     911 Bern Court
     San Jose, California 95112
     (408) 436-2170
 
IPEC is a supplier of CMP systems. In addition, IPEC manufactures advanced
plasma-assisted chemical etch systems and metrology equipment, primarily used in
the manufacture of silicon wafers and semiconductor devices.
 
SPECIAL MEETING OF SHAREHOLDERS OF SPEEDFAM
 
   
The meeting's purpose is to approve:
    
 
   
(1) issuing SpeedFam common stock to IPEC's stockholders in the merger,
    including issuing SpeedFam common stock pursuant to options, warrants and
    other rights to purchase IPEC common stock that will be assumed by SpeedFam;
    
 
   
(2) amending SpeedFam's articles of incorporation to change its name to
    "SPEEDFAM-IPEC, INC.;" and
    
 
(3) amending SpeedFam's 1995 stock plan to increase the number of shares that
    may be issued under it.
 
   
SpeedFam will implement proposals two and three only if the merger is completed.
    
 
RECORD DATE AND VOTE REQUIRED
 
   
Record holders of SpeedFam common stock at the close of business on February 16,
1999 are entitled to notice of and to vote at the SpeedFam special meeting. On
the record date, there were 16,209,795 shares of SpeedFam common stock
outstanding. Each share is entitled to one vote. Issuing SpeedFam common stock
in the merger and amending SpeedFam's 1995 stock plan require the affirmative
vote of a majority of the total votes cast. Amending the articles requires the
affirmative vote of a majority of the outstanding shares of SpeedFam common
stock. See "SpeedFam Special Meeting -- Record Date and Outstanding Shares" and
"-- Vote Required."
    
 
SPECIAL MEETING OF STOCKHOLDERS OF IPEC
 
   
The meeting's purpose is to approve and adopt the merger agreement.
    
 
RECORD DATE AND VOTE REQUIRED
 
   
Record holders of IPEC regular common stock and Class A common
stock -- together, "IPEC common stock" -- at the close of business on February
16, 1999 are entitled to notice of and to vote at the IPEC special meeting.
Holders of IPEC Series B-1, B-2 and B-3 preferred stock -- "IPEC preferred
stock" -- do not have voting rights in connection with the merger. The
affirmative vote of at least a majority of the votes entitled to be cast by the
outstanding shares of IPEC common stock, voting as a single class, is required
to approve the merger.
    
 
                                        1
<PAGE>   9
 
   
On the record date, there were 17,906,832 shares of IPEC regular common stock
outstanding and 7,186 shares of IPEC Class A common stock outstanding. Each
share of IPEC regular common stock has one vote. Each share of IPEC Class A
common stock has four votes. See "IPEC Special Meeting -- Vote Required."
    
 
SPEEDFAM AND IPEC BOARDS RECOMMEND APPROVAL
 
The SpeedFam and IPEC boards approved the merger and the related transactions.
Each board has determined that the merger is fair to, and in the best interests
of, its respective company and shareholders. Each board recommends that their
shareholders vote in favor of the proposals before them.
 
Both boards believe that the merger will combine highly complementary product
lines and give the combined company greater critical mass and a stronger
competitive position with the ability to generate better operating and financial
results in the long term. The boards believe that the following potential
benefits from the merger outweigh the risks of combining the companies:
 
     - creating a combined company with the broadest range of CMP systems
       currently available
 
     - creating a comprehensive worldwide sales, service and support
       infrastructure
 
     - combining advanced technological expertise into one company
 
SpeedFam's financial advisor, Lehman Brothers, performed a detailed financial
analysis and gave its written opinion that the exchange ratio was fair to
SpeedFam from a financial point of view. See "Opinion of SpeedFam's Financial
Advisor" and Annex D.
 
IPEC's financial advisor, Morgan Stanley & Co. Incorporated, performed a
detailed financial analysis and gave its written opinion that the exchange ratio
was fair to IPEC's regular common stockholders from a financial point of view.
See "Opinion of IPEC's Financial Advisor" and Annex E.
 
EXCHANGE RATIO
 
   
<TABLE>
<CAPTION>
-------------------------------------------------
<S>                    <C>                    <C>
 If you own:           You will receive for
                       each IPEC share:
-------------------------------------------------
 - IPEC regular or     - .71 of one share
  Class A common       of SpeedFam common
  stock                  stock
-------------------------------------------------
 - IPEC Series B-1     - 8.90 shares of
  preferred stock        SpeedFam common
                         stock
-------------------------------------------------
 - IPEC Series B-2     - 8.10 shares of
  preferred stock        SpeedFam common
                         stock
-------------------------------------------------
 - IPEC Series B-3     - 10.65 shares of
  preferred stock        SpeedFam common
                         stock
-------------------------------------------------
</TABLE>
    
 
   
SpeedFam's outstanding securities won't change.
    
 
On              , 1999, the closing price per share of SpeedFam common stock was
$          , and for IPEC, $          . See "Comparative Per Share Data."
 
THE EXCHANGE RATIO IS FIXED. CHANGES IN THE MARKET PRICE OF SPEEDFAM COMMON
STOCK WILL AFFECT THE DOLLAR VALUE OF THE COMMON STOCK OF THE COMBINED COMPANY
TO BE RECEIVED BY IPEC STOCKHOLDERS IN THE MERGER. YOU SHOULD OBTAIN CURRENT
MARKET QUOTATIONS FOR SPEEDFAM COMMON STOCK AND IPEC REGULAR COMMON STOCK BEFORE
YOUR MEETING.
 
   
OWNERSHIP AFTER THE MERGER
    
 
   
The merger will result in IPEC becoming a wholly owned SpeedFam-IPEC subsidiary.
Also, post-merger:
    
 
   
     - IPEC's common and preferred stockholders will own approximately
       13,047,000 million SpeedFam-IPEC shares, or approximately 44.6% of the
       combined company's outstanding common stock. SpeedFam's shareholders will
       own approximately
    
 
                                        2
<PAGE>   10
 
   
       16,210,000 million, or approximately 55.4%, of the combined company's
       outstanding common stock.
    
 
APPRAISAL RIGHTS
 
Holders of IPEC regular common stock are not entitled to appraisal rights in
connection with the merger. Holders of IPEC Class A common and IPEC preferred
stock have appraisal rights. To exercise appraisal rights you must
 
(1) make a written demand on IPEC for the appraisal of such shares no later than
    the date of the IPEC special meeting and
 
(2) not vote in favor of the merger. Delaware law requires that you follow
    strict steps in order to exercise your appraisal rights. See "Terms of the
    Merger--Appraisal Rights" and Annex C.
 
INCOME TAX TREATMENT
 
IPEC stockholders will not be taxed as a result of the exchange of IPEC stock in
the merger, except to the extent they receive cash for fractional shares.
 
However, tax matters are very complicated and the tax consequences of the merger
to you will depend on the facts of your own situation. You should consult your
own tax advisor for a full understanding of the tax consequences of the merger
to you. See "Approval of the Merger and Related Transactions -- Material Federal
Income Tax Considerations."
 
SpeedFam shareholders will not be taxed as a result of the merger.
 
RISK FACTORS
 
You should carefully review the section entitled "Risk Factors," which discusses
certain risks relating to the merger and the combined businesses of SpeedFam and
IPEC, including the following:
 
   
     - a fixed exchange ratio that will not be adjusted for any changes in the
       stock prices of either company
    
 
     - difficulties in integrating the two companies
 
   
     - dependence on broader acceptance and sales of CMP systems in a highly
       cyclical semiconductor equipment market
    
 
     - the highly competitive industry in which the combined company will
       compete
 
     - dependence on new product development, particularly in light of rapid
       technological change in the CMP market
 
   
THE MERGER
    
 
   
NEITHER SPEEDFAM NOR IPEC WILL SOLICIT OTHER ACQUISITION PROPOSALS
    
 
   
In order to ensure the commitment of each party to the merger, SpeedFam and IPEC
have agreed that they will not solicit acquisition offers from a third party, or
negotiate an acquisition with a third party. See "Terms of the Merger -- No
Solicitation."
    
 
STOCK OPTION AGREEMENTS
 
   
SpeedFam and IPEC granted each other an option to acquire up to 19.9% of its
outstanding common stock as a condition to the execution of the merger
agreement. The options are only exercisable under the circumstances described
below and are designed to discourage a third party from making a proposal to
acquire either SpeedFam or IPEC.
    
 
   
IPEC's option is exercisable at $14.875 per SpeedFam share. SpeedFam's option is
exercisable at $10.56 per IPEC share. Each option becomes exercisable if the
company granting the option:
    
 
   
     - is subject to a tender offer for at least 15% of its stock; or
    
 
                                        3
<PAGE>   11
 
     - doesn't obtain shareholder approval while a competing proposal is
       pending, and within 12 months signs or closes the competing offer; or
 
     - receives a competing proposal, and (a) recommends that its shareholders
       not approve the SpeedFam-IPEC merger, (b) recommends approval of the
       competing offer, or (c) doesn't hold a meeting to approve the
       SpeedFam-IPEC merger.
 
See "Terms of the Merger -- Option Agreements."
 
TERMINATION
 
The merger agreement may be terminated:
 
     - if the merger hasn't occurred by May 31, 1999
 
     - if government orders prohibit the merger
 
     - if either company's shareholders don't approve the merger at their
       special meeting
 
     - by one company if the other supports a third party acquisition proposal
 
     - by one company if the other breaches its obligations under the merger
       agreement
 
See "Terms of the Merger -- Termination of the Merger Agreement."
 
   
BREAK UP FEES
    
 
SpeedFam and IPEC have agreed to pay the other a termination fee of $6.0 million
if the merger is not completed for any of these reasons:
 
   
     - the shareholders of either company do not approve the merger or the
       related transactions -- but only if a competing proposal with respect to
       that company was announced before the meeting and within 12 months that
       company enters into a definitive acquisition agreement with the party
       that made the competing proposal
    
 
     - the board of directors of the other company withdraws or modifies its
       recommendation to approve the proposal
 
     - the board of directors of the other company recommends a competing
       proposal to the shareholders
 
The termination fee and the reciprocal stock options are designed to discourage
other entities from attempting to enter into a business combination with either
company.
 
See "Terms of the Merger -- Break Up Fees."
 
CONDITIONS TO THE MERGER
 
The merger is subject to the following conditions:
 
     - SpeedFam's and IPEC's shareholders approve the merger
 
     - no law or order prohibits the merger
 
     - SpeedFam and IPEC receive legal opinions that the merger will be treated
       as a tax-free reorganization
 
     - the SpeedFam shares issued are listed on Nasdaq
 
     - SpeedFam and IPEC receive letters from their independent auditors that
       pooling of interests accounting is appropriate
 
     - each company's representations and warranties in the merger agreement are
       accurate
 
     - each company performs all covenants required by the merger agreement
 
     - the absence of a material adverse effect with regard to either company
 
     - each company receives a legal opinion from the other company's counsel
 
See "Terms of the Merger -- Conditions to the Merger."
 
                                        4
<PAGE>   12
 
   
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE MERGER
    
 
   
The board of directors of the combined company will be increased to 9 members, 5
from the current SpeedFam directors and 4 from the current IPEC directors.
    
 
   
SpeedFam's designees are:
    
 
   
     - James N. Farley
    
 
   
     - Makoto Kouzuma
    
 
   
     - Richard J. Faubert
    
 
   
     - Neil R. Bonke
    
 
   
     - Richard S. Hill
    
 
   
IPEC's designees are:
    
 
   
     - Sanjeev R. Chitre
    
 
   
     - Roger D. McDaniel
    
 
   
     - William J. Freschi
    
 
   
     - Kenneth Levy
    
 
   
The principal executive officers of the combined company will be as follows:
    
 
   
     - James N. Farley and Sanjeev R. Chitre, currently chairman of the board of
       SpeedFam and IPEC, respectively, will be co-chairmen of the board
    
 
   
     - Makoto Kouzuma, currently vice chairman of the board of SpeedFam, will be
       vice chairman of the board
    
 
   
     - Richard J. Faubert, currently president and chief executive officer of
       SpeedFam, will be president and chief executive officer
    
 
   
     - Roger K. Marach, currently chief financial officer and treasurer of
       SpeedFam, will be chief financial officer and treasurer
    
 
   
     - Ralph Hartung, currently chief operating officer of IPEC, will be chief
       operating officer and president of the CMP Group
    
 
   
     - Robert R. Smith will continue to serve as managing director of SpeedFam
       Limited -- SpeedFam's British subsidiary
    
 
   
See "Terms of the Merger -- Management of the Combined Company."
    
 
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
 
Certain SpeedFam and IPEC directors and executive officers have the following
interests in the merger in addition to their interests as shareholders
generally:
 
     - some of SpeedFam's and IPEC's directors and officers will become
       directors or officers of the combined company, as described above
 
   
     - Sanjeev R. Chitre, IPEC's chairman of the board, will become the combined
       company's co-chairman of the board and is expected to enter into an
       employment agreement with the combined company under which he is expected
       to receive an annual base salary of $400,000, plus performance-based
       bonuses
    
 
   
     - Pursuant to an existing employment agreement with IPEC, Roger D.
       McDaniel, IPEC's president and chief executive officer, will be
       automatically vested as to shares and options for an additional 238,327
       shares of IPEC regular common stock and will receive a severance payment
       equal to his annual base salary ($400,000) payable over 12 months
    
 
     - Harold C. Baldauf, an IPEC director and largest IPEC preferred
       stockholder, and his two sons will start a 4-year consulting agreement
       which pays an aggregate of $200,000 per year and allows his stock options
       to continue vesting
 
   
     - Ralph Hartung, IPEC's chief operating officer, will become the combined
       company's chief operating officer and president of the CMP Group and is
       expected to enter into an employment agreement with the
    
 
                                        5
<PAGE>   13
 
   
       combined company under which he is expected to receive an annual base
       salary of $300,000, plus performance based bonuses
    
 
   
     - John S. Hodgson, IPEC's chief financial officer, will receive 12 months
       pay ($168,000) and a bonus payment of up to 22% of his annual base salary
       (or $36,960) in a lump sum when his employment terminates on the closing
       of the merger, and start a 12-month consulting agreement under which he
       will receive a minimum of $3,000 per quarter
    
 
     - IPEC's directors and officers will continue to receive the benefit of
       their indemnification agreements with IPEC and a 3-year director and
       officer liability insurance policy purchased by IPEC
 
   
     - James N. Farley, Makoto Kouzuma, Roger K. Marach and Robert R. Smith,
       SpeedFam's chairman, vice chairman, chief financial officer and British
       subsidiary managing director, respectively, will become entitled to 2
       year's pay and bonus and 100% vesting of all stock options, if the
       individual's employment is terminated without cause, or if there are
       certain changes in his duties with the combined company, within 2 years
       after the merger occurs
    
 
   
See "Terms of the Merger -- Interests of Directors and Officers."
    
 
REGULATORY AND OTHER THIRD PARTY CONSENTS
 
IPEC and SpeedFam submitted to the Federal Trade Commission and the Antitrust
Division of the Department of Justice the notifications required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Although the waiting
period under the Hart-Scott-Rodino Act has been terminated, the Department of
Justice and the Federal Trade Commission have the authority to challenge the
merger on antitrust grounds before or after the merger is completed.
In addition, SpeedFam and IPEC must obtain consents or waivers from third
parties in connection with the merger.
 
See "Approval of the Merger and Related Transactions -- Governmental and
Regulatory Approvals."
 
ACCOUNTING TREATMENT
 
The merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting principles.
Pooling of interests means that the two companies are treated as if they had
always been combined for accounting and financial reporting purposes. See
"Approval of the Merger and Related Transactions -- Accounting Treatment."
 
EXCHANGE OF CERTIFICATES; DON'T SEND IN YOUR IPEC STOCK CERTIFICATES
 
After the merger, SpeedFam, through its exchange agent, will deliver to each
IPEC stockholder a letter of transmittal with instructions regarding
surrendering IPEC certificates. YOU SHOULD NOT SURRENDER CERTIFICATES UNTIL YOU
RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT. See "Terms of the
Merger -- Exchange of Certificates."
 
                                        6
<PAGE>   14
 
                       SELECTED HISTORICAL AND PRO FORMA
                       COMBINED FINANCIAL AND OTHER DATA
 
The tables on the following pages present selected historical financial
information and comparative per share data for SpeedFam and IPEC. This
information, except for the interim financial information dated November 30 and
December 31, 1998 and 1997, has been derived from each company's respective
audited consolidated financial statements and notes, certain of which are
included in this joint proxy statement/prospectus. All financial information as
of and for the six months ended November 30 and December 31, 1998 and 1997 has
been derived from unaudited consolidated financial statements, and in the
opinion of SpeedFam's and IPEC's management, reflects all normal recurring
adjustments necessary for a fair presentation. The results of operations for
those interim periods are not necessarily indicative of the results to be
expected for the entire year.
 
The selected pro forma combined financial information is derived from the
unaudited pro forma combined condensed financial statements. You should read the
unaudited pro forma combined condensed financial statements and the related
notes included elsewhere in this joint proxy statement/prospectus. For purposes
of the pro forma combined financial data, SpeedFam's consolidated balance sheet
as of November 30, 1998 and its consolidated statements of earnings for each of
the years in the three year period ended May 31, 1998, and for the six month
periods ended November 30, 1998 and 1997, have been combined with IPEC's
consolidated balance sheet as of December 31, 1998 and its consolidated
statements of operations for each of the years in the three year period ended
June 30, 1998, and for the six month periods ended December 31, 1998 and 1997.
The pro forma information is presented for illustrative purposes only and does
not necessarily indicate the operating results or financial position that would
have occurred if the merger had been consummated at the beginning of the periods
indicated, nor does it necessarily indicate what future operating results or
financial position will be.
 
You should also read "Risk Factors," "SpeedFam Management's Discussion and
Analysis of Financial Condition and Results of Operations," "IPEC Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
SpeedFam's and IPEC's consolidated financial statements included in this joint
proxy statement/prospectus.
                                        7
<PAGE>   15
 
               SPEEDFAM SELECTED HISTORICAL FINANCIAL INFORMATION
                    (in thousands, except per share amounts)
 
<TABLE>
<CAPTION>
                                       SIX MONTHS
                                         ENDED
                                      NOVEMBER 30,                      YEAR ENDED MAY 31,
                                   ------------------   --------------------------------------------------
                                    1998       1997       1998       1997       1996      1995      1994
                                   -------   --------   --------   --------   --------   -------   -------
<S>                                <C>       <C>        <C>        <C>        <C>        <C>       <C>
CONSOLIDATED STATEMENTS OF
  EARNINGS DATA:
REVENUE:
Net sales........................  $59,689   $105,814   $176,247   $160,994   $113,880   $57,021   $49,247
Commissions from affiliate.......      737      4,561      9,009     12,430      6,290     2,757     2,134
                                   -------   --------   --------   --------   --------   -------   -------
Total revenue....................   60,426    110,375    185,256    173,424    120,170    59,778    51,381
Cost of sales....................   40,217     62,600    109,751    103,501     78,661    45,494    38,945
                                   -------   --------   --------   --------   --------   -------   -------
Gross margin.....................   20,209     47,775     75,505     69,923     41,509    14,284    12,436
OPERATING EXPENSES:
Research, development and
  engineering....................   19,451     14,703     33,681     19,766     11,496     2,740     2,267
Selling, general and
  administrative.................   15,553     18,088     35,880     28,671     18,922     9,948     8,988
                                   -------   --------   --------   --------   --------   -------   -------
Operating profit (loss)..........  (14,795)    14,984      5,944     21,486     11,091     1,596     1,181
Other income (expense)...........    3,587      2,269      5,957       (298)      (208)     (953)      277
                                   -------   --------   --------   --------   --------   -------   -------
Earnings (loss) from consolidated
  companies before income
  taxes..........................  (11,208)    17,253     11,901     21,188     10,883       643     1,458
Income tax expense (benefit).....   (5,678)     6,144      3,456      8,037      4,266       186      (238)
                                   -------   --------   --------   --------   --------   -------   -------
Earnings (loss) from consolidated
  companies......................   (5,530)    11,109      8,445     13,151      6,617       457     1,696
Equity in net earnings of
  affiliates.....................    1,429      2,068      4,418      7,068      5,204     1,187       655
                                   -------   --------   --------   --------   --------   -------   -------
Net earnings.....................  $(4,101)  $ 13,177   $ 12,863   $ 20,219   $ 11,821   $ 1,644   $ 2,351
                                   =======   ========   ========   ========   ========   =======   =======
Net earnings per share
  Basic..........................  $  (.25)  $    .94   $    .86   $   1.78   $   1.27   $   .22   $   .32
  Diluted........................  $  (.25)  $    .89   $    .83   $   1.67   $   1.16   $   .20   $   .31
Weighted average shares
  Basic..........................   16,087     14,040     14,971     11,349      9,344     7,468     7,475
  Diluted........................   16,087     14,833     15,591     12,127     10,159     8,146     7,619
</TABLE>
 
   
<TABLE>
<CAPTION>
                                                                        MAY 31,
                                  NOVEMBER 30,    ----------------------------------------------------
                                      1998           1998        1997       1996      1995      1994
                                  -------------   ----------   --------   --------   -------   -------
<S>                               <C>             <C>          <C>        <C>        <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......     $87,858       $ 90,384    $ 56,679   $ 10,871   $ 1,095   $   809
Short-term investments..........      33,435         50,835      20,216         --        --        --
Working capital.................     187,459        210,250     106,822     31,193    11,072     9,980
Total assets....................     313,357        329,765     206,500    107,984    60,029    45,709
Long-term debt, less current
  maturities....................          --             --         272      2,593    10,362     9,716
Stockholders' equity............     288,824        288,852     156,533     60,039    23,037    18,576
</TABLE>
    
 
                                        8
<PAGE>   16
 
                 IPEC SELECTED HISTORICAL FINANCIAL INFORMATION
                    (in thousands, except per share amounts)
 
<TABLE>
<CAPTION>
                                   SIX MONTHS ENDED
                                     DECEMBER 31,                   FISCAL YEAR ENDED JUNE 30,
                                  -------------------   --------------------------------------------------
                                    1998       1997       1998       1997       1996      1995      1994
                                  --------   --------   --------   --------   --------   -------   -------
<S>                               <C>        <C>        <C>        <C>        <C>        <C>       <C>
CONSOLIDATED STATEMENTS OF
  OPERATIONS DATA(1):
Revenue.........................  $ 42,658   $109,153   $189,012   $144,688   $148,690   $75,220   $31,158
Cost of goods sold..............    34,730     60,660    121,581     82,842     85,061    41,599    22,738
                                  --------   --------   --------   --------   --------   -------   -------
    Gross margin................     7,928     48,493     67,431     61,846     63,629    33,621     8,420
Operating expenses:
  Research and development......    16,808     15,050     33,501     23,951     15,877     5,407     2,453
  Purchased research and
    development.................        --         --         --         --     36,961        --     1,107
  Selling, general and
    administrative..............    15,149     17,568     37,036     27,563     26,653    17,061     9,403
  Program discontinuance
    charge......................        --         --         --     17,601         --        --        --
                                  --------   --------   --------   --------   --------   -------   -------
    Total operating expenses....    31,957     32,618     70,537     69,115     79,491    22,468    12,963
                                  --------   --------   --------   --------   --------   -------   -------
    Operating income (loss).....   (24,029)    15,875     (3,106)    (7,269)   (15,862)   11,153    (4,543)
Other income (expense),net......       (64)      (622)    (2,447)      (864)       100      (483)   (5,187)
                                  --------   --------   --------   --------   --------   -------   -------
    Income (loss) from
      continuing operations
      before income taxes.......   (24,093)    15,253     (5,553)    (8,133)   (15,762)   10,670    (9,730)
Income tax expense (benefit)....        --      5,611     26,128     (2,951)    (6,399)      714      (830)
                                  --------   --------   --------   --------   --------   -------   -------
    Income (loss) from
      continuing operations.....   (24,093)     9,642    (31,681)    (5,182)    (9,363)    9,956    (8,900)
Loss from discontinued
  operations....................        --     (6,664)   (10,578)   (28,564)    (1,294)   (9,357)       --
                                  --------   --------   --------   --------   --------   -------   -------
    Net income (loss)...........   (24,093)     2,978    (42,259)   (33,746)   (10,657)      599    (8,900)
Cumulative dividend on preferred
  stock.........................      (102)      (122)      (244)      (284)      (579)     (377)     (118)
                                  --------   --------   --------   --------   --------   -------   -------
    Net income (loss)
      attributable to common
      stockholders..............  $(24,195)  $  2,856   $(42,503)  $(34,030)  $(11,236)  $   222   $(9,018)
                                  ========   ========   ========   ========   ========   =======   =======
Net income (loss) per common
  share -- basic:
  From continuing operations....  $  (1.36)  $    .54   $  (1.81)  $   (.35)  $   (.69)  $  1.27   $ (3.26)
  From discontinued
    operations..................        --       (.38)      (.60)     (1.83)      (.09)    (1.24)       --
                                  --------   --------   --------   --------   --------   -------   -------
Net income (loss) per common
  share -- basic................  $  (1.36)  $    .16   $  (2.41)  $  (2.18)  $   (.78)  $   .03   $ (3.26)
                                  ========   ========   ========   ========   ========   =======   =======
Weighted average shares of
  common stock outstanding......    17,850     17,526     17,603     15,623     14,434     7,549     2,763
Net income (loss) per common
  share -- diluted:
  From continuing operations....  $  (1.36)  $    .50   $  (1.81)  $   (.35)  $   (.69)  $  1.11   $ (3.26)
  From discontinued
    operations..................        --       (.35)      (.60)     (1.83)      (.09)    (1.04)       --
                                  --------   --------   --------   --------   --------   -------   -------
Net income (loss) per common
  share -- diluted..............  $  (1.36)  $    .15   $  (2.41)  $  (2.18)  $   (.78)  $   .07   $ (3.26)
                                  ========   ========   ========   ========   ========   =======   =======
Weighted average shares of
  common stock and common stock
  equivalents outstanding.......    17,850     19,351     17,603     15,623     14,434     8,939     2,763
</TABLE>
 
<TABLE>
<CAPTION>
                                                                            JUNE 30,
                                       DECEMBER 31,    ---------------------------------------------------
                                           1998         1998       1997       1996       1995       1994
                                       -------------   -------   --------   --------   --------   --------
<S>                                    <C>             <C>       <C>        <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............    $  7,866      $14,098   $ 40,656   $ 11,325   $ 65,790   $    979
Short-term investments...............      59,646       70,032         --         --         --         --
Working capital......................     144,547      164,176     99,096     53,700     98,555     15,707
Total assets.........................     211,852      245,888    198,065    184,701    150,624     41,466
Current portion of long-term debt....       1,260        1,555     10,599      1,886      4,362        979
Long-term debt, less current
  portion............................     116,650      117,078     19,546     22,753      1,285      9,249
Total stockholders' equity...........      70,984       95,284    131,784    128,337    130,120     19,575
</TABLE>
 
---------------
(1) Financial data for fiscal 1995 and 1996 have been restated to reflect the
    discontinuation of IPEC Clean during the second quarter of fiscal 1997.
                                        9
<PAGE>   17
 
     UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                        SIX MONTHS ENDED
                                          NOVEMBER 30,               YEAR ENDED MAY 31,
                                      --------------------    --------------------------------
                                        1998        1997        1998        1997        1996
                                      --------    --------    --------    --------    --------
<S>                                   <C>         <C>         <C>         <C>         <C>
PRO FORMA STATEMENTS OF OPERATIONS
  DATA:
Revenue:
Net sales...........................  $102,347    $214,967    $365,259    $305,682    $262,570
Commissions from affiliate..........       737       4,561       9,009      12,430       6,290
                                      --------    --------    --------    --------    --------
Total revenue.......................   103,084     219,528     374,268     318,112     268,860
Cost of sales.......................    74,947     123,260     231,332     186,343     163,722
                                      --------    --------    --------    --------    --------
Gross margin........................    28,137      96,268     142,936     131,769     105,138
                                      --------    --------    --------    --------    --------
Operating expenses:
Research, development, and
  engineering.......................    36,259      29,753      67,182      43,717      27,373
Purchased research and
  development.......................        --          --          --          --      36,961
Selling, general, and
  administrative....................    30,702      35,656      72,916      56,234      45,575
Program discontinuance charge.......        --          --          --      17,601          --
                                      --------    --------    --------    --------    --------
Operating profit (loss).............   (38,824)     30,859       2,838      14,217      (4,771)
Other income (expense)..............     3,523       1,647       3,510      (1,162)       (108)
                                      --------    --------    --------    --------    --------
Earnings (loss) from consolidated
  companies before income taxes.....   (35,301)     32,506       6,348      13,055      (4,879)
Income tax expense (benefit)........    (5,678)     11,755      29,584       5,086      (2,133)
                                      --------    --------    --------    --------    --------
Earnings (loss) from consolidated
  companies.........................   (29,623)     20,751     (23,236)      7,969      (2,746)
Equity in net earnings of
  affiliates........................     1,429       2,068       4,418       7,068       5,204
                                      --------    --------    --------    --------    --------
Earnings (loss) from continuing
  operations........................  $(28,194)   $ 22,819    $(18,818)   $ 15,037    $  2,458
                                      ========    ========    ========    ========    ========
Earnings (loss) from continuing
  operations per common share:
  Basic.............................  $   (.98)   $    .86    $   (.69)   $    .67    $    .13
  Diluted...........................  $   (.98)   $    .80    $   (.69)   $    .62    $    .11
Weighted average common shares
  outstanding:
  Basic.............................    28,761      26,483      27,469      22,441      19,592
  Diluted...........................    28,761      28,622      27,469      24,088      21,953
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                              NOVEMBER 30, 1998
                                                              -----------------
<S>                                                           <C>
PRO FORMA BALANCE SHEET DATA:
Cash and cash investments...................................      $ 95,724
Short-term investments......................................        93,081
Working capital(1)..........................................       325,206
Total assets................................................       526,209
Long-term debt, less current maturities.....................       116,650
Total stockholders' equity(1)...............................       353,308
</TABLE>
    
 
---------------
(1) Adjusted to reflect incurrence of an estimated $6,500 of non-recurring
    merger-related costs primarily related to the fees of financial advisors,
    attorneys, accountants and other costs related to the special meetings. Does
    not include costs which will be incurred to integrate and restructure the
    operations of SpeedFam and IPEC.
                                       10
<PAGE>   18
 
                           COMPARATIVE PER SHARE DATA
 
The following table sets forth certain historical per share data of SpeedFam and
IPEC and combined per share data on an unaudited pro forma basis after giving
effect to the merger on a pooling of interests basis of accounting. You should
also read the selected historical financial data and the unaudited pro forma
combined condensed financial information included elsewhere in this joint proxy
statement/prospectus. The pro forma combined financial data does not necessarily
indicate the operating results that would have been achieved had the merger been
consummated as of the beginning of the periods presented and should not be
construed as representative of future operations.
 
<TABLE>
<CAPTION>
                                                          SIX MONTHS            YEAR ENDED
                                                            ENDED                 MAY 31,
                                                         NOVEMBER 30,    -------------------------
                                                             1998         1998      1997     1996
                                                         ------------    ------    ------    -----
<S>                                                      <C>             <C>       <C>       <C>
HISTORICAL -- SPEEDFAM:
Net earnings (loss) per share
  Basic................................................     $ (.25)      $  .86    $ 1.78    $1.27
  Diluted..............................................     $ (.25)      $  .83    $ 1.67    $1.16
Book value per share(1) (at period end)................     $17.89       $18.10
</TABLE>
 
<TABLE>
<CAPTION>
                                                           SIX MONTHS            YEAR ENDED
                                                             ENDED                JUNE 30,
                                                          DECEMBER 31,    ------------------------
                                                              1998         1998     1997     1996
                                                          ------------    ------    -----    -----
<S>                                                       <C>             <C>       <C>      <C>
HISTORICAL -- IPEC:
Earnings (loss) from continuing operations per common
  share
  Basic.................................................     $(1.36)      $(1.81)   $(.35)   $(.69)
  Diluted...............................................     $(1.36)      $(1.81)   $(.35)   $(.69)
Book value per common share(1) (at period end)..........     $ 3.96       $ 5.30
</TABLE>
 
<TABLE>
<CAPTION>
                                                          SIX MONTHS            YEAR ENDED
                                                            ENDED                 MAY 31,
                                                         NOVEMBER 30,    -------------------------
                                                             1998         1998      1997     1996
                                                         ------------    ------    ------    -----
<S>                                                      <C>             <C>       <C>       <C>
PRO FORMA AND EQUIVALENT PRO FORMA COMBINED EARNINGS
  (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE:
Pro forma earnings (loss) from continuing operations
  per SpeedFam common share(2)
  Basic................................................     $ (.98)      $ (.69)   $  .67    $ .13
  Diluted..............................................     $ (.98)      $ (.69)   $  .62    $ .11
Equivalent pro forma earnings (loss) from continuing
  operations per IPEC common share(2)(3)
  Basic................................................     $ (.70)      $ (.49)   $  .48    $ .09
  Diluted..............................................     $ (.70)      $ (.49)   $  .44    $ .08
Pro forma combined weighted shares outstanding (000's):
  Basic................................................     28,761       27,469    22,411    19,592
  Diluted..............................................     28,761       27,469    24,088    21,953
PRO FORMA COMBINED BOOK VALUE PER COMMON SHARE (AT
  PERIOD END)(4):
Pro forma combined book value per SpeedFam common
  share(2).............................................     $12.10       $13.04    $10.83    $8.43
Equivalent pro forma combined book value per IPEC
  common share(2)(3)...................................     $ 8.59       $ 9.26    $ 7.69    $5.99
Pro forma combined shares outstanding at period end
  (000's)..............................................     29,189       28,961
</TABLE>
 
-------------------------
(1) Historical book value per share is computed by dividing total stockholders'
    equity by the number of common shares outstanding at the end of each period.
(2) Pro forma combined book value per common share is computed by dividing pro
    forma stockholders' equity by the pro forma number of shares of common stock
    outstanding of the combined company.
(3) The equivalent pro forma combined earnings (loss) from continuing operations
    per share and equivalent pro forma combined book value per common share are
    calculated by multiplying the respective pro forma combined per SpeedFam
    common share amounts by the exchange ratio of .71 of one share of SpeedFam
    common stock for each share of IPEC common stock.
(4) Adjusted to reflect incurrence of an estimated $6.5 million of non-recurring
    merger-related costs primarily related to the fees of financial advisors,
    attorneys, accountants and other costs related to the special meetings. Does
    not include costs which will be incurred to integrate and restructure the
    operations of SpeedFam and IPEC.
                                       11
<PAGE>   19
 
   
The table below sets forth the high and low sales prices per share of SpeedFam
common stock and IPEC regular common stock on the Nasdaq National Market on
November 19, 1998, the last full trading day prior to the public announcement of
the execution and delivery of the merger agreement, and February 26, 1999. The
implied equivalent value of one share of IPEC regular common stock on each date
based on the exchange ratio of .71 of one share of SpeedFam common stock for
each share of IPEC regular common stock is also set forth.
    
 
   
<TABLE>
<CAPTION>
                                         SPEEDFAM        IPEC REGULAR         APPROXIMATE
                                       COMMON STOCK      COMMON STOCK       IPEC EQUIVALENT
                                       -------------     -------------     -----------------
                                       HIGH     LOW      HIGH     LOW       HIGH       LOW
                                       ----     ----     ----     ----     ------     ------
<S>                                    <C>      <C>      <C>      <C>      <C>        <C>
November 19, 1998....................  $15 1/4  $14 3/16 $11 1/16 $ 9 15/16 $10.83    $10.07
February 26, 1999....................  $17 5/8  $15 5/8  $12 1/16 $10 1/2  $12.51     $11.09
</TABLE>
    
 
   
As the table above indicates, fluctuations in the market price of SpeedFam
common stock affect the dollar value of the SpeedFam shares which IPEC
stockholders will receive in the merger. The table illustrates that between
November 19, 1998 and February 26, 1999, the value of a share of IPEC regular
common stock, had it been exchanged for SpeedFam common stock at the exchange
ratio provided for in the merger agreement, would have fluctuated between $10.07
and $12.51.
    
 
The table shows only historical comparisons. These comparisons may not provide
meaningful information to you in determining whether to approve the proposals at
your special meeting. You should obtain current market quotations for SpeedFam
common stock and IPEC regular common stock, and review carefully the other
information contained in this joint proxy statement/prospectus, prior to
executing your proxy.
                                       12
<PAGE>   20
 
                                  RISK FACTORS
 
You should carefully consider the risks described below before making your
decision regarding the merger. Additional risks and uncertainties presently
unknown to SpeedFam and IPEC or that both companies currently believe are
immaterial may also negatively impact business operations. If any of these risks
occurs, the combined company's business, financial condition and results of
operations could be seriously harmed.
 
RISKS RELATED TO THE MERGER
 
   
IF SPEEDFAM'S TRADING PRICE DECREASES, THE VALUE RECEIVED BY IPEC STOCKHOLDERS
WILL ALSO DECREASE.  The exchange ratio is fixed. It will not change even if the
price of SpeedFam common stock changes after the date of this joint proxy
statement/prospectus. As a result, the dollar value of the SpeedFam common stock
received by IPEC stockholders will fluctuate based on the market price of
SpeedFam common stock. The market price of SpeedFam common stock has in the past
fluctuated greatly and may continue to fluctuate in the future. IPEC
stockholders should obtain the current market price of SpeedFam common stock
before delivering their proxy. You can find the price of SpeedFam common stock
on a recent date under "Comparative Per Share Data."
    
 
   
IF SPEEDFAM AND IPEC DO NOT INTEGRATE THEIR TECHNOLOGY AND OPERATIONS QUICKLY
AND EFFECTIVELY, THE POTENTIAL BENEFITS OF THE MERGER MAY NOT OCCUR.  Achieving
the merger's potential benefits will require the combined company to reduce
excess personnel and redundant facilities and equipment. Management's choices in
this regard may not prove optimal in the long term. In addition, SpeedFam and
IPEC must integrate all components of their operations, including the following:
    
 
   
     - Sales and marketing operations, including international distribution
       channels. Internationally, SpeedFam distributes its products through a
       direct sales force while IPEC uses distributors. Combining international
       sales channels could result in significant expense or customer confusion.
    
 
     - Product offerings, including marketing of products to the other's
       customers.
 
     - Research and development programs.
 
     - Manufacturing operations and philosophies. SpeedFam assembles components
       purchased from multiple vendors, while IPEC manufactures many of its
       products' components and purchases others from vendors.
 
     - Field service support for CMP equipment.
 
     - Management information and reporting systems. Since SpeedFam and IPEC
       currently use different management information systems, the combined
       company may face difficulties obtaining timely and accurate information,
       data and reports to operate the combined company effectively until
       integration is completed.
 
SpeedFam and IPEC cannot be certain that they can achieve integration of these
components without adversely impacting operations. To the extent management
focuses on integration, it may not be able to develop the business.
 
                                       13
<PAGE>   21
 
   
THE SUBSTANTIAL EXPENSES OF THE MERGER WILL HAVE A NEGATIVE IMPACT ON RESULTS OF
OPERATIONS. SpeedFam and IPEC will incur substantial expenses to complete the
merger, including:
    
 
     - estimated costs of $6.5 million for financial, accounting and legal
       advisors and for the special meetings
 
     - integration costs that currently cannot be estimated
 
These expenses will negatively impact the combined company's results of
operations for at least one year following the merger. Additional costs
presently unknown may also negatively impact results of operations after the
merger, and may result in the possibility of charges to be taken by the combined
company. These expenses include those relating to severance costs, inventory
adjustments, relocation costs, cancellation of real estate leases and the
implementation of a uniform management information system.
 
   
THE MERGER MAY RESULT IN A LOSS OF KEY EMPLOYEES DUE TO DOWNSIZING AND
COMPETITION.  The combined company's success following the merger depends on
retaining and integrating SpeedFam and IPEC personnel. SpeedFam has signed
agreements with a few key IPEC employees to retain their services. However, both
SpeedFam and IPEC employees may leave for many reasons, including:
    
 
     - As integration proceeds, the combined company anticipates eliminating
       excess personnel in many functional areas. Other employees may leave for
       varied reasons, such as increased workloads or the mistaken assumption
       that the individual's job will be terminated.
 
     - SpeedFam and IPEC have different corporate cultures. IPEC's employees
       have greater autonomy than in SpeedFam's organization, which emphasizes
       more centralized planning and control methods.
 
     - Competition for qualified personnel in the industry served by SpeedFam
       and IPEC, particularly in the Phoenix metropolitan area, is intense.
       SpeedFam and IPEC have in the past experienced difficulty in attracting
       qualified personnel. The combined company will experience the same
       difficulty in the future.
 
     - Competitors may recruit employees prior to the merger and during
       integration. This is common in mergers in the technology industry.
 
RISKS RELATED TO BUSINESS AND OPERATIONS
 
   
THE COMBINED COMPANY'S GROWTH DEPENDS ON CONTINUED AND INCREASED ACCEPTANCE OF
CMP AMONG SEMICONDUCTOR MANUFACTURERS.  While CMP is used by a number of
advanced logic semiconductor manufacturers, CMP has been used to manufacture
advanced memory devices only in the past 2 years. Continued and increased
acceptance of CMP systems depends on many factors considered by potential
customers, including the CMP product's
    
 
     - cost of ownership
 
     - throughput
 
     - process flexibility
 
     - performance, including reliability
 
     - customer support
 
   
Failure to adequately meet potential customers' needs with respect to one or
more of these factors will result in decreased acceptance of CMP and, therefore,
the combined
    
 
                                       14
<PAGE>   22
 
   
company's CMP systems, which will in turn negatively impact the combined
company's profitability.
    
 
   
THE CURRENT SLOWDOWN IN THE SEMICONDUCTOR INDUSTRY CONTINUES TO NEGATIVELY
IMPACT BOTH COMPANIES' PROFITABILITY.  Both SpeedFam and IPEC are currently
experiencing a slowdown in product demand and volatility in product pricing for
the following reasons:
    
 
     - the cyclical nature of the semiconductor industry
 
     - general overcapacity of customers
 
     - the financial crisis in Asia
 
This slowdown has reduced the revenue of SpeedFam and IPEC in recent periods.
Both companies believe that the slowdown will continue to negatively impact
revenue performance for at least the next 12 to 18 months. Despite the slowdown,
however, SpeedFam and IPEC will continue to invest in research and development
and customer support to remain competitive. This will result in reduced
profitability for both companies.
 
   
BOTH SPEEDFAM AND IPEC HAVE HAD LOSSES RECENTLY AND EXPECT LOSSES IN THE NEAR
FUTURE. SpeedFam had net losses of $4.3 million in the last quarter, which ended
November 30, 1998, and $5.5 million in the quarter ended May 31, 1998. SpeedFam
did not have a net loss for the quarter ended August 31, 1998, but did have an
operating loss of $3.5 million. IPEC had net losses of $14.0 million in the last
quarter, which ended December 31, 1998, and $10.1 million in the quarter ended
September 30, 1998. Each company attributes these losses mainly to the slowdown
in the industry combined with increasing investment in research and development.
    
 
IPEC had net losses of $42.3 million in fiscal 1998, $33.7 million in fiscal
1997 and $10.7 million in fiscal 1996. In fiscal 1998, IPEC incurred net charges
of $25.9 million to increase the valuation allowance for its deferred tax assets
and $10.6 million for an additional write-down of assets in connection with the
closure of IPEC Clean, a subsidiary of IPEC.
 
   
THE COMBINED COMPANY FACES INTENSE COMPETITION, INCLUDING FROM COMPANIES WITH
GREATER RESOURCES.  Several companies currently market CMP systems that directly
compete with SpeedFam's and IPEC's products, including Applied Materials, Inc.
and Ebara Corporation. For several reasons, the combined company may not compete
effectively with competitors, including:
    
 
     - Some competitors may have greater financial resources than either
       SpeedFam or IPEC. They also may have more extensive engineering,
       manufacturing, marketing and customer service and support capabilities.
 
     - Some competitors may supply a broader range of semiconductor capital
       equipment than either SpeedFam or IPEC. As a result, these competitors
       may have better relationships with semiconductor manufacturers, including
       current and potential customers of SpeedFam and IPEC.
 
     - SpeedFam and IPEC expect competitors to continue to improve their
       existing technology and introduce new products. This could cause a
       decline in the combined company's sales or lead to intensified
       price-based competition.
 
                                       15
<PAGE>   23
 
     - Other capital equipment manufacturers not currently involved in the
       development of CMP systems may enter the market or develop technology
       that reduces the need for the combined company's products.
 
   
THE COMBINED COMPANY MAY NOT DEVELOP PRODUCTS IN TIME TO MEET CHANGING
TECHNOLOGIES. Semiconductor manufacturing equipment and processes are subject to
rapid technological changes and product obsolescence. Developing new products in
the rapidly evolving industry in which SpeedFam and IPEC operate involves a
number of risks:
    
 
     - products may be introduced behind schedule or after customers have made
       buying decisions
 
     - products may not be accepted in the marketplace
 
After the merger, competitive pressures will require SpeedFam and IPEC to
continue to develop or enhance products, including both the copper and dual
damascene processes, end-point detection, metrology, post-CMP cleaning and a
300mm CMP system to address current and future needs of semiconductor
manufacturers. SpeedFam and IPEC will also continue to develop products and
processes for thin film memory disk manufacturers and to enhance the
plasma-assisted chemical etch processes.
 
   
PRODUCT OR PROCESS DEVELOPMENT PROBLEMS COULD HARM THE COMBINED COMPANY'S
RESULTS OF OPERATIONS.  SpeedFam's and IPEC's products are complex, and from
time to time have defects or "bugs" that are difficult and costly to fix. This
can harm results of operations for both companies, and the combined company, in
2 ways:
    
 
     (1) Each company incurs substantial costs to ensure the functionality and
         reliability of products earlier in their life cycle. This can reduce
         orders, increase manufacturing costs, adversely impact working capital
         and increase service and warranty expenses.
 
     (2) Each company requires significant lead-times between product
         introduction and commercial shipment. As a result, each company may
         have to write off inventory and other assets related to products and
         could lose customers and revenue. For example, in the second quarter of
         fiscal 1997, IPEC incurred a $17.6 million pretax asset write-off for
         discontinuance of the Avanti 672 product development program.
 
   
THE COMBINED COMPANY'S QUARTERLY OPERATING RESULTS WILL FLUCTUATE FOR REASONS
NOT IN ITS CONTROL.  The combined company's quarterly operating results, like
SpeedFam's and IPEC's, will fluctuate due to a variety of factors, including:
    
 
   
     - Industry demand for capital equipment, which depends on economic
       conditions in the semiconductor, memory disk and silicon wafer markets.
    
 
   
     - Timing, cancellation or delay of customer orders and shipments. Both
       SpeedFam and IPEC derive a significant portion of revenue from the sale
       of a relatively small number of machines during a given quarter. Order
       and delivery delays and cancellations, even of one or two systems, may
       cause the combined company to miss quarterly revenue and profit
       projections.
    
 
   
     - Unexpected costs associated with sales and service of the CMP tools and
       processes.
    
 
                                       16
<PAGE>   24
 
   
     - The quarterly operating results of SpeedFam's joint ventures, which
       SpeedFam accounts for on the equity method.
    
 
   
     - Foreign currency exchange rates.
    
 
You should not consider results of operations in any period as an indication of
future results. Fluctuations in the combined company's operating results may
also result in fluctuations in SpeedFam's common stock price. In future
quarters, operating results may not meet the expectations of public market
analysts or investors and the trading price of SpeedFam's common stock could
decline.
 
   
ORDERS IN BACKLOG MAY NOT RESULT IN FUTURE REVENUE IF CUSTOMERS CANCEL OR
RESCHEDULE ORDERS. Both SpeedFam and IPEC include in backlog only those customer
orders for which they have accepted purchase orders. Expected revenue may be
lower if customers cancel or reschedule orders, which they can generally do
without penalty. This will also be true for the combined company. For example,
IPEC removed orders of approximately $12.0 million from its backlog in the
fourth quarter of fiscal 1997, primarily due to delays in, and ultimately the
suspension of, construction of a wafer fabrication facility for a customer in
Thailand.
    
 
   
THE COMBINED COMPANY WILL DEPEND ON A SMALL NUMBER OF MAJOR CUSTOMERS.  For the
foreseeable future, SpeedFam and IPEC expect that the combined company will sell
machines to a limited number of major customers. To date, the CMP process has
been used primarily to fabricate advanced semiconductors, which accounts for
only a portion of the overall semiconductor market.
    
 
In fiscal 1998, no SpeedFam customer accounted for 10.0% or more of its total
revenue. In fiscal 1997, AMD accounted for 12.8% and Komag accounted for 10.3%
of SpeedFam's total revenue. In fiscal 1998, Intel represented 38.3% and Tokyo
Electron represented 12.0% of IPEC's revenue. In fiscal 1997, Intel represented
51.0% of IPEC's revenue.
 
   
THE ASIAN FINANCIAL CRISIS IS HARMING BOTH SPEEDFAM'S AND IPEC'S BUSINESS
BECAUSE A LARGE PORTION OF THE SEMICONDUCTOR INDUSTRY IS BASED IN THE FAR
EAST.  Both SpeedFam and IPEC expect reduced sales to Asian customers for at
least the next 12 to 18 months, which will negatively impact the combined
company's sales growth and revenue performance. A substantial portion of
worldwide semiconductor manufacturing capacity is located in the Far East.
Pacific Rim countries are experiencing severe currency and financing problems
that are contributing to economic slowdowns or recessions in those countries.
SpeedFam's and IPEC's U.S. dollar-denominated products have become more
expensive in certain Asian countries. In addition, some customers in these
countries may not be able to obtain satisfactory financing terms to allow them
to place volume orders or pay for equipment that has been shipped.
    
 
   
THE COMBINED COMPANY'S FUTURE SUCCESS DEPENDS ON INTERNATIONAL SALES,
PARTICULARLY IN ASIA AND EUROPE.  International sales accounted for 31.7% of
SpeedFam's net sales for fiscal year 1998, 31.2% for fiscal year 1997 and 21.7%
for fiscal year 1996. International sales accounted for 45.5% of IPEC's revenue
in fiscal 1998, 26.6% in fiscal 1997 and 27.8% in fiscal 1996. SpeedFam and IPEC
expect that international sales will continue to account for a significant
portion of the combined company's net sales in future periods. International
sales are subject to risks, including:
    
 
     - foreign exchange issues
 
     - political, economic and regulatory environment of the countries where
       customers are located
                                       17
<PAGE>   25
 
     - collectibility of accounts receivable
 
     - inadequate intellectual property protection
 
Foreign exchange issues also affect the value of SpeedFam's foreign subsidiaries
and SpeedFam's equity interest in its Far East joint venture. SpeedFam does not
manage this balance sheet risk through currency transactions known as "hedging,"
which are designed to minimize this risk. SpeedFam does try to manage near-term
currency risks through "hedging," and the combined company expects to do the
same after the merger. However, efforts may not be enough to decrease the risks
involved.
 
   
IF THE COMBINED COMPANY IS UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY, ITS
BUSINESS COULD SUFFER.  Together, SpeedFam's and IPEC's intellectual property
portfolio is very important to the potential success of the combined company.
However, the combined company may not be able to protect its technology because:
    
 
     - pending and new patent applications may not be approved in a timely
       manner or approved at all
 
     - third parties may try to challenge or invalidate existing patents and new
       patents
 
     - policing unauthorized use of intellectual property is difficult and
       expensive
 
     - the laws of some foreign countries do not protect intellectual property
       rights as much as U.S. laws
 
     - competitors may independently develop similar technology or design around
       intellectual property owned by the combined company
 
   
THIRD PARTIES MAY PREVENT THE COMBINED COMPANY FROM SELLING PRODUCTS THAT
ALLEGEDLY INFRINGE ON THOSE THIRD PARTIES' INTELLECTUAL PROPERTY RIGHTS.  The
combined company cannot be certain that third parties will not in the future
claim that its products infringe their intellectual property rights. Third
parties may
    
 
     - bring claims of patent, copyright or trademark infringement
 
     - obtain patents or other intellectual property rights that limit the
       combined company's ability to do business or require the combined company
       to license or cross-license technology
 
     - bring costly, time-consuming lawsuits
 
Third parties hold many patents relating to CMP machines and processes. IPEC
licenses the right to manufacture CMP machines employing an orbital motion in
its AvantGaard 676, 776 and 876 from a semiconductor manufacturer.
 
   
THE COMBINED COMPANY MAY EXPERIENCE YEAR 2000 COMPUTER PROBLEMS THAT HARM ITS
BUSINESS.  Certain computer systems may not correctly recognize dates when the
year changes from 1999 to 2000. This could cause computers to either shut down
or lead to incorrect calculations. Both SpeedFam and IPEC have reviewed their
exposure to this problem, and do not believe they will incur significant
expenses either to remedy the problem or as a result of the effect of the
problem on business operations. However, year
    
 
                                       18
<PAGE>   26
 
2000 issues may cause disruptions in the combined company's business for the
following reasons:
 
     - SpeedFam and IPEC cannot be certain that the measures taken are enough.
       Despite completed efforts, SpeedFam and IPEC may incur significant
       expenses to remedy unforeseen problems or the combined company may suffer
       disruptions in its business.
 
     - Third parties with whom SpeedFam and IPEC have relationships may not
       successfully complete their year 2000 remediation efforts. This could
       also result in disruptions in the combined company's business, which
       would harm its financial condition, results of operations and business
       prospects.
 
For a detailed discussion of SpeedFam's year 2000 readiness, you should read
"SpeedFam Management's Discussion and Analysis of Financial Condition and
Results of Operation -- Year 2000." For a detailed discussion of IPEC's year
2000 policies, you should read "IPEC Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Year 2000 Computer Issues."
 
                                       19
<PAGE>   27
 
                         COMPARATIVE MARKET PRICE DATA
 
The table below sets forth, for the calendar quarters indicated, the reported
high and low closing prices of SpeedFam common stock and IPEC regular common
stock as reported on Nasdaq.
 
   
<TABLE>
<CAPTION>
                                                SPEEDFAM             IPEC
                                              COMMON STOCK       COMMON STOCK
                                              -------------      -------------
                                              HIGH      LOW      HIGH      LOW
                                              ----      ---      ----      ---
<S>                                           <C>       <C>      <C>       <C>
1997 CALENDAR YEAR
First Quarter...............................   39 3/4   27 3/8    27 3/8   16 5/8
Second Quarter..............................   36 9/16  24 1/4    25 5/16  13 5/8
Third Quarter...............................   60 3/8   35        37 3/16  24 1/8
Fourth Quarter..............................   58 3/8   19 7/8    36 1/2   14 1/16
1998 CALENDAR YEAR
First Quarter...............................   30 1/2   22 7/8    20 1/4   13 15/16
Second Quarter..............................   30 7/8   18 3/8    22 5/16  10 3/16
Third Quarter...............................   19 1/8    9        11 1/2    5 1/2
Fourth Quarter..............................  18 5/16    9 7/16  11 1/4     6 3/16
1999 CALENDAR YEAR
First Quarter (through February 26, 1999)...   21       15 5/8    14       10 1/2
</TABLE>
    
 
   
Neither SpeedFam nor IPEC has paid cash dividends on its common stock. The terms
of IPEC preferred stock prevent IPEC from paying dividends on its common stock
unless IPEC has paid all dividends due to the holders of the IPEC preferred
stock. In fiscal 1998, IPEC recorded dividends on the IPEC preferred stock in
the amount of $244,000 and paid dividends on the IPEC preferred stock in the
amount of $246,000. In fiscal 1997, IPEC recorded dividends on its IPEC
preferred stock in the amount of $284,000 and paid dividends on its IPEC
preferred stock in the amount of $558,000. There are no accrued but unpaid
dividends on the IPEC preferred stock. The combined company currently intends to
retain any earnings to develop business and not to distribute any earnings to
shareholders as dividends. The declaration and payment by the combined company
of dividends in the future, if any, and the amount thereof will depend upon the
combined company's results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit agreements or
senior securities and other factors deemed relevant by its board of directors.
    
 
                            SPEEDFAM SPECIAL MEETING
 
DATE, TIME AND PLACE OF SPEEDFAM SPECIAL MEETING
 
   
The SpeedFam special meeting will be held at SpeedFam's headquarters at 305
North 54th Street, Chandler, Arizona 85226, on           , April     , 1999 at
               :00 a.m., local time.
    
 
                                       20
<PAGE>   28
 
PURPOSE
 
   
The purpose of the SpeedFam special meeting is to approve:
    
 
     (1) the issuance of shares of SpeedFam common stock to the stockholders of
         IPEC pursuant to the merger agreement, including the issuance of shares
         of SpeedFam common stock pursuant to options, warrants and other rights
         to purchase IPEC common stock that will be assumed by SpeedFam;
 
     (2) the amendment to the articles to change the corporate name of SpeedFam
         to "SPEEDFAM-IPEC, Inc.;" and
 
     (3) the amendment to the 1995 Stock Plan for Employees and Directors of
         SpeedFam which increases the maximum aggregate number of shares of
         SpeedFam's common stock as to which awards of options, restricted
         shares, units or rights may from time to time be issued under the plan
         from 1,800,000 to 3,300,000.
 
   
Proposals two and three are contingent on the consummation of the merger. See
"Terms of the Merger" and "Additional Matters Being Submitted to a Vote of Only
SpeedFam Shareholders."
    
 
RECORD DATE AND OUTSTANDING SHARES
 
   
Only SpeedFam shareholders of record on February 16, 1999 are entitled to notice
of and to vote at the SpeedFam special meeting. As of the SpeedFam record date,
there were approximately 134 shareholders of record holding an aggregate of
16,209,795 shares of SpeedFam common stock. Directors and executive officers of
SpeedFam holding in the aggregate 2,209,463 shares have indicated that they will
vote for the proposals.
    
 
   
On or about March   , 1999, a notice meeting the requirements of Illinois law
was mailed to all shareholders of record as of the SpeedFam record date.
    
 
VOTE REQUIRED
 
   
Approval of proposal one and proposal three requires the affirmative vote of a
majority of the total votes cast. Approval of proposal two requires the
affirmative vote of a majority of the outstanding shares of SpeedFam common
stock. Each shareholder of record of SpeedFam common stock on the SpeedFam
record date is entitled to cast one vote per share on each matter properly
submitted for the vote of the SpeedFam shareholders.
    
 
   
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of SpeedFam common stock entitled to vote at
the SpeedFam special meeting will constitute a quorum. Broker non-votes and
shares held by persons abstaining will be counted in determining whether a
quorum is present. For proposals one and three, abstentions are counted as votes
cast and accordingly have the same effect as votes against the proposal, whereas
broker non-votes are not counted as votes cast and therefore, once a quorum is
present, have no effect on the proposal. Proposal two requires the affirmative
vote of a majority of the outstanding shares of SpeedFam common stock. As a
result, for purposes of proposal two, an abstention or broker non-vote is the
same as a vote against the proposal.
    
 
PROXIES
 
Proxies are being solicited on behalf of the board of directors of SpeedFam.
Each of the persons named in the proxy is an officer of SpeedFam. All shares of
SpeedFam common
 
                                       21
<PAGE>   29
 
   
stock that are entitled to vote and are represented at the SpeedFam special
meeting either in person or by properly executed proxies received prior to or at
the SpeedFam special meeting and not duly and timely revoked will be voted at
the SpeedFam special meeting in accordance with the instructions indicated on
the proxies. If no such instructions are indicated, the proxies will be voted
for the approval of proposals one, two and three.
    
 
   
Any person giving a proxy pursuant to this solicitation may revoke it at any
time before it is voted. Proxies may be revoked by:
    
 
     (1) filing with the Secretary of SpeedFam, at or before the vote at the
         SpeedFam special meeting, a written notice of revocation bearing a
         later date than the proxy;
 
     (2) duly executing a later-dated proxy relating to the same shares and
         delivering it to the Secretary of SpeedFam before the vote at the
         SpeedFam special meeting; or
 
     (3) attending the SpeedFam special meeting and voting in person.
 
   
Attendance at the SpeedFam special meeting will not in and of itself constitute
a revocation of a proxy. Any written notice of revocation or subsequent proxy
should be sent to SpeedFam at 305 North 54th Street, Chandler, Arizona 85226,
Attention: Investor Relations, or hand-delivered to the Secretary of SpeedFam,
in each case before the vote at the SpeedFam special meeting.
    
 
SOLICITATION OF PROXIES; EXPENSES
 
SpeedFam will pay the cost of soliciting its shareholders. Proxies may be
solicited by SpeedFam's directors, officers and employees personally or by
telephone, telegram, letter or facsimile. These individuals will not receive
additional compensation, but may be reimbursed for their reasonable
out-of-pocket expenses incurred in this solicitation.
 
SpeedFam has retained Georgeson & Co. to assist in soliciting proxies at an
estimated fee of $8,500 plus reimbursement of reasonable expenses. SpeedFam will
reimburse brokers, custodians, nominees and fiduciaries for reasonable expenses
incurred for forwarding proxy solicitation materials to beneficial owners of
shares held of record.
 
RECOMMENDATIONS OF SPEEDFAM BOARD OF DIRECTORS
 
   
The SpeedFam board has approved the merger agreement and the related
transactions and has determined that the merger is fair to, and in the best
interests of, SpeedFam and its shareholders. After careful consideration, the
SpeedFam board recommends a vote in favor of:
    
 
     (1) the issuance of shares of SpeedFam common stock pursuant to the merger
         agreement, including the issuance of shares of SpeedFam common stock
         pursuant to currently outstanding options, warrants and other rights to
         purchase IPEC common stock that will be assumed by SpeedFam upon
         consummation of the merger;
 
     (2) the amendment of the articles to change the corporate name of SpeedFam
         to "SPEEDFAM-IPEC, INC;" and
 
     (3) the amendment to the 1995 Stock Plan for Employees and Directors of
         SpeedFam which increases the maximum aggregate number of shares of
         SpeedFam's common stock as to which awards of options, restricted
         shares, units or rights may from time to time be issued under the plan
         from 1,800,000 to 3,300,000.
 
                                       22
<PAGE>   30
 
                              IPEC SPECIAL MEETING
 
DATE, TIME AND PLACE OF IPEC SPECIAL MEETING
 
   
The IPEC special meeting will be held at                , on           , April
  , 1999 at      :00 a.m., local time.
    
 
PURPOSE
 
The purpose of the IPEC special meeting is to approve and adopt the merger
agreement.
 
RECORD DATE AND OUTSTANDING SHARES
 
   
Only stockholders of record of IPEC regular common stock and Class A common
stock on February 16, 1999 are entitled to notice of, and to vote at, the IPEC
special meeting. Holders of IPEC preferred stock do not have voting rights in
connection with the merger. As of the IPEC record date, there were approximately
169 stockholders of record of IPEC regular common stock and an aggregate of
17,906,832 shares outstanding and there was one stockholder of record of Class A
common stock and 7,186 shares outstanding. Directors and executive officers of
IPEC holding in the aggregate 37,271 shares of IPEC regular common stock have
indicated that they will vote for the proposal.
    
 
   
On or about March   , 1999, a notice meeting the requirements of Delaware law is
being mailed to all stockholders of record as of the IPEC record date.
    
 
VOTE REQUIRED
 
The affirmative vote of at least a majority of the votes entitled to be cast by
the outstanding shares of IPEC regular common stock and Class A common stock,
voting as a single class, is required to approve and adopt the merger agreement.
Each stockholder of record of IPEC regular common stock on the IPEC record date
will be entitled to cast one vote per share on each matter to be acted upon at
the IPEC special meeting and each stockholder of record of IPEC Class A common
stock on the IPEC record date will be entitled to cast four votes per share.
 
The representation, in person or by proxy, of at least a majority of the voting
power of IPEC common stock entitled to vote at the IPEC special meeting is
necessary to constitute a quorum for the transaction of business. For purposes
of obtaining the required vote for approval and adoption of the merger
agreement, an abstention or a broker non-vote is the same as a vote against the
proposal.
 
PROXIES
 
Proxies are being solicited on behalf of the board of directors of IPEC. Each of
the persons named in the proxy is an officer of IPEC. All shares of IPEC common
stock that are entitled to vote and are represented at the IPEC special meeting
either in person or by properly executed proxies received prior to or at the
IPEC special meeting and not duly and timely revoked will be voted at the IPEC
special meeting in accordance with the instructions indicated on the proxies. If
no such instructions are indicated, the proxies will be voted for the proposal.
 
                                       23
<PAGE>   31
 
   
Any person giving a proxy pursuant to this solicitation may revoke it at any
time before it is voted. Proxies may be revoked by:
    
 
   
     (1) filing with the Secretary of IPEC, at or before the vote at the IPEC
         special meeting, a written notice of revocation bearing a later date
         than the proxy;
    
 
   
     (2) duly executing a later-dated proxy relating to the same shares and
         delivering it to the Secretary of IPEC before the vote at the IPEC
         special meeting; or
    
 
   
     (3) attending the IPEC special meeting and voting in person.
    
 
Attendance at the IPEC special meeting will not in and of itself constitute a
revocation of a proxy. Any written notice of revocation or subsequent proxy
should be sent to IPEC at 4717 East Hilton Avenue, Phoenix, Arizona 85034,
Attention: Investor Relations, or hand-delivered to the Secretary of IPEC, in
each case before the vote at the IPEC special meeting.
 
SOLICITATION OF PROXIES; EXPENSES
 
IPEC will pay the cost of soliciting its stockholders. Proxies may be solicited
by IPEC's directors, officers and employees personally or by telephone,
telegram, letter or facsimile. These individuals will not receive additional
compensation, but may be reimbursed for their reasonable out-of-pocket expenses
incurred in this solicitation.
 
IPEC has retained Georgeson & Co. to assist in soliciting proxies at an
estimated fee of $8,500 plus reimbursement of reasonable expenses. IPEC will
reimburse brokers, custodians, nominees and fiduciaries for reasonable expenses
incurred for forwarding proxy solicitation materials to beneficial owners of
shares held of record.
 
APPRAISAL RIGHTS
 
   
If the merger agreement is approved and adopted by the stockholders of IPEC at
the IPEC special meeting and the merger is consummated by IPEC, IPEC may have
obligations under Section 262 of the Delaware General Corporation Law to
dissenting stockholders. Only holders of IPEC Class A common or preferred stock
have appraisal rights under Delaware law. Holders of IPEC regular common stock
do not have appraisal rights. To qualify as a dissenting stockholder, a
stockholder must:
    
 
   
     (1) provide a notice to IPEC no later than the day of the IPEC special
         meeting demanding appraisal of the IPEC Class A common or preferred
         stock held by the stockholder; and
    
 
     (2) not vote such shares for the merger.
 
If holders of more than 10% of the outstanding shares of IPEC Class A common and
preferred stock, in the aggregate, are dissenting stockholders, the merger
cannot be accounted for as a pooling of interests and one of the closing
conditions of the merger will not be satisfied. In addition, one of the
conditions to SpeedFam completing the merger is that holders of IPEC Class A
common or preferred stock which, in the aggregate, would represent more than
500,000 shares of SpeedFam common stock if converted pursuant to the merger
agreement do not exercise dissenters' rights. IPEC has obtained waivers of
appraisal rights from the holders of IPEC preferred stock. See "Terms of the
Merger -- Appraisal Rights."
 
                                       24
<PAGE>   32
 
RECOMMENDATIONS OF IPEC BOARD OF DIRECTORS
 
The IPEC board has approved the merger agreement and the related transactions
and has determined that the merger is fair to, and in the best interests of,
IPEC and its stockholders. After careful consideration, the IPEC board
recommends a vote in favor of approval and adoption of the merger agreement.
 
                APPROVAL OF THE MERGER AND RELATED TRANSACTIONS
 
   
The following discussion summarizes the material terms of the proposed merger
and related transactions. It does not state all provisions of the merger
agreement and related agreements. For detailed terms and conditions, you should
read the merger agreement which is attached as Annex A. You should also read the
stock option agreements attached as Annex B, and the other Annexes.
    
 
JOINT REASONS FOR THE MERGER
 
The boards of directors of SpeedFam and IPEC believe the merger will create a
larger, stronger company with the broadest range of CMP systems currently
available. Combining the technical and management experience, financial
resources, size and breadth of product offerings of SpeedFam and IPEC may give
the combined company the critical mass to respond more quickly and effectively
to technological change, increased competition and industry demands in an
industry which requires rapid innovation and change. The boards of directors of
SpeedFam and IPEC have identified the following potential mutual benefits of the
merger that they believe will increase the prospects for success of the combined
company:
 
     - Combining IPEC's CMP systems with SpeedFam's CMP systems will allow the
       combined company to offer a broader product line. The combined company's
       product line will include both rotary and orbital technology, the CMP
       technologies currently accepted in the market today, and be capable of
       supporting all current CMP applications.
 
     - Creating a larger field sales and worldwide service organization and
       expanding the companies' direct sales and distribution channels will
       provide a higher profile with customers and present greater opportunities
       for marketing the products of the combined company globally.
 
     - Combining research and development functions will enable the combined
       company to develop products more economically and support semiconductor
       customers more effectively.
 
     - Combining manufacturing operations will enable the combined company to
       realize economies of scale that may result in improved gross margins.
 
     - Providing SpeedFam and IPEC shareholders the opportunity to benefit from
       the potential growth of the combined company after the merger.
 
SpeedFam and IPEC have each identified additional reasons for the merger, which
are discussed below. Both boards of directors have recognized that the potential
benefits of the merger may not be realized and that there are risks associated
with the merger. See "Risk Factors."
 
                                       25
<PAGE>   33
 
SPEEDFAM'S REASONS FOR THE MERGER
 
At its November 19, 1998 board meeting, the SpeedFam board approved the merger
agreement and the related transactions. The board recommends that its
shareholders vote FOR the issuance of shares of SpeedFam common stock pursuant
to the merger and the related proposals.
 
In addition to the anticipated joint benefits described above, the SpeedFam
board believes that the following are additional reasons the merger will be
beneficial to SpeedFam and its shareholders and for SpeedFam shareholders to
vote FOR the proposals:
 
     - Given the complementary nature of the product lines of SpeedFam and IPEC,
       the merger may achieve SpeedFam's strategic objective of attaining a
       greater presence in the semiconductor equipment industry.
 
     - Combining with IPEC provides an opportunity for increased sales to, and
       support of, semiconductor customers by offering (1) a broader product
       line; and (2) a wider range of process applications.
 
     - The critical mass created by combining with IPEC increases SpeedFam's
       opportunities to enter into strategic alliances with other major
       semiconductor capital equipment suppliers.
 
In the course of its deliberations during SpeedFam board meetings held on
November 17, 1998 and November 19, 1998, the SpeedFam board reviewed with
SpeedFam management a number of additional factors relevant to the merger,
including the strategic overview and prospects for SpeedFam, its products and
its finances. The SpeedFam board also considered, among other matters:
 
      (1) historical information concerning SpeedFam's and IPEC's businesses,
          financial performance, operations, technology, management and
          competitive position. This included review of public reports
          concerning results of operations for each company filed with the SEC;
 
      (2) SpeedFam management's view of the financial condition, results of
          operations and businesses of SpeedFam and IPEC before and after the
          merger based on management due diligence and publicly available
          information;
 
      (3) current and historical stock market prices for SpeedFam common stock
          and IPEC regular common stock;
 
      (4) the amount of SpeedFam common stock to be issued to IPEC stockholders
          in the merger and a comparison of the market value of the SpeedFam
          common stock to the exchange ratio in comparable merger transactions;
 
      (5) the belief that the terms of the merger agreement, including the
          parties' representations, warranties and covenants, and the conditions
          to their obligations, are reasonable;
 
      (6) SpeedFam management's view on the prospects of SpeedFam as an
          independent company, including its prospects in light of increasing
          competition for CMP equipment, a highly cyclical semiconductor
          equipment market, and the ability to develop new products to address
          needs of customers;
 
      (7) the potential for third parties to enter into strategic relationships
          with SpeedFam or IPEC or to acquire IPEC;
 
                                       26
<PAGE>   34
 
      (8) the financial analysis and other information on the merger presented
          by Lehman Brothers in SpeedFam board presentations and a review of
          Lehman Brothers' opinion;
 
      (9) the impact of the merger on SpeedFam's customers, including the
          benefit of a broader product line and expanded research and
          development resources for copper and dual damascene processes and
          300mm CMP;
 
     (10) the impact of the merger on SpeedFam's employees who will continue to
          work in a similar, more secure employment environment;
 
   
     (11) the report from SpeedFam legal advisors on the results of the due
          diligence investigation of IPEC; and
    
 
     (12) the requirement that the merger will be accounted for as a pooling of
          interests and will qualify as a tax-free reorganization.
 
The SpeedFam board also identified and considered a variety of potentially
negative factors in its deliberations concerning the merger, including, but not
limited to:
 
       (1) the risk that the potential benefits sought in the merger might not
           be fully realized;
 
       (2) the possibility that the merger might not be consummated and the
           effect of public announcement of the merger on (a) SpeedFam's sales
           and operating results, (b) SpeedFam's ability to attract and retain
           key management, sales, administrative and technical personnel and (c)
           progress of development projects;
 
   
       (3) the potential dilutive effect of the issuance of SpeedFam common
           stock in the merger and the assumption of IPEC's outstanding options
           and warrants;
    
 
       (4) the assumption of $115.0 million of IPEC's convertible notes;
 
       (5) the substantial charges to be incurred in connection with the merger,
           including costs of integrating the businesses and transaction
           expenses arising from the merger;
 
       (6) the probability that the merger would divert SpeedFam's management's
           attention for an extended time period; and
 
       (7) the risk that despite the efforts of the combined company, key
           technical, administrative, sales and management personnel might not
           remain employed by the combined company.
 
The SpeedFam board believed that the potential benefits of the merger outweighed
these risks.
 
IPEC'S REASONS FOR THE MERGER
 
At its November 19, 1998 board meeting, the IPEC board unanimously approved the
merger agreement. The board recommends that its stockholders vote FOR the
proposal to approve and adopt the merger agreement.
 
                                       27
<PAGE>   35
 
In addition to the joint benefits described above, the board believes that the
following are additional reasons the merger will be beneficial to IPEC and its
stockholders:
 
     - Combining the technological and engineering resources of SpeedFam and
       IPEC allows the combined company to have a more effective and efficient
       research and development function to meet semiconductor manufacturers'
       ongoing CMP needs.
 
     - Combining the companies' direct sales and distribution channels will
       present greater opportunities for marketing the IPEC equipment globally.
 
     - SpeedFam has a strong cash position and no significant debt.
 
During deliberations during IPEC board meetings on November 14, 1998 and
November 19, 1998, the IPEC board reviewed with IPEC management a number of
additional factors relevant to the merger, including the strategic overview and
the prospects for IPEC, its products and its finances. The IPEC board also
considered, among other matters:
 
     (1) historical information concerning IPEC's and SpeedFam's businesses,
         financial performance, operations, technology, management and
         competitive position. This included review of public reports concerning
         results of operations for each company filed with the SEC;
 
     (2) IPEC management's view on the financial condition, results of
         operations and businesses of SpeedFam and IPEC before and after the
         merger, based on management due diligence and publicly available
         financial information;
 
     (3) the impact of the merger on IPEC's employees, including methods to
         ensure that key employees remain with the combined company;
 
   
     (4) the impact of the merger on IPEC's customers, including the benefit of
         a broader product line and expanded research and development resources
         for copper and dual damascene and 300mm CMP;
    
 
     (5) current financial market conditions and historical market prices,
         volatility and trading information for SpeedFam common stock and IPEC
         regular common stock;
 
   
     (6) a comparison of the market value of the SpeedFam common stock to the
         exchange ratio in comparable merger transactions and the equal
         treatment of IPEC regular common, Class A common and preferred
         stockholders in the application of the exchange ratio;
    
 
     (7) IPEC management's view on the prospects of IPEC as an independent
         company, in light of factors such as increasing competition for CMP
         equipment, a highly cyclical semiconductor equipment market and its
         ability to develop new products to address customers' needs;
 
     (8) IPEC management's view on the potential for other third parties to
         enter into strategic relationships with or to acquire SpeedFam or IPEC;
 
     (9) the possibility that antitrust authorities would delay or block the
         merger;
 
     (10) the expectation that the merger will qualify as a tax-free
          reorganization; and
 
     (11) reports from IPEC's management and legal and financial advisors on the
          results of their due diligence investigation of SpeedFam.
 
                                       28
<PAGE>   36
 
The IPEC board also considered the terms of the merger agreement regarding
SpeedFam's and IPEC's rights to consider and negotiate other acquisition
proposals, as well as the possible effects of the provisions regarding the
termination fees and the stock option agreements. In addition, the IPEC board
considered the expectations that the merger would be accounted for as a pooling
of interests and that no goodwill would be created on the books of the combined
company. The IPEC board considered financial presentations by Morgan Stanley,
including the opinion of Morgan Stanley delivered at the November 19, 1998
meeting of the IPEC board, which concluded that the exchange ratio was fair,
from a financial point of view, to IPEC regular common stockholders.
 
The IPEC board also identified and considered a number of potentially negative
factors in its deliberations, including:
 
       (1) the possibility that the merger would not be consummated and the
           effect of the public announcement of the merger on (a) IPEC's sales
           and operating results, (b) IPEC's ability to attract and retain key
           management, marketing and technical personnel and (c) progress of
           development projects;
 
       (2) the substantial expenses of the merger, including costs of
           integrating the businesses and transaction expenses;
 
       (3) the risk that key technical and management personnel may leave the
           combined company despite the efforts of the combined company to
           retain them; and
 
       (4) the risk that the potential benefits of the merger might not be fully
           realized.
 
The IPEC board believed that the potential benefits of the merger outweighed
these risks.
 
   
In considering the exchange ratio, the IPEC board reviewed the issues described
above and the data provided by Morgan Stanley, including the ratio of the
closing prices of IPEC regular common stock to SpeedFam common stock during the
12 months prior to the execution of the merger agreement. This data is presented
on pages 41 through 49. The exchange ratio represented a 4% premium over actual
IPEC/SpeedFam common stock price ratio on November 17, 1998.
    
 
   
The exchange ratio was applied equally to all IPEC stockholders. The Class A
common stock automatically converts to IPEC regular common stock upon any
transfer of the stock. The preferred stock is convertible into IPEC regular
common stock at a rate specified in the terms of each series of preferred stock.
For this information, see "Comparison of Capital Stock -- Description of IPEC
Capital Stock" on page 66. The exchange ratio for each series of preferred stock
was derived by first calculating the number of shares of IPEC regular common
stock the series was convertible into and then applying the exchange ratio.
    
 
   
MATERIAL CONTACTS AND BOARD DELIBERATIONS
    
 
In August 1997, IPEC engaged Morgan Stanley as its financial advisor to evaluate
financing and strategic alternatives.
 
   
In early November 1997 at an industry trade show, Messrs. Chitre and McDaniel,
the chairman and chief executive officer, respectively, of IPEC suggested to
Messrs. Farley and Marach, the chairman and chief financial officer,
respectively, of SpeedFam, that they should meet in the future to talk about the
changing competitive environment in the CMP industry. In mid-December 1997,
Messrs. Chitre and McDaniel met at Mr. Farley's home to discuss changes in the
industry and how SpeedFam and IPEC might work together.
    
 
                                       29
<PAGE>   37
 
   
Mr. Kouzuma, then president and chief executive officer of SpeedFam, also
attended this meeting.
    
 
During January and February 1998, representatives of both companies, primarily
Mr. Farley on behalf of SpeedFam and Mr. Chitre on behalf of IPEC, met on
various occasions to discuss a possible merger of SpeedFam and IPEC. In
February, SpeedFam engaged Lehman Brothers to act as its financial advisor for
the potential business combination. During early March 1998, discussions between
Messrs. Farley and Kouzuma and Messrs. Chitre and McDaniel continued. These
discussions, primarily between Messrs. Farley and Chitre, focused on the
management structure of the combined company if a merger were to take place.
Messrs. Farley and Chitre also discussed the structure that any transaction
would have. During this time, each of SpeedFam and IPEC discussed this
transaction with its financial and legal advisors and advised its respective
board of directors of the discussions.
 
On March 13, 1998, the SpeedFam board of directors met in a regularly scheduled
meeting at SpeedFam's corporate offices. Mr. Farley updated the board on the
status of his discussions. SpeedFam management and Lehman Brothers made
presentations to the board regarding the business of IPEC. After further
presentations from SpeedFam's legal and financial advisors, including a review
of the board's fiduciary duties in evaluating the transaction, the board
authorized SpeedFam management to continue its discussions with IPEC. The
SpeedFam board approved in principle a proposed outline of the structure of a
transaction to be conveyed by Mr. Farley to IPEC.
 
Over the next few weeks, Mr. Farley and Mr. Chitre discussed the terms of the
transaction proposed by SpeedFam. On March 20 and 21, 1998, Messrs. Farley,
Kouzuma and Marach for SpeedFam and Messrs. Chitre and McDaniel for IPEC met to
discuss various aspects of the proposed transaction, particularly the
composition of the board of directors and senior management of the combined
company as well as the financial terms of the merger. These meetings concluded
without an agreement on these issues. After further conversations in which no
agreement was reached, on March 25, 1998, Messrs. Farley and Chitre had a
telephone conversation during which they decided to terminate all discussions.
Notwithstanding this decision, during late March and early April, Messrs. Farley
and Chitre spoke by phone about senior management of the combined company. No
resolution of the issues was reached and all discussions between the parties
terminated. Also during this period, IPEC and Morgan Stanley had discussions
with other potential parties regarding possible strategic business combinations.
 
At the July 23, 1998 IPEC board meeting, Mr. McDaniel reviewed the status of
discussions with other companies regarding the potential sale of IPEC and
confirmed that no formal discussions were underway. Also on that date, the IPEC
board of directors of IPEC approved a resolution providing that IPEC management
may not engage in formal negotiations regarding a sale of IPEC without approval
by the board of directors.
 
At the request of Mr. Chitre, on August 13, 1998, Messrs. Farley and Chitre met
in Phoenix, Arizona, and agreed to resume informal discussions regarding a
proposed merger. They discussed the proposed management structure for the
combined company and the financial terms of the merger. During this meeting, Mr.
Farley indicated that SpeedFam was considering hiring a new chief executive
officer. Each of Mr. Farley and Mr. Chitre contacted his financial advisor. On
August 14, Mr. Kouzuma and Messrs. Neil Bonke and Richard Hill (both outside
directors of SpeedFam) were informed by phone that the discussions between
Messrs. Farley and Chitre had resumed. However, discussions were again
terminated as the companies could not agree on management structure.
 
                                       30
<PAGE>   38
 
On September 1, 1998, Messrs. Farley, Bonke and Hill met with Mr. Chitre and Mr.
Kenneth Levy (an outside director of IPEC) in San Jose, California. The three
outside directors expressed their belief that a combination of SpeedFam and IPEC
would be a good strategic fit and would serve each company's long-term
prospects. They accordingly encouraged Mr. Farley and Mr. Chitre to continue
discussions. Mr. Chitre was informed that Richard J. Faubert was a candidate for
the chief executive officer position of SpeedFam. Mr. Hill suggested that Mr.
Chitre meet with Mr. Faubert. Mr. Chitre and Mr. Faubert met on September 2,
1998.
 
   
During the months of September and October 1998, representatives of SpeedFam and
IPEC, together with their respective financial advisors, held discussions on the
management structure of the combined company and the financial terms of the
merger. On October 8, 1998, SpeedFam hired Mr. Faubert to serve as president and
chief executive officer of SpeedFam. Subsequently, Mr. Faubert and Mr. Chitre
met to discuss the management structure of a combined company and the financial
terms of the merger. Members of the board of directors of SpeedFam and IPEC were
periodically updated regarding the progress of the discussions. At a regularly
scheduled SpeedFam board meeting on October 8, 1998, Mr. Farley further updated
the board on the status of the proposed transaction.
    
 
On October 13, 1998, SpeedFam proposed an outline for the structure of a
transaction with IPEC. Over the next two weeks, representatives of IPEC and
SpeedFam discussed the transaction, particularly the financial terms of the
merger and the composition of the board and senior management of the combined
company. These discussions concluded without a resolution.
 
   
On October 30, 1998, Messrs. Farley and Faubert for SpeedFam and Messrs. Chitre
and McDaniel for IPEC and their financial advisors met to negotiate and finalize
certain terms of a proposed merger that they would present to their boards with
the understanding that discussions between the parties would terminate if
agreement could not be reached. The primary focus of the discussions was the
management structure of the combined company, as well as the proposed exchange
ratio. Agreement was reached on some of the proposed terms, including a
preliminary exchange ratio of .71. The proposed terms were preliminary only and
were subject to due diligence by each party and board approvals.
    
 
On November 2, 1998, representatives of the two companies and their legal and
financial advisors met to discuss the timetable for due diligence and the
preparation of definitive agreements. Certain members of senior management of
each company were advised of the transaction and began preparing for the due
diligence meetings. On November 4, 1998, SpeedFam and IPEC executed a
confidentiality agreement for the materials and other information each side
would provide to the other during due diligence.
 
Between November 4, 1998 and November 14, 1998, representatives of each company
and their legal and financial advisors exchanged various due diligence documents
and drafts of definitive agreements and met to conduct due diligence on the
business of the other company.
 
On November 12, 1998, Morgan Stanley received an oral offer from a financial
advisor to a potential acquiror of IPEC. The offer provided that the potential
acquiror was willing to purchase a majority (but not 100%) interest in IPEC for
a per share cash consideration in a range similar to or slightly higher than the
consideration in the SpeedFam proposal. After discussion with its advisors, IPEC
management instructed Morgan Stanley to advise the potential acquiror that IPEC
was not interested in pursuing the transaction but that
 
                                       31
<PAGE>   39
 
the potential acquiror could make another proposal. Because the potential
acquiror did not want to purchase all of IPEC's outstanding capital stock, IPEC
believed that minority stockholders might be harmed by the transaction, that
negotiating adequate protections for minority stockholders would be difficult
and that the transaction with SpeedFam was in the best long-term interest of the
IPEC stockholders. IPEC management also considered the length of time necessary
to approve the transaction by the potential acquiror's board of directors and
the effect of the transaction on IPEC employees.
 
On November 14, 1998, the IPEC board held a special meeting to review the status
of negotiations. All directors, certain members of IPEC management,
representatives of IPEC's legal advisors, independent auditors and Morgan
Stanley were present in person. Other representatives of Morgan Stanley were
present by telephone and could be heard by the other parties. The IPEC board
discussed the status of IPEC's due diligence review of SpeedFam and the status
of the merger negotiations. Issues discussed at the meeting included certain
terms of the transaction, including termination events, non-solicitation,
breakup fees, the cross-option, closing conditions, governance of the combined
company, the structure of the proposed merger, and management retention
arrangements. The IPEC board also discussed the oral offer from the potential
acquiror and ratified IPEC management's decision to reject the offer. IPEC's
legal advisors reviewed the board's fiduciary duties in evaluating the proposed
transactions and the IPEC stockholder rights plan. IPEC's management and legal
advisors reported on the results of due diligence investigations and responded
to questions on the merger. Representatives of Morgan Stanley gave a preliminary
presentation concerning the merger. At the conclusion of the discussions, the
IPEC board unanimously agreed that management, with the assistance of the board,
should continue to proceed with negotiation and investigation of the proposed
combination.
 
On November 14, 1998, Lehman Brothers delivered to the SpeedFam board materials
that it proposed to discuss as part of its presentation to the board. On
November 16, 1998, SpeedFam management also delivered materials to the SpeedFam
board. On November 17, 1998, the SpeedFam board held a special telephone meeting
to review the status of negotiations and to review SpeedFam's due diligence of
IPEC as well as to discuss the materials that had previously been delivered to
the board. SpeedFam's legal and financial advisors also participated in this
meeting. Mr. Robert Miller, a director of SpeedFam, was unable to participate.
The board deliberations included various legal and financial terms of the merger
as well as the proposed management of the combined company. SpeedFam's
management and advisors reported on the results of the due diligence
investigation and responded to questions on the merger. SpeedFam's legal
advisors reviewed the board's fiduciary duties in evaluating the proposed
transaction. Representatives of Lehman Brothers gave a presentation concerning
the financial terms of the merger. At the conclusion of the discussion, the
SpeedFam board agreed that management should continue to proceed with
negotiation and investigation of the proposed combination. Mr. Miller, a
director of SpeedFam, joined by telephone at the end of this meeting and was
informed of the discussion.
 
On November 17 through November 19, 1998, SpeedFam and IPEC, together with their
legal and financial advisors, continued to negotiate the terms of definitive
agreements. Final due diligence by both companies also took place.
 
On November 19, 1998, the IPEC board convened to consider and vote upon the
proposed merger and related transactions. All directors (except Mr. Levy), some
members of IPEC management and representatives of IPEC's legal advisors and
independent auditors were
 
                                       32
<PAGE>   40
 
   
present in person. Mr. Levy and representatives of Morgan Stanley were present
by telephone and could be heard by the other parties. At this meeting, IPEC
management reported on the terms of the proposed merger and the results of the
due diligence investigation. Management responded to questions on various
aspects of the proposed merger. IPEC's legal advisors reviewed proposed
definitive terms of the merger agreement and related documents, including the
stock option agreements, and reviewed the board's fiduciary duties in evaluating
the transaction. Morgan Stanley made a presentation on the exchange ratio,
reviewed its detailed financial analysis and pro forma and other information on
the companies and delivered its written opinion that, as of that date and based
on certain assumptions and qualifications, the exchange ratio was fair from a
financial point of view to IPEC regular common stockholders. A copy of this
opinion is annexed, and stockholders are urged to carefully review the opinion.
See " -- Opinion of IPEC's Financial Advisor." The board reviewed terms of a
proposed consulting agreement with Harold C. Baldauf. In addition, the board
discussed proposed employment or consulting arrangements expected to be entered
into with Messrs. Chitre, Ralph Hartung and John S. Hodgson. After discussion,
the IPEC board unanimously approved the merger agreement, including the final
exchange ratio of .71, and the related transactions and agreements.
    
 
   
On November 19, 1998, the SpeedFam board convened at SpeedFam's corporate
offices to consider and vote upon the proposed merger and related transactions.
At this special meeting, SpeedFam management reported on the results of its due
diligence investigation and the terms of the proposed merger; management
responded to questions on various aspects of the proposed merger; SpeedFam's
financial and legal advisors reviewed the terms of the merger agreement and
related documents, including the stock option agreements; Lehman Brothers made a
presentation on the financial terms of the merger and delivered its written
opinion to the effect that, as of that date, the exchange ratio was fair from a
financial point of view to SpeedFam. A copy of this opinion is annexed, and
shareholders are urged to carefully review the opinion. See " -- Opinion of
SpeedFam's Financial Advisor." After discussion, the SpeedFam board approved the
merger agreement, including the final exchange ratio of .71, and the related
transactions and agreements, subject to a resolution of some issues satisfactory
to SpeedFam management. One director, Dr. Stuart L. Meyer, voted against the
merger.
    
 
Late in the evening on November 19, 1998, following final resolution of issues
raised by the SpeedFam board, both companies executed the merger agreement and
the stock option agreements, and SpeedFam and IPEC issued a joint press release.
 
OPINION OF SPEEDFAM'S FINANCIAL ADVISOR
 
Lehman Brothers has acted as financial advisor to SpeedFam in connection with
the merger. As part of its role as financial advisor to SpeedFam, Lehman
Brothers was engaged to render its opinion as to the fairness, from a financial
point of view, to SpeedFam of the exchange ratio to be offered to IPEC
stockholders in the merger. The full text of the written opinion of Lehman
Brothers dated November 19, 1998 is incorporated by reference. SpeedFam
shareholders should read the opinion for a discussion of assumptions made,
factors considered and limitations on the review undertaken by Lehman Brothers.
The opinion is set forth in Annex D to this joint proxy statement/ prospectus.
The summary of Lehman Brothers' opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the opinion.
 
No limitations were imposed by SpeedFam on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. In arriving
 
                                       33
<PAGE>   41
 
at its opinion, Lehman Brothers did not ascribe a specific range of value to
SpeedFam or IPEC, but made its determination as to fairness, from a financial
point of view, to SpeedFam of the exchange ratio to be offered to IPEC
stockholders, on the basis of the financial and comparative analyses described
below. Lehman Brothers' opinion was for the use and benefit of the SpeedFam
board and was rendered to the SpeedFam board in connection with its
consideration of the merger. Lehman Brothers' opinion is not intended to be and
does not constitute a recommendation to any shareholder of SpeedFam as to how
such shareholder should vote with respect to the merger. Lehman Brothers was not
requested to opine as to, and its opinion does not in any manner address,
SpeedFam's underlying business decision to proceed with or effect the merger.
 
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
 
      (1) the merger agreement and the specific terms of the merger;
 
      (2) publicly available information concerning SpeedFam and IPEC that it
          believed to be relevant to its analysis;
 
      (3) financial and operating information with respect to the business,
          operations and prospects of SpeedFam and IPEC furnished by SpeedFam
          and IPEC;
 
      (4) trading histories of SpeedFam common stock and IPEC regular common
          stock from October 10, 1995 to the present, and a comparison of that
          trading history with those of other companies that it deemed relevant;
 
      (5) a comparison of the historical financial results and present financial
          condition of SpeedFam and IPEC with those of other companies that it
          deemed relevant;
 
      (6) publicly available estimates of the future financial performances of
          SpeedFam and IPEC prepared by research analysts;
 
      (7) a comparison of the financial terms of the merger with the financial
          terms of certain other transactions that it deemed relevant;
 
      (8) the potential pro forma financial effects of the merger on SpeedFam,
          including the operating synergies and strategic benefits expected by
          the management of SpeedFam to result from a combination of the
          businesses of SpeedFam and IPEC;
 
      (9) a comparison of the relative financial contributions of SpeedFam and
          IPEC to the combined company following consummation of the merger; and
 
     (10) the potential market performance of the common stock of SpeedFam in
          the future in the absence of the merger.
 
In addition, Lehman Brothers had discussions with the managements of SpeedFam
and IPEC concerning their respective businesses, operations, assets, financial
conditions and prospects, and have undertaken such other studies, analyses and
investigations as it deemed appropriate.
 
In arriving at its opinion, Lehman Brothers assumed and relied upon the accuracy
and completeness of the financial and other information used by it without
assuming any responsibility for independent verification of such information.
Lehman Brothers further relied upon the assurances of the managements of both
SpeedFam or IPEC that they were not aware of any facts or circumstances
currently in existence that would make such information inaccurate or misleading
regarding SpeedFam and IPEC, respectively. In performing its analysis, upon
advice of SpeedFam, Lehman Brothers did not rely on any
 
                                       34
<PAGE>   42
 
future financial information for IPEC prepared by the management of IPEC, and
instead, Lehman Brothers assumed that publicly available estimates of third
party research analysts are a reasonable basis upon which to evaluate the future
financial performance of IPEC, and Lehman Brothers relied upon such estimates
arriving in at its opinion. With respect to the future financial information for
the combined company following consummation of the merger, including estimates
of operating synergies and strategic benefits expected by the management of
SpeedFam to result from a combination of the businesses of SpeedFam and IPEC,
upon advice of SpeedFam, Lehman Brothers assumed that such information has been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of SpeedFam as to the future financial
performance of the combined company, and that such operating synergies and
strategic benefits will be achieved substantially in accordance with such
estimates.
 
In arriving at its opinion, Lehman Brothers did not conduct a physical
inspection of the properties and facilities of SpeedFam or IPEC and did not make
nor obtain any evaluations or appraisals of the assets or liabilities of
SpeedFam or IPEC. In arriving at its opinion, Lehman Brothers assumed that the
merger will qualify (1) for pooling of interests accounting treatment, and (2)
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and therefore as a tax-free transaction to the shareholders of SpeedFam
and IPEC. Lehman Brothers' opinion necessarily was based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of its opinion.
 
In connection with its opinion, Lehman Brothers performed a variety of financial
and comparative analyses as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Lehman Brothers did not attribute any particular weight to any
particular analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Lehman Brothers believes that its analyses must be considered as a
whole and that considering any portions of such analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. In its analyses, Lehman Brothers
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of SpeedFam and IPEC. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be more or less favorable than as set forth therein. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
 
The following is a summary of the material financial analyses used by Lehman
Brothers in connection with providing its opinion to the SpeedFam board. Certain
of the analyses include information presented in tabular format. In order to
fully understand the financial analyses used by Lehman Brothers, the tables must
be read together with the text of each summary. The tables alone do not
constitute a complete description of financial analyses.
 
CONTRIBUTION ANALYSIS.  Lehman Brothers utilized publicly available historical
financial data regarding SpeedFam and IPEC and estimates for future financial
performance of SpeedFam and IPEC to calculate the relative contributions of
SpeedFam and IPEC to the pro forma combined company with respect to revenues,
operating income (defined as
 
                                       35
<PAGE>   43
 
   
income before interest and taxes) and net income for the fiscal years 1996,
1997, 1998, 1999 and 2000.
    
 
   
PERCENT CONTRIBUTION OF SPEEDFAM TO THE PRO FORMA COMBINED COMPANY:
    
 
   
<TABLE>
<CAPTION>
                                FY 1996   FY 1997   FY 1998   FY 1999E   FY 2000E
                                -------   -------   -------   --------   --------
<S>                             <C>       <C>       <C>       <C>        <C>
SPEEDFAM CONTRIBUTION
Revenue:......................      45%       55%       50%        55%        44%
Operating Income:.............      35%       68%       73%         NM         NM
Net Income:...................      48%       78%       97%         NM         NM
 
PRO FORMA OWNERSHIP BASED ON EXCHANGE RATIO:
SpeedFam:.....................      56%
</TABLE>
    
 
   
STOCK TRADING HISTORY.  Lehman Brothers considered various historical data
concerning the history of the trading prices for both SpeedFam common stock and
IPEC regular common stock for the period from October 10, 1995 (the date of the
initial public offering of SpeedFam) to November 18, 1998 (the last trading date
prior to the delivery of the opinion) and the relative stock price performances
during this same period of SpeedFam, IPEC and of selected companies engaged in
businesses considered by Lehman Brothers to be comparable to that of both
SpeedFam and IPEC. Specifically, Lehman Brothers included in its review two
groups of semiconductor equipment companies. The first group consisted of large
front end semiconductor capital equipment companies including:
    
 
   
  Applied Materials, Inc.;
    
   
  ASM Lithography Holding N.V.;
    
   
  KLA-Tencor Corporation;
    
   
  Lam Research Corporation; and
    
  Novellus Systems, Inc.
 
   
The second group consisted of medium-sized front end semiconductor capital
equipment companies, including:
    
 
   
  Advanced Energy Industries, Inc.;
    
   
  Asyst Technologies, Inc.;
    
   
  CFM Technologies, Inc.;
    
   
  Cymer, Inc.;
    
  FSI International, Inc.;
   
  GaSonics International Corporation;
    
   
  Mattson Technology Inc.;
    
   
  PRI Automation, Inc.;
    
   
  Semitool, Inc.;
    
   
  Silicon Valley Group, Inc.; and
    
   
  Ultratech Stepper, Inc.
    
 
   
  RANGE OF STOCK PRICES:
    
 
   
<TABLE>
<CAPTION>
                   10/10/95-11/18/98                         HIGH        LOW
                   -----------------                         ----        ---
<S>                                                        <C>          <C>
                                              SpeedFam:      $60.375    $9.000
                                                  IPEC:      $37.750    $5.500
</TABLE>
    
 
                                       36
<PAGE>   44
 
<TABLE>
<CAPTION>
                   11/18/97-11/18/98                         HIGH        LOW
                   -----------------                         ----        ---
<S>                                                        <C>          <C>
                                              SpeedFam:      $33.281    $9.000
                                                  IPEC:      $23.000    $5.500
</TABLE>
 
   
PERCENT CHANGE IN STOCK PRICE:
    
 
   
<TABLE>
<CAPTION>
                   11/18/97-11/18/98                       % CHANGE
                   -----------------                       --------
<S>                                                        <C>          <C>
                                              SpeedFam:       -57.9%
                                                  IPEC:       -50.3%
Median of Large Front End Semiconductor Equipment Cos.:        18.8%
         Median of Medium-Sized Front End Semiconductor
                                        Equipment Cos.:       -39.4%
</TABLE>
    
 
   
COMPARABLE COMPANY ANALYSIS.  Using publicly available information, Lehman
Brothers compared selected financial data of SpeedFam and IPEC with similar data
of the large front end semiconductor capital equipment companies and the
medium-sized front end semiconductor capital equipment companies. For each of
SpeedFam, IPEC, the large front end semiconductor capital equipment companies
and the medium-sized front end semiconductor capital equipment companies, Lehman
Brothers calculated the Firm Value (defined as market value of the respective
company's equity plus total debt less cash and cash equivalents) as a multiple
of the latest twelve months revenues.
    
 
   
COMPARABLE COMPANY MULTIPLES:
    
 
   
<TABLE>
<CAPTION>
                                                               LAST TWELVE MONTHS
                      AS OF 11/18/98                            REVENUE MULTIPLE
                      --------------                           ------------------
<S>                                                            <C>
                                                  SpeedFam:           0.60x
                              IPEC based on Exchange Ratio:           1.40x
    Median of Large Front End Semiconductor Equipment Cos.:           2.70x
                           Median of Medium-Sized Front End
                              Semiconductor Equipment Cos.:           1.22x
</TABLE>
    
 
   
However, because of the inherent differences between the businesses, operations
and prospects of SpeedFam and IPEC and the business, operations and prospects of
the companies included in the comparable companies, Lehman Brothers believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the comparable company analysis, and accordingly also
made qualitative judgments concerning differences between the financial and
operating characteristics and prospects of the companies included in the
comparable companies and SpeedFam and IPEC that would affect the public trading
values of each.
    
 
   
COMPARABLE TRANSACTION ANALYSIS AND TRANSACTION PREMIUM ANALYSIS.  Using
publicly available information, Lehman Brothers compared selected financial data
for IPEC to similar data for selected transactions in the semiconductor
equipment industry from July 1, 1996 through November 18, 1998. The comparable
transactions included the following transactions:
    
 
      (1) the acquisition of Digital Instruments, Inc. by Veeco Instruments,
          Inc.;
 
   
      (2) the acquisition of Equipe Technologies, Inc. by PRI Automation;
    
 
      (3) the acquisition of Fusion Systems Corporation by Eaton Corporation;
 
                                       37
<PAGE>   45
 
      (4) the acquisition of Lawrence Semiconductor Laboratories by Advanced
          Technology Materials;
 
      (5) the acquisition of Varian Associates Inc.'s Thin Film Systems Unit by
          Novellus Systems Inc.;
 
      (6) the acquisition of OnTrack Systems, Inc. by Lam Research Corporation;
 
      (7) the merger of Tencor Instruments with KLA Instruments Corporation;
 
      (8) the acquisition of Therma-Wave, Inc. by Bain Capital;
 
      (9) the acquisition of Orbot Instruments by Applied Materials, Inc.; and
 
     (10)  the acquisition of Electrotech Group by Plasma and Materials
           Technologies, Inc.
 
   
Lehman Brothers reviewed the prices paid in the comparable transactions in terms
of the multiple of the Transaction Enterprise Value (defined as the total
consideration paid including total debt less cash and cash equivalents assumed)
to the latest twelve months revenues.
    
 
   
Lehman Brothers reviewed the premiums paid in selected acquisitions in the
semiconductor sector from January 1, 1995 through November 18, 1998. The
semiconductor transactions included the following transactions:
    
 
      (1) the acquisition of Benchmarq Microelectronics Inc. by Unitrode
          Corporation;
 
      (2) the acquisition of Cyrix Corp. by National Semiconductor Corp.;
 
      (3) the acquisition of OnTrak Systems Inc. by Lam Research Corp.;
 
      (4) the merger of Tencor Instruments with KLA Instruments Corporation;
 
      (5) the acquisition of Computer Identics by Robotic Vision;
 
      (6) the acquisition of Orbit Semiconductor Inc. by DII Group Inc.;
 
      (7) the acquisition of NexGen, Inc. by Advanced Micro Devices Inc.;
 
      (8) the acquisition of Megatest Corporation by Teradyne, Inc.;
 
      (9) the acquisition of MA-COM, Inc. by AMP Inc.;
 
     (10) the acquisition of Micronics Computers, Inc. by Diamond Multimedia
          Systems;
 
     (11) the acquisition of Amati Communications Corp. by Texas Instruments,
          Inc.;
 
     (12) the acquisition of Chips and Technologies Inc by Intel Corp.;
 
     (13) the acquisition of Zilog, Inc. by Texas Pacific Group, Inc.;
 
     (14) the acquisition of Fusion Systems Corporation by Eaton Corporation;
 
     (15) the acquisition of Tylan General by Millipore Corporation;
 
     (16) the acquisition of Opal, Inc. by Applied Materials, Inc.; and
 
     (17) the acquisition of Brooktree Corp. by Rockwell International Corp.
 
   
Lehman Brothers calculated the premium per share paid by the acquiror compared
to the share price of the target company prevailing (1) one month and (2) one
day prior to the announcement of the transaction.
    
 
                                       38
<PAGE>   46
 
   
Lehman Brothers reviewed the premiums paid in selected announced acquisitions in
the technology sector with transaction values under $1 billion from January 1,
1998 through November 18, 1998. The technology transactions included the
following transactions:
    
 
      (1) the acquisition of CKS Group by USWeb Corp.;
 
      (2) the acquisition of USCS International Inc. by DST Systems;
 
      (3) the acquisition of Innova Corp. by Digital Microwave Corp.;
 
      (4) the acquisition of Eltron International Inc. by Zebra Technologies
          Corp.;
 
      (5) the acquisition of Broderbund Software Inc. by Learning Co. Inc.;
 
      (6) the acquisition of Intersolv Inc. by Micro Focus Group PLC;
 
      (7) the acquisition of Award Software International by Phoenix
          Technologies Ltd.;
 
      (8) the acquisition of Claremont Technology Group Inc. by Complete
          Business Solutions;
 
      (9) the acquisition of ForeFront Group Inc. by CBT Group PLC;
 
     (10) the acquisition of Logic Works Inc. by PLATINUM Technology Inc.;
 
     (11) the acquisition of Benchmarq Microelectronics Inc. by Unitrode Corp.;
 
     (12) the acquisition of Scopus Technology Inc. by Siebel Systems, Inc.;
 
     (13) the acquisition of Trusted Information Systems by Network Associates
          Inc.;
 
     (14) the acquisition of Mastering Inc. by PLATINUM Technology Inc.;
 
     (15) the acquisition of Coherent Communications Systems by Tellabs Inc.;
 
     (16) the acquisition of BGS Systems Inc. by BMC Software Inc.;
 
     (17) the acquisition of Shiva Corp. by Intel Corp.;
 
     (18) the acquisition of Quickturn Design Systems by Mentor Graphics Corp.;
 
     (19) the acquisition of Stratus Computer Inc. by Ascend Communications
          Inc.;
 
     (20) the acquisition of CyberMedia Inc. by Network Associates Inc.;
 
     (21) the acquisition of ATL Products Inc. (Odetics) by Quantum Corp.;
 
     (22) the acquisition of XcelleNet Inc. by Sterling Commerce Inc.;
 
     (23) the acquisition of Intelligent Electronics Inc. by Xerox Corp.;
 
     (24) the acquisition of Wonderware Corp. by Siebe PLC; and
 
     (25) the acquisition of State of the Art Inc. by Sage Group PLC.
 
   
Lehman Brothers calculated the premium per share paid by the acquiror compared
to the share price of the target company prevailing (1) one month and (2) one
day prior to the announcement of the transaction.
    
 
   
Lehman Brothers reviewed the premiums paid in selected acquisitions in the
technology sector from January 1, 1995 through November 18, 1998 in which stock
was used as
    
 
                                       39
<PAGE>   47
 
   
consideration and the target shareholders owned at least 33% of the pro forma
combined company. The stock merger transactions included the following
transactions:
    
 
     (1) the acquisition of Award Software International by Phoenix Technologies
         Ltd.;
 
     (2) the acquisition of Raptor Systems Inc. by AXENT Technologies Inc.;
 
     (3) the acquisition of Pure Atria Corp. by Rational Software Corp.;
 
     (4) the acquisition of Cascade Communications Corp. by Ascend
         Communications Inc.;
 
      (5) the acquisition of US Robotics Corp. by 3Com Corp.;
 
      (6) the acquisition of Fractal Design Corp. by MetaTools Inc.;
 
      (7) the merger of Tencor Instruments with KLA Instruments Corp.;
 
      (8) the acquisition of TSX Corporation by ANTEC Corp.;
 
      (9) the acquisition of Integrated Silicon Systems Inc. by ArcSys Inc.; and
 
     (10) the acquisition of Recognition International Inc. by BancTec Inc.
 
   
Lehman Brothers calculated the premium per share paid by the acquiror compared
to the share price of the target company prevailing (1) one month and (2) one
day prior to the announcement of the transaction.
    
 
   
Lehman Brothers reviewed the premium per share paid by SpeedFam compared to the
average share price of IPEC prevailing during:
    
 
   
      (1) one year,
    
 
   
      (2) six months,
    
 
   
      (3) three months,
    
 
   
      (4) one month, and
    
 
   
      (5) one day
    
 
   
prior to the announcement of the transaction.
    
 
   
<TABLE>
<CAPTION>
                                                              LAST TWELVE MONTHS
              COMPARABLE TRANSACTIONS ANALYSIS                 REVENUE MULTIPLE
              --------------------------------                ------------------
<S>                                                           <C>
SpeedFam/IPEC:                                                      1.40x
Median of Comparable Transactions:                                  2.86x
</TABLE>
    
 
   
<TABLE>
<CAPTION>
PREMIUMS PAID ANALYSIS                          ONE MONTH PREMIUM    ONE DAY PREMIUM
----------------------                          -----------------    ---------------
<S>                                             <C>                  <C>
SpeedFam/IPEC:                                        31.4%               -2.4%
Median of Semiconductor Transactions:                 40.0%               31.7%
Median of Technology Transactions (stock):            55.1%               24.5%
Median of Technology Transactions (cash):             45.0%               25.6%
Median of Stock Merger Transactions:                  24.9%               23.4%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
          PREMIUM PAID TO IPEC
       BASED ON AVERAGE EXCHANGE
             RATIO DURING:                1 YEAR   6 MONTHS   3 MONTHS   1 MONTH   1 DAY
       -------------------------          ------   --------   --------   -------   -----
<S>                                       <C>      <C>        <C>        <C>       <C>
                                           9.9%     16.2%      16.8%      19.7%    -2.4%
</TABLE>
    
 
                                       40
<PAGE>   48
 
   
However, because the reasons for and the circumstances surrounding each of the
comparable transactions, the semiconductor transactions, the technology
transactions, and the stock merger transactions were specific to such
transaction, and because of the inherent differences among the businesses,
operations and prospects of SpeedFam and IPEC and the selected acquired
companies analyzed, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the comparable
transactions analyses and, accordingly, also made qualitative judgments
concerning differences between the terms and characteristics of these
transactions and the merger that would affect the transaction values of IPEC and
such acquired companies.
    
 
   
PRO FORMA ANALYSIS.  Based on the exchange ratio and the fiscal year 2000
standalone financial estimates for both IPEC and SpeedFam, Lehman Brothers
calculated the estimated pro forma financial results for the combined company.
Lehman Brothers noted that, assuming no cost savings as a result of the merger,
the merger would be accretive to SpeedFam's standalone earnings per share in
fiscal year 2000.
    
 
Based on the exchange ratio and the fiscal year 2000 financial estimates of the
combined company following consummation of the merger, including the operating
synergies and strategic benefits expected by the management of SpeedFam to
result from a combination of the businesses of SpeedFam and IPEC, upon advice of
SpeedFam, Lehman Brothers calculated the estimated pro forma financial results
for the combined company. Lehman Brothers noted that the merger would be
accretive to SpeedFam's standalone earnings per share in fiscal year 2000.
 
ENGAGEMENT OF LEHMAN BROTHERS.  Lehman Brothers is an internationally recognized
investment banking firm and, as part of its investment banking activities, is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. The SpeedFam board
selected Lehman Brothers because of its expertise, reputation and familiarity
with both SpeedFam as well as the semiconductor equipment industry in general.
 
Pursuant to an engagement letter between SpeedFam and Lehman Brothers, SpeedFam
has agreed to pay Lehman Brothers
 
   
<TABLE>
<S>                                              <C>
Retainer Fee: .................................     $50,000
Opinion Fee: ..................................    $500,000
Fee upon consummation of the merger against
  which the retainer and opinion fee would be
  credited.....................................  $2,000,000
</TABLE>
    
 
   
Lehman Brothers has performed various investment banking services for SpeedFam
in the past, including lead-managing SpeedFam's common stock offerings in 1997.
Lehman Brothers earned approximately $1.8 million and $2.6 million,
respectively, for the February 1997 and October 1997 common stock offerings. In
the ordinary course of its business, Lehman Brothers actively trades in the
securities of SpeedFam and IPEC for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
    
 
OPINION OF IPEC'S FINANCIAL ADVISOR
 
Pursuant to a letter agreement dated as of November 18, 1998, Morgan Stanley &
Co. Incorporated was engaged to provide financial advisory services and a
financial fairness opinion in connection with the merger. Morgan Stanley was
selected by the IPEC board to
 
                                       41
<PAGE>   49
 
act as IPEC's financial advisor based on Morgan Stanley's qualifications,
expertise and reputation and its knowledge of the business and affairs of IPEC.
At the meeting of the IPEC board on November 19, 1998, Morgan Stanley rendered
its oral opinion, subsequently confirmed in writing, that as of November 19,
1998, based upon and subject to the various considerations set forth in the
opinion, the exchange ratio pursuant to the merger agreement was fair from a
financial point of view to the holders of shares of IPEC regular common stock.
 
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY DATED NOVEMBER 19, 1998,
WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY
MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX E TO THIS JOINT
PROXY STATEMENT/PROSPECTUS. IPEC STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO
THE IPEC BOARD AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO PURSUANT TO
THE MERGER AGREEMENT FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF SHARES OF
IPEC REGULAR COMMON STOCK AS OF THE DATE OF THE OPINION, AND DOES NOT ADDRESS
ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF IPEC COMMON STOCK AS TO HOW TO VOTE AT THE IPEC SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION.
 
In connection with rendering its opinion, Morgan Stanley, among other things,
 
      (1) reviewed certain publicly available financial statements and other
          information of IPEC and SpeedFam, respectively;
 
      (2) reviewed certain internal financial statements and other financial and
          operating data concerning IPEC and SpeedFam, respectively;
 
      (3) discussed with the senior managements of IPEC and SpeedFam certain
          research analyst projections for IPEC and SpeedFam, respectively;
 
      (4) discussed the past and current operations and financial condition and
          the prospects of IPEC, including information relating to certain
          strategic, financial and operational benefits anticipated from the
          merger, with senior executives of IPEC;
 
      (5) discussed the past and current operations and financial condition and
          the prospects of SpeedFam, including information relating to certain
          strategic, financial and operational benefits anticipated from the
          merger, with senior executives of SpeedFam;
 
      (6) reviewed the pro forma impact of the merger on the earnings per share
          of SpeedFam;
 
      (7) reviewed the reported prices and trading activity for IPEC regular
          common stock and SpeedFam common stock;
 
      (8) compared the financial performance of IPEC and SpeedFam and the prices
          and trading activity of IPEC regular common stock and SpeedFam common
          stock with that of certain other publicly-traded companies and their
          securities;
 
      (9) reviewed the financial terms, to the extent publicly available, of
          certain comparable merger and acquisition transactions;
 
                                       42
<PAGE>   50
 
     (10) reviewed and discussed with the senior managements of IPEC and
          SpeedFam the strategic rationale for the merger and certain
          alternatives to the merger;
 
     (11) participated in discussions and negotiations among representatives of
          IPEC and SpeedFam and their financial and legal advisors;
 
     (12) reviewed the draft merger agreement and certain related agreements;
          and
 
     (13) performed such other analysis and considered such other factors as
          Morgan Stanley has deemed appropriate.
 
   
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion. With respect to the internal financial statements and/or other
financial and operating data, information, discussions and estimates relating to
the strategic, financial and operational benefits anticipated from the merger
provided by IPEC and SpeedFam, Morgan Stanley assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance and prospects of IPEC and
SpeedFam, respectively. Morgan Stanley relied upon, without independent
verification, the assessment by the managements of IPEC and SpeedFam of their
ability to retain key employees of both IPEC and SpeedFam. Morgan Stanley also
relied upon, without independent verification, the assessment by the managements
of IPEC and SpeedFam of the strategic and other benefits expected to result from
the merger. Morgan Stanley also relied upon, without independent verification,
the assessment by the managements of IPEC and SpeedFam of IPEC's and SpeedFam's
technologies and products, the timing and risks associated with the integration
of IPEC and SpeedFam, and the validity of, and risks associated with IPEC's and
SpeedFam's existing and future products and technologies. Morgan Stanley assumed
that the merger will be accounted for as a "pooling of interests" business
combination in accordance with U.S. Generally Accepted Accounting Principles,
will be treated as a tax-free reorganization and/or exchange pursuant to the
Internal Revenue Code, and will be consummated in accordance with the terms set
forth in the merger agreement. Morgan Stanley did not make any independent
valuation or appraisal of the assets, liabilities or technology of IPEC or
SpeedFam, nor was Morgan Stanley furnished with any such appraisals. Morgan
Stanley's opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to it as of, November 19,
1998.
    
 
The following is a brief summary of certain analyses performed by Morgan Stanley
in connection with its oral opinion and the preparation of its opinion letter
dated November 19, 1998. Certain of these summaries of financial analyses
include information presented in a tabular format. In order fully to understand
the financial analyses used by Morgan Stanley, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
 
   
COMPARATIVE STOCK PRICE PERFORMANCE.  Morgan Stanley reviewed the recent stock
price performance of IPEC and SpeedFam and compared such performance with that
of a group of large semiconductor capital equipment companies and a group of
mid-sized semiconductor capital equipment companies, comprised as follows:
    
 
                                       43
<PAGE>   51
 
   
<TABLE>
<S>                                             <C>
LARGE SEMICAP INDEX                             MID-SIZED SEMICAP INDEX
 
Applied Materials, Inc.                         Etec Systems Inc.
KLA-Tencor Corporation                          LAM Research Corporation
ASM Lithography Inc.                            Ultratech Stepper Inc.
Treadyne, Inc.                                  Cymer Inc.
Novellus Systems Inc.                           Silicon Valley Group Inc.
                                                PRI Automation Inc.
                                                FSI International Corporation
                                                Gasonics International Corporation
                                                Mattson Technology Inc.
</TABLE>
    
 
   
Morgan Stanley also compared SpeedFam's and IPEC's stock price performance to
the Standard and Poors 500 Index and the Morgan Stanley High Technology 35
Index. The following table presents the change in the stock prices for these
groups, as compared to the change in the stock prices for the IPEC regular
common stock and the SpeedFam common stock, over the period from January 1, 1998
to November 17, 1998.
    
 
   
<TABLE>
<CAPTION>
                                                              PERCENTAGE
                                                                CHANGE
                                                              ----------
<S>                                                           <C>
Large SemiCap Index.........................................     +12%
Mid-Sized SemiCap Index.....................................     -15%
Standard and Poors 500 Index................................     +17%
Morgan Stanley High Technology 35 Index.....................     +56%
IPEC regular common stock...................................     -37%
SpeedFam common stock.......................................     -45%
</TABLE>
    
 
   
PEER GROUP COMPARISON.  Morgan Stanley compared certain financial information of
IPEC and SpeedFam with publicly available information for the companies in the
Large SemiCap Index and the Mid-Sized SemiCap Index. The following table
presents, as of November 17, 1998, the median for those companies of estimated
aggregate value (defined as market capitalization plus total debt less cash and
cash equivalents) to projected calendar year 1998 revenue multiples, stock price
to projected calendar year 1998 earnings multiples and stock price to projected
calendar year 1999 earnings multiples, compared to the values indicated for the
IPEC and SpeedFam estimates.
    
 
   
<TABLE>
<CAPTION>
                                AGGREGATE VALUE            STOCK PRICE              STOCK PRICE
                             TO PROJECTED CALENDAR    TO PROJECTED CALENDAR    TO PROJECTED CALENDAR
                               YEAR 1998 REVENUE       YEAR 1998 EARNINGS       YEAR 1999 EARNINGS
                             ---------------------    ---------------------    ---------------------
<S>                          <C>                      <C>                      <C>
SpeedFam.................            0.53                     92.0                    252.0
IPEC.....................            1.61                     N.M.                     N.M.
Median of Large SemiCap
  Index Companies........            2.96                     35.7                     28.8
Median of Mid-Sized
  SemiCap Index
  Companies..............            0.76                     15.4                     38.1
</TABLE>
    
 
                                       44
<PAGE>   52
 
No company utilized in the peer group comparison analysis as a comparison is
identical to IPEC or SpeedFam. In evaluating the peer groups, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond control of IPEC or SpeedFam, such as the impact of competition
on the business of IPEC or SpeedFam and the industry generally, industry growth
and the absence of any adverse material change in the financial condition and
prospects of IPEC or SpeedFam or the industry or in the financial markets in
general. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using peer group data.
 
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS.  Morgan Stanley reviewed a number
of semiconductor capital equipment transactions which consisted of:
 
      (1) the acquisition of Consilium, Inc. by Applied Materials, Inc.;
 
      (2) the acquisition of OrCAD, Inc. by Summit Design, Inc.;
 
      (3) the acquisition of Active Impulse Systems, Inc. by Philips Electronics
          NV;
 
      (4) the acquisition of AMRAY, Inc. by KLA-Tencor Corporation;
 
      (5) the acquisition of NOW Technologies, Inc. by ATMI, Inc.;
 
      (6) the acquisition of Equipe Technologies, Inc. by PRI Automation, Inc.;
 
      (7) the acquisition of Fusion Systems Corporation by Eaton Corporation;
 
      (8) the acquisition of Varian Associates, Inc. (Thin Films Systems
          Business) by Novellus Systems Inc.;
 
      (9) the acquisition of Wyko Corporation by Veeco Instruments Inc.;
 
     (10) the acquisition of OnTrak Systems, Inc. by Lam Research Corporation;
 
     (11) the acquisition of Tencor Instruments by KLA Instruments Corporation;
 
     (12) the acquisition of Opal, Inc. by Applied Materials, Inc.;
 
     (13) the acquisition of Orbot Instruments, Inc. by Applied Materials, Inc.;
 
     (14) the acquisition of Electrotech Limited and Electrotech Equipment
          Limited by Plasma & Materials Technologies, Inc.;
 
   
     (15) the acquisition of Precision Materials Operation of Hughes Danbury
          Optical Systems, Inc. by IPEC;
    
 
     (16) the acquisition of National Semiconductor Corporation's wholly owned
          subsidiary DynaCraft, Inc by Malaysia Pacific Industries;
 
     (17) the acquisition of GAARD Automation, Inc. by Integrated Process
          Equipment Corp.;
 
     (18) the acquisition of Megatest Corporation by Teradyne, Inc.; and
 
     (19) the acquisition of Prometrix Corporation by Tencor Instruments.
 
   
Morgan Stanley compared certain publicly available statistics for these
transactions to the relevant financial statistics for IPEC based on the value of
IPEC implied by the exchange ratio and the closing price for IPEC regular common
stock and SpeedFam Common Stock as of November 17, 1998.
    
 
                                       45
<PAGE>   53
 
   
The following table presents the low, median and high last 12 months revenue
multiple and implied premium to offer price based on the closing price of the
relevant stock 1 day and 1 month prior to the announcement for those
transactions listed above compared to the respective revenue multiple and
implied premium for this transaction as of November 17, 1998.
    
 
   
<TABLE>
<CAPTION>
                                                         IMPLIED PREMIUM TO OFFER PRICE
                                                         -------------------------------
                                         LAST TWELVE         1 DAY           1 MONTH
                                        MONTHS REVENUE      PRIOR TO         PRIOR TO
                                           MULTIPLE       ANNOUNCEMENT     ANNOUNCEMENT
                                        --------------   --------------   --------------
<S>                                     <C>              <C>              <C>
Semiconductor capital equipment
  transactions listed above
  Low................................        0.5              -6.6%            -2.8%
  Median.............................        2.5              34.0%            65.8%
  High...............................        4.9             169.2%           151.9%
IPEC.................................        1.4               3.6%            42.0%
</TABLE>
    
 
No transaction utilized as a comparison in the precedent transactions analysis
is identical to the merger. In evaluating the precedent transactions, Morgan
Stanley made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of IPEC or SpeedFam, such as the impact of
competition on IPEC or SpeedFam and the industry generally, industry growth and
the absence of any adverse material change in the financial condition and
prospects of IPEC or SpeedFam or the industry or in the financial markets in
general. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data.
 
   
RELATIVE CONTRIBUTION ANALYSIS.  Morgan Stanley analyzed the pro forma
contribution of each of IPEC and SpeedFam to the combined company assuming
consummation of the merger and based on estimates from securities research
analysts for both companies. The following table presents IPEC's contribution to
the combined company on a revenue and gross profit basis for the last 12 months,
calendar year 1998 projected and calendar year 1999 projected.
    
 
   
<TABLE>
<CAPTION>
                                                   CONTRIBUTION OF IPEC TO THE COMBINED
                                                                 COMPANY
                                                 ----------------------------------------
                                                  LAST 12        CALENDAR       CALENDAR
                                                   MONTHS        YEAR 1998      YEAR 1999
                                                 HISTORICAL      PROJECTED      PROJECTED
                                                 ----------      ---------      ---------
<S>                                              <C>             <C>            <C>
Revenue....................................        27.8%          26.0%          28.2%
Gross Profit...............................        25.5%          20.7%          28.5%
</TABLE>
    
 
These figures, adjusted to reflect each company's respective capital structures,
were compared to the pro forma fully-diluted ownership of the combined company
by IPEC stockholders of 43.3% implied by the merger.
 
EXCHANGE RATIO ANALYSIS.  Morgan Stanley reviewed the ratios of the closing
prices of IPEC regular common stock divided by the corresponding prices of
SpeedFam common stock over various periods during the twelve month period ending
November 17, 1998 and computed the premia represented by the exchange ratio over
the averages of these daily ratios over various periods. The following table
presents the range of implied exchange ratios over the periods covered and the
implied exchange ratio as of November 17, 1998, compared to the exchange ratio
of the merger.
 
                                       46
<PAGE>   54
 
   
<TABLE>
<CAPTION>
                                                             PERCENTAGE PREMIUM REPRESENTED
                                    AVERAGE HISTORICAL        BY EXCHANGE RATIO IN MERGER
 PERIOD ENDING NOVEMBER 17, 1998      EXCHANGE RATIO     OVER AVERAGE HISTORICAL EXCHANGE RATIO
 -------------------------------    ------------------   --------------------------------------
<S>                                 <C>                  <C>
As of November 17, 1998                   0.685                             4%
5 Trading Days....................        0.620                            15%
10 Trading Days...................        0.570                            25%
20 Trading Days...................        0.578                            23%
30 Trading Days...................        0.603                            18%
60 Trading Days...................        0.623                            14%
90 Trading Days...................        0.610                            16%
120 Trading Days..................        0.610                            17%
</TABLE>
    
 
   
DISCOUNTED EQUITY VALUE.  Morgan Stanley performed an analysis of the present
value per share of IPEC on a standalone basis based on IPEC's future trading
price. Morgan Stanley observed the present value per share of IPEC regular
common stock on a standalone basis, based on a range of earnings per share
estimates based on securities research analysts for the calendar years 2000 and
2001, earnings per share multiples and discount rates. Morgan Stanley compared
the results of the standalone analysis to an analysis of the present value per
share of the implied value of IPEC based on SpeedFam's future trading price
assuming consummation of the merger and based on a range of earnings per share
estimates based on securities research analysts for both companies for calendar
years 2000 and 2001 including synergies anticipated from the merger, estimated
by the managements of both companies, earnings per share multiples and discount
rates. Morgan Stanley also performed an analysis of the present value per share
of SpeedFam on a standalone basis. Morgan Stanley observed the present value per
share of SpeedFam common stock on a standalone basis based on a range of
earnings per share estimates based on securities research analysts for the
calendar years 2000 and 2001, earnings per share multiples and discount rates.
The following table presents the ranges of earnings per share multiples,
discount rates and present values per share of stock for each of the three
analyses:
    
 
   
<TABLE>
<CAPTION>
                                                 DISCOUNTED EQUITY VALUE ANALYSIS
                                      -------------------------------------------------------
                                         RANGE OF                               RANGE OF
                                       EARNINGS PER         RANGE OF         PRESENT VALUES
                                      SHARE MULTIPLES    DISCOUNT RATES    PER SHARE OF STOCK
                                      ---------------    --------------    ------------------
<S>                                   <C>                <C>               <C>
IPEC standalone.....................     15x - 35x       19.7% - 25.0%      $ 6.72 - $26.17
IPEC assuming consummation of the
  merger............................     20x - 40x       18.5% - 25.0%      $15.26 - $35.99
SpeedFam standalone.................     20x - 40x       17.3% - 25.0%      $ 7.08 - $24.14
</TABLE>
    
 
In connection with the review of the merger by the IPEC board of directors,
Morgan Stanley performed a variety of financial and comparative analyses for
purposes of its opinion given in connection therewith. The summary set forth
above does not purport to be a complete description of the analyses performed by
Morgan Stanley in connection with the merger.
 
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Morgan Stanley believes that selecting any
portion of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion. In addition, Morgan
 
                                       47
<PAGE>   55
 
Stanley may have given various analyses and factors more or less weight than
other analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of IPEC or SpeedFam.
 
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of IPEC or SpeedFam. Any
estimates contained in Morgan Stanley's analysis are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness of the
exchange ratio pursuant to the merger agreement from a financial point of view
to the holders of IPEC regular common stock and were conducted in connection
with the delivery of the Morgan Stanley opinion to the board of directors of
IPEC. The analyses do not purport to be appraisals or to reflect the prices at
which IPEC regular common stock or SpeedFam common stock might actually trade.
The exchange ratio pursuant to the merger agreement and other terms of the
merger agreement were determined through arm's-length negotiations between IPEC
and SpeedFam and were approved by the IPEC board of directors. Morgan Stanley
provided advice to IPEC during such negotiations; however, Morgan Stanley did
not recommend any specific consideration to IPEC or that any specific
consideration constituted the only appropriate consideration for the merger. In
arriving at its opinion, Morgan Stanley was not authorized to solicit, and did
not solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving IPEC, although in the
course of its engagement, it did provide advice to IPEC in connections with
certain potential business combinations with parties other than SpeedFam. Also,
with IPEC's consent, the future financial information regarding IPEC and
SpeedFam reviewed by Morgan Stanley in connection with the rendering of this
opinion was limited to publicly available information regarding IPEC and
SpeedFam and certain discussions with the senior managements of IPEC and
SpeedFam regarding the prospects of IPEC and SpeedFam. Morgan Stanley also
relied upon the assurances of the managements of both IPEC and SpeedFam that
they were not aware of any facts or circumstances currently in existence that
would make such information inaccurate or misleading regarding IPEC or SpeedFam,
respectively. In addition, as described above, Morgan Stanley's opinion and
presentation to the IPEC board of directors was one of many factors taken into
consideration by IPEC's board in making its decision to approve the merger.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as determinative of the opinion of the IPEC board of directors with
respect to the value of IPEC or of whether the IPEC board of directors would
have been willing to agree to a different consideration.
 
The IPEC board of directors retained Morgan Stanley based upon Morgan Stanley's
qualifications, experience and expertise. Morgan Stanley is an internationally
recognized investment banking and advisory firm. Morgan Stanley, as part of its
investment banking and financial advisory business, is continuously engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of Morgan
Stanley's trading and brokerage activities, Morgan Stanley or its affiliates may
at any time hold long or short positions, may trade or otherwise effect
transactions, for its own account
 
                                       48
<PAGE>   56
 
or for the account of customers in the equity or debt securities or senior loans
of IPEC or SpeedFam.
 
   
Pursuant to an engagement letter dated November 18, 1998, Morgan Stanley
provided financial advisory services and a financial opinion in connection with
the merger, and IPEC agreed to pay Morgan Stanley a fee of $2.25 million. IPEC
has also agreed to reimburse Morgan Stanley for its out-of-pocket expenses
incurred by Morgan Stanley in performing its services. In addition, IPEC has
also agreed to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against certain liabilities and
expenses, including certain liabilities under the federal securities laws,
related to or arising out of Morgan Stanley's engagement and any related
transactions. In the past, Morgan Stanley and its affiliates earned
approximately $1.4 million for providing financial advisory services for IPEC in
connection with the $115.0 million 6.25% convertible note offering in September
1997.
    
 
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
 
The following discussion summarizes the material federal income tax
considerations of the merger that are generally applicable to holders of IPEC
regular common stock, Class A common stock and preferred stock. This discussion
does not address all income tax considerations that may be relevant to
particular IPEC stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, foreign persons, stockholders who
acquired their shares in connection with previous mergers involving IPEC or an
affiliate, or stockholders who acquired their shares in connection with stock
option or stock purchase plans or in other compensatory transactions.
 
The following discussion also does not address the tax consequences of
transactions effectuated prior to or after the merger (whether or not such
transactions are in connection with the merger), including without limitation
transactions in which shares of IPEC stock were or are acquired or shares of
SpeedFam common stock or common stock of the combined company were or are
disposed of. Furthermore, no foreign, state or local tax considerations are
addressed herein. Accordingly, IPEC stockholders are urged to consult their own
tax advisors as to the specific tax consequences of the merger, including the
applicable federal, state, local and foreign tax consequences to them of the
merger.
 
   
SpeedFam and IPEC have each received an opinion from their respective legal
counsel, Chapman and Cutler and Wilson Sonsini Goodrich & Rosati, Professional
Corporation, respectively, that the merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code, with each of
SpeedFam, SpeedFam, Inc. and IPEC qualifying as a "party to the reorganization"
under Section 368(b) of the Internal Revenue Code. As a reorganization, the
merger will have the following tax consequences, subject to the limitations and
qualifications described below:
    
 
     (a) No gain or loss will be recognized by holders of IPEC regular common
         stock, Class A common stock or preferred stock solely upon their
         receipt of common stock of the combined company in the merger in
         exchange therefor;
 
     (b) IPEC stockholders receiving cash instead of fractional shares of
         SpeedFam common stock will recognize gain (but not loss) to the extent
         cash received exceeds the IPEC stockholder's basis in such fractional
         shares;
 
     (c) The aggregate tax basis of the common stock of the combined company
         received in the merger by an IPEC stockholder will be the same as the
         aggregate tax basis
 
                                       49
<PAGE>   57
 
         of IPEC regular common stock, Class A common stock or preferred stock,
         as applicable, surrendered in exchange therefor;
 
     (d) The holding period of the common stock of the combined company received
         in the merger by a IPEC stockholder will include the period during
         which the stockholder held the IPEC regular common stock, Class A
         common stock or preferred stock, as applicable, surrendered in exchange
         therefor, provided that the IPEC stock is held as a capital asset at
         the time of the merger;
 
   
     (e) An IPEC stockholder who exercises appraisal rights with respect to all
         of such holder's shares of IPEC Class A common stock or preferred stock
         will generally recognize gain or loss for federal income tax purposes,
         measured by the difference between the holder's basis in such shares
         and the amount of cash received, provided that the payment is neither
         essentially equivalent to a dividend within the meaning of Section 302
         of the Internal Revenue Code nor has the effect of a distribution of a
         dividend within the meaning of Section 356(a)(2) of the Internal
         Revenue Code (collectively, a "Dividend Equivalent Transaction"). Such
         gain or loss will be capital gain or loss, provided that the IPEC Class
         A common stock or preferred stock is held as a capital asset at the
         time of the merger. A sale of IPEC Class A common stock or preferred
         stock pursuant to an exercise of appraisal rights will generally not be
         a Dividend Equivalent Transaction if, as a result of such exercise, the
         stockholder exercising appraisal rights owns no shares of SpeedFam
         common stock or IPEC stock (either actually or constructively within
         the meaning of Section 318 of the Internal Revenue Code). If, however,
         a stockholder's sale for cash of IPEC Class A common stock or preferred
         stock pursuant to an exercise of appraisal rights is a Dividend
         Equivalent Transaction, then such stockholder will generally recognize
         income for federal income tax purposes in an amount equal to the lesser
         of IPEC's current and accumulated earnings and profits, or the entire
         amount of cash so received; and
    
 
     (f) None of SpeedFam, SpeedFam, Inc. or IPEC will recognize gain or loss
         solely as a result of the merger.
 
The parties are not requesting a ruling from the Internal Revenue Service in
connection with the merger. The tax opinions neither bind the Internal Revenue
Service nor preclude the Internal Revenue Service from adopting a contrary
position. In addition, the tax opinions are subject to certain assumptions and
qualifications and are based on the truth and accuracy of certain
representations made by SpeedFam, SpeedFam, Inc. and IPEC, including
representations in certificates delivered to counsel by the respective
management of SpeedFam, SpeedFam, Inc. and IPEC. If the tax consequences of the
merger change, you will be resolicited for your vote and you will be provided
with a revised discussion of the tax consequences.
 
A successful Internal Revenue Service challenge to the "reorganization" status
of the merger would result in an IPEC stockholder recognizing gain or loss with
respect to each share of IPEC regular common stock, Class A common stock or
preferred stock surrendered equal to the difference between the stockholder's
basis in such share and the fair market value, as of the effective time of the
merger, of the common stock of the combined company received in exchange
therefor. In such event, a stockholder's aggregate basis in the common stock of
the combined company so received would equal such fair market value and his
holding period for such stock would begin the day after the merger.
 
                                       50
<PAGE>   58
 
INFORMATION REPORTING AND BACKUP WITHHOLDING.  Cash payments in respect of
fractional shares of SpeedFam common stock may be subject to information
reporting to the Internal Revenue Service and to a 31% backup withholding tax.
Backup withholding generally will not apply, however, to a payment to an IPEC
stockholder or other payee if such IPEC stockholder or payee completes and signs
the substitute Form W-9 that will be included as part of the transmittal letter
or otherwise proves to SpeedFam and the exchange agent that it is exempt from
backup withholding.
 
GOVERNMENTAL AND REGULATORY APPROVALS
 
Under the Hart-Scott-Rodino Act and related federal rules, the merger cannot be
consummated until notifications have been given and certain information has been
furnished to the Federal Trade Commission and the Antitrust Division of the
Department of Justice and the specified waiting period has been satisfied. The
notifications required under the Hart-Scott-Rodino Act have been furnished to
the Federal Trade Commission and the Antitrust Division. Although the waiting
period under the Hart-Scott-Rodino Act has been terminated, at any time before
or after consummation of the merger, the Antitrust Division, the Federal Trade
Commission or any state or foreign governmental authority could take action
under the antitrust laws as it deems necessary or desirable in the public
interest. This action could include seeking to enjoin the consummation of the
merger or seeking divestiture of IPEC or businesses of SpeedFam or IPEC by
SpeedFam. Private parties may also seek to take legal action under the antitrust
laws under certain circumstances.
 
Based on information available to them, SpeedFam and IPEC believe that the
merger will be effected in compliance with federal, state and foreign antitrust
laws. However, there can be no assurance that a challenge to the consummation of
the merger on antitrust grounds will not be made or that, if such a challenge
were made, SpeedFam and IPEC would prevail.
 
ACCOUNTING TREATMENT
 
The merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting principles.
Consummation of the merger is conditioned upon receipt at the closing of the
merger by SpeedFam and IPEC of letters from KPMG LLP, SpeedFam's and IPEC's
independent auditors, affirming the firm's concurrence with SpeedFam
management's and IPEC management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the merger.
 
                              TERMS OF THE MERGER
 
The following is a summary of the material provisions of the merger agreement
and the stock option agreements, copies of which are attached as Annex A and
Annex B and are incorporated by reference. This summary is qualified in its
entirety by reference to the full and complete text of these agreements.
 
THE MERGER
 
At the time of the merger, IPEC will become a wholly owned subsidiary of
SpeedFam because SpeedFam, Inc. is merging with and into IPEC. SpeedFam, Inc. is
a wholly owned subsidiary of SpeedFam. The merger will be consummated by filing
a certificate of merger with the Delaware Secretary of State in accordance with
Delaware law as soon as
 
                                       51
<PAGE>   59
 
   
practicable on or after the closing date. If the proposals before you pass, the
closing is anticipated to occur on April      , 1999.
    
 
MERGER CONSIDERATION
 
   
The total number of shares of SpeedFam common stock to be issued in the merger
to IPEC stockholders is expected to be 13,046,791. No fractional shares of
SpeedFam common stock will be issued in the merger. Instead, IPEC stockholders
will receive a cash payment. The exact terms of the share exchange and cash
consideration formula are contained in the merger agreement.
    
 
IPEC REGULAR AND CLASS A COMMON STOCK.  Holders of IPEC regular and Class A
common stock will receive .71 of one share of SpeedFam common stock for each
share of regular and Class A common stock they own.
 
IPEC SERIES B-1 PREFERRED STOCK.  Holders of IPEC Series B-1 preferred stock
will receive 8.90 shares of SpeedFam common stock for each share of Series B-1
preferred stock they own.
 
IPEC SERIES B-2 PREFERRED STOCK.  Holders of IPEC Series B-2 preferred stock
will receive 8.10 shares of SpeedFam common stock for each share of Series B-2
preferred stock they own.
 
IPEC SERIES B-3 PREFERRED STOCK.  Holders of IPEC Series B-3 preferred stock
will receive 10.65 shares of SpeedFam common stock for each share of Series B-3
preferred stock they own.
 
EXCHANGE OF CERTIFICATES
 
You should not surrender your IPEC stock certificates until you receive the
letter of transmittal from the exchange agent. Letters of transmittal will be
sent to IPEC stockholders right after the effective date of the merger. DO NOT
SEND STOCK CERTIFICATES IN WITH YOUR PROXY.
 
IPEC OPTIONS
 
In the merger, SpeedFam will assume (1) all options to purchase IPEC regular
common stock outstanding under IPEC's 1992 Stock Option Plan, whether or not
exercisable, and (2) all options to purchase IPEC regular common stock granted
under the employment agreement, dated as of August 13, 1997, between IPEC and
Roger D. McDaniel, which are vested as of the effective time. These options will
be exercisable for SpeedFam common stock. The number of shares of SpeedFam
common stock and the exercise price will be adjusted to reflect the exchange
ratio.
 
SpeedFam has agreed to file registration statements on Form S-8 covering the
SpeedFam common stock underlying these IPEC options.
 
IPEC EMPLOYEE STOCK PURCHASE PLAN
 
At the time of the merger, the option period then in progress for IPEC's 1994
Employee Stock Purchase Plan will be shortened by setting a new purchase date
which will be the trading day immediately preceding the effective time. On the
new purchase date, IPEC will apply the funds credited as of that date under the
IPEC Employee Stock Purchase Plan to the purchase of whole shares of IPEC
regular common stock. These shares of IPEC regular common stock will
automatically convert into SpeedFam common stock on
 
                                       52
<PAGE>   60
 
the same basis as all other shares of IPEC regular common stock. The IPEC
Employee Stock Purchase Plan will terminate immediately following the purchase
of shares of IPEC regular common stock on the new purchase date.
 
IPEC WARRANTS
 
In the merger, SpeedFam will assume the outstanding warrants to purchase shares
of IPEC regular common stock. In each case, the exercise price and the number of
shares of SpeedFam common stock will be adjusted in accordance with the terms of
the security and the merger agreement.
 
SpeedFam has agreed to file a registration statement on Form S-3 covering
resales of the SpeedFam common stock underlying certain of these warrants.
 
IPEC CONVERTIBLE NOTES
 
SpeedFam and IPEC have agreed to enter into a supplemental indenture for the
convertible notes issued by IPEC under the indenture between IPEC and State
Street Bank and Trust Company of California, N.A., as trustee, dated as of
September 15, 1997. The issued and outstanding convertible notes will remain
outstanding after the merger as an obligation of IPEC, but will be convertible
into the number of shares of SpeedFam common stock receivable in the merger by a
holder of the number of shares of IPEC regular common stock into which the
convertible notes could have been converted immediately prior to the merger.
 
SpeedFam has agreed to file a registration statement on Form S-3 covering
resales of the SpeedFam common stock underlying the IPEC convertible notes.
 
STOCK OWNERSHIP FOLLOWING THE MERGER
 
   
Based on the number of shares of IPEC stock outstanding as of the close of
business on February 16, 1999, and assuming that no holder of IPEC Class A
common stock or preferred stock exercises appraisal rights, an aggregate of
13,046,791 shares of common stock of the combined company will be issued to IPEC
stockholders in the merger. This number of shares assumes that no IPEC stock
will be issued in connection with currently outstanding IPEC options, warrants
or other rights to purchase IPEC stock between now and the effective time of the
merger.
    
 
   
IPEC's common and preferred stockholders will own approximately 13,047,000
SpeedFam-IPEC shares, or approximately 44.6% of the combined company's
outstanding common stock. SpeedFam's shareholders will own approximately
16,210,000, or approximately 55.4%, of the combined company's outstanding common
stock.
    
 
   
The foregoing ownership break-down post-merger will not change even if all of
the shares (382,164) that could be issued upon exercise of SpeedFam's options
and IPEC's options, warrants and other rights to purchase IPEC stock that are
in-the-money as of the record date were outstanding.
    
 
   
In addition, an aggregate of 3,793,286 shares of SpeedFam common stock are
issuable pursuant to the exercise or conversion, as applicable, of IPEC
warrants, vested options and other rights to purchase IPEC stock that were
out-of-the-money as of the record date.
    
 
   
These numbers of shares and percentages are subject to change if the
capitalization of SpeedFam or IPEC changes after February 16, 1999 and before
the effective time, and
    
 
                                       53
<PAGE>   61
 
there can be no assurance as to the actual capitalization of SpeedFam or IPEC at
the effective time or of the combined company at any time after the effective
time.
 
MANAGEMENT OF THE COMBINED COMPANY
 
   
The board of the combined company following the merger will consist of 9
members. Five members will have served on the board of directors of SpeedFam (2
of whom will be independent of the management of SpeedFam) and 4 members will
have served on the board of directors of IPEC (3 of whom will be independent of
the management of IPEC). Mr. Roger D. McDaniel, the current chief executive
officer of IPEC, will be considered independent of the management of IPEC for
this purpose.
    
 
   
Upon consummation of the merger, James N. Farley and Sanjeev Chitre will become
the co-chairmen of the board of the combined company, Makoto Kouzuma will remain
vice chairman, Richard J. Faubert will remain president and chief executive
officer, Roger K. Marach will remain chief financial officer and treasurer and
Robert R. Smith will remain managing director of SpeedFam Limited.
    
 
   
After the merger, a transition team consisting of Messrs. Faubert -- team
chairman, who will be the leader of the transition team -- Kouzuma, Chitre and
McDaniel will be established to address issues that may arise in connection with
the integration of SpeedFam and IPEC. The transition team will remain in place
until the earlier of 1 year from the effective time or such time as the board of
directors of the combined company (including the affirmative vote of at least 2
of the combined company directors who served on the IPEC board) determines the
transition team is no longer necessary. In addition, at the effective time,
Ralph Hartung, currently the chief operating officer of IPEC, will be appointed
as chief operating officer and president of the CMP Group of the combined
company.
    
 
CONDUCT OF SPEEDFAM'S AND IPEC'S BUSINESS PRIOR TO THE MERGER
 
The merger agreement requires that, until the earlier of the termination of the
merger agreement or the effective time, IPEC and SpeedFam carry on their
business diligently and in accordance with good commercial practice and in the
usual, regular and ordinary course except (1) as indicated in the disclosure
schedules each party has delivered to the other or (2) to the extent that the
other of them shall otherwise consent in writing. Each of IPEC and SpeedFam has
agreed to promptly notify the other of any material event involving its business
or operations and to exchange monthly financial data and, to the extent
permissible under federal antitrust law, participate in planning meetings.
 
Except as permitted by the merger agreement or the stock option agreements, or
as provided in the disclosure schedules, without the prior written consent of
the other, neither IPEC nor SpeedFam may do any of the following:
 
     (a)  Change any of the terms of outstanding stock options;
 
     (b)  Grant any severance pay to any officer or employee, except under
          limited circumstances;
 
     (c)  Transfer or license to anyone or otherwise materially change any
          rights to its intellectual property, other than in the ordinary course
          of business;
 
   
     (d)  Declare or pay any dividends except for dividends payable to holders
          of IPEC preferred stock;
    
 
                                       54
<PAGE>   62
 
     (e)  Repurchase or otherwise acquire any shares of capital stock, except
          under outstanding rights of repurchase;
 
     (f)   Issue, deliver, sell, authorize or propose the issuance, delivery or
           sale of, any shares of capital stock or any securities convertible
           into or exercisable for shares of capital stock, or enter into other
           agreements or commitments obligating it to issue any such shares or
           convertible securities, other than in those circumstances
           specifically described in the merger agreement;
 
     (g)  Make or propose any amendments to any charter document or bylaw;
 
     (h)  Consummate or enter into a contract for a material business
          acquisition;
 
     (i)   Sell, lease, license, encumber or otherwise dispose of any material
           properties or assets, except in the ordinary course of business;
 
     (j)   Incur or guarantee any debt (other than ordinary course trade
           payables or pursuant to existing credit facilities in the ordinary
           course of business);
 
     (k)  Adopt or amend any employee benefit plan, or enter into any employment
          contract, pay any special bonus to any director or employee, or
          increase the salaries of its officers or employees, except under
          certain limited circumstances;
 
     (l)   Pay, discharge or satisfy any claim, liability or obligation, other
           than in the ordinary course of business;
 
     (m) Grant exclusive rights to any third party;
 
     (n)  Take any action that would be reasonably likely to interfere with
          SpeedFam's ability to account for the merger as a pooling of
          interests; or
 
     (o)  Agree to take any of the actions described in (a) through (n) above.
 
In addition, IPEC and SpeedFam have agreed that their boards of directors will
recommend adoption of the merger-related matters covered by this joint proxy
statement/ prospectus unless either board determines, in good faith, that
compliance with such board's fiduciary duties under applicable law would require
it to not make such recommendations.
 
NO SOLICITATION
 
Under the merger agreement, until the earlier of termination of the merger
agreement or the effective time, SpeedFam and IPEC have agreed that they will
not:
 
     - solicit any proposals by anyone other than IPEC or SpeedFam; or
 
   
     - negotiate with, disclose any non-public information concerning itself to,
       or give access to its properties to, anyone other than IPEC or SpeedFam
       in connection with any acquisition proposal.
    
 
   
An "acquisition proposal" involving SpeedFam or IPEC is any proposal for:
    
 
     - any merger, sale of assets or similar transaction, other than in the
       ordinary course of business;
 
     - the sale of (1) 15% or more of its outstanding capital stock or (2)
       shares of its capital stock with 15% or more of the voting power in the
       election of directors;
 
     - the acquisition by anyone of beneficial ownership or a right to acquire
       beneficial ownership of (1) 15% or more of its outstanding capital stock
       or (2) shares of its capital stock with 15% or more of the voting power
       in the election of directors, except acquisitions for passive investment
       purposes only; or
 
                                       55
<PAGE>   63
 
     - any public announcement of a proposal to do any of the above or any
       agreement to engage in any of the above.
 
In addition, SpeedFam and IPEC have agreed to
 
   
     (1) notify the other promptly if any inquiry is made in writing in
         connection with an acquisition proposal; and
    
 
   
     (2) notify the other of the significant terms and conditions of any
         acquisition proposal.
    
 
   
In addition, subject to the other provisions in the section of the merger
agreement summarized here, each of SpeedFam and IPEC have agreed that it will
not make any public statement in support of any acquisition proposal made by
anyone other than IPEC or SpeedFam. However, SpeedFam and IPEC have agreed that
their boards of directors may take and disclose to their shareholders a position
with respect to a tender offer pursuant to applicable Exchange Act rules.
    
 
   
Further, each of SpeedFam and IPEC may, if its board of directors determines
that the board's fiduciary duties require it to do so, negotiate with and
furnish information to anyone who has delivered to it an unsolicited, bona fide,
written acquisition proposal which its board of directors determines would
result in a transaction more favorable than the merger to its shareholders -- a
"superior proposal."
    
 
   
In connection with an acquisition proposal, SpeedFam and IPEC may refer any
third party to the provisions summarized here or make a copy of the applicable
section available to the third party.
    
 
   
If SpeedFam or IPEC receives a superior proposal, the merger agreement does not
prevent the board of directors of SpeedFam or IPEC from recommending the
superior proposal to its shareholders or from entering into a qualifying
agreement. However, the board must determine that its fiduciary duties require
it to do so. In that case, the board may change its recommendations concerning
the merger, and that company may refrain from soliciting proxies and taking
other action necessary to secure the vote of its shareholders as required by the
merger agreement.
    
 
   
SpeedFam and IPEC have agreed not to recommend a superior proposal to its
shareholders for at least 48 hours after its receipt of the superior proposal
(or a description of the significant terms and conditions, if not in writing).
    
 
   
Nothing in the merger agreement limits the obligation of SpeedFam or IPEC to
hold its special meeting, regardless of whether the recommendations of the board
have been changed or not yet made. However, the SpeedFam or IPEC board may
submit a superior proposal to shareholders for approval at the same meeting at
which the merger is considered.
    
 
   
The term "qualifying agreement" is a merger or similar agreement for a superior
proposal involving SpeedFam or IPEC that:
    
 
   
     - terminates automatically upon shareholder approval of the merger or
       certain actions in contemplation of the merger;
    
 
   
     - provides that there will be no liability or obligation of SpeedFam or
       IPEC due to termination of the agreement as a result of shareholder
       approval;
    
 
   
     - does not provide for the payment of any expenses of, or the transfer or
       issuance of any assets or securities to, the party making the superior
       proposal, except upon consummation of the superior proposal; and
    
 
                                       56
<PAGE>   64
 
     - does not require SpeedFam or IPEC not to comply or take any act
       inconsistent with any provision of the merger agreement, except to the
       extent permitted by the merger agreement.
 
SpeedFam and IPEC have agreed that they will not provide any non-public
information to a third party unless:
 
     (1) they provide the information under a nondisclosure agreement with terms
         regarding the protection of confidential information at least as
         restrictive as the terms of the confidentiality agreements between
         SpeedFam and IPEC; and
 
     (2) the information is the same as previously delivered to the other party.
 
BREAK UP FEES
 
Each of SpeedFam and IPEC has agreed that if
 
     (1) its board of directors changes, in a manner adverse to the other, its
         recommendation in favor of the merger-related proposals before you and
         at that time there has not occurred a material adverse effect on the
         other party, or
 
   
     (2) its board of directors recommends a superior proposal to its
         shareholders,
    
 
then it will pay $6.0 million to the other party.
 
   
The payment must be made 1 business day following the earlier to occur of (A)
termination of the merger agreement by the other party or (B) a negative vote of
SpeedFam or IPEC. A negative vote is if either company fails to get the required
vote on the merger-related proposals.
    
 
In addition, each of SpeedFam and IPEC have agreed that if no payment is
required under (1) or (2) above, it will make the $6.0 million payment if
 
   
     (1) a negative vote occurs;
    
 
   
     (2) prior to the negative vote an acquisition proposal is made with respect
         to it which has been publicly disclosed and not withdrawn -- a
         "competing proposal"; and
    
 
   
     (3) within 12 months following the negative vote it enters into a
         definitive agreement for the competing proposal with the party that
         made it or the competing proposal is consummated, provided that no
         material adverse effect on the other party had occurred prior to the
         negative vote.
    
 
SpeedFam and IPEC have agreed that payment of the fees described in this section
is in addition to any damages incurred in the event of a breach of the merger
agreement.
 
SpeedFam and IPEC have agreed to pay all their own fees and expenses in
connection with the merger agreement, whether or not the merger is consummated.
However, SpeedFam and IPEC will share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in connection with the
printing and filing of this joint proxy statement/prospectus.
 
                                       57
<PAGE>   65
 
CONDITIONS TO THE MERGER
 
The obligations of SpeedFam and IPEC to consummate the merger are subject to the
satisfaction of the following conditions:
 
     - obtaining the required shareholder approvals of SpeedFam and IPEC;
 
     - the registration statement having become effective under the Securities
       Act;
 
     - the absence of any legal or governmental action making the merger illegal
       or otherwise prohibiting consummation of the merger
 
     - the expiration or termination of the waiting period under the
       Hart-Scott-Rodino Act;
 
   
     - the receipt of written legal opinions that the merger constitutes a
       reorganization within the meaning of Section 368(a) of the Internal
       Revenue Code;
    
 
   
     - the listing of the shares of SpeedFam common stock issuable to IPEC
       stockholders on Nasdaq; and
    
 
     - the receipt of letters from independent accountants affirming that
       pooling of interests accounting is appropriate for the merger.
 
In addition, IPEC's obligation to consummate the merger is subject to the
satisfaction of the following conditions, any of which may be waived by IPEC:
 
     - the representations and warranties of SpeedFam and SpeedFam, Inc.
       contained in the merger agreement being true and correct;
 
     - SpeedFam and SpeedFam, Inc. performing or complying with, in all material
       respects, their agreements and covenants in the merger agreement;
 
     - the receipt of an opinion from SpeedFam's legal counsel on certain
       matters of corporate law; and
 
     - no material adverse effect with respect to SpeedFam having occurred since
       the date of the merger agreement.
 
Further, SpeedFam's obligation to consummate the merger is subject to the
satisfaction of each of the following conditions, any of which may be waived by
SpeedFam:
 
     - the representations and warranties of IPEC contained in the merger
       agreement being true and correct;
 
     - IPEC performing or complying with, in all material respects, its
       agreements and covenants in the merger agreement;
 
     - the receipt of an opinion from IPEC's legal counsel on certain matters of
       corporate law;
 
     - no material adverse effect with respect to IPEC having occurred since the
       date of the merger agreement;
 
     - a "Distribution Date" (as defined in the IPEC stockholder rights plan)
       having not occurred;
 
     - the Stockholder's Agreement among IPEC, Harold C. Baldauf and Janet A.
       Baldauf dated as of August 31, 1993 having been terminated;
 
                                       58
<PAGE>   66
 
     - written objections to the merger having not been made by the holders of
       the IPEC preferred stock or the IPEC Class A common stock in an amount
       which, in the aggregate, would, if converted pursuant to the merger
       agreement, represent more than 500,000 shares of SpeedFam common stock;
       and
 
     - all necessary consents, waivers and approvals for the assumption of the
       options, warrants and convertible notes to be assumed by SpeedFam
       pursuant to the merger agreement having been obtained.
 
TERMINATION OF THE MERGER AGREEMENT
 
The merger agreement may be terminated at any time prior to consummation of the
merger:
 
     - by mutual written consent of SpeedFam and IPEC
 
     - by either IPEC or SpeedFam if the merger has not been consummated by May
       31, 1999, unless its action caused the failure of the merger or is a
       breach of the merger agreement
 
     - by either IPEC or SpeedFam if a governmental entity issues a final order
       that prohibits the merger
 
     - by either IPEC or SpeedFam if the required shareholder approvals of IPEC
       or SpeedFam have not been obtained, unless its action resulted in the
       failure to obtain shareholder approval
 
   
     - by SpeedFam, if the IPEC board recommends a superior proposal or changes
       its recommendation to its stockholders to vote for the proposals
    
 
   
     - by IPEC, if the SpeedFam board recommends a superior proposal or changes
       its recommendation to its shareholders to vote for the proposals
    
 
     - by IPEC, if SpeedFam breaches a representation or warranty in the merger
       agreement
 
     - by SpeedFam, if IPEC breaches a representation or warranty in the merger
       agreement
 
OPTION AGREEMENTS
 
   
As an inducement to the other party, SpeedFam and IPEC entered into stock option
agreements with the other dated as of November 19, 1998. Under the agreements,
SpeedFam granted to IPEC and IPEC granted to SpeedFam rights to acquire up to a
number of shares of SpeedFam common stock or IPEC regular common stock. The
number of shares subject to each option is 19.9% of the issued and outstanding
shares as of the first date, if any, on which an exercise event occurs.
    
 
The exercise price for the options is payable either
 
     (1) in cash at a price of $14.875 per share in the case of the IPEC option
         and $10.56 per share in the case of the SpeedFam option; or
 
     (2) by exchange of shares of IPEC regular common stock or SpeedFam common
         stock at a rate based on the closing sale price of the stock on Nasdaq
         for the trading day just before the closing date of the particular
         option exercise.
 
                                       59
<PAGE>   67
 
   
The option holder may exercise the option after any of the following occurs,
each an "exercise event:"
    
 
     - immediately prior to the consummation of a tender or exchange offer for
       15% or more of any class of the other party's capital stock;
 
   
     - if the shareholders of the other party fail to give the required
       approvals for the merger when a competing proposal is in effect, and
       within 12 months following such failure, the other party enters into a
       definitive agreement for the competing proposal with the party that made
       it or the competing proposal is consummated;
    
 
   
     - if the board of the other party changes, in a manner adverse to the
       option holder, its recommendation in favor of the merger or decides to
       postpone or not hold the shareholders meeting after receipt of an
       acquisition proposal and at that time there has not occurred a material
       adverse effect on the option holder; or
    
 
   
     - if the board of the other party recommends a superior proposal to its
       shareholders.
    
 
The options will terminate upon the earliest of:
 
     - the effective time of the merger;
 
   
     - 180 days after the termination date of the merger agreement if an
       exercise event has occurred on or prior to the termination date;
    
 
   
     - 12 months after the termination date of the merger agreement if a
       negative vote of the other party has occurred and prior to the negative
       vote a competing proposal with respect to the other party has occurred;
    
 
     - 12 months after the termination date of the merger agreement if a tender
       or exchange offer for 15% or more of any class of the other party's
       capital stock was commenced prior to the termination date; and
 
   
     - subject to certain exceptions, the termination date of the merger
       agreement if neither an exercise event, nor both of the events specified
       in the third bullet point above, nor the commencement of a tender or
       exchange offer for 15% or more of any class of the other party's capital
       stock has occurred on or prior to the termination date.
    
 
   
However, if the option cannot be exercised because of any government order, then
the option will not terminate until the tenth business day after the impediment
to exercise has been removed or has become final and not subject to appeal. The
options may not be exercised if (a) the other party has materially breached any
of its covenants in the merger agreement or (b) the representations and
warranties of the other party in the merger agreement were not true in all
material respects on and as of the date when made.
    
 
During the time the option is exercisable, at the request of and upon notice by
the option holder, the other party has agreed to purchase:
 
   
     (1) the option, at a price equal to the number of shares issuable upon
         exercise of the option multiplied by the difference between (a) the
         greater of the highest price per share offered, as of the notice date,
         under any competing proposal or the highest closing sale price of the
         other party's common stock on Nasdaq during the 20 trading days ending
         on the trading day immediately before the notice date -- the
         "market/tender offer price," and (b) the applicable exercise price; and
    
 
                                       60
<PAGE>   68
 
   
     (2) the shares issued upon exercise of the option, if any, at a price per
         share equal to the applicable exercise price plus the difference
         between the market/tender offer price and that exercise price.
    
 
The stock option agreements include other provisions that:
 
     (1) require the option holder to sell back the option shares to the other
         party under specific circumstances; and
 
     (2) provide registration rights for the option shares.
 
These provisions are detailed in the stock option agreements attached to this
joint proxy statement/prospectus.
 
AFFILIATE AGREEMENTS
 
Each director and executive officer of SpeedFam has entered into agreements
restricting sales and other transactions reducing their risk of investment in
the shares of SpeedFam common stock held by them to help ensure that the merger
will be treated as a pooling of interests for accounting and financial reporting
purposes.
 
Each director and executive officer of IPEC has entered into similar agreements
for the shares of IPEC regular common stock held by them as well as the shares
of SpeedFam common stock to be received by them in the merger to comply with
federal securities and tax laws and to help ensure that the merger will be
treated as a pooling of interests for accounting and financial reporting
purposes.
 
RESALE RESTRICTIONS
 
The shares of SpeedFam common stock to be issued to the IPEC stockholders in
connection with the merger have been registered under the Securities Act. These
shares will be freely transferable under the Securities Act, except that shares
issued to any person who may be deemed an "affiliate" of IPEC, within the
meaning of Rule 145 under the Securities Act, may only be sold under an
effective registration statement covering those shares or in compliance with
Rule 145 or another exemption from the registration requirement. "Affiliates" of
IPEC are persons who control, are controlled by, or are under common control
with IPEC at the time of the IPEC special meeting (generally directors,
executive officers and principal stockholders).
 
This joint proxy statement/prospectus does not cover any resales of the SpeedFam
common stock to be received by IPEC stockholders upon consummation of the
merger, and no person is authorized to make any use of this joint proxy
statement/prospectus in connection with any resale.
 
INTERESTS OF DIRECTORS AND OFFICERS
 
Certain SpeedFam and IPEC directors and officers may be deemed to have interests
in the merger in addition to their interests as shareholders.
 
IPEC
 
   
CONSULTING AND EMPLOYMENT AGREEMENTS.  The surviving company will assume the
consulting agreement, dated November 19, 1998 and effective as of the effective
time of the merger, by and between Harold C. Baldauf, Harold Baldauf, Jr., and
David Baldauf -- collectively, the "consultants" -- and IPEC. IPEC entered into
the agreement to retain the
    
 
                                       61
<PAGE>   69
 
   
consultants' services after the effective time of the merger. The material terms
are as follows:
    
 
   
     - the consultants will perform services as advisors in the day-to-day
       operations of the surviving company's business, including providing
       advice regarding cost reductions and increased efficiencies with respect
       to parts and subassemblies for up to 130 days during each calendar year
       that the agreement is in effect
    
 
     - a term of 4 years
 
   
     - Harold C. Baldauf, as agent for the consultants, will receive consulting
       fees of $200,000 per year, plus expenses, to be divided among the
       consultants in accordance with their determination of the proportions of
       the consulting provided by each of them during the relevant period
    
 
     - if Harold C. Baldauf dies during the term of the agreement, the surviving
       company will pay the consulting fees in equal shares to Harold Baldauf,
       Jr. and David Baldauf
 
     - if Harold Baldauf and either Harold Baldauf, Jr. or David Baldauf dies
       during the term of the agreement, the surviving company will pay the
       consulting fees solely to the survivor
 
   
     - if all the consultants die during the term of the agreement, then no
       further consulting fees will be paid
    
 
   
     - during the term of the agreement and for a period of 2 years after
       termination, Harold C. Baldauf has agreed not to be connected with any
       business entity, other than the surviving company, that provides products
       or services in competition with the semiconductor or memory disk business
       conducted by the surviving company
    
 
The agreement does not prevent Harold C. Baldauf from owning, solely for
investment purposes, publicly traded securities of any company which operates a
business described in the last bullet point above.
 
IPEC entered into an employment agreement with Roger D. McDaniel dated August
1997. The material terms are as follows:
 
   
     - IPEC issued to Mr. McDaniel 50,000 shares of IPEC regular common stock
       without consideration with a vesting rate of 1,667 shares, pre-tax, at
       the end of each full month after the effective date of the
       agreement -- the "McDaniel shares"
    
 
   
     - IPEC granted Mr. McDaniel a stock option for up to 400,000 shares of IPEC
       regular common stock at an exercise price equal to the fair market value
       of the IPEC regular common stock on the effective date of the agreement,
       which becomes exercisable each year as to 25% of the number of shares
       initially subject to the option -- the "McDaniel option"
    
 
   
     - in the event of the closing of an "acquisition" of IPEC, the vesting of
       the McDaniel shares and the McDaniel option will accelerate by 12 months
       upon the closing, or as to such greater amount as is necessary for Mr.
       McDaniel to receive vesting in shares and options for no less than
       500,000 shares including full vesting of the remainder of the McDaniel
       shares
    
 
   
Under the terms of the agreement, the merger will constitute an "acquisition" of
IPEC. Accordingly, assuming the merger occurs on April 5, 1999, Mr. McDaniel
will receive
    
 
                                       62
<PAGE>   70
 
   
immediate vesting of shares and options for a total of 169,212 shares of
SpeedFam common stock.
    
 
IPEC has entered an agreement with John S. Hodgson. The material terms are as
follows:
 
   
     - Mr. Hodgson will serve as IPEC's chief financial officer and vice
       president, finance, until the effective time of the merger
    
 
     - Mr. Hodgson will receive from IPEC a payment equal to 12 months pay at
       his current monthly base salary, which is $14,000, plus a bonus of up to
       22% of his current annual base salary in a lump sum -- up to
       $36,960 -- when his employment terminates on the closing of the merger
 
   
     - Mr. Hodgson will start a 12-month consulting agreement at the effective
       time of the merger under which he will receive a minimum of $3,000 per
       quarter and which will allow his stock options to continue vesting, in
       accordance with IPEC's 1992 Stock Option Plan
    
 
   
As of February 16, 1999, Mr. Hodgson holds 109,200 IPEC options, 100,000 of
which are vested and 9,200 of which will vest in the next 12 months.
    
 
After the merger, SpeedFam - IPEC, Inc. will enter into employment agreements
with Messrs. Sanjeev Chitre and Ralph Hartung. The material terms of Mr.
Chitre's agreement will be as follows:
 
   
     - initial term of employment as co-chairman to end on May 31, 2000, but
       with automatic 1-year extensions
    
 
     - base annual salary of $400,000, plus performance-based bonuses
 
     - 2-year non-compete agreement after termination of the agreement
 
     - severance payment of 1 year salary if terminated without cause
 
The material terms of Mr. Hartung's agreement will be as follows:
 
   
     - initial term of employment as chief operating officer and president of
       the CMP Group to end on May 31, 2000, but with automatic 1-year
       extensions
    
 
     - base annual salary of $300,000, plus performance-based bonuses
 
     - 2-year non-compete agreement after termination of the agreement
 
     - severance payment of 1 year salary, plus bonus, if terminated without
       cause
 
INDEMNIFICATION.  After the effective time, SpeedFam will cause the surviving
corporation to fulfill and honor IPEC's obligations under any indemnification
agreements between IPEC and its directors and officers existing on the date of
the merger agreement. The certificate of incorporation and bylaws of the
surviving corporation will contain the provisions for indemnification in the
certificate of incorporation and bylaws of IPEC. SpeedFam has agreed not to
change these provisions in any manner that would adversely affect the rights of
individuals who were directors, officers, employees or agents of IPEC before the
merger for a period of 3 years.
 
The merger agreement provides that IPEC may purchase directors' and officers'
liability insurance, to be effective for 3 years from the effective time,
covering those persons who are currently covered by IPEC's directors' and
officers' liability insurance but only to the extent and on terms comparable to
the terms of IPEC's current policy. Also, IPEC may
 
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<PAGE>   71
 
not pay more than 150% of the annual premium currently paid by IPEC for each
year of coverage without the consent of SpeedFam.
 
The indemnification and insurance obligations (1) will survive the consummation
of the merger at the effective time; (2) are intended to benefit IPEC, the
surviving corporation and the present officers and directors of IPEC; and (3)
will be binding on all successors and assigns of the surviving corporation.
 
SPEEDFAM
 
EMPLOYMENT AGREEMENTS.  SpeedFam has employment agreements with James N. Farley,
Makoto Kouzuma, Roger K. Marach and Robert R. Smith. Each of these agreements
provides for benefits to the employee in the event of a "change of control" of
SpeedFam. The merger will constitute a change of control under these agreements.
 
If, during the 2 years following the change of control, the employee is
terminated by SpeedFam for any reason other than for cause, or if the employee
terminates his employment following certain changes in duties, then
 
     (1) the employee will receive all base annual salary accrued up to the date
         of termination and, within 30 days of termination, a single payment
         equal to 2 times the sum of (a) the employee's highest base annual
         salary and (b) the employee's highest target annual incentive award
         opportunity; and
 
     (2) all unvested stock options awarded to the employee under SpeedFam's
         stock option plans will immediately vest in full, provided that the
         stock options will be exercisable only within 90 days from vesting.
 
APPRAISAL RIGHTS
 
STOCKHOLDERS OF IPEC.  Holders of IPEC regular common stock are not entitled to
appraisal rights in connection with the merger. Holders of IPEC Class A common
stock and IPEC preferred stock have appraisal rights in connection with the
merger.
 
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may be entitled, under varying circumstances, to
appraisal rights pursuant to which the stockholder may receive cash in the
amount of the fair market value of his or her shares instead of the
consideration he or she would otherwise receive in the transaction. In a merger
under Delaware law, these rights are not available for the shares of any class
or series of stock which are either:
 
(1) listed on a national securities exchange, designated as a national market
    system security on an interdealer quotation system by the National
    Association of Securities Dealers, Inc. or held of record by more than 2,000
    holders if the stockholders receive only shares of the surviving
    corporation, shares of any other corporation which are either listed on a
    national securities exchange, designated as a national market system
    security on an interdealer quotation system by the National Association of
    Securities Dealers, Inc. or held of record by more than 2,000 holders, cash
    instead of fractional shares or a combination of both; or
 
(2) issued by the surviving corporation if no vote of the stockholders of the
    surviving corporation is required to approve the merger because the merger
    agreement does not amend the existing certificate of incorporation, each
    share of the surviving corporation outstanding prior to the merger is an
    identical outstanding or treasury share after the merger, and the number of
    shares issued in the merger is 20% or less of the shares of
 
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<PAGE>   72
 
    the surviving corporation outstanding just before to the merger and if
    certain other conditions are met.
 
IPEC regular common stock is designated on Nasdaq as a national market system
security. In the merger, holders of IPEC regular common stock will receive
shares of SpeedFam common stock. Since SpeedFam common stock is also designated
on Nasdaq as a national market system security, holders of IPEC regular common
stock would not be entitled to appraisal rights under Delaware law.
 
Since the shares of IPEC Class A common stock and IPEC preferred stock are not
listed on a national exchange, designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or owned of record by more than 2,000 holders, the holders of IPEC
Class A common stock and IPEC preferred stock are entitled to appraisal rights
under Delaware law.
 
Holders of IPEC Class A common stock and preferred stock which were outstanding
on the IPEC record date and who fully comply with all applicable provisions of
Section 262 of the Delaware General Corporation Law are entitled to exercise
appraisal rights.
 
Appraisal rights are exercisable only by the holder of record, not by a
beneficial owner who does not hold the shares of record.
 
If you are entitled to appraisal rights and should you wish to exercise them,
you should carefully review Section 262, attached to this joint proxy
statement/prospectus as Annex C. Section 262 outlines the steps you must take to
exercise your appraisal rights. Your appraisal rights will be lost if those
steps are not satisfied.
 
   
SHAREHOLDERS OF SPEEDFAM AND SPEEDFAM, INC.  Shareholders of SpeedFam are not
entitled to dissenters' rights under the Illinois Business Corporation Act of
1983 -- "IBCA" -- in connection with the merger because SpeedFam shareholder
approval of the merger is not required under Section 11.65 of the IBCA.
SpeedFam, as the sole stockholder of SpeedFam, Inc., would be entitled to
appraisal rights. However, SpeedFam intends to vote its shares of SpeedFam, Inc.
in favor of the merger.
    
 
SpeedFam, Inc. was created as a merger sub because structuring the merger
through SpeedFam, Inc. eliminated dissenters' rights for SpeedFam's
shareholders.
 
                          COMPARISON OF CAPITAL STOCK
 
DESCRIPTION OF SPEEDFAM CAPITAL STOCK
 
The authorized capital stock of SpeedFam consists of 60,000,000 shares of common
stock, without par value per share, and 1,000,000 shares of preferred stock,
without par value per share.
 
   
SPEEDFAM COMMON STOCK.  As of the SpeedFam record date, there were 16,209,795
shares of SpeedFam common stock outstanding held of record by approximately 134
shareholders. SpeedFam common stock is listed on Nasdaq under the symbol "SFAM."
Holders of common stock are entitled to one vote per share on all matters to be
voted upon by the shareholders generally, including the election of directors.
Subject to the rights of holders of any SpeedFam preferred stock outstanding,
holders of SpeedFam common stock are entitled to receive such dividends as are
declared by the SpeedFam Board out of funds legally available therefor, and in
the event of liquidation, dissolution or winding up of SpeedFam, the holders of
SpeedFam common stock are entitled to share ratably in any
    
 
                                       65
<PAGE>   73
 
assets remaining after payment of SpeedFam's liabilities. Holders of SpeedFam
common stock do not have preemptive or other subscription rights. All
outstanding shares of SpeedFam common stock are fully paid and non-assessable,
and the shares of SpeedFam common stock to be outstanding upon completion of the
merger will be fully paid and non-assessable.
 
PREFERRED STOCK.  SpeedFam has 1,000,000 shares of preferred stock authorized,
none of which, as of the SpeedFam record date, were outstanding. The SpeedFam
preferred stock may be issued from time to time in one or more series, and the
SpeedFam board, without further approval of the shareholders, is authorized to
fix the dividend rights and terms, redemption rights and terms, liquidation
preferences, conversion rights, special series voting rights and sinking fund
provisions applicable to each such series of SpeedFam preferred stock. If
SpeedFam issues a series of SpeedFam preferred stock in the future that has
special voting rights or preferences over the SpeedFam common stock with respect
to the payment of dividends or upon SpeedFam's liquidation, dissolution or
winding up, the rights of the holders of the SpeedFam common stock may be
adversely affected. The issuance of shares of SpeedFam preferred stock could be
utilized, under certain circumstances, in an attempt to prevent an acquisition
of SpeedFam and may adversely affect the voting and other rights of the holders
of SpeedFam common stock.
 
TRANSFER AGENT AND REGISTRAR.  The transfer agent and registrar of the SpeedFam
common stock is Firstar Trust Company and its telephone number is (414)
905-5000.
 
DESCRIPTION OF IPEC CAPITAL STOCK
 
The authorized capital stock of IPEC consists of 50,000,000 shares of common
stock, $.01 par value per share; 3,500,000 shares of Class A common stock, $.01
par value per share; and 2,000,000 shares of preferred stock, $.01 par value per
share.
 
   
REGULAR COMMON STOCK.  As of the IPEC record date, there were 17,906,832 shares
of IPEC regular common stock outstanding held of record by approximately 169
stockholders. IPEC regular common stock is designated as a Nasdaq national
market system security under the symbol "IPEC." Holders of IPEC regular common
stock are entitled to one vote per share on all matters to be voted upon by the
stockholders. The stockholders of IPEC have a right to take action by written
consent. The stockholders of IPEC may not cumulate votes in connection with the
election of directors. The holders of IPEC regular common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the IPEC board out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of IPEC, the holders of IPEC regular
common stock are entitled to share ratably in all assets remaining after payment
of liabilities. The IPEC regular common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the IPEC regular common stock. All outstanding shares
of IPEC regular common stock are fully paid and non-assessable.
    
 
CLASS A COMMON STOCK.  As of the IPEC record date there were 7,186 shares of
IPEC Class A common stock outstanding held of record by one stockholder. The
rights of the holders of the IPEC regular common stock and the IPEC Class A
common stock are essentially identical, except that:
 
     (1) the holders of the IPEC regular common stock are entitled to one vote
         per share, and holders of IPEC Class A common stock are entitled to
         four votes per share
 
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<PAGE>   74
 
         with respect to all matters on which holders of IPEC common stock are
         entitled to vote,
 
     (2) if stock dividends, splits, distributions, reverse splits,
         combinations, reclassification of shares or other recapitalizations
         (collectively, "recapitalizations") are declared or effected, such
         recapitalizations shall be effected in a like manner with respect to
         the IPEC regular common stock and the IPEC Class A common stock except
         that payments in shares of capital stock shall be paid in IPEC regular
         common stock with respect to IPEC regular common stock and in Class A
         common stock with respect to IPEC Class A common stock, and
 
     (3) shares of IPEC Class A common stock are convertible into IPEC regular
         common stock at the option of the holder at any time on a
         share-for-share basis.
 
   
Shares of IPEC Class A common stock are automatically converted into shares of
IPEC regular common stock upon their transfer to any person other than the
following transferees -- "permitted transferees":
    
 
   
     (a) the spouse, lineal descendants or adopted children -- "family
         members -- of the holder;
    
 
   
     (b) a trust for the sole benefit of family members;
    
 
   
     (c) a partnership or a corporation wholly owned by the IPEC Class A common
         stockholders and their family members; and
    
 
     (d) any other IPEC Class A common stockholders.
 
   
IPEC Class A common stock held by a partnership or a corporation may be
transferred to its partners or stockholders existing at the time a transferor
acquired its IPEC Class A common stock or if such partner or stockholder is a
permitted transferee. There is no trading market for the IPEC Class A common
stock.
    
 
Subject to the preferences of the preferred stock, holders of the IPEC regular
common stock and IPEC Class A common stock have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
IPEC board and are entitled to share ratably, as a single class, in all of the
assets of IPEC available for distribution to holders of shares of IPEC regular
common stock and IPEC Class A common stock upon the liquidation, dissolution or
winding up of the affairs of the IPEC. Holders of IPEC Class A common stock do
not have preemptive, subscription or conversion rights. There are no redemption
or sinking fund provisions for the benefit of the IPEC regular common stock or
IPEC Class A common stock in IPEC's certificate of incorporation.
 
PREFERRED STOCK.  IPEC has 2,000,000 shares of preferred stock authorized, of
which, as of the IPEC record date, 21,478 shares of Series B-1 preferred stock
have been authorized, of which 7,204 shares were issued and outstanding; 21,478
shares of Series B-2 preferred stock have been authorized, of which 19,544
shares were issued and outstanding; 21,478 shares of Series B-3 preferred stock
have been authorized, of which 9,898 shares were issued and outstanding; 100,000
shares of Series C preferred stock have been authorized, none of which were
issued and outstanding; and 50,000 shares of Series D preferred stock have been
authorized, none of which were issued and outstanding. The preferred stock of
IPEC may be issued in series, and shares of each series will have such rights
and preferences as are fixed by the IPEC board in the resolutions authorizing
the issuance of that particular series. In designating any series of preferred
stock, the IPEC board may, without further action by the holders of IPEC common
stock, fix the number, conversion rights, voting rights (which may be greater or
lesser than the voting rights of the IPEC
                                       67
<PAGE>   75
 
regular common stock), rights and terms of redemption (including any sinking
fund provisions), and the liquidation preferences of the series of preferred
stock.
 
Holders of IPEC Series B-1, B-2 and B-3 preferred stock -- referred to as "IPEC
preferred stock" -- have no voting rights except as required by law or in
connection with an amendment of the IPEC certificate of incorporation which may
adversely effect their preferences, rights, powers or privileges. Holders of
IPEC preferred stock are entitled to an annual cumulative dividend of $5.59 per
share, payable on each December 31 and June 30. Upon the dissolution or
liquidation of IPEC, the holder of each share of IPEC preferred stock shall be
entitled to payment of $93.12 before the holders of the IPEC regular common
stock or Class A common stock (or any other series of preferred stock which is
junior to the IPEC preferred stock on dissolution or liquidation) receive any
payment. Each share of Series B-1, B-2 and B-3 preferred stock is convertible
into 12.54, 11.41 and 15.00 shares of IPEC regular common stock, respectively.
The conversion rate on the Series B preferred stock would be adjusted in the
event of a stock dividend, stock split, combination or reclassification of the
IPEC regular common stock. The Series B preferred stock has certain
anti-dilution rights upon certain issuances of rights or warrants and
distributions of indebtedness on the IPEC regular common stock. The Series B
preferred stock is not subject to redemption.
 
All shares of Series C preferred stock were converted into IPEC regular common
stock on February 25, 1997, and no shares remain available for issuance.
 
The Series D preferred stock was authorized in connection with IPEC's adoption
of its stockholder rights plan. Series D preferred stock is not redeemable. Each
share of Series D preferred stock will be entitled to an aggregate dividend of
1,000 times the dividend declared per share of IPEC common stock. In the event
of liquidation, the holders of the Series D preferred stock will be entitled to
a minimum preferential liquidation payment equal to $120,000 per share. Each
share of Series D preferred stock will have 1,000 votes, voting together with
the shares of IPEC common stock. In the event of any merger, consolidation or
other transaction in which the shares of IPEC common stock are changed or
exchanged, each share of Series D preferred stock will be entitled to receive
1,000 times the amount received per share of IPEC common stock. These rights are
protected by customary anti-dilution provisions. Because of the nature of the
dividend, liquidation and voting rights of the shares of Series D preferred, the
value of the one one-thousandth interest in a share of Series D preferred
purchasable upon exercise of each Right (as defined below) should approximate
the value of one share of IPEC common stock.
 
TRANSFER AGENT AND REGISTRAR.  The transfer agent and registrar of the IPEC
regular common stock is American Stock Transfer & Trust Co. and its telephone
number is (718) 921-8247.
 
   
IPEC STOCKHOLDER RIGHTS PLAN.  On March 5, 1997, IPEC adopted a stockholder
rights plan. Under the plan, the IPEC board declared a dividend distribution of
one preferred share purchase right on each outstanding share of IPEC common
stock -- the "Right." The dividend distribution was made on May 5, 1997, to
stockholders of record on May 5, 1997. The Rights will expire on January 23,
2007.
    
 
Each Right will entitle stockholders to buy one one-thousandth of a share of
IPEC Series D preferred stock at an exercise price of $120.00 (or, in certain
circumstances as determined by the IPEC board, cash, other property, or other
securities). The Rights may become exercisable following the tenth day after a
public announcement that a person or group has acquired 15% or more of the IPEC
common stock or announces or commences
 
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<PAGE>   76
 
of a tender offer or exchange offer, the consummation of which would result in
ownership by the person or group of 15% or more of the IPEC common stock. IPEC
will be entitled to redeem the Rights at $0.01 per Right at any time on or
before the tenth day following acquisition by a person or group of 15% or more
of the IPEC common stock.
 
If, prior to redemption of the Rights, a person or group acquires 15% or more of
IPEC common stock, each Right not owned by a holder of 15% or more of the IPEC
common stock will entitle its holder to purchase at the Right's then current
exercise price, that number of IPEC common stock (or, in certain circumstances
as determined by the IPEC board, cash, other property or other securities)
having a market value equal to two times the exercise price of $120.00.
Furthermore, prior to redemption of the Rights, if following acquisition by a
person or group of 15% or more of the IPEC common stock, IPEC sells more than
50% of its assets or earning power or is acquired in a merger or other business
combination transaction, the acquiring person must assume the obligations under
the Rights and the Rights will become exercisable to acquire that number of
shares of common stock of the acquiring person having a value equal to two times
the exercise price of $120.00. At any time after an event triggering
exercisability of the Rights and prior to the acquisition by the acquiring
person of 50% or more of the outstanding IPEC common stock, the IPEC board may
exchange the Rights (other than those owned by the acquiring person or its
affiliates) for IPEC common stock at an exchange ratio of one share of IPEC
common stock per Right.
 
   
On November 19, 1998, IPEC amended the plan to provide that the Rights will not
become exercisable by reason of the execution of the merger agreement, the stock
option agreements or the consummation of the transactions contemplated thereby
and will terminate immediately prior to consummation of the merger.
    
 
CAPITAL STOCK OF SPEEDFAM AND IPEC
 
After consummation of the merger, the holders of IPEC stock who receive SpeedFam
common stock under the terms of the merger agreement will become shareholders of
SpeedFam. As stockholders of IPEC, their rights are presently governed by the
Delaware law, the IPEC certificate of incorporation and the IPEC bylaws. As
shareholders of SpeedFam, their rights will be governed by Illinois law, the
IBCA, the SpeedFam articles of incorporation and SpeedFam by-laws. The following
discussion summarizes the material differences between the rights of holders of
IPEC common stock and holders of SpeedFam common stock and differences between
the charters and bylaws of IPEC and SpeedFam. This summary does not purport to
be complete and is qualified in its entirety by reference to the IPEC
certificate of incorporation and IPEC bylaws, the SpeedFam articles and SpeedFam
by-laws and the relevant provisions of Illinois and Delaware law.
 
SIZE OF THE BOARD OF DIRECTORS.  Delaware law permits the board of directors to
change the authorized number of directors by amendment to the bylaws, unless the
directors are not authorized to amend the bylaws or the number of directors is
fixed in the certificate of incorporation (in which case a change in the number
of directors may be made only by amendment to the certificate of incorporation
following approval of such change by the stockholders). The IPEC certificate of
incorporation states that the number of directors will initially be fixed as
provided in the IPEC bylaws. The IPEC bylaws authorize the IPEC board to change
the size of the board. Under Illinois law, although changes in the number of
directors must in general be approved by a majority of the outstanding shares,
the board of directors may fix the exact number of directors within a stated
range set forth in the articles of incorporation or by-laws, if that stated
range has been approved by the
 
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<PAGE>   77
 
shareholders. The SpeedFam by-laws provide the SpeedFam board the authority to
set the exact number of directors within the range of five to nine.
 
VOTING BY BALLOT.  Under Delaware law, the right to vote by written ballot may
be restricted if so provided in the certificate of incorporation. The IPEC
certificate of incorporation provides that the election of directors at a
stockholders' meeting may be by ballot, unless the IPEC bylaws provide
otherwise. The IPEC bylaws provide that any stockholder vote need not be taken
by ballot unless prior to such vote the Chairman of the meeting or a majority of
the stockholders entitled to vote thereon and are present at the meeting demand
that such vote be by ballot. Illinois law provides that the election of
directors may proceed in the manner described in a corporation's bylaws.
SpeedFam's by-laws provide that all votes may be by voice unless the Chairperson
of the meeting orders or any shareholder demands that such vote be by ballot.
 
CUMULATIVE VOTING.  A corporation has cumulative voting if in all elections of
directors every shareholder shall have the right to cumulate its votes for
directors and give one candidate as many votes as shall equal the number of
directors multiplied by the number of shares or to distribute such cumulative
votes in any proportion among any number of candidates. Under Delaware law,
cumulative voting in the election of directors is not mandatory. The IPEC
certificate of incorporation and the IPEC bylaws do not provide for cumulative
voting. All Illinois corporations incorporated before December 31, 1981, such as
SpeedFam, are required to have cumulative voting for directors unless the
articles of incorporation of such corporation provide otherwise. The SpeedFam
articles have been amended to eliminate cumulative voting.
 
CLASSIFIED BOARD OF DIRECTORS.  A classified board is one to which a certain
number, but not all, of the directors are elected on a rotating basis each year.
Delaware law permits, but does not require, a classified board of directors,
with staggered terms under which one-half or one-third of the directors are
elected for terms of two or three years, respectively. This method of electing
directors makes changes in the composition of the board of directors, and thus a
potential change in control of a corporation, a lengthier and more difficult
process. The IPEC certificate of incorporation and IPEC bylaws do not provide
for a classified board of directors. Under Illinois law, Illinois corporations
with 6 or more directors may amend their articles of incorporation to provide
for a classified board. After the consummation of the merger, SpeedFam's board
will have 9 members, but the SpeedFam board has no present intention to request
an amendment to the SpeedFam articles to provide for a classified board.
 
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS; ADVANCE NOTICE OF SHAREHOLDER
BUSINESS AND NOMINEES.  Under Delaware law, a special meeting of stockholders
may be called by the board of directors or by any other person authorized to do
so in the certificate of incorporation or the bylaws. Pursuant to the IPEC
bylaws, special meetings may be called by stockholders holding 30% of either the
IPEC regular common stock or Class A common stock or by the board of directors
and the Secretary. Under Illinois law, a special meeting of shareholders may be
called by the board of directors, the President, the holders of not less than
one-fifth of all the outstanding shares entitled to vote on the matter for which
the meeting is called and such additional persons as are authorized by the
articles of incorporation or the bylaws. The SpeedFam by-laws expand Illinois
law to also allow the chairman or the chief executive officer to call a special
meeting of shareholders. Other than with respect to certain advance notice
requirements of the IBCA, the SpeedFam articles and the SpeedFam by-laws do not
require advance notice of shareholder nominees for election as director or
shareholder business to be brought before a meeting.
 
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<PAGE>   78
 
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS.  Under Illinois and Delaware law,
shareholders may take action by written consent in lieu of voting at a
shareholders meeting. Both Illinois law and Delaware law permit a corporation to
eliminate the ability of shareholders to act by written consent in its charter.
Neither the IPEC certificate of incorporation nor the SpeedFam articles provide
for the elimination of the ability of shareholders to act by written consent.
 
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS.  In the last several
years, a number of states have adopted special laws designed to make certain
kinds of "unfriendly" corporate takeovers, or other transactions involving a
corporation and one or more of its significant shareholders, more difficult.
Under Section 203 of the Delaware law, and Section 11.75 of the IBCA certain
"business combinations" by Delaware and Illinois corporations with "interested
shareholders" are subject to a 3-year moratorium unless specified conditions are
met.
 
Like Section 203, Section 11.75 prohibits an Illinois corporation from engaging
in a "business combination" with an "interested shareholder" for three years
following the date that such person becomes an interested shareholder. With
certain exceptions, an interested shareholder is a person or group who or which
owns 15% or more of the corporation's outstanding voting stock (including any
rights to acquire stock pursuant to an option, warrant, agreement, arrangement
or understanding, or upon the exercise of conversion or exchange rights, and
stock with respect to which the person has voting rights only), or is an
affiliate or associate of the corporation and was the owner of 15% or more of
such voting stock at any time within the previous three years.
 
For purposes of Section 203 and Section 11.75, the term "business combination"
is defined broadly to include mergers with or caused by the interested
shareholder; sales or other dispositions to the interested shareholder (except
proportionately with the corporation's other shareholders) of assets of the
corporation or a subsidiary equal to ten percent or more of the aggregate market
value of the corporation's consolidated assets or its outstanding stock; the
issuance or transfer by the corporation or a subsidiary of stock of the
corporation or such subsidiary to the interested shareholder (with certain
exceptions); or receipt by the interested shareholder (except proportionately as
a shareholder), directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation or a
subsidiary.
 
The three-year moratorium imposed on business combinations by Section 203 or
Section 11.75 does not apply if:
 
     (1) prior to the date on which such shareholder becomes an interested
         shareholder, the board of directors approves either the business
         combination or the transaction which resulted in the person becoming an
         interested shareholder;
 
     (2) the interested shareholder owns 85% of the corporation's voting stock
         upon consummation of the transaction which made him or her an
         interested shareholder (excluding from the 85% calculation shares owned
         by directors who are also officers of the target corporation and shares
         held by employee stock plans which do not permit employees to decide
         confidentially whether to accept a tender or exchange offer); or
 
     (3) on or after the date such person becomes an interested shareholder, the
         board approves the business combination and it is also approved at a
         shareholder meeting by 66 2/3% of the voting stock not owned by the
         interested shareholder.
 
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<PAGE>   79
 
Unlike Delaware law, Illinois law provides an extra protection for "interested
shareholder" transactions as Section 7.85 requires any "business combination" to
be approved by
 
     (1) the affirmative vote of the holders of at least 80% of the combined
         voting power of the then outstanding shares of all classes and series
         of the corporation entitled to vote for the election of directors
         voting together or a single class; and
 
     (2) the affirmative vote of a majority of the voting shares held by
         disinterested shareholders.
 
          This higher vote requirements will not be required if:
 
        (a) such business combination has been approved by two-thirds of the
            directors who are not affiliated with the interested shareholder, or
 
        (b) certain price and procedure requirements of Section 7.85 are met.
 
Sections 7.85 and 11.75 only apply to Illinois corporations which have a class
of voting stock that is listed on a national securities exchange, is quoted on
an interdealer quotation system such as Nasdaq (as is the SpeedFam common stock)
or is held of record by more than 2,000 stockholders. However, an Illinois
corporation may elect not to be governed by Sections 7.85 and 11.75 in its
original articles of incorporation or an amendment thereto or in its by-laws,
which amendment must be approved by majority shareholder vote and may not be
further amended by the board of directors. SpeedFam is governed by Sections 7.85
and 11.75.
 
REMOVAL OF DIRECTORS.  Under Delaware law, a director may be removed, with or
without cause, by the approval of a majority of the outstanding shares entitled
to vote. Under Illinois law, any director or the entire board of directors may
be removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote, provided that such removal may only occur
at a meeting of the shareholders pursuant to a notice which states that the
purpose of the meeting was to remove a specific director from office. Only the
specific named director may be removed at such meeting.
 
FILLING VACANCIES ON THE BOARD OF DIRECTORS.  Under Delaware law, vacancies and
newly created directorships may be filled by a majority of the directors then in
office (even though less than a quorum) unless otherwise provided in the
certificate of incorporation or bylaws (and unless the certificate of
incorporation directs that a particular class is to elect such director, in
which case any other directors elected by such class, or a sole remaining
director, shall fill such vacancy). The IPEC bylaws allow any vacancy on the
board that is created by an increase in the size of the board, death,
resignation or disqualification to be filled by a majority of the directors then
in office. Only the stockholders may fill a vacancy caused by the removal of a
director by the stockholders. Under Illinois law, any vacancy on the board of
directors shall be filled by the stockholders and, if such vacancy occurs
between meetings, by the shareholders or the directors. The SpeedFam by-laws
permit the SpeedFam board to fill any vacancies on the SpeedFam board which
occur between shareholder meetings, provided that the number of directors
selected during such interim period does not exceed 33 1/3% of the total
membership of the board of directors. The SpeedFam by-laws will be amended prior
to consummation of the merger to allow the appointment of IPEC's designees to
the board of the combined company.
 
INDEMNIFICATION AND LIMITATION OF LIABILITY.  Illinois and Delaware have similar
laws respecting indemnification by a corporation of its officers, directors,
employees and other agents. The laws of both states also permit corporations to
adopt a provision in their
 
                                       72
<PAGE>   80
 
charters eliminating the liability of a director to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty of
care.
 
Delaware law does not permit the elimination of monetary liability where such
liability is based on:
 
     (1) any breach of the director's duty of loyalty to the corporation or its
         stockholders,
 
     (2) acts or omissions not in good faith or which involve intentional
         misconduct or a knowing violation of law,
 
     (3) liability of directors for unlawful payment of dividends or unlawful
         stock purchases or redemptions, or
 
     (4) any transaction from which the director derived an improper personal
         benefit.
 
In the event of any amendment to the Delaware law, the IPEC certificate of
incorporation includes a provision providing that IPEC shall limit or eliminate
its directors' liability for monetary damages to the fullest extent permissible
under Delaware law.
 
The IPEC certificate of incorporation provides mandatory indemnification to any
party who is or was a director or officer of IPEC to the fullest extent
permitted by Delaware law. Delaware Law states that the indemnification provided
by statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
 
The SpeedFam articles also eliminate the liability of directors to the fullest
extent permissible under Illinois law, as such law exists currently or as it may
be amended in the future. Under Illinois law, such provision may not eliminate
or limit director monetary liability for:
 
     (1) breaches of the director's duty of loyalty to the corporation or its
         shareholders;
 
     (2) acts or omissions not in good faith or involving intentional misconduct
         or knowing violations of law;
 
     (3) the payment of unlawful dividends or unlawful stock repurchases or
         redemptions; or
 
     (4) transactions in which the director received an improper personal
         benefit.
 
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve SpeedFam or its directors from
the necessity of complying with, federal or state securities laws, or affect the
availability of non-monetary remedies such as injunctive relief or rescission.
The SpeedFam by-laws also provide mandatory indemnification to any party who is
or was a director, officer, employee or agent of SpeedFam to the fullest extent
permitted by Illinois law.
 
INSPECTION OF SHAREHOLDERS LIST.  Delaware law allows any stockholder to inspect
and copy the stockholders list for a purpose reasonably related to such person's
interest as a stockholder. No additional rights of inspection are granted under
the IPEC certificate of incorporation or IPEC bylaws. Illinois law allows any
shareholder of record to examine, after written demand, a corporation's books
and records of account, minutes, voting trust agreements and record of
shareholders, and to make extracts thereof, but only for a proper purpose.
Neither the SpeedFam articles nor the SpeedFam by-laws have expanded these
rights. Restricted access to shareholder records, even though unrelated to the
shareholder's interests as a shareholder, could result in impairment of the
shareholder's ability to
 
                                       73
<PAGE>   81
 
coordinate opposition to management proposals, including proposals with respect
to a change in control of SpeedFam after the merger.
 
DIVIDENDS AND REPURCHASES OF SHARES.  Delaware law permits a corporation to
declare and pay dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets. In addition,
Delaware law generally provides that a corporation may redeem or repurchase its
shares only if such redemption or repurchase would not impair the capital of the
corporation.
 
Under Illinois law it is unlawful for an Illinois corporation to make
distributions to stockholders if, after giving effect to such distribution:
 
     (1) the corporation would be insolvent, or
 
     (2) the net assets of the corporation would be less than zero or less than
         the maximum amount payable at the time of distribution to shareholders
         having preferential rights in liquidation if the corporation were then
         to be liquidated.
 
SHAREHOLDER VOTING.  Delaware law generally requires that the holders of a
majority of the outstanding voting shares of the acquiring and target
corporations approve statutory mergers. Illinois law generally requires
two-thirds of the outstanding voting shares to approve most major actions (like
a statutory merger), unless reduced to as low as a simple majority or increased
as provided in the articles of incorporation of such corporation. Both Illinois
and Delaware law do not require a shareholder vote of the surviving corporation
in a merger (unless the corporation provides otherwise in its articles of
incorporation or certificate of incorporation) if
 
     (1) the merger agreement does not amend the existing articles of
         incorporation or certificate of incorporation;
 
     (2) each share of the surviving corporation outstanding before the merger
         is equal to an identical outstanding share after the merger; and
 
     (3) the number of shares to be issued by the surviving corporation in the
         merger does not exceed 20% of the shares outstanding immediately prior
         to the merger.
 
The IPEC certificate of incorporation and IPEC bylaws do not require any special
vote of the stockholders to approve the merger. IPEC Class A common stockholders
are entitled to four votes per share. IPEC regular common stockholders are
entitled to one vote per share. The SpeedFam articles have been amended to
provide that most major actions (like the approval of a statutory merger and
amendments to the SpeedFam articles) require only a simple majority vote.
 
Delaware law generally does not require class voting, except in certain
transactions involving an amendment to the certificate of incorporation which
adversely affects a specific class of shares. With certain exceptions, Illinois
law may require that mergers, reorganizations, certain sales of assets and
similar transactions be approved by a majority vote of each class of shares
outstanding if the articles of incorporation provide for class voting or if the
proposed transaction contains a provision which, if contained in a proposed
amendment to the articles of incorporation of such corporation, would entitle a
class to vote.
 
                                       74
<PAGE>   82
 
INTERESTED DIRECTOR TRANSACTIONS.  Under both Delaware and Illinois law, certain
contracts or transactions in which one or more of a corporation's directors has
an interest are not void or voidable because of such interest provided that
certain conditions, such as obtaining the required approval and fulfilling the
requirements of good faith and full disclosure, are met. Under Delaware law,
either
 
     (1) the stockholders or the disinterested members of the board of directors
         must approve any such contract or transaction after full disclosure of
         the material facts, or
 
     (2) the contract or transaction must have been "fair" as to the corporation
         at the time it was approved.
 
Under Illinois law, if a transaction is "fair" when authorized, approved or
modified, then the fact that a director has as "interest" in the transaction is
not grounds for invalidating the vote or the director's vote regarding such
transaction. In any proceeding relating to such a transaction, the person
asserting its validity will have the burden of proof unless, after full
disclosure of such director's interest:
 
     (1) a majority of disinterested directors approved the transaction, or
 
     (2) such transaction was approved by the shareholders without counting the
         votes of any shareholder who is an interested director.
 
APPRAISAL RIGHTS.  Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
stockholder may receive payment of the fair value of his or her shares in lieu
of the consideration he or she would otherwise receive in the transaction. Under
Delaware law, such appraisal rights are not available
 
     (1) with respect to the sale, lease or exchange of all or substantially all
         of the assets of a corporation;
 
     (2) with respect to a merger or consolidation by a corporation the shares
         of which are listed on a national securities exchange, designated as a
         national market system security on an interdealer quotation system by
         the National Association of Securities Dealers, Inc., or are held of
         record by more than 2,000 holders if such stockholders receive only
         shares of the surviving corporation or shares of any other corporation
         which are listed on a national securities exchange, designated as a
         national market system security on an interdealer quotation system by
         the National Association of Securities Dealers, Inc., or held of record
         by more than 2,000 holders, plus cash instead of fractional shares; or
 
     (3) to stockholders of a corporation surviving a merger if no vote of the
         stockholders of the surviving corporation is required to approve the
         merger because the merger agreement does not amend the existing
         certificate of incorporation, each share of the surviving corporation
         outstanding prior to the merger is an identical outstanding or treasury
         share after the merger, and the number of shares to be issued in the
         merger does not exceed 20% of the shares of the surviving corporation
         outstanding immediately prior to the merger and if certain other
         conditions are met.
 
In contrast, shareholders of an Illinois corporation have dissenters' rights
entitling a shareholder to dissent from a merger, sale of assets or other
specified corporate act, obtain the corporation's assessment of the "fair value"
of such shareholder's shares and proceed with an action to demand the difference
between the shareholder's estimates of fair value
                                       75
<PAGE>   83
 
and interest due and the amount of the "fair value" payment by the corporation.
Under Illinois law, such dissenter's rights are available only in the event of
any of the following corporate transactions:
 
     (1) consummation of a plan of merger or consolidation or a plan of share
         exchange to which the corporation is a party if shareholder
         authorization is required for such merger, consolidation or share
         exchange;
 
     (2) consummation of a sale, lease or exchange of all, or substantially all,
         of the property and assets of the corporation other than in the usual
         and regular course of business;
 
     (3) an amendment of the articles of incorporation that materially and
         adversely affects rights in respect of a dissenter's shares; or
 
     (4) any other corporate action taken pursuant to a shareholder vote if the
         articles of incorporation or bylaws of the corporation provide that
         shareholders are entitled to dissent and obtain payment for their
         shares in accordance with the procedures of the IBCA.
 
SpeedFam has not amended the SpeedFam articles or SpeedFam by-laws to provide
for any additional incidences where shareholders would be entitled to dissent
and obtain payment for their shares.
 
DISSOLUTION.  Under Delaware law, unless the board of directors approves a
proposal to dissolve, the dissolution must be approved by stockholders holding
100% of the total voting power of the corporation. Only if the dissolution is
initially approved by the board of directors may it be approved by a simple
majority of the corporation's stockholders. In the event of such a
board-initiated dissolution, Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. The IPEC certificate of incorporation contains
no such supermajority voting requirement, however, and a majority of shares
voting at a meeting at which a quorum is present would be sufficient to approve
a dissolution of IPEC which had previously been approved by the IPEC board.
 
Under Illinois law, shareholders holding two-thirds or more of the total voting
power (or such lesser percentage not less than a simple majority or such greater
number as may be provided in the articles of incorporation) may authorize a
corporation's dissolution. The SpeedFam articles currently provide (and after
the merger will provide) that a vote to dissolve the corporation requires only
the approval and affirmative vote of the holders of a majority of the
outstanding shares.
 
SHAREHOLDER DERIVATIVE SUITS.  Under Delaware law, a stockholder may only bring
a derivative action on behalf of the corporation if the stockholder was a
stockholder of the corporation at the time of the transaction in question or his
or her stock thereafter devolved upon him or her by operation of law. Illinois
law provides that a shareholder bringing a derivative action on behalf of a
corporation need not have been a shareholder at the time of the transaction in
question, provided that such shareholder can prove that he or she acquired the
shares prior to disclosure of the wrongdoing complained of by the shareholder.
 
CLASS A COMMON STOCKHOLDER RIGHTS.  Currently the issued and outstanding shares
of IPEC Class A common stock have four votes per share. See "-- Description of
IPEC Capital Stock." Upon consummation of the merger, holders of IPEC Class A
common
 
                                       76
<PAGE>   84
 
stock will receive shares of SpeedFam common stock which will only have one vote
per share.
 
PREFERRED STOCKHOLDER RIGHTS.  Currently the issued and outstanding shares of
IPEC Series B preferred stock have the right to certain dividends and
liquidation preferences as discussed above in "-- Description of IPEC Capital
Stock." Upon the consummation of the merger, holders of IPEC preferred stock
will receive shares of SpeedFam common stock which will have none of the
dividend and liquidation preferences of the IPEC preferred stock.
 
                                       77
<PAGE>   85
 
          UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
The following unaudited pro forma condensed combined financial statements have
been prepared to give effect to the merger, using the pooling of interests
method of accounting. SpeedFam's fiscal year ends on May 31. IPEC's fiscal year
ends on June 30.
 
The unaudited pro forma condensed combined balance sheet gives effect to the
merger as if it had occurred on November 30, 1998, and combines the unaudited
condensed consolidated balance sheet of SpeedFam as of November 30, 1998 and the
unaudited condensed consolidated balance sheet of IPEC as of December 31, 1998.
 
The unaudited pro forma condensed combined statements of operations give effect
to the merger as if it occurred as of the beginning of the earliest year
presented and combines the historical consolidated statements of operations of
SpeedFam for each of the three fiscal years in the period ended May 31, 1998 and
the six month periods ended November 30, 1998 and 1997, with the results of
operations of IPEC for each of the three fiscal years in the period ended June
30, 1998 and the six month periods ended December 31, 1998 and 1997.
 
SpeedFam and IPEC estimate that they will incur approximately $6.5 million of
non-recurring merger-related costs primarily related to the fees of financial
advisors, attorneys, accountants and other costs related to the special
meetings, which will be charged to operations when incurred. There can be no
assurance that the combined company will not incur additional charges to reflect
costs associated with the merger, including costs which may be incurred to
integrate and restructure the operations of SpeedFam and IPEC, or that
management will be successful in its efforts to integrate the operations of the
two companies.
 
The unaudited pro forma condensed combined financial information is presented
for illustrative purposes only and is not necessarily indicative of the
financial position or results of operations that would have actually been
reported had the merger occurred at the beginning of the periods presented, nor
is it necessarily indicative of future financial position or results of
operations. These unaudited pro forma condensed combined financial statements
are based upon the respective historical consolidated financial statements of
SpeedFam and IPEC and should be read in conjunction with the respective
historical consolidated financial statements and notes thereto included
elsewhere in this joint proxy statement/prospectus, and do not incorporate, nor
do they assume, any benefits from cost savings or synergies of operations of the
combined company.
 
                                       78
<PAGE>   86
 
              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
 
                               NOVEMBER 30, 1998
                                 (in thousands)
 
   
<TABLE>
<CAPTION>
                                     SPEEDFAM         IPEC
                                   NOVEMBER 30,   DECEMBER 31,    PRO FORMA
                                       1998           1998       ADJUSTMENTS      TOTAL
                                   ------------   ------------   -----------     --------
<S>                                <C>            <C>            <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents......    $ 87,858      $   7,866       $             $ 95,724
  Short-term investments.........      33,435         59,646                       93,081
  Trade accounts receivable and
     notes receivable, net.......      36,480         30,308                       66,788
  Inventories....................      41,551         69,192                      110,743
  Prepaid expenses and other
     current assets..............      12,648          1,753                       14,401
                                     --------      ---------       -------       --------
Total current assets.............     211,972        168,765                      380,737
Investments in affiliates........      27,968                                      27,968
Property, plant, and equipment,
  net............................      70,940         31,061                      102,001
Intangible assets, net...........       2,424          7,950                       10,374
Other assets.....................       1,053          4,076                        5,129
                                     --------      ---------       -------       --------
Total assets.....................    $314,357      $ 211,852       $             $526,209
                                     ========      =========       =======       ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term
     debt........................    $    102      $   1,260       $             $  1,362
  Accounts payable and due to
     affiliates..................      10,924          5,320                       16,244
  Customer deposits..............       2,421                                       2,421
  Accrued expenses and other
     current liabilities.........      11,066         17,638          6,500(a)     35,204
                                     --------      ---------       -------       --------
Total current liabilities........      24,513         24,218         6,500         55,231
Long-term liabilities:
  Long-term debt.................                    116,650                      116,650
  Deferred income taxes..........       1,020                                       1,020
                                     --------      ---------       -------       --------
Total long-term liabilities......       1,020        116,650                      117,670
Stockholders' equity:
  Preferred stock................                         --            --(b)
  Common stock...................           1            178          (178)(b)          1
  Class A common stock...........                         --            --(b)
  Additional paid-in capital.....     228,054        196,594           178(b)     424,826
  Retained earnings..............      58,228       (124,673)       (6,500)(a)    (72,945)
  Accumulated other comprehensive
     income (loss)...............       2,541         (1,115)                       1,426
                                     --------      ---------       -------       --------
Total stockholders' equity.......     288,824         70,984        (6,500)       353,308
                                     --------      ---------       -------       --------
Total liabilities and
  stockholders' equity...........    $314,357      $ 211,852       $             $526,209
                                     ========      =========       =======       ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
 
                                       79
<PAGE>   87
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                       SIX MONTHS ENDED NOVEMBER 30, 1998
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                    SPEEDFAM         IPEC
                                  NOVEMBER 30,   DECEMBER 31,    PRO FORMA
                                      1998           1998       ADJUSTMENTS     TOTAL
                                  ------------   ------------   -----------    --------
<S>                               <C>            <C>            <C>            <C>
Revenue:
  Net sales.....................    $ 59,689       $ 42,658       $            $102,347
  Commissions from affiliate....         737                                        737
                                    --------       --------       -------      --------
Total revenue...................      60,426         42,658                     103,084
Cost of sales...................      40,217         34,730                      74,947
                                    --------       --------       -------      --------
Gross margin....................      20,209          7,928                      28,137
                                    --------       --------       -------      --------
Operating expenses:
  Research, development, and
     engineering................      19,451         16,808                      36,259
  Selling, general, and
     administrative.............      15,553         15,149                      30,702
                                    --------       --------       -------      --------
Operating loss..................     (14,795)       (24,029)                    (38,824)
Other income....................       3,587            (64)                      3,523
                                    --------       --------       -------      --------
Loss from consolidated companies
  before income taxes...........     (11,208)       (24,093)                    (35,301)
Income tax benefit..............      (5,678)                                    (5,678)
                                    --------       --------       -------      --------
Loss from consolidated
  companies.....................      (5,530)       (24,093)                    (29,623)
Equity in net earnings of
  affiliates....................       1,429                                      1,429
                                    --------       --------       -------      --------
Earnings (loss) from continuing
  operations....................    $ (4,101)      $(24,093)      $            $(28,194)
                                    ========       ========       =======      ========
Earnings (loss) from continuing
  operations per common share:
  Basic.........................    $  (0.25)      $  (1.36)                   $  (0.98)
                                    ========       ========                    ========
  Diluted.......................    $  (0.25)      $  (1.36)                   $  (0.98)
                                    ========       ========                    ========
Weighted average shares
  outstanding:
  Basic.........................      16,087        (17,850)                     28,761
                                    ========       ========                    ========
  Diluted.......................      16,087        (17,850)                     28,761
                                    ========       ========                    ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
 
                                       80
<PAGE>   88
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                       SIX MONTHS ENDED NOVEMBER 30, 1997
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                  SPEEDFAM         IPEC
                                NOVEMBER 30,   DECEMBER 31,     PRO FORMA
                                    1997           1997        ADJUSTMENTS     TOTAL
                                ------------   ------------    -----------    --------
<S>                             <C>            <C>             <C>            <C>
Revenue:
  Net sales...................    $105,814       $109,153        $            $214,967
  Commissions from
     affiliate................       4,561                                       4,561
                                  --------       --------        -------      --------
          Total revenue.......     110,375        109,153                      219,528
Cost of sales.................      62,600         60,660                      123,260
                                  --------       --------        -------      --------
Gross margin..................      47,775         48,493                       96,268
                                  --------       --------        -------      --------
Operating expenses:
  Research, development, and
     engineering..............      14,703         15,050                       29,753
  Selling, general, and
     administrative...........      18,088         17,568                       35,656
                                  --------       --------        -------      --------
Operating profit..............      14,984         15,875                       30,859
Other income (expense)........       2,269           (622)                       1,647
                                  --------       --------        -------      --------
Earnings from consolidated
  companies before income
  taxes.......................      17,253         15,253                       32,506
Income tax expense............       6,144          5,611                       11,755
                                  --------       --------        -------      --------
Earnings from consolidated
  companies...................      11,109          9,642                       20,751
Equity in net earnings of
  affiliates..................       2,068                                       2,068
                                  --------       --------        -------      --------
Earnings from continuing
  operations..................    $ 13,177       $  9,642        $            $ 22,819
                                  ========       ========        =======      ========
Earnings from continuing
  operations per common share:
  Basic.......................    $   0.94       $   0.54                     $   0.86
                                  ========       ========                     ========
  Diluted.....................    $   0.89       $   0.50                     $   0.80
                                  ========       ========                     ========
Weighted average shares
  outstanding:
  Basic.......................      14,040         17,526                       26,483
                                  ========       ========                     ========
  Diluted.....................      14,883         19,351                       28,622
                                  ========       ========                     ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
 
                                       81
<PAGE>   89
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                            YEAR ENDED MAY 31, 1998
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                    SPEEDFAM         IPEC         PRO FORMA
                                  MAY 31, 1998   JUNE 30, 1998   ADJUSTMENTS     TOTAL
                                  ------------   -------------   -----------    --------
<S>                               <C>            <C>             <C>            <C>
Revenue:
  Net sales.....................    $176,247       $189,012       $             $365,259
  Commissions from affiliate....       9,009                                       9,009
                                    --------       --------       --------      --------
Total revenue...................     185,256        189,012                      374,268
Cost of sales...................     109,751        121,581                      231,332
                                    --------       --------       --------      --------
Gross margin....................      75,505         67,431                      142,936
                                    --------       --------       --------      --------
Operating expenses:
  Research, development, and
     engineering................      33,681         33,501                       67,182
  Selling, general, and
     administrative.............      35,880         37,036                       72,916
                                    --------       --------       --------      --------
Operating profit (loss).........       5,944         (3,106)                       2,838
Other income (expense)..........       5,957         (2,447)                       3,510
                                    --------       --------       --------      --------
Earnings (loss) from
  consolidated companies before
  income taxes..................      11,901         (5,553)                       6,348
Income tax expense..............       3,456         26,128                       29,584
                                    --------       --------       --------      --------
Earnings (loss) from
  consolidated companies........       8,445        (31,681)                     (23,236)
Equity in net earnings of
  affiliates....................       4,418                                       4,418
                                    --------       --------       --------      --------
Earnings (loss) from continuing
  operations....................    $ 12,863       $(31,681)      $             $(18,818)
                                    ========       ========       ========      ========
Earnings (loss) from continuing
  operations per common share:
  Basic.........................    $   0.86       $  (1.81)                    $  (0.69)
                                    ========       ========                     ========
  Diluted.......................    $   0.83       $  (1.81)                    $  (0.69)
                                    ========       ========                     ========
Weighted average shares outstanding:
  Basic.........................      14,971         17,603                       27,469
                                    ========       ========                     ========
  Diluted.......................      15,591         17,603                       27,469
                                    ========       ========                     ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
 
                                       82
<PAGE>   90
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                            YEAR ENDED MAY 31, 1997
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                   SPEEDFAM         IPEC         PRO FORMA
                                 MAY 31, 1997   JUNE 30, 1997   ADJUSTMENTS     TOTAL
                                 ------------   -------------   -----------    --------
<S>                              <C>            <C>             <C>            <C>
Revenue:
  Net sales....................    $160,994       $144,688       $             $305,682
  Commissions from affiliate...      12,430                                      12,430
                                   --------       --------       --------      --------
Total revenue..................     173,424        144,688                      318,112
Cost of sales..................     103,501         82,842                      186,343
                                   --------       --------       --------      --------
Gross margin...................      69,923         61,846                      131,769
                                   --------       --------       --------      --------
Operating expenses:
  Research, development, and
     engineering...............      19,766         23,951                       43,717
  Selling, general, and
     administrative............      28,671         27,563                       56,234
  Program discontinuance
     charge....................                     17,601                       17,601
                                   --------       --------       --------      --------
Operating profit (loss)........      21,486         (7,269)                      14,217
Other expense..................        (298)          (864)                      (1,162)
                                   --------       --------       --------      --------
Earnings (loss) from
  consolidated companies before
  income taxes.................      21,188         (8,133)                      13,055
Income tax expense (benefit)...       8,037         (2,951)                       5,086
                                   --------       --------       --------      --------
Earnings (loss) from
  consolidated companies.......      13,151         (5,182)                       7,969
Equity in net earnings of
  affiliates...................       7,068                                       7,068
                                   --------       --------       --------      --------
Earnings (loss) from continuing
  operations...................    $ 20,219       $ (5,182)      $             $ 15,037
                                   ========       ========       ========      ========
Earnings (loss) from continuing
  operations per common share:
  Basic........................    $   1.78       $  (0.35)                    $   0.67
                                   ========       ========                     ========
  Diluted......................    $   1.67       $  (0.35)                    $   0.62
                                   ========       ========                     ========
Weighted average shares outstanding:
  Basic........................      11,349         15,623                       22,441
                                   ========       ========                     ========
  Diluted......................      12,127         15,623                       24,088
                                   ========       ========                     ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
 
                                       83
<PAGE>   91
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                            YEAR ENDED MAY 31, 1996
                    (in thousands, except per share amounts)
 
   
<TABLE>
<CAPTION>
                                 SPEEDFAM         IPEC         PRO FORMA
                               MAY 31, 1996   JUNE 30, 1996   ADJUSTMENTS     TOTAL
                               ------------   -------------   -----------    --------
<S>                            <C>            <C>             <C>            <C>
Revenue:
  Net sales..................    $113,880       $148,690        $            $262,570
  Commissions from
     affiliate...............       6,290                                       6,290
                                 --------       --------        -------      --------
Total revenue................     120,170        148,690                      268,860
Cost of sales................      78,661         85,061                      163,722
                                 --------       --------        -------      --------
Gross margin.................      41,509         63,629                      105,138
                                 --------       --------        -------      --------
Operating expenses:
  Research, development, and
     engineering.............      11,496         15,877                       27,373
  Purchased research and
     development.............                     36,961                       36,961
  Selling, general, and
     administrative..........      18,922         26,653                       45,575
                                 --------       --------        -------      --------
Operating profit (loss)......      11,091        (15,862)                      (4,771)
Other income (expense).......        (208)           100                         (108)
                                 --------       --------        -------      --------
Earnings (loss) from
  consolidated companies
  before income taxes........      10,883        (15,762)                      (4,879)
Income tax expense
  (benefit)..................       4,266         (6,399)                      (2,133)
                                 --------       --------        -------      --------
Earnings (loss) from
  consolidated companies.....       6,617         (9,363)                      (2,746)
Equity in net earnings of
  affiliates.................       5,204                                       5,204
                                 --------       --------        -------      --------
Earnings (loss) from
  continuing operations......    $ 11,821       $ (9,363)       $            $  2,458
                                 ========       ========        =======      ========
Earnings (loss) from
  continuing operations per
  common share:
  Basic......................    $   1.27       $  (0.69)                    $   0.13
                                 ========       ========                     ========
  Diluted....................    $   1.16       $  (0.69)                    $   0.11
                                 ========       ========                     ========
Weighted average shares outstanding:
  Basic......................       9,344         14,434                       19,592
                                 ========       ========                     ========
  Diluted....................      10,159         14,434                       21,953
                                 ========       ========                     ========
</TABLE>
    
 
  See accompanying notes to unaudited pro forma condensed combined statements.
                                       84
<PAGE>   92
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                         COMBINED FINANCIAL STATEMENTS
                     (in thousands, except per share data)
 
NOTE 1:  PRO FORMA ADJUSTMENTS
 
(a) Adjusted to reflect incurrence of an estimated $6,500 of non-recurring
    merger-related costs. These costs are detailed as follows:
 
<TABLE>
<S>                                                             <C>
Financial Advisors                                              $4,250
Legal Advisors                                                   1,500
Accountants                                                        195
Printing costs                                                     204
Registration and Transfer Fees                                     105
Other                                                              246
                                                                ------
                                                                $6,500
                                                                ======
</TABLE>
 
    Does not include costs which will be incurred to integrate and restructure
    the operations of SpeedFam and IPEC.
 
(b) The pro forma amount assumes 13,046 shares of SpeedFam common stock are
    issued in the merger, based on the exchange ratio of .71 shares of SpeedFam
    common stock for each share of IPEC regular common stock, IPEC Class A
    common stock, and the common stock equivalents underlying the IPEC preferred
    stock (collectively referred to herein as "IPEC Stock") outstanding as of
    November 30, 1998 (as calculated below). The actual number of shares of
    SpeedFam common stock to be issued will be determined at the time the merger
    is consummated, based upon the number of shares of IPEC Stock then
    outstanding.
 
<TABLE>
<CAPTION>
                                                                             COMMON STOCK
                                                OUTSTANDING    CONVERSION    EQUIVALENTS
                                                  SHARES         RATIO       OUTSTANDING
                                                -----------    ----------    ------------
<S>                                             <C>            <C>           <C>
Preferred Stock
  Class B-1.................................           7         12.54              90
  Class B-2.................................          20         11.41             223
  Class B-3.................................          10         15.00             149
Common Stock................................      17,906             1          17,906
Class A Common Stock........................           7             1               7
                                                                                ------
Total IPEC Common Stock Outstanding.........                                    18,375
Exchange Ratio..............................                                      0.71
                                                                                ------
SpeedFam Stock Issued.......................                                    13,046
                                                                                ======
</TABLE>
 
   
NOTE 2:  EARNINGS PER SHARE
    
 
The calculation of basic and diluted income (loss) from continuing operations
per common share for the pro forma statements of operations uses the applicable
weighted average number of outstanding shares of SpeedFam and IPEC common stock
adjusted to equivalent shares of SpeedFam common stock. In calculating loss from
continuing operations per common share for the year ended May 31, 1998 and the
six months ended November 30, 1998, common stock equivalent shares consisting of
stock options, warrants,
 
                                       85
<PAGE>   93
                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                  COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                     (In thousands, except per share data)
 
and convertible preferred stock have been excluded because their inclusion would
have been anti-dilutive.
 
NOTE 3:  RECLASSIFICATIONS
 
Certain historical amounts have been reclassified to conform with the pro forma
combined presentation.
 
NOTE 4:  NONRECURRING ITEMS
 
During fiscal 1998, IPEC incurred net charges of $25.9 million to increase the
valuation allowance for its deferred tax assets.
 
   
In the second quarter of fiscal 1997, IPEC decided to discontinue the production
plans for the Avanti 672, an integrated 300mm high-volume oxide CMP tool.
Accordingly, IPEC incurred a $17.6 million pretax program discontinuance charge
in fiscal 1997 from writedowns of inventory and assets relating to the Avanti
672 program.
    
 
During fiscal 1996, IPEC acquired GAARD Automation, Inc. and IPEC Precision,
Inc. The acquisitions were accounted for as purchases and $37.0 million of the
acquisition prices was allocated to purchased research and development that was
expensed at the time of the respective acquisitions.
 
                                       86
<PAGE>   94
 
                ADDITIONAL MATTERS BEING SUBMITTED TO A VOTE OF
                           ONLY SPEEDFAM SHAREHOLDERS
 
PROPOSAL TWO -- AMENDMENT TO ARTICLES OF INCORPORATION -- NAME CHANGE
 
SpeedFam's articles provide that the name of SpeedFam is "SpeedFam
International, Inc." Pursuant to the merger agreement, SpeedFam has agreed to
propose and recommend that the articles be amended at the effective time of the
merger to change SpeedFam's name to "SPEEDFAM-IPEC, Inc." The SpeedFam board has
authorized such amendment of the articles at the effective time, subject to
shareholder approval. Under the proposed amendment, subject to and upon
consummation of the merger, Article One of the articles would be amended and
restated to read as follows:
 
"The name of the corporation is SPEEDFAM-IPEC, Inc."
 
The SpeedFam shareholders are being asked to approve such amendment. The
affirmative vote of at least a majority of the shares of SpeedFam common stock
issued and outstanding on the SpeedFam record date is required to approve the
amendment of the articles. An abstention or a broker non-vote has the effect of
a vote against the proposal.
 
   THE SPEEDFAM BOARD RECOMMENDS THAT SPEEDFAM SHAREHOLDERS VOTE "FOR" THE
   AMENDMENT OF SPEEDFAM'S ARTICLES TO CHANGE THE CORPORATE NAME OF SPEEDFAM TO
   "SPEEDFAM-IPEC, INC."
 
                                       87
<PAGE>   95
 
PROPOSAL THREE -- AMENDMENT TO THE 1995 STOCK PLAN FOR EMPLOYEES AND DIRECTORS
OF SPEEDFAM
 
   
The SpeedFam board recommends that SpeedFam shareholders approve a proposed
amendment to SpeedFam's 1995 stock plan. This amendment, subject to and upon
consummation of the merger, will increase the maximum aggregate number of shares
of SpeedFam common stock available under the plan from 1,800,000 to 3,300,000
shares. The 1995 stock plan currently provides that a total of 1,800,000 shares
of SpeedFam common stock may be issued pursuant to options, restricted shares,
units or rights which may be granted or awarded from time to time under the
plan. As of February 16, 1999, a total of 693,009 shares of SpeedFam common
stock were available for such purpose.
    
 
SpeedFam management believes that this amendment will further promote SpeedFam's
goals of enhancing longterm profitability by offering stock-based incentives to
those individuals who are key to SpeedFam's growth and success, and who, after
the merger, will include former IPEC employees. SpeedFam believes that the use
of options and other rights to purchase SpeedFam common stock is important to
retaining and attracting key employees. This will be especially true after the
merger, with the substantial increase in employees and the importance of
retaining persons in key positions in an increasingly competitive environment.
SpeedFam will not grant any further options under the IPEC 1992 Stock Option
Plan.
 
The major provisions of the 1995 stock plan relating to stock options and the
proposed amendment are described below:
 
Term.  The 1995 stock plan became effective as of July 27, 1995 and has no fixed
expiration date.
 
Administration.  The 1995 stock plan is administered by the compensation
committee of the SpeedFam board, which has the exclusive authority to make
awards under the 1995 stock plan and to make all interpretations and
determinations affecting the plan. No member of the compensation committee will
be eligible to participate in the plan or may be awarded equity securities under
the plan or any other plan of SpeedFam during the year prior to compensation
committee service unless the plan (or any other such plan) and the award comply
with the applicable requirements of Rule 16b-3 under the Exchange Act. The plan
and the grant of stock options to the directors pursuant to the plan have been
structured to comply with the applicable requirements of Rule 16b-3.
 
Participation.  Participation in the plan is limited to key officers and other
employees of SpeedFam and any of its subsidiaries --"Employees"-- and any member
of the SpeedFam board who is not then an Employee or beneficial owner, either
directly or indirectly, of more than 10% of the SpeedFam common stock -- an
"Eligible Director." Eligible Directors are eligible to receive automatic grants
of nonqualified stock options pursuant to the provisions of the plan.
 
Type of Awards.  Awards under the plan may be in the form of stock options
(including incentive stock options -- ISOs -- which meet the requirements of
Section 422 of the Internal Revenue Code, restricted shares and restricted
units. The compensation committee may award stock appreciation rights in
connection with any option granted under the plan, either at the time the option
is granted or thereafter at any time prior to the exercise, termination or
expiration of the option ("tandem right"), or separately ("freestanding right").
Awards will be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. However, the exercise price
per share of SpeedFam common stock purchasable under any ISO and the option
price of any stock
 
                                       88
<PAGE>   96
 
appreciation right accompanying an ISO will not be less than 100% of the fair
market value of a share of SpeedFam common stock on the date of grant of the ISO
or stock appreciation right accompanying an ISO.
 
Shares Available.  As originally effective, no more than 1,000,000 shares of
SpeedFam common stock could be issued under the plan (subject to adjustment as
described below for stock splits, stock dividends, recapitalizations, mergers
and other similar events). On October 8, 1998, shareholders approved an
amendment which increased the maximum number of shares to 1,800,000. If the
proposed amendment is approved, the maximum aggregate number of shares which may
be issued under the plan will be increased to 3,300,000. Generally, any shares
of SpeedFam common stock which cease to be subject to purchase under a granted
option, or any forfeited restricted share or restricted units, will become
available for subsequent awards under the plan.
 
Stock Options.  The compensation committee will fix the term of all options
granted to Employees under the plan; however, the term of ISOs may not exceed
ten years from the grant date. The exercise price for any shares of SpeedFam
common stock purchasable under an option granted to Employees will be determined
by the compensation committee subject to adjustment as described below. The
exercise price for any shares purchasable under an ISO will not be less than
100% of the fair market value of a share of SpeedFam common stock on the date
the ISO is granted. The compensation committee may, in its discretion,
accelerate the exercisability of any outstanding option, in whole or in part, at
any time. The terms of nonqualified stock options granted to Eligible Directors,
the exercise price for shares purchasable under such options and the date such
options become exercisable are determined pursuant to the formula provision of
the plan which can only be amended to the extent permitted by Rule 16b-3.
However, each option granted either to an Employee or Eligible Director will
become exercisable in full at the earliest of the death, eligible retirement or
total disability of the option holder and may become exercisable in the event of
an involuntary termination within three years of a change in control of
SpeedFam. Each option shall be exercisable in full or in part, subject to
certain requirements in the plan, by payment of the exercise price in cash or by
surrender of shares already owned by the option holder.
 
Stock Appreciation Rights.  The compensation committee may grant stock
appreciation rights in connection with any option granted under the plan, either
as a tandem right or a freestanding right. Each tandem right is subject to the
same terms and conditions as the related options. The exercise price of stock
appreciation rights granted under the plan will be determined by the
compensation committee; however, the exercise price of each stock appreciation
right granted in connection with an ISO will not be less than 100% of the fair
market value of a share of SpeedFam common stock on the date the ISO is granted.
Upon exercise of an stock appreciation right, the holder will be entitled to
receive the excess of the fair market value of a share of SpeedFam common stock
over the exercise price of the stock appreciation right, payable in cash (unless
otherwise determined by the compensation committee).
 
Restricted Shares.  The compensation committee will determine the terms,
conditions and restrictions on which awards of shares of SpeedFam common stock
may be made. The holder of such shares will generally have the rights of
shareholders subject to the provisions of the plan. The compensation committee
may at any time, in its sole discretion, waive the terms and conditions and/or
shorten the restricted period established for any award. All restrictions with
respect to a restricted share award will lapse upon the earliest to occur of the
death, eligible retirement or total disability of the holder or a change in
 
                                       89
<PAGE>   97
 
control of SpeedFam. Generally, all restricted shares and all rights with
respect to such restricted shares will be forfeited by reason of termination of
employment. None of the shares subject to a restricted share award may be sold,
transferred, assigned or pledged until they are delivered to the holder of the
share award.
 
Restricted Units.  The compensation committee is authorized to grant and to
determine the terms, conditions and restrictions of any restricted unit awards.
No shares of SpeedFam common stock will be issued at the time the award is made
and SpeedFam will not be required to set aside funds for the payment of any such
award. The compensation committee may at any time, in its sole discretion, waive
the terms and conditions and/or shorten the restricted period established for
any award. All restrictions with respect to a restricted unit award will lapse
upon the earliest to occur of the death, eligible retirement or total disability
of the holder or a change in control of SpeedFam. Restricted unit awards may be
paid in cash or shares or any combination thereof.
 
Adjustments.  The compensation committee may, at any time, in the event of any
stock dividend, stock split, recapitalization, merger, consolidation or other
change in the capitalization of SpeedFam or similar corporate transaction or
event affecting the SpeedFam common stock in such manner as it deems equitable,
adjust, among other things; (1) the limitation of shares that may be issued
under the plan; (2) the number and class of shares that may be subject to stock
options, restricted shares or restricted units that have not been issued; (3)
the exercise price to be paid for unexercised stock options; and (4) the share
value used to determine the amount of value of any award under the plan.
 
Termination and Amendment.  The SpeedFam board may suspend, terminate, modify or
amend the plan at any time, but if any such amendment requires shareholder
approval in order to meet the requirements of the then applicable rules under
Section 16(b) of the Exchange Act, such amendment may not be effected without
obtaining shareholder approval. The board may terminate the plan, but the terms
of the plan will continue to apply to awards granted prior to such termination.
No suspension, termination, modification or amendment of the plan may adversely
affect the rights of an employee or eligible director under previously granted
awards.
 
The SpeedFam board has authorized, subject to shareholder approval, the
amendment to the plan. The amendment increases the maximum aggregate number of
shares of SpeedFam common stock as to which awards of options, restricted
shares, units or rights may be made from time to time thereunder from 1,800,000
to 3,300,000 shares.
 
The SpeedFam shareholders are being asked to approve such amendment. The
affirmative vote of at least a majority of the shares of SpeedFam common stock
present or represented and voting at the SpeedFam special meeting is required to
approve the amendment to the plan. An abstention has the effect of a vote
against the proposal.
 
   
THE SPEEDFAM BOARD RECOMMENDS THAT THE SPEEDFAM SHAREHOLDERS VOTE "FOR"
    
THE AMENDMENT TO THE 1995 STOCK PLAN FOR EMPLOYEES AND DIRECTORS OF SPEEDFAM
INTERNATIONAL, INC., AS AMENDED AS OF OCTOBER 8, 1998, WHICH WOULD INCREASE THE
MAXIMUM AGGREGATE NUMBER OF SHARES OF SPEEDFAM COMMON STOCK AS TO WHICH AWARDS
OF OPTIONS, RESTRICTED SHARES, UNITS OR RIGHTS MAY BE MADE FROM TIME TO TIME
THEREUNDER FROM 1,800,000 TO 3,300,000 SHARES.
 
                                       90
<PAGE>   98
 
                SPEEDFAM MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
SpeedFam designs, develops, manufactures, markets and services chemical
mechanical planarization, or "CMP," systems used in the fabrication of
semiconductor devices as well as other high-throughput precision surface
processing equipment used in the fabrication of thin film memory disk media,
semiconductor wafers and general industrial components. In addition, SpeedFam
markets and distributes parts and expendables and slurries. SpeedFam's total
revenue consists of net sales in two business segments: (1) equipment, parts and
expendables, and (2) slurries, as well as commissions earned on the distribution
in the U.S. and Europe of products manufactured by SpeedFam Co., Ltd.,
SpeedFam's joint venture in the Far East -- the "Far East Joint Venture." Sales
of SpeedFam's products are recorded upon shipment or when the product is
accepted by the customer, provided that no significant obligations remain
outstanding and collection of the related receivable is deemed probable.
SpeedFam accrues estimated warranty and installation expenses for each equipment
and system order at the time the order is shipped.
 
Equipment, parts and expendables consist of capital equipment manufactured by
SpeedFam, spare parts for that equipment and expendable products, such as
bearings, grinding stones, lapping plates, workpiece carriers, seals, retaining
rings, workholders and polishing pads. During the first six months of fiscal
1999 and 1998 and the fiscal years 1998, 1997, and 1996, 80.9%, 84.8%, 83.7%,
83.6%, and 77.3% respectively, of SpeedFam's net sales was attributable to the
sale of capital equipment, parts and expendables. Historically, the gross margin
for products in this segment has been significantly higher than that for
slurries. SpeedFam began development of its original CMP product, the CMP-V, in
1990. SpeedFam initiated volume shipments of the CMP-V in 1994. Shipments of the
Auriga began in fiscal 1997. In the second quarter of fiscal 1998, SpeedFam
began shipments of its latest CMP enhancement, the Auriga-C. Through November
30, 1998, SpeedFam had sold 20 Auriga-C systems. SpeedFam's CMP systems
accounted for 57.1%, 61.8%, 57.2%, 50.2% and 34.7%, of net sales for the first
six months of fiscal 1999 and 1998 and fiscal years 1998, 1997, and 1996
respectively. SpeedFam's CMP systems generally have higher gross margins than
those of SpeedFam's other capital equipment products.
 
Slurries consist of polishing slurry and slurry components (including vehicles
and abrasives) used in surface processing. During the six months ended November
30, 1998 and 1997 and fiscal years 1998, 1997, and 1996, 19.1%, 15.2%, 16.3%,
16.4% and 22.7%, respectively, of SpeedFam's net sales was attributable to the
sale of slurries. Substantially all of the slurries sold by SpeedFam are
manufactured by Fujimi Incorporated. Historically, the gross margin for slurries
has been significantly lower than that for equipment, parts and expendables. In
recent years, SpeedFam has experienced severe competitive pressure in the sale
of slurries and has been required to reduce prices. In addition, SpeedFam has
experienced increased slurry costs.
 
Commissions from affiliate -- "commissions" -- consist primarily of revenue
derived from the distribution by SpeedFam in the U.S. and Europe of products
manufactured by the Far East Joint Venture for which SpeedFam acts as sales
agent. Certain capital equipment marketed and distributed by SpeedFam is
produced solely by the Far East Joint Venture. SpeedFam distributes such
products throughout the U.S. and Europe and receives commissions thereon. Such
amount reflects the difference between the imported
 
                                       91
<PAGE>   99
 
equipment's cost to SpeedFam and sales price to the customer. For the first six
months of fiscal 1999 and 1998 and fiscal years fiscal 1998, 1997, and 1996,
commissions accounted for 1.2%, 4.1%, 4.9%, 7.2%, 5.2%, respectively, of total
revenue. Commissions are subject to foreign exchange rate fluctuations which can
significantly impact operating profit margins.
 
In the first six months of fiscal 1999 and 1998 and in fiscal years 1998, 1997,
and 1996, 50.7%, 33.9%, 31.7%, 31.2% and 21.7%, respectively, of SpeedFam's
total revenue was attributable to sales outside of the United States. In
particular, in the first six months of fiscal 1999, 31.3% of SpeedFam's total
revenue was attributable to sales made to European markets and 19.4% was
attributable to sales to markets in the Far East.
 
SpeedFam generally enters into foreign exchange contracts to hedge certain firm
commitments denominated in foreign currencies, principally in Japanese yen. The
terms of the contracts are rarely more than one year. Currency exchange rate
variations have had an immaterial effect on SpeedFam's results of operations for
the periods presented. The results of operations of SpeedFam's subsidiaries and
its equity in the net earnings of the Far East Joint Venture are translated for
financial statement purposes based upon average exchange rates during the period
covered. As a result, fluctuations in exchange rates may have an adverse effect
on the Company's results of operations. Net assets of the Company's foreign
subsidiaries and 50% of the net assets of the Far East Joint Venture were
approximately $30.1 million at October 31, 1998 (the end of the fiscal 1999
second quarter of such entities).
 
SpeedFam owns a 50% interest in both the Far East Joint Venture and Fujimi
Corporation -- "Fujimi Joint Venture." SpeedFam's equity interest in each joint
venture is accounted for on the equity method. As a result, SpeedFam's share of
the net earnings of the Far East Joint Venture and the Fujimi Joint Venture
appear in the "Equity in net earnings of affiliates" caption on SpeedFam's
consolidated statements of earnings. The Far East Joint Venture and the Fujimi
Joint Venture have paid dividends in the past and may continue to do so in the
foreseeable future, but are expected to reinvest substantially all their
earnings back into their respective businesses. SpeedFam's share of the net
earnings of the Far East Joint Venture has not in the past resulted and is not
expected in the future to result in a like effect on the cash flows of SpeedFam.
At November 30, 1998, SpeedFam's equity interest in the Far East Joint Venture
was $23.8 million, representing 7.6% of SpeedFam's total assets and 8.2% of
stockholders' equity. The net earnings of SpeedFam in the past have been
substantially influenced by the results of operations of the Far East Joint
Venture and can be expected to continue to be so influenced in the future.
 
                                       92
<PAGE>   100
 
QUARTER ENDED NOVEMBER 30, 1998 COMPARED WITH QUARTER ENDED NOVEMBER 30, 1997
 
RESULTS OF OPERATIONS
 
The following table sets forth certain consolidated statements of earnings data
for the periods indicated as a percentage of total revenue:
 
<TABLE>
<CAPTION>
                                         THREE MONTHS       SIX MONTHS
                                            ENDED             ENDED
                                         NOVEMBER 30,      NOVEMBER 30,
                                        --------------    --------------
                                        1998     1997     1998     1997
                                        ----     ----     ----     ----
<S>                                     <C>      <C>      <C>      <C>
REVENUE
Net sales.............................   99.4%    95.3%    98.8%    95.9%
Commissions from affiliate............    0.6      4.7      1.2      4.1
                                        -----    -----    -----    -----
Total revenue.........................  100.0    100.0    100.0    100.0
Cost of sales.........................   69.8     56.2     66.6     56.7
                                        -----    -----    -----    -----
Gross margin..........................   30.2     43.8     33.4     43.3
OPERATING EXPENSES:
Research, development and
  engineering.........................   42.8     14.0     32.2     13.3
Selling, general and administrative...   34.4     15.4     25.7     16.4
                                        -----    -----    -----    -----
Operating profit (loss)...............  (47.0)    14.4    (24.5)    13.6
Other income, net.....................    7.4      2.6      6.0      2.0
                                        -----    -----    -----    -----
Earnings (loss) from consolidated
  companies before income taxes.......  (39.6)    17.0    (18.5)    15.6
Income tax expense (benefit)..........  (19.0)     5.9     (9.3)     5.5
                                        -----    -----    -----    -----
Earnings (loss) from consolidated
  companies...........................  (20.6)    11.1     (9.2)    10.1
Equity in net earnings of
  affiliates..........................    2.9      2.4      2.4      1.8
                                        -----    -----    -----    -----
Net earnings (loss)...................  (17.7)%   13.5%    (6.8)%   11.9%
                                        =====    =====    =====    =====
</TABLE>
 
NET SALES.  SpeedFam's net sales for second quarter of fiscal 1999 were $23.9
million, down 55.6% from net sales of $53.9 million for the corresponding period
in the prior year. Sales of equipment, parts and expendables decreased to $18.2
million of 75.9% of net sales in the second quarter of fiscal 1999, against
$46.0 million or 85.3% of net sales reported in the same period of fiscal 1998.
The sales decline in this segment was primarily attributable to lower sales of
the SpeedFam's CMP systems to the semiconductor industry. Sales of CMP systems
generated $11.1 million, or 46.6% of net sales in the second quarter of fiscal
1999, down from the $34.7 million, or 64.4% of net sales, reported a year
earlier. SpeedFam's net sales in this quarter were affected by the continued
slowdown in overall demand for semiconductor manufacturing equipment including
CMP systems, which is due to the over-capacity situation in the semiconductor
device market worldwide. As a result, semiconductor manufacturers are expected
to continue to reduce or delay their investment in manufacturing equipment. In
addition, the semiconductor device market has been affected by the poor general
economic conditions of many Asian countries, particularly Korea and Japan, who
are both users and producers of semiconductors. SpeedFam believes that these
market and economic uncertainties will likely have an adverse effect on sales of
CMP systems, as well as other equipment products SpeedFam sells, through the
next 12 to 18 months.
 
Sales to the thin film memory disk market in the second quarter of fiscal 1999
accounted for $6.7 million, or 27.9% of net sales, compared with $13.4 million,
or 24.8% of net sales,
 
                                       93
<PAGE>   101
 
for the second quarter of fiscal 1998. The technology of thin film memory disks
has shifted to the use of more alternative substrates, and a majority of those
substrates are being produced by Far East manufacturers. Consequently, thin film
memory disk manufacturers in the United States have experienced manufacturing
over-capacity which in turn has reduced capital spending for equipment SpeedFam
supplies from its U.S. operations. SpeedFam expects these manufacturing
over-capacity problems to continue in the U.S. through the current fiscal year.
 
Net sales for the six months ended November 30, 1998 were $59.7 million, down
43.6% against net sales of $105.8 million in the first six months of fiscal
1998. A decline in sales of CMP equipment accounted for the significant portion
of this sales decline. In the first half of fiscal 1999, sales of CMP systems
were $34.1 million, or 57.1% of net sales, against the $65.4 million or 61.8% of
net sales, reported a year earlier. In addition, net sales in the six months
ended November 30, 1998 decreased due to a decline in sales to the thin film
memory disk market. In the six months ended November 30, 1998, sales to the thin
film memory disk market were $13.4 million compared to $28.9 million in the same
six months of the prior year. Equipment sales to the thin film memory disk
market have declined during this period due to the reasons set forth above.
 
The decrease in net sales in the three and six months ended November 30, 1998
was also attributable to a decrease in sales of slurries. Slurries revenue
decreased to $5.8 million or 24.1% of net sales in the second quarter of fiscal
1999 from $7.9 million or 14.7% in the comparable period of fiscal 1998. In the
first six months of fiscal 1999, sales of slurries were $11.4 million or 19.1%
of net sales compared to the $16.0 million or 15.2% in the same period of fiscal
1998.
 
COMMISSIONS FROM AFFILIATE.  Commissions from affiliate decreased to $152,000
during the second quarter of fiscal 1999 from $2.6 million in the corresponding
period of fiscal 1998. During the first six months of this fiscal year,
commissions from affiliate decreased to $737,000 from $4.6 million in the first
six months of fiscal 1998. The decline in commission revenue in the three and
six months ended November 30, 1998 was due to the continued slowdown in demand
for capital equipment from both the thin film memory disk and silicon wafer
markets. SpeedFam believes that capital equipment spending will decline further
in the thin film memory and silicon wafer industries in the current fiscal year,
in turn further lowering commissions from affiliate compared to prior year
periods.
 
GROSS MARGIN.  Gross margin decreased to $7.3 million or 30.2% of total revenue
for the three months ended November 30, 1998 from $24.8 million or 43.8% of
total revenue for the three months ended November 30, 1997. For the first six
months of fiscal 1999, gross margin was $20.2 million or 33.4% of total revenue
compared to $47.8 million or 43.3% of total revenue in fiscal 1998. Gross
margin, both in dollars and as a percentage of total revenue, was down year over
year due primarily to higher material costs for SpeedFam's mainline CMP tool,
the Auriga-C integrated dry-in/dry-out system, higher overhead costs due to
excess production capacity, lower commission revenue, pricing pressure in all
markets, and shifts in the product mix.
 
RESEARCH DEVELOPMENT AND ENGINEERING.  Research, development and engineering
expense was $10.3 million or 42.8% of total revenue in the second quarter of
fiscal 1999, up from $7.9 million or 14.0% of total revenue in the second
quarter of fiscal 1998. In the six months ended November 30, 1998, research,
development and engineering expense increased to $19.5 million or 32.2% of total
revenue compared to $14.7 million or 13.3% of total revenue in the same period
of fiscal year 1998. The increase in both the three and six month periods of
fiscal 1999 ended November 30, 1998 is a result of SpeedFam's
 
                                       94
<PAGE>   102
 
significant investment in CMP systems' reliability and productivity
improvements, various process technologies for the semiconductor device market
and growing technical support costs due to the greater number of CMP systems now
in the field. Research, development and engineering expense as a percentage of
total revenue also increased substantially due to reduced revenues in fiscal
1999.
 
SELLING, GENERAL AND ADMINISTRATIVE.  In the second quarter of fiscal 1999,
selling, general and administrative expense was $8.3 million, or 34.4% of total
revenue, down from $8.7 million, or 15.4%, last year. Selling, general and
administrative expense decreased to $15.6 million or 25.7% of total revenue in
the first six months of fiscal 1999 from $18.1 million or 16.4% of total revenue
in the first six months of fiscal 1998. The dollar decrease in the second
quarter and first six months of fiscal 1999 as compared to the prior year was
due to lower commissions paid to the Far East Joint Venture as a result of
decreased sales of CMP systems manufactured in the United States and sold into
the Asian markets. Selling, general and administrative expense also declined due
to management's efforts to control expenses to align them with lower revenue
expectations, including decreased travel, an across the board reduction in all
management salaries, a freeze on new hires, and reductions in SpeedFam's global
workforce. Selling, general and administrative expense as a percentage of total
revenue increased substantially in both the three and six month periods ended
November 30, 1998. This was primarily due to reduced revenues in fiscal 1999.
 
OTHER INCOME, NET.  Other income increased to $1.8 million in the second quarter
of fiscal 1999 from $1.5 million in the comparable period of fiscal 1998. Other
income increased to $3.6 million in the first six months of fiscal 1999 from
$2.3 million in the comparable period of fiscal 1998. Other income consisted
almost entirely of interest income in the second quarter of fiscal 1999.
Interest income increased in the second quarter and first six months of fiscal
1999 compared to the prior year period as a result of the cash infusion from
SpeedFam's equity offering in October 1997.
 
INCOME TAX BENEFIT.  In the second quarter and first six months of fiscal 1999,
SpeedFam provided for a tax benefit due to the operating losses reported. The
tax benefit has been recorded at a rate significantly above the federal benefit
rate of 35% due to the impact of significant research and development tax
credits.
 
EQUITY IN NET EARNINGS OF AFFILIATES.  SpeedFam's equity in the net earnings of
its joint ventures was $701,000 for the second quarter, compared to $1.3 million
a year ago. For the first six months of fiscal 1999, equity in net earnings of
affiliates decreased to $1.4 million from $2.1 million in the corresponding
period in the prior year. SpeedFam believes that the earnings of SpeedFam's
largest joint venture, the Far East Joint Venture, may be adversely affected for
at least the current fiscal year by both the slow down in demand for equipment
sold into the thin film memory disk and silicon wafer markets, as well as the
current economic and currency crises facing many Far East economies.
 
                                       95
<PAGE>   103
 
FISCAL 1998 COMPARED WITH FISCAL 1997
 
RESULTS OF OPERATIONS
 
The following table sets forth certain consolidated statements of earnings data
for the periods indicated as a percentage of total revenue:
 
<TABLE>
<CAPTION>
                                                   YEARS ENDED MAY 31,
                                                 -----------------------
                                                 1998     1997     1996
                                                 -----    -----    -----
<S>                                              <C>      <C>      <C>
REVENUE:
Net sales......................................   95.1%    92.8%    94.8%
Commissions from affiliate.....................    4.9      7.2      5.2
                                                 -----    -----    -----
Total revenue..................................  100.0    100.0    100.0
Cost of sales..................................   59.2     59.7     65.5
                                                 -----    -----    -----
Gross margin...................................   40.8     40.3     34.5
OPERATING EXPENSES:
Research, development and engineering..........   18.2     11.4      9.6
Selling, general and administrative............   19.4     16.5     15.7
                                                 -----    -----    -----
Operating profit...............................    3.2     12.4      9.2
Other income (expense).........................    3.2     (0.2)    (0.2)
                                                 -----    -----    -----
Earnings from consolidated companies before
  income taxes.................................    6.4     12.2      9.0
Income tax expense.............................    1.9      4.6      3.5
                                                 -----    -----    -----
Earnings from consolidated companies...........    4.5      7.6      5.5
Equity in net earnings of affiliates...........    2.4      4.1      4.3
                                                 -----    -----    -----
Net earnings...................................    6.9%    11.7%     9.8%
                                                 =====    =====    =====
</TABLE>
 
NET SALES.  Net sales for the fiscal year ended May 31, 1998 were $176.2
million, up 9.5% over net sales of $161.0 million in fiscal 1997. Equipment,
parts and expendables accounted for 83.7% of net sales in fiscal 1998 compared
to 83.6% in fiscal 1997. The dollar growth in this segment was attributable to
higher sales of SpeedFam's CMP planarization systems to the semiconductor
industry. In addition, the average selling price of the CMP systems increased
over the prior year due to a shift in product mix to the Auriga and the Auriga-C
from the CMP-V in fiscal 1998. Sales of CMP systems totaled $100.8 million, or
57.2% of net sales, up 24.8% over the $80.8 million of CMP system sales in
fiscal 1997. However, SpeedFam believes that there has been a slowdown in
overall demand for semiconductor manufacturing equipment including CMP systems,
which has slowed sales to the semiconductor device market worldwide.
 
Sales to the thin film memory disk market in fiscal 1998 accounted for $51.9
million, or 29.4% of net sales, as compared to $59.1 million, or 36.7% of net
sales in fiscal 1997. This decrease was primarily due to a decline in sales of
equipment to the thin film memory disk market from the prior year. The
technology for the production of thin film memory disks has shifted to the use
of alternative substrates; a majority of those substrates being produced by Far
East manufacturers. Consequently, thin film memory disk manufactures
headquartered in the United States have experienced manufacturing over-capacity
which in turn has reduced capital spending for equipment SpeedFam supplies from
its U.S.
 
                                       96
<PAGE>   104
 
operations. SpeedFam expects these manufacturing over-capacity problems to
continue in the U.S. through the next fiscal year.
 
Sales of slurries increased to $28.8 million in fiscal 1998 from $26.3 million
in fiscal 1997. As a percent of net sales, sales of slurries remained relatively
unchanged at 16.3% in fiscal 1998 compared to 16.4% in fiscal 1997. European net
sales increased to $11.0 million in fiscal 1998 from $9.9 million in fiscal
1997.
 
COMMISSIONS FROM AFFILIATE.  Commissions from affiliate decreased to $9.0
million in the year ended May 31, 1998, compared to $12.4 million in the year
ended May 31, 1997. The decrease in fiscal 1998, as compared to fiscal 1997, was
due not only to the continued slowdown in the thin film memory disk market, but
also to a global decrease in orders of capital equipment from the silicon wafer
market related to manufacturing over capacity due to slowing demand for wafers
produced by that industry.
 
GROSS MARGIN.  In fiscal 1998, gross margin was $75.5 million, or 40.8% of total
revenue, compared to $69.9 million, or 40.3% of total revenue, in fiscal 1997.
Gross margin increased primarily due to the increased sales of CMP systems in
fiscal 1998. However, the impact of improved gross margins due to higher sales
of CMP systems was mostly offset by declining gross margins on sales to the thin
film memory disk industry, declining slurry margins and lower commission revenue
compared to fiscal 1997. Gross margin was also impacted by an additional $1.5
million in warranty expense accrued in the fourth quarter of fiscal 1998. Due to
the increasing complexity of SpeedFam's CMP products, and the importance of
maintaining customer good will in the current competitive environment,
management made the decision in the fourth quarter of fiscal year 1998 to accrue
for additional equipment warranty to cover the anticipated customer service
costs of its CMP products.
 
RESEARCH, DEVELOPMENT AND ENGINEERING.  In the year ended May 31, 1998,
research, development and engineering expense increased to $33.7 million, or
18.2% of total revenue, compared to $19.8 million, or 11.4% of total revenue, in
fiscal 1997. The increase in both the dollar amount and the percentage of total
revenue is a result of SpeedFam's significant investment in dry-in/dry-out,
end-point detection and 300mm planarization capabilities for its CMP systems;
improvements in CMP systems' reliability and productivity; and various process
technologies for the semiconductor device, thin film memory disk and silicon
wafer markets. In addition, SpeedFam has committed significant technical support
resources to meet the needs of its customers.
 
SELLING, GENERAL AND ADMINISTRATIVE.  In fiscal 1998, selling, general and
administrative expense increased to $35.9 million from $28.7 million in fiscal
1997. In fiscal 1998, selling, general and administrative expense increased as a
percent of total revenue to 19.4% from 16.5% in fiscal 1997. This increase in
selling, general and administrative expense reflects continued investments in
the sales and administrative infrastructure, as well as increased commissions
paid to the Far East Joint Venture as a result of increased sales of CMP systems
produced by SpeedFam in the U.S. and exported to Pacific Rim customers through
the Far East Joint Venture. In the fourth quarter of fiscal 1998, selling,
general and administrative expense also included an increase in the allowance
for doubtful accounts receivable due to possible exposures in the Far East as
well as severance compensation related to reductions in SpeedFam's workforce
which were made during the quarter.
 
OTHER INCOME (EXPENSE).  Other income increased to $6.0 million in fiscal 1998
from $298,000 of other expense in fiscal 1997. Other income (expense) consisted
primarily of
 
                                       97
<PAGE>   105
 
interest income in fiscal 1998. Interest income increased substantially in
fiscal 1998 as a result of the cash infusions from SpeedFam's two successful
equity offerings in February and October of calendar year 1997.
 
PROVISION FOR INCOME TAXES.  SpeedFam's effective tax rate in fiscal 1998 was
29%, compared to 38% in fiscal 1997. SpeedFam's effective income tax rate in
fiscal 1998 differs from the Federal statutory rate primarily as a result of
state taxes, net of the U.S. federal benefit, more than offset by the tax
benefit from a foreign sales corporation and tax exempt investment securities.
 
EQUITY IN NET EARNINGS OF AFFILIATES.  For the year ended May 31, 1998, equity
in net earnings of affiliates decreased to $4.4 million compared to $7.1 million
in the year ended May 31, 1997. Revenue of the Far East Joint Venture grew in
fiscal 1998 from the same period a year ago. However, net earnings of the Far
East Joint Venture were down from the prior year due to competitive pricing
pressures for the automated disk polishing systems, which negatively impacted
gross margins, combined with higher costs of producing and servicing these
systems. Restructuring costs of approximately $742,000 were incurred by the Far
East Joint Venture during fiscal 1998 in connection with the reorganization of
its Asian operations which included the closing of the Malaysia and Thailand
subsidiaries in July of 1998.
 
FISCAL 1997 COMPARED WITH FISCAL 1996
 
NET SALES.  Net sales for the fiscal year ended May 31, 1997 were $161.0
million, up 41.4% over net sales of $113.9 million in fiscal 1996. Equipment,
parts and expendables accounted for 83.6% of net sales in fiscal 1997 compared
to 77.3% in fiscal 1996. The growth in this segment was attributable to higher
sales of SpeedFam's CMP planarization systems to the semiconductor industry.
Sales of CMP systems totaled $80.8 million, or 50.2% of net sales, more than
double the $39.5 million of CMP system sales in fiscal 1996. In addition to the
significant increase in CMP equipment sales to semiconductor manufacturers, net
sales for the fiscal year increased due to a higher level of sales of equipment,
parts and expendables to the thin film memory disk media market. Sales to the
thin film memory disk market in fiscal 1997 accounted for $59.1 million, or
36.7% of net sales, as compared to $49.5 million, or 43.5% of net sales in 1996.
Sales of slurries increased to $26.3 million in fiscal 1997 from $25.8 million
in fiscal 1996. However, as a percent of net sales, sales of slurries decreased
to 16.4% in fiscal 1997 from 22.7% in fiscal 1996. European sales decreased to
$9.9 million in fiscal 1997 from $10.9 million in fiscal 1996.
 
COMMISSIONS FROM AFFILIATE.  Commissions from affiliate increased to $12.4
million in the year ended May 31, 1997, compared to $6.3 million in the year
ended May 31, 1996. The increase in fiscal 1997, as compared to fiscal 1996, was
due primarily to increased demand in the silicon wafer industry for polishing
systems developed and manufactured by the Far East Joint Venture. In addition,
sales of cleaning and polishing systems, also produced by the Far East Joint
Venture, to customers in the thin film memory disk media market increased
significantly in fiscal 1997 over fiscal 1996. Commissions from affiliate also
improved over the prior year due to improved margins on import machines.
 
GROSS MARGIN.  In fiscal 1997, gross margin was $69.9 million, or 40.3% of total
revenue, compared to $41.5 million, or 34.5% of total revenue, in fiscal 1996.
In addition to higher sales levels, gross margin has increased due to a
continuing increase in sales of higher margin equipment, particularly systems
for the planarization of semiconductor devices. In
 
                                       98
<PAGE>   106
 
addition, higher commission revenue contributed to the increased gross margins
in fiscal 1997.
 
RESEARCH, DEVELOPMENT AND ENGINEERING.  In the year ended May 31, 1997,
research, development and engineering expense increased to $19.8 million, or
11.4% of total revenue, compared to $11.5 million, or 9.6% of total revenue, in
fiscal 1996. The increase in both the dollar amount and as a percent of total
revenue is a result of the continued investment in the development of the CMP
process and products for key markets, particularly for the semiconductor sector,
and the increase in SpeedFam's field support organization throughout the world.
Such expenditures resulted in the development and sale of the Auriga, and the
development of a post-CMP cleaning technology.
 
SELLING, GENERAL AND ADMINISTRATIVE.  In fiscal 1997, selling, general and
administrative expense increased to $28.7 million from $18.9 million in fiscal
1996. In fiscal 1997, selling, general and administrative expense increased as a
percent of total revenue to 16.5% from 15.7% in fiscal 1996. Higher levels of
spending were required to support the sales growth in fiscal 1997. This increase
in selling, general and administrative expense as a percentage of revenue
reflects continued investments in the sales and administrative infrastructure,
as well as increased commissions paid to the Far East Joint Venture as a result
of increased sales of CMP systems produced by SpeedFam in the U.S. and exported
to Pacific Rim customers though its joint venture affiliate.
 
OTHER INCOME (EXPENSE).  Other expense increased to $298,000 in fiscal 1997 from
$208,000 in fiscal 1996. Other income (expense) includes charges associated with
SpeedFam's public common stock offering in the first quarter of fiscal 1997
which was subsequently canceled, interest expense, miscellaneous expenses and
interest income.
 
PROVISION FOR INCOME TAXES.  SpeedFam's effective tax rate in fiscal 1997 was
38%, compared to 39% in fiscal 1996. SpeedFam's effective income tax rate in
fiscal 1997 differs from the Federal statutory rate primarily as a result of
state taxes, net of the U.S. federal benefit offset by the tax benefit from a
foreign sales corporation and research and development tax credits.
 
EQUITY IN NET EARNINGS OF AFFILIATES.  For the year ended May 31, 1997, equity
in net earnings of affiliates increased to $7.1 million compared to $5.2 million
in the year ended May 31, 1996 primarily as a result of continued strong demand
for products sold to the thin film memory disk and semiconductor wafer
industries by the Far East Joint Venture. In addition, SpeedFam's share of the
net earnings of the Fujimi Joint Venture was significantly higher than in fiscal
1996 due to increased sales and improved margins realized during fiscal 1997 on
slurry products sold by the Fujimi Joint Venture to the U.S. silicon wafer
market.
 
LIQUIDITY AND CAPITAL RESOURCES
 
As of November 30, 1998, SpeedFam had $121.3 million in cash, cash equivalents
and short-term investments, compared to $141.2 million at May 31, 1998. SpeedFam
used $5.0 million of cash in operating activities. Cash from operations was used
primarily to pay down accounts payable and amounts due to affiliates, reduce
other current liabilities and increase other current assets.
 
Accounts payable and due to affiliates decreased to $10.9 million at November
30, 1998, from $23.9 million at May 31, 1998. This decrease was a result of
management's efforts to control inventory purchasing in anticipation of lower
sales volume in the first and second
 
                                       99
<PAGE>   107
 
quarters of fiscal year 1999. Cash used in operations was partially offset by
reductions in accounts receivable and inventories.
 
Accounts receivable decreased to $36.5 million at November 30, 1998, from $45.2
million at May 31, 1998. The decrease in accounts receivable was primarily due
to lower sales volume in the first six months of fiscal year 1999, combined with
management's efforts to collect on outstanding receivables.
 
Inventory decreased to $41.6 million at November 30, 1998, from $55.5 million at
May 31, 1998. Inventory had increased substantially in fiscal year 1998 due to a
build up of CMP systems in the third and fourth quarters of fiscal 1998, which
did not ship until the first and second quarters of fiscal year 1999. In
addition, inventories decreased due to decreased production in anticipation of
lower sales volume in fiscal year 1999. SpeedFam established an obsolescence
reserve for inventories in the amount of $1.4 million and $1.7 million at May
31, 1998 and November 30, 1998, respectively.
 
SpeedFam made capital expenditures of $16.2 million. The majority of the cash
was used to fund the continued construction of a new 109,000 square foot
Technology Center next to its corporate headquarters in Chandler, Arizona.
Maturities of short-term investments provided $20.7 million of cash during the
first six months of fiscal 1999. Sales of short-term investments also provided
$35.8 million in cash. In total, $39.1 million in cash was invested in
short-term securities in the six months ended November 30, 1998.
 
Financing activities provided $1.2 million in cash, primarily through the sale
of stock to employees and the exercise of stock options, offset by debt
repayments. The Company has available a $60.0 million credit facility with its
U.S. bank group. The Company also has a L950,000 ($1.6 million) revolving line
of credit with the London branch of the U.S. bank. As of February 3, 1999, no
amounts were outstanding on either loan facility. The Company believes that the
Company's cash, cash equivalents and short-term investments combined with the
available proceeds from the loan facilities will be sufficient to meet the
Company's capital requirements during at least the next 12 months.
 
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" is
effective for financial years beginning after June 15, 1999. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities. SpeedFam is evaluating the new Statement's provisions and
has not yet determined its impact. SpeedFam will adopt SFAS No. 133 effective
June 1, 2000.
 
YEAR 2000
 
SpeedFam has addressed the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The year
2000 problem is pervasive and complex as virtually every computer operation will
be affected in some way. SpeedFam is aware of and has addressed the potential
computing difficulties that may be triggered by the year 2000.
 
SpeedFam has substantially completed a year 2000 date review and conversion
project to address all the necessary changes, testing and implementation issues.
The project encompassed three major areas of review: internal systems (hardware
and software), supplier compliance and SpeedFam products. SpeedFam has
identified the changes required to its computer programs and hardware. The
necessary modifications to SpeedFam's centralized financial, manufacturing and
operational information systems have been completed. SpeedFam's major suppliers
have been sent letters requesting information regarding their own year 2000
plan, as well as requesting confirmation that the components
 
                                       100
<PAGE>   108
 
supplied by these vendors are year 2000 compliant. SpeedFam has evaluated the
vendor responses which have been received and concluded that the vendors which
have responded either are year 2000 compliant or are proceeding with their own
year 2000 compliance programs. SpeedFam will continue to follow-up with vendors
with which SpeedFam has a material relationship and who have not responded to
obtain assurances that they expect to be year 2000 compliant in time. Equipment
and systems manufactured and supplied by SpeedFam have been evaluated and
determined to be free of any material problems that could be caused by the year
2000 issue. Management estimates that SpeedFam's remaining year 2000 compliance
expense will be immaterial. SpeedFam believes that year 2000 problems related to
its own internal systems and equipment and systems it sells have been addressed
and resolved and will not have a material effect on SpeedFam's business,
financial condition and results of operations. However, there can be no
assurance that the systems of other companies upon which SpeedFam's systems and
business rely will be timely converted or that any such failure to convert by
another company would not have a material adverse effect on SpeedFam's business,
financial conditions or results of operations. To mitigate this risk, SpeedFam
is reviewing its vendor relationships and building alternative sources of supply
should the business operations of any one vendor be interrupted due to the year
2000 problems.
 
                                       101
<PAGE>   109
 
                  IPEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
IPEC is a Delaware corporation primarily engaged in designing, manufacturing,
marketing and servicing equipment for the semiconductor manufacturing industry.
IPEC is organized into two principal divisions. IPEC Planar manufactures CMP
equipment and CMP-related products. IPEC Precision manufactures advanced
plasma-assisted chemical etch systems and metrology equipment for use primarily
in manufacturing silicon wafers and semiconductor devices.
 
IPEC's revenue is derived from the sale of products and related spare parts and
service. IPEC recognizes product and spare part revenue when the product or part
is shipped. Service revenue is recognized ratably over the term of service
contracts or in some cases upon completion of service.
 
IPEC's gross margin has varied in the past and may vary significantly in the
future due to many factors and is especially dependent on the percentage of
sales through distributors, materials costs, product mix and favorable terms
given to customers to introduce new products, penetrate new markets and
accelerate purchases. IPEC sells directly in the United States, and such sales
historically have had a higher gross margin than indirect international sales.
Gross margins in any period may not be indicative of margins for future periods.
Because IPEC Precision's customer base is new, IPEC believes that IPEC
Precision's gross margin could be lower than the gross margin for IPEC's CMP
tools. As new products are introduced by IPEC Precision in future quarters,
IPEC's gross margin may decrease.
 
   
IPEC incurred net losses of $24.1 million in the six months ended December 31,
1998, $42.3 million in fiscal 1998, $33.7 million in fiscal 1997 and $10.7
million in fiscal 1996. IPEC's loss in the six months ended December 31, 1998
resulted primarily from a world wide slowdown in the semiconductor and silicon
wafer manufacturing industries. IPEC's fiscal 1998 net loss included a $25.9
million net charge to increase the valuation allowance for IPEC's deferred tax
assets and a $10.6 million charge to record an additional write-down of the
assets in connection with the closure of IPEC Clean. IPEC's fiscal 1997 net loss
included a $25.0 million charge (net of taxes) for estimated losses on disposal
of IPEC Clean, a $3.6 million loss (net of taxes) from IPEC Clean operations of
fiscal 1997, and a $17.6 million pretax charge for asset write downs due to the
discontinuation of the Avanti 672 program. IPEC's fiscal 1996 net loss included
a one-time pretax charge of $37.0 million for the purchase of in-process
research and development in connection with the acquisitions of IPEC Planar
Portland and IPEC Precision.
    
 
IPEC expects to incur losses until semiconductor industry conditions improve,
especially in Asia, and order levels increase. Gross margins in fiscal 1999 are
expected to decline from fiscal 1998 due to the distribution of fixed costs over
a smaller revenue base. Although IPEC has initiated cost-containment measures
and will continue to review its cost structure, these measures alone are not
expected to improve operating results to a profitable level in fiscal 1999. A
significant portion of IPEC's operating expenses is relatively fixed in nature
and planned expenditures are based in part on anticipated orders. Ongoing
expenditures for product development, engineering and customer support make it
difficult to reduce expenses in a particular quarter if IPEC's sales projections
for the quarter are not met. Any inability to reduce spending quickly enough to
mitigate any
 
                                       102
<PAGE>   110
 
revenue shortfall would magnify the adverse impact of the revenue shortfall on
IPEC's results of operations.
 
QUARTER ENDED DECEMBER 31, 1998 COMPARED WITH QUARTER ENDED
DECEMBER 31, 1997
 
RESULTS OF OPERATIONS
 
The following table sets forth for the periods indicated the results of
operations for IPEC expressed as a percentage of total revenue:
 
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED
                                                  DECEMBER 31,
                                           --------------------------
                                              1998           1997
                                           -----------    -----------
<S>                                        <C>            <C>
Revenue..................................        100.0%         100.0%
Cost of goods sold.......................         86.1           54.6
                                           -----------    -----------
     Gross margin........................         13.9           45.4
                                           -----------    -----------
Operating expenses:
  Research and development...............         48.1           14.4
  Selling, general and administrative....         39.0           16.9
                                           -----------    -----------
     Total operating expenses............         87.1           31.3
                                           -----------    -----------
     Operating income (loss).............        (73.2)          14.1
Other income (expense):
  Interest income........................          5.6            2.7
  Interest expense.......................        (11.4)          (3.4)
  Other, net.............................          (.1)            --
                                           -----------    -----------
     Total other income (expense)........         (5.9)          (0.7)
                                           -----------    -----------
     Income (loss) from continuing
       operations
       before income taxes...............        (79.1)          13.4
Income tax expense.......................           --            4.9
                                           -----------    -----------
     Net income (loss) from continuing
       operations........................        (79.1)           8.5
                                           ===========    ===========
     Discontinued operations -- loss on
       disposal of IPEC clean, net of
       taxes.............................           --          (11.5)
                                           -----------    -----------
     Net income (loss)...................        (79.1)%         (3.0)%
                                           ===========    ===========
</TABLE>
 
REVENUE.  Revenue was $17.7 million for the quarter ended December 31, 1998
compared to $57.9 million for the quarter ended December 31, 1997, which was the
highest quarterly level of revenue in IPEC's history. The 69% decrease resulted
from downturns in the semiconductor and silicon wafer industries. IPEC
anticipates lower revenue levels for fiscal 1999 compared to fiscal 1998 as a
result of these economic conditions. Revenue from international sales
represented 42% of total revenue for the quarter ended December 31, 1998 and 49%
of total revenue for the quarter ended December 31, 1997.
 
COST OF GOODS SOLD.  Cost of goods sold as a percentage of revenue increased to
86.1% for the quarter ended December 31, 1998 from 54.6% for the quarter ended
December 31,
 
                                       103
<PAGE>   111
 
1997. This increase resulted primarily from increased fixed manufacturing and
field service expenses incurred to build, support and service new products
spread over a smaller revenue base. Additionally, IPEC received a settlement of
$1.1 million, included in revenue, from a major customer for cancellation of
orders in the quarter ended December 31, 1998. IPEC incurred a corresponding
$1.1 million charge to cost of goods sold to reduce the valuation of inventory
related to these orders in the quarter ended December 31, 1998. Because revenue
is not expected to increase until conditions improve in the semiconductor and
silicon wafer industries, cost of goods sold as a percentage of revenue is
expected to remain high, adversely affecting gross margins.
 
RESEARCH AND DEVELOPMENT.  Research and development expense increased 2% for the
quarter ended December 31, 1998 to $8.5 million from $8.3 million for the
quarter ended December 31, 1997. IPEC also incurred a non-recurring charge of
$375,000 in the quarter ended December 31, 1998 for development costs to a third
party for an integrated cleaning tool. As a result of the economic downturn in
the semiconductor and silicon wafer industries, IPEC had implemented cost
reduction plans in non-critical research and development projects beginning in
the fourth quarter of fiscal 1998 through the second quarter of fiscal 1999. As
a result of these cost reduction plans, research and development expense for the
quarter ended December 31, 1998 decreased 13% from $9.7 million for the quarter
ended June 30, 1998. IPEC is continuing to develop the AvantGaard 676 and
AvantGaard 776. Current development efforts also include a 300mm integrated CMP
system (the AvantGaard 876), plasma-assisted chemical etch systems, metrology
technologies and copper and dual damascene CMP processes.
 
SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses decreased 29% to $6.9 million for the quarter ended December 31, 1998
compared to $9.8 million for the quarter ended December 31, 1997. The $2.9
million decrease resulted primarily from reduced commission expense from lower
foreign selling activity, cost reduction programs and certain patents becoming
fully amortized in the first quarter of fiscal 1999. Cost reduction programs
have included headcount reductions, mandatory shut downs during holiday periods
and certain project reductions.
 
INTEREST INCOME AND INTEREST EXPENSE.  Interest income decreased to $983,000 for
the quarter ended December 31, 1998 from $1.6 million for the quarter ended
December 31, 1997. The decrease resulted from lower aggregate cash, cash
equivalents and short-term investment amounts and lower interest rates during
the quarter ended December 31, 1998 compared to the quarter ended December 31,
1997. Interest expense was $2.0 million for each of the quarters ended December
31, 1998 and 1997. IPEC's interest expense results primarily from the $115.0
million, 6.25% IPEC Convertible Notes financing completed in September 1997.
 
INCOME TAX EXPENSE.  IPEC did not record an income tax benefit for the quarter
ended December 31, 1998, due to the uncertain nature of the ultimate realization
of a future tax benefit. IPEC does not anticipate recording income tax expense
or benefits in fiscal l999. Income tax expense for the quarter ended December
31, 1997 was $2.9 million, an effective tax rate of 36.6%.
 
LOSS ON DISPOSAL OF IPEC CLEAN.  IPEC incurred a loss of $6.7 million, net of
taxes, in the quarter ended December 31, 1997 to write down the net assets of
IPEC Clean. IPEC had been negotiating the sale of IPEC Clean in calendar 1997.
However, the deteriorating business climate in the Pacific Rim resulted in a
delay of expected purchase orders from IPEC Clean customers and IPEC was unable
to consummate the transaction. IPEC closed IPEC Clean in the quarter ended March
31, 1998.
 
                                       104
<PAGE>   112
 
SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
1997
 
RESULTS OF OPERATIONS
 
The following table sets forth for the periods indicated the results of
operations for IPEC expressed as a percentage of total revenue:
 
<TABLE>
<CAPTION>
                                                SIX MONTHS ENDED
                                                  DECEMBER 31,
                                                -----------------
                                                 1998       1997
                                                ------     ------
<S>                                             <C>        <C>
Revenue.....................................
                                                100.0%     100.0%
Cost of goods sold..........................
                                                 81.4       55.6
                                                -----      -----
     Gross margin...........................
                                                 18.6       44.4
                                                -----      -----
Operating expenses:
  Research and development..................
                                                 39.4       13.8
  Selling, general and administrative.......
                                                 35.5       16.1
                                                -----      -----
     Total operating expenses...............
                                                 74.9       29.9
                                                -----      -----
     Operating income (loss)................
                                                (56.3)      14.5
Other income (expense):
  Interest income...........................
                                                  4.5        1.6
  Interest expense..........................
                                                 (9.5)      (2.2)
  Other, net................................
                                                  4.8         --
                                                -----      -----
     Total other income (expense)...........
                                                 (0.2)      (0.6)
                                                -----      -----
     Income (loss) from continuing
       operations before income taxes.......
                                                (56.5)      13.9
Income tax expense..........................
                                                   --        5.1
                                                -----      -----
     Income (loss) from continuing
       operations...........................
                                                (56.5)       8.8
Discontinued operations -- loss on disposal
  of IPEC Clean, net of taxes...............
                                                   --       (6.1)
                                                -----      -----
     Net income (loss)......................
                                                (56.5)%      2.7%
                                                =====      =====
</TABLE>
 
REVENUE.  Revenue was $42.7 million for the six months ended December 31, 1998
compared to $109.2 million for the six months ended December 31, 1997. The 61%
decrease from IPEC's record level revenues of the six months ended December 31,
1997 resulted from downturns in the semiconductor and silicon wafer industries.
IPEC anticipates lower revenue levels for fiscal 1999 compared to fiscal 1998 as
a result of these economic conditions. Revenue from international sales
represented 48% of total revenues for the six months ended December 31, 1998 and
40% of total revenues for the six months ended December 31, 1997.
 
   
COST OF GOODS SOLD.  Costs of goods sold as a percentage of revenue increased to
81.4% for the six months ended December 31, 1998 from 55.6% for the six months
ended December 31, 1997. This increase resulted primarily from increased fixed
manufacturing and field service expenses incurred to build support and service
new products spread over a smaller revenue base. Additionally, the Company
incurred increased expenses of $762,000
    
 
                                       105
<PAGE>   113
 
   
for product installation and process acceptance for the AvantGaard 776 for the
six months ended December 31, 1998 compared to the six months ended December 31,
1997. Because revenue is not expected to increase until conditions improve in
the semiconductor and silicon wafer industries, cost of goods sold as a
percentage of revenue is expected to remain high, adversely affecting gross
margins.
    
 
RESEARCH AND DEVELOPMENT.  Research and development expense increased 12% to
$16.8 million for the six months ended December 31, 1998 from $15.1 for the six
months ended December 31, 1997. IPEC has implemented cost reduction plans in
non-critical research and development projects.
 
SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expense decreased 14% to $15.1 million for the six months ended December 31,
1998 compared to $17.6 million for the six months ended December 31, 1997. The
$2.5 million decrease resulted primarily from lower international sales activity
for the six months ended December 31, 1998 compared to the six months ended
December 31, 1997 and cost reduction programs implemented in the second half of
fiscal 1998 and the first six months of fiscal 1999.
 
INTEREST INCOME AND INTEREST EXPENSE.  Interest income increased to $1.9 million
for the six months ended December 31, 1998 from $1.8 million for the six months
ended December 31, 1997. The increase resulted from investing proceeds of the
$115.0 million, 6.25% IPEC Convertible Notes financing completed in September
1997 for the full six months ended December 31, 1998, compared to approximately
three months, October, November and December, in fiscal 1997. Lower interest
rates for invested funds and lower invested amounts arising from operating
losses will result in reduced amounts of interest income for the remainder of
fiscal 1999 when compared to similar periods in fiscal 1998. Interest expense
increased to $4.0 million for the six months ended December 31, 1998 from $2.4
million for the six months ended December 31, 1997 as a result of the $115
million, 6.25% IPEC Convertible Notes being outstanding for the whole period in
the six months ended December 31, 1998 compared to three and one half months in
the six months ended December 31, 1997.
 
INCOME TAX EXPENSE.  IPEC did not record an income tax benefit for the six
months ended December 31, 1998, due to the uncertain nature of the ultimate
realization of a future tax benefit. Income tax expense for the six months ended
December 31, 1997 was $5.6 million, an effective tax rate of 36.8%.
 
                                       106
<PAGE>   114
 
FISCAL 1998 COMPARED WITH FISCAL 1997
 
RESULTS OF OPERATIONS
 
The following table sets forth, for the periods indicated, selected items of
IPEC's consolidated statements of operations expressed as a percentage of
revenue:
 
<TABLE>
<CAPTION>
                                      FISCAL YEAR ENDED JUNE 30,
                               -----------------------------------------
                                  1998           1997           1996
                               -----------    -----------    -----------
<S>                            <C>            <C>            <C>
Revenue......................        100.0%         100.0%         100.0
Cost of goods sold...........         64.3           57.3           57.2
                               -----------    -----------    -----------
     Gross margin............         35.7           42.7           42.8
Operating expenses:
  Research and development...         17.7           16.5           10.7
  Purchased research and
     development.............           --             --           24.9
  Selling, general and
     administrative..........         19.6           19.0           17.9
  Program discontinuance
     charge..................           --           12.2             --
                               -----------    -----------    -----------
     Total operating
       expenses..............         37.3           47.7           53.5
                               -----------    -----------    -----------
     Operating loss..........        (1.6)          (5.0)         (10.7)
Other income (expense):
  Interest income............          2.3            0.4            1.1
  Interest expense...........        (3.6)          (1.2)          (1.3)
  Other income, net..........        (0.1)            0.2            0.3
                               -----------    -----------    -----------
     Loss from continuing
       operations before
       income taxes..........        (3.0)          (5.6)         (10.6)
Income tax expense
  (benefit)..................         13.8          (2.0)          (4.3)
                               -----------    -----------    -----------
     Loss from continuing
       operations............       (16.8)          (3.6)          (6.3)
Loss from discontinued
  operations.................        (5.6)         (19.7)          (0.9)
                               -----------    -----------    -----------
     Net loss................       (22.4)%        (23.3)%         (7.2)%
                               ===========    ===========    ===========
</TABLE>
 
REVENUE.  Revenue was $189.0 million for fiscal 1998 compared to $144.7 million
for fiscal 1997. This 31% increase was primarily attributable to an increase in
demand for semiconductor capital equipment. IPEC achieved sequential growth in
revenue for five consecutive quarters from $29.4 in million the first quarter of
fiscal 1997, to $57.9 million in the second quarter of fiscal 1998. Revenue for
the second half of fiscal 1998 decreased 27% compared to the first half of
fiscal 1998. This resulted from a reduction in revenue from Asia, particularly
Korea, where customers have been unable to arrange for satisfactory financing
terms, and from downturns in the semiconductor capital equipment and silicon
wafer industries. Revenue from international sales represented 46% and 27% of
total revenue in fiscal 1998 and 1997, respectively. Revenue from IPEC's largest
customer,
 
                                       107
<PAGE>   115
 
Intel, represented 38% and 51% of total revenue in fiscal 1998 and 1997,
respectively. Revenue from Tokyo Electron, Ltd. represented 12% in fiscal 1998.
Accelerated orders in fiscal 1997 represented 14% of revenue.
 
   
COST OF GOODS SOLD.  Cost of goods sold as a percentage of revenue increased to
64.3% in fiscal 1998 from 57.3% in fiscal 1997. This increase included a $7.8
million charge in fiscal 1998 for inventory adjustments and additional retrofit
costs for newly available performance enhancing modifications to installed CMP
tools. Additional costs were incurred in fiscal 1997 as a result of the
allocation of certain fixed costs across lower revenue. Cost of goods sold in
fiscal 1997 was also adversely affected by a $1.1 million charge related to
warrants issued to a major customer in connection with the acceleration of
certain shipments into the first three quarters of fiscal 1997.
    
 
RESEARCH AND DEVELOPMENT.  Research and development expense increased 40% to
$33.5 million in fiscal 1998 from $24.0 million in fiscal 1997 and increased as
a percentage of revenue to 17.7% in fiscal 1998 from 16.5% in fiscal 1997.
 
SELLING GENERAL AND ADMINISTRATIVE.  Selling, general and administrative expense
increased 34% to $37.0 million in fiscal 1998 from $27.6 million in fiscal 1997
and increased as a percentage of revenue to 19.8% in fiscal 1998 from 19.0% in
fiscal 1997. The $9.5 million increase resulted primarily from a higher level of
sales activity and an increased international presence in fiscal 1998 compared
to fiscal 1997. IPEC implemented cost containment measures in the fourth quarter
of fiscal 1998. These cost cutting measures included an approximately 22%
reduction in total work force and consolidation of IPEC Planar manufacturing
operations. Additionally, in fiscal 1997, selling, general and administrative
expenses were offset by a $900 thousand benefit resulting from adjustments for
both the acquisitions of IPEC Planar Phoenix and IPEC Planar Portland.
 
   
PROGRAMS DISCONTINUANCE CHARGE.  In the second quarter of fiscal 1997, IPEC
demonstrated that the AvantGaard 676 tool could be used for oxide planarization
as well as metal planarization. As a result of this improvement and prior to
manufacturing any Avanti 672 systems, IPEC decided to discontinue the production
plans for the Avanti 672, an integrated 300-mm high-throughput oxide CMP tool
and record a $17.6 program discontinuance charge in the quarter ended December
31, 1996. IPEC incurred a write-down of $9.0 million to adjust specific Avanti
672 parts and components to salvage value, since parts and components for this
tool were unlike parts and components for IPEC's other products. A liability
amounting to $4.5 million for noncancelable purchase orders was also incurred as
a result of properly reflecting inventory on order at salvage value. A $4.1
million charge was also incurred to adjust Avanti 672 development and prototype
tools to salvage value.
    
 
INTEREST INCOME AND INTEREST EXPENSE.  Interest income increased to $4.4 million
in fiscal 1998 from $600 thousand in fiscal 1997. Interest expense increased to
$6.8 million in fiscal 1998 from $1.7 million in fiscal 1997. Increased interest
income and expense amounts have resulted from invested proceeds related to the
$115.0 million, 6.25% IPEC Convertible Notes financing completed in September
1997 and the related interest costs of the debt.
 
   
INCOME TAX EXPENSE.  Income tax expense was $26.1 million for fiscal 1998
compared to an income tax benefit of $3.0 million in fiscal 1997. The effective
tax expense (benefit) rates for fiscal 1998 and 1997 were approximately 471% and
(36)%, respectively. IPEC's deferred tax valuation allowance was $7.9 million at
June 30, 1997. At that time, IPEC had four consecutive quarters of revenue
growth. Taxable income was projected for fiscal 1998, CMP bookings and backlog
were strong, and fiscal 1997 and fiscal 1996 were
    
 
                                       108
<PAGE>   116
 
   
the only two years that IPEC had incurred significant tax losses. The increase
in tax expense in 1998 results primarily from a $25.9 million net charge which
increased IPEC's deferred tax valuation allowance. Significant negative results
of the fourth quarter of fiscal 1998, including a decline in sales and backlog,
were due to the dramatic downturn in the semiconductor industry and the Asian
economic crisis. Major customers were unable to predict when orders would
increase. The industry instability changed the assumptions used to predict
future projected results of IPEC. These new circumstances, combined with three
consecutive years of operating losses as of June 30, 1998, caused a change in
judgment about the realization of the deferred tax assets. As a result, IPEC is
unable to predict the level of future sales and ability to generate income under
these circumstances and is predicting tax losses for the next two years. This
increase in the deferred tax valuation allowance fully offsets IPEC's net
deferred tax assets.
    
 
NET LOSS FROM DISCONTINUED OPERATIONS.  As a result of IPEC's decision to focus
on CMP and CMP-related products, IPEC decided to discontinue the operations of
IPEC Clean. The operating results of IPEC Clean were segregated from the
continuing operations of IPEC and reported separately as discontinued
operations. The loss recorded in fiscal 1997 was due to a $3.6 million operating
loss, net of taxes, and a $25.0 million charge, net of taxes, for the estimated
loss on disposal of IPEC Clean. IPEC recorded an additional write-down of the
net assets of IPEC Clean of $10.6 million in fiscal 1998.
 
FISCAL 1997 COMPARED WITH FISCAL 1996
 
REVENUE.  Revenue was $144.7 million for fiscal 1997 compared to $148.7 million
for fiscal 1996. This 3% decrease was primarily attributable to a decline in
demand for semiconductor capital equipment in fiscal 1997 and IPEC's lack of a
high-throughput oxide process CMP system. On a quarterly basis, revenue
increased sequentially every quarter in fiscal 1996 from $30.2 million in the
first quarter of fiscal 1996 to $41.9 million in the fourth quarter of fiscal
1996. Revenue declined to $29.4 million in the first quarter of fiscal 1997,
followed by sequential quarterly revenue growth in fiscal 1997, resulting in
quarterly revenue of $42.6 million in the fourth quarter of fiscal 1997. Revenue
from international sales represented 27% and 28% of total revenue in fiscal 1997
and 1996, respectively. Revenue from IPEC Precision represented 8% and 3% of
total revenue in fiscal 1997 and 1996, respectively. Revenue from IPEC's largest
customer, Intel, represented 51% and 35% of total revenue in fiscal 1997 and
1996, respectively. Accelerated orders in fiscal 1997 represented 14% of
revenue.
 
COST OF GOODS SOLD.  Cost of goods sold increased as a percentage of revenue to
57.3% for fiscal 1997 from 57.2% in fiscal 1996. Cost of goods sold during
fiscal 1997 was adversely affected by a $1.1 million charge related to warrants
issued to a major customer in connection with an agreement permitting IPEC to
accelerate certain deliveries of equipment in fiscal 1997. The charge was based
on the market value of the warrant shares on the date of the agreement. All
warrants under the agreement have been issued, and all charges relating to the
agreement have been incurred. Cost of goods sold also increased as a percentage
of revenue in fiscal 1997 due to increased customer service expenditures in
fiscal 1997. IPEC's shift toward direct international sales and field service
favorably affected fiscal 1997 gross margin through a reduction in distributor
discounts compared to fiscal 1996. However, the margin improvement was partially
offset by increased sales commissions recorded as selling, general and
administrative expense.
 
RESEARCH AND DEVELOPMENT.  Research and development expense increased 51% to
$24.0 million in fiscal 1997 from $15.9 million in fiscal 1996, and increased as
a percentage of
 
                                       109
<PAGE>   117
 
revenue to 16.5% in fiscal 1997 from 10.7% in fiscal 1996. Of this increase,
$5.8 million was due to development of IPEC's high-throughput CMP tools and the
related metal and oxide CMP processes. Research and development costs at IPEC
Precision increased from $1.6 million in fiscal 1996 to $3.9 million in fiscal
1997. These costs were incurred primarily to develop IPEC Precision's wafer
shaping tools and metrology products.
 
SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses increased 3% to $27.6 million in fiscal 1997 from $26.7 million in
fiscal 1996, and increased as a percentage of revenue to 19.0% in fiscal 1997
from 17.9% in fiscal 1996.
 
INTEREST INCOME.  Interest income decreased to $570,000 in fiscal 1997 from $1.7
million in fiscal 1996 as a result of lower average cash and cash equivalent
balances in fiscal 1997.
 
INTEREST EXPENSE.  Interest expense decreased to $1.7 million in fiscal 1997
from $2.0 million in fiscal 1996 primarily as a result of repayment of
borrowings related to the acquisitions of IPEC Planar Portland and IPEC
Precision.
 
INCOME TAX EXPENSE.  The effective tax benefit rates for fiscal 1997 and 1996
were approximately 36% and 41%, respectively. The lower tax benefit rate for
fiscal 1997 resulted primarily from adjustments of deferred tax balances and
state tax accruals.
 
NET LOSS FROM DISCONTINUED OPERATIONS.  The operating results of IPEC Clean have
been segregated from the continuing operations of IPEC and reported separately
as discontinued operations for all periods presented. The loss from IPEC Clean
(net of taxes) increased to $28.6 million in fiscal 1997 from $1.3 million in
fiscal 1996. The fiscal 1997 loss consisted of a $3.6 million operating loss
incurred in the first half of fiscal 1997 and a $25.0 million one-time charge
for the estimated loss on disposal of IPEC Clean. Results of operations of IPEC
Clean for the third and fourth quarters of fiscal 1997 were charged to an
accrued liability included in this charge.
 
LIQUIDITY AND CAPITAL RESOURCES
 
IPEC's principal sources of liquidity include cash, cash equivalents and
short-term investments of $67.5 million as of December 31, 1998, a decrease of
$16.6 million from June 30, 1998. The decrease in cash, cash equivalents and
short-term investments in the first six months of fiscal 1999 resulted primarily
from operating losses.
 
As of December 31, 1998, IPEC had $144.5 million of working capital compared
with $164.2 million as of June 30, 1998. IPEC's accounts receivable decreased to
$30.3 million as of December 31, 1998 as compared to $43.8 million as of June
30, 1998. The decrease in accounts receivable was primarily due to lower levels
of sales activity in the first six months of fiscal 1999 compared to the last
half of fiscal 1998. IPEC's day's sales outstanding increased to 157 days as of
December 31, 1998 compared to 103 days at June 30, 1998. This increase has
resulted from lower revenues, extended terms given to certain customers and
delays in final acceptance for certain AvantGaard 776 tools in the quarter ended
December 31, 1998. IPEC's allowance for doubtful accounts has increased slightly
to $2.1 million as of December 31, 1998 from $1.8 million as of June 30, 1998.
While certain customer receivables may extend beyond normal collection periods,
IPEC believes accounts receivable amounts are collectible and allowances are
adequate.
 
IPEC's inventory increased to $69.2 million as of December 31, 1998 from $67.0
million as of June 30, 1998. The increase in inventory was primarily due to
lower sales activity in the first six months of fiscal 1999 and to fulfill
non-cancelable purchase obligations to vendors under long-term purchase
commitments. Although there was an increase in inventory from June 30, 1998 to
December 31, 1998, reductions should occur in future
                                       110
<PAGE>   118
 
   
quarters as a result of reduced purchasing activity. IPEC's annualized inventory
turnover decreased to 0.9 times per year as of December 31, 1998 compared to 2.0
times per year at June 30, 1998. This decrease has also resulted from lower
levels of sales activity. IPEC's allowance for inventory obsolescence increased
to $7.0 million at December 31, 1998 compared to $6.4 million at June 30, 1998.
Due to the severe downturn in the semiconductor capital equipment industry from
record level revenues in the first half of fiscal 1998, IPEC's inventory levels
are higher than currently required. However, IPEC believes that inventory values
are recoverable and that inventory will be utilized in future periods as the
industry recovers. Reduced purchasing by IPEC also resulted in a decreased
accounts payable balance of $5.3 million at December 31, 1998 compared to $10.4
million at June 30, 1998. There were no significant long-term purchase
commitments at June 30, 1998 and December 31, 1998.
    
 
IPEC's property, plant and equipment additions were $3.0 million in the first
six months of fiscal 1999 compared to $8.7 million in the first six months of
fiscal 1998. These additions consisted primarily of testing and demonstration
equipment related to the AvantGaard 676, 776 and 876 systems.
 
Total long-term debt decreased to $117.9 million as of December 31, 1998 from
$118.6 million as of June 30, 1998. Total long-term debt as a percentage of
stockholders' equity increased to 166% as of December 31, 1998 from 125% as of
June 30, 1998.
 
IPEC believes that its cash, cash equivalents and short-term investments will be
sufficient to fund its operations for the foreseeable future. IPEC's cash needs
depend on, among other things, the length of the economic slowdown, the extent
of future operating losses that will require funding, additional working capital
requirements, whether IPEC is forced by competitive pressures and commercial
terms to continue or increase extended terms for accounts receivable and whether
IPEC acquires other companies or businesses. If IPEC requires additional cash,
there can be no assurance that such additional financing will be available when
needed, or, if available, will be available on satisfactory terms. In order to
raise capital, IPEC may issue debt or equity securities which could result in
substantial dilution. The failure to obtain additional financing when needed on
satisfactory terms would also hinder IPEC's ability to invest in capital
equipment and working capital.
 
YEAR 2000 COMPUTER ISSUES
 
IPEC has identified the changes required to its computer programs and hardware.
IPEC expects to complete the necessary modifications to its centralized
financial, customer and operational information systems by the end of calendar
1998. IPEC is currently reviewing noncentralized systems, such as software used
to operate its products, for year 2000 problems. IPEC expects to complete
modifications to software used to operate its products by the end of the first
quarter of calendar 1999. IPEC has completed modifications to other
noncentralized systems. IPEC expects to incur costs to remedy year 2000 problems
in the future, primarily for non-business systems such as software used to
operate its products. IPEC does not currently anticipate these costs will be
material. If IPEC or third parties with whom it has relationships were to cease
or unsuccessfully complete their year 2000 remediation efforts, IPEC may
encounter disruptions in its business. IPEC has not currently established a
formal year 2000 contingency plan but will consider and, if necessary, address
doing so as part of its year 2000 review process. IPEC maintains and deploys
contingency plans designed to address various other potential business
interruptions. These plans may address interruptions resulting from third
parties' failure to be year 2000 ready.
 
                                       111
<PAGE>   119
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
 
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." The new standard becomes effective for IPEC
for the year ending June 30, 1999, and requires that comparative information
from earlier years be restated to conform to the requirements of this standard.
 
                                 LEGAL MATTERS
 
   
The validity of the shares of SpeedFam common stock to be issued in connection
with the merger and the federal income tax consequences of the merger will be
passed upon for SpeedFam by Chapman and Cutler, Chicago, Illinois. Mr. Charles
A. Kelly, a partner of Chapman and Cutler, serves as Secretary of SpeedFam and
owns 20,000 shares of SpeedFam common stock. In addition, Mr. Kelly has sole
voting and dispositive power over 627,070 shares of SpeedFam common stock held
in the Nancy Jo Farley Trust, a revocable trust, of which he serves as
co-trustee. Mr. Kelly also shares voting and dispositive power over 691,380
shares of SpeedFam common stock held in the Makoto Kouzuma Trust, a revocable
trust, of which he serves as co-trustee and over 137,380 shares of SpeedFam
common stock held in the SpeedFam Employees Profit Sharing Trust, of which he
serves as co-trustee. Certain legal matters in connection with the merger
agreement and the federal income tax consequences of the merger will be passed
upon for IPEC by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California.
    
 
                                    EXPERTS
 
The consolidated financial statements of SpeedFam International, Inc. as of May
31, 1998 and 1997, and for each of the years in the three year period ended May
31, 1998, have been included in this joint proxy statement/prospectus in
reliance on the report of KPMG LLP, independent auditors, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The consolidated financial statements of SpeedFam Co., Ltd. as of
April 30, 1998 and 1997, and for each of the years in the three year period
ended April 30, 1998, incorporated by reference in this joint proxy statement/
prospectus in reliance on the report of KPMG LLP, independent auditors,
incorporated by reference, and upon the authority of said firm as experts in
accounting and auditing. Representatives of KPMG LLP are expected to be present
at the SpeedFam special meeting and will have the opportunity to make a
statement and are expected to be available to respond to appropriate questions.
 
The consolidated financial statements of Integrated Process Equipment Corp. as
of June 30, 1998 and 1997, and for each of the years in the three year period
ended June 30, 1998, have been included in this joint proxy statement/prospectus
in reliance on the report of KPMG LLP, independent auditors, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. Representatives of KPMG LLP are expected to be present at the IPEC
special meeting and said representatives will have the
 
                                       112
<PAGE>   120
 
opportunity to make a statement and are expected to be available to respond to
appropriate questions.
 
                             SHAREHOLDER PROPOSALS
 
Neither SpeedFam nor IPEC is aware of any additional matters which may be
presented at their respective special meetings. As to any proposal that a
shareholder of either company intends to present to shareholders without
inclusion in this joint proxy statement/prospectus, the proxies named in the
respective management's proxy will be entitled to exercise their discretionary
authority on that proposal.
 
Pursuant to Rule 14a-8 under the Exchange Act, SpeedFam shareholders may present
proper proposals for inclusion in SpeedFam's proxy statement and for
consideration at the next annual meeting of its shareholders by submitting such
proposals to SpeedFam in a timely manner. As noted in SpeedFam's proxy statement
relating to its 1998 annual meeting of shareholders, in order to be so included
for the 1999 annual meeting of shareholders, shareholder proposals must be
received by SpeedFam no later than May 20, 1999, and must otherwise comply with
the requirements of Rule 14a-8. As to any proposal that a shareholder intends to
present to shareholders without inclusion in SpeedFam's proxy statement for
SpeedFam's 1999 annual meeting of shareholders, the proxies named in
management's proxy for that meeting will be entitled to exercise their
discretionary authority on that proposal unless the company receives notice of
the matter to be proposed not later than July 26, 1999. Even if proper notice is
received on or prior to July 26, 1999, the proxies named in management's proxy
for that meeting may nevertheless exercise their discretionary authority with
respect to such matter by advising shareholders of such proposal and how they
intend to exercise their discretion to vote on such matter, unless the
shareholder making the proposal solicits proxies with respect to the proposal to
the extent required by Rule 14a-4(c)(2) under the Exchange Act.
 
Pursuant to Rule 14a-8 under the Exchange Act, IPEC stockholders may present
proper proposals for inclusion in IPEC's proxy statement and for consideration
at the next annual meeting of its stockholders by submitting such proposals to
IPEC in a timely manner. As noted in IPEC's proxy statement relating to its 1998
annual meeting of stockholders, in order to be so included for the 1999 annual
meeting of stockholders, in the event that the merger has not been consummated
prior thereto, stockholder proposals must have been received by IPEC no later
than July 2, 1999, and must otherwise have complied with the requirements of
Rule 14a-8. As to any proposal that a stockholder intends to present to
stockholders without inclusion in IPEC's proxy statement for IPEC's 1999 annual
meeting of stockholders, the proxies named in management's proxy for that
meeting will be entitled to exercise their discretionary authority on that
proposal unless the company receives notice of the matter to be proposed not
later than October 5, 1999. Even if proper notice is received on or prior to
October 5, 1999, the proxies named in management's proxy for that meeting may
nevertheless exercise their discretionary authority with respect to such matter
by advising stockholders of such proposal and how they intend to exercise their
discretion to vote on such matter, unless the stockholder making the proposal
solicits proxies with respect to the proposal to the extent required by Rule
14a-4(c)(2) under the Exchange Act.
 
                                       113
<PAGE>   121
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
SpeedFam and IPEC file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy the reports, proxy statements and other information at the SEC's public
reference room in Washington, D.C. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for more information on the public reference rooms. You can also
find these documents on the SEC's Web site at www.sec.gov.
 
SpeedFam has filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933. This joint proxy statement/prospectus does not contain
all of the information set forth in the registration statement. You may read
copies of the registration statement and the exhibits and schedules, without
charge, at the offices of the SEC, or obtain copies of these documents from the
public reference section of the SEC upon payment of a copying fee.
 
Both SpeedFam and IPEC have elected to "incorporate by reference" into this
document other documents filed with the SEC by each of them. SpeedFam and IPEC
can disclose important information to you by referring to those other documents.
As allowed by the SEC, the documents that are incorporated by reference are
considered to be part of this document. SpeedFam incorporates by reference the
following documents previously filed with the SEC (File No. 0-26784) and any
future filings it will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this joint proxy
statement/prospectus and before the SpeedFam special meeting:
 
     1.  SpeedFam's Annual Report on Form 10-K for the fiscal year ended May 31,
         1998;
 
   
     2.  SpeedFam's Quarterly Report on Form 10-Q for the quarter ended August
         31, 1998;
    
 
   
     3.  SpeedFam's Quarterly Report on Form 10-Q for the quarter ended November
         30, 1998;
    
 
   
     4.  SpeedFam's Current Report on Form 8-K dated November 23, 1998; and
    
 
   
     5.  Description of SpeedFam common stock contained in SpeedFam's
         registration statement on Form 8-A filed with the SEC on September 18,
         1995.
    
 
IPEC incorporates by reference the following documents previously filed with the
SEC (File No. 0-20470) and any future filings it will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
joint proxy statement/prospectus and before the IPEC special meeting:
 
     1.  IPEC's Annual Report on Form 10-K for the fiscal year ended June 30,
         1998;
 
     2.  IPEC's Quarterly Report on Form 10-Q for the quarter ended September
         30, 1998;
 
   
     3.  IPEC's Quarterly Report on Form 10-Q for the quarter ended December 31,
         1998;
    
 
   
     4.  IPEC's Current Report on Form 8-K dated November 23, 1998;
    
 
   
     5.  IPEC's Current Report on Form 8-K dated January 27, 1999;
    
 
   
     6.  IPEC's Current Report on Form 8-K dated January 28, 1999;
    
 
                                       114
<PAGE>   122
 
   
     7.  Description of IPEC common stock contained in IPEC's registration
         statement on Form S-3 filed with the SEC on November 18, 1996, as
         amended; and
    
 
   
     8.  Description of IPEC's Preferred Shares Rights Agreement, as amended,
         contained in IPEC's registration statement on Form 8-A filed with the
         SEC on March 5, 1997.
    
 
Information in this joint proxy statement/prospectus supersedes information
incorporated by reference that SpeedFam or IPEC filed with the SEC prior to the
date of this joint proxy statement/prospectus. Information SpeedFam or IPEC
files later with the SEC will automatically update and, in some cases, supersede
this information.
 
SpeedFam has supplied all information contained or incorporated by reference in
this joint proxy statement/prospectus relating to SpeedFam and IPEC has supplied
all such information relating to IPEC.
 
                           FORWARD LOOKING STATEMENTS
 
Certain statements made in this joint proxy statement/prospectus, including
statements as to the anticipated closing of the merger, the anticipated tax
treatment of the merger, the benefits expected to result from the merger, the
future performance of the combined company following the merger and the analyses
performed by the financial advisors to SpeedFam and IPEC, are forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Any statements contained or incorporated by reference
in this document, including statements to the effect that SpeedFam, IPEC or
their respective management "believes," "expects," "anticipates," "plans,"
"may," "will," "projects," "continues" or "estimates," or statements concerning
"potential," or "opportunity" or other variations of these words that are not
statements of historical fact should be considered forward-looking statements.
Actual results could differ materially and adversely from those expressed or
implied in such forward-looking statements as a result of certain factors,
including those discussed in "Risk Factors" beginning on page 13, which you
should carefully review.
 
                        YEAR 2000 READINESS DISCLOSURES
 
   
The statements made in "Risk Factors -- The combined company may experience year
2000 computer problems that harm its business" on pages 18 and 19, in "SpeedFam
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000" on pages 100 and 101 and in IPEC Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Computer Issues " on page 111 are "Year 2000 Readiness Disclosures" within
the meaning of Section 3(9) of the Year 2000 Information and Readiness
Disclosure Act. The protection of this Act does not apply to federal securities
fraud actions.
    
 
                                       115
<PAGE>   123
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Balance Sheets -- at November 30,
  1998 and May 31, 1998.....................................   F-2
Condensed Consolidated Statements of Operations -- for the
  three and six months ended November 30, 1998 and 1997.....   F-3
Condensed Consolidated Statements of Cash Flows -- for the
  six months ended November 30, 1998 and 1997...............   F-4
Notes to Condensed Consolidated Financial Statements........   F-5
Independent Auditors' Report................................  F-10
Consolidated Balance Sheets -- at the end of fiscal years
  1998 and 1997.............................................  F-11
Consolidated Statements of Earnings -- for the fiscal years
  1998, 1997 and 1996.......................................  F-12
Consolidated Statements of Stockholders' Equity -- for the
  fiscal years 1998, 1997 and 1996..........................  F-13
Consolidated Statements of Cash Flows -- for the fiscal
  years 1998, 1997 and 1996.................................  F-14
Notes to Consolidated Financial Statements..................  F-15
INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets -- as of December 31,
  1998 and June 30, 1998....................................  F-34
Condensed Consolidated Statements of Operations -- for the
  three and six months ended December 31, 1998 and 1997.....  F-35
Condensed Consolidated Statement of Changes in Stockholders'
  Equity -- for the six months ended December 31, 1998......  F-36
Condensed Consolidated Statements of Cash Flows -- for the
  six months ended December 31, 1998 and 1997...............  F-37
Notes to Condensed Consolidated Financial Statements........  F-38
Independent Auditors' Report................................  F-43
Consolidated Balance Sheets -- as of June 30, 1998 and
  1997......................................................  F-44
Consolidated Statements of Operations -- for the years ended
  June 30, 1998, 1997 and 1996..............................  F-45
Consolidated Statements of Changes in Stockholders'
  Equity -- for the years ended June 30, 1998, 1997 and
  1996......................................................  F-46
Consolidated Statements of Cash Flows  -- for the years
  ended June 30, 1998, 1997 and 1996........................  F-47
Notes to Consolidated Financial Statements..................  F-48
</TABLE>
 
                                       F-1
<PAGE>   124
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                                         NOVEMBER 30,    MAY 31,
                                                             1998          1998
                                                         ------------    --------
<S>                                                      <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents............................    $ 87,858      $ 90,384
  Short-term investments...............................      33,435        50,835
  Trade accounts and notes receivable, net.............      36,480        45,197
  Inventories..........................................      41,551        55,532
  Other current assets.................................      12,648         8,195
                                                           --------      --------
     Total current assets..............................     211,972       250,143
Investments in affiliates..............................      27,968        24,299
Property, plant and equipment, net.....................      70,940        52,253
Other assets...........................................       3,477         3,070
                                                           --------      --------
     Total assets......................................    $314,357      $329,765
                                                           ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings and current portion of
     long-term debt....................................    $    102      $    248
  Accounts payable and due to affiliates...............      10,924        23,901
  Customer deposits....................................       2,421         1,812
  Other current liabilities............................      11,066        13,932
                                                           --------      --------
     Total current liabilities.........................      24,513        39,893
                                                           --------      --------
Deferred income taxes..................................       1,020         1,020
                                                           --------      --------
Stockholders' equity:
  Common stock, no par value, 60,000 shares authorized,
     16,143 and 15,962 shares issued and outstanding at
     November 30, 1998 and May 31, 1998,
     respectively......................................           1             1
  Additional paid-in capital...........................     228,054       226,729
  Retained earnings....................................      58,228        62,329
  Accumulated other comprehensive income...............       2,541          (207)
                                                           --------      --------
     Total stockholders' equity........................     288,824       288,852
                                                           --------      --------
     Total liabilities and stockholders' equity........    $314,357      $329,765
                                                           ========      ========
</TABLE>
    
 
     See Accompanying Notes to Condensed Consolidated Financial Statements.
 
                                       F-2
<PAGE>   125
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED       SIX MONTHS ENDED
                                        NOVEMBER 30,            NOVEMBER 30,
                                     -------------------    --------------------
                                       1998       1997        1998        1997
                                     --------    -------    --------    --------
<S>                                  <C>         <C>        <C>         <C>
Revenue:
  Net sales........................  $ 23,919    $53,899    $ 59,689    $105,814
  Commissions from affiliate.......       152      2,629         737       4,561
                                     --------    -------    --------    --------
     Total revenue.................    24,071     56,528      60,426     110,375
Cost of sales......................    16,791     31,769      40,217      62,600
                                     --------    -------    --------    --------
  Gross margin.....................     7,280     24,759      20,209      47,775
  Research, development and
     engineering...................    10,311      7,918      19,451      14,703
  Selling, general and
     administrative................     8,284      8,719      15,553      18,088
                                     --------    -------    --------    --------
Operating profit (loss)............   (11,315)     8,122     (14,795)     14,984
Other income, net..................     1,775      1,510       3,587       2,269
                                     --------    -------    --------    --------
Earnings (loss) from consolidated
  companies before income taxes....    (9,540)     9,632     (11,208)     17,253
Income tax expense (benefit).......    (4,582)     3,351      (5,678)      6,144
                                     --------    -------    --------    --------
Earnings (loss) from consolidated
  companies........................    (4,958)     6,281      (5,530)     11,109
Equity in net earnings of
  affiliates.......................       701      1,339       1,429       2,068
                                     --------    -------    --------    --------
Net earnings (loss)................  $ (4,257)   $ 7,620    $ (4,101)   $ 13,177
                                     ========    =======    ========    ========
Net earnings per share:
  Basic............................  $  (0.26)   $  0.52    $  (0.25)   $   0.94
                                     ========    =======    ========    ========
  Diluted..........................  $  (0.26)   $  0.49    $  (0.25)   $   0.89
                                     ========    =======    ========    ========
Weighted average number of shares:
  Basic............................    16,128     14,689      16,087      14,040
                                     ========    =======    ========    ========
  Diluted..........................    16,128     15,530      16,087      14,883
                                     ========    =======    ========    ========
</TABLE>
 
     See Accompanying Notes to Condensed Consolidated Financial Statements.
 
                                       F-3
<PAGE>   126
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                                  NOVEMBER 30,
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings (loss).......................................  $ (4,101)   $ 13,177
  Adjustments to reconcile net earnings (loss) to net cash
     provided by (used in) operating activities:
     Equity in net earnings of affiliates...................    (1,429)     (2,068)
     Depreciation and amortization..........................     3,445       1,760
     Dividend from affiliate................................       521         875
     Other..................................................       339          (7)
     Changes in assets and liabilities:
       (Increase) decrease in trade accounts and notes
          receivable........................................     8,336     (22,303)
       (Increase) decrease in inventories...................     7,576      (5,482)
       Increase in other current assets.....................    (4,428)       (477)
       Increase (decrease) in accounts payable and due to
          affiliates........................................   (13,033)      4,106
       Decrease in customer deposits and other current
          liabilities.......................................    (2,257)       (376)
                                                              --------    --------
  Net used in operating activities..........................    (5,031)    (10,795)
                                                              --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of short-term investments.......................   (39,141)    (28,618)
  Proceeds from the sale of short-term investments..........    35,849          --
  Maturities of short-term investments......................    20,680      10,364
  Proceeds from sales of assets.............................       600          --
  Capital expenditures......................................   (16,220)    (13,495)
  Other investing activities................................      (437)       (353)
                                                              --------    --------
  Net cash provided by (used in) investing activities.......     1,331     (32,102)
                                                              --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from issuance of common stock................        --     116,732
  Proceeds from exercise of stock options...................       354         731
  Proceeds from sale of stock to employees..................       972       1,086
  Principal payments on long-term debt......................      (147)       (134)
                                                              --------    --------
  Net cash provided by financing activities.................     1,179     118,415
                                                              --------    --------
  Effects of foreign currency rate changes on cash..........        (5)        194
                                                              --------    --------
  Net increase (decrease) in cash and cash equivalents......    (2,526)     75,712
  Cash and cash equivalents at beginning of year............    90,384      56,679
                                                              --------    --------
  Cash and cash equivalents at November 30, 1998 and 1997...  $ 87,858    $132,391
                                                              ========    ========
</TABLE>
 
     See Accompanying Notes to Condensed Consolidated Financial Statements.
 
                                       F-4
<PAGE>   127
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
(1) BASIS OF PRESENTATION
 
The condensed consolidated financial statements included herein have been
prepared by management without audit. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, although
management believes that the disclosures made are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements of the Company for the year ended May 31, 1998, as filed with the
Securities and Exchange Commission on August 28, 1998 as part of its Annual
Report on Form 10-K. In the opinion of management the information furnished
herein reflects all adjustments (consisting of normal recurring adjustments)
necessary for a fair statement of results for the interim periods presented.
Results of operations for the three and six months ended November 30, 1998 are
not necessarily indicative of results to be expected for the full fiscal year.
 
(2) EARNINGS (LOSS) PER SHARE
 
In 1998, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share." SFAS No. 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share includes the effect of all potential common shares that are
dilutive and outstanding during the reporting period. Earnings (loss) per share
amounts for all periods presented have been restated to conform to SFAS No. 128.
 
                                       F-5
<PAGE>   128
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
 
<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED    SIX MONTHS ENDED
                                      NOVEMBER 30,         NOVEMBER 30,
                                   -------------------   -----------------
                                     1998       1997      1998      1997
                                   --------   --------   -------   -------
<S>                                <C>        <C>        <C>       <C>
Numerator:
  Net earnings (loss)............  $(4,257)   $ 7,620    $(4,010)  $13,177
Denominator:
  Denominator for basic earnings
     (loss) per
     share -- weighted-average
     shares outstanding..........   16,128     14,689     16,087    14,040
  Effect of dilutive securities:
     Employee stock options......       --        841         --       843
                                   -------    -------    -------   -------
  Denominator for diluted
     earnings (loss) per
     share -- adjusted
     weighted-average shares
     outstanding.................   16,128     15,530     16,087    14,883
                                   =======    =======    =======   =======
Basic earnings (loss) per
  share..........................  $ (0.26)   $  0.52    $ (0.25)  $  0.94
                                   =======    =======    =======   =======
Diluted earnings (loss) per
  share..........................  $ (0.26)   $  0.49    $ (0.25)  $  0.89
                                   =======    =======    =======   =======
</TABLE>
 
Employee stock options outstanding during the three and six months ended
November 30, 1998, were not included in the computation of diluted loss per
share because the effect would be antidilutive.
 
(3) INVENTORIES
 
The components of inventory were:
 
<TABLE>
<CAPTION>
                                                   NOVEMBER 30,   MAY 31,
                                                       1998        1998
                                                   ------------   -------
<S>                                                <C>            <C>
Raw materials....................................    $26,267      $25,223
Work-in-process..................................      9,421       11,423
Finished goods...................................      5,863       18,886
                                                     -------      -------
                                                     $41,551      $55,532
                                                     =======      =======
</TABLE>
 
   
(4) SHORT-TERM INVESTMENTS
    
 
   
In August, 1998 the Company recorded a realized gain of $46 from the sale of tax
exempt short-term investments, classified as held-to-maturity securities, with a
carrying value of $35,803. The proceeds of $35,849 were re-invested into taxable
short-term investments the same day. The Company sold investments originally
intended to be held-to-maturity to
    
 
                                       F-6
<PAGE>   129
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
   
take advantage of more favorable rates of return available on taxable
securities. The Company's short-term investments are now classified as
available-for-sale. The short-term investments are recorded at fair value and an
unrealized loss of $7, net of income taxes of $5, is included as part of
accumulated other comprehensive income within stockholders' equity at November
30, 1998.
    
 
   
(5) INVESTMENTS IN AFFILIATES
    
 
The Company owns a 50% interest in SpeedFam Co., Ltd. The Company's equity
interest in SpeedFam Co., Ltd. was $23,752 and $20,543 at November 30, 1998 and
at May 31, 1998, respectively, based on the balance sheet of SpeedFam Co., Ltd.
at October 31, 1998 and April 30, 1998, respectively. The remaining equity
interest included in investments in affiliates relates to the Company's 50%
ownership interest in Fujimi Corporation. Condensed consolidated financial
statements of SpeedFam Co., Ltd., which are consolidated on a fiscal year that
ends April 30, are as follows:
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                           OCTOBER 31,    APRIL 30,
                                                              1998          1998
                                                           -----------    ---------
<S>                                                        <C>            <C>
ASSETS
Total current assets.....................................   $117,190      $128,379
Investment in affiliates.................................        791           853
Property, plant and equipment, net.......................     39,562        35,763
Deferred income taxes and other assets...................     10,802         8,287
                                                            --------      --------
          Total assets...................................   $168,345      $173,282
                                                            ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities................................   $ 90,938      $106,765
Long-term debt...........................................     21,799        18,095
Other long-term liabilities..............................      8,105         7,336
Stockholders' equity
  Common stock...........................................        664           664
  Retained earnings......................................     41,993        41,162
  Foreign currency translation adjustment................      4,851          (844)
  Unrealized gain (loss) on marketable securities........         (5)          104
                                                            --------      --------
          Total liabilities and stockholders' equity.....   $168,345      $173,282
                                                            ========      ========
</TABLE>
 
                                       F-7
<PAGE>   130
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                  STATEMENTS OF EARNINGS AND RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED     SIX MONTHS ENDED
                                          OCTOBER 31,            OCTOBER 31,
                                       ------------------    -------------------
                                        1998       1997       1998        1997
                                       -------    -------    -------    --------
<S>                                    <C>        <C>        <C>        <C>
Net sales............................  $33,415    $53,681    $73,038    $113,795
Costs and operating expenses.........   31,641     49,860     69,406     109,149
                                       -------    -------    -------    --------
Earnings before income taxes.........    1,774      3,821      3,632       4,646
Income taxes.........................      918      2,256      2,100       2,680
                                       -------    -------    -------    --------
Net earnings before minority
  interest...........................      856      1,565      1,532       1,966
Minority interest....................     (113)      (123)      (345)       (248)
                                       -------    -------    -------    --------
Net earnings.........................      969      1,688      1,877       2,214
Beginning retained earnings..........   41,028     35,825     41,162      37,049
Transfer to capital..................       (4)        --         (4)         --
Dividends............................       --         --     (1,042)     (1,750)
                                       -------    -------    -------    --------
Ending retained earnings.............  $41,993    $37,513    $41,993    $ 37,513
                                       =======    =======    =======    ========
</TABLE>
 
The Company pays a commission to SpeedFam Co., Ltd. on sales of equipment
produced by the Company in the U.S. and exported to Pacific Rim customers
through SpeedFam Co., Ltd. As of November 30, 1998 the Company had accrued
$1,160 of commission expense to SpeedFam Co., Ltd.
 
   
(6) DERIVATIVE FINANCIAL INSTRUMENTS
    
 
The Company uses derivative financial instruments to offset exposure to market
risks arising from changes in foreign exchange rates. Derivative financial
instruments currently utilized by the Company include foreign currency forward
contracts. The Company evaluates and monitors consolidated net exposures by
currency and maturity, and external derivative financial instruments correlate
with that net exposure in all material respects. Gains and losses on hedges of
existing assets and liabilities are included in the carrying amounts of those
assets or liabilities and are ultimately recognized in income when those
carrying amounts are converted. Gains or losses related to hedges of firm
commitments are deferred and included in the bases of the transaction when they
are completed. Gains or losses on unhedged foreign currency transactions, if
any, are included in income as part of cost of sales. Gains and losses on
derivative financial instruments which protect the Company from exposure in a
particular currency, but do not currently have a designated underlying
transaction, are also included in income as part of cost of sales. If a hedged
item matures, or is sold, extinguished, terminated, or is related to an
anticipated transaction that is no longer likely to take place, the derivative
financial instrument is closed and the related gain or loss is included in
income as part of cost of sales.
 
                                       F-8
<PAGE>   131
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
   
(7) COMPREHENSIVE INCOME (LOSS)
    
 
   
Effective June 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" which establishes standards
to report and display comprehensive income and its components in a full set of
general purpose financial statements. The Company's comprehensive income (loss)
and accumulated other comprehensive income (loss) were as follows:
    
 
   
                          COMPREHENSIVE INCOME (LOSS)
    
 
   
<TABLE>
<CAPTION>
                                 THREE MONTHS ENDED      SIX MONTHS ENDED
                                    NOVEMBER 30,           NOVEMBER 30,
                                 -------------------    ------------------
                                   1998       1997       1998       1997
                                 --------    -------    -------    -------
<S>                              <C>         <C>        <C>        <C>
Net income (loss)..............  $(4,257)    $7,620     $(4,101)   $13,177
Other comprehensive income
  (loss):
  Foreign currency translation
     adjustments...............    4,542       (180)      2,755        919
Unrealized holding losses, net
  of income taxes of $7 and $5
  for the three months and six
  months ended November 30,
  1998.........................      (11)        --          (7)        --
                                 -------     ------     -------    -------
Comprehensive income (loss)....  $   274     $7,440     $(1,353)   $14,096
                                 =======     ======     =======    =======
</TABLE>
    
 
   
                 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    
 
   
<TABLE>
<CAPTION>
                                FOREIGN      UNREALIZED        ACCUMULATED
                               CURRENCY      LOSSES ON     OTHER COMPREHENSIVE
                              TRANSLATION    SECURITIES       INCOME (LOSS)
                              -----------    ----------    -------------------
<S>                           <C>            <C>           <C>
Balance at May 31, 1998.....      (207)          --                (207)
Six month period change.....     2,755           (7)              2,748
                                 -----          ---               -----
Balance at November 30,
  1998......................     2,548           (7)              2,541
                                 =====          ===               =====
</TABLE>
    
 
   
(8) RECENT DEVELOPMENTS
    
 
On November 19, 1998, the Company entered into a definitive merger agreement
with Integrated Process Equipment Corp. ("IPEC"). Under terms of the agreement,
the Company's shareholders will retain their existing shares of common stock.
IPEC stockholders will receive 0.71 of a share of the Company's common stock for
each share of IPEC common stock that they currently own. The transaction is
expected to be consummated within approximately the next 120 days. The merger is
subject to shareholder and regulatory approval. There is no assurance that the
transaction will be consummated.
 
                                       F-9
<PAGE>   132
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
SpeedFam International, Inc.:
 
We have audited the accompanying consolidated balance sheets of SpeedFam
International, Inc. and consolidated subsidiaries as of May 31, 1998 and 1997,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended May 31, 1998.
These consolidated financial statements are the responsibility of the management
of SpeedFam International, Inc. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SpeedFam
International, Inc. and consolidated subsidiaries as of May 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the years
in the three-year period ended May 31, 1998 in conformity with generally
accepted accounting principles.
 
                                              KPMG LLP
 
June 26, 1998
Chicago, Illinois
 
                                      F-10
<PAGE>   133
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                             MAY 31, 1998 AND 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 90,384    $ 56,679
  Short-term investments....................................    50,835      20,216
  Trade accounts receivable, less allowance for doubtful
     accounts of $2,737 in 1998 and $1,144 in 1997..........    45,197      38,021
  Inventories...............................................    55,532      35,849
  Deferred income taxes.....................................     3,339       2,912
  Prepaid expenses and other current assets.................     4,856       2,038
                                                              --------    --------
Total current assets........................................   250,143     155,715
Investments in affiliates...................................    24,299      23,956
Property, plant, and equipment, net.........................    52,253      24,582
Other assets................................................     3,070       2,247
                                                              --------    --------
Total assets................................................  $329,765    $206,500
                                                              ========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................  $    248    $    250
  Accounts payable..........................................    20,265      20,923
  Customer deposits.........................................     1,812       4,165
  Due to affiliates.........................................     3,636       4,824
  Accrued expenses..........................................    13,932      14,870
  Income taxes payable......................................        --       3,861
                                                              --------    --------
Total current liabilities...................................    39,893      48,893
                                                              --------    --------
Long-term liabilities:
  Long-term debt............................................        --         272
  Deferred income taxes.....................................     1,020         802
                                                              --------    --------
Total long-term liabilities.................................     1,020       1,074
                                                              --------    --------
Stockholders' equity:
  Common stock, no par value, 60,000 shares authorized,
     15,962 and 13,324 shares issued and outstanding at May
     31, 1998 and 1997, respectively........................         1           1
  Additional paid-in capital................................   226,729     105,522
  Retained earnings.........................................    62,329      49,466
  Cumulative foreign currency translation adjustments.......      (207)      1,544
                                                              --------    --------
Total stockholders' equity..................................   288,852     156,533
                                                              --------    --------
Total liabilities and stockholders' equity..................  $329,765    $206,500
                                                              ========    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-11
<PAGE>   134
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                      CONSOLIDATED STATEMENTS OF EARNINGS
                    YEARS ENDED MAY 31, 1998, 1997, AND 1996
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      1998        1997        1996
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
Revenue:
  Net sales.......................................  $176,247    $160,994    $113,880
  Commissions from affiliate......................     9,009      12,430       6,290
                                                    --------    --------    --------
Total revenue.....................................   185,256     173,424     120,170
Cost of sales.....................................   109,751     103,501      78,661
                                                    --------    --------    --------
Gross margin......................................    75,505      69,923      41,509
                                                    --------    --------    --------
Operating expenses:
  Research, development, and engineering..........    33,681      19,766      11,496
  Selling, general, and administrative............    35,880      28,671      18,922
                                                    --------    --------    --------
Total operating expenses..........................    69,561      48,437      30,418
                                                    --------    --------    --------
Operating profit..................................     5,944      21,486      11,091
Other income (expense)............................     5,957        (298)       (208)
                                                    --------    --------    --------
Earnings from consolidated companies before income
  taxes...........................................    11,901      21,188      10,883
Income tax expense................................     3,456       8,037       4,266
                                                    --------    --------    --------
Earnings from consolidated companies..............     8,445      13,151       6,617
Equity in net earnings of affiliates..............     4,418       7,068       5,204
                                                    --------    --------    --------
Net earnings......................................  $ 12,863    $ 20,219    $ 11,821
                                                    ========    ========    ========
Net earnings per share:
  Basic...........................................  $   0.86    $   1.78    $   1.27
                                                    ========    ========    ========
  Diluted.........................................  $   0.83    $   1.67    $   1.16
                                                    ========    ========    ========
Weighted average number of shares:
  Basic...........................................    14,971      11,349       9,344
                                                    ========    ========    ========
  Diluted.........................................    15,591      12,127      10,159
                                                    ========    ========    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-12
<PAGE>   135
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    YEARS ENDED MAY 31, 1998, 1997, AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               CUMULATIVE
                                                                 FOREIGN
                                       ADDITIONAL               CURRENCY
                              COMMON    PAID-IN     RETAINED   TRANSLATION   TREASURY
                              STOCK     CAPITAL     EARNINGS   ADJUSTMENTS    STOCK      TOTAL
                              ------   ----------   --------   -----------   --------   --------
<S>                           <C>      <C>          <C>        <C>           <C>        <C>
BALANCE AT MAY 31, 1995.....     1      $    828    $17,426      $ 7,991     $(3,209)   $ 23,037
Net earnings................    --            --     11,821           --          --      11,821
Foreign currency translation
  adjustments...............    --            --         --       (3,374)         --      (3,374)
Sale of treasury stock......    --            16         --           --           1          17
Retirement of treasury
  stock.....................    --        (3,208)        --           --       3,208          --
Issuance of common stock....    --        28,284         --           --          --      28,284
Exercise of stock options...    --           254         --           --          --         254
                                --      --------    -------      -------     -------    --------
BALANCE AT MAY 31, 1996.....     1        26,174     29,247        4,617          --      60,039
Net earnings................    --            --     20,219           --          --      20,219
Foreign currency translation
  adjustments...............    --            --         --       (3,073)         --      (3,073)
Income tax benefit from
  exercise of stock
  options...................    --           194         --           --          --         194
Issuance of common stock....    --        77,673         --           --          --      77,673
Employee stock purchases....    --           887         --           --          --         887
Exercise of stock options...    --           594         --           --          --         594
                                --      --------    -------      -------     -------    --------
BALANCE AT MAY 31, 1997.....     1       105,522     49,466        1,544          --     156,533
                                --      --------    -------      -------     -------    --------
Net earnings................    --            --     12,863           --          --      12,863
Foreign currency translation
  adjustments...............    --            --         --       (1,751)         --      (1,751)
Income tax benefit from
  exercise of stock
  options...................    --           780         --           --          --         780
Issuance of common stock....    --       116,704         --           --          --     116,704
Employee stock purchases....    --         2,088         --           --          --       2,088
Exercise of stock options...    --         1,635         --           --          --       1,635
                                --      --------    -------      -------     -------    --------
BALANCE AT MAY 31, 1998.....     1      $226,729    $62,329      $  (207)    $    --    $288,852
                                ==      ========    =======      =======     =======    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-13
<PAGE>   136
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED MAY 31, 1998, 1997 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                          1998        1997        1996
                                                        --------    --------    --------
<S>                                                     <C>         <C>         <C>
Cash flows from operating activities:
  Net earnings........................................  $ 12,863    $ 20,219    $ 11,821
  Adjustments to reconcile net earnings to net cash
     provided by (used in) operating activities:
     Equity in net earnings of affiliates.............    (4,418)     (7,068)     (5,204)
     Depreciation and amortization....................     4,525       2,846       1,326
     Provision for losses on accounts receivable......     1,752         817         316
     Provision for deferred income taxes..............      (209)     (1,460)       (922)
     Gains on sales of assets.........................       (42)        (32)        (10)
     Increase in cash surrender value of life
       insurance......................................      (150)       (144)       (142)
     (Increase) decrease in assets:
       Trade accounts receivable......................    (8,804)     (4,050)    (18,226)
       Inventories....................................   (19,768)     (7,898)    (10,078)
       Prepaid expenses and other current assets......    (2,813)       (749)         23
     Increase (decrease) in liabilities:
       Accounts payable and due to affiliates.........    (1,959)       (709)     10,621
       Accrued expenses and customer deposits.........    (3,331)      6,183       4,102
       Income taxes payable...........................    (3,106)       (942)      4,290
                                                        --------    --------    --------
Net cash provided by (used in) operating activities...   (25,460)      7,013      (2,083)
                                                        --------    --------    --------
Cash flows from investing activities:
  Purchases of short-term investments.................   (63,636)    (20,216)         --
  Maturities of short-term investments................    33,017          --          --
  Capital expenditures................................   (32,071)    (17,431)     (8,121)
  Proceeds from sales of assets.......................        61          75          24
  Dividends from affiliates...........................     2,325         554         163
  Other investing activities..........................      (801)       (553)       (542)
                                                        --------    --------    --------
Net cash used in investing activities.................   (61,105)    (37,571)     (8,476)
                                                        --------    --------    --------
Cash flows from financing activities:
  Sale of treasury stock..............................        --          --          17
  Net proceeds from issuance of common stock..........   116,704      77,673      28,284
  Proceeds from exercise of stock options and employee
     stock purchases..................................     3,723       1,481         254
  Proceeds from long-term debt........................        --         414       3,999
  Principal payments on long-term debt................      (274)     (3,221)    (12,025)
                                                        --------    --------    --------
Net cash provided by financing activities.............   120,153      76,347      20,529
                                                        --------    --------    --------
Effect of foreign currency rate changes on cash.......       117          19        (194)
                                                        --------    --------    --------
Net increase in cash and cash equivalents.............    33,705      45,808       9,776
Cash and cash equivalents at beginning of year........    56,679      10,871       1,095
                                                        --------    --------    --------
Cash and cash equivalents at end of year..............  $ 90,384    $ 56,679    $ 10,871
                                                        ========    ========    ========
Supplemental cash flow information -- cash paid during
  the year for:
  Interest............................................  $     47    $    226    $    810
  Income taxes........................................     6,298      10,463         860
                                                        ========    ========    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-14
<PAGE>   137
 
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
SpeedFam International, Inc. (the Company), an Illinois corporation, designs,
develops, manufactures, markets, and services chemical mechanical polishing, or
"CMP," systems used in the fabrication of semiconductor devices and other high
throughput, precision surface processing systems used in the fabrication of thin
film memory disk media, semiconductor wafers, and general industrial components.
In addition, the Company markets and distributes slurries, parts, and
expendables used in its customers' manufacturing processes. The Company's
customers are primarily located in the United States, Europe, and the Far East.
 
  (a) Principles of Consolidation
 
The consolidated financial statements include the accounts of the Company and
the following wholly owned subsidiaries:
 
<TABLE>
<CAPTION>
                   SUBSIDIARIES                      INCORPORATED
                   ------------                      ------------
<S>                                                 <C>
SpeedFam Corporation..............................  United States
SpeedFam Limited..................................  United Kingdom
SpeedFam GmbH.....................................  Germany
</TABLE>
 
All significant intercompany balances and transactions have been eliminated.
Non-U.S. subsidiaries are included in the consolidated financial statements
based upon fiscal years ended April 30. The Company's fiscal year ends on May
31.
 
The Company's investments in the common stock of affiliates SpeedFam Co., Ltd.
(a Japanese corporation, 50% owned) and Fujimi Corporation (an Illinois
corporation, 50% owned) are accounted for by the equity method using fiscal
years that end April 30 and May 31, respectively.
 
  (b) Cash and Cash Equivalents and Short-term Investments
 
Cash and cash equivalents include deposits in banks and highly liquid
investments with original maturities of three months or less.
 
All of the Company's short-term investments are classified as held-to-maturity
securities. These securities are recorded at amortized cost, adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion, as well as any interest on the securities, is
included in interest income.
 
  (c) Inventories
 
Inventories are stated at the lower of cost (first-in, first-out) or market.
 
  (d) Property, Plant, and Equipment
 
Property, plant, and equipment are stated at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets.
Depreciation expense was $4,394,
 
                                      F-15
<PAGE>   138
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
$2,795, and $1,172 in fiscal years 1998, 1997, and 1996, respectively. The
estimated useful lives of the assets are as follows:
 
<TABLE>
<S>                                                    <C>
Buildings and improvements...........................  7 to 40 years
Machinery and equipment..............................        5 years
Furniture and fixtures...............................   3 to 5 years
Leasehold improvements...............................  2 to 10 years
</TABLE>
 
  (e) Income Taxes
 
Income taxes are accounted for under the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
 
  (f) Revenue Recognition
 
Sales of the Company's products are recorded upon customer acceptance, or
shipment if no customer acceptance is required, at which time title passes to
the customer. Customer acceptance refers to the sign off by the customer that
the equipment is complete and has passed all tests satisfactory to the customer.
Installation of the equipment is generally completed within 30 to 60 days of
acceptance.
 
  (g) Installation and Warranty Costs
 
Costs to be incurred by the Company related to product installation and warranty
fulfillment are accrued at the date of customer acceptance, or shipment if no
customer acceptance is required, and are estimated by the Company based on past
experience. The accrual for product installation and warranty fulfillment,
included in accrued expenses in the consolidated balance sheets, was $5,628 and
$5,510 at the end of fiscal years 1998 and 1997, respectively.
 
  (h) Foreign Currency Translation
 
Assets and liabilities of the Company's non-U.S. operations have been translated
using the exchange rates in effect at each balance sheet date. Results of
operations are translated using the average exchange rates prevailing throughout
each period. Local currencies are
 
                                      F-16
<PAGE>   139
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
considered the functional currencies of the Company's foreign entities. Foreign
currency exchange rates used to translate the financial statements are
summarized below:
 
<TABLE>
<CAPTION>
                                          FOREIGN CURRENCY PER U.S. DOLLAR
                                          --------------------------------
                                            1998        1997        1996
                                          --------    --------    --------
<S>                                       <C>         <C>         <C>
Rates at balance sheet date:
  Pound sterling (L)....................      .60         .62         .66
  Deutsche mark (DM)....................     1.80        1.73        1.53
  Japanese yen (Y)......................   132.83      127.09      105.07
</TABLE>
 
  (i) Treasury Stock
 
The Company accounts for treasury stock using the cost method. All of the
Company's treasury stock was retired upon completion of the Company's initial
public offering of common stock in October, 1995 (see note 15).
 
  (j) Earnings Per Share
 
In fiscal year 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share includes the effect of all potential
common shares that are dilutive and outstanding during the reporting period.
Earnings per share amounts for all periods presented have been restated to
conform to SFAS No. 128.
 
The following table sets forth the computation of basic and diluted earnings per
share:
 
<TABLE>
<CAPTION>
                                                1998       1997       1996
                                               -------    -------    -------
<S>                                            <C>        <C>        <C>
Numerator:
  Net earnings...............................  $12,863    $20,219    $11,821
                                               =======    =======    =======
Denominator:
  Denominator for basic earnings per share --
     weighted-average shares outstanding.....   14,971     11,349      9,344
  Effect of dilutive securities -- employee
     stock options...........................      620        778        815
                                               -------    -------    -------
  Denominator for diluted earnings per
     share -- adjusted weighted-average
     shares outstanding......................   15,591     12,127     10,159
                                               =======    =======    =======
Basic earnings per share.....................  $  0.86    $  1.78    $  1.27
                                               =======    =======    =======
Diluted earnings per share...................  $  0.83    $  1.67    $  1.16
                                               =======    =======    =======
</TABLE>
 
Options to purchase 457 shares of common stock, at an average price of $38.16
per share, were outstanding during 1998, but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares and, therefore,
the effect would be antidilutive.
 
                                      F-17
<PAGE>   140
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
  (k) Significant Customers and Concentration of Credit Risk
 
Presented below is a summary of net sales to and commissions earned from
significant customers as a percentage of total revenue. Net sales to and
commissions earned from these customers are from both of the Company's segments.
 
<TABLE>
<CAPTION>
CUSTOMER                                        1998    1997    1996
--------                                        ----    ----    ----
<S>                                             <C>     <C>     <C>
A.............................................   *       10%     18%
B.............................................   *       13       *
</TABLE>
 
---------------
* Less than 10%.
 
  (l) Patents and Trademarks
 
Patents and trademarks included in other assets, in the net amount of $1,613 and
$769 at the end of fiscal years 1998 and 1997, respectively, are amortized on a
straight-line basis over 17 years for patents and five years for trademarks.
 
  (m) Research, Development, and Engineering
 
Expenditures for research, development, and engineering of products and
processes are expensed as incurred.
 
  (n) Use of Estimates
 
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  (o) Employee Stock Plans
 
Effective June 1, 1996, the Company adopted Statement of Financing Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." In
accordance with the provisions of SFAS No. 123, the Company applies Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its employee stock
option and stock purchase plans and, accordingly, does not recognize
compensation cost. As prescribed by SFAS No. 123, note 11 contains a summary of
the pro forma effects on reported net income and earnings per share for 1998,
1997 and 1996 as if the Company had elected to recognize compensation cost based
on the fair value of the options granted at grant date.
 
  (p) Derivative Financial Instruments
 
The Company uses derivative financial instruments to offset exposure to market
risks arising from changes in foreign exchange rates. Derivative financial
instruments currently utilized by the Company primarily include foreign currency
forward contracts. The Company evaluates and monitors consolidated net exposures
by currency and maturity, and external derivative financial instruments
correlate with the net exposures in all material
 
                                      F-18
<PAGE>   141
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
respects. Gains and losses on hedges of existing assets and liabilities are
included in the carrying amounts of those assets or liabilities and are
ultimately recognized in income when those carrying amounts are converted. Gains
or losses related to hedges of firm commitments are deferred and included in the
bases of the transactions when they are completed. Gains or losses on unhedged
foreign currency transactions are included in income as part of cost of sales.
Gains and losses on derivative financial instruments which protect the Company
from exposure in a particular currency, but do not currently have a designated
underlying transaction, are also included in income as part of cost of sales. If
a hedged item matures, or is sold, extinguished, terminated, or is related to an
anticipated transaction that is no longer likely to take place, the derivative
financial instrument is closed and the related gain or loss is included in
income as part of cost of sales.
 
  (q) Reclassifications
 
Certain reclassifications have been made in the fiscal 1997 and fiscal 1996
financial statements to conform to the fiscal 1998 presentation.
 
(2) SHORT-TERM INVESTMENTS
 
The amortized cost, gross unrealized gains, gross unrealized losses, and
approximate fair value of short-term investments classified as held-to-maturity
are summarized as follows at May 31, 1998 and 1997:
 
<TABLE>
<CAPTION>
                                                        1998
                                 --------------------------------------------------
                                              GROSS         GROSS
                                            UNREALIZED    UNREALIZED    APPROXIMATE
                                  COST        GAINS         LOSSES      FAIR VALUE
                                 -------    ----------    ----------    -----------
<S>                              <C>        <C>           <C>           <C>
Municipal and state
  governments..................  $45,342       $46            $8          $45,380
Corporate debt securities and
  other........................    5,493         4             1            5,496
                                 -------       ---            --          -------
                                 $50,835       $50            $9          $50,876
                                 =======       ===            ==          =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                        1997
                                 --------------------------------------------------
                                              GROSS         GROSS
                                            UNREALIZED    UNREALIZED    APPROXIMATE
                                  COST        GAINS         LOSSES      FAIR VALUE
                                 -------    ----------    ----------    -----------
<S>                              <C>        <C>           <C>           <C>
Municipal and state
  governments..................  $20,216       $--            $5          $20,211
                                 =======       ===            ==          =======
</TABLE>
 
(3) INVENTORIES
 
Inventories at the end of fiscal years 1998 and 1997 are summarized as follows:
 
<TABLE>
<CAPTION>
                                                  1998       1997
                                                 -------    -------
<S>                                              <C>        <C>
Raw materials..................................  $25,223    $16,323
Work-in-process................................   11,423     16,030
Finished goods.................................   18,886      3,496
                                                 -------    -------
Total inventories..............................  $55,532    $35,849
                                                 =======    =======
</TABLE>
 
                                      F-19
<PAGE>   142
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(4) PROPERTY, PLANT, AND EQUIPMENT
 
Property, plant, and equipment at the end of fiscal years 1998 and 1997 are
summarized as follows:
 
<TABLE>
<CAPTION>
                                                  1998       1997
                                                --------    -------
<S>                                             <C>         <C>
Land..........................................  $  8,507    $ 2,280
Buildings.....................................    19,097      2,156
Machinery and equipment.......................    25,141     11,321
Furniture and fixtures........................     3,545      1,446
Leasehold improvements........................       930        643
Construction in progress......................     6,167     13,832
                                                --------    -------
                                                  63,387     31,678
Less accumulated depreciation.................   (11,134)    (7,096)
                                                --------    -------
Net property, plant, and equipment............  $ 52,253    $24,582
                                                ========    =======
</TABLE>
 
(5) INVESTMENTS IN AFFILIATES
 
The Company owns a 50% interest in SpeedFam Co., Ltd. The Company's equity
investment in SpeedFam Co., Ltd. was $20,543 and $20,363 in 1998 and 1997,
respectively. SpeedFam Co., Ltd.'s consolidated financial statements include the
accounts of the following subsidiaries:
 
<TABLE>
<CAPTION>
                       COMPANY                          LOCATION
                       -------                          --------
<S>                                                    <C>
SpeedFam Clean System Co., Ltd.......................  Japan
Saku Seiki K.K.......................................  Japan
SpeedFam Incorporated................................  Taiwan
SpeedFam Korea Ltd...................................  South Korea
SpeedFam India (Pvt.) Ltd............................  India
SpeedFam (S.E.A.) Pte. Ltd...........................  Singapore
SpeedFam Malaysia SDN BHD............................  Malaysia
</TABLE>
 
Significant intercompany balances and transactions have been eliminated.
SpeedFam Co., Ltd.'s investments in three affiliated Japanese companies,
Met-Coil Ltd.; CRT K.K.; Clean Technology K.K.; and Xevios Corporation are
accounted for by the equity method.
 
                                      F-20
<PAGE>   143
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
Condensed consolidated financial statements of SpeedFam Co. Ltd., are as
follows:
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                   APRIL 30,
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
                                      ASSETS
Current assets:
  Cash and short-term investments...........................  $ 13,612    $  9,794
  Trade accounts receivable, net and due from affiliates....    89,359      77,380
  Inventories...............................................    20,723      25,063
  Prepaid expenses and other current assets.................     4,685       3,434
                                                              --------    --------
Total current assets........................................   128,379     115,671
Property, plant and equipment, net..........................    35,763      30,327
Other assets................................................     9,140       7,702
                                                              --------    --------
Total assets................................................  $173,282    $153,700
                                                              ========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings and current portion of long-term
     debt...................................................  $ 37,779    $ 15,841
  Accounts payable..........................................    58,440      64,523
  Accrued expenses..........................................     6,656       9,969
  Income taxes payable......................................     3,890       5,701
                                                              --------    --------
Total current liabilities...................................   106,765      96,034
                                                              --------    --------
Long-term debt..............................................    18,945      10,786
Other long-term liabilities.................................     6,486       6,154
                                                              --------    --------
Total long-term liabilities.................................    25,431      16,940
                                                              --------    --------
Stockholders' equity........................................    41,086      40,726
                                                              --------    --------
Total liabilities and stockholders' equity..................  $173,282    $153,700
                                                              ========    ========
</TABLE>
 
                                      F-21
<PAGE>   144
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                  STATEMENTS OF EARNINGS AND RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                                         YEARS ENDED APRIL 30,
                                                    --------------------------------
                                                      1998        1997        1996
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
Net sales.........................................  $221,738    $220,281    $161,169
Costs and operating expenses......................  (210,900)   (198,449)   (141,752)
                                                    --------    --------    --------
Earnings before income taxes......................    10,838      21,832      19,417
Income taxes......................................    (5,041)    (10,250)     (9,479)
                                                    --------    --------    --------
Net earnings before minority interest.............     5,797      11,582       9,938
Minority interest.................................        66        (569)       (301)
                                                    --------    --------    --------
Net earnings......................................     5,863      11,013       9,637
Retained earnings at beginning of year............    37,049      26,943      18,036
Common stock dividend.............................        --          --        (454)
Dividends.........................................    (1,750)       (907)       (276)
                                                    --------    --------    --------
Retained earnings at end of year..................  $ 41,162    $ 37,049    $ 26,943
                                                    ========    ========    ========
</TABLE>
 
The following is a summary of SpeedFam International, Inc. and consolidated
subsidiaries' transactions with SpeedFam Co., Ltd. and its subsidiaries.
 
<TABLE>
<CAPTION>
                                                          1998      1997       1996
                                                         ------    -------    ------
<S>                                                      <C>       <C>        <C>
Sales to SpeedFam Co., Ltd.............................  $  924    $ 1,520    $1,737
                                                         ======    =======    ======
Purchases from SpeedFam Co., Ltd.......................  $6,344    $ 6,146    $7,612
                                                         ======    =======    ======
Commission revenue.....................................  $9,009    $12,430    $6,290
                                                         ======    =======    ======
Commission expense.....................................  $4,433    $ 2,707    $  582
                                                         ======    =======    ======
</TABLE>
 
Net amounts due to SpeedFam Co., Ltd. included in the consolidated balance
sheets at the end of fiscal years 1998 and 1997 are $3,437 and $4,360,
respectively.
 
                                      F-22
<PAGE>   145
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
The Company owns a 50% interest in Fujimi Corporation. The Company's equity
investment in Fujimi Corporation was $3,757 and $3,593 in 1998 and 1997,
respectively. Summary financial information relating to Fujimi Corporation is as
follows:
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                   MAY 31,
                                                              ------------------
                                                               1998       1997
                                                              -------    -------
<S>                                                           <C>        <C>
                                     ASSETS
Current assets..............................................  $11,063    $13,346
Other assets................................................       30         16
                                                              -------    -------
Total assets................................................  $11,093    $13,362
                                                              =======    =======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities.................................................  $ 3,579    $ 6,177
Stockholders' equity........................................    7,514      7,185
                                                              -------    -------
Total liabilities and stockholders' equity..................  $11,093    $13,362
                                                              =======    =======
</TABLE>
 
                             STATEMENTS OF EARNINGS
 
<TABLE>
<CAPTION>
                                                          YEARS ENDED MAY 31,
                                                    --------------------------------
                                                      1998        1997        1996
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
Net sales.........................................  $ 36,767    $ 36,556    $ 19,734
Costs and operating expenses......................   (31,332)    (30,775)    (18,235)
                                                    --------    --------    --------
Earnings before income taxes......................     5,435       5,781       1,499
Income taxes......................................    (2,207)     (2,205)       (589)
                                                    --------    --------    --------
Net earnings......................................  $  3,228    $  3,576    $    910
                                                    ========    ========    ========
</TABLE>
 
The Company received dividends from Fujimi Corporation of $1,450, $100, and $25
in 1998, 1997, and 1996, respectively. Purchases from Fujimi Corporation
approximated $2,271, $1,725, and $952 in 1998, 1997, and 1996, respectively.
Amounts due to Fujimi Corporation included in the consolidated balance sheets at
the end of fiscal years 1998 and 1997 are $199 and $464, respectively.
 
(6) INCOME TAXES
 
The Company files consolidated U.S. Federal income tax returns with its domestic
subsidiary. Operations in the United Kingdom and Germany file local income tax
returns. Earnings from consolidated companies before income taxes are as
follows:
 
<TABLE>
<CAPTION>
                                        1998       1997       1996
                                       -------    -------    -------
<S>                                    <C>        <C>        <C>
U.S..................................  $ 9,495    $18,608    $ 9,380
Non-U.S..............................    2,406      2,580      1,503
                                       -------    -------    -------
Total................................  $11,901    $21,188    $10,883
                                       =======    =======    =======
</TABLE>
 
                                      F-23
<PAGE>   146
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
The provision (benefit) for income taxes is as follows:
 
<TABLE>
<CAPTION>
                                          1998      1997       1996
                                         ------    -------    ------
<S>                                      <C>       <C>        <C>
Current:
  U.S. Federal.........................  $2,348    $ 6,673    $3,693
  State................................     780      1,800       965
  Non-U.S..............................     640      1,025       537
                                         ------    -------    ------
                                          3,768      9,498     5,195
                                         ------    -------    ------
Deferred:
  U.S. Federal and state...............    (462)    (1,311)     (915)
  Non-U.S..............................     150       (150)      (14)
                                         ------    -------    ------
                                           (312)    (1,461)     (929)
                                         ------    -------    ------
Income tax expense.....................  $3,456    $ 8,037    $4,266
                                         ======    =======    ======
</TABLE>
 
The tax effects of temporary differences that give rise to the deferred tax
assets (liabilities) at the end of fiscal years 1998 and 1997 are attributable
to:
 
<TABLE>
<CAPTION>
                                                    1998      1997
                                                   ------    ------
<S>                                                <C>       <C>
Property, plant, and equipment...................  $ (936)   $ (789)
Inventory........................................     586       352
Allowance for doubtful accounts..................     443       469
Trademark amortization...........................     105        98
Warranty accrual.................................   2,157     2,201
Other............................................     (36)     (221)
                                                   ------    ------
Net deferred tax asset...........................  $2,319    $2,110
                                                   ======    ======
</TABLE>
 
The net deferred tax asset has been recorded on the balance sheet as follows:
 
<TABLE>
<CAPTION>
                                                   1998       1997
                                                  -------    ------
<S>                                               <C>        <C>
Current deferred tax asset......................  $ 3,339    $2,912
Long-term deferred tax liability................   (1,020)     (802)
                                                  -------    ------
                                                  $ 2,319    $2,110
                                                  =======    ======
</TABLE>
 
There is no valuation allowance for deferred tax assets at the end of fiscal
years 1998 or 1997. Deferred tax assets are considered realizable due to the
expectation of future taxable income.
 
                                      F-24
<PAGE>   147
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
A reconciliation between the Company's effective tax rate and the expected tax
rate on earnings before income taxes is as follows:
 
<TABLE>
<CAPTION>
                                                1998    1997    1996
                                                ----    ----    ----
<S>                                             <C>     <C>     <C>
Expected income tax rate......................   34%     35%     34%
Dividend income from affiliates...............    1       1      --
State taxes, net of U.S. Federal tax
  benefit.....................................    4       6       4
Foreign sales corporation.....................   (5)     (1)     --
Research and development tax credits..........   --      (1)     --
Tax exempt investment securities..............   (9)     (2)     --
Meals and entertainment.......................    2      --      --
Other.........................................    2      --       1
                                                 --      --      --
Effective income tax rate.....................   29%     38%     39%
                                                 ==      ==      ==
</TABLE>
 
No provision is made for income taxes on undistributed earnings of wholly owned
non-U.S. subsidiaries and SpeedFam Co., Ltd., because it is the Company's
present intention to reinvest substantially all the earnings of these
operations. At the end of fiscal year 1998, there was approximately $26,372 of
accumulated undistributed earnings of those operations. It is not practical for
the Company to compute the amount of unrecognized deferred tax liability on the
undistributed earnings.
 
(7) LONG-TERM DEBT
 
The Company has a term loan payable in monthly installments of $26 (including
interest at a fixed rate of 9.25%) beginning April 1, 1994 for five years. The
balance due is $248 and $522 at May 31, 1998 and 1997, respectively. As all
amounts due will be repaid during fiscal year 1999, the balance is shown as a
current liability at May 31, 1998. The term loan payable is secured by certain
machinery of SpeedFam Corporation.
 
On August 29, 1997, the Company negotiated a new unsecured credit facility with
its U.S. bank group. The new credit agreement provides for a revolving loan
facility in the amount of $60,000 with a term of three years. If the loan is
utilized, principal will be repaid at the end of the loan term. Interest will
accrue and be paid monthly on the outstanding balance based on a 90 day LIBOR
rate plus 25 to 100 basis points. The Company must meet certain financial
objectives each year as defined in the credit agreement. At May 31, 1998, no
amounts were outstanding on this loan facility.
 
On October 31, 1996, SpeedFam Limited in the United Kingdom, a wholly owned
subsidiary of SpeedFam International, Inc., entered into a L950 ($1,587)
multi-currency revolving line of credit with the London branch of a U.S. bank.
The revolving line of credit is secured by property and equipment of the
subsidiary and is payable on demand. If the line of credit is utilized, interest
will accrue on the outstanding balance at 2.0% above the bank's base rate (7.25%
and 6.0% at April 30, 1998 and 1997, respectively). As of April 30, 1998 and
1997, no amounts were outstanding on this credit facility.
 
                                      F-25
<PAGE>   148
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(8) COMMITMENTS AND CONTINGENCIES
 
During fiscal year 1996, the Company entered into a technology license agreement
related to the development of a new product introduced during fiscal year 1997.
The agreement obligates the Company to make annual royalty payments of 5.5% of
the Company's net sales of products using the licensed technology for ten years.
The annual royalty payments are subject to a minimum payment of $150 beginning
in fiscal year 1998 and $200 for fiscal years 1999 to 2006.
 
The Company and its subsidiaries occupy certain manufacturing and office
facilities and use certain equipment under noncancelable operating leases
expiring at various dates through fiscal year 2001. Rental expense aggregated
approximately $1,635, $1,235, and $917 in fiscal years 1998, 1997, and 1996,
respectively.
 
Future minimum lease payments for all noncancelable operating leases having
remaining terms in excess of one year at the end of fiscal year 1998 are as
follows:
 
<TABLE>
<CAPTION>
YEAR                                                 AMOUNT
----                                                 ------
<S>                                                  <C>
1999...............................................  $1,907
2000...............................................   1,311
2001...............................................     787
2002...............................................     305
2003 and thereafter................................      66
                                                     ------
Total..............................................  $4,376
                                                     ======
</TABLE>
 
(9) FORWARD EXCHANGE CONTRACTS
 
The notional amounts of foreign exchange contracts as of May 31, 1998 and May
31, 1997 were as follows:
 
<TABLE>
<CAPTION>
                                                   1998      1997
                                                  ------    -------
<S>                                               <C>       <C>
Forward exchange contracts to buy foreign
  currency......................................  $2,833    $16,670
                                                  ======    =======
Forward exchange contracts to sell foreign
  currency......................................  $1,637    $ 3,379
                                                  ======    =======
</TABLE>
 
All currency forward contracts outstanding at May 31, 1998 have maturities of
less than one year and are primarily to buy or sell Japanese yen in exchange for
U.S. dollars. Management believes that these contracts should not subject the
Company to undue risk from foreign exchange movements, because gains and losses
on these contracts generally offset gains and losses on the assets, liabilities,
and transactions being hedged.
 
(10) SAVINGS AND PROFIT-SHARING PLANS
 
The Company maintains defined-contribution savings and profit-sharing plans for
its employees. The plans cover certain employees who meet length of service
requirements. Expenses under the plans, determined by the Company's Board of
Directors, aggregated $143, $2,414, and $1,443 in fiscal years 1998, 1997, and
1996, respectively.
 
                                      F-26
<PAGE>   149
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(11) STOCK OPTION PLANS
 
The Company grants options to employees under the 1991 Employee Incentive Stock
Option Plan and the 1995 Stock Plan for Employees and Directors of the Company.
Under the plans, options may be granted to purchase up to 2,500,000 shares of
the Company's authorized but unissued common stock. Prior to fiscal year 1995,
stock options were granted at 100% to 110% of the value of the Company's common
stock as determined by an established formula. In fiscal year 1995, stock
options were granted at 100% to 110% of the fair value of the Company's common
stock as determined by an independent appraiser. Subsequent to fiscal year 1995
stock options are granted at a price not less than the fair market value on the
date of grant. The stock options vest over five years (i.e., 20% each year) with
the exception of 163,800 stock options issued in 1992, which vested immediately.
The stock options expire 10 years after the grant date, except for 71,100 stock
options which expire five years after the grant date.
 
The following table summarizes option activity and related information:
 
<TABLE>
<CAPTION>
                                                                 WEIGHTED AVERAGE
                                 OPTIONS     PRICE PER SHARE      EXERCISE PRICE
                                ---------    ----------------    ----------------
<S>                             <C>          <C>       <C>       <C>
BALANCE AT MAY 31, 1995.......  1,103,660    $  2.04 - $ 6.41         $ 2.87
  Granted.....................    330,976      10.75 -  20.50          20.07
  Exercised...................   (127,668)      2.04 -   5.83           2.12
  Canceled or expired.........    (33,900)      2.04 -   5.83           2.25
                                ---------    --------- ------         ------
BALANCE AT MAY 31, 1996.......  1,273,068       2.04 -  20.50           7.43
  Granted.....................    496,200      15.75 -  37.75          36.16
  Exercised...................   (234,976)      2.04 -  18.25           2.53
  Canceled or expired.........    (12,360)      5.83 -  20.50          14.72
                                ---------    --------- ------         ------
BALANCE AT MAY 31, 1997.......  1,521,932       2.04 -  37.75          17.17
  Granted.....................    557,420      19.50 -  59.00          23.01
  Exercised...................   (222,013)      2.04 -  20.50           5.68
  Canceled or expired.........   (123,661)      2.04 -  56.50          22.59
                                ---------    --------- ------         ------
BALANCE AT MAY 31, 1998.......  1,733,678    $  2.04 - $59.00         $20.13
                                =========    ========= ======         ======
</TABLE>
 
The following table summarizes information about stock options outstanding at
May 31, 1998:
 
<TABLE>
<CAPTION>
                                   WEIGHTED AVERAGE
                     OPTIONS          REMAINING          WEIGHTED         OPTIONS          WEIGHTED
   RANGE OF       OUTSTANDING AT   CONTRACTUAL LIFE      AVERAGE       EXERCISABLE AT      AVERAGE
EXERCISE PRICES    MAY 31, 1998        (YEARS)        EXERCISE PRICE    MAY 31, 1998    EXERCISE PRICE
---------------   --------------   ----------------   --------------   --------------   --------------
<S>               <C>              <C>                <C>              <C>              <C>
$ 2.04 - $ 2.41       335,900            5.27             $ 2.08          231,080           $ 2.08
$ 5.83 - $ 6.41       146,970            6.25               5.91           73,018             5.93
$10.75 - $15.75        29,400            8.05              14.31            6,200            14.19
$18.25 - $26.69       761,808            9.30              20.19           94,068            20.57
$32.50 - $46.75       421,950            9.00              36.59           86,189            36.45
$51.00 - $59.00        37,650            9.34              55.47               --               --
                    ---------            ----             ------          -------           ------
$ 2.04 - $59.00     1,733,678            8.17             $20.13          490,555           $12.39
                    =========            ====             ======          =======           ======
</TABLE>
 
                                      F-27
<PAGE>   150
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
As permitted under SFAS No. 123, the Company has elected to follow APB No. 25 in
accounting for stock-based awards to employees. Accordingly, no compensation
cost has been recognized for the stock option and stock purchase plans. Had
compensation cost for the Company's stock option and stock purchase plans been
determined based on the fair value at the grant date for awards in fiscal years
1998, 1997 and 1996 consistent with the provisions of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                1998       1997       1996
                                               -------    -------    -------
<S>                                            <C>        <C>        <C>
Net income as reported.......................  $12,863    $20,219    $11,821
Pro forma net income.........................  $11,363    $19,537    $11,763
Basic earnings per share as reported.........  $  0.86    $  1.78    $  1.27
Basic pro forma earnings per share...........  $  0.76    $  1.72    $  1.26
Diluted earnings per share as reported.......  $  0.83    $  1.67    $  1.16
Diluted pro forma earnings per share.........  $  0.73    $  1.61    $  1.16
</TABLE>
 
In accordance with the provisions of SFAS No. 123, pro forma net income reflects
only options granted in fiscal years 1998, 1997 and 1996. Therefore, the full
impact of calculating compensation cost of options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above because
compensation cost is reflected over the options vesting period of five years,
and compensation cost for options granted prior to June 1, 1995 is not
considered.
 
In calculating pro forma compensation, the fair value of each option is
estimated on the date of grant using the Black-Scholes option-pricing model,
with the following weighted average assumptions for grants made in fiscal years
1998, 1997 and 1996.
 
<TABLE>
<CAPTION>
                                         1998       1997       1996
                                        -------    -------    -------
<S>                                     <C>        <C>        <C>
Dividend yield........................     None       None       None
Expected volatility...................       61%        56%        56%
Risk-free interest rate...............     5.53%      6.38%      6.35%
Expected lives........................  3 years    3 years    3 years
</TABLE>
 
The weighted average fair value of options granted during the year was $10.35
per share, $15.21 per share and $8.68 per share for fiscal years 1998, 1997 and
1996, respectively.
 
                                      F-28
<PAGE>   151
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
The pro forma net income and earnings per share listed above includes expense
related to the Company's 1995 Employee Stock Purchase Plan. The fair value of
grants under the employee stock purchase plan is estimated on the grant date
using the Black-Scholes model with the following weighted average assumptions
for grants made in fiscal years 1998, 1997 and 1996:
 
<TABLE>
<CAPTION>
                                            1998          1997          1996
                                         ----------    ----------    ----------
<S>                                      <C>           <C>           <C>
Dividend yield.........................        None          None          None
Expected volatility....................          61%           56%           56%
Risk-free interest rate................        5.32%         5.41%         5.33%
Expected lives.........................    1/2 year      1/2 year      1/2 year
</TABLE>
 
The weighted average fair value of purchase rights granted during the year was
$7.06 per share, $6.48 per share and $3.30 per share for fiscal years 1998, 1997
and 1996, respectively.
 
(12) EMPLOYEE STOCK PURCHASE PLAN
 
The Company's 1995 Employee Stock Purchase Plan qualifies under Section 423 of
the Internal Revenue Code and the Company has reserved 500,000 shares of common
stock for issuance under the plan. The plan provides that eligible employees may
purchase stock at 85% of its fair value on specified dates. Under the plan, the
Company sold 89,751, 73,703, and -0- shares in fiscal years 1998, 1997, and
1996, respectively.
 
(13) BUSINESS SEGMENT INFORMATION
 
The Company classifies its products into two core business segments: (i)
equipment, parts, and expendables, which is comprised of the Company's
operations in designing, developing, manufacturing, marketing, and servicing
high throughput, precision surface processing systems; and (ii) slurries, which
is comprised of the distribution and sale of materials used in the customers'
manufacturing processes. Information concerning the Company's business segments
in fiscal years 1998, 1997, and 1996 is as follows:
 
<TABLE>
<CAPTION>
                                              1998        1997        1996
                                            --------    --------    --------
<S>                                         <C>         <C>         <C>
Revenue:
  Sales to unaffiliated customers:
     Equipment, parts, and expendables....  $147,444    $134,658    $ 88,050
     Slurries.............................    28,803      26,336      25,830
                                            --------    --------    --------
  Total sales to unaffiliated customers...   176,247     160,994     113,880
                                            --------    --------    --------
  Commissions from affiliate -- equipment,
     parts, and expendables...............     9,009      12,430       6,290
                                            --------    --------    --------
Total revenue.............................  $185,256    $173,424     120,170
                                            ========    ========    ========
</TABLE>
 
                                      F-29
<PAGE>   152
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                              1998        1997        1996
                                            --------    --------    --------
<S>                                         <C>         <C>         <C>
Segment operating profit:
  Equipment, parts, and expendables.......  $  5,697    $ 24,328      14,585
  Slurries................................     1,786       2,363         572
                                            --------    --------    --------
Total segment operating profit............     7,483      26,691      15,157
                                            --------    --------    --------
General corporate income (expense)........     4,465      (5,300)     (3,583)
Interest expense..........................       (47)       (203)       (691)
                                            --------    --------    --------
Earnings from consolidated companies
  before income taxes.....................  $ 11,901    $ 21,188    $ 10,883
                                            ========    ========    ========
Identifiable assets:
  Equipment, parts, and expendables.......  $132,293    $ 87,357    $ 62,177
  Slurries................................     9,427       8,460       8,836
  Investments in affiliates...............    24,299      23,956      20,450
  Corporate assets........................   163,746      86,727      16,521
                                            --------    --------    --------
Total identifiable assets.................  $329,765    $206,500    $107,984
                                            ========    ========    ========
Capital expenditures:
  Equipment, parts, and expendables.......  $ 20,215    $ 15,162    $  5,197
  Slurries................................        99          94          35
  Corporate...............................    11,757       2,175       2,889
                                            --------    --------    --------
Total capital expenditures................  $ 32,071    $ 17,431    $  8,121
                                            ========    ========    ========
Depreciation expense:
  Equipment, parts, and expendables.......  $  3,734    $  2,467    $  1,044
  Slurries................................        69          31          29
  Corporate...............................       591         297          99
                                            --------    --------    --------
Total depreciation expense................  $  4,394    $  2,795    $  1,172
                                            ========    ========    ========
</TABLE>
 
Intersegment sales are not material. Segment operating profit represents total
revenue less cost of sales and operating expenses, and excludes equity in net
earnings of affiliates, general corporate expenses, interest income and expense,
and income taxes. Segment identifiable assets are those assets employed in each
segment's operation, including an allocated value. Corporate assets consist
primarily of cash and cash equivalents, investments, and other assets not
employed in production.
 
                                      F-30
<PAGE>   153
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
Information regarding the Company's operations in the United States and
internationally is presented below:
 
<TABLE>
<CAPTION>
                                              1998        1997        1996
                                            --------    --------    --------
<S>                                         <C>         <C>         <C>
Net sales:
  United States...........................  $166,855    $152,216    $103,698
  Europe..................................    10,966       9,856      10,855
  Intercompany sales......................    (1,574)     (1,078)       (673)
                                            --------    --------    --------
Consolidated net sales....................  $176,247    $160,994    $113,880
                                            ========    ========    ========
Operating profit:
  United States...........................  $  3,791    $ 20,736      10,184
  Europe..................................     2,059         780         917
  Eliminations............................        94         (30)        (10)
                                            --------    --------    --------
Operating profit..........................  $  5,944    $ 21,486    $ 11,091
                                            ========    ========    ========
  Identifiable assets:
  United States...........................  $132,468    $ 88,762      66,059
  Europe..................................     9,222       7,055       4,954
  Corporate...............................   188,075     110,683      36,971
                                            --------    --------    --------
Consolidated identifiable assets..........  $329,765    $206,500    $107,984
                                            ========    ========    ========
Export sales:
  Taiwan..................................  $ 15,254    $ 12,903    $  3,800
  England.................................     7,524          --          --
  Germany.................................     1,977       9,478       6,960
  Malaysia................................     1,653       7,854       1,806
  Other...................................     3,946       3,474         678
                                            --------    --------    --------
                                            $ 30,354    $ 33,709    $ 13,244
                                            ========    ========    ========
</TABLE>
 
                                      F-31
<PAGE>   154
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
Following is a summary of unaudited quarterly information:
 
<TABLE>
<CAPTION>
                                     FIRST     SECOND      THIRD     FOURTH
                                    QUARTER    QUARTER    QUARTER    QUARTER
                                    -------    -------    -------    -------
<S>                                 <C>        <C>        <C>        <C>
Year ended May 31, 1997:
 
  Total revenue...................  $39,728    $39,119    $45,280    $49,297
                                    =======    =======    =======    =======
  Gross margin....................  $13,946    $15,027    $19,689    $21,261
                                    =======    =======    =======    =======
  Net earnings....................  $ 4,038    $ 4,783    $ 4,909    $ 6,489
                                    =======    =======    =======    =======
  Basic earnings per share........  $  0.38    $  0.45    $  0.45    $  0.49
                                    =======    =======    =======    =======
  Diluted earnings per share......  $  0.36    $  0.42    $  0.42    $  0.46
                                    =======    =======    =======    =======
Year ended May 31, 1998:
 
  Total revenue...................  $53,847    $56,528    $48,380    $26,501
                                    =======    =======    =======    =======
  Gross margin....................  $23,016    $24,759    $20,039    $ 7,691
                                    =======    =======    =======    =======
  Net earnings (loss).............  $ 5,557    $ 7,620    $ 5,143    $(5,457)
                                    =======    =======    =======    =======
  Basic earnings (loss) per
     share........................  $  0.41    $  0.52    $  0.32    $ (0.34)
                                    =======    =======    =======    =======
  Diluted earnings (loss) per
     share........................  $  0.39    $  0.49    $  0.31    $ (0.34)
                                    =======    =======    =======    =======
</TABLE>
 
(15) OFFERINGS OF COMMON STOCK
 
In October 1995, the Company completed its initial public offering of common
stock. The Company issued 2,928 shares of common stock and received proceeds of
$28,284, net of underwriters' discounts and commissions and offering expenses.
 
In February 1997, the Company completed an additional public offering of common
stock. The Company issued 2,500 shares of common stock and received proceeds of
$77,673, net of underwriters' discounts and commissions and offering expenses.
 
In October 1997, the Company completed a public offering of common stock. The
Company issued 2,327 shares of common stock and received proceeds of $116,704,
net of underwriters' discounts and commissions and offering expenses.
 
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The Company's financial instruments at May 31, 1998 and 1997 include cash
equivalents, short-term investments, trade receivables, trade payables, foreign
exchange contracts, and long-term debt. The carrying value of cash equivalents,
short-term investments, trade receivables, and trade payables approximates fair
value because of the short maturity of these instruments. Fair values relating
to foreign currency contracts (used for hedging purposes) reflect the estimated
net amounts that the Company would receive or pay to terminate the contracts at
the reporting date based on quoted market prices of comparable contracts and are
not material at May 31, 1998 and 1997. The fair value of the Company's long-term
debt is not materially different from its financial statement carrying value.
The
 
                                      F-32
<PAGE>   155
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
fair value of the Company's long-term debt is estimated based on current rates
offered to the Company for debt of the same remaining maturities.
 
(17) OTHER INCOME (EXPENSE)
 
Other income (expense) consisted of the following for fiscal years 1998, 1997,
and 1996:
 
<TABLE>
<CAPTION>
                                           1998      1997     1996
                                          ------    ------    -----
<S>                                       <C>       <C>       <C>
Net gain on sales of assets.............  $   42    $   32    $  10
Expenses of canceled public offering....      --      (493)      --
Interest income.........................   5,687     1,079      454
Interest expense........................     (47)     (203)    (691)
Miscellaneous, net......................     275      (713)      19
                                          ------    ------    -----
                                          $5,957    $ (298)   $(208)
                                          ======    ======    =====
</TABLE>
 
                                      F-33
<PAGE>   156
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   JUNE 30,
                                                                  1998         1998
                                                              ------------   ---------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................   $   7,866     $  14,098
  Short term investments....................................      59,646        70,032
  Accounts receivable.......................................      30,308        43,837
  Inventories...............................................      69,192        67,049
  Prepaid expenses..........................................       1,753         2,686
                                                               ---------     ---------
    Total current assets....................................     168,765       197,702
                                                               ---------     ---------
Property, plant and equipment, net..........................      31,061        34,883
Intangible assets, net......................................       7,950         8,820
Other assets................................................       4,076         4,483
                                                               ---------     ---------
                                                               $ 211,852     $ 245,888
                                                               =========     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................   $   1,260     $   1,555
  Accounts payable..........................................       5,320        10,443
  Accrued liabilities.......................................      17,638        21,528
                                                               ---------     ---------
    Total current liabilities...............................      24,218        33,526
Long-term debt, less current portion........................     116,650       117,078
                                                               ---------     ---------
    Total liabilities.......................................     140,868       150,604
                                                               ---------     ---------
Stockholders' equity:
Preferred stock, $.01 par value per share. Nonvoting,
  authorized 2,000,000 shares:
  Series B-1 cumulative preferred stock. Authorized 21,478
    shares, issued and outstanding 14,408 shares at June 30,
    1998 and 7,204 shares at December 31, 1998. Liquidation
    preference of $671......................................          --            --
  Series B-2 cumulative preferred stock. Authorized 21,478
    shares, issued and outstanding 19,544 shares at June 30,
    1998 and December 31, 1998. Liquidation preference of
    $1,820..................................................          --            --
  Series B-3 cumulative preferred stock. Authorized 21,478
    shares, issued and outstanding 9,898 shares at June 30,
    1998 and December 31, 1998. Liquidation preference of
    $922....................................................          --            --
  Series D preferred stock, $.01 par value per share.
    Authorized 50,000 shares, 1,000 votes per share; no
    shares issued and outstanding...........................          --            --
Common stock, $.01 par value per share. Authorized
  50,000,000 shares; one vote per share; issued and
  outstanding. 17,530,368 shares at June 30, 1998 and
  17,906,000 at December 31, 1998...........................         178           175
Class A common stock, $.01 par value per share. Authorized
  3,500,000 shares, four votes per share; issued and
  outstanding 223,675 shares at June 30, 1998 and 7,186
  shares at December 31, 1998...............................          --             2
Additional paid-in capital..................................     196,594       196,242
Accumulated deficit.........................................    (124,673)     (100,355)
Foreign currency translation adjustment.....................      (1,115)         (780)
                                                               ---------     ---------
    Total stockholders' equity..............................      70,984        95,284
                                                               ---------     ---------
                                                               $ 211,852     $ 245,888
                                                               =========     =========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                      F-34
<PAGE>   157
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED    SIX MONTHS ENDED
                                                DECEMBER 31,         DECEMBER 31,
                                             ------------------   -------------------
                                               1998      1997       1998       1997
                                             --------   -------   --------   --------
<S>                                          <C>        <C>       <C>        <C>
Revenue....................................  $ 17,704   $57,879   $ 42,658   $109,153
Cost of goods sold.........................    15,241    31,582     34,730     60,660
                                             --------   -------   --------   --------
  Gross margin.............................     2,463    26,297      7,928     48,493
                                             --------   -------   --------   --------
Operating expenses:
  Research and development.................     8,508     8,341     16,808     15,050
  Selling, general and administrative......     6,905     9,780     15,149     17,568
                                             --------   -------   --------   --------
     Total operating expenses..............    15,413    18,121     31,957     32,618
                                             --------   -------   --------   --------
  Operating income (loss)..................   (12,950)    8,176    (24,029)    15,875
Other income (expense):
  Interest income..........................       983     1,584      1,934      1,787
  Interest expense.........................    (2,013)   (1,953)    (4,039)    (2,426)
  Other, net...............................       (15)        2      2,041         17
                                             --------   -------   --------   --------
     Total other income (expense)..........    (1,045)     (367)       (64)      (622)
                                             --------   -------   --------   --------
  Income (loss) from continuing operations
     before income taxes...................   (13,995)    7,809    (24,093)    15,253
Income tax expense.........................        --     2,858         --      5,611
                                             --------   -------   --------   --------
  Net income (loss) from continuing
     operations............................   (13,995)    4,951    (24,093)     9,642
Discontinued operations --
  Loss on disposal or IPEC Clean, Inc., net
     of taxes..............................        --    (6,664)        --     (6,664)
                                             --------   -------   --------   --------
  Net income (loss)........................   (13,995)   (1,713)   (24,093)     2,978
Cumulative dividends on preferred
  stock....................................       (51)      (61)      (102)      (122)
                                             --------   -------   --------   --------
  Net income (loss) attributable to common
     shareholders..........................  $(14,046)  $(1,774)  $(24,195)  $  2,856
                                             ========   =======   ========   ========
Net income (loss) from continuing
  operations per common share:
  Basic....................................  $   (.79)  $   .28   $  (1.36)  $    .54
                                             ========   =======   ========   ========
  Diluted..................................      (.79)      .26      (1.36)       .50
                                             ========   =======   ========   ========
Income (loss) per common share:
  Basic....................................  $   (.79)  $  (.10)  $  (1.36)  $    .16
                                             ========   =======   ========   ========
  Diluted..................................      (.79)     (.10)     (1.36)       .15
                                             ========   =======   ========   ========
Shares used in basic per share
  calculation..............................    17,880    17,599     17,850     17,526
                                             ========   =======   ========   ========
Shares used in diluted per share
  calculation..............................    17,880    19,208     17,850     19,351
                                             ========   =======   ========   ========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                      F-35
<PAGE>   158
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
      CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                  SERIES B                                  CLASS A                                     FOREIGN
                               PREFERRED STOCK      COMMON STOCK         COMMON STOCK      ADDITIONAL                  CURRENCY
                               ---------------   -------------------   -----------------    PAID-IN     ACCUMULATED   TRANSLATION
                               SHARES   AMOUNT     SHARES     AMOUNT    SHARES    AMOUNT    CAPITAL       DEFICIT     ADJUSTMENT
                               ------   ------   ----------   ------   --------   ------   ----------   -----------   -----------
<S>                            <C>      <C>      <C>          <C>      <C>        <C>      <C>          <C>           <C>
Balance -- June 30, 1998.....  43,850    $--     17,530,368    $175     223,675    $ 2      $196,242     $(100,355)     $  (780)
Net loss.....................     --      --             --      --          --     --            --       (24,093)          --
Conversion of Series B
  Preferred Stock............  (7,204)    --         90,338       1          --     --            (1)           --           --
Conversion of Class A Common
  Stock......................     --      --        216,489       2    (216,489)    (2)           --            --           --
Exercise of Stock Options....     --      --         13,436      --          --     --           120            --           --
Employee Stock Purchase
  Plan.......................     --      --         49,545      --          --     --            --            --           --
Unearned compensation, net...     --      --          5,824      --          --     --           233            --           --
Cumulative translation
  adjustment.................     --      --             --      --          --     --            --            --         (335)
Preferred stock dividends....     --      --             --      --          --     --            --          (225)          --
                               ------    ---     ----------    ----    --------    ---      --------     ---------      -------
Balance -- December 31,
  1998.......................  36,646    $--     17,906,000    $178       7,186    $--      $196,594     $(124,673)     $(1,115)
                               ======    ===     ==========    ====    ========    ===      ========     =========      =======
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                      F-36
<PAGE>   159
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                             SIX MONTHS ENDED
                                                               DECEMBER 31,
                                                           --------------------
                                                             1998        1997
Cash flows from operating activities:                      --------    --------
<S>                                                        <C>         <C>
Net income (loss)........................................  $(24,093)   $  2,978
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Loss on disposal of IPEC Clean, Inc., net of taxes.....        --       6,664
  Depreciation and amortization..........................     6,531       5,149
  Deferred tax expense...................................        --       5,705
Changes in assets and liabilities:
  (Increase) decrease in accounts receivable.............    13,529     (22,315)
  Increase in inventories................................      (999)    (10,262)
  (Increase) decrease in prepaid expenses and other
     assets..............................................     1,340      (1,774)
  (Increase) decrease in accounts payable................    (5,123)        589
  (Increase) decrease in accrued liabilities.............    (3,890)      1,063
  Increase in net assets of discontinued operations......        --        (802)
                                                           --------    --------
     Net cash used in operating activities...............   (12,705)    (13,005)
                                                           --------    --------
Cash flows from investing activities:
  Purchases of property and equipment, net...............    (2,983)     (8,693)
  Proceeds from the maturities of short-term
     investments.........................................    10,386          --
                                                           --------    --------
     Net cash provided by (used in) investing
       activities........................................     7,403      (8,693)
                                                           --------    --------
Cash flows from financing activities:
  Proceeds from long-term debt...........................        --     111,181
  Repayment of long-term debt and capital leases.........      (723)    (26,501)
  Repayment of notes payable.............................        --        (124)
  Payment of preferred stock dividends...................      (225)       (123)
  Net proceeds from issuance of common stock and
     warrants............................................       353       3,798
                                                           --------    --------
     Net cash provided by (used in) financing
       activities........................................      (595)     88,231
                                                           --------    --------
Effect of exchange rate changes on cash..................      (335)     (1,036)
                                                           --------    --------
Net increase (decrease) in cash and cash equivalents.....    (6,232)     65,497
Cash and cash equivalents, beginning of period...........    14,098      40,656
                                                           --------    --------
Cash and cash equivalents, end of period.................  $  7,866    $106,153
                                                           ========    ========
Supplemental disclosure of cash flow information:
     Cash paid for interest during the period............  $  3,742    $    421
                                                           ========    ========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                      F-37
<PAGE>   160
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
BASIS OF PREPARATION:
 
The accompanying condensed consolidated financial statements as of December 31,
1998 and for the three month and six month periods ended December 31, 1998 are
unaudited; however, in the opinion of the management of Integrated Process
Equipment Corp. ("IPEC") and subsidiaries (the "Company"), such statements
include all adjustments (consisting solely of normal recurring accruals)
necessary for the fair statement of the information presented therein. The
condensed consolidated balance sheet as of June 30, 1998 was derived from the
audited financial statements at such date.
 
Pursuant to accounting requirements of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, the accompanying condensed
consolidated financial statements and notes do not include all disclosures
required by generally accepted accounting principles for complete financial
statements. Accordingly, these statements should be read in conjunction with the
Company's annual financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended June 30, 1998.
 
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
 
USE OF ESTIMATES
 
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
 
ORGANIZATION:
 
IPEC is a Delaware corporation organized in December 1991 and is the successor
by merger to a California corporation of the same name that was incorporated in
October 1989. The Company is primarily engaged in designing, manufacturing,
marketing and servicing equipment for the semiconductor manufacturing industry.
 
The Company is organized into two divisions. IPEC Planar manufactures CMP
equipment and CMP-related products for use principally in manufacturing of
semiconductor devices. IPEC Precision manufactures advanced plasma-assisted
chemical etching equipment and metrology equipment for use primarily in
manufacturing of silicon wafers and semiconductor devices.
 
On November 19, 1998, the Company and SpeedFam International, Inc. ("SpeedFam")
entered into an Agreement and Plan of Merger. Upon consummation of the merger,
holders of IPEC common stock and Class A Common Stock will receive 0.71 of a
share of SpeedFam common stock for each share of IPEC stock they own. Holders of
IPEC Series B-1, B-2 and B-3 preferred stock will receive 8.90, 8.10 and 10.65
shares, respectively, of SpeedFam common stock for each share they own.
 
                                      F-38
<PAGE>   161
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED) -- (CONTINUED)
 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
INCOME (LOSS) PER SHARE OF COMMON STOCK:
 
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). The Statement replaces primary earnings per share ("EPS") with basic EPS
and requires dual presentation of basic and diluted EPS. The Statement is
effective for both interim and annual periods ending after December 15, 1997.
All prior-period EPS data has been restated to conform to SFAS 128. Basic EPS
excludes dilution and is computed by dividing income attributable to common
stockholders or income from continuing operations, by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company. These
securities or other contracts are generally anti-dilutive if a loss is being
reported. Although including those potential common shares in other diluted per
share computations may be dilutive to their comparable basic per share amounts,
no potential common shares shall be included in the computation of any diluted
per share amount when a loss from continuing operations exists, even if the
entity reports net income.
 
The following table reconciles the numerators and denominators of the basic and
diluted EPS computations from continuing operations and net income attributable
to common stockholders for the three month and six month periods ended December
31, 1998 and 1997 (in thousands, except per share data).
 
<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED      SIX MONTHS ENDED
                                         DECEMBER 31,           DECEMBER 31,
                                      -------------------    -------------------
                                        1998       1997        1998       1997
                                      --------    -------    --------    -------
<S>                                   <C>         <C>        <C>         <C>
BASIC EARNINGS (LOSS) FROM
  CONTINUING OPERATIONS PER COMMON
  SHARE:
  Net income (loss) from continuing
     operations.....................  $(13,995)   $ 4,951    $(24,093)   $ 9,642
  Cumulative dividend on preferred
     stock..........................       (51)       (61)       (102)      (122)
                                      --------    -------    --------    -------
  Net income (loss) from continuing
     operations attributable to
     common stockholders............  $(14,046)   $ 4,890    $ 24,195    $ 9,520
                                      ========    =======    ========    =======
  Weighted average number of shares
     outstanding....................    17,880     17,599      17,850     17,526
                                      ========    =======    ========    =======
  Basic earnings (loss) from
     continuing operations per
     share..........................  $  (0.79)   $  0.28    $  (1.36)   $  0.54
                                      ========    =======    ========    =======
</TABLE>
 
                                      F-39
<PAGE>   162
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED) -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED      SIX MONTHS ENDED
                                         DECEMBER 31,           DECEMBER 31,
                                      -------------------    -------------------
                                        1998       1997        1998       1997
                                      --------    -------    --------    -------
<S>                                   <C>         <C>        <C>         <C>
DILUTED EARNINGS (LOSS) FROM
  CONTINUING OPERATIONS PER COMMON
  SHARE:
  Net income (loss) from continuing
     operations attributable to
     common stockholders............  $(14,046)   $ 4,890    $(24,195)   $ 9,520
  Add back: Cumulative dividend on
     preferred stock................       N/A         61         N/A        122
                                      --------    -------    --------    -------
                                      $(14,046)   $ 4,951    $(24,195)   $ 9,642
                                      --------    -------    --------    -------
  Weighted average number of shares
     outstanding....................    17,880     17,599      17,850     17,526
  Add: Shares of Series B
     Convertible Preferred Stock
     assuming conversion............       N/A        554         N/A        554
  Add: Stock options and warrants...       N/A      1,055         N/A      1,271
                                      --------    -------    --------    -------
  Weighted average number of shares
     used to compute diluted
     earnings (loss) per share......    17,880     19,208      17,850     19,351
                                      ========    =======    ========    =======
  Diluted earnings (loss) per
     share..........................  $  (0.79)   $  0.26    $  (1.36)   $   .50
                                      ========    =======    ========    =======
BASIC NET INCOME (LOSS) PER COMMON
  SHARE:
  Net income (loss) attributable to
     common stockholders............  $(14,046)   $(1,744)   $(24,195)   $ 2,856
                                      ========    =======    ========    =======
  Weighted average number of shares
     outstanding....................    17,880     17,599      17,850     17,526
                                      ========    =======    ========    =======
  Basic net income (loss) per common
     share..........................  $  (0.79)   $ (0.10)   $  (1.36)   $  0.16
                                      ========    =======    ========    =======
</TABLE>
 
                                      F-40
<PAGE>   163
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED) -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED      SIX MONTHS ENDED
                                         DECEMBER 31,           DECEMBER 31,
                                      -------------------    -------------------
                                        1998       1997        1998       1997
                                      --------    -------    --------    -------
<S>                                   <C>         <C>        <C>         <C>
DILUTED NET INCOME (LOSS) PER COMMON
  SHARE:
  Net income (loss).................  $(14,046)   $(1,774)   $(24,195)   $ 2,856
  Add back: Cumulative dividend on
     preferred shares...............       N/A        N/A         N/A        122
                                      --------    -------    --------    -------
  Net income (loss) used in
     computation....................  $(14,046)   $(1,774)   $(24,195)   $ 2,978
                                      ========    =======    ========    =======
  Weighted average number of shares
     outstanding....................    17,880     17,599      17,850     17,526
  Add: Shares of Series B
     Convertible Preferred Stock
     assuming conversion............       N/A        N/A         N/A        554
  Add: Stock options and warrants...       N/A        N/A         N/A      1,271
                                      --------    -------    --------    -------
  Weighted average number of shares
     used to compute diluted
     earnings (loss) per share......    17,880     19,208      17,850     19,351
                                      ========    =======    ========    =======
  Diluted earnings (loss) per
     share..........................  $  (0.79)   $ (0.10)   $  (1.36)   $  0.15
                                      ========    =======    ========    =======
</TABLE>
 
INVENTORIES:
 
Inventories are summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,         JUNE 30,
                                                           1998               1998
                                                     -----------------    -------------
                                                        (UNAUDITED)
<S>                                                  <C>                  <C>
  Raw materials....................................       $55,729            $48,422
  Work in process..................................        20,211             19,880
  Finished goods...................................           268              5,103
                                                          -------            -------
                                                           76,208             73,405
  Less inventory obsolescence reserve..............        (7,016)            (6,356)
                                                          -------            -------
                                                          $69,192            $67,049
                                                          =======            =======
</TABLE>
 
LONG-TERM DEBT:
 
The Company completed a private placement in the first quarter of fiscal 1998 of
$115.0 million 6.25% Convertible Subordinated Notes due in 2004. Interest is
payable semi-annually in March and September. The Notes are subordinated to all
existing and future senior indebtedness and effectively subordinated to all
liabilities, including trade payables
 
                                      F-41
<PAGE>   164
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED) -- (CONTINUED)
 
and lease obligations of the Company and its subsidiaries. The Notes can be
converted after ninety days from the original issuance into the Company's common
stock at a conversion price of $39.00 per share. The notes are not redeemable by
the Company prior to September 20, 2000.
 
Proceeds have been utilized primarily for working capital purposes and to repay
the balance of the Company's revolving line of credit. Remaining portions of
proceeds may be used to expand the Company's sales and service operations in
Asia, to expand IPEC Precision's facilities and for general corporate purposes
including working capital and research and development. Pending such uses, the
Company intends to invest the net proceeds in interest-bearing, investment grade
securities. Debt issuance costs of $4.0 million incurred in connection with the
private placement have been included in other assets and are being amortized
over seven years.
 
COMPREHENSIVE INCOME:
 
Effective July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" which establishes standards
to report and display comprehensive income and its components in a full set of
general purpose financial statements. The Company's comprehensive income was as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED      SIX MONTHS ENDED
                                             DECEMBER 31,           DECEMBER 31,
                                          -------------------    -------------------
                                            1998       1997        1998       1997
                                          --------    -------    --------    -------
<S>                                       <C>         <C>        <C>         <C>
Net income, (loss)......................  $(13,995)   $(1,713)   $(24,093)   $ 2,978
Other comprehensive income:
  Foreign currency translation
     adjustments........................      (310)    (1,028)       (335)    (1,036)
                                          --------    -------    --------    -------
Comprehensive income (loss).............  $(14,305)   $(2,741)   $(24,428)   $ 1,942
                                          ========    =======    ========    =======
</TABLE>
 
                                      F-42
<PAGE>   165
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders
Integrated Process Equipment Corp.:
 
We have audited the accompanying consolidated balance sheets of Integrated
Process Equipment Corp. and subsidiaries as of June 30, 1998 and 1997 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended June 30,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Integrated Process
Equipment Corp. and subsidiaries as of June 30, 1998 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1998 in conformity with generally accepted accounting
principles.
 
                                              KPMG LLP
 
Phoenix, Arizona
August 4, 1998
 
                                      F-43
<PAGE>   166
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                              ---------------------
                                                                1998         1997
                                                              ---------    --------
<S>                                                           <C>          <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents.................................  $  14,098    $ 40,656
  Short-term investments....................................     70,032          --
  Accounts receivable.......................................     43,837      45,590
  Inventories...............................................     67,049      44,729
  Prepaid expenses..........................................      2,686         968
  Net assets of discontinued operations.....................         --       2,463
  Deferred income taxes.....................................         --      11,425
                                                              ---------    --------
          Total current assets..............................    197,702     145,831
                                                              ---------    --------
Property, plant and equipment, net..........................     34,883      25,462
Intangible assets, net......................................      8,820      11,798
Deferred income taxes.......................................         --      13,381
Other assets................................................      4,483       1,593
                                                              ---------    --------
                                                              $ 245,888    $198,065
                                                              =========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable.............................................  $      --    $    124
  Current portion of long-term debt.........................      1,555      10,599
  Accounts payable..........................................     10,443      17,445
  Accrued liabilities.......................................     21,528      18,567
                                                              ---------    --------
          Total current liabilities.........................     33,526      46,735
Long-term debt, less current portion........................    117,078      19,546
                                                              ---------    --------
          Total liabilities.................................    150,604      66,281
                                                              ---------    --------
Commitments and contingencies
Stockholders' equity:
  Series B preferred stock, $.01 par value per share.
     Nonvoting Authorized, 2,000,000 shares:
     Series B-1 cumulative preferred stock. Authorized
      21,478 shares, issued and outstanding 14,408 shares at
      June 30, 1998 and 14,543 shares at June 30, 1997.
      Liquidation preference of $1,342 as of June 30,
      1998..................................................         --          --
     Series B-2 cumulative preferred stock. Authorized
      21,478 shares, issued and outstanding 19,544 shares at
      June 30, 1998 and 1997. Liquidation preference of
      $1,820 as of June 30, 1998............................         --          --
     Series B-3 cumulative preferred stock. Authorized
      21,478 shares, issued and outstanding 9,898 shares at
      June 30, 1998 and 1997. Liquidation preference of $922
      as of June 30, 1998...................................         --          --
  Series D preferred stock, $.01 par value per share.
     Authorized 50,000 shares, 1,000 votes per share; no
     shares issued and outstanding..........................         --          --
  Common stock, $.01 par value per share. One vote per
     share. Authorized 50,000,000 shares, issued and
     outstanding 17,530,368 shares at June 30, 1998 and
     16,889,071 shares at June 30, 1997.....................        175         169
  Class A common stock, $.01 par value per share. Four votes
     per share Authorized 3,500,000 shares, issued and
     outstanding 223,675 shares at June 30, 1998 and 453,057
     shares at June 30, 1997................................          2           5
  Additional paid-in capital................................    196,242     189,422
  Accumulated deficit.......................................   (100,355)    (57,850)
  Foreign currency translation adjustment...................       (780)         38
                                                              ---------    --------
          Total stockholders' equity........................     95,284     131,784
                                                              ---------    --------
                                                              $ 245,888    $198,065
                                                              =========    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-44
<PAGE>   167
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED JUNE 30,
                                                --------------------------------
                                                  1998        1997        1996
                                                --------    --------    --------
<S>                                             <C>         <C>         <C>
Revenue.......................................  $189,012    $144,688    $148,690
Cost of goods sold............................   121,581      82,842      85,061
                                                --------    --------    --------
  Gross margin................................    67,431      61,846      63,629
Operating expenses:
  Research and development....................    33,501      23,951      15,877
  Selling, general and administrative.........    37,036      27,563      26,653
  Purchased research and development..........        --          --      36,961
  Program discontinuance charge...............        --      17,601          --
                                                --------    --------    --------
          Total operating expenses............    70,537      69,115      79,491
                                                --------    --------    --------
  Operating loss..............................    (3,106)     (7,269)    (15,862)
Other income (expense):
  Interest income.............................     4,402         570       1,680
  Interest expense............................    (6,761)     (1,707)     (2,031)
  Other, net..................................       (88)        273         451
                                                --------    --------    --------
          Total other income (expense)........    (2,447)       (864)        100
                                                --------    --------    --------
  Loss from continuing operations before
     income taxes.............................    (5,553)     (8,133)    (15,762)
Income tax expense (benefit)..................    26,128      (2,951)     (6,399)
                                                --------    --------    --------
  Loss from continuing operations.............   (31,681)     (5,182)     (9,363)
Discontinued operations:
  Loss from operations of IPEC Clean, net of
     taxes....................................        --      (3,614)     (1,294)
  Loss on disposal of IPEC Clean, net of
     taxes....................................   (10,578)    (24,950)         --
                                                --------    --------    --------
  Loss from discontinued operations...........   (10,578)    (28,564)     (1,294)
                                                --------    --------    --------
  Net loss....................................   (42,259)    (33,746)    (10,657)
Cumulative dividend on preferred stock........      (244)       (284)       (579)
                                                --------    --------    --------
  Net loss attributable to common
     stockholders.............................  $(42,503)   $(34,030)   $(11,236)
                                                ========    ========    ========
Basic and diluted loss from continuing
  operations per common share.................  $  (1.81)   $  (0.35)   $  (0.69)
                                                ========    ========    ========
Basic and diluted net loss per common share...  $  (2.41)   $  (2.18)   $  (0.78)
                                                ========    ========    ========
Weighted average shares used in per share
  calculation.................................    17,603      15,623      14,434
                                                ========    ========    ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-45
<PAGE>   168
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED JUNE 30, 1998, 1997 AND 1996
                                       -------------------------------------------------------------------------
                                                                                       FOREIGN
                                                CLASS A   ADDITIONAL                  CURRENCY         TOTAL
                                       COMMON   COMMON     PAID-IN     ACCUMULATED   TRANSLATION   STOCKHOLDERS'
                                       STOCK     STOCK     CAPITAL       DEFICIT     ADJUSTMENT       EQUITY
                                       ------   -------   ----------   -----------   -----------   -------------
<S>                                    <C>      <C>       <C>          <C>           <C>           <C>
Balance at June 30, 1995.............   $135      $ 5      $142,422     $ (12,450)      $   8        $130,120
Issuance of Series B-3 preferred
  stock..............................     --       --         2,000            --          --           2,000
Exercise of warrants and unit
  purchase options...................      3       --         2,339            --          --           2,342
Acquisition of remaining interests in
  Athens Corp........................      2       --           204            --          --             206
Conversion of convertible
  debenture..........................     --       --           110            --          --             110
Exercise of stock options, net of tax
  benefits and employee stock plan
  purchases..........................      2       --         4,555            --          --           4,557
Issuance of warrants.................     --       --           100            --          --             100
Net loss.............................     --       --            --       (10,657)         --         (10,657)
Preferred stock dividends paid.......     --       --            --          (439)         --            (439)
Foreign currency translation
  adjustment.........................     --       --            --            --          (2)             (2)
                                        ----      ---      --------     ---------       -----        --------
Balance at June 30, 1996.............    142        5       151,730       (23,546)          6         128,337
Retirement of Series B-1 preferred
  stock..............................     --       --          (500)           --          --            (500)
Conversion of Series B preferred
  stock to common stock..............      2       --            (2)           --          --              --
Issuance of Series C preferred stock
  (less offering costs of $1,600) and
  conversion of Series C preferred
  stock to common stock..............     13       --        23,387            --          --          23,400
Issuance of warrants.................     --       --         1,059            --          --           1,059
Exercise of stock options, net of tax
  benefits and employee stock plan
  purchases..........................     10       --        13,403            --          --          13,413
Exercise of warrants.................      2       --           345            --          --             347
Net loss.............................     --       --            --       (33,746)         --         (33,746)
Preferred stock dividends paid.......     --       --            --          (558)         --            (558)
Foreign currency translation
  adjustment.........................     --       --            --            --          32              32
                                        ----      ---      --------     ---------       -----        --------
Balance at June 30, 1997.............    169        5       189,422       (57,850)         38         131,784
Conversion of Class A common stock to
  common stock.......................      3       (3)           --            --          --              --
Exercise of stock options, net of tax
  benefits and employee stock plan
  purchases..........................      3       --         7,716            --          --           7,719
Net loss.............................     --       --            --       (42,259)         --         (42,259)
Unearned compensation, net...........     --       --          (896)           --          --            (896)
Preferred stock dividends paid.......     --       --            --          (246)         --            (246)
Foreign currency translation
  adjustment.........................     --       --            --            --        (818)           (818)
                                        ----      ---      --------     ---------       -----        --------
Balance at June 30, 1998.............   $175      $ 2      $196,242     $(100,355)      $(780)       $ 95,284
                                        ====      ===      ========     =========       =====        ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-46
<PAGE>   169
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED JUNE 30,
                                                            -------------------------------
                                                              1998        1997       1996
                                                            ---------   --------   --------
<S>                                                         <C>         <C>        <C>
Cash flows from operating activities:
  Net loss................................................  $ (42,259)  $(33,746)  $(10,657)
  Adjustments to reconcile net loss to net cash provided
     by (used in) operating activities:
     Depreciation and amortization........................     11,021      9,496      6,328
     Deferred taxes.......................................     26,222    (10,527)   (15,855)
     Loss on disposal of IPEC Clean, net of taxes.........     10,578     24,950         --
     Program discontinuance charge........................         --     17,601         --
     Purchased research and development...................         --         --     36,961
     Cost of warrants issued..............................         --      1,059         --
     Changes in operating assets and liabilities, net of
       effects of acquisitions:
       Accounts receivable................................      2,607    (11,584)   (10,432)
       Inventories........................................    (22,320)   (30,293)       521
       Prepaid expenses and other assets..................       (789)      (140)      (487)
       Accounts payable...................................     (7,057)     5,484     (7,054)
       Accrued liabilities................................     (4,848)     1,624      3,062
       Net assets of discontinued operations..............       (802)     2,306      7,349
                                                            ---------   --------   --------
          Net cash provided by (used in) operating
             activities...................................    (27,647)   (23,770)     9,736
                                                            ---------   --------   --------
Cash flows from investing activities:
  Purchase of property, plant and equipment...............    (16,994)    (3,703)   (36,571)
  Proceeds from sale of property, plant and equipment.....         --     20,417        752
  Purchases of short-term investments.....................   (545,536)        --         --
  Proceeds from the maturities of short-term
     investments..........................................    475,504         --         --
  Purchase of subsidiaries, net of cash acquired..........         --         --    (23,641)
                                                            ---------   --------   --------
          Net cash provided by (used in) investing
             activities...................................    (87,026)    16,714    (59,460)
                                                            ---------   --------   --------
Cash flows from financing activities:
  Proceeds from long-term debt............................    111,181     15,214     35,787
  Repayment of notes payable..............................       (124)    (1,356)   (24,000)
  Net proceeds from issuance of common stock and
     warrants.............................................      5,407     11,701      5,544
  Payment of preferred stock dividends....................       (246)      (558)      (439)
  Repayment of long-term debt and capital leases..........    (27,285)   (12,046)   (21,631)
  Net proceeds from issuance of Series C preferred
     stock................................................         --     23,400         --
                                                            ---------   --------   --------
          Net cash provided by (used in) financing
             activities...................................     88,933     36,355     (4,739)
                                                            ---------   --------   --------
Effect of exchange rate changes on cash...................       (818)        32         (2)
                                                            ---------   --------   --------
          Net increase (decrease) in cash and cash
             equivalents..................................    (26,558)    29,331    (54,465)
Cash and cash equivalents, beginning of year..............     40,656     11,325     65,790
                                                            ---------   --------   --------
Cash and cash equivalents, end of year....................  $  14,098   $ 40,656   $ 11,325
                                                            =========   ========   ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-47
<PAGE>   170
 
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        (IN THOUSANDS, EXCEPT PERCENTAGES, SHARES AND PER SHARE AMOUNTS)
 
(1) ORGANIZATION
 
Integrated Process Equipment Corp. (IPEC) and subsidiaries (the Company) is a
supplier of chemical mechanical planarization (CMP) systems used in the
manufacture of semiconductors and advanced plasma-assisted chemical etching
equipment and metrology equipment for use primarily in manufacturing silicon
wafers and semiconductor devices.
 
ACQUISITIONS
 
IPEC Planar Portland
 
On October 30, 1995, the Company acquired all of the outstanding common stock of
GAARD Automation, Inc. (GAARD), a privately-owned company that developed and
sold an advanced high-throughput CMP system for metal planarization. On January
1, 1997, GAARD was merged into IPEC Planar, Inc., a wholly owned subsidiary of
IPEC. The purchase price consisted of cash of $12 million and notes payable and
long-term debt of $18.9 million. Notes payable of $15 million were subsequently
repaid in fiscal 1996.
 
The purchase price was allocated to the assets acquired (including cash of $1.3
million) and liabilities assumed based on their fair values as follows:
 
<TABLE>
<S>                                             <C>
Purchase price:
  Cash......................................    $12,000
  Notes payable.............................     15,700
  Long-term debt............................      3,223
  Costs of acquisition......................        620
                                                -------
          Total.............................    $31,543
                                                =======
Assets acquired and liabilities assumed:
  Current assets............................    $ 7,958
  Property, plant and equipment.............        128
  Deferred income taxes.....................      1,010
  Purchased research and development........     28,793
  Current liabilities.......................     (6,346)
                                                -------
          Total.............................    $31,543
                                                =======
</TABLE>
 
The purchased research and development was charged to operations upon
acquisition. The acquisition was accounted for as a purchase, and accordingly,
the accompanying consolidated financial statements include the results of GAARD
from the date of acquisition.
 
The purchased research and development included one potential product and was
valued using a discounted cash flow analysis. The valuation did not exceed the
estimated replacement cost to the Company. The product, a CMP tool, was in the
product definition stage at the time of the acquisition, and there were no
future alternative uses for this product. The Company believes that the
technology had no separate economic value and
 
                                      F-48
<PAGE>   171
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the technology was expensed as purchased research and development cost at the
time of acquisition.
 
IPEC Precision
 
On December 29, 1995, the Company's subsidiary IPEC Precision, Inc. acquired
substantially all of the assets constituting the Precision Materials Operation
of Hughes Danbury Optical Systems, Inc. (HDOS). IPEC Precision (formerly HDOS)
was engaged in the design, manufacture, and sale of precision equipment, based
on proprietary plasma-assisted chemical etching and metrology technologies, for
use in the production of advanced semiconductor wafers and devices, and provided
wafer processing services that use such proprietary technology and equipment.
The purchase price consisted of cash of $11.5 million and notes payable of $10.4
million. The notes payable were paid in fiscal 1996 and 1997.
 
The purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values as follows:
 
<TABLE>
<S>                                             <C>
Purchase price:
  Cash........................................  $11,517
  Notes payable...............................   10,356
  Costs of acquisition........................      725
                                                -------
          Total...............................  $22,598
                                                =======
Assets acquired and liabilities assumed:
  Current assets..............................  $   879
  Property, plant and equipment...............    6,190
  Deferred income taxes.......................      400
  Patents.....................................    6,222
  Assembled workforce.........................    1,622
  Purchased research and development..........    8,168
  Current liabilities.........................     (883)
                                                -------
          Total...............................  $22,598
                                                =======
</TABLE>
 
The purchased research and development was charged to operations upon
acquisition. The acquisition was accounted for as a purchase and, accordingly,
the accompanying consolidated financial statements include the results of IPEC
Precision from the date of acquisition.
 
The purchased research and development included four potential products and was
valued using a discounted cash flow analysis. The valuation did not exceed the
estimated replacement cost to the Company. Of the four "in-process" products
acquired, two were in the product definition stage and two products had been
conceptually outlined but had not gone through the product definition stage. The
Company believes that the technology had no separate economic value and the
technology was expensed as purchased research and development cost at the time
of acquisition.
 
                                      F-49
<PAGE>   172
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Pro Forma
 
Pro forma unaudited consolidated operations data from continuing operations
(excluding nonrecurring charges for purchased research and development and
discontinued operations), assuming all acquisitions had taken place on July 1,
1995, is as follows:
 
<TABLE>
<CAPTION>
                                              YEAR ENDED
                                               JUNE 30,
                                                 1996
                                              ----------
<S>                                          <C>
Revenue....................................    $156,839
Net income.................................    $ 13,587
Net income per share.......................    $    .94
</TABLE>
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
PRINCIPLES OF CONSOLIDATION
 
The consolidated financial statements include the accounts of IPEC and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
 
USE OF ESTIMATES
 
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
 
CASH AND CASH EQUIVALENTS
 
All highly liquid securities on deposit with banks, including marketable
securities purchased with original maturities of three months or less at the
date of purchase, are considered to be cash equivalents. As of June 30, 1997,
the Company has classified marketable securities of $10 million with maturities
of less than three months as cash equivalents. The Company intends to hold these
securities to maturity.
 
SHORT-TERM INVESTMENTS
 
Short-term investments have an original maturity of less than eighteen months
and a remaining maturity of one year or less. The Company's short-term
investments are classified as held to maturity and carried at amortized cost as
the Company has the ability and intent to hold these securities until maturity.
 
A decline in the market value of any security below cost that is deemed to be
other than temporary results in a reduction in carrying amount to fair value.
The impairment is charged to earnings and a new carrying value for the security
is established. Premiums and discounts are amortized or accreted over the life
of the related security as an adjustment to yield using the effective interest
method. Dividend and interest income are recognized when earned.
 
                                      F-50
<PAGE>   173
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
CONCENTRATION OF CREDIT RISK
 
The Company sells products and services primarily to semiconductor
manufacturers, and extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to losses
on receivables is principally dependent on each customer's financial condition.
The Company monitors its exposure for credit losses and maintains allowances for
anticipated losses. At June 30, 1998, accounts receivable from the Company's
largest customer was $14 million.
 
INVENTORIES
 
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
 
PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment are stated at cost and are depreciated on the
straight-line method over the estimated useful lives of the assets which range
from three to fifteen years. Equipment recorded under capital leases is stated
at the lower of fair market value or the present value of minimum lease payments
at the inception of the lease. Equipment recorded under capital leases and
leasehold improvements are amortized using the straight-line method over the
shorter of the lease term or the estimated useful lives of the related assets.
 
INTANGIBLE ASSETS
 
Intangible assets have been allocated among various categories based on their
estimated fair value upon acquisition as determined by management or by
independent appraisal. The Company continually evaluates whether events and
circumstances have occurred that indicate the estimated useful life of
intangible assets may warrant revision or that the remaining balance may not be
recoverable. When factors indicate that the asset should be evaluated for
possible impairment, the Company uses an estimate of the related undiscounted
net cash flows generated by the asset over the remaining estimated life of the
asset in measuring whether the asset is recoverable. Material factors which may
alter the useful life of the asset or determine that the balance may not be
recoverable include effects of new technologies, obsolescence, demand,
competition and other economic factors.
 
Goodwill represents the excess cost over the fair value of tangible and
intangible assets acquired and is amortized over 10 years using the
straight-line method. Patents are amortized over 5 to 10 years using the
straight-line method.
 
IMPAIRMENT OF LONG-LIVED ASSETS
 
The Company records impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.
 
WARRANTY EXPENSE
 
The Company warrants its products for a period of one year or longer upon
customer acceptance. Future estimated warranty costs are charged to operations
at the time of sale.
 
                                      F-51
<PAGE>   174
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
REVENUE RECOGNITION
 
   
Sales of the Company's products are recorded upon customer acceptance, or
shipment if no customer acceptance is required, at which time title passes to
the customer. Customer acceptance refers to the sign off by the customer that
the equipment is complete and has passed all tests satisfactory to the customer.
Installation of the equipment is generally completed within 30 to 60 days of
acceptance. Service revenue is recognized upon completion of the service.
    
 
RESEARCH AND DEVELOPMENT
 
Expenditures for research and development are charged to operations as incurred.
 
INCOME TAXES
 
The Company utilizes the method of accounting for income taxes prescribed by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). Pursuant to SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be
recovered or settled.
 
LOSS PER SHARE OF COMMON STOCK
 
During fiscal 1998, the Company adopted Financial Accounting Standards Board
(FASB) SFAS No. 128, "Earnings per Share" (SFAS No. 128). Earnings (loss) per
share for all prior periods have been restated to conform to the provisions of
SFAS 128. Basic earnings per share is computed by dividing income attributable
to common stockholders or income from continuing operations, by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company. In calculating net loss per common share for 1998, 1997 and 1996, 1.4
million, 1.2 million and 2.2 million common stock equivalent shares consisting
of stock options, warrants, and convertible preferred stock have been excluded
because their inclusion would have been anti-dilutive.
 
STOCK BASED COMPENSATION
 
In accordance with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, the Company measures stock-based
compensation expense as the excess of the market price at the grant date over
the amount the employee must pay for the stock. The Company's policy is to
generally grant stock options at fair market value at the date of grant, so no
compensation expense is recognized. As permitted, the Company has elected to
adopt only the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation (see note 10).
 
                                      F-52
<PAGE>   175
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
FOREIGN CURRENCY TRANSLATION
 
The functional currency for the Company's foreign operations is their local
currency. Assets and liabilities of foreign operations are translated into U.S.
dollars using current exchange rates at the balance sheet date, and revenue and
expenses are translated into U.S. dollars using average exchange rates for the
year. The effects of foreign currency translation adjustments are included as a
separate component of stockholders' equity. Transaction gains and losses are
included in operations and were not significant for the years ended June 30,
1998, 1997 and 1996.
 
RECLASSIFICATIONS
 
Certain 1996 and 1997 balances have been reclassified to conform to the 1998
presentation.
 
(3) INVENTORIES
 
Inventories are summarized as follows:
 
<TABLE>
<CAPTION>
                                                  JUNE 30,
                                             ------------------
                                              1998       1997
                                             -------    -------
<S>                                          <C>        <C>
Raw materials..............................  $48,422    $35,977
Work in process............................   19,880     18,182
Finished goods.............................    5,103      3,549
                                             -------    -------
                                              73,405     57,708
Less: inventory obsolescence allowance.....   (6,356)   (12,979)
                                             -------    -------
                                             $67,049    $44,729
                                             =======    =======
</TABLE>
 
   
In the second quarter of fiscal 1997, the Company recorded a pretax nonrecurring
charge of $17.6 million, related to write-downs of inventories of $9.0 million,
write-downs of property, plant and equipment of $4.1 million and the accrual of
related noncancelable purchase orders of $4.5 million related to the
discontinuance of the Avanti 672 program. Inventory associated with the Avanti
672 program was $900 thousand and $12.6 million, primarily in raw materials,
with related allowances of $900 thousand and $10.1 million at June 30, 1998 and
1997, respectively.
    
 
(4) DISCONTINUED OPERATIONS
 
In the second quarter of fiscal 1997, the Company announced its decision to
focus its resources on manufacturing CMP and CMP related equipment. As a result
of this decision, the Company adopted a plan for the disposition by sale or
closure of IPEC Clean in calendar 1997.
 
                                      F-53
<PAGE>   176
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
IPEC Clean has been accounted for as a discontinued operation and, accordingly,
its results of operations and financial position are segregated for all periods
presented in the accompanying consolidated financial statements. Revenue,
related losses and income taxes associated with the discontinued operations are
as follows:
 
<TABLE>
<CAPTION>
                                                  JUNE 30,
                                             ------------------
                                              1997       1996
                                             -------    -------
<S>                                          <C>        <C>
Revenue....................................  $ 4,609    $35,810
                                             -------    -------
Loss from discontinued operations before
  taxes....................................   (5,495)    (1,674)
Income tax benefit.........................   (1,881)      (380)
                                             -------    -------
Loss from discontinued operations, net of
  taxes....................................  $(3,614)   $(1,294)
                                             =======    =======
</TABLE>
 
The effective income tax benefit for discontinued operations differs from the
Company's effective tax rate primarily as a result of nondeductible amortization
of intangible assets.
 
The Company recorded a pretax charge of $27.2 million to write down intangible
assets, accounts receivable, inventory, equipment and other assets to estimated
net realizable value and to record additional liabilities in the second quarter
of fiscal 1997. A charge of $3.0 million was also recorded to reflect the
estimated phase out costs and losses from operations associated with IPEC Clean
until disposition. The tax benefit associated with these charges was $5.2
million.
 
Following the decision to dispose of IPEC Clean in calendar 1997, the Company
entered into negotiations to sell its remaining assets. The deteriorating
business climate in the Pacific Rim resulted in customers delaying expected
purchases from IPEC Clean and the Company was unable to consummate a sale. The
Company closed IPEC Clean in the third quarter of fiscal 1998 and is in the
process of disposing of its assets. A charge of $10.6 million to write-down
accounts receivable, inventory, equipment and other assets to liquidation value
and to record additional liabilities was recorded in fiscal 1998.
 
The net assets of the discontinued operations at June 30, 1997 have been
reclassified in the accompanying consolidated balance sheet as follows:
 
<TABLE>
<S>                                             <C>
Current assets................................  $ 7,078
Current liabilities...........................   (4,615)
                                                -------
                                                $ 2,463
                                                =======
</TABLE>
 
                                      F-54
<PAGE>   177
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment is summarized as follows:
 
<TABLE>
<CAPTION>
                                                 JUNE 30,
                                           --------------------
                                             1998        1997
                                           --------    --------
<S>                                        <C>         <C>
Buildings................................  $    151    $    151
Machinery and equipment..................    43,090      33,077
Building and leasehold improvements......     3,676       3,384
Office furniture and fixtures............     1,172       1,067
Vehicles.................................        64          84
Equipment recorded under capital
  leases.................................     5,192       4,629
                                           --------    --------
                                             53,345      42,392
Less: accumulated depreciation and
  amortization...........................   (18,462)    (16,930)
                                           --------    --------
                                           $ 34,883    $ 25,462
                                           ========    ========
</TABLE>
 
(6) INTANGIBLE ASSETS
 
Intangible assets are summarized as follows:
 
<TABLE>
<CAPTION>
                                                  JUNE 30,
                                             ------------------
                                              1998       1997
                                             -------    -------
<S>                                          <C>        <C>
Goodwill...................................  $ 6,910    $ 6,910
Patents....................................   11,398     11,398
Assembled workforce........................       --      1,622
                                             -------    -------
                                              18,308     19,930
Less: accumulated amortization.............   (9,488)    (8,132)
                                             -------    -------
                                             $ 8,820    $11,798
                                             =======    =======
</TABLE>
 
                                      F-55
<PAGE>   178
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) ACCRUED LIABILITIES
 
Accrued liabilities are summarized as follows:
 
<TABLE>
<CAPTION>
                                                  JUNE 30,
                                             ------------------
                                              1998       1997
                                             -------    -------
<S>                                          <C>        <C>
Accrued warranties.........................  $ 6,639    $ 4,382
Accrued interest...........................    2,095         58
Accrued payroll and benefits...............    1,821      1,943
Accrued vacation...........................    1,492      1,413
Accrued commissions........................    1,301      1,558
Accrued losses for phase-out of
  discontinued operations..................    3,956        877
Accrued income taxes.......................      168        775
Accrued losses on noncancelable purchase
  commitments for discontinued program.....       --      3,381
Other accrued liabilities..................    4,056      4,180
                                             -------    -------
                                             $21,528    $18,567
                                             =======    =======
</TABLE>
 
(8) LONG-TERM DEBT
 
Long-term debt is summarized as follows:
 
<TABLE>
<CAPTION>
                                                 JUNE 30,
                                            -------------------
                                              1998       1997
                                            --------    -------
<S>                                         <C>         <C>
Convertible subordinated notes(a).........  $115,000    $    --
Notes payable, bank(b)....................        --     25,000
Note payable, GAARD acquisition(c)........       395      1,538
Capital lease obligations, interest at
  rates ranging from 8.7% to 10.9%(d).....     3,238      3,513
Other notes payable.......................        --         94
                                            --------    -------
                                             118,633     30,145
Less: current portion.....................     1,555     10,599
                                            --------    -------
Long-term debt, net.......................  $117,078    $19,546
                                            ========    =======
</TABLE>
 
-------------------------
 
(a) The Company completed a private placement in the first quarter of fiscal
    1998 of $115.0 million 6.25% Convertible Subordinated Notes due in 2004
    ("Notes"). The notes were subsequently registered with the Securities and
    Exchange Commission in fiscal 1998. Interest is payable semi-annually in
    March and September. The Notes are subordinated to all existing and future
    senior indebtedness and effectively subordinated to all liabilities,
    including trade payables and lease obligations of the Company and its
    subsidiaries. The Notes can be converted after ninety days from the original
    issuance
                                      F-56
<PAGE>   179
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
    into the Company's common stock at a conversion price of $39.00 per share.
    The notes are not redeemable by the Company prior to September 20, 2000.
 
    Proceeds have been utilized primarily for working capital purposes and to
    repay the balance of the Company's revolving line of credit, described
    below. Remaining portions of proceeds may be used to expand the Company's
    sales and service operations in Asia and for general corporate purposes
    including working capital and research and development. Pending such uses,
    the Company intends to invest the net proceeds in interest-bearing,
    investment grade securities. Debt issuance costs of $3.8 million incurred in
    connection with the private placement have been included in other assets and
    are being amortized over seven years.
 
(b) The Company entered into a loan agreement in April 1996 with a bank. Under
    the terms of the agreement, as modified, the Company received a $10.0
    million term loan and a $20 million revolving loan facility, since modified
    to $15 million, to provide working capital and for general corporate
    purposes. The loan agreement was further modified to allow a $5 million
    increase of the revolving loan facility from the beginning of the last week
    of each fiscal quarter through the end of the first week of the subsequent
    quarter. The outstanding balance on the revolving loan facility was $25.0
    million at June 30, 1997.
 
    The weighted average interest rate at June 30, 1997 on the outstanding
    balance was 8.32%. There have been no borrowings under this facility since
    September 1997. The commitments made under the revolving credit facility
    expired in April 1998, but were extended until June 22, 1998. The revolving
    loan facility was secured by a blanket lien on substantially all of the
    assets of the Company and its subsidiaries. The Company is currently
    negotiating a new credit facility with the bank. The $10.0 million term loan
    was repaid in the second quarter of fiscal 1997 in connection with the
    sale/leaseback transaction of the Company's Phoenix manufacturing and
    administrative facility described in Note 13.
 
(c) The Company issued a $3.2 million promissory note to the former owner of
    GAARD. The note bears interest at 5.58% per year, principal and interest are
    payable in monthly installments. The note matures in September 1998 and is
    unsecured.
 
(d) The Company entered into lease financing arrangements for certain equipment
    that expire at various dates through December 2001.
 
Interest expense to related parties was $304 thousand for the year ended June
30, 1996.
 
                                      F-57
<PAGE>   180
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
The future maturities of long-term debt as of June 30, 1998 are as follows:
 
<TABLE>
<CAPTION>
            YEARS ENDING JUNE 30,
            ---------------------
<S>                                            <C>
      1999...................................  $  1,555
      2000...................................     1,214
      2001...................................       815
      2002...................................        49
      2003...................................        --
      Thereafter.............................   115,000
                                               --------
      Total..................................  $118,633
                                               ========
</TABLE>
 
(9) STOCKHOLDERS' EQUITY
 
PREFERRED STOCK
 
The holders of Series B preferred stock are entitled to an annual cumulative
dividend amounting to $5.59 per share, payable semiannually on December 31 and
June 30, commencing June 30, 1994. Each share of the Series B-1 preferred stock,
Series B-2 preferred stock and Series B-3 preferred stock is convertible into
12.54, 11.41 and 15.00 shares of common stock, respectively. During fiscal 1996,
268 shares of Series B-3 preferred stock were converted into 4,020 shares of
common stock, in fiscal 1997, 13,738 shares of Series B-1, B-2 and B-3 preferred
stock were converted into 198,522 shares of common stock, and in fiscal 1998,
135 shares of Series B-1 preferred stock were converted into 1,692 shares of
common stock. During fiscal 1997, 5,370 shares of Series B-1 preferred stock
were released from escrow to the selling stockholders of Westech (including a
director) upon settlement of the purchase price of Westech. In accordance with
the escrow settlement, the remaining 5,369 shares of the Series B-1 preferred
stock held in escrow were retired.
 
The Company completed a $25.0 million equity financing in fiscal 1997. The
Company sold 100,000 shares of newly issued Series C convertible preferred
stock. At the holder's option, each share of Series C convertible preferred
stock was convertible at a premium over an average of the volume weighted
average daily market prices of the common stock. On February 25, 1997 all shares
of Series C convertible preferred stock converted into 1,283,961 shares of
common stock.
 
In connection with the issuance of the Series C convertible preferred stock,
warrants were issued to acquire up to 476,352 shares of the Company's common
stock. These warrants may generally be exercised from and after June 16, 1998
until December 16, 2002 at an exercise price of $24.57 per share.
 
CLASS A COMMON STOCK
 
Each share of Class A common stock is entitled to four votes and can be
converted into one share of the Company's common stock. Each share of common
stock is entitled to one vote.
 
                                      F-58
<PAGE>   181
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
UNIT PURCHASE OPTIONS
 
Concurrent with the Company's secondary offering in February 1994, the Company
issued unit purchase options to the underwriter for the purchase of 1,800 units
at an exercise price of $1,650 per unit. Each unit consists of 130 shares of
common stock and 78 Class B warrants which expire in 1999. At June 30, 1998,
103.6 of the original 1,800 units were outstanding. Class B warrants included in
unit purchase options outstanding at June 30, 1998 could result in the issuance
of 8,080 shares of the Company's common stock, if exercised.
 
WARRANTS
 
The following table summarizes warrant activity:
 
<TABLE>
<CAPTION>
                            CLASS C     COMMON      COMMON      COMMON
                              (A)         (B)         (C)         (D)        TOTAL
                           ---------   ---------   ---------   ---------   ---------
<S>                        <C>         <C>         <C>         <C>         <C>
Exercise price...........  $    2.52   $   29.25   $   14.66   $   24.57          --
Expiration...............    8/28/97    12/26/00    12/31/99    12/16/02          --
Outstanding at June 30,
  1996...................  $ 137,500   $  10,000   $      --   $      --   $ 147,500
  Exercised in fiscal
     1997................   (137,500)         --          --          --    (137,500)
  Issued in connection
     with an agreement
     with a major
     customer to
     accelerate certain
     deliveries in fiscal
     1997................         --          --     250,000          --     250,000
  Issued in connection
     with issuance of
     Series C preferred
     stock in fiscal
     1997................         --          --          --     476,352     476,352
                           ---------   ---------   ---------   ---------   ---------
Outstanding at June 30,
  1997 and 1998..........  $      --   $  10,000   $ 250,000   $ 476,352   $ 736,352
                           =========   =========   =========   =========   =========
</TABLE>
 
-------------------------
(a) Upon exercise, the holder will receive one share of common stock for each
    warrant exercised.
 
(b) These warrants were issued in connection with services provided during the
    acquisition of GAARD and were assigned a value of $100 thousand.
 
(c) These warrants were issued in connection with an agreement to accelerate
    planned orders from a significant customer and were assigned a value of $1.1
    million.
 
(d) These warrants were issued in connection with the Series C convertible
    preferred stock and assigned a value of $4.8 million.
 
                                      F-59
<PAGE>   182
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(10) EMPLOYEE BENEFITS
 
The Company has a defined contribution plan under Section 401(k) of the Internal
Revenue Code that covers all eligible employees. Participants may contribute up
to 15% of their salary. Participants vest immediately in their own contributions
and over a five-year period in the Company's matching contributions. The Company
made matching contributions of $350 thousand, $211 thousand and $189 thousand in
fiscal 1998, 1997 and 1996, respectively.
 
The Company's 1994 Employee Stock Purchase Plan (the "Purchase Plan") provides
employees with a convenient means to acquire an equity interest in the Company.
Eligible employees of the Company can purchase common stock through payroll
deductions at 85% of the fair market value of the stock. Payroll deductions for
the purchase of stock may not exceed 10% of an employee's base compensation or
$25 thousand. As of June 30, 1998, 265,417 shares have been purchased under this
plan. The maximum number of shares that may be issued under this plan is
1,000,000.
 
The Company's 1992 Stock Option Plan (the "Option Plan") provides for the
issuance of incentive stock options and nonqualified stock options to purchase
up to 4,900,000 shares of common stock to employees, directors and consultants.
The grants vest over periods ranging up to five years. Under the Option Plan,
options may be granted to purchase shares of the Company's common stock at not
less than fair market value at the date of grant, and are exercisable for a
period not exceeding ten years from that date.
 
The Company granted to an officer 50,000 shares of Common Stock which vest
monthly from September 1997 through February 2000. The Company deferred the
related compensation of $1.3 million and is amortizing the cost over the vesting
period. In 1998, $448 thousand was recorded as compensation expense.
 
Effective in fiscal 1997 the Company adopted the disclosure requirements of SFAS
No. 123, Accounting for Stock-Based Compensation. As permitted under SFAS No.
123, the Company will continue to measure stock-based compensation expense as
the excess of the market price at the grant date over the amount the employee
must pay for the stock.
 
SFAS No. 123 requires disclosure of pro forma net earnings and pro forma net
earnings per share as if the fair value based method had been applied in
measuring compensation expense for awards granted in fiscal 1998, 1997 and 1996.
Management believes that the fiscal 1998, 1997 and 1996 pro forma amounts may
not be representative of the effects of stock-based awards on future pro forma
net earnings and pro forma net earnings per share because, among other reasons,
those pro forma amounts exclude the pro forma compensation expense related to
unvested stock options granted before fiscal 1996.
 
At June 30, 1998, there were 853,842 shares available for grant under the Option
Plan. The per share weighted-average fair value of stock options granted under
the Option Plan for the years ended June 30, 1998 and 1997 was $15.23 and $9.30,
respectively, based on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions for both years: expected
dividend yield of 0%, expected volatility of 90%, risk-free interest rate of
6.25% and an expected life of three years.
 
                                      F-60
<PAGE>   183
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
The following table summarizes the activity under this plan and includes 200,000
options granted outside the plan:
 
<TABLE>
<CAPTION>
                              NUMBER OF                      WEIGHTED AVERAGE
                               OPTIONS     EXERCISE PRICE     EXERCISE PRICE    EXERCISABLE
                              ----------   ---------------   ----------------   -----------
<S>                           <C>          <C>               <C>                <C>
Outstanding, June 30,
  1995......................   2,857,000   $ 7.75 - $28.75        $21.70           655,000
                                                                                 =========
Granted.....................   1,256,000   17.88 -  31.00          22.47
Exercised...................    (180,000)   7.75 -  20.75          10.85
Cancelled...................    (607,000)  18.38 -  31.00          27.17
Forfeitures.................    (178,000)   9.00 -  31.00          21.89
                              ----------
Outstanding, June 30,
  1996......................   3,148,000   $ 7.75 - $31.00        $21.56         1,103,000
                                                                                 =========
Granted.....................   2,525,000   10.88 -  25.88          14.47
Exercised...................    (473,000)   7.75 -  20.75          10.73
Cancelled...................  (2,227,000)  15.25 -  31.00          27.73
Forfeitures.................    (278,000)   9.00 -  28.75          19.13
                              ----------
Outstanding, June 30,
  1997......................   2,695,000   $ 7.75 - $28.75        $14.56         1,070,000
                                                                                 =========
Granted.....................     803,000   11.50 -  33.00          25.31
Exercised...................    (318,000)   7.75 -  26.88          13.74
Forfeitures.................    (112,000)  10.88 -  33.00          18.56
                              ----------
Outstanding, June 30,
  1998......................   3,068,000   $ 7.75 - $33.00        $14.68         1,464,000
                              ==========                                         =========
</TABLE>
 
The following table summarizes information about the stock options outstanding
at June 30, 1998:
 
<TABLE>
<CAPTION>
                               WEIGHTED AVERAGE      WEIGHTED
   RANGE OF        OPTIONS        REMAINING          AVERAGE         OPTIONS     WEIGHTED AVERAGE
EXERCISE PRICE   OUTSTANDING   CONTRACTUAL LIFE   EXERCISE PRICE   EXERCISABLE    EXERCISE PRICE
--------------   -----------   ----------------   --------------   -----------   ----------------
<S>              <C>           <C>                <C>              <C>           <C>
$ 7.75 - 11.50      257,000          6.25             $ 9.02          239,000         $ 8.88
         13.88    1,819,000          8.10              13.88        1,040,000          13.88
 14.00 - 25.88      263,000          9.05              20.10           34,000          20.85
 28.13 - 33.00      729,000          8.75              27.24          151,000          28.13
                  ---------          ----             ------        ---------         ------
$ 7.75 - 33.00    3,068,000          8.18             $17.18        1,464,000         $14.68
                  =========          ====             ======        =========         ======
</TABLE>
 
On April 3, 1996, the Board of Directors of the Company approved a repricing of
options granted after April 20, 1995. Employees, excluding officers and
directors, who were issued stock options subsequent to April 20, 1995 and who
were active in their respective positions on April 3, 1996, could elect to keep
their options to buy common stock at the original grant price or reprice their
options to $17.88 per share, the fair market value of the common stock on April
2, 1996. If the option holder elected to reprice the options to $17.88 per
share, the vesting commencement date was extended by periods ranging from four
months to one year. Options for 607,000 shares were repriced.
 
                                      F-61
<PAGE>   184
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
On August 16, 1996, the Board of Directors of the Company approved a repricing
of options granted after January 20, 1995, and prior to August 16, 1996, with an
exercise price exceeding $13.88 per share. Employees, officers and directors
holding options granted with an exercise price exceeding $13.88 per share, who
were active in their respective positions on August 16, 1996, could elect to
keep their options to buy common stock at the original grant price or reprice
their options to $13.88 per share, the fair market value of the common stock on
August 15, 1996. If the option holder elected to reprice the options to $13.88
per share, the vesting commencement date was extended by periods ranging from
one to thirteen months. Options for 2,227,000 shares were repriced.
 
Common stock received through the exercise of non-qualified stock options
results in a tax deduction for the Company equivalent to the taxable income
recognized by the optionee at time of exercise. For financial reporting
purposes, the tax effect of this deduction is accounted for as a credit to
additional paid-in capital rather than as a reduction of income tax expense.
Such optionee exercise of options resulted in a tax benefit to the Company of
$1.4 million, $2.1 million and $1.6 million for the years ended June 30, 1998,
1997 and 1996, respectively.
 
The Company applies APB Opinion No. 25 in accounting for its various stock plans
and, accordingly, no compensation costs for the Purchase Plan or the Option Plan
are reflected in the consolidated financial statements. Had the Company
determined compensation cost in accordance with SFAS No. 123, the Company's net
loss and net loss per share would have been increased to the pro forma amounts
indicated below:
 
<TABLE>
<CAPTION>
                                      YEARS ENDED JUNE 30,
                                --------------------------------
                                  1998        1997        1996
                                --------    --------    --------
<S>                             <C>         <C>         <C>
Net loss
  As reported.................  $(42,259)   $(33,746)   $(10,657)
  Pro forma...................   (54,800)    (49,418)    (15,817)
Net loss per common share
  As reported.................     (2.41)      (2.18)       (.78)
  Pro forma...................     (3.11)      (3.16)      (1.10)
</TABLE>
 
Pro forma net loss reflects only options and warrants granted during the fiscal
years ended June 30, 1998, 1997 and 1996. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net loss amounts presented above because compensation
cost is reflected over the option's vesting period and compensation cost for
options granted prior to July 1, 1995 is not considered.
 
(11) MAJOR CUSTOMERS
 
One customer accounted for 38%, 51%, and 35% of revenue for the fiscal years
ended June 30, 1998, 1997 and 1996, respectively. Another customer accounted for
12% of revenue for the fiscal year ended June 30, 1998. A third customer
accounted for 11% of revenue for the fiscal year ended June 30, 1996.
 
                                      F-62
<PAGE>   185
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Total export sales by geographic region are as follows:
 
<TABLE>
<CAPTION>
                                       YEARS ENDED JUNE 30,
                                   -----------------------------
                                    1998       1997       1996
                                   -------    -------    -------
<S>                                <C>        <C>        <C>
Far East.........................  $44,064    $17,850    $23,738
Europe...........................  $38,410    $20,494    $17,472
Other............................  $ 3,610    $   113    $    81
</TABLE>
 
(12) INCOME TAXES
 
Income tax expense (benefit) is comprised of the following:
 
<TABLE>
<CAPTION>
                                      YEARS ENDED JUNE 30,
                                 -------------------------------
                                  1998        1997        1996
                                 -------    --------    --------
<S>                              <C>        <C>         <C>
Current:
  Federal......................  $    --    $     --    $  7,827
  State........................      300         500       1,249
                                 -------    --------    --------
                                     300         500       9,076
                                 -------    --------    --------
Deferred:
  Federal......................   23,243      (9,729)    (13,474)
  State........................    2,585        (798)     (2,381)
                                 -------    --------    --------
                                  25,828     (10,527)    (15,855)
                                 -------    --------    --------
  Income tax expense
     (benefit).................  $26,128    $(10,027)   $ (6,779)
                                 =======    ========    ========
</TABLE>
 
Income tax expense (benefit) is included in the statements of operations as
follows:
 
<TABLE>
<CAPTION>
                                       YEARS ENDED JUNE 30,
                                  ------------------------------
                                   1998        1997       1996
                                  -------    --------    -------
<S>                               <C>        <C>         <C>
Continuing operations...........  $26,128    $ (2,951)   $(6,399)
Discontinued operations.........       --      (7,076)      (380)
                                  -------    --------    -------
                                  $26,128    $(10,027)   $(6,779)
                                  =======    ========    =======
</TABLE>
 
                                      F-63
<PAGE>   186
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
DEFERRED INCOME TAXES
 
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets, liabilities and the valuation allowance are as
follows:
 
<TABLE>
<CAPTION>
                                                 JUNE 30,
                                            -------------------
                                              1998       1997
                                            --------    -------
<S>                                         <C>         <C>
Deferred tax assets:
  Warranty reserve........................  $  2,434    $ 2,033
  Inventory reserve.......................     2,513      1,547
  Vacation accrual........................       404        440
  Research and development credits........     3,874      2,018
  Allowance for losses on program
     discontinuance.......................     1,276      7,035
  Allowance for losses on discontinued
     operations...........................     3,789      2,731
  Net operating loss carryforwards........    28,680     19,772
  Other...................................     1,869        167
                                            --------    -------
                                              44,839     35,743
  Valuation allowance.....................   (40,019)    (7,840)
                                            --------    -------
                                               4,820     27,903
                                            --------    -------
Deferred tax liabilities:
  Differences between the tax basis and
     fair value of intangibles and fixed
     assets acquired......................       561        754
  Depreciation differences................     4,259      2,343
                                            --------    -------
                                               4,820      3,097
                                            --------    -------
     Net deferred tax asset...............  $     --    $24,806
                                            ========    =======
</TABLE>
 
The Company has $77.6 million of Federal net operating loss carryforwards (NOLs)
at June 30, 1998 which expire between 2000 and 2013. The Company also has $3.3
million of Federal research and development tax credit carryforwards available.
These carryforwards begin to expire in 2011.
 
The valuation allowance for deferred taxes was increased by $32.2 million and
$6.1 million during the years ended June 30, 1998 and 1997, respectively. SFAS
No. 109 requires that a valuation allowance be recorded against deferred tax
assets that are less likely than not to be realized. This determination is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Significant negative
results of the fourth quarter of fiscal 1998, including a decline in sales and
backlog, were due to the dramatic downturn in the semiconductor industry and the
Asian economic crisis. The industry instability changed the assumptions used to
predict future projected results of the Company. These new circumstances,
combined with three
 
                                      F-64
<PAGE>   187
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
consecutive years of operating losses as of June 30, 1998, caused a change in
judgment about the realization of the deferred tax assets. As a result, the
Company is unable to predict the level of future sales and ability to generate
income under these circumstances. The Company has established a full valuation
allowance against all of its deferred tax assets. The Company will recognize
future benefits only as reassessment demonstrates they are reasonable. While the
need for this valuation allowance is subject to periodic review, if the
allowance is reduced, the tax benefits attributable to the deferred tax assets
will be recorded in future operations as a reduction of the Company's income tax
expense.
 
RATE RECONCILIATION
 
The effective tax rate on income (loss) from continuing operations before income
taxes is different from the federal statutory tax rate. A reconciliation of the
Federal statutory income tax rate to the effective income tax rate is as
follows:
 
<TABLE>
<CAPTION>
                                                  YEARS ENDED JUNE 30,
                                                 -----------------------
                                                 1998     1997     1996
                                                 -----    -----    -----
<S>                                              <C>      <C>      <C>
Federal income tax benefit at statutory rate...  (34.0)%  (34.0)%  (34.0)%
  State and local taxes........................    5.4      4.1     (4.2)
  Research and development tax credits.........     --    (14.3)    (4.4)
  Foreign service corp. deduction..............  (10.7)      --       --
  Nondeductible expenses, including purchased
     research and development and amortization
     of goodwill...............................   43.3      7.6      5.7
  Change in beginning of year valuation
     allowance.................................  446.7       --       --
  Stock option compensation....................   23.4       --       --
  Other........................................   (3.6)      .3     (3.7)
                                                 -----    -----    -----
Total effective income tax rate................  470.5%   (36.3)%  (40.6)%
                                                 =====    =====    =====
</TABLE>
 
(13) COMMITMENTS AND CONTINGENCIES
 
The Company is subject to lawsuits and other claims arising in the ordinary
course of business. In the opinion of management, based on consultation with
legal counsel, the effect of such matters will not have a material adverse
effect on the Company's financial position or results of operations.
 
SALE/LEASEBACK
 
The Company completed an $18.7 million sale/leaseback transaction of its Phoenix
manufacturing and administrative facility in the second quarter of fiscal 1997.
The Company leased back the facility for an initial fifteen-year term with two
five-year renewal options. Proceeds from the transaction were used to repay a
$10.0 million term loan with a bank. Annual rental payments will vary but will
range between $2.1 million and $2.4 million over the next five years.
 
                                      F-65
<PAGE>   188
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
The following is a schedule of the approximate future minimum lease payments
under noncancelable operating leases with terms in excess of one year as of June
30, 1998:
 
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30,
---------------------
<S>                                     <C>
1999..................................  $ 3,367
2000..................................    3,219
2001..................................    2,971
2002..................................    2,927
2003..................................    2,936
Thereafter............................   23,111
                                        -------
                                        $38,531
                                        =======
</TABLE>
 
Total rent expense under all operating leases for the years ended June 30, 1998,
1997 and 1996 was $3.4 million, $2.6 million and $1.2 million, respectively.
 
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires that the Company disclose estimated
fair values for its financial instruments. The following summary presents a
description of the methodologies and assumptions used to determine such amounts.
 
LIMITATIONS
 
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale, at one time,
the Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
 
Since the fair value is estimated as of June 30, 1998, the amounts that will
actually be realized or paid at settlement or maturity of the instruments could
be significantly different.
 
SHORT-TERM INVESTMENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
 
The carrying amount is assumed to be the fair value because of the short-term
maturity of these instruments.
 
NOTES PAYABLE AND LONG-TERM DEBT
 
The fair value of the Company's notes payable and long-term debt approximate the
terms in the marketplace at which they could be replaced. Therefore, the fair
value approximates the carrying value of these financial instruments.
 
                                      F-66
<PAGE>   189
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(15) RELATED PARTY TRANSACTIONS
 
The Company had purchases of raw materials and services of approximately $6.6
million, $7.4 million and $8.8 million from companies owned by stockholders of
the Company during the years ended June 30, 1998, 1997 and 1996, respectively.
The Company had payables related to these purchases of $286 thousand and $918
thousand at June 30, 1998 and 1997, respectively.
 
On December 29, 1995, the Company loaned $900 thousand to the Chairman of the
Company. The loan bears interest at the prime rate and is due on the earliest to
occur of (i) 90 days after the Chairman's ability to sell Company stock without
restriction under Section 16 of the Securities Exchange Act or a lockup
agreement, (ii) immediately on voluntary termination of employment, (iii) 90
days after involuntary termination of employment for "cause," or (iv)
immediately on the sale of a personal residence. The loan is secured by all of
the executive's options to purchase the Company's common stock and shares of
common stock. Included in other assets is a receivable of $171 thousand and $975
thousand related to this loan at June 30, 1998 and 1997, respectively. The loan
was repaid in full in July 1998.
 
(16) SUPPLEMENTAL FINANCIAL INFORMATION
 
A summary of additions and deductions related to the allowance for accounts
receivable and inventory obsolescence for the years ended June 30, 1998, 1997
and 1996 follows:
 
<TABLE>
<CAPTION>
                                BALANCE                                  BALANCE
                                   AT                                       AT
                               BEGINNING                                  END OF
                                OF YEAR      ADDITIONS    DEDUCTIONS       YEAR
                               ----------    ---------    ----------    ----------
<S>                            <C>           <C>          <C>           <C>
Allowance for doubtful
  accounts:
  Year ended June 30, 1998...   $ 2,188       $ 1,650      $(2,088)      $ 1,750
  Year ended June 30, 1997...       100         2,088           --         2,188
  Year ended June 30, 1996...        50            50           --           100
Allowance for inventory
  obsolescence:
  Year ended June 30, 1998...    12,979         2,893       (9,516)        6,356
  Year ended June 30, 1997...     1,952        11,027           --        12,979
  Year ended June 30, 1996...       985         1,122         (155)        1,952
</TABLE>
 
Supplemental disclosure of cash flow information is as follows:
 
<TABLE>
<CAPTION>
                                                 YEARS ENDED JUNE 30,
                                              --------------------------
                                               1998      1997      1996
                                              ------    ------    ------
<S>                                           <C>       <C>       <C>
Cash paid for:
  Interest..................................  $4,724    $1,916    $1,902
                                              ======    ======    ======
  Income taxes..............................  $  963    $  510    $3,317
                                              ======    ======    ======
</TABLE>
 
                                      F-67
<PAGE>   190
              INTEGRATED PROCESS EQUIPMENT CORP. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Supplemental disclosures of noncash investing activities:
 
The Company made acquisitions of $23,593 for cash in the year ended June 30,
1996.
 
The purchase prices were allocated to the assets acquired and liabilities
assumed based on their fair values at the date of acquisition. A summary of cash
paid for the acquisitions follows:
 
<TABLE>
<S>                                                           <C>
  Purchase price............................................  $ 54,395
  Less cash acquired........................................    (1,269)
  Common stock issued.......................................      (206)
  Notes payable.............................................   (26,056)
  Long-term debt............................................    (3,223)
                                                              --------
                                                              $ 23,641
                                                              ========
</TABLE>
 
                                      F-68
<PAGE>   191
 
                                                                         ANNEX A
 
                          AGREEMENT AND PLAN OF MERGER
 
                                  BY AND AMONG
 
                          SPEEDFAM INTERNATIONAL, INC.
 
                                 SPEEDFAM, INC.
 
                                      AND
 
                       INTEGRATED PROCESS EQUIPMENT CORP.
 
                         DATED AS OF NOVEMBER 19, 1998
<PAGE>   192
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
   SECTION                                HEADING                             PAGE
   -------                                -------                             ----
<S>             <C>                                                           <C>
RECITALS....................................................................   A-1
ARTICLE I  THE MERGER.......................................................   A-2
  Section 1.1   The Merger..................................................   A-2
  Section 1.2   Effective Time; Closing.....................................   A-2
  Section 1.3   Effect of the Merger........................................   A-2
  Section 1.4   Certificate of Incorporation; Bylaws........................   A-2
  Section 1.5   Directors and Officers of the Surviving Corporation.........   A-3
  Section 1.6   Effect on Capital Stock.....................................   A-3
  Section 1.7   Surrender of Certificates...................................   A-6
  Section 1.8   No Further Ownership Rights in IPEC Common Stock or IPEC
                Preferred Stock.............................................   A-7
  Section 1.9   Lost, Stolen or Destroyed Certificates......................   A-7
  Section 1.10  Tax and Accounting Consequences.............................   A-7
  Section 1.11  Taking of Necessary Action; Further Action..................   A-8
ARTICLE II  REPRESENTATIONS AND WARRANTIES OF IPEC..........................   A-8
  Section 2.1   Organization of IPEC........................................   A-8
  Section 2.2   IPEC Capital Structure......................................   A-9
  Section 2.3   Obligations With Respect to Capital Stock...................  A-10
  Section 2.4   Authority...................................................  A-11
  Section 2.5   SEC Filings; IPEC Financial Statements......................  A-12
  Section 2.6   Absence of Certain Changes or Events........................  A-13
  Section 2.7   Taxes.......................................................  A-13
  Section 2.8   Intellectual Property.......................................  A-14
  Section 2.9   Compliance; Permits; Restrictions...........................  A-15
  Section 2.10  Litigation..................................................  A-15
  Section 2.11  Brokers' and Finders' Fees..................................  A-15
  Section 2.12  Employee Benefit Plans......................................  A-15
  Section 2.13  Absence of Liens and Encumbrances...........................  A-16
  Section 2.14  Environmental Matters.......................................  A-16
  Section 2.15  Labor Matters...............................................  A-17
  Section 2.16  Agreements, Contracts and Commitments.......................  A-17
  Section 2.17  Pooling of Interests........................................  A-18
  Section 2.18  Change of Control Payments..................................  A-18
  Section 2.19  Statements; Proxy Statement/Prospectus......................  A-18
  Section 2.20  Board Approval..............................................  A-19
  Section 2.21  Fairness Opinion............................................  A-19
  Section 2.22  Section 203 of the Delaware General Corporation Law Not
                Applicable; State Takeover Statutes.........................  A-19
  Section 2.23  IPEC Rights Plan............................................  A-19
ARTICLE III  REPRESENTATIONS AND WARRANTIES OF SPEEDFAM AND MERGER SUB......
                                                                              A-20
  Section 3.1   Organization of SpeedFam....................................  A-20
  Section 3.2   SpeedFam and Merger Sub Capital Structure...................  A-21
  Section 3.3   Obligations With Respect to Capital Stock...................  A-21
  Section 3.4   Authority...................................................  A-22
  Section 3.5   SEC Filings; SpeedFam Financial Statements..................  A-23
</TABLE>
 
                                        i
<PAGE>   193
 
<TABLE>
<CAPTION>
   SECTION                                HEADING                             PAGE
   -------                                -------                             ----
<S>             <C>                                                           <C>
  Section 3.6   Absence of Certain Changes or Events........................  A-24
  Section 3.7   Taxes.......................................................  A-24
  Section 3.8   Intellectual Property.......................................  A-26
  Section 3.9   Compliance; Permits; Restrictions...........................  A-26
  Section 3.10  Litigation..................................................  A-27
  Section 3.11  Brokers' and Finders' Fees..................................  A-27
  Section 3.12  Employee Benefit Plans......................................  A-27
  Section 3.13  Absence of Liens and Encumbrances...........................  A-28
  Section 3.14  Environmental Matters.......................................  A-28
  Section 3.15  Labor Matters...............................................  A-28
  Section 3.16  Agreements, Contracts and Commitments.......................  A-29
  Section 3.17  Pooling of Interests........................................  A-29
  Section 3.18  Change of Control Payments..................................  A-30
  Section 3.19  Statements; Proxy Statement/Prospectus......................  A-30
  Section 3.20  Board Approval..............................................  A-30
  Section 3.21  Fairness Opinion............................................  A-30
  Section 3.22  Section 5/11.75 of the Illinois Business Corporation Act Not
                Applicable; State Takeover Statutes.........................  A-30
ARTICLE IV  CONDUCT PRIOR TO THE EFFECTIVE TIME.............................  A-31
  Section 4.1   Conduct of Business.........................................  A-31
ARTICLE V  ADDITIONAL AGREEMENTS............................................  A-33
  Section 5.1   Proxy Statement/Prospectus; Registration Statement; Other
                Filings; Board Recommendations..............................  A-33
  Section 5.2   Meetings of IPEC Stockholders and SpeedFam Shareholders.....  A-34
  Section 5.3   Confidentiality.............................................  A-35
  Section 5.4   No Solicitation.............................................  A-35
  Section 5.5   Public Disclosure...........................................  A-38
  Section 5.6   Legal Requirements..........................................  A-39
  Section 5.7   Third Party Consents........................................  A-39
  Section 5.8   FIRPTA......................................................  A-39
  Section 5.9   Notification of Certain Matters.............................  A-39
  Section 5.10  Reasonable Efforts and Further Assurances...................  A-39
  Section 5.11  Stock Options and Warrants..................................  A-40
  Section 5.12  Registration Statements.....................................  A-42
  Section 5.13  Indemnification and Insurance...............................  A-42
  Section 5.14  NMS Listing.................................................  A-43
  Section 5.15  SpeedFam Affiliate Agreement................................  A-43
  Section 5.16  IPEC Affiliate Agreement....................................  A-43
  Section 5.17  Regulatory Filings; Reasonable Efforts......................  A-43
  Section 5.18  Board of Directors of SpeedFam..............................  A-43
  Section 5.19  Officers of SpeedFam; Transition Team.......................  A-44
  Section 5.20  Change of Name..............................................  A-44
  Section 5.21  IPEC Rights Plan............................................  A-44
  Section 5.22  Director Designation Provision..............................  A-44
  Section 5.23  Notice of Demand for Appraisal..............................  A-44
</TABLE>
 
                                       ii
<PAGE>   194
 
<TABLE>
<CAPTION>
   SECTION                                HEADING                             PAGE
   -------                                -------                             ----
<S>             <C>                                                           <C>
ARTICLE VI  CONDITIONS TO THE MERGER........................................  A-45
  Section 6.1   Conditions to Obligations of Each Party to Effect the
                Merger......................................................  A-45
  Section 6.2   Additional Conditions to Obligations of IPEC................  A-46
  Section 6.3   Additional Conditions to the Obligations of SpeedFam and
                Merger Sub..................................................  A-46
ARTICLE VII  TERMINATION, AMENDMENT AND WAIVER..............................  A-47
  Section 7.1   Termination.................................................  A-47
  Section 7.2   Notice of Termination; Effect of Termination................  A-48
  Section 7.3   Fees and Expenses...........................................  A-48
  Section 7.4   Amendment...................................................  A-50
  Section 7.5   Extension; Waiver...........................................  A-50
ARTICLE VIII  GENERAL PROVISIONS............................................  A-50
  Section 8.1   Non-Survival of Representations and Warranties..............  A-50
  Section 8.2   Notices.....................................................  A-50
  Section 8.3   Interpretation; Knowledge...................................  A-51
  Section 8.4   Counterparts................................................  A-51
  Section 8.5   Entire Agreement; Third Party Beneficiaries.................  A-51
  Section 8.6   Severability................................................  A-51
  Section 8.7   Other Remedies; Specific Performance........................  A-52
  Section 8.8   Governing Law...............................................  A-52
  Section 8.9   Rules of Construction.......................................  A-52
  Section 8.10  Assignment..................................................  A-52
</TABLE>
 
                                       iii
<PAGE>   195
 
                               INDEX OF EXHIBITS
 
<TABLE>
<S>         <C>  <C>
EXHIBIT A   --   SpeedFam Stock Option Agreement
EXHIBIT B   --   IPEC Stock Option Agreement
*EXHIBIT C  --   Certificate of Merger
*EXHIBIT D  --   Amended and Restated Certificate of Incorporation of the
                 Surviving Corporation
*EXHIBIT E  --   Amended and Restated Bylaws of the Surviving Corporation
*EXHIBIT F  --   SpeedFam Affiliate Agreement
*EXHIBIT G  --   IPEC Affiliate Agreement
*EXHIBIT H  --   Legal Opinion of SpeedFam Counsel
*EXHIBIT I  --   Legal Opinion of IPEC Counsel
*Omitted
</TABLE>
 
                                       iv
<PAGE>   196
 
                          AGREEMENT AND PLAN OF MERGER
 
This AGREEMENT AND PLAN OF MERGER is made and entered into as of November 19,
1998 among SpeedFam International, Inc., an Illinois corporation ("SpeedFam"),
SpeedFam, Inc., a Delaware corporation and a wholly-owned subsidiary of SpeedFam
("Merger Sub"), and Integrated Process Equipment Corp., a Delaware corporation
("IPEC").
 
                                    RECITALS
 
A.  Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law, as amended ("Delaware
Law"), and the Illinois Business Corporation Act, as amended ("Illinois Law"),
SpeedFam and IPEC intend to enter into a business combination transaction to
pursue their long-term business strategies.
 
B.  The Board of Directors of SpeedFam (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of
SpeedFam and fair to, and in the best interests of, SpeedFam and its
shareholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the shareholders of SpeedFam vote to approve the amendment to
SpeedFam's Articles of Incorporation as hereinafter set forth and the issuance
of shares of SpeedFam Common Stock (as defined in Section 1.6(a)) to the
stockholders of IPEC pursuant to the terms of the Merger.
 
C.  The Board of Directors of IPEC (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of IPEC
and fair to, and in the best interests of, IPEC and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the stockholders of
IPEC adopt and approve this Agreement and approve the Merger.
 
D.  Concurrently with the execution of this Agreement, and as a condition and
inducement to SpeedFam's and IPEC's willingness to enter into this Agreement,
SpeedFam shall execute and deliver a Stock Option Agreement in favor of IPEC in
substantially the form attached hereto as Exhibit A (the "SpeedFam Stock Option
Agreement") and IPEC shall execute and deliver a Stock Option Agreement in favor
of SpeedFam in substantially the form attached hereto as Exhibit B (the "IPEC
Stock Option Agreement" and, together with the SpeedFam Stock Option Agreement,
the "Stock Option Agreements"). The Board of Directors of SpeedFam and IPEC have
each approved the Stock Option Agreements.
 
E.  The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
 
F.  It is also intended by the parties hereto that the Merger shall qualify for
accounting treatment as a pooling of interests.
 
                                       A-1
<PAGE>   197
 
NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
 
                                   ARTICLE I
 
                                   THE MERGER
 
Section 1.1.  The Merger.  At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
IPEC (the "Merger"), the separate corporate existence of Merger Sub shall cease
and IPEC shall continue as the surviving corporation. IPEC as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
 
Section 1.2.  Effective Time; Closing.  Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger, substantially in the form of Exhibit C hereto (the
"Certificate of Merger"), with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of Delaware Law (the time of such
filing (or such later time as may be agreed in writing by the parties and
specified in the Certificate of Merger) being the "Effective Time") as soon as
practicable on or after the Closing Date (as herein defined). The closing of the
Merger (the "Closing") shall take place at the offices of Chapman and Cutler in
Phoenix, Arizona, at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI (except those which by their terms can only
be satisfied at the Closing), or at such other time, date and location as the
parties hereto agree in writing (the "Closing Date").
 
Section 1.3.  Effect of the Merger.  At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time the separate existence of Merger Sub shall cease
and Merger Sub shall be merged into IPEC, possessing all the rights, privileges,
powers and franchises as well of a public as of a private nature of each of
Merger Sub and IPEC, and being subject to all the restrictions, disabilities and
duties of each of Merger Sub and IPEC; and all and singular, the rights,
privileges, powers and franchises of each of Merger Sub and IPEC, and all
property, real, personal and mixed, and all debts due to of each of Merger Sub
and IPEC on whatever account, as well for stock subscriptions as all other
things in action or belonging to of each of Merger Sub and IPEC shall be vested
in the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of Merger Sub and IPEC,
and the title to any real estate vested by deed or otherwise, in Merger Sub or
IPEC shall not revert or be in any way impaired by reason of the Merger, but all
rights of creditors and all liens upon any property of each of Merger Sub and
IPEC shall be preserved unimpaired, and all debts, liabilities and duties of
each of Merger Sub and IPEC shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
 
Section 1.4.  Certificate of Incorporation; Bylaws.  (a) At the Effective Time,
the Certificate of Incorporation of IPEC, as in effect immediately prior to the
Effective Time, shall be amended and restated in its entirety in the form
attached hereto as Exhibit D and
 
                                       A-2
<PAGE>   198
 
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation.
 
(b) At the Effective Time the Bylaws of IPEC, as in effect immediately prior to
the Effective Time, shall be amended and restated in its entirety in the form
attached hereto as Exhibit E and shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such Bylaws.
 
Section 1.5.  Directors and Officers of the Surviving Corporation.  The initial
directors of the Surviving Corporation shall be the directors of Merger Sub
immediately prior to the Effective Time, until their respective successors are
duly elected or appointed and qualified. The initial officers of the Surviving
Corporation shall be the officers of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly appointed.
 
Section 1.6.  Effect on Capital Stock.  At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, IPEC or the holders of
any of the following securities:
 
          (a) Conversion of IPEC Common Stock.  Each share of Common Stock, $.01
     par value, of IPEC (the "IPEC Regular Common Stock") and each share of
     Class A Common Stock, $.01 par value of IPEC (the "IPEC Class A Common
     Stock," which together with the IPEC Regular Common Stock is referred to as
     the "IPEC Common Stock") issued and outstanding immediately prior to the
     Effective Time, (other than any shares of IPEC Common Stock to be canceled
     pursuant to Section 1.6(b)) will be canceled and extinguished and
     automatically converted (subject to Sections 1.6(k) and (l)) into the right
     to receive .71 (the "Exchange Ratio") of a share of Common Stock, without
     par value of SpeedFam (the "SpeedFam Common Stock"). Certificates for
     SpeedFam Common Stock will be delivered only upon surrender of the
     certificate representing such share of IPEC Common Stock in the manner
     provided in Section 1.7 (or in the case of a lost, stolen or destroyed
     certificate, upon delivery of an affidavit (and bond, if required) in the
     manner provided in Section 1.9).
 
          (b) Cancellation of Certain IPEC Stock.  Each share of IPEC Common
     Stock or IPEC Preferred Stock (as defined in paragraph (h) herein) held by
     IPEC or owned by Merger Sub, SpeedFam or any direct or indirect wholly
     owned subsidiary of IPEC or of SpeedFam immediately prior to the Effective
     Time shall be canceled and extinguished without any conversion thereof.
 
          (c) Stock Options.  At the Effective Time, all options to purchase
     IPEC Regular Common Stock then outstanding under IPEC's 1992 Stock Option
     Plan (the "1992 IPEC Stock Option Plan"), shall be assumed by SpeedFam in
     accordance with Section 5.11. At the Effective Time, all options to
     purchase IPEC Regular Common Stock granted pursuant to that certain
     employment agreement, dated as of August 13, 1997 between IPEC and Roger D.
     McDaniel, as amended (the "McDaniel Agreement"), and which are vested as of
     the Effective Time, shall be assumed by SpeedFam in accordance with Section
     5.11.
 
          (d) IPEC 1994 Employee Stock Purchase Plan.  At the Effective Time, in
     accordance with the terms of IPEC's 1994 Employee Stock Purchase Plan (the
     "IPEC Employee Stock Purchase Plan"), the option period then in progress
     shall be shortened by setting a new purchase date which shall be the
     trading day immediately preceding the Effective Time (the "New Purchase
     Date"), so that any IPEC Common Stock purchased on the New Purchase Date
     shall be automatically
 
                                       A-3
<PAGE>   199
 
     converted into SpeedFam Common Stock on the same basis as all other shares
     of IPEC Common Stock; provided, however, that the New Purchase Date shall
     be conditional upon consummation of the Merger. On the New Purchase Date,
     IPEC shall apply the funds credited as of such date under the IPEC Employee
     Stock Purchase Plan within each participant's payroll withholding account
     to the purchase of whole shares of IPEC Common Stock in accordance with the
     terms of the IPEC Employee Stock Purchase Plan. The IPEC Employee Stock
     Purchase Plan shall terminate immediately following the purchase of shares
     of IPEC Regular Common Stock on the New Purchase Date.
 
          (e) IPEC Warrants; IPEC 1994 Unit Purchase Options.  At the Effective
     Time, the warrant to purchase shares of IPEC Regular Common Stock between
     IPEC and Hambrecht & Quist LLC granted December 26, 1995 (the "H & Q I
     Warrant") shall be assumed by SpeedFam in accordance with Section 5.11. At
     the Effective Time, the warrant to purchase shares of IPEC Regular Common
     Stock between IPEC and Hambrecht & Quist LLC granted December 16, 1996 (the
     "H & Q II Warrant") shall be assumed by SpeedFam in accordance with Section
     5.11. At the Effective Time, the warrant to purchase shares of IPEC Regular
     Common Stock between IPEC and Intel Corporation granted October 14, 1996
     (the "Intel I Warrant") shall be assumed by SpeedFam in accordance with
     Section 5.11. At the Effective Time, the warrant to purchase shares of IPEC
     Regular Common Stock between IPEC and Intel Corporation granted December
     31, 1996 (the "Intel II Warrant") shall be assumed by SpeedFam in
     accordance with Section 5.11. At the Effective Time, the warrant to
     purchase shares of IPEC Regular Common Stock between IPEC and Intel
     Corporation granted March 31, 1997 (the "Intel III Warrant" and, together
     with the Intel I Warrant and Intel II Warrant, the "Intel Warrants") shall
     be assumed by SpeedFam in accordance with Section 5.11. At the Effective
     Time, the warrant to purchase shares of IPEC Regular Common Stock between
     IPEC and Fletcher International Limited granted December 16, 1996 (the
     "Fletcher Warrant") shall be assumed by SpeedFam in accordance with Section
     5.11. The H & Q I Warrant, the H & Q II Warrant, the Intel Warrants and the
     Fletcher Warrant shall together be referred to herein as the "IPEC
     Warrants." At the Effective Time, the Unit Purchase Options issued by IPEC
     to D.H. Blair Investment Banking Corp. on February 2, 1994 (the "UPO's")
     shall be assumed by SpeedFam in accordance with Section 5.11.
 
          (f) IPEC Series B-1 Cumulative Preferred Stock.  Each share of Series
     B-1 Preferred Stock, $.01 par value, of IPEC (the "IPEC Series B-1
     Preferred Stock") issued and outstanding immediately prior to the Effective
     Time (other than any shares of IPEC Series B-1 Preferred Stock to be
     canceled pursuant to Section 1.6(b)) will be canceled and extinguished and
     automatically converted (subject to Sections 1.6(k) and (l)) into the right
     to receive that number of shares of SpeedFam Common Stock determined by
     multiplying (x) the number of shares of IPEC Regular Common Stock into
     which the IPEC Series B-1 Preferred Stock is convertible immediately prior
     to the Effective Time pursuant to the terms of the Certificate of
     Designation creating the IPEC Series B-1 Preferred Stock by (y) the
     Exchange Ratio. Certificates for SpeedFam Common Stock will be delivered
     only upon surrender of the certificate representing such share of IPEC
     Series B-1 Preferred Stock in the manner provided in Section 1.7 (or in the
     case of a lost, stolen or destroyed certificate, upon delivery of an
     affidavit (and bond, if required) in the manner provided in Section 1.9).
 
          (g) IPEC Series B-2 Cumulative Preferred Stock.  Each share of Series
     B-2 Preferred Stock, $.01 par value, of IPEC (the "IPEC Series B-2
     Preferred Stock")
 
                                       A-4
<PAGE>   200
 
     issued and outstanding immediately prior to the Effective Time (other than
     any shares of IPEC Series B-2 Preferred Stock to be canceled pursuant to
     Section 1.6(b)) will be canceled and extinguished and automatically
     converted (subject to Sections 1.6(k) and (l)) into the right to receive
     that number of shares of SpeedFam Common Stock determined by multiplying
     (x) the number of shares of IPEC Regular Common Stock into which the IPEC
     Series B-2 Preferred Stock is convertible immediately prior to the
     Effective Time pursuant to the terms of the Certificate of Designation
     creating the IPEC Series B-2 Preferred Stock by (y) the Exchange Ratio.
     Certificates for SpeedFam Common Stock will be delivered only upon
     surrender of the certificate representing such share of IPEC Series B-2
     Preferred Stock in the manner provided in Section 1.7 (or in the case of a
     lost, stolen or destroyed certificate, upon delivery of an affidavit (and
     bond, if required) in the manner provided in Section 1.9).
 
          (h) IPEC Series B-3 Cumulative Preferred Stock.  Each share of Series
     B-3 Preferred Stock, $.01 par value, of IPEC (the "IPEC Series B-3
     Preferred Stock") issued and outstanding immediately prior to the Effective
     Time (other than any shares of IPEC Series B-3 Preferred Stock to be
     canceled pursuant to Section 1.6(b)) will be canceled and extinguished and
     automatically converted (subject to Sections 1.6(k) and (l)) into the right
     to receive that number of shares of SpeedFam Common Stock determined by
     multiplying (x) the number of shares of IPEC Regular Common Stock into
     which the IPEC Series B-3 Preferred Stock is convertible immediately prior
     to the Effective Time pursuant to the terms of the Certificate of
     Designation creating the IPEC Series B-3 Preferred Stock by (y) the
     Exchange Ratio. Certificates for SpeedFam Common Stock will be delivered
     only upon surrender of the certificate representing such share of IPEC
     Series B-3 Preferred Stock in the manner provided in Section 1.7 (or in the
     case of a lost, stolen or destroyed certificate, upon delivery of an
     affidavit (and bond, if required) in the manner provided in Section 1.9).
 
          (The IPEC Series B-1 Preferred Stock, the IPEC Series B-2 Preferred
     Stock and the IPEC Series B-3 Preferred Stock are hereinafter referred to
     collectively as the "IPEC Preferred Stock").
 
          (i) IPEC 6 1/4% Convertible Subordinated Notes.  At the Effective
     Time, SpeedFam and IPEC shall enter into a supplemental indenture with
     respect to the 6 1/4% Convertible Subordinated Notes due 2004 issued by
     IPEC pursuant to the Indenture between IPEC and State Street Bank and Trust
     Company of California, N.A., as trustee, dated as of September 15, 1997
     (the "IPEC Convertible Notes") in accordance with Section 5.11.
 
          (j) Capital Stock of Merger Sub.  Each share of Common Stock, no par
     value, of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
     immediately prior to the Effective Time shall be converted into one validly
     issued, fully paid and nonassessable share of Common Stock, no par value,
     of the Surviving Corporation. Each certificate evidencing ownership of
     shares of Merger Sub Common Stock shall continue to evidence ownership of
     such shares of capital stock of the Surviving Corporation.
 
          (k) Adjustments to Exchange Ratio.  The Exchange Ratio shall be
     adjusted to reflect appropriately the effect of any stock split, reverse
     stock split, stock dividend (including any dividend or distribution of
     securities convertible into SpeedFam Common Stock or IPEC Common Stock),
     reorganization, recapitalization or other like change with respect to
     SpeedFam Common Stock or IPEC Common Stock occurring on or after the date
     hereof and prior to the Effective Time.
 
                                       A-5
<PAGE>   201
 
          (l) Fractional Shares.  No fraction of a share of SpeedFam Common
     Stock will be issued by virtue of the Merger, but in lieu thereof each
     holder of shares of IPEC Common Stock or IPEC Preferred Stock who would
     otherwise be entitled to a fraction of a share of SpeedFam Common Stock
     (after aggregating all fractional shares of SpeedFam Common Stock to be
     received by such holder) shall receive from SpeedFam an amount of cash
     (rounded to the nearest whole cent) equal to the product of (i) such
     fraction, multiplied by (ii) the average closing price of one share of
     SpeedFam Common Stock for the ten most recent days that SpeedFam Common
     Stock has traded ending on the trading day immediately prior to the
     Effective Time, as reported on the Nasdaq National Market.
 
Section 1.7.  Surrender of Certificates.
 
(a) Exchange Agent.  SpeedFam shall select an institution reasonably
satisfactory to IPEC to act as the exchange agent (the "Exchange Agent") in the
Merger.
 
(b) SpeedFam to Provide SpeedFam Common Stock.  Promptly after the Effective
Time, SpeedFam shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of SpeedFam Common Stock issuable
pursuant to this Article I in exchange for outstanding shares of IPEC Common
Stock and IPEC Preferred Stock, and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(l) and any dividends or
distributions which holders of shares of IPEC Common Stock or IPEC Preferred
Stock may be entitled pursuant to Section 1.7(d).
 
(c) Exchange Procedures.  Promptly after the Effective Time, SpeedFam shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of IPEC Common Stock
or IPEC Preferred Stock whose shares were converted into the right to receive
shares of SpeedFam Common Stock pursuant to this Article I, cash in lieu of any
fractional shares pursuant to Section 1.6(l) and any dividends or other
distributions pursuant to Section 1.7(d), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as SpeedFam may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of SpeedFam
Common Stock, cash in lieu of any fractional shares pursuant to Section 1.6(l)
and any dividends or other distributions pursuant to Section 1.7(d). Upon
surrender of Certificates for cancellation to the Exchange Agent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holders of such Certificates shall be
entitled to receive in exchange therefor certificates representing the number of
whole shares of SpeedFam Common Stock, payment in lieu of fractional shares
which such holders have the right to receive pursuant to Section 1.6(l) and any
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 1.7(d) as to the payment of
dividends, to evidence the ownership of the number of full shares of SpeedFam
Common Stock into which such shares of IPEC Common Stock or IPEC Preferred Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.6(l) and
any dividends or distributions payable pursuant to Section 1.7(d).
 
                                       A-6
<PAGE>   202
 
(d) Distributions With Respect to Unexchanged Shares.  No dividends or other
distributions declared or made after the date of this Agreement with respect to
SpeedFam Common Stock with a record date after the Effective Time will be paid
to the holders of any unsurrendered Certificates with respect to the shares of
SpeedFam Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, the amount of any such
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of SpeedFam Common Stock.
 
(e) Transfers of Ownership.  If certificates for shares of SpeedFam Common Stock
are to be issued in a name other than that in which the Certificates surrendered
in exchange therefor are registered, it will be a condition of the issuance
thereof that the Certificates so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to SpeedFam or any agent designated by it any transfer
or other taxes required by reason of the issuance of certificates for shares of
SpeedFam Common Stock in any name other than that of the registered holder of
the Certificates surrendered, or established to the satisfaction of SpeedFam or
any agent designated by it that such tax has been paid or is not payable.
 
(f) No Liability.  Notwithstanding anything to the contrary in this Section 1.7,
neither the Exchange Agent, SpeedFam, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of SpeedFam Common Stock, IPEC
Common Stock or IPEC Preferred Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
 
Section 1.8.  No Further Ownership Rights in IPEC Common Stock or IPEC Preferred
Stock.  All shares of SpeedFam Common Stock issued upon the surrender for
exchange of shares of IPEC Common Stock or IPEC Preferred Stock in accordance
with the terms of this Article I (including any cash paid in respect thereof
pursuant to Section 1.6(l) and 1.7(d)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of IPEC Common Stock
or IPEC Preferred Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of IPEC Common Stock or
IPEC Preferred Stock which were outstanding immediately prior to the Effective
Time. If after the Effective Time Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
 
Section 1.9.  Lost, Stolen or Destroyed Certificates.  In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
SpeedFam Common Stock, cash for fractional shares, if any, as may be required
pursuant to Section 1.6(l) and any dividends or distributions payable pursuant
to Section 1.7(d); provided, however, that SpeedFam may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
SpeedFam, IPEC or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
 
Section 1.10.  Tax and Accounting Consequences.  (a) It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code. The parties hereto adopt this Agreement as a
"plan of reorganization" within
 
                                       A-7
<PAGE>   203
 
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income
Tax Regulations.
 
(b) It is intended by the parties hereto that the Merger shall qualify for
accounting treatment as a pooling of interests.
 
Section 1.11.  Taking of Necessary Action; Further Action.  If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of IPEC and Merger Sub, the officers and directors of IPEC
and Merger Sub will take all such lawful and necessary action, so long as such
action is consistent with this Agreement.
 
                                   ARTICLE II
 
                     REPRESENTATIONS AND WARRANTIES OF IPEC
 
IPEC represents and warrants to SpeedFam and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by IPEC to SpeedFam dated as of the date hereof and certified by a duly
authorized officer of IPEC (the "IPEC Schedules"), as follows:
 
Section 2.1.  Organization of IPEC.  (a) IPEC and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; has the corporate power and authority
to own, lease and operate its assets and property and to carry on its business
as now being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
below) on IPEC.
 
(b) IPEC has delivered to SpeedFam a true and complete list of all of IPEC's
subsidiaries, indicating the jurisdiction of incorporation of each subsidiary
and IPEC's equity interest therein.
 
(c) IPEC has delivered or made available to SpeedFam a true and correct copy of
the Certificate of Incorporation and Bylaws of IPEC and similar governing
instruments of each of its subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither IPEC nor any of its subsidiaries
is in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent governing instruments.
 
(d) When used in connection with IPEC, the term "Material Adverse Effect" means,
for purposes of this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of IPEC and its subsidiaries taken as a whole
(except for those changes, events and effects that are directly caused by (i)
conditions affecting the worldwide economy as a whole; or (ii) conditions
affecting either the semiconductor, thin film memory disk or silicon wafer
capital equipment manufacturing industry, in either such case as a whole, which
conditions (in the case of clause (i) or (ii)) do not affect IPEC in a
disproportionate manner); or (iii) any adverse effect (A) on the bookings or
revenues of IPEC (or the direct consequences thereof) following the date of this
Agreement which is primarily attributable to a delay, reduction, cancellation or
change in the terms of product orders by customers of IPEC or (B) due to
employee attrition of IPEC, where such delay, reduction,
 
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<PAGE>   204
 
cancellation, change or attrition is primarily attributable to the transactions
contemplated by this Agreement or the pendency or announcement of the Merger. A
change in the market price of IPEC Regular Common Stock shall not, in and of
itself, be deemed a Material Adverse Effect with respect to IPEC.
 
Section 2.2.  IPEC Capital Structure.  The authorized capital stock of IPEC
consists of 50,000,000 shares of IPEC Regular Common Stock, of which there were
17,841,457 shares issued and outstanding as of November 2, 1998, 3,500,000
shares of IPEC Class A Common Stock of which there were 7,186 shares issued and
outstanding as of November 2, 1998 and 2,000,000 shares of Preferred Stock, $.01
par value, of which there were 7,204 shares of IPEC Series B-1 Preferred Stock
issued and outstanding as of November 2, 1998, 19,544 shares of IPEC Series B-2
Preferred Stock issued and outstanding as of November 2, 1998, 9,898 shares of
IPEC Series B-3 Preferred Stock issued and outstanding as of November 2, 1998,
and 50,000 shares of IPEC Series D Participating Preferred Stock ("IPEC Series D
Preferred") authorized for issuance pursuant to the IPEC Preferred Share Rights
Agreement dated March 5, 1997, as amended (the "IPEC Rights Plan"), none of
which are issued. All outstanding shares of IPEC Common Stock and IPEC Preferred
Stock are duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of IPEC or any agreement or document to which IPEC is a
party or by which it is bound. As of November 2, 1998, IPEC had remaining a
reserve of an aggregate of 7,186 shares of IPEC Regular Common for issuance upon
conversion of the IPEC Class A Common Stock. As of November 2, 1998, IPEC had
remaining a reserve of an aggregate of 4,812,020 shares of IPEC Regular Common
Stock for issuance to employees, directors and consultants pursuant to the 1992
IPEC Option Plan. As of November 2, 1998, IPEC had remaining a reserve of an
aggregate of 650,000 shares of IPEC Regular Common Stock for issuance pursuant
to options granted under the McDaniel Agreement. As of November 2, 1998 IPEC had
remaining a reserve of an aggregate of 685,038 shares of IPEC Regular Common
Stock for issuance to employees under the 1994 Employee Stock Purchase Plan. As
of November 2, 1998, IPEC had remaining a reserve of an aggregate of 90,338
shares, 222,997 shares and 148,470 shares, respectively, of IPEC Regular Common
Stock for issuance upon conversion of the IPEC Series B-1 Preferred Stock, IPEC
Series B-2 Preferred Stock and IPEC Series B-3 Preferred Stock. As of November
2, 1998, IPEC had remaining a reserve of 10,000 shares of IPEC Regular Common
Stock for issuance upon the exercise of H & Q I Warrant. As of November 2, 1998,
IPEC had remaining a reserve of 20,352 shares of IPEC Regular Common Stock for
issuance upon the exercise of the H & Q II Warrant. As of November 2, 1998, IPEC
had remaining a reserve of an aggregate of 250,000 shares of IPEC Regular Common
Stock for issuance upon the exercise of the Intel Warrants. As of November 2,
1998, IPEC had remaining a reserve of 456,000 shares of IPEC Regular Common
Stock for issuance upon the exercise of the Fletcher Warrant. As of November 2,
1998 IPEC had remaining a reserve of 13,468 shares of IPEC Regular Common Stock
for issuance upon exercise of the UPO's and a reserve of 8,080 shares of IPEC
Regular Common Stock for issuance upon exercise of the Class B Warrants
underlying the UPO's. As of November 2, 1998, IPEC had remaining a reserve of an
aggregate of 2,948,717 shares of IPEC Regular Common for issuance upon
conversion of the IPEC Convertible Notes. As of November 2, 1998, the Conversion
Rates pursuant to which the IPEC Series B-1 Preferred Stock, the IPEC Series B-2
Preferred Stock, and the IPEC Series B-3 Preferred Stock are convertible into
IPEC Regular Common Stock are 12.54, 11.41, and 15.00 shares of IPEC Regular
Common Stock per share of IPEC B-1 Preferred Stock, IPEC B-2 Preferred Stock,
and IPEC B-3 Preferred Stock,
 
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respectively (hereinafter collectively referred to as the "Preferred Stock
Conversion Rates"). As of November 2, 1998, the Conversion Price applicable to
the IPEC Convertible No tes was $39.00 per share (the "Convertible Notes
Conversion Price"). As of November 2, 1998, the exercise price applicable to the
H & Q I Warrant was $29.25 per share (the "H & Q I Exercise Price"). As of
November 2, 1998, the exercise price applicable to the H & Q II Warrant was
$24.567 per share (the "H & Q II Exercise Price"). As of November 2, 1998, the
exercise price applicable to the Intel Warrants was $14.6625 per share (the
"Intel Exercise Price"). As of November 2, 1998, the exercise price applicable
to the Fletcher Warrant was $24.567 per share (the "Fletcher Exercise Price").
As of November 2, 1998, the exercise price applicable to the UPO's (each for 130
shares of IPEC Regular Common Stock and 78 Class B warrants, each exercisable
for one share of IPEC Regular Common Stock) was $1,650 (the "UPO Exercise
Price"). Collectively, each of the H & Q I Exercise Price, the H & Q II Exercise
Price, the Intel Exercise Price, the Fletcher Exercise Price and the UPO
Exercise Price are hereinafter referred to as the "Warrant Exercise Prices." No
event, circumstance or fact has occurred or is in existence which would result
in any change in any Preferred Stock Conversion Rate, the Convertible Notes
Conversion Price, or the Warrant Exercise Prices. The execution and delivery of
this Agreement and the Stock Option Agreements by IPEC do not, and the
performance of this Agreement and Stock Option Agreements by IPEC will not,
result in any change in any Preferred Stock Conversion Rates or the Convertible
Notes Conversion Price. All shares of IPEC Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. The IPEC Schedules list for each
person who held options, rights or warrants to acquire shares of IPEC Common
Stock at November 5, 1998, the name of the holder of such option, right, or
warrant, the exercise price of such option, right or warrant, the number of
shares as to which such option, right or warrant will have vested at such date,
the vesting schedule for such option, right or warrant and whether the
exercisability of such option, right or warrant will be accelerated in any way
by the transactions contemplated by this Agreement, and indicate the extent of
acceleration, if any.
 
Section 2.3.  Obligations With Respect to Capital Stock.  Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of IPEC, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities IPEC owns, directly or indirectly through one
or more subsidiaries, there are no equity securities, partnership interests or
similar ownership interests of any class of any subsidiary of IPEC, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which IPEC or any of its subsidiaries is a party
or by which it is bound obligating IPEC or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
IPEC or any of its subsidiaries or obligating IPEC or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of IPEC, as of the date of this Agreement, there
are no voting trusts, proxies or other agreements or
 
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<PAGE>   206
 
understandings with respect to any equity security of any class of IPEC or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
 
Section 2.4.  Authority.  (a) IPEC has all requisite corporate power and
authority to enter into this Agreement and the IPEC Stock Option Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, and the execution and delivery of the IPEC Stock Option
Agreement and the consummation of the transactions contemplated thereby, have
been duly authorized by all necessary corporate action on the part of IPEC,
subject only to the approval and adoption of this Agreement and the approval of
the Merger by IPEC's stockholders and the filing and recordation of the
Certificate of Merger pursuant to Delaware Law. The affirmative vote of at least
a majority of the votes entitled to be cast by the outstanding shares of the
IPEC Regular Common Stock and the IPEC Class A Common Stock, voting as a single
class, is required for IPEC's stockholders to approve and adopt this Agreement
and approve the Merger. No stockholders of any class or series of capital stock
of IPEC are entitled to vote as a separate class or series to approve and adopt
this Agreement and the Merger. This Agreement and the IPEC Stock Option
Agreement have been duly executed and delivered by IPEC and, assuming the due
authorization, execution and delivery by SpeedFam and, if applicable, Merger
Sub, constitute valid and binding obligations of IPEC, enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement and the IPEC Stock Option Agreement by
IPEC do not, and the performance of this Agreement and the IPEC Stock Option
Agreement by IPEC will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of IPEC or the equivalent organizational documents of
any of its subsidiaries, (ii) subject to compliance with the requirements set
forth in Section 2.4(b) below and, with respect to this Agreement only,
obtaining the approval and adoption of this Agreement and the approval of the
Merger by IPEC's stockholders as contemplated in Section 5.2, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to IPEC
or any of its subsidiaries or by which its or any of their respective properties
is bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair IPEC's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of IPEC or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which IPEC or any of its subsidiaries is a party or by which IPEC
or any of its subsidiaries or its or any of their respective properties are
bound or affected. None of the execution and delivery of this Agreement and the
IPEC Stock Option Agreement, the performance of this Agreement and the IPEC
Stock Option Agreement, the consummation of the Merger of the issuance of the
IPEC Common Stock under the IPEC Stock Option Agreement will constitute a
"Fundamental Change," as such term is used in the IPEC Convertible Notes. The
IPEC Schedules list all material consents, waivers and approvals under any of
IPEC's or any of its subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
 
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or
 
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<PAGE>   207
 
instrumentality, foreign or domestic ("Governmental Entity"), is required by or
with respect to IPEC in connection with the execution and delivery of this
Agreement and the IPEC Stock Option Agreement or the consummation of the Merger,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (ii) the filing of the Proxy Statement (as
defined in Section 2.19) with the Securities and Exchange Commission ("SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the securities or antitrust laws of any foreign
country, and (iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to IPEC or
SpeedFam or have a material adverse effect on the ability of the parties to
consummate the Merger.
 
Section 2.5.  SEC Filings; IPEC Financial Statements.  (a) IPEC has filed all
forms, reports and documents required to be filed with the SEC since January 1,
1995, and has made available to SpeedFam such forms, reports and documents in
the form filed with the SEC. All such required forms, reports and documents
(including those that IPEC may file subsequent to the date hereof) are referred
to herein as the "IPEC SEC Reports." As of their respective dates, the IPEC SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
IPEC SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of IPEC's subsidiaries is required to file any forms,
reports or other documents with the SEC. IPEC meets the registrant requirements
for use of Form S-3 under the Securities Act.
 
(b) Each of the consolidated financial statements (including, in each case, any
related notes thereto) contained in IPEC SEC Reports (the "IPEC Financials"),
including any IPEC SEC Reports filed after the date hereof until the Closing,
(x) complied or will comply, as the case may be, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (y) was or will be, as the case may be, prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act) and (z) fairly presented or will
fairly present, as the case may be, the consolidated financial position of IPEC
and its subsidiaries as at the respective dates thereof and the consolidated
results of IPEC's operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments. The balance sheet of IPEC contained in IPEC
SEC Reports as of September 30, 1998 is hereinafter referred to as the "IPEC
Balance Sheet." Except as disclosed in the IPEC Financials, since the date of
the IPEC Balance Sheet neither IPEC nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent, unknown or otherwise) of a nature
which, if known, would be required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of IPEC and its subsidiaries taken
as a whole, except liabilities
 
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<PAGE>   208
 
(i) provided for in the IPEC Balance Sheet, or (ii) incurred since the date of
the IPEC Balance Sheet in the ordinary course of business consistent with past
practices and immaterial in the aggregate.
 
(c) IPEC has heretofore furnished to SpeedFam a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed pursuant to the Exchange Act, to agreements,
documents or other instruments which previously had been filed by IPEC with the
SEC pursuant to the Securities Act or the Exchange Act.
 
Section 2.6.  Absence of Certain Changes or Events.  Since the date of the IPEC
Balance Sheet through the date of this Agreement, there has not been: (i) any
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition or results of operations of
IPEC and its subsidiaries taken as a whole, (ii) any material change by IPEC in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP and described in the IPEC Schedules, or (iii) any
material revaluation by IPEC of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
 
Section 2.7. Taxes.
 
(a) Definition of Taxes.  For the purposes of this Agreement, "Tax" or "Taxes"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
 
(b) Tax Returns and Audits.  (i) IPEC and each of its subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to Taxes required to be filed by
IPEC and each of its subsidiaries, except such Returns which are not material to
IPEC, and have paid all Taxes shown to be due on such Returns.
 
          (ii) Except as is not material to IPEC, IPEC and each of its
     subsidiaries as of the Effective Time will have withheld with respect to
     its employees all federal and state income taxes, FICA, FUTA and other
     Taxes required to be withheld.
 
          (iii) Except as is not material to IPEC, neither IPEC nor any of its
     subsidiaries has been delinquent in the payment of any Tax nor is there any
     Tax deficiency outstanding, proposed or assessed against IPEC or any of its
     subsidiaries, nor has IPEC or any of its subsidiaries executed any waiver
     of any statute of limitations on or extending the period for the assessment
     or collection of any Tax.
 
          (iv) Except as is not material to IPEC, no audit or other examination
     of any Return of IPEC or any of its subsidiaries is presently in progress,
     nor has IPEC or any of its subsidiaries been notified of any request for
     such an audit or other examination.
 
          (v) Except as is not material to IPEC, no adjustment relating to any
     Returns filed by IPEC or any of its subsidiaries has been proposed formally
     or informally by
 
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<PAGE>   209
 
     any Tax authority to IPEC or any of its subsidiaries or any representative
     thereof and, to the knowledge of IPEC, no basis exists for any such
     adjustment which would be material to IPEC.
 
          (vi) Neither IPEC nor any of its subsidiaries has any liability for
     unpaid Taxes which has not been accrued for or reserved on the IPEC Balance
     Sheet, whether asserted or unasserted, contingent or otherwise, which is
     material to IPEC.
 
          (vii) None of IPEC's assets are treated as "tax-exempt use property"
     within the meaning of Section 168(h) of the Code.
 
          (viii) There is no contract, agreement, plan or arrangement, including
     but not limited to the provisions of this Agreement, covering any employee
     or former employee of IPEC or any of its subsidiaries that, individually or
     collectively, could give rise to the payment of any amount that would not
     be deductible pursuant to Sections 280G, 404 or 162 of the Code.
 
          (ix) Neither IPEC nor any of its subsidiaries has filed any consent
     agreement under Section 341(f) of the Code or agreed to have Section
     341(f)(2) of the Code apply to any disposition of a subsection (f) asset
     (as defined in Section 341(f)(4) of the Code) owned by IPEC.
 
          (x) IPEC is not, and has not been at any time, a "United States real
     property holding corporation" within the meaning of Section 897(c)(2) of
     the Code.
 
          (xi) No power of attorney that is currently in force has been granted
     with respect to any matter relating to Taxes payable by IPEC or any of its
     subsidiaries.
 
          (xii) Neither IPEC nor any of its subsidiaries is party to or affected
     by any tax-sharing or allocation agreement or arrangement.
 
          (xiii) The IPEC Schedules list (y) any Tax exemption, Tax holiday or
     other Tax-sharing arrangement that IPEC or any of its subsidiaries has in
     any jurisdiction, including the nature, amount and lengths of such Tax
     exemption, Tax holiday or other Tax-sharing arrangement and (z) any
     expatriate tax programs or policies affecting IPEC or any of its
     subsidiaries. Each of IPEC and its subsidiaries is in full compliance with
     all terms and conditions of any Tax exemption, Tax holiday or other
     Tax-sharing arrangement or order of any Governmental Entity and the
     consummation of the transactions contemplated hereby will not have any
     adverse effect on the continued validity and effectiveness of any such Tax
     exemption, Tax holiday or other Tax-sharing arrangement or order.
 
Section 2.8.  Intellectual Property.  (a) To IPEC's knowledge, IPEC and its
subsidiaries own, or have the right to use, sell or license all intellectual
property rights being used, necessary or required for the conduct of their
respective businesses as presently conducted (such intellectual property rights
are collectively referred to herein as the "IPEC IP Rights").
 
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any IPEC IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any IPEC IP Rights or materially impair the right
of IPEC, the Surviving Corporation or SpeedFam to use, sell or license any IPEC
IP Rights or portion thereof.
 
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<PAGE>   210
 
(c) To IPEC's knowledge, neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by IPEC or any of its subsidiaries violates in any material respect
any license or agreement between IPEC or any of its subsidiaries and any third
party or infringes in any material respect any intellectual property right of
any other party; and there is no pending or, to the knowledge of IPEC,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any IPEC IP Rights, nor has IPEC received any
written notice asserting that any IPEC IP Rights or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the rights of any
other party.
 
(d) IPEC has taken reasonable and practicable steps designed to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in, all
those IPEC IP Rights requiring confidentiality.
 
Section 2.9.  Compliance; Permits; Restrictions.  (a) Neither IPEC nor any of
its subsidiaries is in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to IPEC or any of its
subsidiaries or by which IPEC or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which IPEC or any of its subsidiaries is a party or
by which IPEC or any of its subsidiaries or its or any of their respective
properties is bound or affected, which conflict, default, or violation has or
could reasonably be expected to have the effect of materially impairing the
business of IPEC together with its subsidiaries. To the knowledge of IPEC, no
investigation or review by any Governmental Entity is pending or threatened
against IPEC or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no material agreement,
judgment, injunction, order or decree binding upon IPEC or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of IPEC or any of its
subsidiaries, any acquisition of material property by IPEC or any of its
subsidiaries or the conduct of business by IPEC as currently conducted.
 
(b) IPEC and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to the
operation of the business of IPEC (collectively, the "IPEC Permits"). IPEC and
its subsidiaries are in compliance in all material respects with the terms of
the IPEC Permits.
 
Section 2.10.  Litigation.  There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which IPEC or any of its
subsidiaries has received any notice of assertion nor, to IPEC's knowledge, is
there a threatened action, suit, proceeding, claim, arbitration or investigation
against IPEC or any of its subsidiaries which reasonably would be likely to be
material to IPEC, or which in any manner challenges or seeks to prevent, enjoin,
alter or delay any of the transactions contemplated by this Agreement.
 
Section 2.11.  Brokers' and Finders' Fees.  Except for fees payable to Morgan
Stanley & Co. pursuant to an engagement letter effective November 18, 1998, a
copy of which has been provided to SpeedFam, IPEC has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
 
Section 2.12.  Employee Benefit Plans.  (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of
 
                                      A-15
<PAGE>   211
 
1974, as amended ("ERISA")) maintained or contributed to by IPEC or any trade or
business (an "ERISA Affiliate") which is under common control with IPEC within
the meaning of Section 414 of the Code (the "IPEC Employee Plans"), IPEC has
made available to SpeedFam a true and complete copy of, to the extent
applicable, (i) such IPEC Employee Plan, (ii) the most recent annual report
(Form 5500), (iii) each trust agreement related to such IPEC Employee Plan, (iv)
the most recent summary plan description for each IPEC Employee Plan for which
such a description is required, (v) the most recent actuarial report relating to
any IPEC Employee Plan subject to Title IV of ERISA and (vi) the most recent
United States Internal Revenue Service ("IRS") determination letter issued with
respect to any IPEC Employee Plan.
 
(b) Each IPEC Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination from the IRS covering
the provisions of the Tax Reform Act of 1986 stating that such IPEC Employee
Plan is so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to affect the qualified status of such plan. Each
IPEC Employee Plan has been operated in all material respects in accordance with
its terms and the requirements of applicable law. Neither IPEC nor any ERISA
Affiliate of IPEC has incurred or is reasonably expected to incur any material
liability under Title IV of ERISA in connection with any IPEC Employee Plan.
There have been no non-exempt prohibited transactions (as described in Section
406 of ERISA or Section 4975 of the Code) with respect to any IPEC Employee
Plan. As to any IPEC Employee Plan which is subject to Title IV of ERISA, there
have been no "reportable events" as defined in Section 4043 of ERISA, no steps
have been taken by IPEC or any ERISA Affiliate or the Pension Benefit Guaranty
Corporation to terminate any such plan and no event or condition has occurred
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer any such plan. There have been
no acts or omission by IPEC or any ERISA Affiliate which have given rise to or
may give rise to fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code, for which IPEC may be
liable. There are no actions, suits or claims (other than routine claims for
benefits) pending or threatened involving such plans or the assets of such
plans, and no facts exist which could give rise to any such actions, suits or
claims (other than routine claims for benefits). Actuarially adequate accruals
for all obligations under such plans, arrangements and agreements are reflected
in the balance sheet of IPEC. No such plan is a multiemployer plan as defined in
3(37) of ERISA and neither IPEC nor any ERISA Affiliate has ever contributed to
or had an obligation to contribute to any multiemployer plan.
 
Section 2.13.  Absence of Liens and Encumbrances.  IPEC and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the IPEC Financials
and except for liens for taxes not yet due and payable, inchoate, mechanics and
materialmen's liens and such imperfections of title and encumbrances, if any,
which would not be material to IPEC.
 
Section 2.14.  Environmental Matters.
 
(a) Hazardous Material.  Except as reasonably would not be likely to result in a
material liability to IPEC, no underground storage tanks, landfills or waste
improvements, and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a
 
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<PAGE>   212
 
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, (a "Hazardous Material"),
but excluding office and janitorial supplies, are present, or have been
released, as a result of the actions of IPEC or any of its subsidiaries or any
affiliate of IPEC, or, to IPEC's knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that IPEC or any of
its subsidiaries has at any time owned, operated, occupied or leased.
 
(b) Hazardous Materials Activities.  Except as reasonably would not be likely to
result in a material liability to IPEC, neither IPEC nor any of its subsidiaries
has transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, nor has IPEC or any of its subsidiaries disposed
of, transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
 
(c) Permits.  IPEC and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "IPEC Environmental
Permits") necessary for the conduct of IPEC's and its subsidiaries' Hazardous
Material Activities and other businesses of IPEC and its subsidiaries as such
activities and businesses are currently being conducted.
 
(d) Environmental Liabilities.  No material action, proceeding, investigation,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to IPEC's knowledge, threatened concerning any IPEC Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of IPEC or any of
its subsidiaries. IPEC is not aware of any fact or circumstance which could
involve IPEC or any of its subsidiaries in any material environmental litigation
or impose upon IPEC any material environmental liability.
 
Section 2.15.  Labor Matters.  To IPEC's knowledge, there are no activities or
proceedings of any labor union to organize any employees of IPEC or any of its
subsidiaries and there are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any employees of IPEC or any
of its subsidiaries. IPEC and its subsidiaries are and have been in compliance
in all material respects with all applicable laws regarding employment
practices, terms and conditions of employment, and wages and hours (including,
without limitation, ERISA, WARN or any similar state or local law).
 
Section 2.16.  Agreements, Contracts and Commitments.  Except as set forth in
the IPEC Schedules, neither IPEC nor any of its subsidiaries is a party to or is
bound by:
 
          (a) any employment or consulting agreement, contract or commitment
     with any officer or director level employee or member of IPEC's Board of
     Directors, other than those that are terminable by IPEC or any of its
     subsidiaries on no more than thirty days notice without liability or
     financial obligation, except to the extent general
 
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<PAGE>   213
 
     principles of wrongful termination law may limit IPEC's or any of its
     subsidiaries' ability to terminate employees at will;
 
          (b) any agreement or plan, including, without limitation, any stock
     option plan, stock appreciation right plan or stock purchase plan, any of
     the benefits of which will be increased, or the vesting of benefits of
     which will be accelerated, by the occurrence of any of the transactions
     contemplated by this Agreement or the value of any of the benefits of which
     will be calculated on the basis of any of the transactions contemplated by
     this Agreement;
 
          (c) any agreement of indemnification or guaranty not entered into in
     the ordinary course of business including any indemnification agreements
     between IPEC or any of its subsidiaries and any of its officers or
     directors;
 
          (d) any agreement, contract or commitment containing any covenant
     limiting the freedom of IPEC or any of its subsidiaries to engage in any
     line of business or compete with any person or granting any exclusive
     distribution rights;
 
          (e) any agreement, contract or commitment currently in force relating
     to the disposition or acquisition of assets not in the ordinary course of
     business or any ownership interest in any corporation, partnership, joint
     venture or other business enterprise;
 
          (f) any material joint marketing or development agreement; or
 
          (g) any material agreement relating to the sale or purchase of any
     business or business assets providing for payment of any deferred or
     contingent consideration by IPEC or providing for indemnification by IPEC.
 
Neither IPEC nor any of its subsidiaries, nor to IPEC's knowledge any other
party to an IPEC Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which IPEC or any of its subsidiaries is a party or
by which it is bound of the type described in clauses (a) through (g) above (any
such agreement, contract or commitment, an "IPEC Contract") in such a manner as
would permit any other party to cancel or terminate any such IPEC Contract, or
would permit any other party to seek damages, which would be reasonably likely
to be material to IPEC.
 
Section 2.17.  Pooling of Interests.  To the knowledge of IPEC, based on
consultation with its independent accountants, neither IPEC nor any of its
directors, officers, affiliates or stockholders has taken any action which would
preclude SpeedFam's ability to account for the Merger as a pooling of interests.
 
Section 2.18.  Change of Control Payments.  The IPEC Schedules set forth each
plan or agreement pursuant to which any material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of IPEC as a result of or in connection with the Merger.
 
Section 2.19.  Statements; Proxy Statement/Prospectus.  The information supplied
by IPEC for inclusion in the Registration Statement (as defined in Section
3.4(b) hereof) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by IPEC for inclusion in the
proxy statement/prospectus to be sent to the stockholders of IPEC and
 
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<PAGE>   214
 
shareholders of SpeedFam in connection with the meeting of IPEC's stockholders
to consider the approval and adoption of this Agreement and the approval of the
Merger (the "IPEC Stockholders' Meeting") and in connection with the meeting of
SpeedFam's shareholders to consider the approval of (i) the issuance of shares
of SpeedFam Common Stock by virtue of the Merger, (ii) the amendment of
SpeedFam's Articles of Incorporation to change SpeedFam's corporate name
(subject to and conditional upon the effectiveness of the Merger), and (iii) the
approval of any stock option or similar plan necessary for compliance with
applicable laws and regulations and to preserve the benefits of such plans as
they exist prior to the Merger with respect to IPEC, to the extent required by
Section 5.11 of this Agreement (subject to and conditional upon the
effectiveness of the Merger), (the "SpeedFam Shareholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed to
IPEC's stockholders and SpeedFam's shareholders, at the time of the IPEC
Stockholders' Meeting or the SpeedFam Shareholders' Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the IPEC Stockholders' Meeting or the SpeedFam Shareholders' Meeting
which has become false or misleading. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder. If at any time prior to the Effective Time, any
event relating to IPEC or any of its affiliates, officers or directors should be
discovered by IPEC which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, IPEC shall promptly inform
SpeedFam. Notwithstanding the foregoing, IPEC makes no representation or
warranty with respect to any information supplied by SpeedFam or Merger Sub
which is contained in any of the foregoing documents.
 
Section 2.20.  Board Approval.  The Board of Directors of IPEC has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of IPEC and its stockholders, and (ii) to recommend that the
stockholders of IPEC approve and adopt this Agreement and approve the Merger.
 
Section 2.21.  Fairness Opinion.  IPEC has received a written opinion from
Morgan Stanley & Co., dated as of the date hereof, addressed to IPEC's
stockholders, to the effect that as of the date hereof, the Exchange Ratio is
fair to IPEC's stockholders from a financial point of view and has delivered to
SpeedFam a copy of such opinion. This representation is made only at the date of
this Agreement.
 
Section 2.22.  Section 203 of the Delaware General Corporation Law Not
Applicable; State Takeover Statutes.  The Board of Directors of IPEC has taken
all actions so that the restrictions contained in Section 203 of Delaware Law
applicable to a "business combination" (as defined in such Section 203) will not
apply to the execution, delivery or performance of this Agreement or the Stock
Option Agreements or to the consummation of the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreements. To the knowledge
of IPEC, no other state takeover statute is applicable to the Merger or the
other transactions contemplated hereby and by the Stock Option Agreements.
 
Section 2.23.  IPEC Rights Plan.  The IPEC Rights Plan has been amended (the
"IPEC Rights Plan Amendment") to (i) render the IPEC Rights Plan inapplicable to
the Merger
 
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<PAGE>   215
 
and the other transactions contemplated by this Agreement and the Stock Option
Agreements and (ii) ensure that (x) none of Merger Sub, SpeedFam, SpeedFam's
subsidiaries, or SpeedFam's permitted assignees or transferees under the IPEC
Stock Option Agreement is, or will become an Acquiring Person (as defined in the
IPEC Rights Plan) pursuant to the IPEC Rights Plan by reason of the execution of
this Agreement and the Stock Option Agreements and the consummation of the
transactions contemplated by this Agreement and the Stock Option Agreements and
the consummation of the Merger, or the consummation of the other transactions
contemplated by this Agreement and the Stock Option Agreements, (y) a
Distribution Date, a Triggering Event or Shares Acquisition Date (as such terms
are defined in the IPEC Rights Plan) does not occur by reason of the execution
of this Agreement and the Stock Option Agreements and the consummation of the
transactions contemplated by this Agreement and the Stock Option Agreements and
the consummation of the Merger, or the consummation of the other transactions
contemplated by this Agreement and the Stock Option Agreements, and (z) the IPEC
Rights Plan and all Rights thereunder shall terminate at the Effective Time of
the Merger, and such amendment may not be further amended by IPEC without the
prior written consent of SpeedFam in its sole discretion.
 
                                  ARTICLE III
 
           REPRESENTATIONS AND WARRANTIES OF SPEEDFAM AND MERGER SUB
 
SpeedFam and Merger Sub represent and warrant to IPEC, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by SpeedFam
to IPEC dated as of the date hereof and certified by a duly authorized officer
of SpeedFam (the "SpeedFam Schedules"), as follows:
 
Section 3.1.  Organization of SpeedFam.  (a) SpeedFam and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted and as proposed to be
conducted; and is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined below) on
SpeedFam.
 
(b) SpeedFam has delivered to IPEC a true and complete list of all of SpeedFam's
subsidiaries, indicating the jurisdiction of incorporation of each subsidiary
and SpeedFam's equity interest therein.
 
(c) SpeedFam has delivered or made available to IPEC a true and correct copy of
the Articles of Incorporation and Bylaws of SpeedFam and similar governing
instruments of each of its subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither SpeedFam nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent governing instruments.
 
(d) When used in connection with SpeedFam, the term "Material Adverse Effect"
means, for purposes of this Agreement, any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of SpeedFam and its subsidiaries
taken as a whole (except for those changes, events and effects that are directly
caused by (i) conditions affecting the worldwide economy as a whole; or (ii)
conditions affecting either the semiconductor, thin film memory disk or
 
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<PAGE>   216
 
silicon wafer capital equipment manufacturing industry, in either such case as a
whole, which conditions (in the case of clause (i) or (ii) do not affect
SpeedFam in a disproportionate manner); or (iii) any adverse effect (A) on the
bookings or revenues of SpeedFam (or the direct consequences thereof) following
the date of this Agreement which is primarily attributable to a delay,
reduction, cancellation or change in the terms of product orders by customers of
SpeedFam or (B) due to employee attrition of SpeedFam, where such delay,
reduction, cancellation, change or attrition is primarily attributable to the
transactions contemplated by this Agreement or the pendency or announcement of
the Merger. A change in the market price of SpeedFam Common Stock shall not, in
and of itself, be deemed a Material Adverse Effect with respect to SpeedFam.
 
Section 3.2.  SpeedFam and Merger Sub Capital Structure.  The authorized capital
stock of SpeedFam consists of 60,000,000 shares of Common Stock, without par
value of which there were 16,139,742 shares issued and outstanding as of
November 2, 1998, no shares held in the treasury of SpeedFam; and 1,000,000
shares of Preferred Stock, without par value, of which no shares are issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of Common Stock, without par value, all of which, as of the date hereof, are
issued and outstanding and are held by SpeedFam. Merger Sub was formed on
November 2, 1998, for the purpose of consummating the Merger and has no material
assets or liabilities except as necessary for such purpose. All outstanding
shares of SpeedFam Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by statute,
the Articles of Incorporation or Bylaws of SpeedFam or any agreement or document
to which SpeedFam is a party or by which it is bound. As of November 2, 1998,
SpeedFam had remaining a reserve of an aggregate of 807,303 shares, 1,792,600
shares and 772,520 shares, respectively, of SpeedFam Common Stock for issuance
to employees, and non-employee directors pursuant to the SpeedFam 1991 Employee
Incentive Stock Option Plan (the "SpeedFam 1991 Stock Option Plan"), the
SpeedFam 1995 Stock Plan for Employees and Directors (the "SpeedFam 1995 Stock
Option Plan") and the SpeedFam 1995 Employee Stock Purchase Plan (the "SpeedFam
Employee Stock Purchase Plan"). The SpeedFam 1991 Stock Option Plan and the
SpeedFam 1995 Stock Option Plan are referred to collectively as (the "SpeedFam
Stock Option Plans"). The SpeedFam Schedules list for each person who held
options to acquire shares of SpeedFam Common Stock at November 5, 1998, the name
of the holder of such option, the number of shares subject to such option, the
exercise price of such option, the number of shares as to which such option will
have vested at such date, the vesting schedule for such option and whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicate the extent of acceleration, if any.
 
Section 3.3.  Obligations With Respect to Capital Stock.  Except as set forth in
Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of SpeedFam, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities SpeedFam owns, directly or indirectly through
one or more subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any subsidiary of SpeedFam, or
any security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 3.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which SpeedFam or
 
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<PAGE>   217
 
any of its subsidiaries is a party or by which it is bound obligating SpeedFam
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of SpeedFam or any of its
subsidiaries or obligating SpeedFam or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration rights
and, to the knowledge of SpeedFam, as of the date of this Agreement, there are
no voting trusts, proxies or other agreements or understandings with respect to
any equity security of any class of SpeedFam or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries.
 
Section 3.4.  Authority.  (a) Each of SpeedFam and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby and SpeedFam has all requisite corporate power
and authority to enter into the SpeedFam Stock Option Agreement and to
consummate the transactions contemplated thereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
the execution and delivery of the SpeedFam Stock Option Agreement and the
consummation of the transactions contemplated thereby, have been duly authorized
by all necessary corporate action on the part of SpeedFam and, in the case of
this Agreement, Merger Sub, subject only to the filing and recordation of the
Certificate of Merger pursuant to Delaware Law, the filing of Articles of
Amendment to the Articles of Incorporation of SpeedFam pursuant to Illinois Law,
and the approval by SpeedFam's shareholders of (i) the issuance of shares of
SpeedFam Common Stock by virtue of the Merger, (ii) the amendment of SpeedFam's
Articles of Incorporation to change SpeedFam's corporate name (subject to and
conditional upon the effectiveness of the Merger), and (iii) the approval of any
stock option or similar plan necessary for compliance with applicable laws and
regulations and to preserve the benefits of such plans as they exist prior to
the Merger, to the extent required by Section 5.11 of this Agreement (subject to
and conditional upon the effectiveness of the Merger). A vote of the holders of
at least a majority of the outstanding shares of the SpeedFam Common Stock is
required for SpeedFam's shareholders to approve each of (i) the issuance of
shares of SpeedFam Common Stock by virtue of the Merger, (ii) the amendment of
SpeedFam's Articles of Incorporation to change SpeedFam's corporate name
(subject to and conditional upon the effectiveness of the Merger), and (iii) the
approval of any stock option or similar plan necessary for compliance with
applicable laws and regulations and to preserve the benefits of such plans as
they exist prior to the Merger, to the extent required by Section 5.11 of this
Agreement (subject to and conditional upon the effectiveness of the Merger).
This Agreement has been duly executed and delivered by each of SpeedFam and
Merger Sub and, assuming the due authorization, execution and delivery by IPEC,
constitutes the valid and binding obligation of SpeedFam, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The SpeedFam Stock
Option Agreement has been duly executed and delivered by SpeedFam and, assuming
the due authorization, execution and delivery of the SpeedFam Stock Option
Agreement by IPEC, the SpeedFam Stock Option Agreement constitutes the valid and
binding obligation of SpeedFam, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
each of SpeedFam and Merger Sub and the execution and delivery of the SpeedFam
Stock Option Agreement by SpeedFam do not, and the performance of this Agreement
by each of SpeedFam and Merger Sub will not
 
                                      A-22
<PAGE>   218
 
and the performance of the SpeedFam Stock Option Agreement by SpeedFam will not,
(i) conflict with or violate the Articles of Incorporation or Bylaws of SpeedFam
or the Certificate of Incorporation or Bylaws of Merger Sub or the equivalent
organizational documents of any of SpeedFam's other subsidiaries, (ii) subject
to compliance with the requirements set forth in Section 3.4(b) below and with
respect to this Agreement only, obtaining the approval of SpeedFam's
shareholders of (x) the issuance of shares of SpeedFam Common Stock by virtue of
the Merger, (y) the amendment of SpeedFam's Articles of Incorporation to change
SpeedFam's corporate name (subject to and conditional upon the effectiveness of
the Merger), and (z) any stock option or similar plan, necessary for compliance
with applicable laws and regulations and to preserve the benefits of such plans
as they exist prior to the Merger, to the extent required by Section 5.11 of
this Agreement (subject to and conditional upon the effectiveness of the Merger)
as contemplated in Section 5.2, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to SpeedFam or any of its
subsidiaries (including Merger Sub) or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair SpeedFam's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of SpeedFam or any of its
subsidiaries (including Merger Sub) pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which SpeedFam or any of its subsidiaries
(including Merger Sub) is a party or by which SpeedFam or any of its
subsidiaries or its or any of their respective properties are bound or affected.
The SpeedFam Schedules list all material consents, waivers and approvals under
any of SpeedFam's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby.
 
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to SpeedFam or Merger Sub in connection with the execution and delivery
of this Agreement and the SpeedFam Stock Option Agreement or the consummation of
the Merger, except for (i) the filing of a Form S-4 Registration Statement (the
"Registration Statement") with the SEC in accordance with the Securities Act,
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware, (iii) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the HSR Act and the securities
or antitrust laws of any foreign country, and (v) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to SpeedFam or IPEC or have a material adverse effect
on the ability of the parties to consummate the Merger.
 
Section 3.5.  SEC Filings; SpeedFam Financial Statements.  (a) SpeedFam has
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1996, and has made available to IPEC such forms, reports and
documents in the form filed with the SEC. All such required forms, reports and
documents (including those that SpeedFam may file subsequent to the date hereof)
are referred to herein as the "SpeedFam SEC Reports." As of their respective
dates, the SpeedFam SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such SpeedFam
 
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<PAGE>   219
 
SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of SpeedFam's subsidiaries is required to file any
forms, reports or other documents with the SEC. SpeedFam meets the registrant
requirements for use of Form S-3 under the Securities Act.
 
(b) Each of the consolidated financial statements (including, in each case, any
related notes thereto) contained in SpeedFam SEC Reports (the "SpeedFam
Financials"), including any SpeedFam SEC Reports filed after the date hereof
until the Closing, (x) complied or will comply, as the case may be, as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (y) was or will be, as the case may be, prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) fairly presented or will fairly present, as
the case may be, the consolidated financial position of SpeedFam and its
subsidiaries as at the respective dates thereof and the consolidated results of
SpeedFam's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments. The balance sheet of SpeedFam contained in
SpeedFam SEC Reports as of August 31, 1998 is hereinafter referred to as the
"SpeedFam Balance Sheet." Except as disclosed in the SpeedFam Financials, since
the date of the SpeedFam Balance Sheet neither SpeedFam nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent, unknown or
otherwise) of a nature which, if known, would be required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are, individually or in the aggregate,
material to the business, results of operations or financial condition of
SpeedFam and its subsidiaries taken as a whole, except liabilities (i) provided
for in the SpeedFam Balance Sheet, or (ii) incurred since the date of the
SpeedFam Balance Sheet in the ordinary course of business consistent with past
practices and immaterial in the aggregate.
 
(c) SpeedFam has heretofore furnished to IPEC a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed pursuant to the Exchange Act, to agreements,
documents or other instruments which previously had been filed by SpeedFam with
the SEC pursuant to the Securities Act or the Exchange Act.
 
Section 3.6.  Absence of Certain Changes or Events.  Since the date of the
SpeedFam Balance Sheet through the date of this Agreement, there has not been:
(i) any change, event or effect that is materially adverse to the business,
assets (including intangible assets), financial condition or results of
operations of SpeedFam and its subsidiaries taken as a whole, (ii) any material
change by SpeedFam in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP and described in the SpeedFam Schedules,
or (iii) any material revaluation by SpeedFam of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
 
Section 3.7.  Taxes.
 
(a) Tax Returns and Audits.  (i) SpeedFam and each of its subsidiaries have
timely filed all Returns relating to Taxes required to be filed by SpeedFam and
each of its subsidiaries,
 
                                      A-24
<PAGE>   220
 
except such Returns which are not material to SpeedFam, and have paid all Taxes
shown to be due on such Returns.
 
(ii) Except as is not material to SpeedFam, SpeedFam and each of its
subsidiaries as of the Effective Time will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
 
(iii) Except as is not material to SpeedFam, neither SpeedFam nor any of its
subsidiaries has been delinquent in the payment of any Tax nor is there any Tax
deficiency outstanding, proposed or assessed against SpeedFam or any of its
subsidiaries, nor has SpeedFam or any of its subsidiaries executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
 
(iv) Except as is not material to SpeedFam, no audit or other examination of any
Return of SpeedFam or any of its subsidiaries is presently in progress, nor has
SpeedFam or any of its subsidiaries been notified of any request for such an
audit or other examination.
 
(v) Except as is not material to SpeedFam, no adjustment relating to any Returns
filed by SpeedFam or any of its subsidiaries has been proposed formally or
informally by any Tax authority to SpeedFam or any of its subsidiaries or any
representative thereof and, to the knowledge of SpeedFam, no basis exists for
any such adjustment which would be material to SpeedFam.
 
(vi) Neither SpeedFam nor any of its subsidiaries has any liability for unpaid
Taxes which has not been accrued for or reserved on the SpeedFam Balance Sheet,
whether asserted or unasserted, contingent or otherwise, which is material to
SpeedFam.
 
(vii) None of SpeedFam's assets are treated as "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
 
(viii) There is no contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of SpeedFam or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162 of the Code.
 
(ix) Neither SpeedFam nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by SpeedFam.
 
(x) SpeedFam is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
 
(xi) No power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes payable by SpeedFam or any of its
subsidiaries.
 
(xii) Neither SpeedFam nor any of its subsidiaries is party to or affected by
any taxsharing or allocation agreement or arrangement.
 
(xiii) The SpeedFam Schedules list (y) any Tax exemption, Tax holiday or other
Tax-sharing arrangement that SpeedFam or any of its subsidiaries has in any
jurisdiction, including the nature, amount and lengths of such Tax exemption,
Tax holiday or other Tax-sharing arrangement and (z) any expatriate tax programs
or policies affecting SpeedFam or any of its subsidiaries. Each of SpeedFam and
its subsidiaries is in full compliance with all terms and conditions of any Tax
exemption, Tax holiday or other Tax-sharing arrangement or order of any
Governmental Entity and the consummation of the
 
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<PAGE>   221
 
transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sharing arrangement or order.
 
Section 3.8.  Intellectual Property.  (a) To SpeedFam's knowledge, SpeedFam and
its subsidiaries own, or have the right to use, sell or license all intellectual
property rights being used, necessary or required for the conduct of their
respective businesses as presently conducted (such intellectual property rights
are collectively referred to herein as the "SpeedFam IP Rights").
 
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any SpeedFam IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any SpeedFam IP Rights or materially impair the
right of SpeedFam, the Surviving Corporation or IPEC to use, sell or license any
SpeedFam IP Rights or portion thereof.
 
(c) To SpeedFam's knowledge, neither the manufacture, marketing, license, sale
or intended use of any product or technology currently licensed or sold or under
development by SpeedFam or any of its subsidiaries violates in any material
respect any license or agreement between SpeedFam or any of its subsidiaries and
any third party or infringes in any material respect any intellectual property
right of any other party; and there is no pending or, to the knowledge of
SpeedFam, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any SpeedFam IP Rights, nor has
SpeedFam received any written notice asserting that any SpeedFam IP Rights or
the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party.
 
(d) SpeedFam has taken reasonable and practicable steps designed to safeguard
and maintain the secrecy and confidentiality of, and its proprietary rights in,
all those SpeedFam IP Rights requiring confidentiality.
 
Section 3.9.  Compliance; Permits; Restrictions.  (a) Neither SpeedFam nor any
of its subsidiaries is in conflict with, or in default or violation of (i) any
law, rule, regulation, order, judgment or decree applicable to SpeedFam or any
of its subsidiaries or by which SpeedFam or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which SpeedFam or any of its subsidiaries is a
party or by which SpeedFam or any of its subsidiaries or its or any of their
respective properties is bound or affected, which conflict, default, or
violation has or could reasonably be expected to have the effect of materially
impairing the business of SpeedFam together with its subsidiaries. To the
knowledge of SpeedFam, no investigation or review by any Governmental Entity is
pending or threatened against SpeedFam or any of its subsidiaries, nor has any
Governmental Entity indicated an intention to conduct the same. There is no
material agreement, judgment, injunction, order or decree binding upon SpeedFam
or any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of SpeedFam
or any of its subsidiaries, any acquisition of material property by SpeedFam or
any of its subsidiaries or the conduct of business by SpeedFam as currently
conducted.
 
(b) SpeedFam and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of SpeedFam (collectively, the
"SpeedFam Permits"). SpeedFam and its
 
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<PAGE>   222
 
subsidiaries are in compliance in all material respects with the terms of the
SpeedFam Permits.
 
Section 3.10.  Litigation.  There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which SpeedFam or any of its
subsidiaries has received any notice of assertion nor, to SpeedFam's knowledge,
is there a threatened action, suit, proceeding, claim, arbitration or
investigation against SpeedFam or any of its subsidiaries which reasonably would
be likely to be material to SpeedFam, or which in any manner challenges or seeks
to prevent, enjoin, alter or delay any of the transactions contemplated by this
Agreement.
 
Section 3.11.  Brokers' and Finders' Fees.  Except for fees payable to Lehman
Brothers pursuant to an engagement letter dated November 16, 1998, a copy of
which has been provided to IPEC, SpeedFam has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
 
Section 3.12.  Employee Benefit Plans.  (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of ERISA) maintained or
contributed to by SpeedFam or any trade or business which is under common
control with SpeedFam within the meaning of Section 414 of the Code (the
"SpeedFam Employee Plans"), SpeedFam has made available to IPEC a true and
complete copy of, to the extent applicable, (i) such SpeedFam Employee Plan,
(ii) the most recent annual report (Form 5500), (iii) each trust agreement
related to such SpeedFam Employee Plan, (iv) the most recent summary plan
description for each SpeedFam Employee Plan for which such a description is
required, (v) the most recent actuarial report relating to any SpeedFam Employee
Plan subject to Title IV of ERISA and (vi) the most recent IRS determination
letter issued with respect to any SpeedFam Employee Plan.
 
(b) Each SpeedFam Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination from the IRS covering
the provisions of the Tax Reform Act of 1986 stating that such SpeedFam Employee
Plan is so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to affect the qualified status of such plan. Each
SpeedFam Employee Plan has been operated in all material respects in accordance
with its terms and the requirements of applicable law. Neither SpeedFam nor any
ERISA Affiliate of SpeedFam has incurred or is reasonably expected to incur any
material liability under Title IV of ERISA in connection with any SpeedFam
Employee Plan. There have been no non-exempt prohibited transactions (as
described in Section 406 of ERISA or Section 4975 of the Code) with respect to
any SpeedFam Employee Plan. As to any SpeedFam Employee Plan which is subject to
Title IV of ERISA, there have been no "reportable events" as defined in Section
4043 of ERISA, no steps have been taken by SpeedFam or any ERISA Affiliate or
the Pension Benefit Guaranty Corporation to terminate any such plan and no event
or condition has occurred which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer any
such plan. There have been no acts or omission by SpeedFam or any ERISA
Affiliate which have given rise to or may give rise to fines, penalties, taxes
or related charges under Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43
of the Code, for which SpeedFam may be liable. There are no actions, suits or
claims (other than routine claims for benefits) pending or threatened involving
such plans or the assets of such plans, and no facts exist which could give rise
to any such actions, suits or claims (other than routine
 
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<PAGE>   223
 
claims for benefits). Actuarially adequate accruals for all obligations under
such plans, arrangements and agreements are reflected in the balance sheet of
SpeedFam. No such plan is a multiemployer plan as defined in 3(37) of ERISA and
neither SpeedFam nor any ERISA Affiliate has ever contributed to or had an
obligation to contribute to any multiemployer plan.
 
Section 3.13.  Absence of Liens and Encumbrances.  SpeedFam and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the SpeedFam
Financials and except for liens for taxes not yet due and payable, inchoate,
mechanics and materialmen's liens and such imperfections of title and
encumbrances, if any, which would not be material to SpeedFam.
 
Section 3.14.  Environmental Matters.
 
(a) Hazardous Material.  Except as reasonably would not be likely to result in a
material liability to SpeedFam, no underground storage tanks and no amount of
any Hazardous Material, but excluding office and janitorial supplies, are
present, as a result of the actions of SpeedFam or any of its subsidiaries or
any affiliate of SpeedFam, or, to SpeedFam's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that
SpeedFam or any of its subsidiaries has at any time owned, operated, occupied or
leased.
 
(b) Hazardous Materials Activities.  Except as reasonably would not be likely to
result in a material liability to SpeedFam, neither SpeedFam nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has SpeedFam or any of its
subsidiaries engaged in any Hazardous Materials Activities in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
 
(c) Permits.  SpeedFam and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "SpeedFam
Environmental Permits") necessary for the conduct of SpeedFam's and its
subsidiaries' Hazardous Material Activities and other businesses of SpeedFam and
its subsidiaries as such activities and businesses are currently being
conducted.
 
(d) Environmental Liabilities.  No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
SpeedFam's knowledge, threatened concerning any SpeedFam Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of SpeedFam or any of its
subsidiaries. SpeedFam is not aware of any fact or circumstance which could
involve SpeedFam or any of its subsidiaries in any material environmental
litigation or impose upon SpeedFam any material environmental liability.
 
Section 3.15.  Labor Matters.  To SpeedFam's knowledge, there are no activities
or proceedings of any labor union to organize any employees of SpeedFam or any
of its subsidiaries and there are no strikes, or material slowdowns, work
stoppages or lockouts, or threats thereof by or with respect to any employees of
SpeedFam or any of its subsidiaries. SpeedFam and its subsidiaries are and have
been in compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of
 
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<PAGE>   224
 
employment, and wages and hours (including, without limitation, ERISA, WARN or
any similar state or local law).
 
Section 3.16.  Agreements, Contracts and Commitments.  Except as set forth in
the SpeedFam Schedules, neither SpeedFam nor any of its subsidiaries is a party
to or is bound by:
 
          (a) any employment or consulting agreement, contract or commitment
     with any officer or director level employee or member of SpeedFam's Board
     of Directors, other than those that are terminable by SpeedFam or any of
     its subsidiaries on no more than thirty days notice without liability or
     financial obligation, except to the extent general principles of wrongful
     termination law may limit SpeedFam's or any of its subsidiaries' ability to
     terminate employees at will;
 
          (b) any agreement or plan, including, without limitation, any stock
     option plan, stock appreciation right plan or stock purchase plan, any of
     the benefits of which will be increased, or the vesting of benefits of
     which will be accelerated, by the occurrence of any of the transactions
     contemplated by this Agreement or the value of any of the benefits of which
     will be calculated on the basis of any of the transactions contemplated by
     this Agreement;
 
          (c) any agreement of indemnification or guaranty not entered into in
     the ordinary course of business including any indemnification agreements
     between SpeedFam or any of its subsidiaries and any of its officers or
     directors;
 
          (d) any agreement, contract or commitment containing any covenant
     limiting the freedom of SpeedFam or any of its subsidiaries to engage in
     any line of business or compete with any person or granting any exclusive
     distribution rights;
 
          (e) any agreement, contract or commitment currently in force relating
     to the disposition or acquisition of assets not in the ordinary course of
     business or any ownership interest in any corporation, partnership, joint
     venture or other business enterprise;
 
          (f) any material joint marketing or development agreement; or
 
          (g) any material agreement relating to the sale or purchase of any
     business or business assets providing for payment of any deferred or
     contingent consideration by SpeedFam or providing for indemnification by
     SpeedFam.
 
Neither SpeedFam nor any of its subsidiaries, nor to SpeedFam's knowledge any
other party to a SpeedFam Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which SpeedFam or any of its subsidiaries is a party
or by which it is bound of the type described in clauses (a) through (g) above
(any such agreement, contract or commitment, a "SpeedFam Contract") in such a
manner as would permit any other party to cancel or terminate any such SpeedFam
Contract, or would permit any other party to seek damages, which would be
reasonably likely to be material to SpeedFam.
 
Section 3.17.  Pooling of Interests.  To the knowledge of SpeedFam, based on
consultation with its independent accountants, neither SpeedFam nor any of its
directors, officers, affiliates or shareholders has taken any action which would
preclude SpeedFam's ability to account for the Merger as a pooling of interests.
 
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<PAGE>   225
 
Section 3.18.  Change of Control Payments.  The SpeedFam Schedules set forth
each plan or agreement pursuant to which any material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of SpeedFam as a result of or in connection with the Merger.
 
Section 3.19.  Statements; Proxy Statement/Prospectus.  The information supplied
by SpeedFam for inclusion in the Registration Statement shall not at the time
the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by SpeedFam for inclusion in the Proxy Statement shall not,
on the date the Proxy Statement is first mailed to SpeedFam's shareholders and
IPEC's stockholders, at the time of the SpeedFam Shareholders' Meeting or the
IPEC Stockholders' Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the SpeedFam
Shareholders' Meeting or the IPEC Stockholders' Meeting which has become false
or misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
SpeedFam or any of its affiliates, officers or directors should be discovered by
SpeedFam which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, SpeedFam shall promptly inform IPEC.
Notwithstanding the foregoing, SpeedFam makes no representation or warranty with
respect to any information supplied by IPEC which is contained in any of the
foregoing documents.
 
Section 3.20.  Board Approval.  The Board of Directors of SpeedFam has, as of
the date of this Agreement, determined (i) that the Merger is fair to, and in
the best interests of SpeedFam and its shareholders, (ii) to recommend that the
shareholders of SpeedFam approve (x) the issuance of shares of SpeedFam Common
Stock by virtue of the Merger, (y) the amendment of SpeedFam's Articles of
Incorporation to change SpeedFam's corporate name (subject to and conditional
upon the effectiveness of the Merger), and (z) such other matters relating to
any stock option or similar plan necessary for compliance with applicable laws
and regulations and to preserve the benefits of such plans as they exist prior
to the Merger, to the extent required by Section 5.11 of this Agreement (subject
to and conditional upon the effectiveness of the Merger).
 
Section 3.21.  Fairness Opinion.  SpeedFam has received a written opinion from
Lehman Brothers, dated as of the date hereof, to the effect that as of the date
hereof, the Exchange Ratio is fair to SpeedFam from a financial point of view
and has delivered to IPEC a copy of such opinion.
 
Section 3.22.  Section 5/11.75 of the Illinois Business Corporation Act Not
Applicable; State Takeover Statutes.  The Board of Directors of SpeedFam has
taken all actions so that the restrictions contained in Section 5/11.75 of
Illinois Law applicable to a "business combination" (as defined in such Section
5/11.75) will not apply to the execution, delivery or performance of this
Agreement or the Stock Option Agreements or to the consummation of the Merger or
the other transactions contemplated by this Agreement or the Stock Option
Agreements. To the knowledge of SpeedFam, no other state takeover
 
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<PAGE>   226
 
statute is applicable to the Merger or the other transactions contemplated
hereby and by the Stock Option Agreements.
 
                                   ARTICLE IV
 
                      CONDUCT PRIOR TO THE EFFECTIVE TIME
 
Section 4.1.  Conduct of Business.  During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, IPEC (which for the purposes of
this Article 4 shall include IPEC and each of its subsidiaries) and SpeedFam
(which for the purposes of this Article 4 shall include SpeedFam and each of its
subsidiaries) agree, except (i) in the case of any action or omission by IPEC to
the extent provided in Article 4 of the IPEC Schedules and in the case of any
action or omission by SpeedFam to the extent provided in Article 4 of the
SpeedFam Schedules, or (ii) to the extent that the other of them shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, to pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, to pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, each of IPEC and SpeedFam will promptly notify the other
of any material event involving its business or operations. Furthermore, IPEC
and SpeedFam agree that during the period prior to the Effective Time, IPEC and
SpeedFam agree that they will exchange monthly summary financial data and that,
if the waiting period under the HSR Act has expired or terminated early, their
respective senior management groups will participate in planning meetings on a
weekly basis, at such time and place as shall be mutually agreeable. If the
waiting period under the HSR Act has not expired or been terminated early, then
such planning meetings shall occur on a frequency, cover subject matter, involve
participants, and allow for the exchange of information only to the extent that
SpeedFam's and IPEC's respective antitrust counsel agree that such actions can
reasonably be expected to occur without violation of the HSR Act. No information
or knowledge obtained in any investigation will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
 
In addition, except as permitted by the terms of this Agreement or the Stock
Option Agreements, and except in the case of any action or omission by IPEC to
the extent provided in Article 4 of the IPEC Schedules, and except in the case
of any action or omission by SpeedFam to the extent provided in Article 4 of the
SpeedFam Schedules, without the prior written consent of the President and Chief
Executive Officer of the other, neither IPEC nor SpeedFam shall do any of the
following, and neither IPEC nor SpeedFam shall permit its subsidiaries to do any
of the following:
 
          (a) Waive any stock repurchase rights, accelerate, amend or change the
     period of exercisability of options or restricted stock, or reprice options
     granted under any employee, consultant or director stock plans or authorize
     cash payments in exchange for any options granted under any of such plans;
 
                                      A-31
<PAGE>   227
 
          (b) Grant any severance or termination pay to any officer or employee
     except payments in amounts consistent with policies and past practices or
     pursuant to written agreements outstanding, or policies existing, on the
     date hereof and as previously disclosed in writing to the other, or adopt
     any new severance plan;
 
          (c) Transfer or license to any person or entity or otherwise extend,
     amend or modify in any material respect any rights to the IPEC IP Rights or
     the SpeedFam IP Rights, as the case may be, or enter into grants to future
     patent rights, other than in the ordinary course of business;
 
          (d) Declare or pay any dividends on or make any other distributions
     (whether in cash, stock or property) in respect of any capital stock or
     split, combine or reclassify any capital stock or issue or authorize the
     issuance of any other securities in respect of, in lieu of or in
     substitution for any capital stock, except for dividends payable to holders
     of IPEC Preferred Stock in accordance with their terms;
 
          (e) Repurchase or otherwise acquire, directly or indirectly, any
     shares of capital stock except pursuant to rights of repurchase of any such
     shares under any employee, consultant or director stock plan existing on
     the date hereof;
 
          (f) Issue, deliver, sell, authorize or propose the issuance, delivery
     or sale of, any shares of capital stock or any securities convertible into
     shares of capital stock, or subscriptions, rights, warrants or options to
     acquire any shares of capital stock or any securities convertible into
     shares of capital stock, or enter into other agreements or commitments of
     any character obligating it to issue any such shares or convertible
     securities, other than (i) the issuance of shares of IPEC Regular Common
     Stock or SpeedFam Common Stock, as the case may be, pursuant to the
     exercise of stock options therefor outstanding as of the date of this
     Agreement (including those options granted pursuant to McDaniel Agreement),
     (ii) options to purchase shares of IPEC Regular Common Stock or SpeedFam
     Common Stock, as the case may be, to be granted at fair market value in the
     ordinary course of business, consistent with past practice and in
     accordance with stock option plans existing on the date hereof, (iii)
     shares of IPEC Regular Common Stock or SpeedFam Common Stock, as the case
     may be, issuable upon the exercise of the options referred to in clause
     (ii), (iv) shares of IPEC Regular Common Stock or SpeedFam Common Stock, as
     the case may be, issuable to participants in the SpeedFam Employee Stock
     Purchase Plan or the IPEC Employee Stock Purchase Plan consistent with past
     practice and the terms thereof, (v) shares of IPEC Regular Common Stock or
     SpeedFam Common Stock, as the case may be, issuable pursuant to the Stock
     Option Agreements, (vi) the issuance of shares of IPEC Regular Common Stock
     upon conversion of the IPEC Class A Common Stock, the IPEC Preferred Stock
     or the IPEC Convertible Notes, (vii) the issuance of shares of IPEC Regular
     Common Stock upon exercise of IPEC Warrants and UPO's outstanding as of the
     date of this Agreement, and (viii) the issuance of shares of IPEC Series D
     Preferred Stock or IPEC Regular Common Stock as may be expressly required
     and authorized under the IPEC Rights Plan without further action by IPEC's
     Board of Directors;
 
          (g) Cause, permit or propose any amendments to any charter document or
     Bylaw (or similar governing instruments of any subsidiaries);
 
          (h) Acquire or agree to acquire by merging or consolidating with, or
     by purchasing any equity interest in or a material portion of the assets
     of, or by any other manner, any business or any corporation, partnership
     interest, association or other
 
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<PAGE>   228
 
     business organization or division thereof, or otherwise acquire or agree to
     acquire any assets which are material, individually or in the aggregate, to
     the business of IPEC or SpeedFam, as the case may be, or enter into any
     material joint ventures, strategic partnerships or alliances;
 
          (i) Sell, lease, license, encumber or otherwise dispose of any
     properties or assets which are material, individually or in the aggregate,
     to the business of IPEC or SpeedFam, as the case may be, except in the
     ordinary course of business consistent with past practice;
 
          (j) Incur any indebtedness for borrowed money (other than ordinary
     course trade payables or pursuant to existing credit facilities in the
     ordinary course of business) or guarantee any such indebtedness or issue or
     sell any debt securities or warrants or rights to acquire debt securities
     of IPEC or SpeedFam, as the case may be, or guarantee any debt securities
     of others;
 
          (k) Adopt or amend any employee benefit or employee stock purchase or
     employee option plan, or enter into any employment contract, pay any
     special bonus or special remuneration to any director or employee, or
     increase the salaries or wage rates of its officers or employees other than
     in the ordinary course of business, consistent with past practice, or
     change in any material respect any management policies or procedures;
 
          (l) Pay, discharge or satisfy any claim, liability or obligation
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge or satisfaction in the ordinary course of
     business;
 
          (m) Make any grant of exclusive rights to any third party;
 
          (n) Take any action that would be reasonably likely to interfere with
     SpeedFam's ability to account for the Merger as a pooling of interests; or
 
          (o) Agree in writing or otherwise to take any of the actions described
     in Article 4(a) through (n) above.
 
                                   ARTICLE V
 
                             ADDITIONAL AGREEMENTS
 
Section 5.1.  Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations.  (a) As promptly as practicable after the execution of
this Agreement, IPEC and SpeedFam will prepare, and file with the SEC, the Proxy
Statement and SpeedFam will prepare and file with the SEC the Registration
Statement in which the Proxy Statement will be included as a prospectus. Each of
IPEC and SpeedFam will respond to any comments of the SEC, will use its
respective reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and will cause the Proxy Statement to be mailed to its respective shareholders
or stockholders, as the case may be, at the earliest practicable time. As
promptly as practicable after the date of this Agreement, IPEC and SpeedFam will
prepare and file any other filings required under the Exchange Act, the
Securities Act or any other Federal, foreign or Blue Sky laws relating to the
Merger and the transactions contemplated by this Agreement (the "Other
Filings"). Each of IPEC and SpeedFam will notify the other promptly upon the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement, the Proxy Statement or any Other Filing or for
 
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<PAGE>   229
 
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, IPEC or SpeedFam, as the case may be, will promptly inform the other of
such occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of IPEC or shareholders of
SpeedFam, such amendment or supplement.
 
(b) The Proxy Statement will include the recommendation of the Board of
Directors of IPEC in favor of adoption and approval of this Agreement and
approval of the Merger (except that the Board of Directors of IPEC may withdraw,
modify or refrain from making such recommendation to the extent that the Board
determines, in good faith, after consultation with outside legal counsel, that
compliance with the Board's fiduciary duties under applicable law would require
it to do so). In addition, the Proxy Statement will include the recommendations
of the Board of Directors of SpeedFam in favor of (x) the issuance of shares of
SpeedFam Common Stock by virtue of the Merger, (y) the amendment of SpeedFam's
Articles of Incorporation to change SpeedFam's corporate name, subject to and
conditional upon the effectiveness of the Merger, and (z) such other matters
relating to any stock option or similar plan necessary for compliance with
applicable laws and regulations and to preserve the benefits of such plans as
they exist prior to the Merger, to the extent required by Section 5.11 of this
Agreement, subject to and conditional upon the effectiveness of the merger
(except that the Board of Directors of SpeedFam may withdraw, modify or refrain
from making such recommendations to the extent that the Board determines, in
good faith, after consultation with outside legal counsel, that compliance with
the Board's fiduciary duties under applicable law would require it to do so).
 
Section 5.2.  Meetings of IPEC Stockholders and SpeedFam Shareholders.  Promptly
after the date hereof, IPEC will take all action necessary in accordance with
Delaware Law and its Certificate of Incorporation and Bylaws to convene the IPEC
Stockholders' Meeting to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement and the Merger. IPEC will consult with SpeedFam and
use its best efforts to hold the IPEC Stockholders' Meeting on the same day as
the SpeedFam Shareholders' Meeting. Promptly after the date hereof, SpeedFam
will take all action necessary in accordance with Illinois Law and its Articles
of Incorporation and Bylaws to convene the SpeedFam Shareholders' Meeting to be
held as promptly as practicable, and in any event (to the extent permissible
under applicable law) within 45 days after the declaration of effectiveness of
the Registration Statement, for the purpose of (i) voting upon the issuance of
shares of the SpeedFam Common Stock by virtue of the Merger, (ii) amending its
Articles of Incorporation to change its corporate name (subject to and
conditional upon the effectiveness of the Merger) and (iii) such other matters
relating to any stock option or similar plan necessary for compliance with
applicable laws and regulations and to preserve the benefits of such plans as
they exist prior to the Merger, to the extent required by Section 5.11 of this
Agreement (subject to and conditional upon the effectiveness of the Merger).
SpeedFam
 
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<PAGE>   230
 
will consult with IPEC and will use its best efforts to hold the SpeedFam
Shareholders' Meeting on the same day as the IPEC Stockholders' Meeting. For so
long as the Board of Directors of IPEC continues to make the recommendation set
forth in Section 5.1, IPEC will use its best efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by the rules of the
National Association of Securities Dealers, Inc. or Delaware Law to obtain such
approvals. For so long as the Board of Directors of SpeedFam continues to make
the recommendations set forth in Section 5.1, SpeedFam will use its best efforts
to solicit from its shareholders proxies in favor of (i) the issuance of shares
of SpeedFam Common Stock by virtue of the Merger, (ii) the amendment of
SpeedFam's Articles of Incorporation to change SpeedFam's corporate name
(subject to and conditional upon the effectiveness of the Merger) and (iii) such
other matters relating to any stock option or similar plan necessary for
compliance with applicable laws and regulations and to preserve the benefits of
such plans as they exist prior to the Merger, to the extent required by Section
5.11 of this Agreement (subject to and conditional upon the effectiveness of the
Merger) and will take all other action necessary or advisable to secure the vote
or consent of its shareholders required by the rules of the National Association
of Securities Dealers, Inc. or Illinois Law to obtain such approvals.
 
Section 5.3.  Confidentiality.  The parties acknowledge that IPEC and SpeedFam
have previously executed two Confidentiality Agreements, each dated November 4,
1998 (the "Confidentiality Agreements"), which Confidentiality Agreements will
continue in full force and effect in accordance with their terms.
 
Section 5.4.  No Solicitation.
 
(a) Restrictions on SpeedFam. (i) From and after the date of this Agreement
until the earlier of the Effective Time or termination of this Agreement
pursuant to its terms, SpeedFam, its subsidiaries and their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates shall not, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than IPEC and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning SpeedFam or any of its subsidiaries to, or afford any access to the
properties, books or records of SpeedFam or any of its subsidiaries to, or
otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than IPEC and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to SpeedFam or any subsidiary of SpeedFam. For the purposes of this Agreement,
an "Acquisition Proposal" with respect to an entity means any proposal or offer
relating to (i) any merger, consolidation, sale of substantial assets or similar
transactions involving the entity or any subsidiaries of the entity (other than
sales of assets or inventory in the ordinary course of business or as permitted
under the terms of this Agreement), (ii) sale of (x) 15% or more of the
outstanding shares of capital stock of the entity or (y) shares of capital stock
of the entity with 15% or more of the voting power in the election of directors
(including without limitation by way of a tender offer or an exchange offer),
(iii) the acquisition by any person of beneficial ownership or a right to
acquire beneficial ownership of, or the formation of any "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, (x) 15% or more of the then outstanding shares of capital stock of
the entity or (y) shares of capital stock of the entity with 15% or more of the
voting power in the election of directors (except for
 
                                      A-35
<PAGE>   231
 
acquisitions for passive investment purposes only in circumstances where the
person or group qualifies for and files a Schedule 13G with respect thereto); or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. SpeedFam will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
SpeedFam will (i) notify IPEC as promptly as practicable if any inquiry or
proposal is made or any information or access is requested in connection with an
Acquisition Proposal or potential Acquisition Proposal and (ii) as promptly as
practicable notify IPEC of the significant terms and conditions of any such
Acquisition Proposal. In addition, subject to the other provisions of this
Section 5.4(a), from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms,
SpeedFam and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any person, entity or group (other than IPEC); provided, however, that
nothing herein shall prohibit SpeedFam's Board of Directors from taking and
disclosing to SpeedFam's shareholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
 
(ii) Notwithstanding the provisions of paragraph (a)(i) above, prior to the
Effective Time, SpeedFam may, to the extent the Board of Directors of SpeedFam
determines, in good faith, after consultation with outside legal counsel, that
the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (a)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to SpeedFam in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of SpeedFam in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the shareholders of SpeedFam (a
"SpeedFam Superior Proposal"). In addition, notwithstanding the provisions of
paragraph (a)(i) above, in connection with a possible Acquisition Proposal,
SpeedFam may refer any third party to this Section 5.4(a) or make a copy of this
Section 5.4(a) available to a third party. In the event SpeedFam receives a
SpeedFam Superior Proposal, nothing contained in this Agreement (but subject to
the terms hereof) will prevent the Board of Directors of SpeedFam from
recommending such SpeedFam Superior Proposal to SpeedFam's shareholders or from
entering into a SpeedFam Qualifying Agreement, if the Board determines, in good
faith, after consultation with outside legal counsel, that such action is
required by its fiduciary duties under applicable law; in such case, the Board
of Directors of SpeedFam may withdraw, modify or refrain from making its
recommendations set forth in Section 5.1(b), and, to the extent it does so,
SpeedFam may refrain from soliciting proxies and taking such other action
necessary to secure the vote of its shareholders as may be required by Section
5.2; provided, however, that SpeedFam shall not recommend to its shareholders a
SpeedFam Superior Proposal for a period of not less than 48 hours after IPEC's
receipt of a copy of such SpeedFam Superior Proposal (or a description of the
significant terms and conditions thereof, if not in writing); and provided
further, that nothing contained in this Section shall limit SpeedFam's
obligation to hold and convene the SpeedFam Shareholders Meeting (regardless of
whether the recommendations of the Board of Directors of SpeedFam shall have
been withdrawn, modified or not yet made), although SpeedFam may concurrently
submit a SpeedFam Superior Proposal to SpeedFam shareholders for approval. The
term "SpeedFam Qualifying Agreement" means a merger, purchase, reorganization or
similar
 
                                      A-36
<PAGE>   232
 
agreement for a SpeedFam Superior Proposal that (A) terminates automatically
upon receipt, if any, of SpeedFam shareholder approval of the issuance of the
SpeedFam Common Stock, the SpeedFam name change, and other matters relating to
any stock option or similar plans pursuant to this Agreement (the "SpeedFam
Shareholder Approval"), (B) provides that there shall be no liability or
obligation of SpeedFam upon or following termination thereof as a result of the
receipt by SpeedFam of SpeedFam Shareholder Approval, (C) does not provide for
the payment of any expenses of, or the transfer or issuance of any assets or
securities to, the party making the SpeedFam Superior Proposal (or any affiliate
of such party) except upon consummation of the SpeedFam Superior Proposal and
(D) does not require SpeedFam not to perform or comply with or take any act
inconsistent with any provision of this Agreement except (for clause (D)) to the
extent SpeedFam is specifically permitted under this Agreement to act or omit to
act in connection with a SpeedFam Superior Proposal.
 
(iii) Notwithstanding anything to the contrary herein, SpeedFam will not provide
any non-public information to a third party unless: (x) SpeedFam provides such
non-public information pursuant to a nondisclosure agreement with terms
regarding the protection for confidential information and employees at least as
protective as such terms in the Confidentiality Agreements; and (y) such
non-public information is the same information previously delivered to IPEC.
 
(b) Restrictions on IPEC.  (i) From and after the date of this Agreement until
the earlier of the Effective Time or termination of this Agreement pursuant to
its terms, IPEC, its subsidiaries and their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates shall not,
directly or indirectly, (i) solicit or knowingly encourage submission of, any
proposals or offers by any person, entity or group (other than SpeedFam and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any non-public information concerning IPEC or
any of its subsidiaries to, or afford any access to the properties, books or
records of IPEC or any of its subsidiaries to, or otherwise assist or
facilitate, or enter into any agreement or understanding with, any person,
entity or group (other than SpeedFam and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
IPEC or any subsidiary of IPEC. IPEC will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. IPEC will (i) notify SpeedFam as promptly
as practicable if any inquiry or proposal is made or any information or access
is requested in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify SpeedFam of the significant
terms and conditions of any such Acquisition Proposal. In addition, subject to
the other provisions of this Section 5.4(b), from and after the date of this
Agreement until the earlier of the Effective Time and termination of this
Agreement pursuant to its terms, IPEC and its subsidiaries will not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than
SpeedFam); provided, however, that nothing herein shall prohibit IPEC's Board of
Directors from taking and disclosing to IPEC's shareholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act.
 
(ii) Notwithstanding the provisions of paragraph (b)(i) above, prior to the
Effective Time, IPEC may, to the extent the Board of Directors of IPEC
determines, in good faith, after consultation with outside legal counsel, that
the Board's fiduciary duties under
 
                                      A-37
<PAGE>   233
 
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements of paragraph (b)(iii), below, furnish
information to any person, entity or group after such person, entity or group
has delivered to IPEC in writing, an unsolicited bona fide Acquisition Proposal
which the Board of Directors of IPEC in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Merger to the stockholders of
IPEC (a "IPEC Superior Proposal"). In addition, notwithstanding the provisions
of paragraph (b)(i) above, in connection with a possible Acquisition Proposal,
IPEC may refer any third party to this Section 5.4(b) or make a copy of this
Section 5.4(b) available to a third party. In the event IPEC receives an IPEC
Superior Proposal, nothing contained in this Agreement (but subject to the terms
hereof) will prevent the Board of Directors of IPEC from recommending such IPEC
Superior Proposal to its stockholders or from entering into an IPEC Qualifying
Agreement, if the Board determines, in good faith, after consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board of Directors of IPEC may withdraw,
modify or refrain from making its recommendation set forth in Section 5.1(b),
and, to the extent it does so, IPEC may refrain from soliciting proxies and
taking such other action necessary to secure the vote of its stockholders as may
be required by Section 5.2; provided, however, that IPEC shall not recommend to
its stockholders an IPEC Superior Proposal for a period of not less than 48
hours after SpeedFam's receipt of a copy of such IPEC Superior Proposal (or a
description of the significant terms and conditions thereof, if not in writing);
and provided further, that nothing contained in this Section shall limit IPEC's
obligation to hold and convene the IPEC Stockholders Meeting (regardless of
whether the recommendation of the Board of Directors of IPEC shall have been
withdrawn, modified or not yet made), although IPEC may concurrently submit an
IPEC Superior Proposal to IPEC stockholders for approval. The term "IPEC
Qualifying Agreement" means a merger, purchase, reorganization or similar
agreement for an IPEC Superior Proposal that (A) terminates automatically upon
receipt, if any, of IPEC stockholder approval of and adoption of this Agreement
and the approval of the Merger (the "IPEC Stockholder Approval"), (B) provides
that there shall be no liability or obligation of IPEC upon or following
termination thereof as a result of the receipt by IPEC of IPEC Stockholder
Approval, (C) does not provide for the payment of any expenses of, or the
transfer or issuance of any assets or securities to, the party making the IPEC
Superior Proposal (or any affiliate of such party) except upon consummation of
the IPEC Superior Proposal, and (D) does not require IPEC not to perform or
comply with or take any act inconsistent with any provision of this Agreement
except (for clause (D)) to the extent IPEC is specifically permitted under this
Agreement to act or omit to act in connection with an IPEC Superior Proposal.
 
(iii) Notwithstanding anything to the contrary herein, IPEC will not provide any
non-public information to a third party unless: (x) IPEC provides such
non-public information pursuant to a nondisclosure agreement with terms
regarding the protection for confidential information and employees at least as
protective as such terms in the Confidentiality Agreements; and (y) such
non-public information is the same information previously delivered to SpeedFam.
 
Section 5.5.  Public Disclosure.  SpeedFam and IPEC will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or the Nasdaq
 
                                      A-38
<PAGE>   234
 
National Market. If such law or listing agreement requires disclosure prior to
such consultation, the entity issuing the press release or making the public
statement will provide the press release or the public statement in writing to
the other with as much advance notice as is practicable, and in any event at the
same time as the press release or public statement is distributed to the media.
 
Section 5.6.  Legal Requirements.  Each of SpeedFam, Merger Sub and IPEC will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. SpeedFam will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of SpeedFam Common Stock pursuant hereto. IPEC will use its
commercially reasonable efforts to assist SpeedFam as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are applicable
in connection with the issuance of SpeedFam Common Stock pursuant hereto.
 
Section 5.7.  Third Party Consents.  As soon as practicable following the date
hereof, SpeedFam and IPEC will each use its commercially reasonable efforts to
obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby,
including, without limitation, any consents, waivers and approvals with respect
to the options, warrants and convertible securities to be assumed by SpeedFam
pursuant to Sections 1.6 and 5.11 hereof.
 
Section 5.8.  FIRPTA.  At or prior to the Closing, IPEC, if requested by
SpeedFam, shall deliver to the IRS a notice that the IPEC Common Stock and IPEC
Preferred Stock is not a "U.S. Real Property Interest" as defined and in
accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2).
 
Section 5.9.  Notification of Certain Matters.  SpeedFam and Merger Sub will
give prompt notice to IPEC, and IPEC will give prompt notice to SpeedFam, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty
contained in this Agreement and made by it to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time such that the conditions set forth in Section 6.2(a) or 6.3(a), as the case
may be, would not be satisfied as a result thereof or (b) any material failure
of SpeedFam and Merger Sub or IPEC, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
 
Section 5.10.  Reasonable Efforts and Further Assurances.  Subject to the
respective rights and obligations of SpeedFam and IPEC under this Agreement,
each of the parties to this Agreement will use its commercially reasonable
efforts to effectuate the Merger and the other transactions contemplated hereby
and to fulfill and cause to be fulfilled the
 
                                      A-39
<PAGE>   235
 
conditions to closing under this Agreement; provided that neither SpeedFam nor
IPEC nor any subsidiary or affiliate thereof will be required to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the foregoing, each
party hereto, at the reasonable request of another party hereto, will execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
 
Section 5.11.  Stock Options and Warrants.  (a) At the Effective Time, each
outstanding option to purchase shares of IPEC Regular Common Stock (each an
"IPEC Stock Option") under the 1992 IPEC Stock Option Plan, whether or not
exercisable, will be assumed by SpeedFam and each option to purchase IPEC
Regular Common Stock (also an "IPEC Stock Option") granted pursuant to the
McDaniel Agreement which is vested as of the Effective Time shall be assumed by
SpeedFam. Each IPEC Stock Option so assumed by SpeedFam under this Agreement
will continue to have, and be subject to, the same terms and conditions set
forth in the 1992 IPEC Stock Option Plan or the McDaniel Agreement, as
applicable, immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each IPEC Stock Option will
be exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of SpeedFam Common Stock equal to the product of the
number of shares of IPEC Common Stock that were issuable upon exercise of such
IPEC Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of SpeedFam
Common Stock, and (ii) the per share exercise price for the shares of SpeedFam
Common Stock issuable upon exercise of such assumed IPEC Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
IPEC Common Stock at which such IPEC Stock Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. After the Effective Time, SpeedFam will issue to each holder of an
outstanding IPEC Stock Option a notice describing the foregoing assumption of
such IPEC Stock Option by SpeedFam.
 
At the Effective Time, SpeedFam shall issue a new warrant to replace the
unexercised, issued and outstanding H & Q I Warrant which shall be exercisable
for the number of shares of SpeedFam Common Stock that equals the number of
shares of IPEC Regular Common Stock for which the H & Q I Warrant was
exercisable immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of shares of SpeedFam Common
Stock. In addition, the H & Q I Warrant Exercise Price shall be adjusted at the
Effective Time in accordance with the terms of the H & Q I Warrant.
 
At the Effective Time, SpeedFam shall assume the unexercised, issued and
outstanding H & Q II Warrant which shall become exercisable for the number of
shares of SpeedFam Common Stock that equals the number of shares of IPEC Regular
Common Stock for which the H & Q II Warrant was exercisable immediately prior to
the Effective Time, adjusted in accordance with the terms of the H & Q II
Warrant. In addition, the H & Q II Exercise Price shall be adjusted at the
Effective Time in accordance with the terms of the H & Q II Warrant.
 
At the Effective Time, each of the unexercised, issued and outstanding Intel
Warrants shall automatically by operation of law and their original terms, and
without necessity of
 
                                      A-40
<PAGE>   236
 
any exchange or other action by the holder thereof, become exercisable for the
number of shares of SpeedFam Common Stock that equals the number of shares of
IPEC Regular Common Stock for which the Intel Warrants were exercisable
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of SpeedFam Common Stock. In
addition, the Intel Exercise Price shall be adjusted at the effective Time in
accordance with the terms of the Intel Warrant.
 
At the Effective Time, SpeedFam shall assume the unexercised, issued and
outstanding Fletcher Warrant which shall become exercisable for the number of
shares of SpeedFam Common Stock that equals the number of shares of IPEC Regular
Common Stock for which the Fletcher Warrant was exercisable immediately prior to
the Effective Time, adjusted in accordance with the terms of the Fletcher
Warrant. In addition, the Fletcher Exercise Price shall be adjusted at the
Effective Time in accordance with the terms of the Fletcher Warrant.
 
At the Effective Time, each of the unexercised, issued and outstanding UPO's
shall automatically by operation of law and their original terms, and without
necessity of any exchange or other action by the holder thereof, become
exercisable for the number of shares of SpeedFam Common Stock that equals the
number of shares of IPEC Regular Common Stock for which the UPO's were
exercisable immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of shares of SpeedFam Common
Stock, plus warrants for the number of shares of SpeedFam Common Stock that
equals the number of shares of IPEC Regular Common Stock for which the warrants
under the UPO's were exercisable immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of SpeedFam Common Stock (the "UPO Warrant"). In addition, the UPO
Exercise Price shall be adjusted at the Effective Time in accordance with the
terms of the UPO's, and the UPO Warrant Exercise Price shall be adjusted at the
Effective Time in accordance with the terms of the UPO Warrant.
 
At the Effective Time, each of the issued and outstanding IPEC Convertible Notes
shall remain outstanding thereafter as an obligation of IPEC, as applicable, and
from and after the Effective Time, the holders of the IPEC Convertible Notes
shall have the right to convert such IPEC Convertible Notes into the number of
shares of SpeedFam Common Stock receivable in the Merger by a holder of the
number of shares of IPEC Regular Common Stock into which the IPEC Convertible
Notes could have been converted immediately prior to the Merger. IPEC shall
comply with all notice requirements arising as a consequence of this Agreement
and the transactions contemplated hereby under that certain Indenture, dated as
of September 15, 1997 (the "Indenture"), between IPEC and State Street Bank and
Trust Company of California, N.A., as trustee thereunder (the "Trustee")
pursuant to which the IPEC Convertible Notes are issued and outstanding. At the
Effective Time, IPEC and SpeedFam shall execute and deliver to the Trustee a
supplemental indenture pursuant to, and satisfying the requirements of, Section
3.5(e), 11.1 and 15.6 of the Indenture, which supplemental shall be in form and
substance reasonably satisfactory to SpeedFam and the Trustee and shall provide,
among other things, that SpeedFam shall either assume, or be a guarantor of,
IPEC's obligations under the Indenture (the "Note Guarantee"). IPEC and SpeedFam
shall use reasonable efforts to obtain the consent of Noteholders required under
the September 15, 1997 Registration Rights Agreement relating to the Notes
("Notes Registration Rights Agreements") to delete clause (B) from the
definition of "Registrable Securities." Obtaining this consent is not a
condition to closing.
 
                                      A-41
<PAGE>   237
 
(b) IPEC Stock Options assumed by SpeedFam shall qualify following the Effective
Time as incentive stock options as defined in Section 422 of the Code to the
extent IPEC Stock Options qualified as incentive stock options immediately prior
to the Effective Time.
 
(c) The Board of Directors of IPEC will take all actions necessary, including
the making of any required announcement in a timely manner, to set the New
Purchase Date under the IPEC Employee Stock Purchase Plan and to terminate such
Plan immediately following the purchase of shares of IPEC Regular Common Stock
on the New Purchase Date. SpeedFam shall take all actions necessary to enable
employees of IPEC as of the Effective Time to participate in SpeedFam's Employee
Stock Purchase Plan commencing on the first enrollment date following the
Effective Time, giving credit for employment by IPEC for purposes of the
eligibility provisions of SpeedFam's Employee Stock Purchase Plan.
 
(d) SpeedFam will reserve sufficient shares of SpeedFam Common Stock for
issuance under Sections 5.11(a) and under Section 1.6(c), (e) and (i) hereof.
 
Section 5.12.  Registration Statements.  SpeedFam agrees to file a registration
statement on Form S-8 for (i) the shares of SpeedFam Common Stock issuable with
respect to the assumed 1992 IPEC Stock Options and (ii) the shares of SpeedFam
Common Stock issuable with respect to the assumed McDaniel Agreement no later
than two (2) business days after the Closing Date. SpeedFam agrees to assume, as
of the Effective Time, IPEC's obligations under the registration rights
agreements applicable to, and to file a registration statement on Form S-3 for,
the shares of SpeedFam Common Stock issuable with respect to the Intel Warrants,
the Fletcher Warrant and the UPO's no later than two (2) business days after the
Closing Date. SpeedFam further agrees to assume, as of the Effective Time,
IPEC's obligations under the registration rights agreement applicable to, and to
file a registration statement on Form S-3 for, the shares of SpeedFam Common
Stock issuable on conversion of the IPEC Convertible Notes no later than thirty
(30) business days after the Closing Date.
 
Section 5.13.  Indemnification and Insurance.  (a) From and after the Effective
Time, SpeedFam will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of IPEC pursuant to any indemnification agreements
between IPEC and its directors and officers existing prior to the date hereof.
The Certificate of Incorporation and By-laws of the Surviving Corporation will
contain the provisions with respect to indemnification set forth in the
Certificate of Incorporation and By-laws of IPEC, which provisions will not be
amended, repealed or otherwise modified for a period of three years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of IPEC, unless such modification is required by
law. This Section 5.13(a) will survive the consummation of the Merger at the
Effective Time, is intended to benefit IPEC, the Surviving Corporation and the
present officers and directors of IPEC, and will be binding on all successors
and assigns of the Surviving Corporation.
 
(b) Notwithstanding Article IV hereof, IPEC may purchase a policy of directors'
and officers' liability insurance, to be effective for a period not to exceed
three years from the Effective Time, covering those persons who are currently
covered by IPEC's directors' and officers' liability insurance policy but only
to the extent and on terms comparable to those applicable to IPEC's current
policy; provided, however, that in no event may IPEC expend in excess of 150% of
the annual premium currently paid by IPEC for such coverage for each such year
of coverage.
 
                                      A-42
<PAGE>   238
 
Section 5.14.  NMS Listing.  SpeedFam agrees to authorize for listing on the
Nasdaq National Market the shares of SpeedFam Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, upon
official notice of issuance.
 
Section 5.15.  SpeedFam Affiliate Agreement.  Set forth on the SpeedFam
Schedules is a list of those persons who may be deemed to be, in SpeedFam's
reasonable judgment, affiliates of SpeedFam within the meaning of Rule 145
promulgated under the Securities Act (each a "SpeedFam Affiliate"). SpeedFam
will provide IPEC with such information and documents as IPEC reasonably
requests for purposes of reviewing such list. SpeedFam will use its reasonable
efforts to deliver or cause to be delivered to IPEC, as promptly as practicable
on or following the date hereof, from each SpeedFam Affiliate an executed
affiliate agreement in substantially the form attached hereto as Exhibit F, each
of which will be in full force and effect as of the Effective Time.
 
Section 5.16.  IPEC Affiliate Agreement.  Set forth on the IPEC Schedules is a
list of those persons who may be deemed to be, in IPEC's reasonable judgment,
affiliates of IPEC within the meaning of Rule 145 promulgated under the
Securities Act (each a "IPEC Affiliate"). IPEC will provide SpeedFam with such
information and documents as SpeedFam reasonably requests for purposes of
reviewing such list. IPEC will use its reasonable efforts to deliver or cause to
be delivered to SpeedFam, as promptly as practicable on or following the date
hereof, from each IPEC Affiliate an executed affiliate agreement in
substantially the form attached hereto as Exhibit G (the "IPEC Affiliate
Agreement"), each of which will be in full force and effect as of the Effective
Time. SpeedFam will be entitled to place appropriate legends on the certificates
evidencing any SpeedFam Common Stock to be received by an IPEC Affiliate
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the SpeedFam Common Stock, consistent
with the terms of the IPEC Affiliate Agreement.
 
Section 5.17.  Regulatory Filings; Reasonable Efforts.  As soon as may be
reasonably practicable, IPEC and SpeedFam each shall file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice ("DOJ") Notification and Report Forms relating to
the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. IPEC and SpeedFam each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
 
Section 5.18.  Board of Directors of SpeedFam.  The Board of Directors of
SpeedFam will take all actions necessary to cause the Board of Directors of
SpeedFam, immediately after the Effective Time, to consist of nine persons, five
of whom shall have served on the Board of Directors of SpeedFam immediately
prior to the Effective Time (two of whom shall be independent of the management
of SpeedFam), and four of whom shall have served on the Board of Directors of
IPEC immediately prior to the Effective Time (three of whom shall be independent
of the management of IPEC). Mr. Roger D. McDaniel, the current chief executive
officer of IPEC, shall be considered independent of the management of IPEC for
these purposes. If, prior to the Effective Time, any of the IPEC or SpeedFam
designees shall decline or be unable to serve as an IPEC or SpeedFam director,
IPEC (if such person was designated by IPEC) or SpeedFam (if such person
 
                                      A-43
<PAGE>   239
 
was designated by SpeedFam) shall designate another person to serve in such
person's stead, which person shall be reasonably acceptable to the other party.
 
Section 5.19.  Officers of SpeedFam; Transition Team.  At the Effective Time,
James N. Farley and Sanjeev Chitre will become the Co-Chairmen of the Board of
SpeedFam, Makoto Kouzuma will retain his position as Vice Chairman of SpeedFam,
Richard J. Faubert will retain his position as the President and Chief Executive
Officer of SpeedFam and Roger K. Marach will retain his position as Chief
Financial Officer of SpeedFam. At the Effective Time, a transition team
("Transition Team") consisting of Messrs. Richard J. Faubert (Team Chairman, who
shall be the leader of the Transition Team), Makoto Kouzuma, Sanjeev Chitre and
Roger D. McDaniel will be established to address issues that may arise in
connection with the integration of SpeedFam and IPEC. The Transition Team shall
remain in place until the earlier of one (1) year from the Effective Time or
such time as the Board of Directors of SpeedFam (including the affirmative vote
of at least 2 of the SpeedFam directors who served on the IPEC Board of
Directors immediately prior to the Effective Time), determines the Transition
Team is no longer necessary. In addition, at the Effective Time, the following
persons will be appointed to the following positions: Ralph Hartung as President
and Chief Operating Officer of the CMP Division. The Board of Directors of
SpeedFam will take all actions necessary to effectuate the provisions of this
Section 5.19.
 
Section 5.20.  Change of Name.  Subject to the terms hereof, at the SpeedFam
Shareholders' Meeting SpeedFam shall propose and recommend that its Articles of
Incorporation be amended at the Effective Time to change its name to
"SpeedFam-IPEC, Inc."
 
Section 5.21.  IPEC Rights Plan.  The Board of Directors of IPEC shall take all
further action (in addition to that referred to in Section 2.23) reasonably
requested in writing by SpeedFam in order to render the IPEC Rights Plan
inapplicable to the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreements. Except as provided above with respect
to the Merger and the other transactions contemplated by this Agreement and the
Stock Option Agreements, the Board of Directors of IPEC shall not, without the
consent of SpeedFam (a) amend the IPEC Rights Plan or (b) take any action with
respect to, or make any determination under, the IPEC Rights Plan, including a
redemption of the IPEC Rights or any action to facilitate an Acquisition
Proposal, except for any action which the Board of Directors decides to take
with respect to the IPEC Rights Plan in connection with an IPEC Superior
Proposal which the IPEC Board of Directors recommends that IPEC stockholders
approve; provided, however, that in no event may the IPEC Board of Directors
amend the IPEC Rights Plan Amendment.
 
Section 5.22.  Director Designation Provision.  The Board of Directors of IPEC
shall take all action reasonably requested by SpeedFam to terminate the
Stockholders' Agreement, dated August 31, 1993, among IPEC, Harold C. Baldauf
and Janet A. Baldauf (the "Stockholders' Agreement").
 
Section 5.23.  Notice of Demand for Appraisal.  IPEC shall give SpeedFam (i)
prompt notice of any written demands for appraisal of any shares of IPEC Class A
Common Stock or IPEC Preferred Stock, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by IPEC which relate to
any such demand for appraisal and (ii) the opportunity to participate in all
negotiations and proceedings which take place prior to the Effective Time with
respect to demands for appraisal under Delaware Law. IPEC shall not, except with
the prior written consent of SpeedFam or as may be required by applicable law,
voluntarily make any payment with respect to any
 
                                      A-44
<PAGE>   240
 
demands for appraisal of IPEC Class A Common Stock or IPEC Preferred Stock or
offer to settle or settle any such demands. Any payments made in respect of
dissenting shares shall be made by IPEC or the Surviving Corporation as the case
may be.
 
                                   ARTICLE VI
 
                            CONDITIONS TO THE MERGER
 
Section 6.1.  Conditions to Obligations of Each Party to Effect the Merger.  The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
 
          (a) Shareholder and Stockholder Approval.  This Agreement shall have
     been approved and adopted, and the Merger shall have been duly approved, by
     the requisite vote under applicable law, by the stockholders of IPEC; as
     well as the issuance of the SpeedFam Common Stock, the SpeedFam name
     change, and other matters relating to any stock option or similar plan
     shall have been duly approved by the requisite vote under applicable law
     and the rules of the National Association of Securities Dealers, Inc. by
     the shareholders of SpeedFam.
 
          (b) Registration Statement Effective; Proxy Statement.  The SEC shall
     have declared the Registration Statement effective. No stop order
     suspending the effectiveness of the Registration Statement or any part
     thereof shall have been issued and no proceeding for that purpose, and no
     similar proceeding in respect of the Proxy Statement, shall have been
     initiated or threatened in writing by the SEC.
 
          (c) No Order; HSR Act.  No Governmental Entity shall have enacted,
     issued, promulgated, enforced or entered any statute, rule, regulation,
     executive order, decree, injunction or other order (whether temporary,
     preliminary or permanent) which is in effect and which has the effect of
     making the Merger illegal or otherwise prohibiting consummation of the
     Merger. All waiting periods under the HSR Act relating to the transactions
     contemplated hereby will have expired or terminated early.
 
          (d) Tax Opinions.  SpeedFam and IPEC shall each have received written
     opinions from their respective counsel, Chapman and Cutler and Wilson
     Sonsini Goodrich & Rosati, Professional Corporation, to the effect that the
     Merger will constitute a reorganization within the meaning of Section
     368(a) of the Code; provided, however, that if the counsel to either
     SpeedFam or IPEC does not render such opinion, this condition shall
     nonetheless be deemed to be satisfied with respect to such party if counsel
     to the other party renders such opinion to such party. The parties to this
     Agreement agree to make reasonable representations as requested by such
     counsel for the purpose of rendering such opinions.
 
          (e) Nasdaq Listing.  The shares of SpeedFam Common Stock issuable to
     stockholders of IPEC pursuant to this Agreement and such other shares
     required to be reserved for issuance in connection with the Merger shall
     have been authorized for listing on the Nasdaq National Market upon
     official notice of issuance.
 
          (f) Opinion of Accountants.  Each of SpeedFam and IPEC shall have
     received a letter from KPMG Peat Marwick, LLP, dated within two (2)
     business days prior to the Effective Time, regarding that firm's
     concurrence with SpeedFam's managements' and IPEC's managements'
     conclusions as to the appropriateness of pooling of interest accounting for
     the Merger under Accounting Principles Board Opinion No. 16, if the Merger
     is consummated in accordance with this Agreement.
 
                                      A-45
<PAGE>   241
 
Section 6.2.  Additional Conditions to Obligations of IPEC.  The obligation of
IPEC to consummate and effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by IPEC:
 
          (a) Representations and Warranties.  The representations and
     warranties of SpeedFam and Merger Sub contained in this Agreement shall
     have been true and correct in all material respects as of the date of this
     Agreement. In addition, the representations and warranties of SpeedFam and
     Merger Sub contained in this Agreement shall be true and correct in all
     material respects on and as of the Effective Time except for changes
     contemplated by this Agreement, with the same force and effect as if made
     on and as of the Effective Time, except in such cases (other than the
     representations in Sections 3.2 and 3.3) where the failure to be so true
     and correct would not have a Material Adverse Effect on SpeedFam. IPEC
     shall have received a certificate with respect to the foregoing signed on
     behalf of SpeedFam by the Chief Executive Officer and the Chief Financial
     Officer of SpeedFam;
 
          (b) Agreements and Covenants.  SpeedFam and Merger Sub shall have
     performed or complied in all material respects with all agreements and
     covenants required by this Agreement to be performed or complied with by
     them on or prior to the Effective Time, and IPEC shall have received a
     certificate to such effect signed on behalf of SpeedFam by the Chief
     Executive Officer and the Chief Financial Officer of SpeedFam;
 
          (c) Opinion of SpeedFam's Counsel.  IPEC shall have received the
     opinion of Chapman and Cutler, counsel to SpeedFam, dated the day of the
     Closing, addressed to IPEC and substantially to the effect set forth in
     Exhibit H attached hereto and hereby made a part hereof; and
 
          (d) Material Adverse Effect.  No Material Adverse Effect with respect
     to SpeedFam shall have occurred since the date of this Agreement.
 
Section 6.3.  Additional Conditions to the Obligations of SpeedFam and Merger
Sub. The obligations of SpeedFam and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by SpeedFam:
 
          (a) Representations and Warranties.  The representations and
     warranties of IPEC contained in this Agreement shall have been true and
     correct in all material respects as of the date of this Agreement. In
     addition, the representations and warranties of IPEC contained in this
     Agreement shall be true and correct in all material respects on and as of
     the Effective Time except for changes contemplated by this Agreement, with
     the same force and effect as if made on and as of the Effective Time,
     except in such cases (other than the representations in Sections 2.2 and
     2.3) where the failure to be so true and correct would not have a Material
     Adverse Effect on IPEC. SpeedFam shall have received a certificate with
     respect to the foregoing signed on behalf of IPEC by the President and the
     Chief Financial Officer of IPEC;
 
          (b) Agreements and Covenants.  IPEC shall have performed or complied
     in all material respects with all agreements and covenants required by this
     Agreement to be performed or complied with by it on or prior to the
     Effective Time, and SpeedFam shall have received a certificate to such
     effect signed on behalf of IPEC by the President and the Chief Financial
     Officer of IPEC;
 
                                      A-46
<PAGE>   242
 
          (c) Opinion of IPEC's Counsel.  SpeedFam shall have received the
     opinion of Wilson Sonsini Goodrich & Rosati, counsel to IPEC, dated the day
     of the Closing, addressed to SpeedFam and substantially to the effect set
     forth in Exhibit I attached hereto and hereby made a part hereof;
 
          (d) Material Adverse Effect.  No Material Adverse Effect with respect
     to IPEC shall have occurred since the date of this Agreement;
 
          (e) No Distribution Date under the IPEC Rights Plan.  No Distribution
     Date shall have occurred under the IPEC Rights Plan;
 
          (f) Termination of Contract.  The Stockholders' Agreement shall have
     been terminated;
 
          (g) Appraisal Rights.  Written objections to the Merger shall not have
     been made by the holders of the IPEC Preferred Stock or the IPEC Class A
     Common Stock in an amount which, in the aggregate, would, if converted
     pursuant to Section 1.6 hereof, represent more than 500,000 shares of
     SpeedFam Common Stock; and
 
          (h) Certain Third Party Consents.  All necessary consents, waivers and
     approvals with respect to the assumption of the options, warrants and
     convertible securities to be assumed by SpeedFam pursuant to Section 1.6
     and Section 5.11 hereof shall have been obtained in form and substance
     reasonably satisfactory to SpeedFam.
 
                                  ARTICLE VII
 
                       TERMINATION, AMENDMENT AND WAIVER
 
Section 7.1.  Termination.  This Agreement may be terminated at any time prior
to the Effective Time of the Merger, whether before or after approval of the
Merger by the stockholders of IPEC or the approval of the issuance of the
SpeedFam Common Stock in connection with the Merger by the shareholders of
SpeedFam:
 
          (a) by mutual written consent duly authorized by the Boards of
     Directors of SpeedFam and IPEC;
 
          (b) by either IPEC or SpeedFam if the Merger shall not have been
     consummated by May 31, 1999; provided, however, that the right to terminate
     this Agreement under this Section 7.1(b) shall not be available to any
     party whose action or failure to act has been a principal cause of or
     resulted in the failure of the Merger to occur on or before such date and
     such action or failure to act constitutes a breach of this Agreement;
 
          (c) by either IPEC or SpeedFam if a Governmental Entity shall have
     issued an order, decree or ruling or taken any other action (an "Order"),
     in any case having the effect of permanently restraining, enjoining or
     otherwise prohibiting the Merger, which order, decree or ruling is final
     and nonappealable;
 
          (d) by either IPEC or SpeedFam if the required approvals of the
     stockholders of IPEC or the shareholders of SpeedFam contemplated by this
     Agreement shall not have been obtained by reason of the failure to obtain
     the required vote upon a vote taken at a meeting of stockholders or
     shareholders, as the case may be, duly convened therefor or at any
     adjournment thereof (provided that the right to terminate this Agreement
     under this Section 7.1(d) shall not be available to any party where the
 
                                      A-47
<PAGE>   243
 
     failure to obtain stockholder or shareholder approval of such party shall
     have been caused by the action or failure to act of such party in breach of
     this Agreement);
 
          (e) by SpeedFam, if the Board of Directors of IPEC recommends an IPEC
     Superior Proposal to the stockholders of IPEC, or if the Board of Directors
     of IPEC shall have withheld, withdrawn or modified in a manner adverse to
     SpeedFam its recommendation in favor of adoption and approval of this
     Agreement and approval of the Merger;
 
          (f) by IPEC, if the Board of Directors of SpeedFam recommends a
     SpeedFam Superior Proposal to the shareholders of SpeedFam, or if the Board
     of Directors of SpeedFam shall have withheld, withdrawn or modified in a
     manner adverse to IPEC its recommendation in favor of approving the
     issuance of the shares of SpeedFam Common Stock by virtue of the Merger;
 
          (g) by IPEC, upon a breach of any representation, warranty, covenant
     or agreement on the part of SpeedFam set forth in this Agreement, or if any
     representation or warranty of SpeedFam shall have become untrue, in either
     case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
     would not be satisfied as of the time of such breach or as of the time such
     representation or warranty shall have become untrue, provided that if such
     inaccuracy in SpeedFam's representations and warranties or breach by
     SpeedFam is curable by SpeedFam through the exercise of its commercially
     reasonable efforts, then IPEC may not terminate this Agreement under this
     Section 7.1(g) provided SpeedFam continues to exercise such commercially
     reasonable efforts to cure such breach; or
 
          (h) by SpeedFam, upon a breach of any representation, warranty,
     covenant or agreement on the part of IPEC set forth in this Agreement, or
     if any representation or warranty of IPEC shall have become untrue, in
     either case such that the conditions set forth in Section 6.3(a) or Section
     6.3(b) would not be satisfied as of the time of such breach or as of the
     time such representation or warranty shall have become untrue, provided,
     that if such inaccuracy in IPEC's representations and warranties or breach
     by IPEC is curable by IPEC through the exercise of its commercially
     reasonable efforts, then SpeedFam may not terminate this Agreement under
     this Section 7.1(h) provided IPEC continues to exercise such commercially
     reasonable efforts to cure such breach.
 
Section 7.2.  Notice of Termination; Effect of Termination.  Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreements or the Stock Option Agreements, all
of which obligations shall survive termination of this Agreement in accordance
with their terms.
 
Section 7.3.  Fees and Expenses.
 
(a) General.  Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated; provided, however, that SpeedFam and IPEC shall share
equally all fees and expenses, other than
 
                                      A-48
<PAGE>   244
 
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing of the Proxy Statement (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto.
 
(b) IPEC Payments.  (i) If (x) the Board of Directors of IPEC shall have
withheld, withdrawn or modified in a manner adverse to SpeedFam its
recommendation in favor of adoption and approval of this Agreement and approval
of the Merger and at that time there shall not have occurred a Material Adverse
Effect on SpeedFam, or (y) the Board of Directors of IPEC recommends an IPEC
Superior Proposal to the stockholders of IPEC, IPEC shall pay to SpeedFam an
amount equal to $6,000,000 within one business day following the earlier to
occur of (A) termination of this Agreement pursuant to Section 7.1(e) hereof or
(B) an IPEC Negative Vote (as defined below); and
 
(ii) If no payment shall be required pursuant to clause 7.3(b)(i) above, and if
(x) the vote of the stockholders of IPEC approving and adopting this Agreement
and approving the Merger shall not have been obtained by reason of the failure
to obtain the required vote upon a vote taken at a meeting of stockholders duly
convened therefor or at any adjournment thereof (a "IPEC Negative Vote") and (y)
prior to such IPEC Negative Vote there shall have occurred an Acquisition
Proposal with respect to IPEC which shall have been publicly disclosed and not
withdrawn (a "IPEC Competing Proposal") and (z) within 12 months following such
IPEC Negative Vote IPEC shall enter into a definitive agreement with respect to
an Acquisition Proposal with the party (or any affiliate of the party) that made
the IPEC Competing Proposal or an Acquisition Proposal with such party (or any
such affiliate) shall have been consummated, then, provided that there shall
have not occurred a Material Adverse Effect on SpeedFam prior to the IPEC
Negative Vote, IPEC shall pay to SpeedFam an amount equal to $6,000,000 within
one business day following demand therefor.
 
(c) SpeedFam Payments.  (i) If (x) the Board of Directors of SpeedFam shall have
withheld, withdrawn or modified in a manner adverse to IPEC its recommendation
in favor of approving the issuance of the shares of SpeedFam Common Stock by
virtue of the Merger and at that time there shall not have occurred a Material
Adverse Effect on IPEC, or (y) the Board of Directors of SpeedFam recommends a
SpeedFam Superior Proposal to the shareholders of SpeedFam, SpeedFam shall pay
to IPEC an amount equal to $6,000,000 within one business day following the
earlier to occur of (A) termination of this Agreement pursuant to Section 7.1(f)
hereof or (B) a SpeedFam Negative Vote (as defined below); and
 
(ii) If no payment shall be required pursuant to clause 7.3(c)(i) above, and if
(x) the vote of the shareholders of SpeedFam to permit the issuance of shares of
SpeedFam Common Stock by virtue of the Merger, shall not have been obtained by
reason of the failure to obtain the required vote upon a vote taken at a meeting
of shareholders duly convened therefor or at any adjournment thereof (a
"SpeedFam Negative Vote") and (y) prior to such SpeedFam Negative Vote there
shall have occurred an Acquisition Proposal with respect to SpeedFam which shall
have been publicly disclosed and not withdrawn (a "SpeedFam Competing Proposal")
and (z) within 12 months following such SpeedFam Negative Vote SpeedFam shall
enter into a definitive agreement with respect to an Acquisition Proposal with
the party (or any affiliate of the party) that made the SpeedFam Competing
Proposal or an Acquisition Proposal with such party (or any such affiliate)
shall have been consummated, then, provided that there shall not have occurred a
Material Adverse Effect on IPEC prior to the SpeedFam Negative Vote, SpeedFam
shall
 
                                      A-49
<PAGE>   245
 
pay to IPEC an amount equal to $6,000,000 within one business day following
demand therefor.
 
(d) Payment of the fees described in Section 7.3(b) and (c) above shall not be
in lieu of damages incurred in the event of breach of this Agreement.
 
Section 7.4.  Amendment.  Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
 
Section 7.5.  Extension; Waiver.  At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
 
                                  ARTICLE VIII
 
                               GENERAL PROVISIONS
 
Section 8.1.  Non-Survival of Representations and Warranties.  The
representations and warranties of IPEC, SpeedFam and Merger Sub contained in
this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
 
Section 8.2.  Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
 
        (a) if to SpeedFam or
            Merger Sub, to:
 
            SpeedFam International, Inc.
            305 N. 54th Street
            Chandler, Arizona 85226-2416
            Attention: President and Chief
            Executive Officer
            Telephone No.: (602) 705-2100
            Telecopy No.: (602) 705-2122
 
            with a copy to:
 
            Chapman and Cutler
            111 W. Monroe Street
            Chicago, Illinois 60603
            Attention: Jonathan A. Koff
            Telephone No.: (312) 845-3000
            Telecopy No.: (312) 701-2361
 
                                      A-50
<PAGE>   246
 
        (b) if to IPEC, to:
 
            Integrated Process Equipment Corp.
            4717 East Hilton Avenue
            Phoenix, Arizona 85034
            Attention: President and Chief Executive Officer
            Telephone No.: (602) 517-7200
            Telecopy No.: (602) 517-6016
 
            with a copy to:
 
            Wilson Sonsini Goodrich & Rosati
            650 Page Mill Road
            Palo Alto, California 94304-1050
            Attention: Francis Currie
            Telephone No.: (650) 493-9300
            Telecopy No.: (650) 845-5000
 
Section 8.3.  Interpretation; Knowledge.  (a) When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. The words "Include," "Includes" and "Including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "The Business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity. As used herein, "subsidiary" shall include only majority-owned
subsidiaries as such term is defined in Rule 1-02 of Regulation S-X.
 
(b) For purposes of this Agreement, the term "Knowledge" means, with respect to
any matter in question, that any of the Chairman, Chief Executive Officer, Chief
Operating Officer, if applicable, Chief Financial Officer or Controller of IPEC
or SpeedFam, as the case may be, have actual knowledge of such matter.
 
Section 8.4.  Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
 
Section 8.5.  Entire Agreement; Third Party Beneficiaries.  This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the IPEC Schedules and the
SpeedFam Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreements
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except with respect to the matters set
forth in Section 5.13.
 
Section 8.6.  Severability.  In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force
 
                                      A-51
<PAGE>   247
 
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
 
Section 8.7.  Other Remedies; Specific Performance.  Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
 
Section 8.8.  Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof; provided that issues involving the corporate governance of any of the
parties hereto shall be governed by their respective jurisdictions of
incorporation and that the Merger shall be governed by Delaware Law. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction of any federal
court within the Ninth District of Arizona, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein, other
than issues involving the corporate governance of any of the parties hereto,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Arizona for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction and
such process.
 
Section 8.9.  Rules of Construction.  The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
 
Section 8.10.  Assignment.  No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the of the parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
 
                                      A-52
<PAGE>   248
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the date first above written.
 
                                          INTEGRATED PROCESS EQUIPMENT CORP.
 
                                          By /s/ ROGER D. MCDANIEL
 
                                            ------------------------------------
                                             Name: Roger D. McDaniel
                                             Title: President and Chief
                                             Executive Officer
 
                                          SPEEDFAM INTERNATIONAL, INC.
 
                                          By /s/ RICHARD J. FAUBERT
 
                                            ------------------------------------
                                             Name: Richard J. Faubert
                                             Title: President and Chief
                                             Executive Officer
 
                                          SPEEDFAM, INC.
 
                                          By /s/ RICHARD J. FAUBERT
 
                                            ------------------------------------
                                             Name: Richard J. Faubert
                                             Title: President
 
                                      A-53
<PAGE>   249
 
                                                                         ANNEX B
 
                             STOCK OPTION AGREEMENT
 
THIS STOCK OPTION AGREEMENT dated as of November 19, 1998 (the "Agreement") is
entered into by and between Integrated Process Equipment Corp., a Delaware
corporation ("IPEC"), and SpeedFam International, Inc., an Illinois corporation
("SpeedFam").
 
                                    RECITALS
 
WHEREAS, concurrently with the execution and delivery of this Agreement, IPEC,
SpeedFam and SpeedFam, Inc., a Delaware corporation and a wholly owned
subsidiary of SpeedFam ("Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"), which provides that, among other things, upon
the terms and subject to the conditions thereof, IPEC and SpeedFam will enter
into a business combination transaction to pursue their long-term business
strategies (the "Merger"); and
 
WHEREAS, as a condition to IPEC's willingness to enter into the Merger
Agreement, IPEC has requested that SpeedFam agree, and SpeedFam has so agreed,
to grant to IPEC an option to acquire shares of SpeedFam's Common Stock, no par
value, upon the terms and subject to the conditions set forth herein;
 
                                   AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements set forth herein and in the Merger Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
 
Section 1.  Grant of Option
 
SpeedFam hereby grants to IPEC an irrevocable option (the "Option") to acquire
up to a number of shares of the Common Stock, without par value, of SpeedFam
("SpeedFam Shares") equal to 19.9% of the issued and outstanding shares as of
the first date, if any, upon which an Exercise Event (as defined in Section 2(a)
below) shall occur (the "Option Shares")(provided that the Option Shares shall
not upon timely issuance constitute more than 19.9% of the then issued and
outstanding SpeedFam Shares), in the manner set forth below (i) by paying cash
at a price of $14.875 per share (the "Exercise Price") and/or, at IPEC's
election, (ii) by exchanging therefor shares of the Common Stock, $.01 par
value, of IPEC ("IPEC Shares") at a rate (the "Exercise Ratio"), for each Option
Share, of a number of IPEC Shares equal to the Exercise Price divided by the
closing sale price of IPEC Shares on the Nasdaq National Market for the trading
day immediately preceding the date of the Closing (as defined below) of the
particular Option exercise. Capitalized terms used in this Agreement but not
defined herein shall have the meanings ascribed thereto in the Merger Agreement.
 
Section 2.  Exercise of Option; Maximum Proceeds
 
(a) The Option may be exercised by IPEC, in whole or in part, at any time or
from time to time, (i) immediately prior to the consummation of a tender or
exchange offer for 15% or more of any class of SpeedFam's capital stock, (ii)
upon the occurrence of all of the events specified in Section 7.3(c)(ii) of the
Merger Agreement, (iii) if and when the
 
                                       B-1
<PAGE>   250
 
Board of Directors of SpeedFam shall have withheld, withdrawn or modified in a
manner adverse to IPEC its recommendation in favor of approving the issuance of
the shares of SpeedFam Common Stock by virtue of the Merger and such other
matters as may be required by the Merger Agreement, or decides to postpone or
not hold the SpeedFam Shareholders' Meeting after receipt of and in connection
with an Acquisition Proposal with respect to SpeedFam and at that time there
shall not have occurred a Material Advice Effect (as defined in the Merger
Agreement) on IPEC or (iv) if and when the Board of Directors of SpeedFam
recommends a SpeedFam Superior Proposal to the shareholders of SpeedFam (any of
the events specified in clauses (i), (ii), (iii) or (iv) of this sentence being
referred to herein as an "Exercise Event"). In the event IPEC wishes to exercise
the Option, IPEC shall deliver to SpeedFam a written notice (each an "Exercise
Notice") specifying the total number of Option Shares it wishes to acquire and
the form of consideration to be paid. Each closing of a purchase of Option
Shares (a "Closing") shall occur on a date and at a time prior to the
termination of the Option designated by IPEC in an Exercise Notice delivered at
least two business days prior to the date of such Closing, which Closing shall
be held at the principal offices of SpeedFam.
 
(b) Notwithstanding the foregoing, upon the commencement of a tender or exchange
offer for 15% or more of any class of SpeedFam's capital stock (and/or during
any time which such a tender or exchange offer remains open), IPEC may deliver
to SpeedFam an Exercise Notice (a "Conditional Exercise Notice") specifying that
it wishes to exercise and close a purchase of Option Shares immediately prior to
the consummation of such tender or exchange offer. Unless the Conditional
Exercise Notice is withdrawn by IPEC, the Closing of a purchase of Option Shares
specified in a Conditional Exercise Notice shall take place immediately prior to
the consummation of such tender or exchange offer. In the event that such tender
or exchange offer is not consummated prior to termination of the Option, such
Conditional Exercise Notice shall be void and of no further force and effect.
 
(c) The Option shall terminate upon the earliest of (i) the Effective Time, (ii)
180 days following the termination of the Merger Agreement pursuant to Article
VII thereof if an Exercise Event shall have occurred on or prior to the date of
such termination, (iii) 12 months following the date on which the Merger
Agreement is terminated pursuant to Article VII thereof if (x) there shall have
been a SpeedFam Negative Vote and (y) prior to such SpeedFam Negative Vote there
shall have occurred an Acquisition Proposal with respect to SpeedFam which shall
have been publicly disclosed and not withdrawn, (iv) 12 months following the
date on which the Merger Agreement is terminated pursuant to Article VII thereof
if prior thereto there shall have commenced a tender or exchange offer for 15%
or more of any class of SpeedFam's capital stock and (v) the date on which the
Merger Agreement is terminated if neither an Exercise Event, nor both of the
events specified in subclauses (x) and (y) of clause (iii), nor the commencement
of a tender or exchange offer for 15% or more of any class of SpeedFam's capital
stock shall have occurred on or prior to such date of termination; provided
however, that if the Option cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the HSR Act shall not have expired or been terminated, then
the Option shall not terminate until the tenth business day after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal. Notwithstanding the foregoing, the Option may not be
exercised if (i) IPEC shall have breached in any material respect any of its
covenants or agreements contained in the Merger Agreement or (ii) the
representations
 
                                       B-2
<PAGE>   251
 
and warranties of IPEC contained in the Merger Agreement shall not have been
true and correct in all material respects on and as of the date when made.
 
(d) If IPEC receives in the aggregate pursuant to Section 7.3(c) of the Merger
Agreement together with proceeds in connection with any sales or other
dispositions of Option Shares and any dividends received by IPEC declared on
Option Shares, more than the sum of (x) $6,000,000 plus (y) the Exercise Price
multiplied by the number of SpeedFam Shares purchased by IPEC pursuant to the
Option, then all proceeds to IPEC in excess of such sum shall be remitted by
IPEC to SpeedFam.
 
Section 3.  Conditions to Closing
 
The obligation of SpeedFam to issue Option Shares to IPEC hereunder is subject
to the conditions that (a) any waiting period under the HSR Act applicable to
the issuance of the Option Shares hereunder shall have expired or been
terminated; (b) all material consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect. It is understood and agreed that at any time during which
the Option is exercisable or if IPEC shall have delivered to SpeedFam a
Conditional Exercise Notice, the parties will use their respective best efforts
to satisfy all conditions to Closing, so that a Closing may take place as
promptly as practicable, and in any event, prior to consummation of a tender or
exchange offer for shares of SpeedFam capital stock; provided that neither
SpeedFam nor IPEC nor any subsidiary or affiliate thereof will be required to
agree to any divestiture by itself or any of its affiliates of shares of capital
stock or of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
 
Section 4.  Closing
 
At any Closing, (a) SpeedFam shall deliver to IPEC a single certificate in
definitive form representing the number of SpeedFam Shares designated by IPEC in
its Exercise Notice, such certificate to be registered in the name of IPEC and
to bear the legend set forth in Section 10 hereof, against delivery of (b)
payment by IPEC to SpeedFam of the aggregate purchase price for the SpeedFam
Shares so designated and being purchased by delivery of (i) immediately
available funds and/or, at IPEC's election, (ii) a single certificate in
definitive form representing the number of IPEC Shares being issued by IPEC in
consideration therefor (based on the Exercise Ratio), such certificate to be
registered in the name of SpeedFam and to bear the legend set forth in Section
10 hereof.
 
Section 5.  Representations and Warranties of SpeedFam
 
SpeedFam represents and warrants to IPEC that (a) SpeedFam is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder; (b) the execution and delivery of
this Agreement by SpeedFam and consummation by SpeedFam of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of SpeedFam and no other corporate proceedings on the part of
SpeedFam are necessary to authorize this Agreement or any of the transactions
contemplated hereby; (c) this Agreement has been duly executed and delivered by
SpeedFam and constitutes a legal, valid and binding obligation
 
                                       B-3
<PAGE>   252
 
of SpeedFam and, assuming this Agreement constitutes a legal, valid and binding
obligation of IPEC, is enforceable against SpeedFam in accordance with its
terms, except as enforceability may be limited by bankruptcy and other laws
affecting the rights and remedies of creditors generally and general principles
of equity; (d) except for any filings required under the HSR Act, SpeedFam has
taken all necessary corporate and other action to authorize and reserve for
issuance and to permit it to issue upon exercise of the Option, and at all times
from the date hereof until the termination of the Option will have reserved for
issuance, a sufficient number of unissued SpeedFam Shares for IPEC to exercise
the Option in full and will take all necessary corporate or other action to
authorize and reserve for issuance all additional SpeedFam Shares or other
securities which may be issuable pursuant to Section 9(a) upon exercise of the
Option, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable;
(e) upon delivery of the SpeedFam Shares and any other securities to IPEC upon
exercise of the Option, IPEC will acquire such SpeedFam Shares or other
securities free and clear of all material claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever, excluding those imposed
by IPEC; (f) the execution and delivery of this Agreement by SpeedFam do not,
and the performance of this Agreement by SpeedFam will not, (i) violate the
Articles of Incorporation or By-Laws of SpeedFam, (ii) conflict with or violate
any order applicable to SpeedFam or any of its subsidiaries or by which they or
any of their property is bound or affected or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets of SpeedFam or any of its
subsidiaries pursuant to, any contract or agreement to which SpeedFam or any of
its subsidiaries is a party or by which SpeedFam or any of its subsidiaries or
any of their property is bound or affected, except, in the case of clauses (ii)
and (iii) above, for violations, conflicts, breaches, defaults, rights of
termination, amendment, acceleration or cancellation, liens or encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on SpeedFam; (g) the execution and delivery of this Agreement by SpeedFam
does not, and the performance of this Agreement by SpeedFam will not, require
any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity by SpeedFam except pursuant to the HSR
Act or to the extent required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); and (h) any IPEC Shares acquired pursuant to this
Agreement will not be acquired by SpeedFam with a view to the public
distribution thereof and SpeedFam will not sell or otherwise dispose of such
shares in violation of applicable law or this Agreement.
 
Section 6.  Representations and Warranties of IPEC
 
IPEC represents and warrants to SpeedFam that (a) IPEC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by IPEC and the consummation by IPEC of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of IPEC and no other corporate proceedings on the
part of IPEC are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by IPEC and constitutes a legal, valid and binding obligation of IPEC
and, assuming this Agreement constitutes a legal, valid and binding obligation
of SpeedFam, is enforceable against IPEC in accordance with its terms, except as
enforceability may be
 
                                       B-4
<PAGE>   253
 
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity; (d) upon delivery of IPEC
Shares to SpeedFam in consideration of any acquisition of SpeedFam Shares
pursuant hereto, SpeedFam will acquire such IPEC Shares free and clear of all
material claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever, excluding those imposed by SpeedFam; (e) the execution and
delivery of this Agreement by IPEC do not, and the performance of this Agreement
by IPEC will not, (i) violate the Articles of Incorporation or By-Laws of IPEC,
(ii) conflict with or violate any order applicable to IPEC or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
IPEC or any of its subsidiaries pursuant to, any contract or agreement to which
IPEC or any of its subsidiaries is a party or by which IPEC or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on IPEC; (f) the execution and delivery of this Agreement by IPEC
does not, and the performance of this Agreement by IPEC will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity by IPEC except pursuant to the HSR Act or the
Exchange Act; and (g) any SpeedFam Shares acquired upon exercise of the Option
will not be acquired by IPEC with a view to the public distribution thereof and
IPEC will not sell or otherwise dispose of such shares in violation of
applicable law or this Agreement.
 
Section 7.  Certain Rights
 
(a) IPEC Put.  At the request of and upon notice by IPEC (the "Put Notice"), at
any time during the period during which the Option is exercisable pursuant to
Section 2 (the "Purchase Period") or in accordance with subparagraph (iv) below,
SpeedFam (or any successor entity thereof) shall purchase from IPEC the Option,
to the extent not previously exercised, at the price set forth in subparagraph
(i) below (as limited by subparagraph (iii) below), and the Option Shares, if
any, acquired by IPEC pursuant thereto, at the price set forth in subparagraph
(ii) below (as limited by subparagraph (iii) below):
 
          (i) The difference between the "Market/Tender Offer Price" for
     SpeedFam Shares as of the date IPEC gives notice of its intent to exercise
     its rights under this Section 7(a) (defined as the higher of (A) the
     highest price per share offered as of such date pursuant to any Acquisition
     Proposal which was made prior to such date and not terminated or withdrawn
     as of such date and (B) the highest closing sale price of SpeedFam Shares
     on the Nasdaq National Market during the twenty (20) trading days ending on
     the trading day immediately preceding such date) and the Exercise Price,
     multiplied by the number of SpeedFam Shares purchasable pursuant to the
     Option, but only if the Market/Tender Offer Price is greater than the
     Exercise Price. For purposes of determining the highest price offered
     pursuant to any Acquisition Proposal which involves consideration other
     than cash, the value of such consideration shall be equal to the higher of
     (x) if securities of the same class of the proponent as such consideration
     are traded on any national securities exchange or by any registered
     securities association, a value based on the closing sale price or asked
     price for such securities on their principal trading market on such date
     and (y) the
 
                                       B-5
<PAGE>   254
 
     value ascribed to such consideration by the proponent of such Acquisition
     Proposal, or if no such value is ascribed, a value determined in good faith
     by the Board of Directors of SpeedFam.
 
          (ii) The Exercise Price paid by IPEC for SpeedFam Shares acquired
     pursuant to the Option plus the difference between the Market/Tender Offer
     Price and such Exercise Price (but only if the Market/Tender Offer Price is
     greater than the Exercise Price) multiplied by the number of SpeedFam
     Shares so purchased. If IPEC issued IPEC Shares in connection with any
     exercise of the Option, the Exercise Price in connection with such exercise
     shall be calculated as set forth in Section 1 as if IPEC had exercised its
     right to pay cash instead of issuing IPEC Shares.
 
          (iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant to
     this Section 7, SpeedFam shall not be required to pay IPEC in excess of an
     aggregate of (x) $6,000,000 plus (y) the Exercise Price paid by IPEC for
     SpeedFam Shares acquired pursuant to the Option minus (z) any amounts paid
     to IPEC by SpeedFam pursuant to Section 7.3(c) of the Merger Agreement.
 
          (iv) Notwithstanding the foregoing, upon the commencement of a tender
     or exchange offer for 15% or more of any class of SpeedFam's capital stock
     (and/or during any time which such a tender or exchange offer remains
     open), IPEC may deliver to SpeedFam a Put Notice (a "Conditional Put
     Notice") specifying that it wishes to exercise and close immediately prior
     to the consummation of such tender or exchange offer, a sale to SpeedFam
     pursuant to this Section 7(a) of the Option, to the extent not previously
     exercised, and the Option Shares, if any, acquired by IPEC pursuant
     thereto. Unless the Conditional Put Notice is withdrawn by IPEC, the
     Closing of any such sale specified in a Conditional Put Notice shall take
     place immediately prior to the consummation of such tender or exchange
     offer. In the event that such tender or exchange offer is not consummated
     prior to termination of the Option, such Conditional Put Notice shall be
     void and of no further force and effect.
 
(b) Redelivery of IPEC Shares.  If IPEC has acquired SpeedFam Shares pursuant to
exercise of the Option by the issuance and delivery of IPEC Shares, then
SpeedFam shall, if so requested by IPEC, in fulfillment of its obligation
pursuant to the first clause of Section 7(a)(ii) with respect to the Exercise
Price paid in the form of IPEC Shares only, redeliver the certificate(s) for
such IPEC Shares to IPEC, free and clear of all claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever, other than
those imposed by IPEC.
 
(c) Payment and Redelivery of Option or Shares.  In the event IPEC exercises its
rights under Sections 7(a) or (b), SpeedFam shall, within ten business days
after IPEC delivers notice pursuant to Section 7(a), pay the required amount to
IPEC in immediately available funds (and IPEC Shares, if applicable) and IPEC
shall surrender to SpeedFam the Option and the certificates evidencing the
SpeedFam Shares purchased by IPEC pursuant thereto, and IPEC shall represent and
warrant that such shares are then free and clear of all claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever, other than
those imposed by SpeedFam.
 
(d) SpeedFam Call.  If IPEC has acquired Option Shares pursuant to exercise of
the Option (the date of any Closing relating to any such exercise herein
referred to as an "Exercise Date") and no Acquisition Proposal with respect to
SpeedFam has been consummated at any time after the date of this Agreement and
prior to the date one year following such Exercise Date (nor has SpeedFam
entered into a definitive agreement or
 
                                       B-6
<PAGE>   255
 
letter of intent with respect to such an Acquisition Proposal which agreement or
letter of intent remains in effect at the end of such year), then, at any time
after the date one year following such Exercise Date and prior to the date
eighteen months following such Exercise Date, SpeedFam may require IPEC, upon
delivery to IPEC of written notice, to sell to SpeedFam any SpeedFam Shares held
by IPEC as of the day that is ten business days after the date of such notice,
up to a number of shares equal to the number of Option Shares acquired by IPEC
pursuant to exercise of the Option in connection with such Exercise Date. The
per share purchase price for such sale (the "SpeedFam Call Price") shall be
equal to the Exercise Price plus interest at 7% per annum, less any dividends
paid on the SpeedFam Shares to be purchased by SpeedFam pursuant to this Section
7(d). The closing of any sale of SpeedFam Shares pursuant to this Section 7(d)
shall take place at the principal offices of SpeedFam at a time and on a date
designated by SpeedFam in the aforementioned notice to IPEC, which date shall be
no more than 20 and no less than 12 business days from the date of such notice.
The SpeedFam Call Price shall be paid in immediately available funds, provided
that, in the event IPEC has acquired Option Shares pursuant to exercise of the
Option by issuance and delivery of IPEC Shares, at the option of SpeedFam, the
SpeedFam Call Price for part or all of any purchase of SpeedFam Shares pursuant
to this Section 7(d), up to a number of such shares equal to the number of
Option Shares acquired by IPEC by issuance and delivery of IPEC Shares, shall be
paid by delivery of a number of IPEC Shares equal to the SpeedFam Call Price
divided by the closing sale price of IPEC Shares on the Nasdaq National Market
for the trading day immediately preceding the date of the Exercise Date on which
the Option Shares to be purchased by SpeedFam pursuant to this Section 7(d) were
originally issued to IPEC.
 
(e) Restrictions on Transfer.  Until the expiration of the Purchase Period,
SpeedFam shall not sell, transfer or otherwise dispose of any IPEC Shares
acquired by it pursuant to this Agreement.
 
Section 8.  Registration Rights
 
(a) Following the termination of the Merger Agreement, each party hereto (a
"Holder") may by written notice (a "Registration Notice") to the other party
(the "Registrant") request the Registrant to register under the Securities Act
all or any part of the shares acquired by such Holder pursuant to this Agreement
(the "Registrable Securities") in order to permit the sale or other disposition
of such shares pursuant to a bona fide firm commitment underwritten public
offering in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis (a "Permitted
Offering"); provided, however, that any such Registration Notice must relate to
a number of shares equal to at least 2% of the outstanding shares of Common
Stock of the Registrant on a fully diluted basis and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registration Notice
shall include a certificate executed by the Holder and its proposed managing
underwriter, which underwriter shall be an investment banking firm of nationally
recognized standing (the "Manager"), stating that (i) the Holder and the Manager
have a good faith intention to commence a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the per share average of the closing sale prices
of the Registrant's Common Stock on the Nasdaq National Market for the twenty
trading days immediately preceding the date of the Registration Notice. The
Registrant shall
 
                                       B-7
<PAGE>   256
 
thereupon have the option exercisable by written notice delivered to the Holder
within ten business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable Securities
for cash at a price (the "Option Price" equal to the product of (i) the number
of Registrable Securities so purchased and (ii) the per share average of the
closing sale prices of the Registrant's Common Stock on the Nasdaq National
Market for the twenty trading days immediately preceding the date of the
Registration Notice. Any such purchase of Registrable Securities by the
Registrant hereunder shall take place at a closing to be held at the principal
executive offices of the Registrant or its counsel at any reasonable date and
time designated by the Registrant in such notice within 10 business days after
delivery of such notice. The payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in immediately
available funds.
 
(b) If the Registrant does not elect to exercise its option to purchase pursuant
to Section 8(a) with respect to all Registrable Securities, the Registrant shall
use all reasonable efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable Securities
requested to be registered in the Registration Notice; provided, however, that
(i) neither party shall be entitled to more than an aggregate of two effective
registration statements hereunder and (ii) the Registrant will not be required
to file any such registration statement during any period of time (not to exceed
40 days after a Registration Notice in the case of clause (A) below or 90 days
after a Registration Notice in the case of clauses (B) and (C) below) when (A)
the Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to such Registrant, such information would have
to be disclosed if a registration statement were filed at that time; (B) such
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) such Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 180 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 8 shall again be applicable
to any proposed registration, it being understood that neither party shall be
entitled to more than an aggregate of two effective registration statements
hereunder. The Registrant shall use all reasonable efforts to cause any
Registrable Securities registered pursuant to this Section 8 to be qualified for
sale under the securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdictions; provided, however, that the Registrant shall not
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
 
(c) The registration rights set forth in this Section 8 are subject to the
condition that the Holder shall provide the Registrant with such information
with respect to such Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to such Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all material facts required to
be disclosed with respect to a registration thereunder.
 
(d) A registration effected under this Section 8 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant shall provide to
the underwriters such
 
                                       B-8
<PAGE>   257
 
documentation (including certificates, opinions of counsel and "comfort" letters
from auditors) as are customary in connection with underwritten public offerings
and as such underwriters may reasonably require. In connection with any
registration, the Holder and the Registrant agree to enter into an underwriting
agreement reasonably acceptable to each such party, in form and substance
customary for transactions of this type with the underwriters participating in
such offering.
 
(e) Indemnification.  (i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Registrant of any rule or regulation
promulgated under the Securities Act applicable to the Registrant in connection
with any such registration, qualification or compliance, and the Registrant will
reimburse the Holder and each of its directors and officers and each person who
controls the Holder within the meaning of Section 15 of the Securities Act, and
each underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Registrant by such Holder or director or
officer or controlling person or underwriter seeking indemnification.
 
(ii) The Holder will indemnify the Registrant, each of its directors and
officers and each underwriter of the Registrant's securities covered by such
registration statement and each person who controls the Registrant within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Holder of any rule or regulation
promulgated under the Securities Act applicable to the Holder in connection with
any such registration, qualification or compliance, and will reimburse the
Registrant, such directors, officers or control persons or underwriters for any
legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Registrant by the Holder for use
 
                                       B-9
<PAGE>   258
 
therein, provided that in no event shall any indemnity under this Section 8(e)
exceed the gross proceeds of the offering received by the Holder.
 
(iii) Each party entitled to indemnification under this Section 8(e) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall pay such
expense if representation of the Indemnified Party by counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8(e) unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action. No Indemnifying Party, in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be required to indemnify any Indemnified
Party with respect to any settlement entered into without such Indemnifying
Party's prior consent (which shall not be unreasonably withheld).
 
(f) Contribution.  If the indemnification from the Indemnifying Party provided
for in Section 8(e) is found, pursuant to a final judicial determination not
subject to appeal, to be unavailable to an Indemnified Party hereunder or
insufficient in respect of any claims, losses, damages and liabilities incurred
by such Indemnified Party, then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the claims, losses, damages and
liabilities paid or payable by such Indemnified Party in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the actions or omissions that resulted in
such claims, losses, damages and liabilities, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action or omission in question, including any untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact, has been made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the claims, losses,
damages and liabilities referred to above shall be deemed to include any legal
or other expenses reasonably incurred by such party in connection with any
investigation or proceeding.
 
Section 9.  Adjustment Upon Changes in Capitalization; Rights Plans
 
(a) In the event of any change in the SpeedFam Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such
 
                                      B-10
<PAGE>   259
 
transaction so that IPEC shall receive, upon exercise of the Option, the number
and class of shares or other securities or property that IPEC would have
received in respect of the SpeedFam Shares if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
 
(b) At any time during which the Option is exercisable, and at any time after
the Option is exercised (in whole or in part, if at all), SpeedFam shall not
adopt a shareholders rights plan (a so-called "poison pill"), and IPEC shall not
amend the IPEC Rights Plan or adopt a new shareholders rights plan, that
contains provisions for the distribution of rights thereunder as a result of the
other party being the beneficial owner of shares of the first party by virtue of
the Option being exercisable or having been exercised (or as a result of such
other party beneficially owning shares issuable in respect of any Option
Shares). It is understood, however, that following termination (if any) of the
Merger Agreement, a party may adopt (or in the case of IPEC, adopt and/or amend)
a shareholders rights plan, that contains provisions for the distribution of
rights thereunder as a result of the other party being the beneficial owner of
shares of the first party in addition to those that may be beneficially owned by
virtue of the Option being exercisable or having been exercised (or as a result
of such other party beneficially owning shares issuable in respect of any Option
Shares).
 
Section 10.  Restrictive Legends
 
Each certificate representing Option Shares issued to IPEC hereunder, and each
certificate representing IPEC Shares delivered to SpeedFam at a Closing, shall
include a legend in substantially the following form:
 
        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
        BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
        FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
        SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN
        THE STOCK OPTION AGREEMENT DATED AS OF NOVEMBER 19, 1998, A COPY
        OF WHICH MAY BE OBTAINED FROM THE ISSUER.
 
Section 11.  Listing and HSR Filing
 
SpeedFam, upon the request of IPEC, shall promptly file an application to list
the SpeedFam Shares to be acquired upon exercise of the Option for quotation on
the Nasdaq National Market and shall use its best efforts to obtain approval of
such listing as soon as practicable. IPEC, upon the request of SpeedFam, shall
promptly file an application to list the IPEC Shares issued and delivered to
SpeedFam pursuant to Section 4 for quotation on the Nasdaq National Market and
shall use its best efforts to obtain approval of such listing as soon as
practicable. Promptly after the date hereof, each of the parties hereto shall
promptly file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice all required premerger notification and
report forms and other documents and exhibits required to be filed under the HSR
Act to permit the acquisition of the SpeedFam Shares subject to the Option at
the earliest possible date.
 
Section 12.  Binding Effect
 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing contained
in this Agreement,
 
                                      B-11
<PAGE>   260
 
express or implied, is intended to confer upon any person other than the parties
hereto and their respective successors and permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement. Any shares sold
by a party in compliance with the provisions of Section 8 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement and any transferee of such shares shall not be
entitled to the rights of such party. Certificates representing shares sold in a
registered public offering pursuant to Section 8 shall not be required to bear
the legend set forth in Section 10.
 
Section 13.  Specific Performance
 
The parties recognize and agree that if for any reason any of the provisions of
this Agreement are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each party
agrees that in addition to other remedies the other party shall be entitled to
an injunction restraining any violation or threatened violation of the
provisions of this Agreement. In the event that any action shall be brought in
equity to enforce the provisions of the Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
 
Section 14.  Entire Agreement
 
This Agreement and the Merger Agreement (including the appendices thereto)
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
 
Section 15.  Further Assurances
 
Each party will execute and deliver all such further documents and instruments
and take all such further action as may be necessary in order to consummate the
transactions contemplated hereby.
 
Section 16.  Validity
 
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the other provisions of this Agreement,
which shall remain in full force and effect. In the event any Governmental
Entity of competent jurisdiction holds any provision of this Agreement to be
null, void or unenforceable, the parties hereto shall negotiate in good faith
and shall execute and deliver an amendment to this Agreement in order, as nearly
as possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision.
 
                                      B-12
<PAGE>   261
 
Section 17.  Notices
 
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or sent
via telecopy (receipt confirmed) to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party as
shall be specified by like notice):
 
        (1) if to IPEC, to:
 
            Integrated Process Equipment Corp.
            4717 East Hilton Avenue
            Phoenix, Arizona 85034
            Attention: Roger D. McDaniel
            Telephone No.: (602) 517-7200
            Telecopy No.: (602) 517-6016
 
            with a copy to:
 
            Wilson Sonsini Goodrich & Rosati
            650 Page Mill Road
            Palo Alto, California 94304-1050
            Attention: Francis Currie
            Telephone No.: (650) 493-9300
            Telecopy No.: (650) 845-5000
 
        (2) if to SpeedFam, to:
 
            SpeedFam International, Inc.
            305 N. 54th Street
            Chandler, Arizona 85226-2416
            Attention:
            Telephone No.: (602) 705-2100
            Telecopy No.: (602) 705-2122
 
            with a copy to:
 
            Chapman and Cutler
            111 West Monroe Street
            Chicago, Illinois 60603
            Attention: Jonathan A. Koff
            Telephone No.: (312) 845-3000
            Telecopy No.: (312) 701-2361
 
Section 18.  Governing Law
 
This Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois applicable to agreements made and to be performed entirely
within such State.
 
Section 19.  Counterparts
 
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
 
Section 20.  Expenses
 
Except as otherwise expressly provided herein or in the Merger Agreement, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
 
                                      B-13
<PAGE>   262
 
Section 21.  Amendments; Waiver
 
This Agreement may be amended by the parties hereto and the terms and conditions
hereof may be waived only by an instrument in writing signed on behalf of each
of the parties hereto, or, in the case of a waiver, by an instrument signed on
behalf of the party waiving compliance.
 
Section 22.  Assignment
 
Neither of the parties hereto may sell, transfer, assign or otherwise dispose of
any of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that the rights and obligations hereunder shall inure to the
benefit of and be binding upon any successor of a party hereto.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the date first above written.
 
                                          INTEGRATED PROCESS EQUIPMENT CORP.
 
                                          By /s/ ROGER D. MCDANIEL
                                            ------------------------------------
                                             Name: Roger D. McDaniel
                                             Title: President and Chief
                                             Executive Officer
 
                                          SPEEDFAM INTERNATIONAL, INC.
 
                                          By /s/ RICHARD J. FAUBERT
                                            ------------------------------------
                                             Name: Richard J. Faubert
                                             Title: President and Chief
                                             Executive Officer
 
                                      B-14
<PAGE>   263
 
                             STOCK OPTION AGREEMENT
 
THIS STOCK OPTION AGREEMENT dated as of November 19, 1998 (the "Agreement") is
entered into by and between Integrated Process Equipment Corp., a Delaware
corporation ("IPEC"), and SpeedFam International, Inc., an Illinois corporation
("SpeedFam").
 
                                    RECITALS
 
WHEREAS, concurrently with the execution and delivery of this Agreement, IPEC,
SpeedFam and SpeedFam, Inc., a Delaware corporation and a wholly owned
subsidiary of SpeedFam ("Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"), which provides that, among other things, upon
the terms and subject to the conditions thereof, IPEC and SpeedFam will enter
into a business combination transaction to pursue their long-term business
strategies (the "Merger"); and
 
WHEREAS, as a condition to SpeedFam's willingness to enter into the Merger
Agreement, SpeedFam has requested that IPEC agree, and IPEC has so agreed, to
grant to SpeedFam an option to acquire shares of IPEC's Common Stock, $.01 par
value per share together with any associated rights ("IPEC Rights") under the
IPEC Preferred Share Rights Agreement dated March 5, 1997, as amended, upon the
terms and subject to the conditions set forth herein;
 
                                   AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements set forth herein and in the Merger Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
 
Section 1.  Grant of Option
 
IPEC hereby grants to SpeedFam an irrevocable option (the "Option") to acquire
up to a number of shares of the Common Stock, $.01 par value per share, of IPEC
("IPEC Shares") equal to 19.9% of the issued and outstanding shares as of the
first date, if any, upon which an Exercise Event (as defined in Section 2(a)
below) shall occur (the "Option Shares") (provided that the Option Shares shall
not upon timely issuance constitute more than 19.9% of the then issued and
outstanding IPEC Shares), in the manner set forth below (i) by paying cash at a
price of $10.56 per share (the "Exercise Price") and/or, at SpeedFam's election,
(ii) by exchanging therefor shares of the Common Stock, no par value, of
SpeedFam ("SpeedFam Shares") at a rate (the "Exercise Ratio"), for each Option
Share, of a number of SpeedFam Shares equal to the Exercise Price divided by the
closing sale price of SpeedFam Shares on The Nasdaq National Market for the
trading day immediately preceding the date of the Closing (as defined below) of
the particular Option exercise. All references in this Agreement to IPEC Shares
or Option Shares shall be deemed to include the associated IPEC Rights.
Capitalized terms used in this Agreement but not defined herein shall have the
meanings ascribed thereto in the Merger Agreement.
 
Section 2.  Exercise of Option; Maximum Proceeds
 
(a) The Option may be exercised by SpeedFam, in whole or in part, at any time or
from time to time, (i) immediately prior to the consummation of a tender or
exchange offer for 15% or more of any class of IPEC's capital stock, (ii) upon
the occurrence of all of the events specified in Section 7.3(b)(ii) of the
Merger Agreement, (iii) if and when the
 
                                      B-15
<PAGE>   264
 
Board of Directors of IPEC shall have withheld, withdrawn or modified in a
manner adverse to SpeedFam its recommendation that the stockholders of IPEC
approve and adopt the Merger Agreement and approve the Merger, or decides to
postpone or not hold the IPEC Stockholders' Meeting, after receipt of and in
connection with an Acquisition Proposal with respect to IPEC and at that time
there shall not have occurred a Material Adverse Effect (as defined in the
Merger Agreement) on SpeedFam or (iv) if and when the Board of Directors of IPEC
recommends a IPEC Superior Proposal to the stockholders of IPEC (any of the
events specified in clauses (i), (ii), (iii) or (iv) of this sentence being
referred to herein as an "Exercise Event"). In the event SpeedFam wishes to
exercise the Option, SpeedFam shall deliver to IPEC a written notice (each an
"Exercise Notice") specifying the total number of Option Shares it wishes to
acquire and the form of consideration to be paid. Each closing of a purchase of
Option Shares (a "Closing") shall occur on a date and at a time prior to the
termination of the Option designated by SpeedFam in an Exercise Notice delivered
at least two business days prior to the date of such Closing, which Closing
shall be held at the principal offices of IPEC.
 
(b) Notwithstanding the foregoing, upon the commencement of a tender or exchange
offer for 15% or more of any class of IPEC's capital stock (and/or during any
time which such a tender or exchange offer remains open), SpeedFam may deliver
to IPEC an Exercise Notice (a "Conditional Exercise Notice") specifying that it
wishes to exercise and close a purchase of Option Shares immediately prior to
the consummation of such tender or exchange offer. Unless the Conditional
Exercise Notice is withdrawn by SpeedFam, the Closing of a purchase of Option
Shares specified in a Conditional Exercise Notice shall take place immediately
prior to the consummation of such tender or exchange offer. In the event that
such tender or exchange offer is not consummated prior to termination of the
Option, such Conditional Exercise Notice shall be void and of no further force
and effect.
 
(c) The Option shall terminate upon the earliest of (i) the Effective Time, (ii)
180 days following the termination of the Merger Agreement pursuant to Article
VII thereof if an Exercise Event shall have occurred on or prior to the date of
such termination, (iii) 12 months following the date on which the Merger
Agreement is terminated pursuant to Article VII thereof if (x) there shall have
been an IPEC Negative Vote and (y) prior to such IPEC Negative Vote there shall
have occurred an Acquisition Proposal with respect to IPEC which shall have been
publicly disclosed and not withdrawn, (iv) 12 months following the date on which
the Merger Agreement is terminated pursuant to Article VII thereof if prior
thereto there shall have commenced a tender or exchange offer for 15% or more of
any class of IPEC's capital stock and (v) the date on which the Merger Agreement
is terminated if neither an Exercise Event, nor both of the events specified in
subclauses (x) and (y) of clause (iii), nor the commencement of a tender or
exchange offer for 15% or more of any class of IPEC's capital stock shall have
occurred on or prior to such date of termination; provided, however, that if the
Option cannot be exercised by reason of any applicable government order or
because the waiting period related to the issuance of the Option Shares under
the HSR Act shall not have expired or been terminated, then the Option shall not
terminate until the tenth business day after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal.
Notwithstanding the foregoing, the Option may not be exercised if (i) SpeedFam
shall have breached in any material respect any of its covenants or agreements
contained in the Merger Agreement or (ii) the representations and warranties of
SpeedFam contained in the Merger Agreement shall not have been true and correct
in all material respects on and as of the date when made.
 
                                      B-16
<PAGE>   265
 
(d) If SpeedFam receives in the aggregate pursuant to Section 7.3(b) of the
Merger Agreement together with proceeds in connection with any sales or other
dispositions of Option Shares and any dividends received by SpeedFam declared on
Option Shares, more than the sum of (x) $6,000,000 plus (y) the Exercise Price
multiplied by the number of IPEC Shares purchased by SpeedFam pursuant to the
Option, then all proceeds to SpeedFam in excess of such sum shall be remitted by
SpeedFam to IPEC.
 
Section 3.  Conditions to Closing
 
The obligation of IPEC to issue Option Shares to SpeedFam hereunder is subject
to the conditions that (a) any waiting period under the HSR Act applicable to
the issuance of the Option Shares hereunder shall have expired or been
terminated; (b) all material consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal, state or local
governmental authority or instrumentality, if any, required in connection with
the issuance of the Option Shares hereunder shall have been obtained or made, as
the case may be; and (c) no preliminary or permanent injunction or other order
by any court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. It is understood and agreed that at any time during
which the Option is exercisable or if SpeedFam shall have delivered to IPEC a
Conditional Exercise Notice, the parties will use their respective best efforts
to satisfy all conditions to Closing, so that a Closing may take place as
promptly as practicable, and in any event, prior to consummation of a tender or
exchange offer for shares of IPEC capital stock; provided that neither IPEC nor
SpeedFam nor any subsidiary or affiliate thereof will be required to agree to
any divestiture by itself or any of its affiliates of shares of capital stock or
of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
 
Section 4.  Closing
 
At any Closing, (a) IPEC shall deliver to SpeedFam a single certificate in
definitive form representing the number of IPEC Shares designated by SpeedFam in
its Exercise Notice, such certificate to be registered in the name of SpeedFam
and to bear the legend set forth in Section 10 hereof, against delivery of (b)
payment by SpeedFam to IPEC of the aggregate purchase price for the IPEC Shares
so designated and being purchased by delivery of (i) immediately available funds
and/or, at SpeedFam's election, (ii) a single certificate in definitive form
representing the number of SpeedFam Shares being issued by SpeedFam in
consideration therefor (based on the Exercise Ratio), such certificate to be
registered in the name of IPEC and to bear the legend set forth in Section 10
hereof.
 
Section 5.  Representations and Warranties of IPEC
 
IPEC represents and warrants to SpeedFam that (a) IPEC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder; (b) the execution and delivery of
this Agreement by IPEC and consummation by IPEC of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of IPEC and no other corporate proceedings on the part of IPEC are necessary to
authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by IPEC and constitutes a
legal, valid and binding obligation of IPEC and, assuming this Agreement
constitutes a legal, valid and binding obligation of SpeedFam, is enforceable
against IPEC in accordance with its terms, except as enforceability may be
 
                                      B-17
<PAGE>   266
 
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity; (d) except for any filings
required under the HSR Act, IPEC has taken all necessary corporate and other
action to authorize and reserve for issuance and to permit it to issue upon
exercise of the Option, and at all times from the date hereof until the
termination of the Option will have reserved for issuance, a sufficient number
of unissued IPEC Shares for SpeedFam to exercise the Option in full and will
take all necessary corporate or other action to authorize and reserve for
issuance all additional IPEC Shares or other securities which may be issuable
pursuant to Section 9(a) upon exercise of the Option, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable; (e) upon delivery of the IPEC
Shares and any other securities to SpeedFam upon exercise of the Option,
SpeedFam will acquire such IPEC Shares or other securities free and clear of all
material claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever, excluding those imposed by SpeedFam; (f) the execution and
delivery of this Agreement by IPEC do not, and the performance of this Agreement
by IPEC will not, (i) violate the Certificate of Incorporation or By-Laws of
IPEC, (ii) conflict with or violate any order applicable to IPEC or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
IPEC or any of its subsidiaries pursuant to, any contract or agreement to which
IPEC or any of its subsidiaries is a party or by which IPEC or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on IPEC; (g) the execution and delivery of this Agreement by IPEC
does not, and the performance of this Agreement by IPEC will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any Governmental Entity by IPEC except pursuant to the HSR Act or to the
extent required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (h) the execution and delivery of this Agreement by IPEC does
not, and the performance of this Agreement by IPEC will not, result in any
change in the Preferred Stock Conversion Rates, the Convertible Notes Conversion
Price or in any adjustment in the number of shares issuable, or the exercise
price payable, upon the exercise of any option or warrant to purchase any class
of IPEC capital stock outstanding on the date hereof; and (i) any SpeedFam
Shares acquired pursuant to this Agreement will not be acquired by IPEC with a
view to the public distribution thereof and IPEC will not sell or otherwise
dispose of such shares in violation of applicable law or this Agreement.
 
Section 6.  Representations and Warranties of SpeedFam
 
SpeedFam represents and warrants to IPEC that (a) SpeedFam is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Illinois and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by SpeedFam and the consummation by SpeedFam of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of SpeedFam and no other corporate proceedings on
the part of SpeedFam are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly
 
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<PAGE>   267
 
executed and delivered by SpeedFam and constitutes a legal, valid and binding
obligation of SpeedFam and, assuming this Agreement constitutes a legal, valid
and binding obligation of IPEC, is enforceable against SpeedFam in accordance
with its terms, except as enforceability may be limited by bankruptcy and other
laws affecting the rights and remedies of creditors generally and general
principles of equity; (d) upon delivery of SpeedFam Shares to IPEC in
consideration of any acquisition of IPEC Shares pursuant hereto, IPEC will
acquire such SpeedFam Shares free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever,
excluding those imposed by IPEC; (e) the execution and delivery of this
Agreement by SpeedFam do not, and the performance of this Agreement by SpeedFam
will not, (i) violate the Articles of Incorporation or By-Laws of SpeedFam, (ii)
conflict with or violate any order applicable to SpeedFam or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
SpeedFam or any of its subsidiaries pursuant to, any contract or agreement to
which SpeedFam or any of its subsidiaries is a party or by which SpeedFam or any
of its subsidiaries or any of their property is bound or affected, except, in
the case of clauses (ii) and (iii) above, for violations, conflicts, breaches,
defaults, rights of termination, amendment, acceleration or cancellation, liens
or encumbrances which would not, individually or in the aggregate, have a
Material Adverse Effect on SpeedFam; (f) the execution and delivery of this
Agreement by SpeedFam does not, and the performance of this Agreement by
SpeedFam will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity by SpeedFam except
pursuant to the HSR Act or the Exchange Act; and (g) any IPEC Shares acquired
upon exercise of the Option will not be acquired by SpeedFam with a view to the
public distribution thereof and SpeedFam will not sell or otherwise dispose of
such shares in violation of applicable law or this Agreement.
 
Section 7.  Certain Rights
 
(a) SpeedFam Put.  At the request of and upon notice by SpeedFam (the "Put
Notice"), at any time during the period during which the Option is exercisable
pursuant to Section 2 (the "Purchase Period") or in accordance with subparagraph
(iv) below, IPEC (or any successor entity thereof) shall purchase from SpeedFam
the Option, to the extent not previously exercised, at the price set forth in
subparagraph (i) below (as limited by subparagraph (iii) below), and the Option
Shares, if any, acquired by SpeedFam pursuant thereto, at the price set forth in
subparagraph (ii) below (as limited by subparagraph (iii) below):
 
          (i) The difference between the "MARKET/TENDER OFFER PRICE" for IPEC
     Shares as of the date SpeedFam gives notice of its intent to exercise its
     rights under this Section 7(a) (defined as the higher of (A) the highest
     price per share offered as of such date pursuant to any Acquisition
     Proposal which was made prior to such date and not terminated or withdrawn
     as of such date and (B) the highest closing sale price of IPEC Shares on
     The Nasdaq Stock Market during the twenty (20) trading days ending on the
     trading day immediately preceding such date) and the Exercise Price,
     multiplied by the number of IPEC Shares purchasable pursuant to the Option,
     but only if the Market/Tender Offer Price is greater than the Exercise
     Price. For purposes of determining the highest price offered pursuant to
     any Acquisition Proposal which involves consideration other than cash, the
     value of such consideration shall be equal to the higher of (x) if
     securities of the same class of the
 
                                      B-19
<PAGE>   268
 
     proponent as such consideration are traded on any national securities
     exchange or by any registered securities association, a value based on the
     closing sale price or asked price for such securities on their principal
     trading market on such date and (y) the value ascribed to such
     consideration by the proponent of such Acquisition Proposal, or if no such
     value is ascribed, a value determined in good faith by the Board of
     Directors of IPEC.
 
          (ii) The Exercise Price paid by SpeedFam for IPEC Shares acquired
     pursuant to the Option plus the difference between the Market/Tender Offer
     Price and such Exercise Price (but only if the Market/Tender Offer Price is
     greater than the Exercise Price) multiplied by the number of IPEC Shares so
     purchased. If SpeedFam issued SpeedFam Shares in connection with any
     exercise of the Option, the Exercise Price in connection with such exercise
     shall be calculated as set forth in Section 1 as if SpeedFam had exercised
     its right to pay cash instead of issuing SpeedFam Shares.
 
          (iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant to
     this Section 7, IPEC shall not be required to pay SpeedFam in excess of an
     aggregate of (x) $6,000,000 plus (y) the Exercise Price paid by SpeedFam
     for IPEC Shares acquired pursuant to the Option minus (z) any amounts paid
     to SpeedFam by IPEC pursuant to Section 7.3(b) of the Merger Agreement.
 
          (iv) Notwithstanding the foregoing, upon the commencement of a tender
     or exchange offer for 15% or more of any class of IPEC's capital stock
     (and/or during any time which such a tender or exchange offer remains
     open), SpeedFam may deliver to IPEC a Put Notice (a "Conditional Put
     Notice") specifying that it wishes to exercise and close immediately prior
     to the consummation of such tender or exchange offer, a sale to IPEC
     pursuant to this Section 7(a) of the Option, to the extent not previously
     exercised, and the Option Shares, if any, acquired by SpeedFam pursuant
     thereto. Unless the Conditional Put Notice is withdrawn by SpeedFam, the
     Closing of any such sale specified in a Conditional Put Notice shall take
     place immediately prior to the consummation of such tender or exchange
     offer. In the event that such tender or exchange offer is not consummated
     prior to termination of the Option, such Conditional Put Notice shall be
     void and of no further force and effect.
 
(b) Redelivery of SpeedFam Shares.  If SpeedFam has acquired IPEC Shares
pursuant to exercise of the Option by the issuance and delivery of SpeedFam
Shares, then IPEC shall, if so requested by SpeedFam, in fulfillment of its
obligation pursuant to the first clause of Section 7(a)(ii) with respect to the
Exercise Price paid in the form of SpeedFam Shares only, redeliver the
certificate(s) for such SpeedFam Shares to SpeedFam, free and clear of all
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, other than those imposed by SpeedFam.
 
(c) Payment and Redelivery of Option or Shares.  In the event SpeedFam exercises
its rights under Sections 7(a) or (b), IPEC shall, within ten business days
after SpeedFam delivers notice pursuant to Section 7(a), pay the required amount
to SpeedFam in immediately available funds (and SpeedFam Shares, if applicable)
and SpeedFam shall surrender to IPEC the Option and the certificates evidencing
the IPEC Shares purchased by SpeedFam pursuant thereto, and SpeedFam shall
represent and warrant that such shares are then free and clear of all claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever, other than those imposed by IPEC.
 
(d) IPEC Call.  If SpeedFam has acquired Option Shares pursuant to exercise of
the Option (the date of any Closing relating to any such exercise herein
referred to as an
 
                                      B-20
<PAGE>   269
 
"Exercise Date") and no Acquisition Proposal with respect to IPEC has been
consummated at any time after the date of this Agreement and prior to the date
one year following such Exercise Date (nor has IPEC entered into a definitive
agreement or letter of intent with respect to such an Acquisition Proposal which
agreement or letter of intent remains in effect at the end of such year), then,
at any time after the date one year following such Exercise Date and prior to
the date eighteen months following such Exercise Date, IPEC may require
SpeedFam, upon delivery to SpeedFam of written notice, to sell to IPEC any IPEC
Shares held by SpeedFam as of the day that is ten business days after the date
of such notice, up to a number of shares equal to the number of Option Shares
acquired by SpeedFam pursuant to exercise of the Option in connection with such
Exercise Date. The per share purchase price for such sale (the "IPEC Call
Price") shall be equal to the Exercise Price plus interest at 7% per annum, less
any dividends paid on the IPEC Shares to be purchased by IPEC pursuant to this
Section 7(d). The closing of any sale of IPEC Shares pursuant to this Section
7(d) shall take place at the principal offices of IPEC at a time and on a date
designated by IPEC in the aforementioned notice to SpeedFam, which date shall be
no more than 20 and no less than 12 business days from the date of such notice.
The IPEC Call Price shall be paid in immediately available funds, provided that,
in the event SpeedFam has acquired Option Shares pursuant to exercise of the
Option by issuance and delivery of SpeedFam Shares, at the option of IPEC, the
IPEC Call Price for part or all of any purchase of IPEC Shares pursuant to this
Section 7(d), up to a number of such shares equal to the number of Option Shares
acquired by SpeedFam by issuance and delivery of SpeedFam Shares, shall be paid
by delivery of a number of SpeedFam Shares equal to the IPEC Call Price divided
by the closing sale price of SpeedFam Shares on The Nasdaq National Market for
the trading day immediately preceding the date of the Exercise Date on which the
Option Shares to be purchased by IPEC pursuant to this Section 7(d) were
originally issued to SpeedFam.
 
(e) Restrictions on Transfer.  Until the expiration of the Purchase Period, IPEC
shall not sell, transfer or otherwise dispose of any SpeedFam Shares acquired by
it pursuant to this Agreement.
 
Section 8.  Registration Rights
 
(a) Following the termination of the Merger Agreement, each party hereto (a
"Holder") may by written notice (a "Registration Notice") to the other party
(the "Registrant") request the Registrant to register under the Securities Act
all or any part of the shares acquired by such Holder pursuant to this Agreement
(the "Registrable Securities") in order to permit the sale or other disposition
of such shares pursuant to a bona fide firm commitment underwritten public
offering in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis (a "Permitted
Offering"); provided, however, that any such Registration Notice must relate to
a number of shares equal to at least 2% of the outstanding shares of Common
Stock of the Registrant on a fully diluted basis and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registration Notice
shall include a certificate executed by the Holder and its proposed managing
underwriter, which underwriter shall be an investment banking firm of nationally
recognized standing (the "Manager"), stating that (i) the Holder and the Manager
have a good faith intention to commence a Permitted Offering and (ii) the
Manager in good faith believes that, based
 
                                      B-21
<PAGE>   270
 
on the then prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least 80% of the per
share average of the closing sale prices of the Registrant's Common Stock on The
Nasdaq National Market for the twenty trading days immediately preceding the
date of the Registration Notice. The Registrant shall thereupon have the option
exercisable by written notice delivered to the Holder within ten business days
after the receipt of the Registration Notice, irrevocably to agree to purchase
all or any part of the Registrable Securities for cash at a price (the "Option
Price" equal to the product of (i) the number of Registrable Securities so
purchased and (ii) the per share average of the closing sale prices of the
Registrant's Common Stock on The Nasdaq National Market for the twenty trading
days immediately preceding the date of the Registration Notice. Any such
purchase of Registrable Securities by the Registrant hereunder shall take place
at a closing to be held at the principal executive offices of the Registrant or
its counsel at any reasonable date and time designated by the Registrant in such
notice within 10 business days after delivery of such notice. The payment for
the shares to be purchased shall be made by delivery at the time of such closing
of the Option Price in immediately available funds.
 
(b) If the Registrant does not elect to exercise its option to purchase pursuant
to Section 8(a) with respect to all Registrable Securities, the Registrant shall
use all reasonable efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable Securities
requested to be registered in the Registration Notice; provided, however, that
(i) neither party shall be entitled to more than an aggregate of two effective
registration statements hereunder and (ii) the Registrant will not be required
to file any such registration statement during any period of time (not to exceed
40 days after a Registration Notice in the case of clause (A) below or 90 days
after a Registration Notice in the case of clauses (B) and (C) below) when (A)
the Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to such Registrant, such information would have
to be disclosed if a registration statement were filed at that time; (B) such
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) such Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 180 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 8 shall again be applicable
to any proposed registration, it being understood that neither party shall be
entitled to more than an aggregate of two effective registration statements
hereunder. The Registrant shall use all reasonable efforts to cause any
Registrable Securities registered pursuant to this Section 8 to be qualified for
sale under the securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdictions; provided, however, that the Registrant shall not
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
 
(c) The registration rights set forth in this Section 8 are subject to the
condition that the Holder shall provide the Registrant with such information
with respect to such Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to such Holder as, in the
reasonable judgment of counsel for the Registrant, is
 
                                      B-22
<PAGE>   271
 
necessary to enable the Registrant to include in a registration statement all
material facts required to be disclosed with respect to a registration
hereunder.
 
(d) A registration effected under this Section 8 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant shall provide to
the underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, the Holder and the Registrant agree to
enter into an underwriting agreement reasonably acceptable to each such party,
in form and substance customary for transactions of this type with the
underwriters participating in such offering.
 
(e) Indemnification.  (i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Registrant of any rule or regulation
promulgated under the Securities Act applicable to the Registrant in connection
with any such registration, qualification or compliance, and the Registrant will
reimburse the Holder and each of its directors and officers and each person who
controls the Holder within the meaning of Section 15 of the Securities Act, and
each underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Registrant by such Holder or director or
officer or controlling person or underwriter seeking indemnification.
 
(ii) The Holder will indemnify the Registrant, each of its directors and
officers and each underwriter of the Registrant's securities covered by such
registration statement and each person who controls the Registrant within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Holder of any rule or regulation
promulgated under the Securities Act applicable to the Holder in connection with
any such registration, qualification or compliance, and will reimburse the
Registrant, such directors, officers or control persons or underwriters for any
legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, in
 
                                      B-23
<PAGE>   272
 
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Registrant by the Holder for use therein, provided that in no event shall any
indemnity under this Section 8(e) exceed the gross proceeds of the offering
received by the Holder.
 
(iii) Each party entitled to indemnification under this Section 8(e) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall pay such
expense if representation of the Indemnified Party by counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8(e) unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action. No Indemnifying Party, in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be required to indemnify any Indemnified
Party with respect to any settlement entered into without such Indemnifying
Party's prior consent (which shall not be unreasonably withheld).
 
(f) Contribution.  If the indemnification from the Indemnifying Party provided
for in Section 8(e) is found, pursuant to a final judicial determination not
subject to appeal, to be unavailable to an Indemnified Party hereunder or
insufficient in respect of any claims, losses, damages and liabilities incurred
by such Indemnified Party, then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the claims, losses, damages and
liabilities paid or payable by such Indemnified Party in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the actions or omissions that resulted in
such claims, losses, damages and liabilities, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action or omission in question, including any untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact, has been made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the claims, losses,
damages and liabilities referred to above shall be deemed to include any legal
or other expenses reasonably incurred by such party in connection with any
investigation or proceeding.
 
                                      B-24
<PAGE>   273
 
Section 9.  Adjustment upon Changes in Capitalization; Rights Plans
 
(a) In the event of any change in the IPEC Shares by reason of stock dividends,
stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that SpeedFam shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that SpeedFam would have received in respect of the IPEC
Shares if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable.
 
(b) At any time during which the Option is exercisable, and at any time after
the Option is exercised (in whole or in part, if at all), SpeedFam shall not
adopt a shareholders rights plan (a so-called "poison pill"), and IPEC shall not
amend the IPEC Rights Plan or adopt a new shareholders rights plan, that
contains provisions for the distribution of rights thereunder as a result of the
other party being the beneficial owner of shares of the first party by virtue of
the Option being exercisable or having been exercised (or as a result of such
other party beneficially owning shares issuable in respect of any Option
Shares). It is understood, however, that following termination (if any) of the
Merger Agreement, a party may adopt (or in the case of IPEC, adopt and/or amend)
a shareholders rights plan, that contains provisions for the distribution of
rights thereunder as a result of the other party being the beneficial owner of
shares of the first party in addition to those that may be beneficially owned by
virtue of the Option being exercisable or having been exercised (or as a result
of such other party beneficially owning shares issuable in respect of any Option
Shares).
 
Section 10.  Restrictive Legends
 
Each certificate representing Option Shares issued to SpeedFam hereunder, and
each certificate representing SpeedFam Shares delivered to IPEC at a Closing, if
any, shall include a legend in substantially the following form:
 
        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
        BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
        FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
        SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN
        THE STOCK OPTION AGREEMENT DATED AS OF NOVEMBER 19, 1998, A COPY
        OF WHICH MAY BE OBTAINED FROM THE ISSUER.
 
Section 11.  Listing and HSR Filing
 
IPEC, upon the request of SpeedFam, shall promptly file an application to list
the IPEC Shares to be acquired upon exercise of the Option for quotation on The
Nasdaq National Market and shall use its best efforts to obtain approval of such
listing as soon as practicable. SpeedFam, upon the request of IPEC, shall
promptly file an application to list the SpeedFam Shares issued and delivered to
IPEC pursuant to Section 4, if any, for quotation on The Nasdaq National Market
and shall use its best efforts to obtain approval of such listing as soon as
practicable. Promptly after the date hereof, each of the parties hereto shall
promptly file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice all required premerger notification and
report
 
                                      B-25
<PAGE>   274
 
forms and other documents and exhibits required to be filed under the HSR Act to
permit the acquisition of the IPEC Shares subject to the Option at the earliest
possible date.
 
Section 12.  Binding Effect
 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing contained
in this Agreement, express or implied, is intended to confer upon any person
other than the parties hereto and their respective successors and permitted
assigns any rights or remedies of any nature whatsoever by reason of this
Agreement. Any shares sold by a party in compliance with the provisions of
Section 8 shall, upon consummation of such sale, be free of the restrictions
imposed with respect to such shares by this Agreement and any transferee of such
shares shall not be entitled to the rights of such party. Certificates
representing shares sold in a registered public offering pursuant to Section 8
shall not be required to bear the legend set forth in Section 10.
 
Section 13.  Specific Performance
 
The parties recognize and agree that if for any reason any of the provisions of
this Agreement are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each party
agrees that in addition to other remedies the other party shall be entitled to
an injunction restraining any violation or threatened violation of the
provisions of this Agreement. In the event that any action shall be brought in
equity to enforce the provisions of the Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
 
Section 14.  Entire Agreement
 
This Agreement and the Merger Agreement (including the appendices thereto)
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
 
Section 15.  Further Assurances
 
Each party will execute and deliver all such further documents and instruments
and take all such further action as may be necessary in order to consummate the
transactions contemplated hereby.
 
Section 16.  Validity
 
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the other provisions of this Agreement,
which shall remain in full force and effect. In the event any Governmental
Entity of competent jurisdiction holds any provision of this Agreement to be
null, void or unenforceable, the parties hereto shall negotiate in good faith
and shall execute and deliver an amendment to this Agreement in order, as nearly
as possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision.
 
Section 17.  Notices
 
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or sent
via telecopy (receipt
 
                                      B-26
<PAGE>   275
 
confirmed) to the parties at the following addresses or telecopy numbers (or at
such other address or telecopy numbers for a party as shall be specified by like
notice):
 
        (1) if to IPEC, to:
 
            Integrated Process Equipment Corp.
            4717 East Hilton Avenue
            Phoenix, Arizona 85034
            Attention: Roger D. McDaniel
            Telephone No.: (602) 517-7200
            Telecopy No.: (602) 517-6016
 
            with a copy to:
 
            Wilson Sonsini Goodrich & Rosati
            650 Page Mill Road
            Palo Alto, California 94304-1050
            Attention: Francis Currie
            Telephone No.: (650) 493-9300
            Telecopy No.: (650) 845-5000
 
        (2) if to SpeedFam, to:
 
            SpeedFam International Inc.
            305 N. 54th Street
            Chandler, Arizona 85226-2416
            Attention:
            Telephone No.: (602) 705-2100
            Telecopy No.: (602) 705-2122
 
            with a copy to:
 
            Chapman and Cutler
            111 West Monroe Street
            Chicago, Illinois 60603
            Attention: Jonathan A. Koff
            Telephone No.: (312) 845-3000
            Telecopy No.: (312) 701-2361
 
Section 18.  Governing Law
 
This Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois applicable to agreements made and to be performed entirely
within such State.
 
Section 19.  Counterparts
 
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
 
Section 20.  Expenses
 
Except as otherwise expressly provided herein or in the Merger Agreement, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
 
                                      B-27
<PAGE>   276
 
Section 21.  Amendments; Waiver
 
This Agreement may be amended by the parties hereto and the terms and conditions
hereof may be waived only by an instrument in writing signed on behalf of each
of the parties hereto, or, in the case of a waiver, by an instrument signed on
behalf of the party waiving compliance.
 
Section 22.  Assignment
 
Neither of the parties hereto may sell, transfer, assign or otherwise dispose of
any of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that the rights and obligations hereunder shall inure to the
benefit of and be binding upon any successor of a party hereto.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the date first above written.
 
                                          INTEGRATED PROCESS EQUIPMENT CORP.
 
                                          By      /s/ ROGER D. MCDANIEL
                                             -----------------------------------
                                             Name: Roger D. McDaniel
                                             Title: President and Chief
                                             Executive Officer
 
                                          SPEEDFAM INTERNATIONAL, INC.
 
                                          By      /s/ RICHARD J. FAUBERT
                                             -----------------------------------
                                             Name: Richard J. Faubert
                                             Title: President and Chief
                                             Executive Officer
 
                                      B-28
<PAGE>   277
 
                                                                         ANNEX C
 
                                 SECTION 262 OF
                        DELAWARE GENERAL CORPORATION LAW
 
262  APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
 
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to sec.251 (other than a merger effected pursuant to sec.251(g) of this
title), sec.252, sec.254, sec.257, sec.258, sec.263 or sec.264 of this title:
 
          (1) Provided, however, that no appraisal rights under this section
     shall be available for the shares of any class or series of stock, which
     stock, or depository receipts in respect thereof, at the record date fixed
     to determine the stockholders entitled to receive notice of and to vote at
     the meeting of stockholders to act upon the agreement of merger or
     consolidation, were either (i) listed on a national securities exchange or
     designated as a national market system security on an interdealer quotation
     system by the National Association of Securities Dealers, Inc. or (ii) held
     of record by more than 2,000 holders; and further provided that no
     appraisal rights shall be available for any shares of stock of the
     constituent corporation surviving a merger if the merger did not require
     for its approval the vote of the stockholders of the surviving corporation
     as provided in subsection (f) of sec.251 of this title.
 
          (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
     under this section shall be available for the shares of any class or series
     of stock of a constituent corporation if the holders thereof are required
     by the terms of an agreement of merger or consolidation pursuant to
     sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
     such stock anything except:
 
             a.  Shares of stock of the corporation surviving or resulting from
        such merger or consolidation, or depository receipts in respect thereof;
 
             b.  Shares of stock of any other corporation, or depository
        receipts in respect thereof, which shares of stock (or depository
        receipts in respect thereof) or depository receipts at the effective
        date of the merger or consolidation will be either listed on a national
        securities exchange or designated as a national market system security
        on an interdealer quotation system by the National Association of
        Securities Dealers, Inc. or held of record by more than 2,000 holders;
 
                                       C-1
<PAGE>   278
 
             c.  Cash in lieu of fractional shares or fractional depository
        receipts described in the foregoing subparagraphs a. and b. of this
        paragraph; or
 
             d.  Any combination of the shares of stock, depository receipts and
        cash in lieu of fractional shares or fractional depository receipts
        described in the foregoing subparagraphs a., b. and c. of this
        paragraph.
 
          (3) In the event all of the stock of a subsidiary Delaware corporation
     party to a merger effected under sec.253 of this title is not owned by the
     parent corporation immediately prior to the merger, appraisal rights shall
     be available for the shares of the subsidiary Delaware corporation.
 
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
 
(d) Appraisal rights shall be perfected as follows:
 
          (1) If a proposed merger or consolidation for which appraisal rights
     are provided under this section is to be submitted for approval at a
     meeting of stockholders, the corporation, not less than 20 days prior to
     the meeting, shall notify each of its stockholders who was such on the
     record date for such meeting with respect to shares for which appraisal
     rights are available pursuant to subsections (b) or (c) hereof that
     appraisal rights are available for any or all of the shares of the
     constituent corporations, and shall include in such notice a copy of this
     section. Each stockholder electing to demand the appraisal of (1)such
     stockholder's shares shall deliver to the corporation, before the taking of
     the vote on the merger or consolidation, a written demand for appraisal of
     (1)such stockholder's shares. Such demand will be sufficient if it
     reasonably informs the corporation of the identity of the stockholder and
     that the stockholder intends thereby to demand the appraisal of (1)such
     stockholder's shares. A proxy or vote against the merger or consolidation
     shall not constitute such a demand. A stockholder electing to take such
     action must do so by a separate written demand as herein provided. Within
     10 days after the effective date of such merger or consolidation, the
     surviving or resulting corporation shall notify each stockholder of each
     constituent corporation who has complied with this subsection and has not
     voted in favor of or consented to the merger or consolidation of the date
     that the merger or consolidation has become effective; or
 
          (2) If the merger or consolidation was approved pursuant to sec.228 or
     sec.253 of this title, each constituent corporation, either before the
     effective date of the merger or consolidation or within ten days
     thereafter, shall notify each of the holders of any class or series of
     stock of such constituent corporation who are entitled to appraisal rights
     of the approval of the merger or consolidation and that appraisal rights
     are available for any or all shares of such class or series of stock of
     such constituent corporation, and shall include in such notice a copy of
     this section; provided that, if the notice is given on or after the
     effective date of the merger or consolidation, such notice shall be given
     by the surviving or resulting corporation to all such holders of any class
     or series of stock of a constituent corporation that are entitled to
     appraisal rights. Such notice may, and, if given on or after the effective
     date of the merger or
 
                                       C-2
<PAGE>   279
 
     consolidation, shall, also notify such stockholders of the effective date
     of the merger or consolidation. Any stockholder entitled to appraisal
     rights may, within 20 days after the date of mailing of such notice, demand
     in writing from the surviving or resulting corporation the appraisal of
     such holder's shares. Such demand will be sufficient if it reasonably
     informs the corporation of the identity of the stockholder and that the
     stockholder intends thereby to demand the appraisal of such holder's
     shares. If such notice did not notify stockholders of the effective date of
     the merger or consolidation, either (i) each such constituent corporation
     shall send a second notice before the effective date of the merger or
     consolidation notifying each of the holders of any class or series of stock
     of such constituent corporation that are entitled to appraisal rights of
     the effective date of the merger or consolidation or (ii) the surviving or
     resulting corporation shall send such a second notice to all such holders
     on or within 10 days after such effective date; provided, however, that if
     such second notice is sent more than 20 days following the sending of the
     first notice, such second notice need only be sent to each stockholder who
     is entitled to appraisal rights and who has demanded appraisal of such
     holder's shares in accordance with this subsection. An affidavit of the
     secretary or assistant secretary or of the transfer agent of the
     corporation that is required to give either notice that such notice has
     been given shall, in the absence of fraud, be prima facie evidence of the
     facts stated therein. For purposes of determining the stockholders entitled
     to receive either notice, each constituent corporation may fix, in advance,
     a record date that shall be not more than 10 days prior to the date the
     notice is given, provided, that if the notice is given on or after the
     effective date of the merger or consolidation, the record date shall be
     such effective date. If no record date is fixed and the notice is given
     prior to the effective date, the record date shall be the close of business
     on the day next preceding the day on which the notice is given.
 
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw (1)such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
1)such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
 
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly
 
                                       C-3
<PAGE>   280
 
verified list. The Register in Chancery, if so ordered by the Court, shall give
notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
 
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
 
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
(1)such stockholder's certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it is finally
determined that (2)such stockholder is not entitled to appraisal rights under
this section.
 
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
 
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
 
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded (1)appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other
 
                                       C-4
<PAGE>   281
 
distributions on the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of (1)such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
 
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation. (Last amended by Ch. 339, L. '98,
eff. 7-1-98.)
 
---------------
 
Ch. 339, L. '98, eff. 7-1-98, added matter in italic and deleted (1)"his" and
(2)"he".
                                       C-5
<PAGE>   282
 
                                                                         ANNEX D
 
November 19, 1998
 
Board of Directors
SpeedFam International, Inc.
305 North 54th Street
Chandler, Arizona 85226
 
Members of the Board:
 
We understand that SpeedFam International, Inc. ("SpeedFam" or the "Company") is
considering an acquisition of Integrated Process Equipment Corp. ("IPEC") by
means of a merger of IPEC with a wholly-owned subsidiary of SpeedFam (the
"Proposed Transaction"), pursuant to which all outstanding shares of common
stock of IPEC will be exchanged for shares of common stock of SpeedFam at an
exchange ratio of 0.71 SpeedFam shares for each IPEC share (the "Exchange
Ratio"). In addition, each outstanding share of IPEC Series B-1, Series B-2 and
Series B-3 preferred stock will be exchanged for shares of SpeedFam common stock
at exchange ratios of 8.90, 8.10 and 10.65, respectively, which are based on the
Exchange Ratio. In addition, all outstanding options and warrants to purchase
shares of IPEC common stock will be exchanged for options and warrants to
purchase shares of SpeedFam common stock at the Exchange Ratio. The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger dated November 19, 1998 between SpeedFam, Merger
Sub and IPEC (the "Agreement").
 
We have been requested by the Board of Directors of the Company to render our
opinion with respect to the fairness, from a financial point of view, to the
Company of the Exchange Ratio to be offered to the holders of common stock of
IPEC in the Proposed Transaction. We have not been requested to opine as to, and
our opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
 
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and the
specific terms of the Proposed Transaction, (2) publicly available information
concerning the Company and IPEC that we believe to be relevant to our analysis,
(3) financial and operating information with respect to the business, operations
and prospects of the Company and IPEC furnished to us by the Company and IPEC,
(4) trading histories of the Company's and IPEC's common stock from October 10,
1995 to the present, and a comparison of that trading history with those of
other companies that we deemed relevant, (5) a comparison of the historical
financial results and present financial condition of the Company and IPEC with
those of other companies that we deemed relevant, (6) publicly available
estimates of the future financial performances of the Company and IPEC prepared
by research analysts, (7) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other transactions that we
deemed relevant, (8) the potential pro forma financial effects of the Proposed
Transaction on the Company, including the operating synergies and strategic
benefits expected by the management of the Company to result from a combination
of the businesses of the Company and IPEC, (9) a comparison of the relative
financial contributions of the Company and IPEC to the combined company
following consummation of the Proposed Transaction, and (10) the potential
market performance of the common stock of the Company in the future in the
absence of the Proposed Transaction. In addition, we have had discussions with
the managements of the Company and IPEC concerning their respective businesses,
 
                                       D-1
<PAGE>   283
Board of Directors
SpeedFam International, Inc.
November 19, 1998
Page  2
 
operations, assets, financial conditions and prospects, and we have undertaken
such other studies, analyses and investigations as we deemed appropriate.
 
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of managements of the Company and IPEC that
they are not aware of any facts or circumstances currently in existence that
would make such information inaccurate or misleading regarding the Company or
IPEC, respectively. In performing our analysis, upon advice of the Company, we
have not relied on any future financial information for IPEC prepared by the
management of IPEC and, instead, we have assumed that publicly available
estimates of third party research analysts are a reasonable basis upon which to
evaluate the future financial performance of IPEC, and we have relied upon such
estimates in arriving at our opinion. With respect to the future financial
information for the combined company following consummation of the Proposed
Transaction, including estimates of operating synergies and strategic benefits
expected by the management of the Company to result from a combination of the
businesses of the Company and IPEC, upon advice of the Company, we have assumed
that such information has been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the combined company, and that
such operating synergies and strategic benefits will be achieved substantially
in accordance with such estimates.
 
We have not conducted a physical inspection of the properties and facilities of
the Company or IPEC and have not made or obtained any evaluations or appraisals
of the assets or liabilities of the Company or IPEC. In arriving at our opinion,
we have assumed that the Proposed Transaction will qualify (i) for
pooling-of-interests accounting treatment, and (ii) as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and therefore as a tax-free transaction to the stockholders of the Company and
IPEC. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
 
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the Exchange Ratio to be offered to
the holders of common stock of IPEC in the Proposed Transaction is fair to the
Company.
 
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the
equity securities of the Company and IPEC for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
 
This opinion is for the use and benefit of the Board of Directors of the Company
and is rendered to the Board of Directors in connection with its consideration
of the Proposed
 
                                       D-2
<PAGE>   284
Board of Directors
SpeedFam International, Inc.
November 19, 1998
Page  3
 
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote with respect to the Proposed Transaction.
 
                                   Very truly yours,
 
                                   By: /s/ ERNEST H. RUEHL, JR.
                                   --------------------------------------   
                                       Ernest H. Ruehl, Jr.
                                       Managing Director
 
                                       D-3
<PAGE>   285
 
                                                                         ANNEX E
                               November 19, 1998
 
Board of Directors
Integrated Process Equipment Corp.
911 Bern Court
San Jose, California 95112
 
Members of the Board:
 
We understand that Integrated Process Equipment Corp. ("IPEC"), SpeedFam
International, Inc. ("SpeedFam") and SpeedFam, Inc. ("Acquisition Sub"), a
wholly-owned subsidiary of SpeedFam, propose to enter into an Agreement and Plan
of Merger, substantially in the form of the draft dated November 16, 1998 (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of Acquisition Sub with and into IPEC. Pursuant to the Merger, IPEC
will become a wholly-owned subsidiary of SpeedFam and each issued and
outstanding share of common stock, par value $0.01 per share, of IPEC (the "IPEC
Common Stock") will be converted into the right to receive 0.71 shares (the
"Exchange Ratio") of common stock, no par value per share, of SpeedFam (the
"SpeedFam Common Stock"). We also understand that (i) each issued and
outstanding share of Class A common stock, par value $0.01 par value per share,
of IPEC will be converted into the right to receive a certain number of shares
of SpeedFam Common Stock, (ii) each issued and outstanding share of Series B-1
Preferred Stock, $0.01 par value, of IPEC will be converted into the right to
receive a certain number of shares of SpeedFam Common Stock, (iii) each issued
and outstanding share of Series B-2 Preferred Stock, $0.01 par value, of IPEC
will be converted into the right to receive a certain number of shares of
SpeedFam Common Stock, (iv) each issued and outstanding share of Series B-3
Preferred Stock, $0.01 par value, of IPEC will be converted into the right to
receive a certain number of shares of SpeedFam Common Stock, (v) each issued and
outstanding option or warrant to purchase IPEC Common Stock will be converted
into the right to purchase a certain number of shares of SpeedFam Common Stock,
(vi) each issued and outstanding unit purchase option to purchase IPEC Common
Stock and warrants to purchase IPEC Common Stock will be converted into the
right to purchase a certain number of shares of SpeedFam Common Stock and
warrants to purchase a certain number of shares of SpeedFam Common Stock and
(vii) each issued and outstanding convertible note for IPEC Common Stock will be
converted into the right to receive a certain number of shares of SpeedFam
Common Stock, all as determined pursuant to certain formulas set forth in the
Merger Agreement. The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.
 
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to the holders of shares
of IPEC Common Stock.
 
For purposes of the opinion set forth herein, we have:
 
     (i)    reviewed certain publicly available financial statements and other
            information of IPEC and SpeedFam, respectively;
 
     (ii)   reviewed certain internal financial statements and other financial
            and operating data concerning IPEC and SpeedFam, respectively;
 
    (iii)   discussed with the senior managements of IPEC and SpeedFam certain
            research analyst projections for IPEC and SpeedFam, respectively;
 
                                       E-1
<PAGE>   286
 
     (iv)   discussed the past and current operations and financial condition
            and the prospects of IPEC, including information relating to certain
            strategic, financial and operational benefits anticipated from the
            Merger, with senior executives of IPEC;
 
     (v)    discussed the past and current operations and financial condition
            and the prospects of SpeedFam, including information relating to
            certain strategic, financial and operational benefits anticipated
            from the Merger, with senior executives of SpeedFam;
 
     (vi)   reviewed the pro forma impact of the Merger on the earnings per
            share of SpeedFam;
 
     (vii)  reviewed the reported prices and trading activity for the IPEC
            Common Stock and the SpeedFam Common Stock;
 
     (viii) compared the financial performance of IPEC and SpeedFam and the
            prices and trading activity of the IPEC Common Stock and the
            SpeedFam Common Stock with that of certain other publicly-traded
            companies and their securities;
 
     (ix)   reviewed the financial terms, to the extent publicly available, of
            certain comparable merger and acquisition transactions;
 
      (x)   reviewed and discussed with the senior managements of IPEC and
            SpeedFam the strategic rationale for the Merger and certain
            alternatives to the Merger;
 
     (xi)   participated in discussions and negotiations among representatives
            of IPEC and SpeedFam and their financial and legal advisors;
 
     (xii)  reviewed the draft Merger Agreement and certain related agreements;
            and
 
     (xiii) performed such other analysis and considered such other factors as
            we have deemed appropriate.
 
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the internal financial statements and/or other
financial and operating data, information, discussions and estimates relating to
the strategic, financial and operational benefits anticipated from the Merger
provided by IPEC and SpeedFam, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance and prospects of IPEC and
SpeedFam, respectively. We have relied upon, without independent verification,
the assessment by the managements of IPEC and SpeedFam of their ability to
retain key employees of both IPEC and SpeedFam. We have also relied upon,
without independent verification, the assessment by the managements of IPEC and
SpeedFam of the strategic and other benefits expected to result from the Merger.
We have also relied upon, without independent verification, the assessment by
the managements of IPEC and SpeedFam of IPEC's and SpeedFam's technologies and
products, the timing and risks associated with the integration of IPEC and
SpeedFam, and the validity of, and risks associated with IPEC's and SpeedFam's
existing and future products and technologies. We have assumed that the Merger
will be accounted for as a "pooling-of-interests" business combination in
accordance with U.S. Generally Accepted Accounting Principles, will be treated
as a tax-free reorganization and/or exchange pursuant to the Internal Revenue
Code of 1986, as amended, and will be consummated in accordance with the terms
set forth in the Merger Agreement. We have not made any independent valuation or
appraisal of the assets, liabilities or technology of IPEC or SpeedFam, nor have
we been furnished with any such
                                       E-2
<PAGE>   287
 
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
 
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving IPEC, although we have
in the course of our engagement provided advice to IPEC in connection with
certain potential business combinations with parties other than SpeedFam. Also,
with your consent, the future financial information regarding IPEC and SpeedFam
reviewed by Morgan Stanley in connection with the rendering of this opinion was
limited to publicly available information regarding IPEC and SpeedFam and
certain discussions with the senior managements of IPEC and SpeedFam regarding
the prospects of IPEC and SpeedFam. We also relied upon the assurances of the
managements of both IPEC and SpeedFam that they were not aware of any facts or
circumstances currently in existence that would make such information inaccurate
or misleading regarding IPEC or SpeedFam, respectively.
 
We have acted as financial advisor to the Board of Directors of IPEC in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for IPEC and have received fees for
the rendering of these services.
 
It is understood that this letter is for the information of the Board of
Directors of IPEC and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by IPEC in respect of the Merger with the Securities and Exchange
Commission. In addition, this opinion does not in any manner address the prices
at which the IPEC or SpeedFam Common Stock will actually trade at any time and
we express no recommendation or opinion as to how the holders of IPEC Common
Stock should vote at the shareholders' meeting held in connection with the
Merger.
 
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of shares of IPEC Common Stock.
 
                                          Very truly yours,
 
                                          MORGAN STANLEY & CO. INCORPORATED
 
                                          By: /s/ MARK S. MENELL
                                             -----------------------------------
                                              Mark S. Menell
                                              Principal
 
                                       E-3
<PAGE>   288
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
Section 8.75 of the Illinois Business Corporation Act of 1983, as amended (the
"BCA") sets forth the conditions and limitations governing the indemnification
of officers, directors, and other persons.
 
Reference is made to Article X of SpeedFam's Bylaws which provides for
indemnification of directors, officers, employees or agents of SpeedFam's to the
full extent permitted by the above-mentioned section of the Act.
 
Section 8.75(g) of the BCA and Article X, Section (g) of the Bylaws also
authorize SpeedFam to purchase and maintain insurance on behalf of any director,
officer, employee or agent of SpeedFam against any liability asserted against or
incurred by them in such capacity or arising out of their status as such whether
or not SpeedFam would have the power to indemnify such director, officer,
employee or agent against such liability under the applicable provisions of the
Act or Bylaws. SpeedFam currently maintains a directors and officers liability
policy in the amount of $5 million.
 
ITEM 21.  EXHIBITS.
 
Exhibits
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C>       <S>
  2.1     Agreement and Plan of Merger dated November 19, 1998
          (attached as Annex A to the Joint Proxy Statement and
          Prospectus included in this Registration Statement).
  3.1     Articles of Incorporation of SpeedFam International, Inc.
          (incorporated by reference to Exhibit 3 to the Registrant's
          Form 10-Q for the quarter ended November 30, 1997 (Exchange
          Act File No. 0-26784)).
  3.2     By-laws of SpeedFam International, Inc. (incorporated by
          reference to Exhibit 3.2 to the Registrant's Form 10-K for
          the fiscal year ended May 31, 1996 (Exchange Act File No.
          0-26784)).
 *5.1     Opinion of Chapman and Cutler as to legality of securities.
 *8.1     Opinion of Chapman and Cutler as to tax matters relating to
          the merger.
 *8.2     Opinion of Wilson Sonsini Goodrich & Rosati, Professional
          Corporation as to tax matters relating to the merger.
 10.1     Stock Option Agreements dated November 19, 1998 (both
          attached as Annex B to the Joint Proxy Statement/Prospectus
          included in this Registration Statement).
*10.2     Employee Agreement between the Registrant and Richard J.
          Faubert.
 23.1     Consent of KPMG LLP.
 23.2     Consent of KPMG LLP.
 23.3     Consent of KPMG LLP.
*23.4     Consent of Chapman and Cutler (included in Exhibits 5.1 and
          8.1).
</TABLE>
    
 
                                      II-1
<PAGE>   289
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C>       <S>
*23.5     Consent of Wilson Sonsini Goodrich & Rosati, Professional
          Corporation (included in Exhibit 8.2).
*23.6     Consent of Lehman Brothers Inc.
*23.7     Consent of Morgan Stanley & Co. Incorporated (included in
          Annex E).
*23.8     Consent of Sanjeev R. Chitre.
*23.9     Consent of Roger D. McDaniel.
*23.10    Consent of William J. Freschi.
*23.11    Consent of Kenneth Levy.
*24.1     Power of Attorney.
 99.1     SpeedFam Form of Proxy.
 99.2     IPEC Form of Proxy.
</TABLE>
    
 
---------------
   
* Previously filed.
    
 
ITEM 22.  UNDERTAKINGS.
 
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities so that time shall be deemed to be
the initial bona fide offering thereof.
 
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item
20 -- Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
 
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
after the effective date of this Registration Statement through the date of
responding to the request.
 
                                      II-2
<PAGE>   290
 
(d) The undersigned Registrant hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
 
                                      II-3
<PAGE>   291
 
                                   SIGNATURES
 
   
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Chandler, County of Maricopa, Arizona, on
February 26, 1999.
    
 
                                          SPEEDFAM INTERNATIONAL, INC.
 
                                          By       /s/ JAMES N. FARLEY
                                            ------------------------------------
                                                      James N. Farley
                                                   Chairman of the Board
 
                               POWER OF ATTORNEY
 
   
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
    
 
   
<TABLE>
<CAPTION>
SIGNATURES                                                         TITLE                      DATE
----------                                                         -----                      ----
<C>                                                    <S>                              <C>
 
                /s/ JAMES N. FARLEY                    Chairman of the Board            February 26, 1999
---------------------------------------------------
                  James N. Farley
 
                         *                             Vice-Chairman of the Board       February 26, 1999
---------------------------------------------------
                  Makoto Kouzuma
 
                         *                             President, Chief Executive       February 26, 1999
---------------------------------------------------    Officer and Director
                Richard J. Faubert
 
                /s/ ROGER K. MARACH                    Treasurer, Assistant             February 26, 1999
---------------------------------------------------    Secretary and Chief Financial
                  Roger K. Marach                      Officer (Principal financial
                                                       and accounting officer)
 
                         *                             Director                         February 26, 1999
---------------------------------------------------
                   Neil R. Bonke
 
                         *                             Director                         February 26, 1999
---------------------------------------------------
                  Richard S. Hill
</TABLE>
    
 
                                      II-4
<PAGE>   292
 
   
<TABLE>
<CAPTION>
SIGNATURES                                                         TITLE                      DATE
----------                                                         -----                      ----
<C>                                                    <S>                              <C>
                                                       Director
---------------------------------------------------
                   Stuart Meyer
 
                         *                             Director                         February 26, 1999
---------------------------------------------------
                   Robert Miller
 
               by/s/ ROGER K. MARACH
---------------------------------------------------
                  Roger K. Marach
                 Attorney-in-Fact.
</TABLE>
    
 
                                      II-5
<PAGE>   293
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<C>     <S>
 
  2.1   Agreement and Plan of Merger dated November 19, 1998
        (attached as Annex A to the Joint Proxy Statement and
        Prospectus included in this Registration Statement).
  3.1   Articles of Incorporation of SpeedFam International, Inc.
        (incorporated by reference to Exhibit 3 to the Registrant's
        Form 10-Q for the quarter ended November 30, 1997 (Exchange
        Act File No. 0-26784)).
  3.2   By-laws of SpeedFam International, Inc. (incorporated by
        reference to Exhibit 3.2 to the Registrant's Form 10-K for
        the fiscal year ended May 31, 1996 (Exchange Act File No.
        0-26784)).
 *5.1   Opinion of Chapman and Cutler as to legality of securities.
 *8.1   Opinion of Chapman and Cutler as to tax matters relating to
        the merger.
 *8.2   Opinion of Wilson Sonsini Goodrich & Rosati, Professional
        Corporation as to tax matters relating to the merger.
 10.1   Stock Option Agreements dated November 19, 1998 (both
        attached as Annex B to the Joint Proxy Statement/Prospectus
        included in this Registration Statement).
*10.2   Employment Agreement between the Registrant and Richard J.
        Faubert.
 23.1   Consent of KPMG LLP.
 23.2   Consent of KPMG LLP.
 23.3   Consent of KPMG LLP.
*23.4   Consent of Chapman and Cutler (included in Exhibits 5.1 and
        8.1).
*23.5   Consent of Wilson Sonsini Goodrich & Rosati, Professional
        Corporation (included in Exhibit 8.2).
*23.6   Consent of Lehman Brothers Inc.
*23.7   Consent of Morgan Stanley & Co. Incorporated (included in
        Annex E).
*23.8   Consent of Sanjeev R. Chitre.
*23.9   Consent of Roger D. McDaniel.
*23.10  Consent of William J. Freschi.
*23.11  Consent of Kenneth Levy.
*24.1   Power of Attorney.
 99.1   SpeedFam Form of Proxy.
 99.2   IPEC Form of Proxy.
</TABLE>
    
 
-------------------------
 
   
* Previously filed.