10-Q

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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: October 31, 2001 Commission File Number 0-26714

ADE CORPORATION
(Exact name of registrant as specified in its charter)

Massachusetts
(State or other jurisdiction of
incorporation or organization) 04-2441829
(I.R.S. Employer
Identification Number)

80 Wilson Way, Westwood, Massachusetts 02090
(Address of principal executive offices, including zip code)

(781) 467-3500
(Registrant's telephone number, including area code)

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

YES /x/    NO / /

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, par value $.01 per share	13,623,627 shares
Class	Outstanding at December 13, 2001

ADE CORPORATION
INDEX

			Page
Part I.—Financial Information
	Item 1.	Condensed Consolidated Financial Statements (unaudited)	—
		Condensed Consolidated Balance Sheet—October 31, 2001 and April 30, 2001	3
		Condensed Consolidated Statement of Operations—Three and Six Months Ended October 31, 2001 and 2000	4
		Condensed Consolidated Statement of Cash Flows—Six Months Ended October 31, 2001 and 2000	5
		Notes to Unaudited Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Part II.—Other Information			18
Signatures			20
Exhibit Index			21

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ADE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(in thousands)

			October 31, 2001			April 30, 2001
			(Unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	31,227		$	29,220
	Marketable securities			1,638			1,913
	Accounts receivable, net			19,242			24,424
	Inventories			34,559			39,025
	Prepaid expenses and other current assets			1,576			1,566
	Deferred income taxes			—			6,514
		Total current assets		88,242			102,662
Fixed assets, net				29,173			29,569
Deferred income taxes				—			4,076
Investments				3,289			3,221
Intangible assets, net				2,944			3,286
Restricted cash				3,425			3,525
Other assets				186			368
Total assets			$	127,259		$	146,707
Liabilities and stockholders' equity
Current liabilities:
	Current portion of long-term debt		$	633		$	621
	Accounts payable			5,878			6,833
	Accrued expenses and other current liabilities			17,575			21,134
	Deferred income on sales to affiliates			2,893			2,116
		Total current liabilities		26,979			30,704
Long-term debt				11,028			11,339
Stockholders' equity:
	Common stock			136			136
	Capital in excess of par value			103,051			102,429
	Retained earnings (Accumulated deficit)			(15,073	)		686
	Accumulated other comprehensive income			1,138			1,413
		Total stockholders' equity		89,252			104,664
Total liabilities and stockholders' equity			$	127,259		$	146,707

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ADE CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data, unaudited)

			Three months ended October 31,						Six months ended October 31,
			2001			2000			2001			2000
Net Revenue:
System and parts			$	19,526		$	20,894		$	42,618		$	40,159
Service				2,384			2,777			4,663			4,899
	Total revenue			21,910			23,671			47,281			45,058
Cost of revenue:
System and parts				11,315			8,362			23,385			16,455
Service				2,414			3,604			5,264			6,621
	Total cost of revenue			13,729			11,966			28,649			23,076
		Gross profit		8,181			11,705			18,632			21,982
Operating expenses:
	Research and development			5,961			5,176			12,076			10,331
	Marketing and sales			3,551			4,284			7,138			8,545
	General and administrative			2,796			2,624			5,108			4,851
		Total operating expenses		12,308			12,084			24,322			23,727
Loss from operations				(4,127	)		(379	)		(5,690	)		(1,745	)
Interest and other income, net				48			326			360			665
Loss before provision for income taxes, equity in net earnings (loss) of affiliated companies and cumulative effect of change in accounting principle				(4,079	)		(53	)		(5,330	)		(1,080	)
Provision for income taxes				10,598			64			10,605			64
Loss before equity in net earnings (loss) of affiliated companies and cumulative effect of change in accounting principle				(14,677	)		(117	)		(15,935	)		(1,144	)
Equity in net earnings (loss) of affiliated companies				109			304			177			(418	)
Income (loss) before cumulative effect of change in accounting principle				(14,568	)		187			(15,758	)		(1,562	)
Cumulative effect of change in accounting principle, net of tax				—			—			—			(1,785	)
Net income (loss)			$	(14,568	)	$	187		$	(15,758	)	$	(3,347	)
Net earnings (loss) per share:
	Basic
		Earnings (loss) before cumulative effect of change in accounting principle	$	(1.07	)	$	0.01		$	(1.16	)	$	(0.12	)
		Cumulative effect of change in accounting principle	$	—		$	—		$	—		$	(0.13	)
		Basic earnings (loss) per share	$	(1.07	)	$	0.01		$	(1.16	)	$	(0.25	)
	Diluted
		Earnings (loss) before cumulative effect of change in accounting principle	$	(1.07	)	$	0.01		$	(1.16	)	$	(0.12	)
		Cumulative effect of change in accounting principle	$	—		$	—		$	—		$	(0.13	)
		Diluted earnings (loss) per share	$	(1.07	)	$	0.01		$	(1.16	)	$	(0.25	)
Weighted average shares outstanding
	Basic			13,607			13,497			13,587			13,490
	Diluted			13,607			13,781			13,587			13,490

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ADE CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands, unaudited)

					Six months ended October 31,
					2001			2000
Cash flows from operating activities:
	Net loss				$	(15,758	)	$	(3,347	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization				2,835			3,292
		Deferred income taxes				10,590			—
		Equity in net earnings (loss) of affiliated companies, net of dividends received				(68	)		482
		Cumulative effect of change in accounting principle				—			1,785
		Changes in assets and liabilities:
			Accounts receivable, net			5,181			(7,643	)
			Inventories			4,466			(5,820	)
			Prepaid expenses and other current assets			(11	)		(711	)
			Accounts payable			(955	)		2,379
			Accrued expenses and other current liabilities			(3,559	)		6,979
			Deferred income on sales to affiliate			777			828
				Net cash provided by (used in) operating activities		3,498			(1,776	)
Cash flows from investing activities:
	Purchases of fixed assets					(2,096	)		(931	)
	Change in restricted cash					100			30
	Advances to affiliated company					—			(449	)
	(Increase) decrease in other assets					182			(22	)
		Net cash used in investing activities				(1,814	)		(1,372	)
Cash flows from financing activities:
	Repayment of long-term debt					(298	)		(291	)
	Proceeds from issuance of common stock					621			432
		Net cash provided by financing activities				323			141
Net increase (decrease) in cash and cash equivalents						2,007			(3,007	)
Cash and cash equivalents, beginning of period						29,220			35,001
Cash and cash equivalents, end of period					$	31,227		$	31,994

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ADE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Preparation

    The accompanying unaudited condensed consolidated financial statements of ADE Corporation (the "Company") include, in the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair statement of the Company's financial position, results of operations and cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years.

    Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying unaudited condensed consolidated financial statements and these 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 financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2001.

2. Change in Accounting Principle

    In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes certain areas of the Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. Historically, for some of the Company's sales transactions, a portion of the sales price, usually 10%, was not due until installation occurs and the customer accepts the product. Under SAB 101 and the new accounting method adopted retroactive to May 1, 2000, the Company now defers recognition of the portion of the sales price not due until the customer has accepted the product. Effective during the first quarter of the year ended April 30, 2001, the Company implemented the SEC's SAB 101 guidelines, which was reported as a cumulative effect of a change in accounting principle as of May 1, 2000. The cumulative effect of the change in accounting principle resulted in a charge to income of $1.8 million (net of income taxes of $0), or $0.13 per share, in the first quarter of fiscal 2001. The results for the three and six months ended October 31, 2000 have been adjusted to reflect the adoption of SAB 101.

3. Comprehensive Income (Loss)

    Comprehensive income (loss) was as follows:

		Three months ended					Six months ended
		October 31, 2001			October 31, 2000		October 31, 2001			October 31, 2000
		(in thousands)					(in thousands)
Net income (loss)		$	(14,568	)	$	187	$	(15,758	)	$	(3,347	)
Other comprehensive income loss:
	Unrealized loss on marketable securities, net of $0 tax		(304	)		—		(275	)		—
Other comprehensive loss			(304	)		—		(275	)		—
Comprehensive income (loss)		$	(14,872	)	$	187	$	(16,033	)	$	(3,347	)

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4. Inventories

    Inventories consist of the following:

	October 31, 2001		April 30, 2001
	(unaudited)
	(in thousands)
Raw materials and purchased parts	$	15,436	$	16,910
Work-in-process		15,782		18,749
Finished goods		3,341		3,366
	$	34,559	$	39,025

5. Accrued Expenses and Other Current Liabilities

    Accrued expenses and other current liabilities consist of the following:

	October 31, 2001		April 30, 2001
	(unaudited)
	(in thousands)
Accrued salaries, wages and vacation pay	$	2,310	$	2,342
Accrued commissions		2,055		1,341
Accrued warranty costs		1,670		1,899
Deferred revenue		9,075		11,655
Other		2,465		3,897
	$	17,575	$	21,134

6. Earnings (Loss) Per Share

    Basic and diluted earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. For the three months ended October 31, 2001 and 2000, respectively, 735,450 and 144,200 common shares issuable upon the exercise of stock options have been excluded from the computation of diluted earnings per share, as their effect would have been antidilutive. For the six months ended October 31, 2001 and 2000, respectively, 524,690 and 150,240 common shares issuable upon the exercise of stock options have been excluded from the computation of diluted earnings per share, as their effect would have been antidilutive. For the three months ended October 31, 2001 and the six months ended October 31, 2001 and 2000, respectively, basic and diluted loss per share is the same due to the antidilutive effect of potential common shares outstanding.

7. Segment Reporting

    The Company has three reportable segments: ADE Semiconductor Systems Group ("SSG"), ADE Phase Shift ("PST") and ADE Technologies ("ATI"). SSG manufactures and markets metrology and inspection systems to the semiconductor wafer and device manufacturing industries that are used to improve yield and capital productivity. Sales of the Company's stand-alone software products and software consulting services are also included in the SSG segment. PST manufactures and markets high performance, non-contact surface metrology equipment using advanced interferometric technology that

7

provides enhanced yield management to the data storage, semiconductor and optics industries. ATI manufactures and markets high precision magnetic characterization and non-contact dimensional metrology gaging systems primarily to the data storage industry.

    The Company's reportable segments are determined based upon the nature of the products, the external customers and customer industries and the sales and distribution methods used to market the products. The Company evaluates performance based upon profit or loss from operations. The Company does not measure the assets allocated to the segments. Management fees representing certain services provided by corporate offices have been allocated to each of the reportable segments based upon the usage of those services by each segment. Additionally, other income (loss), the provision for (benefit from) income taxes and the equity in net earnings (loss) of affiliated companies are not included in segment profitability.

		SSG			PST			ATI			Total
		(in thousands)
For the quarter ended October 31, 2001
	Revenue from external customers	$	17,142		$	2,590		$	1,947		$	21,679
	Intersegment revenue		199			—			212			411
	Loss from operations		(3,410	)		(344	)		(461	)		(4,215	)
	Depreciation and amortization expense		1,195			94			57			1,346
	Capital expenditures		1,139			—			17			1,156
For the quarter ended October 31, 2000
	Revenue from external customers	$	19,071		$	1,883		$	2,326		$	23,280
	Intersegment revenue		11			—			211			222
	Income (loss) from operations		440			(483	)		(444	)		(487	)
	Depreciation and amortization expense		1,306			63			102			1,471
	Capital expenditures		301			61			57			419

		SSG			PST			ATI			Total
		(in thousands)
For the six months ended October 31, 2001
	Revenue from external customers	$	36,699		$	3,744		$	3,683		$	44,126
	Intersegment revenue		397			—			515			912
	Loss from operations		(4,946	)		(1,625	)		(777	)		(7,348	)
	Depreciation and amortization expense		2,533			189			113			2,835
	Capital expenditures		1,959			49			88			2,096
For the six months ended October 31, 2000
	Revenue from external customers	$	37,845		$	3,124		$	5,380		$	46,349
	Intersegment revenue		288			—			342			630
	Income (loss) from operations		205			(870	)		(425	)		(1,090	)
	Depreciation and amortization expense		2,952			127			213			3,292
	Capital expenditures		773			88			70			931

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    The following is a reconciliation for the above items where aggregate reportable segment amounts differ from amounts contained in the Company's consolidated financial statements.

	Three months ended October 31,						Six months ended October 31,
	2001			2000			2001			2000
Total external revenue for reportable segments	$	21,679		$	23,280		$	44,126		$	46,349
Net impact of revenue recognition on sales to affiliate		231			391			3,155			(1,291	)
Total consolidated revenue	$	21,910		$	23,671		$	47,281		$	45,058
Total operating loss for reportable segments	$	(4,215	)	$	(487	)	$	(7,348	)	$	(1,090	)
Net impact of intercompany gross profit eliminations and deferred profit on sales to affiliate		88			108			1,658			(655	)
Total consolidated operating loss	$	(4,127	)	$	(379	)	$	(5,690	)	$	(1,745	)

8. New Accounting Pronouncements

    In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, in fiscal year 2003. The Company is currently assessing the impact of SFAS No. 141 and SFAS No. 142 on its consolidated financial position and results of operations and has not yet determined the impact of this adoption.

    In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and provides a single accounting model for long-lived assets to be disposed of. The Company is currently assessing the impact of this new statement on its consolidated financial position and results of operations and has not yet determined the impact of this adoption.

9. Income Taxes

    The Company has deferred tax assets, which have arisen primarily as a result of operating losses incurred in prior years, as well as other temporary differences between book and tax accounting. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," requires the establishment of a valuation allowance to reflect the likelihood of the realization of deferred tax assets. As a result of current year operating losses to date, anticipated additional operating losses for the third quarter of 2002, an expected operating loss for fiscal 2002, and uncertainty as to the extent and timing of profitability in future periods, the Company recorded an additional valuation allowance to reserve

9

the remaining deferred tax assets during the three months ended October 31, 2001, resulting in income tax expense of $10.6 million. As of October 31, 2001 the company has a full valuation allowance. As of October 31, 2001, the Company has available unused operating loss carryforwards, which may be applied against future taxable income.

10. Pending Litigation

    On October 12, 2000, the Company filed a patent infringement lawsuit against KLA-Tencor (KLA), a competitor, in the U.S. District Court in Delaware. The Company seeks damages and a permanent injunction against further infringement of United States Patent Number 6,118,525, entitled "Wafer Inspection System for Distinguishing Pits and Particles." On November 22, 2000, KLA filed a counterclaim in the United States District Court in Delaware alleging that ADE has infringed three patents owned by KLA. KLA is seeking damages for the alleged patent infringement and a permanent injunction against future infringement. In addition, KLA has asked the District Court for a declaration that United States Patent Number 6,118,525, owned by ADE, is invalid and not infringed by KLA. At this time, the Company cannot predict the outcome or the amount of gain or loss, if any.

10

ADE CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Introduction

    ADE Corporation (the "Company") designs, manufactures, markets and services highly precise, automated measurement, defect detection and handling equipment with current applications in the production of semiconductor wafers, semiconductor devices and computer disks.

    The following information should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report and the audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2001.

Forward-Looking Statements

    This quarterly report on Form 10-Q contains certain forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed by such statements. Those statements that make reference to the Company's expectations, predictions and anticipations should be considered forward-looking statements. These statements include, but are not limited to, risks and uncertainties associated with the strength of the semiconductor and hard disk markets, wafer pricing and wafer demand, the results of its product development efforts, the success of ADE's product offerings to meet customer needs within the timeframes required by customers in these markets, further increases in backlog, our visibility and the Company's predictions of future financial outcomes. Further information on potential factors that could affect ADE Corporation's business is described in "Other Risks" appearing at the end of this Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Company's reports on file with the Securities and Exchange Commission, including its Form 10-K for the fiscal year ended April 30, 2001.

Results of Operations

Three Months Ended October 31, 2001 compared to Three Months Ended October 31, 2000

    Revenue.  Revenue decreased 7% to $21.9 million in the second quarter of fiscal 2002 from $23.7 million in the second quarter of fiscal 2001. Decreased sales of the Company's products in the Semiconductor Systems Group ("SSG") segment reflected a decrease in demand for capital equipment in the semiconductor wafer and device industries as a result of the current severe down cycle. The decrease in revenue in the SSG segment was somewhat offset by an increase in revenue from the ADE Phase Shift ("PST") segment due to industry acceptance and the related shipments of PST's NanoMapper tool. Wafer manufacturer's capital equipment purchases have been focused on advanced industry requirements rather than on capacity expansion, which resulted in technology purchases of the Company's next generation of products. For the three months ended October 31, 2001, 84% of the Company's revenue was derived from the semiconductor industry compared to 88% for the year earlier period. The Company sells its semiconductor products to both wafer and device manufacturers. Historically, the Company's semiconductor revenue has been derived to a greater extent from wafer manufacturers compared to device manufacturers. For the three months ended October 31, 2001, 81% of semiconductor revenue was derived from wafer manufacturers while 19% was derived from device manufacturers compared to 73% and 27%, respectively, for the year earlier period. An increase in short-term chip demand or increases in semiconductor market capital expenditures is expected to

11

impact device manufacturers prior to wafer manufacturers as wafer manufacturers are further down on the overall semiconductor industry supply chain.

    The data storage industry has continued to experience extreme pricing pressure, consolidation and excess supply in many data storage market segments, which has resulted in reduced production and capital equipment purchases. Consequently, revenues in each of the metrology product lines that are marketed to the data storage industry by the Company's ADE Technologies ("ATI") segment have decreased in the second quarter of fiscal 2002 compared with the year earlier period. Data storage industry revenue comprised 16% of total revenue for the three months ended October 31, 2001, compared to 12% for the year earlier period.

    Gross Margin.  Gross margin decreased to 37% in the second quarter of fiscal 2002 from 49% in the second quarter of fiscal 2001. The decrease in gross margin was due primarily to the higher volume of shipments of 300mm products in the SSG segment, which carry lower margins in their initial stages than the Company's legacy products. The Company expects these lower margins to continue in the short term due to expected shipments of newer technologies. Also contributing to the decrease in gross margins was a decline in factory utilization during the second quarter of fiscal 2002 due to the decrease in demand for the Company's products. The decrease in gross margins at the SSG and ATI segments was somewhat offset by an increase in the gross margin of the PST segment.

    Research and Development.  Research and development expense increased $785,000, or 15%, to $6.0 million in the second quarter of fiscal 2002 from $5.2 million in the second quarter of 2001 and increased as a percentage of revenue to 27% compared to 22% in the second quarter of fiscal 2001. The increase in expense resulted primarily from continued investment by the SSG segment to develop its Advanced Flatness System ("AFS") and Advanced Wafer Inspection System ("AWIS") to capitalize on the next wave of worldwide capital spending, which is expected to be focused on 300mm wafer production. Also contributing to the overall increase was an increased investment in research and development at the PST segment. The Company also continues to develop new products for the data storage industry, including those that measure the magnetic properties of materials used in manufacturing disk drives. The Company is committed to continuing its investment in research and development to maintain its position as a technological leader, which may necessitate continued research and development spending at or above current levels.

    Marketing and Sales.  Marketing and sales expense decreased $733,000, or 17%, to $3.6 million in the second quarter of fiscal 2002 from $4.3 million in the second quarter of 2001 and decreased as a percentage of revenue to 16% from 18% in the second quarter of fiscal 2001. The decreased expense resulted primarily from decreased commissions expense on sales made through internal and external sales representatives. The mix of sales channels through which the Company's products are sold may have a significant impact on the Company's marketing and sales expense and the results in any period may not be indicative of marketing and sales expense for future periods. Also contributing to the decrease in expense was decreased travel and tradeshow expenses during the second quarter of fiscal 2002. The decrease in marketing and sales expense as a percentage of revenue resulted from the decrease in expense during the second quarter of fiscal 2002, partially offset by the decrease in revenue as discussed above.

    General and Administrative.  General and administrative expense increased $172,000 or 7% to $2.8 million in the second quarter of fiscal 2002 from $2.6 million in the second quarter of fiscal 2001 and increased as a percentage of revenue to 13% from 11% in the second quarter of 2001. Expenses

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increased primarily due to an increase in legal expenses, which was partially offset by a decrease in recruiting and consulting expenses.

    Interest and Other Income, Net.  Net interest and other income was $48,000 in the second quarter of fiscal 2002 compared to net interest and other income of $326,000 in the second quarter of fiscal 2001. The decrease in interest and other income resulted primarily from lower interest returns due to lower interest rates during the second quarter of fiscal 2002 compared to the year earlier period.

    Income Taxes.  There was a provision for income taxes of $10.6 million in the second quarter of fiscal 2002 compared to a provision for income taxes of $64,000 in the second quarter of fiscal 2001. The provision for income taxes in the second quarter of fiscal 2002 consists of an increase in the valuation allowance against the Company's deferred tax assets. The Company has deferred tax assets, which have arisen primarily as a result of operating losses incurred in prior years, as well as other temporary differences between book and tax accounting. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," requires the establishment of a valuation allowance to reflect the likelihood of the realization of deferred tax assets. As a result of current year operating losses to date, anticipated additional operating losses for the third quarter of 2002, an expected operating loss for fiscal 2002, and uncertainty as to the extent and timing of profitability in future periods, the Company recorded an additional valuation allowance to reserve the remaining deferred tax assets during the three months ended October 31, 2001, resulting in income tax expense of $10.6 million. As of October 31, 2001 the Company has a full valuation allowance. As of October 31, 2001, the Company has available unused operating loss carryforwards, which may be applied against future taxable income.

    Equity in Net Earnings (Loss) of Affiliated Companies.  Equity in net earnings of affiliated companies was $109,000 in the second quarter of fiscal 2002 compared to equity in earnings of affiliated companies of $304,000 in the second quarter of fiscal 2001. The Company's Japanese affiliate sells primarily to the semiconductor industry and the current period earnings reflect the timing of shipments and the recognition of revenue by the affiliate.

Six Months Ended October 31, 2001 compared to Six Months Ended October 31, 2000

    Revenue.  Revenue increased 5% to $47.3 million in the six months ended October 31, 2001 from $45.1 million in the year earlier period. Increased sales of the Company's products in the Semiconductor Systems Group ("SSG") and ADE Phase Shift ("PST") segments reflected a higher level of demand for capital equipment in the semiconductor wafer industry during the six months ended October 31, 2001, which was somewhat offset by a decline in demand in the semiconductor device industry. Also contributing to the increase in revenue was the industry acceptance and the related shipments of the PST segment's NanoMapper tool. Currently, the semiconductor industry is in the midst of a severe down cycle. As a result, wafer manufacturers' capital equipment purchases have focused on advanced industry requirements rather than capacity expansion, which has resulted in technology purchases of the Company's next generation of products. For the six months ended October 31, 2001 and 2000, 86% of the Company's revenue was derived from the semiconductor industry. The Company sells its semiconductor products to both wafer and device manufacturers. Historically, the Company's semiconductor revenue has been derived to a greater extent from wafer manufacturers compared to device manufacturers. For the six months ended October 31, 2001, 87% of semiconductor revenue was derived from wafer manufacturers while 13% was derived from device manufacturers compared to 79% and 21%, respectively, for the year earlier period. An increase in short-term chip demand or increases in semiconductor market capital expenditures is expected to

13

impact device manufacturers prior to wafer manufacturers as wafer manufacturers are further down on the overall semiconductor industry supply chain.

    The data storage industry has been experiencing extreme pricing pressure, consolidation and excess supply in many data storage market segments, which has resulted in reduced production and capital equipment purchases. Consequently, revenues in each of the metrology product lines that are marketed to the data storage industry by the Company's ADE Technologies ("ATI") segment have decreased in the six months ended October 31, 2001 compared with the year earlier period. Data storage industry revenue comprised 14% of total revenue for the six months ended October 31, 2001 and 2000.

    Gross Margin.  Gross margin decreased to 39% in the six months ended October 31, 2001 from 49% in the year earlier period. The decrease in gross margin was due primarily to the higher volume of shipments of 300mm products in the SSG segment, which carry lower margins in their initial stages than the Company's legacy products. The Company expects these lower margins to continue in the short term due to expected shipments of newer technologies. Also contributing to the decrease in gross margins was a decline in factory utilization during the second quarter of fiscal 2002 in all of the Company's segments.

    Research and Development.  Research and development expense increased $1.7 million, or 17%, to $12.1 million in the six months ended October 31, 2001 from $10.3 million in the year earlier period and increased as a percentage of revenue at 26% compared to 23% in the year earlier period. The increase in expense resulted primarily from continued investment by the SSG segment to develop its AFS and AWIS products to capitalize on the next wave of worldwide capital spending, which is expected to be focused on 300mm wafer production. Also contributing to the overall increase was continued investment in research and development at the PST segment. The Company also continues to develop new products for the data storage industry, including those that measure the magnetic properties of materials used in manufacturing disk drives. The Company is committed to continuing its investment in research and development to maintain its position as a technological leader, which may necessitate continued research and development spending at or above current levels.

    Marketing and Sales.  Marketing and sales expense decreased $1.4 million, or 16%, to $7.1 million in the six months ended October 31, 2001 from $8.5 million in the year earlier period and decreased as a percentage of revenue to 15% from 19% in the year earlier period. The decreased expense resulted primarily from decreased commissions expense on sales made through external sales representatives. The mix of sales channels through which the Company's products are sold may have a significant impact on the Company's marketing and sales expense and the results in any period may not be indicative of marketing and sales expense for future periods. Also contributing to the decrease in expense was decreased payroll expense as well as a decrease in travel and tradeshow expenses during the six months ended October 31, 2001. The decrease in marketing and sales expense as a percentage of revenue resulted both from the increase in revenue and the decrease in expense during the six months ended October 31, 2001 as discussed above.

    General and Administrative.  General and administrative expense increased $257,000 or 5% to $5.1 million in the six months ended October 31, 2001 from $4.9 million in the year earlier period and remained consistent as a percentage of revenue at 11% compared to the year earlier period. Expenses increased due primarily to an increase in payroll and legal expenses offset by a decrease in recruiting and consulting expenses.

14

    Interest and Other Income, Net.  Net interest and other income was $360,000 in the six months ended October 31, 2001 compared to net interest and other income of $665,000 in the year earlier period. The decrease in interest and other income resulted primarily from lower interest returns due to lower interest rates during the six months ended October 31, 2001 compared to the year earlier period.

    Income Taxes.  There was a provision for income taxes of $10.6 million in the six months ended October 31, 2001 compared to a provision for income taxes of $64,000 in the year earlier period. The provision for income taxes in the six months ended October 31, 2001 consists of an increase in the valuation allowance against the Company's deferred tax assets. The Company has deferred tax assets, which have arisen primarily as a result of operating losses incurred in prior years, as well as other temporary differences between book and tax accounting. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," requires the establishment of a valuation allowance to reflect the likelihood of the realization of deferred tax assets. As a result of current year operating losses to date, anticipated additional operating losses for the third quarter of 2002, an expected operating loss for fiscal 2002, and uncertainty as to the extent and timing of profitability in future periods, the Company recorded an additional valuation allowance to reserve the remaining deferred tax assets during the six months ended October 31, 2001, resulting in income tax expense of $10.6 million. As of October 31, 2001 the Company has a full valuation allowance. As of October 31, 2001, the Company has available unused operating loss carryforwards, which may be applied against future taxable income.

    Equity in Net Earnings (Loss) of Affiliated Companies.  Equity in net earnings of affiliated companies was $177,000 in the six months ended October 31, 2001 compared to equity in net loss of affiliated companies of $418,000 in the year earlier period. The net earnings from affiliated companies in the six months ended October 31, 2001 compared to the loss in the year earlier period was due primarily to the absence of the losses incurred by the Company's former affiliate, Microspec, which was sold during the first quarter of fiscal 2001. The Company's Japanese affiliate sells primarily to the semiconductor industry and the current period earnings reflect the timing of shipments and the recognition of revenue by the affiliate.

Liquidity and Capital Resources

    At October 31, 2001, the Company had $31.2 million in cash and cash equivalents and $61.3 million in working capital. In addition, the Company had $3.4 million in restricted cash used as security for a tax-exempt Industrial Development Bond issued through the Massachusetts Industrial Finance Agency in December 1997. Under the terms of the bond agreement, the Company may substitute a letter of credit in an amount equal to approximately 105% of the outstanding principal balance as collateral for the Company's obligations under the IDB, assuming the Company has the ability to borrow under a credit facility. Such actions would allow the restricted cash balance to be used for general corporate purposes.

    Cash provided by operating activities for the six months ended October 31, 2001 was $3.5 million. This amount resulted from net loss of $15.8 million adjusted for non-cash charges of $13.3 million and a $5.9 million net decrease in working capital accounts. Non-cash items consisted primarily of a deferred income tax charge of $10.6 million and $2.8 million of depreciation and amortization. Working capital items consisted primarily of decreases in accounts receivable of $5.2 million, inventories of $4.5 million, accounts payable of $1.0 million and accrued expenses and other current liabilities of $3.6 million, which were offset by an increase in deferred income on sales to affiliate of $0.8 million. The decrease in accounts receivable was due to improved collections in the first six months of fiscal

15

2002. The decrease in inventory was due to the high volume of shipments during the first six months of fiscal 2002 as well as a decrease in the purchase of raw materials. The decrease in accounts payable was due to the timing of payments and the decrease in inventory purchases. The decrease in accrued expenses and other current liabilities was primarily due to the decrease in deferred revenue and other accrued expenses. The increase in deferred income on sales to affiliate is due to the timing of shipments and revenue recognition by the Company's Japanese affiliate.

    Cash used in investing activities was $1.8 million, and consisted primarily of $2.1 million for purchases of fixed assets, which was partially offset by a combined decrease in other assets and restricted cash of $282,000.

    Cash provided by financing activities was $323,000, which consisted of $621,000 of aggregate proceeds from the issuance of common stock from the exercise of stock options and stock purchased through the employee stock purchase plan, partially offset by $298,000 in repayments of long-term debt.

    The Company expects to meet its near-term working capital needs and capital expenditures primarily through cash generated from operations and its available cash and cash equivalents.

Other Risk Factors

    Capital expenditures by semiconductor wafer and device manufacturers historically have been cyclical as they in turn depend upon the current and anticipated demand for integrated circuits. While the semiconductor industry is in the midst of a severe down cycle, it is not clear when semiconductor wafer manufacturers, who account for approximately 75% of the Company's revenue, will be in a position to increase their purchases of capital equipment. The data storage industry has been in a period of oversupply and excess manufacturing capacity for an extended period of time and this has also had an adverse impact on the Company. At October 31, 2001, the Company's backlog was $33.3 million. The Company remains uncertain about when sustained growth in revenue will return. The Company continues to evaluate its cost structure relative to expected revenue and will continue to implement aggressive cost containment measures where necessary.

    Furthermore, the Company's success is dependent upon supplying technologically superior products to the marketplace at appropriate times to satisfy customer needs. Product development requires substantial investment and is subject to technological risks. Delays or difficulties in product development or market acceptance of newly developed products could adversely affect the future performance of the Company.

Change in Accounting Principle

    In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes certain areas of the Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. Historically, for some of the Company's sales transactions, a portion of the sales price, usually 10%, was not due until installation occurs and the customer accepts the product. Under SAB 101 and the new accounting method adopted retroactive to May 1, 2000, the Company now defers recognition of the portion of the sales price not due until the customer has accepted the product. Effective during the first quarter of the year ended April 30, 2001, the Company implemented the SEC's SAB 101 guidelines, which was reported as a cumulative effect of a change in accounting principle as of May 1, 2000. The cumulative effect of the change in accounting principle resulted in a charge to income of $1.8 million (net of income taxes of $0), or $0.13 per share, in the first quarter of fiscal 2001. The results for the three and six months ended October 31, 2000 have been adjusted to reflect the adoption of SAB 101.

16

New Accounting Pronouncements

    In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, in fiscal year 2003. The Company is currently assessing the impact of SFAS No. 141 and SFAS No. 142 on its consolidated financial position and results of operations and has not yet determined the impact of this adoption.

    In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and provides a single accounting model for long-lived assets to be disposed of. The Company is currently assessing the impact of this new statement on its consolidated financial position and results of operations and has not yet determined the impact of this adoption.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    There were no material changes in the Company's exposure to market risk from April 30, 2001.

17

PART II.

OTHER INFORMATION

Item 1.  Legal Proceedings:

    On October 12, 2000, the Company filed a patent infringement lawsuit against KLA-Tencor (KLA), a competitor, in the U.S. District Court in Delaware. The Company seeks damages and a permanent injunction against further infringement upon United States Patent Number 6,118,525, entitled "Wafer Inspection System for Distinguishing Pits and Particles." On November 22, 2000, KLA filed a counterclaim in the United States District Court in Delaware that ADE has infringed upon three patents owned by KLA. KLA is seeking damages for patent infringement and a permanent injunction against any future infringement activity. In addition, KLA has asked the District Court for a declaration that United States Patent Number 6,118,525, owned by ADE, is invalid and not infringed upon by KLA. At this time, the Company cannot predict the outcome or the amount of gain or loss, if any.

Item 2.  Changes in Securities:

    None

Item 3.  Defaults Upon Senior Securities:

    None

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

    The Annual Meeting of Stockholders was held on September 20, 2001. The stockholders voted on the following matters:

1.

Election of Directors

Nominee	For	Against
Robert C. Abbe	11,137,855	607,330
Harris Clay	11,735,840	9,345
Landon T. Clay	11,735,840	9,345
H. Kimball Faulkner	11,733,440	9,345
Chris L. Koliopoulos	11,737,390	7,795
Francis B. Lothrop, Jr.	11,732,840	9,945
Kendall Wright	11,735,440	9,745

There were no abstentions and 1,855,876 broker non-votes with respect to this matter.

2.

Proposal to fix the size of the Board of Directors at seven.

For	Against	Abstain
10,706,657	1,024,120	10,096

There were 1,860,188 broker non-votes with respect to this matter.

3.

Appointment of PricewaterhouseCoopers LLP as the Company's independent public accountants for the fiscal year ending April 30, 2002.

For	Against	Abstain
11,730,137	6,836	3,900

There were 1,860,188 broker non-votes with respect to this matter.

Item 5.  Other Information:

    None

18

Item 6.  Exhibits and Reports on Form 8-K:

a.

See Exhibit Index, Page 21



b.

Reports on Form 8-K

None

19

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ADE CORPORATION
Date: December 14, 2001	/s/ BRIAN C. JAMES Brian C. James Executive Vice President, Treasurer and Chief Financial Officer
Date: December 14, 2001	/s/ ROBERT C. ABBE Robert C. Abbe President and Chief Executive Officer

20

EXHIBIT INDEX

Exhibit Number	Description
2.1	Agreement and Plan of Merger dated as of February 27, 1997 by and between ADE Corporation, ADE Technologies, Inc., Digital Measurement Systems, Inc., Dennis E. Speliotis, Elias Speliotis, Evanthia Speliotis, Ismene Speliotis, Advanced Development Corporation, David C. Bono and Alan Sliski (filed as Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).
2.2	Agreement and Plan of Merger dated as of May 31, 1998 by and among ADE Corporation, Theta Acquisition Corp., Phase Shift Technology, Inc., Chris Koliopoulos and David Basila (filed as Exhibit 2 to the Company's Form 8-K dated June 25, 1998 and incorporated herein by reference).
2.3	Purchase and Sale Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E. Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992, Elias Speliotis, Evanthia Speliotis and Ismene Speliotis (filed as Exhibit 10.20 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).
3.1	Restated Articles of Organization (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).
3.2	By-laws (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).
4.1	Registration Rights Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E. Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992 recorded in the Middlesex South District Registry of Deeds at Book 22305, Page 375 filed as Exhibit 10.21 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).
4.2	Registration Rights Agreement dated as of February 27, 1997, by and among ADE Corporation and Advanced Development Corporation, David C. Bono and Alan Sliski (filed as Exhibit 10.19 to the Company's Form 10-K for the fiscal year ended April 30, 1997 and incorporated herein by reference).
4.3	Registration Rights Agreement dated as of May 31, 1998 by and among ADE Corporation, Chris Koliopoulos and David Basila (filed as Exhibit 4.6 to the Company's Form 8-K dated June 25, 1998 and incorporated herein by reference).
10.1	Form of Employee Confidentiality Agreement (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (333-96408) or amendments thereto and incorporated herein by reference).
10.2	2000 Stock Option Plan (filed as Exhibit A to the Company's Proxy Statement with respect to its Annual Meeting of Shareholders for the fiscal year ended April 30, 2000 and incorporated herein by reference).*
10.3	1997 Stock Option Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (333-46505) or amendments thereto and incorporated herein by reference). *
10.4	Amendment to 1997 Stock Option Plan dated April 7, 1999 (filed as Exhibit 10.3 to the Company's Form 10-K for the fiscal year ended April 30, 1999 and incorporated herein by reference). *

21

10.5	1995 Stock Option Plan (filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).*
10.6	1992 Stock Option Plan (filed as Exhibit 10.5 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).*
10.7	Amendment to 1992 Stock Option Plan dated April 7, 1999 (filed as Exhibit 10.6 to the Company's Form 10-K for the fiscal year ended April 30, 1999 and incorporated herein by reference). *
10.8	1982 Stock Option Plan (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (333-2280) and incorporated herein by reference).*
10.9	Employee Stock Purchase Plan (as amended) (filed herewith).*
10.11	Purchase and Sale Agreement for 80 Wilson Way, Westwood, Massachusetts, dated January 11, 1996, between Met Path New England, Inc., and the Company, with Schedules (filed as Exhibit 10.12 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.12	Loan Agreement dated as of June 7, 1996, among GE Capital Public Finance, Inc., Massachusetts Industrial Finance Agency and the Company (filed as Exhibit 10.9 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.13	Certificate as to Nonarbitrage and Tax Compliance, dated as of June 7, 1996, from the Company to Massachusetts Industrial Finance Agency (filed as Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.14	Letter of Credit Agreement, dated June 7, 1996, between Citizens Bank of Massachusetts and the Company (filed as Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.15	Mortgage, Security Agreement, and Assignment, dated June 7, 1996, from the Company to Citizens Bank of Massachusetts (filed as Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.16	Pledge Agreement, dated June 7, 1996, from the Company to Citizens Bank of Massachusetts (filed as Exhibit 10.14 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.17	Oil and Hazardous Materials Indemnification Agreement, dated June 7, 1996, between the Company and Citizens Bank of Massachusetts (filed as Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.18	Indemnification Agreement, dated as of February 28, 1996, among MetPath of New England, Inc., Corning Life Sciences, Inc. and the Company (filed as Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.19	Letter Agreement regarding collateral assignment of Indemnification from the Company to Citizens Bank of Massachusetts, with attachment, (filed as Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).
10.20	Noncompetition Agreement dated as of May 31, 1998 by and between ADE Corporation and Chris Koliopoulos (filed as Exhibit 10.21 to the Company's Form 10-K for the fiscal year ended April 30, 1998, and incorporated herein by reference).

22

10.21	Noncompetition Agreement dated as of May 31, 1998 by and between ADE Corporation and David Basila (filed as Exhibit 10.22 to the Company's Form 10-K for the fiscal year ended April 30, 1998, and incorporated herein by reference).
21.1	Subsidiaries of the Company (filed as Exhibit 21.1 to the Company's Form 10-Q for the quarter ended October 31, 2000 and incorporated herein by reference).
23.1	Consent of PricewaterhouseCoopers LLP (filed as exhibit 23.1 to the Company's Form 10-K for the fiscal year ended April 30, 2001 and incorporated herein by reference).

*

Compensatory plan or agreement applicable to management and employees.

23

QuickLinks

ADE CORPORATION INDEX
Condensed Connsolidated Financial Statements (unaudited)
CONDENSED CONSOLIDATED BALANCE SHEET
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II.—OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
EXHIBIT INDEX

EX-10.9

EXHIBIT 10.9

October 25, 2001

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

ADE CORPORATION EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I

PURPOSE

1.01 Purpose.  The ADE Corporation Employee Stock Purchase Plan (the "Plan") is intended to provide a method whereby eligible employees of ADE Corporation and its participating subsidiary corporations (hereinafter collectively referred to, unless the context otherwise requires, as "ADE" or the "Company") will have an opportunity to acquire or increase proprietary interest in the Company through the purchase of shares of the Common Stock of ADE. The Plan is designed to encourage eligible employees to remain in the employ of the Company. It is the intention of the Company to have the Plan qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall be construed so as to extend and limit participation in a manner consistent with the requirements of that Section of the Code, and, except as specifically provided herein, all options granted to participants hereunder shall give the holders thereof the same rights and privileges.

ARTICLE II

DEFINITIONS

2.01	Committee.  "Committee" shall mean those individuals who shall, from time to time, constitute the Compensation Committee of the Board of Directors of ADE Corporation (the "Board of Directors").
2.02	Common Stock.  "Common Stock" shall mean shares of the $.01 par value common stock of the Company and any other stock or securities resulting from the adjustment thereof or substitution thereof as described in Section 12.04.
2.03	Employee.  "Employee" means any person who is customarily employed by the Company and paid on the United States payroll on a full-time regular or part-time regular basis by the Company and is regularly scheduled to work more than 20 hours per week.
2.04	Offering.  "Offering" or "Offerings" shall have the meanings set forth in Section 4.01 below.
2.05	Offering Commencement Date.  "Offering Commencement Date" means January 1, April 1, July 1, and October 1, as the case may be, on which a particular Offering begins.
2.06	Offering Termination Date.  "Offering Termination Date" means March 31, June 30, September 30, or December 31, as the case may be, on which a particular Offering terminates.
2.07	Option Price.  "Option Price" means the price established under Section 6.02 below.

1

2.08	Pay.  "Pay" shall mean total earnings, including regular straight-time earnings and payments for overtime, shift premiums, bonuses and other special payments, commissions and other incentive payments.
2.09	Subsidiary Corporation.  "Subsidiary Corporation" shall mean any present or future corporation which (i) would be a "subsidiary corporation" of ADE Corporation, as that term is defined in Section 424 of the Code, and (ii) is designated as a participant in the Plan by the Committee.

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.01	Initial Eligibility.  Any Employee who shall have completed at least ninety (90) days' employment and shall be employed by the Company on the date his/her participation in the Plan is to become effective shall be eligible to participate in Offerings under the Plan which commence on or after such ninety day period has concluded.
3.02	Leave of Absence.  For purposes of participation in the Plan, a person on leave of absence shall be deemed to be an Employee for the first 90 days of such leave of absence and, subject to applicable Federal and State laws, such Employee's employment shall be deemed to have terminated at the close of business on the 90th day of such leave of absence unless such Employee shall have returned to regular full-time or regular part-time employment (as the case may be) prior to the close of business on such 90th day or unless otherwise agreed to by the Company and the Employee. Termination by the Company of any Employee's leave of absence, other than termination of such leave of absence on return to full-time or part-time employment, shall terminate such Employee's participation in the Plan and right to exercise any option.
3.03	Restrictions on Participation.  Notwithstanding any provisions of the Plan to the contrary, no Employee shall be granted an option to participate in the Plan:

(a)

if, immediately after the grant, such Employee would own stock, and/or hold outstanding options to purchase stock, possessing 5% or more of the total combined voting power or value of all classes of stock of the Company (for purposes of this paragraph, the rules of Section 424(d) of the Code shall apply in determining stock ownership of any Employee); or



(b)

which permits his/her rights to purchase stock under this Plan and all other employee stock purchase plans of the Company intended to qualify under Section 423 of the Code to accrue at a rate which exceeds $25,000 in fair market value of the stock (determined at the time such option is granted) for each calendar year in which such an option is outstanding.

3.04 Commencement of Participation.  An eligible Employee may become a participant by completing an authorization for a payroll deduction on the form provided by the Company and filing it with the office of the Treasurer of the Company on or before the next date set therefor by the Committee, which date shall be prior to the Offering Commencement Date for the next Offering. Payroll deductions for a participant shall commence on the applicable Offering Commencement Date when his/her authorization for a payroll deduction becomes effective and shall end on the Offering Termination Date of the Offering to which such authorization is applicable unless sooner terminated by the participant as provided in Article VIII.

2

ARTICLE IV

OFFERINGS

4.01 Quarterly Offerings.  A total of One Million (1,000,000) shares of the Company's Common Stock shall be offered under the Plan, over a period of ten (10) years; during the first five (5) years, the shares shall be offered in quarterly offerings of Fifty Thousand (50,000) shares each plus any shares not issued in any previous quarter and during the second five (5) years, the quarterly offerings shall consist of any shares not issued in any previous quarter, including during the first five (5) years (the "Offerings"). The Offerings will, commence on the first day of the first Offering Commencement Date after the Board of Director's approval and thereafter on the first day of each subsequent quarter within the duration of the Plan until the Plan expires. Any shares not issued in any Offering shall be available for issuance in subsequent Offerings.

ARTICLE V

PAYROLL DEDUCTIONS

5.01	Amount of Deduction.  At the time a participant files his/her authorization for payroll deduction, he/she shall elect to have deductions made from his/her Pay on each payday during the time he/she is a participant in an Offering at the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his/her Pay.
5.02	Participant's Account.  All payroll deductions made for a participant shall be credited to his/her account under the Plan. A participant may not make any separate cash payment into such account except when on a leave of absence and then only as provided in Section 5.04.
5.03	Changes in Payroll Deductions.  A participant may discontinue his/her participation in the Plan as provided in Article VIII, but no other change can be made during an Offering and, specifically, a participant may not alter the amount of his/her payroll deductions for that Offering.
5.04	Leave of Absence.  If a participant goes on a leave of absence, such participant shall have the right to elect: (a) to withdraw the cash balance in his/her account pursuant to Section 8.01; (b) to discontinue contributions to the Plan but remain a participant in the Plan; or (c) to remain a participant in the Plan during such leave of absence, authorizing deductions to be made from payments by the Company to the participant during such leave of absence and undertaking to make cash payments to the Plan at the end of each payroll period to the extent that amounts payable by the Company to such participant are insufficient to meet such participant's authorized Plan deductions.

ARTICLE VI

GRANTING OF OPTIONS

6.01 Number of Option Shares.  On the Offering Commencement Date of each Offering, each participating Employee shall be deemed to have been granted an option to purchase a maximum number of shares of Common Stock of the Company equal to an amount determined as follows: an amount equal to (i) that percentage of the Employee's Pay which he/she has elected to have withheld (but not in any case in excess of 10% of his/her Pay) multiplied by (ii) the Employee's Pay during the period of the Offering divided by (iii) the Option Price determined under Section 6.02 below.

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6.02
Option Price.  The Option Price of stock purchased with payroll deductions made during each Offering for a participant therein shall be the lower of:

(a)

Ninety percent (90%) of the closing price of the stock on the Offering Commencement Date or the nearest prior business day on which trading occurred on the Nasdaq National Market System; or



(b)

Ninety percent (90%) of the closing price of the stock on the Offering Termination Date or the nearest prior business day on which trading occurred on the Nasdaq National Market System

If the Common Stock of the Company is not admitted to trading on any of the aforesaid dates for which closing prices of the stock are to be determined, then reference shall be made to the fair market value of the stock on that date, as determined on such basis as shall be established or specified for the purpose by the Committee.

ARTICLE VII

EXERCISE OF OPTION

7.01	Automatic Exercise.  A participant who elects to participate in an Offering shall be deemed to have exercised his/her option to purchase stock with payroll deductions for the purchase of the number of full or partial shares of stock which the accumulated payroll deductions in his/her account at the Offering Termination Date will purchase at the applicable Option Price.
7.02	Fractional Shares.  Fractional shares will be purchased under the Plan and held in the Employee's account for the next subsequent Offering or, if the Employee ceases to participate in the Plan, shall be returned to the Employee in cash promptly following the termination of an Offering, without interest.
7.03	Transferability of Option.  During a participant's lifetime, options held by such participant shall be exercisable only by that participant and shall not be transferable.
7.04	Delivery of Stock.  As promptly as practicable after the Offering Termination Date of each Offering, the Company will either, at the Company's discretion: (i) deliver to each participant, as appropriate, a certificate representing the number of shares of Common Stock purchased upon exercise of his/her option; or (ii) deliver (a) to any brokerage firm then retained by the Company to administer the Plan the total number of shares purchased by all participants in the Plan for allocation among the various accounts of such participants and (b) to each participant after the end of each Offering a statement which shall indicate the number of shares of Common Stock purchased upon exercise of his/her option and the aggregate number of shares of Common Stock held on behalf of each such participant under the Plan.

ARTICLE VIII

WITHDRAWAL

8.01 In General.  Upon at least ten (10) days prior written notice, an Employee may direct the discontinuance of future payroll deductions. All of the participant's payroll deductions previously credited to his/her account shall be used to purchase stock for his/her account on the next Offering Termination Date, and no further payroll deductions will be made from his/her Pay during such Offering or during any future Offering unless the Employee shall elect to participate in any future Offering.

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8.02	Effect on Subsequent Participation.  Subject to applicable Federal and State securities laws and tax laws, a participant's withdrawal from any Offering will not have any effect upon his/her eligibility to participate in any succeeding Offering or in any similar plan which may hereafter be adopted by the Company.
8.03	Termination of Employment.  Upon termination of the participant's employment for any reason, including retirement or pursuant to Section 3.02 herein (but excluding death while in the employ of the Company), the payroll deductions credited to his/her account will be returned in cash to him/her, or, in the case of his/her death subsequent to the termination of his/her employment, to the person or persons entitled thereto under Section 12.01. No interest is paid on such payments.
8.04	Termination of Employment Due to Death.  Upon termination of the participant's employment because of his/her death, his/her beneficiary (as defined in Section 12.01) shall have the right to elect, by written notice given to the office of the Treasurer of the Company prior to earliest of the next Offering Termination Date or the expiration of a period of sixty (60) days commencing with the date of the death of the participant, either:

(a)

to withdraw in cash all of the payroll deductions credited to the participant's account under the Plan during the Offering outstanding at the time of death; or



(b)

to exercise the participant's option for the purchase of stock on the Offering Termination Date next following the date of the participant's death for the purchase of the number of full shares of stock which the accumulated payroll deductions in the participant's account at the date of the participant's death will purchase at the applicable Option Price, and any excess in such account will be returned in cash to said beneficiary, without interest.

In the event that no such written notice of election shall be duly received by the office of the Treasurer of the Company, the beneficiary shall automatically be deemed to have elected, pursuant to paragraph (b), to exercise the participant's option.

ARTICLE IX

INTEREST

9.01 Payment of Interest.  No interest will be paid or allowed on any money paid into the Plan or credited to the account of any participant Employee.

ARTICLE X

STOCK

10.01 Maximum Shares.  The maximum number of shares which shall be issued under the Plan, subject to adjustment upon changes in capitalization of the Company as provided in Section 12.04, shall be 50,000 shares in each Offering plus in each Offering all unissued shares from prior Offerings not to exceed 1,000,000 shares for all Offerings. If the total number of shares for which options are exercised on any Offering Termination Date in accordance with Article VI exceeds the maximum number of shares for the applicable Offering, the Company shall make a pro rata allocation of the shares available for delivery and distribution in as nearly a uniform manner as shall be practicable and as it shall determine to be equitable, and the balance of payroll deductions credited to the account of each participant under the Plan shall be returned to him/her as promptly as possible, without interest.

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	Further, in accordance with Article III, no Employee shall be granted an option which permits the Employee's right to purchase stock under the Plan, and under all other Section 423(b) employee stock purchase plans of the Company, to accrue at a rate which exceeds $25,000 of market value of such stock (determined on the date or dates that options on such stock were granted) for each calendar year in which such option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code. If the participant's accumulated payroll deductions on the Offering Termination Date of the last Offering of the calendar year would otherwise enable the participant to purchase Common Stock in excess of the Section 423(b)(8) limitation described in this paragraph, the excess of the amount of the accumulated payroll deductions over the aggregate purchase price of the shares actually purchased shall be promptly refunded to the participant by the Company, without interest.
10.02	Participant's Interest in Option Stock.  The participant will have no interest in stock covered by his/her option until the Offering Termination Date on which the participant purchases such stock.
10.03	Registration of Stock.  Stock to be delivered to or held by a brokerage firm for a participant under the Plan will be registered in the name of the participant or, if the participant so directs by written notice to the Treasurer of the Company prior to the Offering Termination Date applicable thereto, in the names of the participant and one such other person as may be designated by the participant as joint tenants with rights of survivorship or as tenants by the entireties, to the extent permitted by applicable law.
10.04	Restrictions on Exercise.  The Board of Directors may, in its discretion, require as conditions to the exercise of any option that the shares of Common Stock reserved for issuance upon the exercise of the option shall have been duly listed, upon official notice of issuance, upon a stock exchange, and that either:

(a)

a Registration Statement under the Securities Act of 1933, as amended, with respect to said shares shall be effective; or



(b)

the participant shall have represented at the time of purchase, in form and substance satisfactory to the Company, that it is his/her intention to purchase the shares for investment and not for resale or distribution.

10.05

Limits on Sale of Stock Purchased Under the Plan.  The Plan is intended to provide shares of Common Stock for investment and not for resale. The Company does not, however, intend to restrict or influence any Employee in the conduct of his/her own affairs. An Employee may, therefore, sell stock purchased under the Plan at any time the Employee chooses, subject to compliance with any applicable federal or state securities laws and tax laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.

10.06

Notice to Company of Disqualifying Disposition.  By electing to participate in the Plan, each participant agrees to notify the Company in writing immediately after the participant transfers Common Stock acquired under the Plan, if such transfer occurs within two years after the Offering Commencement Date of the Offering in which such Common Stock was acquired. Each participant further agrees to provide any information about such a transfer as may be requested by the Company in order to assist it in complying with the tax laws. Such dispositions are generally treated as "disqualifying dispositions" under Sections 421 and 424 of the Code, which have certain tax consequences to participants and to the Company.

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ARTICLE XI

ADMINISTRATION

11.01

Appointment of Committee.  The Committee which shall administer the Plan shall be the Compensation Committee appointed from time to time by the Board of Directors. No member of the Committee shall be eligible to purchase stock under the Plan.

11.02

Authority of Committee.  Subject to the express provisions of the Plan, the Committee shall have plenary authority in its discretion to interpret and construe any and all provisions of the Plan, to adopt rules and regulations for administering the Plan, to designate certain administrative functions under the Plan regarding the custody and distribution of stock to an outside brokerage firm and to make all other determinations deemed necessary or advisable for administering the Plan. The Committee's determination on the foregoing matters shall be conclusive.

ARTICLE XII

MISCELLANEOUS

12.01	Designation of Beneficiary.  A participant may file a written designation of a beneficiary who is to receive any stock and/or cash. Such designation of beneficiary may be changed by the participant at any time by written notice to the office of the Treasurer of the Company. Upon the death of a participant and upon receipt by the Company of proof of identity and existence at the participant's death of a beneficiary validly designated by him/her under the Plan, the Company, or any brokerage firm with custody of such stock, shall deliver such stock and/or cash to such beneficiary. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, such stock and/or cash shall be delivered to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), to the spouse or to any one or more dependents of the participant as the Company may designate. No beneficiary shall, prior to the death of the participant by whom he/she has been designated, acquire any interest in the stock or cash credited to the participant under the Plan.
12.02	Transferability.  Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the participant other than by will or the laws of descent and distribution. Any such attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 8.01. Option rights granted under the Plan are exercisable during a participant's lifetime only by the participant.
12.03	Use of Funds.  All payroll deductions received or held by the Company under this Plan may be used by the Company for any corporate purpose and the Company shall not be obligated to segregate such payroll deductions.
12.04	Effect on Certain Transactions.  The number of shares of Common Stock reserved for the Plan pursuant to Section 4.01, the maximum number of shares of Common Stock offered pursuant to Section 4.01, and the determination under Section 6.02 of the purchase price per share of the shares of Common Stock offered to participants pursuant to an Offering shall be appropriately adjusted to reflect any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, a consolidation of shares, the payment of a stock dividend, or any other capital adjustment affecting the number of issued shares of the Common Stock of the Company.

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In the event that the outstanding shares of Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or another corporation, whether through reorganization, recapitalization, merger, consolidation, or otherwise, then there shall be substituted for each share of Common Stock reserved for issuance under the Plan but not yet purchased by participants, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which each such share shall be exchanged. Notwithstanding the foregoing, a dissolution or liquidation of the Company shall cause the Plan and any Offering hereunder to terminate and any payroll deductions credited to a participant's account under the Plan during the Offering outstanding at the time of dissolution or liquidation shall be refunded to the participant without interest.

12.05

Amendment and Termination.

(a)

Amendment of Plan.  The Company expressly reserves the right, at any time and from time to time, to amend in whole or in part any of the terms and provisions of the Plan; provided, however, no amendment may without the approval of the shareholders of the Company (i) increase the number of shares of Common Stock reserved under the Plan, (ii) change the method of determining the purchase price for shares of Common Stock, (iii) materially increase the benefits accruing to participants, or (iv) materially change the eligibility requirements for participation in the Plan.



(b)

Termination of Plan.  The Company expressly reserves the right, at any time and for whatever reason it may deem appropriate, to terminate the Plan. If not sooner terminated pursuant to the preceding sentence, the Plan shall continue in effect through September 30, 2006. Upon any termination of the Plan, the entire amount credited to the account of each participant shall be distributed to each such participant, without interest.



(c)

Procedure for Amendment or Termination.  Any amendment to the Plan or termination of the Plan may be retroactive to the extent not prohibited by applicable law. Any amendment to the Plan or termination of the Plan shall be made by the Company by resolution of the Board of Directors (subject to Section 12.05(a)) and shall not require the approval or consent of any participant in order to be effective.

12.06	Effective Date.  The Plan shall become effective as of July 1, 1996 subject to approval and ratification on or before February 28, 1997 by the stockholders of the Company. In the event the Plan is not so approved, all amounts deducted from the Pay of each participant and credited to his/her account shall be refunded to each such participant without interest as soon as administratively practicable and the Plan shall be terminated.
12.07	No Employment Rights.  Participation in the Plan does not, directly or indirectly, create in any Employee or class of Employees any right with respect to continuation of employment by the Company, and it shall not be deemed to interfere in any way with the Company's right to terminate, or otherwise modify, an Employee's employment at any time.
12.08	Effect of Plan.  The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Employee participating in the Plan, including, without limitation, such Employee's estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors of such Employee.

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12.09

Governmental Regulations.  The Company's obligation to sell and deliver or retain shares of Common Stock under the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares. Government regulations may impose reporting or other obligations on the Company with respect to the Plan. For example, the Company may be required to identify shares of Common Stock issued under the Plan on its stock ownership records and send tax information statements to Employees and former Employees who transfer title to such shares.

12.10

Construction.  Article, Section and paragraph headings have been inserted in the Plan for convenience of reference only and are to be ignored in any construction of the provisions hereof. If any provision of the Plan shall be invalid or unenforceable, the remaining provisions shall nevertheless be valid, enforceable, and fully effective. It is the intent that the Plan shall at all times constitute an "employee stock purchase plan" within the meaning of Section 423(b) of the Code, and the Plan shall be construed, and interpreted to remain such. The Plan shall be construed, administered, regulated, and governed by the laws of the United States to the extent applicable, and to the extent such laws are not applicable, by the laws of the Commonwealth of Massachusetts.

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