10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly period ended June 28, 2003
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                 to
Commission File Number 0-22248

ULTRATECH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE	94-3169580
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3050 Zanker Road, San Jose, California	95134
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code (408) 321-8835

Ultratech Stepper, Inc.

(Former name, former address and former fiscal year, if changed since last report.)

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class	Outstanding as of July 29, 2003
common stock, $.001 par value	22,866,136

ULTRATECH, INC.

INDEX

PART 1.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 28, 2003 and December 31, 2002	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 28, 2003 and June 29, 2002	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2003 and June 29, 2002	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART 2.	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 2.	Changes in Securities and Use of Proceeds	31
Item 3.	Defaults upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits and Reports on Form 8-K	32
SIGNATURES AND CERTIFICATIONS		33

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PART 1.                FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

ULTRATECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)	June 28, 2003		Dec. 31, 2002*
	(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents, and short-term investments	$	159,279	$	157,529
Accounts receivable	14,490		12,870
Inventories	20,327		25,182
Income taxes receivable	—		1,179
Prepaid expenses and other current assets	2,288		1,627
Total current assets	196,384		198,387
Equipment and leasehold improvements, net	17,747		19,090
Intangible assets, net	667		858
Demonstration inventories, net	3,438		2,208
Other assets	1,865		1,823
Total assets	$	220,101	$	222,366
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	6,888	$	9,769
Accounts payable	9,087		6,719
Deferred product and services income	6,095		6,293
Deferred license income	6,607		8,463
Other current liabilities	13,775		14,983
Total current liabilities	42,452		46,227
Other liabilities	3,848		4,385
Stockholders’ equity	173,801		171,754
Total liabilities and stockholders’ equity	$	220,101	$	222,366

Notes:

* The Balance Sheet as of  Dec. 31, 2002 has been derived from the audited financial statements at that date.

See accompanying notes to condensed consolidated financial statements.

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ULTRATECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
(In thousands, except per share amounts)	June 28, 2003			June 29, 2002			June 28, 2003			June 29, 2002
Net sales:
Products	$	21,206		$	16,615		$	39,842		$	31,494
Services	2,630			3,166			5,066			5,611
Licenses	928			928			1,856			3,389
Total net sales	$	24,764		$	20,709		$	46,764		$	40,494
Cost of sales:
Cost of products sold	11,901			11,092			24,181			21,140
Cost of services	1,779			2,275			3,365			4,080
Cost of inventory writedown	(619		)	—			(619		)	—
Cost of discontinued products	(121		)	—			(121		)	—
Total cost of sales	12,940			13,367			26,806			25,220
Gross profit	$	11,824		$	7,342		$	19,958		$	15,274
Operating expenses:
Research, development, and engineering	5,583			5,904			10,174			11,732
Amortization of intangible assets	95			95			190			190
Selling, general, and administrative	5,160			5,823			10,266			11,904
Restructure of operations	(114		)	—			(114		)	—
Operating income (loss)	$	1,100		$	(4,480	)	$	(558	)	$	(8,552	)
Interest expense	(57		)	(12		)	(123		)	(15		)
Interest and other income, net	1,121			1,615			2,172			3,268
Income (loss) before tax	$	2,164		$	(2,877	)	$	1,491		$	(5,299	)
Income taxes (benefit)	135			(1,218		)	445			(1,218		)
Net income (loss)	$	2,029		$	(1,659	)	$	1,046		$	(4,081	)
Earnings per share - basic:
Net income (loss)	$	0.09		$	(0.07	)	$	0.05		$	(0.18	)
Number of shares used in per share calculations - basic	22,783			22,574			22,743			22,544
Earnings per share - diluted:
Net income (loss)	$	0.09		$	(0.07	)	$	0.05		$	(0.18	)
Number of shares used in per share calculations - diluted	23,381			22,574			23,030			22,544

See accompanying notes to condensed consolidated financial statements.

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ULTRATECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
(In thousands)	June 28, 2003			June 29, 2002
Cash flows from operating activities:
Net income (loss)	$	1,046		$	(4,081	)
Charges to income not affecting cash	4,846			4,597
Net effect of changes in operating assets and liabilities	544			(2,356		)
Net cash generated by (used in) operating activities	6,436			(1,840		)
Cash flows from investing activities:
Capital expenditures	(2,220		)	(3,002		)
Net decrease (increase) in available-for-sale securities	2,346			(7,095		)
Net cash generated by (used in) investing activities	126			(10,097		)
Cash flows from financing activities:
Net proceeds from (repayment of) notes payable	(2,945		)	3,110
Proceeds from issuance of Common Stock	971			1,848
Net cash provided by (used in) financing activities	(1,974		)	4,958
Net effect of exchange rate changes on cash	19			(47		)
Net increase (decrease) in cash and cash equivalents	4,607			(7,026		)
Cash and cash equivalents at beginning of period	18,178			62,729
Cash and cash equivalents at end of period	$	22,785		$	55,703

See accompanying notes to condensed consolidated financial statements

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Ultratech, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 28, 2003

(1)  Description of Business

Ultratech, Inc. develops, manufactures and markets photolithography and laser thermal processing equipment for manufacturers of integrated circuits and nanotechnology components located throughout North America, Europe, Japan and the rest of Asia.

The Company supplies step-and-repeat photolithography systems based on one-to-one imaging technology. Markets for the Company’s photolithography products include advanced packaging and the manufacture of various nanotechnology components, including thin film head magnetic recording devices, optical networking devices, laser diodes and colored LED’s.

In evaluating its business segments, the Company gave consideration to the Chief Executive Officer’s review of financial information and the organizational structure of the Company’s management. Based on this review, the Company concluded that, at the present time, resources are allocated and other financial decisions are made based, primarily, on consolidated financial information. Accordingly, the Company has determined that it operates in one business segment, which is the manufacture and distribution of capital equipment to manufacturers of integrated circuits and nanotechnology components.

(2) Summary of Significant Accounting Policies

BASIS OF PRESENTATION - The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for fair presentation have been included.

Operating results for the three and six-month periods ended June 28, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003, or any future period.

USE OF ESTIMATES – The preparation of the financial statements and related disclosures, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and judgments that affect the reported amounts in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to inventories, warranty obligations, purchase order commitments, bad debts, income taxes, intangible assets, restructuring and contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

REVENUE RECOGNITION – In November 2002, the Emerging Task Force issued EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 addresses how to account for arrangements that may involve delivery or performance of multiple products, services and/or rights to use assets, and when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting.  It does not change otherwise applicable revenue recognition criteria. It applies to arrangements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted.

Under the provisions of EITF 00-21, separate units of accounting exist if all of the following criteria are met: the item has value on a standalone basis; there is objective and reliable evidence of fair value; delivery of undelivered items is probable and in control of the Company; and consideration allocable to delivered item is not contingent on delivery of additional items.

In response to EITF 00-21, the Company has reviewed its arrangements involving multiple deliverables. The Company has concluded that the adoption of EITF 00-21 has no effect on its current revenue recognition policy. Although application of EITF 00-21 results in the identification of separate accounting units, e.g. the system and its installation, the Company believes that all elements of SAB 101 are not met at the time of shipment. Therefore, revenue recognition for systems must be delayed until all elements of SAB 101 are met, generally upon acceptance of the system.

Accordingly, the Company recognizes revenues on system sales when the contractual obligation for installation (if any) has been satisfied, or installation is substantially complete, and/or customer acceptance

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provisions have lapsed, provided collections of the related receivable are probable. In the event of a delay in the installation of our products caused by the customer, we may seek acceptance of the system and warranty commencement after shipment and transfer of title, but prior to completion of installation. Revenue recorded as a result of these customer acceptances is reduced by an amount representing the fair-value of installation services. In these instances, revenue is recorded only if the product has met product specifications prior to shipment and management deems that no significant uncertainties as to product performance exist. The Company generally recognizes revenue from spare parts sales upon shipment. The Company sells service contracts for which revenue is recognized ratably over the contract period. The Company recognizes revenue from licensing and technology support agreements ratably over the contract period, or the estimated useful life of the licensed technologies, whichever is shorter.

BASIC AND DILUTED NET LOSS PER SHARE - The following sets forth the computation of basic and diluted net loss per share:

	Three Months Ended					Six Months Ended
(Unaudited, in thousands, except per share amounts)	June 28, 2003		June 29, 2002			June 28, 2003		June 29, 2002
Numerator:
Net income (loss)	$	2,029	$	(1,659	)	$	1,046	$	(4,081	)
Denominator:
Denominator for basic earnings per share	22,783		22,574			22,743		22,544
Effect of dilutive employee stock options	598		—			287		—
Denominator for diluted earnings per share	23,381		22,574			23,030		22,544
Earnings per share - basic:
Net income (loss)	$	0.09	$	(0.07	)	$	0.05	$	(0.18	)
Earnings per share - diluted:
Net income (loss)	$	0.09	$	(0.07	)	$	0.05	$	(0.18	)

For the three and six-month periods ended June 28, 2003, options to purchase 1,518,000 and 3,833,000 shares of Common Stock at an average exercise price of $22.22 and $17.29, respectively, were excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. For the three and six-month periods ended June 29, 2002, options to purchase 4,683,000 shares of Common Stock at an average exercise price of $16.58 were excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. Options are anti-dilutive when the Company has a net loss or when the exercise price of the stock option is greater than the average market price of the Company’s Common Stock.

STOCK-BASED COMPENSATION - On December 31, 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (SFAS 148).  SFAS 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition to the fair value method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure provisions of Statement 123 to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements.  SFAS 148 is effective for fiscal years ending after December 15, 2002, with earlier application permitted.

At June 28, 2003, the Company had several stock-based employee compensation plans, including stock option plans and an employee stock purchase plan. The Company accounts for these plans under the intrinsic value method. No stock option-based employee compensation cost is reflected in net income (loss), as all options granted under those plans had an exercise price equal to the market value of the

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underlying common stock on the date of grant. The following table illustrates the effect on net loss and earnings per share if the Company had applied the fair value recognition method.

	Three months ended						Six months ended
In thousands, except per share amounts	June 28, 2003			June 29, 2002			June 28, 2003			June 29, 2002
Net income (loss) as reported	$	2,029		$	(1,659	)	$	1,046		$	(4,081	)
Total stock-based employee compensation expense, determined under fair value based method for all awards, net of related tax effects	$	(2,054	)	$	(3,070	)	$	(4,231	)	$	(5,566	)
Pro forma net loss	$	(25	)	$	(4,729	)	$	(3,185	)	$	(9,647	)
Net income (loss) per share - basic, as reported	$	0.09		$	(0.07	)	$	0.05		$	(0.18	)
Pro forma net loss per share - basic	$	(0.00	)	$	(0.21	)	$	(0.14	)	$	(0.43	)
Net income (loss) per share - diluted, as reported	$	0.09		$	(0.07	)	$	0.05		$	(0.18	)
Pro forma net loss per share - diluted	$	(0.00	)	$	(0.22	)	$	(0.14	)	$	(0.44	)

(3) Inventories

Inventories consist of the following:

(In thousands)	June 28, 2003		Dec. 31, 2002
	(Unaudited)
Raw materials	$	10,102	$	12,094
Work-in-process	9,161		10,289
Finished products	1,064		2,799
	$	20,327	$	25,182

(4) Notes Payable and Letter of Credit

The Company has a line of credit agreement with a brokerage firm. Under the terms of this agreement, the Company may borrow funds at a cost equal to the current Federal funds rate plus 100 basis points (2.00% as of June 28, 2003). Certain of the Company’s cash, cash equivalents and short-term investments secure borrowings outstanding under this facility. Funds are advanced to the Company under this facility based on pre-determined advance rates on the cash and securities held by the Company in this brokerage account. This agreement has no set expiration date and there are no loan covenants. As of June 28, 2003, $6.6 million was outstanding under this facility, with a related collateral requirement of approximately $9.5 million of the Company’s cash, cash equivalents and short-term investments.

In June 2003, the Company replaced a credit facility requiring $2.0 million of restricted cash with a credit facility requiring $4.0 million in compensating balances, consisting of the Company’s cash, cash equivalents and short-term investments. The requirement for this credit facility results from contractual provisions of a lease for certain of the Company’s facilities, wherein the Company is required to supply the landlord with a $2.0 million letter of credit.

(5) Other Current Liabilities

Other current liabilities consist of the following:

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	June 28, 2003		Dec. 31, 2002
(In thousands)	(Unaudited)
Salaries and benefits	$	3,230	$	3,247
Warranty reserves	1,615		1,462
Advance billings	1,105		1,024
Income taxes payable	847		440
Accrued restructuring cost	1,838		2,558
Reserve for losses on purchase order commitments	1,310		2,120
Other	3,830		4,132
	$	13,775	$	14,983

Warranty reserves

The Company generally warrants its products for a period of 12 months from the date of customer acceptance for material and labor to repair the product; accordingly, a provision for the estimated cost of the warranty is recorded at the time revenue is recognized. Extended warranty terms, if granted, result in deferral of revenue approximating the Company’s standard pricing for similar service contracts. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time the product is shipped. Recognition of the related warranty cost is deferred until product revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product liability are as follows:

	Three months ended						Six months ended
In thousands	June 28, 2003			June 29, 2002			June 28, 2003			June 29, 2002
Balance, beginning of the period	$	1,689		$	1,681		$	1,462		$	1,895
Warranties issued during the period	853			875			1,843			1,504
Settlements made during the period	(927		)	(1,379		)	(1,690		)	(2,222		)
Balance, end of the period	$	1,615		$	1,177		$	1,615		$	1,177

(6) Deferred Rent

In 2002, in conjunction with a $3.2 million sale/leaseback transaction, the Company recorded a deferred rent credit equal to the excess of the sale proceeds over the adjusted basis in the equipment sold. During the three-year term of this agreement, the deferred rent credit will be amortized as an offset to rent expense. At June 28, 2003, credits of $0.7 million and $0.6 million representing the short-term and long-term portions of deferred rent, respectively, were carried as liabilities on the Company’s condensed consolidated balance sheets.

For the three-month period ended December 31, 2002, as part of the Company’s review of its lease commitments, certain matters were identified related to prior financial reporting periods that necessitated the recording of additional expenses. Such matters were related to (i) the extension of the Company’s lease of its headquarters building in November 1999 and (ii) the lease of an additional building in March 2000. The Company does not believe these amounts are material to the periods in which they should have been recorded. Had this adjustment been recorded in the proper periods, the impact for the three and six-month periods ended June 30, 2002 would be an increase to the net loss of $0.1 million and $0.2 million ($0.00 and $0.01 per share), respectively.

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(7) Reporting Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:

	Three Months Ended					Six Months Ended
(Unaudited, in thousands)	June 28, 2003		June 29, 2002			June 28, 2003			June 29, 2002
Net income (loss)	$	2,029	$	(1,659	)	$	1,046		$	(4,081	)
Accumulated other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale securities	111		267			(69		)	(734		)
Unrealized gain (loss) on foreign exchange forward contracts	24		19			19			(47		)
Tax effect	—		—			—			—
Comprehensive income (loss)	$	2,164	$	(1,373	)	$	996		$	(4,862	)

Accumulated other comprehensive income presented in the accompanying condensed consolidated balance sheets consists entirely of accumulated unrealized gains or losses on available-for-sale securities and the effect of exchange rate changes on foreign exchange forward contracts. The unrealized gain on available-for-sale securities is not currently adjusted for income taxes, as a result of the Company’s operating loss carry forward.  Accumulated other comprehensive income consists of the following:

In thousands:	June 28, 2003		Dec. 31, 2002
Unrealized gains (losses) on:
Available-for-sale investments	$	1,834	$	1,903
Foreign exchange contracts	—		(19		)
Accumulated other comprehensive income (loss) at end of period	$	1,834	$	1,884

(8) Restructure of Operations

In September 2002, in response to worsening conditions in the semiconductor industry in particular, and the general economy as a whole, the Company decided to reduce its workforce by approximately 15% and to cease or suspend activities related to certain engineering and administrative initiatives. As a result of this decision, the Company recognized a restructuring charge of $4.3 million, or $0.19 per share for the three-month period ended September 30, 2002. The Company reduced this charge by $0.2 million during the three-month period ended December 31, 2002, primarily as a result of canceling its plans to exit a certain building and an adjustment of its international severance costs. Of the total net charge for the year ended December 31, 2002 of $4.1 million, the cash component included employee severance costs of $0.9 million, contract termination fees of $0.2 million and facility closure costs of $0.1 million. The non-cash component of this charge included $2.5 million of impairment to the carrying value of equipment and leasehold improvements and $0.3 million of impairment to prepaid expenses and other current assets.

As of June 28, 2003, there was no accrued but unpaid amount of these restructuring costs. Cash components of accrued restructuring costs, and amounts charged against the plan for the six-month period then ended, relative to the September 2002 restructure of operations, were as follows:

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(in millions)	Balance at Dec. 31, 2002		Expenditures			Balance at June 28, 2003
Facility closure costs	$	0.1	$	(0.1	)	$	—
Employee severance costs	0.1		(0.1		)	—
Other costs	0.2		(0.2		)	—
Total	$	0.4	$	(0.4	)	$	—

In September 2001, the Company reached a decision to consolidate its manufacturing operations and eliminate approximately 20% of its workforce. As a result of this decision, the Company recognized a restructuring charge of $12.0 million, or $0.54 per share (diluted) in the quarter ended September 30, 2001. Additionally, the Company recognized restructuring charges of $0.3 million, or $0.01 per share (diluted) in the quarter ended December 31, 2001, primarily related to employee severance costs of $0.6 million (from additional personnel actions) and higher fixed asset disposal costs of $0.4 million, partially offset by revised facility closure and other cost estimates of $0.7 million. Of the full-year charge of $12.3 million, non-cash components included a $4.1 million impairment charge for intangible assets related to the Company’s XLS reduction product platform acquired in 1998 and a $1.5 million impairment charge for fixed assets disposed of in conjunction with the consolidation of manufacturing facilities. The cash components of this charge included $4.0 million for estimated expenditures related to the closure of facilities, $2.5 million for employee severance costs and $0.1 million of other restructuring costs. As of March 29, 2003, the amount of restructuring costs accrued but unpaid was $2.0 million.

Cash components of accrued restructuring costs as of June 28, 2003, and amounts charged against the plan for the six-month period then ended, relative to the September 2001 restructure of operations, were as follows:

(in millions)	Balance at Dec. 31, 2002		Expenditures			Balance at June 28, 2003
Employee severance costs	$	—	$	—		$	—
Facility closure costs	2.2		(0.4		)	1.8
Other costs	—		—			—
Total	$	2.2	$	(0.4	)	$	1.8

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Certain of the statements contained herein may be considered forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties, such as integration and development of the laser thermal processing operation; cyclicality in the nanotechnology and semiconductor industries; delays, deferrals and cancellations of orders by customers; pricing pressures; competition; lengthy sales cycles, including the timing of system acceptances; ability to volume produce systems and meet customer requirements; mix of products sold; , rapid technological change and the importance of timely product introductions; dependence on new product introductions and commercial success of any new products; sole or limited sources of supply; international sales; customer concentration; manufacturing inefficiencies and absorption levels; expiration of technology support and licensing arrangements, and the resulting adverse impact on the Company’s licensing revenues; timing and degree of success of technologies licensed to outside parties; product concentration and lack of product revenue diversification; lengthy development cycles for advanced lithography technologies and applications; inventory obsolescence; asset impairment; ability and resulting costs to attract or retain sufficient personnel to achieve the Company’s targets for a particular period; future acquisitions; changes to financial accounting standards; intellectual property matters; environmental regulations; effects of certain anti-takeover provisions; volatility of stock price; and any adverse effects of terrorist attacks in the United States or elsewhere, or government responses thereto, or military actions in Iraq, Afghanistan and elsewhere, on the economy, in general, or on our business in particular. Such risks and uncertainties are described in the Company’s filings with the SEC, including the company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Due to these and additional factors, certain statements, historical results and percentage relationships discussed below are not necessarily indicative of the results of operations for any future period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Company evaluates its estimates, including those related to inventories, warranty obligations, purchase order commitments, bad debts, income taxes, intangible assets, restructuring and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. The Company has reviewed these policies with its Audit Committee.

Revenue Recognition

In November 2002, the Emerging Task Force issued EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 addresses how to account for arrangements that may involve delivery or performance of multiple products, services and/or rights to use assets, and when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting.  It does

12

not change otherwise applicable revenue recognition criteria. It applies to arrangements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted.

Under the provisions of EITF 00-21, separate units of accounting exist if all of the following criteria are met: the item has value on a standalone basis; there is objective and reliable evidence of fair value; delivery of undelivered items is probable and in control of the Company; and consideration allocable to delivered item is not contingent on delivery of additional items.

In response to EITF 00-21, the Company has reviewed its arrangements involving multiple deliverables. In response to EITF 00-21, the Company has reviewed its arrangements involving multiple deliverables. The Company has concluded that the adoption of EITF 00-21 has no effect on its current revenue recognition policy. Although application of EITF 00-21 results in the identification of separate accounting units, e.g. the system and its installation, the Company believes that all elements of SAB 101 are not met at the time of shipment. Therefore, revenue recognition for systems must be delayed until all elements of SAB 101 are met, generally upon acceptance of the system.

Accordingly, the Company recognizes product revenue when the contractual obligation for installation (if any) has been satisfied, or installation is substantially complete, and/or customer acceptance provisions have lapsed, provided collections of the related receivable are probable. In the event of a delay in the installation of our products caused by the customer, we may seek acceptance of the system and warranty commencement after shipment and transfer of title, but prior to completion of installation. Revenue recorded as a result of these customer acceptances is reduced by an amount representing the fair-value of installation services. In these instances, revenue is recorded only if the product has met product specifications prior to shipment and management deems that no significant uncertainties as to product performance exist. Costs incurred for shipping and handling are included in cost of sales.

Revenue from spare parts sales is generally recognized upon shipment. Deferred income related to service revenue is recognized ratably over the life of the related service contract. Deferred income relative to the Company’s licensing activities is recognized over the estimated useful life of the licensed technologies, or the contract period of any technology transfer support arrangements.

Inventories and Purchase Order Commitments

The Company estimates and reserves for the effects on inventory and purchase order commitments of obsolescence and unrealizable carrying values based upon estimates of future demand for its products and market conditions. The Company presently records reserves for inventories and purchase order commitments in excess of 12 months of production demand (18 months for certain long lead-time items). Due to the cyclical nature of the Company’s business, during periods of declining demand for the Company’s products, the Company records reserves for inventories and purchase order commitments in excess of an 18 month production demand (24 months for certain long lead-time items). Should actual production demand differ from management’s estimates, revisions to inventory write-downs and purchase order commitment reserves would be required.

Warranty Obligations

The Company provides for the estimated cost of its product warranties at the time revenue is recognized. The Company’s warranty obligation is affected by product failure rates, material usage rates and the efficiency by which the product failure is corrected. Should actual product failure rates, material usage rates and labor efficiencies differ from the Company’s estimates, revisions to the estimated warranty liability would be required.

Bad Debt

The Company maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, or even a single customer was otherwise unable to make payments, additional allowances may be required. The average selling price of the Company’s systems is in excess of $1.5 million. Accordingly, a single customer default could have a material adverse effect on the Company’s results of operations.

Deferred Taxes

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Based on the uncertainty of future pre-tax income, the Company has presently fully reserved its deferred tax assets. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future, an adjustment to the deferred tax asset valuation reserve would increase income in the period such determination was made.

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The following discussion should be read in conjunction with the Company’s 2002 Annual Report on Form 10-K, which is available from the Company upon request.

RESULTS OF OPERATIONS

Factors that have caused results to fluctuate significantly in the past and most likely will continue to significantly impact results in the future, and could cause actual results to differ materially, include the following: cyclicality in the Company’s served markets; delays, deferrals and cancellations of orders by customers; customer concentration; high degree of industry competition; market acceptance of new products and enhanced versions of the Company’s existing products; lengthy and costly development cycles for lithography and laser thermal processing technologies and applications; integration and development of laser thermal processing operations; mix of products sold; timing of new product announcements and releases by the Company or its competitors; expiration of technology support and licensing arrangements, and the resulting adverse impact on the Company’s licensing revenues; product discounts; changes in pricing by the Company, its competitors or suppliers; timing and degree of success of technologies licensed to outside parties; product concentration and lack of product revenue diversification; outcome of litigation; lengthy sales and manufacturing cycles and the pattern of capital spending by customers, including the timing of system acceptances; inventory obsolescence; manufacturing inefficiencies and the ability to volume produce systems; the ability and resulting costs to attract or retain sufficient personnel to achieve the Company’s targets for a particular period; dilutive effect of employee stock option grants on net income per share, which is largely dependent upon the Company attaining profitability and the market price of the Company’s stock; sole or limited sources of supply; international sales; rapid technological change and the importance of timely product introductions; future acquisitions; changes to financial accounting standards; intellectual property matters; environmental regulations; any adverse effects of worldwide terrorist attacks on the economy in general or on our business in particular; political and economic instability throughout the world; business interruptions due to natural disasters or utility failures; and regulatory changes; and the other risk factors listed in this filing and other Company filings with the SEC. In addition, the recent outbreak of SARS may have an adverse affect on business activities, particularly in Asia, which could adversely affect the Company’s business. The Company undertakes no obligation to update any of its disclosures to reflect such future events.

The Company derives a substantial portion of its total net sales from sales of a relatively small number of newly manufactured systems, which typically range in price from $1.0 million to $3.6 million for the Company’s 1X steppers. As a result of these high sale prices, the timing and recognition of revenue from a single transaction has had and most likely will continue to have a significant impact on the Company’s net sales and operating results for any particular period.

The Company’s backlog at the beginning of a period typically does not include all of the sales needed to achieve the Company’s sales objectives for that period. In addition, orders in backlog are subject to cancellation, shipment or customer acceptance delays, and deferral or rescheduling by a customer with limited or no penalties. Consequently, the Company’s net sales and operating results for a period have been and will continue to be dependent upon the Company obtaining orders for systems to be shipped and accepted in the same period in which the order is received. The Company’s business and financial results for a particular period could be materially adversely affected if an anticipated order for even one system is not received in time to permit shipment and customer acceptance during that period. Furthermore, a substantial portion of the Company’s shipments has historically been realized near the end of each quarter. Delays in installation and customer acceptance due, for example, to the inability of the Company to successfully demonstrate the agreed-upon specifications or criteria at the customer’s facility, or to the failure of the customer to permit installation of the system in the agreed upon time, may cause net sales in a particular period to fall significantly below the Company’s expectations, which may materially adversely affect the Company’s operating results for that period. Additionally, the failure to receive anticipated orders or delays in shipments due, for example, to rescheduling, delays, deferrals or cancellations by customers, additional customer configuration requirements, or to unexpected manufacturing difficulties or delays in deliveries by suppliers due to their long production lead times or otherwise, have caused and may continue to cause net sales in a particular period to fall significantly below the Company’s expectations, materially adversely affecting the Company’s operating results for that period. In particular, the long manufacturing cycles of the Company’s Saturn Spectrum family of wafer steppers, laser thermal processing systems and the long lead time for lenses and other materials, could cause shipments of such products to be delayed from

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one quarter to the next, which could materially adversely affect the Company’s financial condition and results of operations for a particular quarter.

Additionally, the need for continued expenditures for research and development, capital equipment, ongoing training and worldwide customer service and support, among other factors, will make it difficult for the Company to reduce its operating expenses in a particular period if the Company fails to achieve its net sales goals for the period.

The following table illustrates the results of Ultratech, Inc., expressed as a percentage of net sales:

	Three Months Ended				Six Months Ended
	June 28, 2003		June 29, 2002		June 28, 2003		June 29, 2002
Net sales:
Products	85.6	%	80.2	%	85.2	%	77.8	%
Services	10.6	%	15.3	%	10.8	%	13.9	%
Licenses	3.7	%	4.5	%	4.0	%	8.4	%
Total net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales:
Cost of products sold	48.1	%	53.6	%	51.7	%	52.2	%
Cost of services	7.2	%	11.0	%	7.2	%	10.1	%
Cost of inventory writedown	(2.5	)%	0.0	%	(1.3	)%	0.0	%
Cost of discontinued products	(0.5	)%	0.0	%	(0.3	)%	0.0	%
Total cost of sales	52.3	%	64.5	%	57.3	%	62.3	%
Gross profit	47.7	%	35.5	%	42.7	%	37.7	%
Operating expenses:
Research, development, and engineering	22.5	%	28.5	%	21.8	%	29.0	%
Amortization of intangible assets	0.4	%	0.5	%	0.4	%	0.5	%
Selling, general, and administrative	20.8	%	28.1	%	22.0	%	29.4	%
Restructure of operations	(0.5	)%	0.0	%	(0.2	)%	0.0	%
Operating expenses	43.3	%	57.1	%	43.9	%	58.8	%
Operating income (loss)	4.4	%	(21.6	)%	(1.2	)%	(21.1	)%
Interest expense	(0.2	)%	(0.1	)%	(0.3	)%	(0.0	)%
Interest and other income, net	4.5	%	7.8	%	4.6	%	8.1	%
Income (loss) before tax	8.7	%	(13.9	)%	3.2	%	(13.1	)%
Income taxes (benefit)	0.5	%	(5.9	)%	1.0	%	(3.0	)%
Net income (loss)	8.2	%	(8.0	)%	2.2	%	(10.1	)%

Net sales

Net sales consist of revenues from system sales, spare parts sales, service and licensing of technologies. For the three months ended June 28, 2003, net sales were $24.8 million, an increase of 20% as compared with $20.7 million for the comparable period in 2002. System sales, a component of product sales, increased 30%, to $18.9 million, on a unit volume increase of 30%. The weighted-average selling prices of systems sold decreased 4%, due primarily to the impact of refurbished system sales. Geographically, the increase in unit volumes was primarily attributable to a 300% increase in Taiwan, driven by demand for bump processing tools. On a market segment basis, the increase in unit volumes was primarily attributable to demand from bump processing customers. The Company believes that a significant portion of its system sales will continue to be derived from bump processing customers, including bump-processing customers from Japan.

On a product market application basis, system sales to the semiconductor industry were $13.0 million for the three months ended June 28, 2003, an increase of 32% as compared with system sales of $9.9 million for the comparable period in 2002. This increase was due primarily to a 75% increase in demand from

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bump processing customers. System sales to the nanotechnology market were $5.8 million for the three months ended June 28, 2003, an increase of 25% as compared with system sales of $4.7 million for the comparable period in 2002, primarily as a result of increased demand from thin film head customers.

Spare part sales, a component of product sales, increased 12%, to $2.3 million for the three months ended June 28, 2003, as compared to $2.1 million in the comparable period in 2002. This increase was primarily a result of the 30% unit volume increase in system sales and the accompanying spare parts sales on those systems.

Revenues from services were $2.6 million for the three months ended June 28, 2003, a decrease of 17% as compared with $3.2 million for the comparable period in 2002. This decrease was primarily a result of lower revenues from system relocations and lower service contract revenues related to reduction steppers.

Revenues from licensing and licensing support arrangements were $0.9 million for the three months ended June 28, 2003, as compared with $0.9 million for the comparable period in 2002. The Company presently anticipates that revenues from licensing and licensing support arrangements will be approximately $0.9 million per quarter for the remainder of 2003.

For the three months ended June 28, 2003, international net sales were $15.9 million, or 64% of total net sales, as compared with $13.7 million, or 66% of total net sales for the comparable period in 2002. The Company’s operations in foreign countries are not generally subject to significant exchange rate fluctuations, principally because sales contracts for the Company’s systems are generally denominated in U.S. dollars. In Japan, however, orders are often denominated in Japanese yen. This subjects the Company to the risk of currency fluctuations. The Company attempts to mitigate this exposure through the use of foreign exchange contracts; however, there can be no assurance of the success of any such efforts. International sales expose the Company to a number of additional risks, including fluctuations in the value of local currencies relative to the U.S. dollar, which, in turn, impact the relative cost of ownership of the Company’s products. (See “Additional Risk Factors: International Sales”).

At June 28, 2003, the Company had approximately $9.7 million of deferred revenue resulting from products shipped but not yet installed and accepted, as compared with $10.5 million at December 31, 2002 and $0.0 million at June 29, 2002. Deferred product and services income, which represents deferred revenue less related manufacturing and warranty costs, was $6.1 million at June 28, 2003, as compared with $6.3 million at December 31, 2002 and $0.6 million at June 29, 2002. Deferred license income decreased by $0.9 million during the three-month period ended June 28, 2003, to $6.6 million, as a result of amortization of proceeds received in prior periods.

Deferred income related to the Company’s products is recognized upon satisfying the contractual obligations for installation (if any) and/or customer acceptance. Deferred income related to service revenue is recognized over the life of the related service contract. Deferred income relative to the Company’s licensing activities is recognized over the estimated useful life of the licensed technologies, or the period of any technology transfer support arrangements. Amortization of license income results in current period license revenue.

For the six months ended June 28, 2003, net sales were $46.8 million, an increase of 15% from the $40.5 million achieved during the comparable period in 2002. System sales increased 28%, to $34.8 million, on a unit volume increase of 29%. The weighted-average selling prices of systems sold increased 5%, as compared to the year-ago period, due primarily to a lower proportion of refurbished systems sold. For the six months ended June 28, 2003, international net sales were $28.4 million, or 61% of total net sales, as compared with $21.1 million, or 52% of total net sales for the comparable period in 2002. Geographically, the increase in unit volumes was attributable to a 150% increase in Taiwan and a 60% increase in Japan. On a market segment basis, the increase in unit volumes was primarily attributable to an increase in demand from semiconductor-packaging customers. Spare part sales increased 16%, to $5.1 million, primarily as a result of the 29% unit volume increase in system sales and the accompanying spare parts sales on those systems. Revenues from services declined 10%, to $5.1 million, primarily as a result of lower revenues from system relocations and lower service contract revenues related to reduction steppers.  Revenues from licensing and licensing support arrangements declined to $1.9 million, as compared with $3.4 million in the comparable period in 2002, as a result of a technology support agreement that expired in February 2002.

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The anticipated timing of shipments and customer acceptances will require the Company to fill a number of production slots in the current and subsequent quarters in order to meet its near-term sales targets. If the Company is unsuccessful in its efforts to secure those production orders, or if existing production orders are delayed or cancelled, its results of operations will be materially adversely impacted in the near-term. Accordingly, the Company can give no assurance that it will be able to achieve or maintain its current or prior level of sales.

The Company expects that net sales for the quarter ending September 27, 2003 may be higher than net sales for the comparable period in 2002, and may be flat to slightly higher than net sales for the three-month period ended June 28, 2003.

Because the Company’s net sales are subject to a number of risks, including intense competition in the capital equipment industry, uncertainty relating to the timing and market acceptance of the Company’s products, the condition of the macro-economy and the semiconductor industry and the other risks described herein, the Company may not exceed or maintain its current or prior level of net sales for any period in the future. Additionally, the Company believes that the market acceptance and volume production of its Saturn Spectrum 3^e, its 300mm offerings, its laser thermal processing systems and its 1000 series family of wafer steppers, are of critical importance to its future financial results. To the extent that these products do not achieve significant sales due to difficulties involving manufacturing or engineering, the inability to reduce the current long manufacturing cycles for these products, competition, excess capacity in the semiconductor or nanotechnology device industries, customer acceptances, or any other reason, the Company’s business, financial condition and results of operations would be materially adversely affected.

Gross profit

The Company’s gross profit as a percentage of net sales, or gross margin, was 47.7% for the three months ended June 28, 2003, as compared with 35.5% for the comparable period in 2002. Excluding the impact of special benefits (described below), gross margin for the three months ended June 28, 2003 was 44.8%, as compared with 35.5% for the comparable period in 2002. On a year-to-date basis, gross margin was 42.7% for the six months ended June 28, 2003, as compared with 37.7% for the comparable period in 2002. Excluding the impact of special benefits (described below), gross margin for the six months ended June 28, 2003 was 41.1%, as compared to 37.7% for the comparable period in 2002. Both the current quarter and year-to-date improvements in gross margin, as compared to the comparable periods in 2002, were primarily due to an improvement in model mix (including improved margin on refurbished system sales), improved warranty results and lower inventory reserves. On a year-to-date basis, the improvement in gross margin was partially offset by the impact of lower licensing revenues, which have no related cost of sales. Exclusive of licensing revenues, licensing support revenues and special charges, gross margin was 42.6% and 38.7% for the three and six-month periods ended June 28, 2003, as compared with 32.4% and 32% for the comparable periods in 2002, respectively.

The Company has included the information presented above, with respect to gross margin without the affect of special charges and licensing and licensing support revenues, because it believes this information is helpful to a stockholder’s understanding of the Company’s operating results.

During the three-month period ended June 28, 2003, the Company recognized special benefits from the reversal of certain purchase order commitment and inventory reserves. These benefits totaled $0.7 million. The Company presently records reserves for inventories and purchase order commitments in excess of 12 months of production demand (18 months for certain long lead-time items). Based on the Company’s current expectations with respect to market demand for its products, the Company may recognize further reserve reversals during the second half of 2003.

The Company’s gross profit as a percentage of sales has been and most likely will continue to be significantly affected by a variety of factors, including the mix of products sold; inventory and open purchase commitment reserve provisions; the rate of capacity utilization; product discounts and competition in the Company’s targeted markets; technology support and licensing revenues, which have little, if any, associated cost of sales; non-linearity of shipments during the quarter; the introduction of new products, which typically have higher manufacturing costs until manufacturing efficiencies are realized and which are typically discounted more than existing products until the products gain market acceptance; the percentage of international sales, which typically have lower gross margins than domestic sales principally due to higher field service and support costs; and the implementation of subcontracting arrangements.

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The Company believes that gross margin for the quarter ending September 27, 2003 may be higher as compared to the comparable period in 2002, and may be flat to slightly higher than gross margin for the quarter ended June 28, 2003, exclusive of special charges.

New products generally have lower gross margins until there is widespread market acceptance and until production and after-sales efficiencies can be achieved. Should significant market demand fail to develop for the Company’s Verdant laser thermal processing system, the Company’s business, financial condition and results of operations would be materially adversely affected.

Research, development and engineering expenses

The Company’s research, development, and engineering expenses were $5.6 million for the three months ended June 28, 2003, as compared to $5.9 million for the comparable period in 2002. On a year-to-date basis, research, development, and engineering expenses were $10.2 million, as compared with $11.7 million for the comparable period in 2002. Both the current quarter and year-to-date declines in spending, relative to the year-ago periods, were primarily attributable to the discontinuance of the Company’s advanced reduction stepper platforms and to other cost reduction measures implemented in the second half of 2002, partially offset by increased spending on the Company’s laser thermal processing technologies.

The Company continues to invest significant resources in the development and enhancement of its laser thermal processing systems and technologies, and its 1X optical products and related technologies, including its next generation platform for its 1X optical products. The Company presently expects that, as a result of the Company’s restructuring of operations in September 2002, and as a result of overhead absorption relative to the production of laser thermal processing systems for customers, the absolute dollar amount of research, development and engineering expenses for the quarter ending September 27, 2003 will be lower than expenses incurred for the comparable period in 2002. Additionally, research, development and engineering expenses for the quarter ending September 27, 2003 may be lower than levels incurred during the three-month period ended June 28, 2003, primarily as a result of overhead absorption relative to the production of laser thermal processing systems for customers.

Amortization of intangible assets

Amortization of intangible assets was $0.1 million and $0.2 million for the three and six-month periods, respectively, ended June 28, 2003 and June 29, 2002.

Selling, general and administrative expenses

Selling, general, and administrative expenses were $5.2 million for the three-month period ended June 28, 2003, as compared with $5.8 million for the comparable period in 2002. As a percentage of net sales, selling, general, and administrative expenses decreased to 20.8%, as compared with 28.1% in the year-ago period. For the six-month period ended June 28, 2003, selling, general and administrative expenses were $10.3 million, as compared with $11.9 million for the comparable period in 2002. As a percentage of net sales, selling, general and administrative expenses decreased to 22.0%, as compared with 29.4% in the year-ago period. These year-over-year declines, in absolute dollars, were primarily attributable to cost containment measures implemented in the second half of 2002.

The Company presently anticipates that selling, general and administrative expenses for the three-month period ending September 27, 2003 will be higher than the comparable period in 2002, and significantly higher than the three-month period ended June 28, 2003. This anticipated increase is due, primarily, to higher selling expenses (resulting from higher anticipated sales levels), and administrative initiatives, resulting from compliance efforts associated with the Sarbanes-Oxley Act of 2002.

Interest and other income, net

Interest and other income, net, which consists primarily of interest income, was $1.1 million and $2.2 million for the three and six-month periods ended June 28, 2003, respectively. This compares with $1.6 million and $3.3 million for the comparable three and six-month periods in 2002, respectively. Both the current quarter and year-to-date declines in interest and other income, net, were primarily attributable to significantly lower interest rates and to lower average invested balances.

The Company presently maintains an investment portfolio with a weighted-average maturity of less than one year. Consequently, changes in short-term interest rates have a major impact on the Company’s interest

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income. Future changes are expected to have a similar impact. The Company presently expects that interest and other income, net, for the three-month period ending September 27, 2003, will be significantly lower than levels achieved in the comparable period in 2002, primarily as a result of lower interest rates, and will also be lower than levels achieved for the three-month period ended June 28, 2003.

Income tax expense

For the three and six-month periods ended June 28, 2003, the Company recorded an income tax provision of $0.1 million and $0.4 million, respectively. These provisions are primarily related to taxable income in Japan, for which there is no corresponding net operating loss carry-forward benefit. The Company did not recognize a tax benefit for the three and six-month periods ended June 29, 2002, and did not recognize a domestic tax benefit for the three and six-month periods ended June 28, 2003, due to uncertainty related to the utilization of its federal net operating loss carry-forward.

The Company anticipates that it will recognize income tax expense during the remainder of 2003, primarily as a result of foreign income taxes. However, the Company believes that the tax rate in 2003 will be substantially less than the statutory rate, primarily as a result of available federal net operating loss carry-forwards.

Income taxes can be affected by estimates of whether, and within which jurisdictions, future earnings will occur and how and when cash is repatriated to the United States, combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with the Company’s tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. The Company believes it has adequately provided for any reasonably foreseeable outcome related to these matters, and it does not anticipate any material earnings impact from their ultimate resolutions.

LIQUIDITY AND CAPITAL RESOURCES

Net cash generated by operating activities was $6.4 million for the six months ended June 28, 2003, as compared with net cash used in operations of $1.8 million for the comparable period in 2002. Net cash generated by operating activities during the six months ended June 28, 2003 was primarily attributable to net income of $1.0 million, non-cash charges to income of $4.8 million and a net change in operating assets and liabilities of $0.5 million. The $0.5 million net change in operating assets and liabilities was primarily a result of a decline in inventories of $4.7 million, an increase in accounts payable of $2.4 million and a decline in income taxes receivable of $1.2 million, partially offset by a decrease in deferred licensing revenue of $1.9 million, an increase in accounts receivable of $1.6 million, an increase in long-term demonstration inventories of $1.6 million, a decrease in other current liabilities of $1.2 million and an increase in prepaid expenses and other current assets of $0.7 million.

The Company believes that because of the relatively long manufacturing cycle of certain of its systems, particularly newer products, the Company’s inventories will continue to represent a significant portion of working capital. Currently, the Company is devoting significant resources to the development, introduction and commercialization of its laser thermal processing system and to the development of its next generation platform of its 1X lithography technologies. The Company currently intends to continue to develop these products and technologies during the remainder of 2003, and will continue to incur significant operating expenses in the areas of research, development and engineering, manufacturing and general and administrative costs in order to further develop, produce and support these new products. Additionally, gross profit margins, inventory and capital equipment levels may be further adversely impacted in the future by costs associated with the initial production of the laser thermal processing system and by future generations of the Company’s 1X wafer steppers. These costs include, but are not limited to, additional manufacturing overhead, costs of demonstration systems and facilities, costs associated with managing multiple sites and the establishment of additional after-sales support organizations. Additionally, there can be no assurance that operating expenses will not increase, relative to sales, as a result of adding additional marketing and administrative personnel, among other costs, to support the Company’s new products. If the Company is unable to achieve significantly increased net sales or if its sales fall below expectations, the Company’s cash flow and operating results will be materially adversely affected until, among other factors, costs and expenses can be reduced. The failure of the Company to achieve its sales targets for these new

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products could result in additional inventory write-offs and asset impairment charges, either of which could materially adversely impact the Company’s results of operations.

During the six months ended June 28, 2003, net cash provided by investing activities was $0.1 million, attributable to a net reduction in available-for-sale securities of $2.3 million, partially offset by capital expenditures of $2.2 million. In June 2003, the Company replaced a credit facility requiring $2.0 million of restricted cash with a credit facility requiring $4.0 million in compensating balances, consisting of the Company’s cash, cash equivalents and short-term investments. This generated $2.0 million of positive cash flow from investing activities during the quarter, offsetting a similar use of cash during the three-month period ended March 29, 2003. The requirement for this credit facility results from contractual provisions of a lease for certain of the Company’s facilities, wherein the Company is required to supply the landlord with a $2.0 million letter of credit.

Net cash used in financing activities was $2.0 million during the six-month period ended June 28, 2003, attributable to net repayments of notes payable of $2.9 million, partially offset by $1.0 million in proceeds received from the issuance of Common Stock under the Company’s employee stock purchase and stock option plans.

At June 28, 2003, the Company had working capital of $153.9 million. The Company’s principal source of liquidity at June 28, 2003 consisted of $159.3 million in cash, cash equivalents and short-term investments.

The Company has approximately $7.5 million of retained earnings in its foreign subsidiaries. Possible adverse tax consequences associated with repatriating these funds may effectively restrict their use to cash requirements in those specific jurisdictions.

During 2002, the Company received proceeds of $3.2 million in conjunction with a sale/leaseback transaction. To provide additional security to the lessor, the Company granted a security interest in certain of its other equipment having a net book value of approximately $1.0 million at June 28, 2003. The Company recorded a deferred rent credit equal to the excess of the sale proceeds over the adjusted basis in the equipment sold. During the three-year term of this agreement, the deferred rent credit will be amortized as an offset to rental expense. At June 28, 2003, credits of $0.7 million and $0.6 million representing the short-term and long-term portions of deferred rent, respectively, were carried as liabilities on the Company’s balance sheet.

In September 2002, the Company entered into a line of credit agreement with a brokerage firm. Under the terms of this agreement, the Company may borrow funds at a cost equal to the current Federal funds rate plus 100 basis points (2.00% as of June 28, 2003). Certain of the Company’s cash, cash equivalents and short-term investments secure borrowings outstanding under this facility. Funds are advanced to the Company under this facility based on pre-determined advance rates on the cash and securities held by the Company in this brokerage account. This agreement has no set expiration date and there are no loan covenants. As of June 28, 2003, $6.6 million was outstanding under this facility, with a related collateral requirement of approximately $9.5 million of the Company’s cash, cash equivalents and short-term investments.

In January 2003, the Company’s Board of Directors authorized the purchase of up to 5.0 million shares of the Company’s Common Stock at prevailing market prices. As of August 1, 2003, the Company had not elected to repurchase shares under this arrangement. Should the Company decide to acquire its own shares in the open market, potentially large amounts of the Company’s cash, cash equivalents and short-term investments would be required.

The Company’s off-balance sheet transactions consist of certain financial guarantees, both expressed and implied, related to product liability, infringement of intellectual property and latent product defects. Other than liabilities recorded pursuant to known product defects, at June 28, 2003, the Company did not record a liability associated with these guarantees, as the Company has little or no history of costs associated with such indemnification requirements.

The following summarizes the Company’s contractual obligations at June 28, 2003, and the effect such obligations are expected to have on its liquidity and cash flows in future periods:

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(in millions)	Total		Less than 1 year		1-3 years		After 3 years
Notes payable obligations	$	6.8	$	6.8	$	—	$	—
Non-cancelable capitalized lease obligations	0.1		0.1		—		—
Non-cancelable operating lease obligations - equipment	2.4		1.2		1.2		—
Non-cancelable operating lease obligations - buildings	30.3		3.6		8.1		18.6
Long-term vendor accounts payable	0.9		0.7		0.2		—
Total contractual cash obligations	$	40.5	$	12.4	$	9.5	$	18.6

At June 28, 2003, the Company had open purchase order commitments of approximately $18 million, primarily related to the purchase of inventories, equipment and leasehold improvements. The Company records reserves for purchase order commitments it deems in excess of normal operating requirements (see “Critical Accounting Policies and Estimates”).

The development and manufacture of new lithography systems and enhancements are highly capital-intensive. In order to be competitive, the Company believes it must continue to make significant expenditures for capital equipment; sales, service, training and support capabilities; systems, procedures and controls; and expansion of operations and research and development, among many other items. The Company expects that its cash, cash equivalents and short-term investments will be sufficient to meet the Company’s cash requirements for at least the next twelve months. However, in the near-term, the Company may continue to utilize existing and future lines of credit, and other sources of financing, in order to maintain its present levels of cash, cash equivalents and short-term investments. Beyond the next twelve months, the Company may require additional equity or debt financing to address its working capital or capital equipment needs. In addition, the Company may seek to raise equity or debt capital at any time that it deems market conditions to be favorable. Additional financing, if needed, may not be available on reasonable terms, or at all.

The Company may in the future pursue additional acquisitions of complementary product lines, technologies or businesses. Future acquisitions by the Company may result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses and impairment charges related to goodwill and other intangible assets, which could materially adversely affect the Company’s financial condition and results of operations. In addition, acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, personnel and products of the acquired companies; the diversion of management’s attention from other business concerns; risks of entering markets in which the Company has limited or no direct experience; and the potential loss of key employees of the acquired company. In the event the Company acquires product lines, technologies or businesses which do not complement the Company’s business, or which otherwise do not enhance the Company’s sales or operating results, the Company may incur substantial write-offs and higher recurring operating costs, which could have a material adverse effect on the Company’s business, financial condition and results of operations. In the event that any such acquisition does occur, there can be no assurance as to the effect thereof on the Company’s business or operating results.

Foreign currency

The Company uses foreign exchange contracts to hedge the risk that unremitted Japanese yen denominated receipts from customers for actual or forecasted sales of equipment after receipt of customer purchase orders may be adversely affected by changes in foreign currency exchange rates. As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, the Company attempts to hedge most of these Japanese yen denominated foreign currency exposures anticipated over the ensuing twelve-month period. At June 28, 2003, the Company had hedged approximately 75% of these Japanese yen denominated exposures. To hedge this exposure, the Company used foreign exchange forward contracts that generally have maturities of nine months or less. The Company often closes foreign exchange sale contracts by purchasing an offsetting purchase contract. At June 28, 2003, the Company had contracts for the sale of $2.8 million of foreign currencies at fixed rates.

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ADDITIONAL RISK FACTORS

In addition to risks described in the foregoing discussions, the following risks apply to the Company and its business:

Cyclicality of Semiconductor and Nanotechnology Industries The Company’s business depends in significant part upon capital expenditures bymanufacturers of semiconductors, bumped semiconductors and nanotechnology components, including thin film head magnetic recording devices, which in turn depend upon the current and anticipated market demand for such devices and products utilizing such devices. The semiconductor industry historically has been highly cyclical and has experienced recurring periods of oversupply. This has, from time to time, resulted in significantly reduced demand for capital equipment including the systems manufactured and marketed by the Company. The semiconductor industry, which includes the semiconductor-packaging sector, is presently experiencing a severe downturn. The Company also believes that markets for new generations of semiconductors and semiconductor packaging will also be subject to similar fluctuations. The Company’s business and operating results would be materially adversely affected by continued downturns or slowdowns in the semiconductor packaging market or by loss of market share. Accordingly, the Company can give no assurance that it will be able to achieve or maintain its current or prior level of sales.

The Company attempts to mitigate the risk of cyclicality by participating in multiple markets including semiconductor, semiconductor packaging, thin film head and other nanotechnology sectors, as well as diversifying into new markets such as photolithography for optical networking (a nanotechnology application) and laser-based thermal annealing for implant activation and other applications. Despite such efforts, when one or more of such markets experiences a downturn or a situation of excess capacity, such as is presently occurring in the semiconductor, semiconductor packaging, optical networking and thin film head markets, the Company’s net sales and operating results are materially adversely affected.

During 2002 and 2001, approximately 20% and 33%, respectively, of the Company’s net sales were derived from sales to nanotechnology manufacturers, including micro systems, thin film heads and optical networking devices. During the first six months of 2003, approximately 27% of the Company’s net sales were derived from sales to nanotechnology manufacturers.

Highly Competitive Industry        The capital equipment industry in which the Company operates is intensely competitive. A substantial investment is required to install and integrate capital equipment into a semiconductor, semiconductor packaging or nanotechnology device production line. The Company believes that once a device manufacturer or packaging subcontractor has selected a particular vendor’s capital equipment, the manufacturer generally relies upon that equipment for the specific production line application and, to the extent possible, subsequent generations of similar products. Accordingly, it is difficult to achieve significant sales to a particular customer once another vendor’s capital equipment has been selected. The Company experiences intense competition worldwide from a number of leading stepper manufacturers, such as Nikon Inc. (“Nikon”), Canon, Inc. (“Canon”) and ASM Lithography (“ASML”), all of which have substantially greater financial, marketing and other resources than the Company. Nikon supplies a 1X stepper for use in the manufacture of liquid crystal displays and Canon, Nikon and ASML offer reduction steppers for thin film head fabrication. With respect to the semiconductor packaging and nanotechnology markets, the Company experiences competition from various proximity aligner companies such as Suss Microtec AG.

ASML, Canon and Nikon have each introduced i-line step-and-scan system as a lower cost alternative to the deep ultra-violet (DUV) step-and-scan system for use on the less critical layers. These systems compete with wide-field steppers, such as the Company’s Saturn and Titan steppers, for advanced mix-and-match applications. In addition, the Company believes that the high cost of developing new lithography tools has increasingly caused its competitors to collaborate with customers and other parties in various areas such as research and development, manufacturing and marketing, or to acquire other competitors, thereby resulting in a combined competitive threat with significantly enhanced financial, technical and other resources.

The Company expects its competitors to continue to improve the performance of their current products and to introduce new products with improved price and performance characteristics that will also compete directly with the Company’s products. This could cause a decline in sales or loss of market acceptance of the Company’s steppers, and thereby materially adversely affect the Company’s business, financial condition and results of operations. There can be no assurance that enhancements to, or future generations

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of, competing products will not be developed that offer superior cost of ownership and technical performance features.

The Company believes that to be competitive, it will require significant financial resources in order to continue to invest in new product development, features and enhancements, to introduce next generation stepper systems on a timely basis, and to maintain customer service and support centers worldwide. In marketing its products, the Company may also face competition from vendors employing other technologies. In addition, increased competitive pressure has led to intensified price-based competition in certain of the Company’s markets, resulting in lower prices and margins. Should these competitive trends continue, the Company’s business, financial condition and operating results would continue to be materially adversely affected. There can be no assurance that the Company will be able to compete successfully in the future.

With respect to the Company’s laser annealing technologies, marketed under the Verdant product name, the primary competition comes from rapid thermal annealing (“RTA”), which is the current manufacturing technology. RTA does not limit semiconductor device manufacturers from scaling their transistors to obtain improved performance. However, improved annealing technology results in faster transistors for a given size. RTA manufacturers recognize the need to reduce thermal cycle times and are working toward this goal. Several companies have published papers on their prototype annealing tools that incorporate flash lamp technology in order to reduce annealing times and increase anneal temperatures. The Company believes these tools are presently in the development phase. Additionally, competition to the Verdant products may come from other laser annealing tools, including those presently being used by the flat panel display industry to crystallize amorphous silicon. Manufacturers of these tools may try to extend the use of their technologies to semiconductor device applications. In July 2000, the Company licensed its then existing laser annealing technology, with reservations, to a manufacturer of semiconductor equipment. The Company presently anticipates this company will offer laser-annealing tools to the semiconductor industry that will compete with the Company’s offerings.

Foreign integrated circuit manufacturers have a significant share of the worldwide market for certain types of integrated circuits for which the Company’s systems are used. The Japanese stepper manufacturers are well established in the Japanese stepper market, and it is extremely difficult for non-Japanese lithography equipment companies to penetrate this market. Although the Company has experienced recent success in the introduction of its Saturn Spectrum family of wafer steppers into the Japanese marketplace, to date the Company has not established itself as a major competitor in the Japanese equipment market and there can be no assurance that the Company will be able to achieve significant sales to Japanese manufacturers in the future.

Development of New Product Lines; Expansion of Operations Currently, the Company is devoting significant resources to the development, introduction and commercialization of its laser thermal processing systems and to enhancements and future versions of its Saturn Spectrum 3^e and Saturn Spectrum 300e² wafer steppers and related platforms. The Company intends to continue to develop these products and technologies during 2003, and will continue to incur significant operating expenses in the areas of research, development and engineering, manufacturing and general and administrative costs in order to further develop, produce and support these new products. Additionally, gross profit margins and inventory levels may be further adversely impacted in the future by costs associated with the initial production of its Verdant laser thermal processing systems and by future generations of its 1X-lithography systems. These costs include, but are not limited to, additional manufacturing overhead, additional inventory write-offs, costs of demonstration systems and facilities, costs associated with managing multiple sites and the establishment of additional after-sales support organizations. Additionally, there can be no assurance that operating expenses will not increase, relative to sales, as a result of adding additional marketing and administrative personnel, among other costs, to support the Company’s new products. If the Company is unable to achieve significantly increased net sales or if its sales fall below expectations, the Company’s operating results will be materially adversely affected.

The Company’s ability to commercialize its laser annealing, or laser thermal processing technologies, depends on its ability to demonstrate a manufacturing-worthy tool. The Company does not presently have in-house capability to fabricate devices. As a result, the Company must rely on partnering with companies to develop the laser anneal process. The development of new process technologies is largely dependent upon the Company’s ability to interest potential customers in working on joint process development. The

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Company’s ability to deliver timely solutions is also limited by wafer turnaround at the potential customer’s fabrication facility.

Lengthy Sales Cycles      Sales of the Company’s systems depend, in significant part, upon the decision of a prospective customer to increase manufacturing capacity or to restructure current manufacturing facilities, either of which typically involves a significant commitment of capital. Many of the Company’s customers have cancelled the development of new manufacturing facilities and have substantially reduced their capital equipment budgets. In view of the significant investment involved in a system purchase, the Company has experienced and may continue to experience delays following initial qualification of the Company’s systems as a result of delays in a customer’s approval process. Additionally, the Company is presently receiving orders for systems that have lengthy delivery schedules, which may be due to longer production lead times or a result of customers’ capacity scheduling requirements. In order to maintain or exceed the Company’s present level of net sales, the Company is dependent upon obtaining orders for systems that will ship and be accepted in the current period. There can be no assurance that the Company will be able to obtain those orders. For these and other reasons, the Company’s systems typically have a lengthy sales cycle during which the Company may expend substantial funds and management effort in securing a sale. Lengthy sales cycles subject the Company to a number of significant risks, including inventory obsolescence and fluctuations in operating results, over which the Company has little or no control.

Customer and Market Concentrations      Historically, the Company has sold a substantial portion of its systems to a limited number of customers. For the six-month period ended June 28, 2003, five customers accounted for approximately 65% of the Company’s system revenue. In 2002, Intel Corporation accounted for 19% and Sumitomo Chemical Company, Ltd. accounted for 10% of the Company’s total net sales.

At June 28, 2003, one customer accounted for 40% of the Company’s system backlog. Cancellation, deferrals or rescheduling of orders by this customer would have a material adverse impact on the Company’s future results of operations.

During 2002, the Company experienced significant levels of order cancellations, delays and deferrals. In particular, the Company has removed from backlog a significant number of systems from a single customer because delivery may be deferred beyond one year. Company policy requires that orders with delivery dates beyond one year be excluded from reportable backlog.

The Company expects that sales to a relatively few customers will continue to account for a high percentage of its net sales in the foreseeable future and believes that the Company’s financial results depend in significant part upon the success of these major customers and the Company’s ability to meet their future capital equipment needs. Although the composition of the group comprising the Company’s largest customers may vary from period to period, the loss of a significant customer or any reduction in orders by any significant customer, including reductions due to market, economic or competitive conditions in the semiconductor, semiconductor packaging or nanotechnology industries or in the industries that manufacture products utilizing integrated circuits, thin film heads or other nanotechnology components, may have a material adverse effect on the Company’s business, financial condition and results of operations. The Company’s ability to maintain or increase its sales in the future depends, in part, on its ability to obtain orders from new customers as well as the financial condition and success of its existing customers, the semiconductor and nanotechnology industries and the economy in general.

In addition to the business risks associated with dependence on major customers, these significant customer concentrations have in the past resulted in significant concentrations of accounts receivable. These significant and concentrated receivables expose the Company to additional risks, including the risk of default by one or more customers representing a significant portion of the Company’s total receivables. If the Company were required to take additional accounts receivable reserves, its business, financial condition and results of operations would be materially adversely affected.

On a market application basis, sales to semiconductor packaging customers accounted for approximately 71% of system revenue for the six-month period ended June 28, 2003, and 53% of system revenue for the year ended December 31, 2002. The Company’s future results of operations and financial position would be materially adversely impacted by further downturns in this market segment, or by loss of market share.

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Rapid Technological Change; Importance of Timely Product Introduction

The semiconductor and nanotechnology manufacturing industries are subject to rapid technological change and new product introductions and enhancements. The Company’s ability to be competitive in these and other markets will depend, in part, upon its ability to develop new and enhanced systems and related software tools, and to introduce these systems and related software tools at competitive prices and on a timely and cost-effective basis to enable customers to integrate them into their operations either prior to or as they begin volume product manufacturing. The Company will also be required to enhance the performance of its existing systems and related software tools. Any success of the Company in developing new and enhanced systems and related software tools depends upon a variety of factors, including product selection, timely and efficient completion of product design, timely and efficient implementation of manufacturing and assembly processes, product performance in the field and effective sales and marketing. Because new product development commitments must be made well in advance of sales, new product decisions must anticipate both future demand and the technology that will be available to supply that demand. There can be no assurance that the Company will be successful in selecting, developing, manufacturing or marketing new products and related software tools or enhancing its existing products and related software tools. Any such failure would materially adversely affect the Company’s business, financial condition and results of operations.

Because of the large number of components in the Company’s systems, significant delays can occur between a system’s introduction and the commencement by the Company of volume production of such systems. The Company has experienced delays from time to time in the introduction of, and technical and manufacturing difficulties with, certain of its systems, product enhancements and related software tools, and may experience delays and technical and manufacturing difficulties in future introductions or volume production of new systems, product enhancements and related software tools.

The Company may encounter additional technical, manufacturing or other difficulties that could further delay future introductions or volume production of systems or enhancements. The Company’s inability to complete the development or meet the technical specifications of any of its systems or enhancements and related software tools, or its inability to manufacture and ship these systems or enhancements and related software tools in volume and in time to meet the requirements for manufacturing the future generation of semiconductor or nanotechnology devices would materially adversely affect the Company’s business, financial condition and results of operations. In addition, the Company may incur substantial unanticipated costs to ensure the functionality and reliability of its products early in the products’ life cycles. If new products have reliability or quality problems, reduced orders or higher manufacturing costs, delays in collecting accounts receivable and additional service and warranty expenses may result. Any of such events may materially adversely affect the Company’s business, financial condition and results of operations.

Intellectual Property Rights      Although the Company attempts to protect its intellectual property rights through patents, copyrights, trade secrets and other measures, it believes that any success will depend more upon the innovation, technological expertise and marketing abilities of its employees. Nevertheless, the Company has a policy of seeking patents when appropriate on inventions resulting from its ongoing research and development and manufacturing activities.  The Company owns various United States and foreign patents, which expire on dates ranging from March 2004 to May 2021 and has various United States and foreign patent applications pending. The Company also has various registered trademarks and copyright registrations covering mainly software programs used in the operation of its stepper systems. The Company also relies upon trade secret protection for its confidential and proprietary information. There can be no assurance that the Company will be able to protect its technology adequately or that competitors will not be able to develop similar technology independently. There can be no assurance that any of the Company’s pending patent applications will be issued or that U.S. or foreign intellectual property laws will protect the Company’s intellectual property rights. In addition, litigation may be necessary to enforce the Company’s patents, copyrights or other intellectual property rights, to protect the Company’s trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement.  Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on the Company’s business, financial condition and results of operations, regardless of the outcome of the litigation. Patents issued to the Company may be challenged, invalidated or circumvented and the rights granted thereunder may not provide competitive advantages to the Company. Furthermore, others may independently develop similar products, duplicate the Company’s products or, if patents are issued to the Company, design around the patents issued to the Company. Additionally, the Company presently has several agreements in force to license certain of its technologies. Challenges to, or invalidation of, patents

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related to those technologies would expose the Company to the risk of forfeiture of revenues and further risk of damage claims.

On February 29, 2000, in the U.S. District Court of Virginia, the Company filed patent infringement lawsuits against Nikon, Canon and ASML. In April 2000, the Company reached a settlement with Nikon and in September 2001, the Company reached a settlement with Canon. The patent litigation case against ASML is ongoing. The Court has made a preliminary determination that ASML does not infringe the patent. The Company has filed an appeal against this preliminary determination of the Court. On October 12, 2001, the Company was sued in the District Court in Massachusetts for alleged infringement of certain patents owned by Silicon Valley Group, Inc. (“SVG”), a company acquired by ASML. The Company is in the process of defending against this claim and believes the claim is without merit.

With the exception of the SVG claim, there are no pending lawsuits against the Company regarding infringement claims with respect to any existing patent or any other intellectual property right. However, the Company has from time to time been notified of claims that it may be infringing intellectual property rights possessed by third parties. Some of the Company’s customers have received notices of infringement from Technivision Corporation and the Lemelson Medical, Education and Research Foundation, Limited Partnership alleging that the manufacture of certain semiconductor products and/or the equipment used to manufacture those semiconductor products infringes certain issued patents. The Company has been notified by certain of these customers that the Company may be obligated to defend or settle claims that the Company’s products infringe any of such patents and, in the event it is subsequently determined that the customer infringes any of such patents, they intend to seek reimbursement from the Company for damages and other expenses resulting from this matter.

Infringement claims by third parties or claims for indemnification resulting from infringement claims may be asserted in the future and such assertions, if proven to be true, may materially adversely affect the Company’s business, financial condition and results of operations, regardless of the outcome of any litigation. With respect to any such future claims, the Company may seek to obtain a license under the third party’s intellectual property rights. However, a license may not be available on reasonable terms or at all. The Company could decide, in the alternative, to resort to litigation to challenge such claims. Such challenges could be expensive and time consuming and could materially adversely affect the Company’s business, financial condition and results of operations, regardless of the outcome of any litigation.

Sole or Limited Sources of Supply      The Company relies heavily on outside suppliers and subcontractors to manufacture certain components and subassemblies in an attempt to maximize the Company’s available manufacturing capacity. The Company orders one of the most critical components of its technology, the glass for its 1X lenses, from suppliers on purchase orders. The Company designs the 1X lenses and provides the lens specifications to other suppliers that grind the lens elements. The Company then assembles and tests the optical 1X lenses in its metrology laboratory.  The Company has recorded the critical parameters of each of its optical lenses sold since 1982, and believes that such information enables it to supply lenses to its customers that match the characteristics of its customers’ existing lenses.

In addition to glass, the Company procures many of its other critical systems’ components, subassemblies and services from single outside suppliers or a limited group of outside suppliers in order to ensure overall quality and timeliness of delivery. Many of these components and subassemblies have significant production lead times. To date, the Company has been able to obtain adequate services and supplies of components and subassemblies for its systems in a timely manner.  However, disruption or termination of certain of these sources could result in a significant adverse impact on the Company’s ability to manufacture its systems. This, in turn, would have a material adverse effect on the Company’s business, financial condition and results of operations. The Company’s reliance on sole or a limited group of suppliers and the Company’s increasing reliance on subcontractors involve several risks, including a potential inability to obtain an adequate supply of required components due to the suppliers’ failure or inability to provide such components in a timely manner, or at all, and reduced control over pricing. Although the timeliness, yield and quality of deliveries to date from the Company’s subcontractors have been acceptable, manufacture of certain of these components and subassemblies is an extremely complex process, and long lead-times are required. Any inability to obtain adequate deliveries or any other circumstance that would require the Company to seek alternative sources of supply or to manufacture such components internally could delay the Company’s ability to ship its products, which could damage

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relationships with current and prospective customers and have a material adverse effect on the Company’s business, financial condition and results of operations.

International Sales      International net sales accounted for approximately 48% and 51% of total net sales for the years 2002 and 2001, respectively. For the six months ended June 28, 2003, international net sales accounted for approximately 61% of total net sales, as compared with 52% for the comparable period in 2002. The Company anticipates that international sales, which typically have lower gross margins than domestic sales, principally due to increased competition and higher field service and support costs, will continue to account for a significant portion of total net sales. As a result, a significant portion of the Company’s net sales will continue to be subject to certain risks, including the current SARS outbreak in Asia, which could delay or curtail installation and acceptance of the Company’s systems in those areas impacted; dependence on outside sales representative organizations; unexpected changes in regulatory requirements; difficulty in satisfying existing regulatory requirements; exchange rate fluctuations; tariffs and other barriers; political and economic instability; difficulties in accounts receivable collections; natural disasters; difficulties in staffing and managing foreign subsidiary and branch operations; and potentially adverse tax consequences.

Although the Company generally transacts its international sales in U.S. dollars, international sales expose the Company to a number of additional risk factors, including fluctuations in the value of local currencies relative to the U.S. dollar, which, in turn, impact the relative cost of ownership of the Company’s products and may further impact the purchasing ability of its international customers. However, in Japan, the Company has direct sales operations and orders are often denominated in Japanese yen. This may subject the Company to a higher degree of risk from currency fluctuations. The Company attempts to mitigate this exposure through the use of foreign exchange contracts.  The Company is also subject to the risks associated with the imposition of legislation and regulations relating to the import or export of semiconductors and nanotechnology products.  The Company cannot predict whether the United States, Japan or any other country will implement changes to quotas, duties, taxes or other charges or restrictions upon the importation or exportation of the Company’s products. These factors, or the adoption of restrictive policies, may have a material adverse effect on the Company’s business, financial condition and results of operations.

Dependence on Key Personnel      The Company’s future operating results depend, in significant part, upon the continued contributions of key personnel, many of whom would be difficult to replace. Few of such persons have an employment agreement with the Company. The Company does not maintain any life insurance on any of its key persons.  The loss of key personnel could have a material adverse effect on the business, financial condition and results of operations of the Company.  In addition, the Company’s future operating results depend in significant part upon its ability to attract and retain other qualified management, manufacturing, technical, sales and support personnel for its operations. There are only a limited number of persons with the requisite skills to serve in these positions and it may become increasingly difficult for the Company to hire such personnel over time. At times, competition for such personnel has been intense, particularly in the San Francisco Bay Area where the Company maintains its headquarters and principal operations, and there can be no assurance that the Company will be successful in attracting or retaining such personnel. The failure to attract or retain such persons would materially adversely affect the Company’s business, financial condition and results of operations.

Changes to Financial Accounting Standards May Affect the Company’s Reported Results of Operations      The Company prepares its financial statements to conform with generally accepted accounting principles, or GAAP. These principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies.  A change in those policies can have a significant effect on the Company’s reported results and may affect its reporting of transactions completed before a change is announced.

Accounting policies affecting many other aspects of our business, including rules relating to revenue recognition, off-balance sheet transactions, employee stock options, restructurings, asset disposals, intangible assets, derivatives, financial instruments and in-process research and development charges, have recently been revised or are under review. Changes to those rules or the questioning of current practices may have a material adverse effect on the Company’s reported financial results or on the way it conducts business.  In addition, the Company’s preparation of financial statements in accordance with GAAP requires that it make estimates and assumptions that affect the recorded amounts of assets and liabilities,

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disclosure of those assets and liabilities at the date of the financial statements and the recorded amounts of expenses during the reporting period.  A change in the facts and circumstances surrounding those estimates could result in a change to the Company’s estimates and could impact its future operating results.

Effects of Certain Anti-Takeover Provisions      Certain provisions of the Company’s Certificate of Incorporation, equity incentive plans, Shareholder Rights Plan, licensing agreements, Bylaws and Delaware law may discourage certain transactions involving a change in control of the Company.  In addition to the foregoing, the Company’s classified board of directors, the shareholdings of the Company’s officers, directors and persons or entities that may be deemed affiliates and the ability of the Board of Directors to issue “blank check” preferred stock without further stockholder approval could have the effect of delaying, deferring or preventing a change in control of the Company and may adversely affect the voting and other rights of holders of Common Stock.

Volatility of Stock Price and Dilutive Impact of Employee Stock OptionsThe Company believes that factors such as announcements of developments related to the Company’s business, fluctuations in the Company’s operating results, a shortfall in revenue or earnings, changes in analysts’ expectations, general conditions in the semiconductor and nanotechnology industries or the worldwide or regional economies, sales of securities of the Company into the marketplace, an outbreak or escalation of hostilities, announcements of technological innovations or new products or enhancements by the Company or its competitors, developments in patents or other intellectual property rights and developments in the Company’s relationships with its customers and suppliers could cause the price of the Company’s Common Stock to fluctuate, perhaps substantially. The market price of the Company’s Common Stock may continue to experience significant fluctuations in the future, including fluctuations that may be unrelated to the Company’s performance.

As of July 29, 2003, the Company had issued and outstanding options to purchase approximately 5.8 million shares of its Common Stock. Among other determinants, the market price of the Company’s stock has a major bearing on the number of stock options outstanding that are included in the weighted-average shares used in determining the Company’s net income (loss) per share. During periods of extreme volatility, the impact of higher stock prices can have a materially dilutive effect on the Company’s net income per share (diluted).Additionally, options are excluded from the calculation of net income (loss) per share when the Company has a net loss or when the exercise price of the stock option is greater than the average market price of the Company’s Common Stock, as the impact of the stock options would be anti-dilutive.

Terrorist Attacks and Threats, Government ResponsesThereto, and Military Actions May Negatively Impact All Aspects of Our Operations, Revenues, Costs and Stock Price Terrorist attacks in the United States and elsewhere, government responses thereto, and military actions in Iraq, Afghanistan and elsewhere, may disrupt our operations or those of our customers and suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. In addition, any of these events could increase volatility in the United States and world financial markets which may depress the price of the Company’s Common Stock and may limit the capital resources available to the Company or its customers or suppliers, which could result in decreased orders from customers, less favorable financing terms from suppliers, and scarcity or increased costs of materials and components of our products. Any of these occurrences could have a significant impact on our operating results, revenues and costs and may result in increased volatility of the market price of our Common Stock.

Environmental Regulations      The Company is subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances used to manufacture the Company’s systems.  The Company believes that it is currently in compliance in all material respects with such regulations and that it has obtained all necessary environmental permits to conduct its business. Nevertheless, the failure to comply with current or future regulations could result in substantial fines being imposed on the Company, suspension of production, alteration of the manufacturing process or cessation of operations. Such regulations could require the Company to acquire expensive remediation equipment or to incur substantial expenses to comply with environmental regulations. Any failure by the Company to control the use, disposal or storage of, or adequately restrict the discharge of, hazardous or toxic substances could subject the Company to significant liabilities.

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Information Available on Company Web-site

The Company’s web-site is located at www.ultratech.com. The Company makes available, free of charge, through its web-site, its annual report on Form 10-K, quarterly reports on Form 10-Q, Form 4 filings and current reports on Form 8-K (and amendments to those reports), as soon as reasonably practicable after such reports are filed with the SEC.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Reference is made to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and to the subheading “Derivative Instruments and Hedging” in Item 8, “Financial Statements and Supplementary Data”, under the heading “Notes to Consolidated Financial Statement” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Foreign Currency Risk Management

Foreign exchange contracts are used primarily by the Company to hedge the risk that unremitted Japanese yen denominated receipts, for actual or forecasted sales of equipment, may be adversely affected by changes in foreign currency exchange rates after receipt of customer purchase orders. As part of its overall strategy to manage the level of exposure to currency exchange rate fluctuations, the Company attempts to hedge most of these Japanese yen denominated foreign currency exposures anticipated over the ensuing twelve-month period. At June 28, 2003, the Company had taken action to hedge approximately 75% of these Japanese yen denominated exposures. To hedge this exposure, the Company used foreign exchange contracts that generally have maturities of nine months or less. The Company often closes foreign exchange sale contracts by purchasing an offsetting purchase contract.

The Company records these foreign exchange contracts at fair value in its consolidated balance sheet and the related gains or losses on these contracts are deferred in stockholders’ equity (as a component of comprehensive income). These deferred gains and losses are recognized in income, as a component of revenue, in the period in which the sales being hedged are received and recognized in income. However, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the sales being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. These amounts were not material to the periods presented.

Gains and losses on foreign exchange contracts that are not designated as hedges are included as a component of interest and other income, net, in the Company’s consolidated statement of operations.

At June 28, 2003, the Company had contracts for the sale of $2.8 million of Japanese Yen at fixed rates. The Company had less than $0.1 million of deferred gains on foreign exchange contracts at June 28, 2003.

Item 4.Controls and Procedures

Based on their evaluation, as of a date within 90 days of the filing of this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed

29

and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is further required to apply judgement in evaluating the cost-benefit relationship of possible controls and procedures.

30

PART 2:		OTHER INFORMATION
Item 1.		Legal Proceedings.
		On February 29, 2000, in the U.S. District Court of Virginia, the Company filed patent infringement lawsuits against Nikon, Canon and ASML. In April 2000, the Company reached a settlement with Nikon and in September 2001, the Company reached a settlement with Canon. The patent litigation against ASML is ongoing. The Court has made a preliminary determination that ASML does not infringe the patent. The Company has filed an appeal against this preliminary determination of the Court. On October 12, 2001, the Company was sued in the District Court in Massachusetts for alleged infringement of certain patents owned by Silicon Valley Group, Inc. (“SVG”), a company acquired by ASML. The Company is in the process of defending against this claim and believes the claim is without merit.
Item 2.		Changes in Securities and Use of Proceeds.						None.
Item 3.		Defaults upon Senior Securities.						None.
Item 4.		Submission of Matters to a Vote of Security Holders.
		The following proposals were voted upon by the Company’s stockholders at the Company’s Annual Stockholders’ Meeting held on June 5, 2003.
		1.	The following persons were elected as directors of the Company to serve for a term ending upon the Annual Stockholders’ Meeting indicated beside their respective names and until their successors are elected and qualified:
					Terms Ending Upon the Annual Stockholders’ Meeting	Votes for	Votes withheld
		Thomas D. George			2005	20,218,706	193,795
		Kenneth Levy			2005	13,586,424	6,826,077
		Dennis R. Raney			2005	20,217,376	195,125
		Vincent F. Sollitto			2005	19,944,196	468,305
	2.			A proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2003 was approved by the vote of 20,058,057 shares for; 331,040 shares against; and 23,404 shares abstained.
	3.			A proposal to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to change the name of the Company to “Ultratech, Inc.” was approved by the vote of 20,373,967 shares for; 31,506 shares against; and 7,028 shares abstained.
	4.			A proposal to approve an amendment to the Company’s 1993 Stock Option/Stock Issuance Plan, to increase the number of shares subject to options granted to non-employee directors each year pursuant to the automatic grant program in effect under the Plan to 8,000 shares, was approved by the vote of 10,377,031 shares for; 9,981,019 shares against; and 54,451 shares abstained.
Item 5.	Other Information.
	On July 22, 2003, the Company amended its bylaws to change the maximum number of directors to eight, from the previous maximum of nine.

31

Item 6.	Exhibits and Reports on Form 8-K
	(a) Exhibits
	3.1	Amended and Restated Certificate of Incorporation of the Company, filed October 6, 1993.
	3.1.1	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed May 17, 1995.
	3.1.2	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed June 17, 1998.
	3.1.3	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed June 20, 2003.
	3.2	Bylaws of the Company, as amended.
	99.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	(b) Reports on Form 8-K
	Current Reports on Form 8-K, dated May 22, 2003 and June 19, 2003, were filed during the quarter ended June 28, 2003, reporting updates to the Company’s quarterly teleconference guidance. A Current Report on Form 8-K, dated April 17, 2003 was filed during the quarter ended June 28, 2003, reporting the Company’s quarterly results for the period ended March 29, 2003.

32

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.

ULTRATECH, INC.
(Registrant)
Date:	August 1, 2003	By:	/s/Bruce R. Wright
			Bruce R. Wright
			Senior Vice President, Finance and Chief Financial
			Officer (Duly Authorized Officer and Principal
			Financial and Accounting Officer)

33

CERTIFICATIONS

I, Arthur Zafiropoulo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ultratech, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 1, 2003

/s/ Arthur Zafiropoulo

Arthur Zafiropoulo

Chief Executive Officer

34

I, Bruce Wright, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ultratech, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 1, 2003

/s/ Bruce Wright

Bruce Wright

Chief Financial Officer

35

EXHIBIT INDEX

3.1	Amended and Restated Certificate of Incorporation of the Company, filed October 6, 1993.
3.1.1	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed May 17, 1995.
3.1.2	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed June 17, 1998.
3.1.3	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, filed June 20, 2003.
3.2	Bylaws of the Company, as amended.
99.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

36

EX-3.1

EXHIBIT 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ULTRATECH STEPPER, INC.

A Delaware corporation

(Pursuant to Sections 242 and 245

of the Delaware General Corporation Law)

ULTRATECH STEPPER, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, originally incorporated on September 21, 1992, under the name UTS Acquisition Corporation, hereby certifies as follows:

ONE:  The Amended and Restated Certificate of Incorporation of said corporation shall be further amended to read in full as follows:

ARTICLE I

The name of the corporation is Ultratech Stepper, Inc.

ARTICLE II

The address of the registered office of this corporation in the State of Delaware is 32 Loockerman Square, Suite L-100 in the City of Dover, County of Kent.  The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE IV

This corporation is authorized to issue two classes of stock to be designated common stock (“Common Stock”) and preferred stock (“Preferred Stock”).  The number of shares of Common Stock authorized to be issued is Twenty Million (20,000,000), par value $0.001 per share, and the number of shares of Preferred Stock authorized to be issued is Two Million (2,000,000), par value $0.001 per share.

The Preferred Stock may be issued from time to time in one or more series, without further stockholder approval.  The Board of Directors is hereby authorized, in the resolution or resolutions adopted by the Board of Directors providing for the issue of any wholly unissued series of Preferred Stock, within the limitations and restrictions stated in this Amended and Restated Certificate of Incorporation, to fix or alter the divided rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund

provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

ARTICLE V

Except as otherwise provided in this Amended and Restated Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend, and rescind any or all of the Bylaws of this corporation.

ARTICLE VI

At each annual meeting of stockholders, directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at the stockholders’ meeting called and held in accordance with the Delaware General Corporation Law.  The directors of the corporation shall be divided into two classes as nearly equal in size as is practicable, hereby designated Class I and Class II.  The term of office of the initial Class I directors shall expire at the next succeeding annual meeting of stockholders and the term of office of the initial Class II directors shall expire at the second succeeding annual meeting of stockholders.  For the purposes hereof, the initial Class I and Class II directors shall be those directors so nominated and elected at the next annual meeting of stockholders after the filing of this Amended and Restated Certificate of Incorporation.  At each annual meeting of stockholders thereafter, directors to replace those of a Class whose terms expire at such annual meeting shall be elected to hold office until the second succeeding annual meeting and until their respective successors shall have been duly elected and qualified.  If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable.

The number of directors which constitute the whole board of directors of the corporation shall be designated in the bylaws of the corporation.  Vacancies occurring on the board of directors for any reason may be filled by vote of a majority of the remaining members of the board of directors, although less than a quorum, at any meeting of the board of directors.  A person so elected by the board of directors to fill a vacancy shall hold office until the next succeeding annual meeting of stockholders of the corporation and until his or her successor shall have been duly elected and qualified.

2

ARTICLE VII

Elections of directors need not be by written ballot unless the Bylaws of this corporation shall so provide.

ARTICLE VIII

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide.  The books of this corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may designated from time to time by the Board of Directors or in the Bylaws of this corporation.

ARTICLE IX

A director of this corporation shall not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) under Section 174 of the Delaware General Corporation Law, or (iii) for any transaction from which the director derived any improper personal benefit.  If the Delaware General Corporation Law is amended after approval by the stockholders of this Article IX to authorize corporation action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.

Any repeal or modification of the foregoing provisions of this Article IX by the stockholders of the corporation shall not adversely affect any right or protection of a director of this corporation existing at the time of such repeal or modification.

ARTICLE X

No action required to be taken or which may be taken at any annual or special meeting of the stockholders of the corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.

ARTICLE XI

This corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

* * * *

3

TWO:  The Amended and Restated Certificate of Incorporation as set forth above has been duly adopted by this corporation’s Board of Directors and stockholders in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, ULTRATECH STEPPER, INC. has caused its corporate seal to be hereunto affixed and this Amended and Restated Certificate of Incorporation to be signed by its President and attested to by its Secretary this 30^th day of September, 1993.

ULTRATECH STEPPER, INC.

/s/ Arthur W. Zafiropoulo

Arthur W. Zafiropoulo, President

ATTEST:

/s/ William G. Leunis

William G. Leunis, III, Secretary

4

EX-3.1.1

EXHIBIT 3.1.1

CERTIFICATE OF AMENDMENT OF THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF
ULTRATECH STEPPER, INC.

Ultratech Stepper, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”)

DOES HEREBY CERTIFY:

FIRST:           That the Board of Directors of the Corporation duly adopted a resolution setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation and declaring said amendment advisable and directing that said amendment be submitted to the stockholders of said Corporation entitled to vote in respect thereof for their approval.  The resolution setting forth said amendment is as follows:

RESOLVED, that the Amended and Restated Certificate of Incorporation of the Corporation be amended by changing Article IV thereof so that, as amended, said provision shall be and read in its entirety as follows:

ARTICLE IV

This corporation is authorized to issue two classes of stock to be designated common stock (“Common Stock”) and preferred stock (“Preferred Stock”).  The number of shares of Common Stock authorized to be issued is Thirty Million (30,000,000), par value $0.001 per share, and the number of shares of Preferred Stock authorized to be issued is Two Million (2,000,000), par value $0.001 per share.

The Preferred Stock may be issued from time to time in one or more series, without further stockholder approval.  The Board of Directors is hereby authorized, in the resolution or resolutions adopted by the Board of Directors providing for the issue of any wholly unissued series of Preferred Stock, within the limitations and restrictions stated in this Amended and Restated Certificate of Incorporation, to fix or alter the divided rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

SECOND:      That thereafter said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, this Certificate of Amendment of the Amended and Restated Certificate of Incorporation has been signed by the President and the Secretary of the Corporation this 17^th day of May, 1995.

ULTRATECH STEPPER, INC.
By:	/s/ Arthur W. Zafirouplo
	Arthur W. Zafiropoulo, President

ATTEST:
By:	/s/ William G. Leunis
	William G. Leunis, III,
	Secretary

EX-3.1.2

EXHIBIT 3.1.2

CERTIFICATE OF AMENDMENT OF THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF

ULTRATECH STEPPER, INC.

Ultratech Stepper, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”) does hereby certify:

FIRST:           That the Board of Directors of the Corporation duly adopted a resolution setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation and declaring said amendment advisable and directing that said amendment be submitted to the stockholders of said Corporation entitled to vote in respect thereof for their approval.  The resolution setting forth said amendment is as follows:

RESOLVED, that the Amended and Restated Certificate of Incorporation of the Corporation be amended by changing Article IV thereof so that, as amended, said provision shall be and read in its entirety as follows:

ARTICLE IV

This corporation is authorized to issue two classes of stock to be designated common stock (“Common Stock”) and preferred stock (“Preferred Stock”).  The number of shares of Common Stock authorized to be issued is Forty Million (40,000,000), par value $0.001 per share, and the number of shares of Preferred Stock authorized to be issued is Two Million (2,000,000), par value $0.001 per share.

The Preferred Stock may be issued from time to time in one or more series, without further stockholder approval.  The Board of Directors is hereby authorized, in the resolution or resolutions adopted by the Board of Directors providing for the issue of any wholly unissued series of Preferred Stock, within the limitations and restrictions stated in this Amended and Restated Certificate of Incorporation, to fix or alter the divided rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be so decreased, the

shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

SECOND:      That thereafter said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

2

IN WITNESS WHEREOF, this Certificate of Amendment of the Amended and Restated Certificate of Incorporation has been signed by the President and the Secretary of the Corporation this 16th day of June, 1998.

		ULTRATECH STEPPER, INC.
		By:	/s/ Arthur W. Zafiropoulo
		Arthur W. Zafiropoulo
		President
ATTEST:
By:	/s/ William G. Leunis
	William G. Leunis, III
	Secretary

EX-3.1.3

EXHIBIT 3.1.3

CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ULTRATECH STEPPER, INC.,

a Delaware Corporation

Ultratech Stepper, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”) DOES HEREBY CERTIFY THAT:

FIRST:  The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on September 21, 1992 (at such time the name of the Corporation was UTS Acquisition Corporation).  The Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on October 6, 1993 and was amended by a Certificate of Amendment filed with the Secretary of State of Delaware on May 17, 1995, a Certificate of Designation filed with the Secretary of State of Delaware on February 13, 1997 and a Certificate of Amendment filed with the Secretary of State of Delaware on June 17, 1998.

SECOND:  The amendment of the Corporation’s Amended and Restated Certificate of Incorporation set forth below was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation.

THIRD:  Article I of the Certificate of Incorporation is hereby amended to read in its entirety as follows:

“The name of this Corporation is Ultratech, Inc.”

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of the Amended and Restated Certificate of Incorporation to be executed by Arthur W. Zafiropoulo, its authorized officer, on this 10th day of June, 2003.

/s/ Arthur W. Zafiropoulo

Arthur W. Zafiropoulo

Chairman of the Board, Chief Executive
Officer and President

EX-3.2

EXHIBIT 3.2

BYLAWS

OF

ULTRATECH, INC.

TABLE OF CONTENTS

ARTICLE I  CORPORATE OFFICES
	1.1	REGISTERED OFFICE
	1.2	OTHER OFFICES
ARTICLE II  MEETINGS OF STOCKHOLDERS
	2.1	PLACE OF MEETINGS
	2.2	ANNUAL MEETING
	2.3	SPECIAL MEETINGS
	2.4	NOTICE OF STOCKHOLDERS’ MEETINGS
	2.5	ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
	2.6	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
	2.7	QUORUM
	2.8	ADJOURNED MEETING; NOTICE
	2.9	VOTING
	2.10	WAIVER OF NOTICE
	2.11	STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
	2.12	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
	2.13	PROXIES
	2.14	LIST OF STOCKHOLDERS ENTITLED TO VOTE
	2.15	CONDUCT OF BUSINESS
ARTICLE III  DIRECTORS
	3.1	POWERS
	3.2	NUMBER OF DIRECTORS
	3.3	ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
	3.4	RESIGNATION AND VACANCIES
	3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE
	3.6	FIRST MEETINGS
	3.7	REGULAR MEETINGS

i

	3.8	SPECIAL MEETINGS; NOTICE
	3.9	QUORUM
	3.10	WAIVER OF NOTICE
	3.11	ADJOURNED MEETING; NOTICE
	3.12	CONDUCT OF BUSINESS
	3.13	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
	3.14	FEES AND COMPENSATION OF DIRECTORS
	3.15	APPROVAL OF LOANS TO OFFICERS
ARTICLE IV  COMMITTEES
	4.1	COMMITTEES OF DIRECTORS
	4.2	COMMITTEE MINUTES
	4.3	MEETINGS AND ACTION OF COMMITTEES
ARTICLE V  OFFICERS
	5.1	OFFICERS
	5.2	ELECTION OF OFFICERS
	5.3	REMOVAL AND RESIGNATION OF OFFICERS
	5.4	CHAIRMAN OF THE BOARD
	5.5	PRESIDENT
	5.6	VICE PRESIDENTS
	5.7	SECRETARY
	5.8	CHIEF FINANCIAL OFFICER
	5.9	ASSISTANT SECRETARY
	5.10	AUTHORITY AND DUTIES OF OFFICERS
ARTICLE VI  INDEMNITY
	6.1	INDEMNIFICATION OF DIRECTORS AND OFFICERS
	6.2	INDEMNIFICATION OF OTHERS
	6.3	INSURANCE
ARTICLE  VII RECORDS AND REPORTS
	7.1	MAINTENANCE AND INSPECTION OF RECORDS
	7.2	INSPECTION BY DIRECTORS

ii

	7.3	REPRESENTATION OF SHARES OF OTHER CORPORATIONS
ARTICLE VIII  GENERAL MATTERS
	8.1	STOCK CERTIFICATES; PARTLY PAID SHARES
	8.2	LOST CERTIFICATES
	8.3	CONSTRUCTION; DEFINITIONS
	8.4	DIVIDENDS
	8.5	FISCAL YEAR
	8.6	SEAL
	8.7	TRANSFER OF STOCK
	8.8	STOCK TRANSFER AGREEMENTS
	8.9	REGISTERED STOCKHOLDERS
ARTICLE IX  AMENDMENTS
ARTICLE X  DISSOLUTION
ARTICLE XI  CUSTODIAN
	11.1	APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
	11.2	DUTIES OF CUSTODIAN

iii

BYLAWS

OF

ULTRATECH, INC.

ARTICLE I

CORPORATE OFFICES

1.1REGISTERED OFFICE.

The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware.  The name of the registered agent of the corporation at such location is The Prentice-Hall Corporation System, Inc.

1.2OTHER OFFICES.

The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1PLACE OF MEETINGS.

Meetings of stockholders shall be held at the principal executive offices of the corporation, or at any other place, within or outside the State of Delaware, designated by the board of directors.  In the absence of any such designation, stockholders’ meetings shall be held at the principal executive offices of the corporation.

2.2ANNUAL MEETING.

An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the board of directors from time to time.  Any other proper business may be transacted at the annual meeting.

2.3SPECIAL MEETINGS.

A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, by the president or by the chief executive officer.

If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the

business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, chief executive officer, or the secretary of the corporation.  No business may be transacted at such special meeting otherwise than specified in such notice.  The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5, that a meeting will be held at the time requested by the person or persons who called the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request.  If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice.  Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held.

2.4NOTICE OF STOCKHOLDERS’ MEETINGS.

All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.6 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting.  The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.5ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.

To be properly brought before an annual meeting or special meeting, nominations for the election of director or other business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder.  For such nominations or other business to be considered properly brought before the meeting by a stockholder, such stockholder must have given timely notice and in proper form of his intent to bring such business before such meeting.  To be timely, such stockholder’s notice must be delivered to or mailed and received by the secretary of the corporation not less than ninety (90) days prior to the meeting; provided, however, that in the event that less than one-hundred (100) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made.  To be in proper form, a stockholder’s notice to the secretary shall set forth:

(i)            the name and address of the stockholder who intends to make the nominations or propose the business and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed;

(ii)           a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business specified in the notice;

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(iii)          if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;

(iv)          such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; or

(v)           if applicable, the consent of each nominee to serve as director of the corporation if so elected.

The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.

2.6MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation.  An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.7QUORUM.

The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation.  If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented.  At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provisions of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of the question.

2.8ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the

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corporation may transact any business that might have been transacted at the original meeting.  If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.9VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 and Section 2.14 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

Except as may otherwise be provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

2.10WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

2.11STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Effective upon the closing of the corporation’s initial public offering of securities pursuant to a registration statement filed under the Securities Act of 1933, as amended, the stockholders of the corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting.

2.12RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

In order that the corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof or entitled to express consent or dissent to corporate action in writing without a meeting (if otherwise permitted by these bylaws and the corporation’s certificate of incorporation), or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

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If the board of directors does not so fix a record date, the fixing of such record date shall be governed by the provisions of Section 213 of the General Corporation Law of Delaware.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

2.13PROXIES.

Each stockholder entitled to vote at a meeting of stockholders or entitled to express consent or dissent to corporate action in writing without a meeting (if otherwise permitted by these bylaws and the corporation’s certificate of incorporation) may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period.  A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact.  The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware.

2.14LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders and of the number of shares held by each such stockholder.

2.15CONDUCT OF BUSINESS.

Meetings of stockholders shall be presided over by the chairman of the board, if any, or in his absence by the president, or in his absence by a vice president, or in the absence of the foregoing persons by a chairman designated by the board of directors, or in the absence of such designation by a chairman chosen at the meeting.  The secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.  The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such matters as the regulation of the manner of voting and conduct of business.

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ARTICLE III

DIRECTORS

3.1POWERS.

Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

3.2NUMBER OF DIRECTORS.

The number of directors of the corporation is fixed at eight (8)(1).  No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Each director shall hold office until his successor is elected and qualified or until his earlier resignation or removal.  Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws.  Election of directors need not be by written ballot.

3.4RESIGNATION AND VACANCIES.

Any director may resign at any time upon written notice to the corporation.  Any vacancy occurring in the board of directors may be filled by a majority of the remaining members of the board of directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced.

Unless otherwise provided in the certificate of incorporation or these bylaws:

(i)            Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

(ii)           Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

(1)     Amended as of September 27, 1995, March 5, 1996, July 18, 2000, April 15, 2003 and July 22, 2003.

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If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.

3.5PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6FIRST MEETINGS.

The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present.  In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.

3.7REGULAR MEETINGS.

Regular meetings of the board of directors may be held without notice at such time and at such place, within or without the State of Delaware, as shall from time to time be determined by the board.

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3.8SPECIAL MEETINGS; NOTICE.

Special meetings of the board of directors may be held at such time and at such place, within or without the State of Delaware, whenever called by the chairman of the board, the president, the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered personally or by telephone or facsimile to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation.  If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting.  If the notice is delivered personally or by telephone, facsimile or by telegram, it shall be delivered personally or by telephone, facsimile or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting.  Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director.  The notice need not specify the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.

3.9QUORUM.

At all meetings of the board of directors, a majority of the number of authorized directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation.

3.10WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

3.11ADJOURNED MEETING; NOTICE.

If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

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3.12CONDUCT OF BUSINESS.

Meetings of the board of directors shall be presided over by the chairman of the board, if any, or in his absence by the president, or in their absence by a chairman chosen at the meeting.  The secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.  The chairman of any meeting shall determine the order of business and the procedures at the meeting.

3.13BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee.

3.14FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.  The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director.  No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

3.15APPROVAL OF LOANS TO OFFICERS.

The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation.  The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation.  Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

ARTICLE IV

COMMITTEES

4.1COMMITTEES OF DIRECTORS.

The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation.  The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting

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of the committee.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware.

4.2COMMITTEE MINUTES.

Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

4.3MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), Section 3.12 (conduct of business) and Section 3.13 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee.  The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

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ARTICLE V

OFFICERS

5.1OFFICERS.

The officers of the corporation shall be a president, one or more vice presidents, a secretary, and a chief financial officer.  The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more assistant vice presidents, assistant secretaries and any such other officers as may be appointed in accordance with the provisions of Section 5.2 of these bylaws.  Any number of offices may be held by the same person.

5.2ELECTION OF OFFICERS.

Except as otherwise provided in this Section 5.2, the officers of the corporation shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment.  The board of directors may appoint, or empower the president to appoint (whether or not such officer is described in this Article V), such officers and agents of the business as the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.  Any vacancy occurring in any office of the corporation shall be filled by the board of directors or may be filled by the president (if the president appointed such officer).

5.3REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract or employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors or, in the case of an officer appointed by the president, by the president.

Any officer may resign at any time by giving written notice to the corporation.  Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective.  Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

5.4CHAIRMAN OF THE BOARD.

The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.  If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.5 of these bylaws.

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5.5PRESIDENT.

Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president, unless otherwise determined by the board of directors, shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation.  He shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors.  He shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.

5.6VICE PRESIDENTS.

In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president.  The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.

5.7SECRETARY.

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders.  The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws.  He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.

5.8CHIEF FINANCIAL OFFICER.

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of

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the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares.  The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors.  He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.

5.9ASSISTANT SECRETARY.

The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (of if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe.

5.10AUTHORITY AND DUTIES OF OFFICERS.

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders.

ARTICLE VI

INDEMNITY

6.1INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The corporation shall, to the maximum extend and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation.  For purposes of this Section 6.1, a “director” or “officer” of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, any direct or indirect subsidiary of the corporation, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

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6.2INDEMNIFICATION OF OTHERS.

The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (in addition to directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation.  For purposes of this Section 6.2, an “employee” or “agent” of the corporation includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, any direct or indirect subsidiary of the corporation, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

6.3INSURANCE.

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware.

ARTICLE VII

RECORDS AND REPORTS

7.1MAINTENANCE AND INSPECTION OF RECORDS.

The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom.  A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder.  In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder.  The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

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7.2INSPECTION BY DIRECTORS.

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director.  The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought.  The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom.  The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

7.3REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

The chairman of the board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation.  The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

ARTICLE VIII

GENERAL MATTERS

8.1STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation.  Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman the board of directors, or the president or vice-president, and by the chief financial officer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificated form.  Any or all of the signatures on the certificate may be a facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor.  Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated.  Upon the

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declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

8.2LOST CERTIFICATES.

Except as provided in this Section 8.2, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time.  The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

8.3CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws.  Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

8.4DIVIDENDS.

The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware.  Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

8.5FISCAL YEAR.

The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.

8.6SEAL.

The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

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8.7TRANSFER OF STOCK.

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

8.8STOCK TRANSFER AGREEMENTS.

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

8.9REGISTERED STOCKHOLDERS.

The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE IX

AMENDMENTS

The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors.  The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

ARTICLE X

DISSOLUTION

If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution.

At the meeting a vote shall be taken for and against the proposed dissolution.  If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed,

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acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware.  Upon such certificate’s becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved.

ARTICLE XI

CUSTODIAN

11.1APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.

The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when:

(i)            at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or

(ii)           the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or

(iii)          the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets.

11.2DUTIES OF CUSTODIAN.

The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.

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EX-99.1

Exhibit 99.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Arthur Zafiropoulo, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

•the Quarterly Report of Ultratech, Inc. on Form 10-Q for the quarterly period ended June 28, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•the information contained in such Quarterly Report fairly presents in all material respects the financial condition and results of operations of Ultratech, Inc.

By:	/s/ Arthur Zafiropoulo*
Name: Arthur Zafiropoulo
Title: Chief Executive Officer

I, Bruce Wright, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

•the Quarterly Report of Ultratech, Inc. on Form 10-Q for the quarterly period ended June 28, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•the information contained in such Quarterly Report fairly presents in all material respects the financial condition and results of operations of Ultratech, Inc.

By:	/s/ Bruce Wright*
Name: Bruce Wright
Title: Chief Financial Officer

*A signed original of this written statement required by Section 906 has been provided to Ultratech, Inc. and will be retained by Ultratech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.