
<PAGE>
 
                                                                     EXHIBIT 12
 
DIRECTORS' COMPENSATION
 
  Directors do not receive cash compensation for serving as members of the
Company's Board of Directors, but are reimbursed for their expenses in
attending meetings of the Board and of Committees of the Board. Outside
Directors (directors who are not employed by the Company or any of its
subsidiaries and who do not represent a corporate strategic partner of the
Company) are eligible for automatic option grants under the 1994 Directors
Stock Option Plan (the "Directors Plan"). The Directors Plan provides for the
automatic grant of an option for 5,000 shares when an individual first becomes
an Outside Director. If the individual is still an Outside Director on each
anniversary of the date he or she joined the Board, he or she is automatically
granted an additional option for 1,000 shares. All options granted under the
Directors Plan have an exercise price equal to the fair market value of the
Company's common stock on the date of grant, become exercisable at a rate of
25% of the shares each year, and expire five years after the date of grant.
During fiscal 1997, the following options were granted under the Directors
Plan to Outside Directors of the Company: in January 1997, the Company granted
an option to purchase 1,000 shares of Common Stock to Cecil Parker, and in
February 1997, the Company granted an option to purchase 1,000 shares of
Common Stock to John Moore. Mr. Moore resigned from the Board in November
1997. All other options currently held by directors were granted prior to the
time the Directors Plan was adopted.
 
  The following options were held by the Company's directors as of September
30, 1997:
 
<TABLE>
<CAPTION>
                      Number of Exercise  Grant                      Termination
Name                   Shares    Price     Date       Plan Type         Date
----                  --------- -------- -------- -----------------  -----------
<S>                   <C>       <C>      <C>      <C>                <C>
Arnon Gat............  18,750    $ 3.30  01/14/94    1993 Plan(1)     01/14/99
                        3,960    $ 8.36  10/01/94    1993 Plan(2)     10/01/99
Anita Gat............  18,750    $ 3.30  01/14/94    1993 Plan(1)     01/14/99
                        2,319    $ 8.36  10/01/94    1993 Plan(2)     10/01/99
                        6,900    $15.29  12/19/95    1993 Plan(3)     12/19/00
                        7,800    $ 7.50  03/18/96    1993 Plan(3)     03/18/01
                        5,164    $ 5.78  11/04/96    1993 Plan(3)     11/04/01
John C. Moore (6)....   2,500    $ 4.80  07/13/91    Non Plan(4)      07/13/01
                        1,000    $ 9.14  02/18/96 Directors Plan(5)   02/18/01
                        1,000    $ 5.88  02/18/97 Directors Plan(5)   02/18/02
Cecil Parker.........   5,000    $16.71  12/06/95 Directors Plan(4)   12/06/00
                        1,000    $ 6.38  01/27/97 Directors Plan(4)   01/27/02
</TABLE>
--------
(1) Granted under the Company's 1993 Stock Option Plan. These options vested
    as to 50% of the shares subject to the option on May 23, 1996 and at the
    rate of 25% of the shares subject to the option annually thereafter. Since
    these option holders also hold more than 10% of the Company's stock, the
    exercise price was equal to 110% of the fair market value of the Common
    Stock on the date of grant as required by applicable tax laws.
(2) Granted under the Company's 1993 Stock Option Plan. These options are 100%
    vested. Since these option holders also hold more than 10% of the
    Company's stock, the exercise price was equal to 110% of the fair market
    value of the Common Stock on the date of grant as required by applicable
    tax laws.
(3) Granted under the Company's 1993 Stock Option Plan. These five-year
    options vest as to 25% of the shares each year after the date of grant.
    Since these option holders also hold more than 10% of the Company's stock,
    the exercise price was equal to 110% of the fair market value of the
    Common Stock on the date of grant as required by applicable tax laws.
(4) Granted outside of the terms of any of the Company's stock option plans.
    This option vests at the rate of 25% of the shares subject to the option
    annually from the date of grant. The exercise price was equal to the fair
    market value of the Common Stock on the date of grant.
(5) Granted under the Directors Plan. These five-year options vest as to 25%
    of the shares each year after the date of grant.
(6) Mr. Moore resigned from the Board in November 1997.
 
                                       1
<PAGE>
 
COMPENSATION OF NAMED OFFICERS
 
  The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to the Company during fiscal 1997, fiscal
1996 and fiscal 1995 to the Named Officers. This information includes the
dollar values of base salaries, bonus awards, the number of stock options
granted and certain other compensation, if any, whether paid or deferred. The
Company does not grant SARs and has no long-term compensation benefits other
than stock options.
 
                          SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                   Long-term
                                                                  Compensation
                                                                  ------------
                                  Annual Compensation                Awards
                         ---------------------------------------- ------------
                                                     Other Annual    Shares
Name and  Principal      Fiscal  Salary      Bonus   Compensation  Underlying      All Other
Position                  Year    ($)        ($)(1)      ($)       Options(#)   Compensation($)
-------------------      ------ --------    -------- ------------ ------------  ---------------
<S>                      <C>    <C>         <C>      <C>          <C>           <C>
Arnon Gat...............  1997  $200,000    $ 23,893    $5,100(2)       --          $   522(3)
 Chairman of the Board    1996   200,000      21,500     5,100(2)       --              522(3)
 of Directors and Chief   1995   142,308     121,136     1,362(2)     3,960          15,519(4)
 Executive Officer
Julio Guardado..........  1997   175,000      24,953     5,100(2)       --              306(3)
 President and Chief      1996   206,141(5)   25,104     5,100(2)   125,000(7)          306(3)
 Operating Officer        1995    30,288         --        --       100,000             --
Derek Tomlinson.........  1997   150,000      15,663     8,480(6)     4,743             188(3)
 Vice President           1996   100,429      75,241     7,260(6)    18,800(7)          148(3)
 Sales and Marketing      1995    81,153     114,653     4,122(6)     5,000              67(3)
Robert Bogart...........  1997   153,101       5,400     5,100(2)    10,000             854(3)
 Vice President           1996    87,522      11,333       785(2)    25,000(7)          549(3)
 Product Development      1995       --          --        --           --              --
Duane McCallister (8)...  1997   135,000      18,252     5,100(2)     2,817           1,238(3)
 Former Vice President    1996   136,154(5)   17,972     4,315(2)    48,400(7)          712(3)
 Operations               1995       --          --        --           --              --
</TABLE>
--------
(1) Includes profit sharing and executive bonuses for services rendered during
    fiscal 1995, executive bonuses for services rendered during fiscal 1996
    and executive and incentive bonuses for services rendered during fiscal
    1997 but that may have been paid in a different fiscal year. Profit
    sharing is paid quarterly to all employees with at least two months'
    service with the Company in the quarter, except that officers did not
    receive profit sharing during fiscal 1996 or fiscal 1997. The amount to be
    paid to each eligible employee equals 10% of the Company's pre-tax profit
    for the quarter divided by the number of eligible employees.
(2) Represents car allowance.
(3) Represents group term life insurance paid by the Company.
(4) Includes $15,024 paid for vacation over-accrual and $495 for group term
    life insurance paid by the Company.
(5) Includes reimbursement of relocation expenses of $30,000 for Mr. Guardado
    and $25,000 for Mr. McCallister.
(6) Includes a car allowance of $5,100, $5,100 and $3,762 and an office
    allowance of $3,380, $2,160 and $360 for fiscal 1997, fiscal 1996 and
    fiscal 1995, respectively.
(7) Includes options granted earlier but repriced during fiscal 1996.
(8) Mr. McCallister resigned from the Company in December 1997.
 
                                       2
<PAGE>
 
  The following table sets forth information concerning option grants during
the fiscal year ended September 30, 1997 to each of the Named Officers.
 
                         OPTION GRANTS IN FISCAL 1997
 
<TABLE>
<CAPTION>
                                     Individual Grants
                         ------------------------------------------
                                                                       Potential
                                                                       Realizable
                                                                    Value at Assumed
                         Number of  % of Total                       Annual Rates of
                           Shares    Options                           Stock Price
                         Underlying Granted to                      Appreciation for
                          Options   Employees  Exercise              Option Term(3)
                          Granted   in Fiscal  Price Per Expiration -----------------
                           (#)(1)     Year(2)  Share($)     Date     5%($)    10%($)
                         ---------- ---------- --------- ---------- -------- --------
<S>                      <C>        <C>        <C>       <C>        <C>      <C>
 
Arnon Gat...............      --       --          --          --        --       --
Julio Guardado..........      --       --          --          --        --       --
Derek Tomlinson.........    4,743      1.3%      $5.13    11/04/06  $ 15,302 $ 38,778
Robert Bogart...........   10,000      2.8        5.00    11/11/06    31,445   79,687
Duane McCallister (4)...    2,817      0.8        5.13    11/04/06     9,088   23,032
</TABLE>
--------
(1) Options granted in fiscal 1997 vest at the rate of 25% of the shares
    subject to the option annually from the date of grant. The exercise price
    was equal to the fair market value of the Common Stock on the date of
    grant. Under the terms of the option plan, the Compensation Committee
    retains discretion, subject to plan limits, to modify the terms of
    outstanding options.
(2) Percent of total options granted to employees in fiscal year is based on a
    total of 357,680 options granted to employees during fiscal 1997.
(3) In accordance with the rules of the Securities and Exchange Commission
    (the "Commission"), the table sets forth the hypothetical gains or "option
    spreads" that would exist for the options at the end of their respective
    terms. These gains are based on assumed rates of annual compound stock
    price appreciation of 5% and 10% from the date the option was granted to
    the end of the option term. The 5% and 10% assumed annual compound rates
    of stock price appreciation are mandated by the rules of the Commission
    and do not represent the Company's estimate or projection of future Common
    Stock prices. Actual gains, if any, on option exercises are dependent on
    the future performance of the Company's Common Stock.
(4) Mr. McCallister resigned from the Company in December 1997.
 
  The following table sets forth the number of shares of Common Stock
represented by outstanding stock options held by each of the Named Officers as
of September 30, 1997 and the value of such options based on the closing price
of the Company's Common Stock at fiscal year-end ($6.875). None of the Named
Officers exercised stock options during fiscal 1997.
 
                      FISCAL 1997 YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                          Value of Securities
                                 Number of Shares            Unexercisable
                             Underlying Unexercisable        In-the-Money
                                 Options at Fiscal         Options at Fiscal
                                    Year-End(#)               Year-End($)
                             ------------------------- -------------------------
Name                         Exercisable Unexercisable Exercisable Unexercisable
----                         ----------- ------------- ----------- -------------
<S>                          <C>         <C>           <C>         <C>
Arnon Gat...................   18,023        4,687      $ 50,275      $16,756
Julio Guardado..............   56,250       68,750           344        1,037
Derek Tomlinson.............   33,699       21,094       103,749       24,512
Robert Bogart...............    6,250       28,750         3,938       33,063
Duane McCallister (1).......    8,430       25,287         2,355        7,060
</TABLE>
--------
(1) Mr. McCallister resigned from the Company in December 1997.
 
                                       3
<PAGE>
 
EMPLOYMENT AGREEMENTS
 
  The Company has entered into an employment agreement with Mr. Guardado,
dated July 20, 1995, which specifies that he will be paid a base salary of
$14,585 per month (calculating to $175,000 annually) and will be eligible for
a bonus of up to 45% of annual base salary based on the Company meeting
performance goals to be agreed upon by Mr. Guardado with the Company's Chief
Executive Officer prior to the beginning of each fiscal year. In addition,
pursuant to the agreement, the Company has reimbursed Mr. Guardado $30,000 for
his actual and reasonable expenses to relocate to the San Jose area. The
Company and Mr. Guardado must each give the other six months' notice of
termination of Mr. Guardado's employment. In addition to other fringe benefits
offered to the Company's employees generally and pursuant to the terms of Mr.
Guardado's employment agreement, in July 1995, Mr. Guardado was granted an
option to purchase up to 100,000 shares of the Company's Common Stock under
the 1993 Plan exercisable at $21.63 per share. In June 1996, this option grant
was repriced and is now exercisable at $7.125 per share. In connection with
Mr. Guardado's employment agreement, in August 1995, the Company advanced Mr.
Guardado $60,000 pursuant to a promissory note that bears interest at the rate
of 8.75% per annum. During fiscal 1996, Mr. Guardado paid down the note, and
the note had a remaining balance of $25,655 plus accrued interest of $2,085 as
of July 1997. In fiscal 1997, the Company extended the note until July 1998
and added a provision to the note specifying that all payments and interest
due on the note would be canceled if Mr. Guardado is employed by the Company
through July 1998.
 
  In fiscal 1997, the executive officers of the Company each entered into an
employment agreement with the Company that provides for one year of salary
continuation and up to two years of option vesting following the closing of
certain change of control transactions.
 
                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  See "Proposal No. 1--Election of Directors" above for a description of
directors' compensation arrangements and "Executive Compensation--Employment
Agreements" above for a description of compensation-related agreements entered
into by the Company with its officers.
 
  Other than these compensation arrangements, since October 1, 1996, there has
not been, nor is there currently proposed, any transaction or series of
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, or
holder of more than 5% of the Company's Common Stock had or will have a direct
or indirect material interest except for the transactions described below.
 
CANON SALES CO., INC. ("CANON")
 
  In July 1989, Canon, Appex Corporation and Nippon Typewriter Corporation
(collectively, the "Purchasers") entered into Stock Purchase Agreements with
the Company. Under the Stock Purchase Agreements, the Purchasers acquired
approximately 799,999 shares of the Common Stock of the Company, or 37% of the
then-outstanding shares of the Company's Common and Preferred Stock for an
aggregate purchase price of approximately $3.8 million. In connection with
such purchase, the Purchasers were granted incidental registration rights at
the Purchasers' expense to include their shares in any registration of shares
held by shareholders in an amount up to 37% of the shares registered.
Subsequent to the purchase, Norio Kuroda's predecessor, who was then Managing
Director of Canon, was elected to the Company's Board of Directors.
Mr. Kuroda, Managing Director of Canon's Optical Product Group, now serves on
the Company's Board of Directors, although there is no obligation on the
Company's part to nominate a representative of Canon.
 
  In January 1994, the Company entered into an Improvements License Agreement
with Canon under which the Company granted Canon a non-exclusive, non-
transferable (except in a merger or sale of assets), royalty-free, fully paid
license to use the Company's technology (a) to make modifications to rapid
thermal processing ("RTP") systems purchased from the Company and to
distribute such modified units in Japan under any separate distribution
arrangement that may exist between the Company and Canon from time to time and
(b) to
 
                                       4
<PAGE>
 
manufacture prototypes of component parts of RTP systems but only if such
parts are integrated into a system purchased from the Company. Title to the
resulting modifications is held jointly by Canon and the Company without the
right to sell or transfer rights in the same.
 
  In connection with the 1989 transactions described above, Canon entered into
an agreement (renewed in 1994) to act as the Company's exclusive distributor
in Japan. Sales to Canon amounted to $5.7 million under this arrangement in
fiscal 1997.
 
AGREEMENTS WITH CLAL ELECTRONICS
 
  Pursuant to a 1995 agreement among the Company, Dr. Arnon Gat, the Company's
Chairman of the Board, a director and a principal shareholder of the Company,
Anita Gat, an executive officer, director and principal shareholder of the
Company, AG Associates (Israel) Ltd, then a 49%-owned subsidiary of the
Company ("AG Israel"), Rapro Technology Inc., a wholly owned subsidiary of the
Company ("Rapro"), and Clal Electronics, Clal Electronics acquired
approximately 544,000 shares (then 9.9%) of the Company's outstanding shares
of Common Stock from existing shareholders. After May 15, 1998, Clal
Electronics may increase its ownership in the Company up to 12% and, if its
ownership exceeds 10%, it has the right to nominate a member for election to
the Company's Board of Directors. In the interim, Clal Electronics has the
right to nominate an observer to attend meetings of the Company's Board of
Directors.
 
  Clal Electronics and its assignees have also been granted the right to
require the Company to register the shares of the Company's Common Stock sold
in 1995 to Clal Electronics with the Securities and Exchange Commission and to
include such shares in any registration planned by the Company. These
registration rights were granted in order to enable the holder of the shares
to sell such shares in the public market and are exercisable at the expense of
the holders of the shares to be registered.
 
AGREEMENTS BETWEEN AG ISRAEL AND THE COMPANY
 
  In March 1996, the Company and AGI, Inc., the wholly owned subsidiary of AG
Israel, entered into a Transition Services Agreement whereby the Company
provides certain services to AGI, Inc. These services include: (1) providing
employment, operational and human resources services under the direction of
AGI, Inc., utilizing, in all cases, records and procedures separate from those
of the Company; (2) providing accounts payable services to AGI, Inc., and, at
the request of AGI, Inc., collecting accounts receivable and paying accounts
payable for AGI, Inc.; and (3) providing such other services as shall be
agreed to by the parties. As consideration for these services, AGI, Inc. pays
to the Company the incremental direct costs and out-of-pocket expenses derived
directly from the provision of the services. During fiscal 1997, AGI, Inc.
incurred expenses payable to the Company of $548,750 under the Transition
Services Agreement. The Transition Services Agreement has an indefinite term,
but either party may cancel any or all service or services provided pursuant
to the Transition Services Agreement on 90-days prior notice. As of December
31, 1997, all of the expenses due under the Transition Services Agreement at
the end of fiscal 1997 had been paid by AG Israel.
 
  The Company also subleases to AGI, Inc. 3,148 square feet of space that is
part of the Company's principal executive office facility. The rental charge
is $7,500 per month under the terms of a Sublease, dated, for reference
purposes only, August 20, 1996, among the Company, AGI, Inc. and AG Israel as
guarantor of AGI, Inc.'s obligations. The Sublease terminates on November 30,
1998, unless sooner terminated as provided in the Sublease, except that AGI,
Inc. has the option through October 2001 to extend and renew the Sublease upon
the same terms and conditions and at the same rental rate (as such may be
adjusted) for consecutive one year additional terms. During fiscal 1997, AGI,
Inc. incurred expenses payable to the Company of $440,000 under the Sublease.
As of December 31, 1997, all of the expenses due under the Sublease at the end
of fiscal 1997 had been paid by AG Israel. In addition, the Company and AGI,
Inc. agreed to share the cost of a research and development laboratory, and,
in connection with this agreement, AGI, Inc. incurred expenses payable to the
Company of $350,000 in fiscal 1997. As of December 31, 1997, all of the
expenses due under this research and development laboratory sharing agreement
at the end of fiscal 1997 had been paid by AG Israel.
 
                                       5
<PAGE>
 
  In January 1997, the Company and AG Israel entered into a Technology
Agreement whereby the Company granted to AG Israel a license to use new
technology generated under the Company's next generation rapid thermal
processing research and development program in return for AG Israel's
obligation to pay the Company up to $2 million in royalties on AG Israel's
sale of products incorporating certain of the Company's technology. No
royalties were due under this Technology Agreement in fiscal 1997.
 
  During fiscal 1997, AG Israel completed a private placement of its ordinary
shares in which the Company did not participate, reducing the Company fully
diluted equity interest in AG Israel from approximately 45% to 25.2% and the
Company's voting interest in AG Israel from 49% to 28%. At that time, the
Company, Clal Electronics and AG Israel also modified certain additional
existing agreements as follows:
 
  (1) Fields of Use. During 1995 and until May 15, 2002, AG Israel and the
      Company had agreed to operate to the exclusion of the other in a
      defined "Field of Use." The Fields of Use for each of AG Israel and the
      Company were clarified during fiscal 1997 to make certain that both
      parties would be allowed to compete in certain chemical vapor
      deposition applications and that both parties could develop technology
      involving certain integrated circuit manufacturing processes. The
      effect of this clarification was to reduce the scope of both the
      Company's and AG Israel's exclusive Fields of Use and increase the
      number of markets and applications, including certain cluster tool
      applications, in which the Company and AG Israel can compete.
 
  (2) Options on AG Israel Stock. A five-year option held by the Company to
      purchase the Clal Electronics' ownership interest in AG Israel at a
      specified price, and a right of the Company to require the sale of such
      interest to the Company if AG Israel should become inactive, were each
      terminated.
 
  (3) AG Israel Corporate Governance. Certain 1995 agreements between Clal
      Electronics and the Company concerning the management, board
      representation and obligations to continue to fund AG Israel were
      terminated. In connection with AG Israel's 1997 closing of its new
      round of financing, Clal Electronics and AG Associates entered into an
      agreement with the new AG Israel investors concerning the corporate
      governance of AG Israel, replacing the 1995 corporate governance
      agreements. Under the new agreement, the Company is entitled to appoint
      up to two directors of AG Israel until its initial public offering. Dr.
      Gat serves as one of the directors.
 
  (4) AG Israel Indemnities. During 1995, at the time Clal Electronics
      invested in AG Israel, the Company, Dr. Gat, and Rapro made certain
      warranties to, and promised to indemnify, AG Israel and Clal
      Electronics with respect to the status and condition of the technology
      that is currently jointly owned by AG Israel and the Company. During
      1997, these warranties and indemnities were amended to release Dr. Gat
      from any obligation thereunder and to remove Clal Electronics as a
      beneficiary thereof, leaving the Company as the sole obligor thereunder
      and AG Israel as the sole beneficiary.
 
                                       6
