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u l t r a t e c h 2 0 1 3 a n n u a l r e p o r t

F u t u r e r e a D Y

U l t r a t e c h , I n c . [ n a s d a q : U t e K ]

Designs, builDs anD markets manufacturing systems for the global technology inDustry.

founDeD in 1979, ultratech serves three core markets: front-enD semiconDuctor, back-enD

semiconDuctor, anD nanotechnology. the company is the leaDing suppl ier of l ithography

proDucts for aDvanceD packaging of integrateD c ircuits anD h igh-brightness leDs. ultratech

is also the market leaDer anD pioneer of laser spike annealing for the proDuction of aDvanceD

semiconDuctor Devices. in aDDit ion the company offers solutions leveraging its proprietary

coherent graDient sensing (cgs) technology to the semiconDuctor wafer inspection market,

anD proviDes atomic layer Deposition (alD) tools to leaDing research organizations, incluDing

acaDemic anD inDustrial inst itut ions.

ultratech | 2013 ar 1

Balance Sheet Summary

total aSSetS total equity

Fiscal Year Fiscal Year

500

400

300

200

100

0

400

300

200

100

0

$ M

illio

ns

$ M

illio

ns

2010 2011 2012 2013 2010 2011 2012 2013

Financial h ighlights

in millions $ 2013 2012

Cash, cash equivalents & investments 297.0 302.5

Accounts receivable, net 34.4 42.5

Inventory, net 47.8 46.8

Current assets 384.8 400.1

Total assets 434.2 437.0

Current liabilities 35.7 50.6

Long term debt –– ––

Total equity 386.5 375.2

Total liabilities & equity 434.2 437.0

434.2437.0

353.4

281.3231.1

296.0

375.2386.5

FUTURE READY

Ultratech is

continuing to

transform itself

in order to be

ready to rise

above the

challenges

of the future.

2 ultratech | 2013 ar

To our valued sTockholders:

In 2013, Ultratech progressed in readying itself to lead not just today, but in

the future. The company made significant strides in its strategy to broaden

and diversify its revenue base by broadening its reach in areas such as

high-brightness light emitting diodes (HB-LEDs), wafer inspection and atomic

layer deposition (ALD). Responsive to the needs of our customers, we moved

forward on a comprehensive product strategy to address the technology

industry’s capital expenditure (capex) challenge by further improving our

cost-of-ownership value proposition. This was achieved by enhancing the

productivity of our systems to fortify our market leadership position. By taking

steps such as these, Ultratech is continuing to transform itself, in order to be

ready to rise above the challenges of the future.

Future ready strategies

In the past, some have questioned why Ultratech would invest to expand beyond

its core markets centered around the semiconductor logic devices driving the

mobile revolution. In fact, sales of Ultratech’s advanced packaging (AP) and laser

spike annealing (LSA) systems drove financial results over three years prior to

2013 that catapulted it onto Fortune Magazine’s top twenty ranking of the fastest

growing public companies. However, not soon after Ultratech’s past performance

won accolades, sales of equipment related to the manufacturing of semiconductor

logic devices took a step back as manufacturers struggled in 2013 to implement

the next-generation of process technology.


During 2013, the challenging move from two dimensional transistors to a vertical transistor

architecture, also called FinFET, was proving even more difficult than expected for Ultratech’s

customers. With production processes not ready to move forward in 2013, there was little need

for new equipment, despite the smart phone and tablet market remaining healthy. Although sales

of such production tools, including Ultratech’s AP and LSA systems, appear ready to resume at

healthy levels later in 2014, the declining sales in 2013 were a powerful testament to the wisdom

of Ultratech’s strategy to broaden its revenue base. Further diversifying into

other markets with strong growth prospects, such as HB-LED, ALD and

wafer inspection, now seems more prudent than ever.

Readying itself for the future, Ultratech’s strategies go beyond broadening its revenue base to

also address key industry challenges, including escalating semiconductor industry capex costs.

While incredibly technically difficult, transitions such as the move to three dimensional (3D)

transistor structures are also extremely expensive. With technology challenges related to

scaling and materials integration growing, the costs of the equipment capable of manufacturing

new structures keep escalating. Such increasing capital expenditure costs represent a barrier

to growth that must be overcome. As an initial step in its strategy to lower capex, Ultratech

is working to reduce the costs of equipment through extendibility of its hardware platform.

Ultratech’s Unity Platform for example represents a common platform that has already been

adopted across multiple product lines.

The Unity Platform has contributed to Ultratech delivering very reliable tools to its customers,

demonstrated in low warranty costs. The company will also continue to focus on not just delivering

superior technology, but also further improving its cost-of-ownership proposition. We believe

embracing a design philosophy that emphasizes more extendible platforms and lower materials

costs will allow us to lead the way in meeting the semiconductor industry’s cost challenges. In

our estimation, pivotal to delivering an even stronger financial future to our investors is continued

execution related to our strategies to simultaneously move beyond the AP and LSA markets and

address the growing cost challenges related to leading-edge semiconductor device production.

TSV

realiz ing rewards in semiconductors

Although there are big challenges related to advanced semiconductor production processes,

this is also where the biggest rewards lie for the foreseeable future. Ultratech has built a

commanding market position around advanced packaging, with its tools representing about

90 percent of installed steppers for this served market. Advanced packaging for logic devices

enables faster and thinner chips, thereby providing superior performance for thinner mobile devices.

During the year, the company further improved the performance and field operations support for its

AP lithography systems. Going forward, we expect this market to continue to outgrow the

general semiconductor market and generate the potential for significant value for our investors.

Previously, the AP market was the primary source of sales for Ultratech, but that changed with the

success of the first phase in Ultratech’s strategy to diversify its revenue base by pioneering laser spike

annealing technology. Sales of the company’s LSA systems are poised to not only outgrow the industry,

but continue to outperform AP tool sales. Although the pause in sales of tools for advanced logic

production also impacted LSA sales, we are optimistic looking ahead.


Source: VLSI Research

Millisecond Anneal Market Size Forecast $250

$200

$150

$100

$50

$0

2013 2014 2015 2016 2017 2018

Reve

nue

($M

)

Through Silicon ViasUltratech Advanced Packaging Systems Enable TSV Technology

advantages

• Improves system level performance without further transistor shrink

• Accommodates form factor requirements for leading edge consumer devices

• Improves bandwidth performance for high performance logic functions

Top Thin wafer

boTTom wafer

bonding sTrucTure

bonding inTerface

Thru-sil icon v ia

meTal l ines on backside of Thin wafer

preheaT laserco 2

a ir

purged micro-chamber

waTer-cooled plaTe

LSA 201LP Laser Spike Annealing System

advantages:

• Full Wafer Ambient Control

– Compatible with external selected gases

– Eliminate risk of oxidation during O2 sensitive applications

– Enable materials modification / interface engineering

– Eliminate ambient as a potential source of device performance or yield degradation

– Several systems installed in the field for 10nm development for high-k anneal, advanced silicide, etc.

The move to new technology nodes means the restart of increased purchases by manufacturers.

In the case of LSA tools, they are expected to be utilized in process steps with each node

progression, thereby further driving demand. In addition, during the year we continued to make

progress with memory manufacturers.

Although AP and LSA tools will remain core markets for Ultratech, our new Superfast wafer

inspection tool is now poised to begin contributing to revenue. During the year we validated

the core technology with manufacturers, delivered our first production system to a major

semiconductor company and shipped a second system. This low-cost inspection tool

can process over 100 wafers an hour and measure an enormous number of data points,

making it a double threat to the competition in terms of addressing both cost and technology

challenges with future advanced semiconductor manufacturing. Eventually, we expect wafer

inspection sales could even supersede those of our AP systems in further validation of our

market diversification strategy.


LSA 201LP

Macro Market Momentum

Source: Strategies Unlimited, February 2014

Glob

al P

acka

ged

LED

Mar

ket S

ize

LSA 201LP Laser Spike Annealing System

advantages:

• Full Wafer Ambient Control

– Compatible with external selected gases

– Eliminate risk of oxidation during O2 sensitive applications

– Enable materials modification / interface engineering

– Eliminate ambient as a potential source of device performance or yield degradation

– Several systems installed in the field for 10nm development for high-k anneal, advanced silicide, etc.

$30

$25

$20

$15

$10

$5

$0

Others

Automotive

Signs

Mobile/Display

Lighting

2013 2018

SuperfaSt

going Beyond semiconductors

To further broaden our revenue base, Ultratech is investing beyond the semiconductor market

into synergistic nanotechnology opportunities. In the lighting market, the company’s systems

are positioned to empower future low-cost production of HB-LEDs. Although sales of such

tools declined during the year, growing HB-LED market demand is now exceeding existing

production capacity. We also took advantage of the lull to educate manufacturers on the

superior cost of ownership around our HB-LED Sapphire lithography systems. We believe

our outreach to manufacturers puts us in an excellent position to capitalize on the new orders

for production tools we expect to begin materializing next year.

Ultratech also expanded into the atomic layer deposition market with its asset acquisition of

CambridgeNanoTech, and at the end of 2012 we focused on integrating and enhancing related

operations, as well as improving our ALD product family. We moved ALD operations into a new

state-of-the-art facility. We updated and redesigned for greater flexibility our two most popular

ALD tools. We also improved our operations and sales distribution networks. We did all of this

with a focus on serving the research organizations and universities developing new applications.

In our view ALD technologies capable of depositing films at atomic-levels of thinness have a bright

commercial future. We plan to be a part of that future when volume manufacturing applications

become practical in those markets we have determined to add value for our customer base.

Our strategy to lead the way there is to build on our market leadership amongst the research

community developing such applications.


Advanced Packaging Adoption

0 10% 20% 30% 40%

Percentage of Total IC

Source: Tech Search International, Internal Estimates

2021

2019

2017

2015

2013

SuperfaStcamera

wafer

beam eXpander

inTerferomeTer

laserSUPErfAST 3G Wafer Inspection System

advantages

• Lowest Cost of Ownership

• No Targets Needed

• Edge Monitoring (70,000 points at 5mm)

• Highest Resolution (>3 Million points)

a Future ready company

Looking ahead, Ultratech intends to outgrow the semiconductor industry in both of our primary

markets of advanced packaging and laser spike annealing. We continue to focus on solving the

major challenges our customers face, ranging from technical hurdles such as device leakage to

economic barriers including rising capital expenditures. We believe that the best way to remain a

market leader is to be the best at solving customer problems. By combining that same philosophy

with leading technology we also anticipate strong future growth in our new markets of wafer

inspection and high-brightness LEDs. Similarly, we are helping drive the advancement of ALD

technologies and should be well-positioned to benefit from growth in this segment as well.

At Ultratech, we believe that we are well on the way to successfully transitioning to an advanced

technology company in multiple high-growth markets. For our investors this transition would mean

not just delivering improving sales, but also decreasing our market concentration risks, as we

broaden our revenue base. At the same time, we continue to work hard maintaining and improving

our high levels of operational efficiency. Such efficiencies helped us perform well in 2013, despite

our present revenue concentration around the semiconductor logic market that was pausing in its

purchasing of tools. Although sales decreased by a third, in 2013 we managed to deliver a net

loss of only $7.5 million, when excluding an inventory reserve of $6.2 million of glass products

needed for some of our systems that are in short supply. We ended the year with an order

backlog of $133 million, a very healthy balance sheet and a forecast for semiconductor industry

growth to rebound over the next year.


Sincerely,

Arthur W. ZafiropouloChairman and Chief Executive Officer

Ultratech is today well positioned to financially outperform its high-tech peers. We possess

a strong portfolio of products in our core markets of advanced packaging and laser spike

annealing, as well as in our new markets of wafer inspection, high brightness LED and atomic

layer deposition. We paved the way for a return to growth by continuing our efforts to educate

our new manufacturing customers about the strong value proposition around our LSA, wafer

inspection and HB-LED tools. In advanced packaging we track multiple performance metrics

with our long-time customers and demonstrated compelling gains against the competition.

With our reorganization of CambridgeNanoTech we are now ready to educate the research

community about our ALD value proposition.

Ultratech is future ready. We are busy communicating our product leadership to our customers

and laying the ground work for a return to growth. We have only arrived at this point however,

thanks to the hard work of our employees, business partners and the support of you, our

stockholders. We thank you for your support during a year where we were strategically preparing

for the future and look forward to sharing in the resulting rewards over the years ahead.


executive directors

Arthur W. Zafiropoulo

Chairman, Chief Executive Officer and President

Bruce R. Wright

Senior Vice President, Finance, Chief Financial Officer

senior directors

Galen Fong

Senior Director,Worldwide Sales and Customer Service Operations

Russell H. Friedman

Vice President, SalesNorth America/Europe

Dave Ghosh

Senior Vice President, Corporate and Customer Service

Andrew M. Hawryluk, Ph.D.

Senior Vice President, Chief Technical Officer

S. David Holmes

Senior Vice President, Customer Relations

Y. Joe Iwasaki

President, Asia Pacific Sales Operations

Tammy Landon

Senior Vice President, Operations

Kenneth Looi

General Manager, International Sales

Jim McWhirter, Ph.D.

Vice President, EngineeringLaser Programs

David M. Owen, Ph.D.

Vice President, Chief Technologist Surface Metrology

Emily M. True, Ph.D.

Vice President, Engineering Lithography Programs

Yun Wang, Ph.D.

Senior Vice President and Chief Technologist, Laser Processing

Y. Chris Wong

Vice President, Global Service

Scott Zafiropoulo

Vice President, Marketing and Technology Transfer

(1) Member of the Compensation Committee

(2) Member of the Audit Committee

(3) Member of the Nominating and Corporate Governance Committee

(4) Member of the Business Development Committee

Board oF directors

Arthur W. Zafiropoulo

Chairman,Chief Executive Officer and President,Ultratech, Inc.

Michael Child1,4

Senior Advisor,T. A. Associates

Joel F. Gemunder1

RetiredFormer President and Chief Executive Officer,Omnicare, Inc.

Nicholas Konidaris2,3

President and Chief Executive Officer,Electric Scientific Industries, Inc.

Dennis R. Raney2,3,4

Independent Consultant

Henri Richard1,3,4

Senior Vice President,Worldwide OEM & Enterprise SalesSanDisk Corp.

Rick Timmins1,2

Venture Partner, G51 CapitalBoard Chairman, Central Texas Angel Network


u lt r at e c h 2 0 1 3 f o r m 1 0 - K a n d 1 0 - K / a

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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K(Mark one)

È Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the Fiscal Year Ended December 31, 2013

Or

‘ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For 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 RoadSan Jose, California 95134

(Address of principal executive offices) (Zip Code)

(408) 321-8835(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registered

Common Stock, $0.001 Par Value Per Share NASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes ‘ No È

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes ‘ No È

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not containedherein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to this Form 10-K. È

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ‘ Accelerated filer È

Non-accelerated filer ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes ‘ No È

The aggregate market value of voting stock held by non-affiliates of the Registrant, as of June 29, 2013, was approximately$668,573,378 (based upon the closing price for shares of the Registrant’s common stock as reported by the NASDAQ Global Marketon that date, the last trading date of the Registrant’s most recently completed second quarter). Shares of common stock held by eachofficer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemedto be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of January 31, 2014, the Registrant had 28,010,601 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Proxy Statement for the 2013 Annual Meeting of Stockholders are incorporated by reference into

Part III of this Annual Report on Form 10-K.

Ultratech, Inc.

Index

PART I.Item 1. Business 3Item 1A. Risk Factors 13Item 1B. Unresolved Staff Comments 25Item 2. Properties 25Item 3. Legal Proceedings 26Item 4. Mine Safety Disclosures 26

Part II.Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities 27Item 6. Selected Financial Data 29Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44Item 8. Financial Statements and Supplementary Data 46Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 79Item 9A. Controls and Procedures 79Item 9B. Other Information 80

PART III.Item 10. Directors, Executive Officers and Corporate Governance 81Item 11. Executive Compensation 81Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters 82Item 13. Certain Relationships and Related Transactions, and Director Independence 82Item 14. Principal Accountant Fees and Services 82

Part IV.Item 15. Financial Statements, Financial Statement Schedules, and Exhibits 83Signatures 87Schedule II 89Exhibit Index 90

PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K contains, in addition to historical information, certain forward-lookingstatements that involve significant risks and uncertainties, which are difficult to predict, and are not guarantees offuture performance. Such statements can generally be identified by words such as “anticipates,” “expects,”“remains,” “thinks,” “intends,” “will,” “could,” “believes,” “poised,” “estimates,” “continue,” and similarexpressions. Our actual results could differ materially from the information set forth in any such forward-lookingstatements. Factors that could cause or contribute to such differences include those discussed below, as well asthose discussed under “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

The Company

Ultratech, Inc. (referred to herein as “Ultratech,” the “Company”, “we”, “our” or “us”) develops,manufactures and markets photolithography, laser thermal processing, and inspection equipment designed toreduce the cost of ownership for manufacturers of semiconductor devices, including advanced packagingprocesses and various nanotechnology components such as thin film head magnetic recording devices (“thin filmheads” or “TFHs”), laser diodes, high-brightness light emitting diodes (“HBLEDs”) and atomic layer deposition(“ALD”) for customers located throughout North America, Europe, Singapore, Japan, Taiwan, Korea and the restof Asia. Ultratech was incorporated in the state of Delaware in 1992.

Lithography and ALD

We supply step-and-repeat photolithography systems based on one-to-one (“1X”) imaging technology tocustomers located throughout North America, Europe and Asia. We believe that our 1X steppers utilizing theWynne Dyson optical design offer cost and performance advantages, as compared with competitors’ contactaligners or reduction steppers, to semiconductor device manufacturers for applications involving line geometriesof 0.75 microns or greater (“non-critical feature sizes”) and to nanotechnology manufacturers.

Advanced packaging manufacturing processes such as flip chip, wafer level chip scale packaging(“WLCSP”) and 3D packaging techniques, require several lithography steps in the device fabrication process.We believe that the use of flip chip technology will continue to gain traction as customers migrate towardsleading edge technology nodes. It is expected that wafer level packaging technologies will continue to play animportant role for continued miniaturization of electronic products such as smartphones. As customers transitionto sub-28 nm manufacturing technology, traditional front end scaling is becoming increasingly complex. Assuch, semiconductor manufacturing companies are now also focusing on various packaging technologies such asThrough Silicon Via (“TSV”) to play an important role in delivering improved system level performance in thefuture. The manufacturing approach utilizing three dimensional (“3-D”) TSV technology alleviates interconnectdelay considerations by reducing global interconnect wiring length. In addition, TSV delivers superior bandwidthperformance, and power management improvements and addresses some device latency issues. Severalcustomers are also evaluating silicon interposer technology solutions for delivering improved bandwidth andsystem level performance.

Lithography is one of the critical process steps that affect the final device performance and associated yieldfor advanced packaging technology. The use of 1X stepper technology provides superior operational flexibilityfor thick resists utilized in the advanced packaging market. Furthermore the use of our proprietary alignmentsystems enables easy insertion of our products for any back end of line application. Lastly, we have alsodeveloped a large number of application specific features which deliver technology leadership and superioreconomic value for our customers. Our steppers are used to manufacture high volume, low cost semiconductorsused in a variety of applications such as communications, personal computing, automotive control systems,power systems and consumer electronics. We also supply 1X photolithography systems to thin film headmanufacturers and believe that our steppers offer advantages over certain competitive reduction lithography tools

3

with respect to field size, throughput, specialized substrate handling and cost of ownership savings. In December2012, we purchased certain assets of Cambridge NanoTech, Inc. (“Cambridge”) which was a technological leaderin the ALD market. We will continue to pursue selling opportunities in the ALD market focusing our efforts onuniversities and research institutes. Additionally, we may sell these products for production applications.

Laser Anneal Technology

Device scaling has been the predominant means pursued by the semiconductor industry to achieve the gainsin productivity and performance quantified by Moore’s Law. In the past several years, scaled device performancehas been compromised because traditional transistor materials, such as silicon, silicon dioxide, and polysilicon,have been pushed to their fundamental materials limits. Continued scaling thus requires the introduction of newmaterials. For example, the traditional gate dielectric has been silicon dioxide, and as devices are scaled below 45nanometers (nm), high K material such as hafnium oxide must be considered because silicon dioxide begins tolose its effectiveness. These new materials impose added challenges to the methods used to dope and activatesilicon to produce very shallow, highly activated junctions (the main challenges regarding short channel effectsinclude achieving maximum activation and minimal diffusion while maintaining abrupt junctions).

By leveraging our core competencies in optics engineering and system integration and our extensiveknowledge of laser thermal processing, we introduced our laser spike annealing system to enable thermalannealing solutions at the 65 nm technology node and below. This advanced annealing technology providessolutions to the difficult challenge of fabricating ultra-shallow junctions and highly activated source/draincontacts. Laser thermal processing offers the flexibility to operate at near-instantaneous timeframes(microseconds to milliseconds) at temperatures below the melting point of silicon (1412° C). At thesetemperatures and anneal times, full activation is achieved with negligible diffusion. In addition, our proprietaryhardware design minimizes the pattern density effect, reducing absorptivity variations.

Inspection

In 2012, we introduced a new in-line wafer inspection system, the Superfast 3G, based on patented coherentgradient sensing technology (“CGS”). The CGS technology was developed at the California Institute ofTechnology during the 1990’s, and we acquired the rights to develop the CGS technology when we acquiredcertain assets of a semiconductor inspection startup, Oraxion Inc., in July 2006. We developed a next-generationsystem in 2007 which was primarily used internally. Superfast 3G represents the third generation of thistechnology, which is focused on the inspection of a number of critical semiconductor inspection steps.

Our products and markets are more fully described below.

General Background

The fabrication of devices such as integrated circuits (“semiconductors” or “ICs”) requires a large numberof complex processing steps, including deposition, photolithography and etching.

Photolithography is one of the most critical and expensive steps in IC device manufacturing.Photolithography exposure equipment is used to create device features by patterning a light-sensitive polymercoating on the wafer surface using a photomask containing the master image of a particular device layer.Typically, each exposure results in the patterning of a different deposited layer, and therefore requires a differentpattern on the device. Each new device layer must be properly aligned to previously defined layers beforeimaging takes place, so that structures formed on the wafers are correctly placed, one on top of the other, in orderto ensure a functioning device.

Since the introduction of the earliest commercial photolithography tools for IC manufacturing in the early1960s, a number of tools have been introduced to enable manufacturers to produce ever more complex devicesthat incorporate progressively finer line widths. In the early 1970s, photolithography tools included contact

4

printers and proximity aligners, which required the photomask to physically contact or nearly contact the waferin order to transfer the entire pattern during a single exposure. By the mid—1970s, there were also projectionscanners, which transferred the device image through reflective optics having a very narrow annular field thatspanned the width of the wafer. Exposure was achieved by scanning the entire photomask and wafer in a single,continuous motion across the annular field. Scanners were followed by steppers, which expose a rectangular areaor field on the wafer containing one or more chip patterns in a single exposure, then move or “step” the wafer toan adjacent site to repeat the exposure. This stepping process is repeated as often as necessary until the entirewafer has been exposed. By imaging a small area, steppers are able to achieve finer resolution, improved imagesize control and better alignment between the multiple device layers resulting in higher yield and higherperformance devices than was possible with earlier tools.

The two principal types of steppers currently in use by the semiconductor industry are reduction steppers,which are the most widely-used steppers, and 1X steppers. Reduction steppers, which typically have reductionratios of four- or five-to-one, employ photomask patterns that are four or five times larger than the device patternthat is to be exposed on the wafer surface. In addition, there is now a fourth generation of lithography tools,known as step-and-scan systems, that typically address device sizes of 0.35 micron and below. In contrast tosteppers, which require lenses that cover the entire field, step-and-scan optical systems have an instantaneousfield just large enough to span the width of a field and employ scanning to stretch coverage over the entire field.Each scan is followed by re-registration of the wafer with respect to the mask, i.e. “stepping”, to create multiplefields covering the entire wafer. The smaller instantaneous field size of step-and-scan system projection opticalsystems allows them to resolve finer geometries and scanning allows them to cover larger fields.

The principal advantage of reduction steppers and step-and-scan systems is that they may be used inmanufacturing steps requiring critical feature sizes and are therefore necessary for manufacturing advanced ICs.1X steppers, on the other hand, employ photomask patterns that are the same scale as the device pattern that isexposed on the wafer surface. The optical projection system employed in our 1X steppers is based on a WynneDyson design, which uses both a reflective mirror and refractive lens elements. This design approach leads to avery simple and versatile optical system that is less expensive than those employed in reduction steppers.Because our 1X optical design covers a much broader spectral range than reduction steppers, it delivers a greaterproportion of the exposure energy from the lamp to the wafer surface. Depending on the size of the lamp usedand the exposure energy required for an application, this can result in appreciably higher throughput. Resolutionconsiderations currently limit 1X steppers to manufacturing steps involving less-critical, larger feature sizes.Accordingly, we believe that sales of these systems are highly dependent upon capacity expansions by ourcurrent 1X customers, or by customers making the transition to chips containing “bump” connections, thatfacilitate the use of higher data rates and a higher number of connections.

In the past, manufacturers of ICs and similar devices purchased capital equipment based principally onperformance specifications. In view of the significant capital expenditures required to construct, equip andmaintain advanced fabrication facilities, relatively short product cycles and manufacturers’ increasing concernfor overall fabrication costs, we believe that focus has shifted to the total cost of ownership. Cost of ownershipincludes the costs associated with the acquisition of equipment, as well as components based on throughput,yield, up-time, service, labor overhead, maintenance, and various other costs associated with owning and usingthe equipment. As a result, in many cases, the most technologically advanced system will not necessarily be themanufacturing system of choice.

In addition to enhancing our current lithography solutions, we continue to develop new tools to serve newmarkets such as advanced annealing. The LSA family of tools is aimed at volume production of advanced state ofthe art devices. These products, based on the same platform and stage technology as our advanced lithographytools, employ a 3500 Watt carbon dioxide laser to activate ultra-shallow, transistor junctions. Annealing timesare reduced from several seconds, typical for the current generation of Rapid Thermal Processing (“RTP”)equipment, to a millisecond or less. This results in more abrupt junctions with higher dopant activation levels andleads to transistors with higher drive currents and lower leakage. While this technology is expected to be useful

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for multiple IC generations, we anticipate that eventually this technology will be superseded by a laser thermalprocessing technology that will exceed the melting point of silicon (1412°C) and reduce the processing timebelow one microsecond, thereby achieving even higher performance characteristics with almost “zero” thermalbudget. We believe these new laser thermal processing technologies remove several critical barriers to futuredevice scaling and will help to extend Moore’s Law well into the future.

Thermal annealing is used by the semiconductor industry for a variety of process steps, including activationof implanted impurities, dopant activation, dielectric film formation, formation of silicides and stabilization ofcopper grain structures. Our LSA systems compete with annealing tools currently in use by manufacturers ofsemiconductor devices, including both furnaces and RTP systems. It is widely recognized that there is a need fortools that anneal at higher temperatures for shorter periods of time. We believe our current laser annealing toolsare already providing this capability in a production environment for dopant activation. Our customers are alsodeveloping other applications for our laser annealing tools such as k-dialetric anneal and silicide formation.

Inspection requirements are evolving rapidly with the development of the next-generation device nodes.Tighter device specifications, new materials and new device geometries necessitate new ways to identify andeliminate the sources of defects that compromise device performance and reduce yield. The cost of these defectsis also increasing; not only do individual wafers have more value, but more importantly, rapid resolution ofdefects and process issues can dramatically reduce time-to-market by enabling the ramp to high volumeproduction sooner. Traditional inspection techniques can often be difficult to extend without significant increasein cost of ownership or decrease in throughput. New inspection techniques that are accurate, precise, rapid andprovide large amounts of data are essential for providing device manufacturers the insight into efficientlyresolving manufacturing issues during development and high-volume production alike.

Products

We currently offer two different series of 1X lithography systems for use in the semiconductor fabricationprocess: the 1000 series, which addresses the markets for HBLED, semiconductor fabrication andnanotechnology applications; and the AP series, which is designed to meet the requirements of the advancedpackaging market. These steppers currently offer minimum feature size capabilities ranging from 2.0 microns to0.75 microns.

The 1000 series systems are small field systems available with gh-line, i-line and broadband ghi-lineillumination options. We offer the Sapphire 100 and Sapphire 100E for HBLED applications, the Star 100 forsemiconductor and nanotechnology applications, and the Nanotech 190 for data storage applications for backendTFH processing. These 1000 series platform systems are typically used in the manufacture of HBLED’s, powerdevices, ASICs, analog devices and compound semiconductors. In addition, this platform is used for a number ofnanotechnology applications.

Nanotechnology manufacturing combines electronics with mechanics in small devices. We have defined ananotechnology device as a device that has at least one dimension in the XYZ direction less than 0.1 microns.Examples include accelerometers used to activate air bags in automobiles and membrane pressure sensors used inindustrial control systems. These micro-machined devices are manufactured on silicon substrates usingphotolithography techniques similar to those used for manufacturing semiconductors and thin film head devices.

The NanoTech steppers have enhanced capabilities directed at TFH backend, or rowbar processingapplications. These steppers are used to expose the Air Bearing Surface (“ABS”) patterns on rowbars. Webelieve that our NanoTech steppers offer technology and productivity advantages over alternative technologies.

In 2010, we introduced the Sapphire 100 system, and in 2011 we introduced the Sapphire 100E system.These systems are configurable with customized options designed specifically for high volume HBLEDmanufacturing applications. The Sapphire 100 and the Sapphire 100E are also based on the 1000 Series platform,with additional features developed specifically for HBLED lithography applications. HBLED manufacturing

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requires special substrate handling capabilities for the small diameter sapphire and silicon carbide substrates usedto manufacture the LED devices for display backlighting and general lighting applications. For HBLEDapplications, we believe our Sapphire 100 and our Sapphire 100E steppers offer depth of focus, productivity andyield improvement advantages over competitive product offerings.

For the advanced packaging market, we offer our AP series built on the Unity Platform®. These advancedpackaging systems were developed for high volume flip-chip and WLCSP manufacturing and 3-D packagingapplications. They provide broadband or selective exposure (gh, i, or ghi-line), and are used in conjunction withdownstream processes to produce a pattern of bumps, or metal connections, on the bond pads of the die for flipchip devices. Using flip chip interconnect may result in reduced signal inductance, reduced power/groundinductance, die shrink advantages and reduced package footprint.

The AP series, consisting of the AP300W, AP300 and AP200, is built on our Unity Platform and features acustomer-configurable design that supports flexible manufacturing requirements as well as tool extendibility formultiple device generations. Designed specifically for advanced packaging applications, the AP systems integratethe processing advantages associated with our advanced packaging lithography equipment with the productivitybenefits of our Unity Platform. We believe that this family of lithography systems support a lower cost-of-ownership strategy due to significant throughput enhancements, higher reliability, and superior alignment andillumination systems.

We offer a family of advanced laser-based thermal annealing tools built on our Unity Platform, the LSA101,LSA101LP, LSA201 and LSA201LP. In addition to our flagship model, the LSA101, which enables junctionactivation and other advanced front-end annealing processes for the 28nm node and below, we have introduced anovel dual beam technology extending the system’s capabilities to lower processing temperatures (LSA101LP).The addition of the LP dual beam is targeted to enable middle-of-line (MOL) applications such as nickel silicideformation,. The LSA201 is our latest LSA product offering, which enables full-wafer ambient control processingtargeted for sub-20nm nodes. The LSA201’s simple and robust design includes our patented micro-chamberdesign for achieving ambient control in a scanning system. The LSA201 platform can also be configured with thedual beam laser mentioned above-named the LSA201LP. As devices scale below 20nm, we believe the ambientcontrol capability enables new applications such as high-k anneal and film property modification.

In 2012, we also introduced our new in-line wafer inspection system, the Superfast 3G, which provides theflexibility to address a wide range of applications including improved overlay control and enhanced yield. Atadvanced technology nodes, variations in stress and distortion on a wafer can have a significant impact on deviceperformance and yield. Based on CGS technology, we believe that our Superfast 3G provides the industry’shighest wafer resolution for the targeted applications and measures over 3 million points of data per 300mmwafer. The Superfast 3G is unique in that it collects data from the whole wafer simultaneously, providingsignificantly higher data density without the need for targets or pads. The system’s high data density enables awide range of applications from one measurement, as within-die, die-to-die and wafer-to-wafer processvariations can be characterized quickly and comprehensively. The Superfast 3G approach provides other keyadvantages as well. First, data is obtained within each die at the location of the devices (not the location of a testtarget) and within-die variations can be mapped via approximately 10,000 data points. Second, data acquisition isinherently faster using rapid image capture of the whole wafer with a camera. Third, data is obtained to within2mm of the wafer edge, providing a means to characterize issues with edge-die, which dominate yield loss atleading edge nodes.

In addition to selling new systems, we sell upgrades to systems in our installed base.

Research, Development and Engineering

The semiconductor and nanotechnology industries are subject to rapid technological change and newproduct introductions and enhancements. We believe that continued and timely development and introduction ofnew and enhanced systems to serve these markets is essential for us to maintain our competitive position. We

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have made and continue to make substantial investments in the research and development of our core opticaltechnology, which we believe is critical to our future financial results. We intend to continue to develop ourtechnology and to develop innovative lower cost of ownership products and product features to meet customerdemands. Current engineering projects include continued research and development and process insertion for ourlaser thermal processing technologies, continued development of our 1X stepper products and the introduction ofnew products. Other research and development efforts are currently focused on: performance enhancement anddevelopment of new features for existing systems, both for inclusion as a standard component in our systems andto meet special customer order requirements; reliability improvement; and manufacturing cost reductions. Theseresearch and development efforts are undertaken, principally, by our research, development and engineeringorganizations and costs are generally expensed as incurred. Other operating groups within Ultratech support ourresearch, development and engineering efforts, and the associated costs are expensed as incurred.

We work with many customers to jointly develop technology required to manufacture advanced devices orto lower the customer’s cost of ownership. We also have a worldwide engineering support organization includingreticle engineering, photo processing capability and applications support.

We have historically devoted a significant portion of our financial resources to research and developmentprograms and expect to continue to allocate significant resources to these efforts in the future. As ofDecember 31, 2013, we had approximately 88 full-time employees engaged in research, development andengineering. For 2013, 2012 and 2011, total research, development and engineering expenses wereapproximately $33.6 million, $30.1 million and $23.6 million, respectively, and represented 21%, 13% and 11%of our net sales, respectively.

Sales and Service

We market and sell our products in North America, Europe and Asia principally through our direct salesorganization. We also have service personnel based throughout the United States, Europe, Japan and the rest ofAsia. We believe that as semiconductor and nanotechnology device manufacturers produce increasingly complexdevices, they will require an increased level of support. Global support capability as well as product reliability,performance, yield, cost, uptime and mean time between failures are increasingly important factors by whichcustomers evaluate potential suppliers of photolithography equipment. We believe that the strength of ourworldwide service and support organization is an important factor in our ability to sell our systems, maintaincustomer loyalty and reduce the maintenance costs of our systems. In addition, we believe that working with oursuppliers and customers is necessary to ensure that our systems are cost effective, technically advanced anddesigned to satisfy customer requirements.

We support our customers with field service, applications, technical support service engineers and trainingprograms. We provide our customers with comprehensive support and service before, during and after delivery ofour systems. To support the sales process and to enhance customer relationships, we work closely withprospective customers to develop hardware, applications test specifications and benchmarks, and often designcustomized applications to enable prospective customers to evaluate our equipment for their specific needs. Priorto shipment, our support personnel typically assist the customer in site preparation and inspection, and providecustomers with training at our facilities or at the customer’s location. We currently offer our customers variouscourses of instruction on our systems, including instructions in system hardware and related applications tools foroptimizing our systems to fit a customer’s particular needs. Our customer training program also includesinstructions in the maintenance of our systems. Our field support personnel work with the customer to install thesystem and demonstrate system readiness. Technical support is also available via telephone 24 hours a day, sevendays a week at our San Jose, California and Singapore locations and through our on-site personnel.

In general, we warrant our new systems against defects in design, materials and workmanship for one year. Weoffer our customers additional support after the warranty period for a fee in the form of service contracts forspecified time periods. Service contracts include various options such as priority response, planned preventivemaintenance, scheduled one-on-one training, daily on-site support, and monthly system and performance analysis.

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Manufacturing

Until the third quarter of 2010, we performed all of our manufacturing activities (final assembly, systemtesting and certain subassembly) in clean room environments totaling approximately 25,000 square feet locatedin San Jose, California. Performing manufacturing operations in California exposes us to a higher risk of naturaldisasters, including earthquakes. In addition, in the past, California has experienced power shortages which haveinterrupted our operations. Such shortages could occur in the future and could again interrupt our operationsresulting in product shipment delays, increased costs and other problems, any of which could have a materialadverse effect on our business, customer relationships and results of operations.

Beginning in the fourth quarter of 2010, we started a manufacturing operation in Singapore for theproduction of our lithography products. This facility consists of approximately 9,000 square feet of additionalclean-room production space for the manufacturing of our advanced packaging Unity AP products, HBLEDSapphire and Superfast 3G inspection product platforms. Our Singapore manufacturing personnel undergo anextensive training program.

Our manufacturing activities consist of assembling and testing components and subassemblies, which arethen integrated into finished systems. We rely on a limited number of outside suppliers and subcontractors tomanufacture certain components and subassemblies. We order one of the most critical components of ourtechnology, the glass for our 1X lenses, from external suppliers. We design the 1X lenses and provide the lensspecifications and the glass to other suppliers, who then machine the lens elements. We then assemble and testthe optical 1X lenses. We have recorded the critical parameters of each of our optical lenses sold since 1988, andbelieve that such information enables us to supply lenses to our customers that match the characteristics of ourcustomers’ existing lenses.

We procure some of our other critical systems’ components, subassemblies and services from single outsidesuppliers 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, we have been ableto obtain adequate services and supplies of components and subassemblies for our systems in a timely manner.We are actively engaged with a number of our Asia-based suppliers to provide high precision parts and majoropto-mechanical and electro-mechanical sub-assemblies and modules for our lithography products both inSingapore and San Jose. However, disruption or termination of certain of these sources could result in asignificant adverse impact on our ability to manufacture our systems. This, in turn, would have a material adverseeffect on our business, financial condition and results of operations. Our reliance on a sole or a limited group ofsuppliers and our reliance on subcontractors involve several risks, including a potential inability to obtain anadequate supply of required components due to the suppliers’ failure or inability to provide such components in atimely manner, or at all, and reduced control over pricing and timely delivery of components. Although thetimeliness, yield and quality of deliveries to date from our subcontractors have been acceptable, manufacture ofcertain of these components and subassemblies is an extremely complex process, and long lead-times arerequired. Any inability to obtain adequate deliveries or any other circumstance that would require us to seekalternative sources of supply or to manufacture such components internally could delay our ability to ship ourproducts, which could damage relationships with current and prospective customers and have a material adverseeffect on our business, financial condition and results of operations.

We maintain a company-wide quality and environmental program. Our San Jose operations achieved ISO9001:1994 certification in 1996 and ISO 14001:1996 certification in March 2001. Our San Jose ISO 9001certification was upgraded to the ISO 9001:2000 standard in January 2002, and to the ISO 9001:2008 standard inJune 2010. Our San Jose ISO 14001 certification was upgraded to the ISO 14001:2004 standard in June 2006.Our ISO 9001 and 14001 certifications were expanded to our Singapore operation in August 2011. Allcertifications have been maintained uninterrupted through the date of this report.

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Competition

The capital equipment industry in which we operate is intensely competitive. A substantial investment isrequired to install and integrate capital equipment into a semiconductor, semiconductor packaging ornanotechnology device production line. We believe that once a device manufacturer or packaging subcontractorhas selected a particular supplier’s capital equipment, the manufacturer generally relies upon that equipment forthe 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 supplier’s capitalequipment has been selected as they are relying on reduced cost of ownership solutions and a decision by acustomer to change solutions could have a material and adverse effect on our business and operating results.

Advanced Packaging and HBLED Lithography

We experience competition in the advanced packaging lithography market from various reduction steppersand proximity and projection aligner companies such as Canon Incorporated (“Canon”), Nikon Corporation(“Nikon”), Suss Microtec AG (“Suss Microtec”), Rudolph Technologies, Inc. (“Rudolph”), Shanghai MicroElectronics Equipment Co., Ltd (“SMEE”), ORC Manufacturing Co., Ltd. and Ushio and from third party re-saleof used projection systems. We expect our competitors to continue to improve the performance of their currentproducts and to introduce new products with improved price and performance characteristics. This could cause adecline in sales or loss of market acceptance of our steppers in our served markets, and thereby materiallyadversely affect our business, financial condition and results of operations. Enhancements to, or futuregenerations of, competing products may be developed that offer superior cost of ownership and technicalperformance features. We believe that to be competitive, we will require significant financial resources tocontinue to invest in new product development, to invest in new features and enhancements to existing products,to introduce new generation stepper systems in our served markets on a timely basis, and to maintain customerservice and support centers worldwide. In marketing our products, we may also face competition from suppliersemploying other technologies. In addition, increased competitive pressure has led to intensified price-basedcompetition in certain of our markets, resulting in lower prices and margins. Should these competitive trendscontinue, our business, financial condition and operating results may be materially adversely affected.

Our primary competition in the high brightness lithography market comes from contact, proximity andprojection aligners offered by companies such as Suss Microtec, Ushio and EV Group, by stepper companiessuch as SMEE, as well as by third party sales of used reduction steppers. Although contact, proximity aligners,and used reduction steppers generally have lower purchase prices than new 1X steppers, 1X steppers offer loweroperating costs and favorable total cost of ownership in most applications. We believe that most device andHBLED manufacturers choose 1X steppers for the yield improvement, and lower modification costs, offered bythe use of non-contact projection lithography.

Laser Thermal Processing

With respect to our laser annealing technologies, marketed under the LSA product name, our primarycompetition comes from companies such as Dainippon Screen Manufacturing Co., Ltd., Applied Materials, Inc.and Mattson Technology, Inc. Many of these companies offer products utilizing RTP, which is the dominantmanufacturing technology for devices above 65nm. The dopant diffusion in the lateral dimension resulting fromthe time scales associated with RTP limits the scaling of transistors to advanced technology nodes. Shorterannealing times result in shallower and more abrupt junctions and faster transistors. We believe that RTPmanufacturers recognize the need to reduce thermal budgets and are working toward this goal. Severalcompanies offer annealing tools that incorporate flash lamp anneal (“FLA”) technology, a potential advancedannealing solution, in order to reduce annealing times and increase anneal temperatures. Developers of FLAtechnology claim to have overcome annealing difficulties at the 28nm node and below. This technique, whichemploys flash lamps, has shown improvements over RTP in junction depth and sheet resistance, but we believeFLA suffers from pattern-related non-uniformities and could require additional, costly processes to equalize thereflectivity of different areas within the chip or wafer. Our proprietary laser thermal processing solution has been

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specifically developed to provide junction annealing on near-instantaneous timescales, while achieving highactivation levels, and doing so very uniformly within the chip and within the wafer due to our unique longwavelength technology. LSA, our first implementation of laser thermal processing, activates dopants in themicrosecond-to-millisecond time frame without melting. Our research indicates that, at temperatures just belowthe melting point of silicon, time durations in the microsecond to millisecond range, are required to achieve fullactivation, with minimal dopant diffusion.

In July 2000, we licensed certain rights to our then existing laser thermal processing technology, withreservations, to a competing manufacturer of semiconductor equipment. This company and others currently offerlaser annealing tools to the semiconductor industry that compete with our offerings.

Inspection

Competition for the Superfast 3G inspection systems comes from a wide range of companies, includinglarge companies such as KLA-Tencor, Nanometrics, Rudolph, Frontier Semiconductor (“FSM”) and NovaMeasuring Instruments and numerous smaller companies developing and manufacturing inspection equipment.Similarly, there is an extremely wide range of technologies and approaches used by the competitors. Eachindividual technology will have advantages for certain specific inspection applications. In general, thesecompetitors offer systems that inspect and measure at one location on the wafer, or one data point, at a time. Thiscan limit overall data density to only a few hundred data points per wafer, as well as throughput. Often thesecompetitive systems require dedicated targets, pads or other special features in order to make a measurement.

Intellectual Property Rights

Although we attempt to protect our intellectual property rights through patents, copyrights, trade secrets andother measures, we believe that our success will depend more upon the innovation, technological expertise andmarketing abilities of our employees. Nevertheless, we have a policy of seeking patents when appropriate oninventions resulting from our ongoing research and development and manufacturing activities. Our intellectualproperty portfolio contains 953 patents and patent applications. We have patent expiration dates ranging fromJanuary 2014 to May 2030. In addition, we also have various registered trademarks and copyright registrationscovering mainly applications used in the operation of our systems. We also rely upon trade secret protection forour confidential and proprietary information. We may not be able to protect our technology adequately andcompetitors may be able to develop similar technology independently. Our pending patent applications may notbe issued or U.S. or foreign intellectual property laws may not protect our intellectual property rights. Inaddition, litigation may be necessary to enforce our patents, copyrights or other intellectual property rights, toprotect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defendagainst claims of infringement. Such litigation has resulted in, and in the future could result in, substantial costsand diversion of resources and could have a material adverse effect on our business, financial condition andresults of operations, regardless of the outcome of the litigation. Patents issued to us may be challenged,invalidated or circumvented and the rights granted thereunder may not provide competitive advantages to us.Furthermore, others may independently develop similar technology or products, or, if patents are issued to us,design around the patents issued to us. Invalidation of our patents related to those technologies, or the expirationof patents covering our key technologies, could allow our competitors to more effectively compete against us,which could result in less revenue for us.

Environmental Regulations

We are 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. We believe that we arecurrently in compliance in all material respects with such regulations and that we have obtained all necessaryenvironmental permits to conduct our business. Nevertheless, the failure to comply with current or futureregulations could result in substantial fines being imposed on us, suspension of production, and alteration of the

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manufacturing process or cessation of operations. Such regulations could require us to acquire expensiveremediation equipment or to incur substantial expenses to comply with environmental regulations. Any failure byus to control the use, disposal or storage of, or adequately restrict the discharge of, hazardous or toxic substancescould subject us to significant liabilities.

Customers, Applications and Markets

We sell our systems to semiconductor, advanced packaging, HBLED, TFH and various othernanotechnology manufacturers located throughout North America, Europe and Asia. We sell our ALD systems touniversities and research institutes throughout the world. Semiconductor manufacturers have purchased the 1000Series steppers, the AP series of steppers, the NanoTech steppers or the LSA systems for the fabrication and/orpackaging of microprocessors, applications processors, microcontrollers, DRAMs, ASICs and a host of otherdevices. Such systems could be used in mix-and-match applications with other production tools, such as forreplacements of contact proximity printers for flip chip applications, and for high volume capacity production.

On a market application basis, sales to the semiconductor industry, primarily for advanced packaging andlaser thermal processing applications, accounted for approximately 83% of systems revenue for the year endedDecember 31, 2013, as compared to 84% and 86% for the years ended December 31, 2012 and 2011,respectively. During the years ended December 31, 2013, 2012 and 2011, approximately 17%, 16% and 14%,respectively, of our systems revenue was derived from sales to nanotechnology manufacturers, including microsystems, TFH and optical networking device manufacturers. Our future results of operations and financialposition would be materially adversely impacted by a downturn in any of these industries, or by loss of marketshare in any of these industries.

International sales accounted for approximately 72%, 65% and 60% of total net sales for the years endedDecember 31, 2013, 2012 and 2011, respectively, with Asia representing 63%, 46% and 51% of total net salesfor those same years and Europe representing 9%, 19% and 10% of total net sales for those same years,respectively.

Sales of our systems depend, in significant part, upon the decision of a prospective customer to increasemanufacturing capacity or to restructure current manufacturing facilities, either of which typically involves asignificant commitment of capital. Many of our customers in the past have cancelled or postponed thedevelopment of new manufacturing facilities and have substantially reduced their capital equipment budgets. Inview of the significant investment involved in a system purchase, we have experienced and may continue toexperience delays following initial qualification of our systems as a result of delays in a customer’s approvalprocess. Additionally, we are presently receiving orders for some systems that have lengthy delivery schedules,which may be due to longer production lead times or a result of customers’ capacity scheduling requirements.For these and other reasons, our systems typically have a lengthy sales cycle during which we may expendsubstantial funds and management effort in securing a sale. Lengthy sales cycles subject us to a number ofsignificant risks, including inventory obsolescence and fluctuations in operating results, over which we have littleor no control. In order to maintain or exceed our present level of net sales, we are dependent upon obtainingorders for systems that will ship and be accepted in the current period. We may not be able to obtain those orders.

Backlog

We schedule production of our systems based upon order backlog, informal customer commitments andgeneral economic forecasts for our targeted markets. We include in our backlog all accepted customer orders forour systems with assigned shipment dates within one year, as well as all orders for service, spare parts andupgrades, in each case, that management believes to be firm. However, all orders are subject to cancellation orrescheduling by the customer with limited or no penalties. Because of changes in system delivery schedules,cancellations of orders and potential delays in system shipments, our backlog at any particular date may notnecessarily be representative of actual sales for any succeeding period. As of December 31, 2013, our backlog

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was approximately $132.7 million, including $4.7 million of products shipped but not yet installed. Cancellation,deferrals or rescheduling of orders by these customers would have a material adverse impact on our future resultsof operations.

Employees

At December 31, 2013, we had approximately 351 full-time employees, including 88 engaged in research,development and engineering, 40 in sales and marketing, 114 in customer service and support, 70 inmanufacturing and 39 in general administration and finance. We believe our future success depends, in largepart, on our ability to attract and retain highly skilled employees. None of our employees are covered by acollective bargaining agreement. We have, however, entered into employment agreements with our ChiefExecutive Officer and Chief Financial Officer. We consider our relationships with our employees to be good.

Information Available at the SEC

Copies of any materials that we have filed with the SEC can be viewed at the SEC’s Public Reference Roomat 100 F Street NE, Washington, DC 20549. Information regarding the operations of the Public Reference Roomcan be obtained from the SEC by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains a websitethat contains reports, proxy and other information that we have filed with the SEC. The SEC website can befound at http://www.sec.gov.

Information Available on Our Website

Our website is located at www.ultratech.com. We make available, free of charge, through our website, ourannual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (and amendmentsto those reports), as soon as reasonably practicable after such reports are filed electronically with the SEC. Wehave adopted a Code of Ethics for our principal executive officer, principal financial officer, principal accountingofficer or controller, or persons performing similar functions. We have posted this Code of Ethics on our website.Any future amendments to this Code will also be posted on our website.

ITEM IA. RISK FACTORS

In addition to risks described in the foregoing discussions under “Business,” including but not limited tothose under “Products,” “Research, Development and Engineering,” “Sales and Service,” “Manufacturing,”“Competition,” “Intellectual Property Rights,” “Environmental Regulations,” “Customers, Applications andMarkets,” “Backlog,” and “Employees,” the following risks apply to our business and us:

The semiconductor industry historically has been highly cyclical and has experienced periods ofoversupply and technology changes, which have in turn affected the market for semiconductor equipmentsuch as ours and which can adversely affect our results of operations during such periods.

Our business depends in significant part upon capital expenditures by manufacturers of semiconductors,advanced packaging semiconductors and nanotechnology components which in turn depend upon the current andanticipated market demand for such devices and products utilizing such devices. The semiconductor industryhistorically has been highly cyclical and has experienced recurring periods of oversupply and technologychanges. This has, from time to time, resulted in significantly reduced demand for capital equipment includingthe systems manufactured and marketed by us. We believe that markets for new generations of semiconductors,semiconductor packaging and inspection will also be subject to similar fluctuations. Our business and operatingresults would be materially adversely affected by downturns or slowdowns in the semiconductor packagingmarket or by loss of market share. Accordingly, we may not be able to achieve or maintain our current or priorlevel of sales. We attempt to mitigate the risk of cyclicality by participating in multiple markets includingsemiconductor, semiconductor packaging, semiconductor inspection and nanotechnology sectors as well as

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diversifying into new markets. We believe that diversifying into new markets such as laser-based annealing forimplant activation, lithography steppers for 3-D packaging, HBLED, ALD and inspection can help mitigate theeffects of this cyclicality in our industry. Despite such efforts, when one or more of such markets experiences adownturn or a situation of excess capacity, our net sales and operating results are materially adversely affected.For example, during 2013, we have experienced less revenue from laser processing and advanced packaging as aresult of a slowdown in the logic sector. Customers who manufacture both logic and memory devices arefocusing their capital spending on the memory sector at this time. We believe that as a result of cyclicality and ofother factors affecting our foundry customers, such as shifting customer demand, lower capacity utilization ratesand changing product designs, we have and will continue to experience the push out of orders to us anduncertainty in our business.

We operate in a highly competitive industry in which customers are required to invest substantialresources in each product, which makes it difficult to achieve significant sales to a particular customeronce another vendor’s equipment has been purchased by that customer.

The capital equipment industry in which we operate is intensely competitive. A substantial investment isrequired to install and integrate capital equipment into a semiconductor, semiconductor inspection,semiconductor packaging or nanotechnology device production line. We believe that once a device manufactureror packaging subcontractor has selected a particular supplier’s capital equipment, the manufacturer generallyrelies upon that equipment for the specific production line application and, to the extent possible, subsequentgenerations of similar products. Accordingly, it is difficult to achieve significant sales to a particular customeronce another supplier’s capital equipment has been selected.

We experience competition in advanced packaging from various proximity aligner and stepper companiessuch as Canon Incorporated, Nikon Corporation, Suss Microtec AG (“Suss Microtec”), Rudolph Technologies,Inc. (“Rudolph”), Shanghai Micro Electronics Equipment Co., Ltd (“SMEE”), ORC Manufacturing Co., Ltd. andUshio and used projection and reduction stepper systems. In nanotechnology, we experience competition fromcontact, proximity and projection aligner companies, such as Suss Microtec and Ushio as well as other third partystepper suppliers. We expect our competitors in the lithography arena to continue to improve the performance oftheir current products and to introduce new products with improved price and performance characteristics. Thiscould cause a decline in sales or loss of market acceptance of our steppers in our served markets, and therebymaterially adversely affect our business, financial condition and results of operations. Enhancements to, or futuregenerations of, competing products may be developed that offer superior cost of ownership and technicalperformance features.

With respect to our laser annealing technologies, marketed under the LSA100A and LSA101 productnames, our primary millisecond anneal competition comes from companies such as Dainippon ScreenManufacturing Co., Ltd., Applied Materials, Inc. and Mattson Technology, Inc. Applied Materials, Inc. andTokyo Electron Limited recently announced that they had entered into a definitive agreement to merge, and ifsuch merger is consummated, the combined company may have significant resources which could impact laserannealing as well as potentially other markets. Many of these companies offer products utilizing Rapid ThermalProcessing (“RTP”), which is the current prevailing manufacturing technology. RTP does not preventsemiconductor device manufacturers from scaling the lateral dimensions of their transistors to obtain improvedperformance, but diffusion resulting from the time scales associated with RTP limits the vertical dimension of thejunctions. Faster annealing times result in shallower and more abrupt junctions and faster transistors. We believethat RTP manufacturers recognize the need to reduce thermal cycle times and are working toward this goal. InJuly 2000, we licensed certain rights to our then existing laser thermal processing technology, with reservations,to a competing manufacturer of semiconductor equipment. We presently anticipate that this company and othersintend to offer laser annealing tools to the semiconductor industry that will compete with our offerings.

Another potential advanced annealing solution utilizes flash lamp annealing technology, or “FLA”. Severalcompanies have published papers on annealing tools that incorporate flash lamp technology in order to reduceannealing times and increase annealing temperatures. Developers of FLA technology claim to have overcome

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annealing difficulties at the advanced nodes. This technique, which employs flash lamps, has shownimprovements over RTP in junction depth and sheet resistance, but we believe FLA suffers from pattern-relatednon-uniformities and could require additional, costly processes to equalize the reflectivity of different areaswithin the chip or wafer. Our proprietary laser thermal processing solution has been specifically developed toprovide junction annealing on near-instantaneous time-scales, while achieving high activation levels. Laserthermal annealing, our first implementation of laser thermal processing, activates dopants in the microsecond-to-millisecond time frame without melting. Our research indicates that, at temperatures just below the melting pointof silicon, time durations in the microsecond to millisecond range, are required to achieve full activation, andminimal dopant diffusion.

Additionally, competition to our laser thermal processing products may come from other laser annealingtools, including those presently being used by the flat panel display industry to re-crystallize silicon.Manufacturers of these tools may try to extend the use of their technologies to semiconductor deviceapplications.

In the market for inspection systems, competition for inspection systems comes from a wide range ofcompanies, including large companies such as KLA-Tencor, Nanometrics, Rudolph, and numerous smallercompanies developing and manufacturing inspection equipment.

We believe that in order to be competitive, we will need to continue to invest significant financial resourcesin new product development, new features and enhancements to existing products, the introduction of newstepper systems in our served markets on a timely basis, and maintaining customer service and support centersworldwide. In marketing our products, we may also face competition from vendors employing othertechnologies. In addition, increased competitive pressure has led to intensified price-based competition in certainof our markets, resulting in lower prices and margins. Should these competitive trends continue, our business,financial condition and operating results may be materially adversely affected.

Our quarterly revenues and operating results are difficult to predict.

Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number offactors, not all of which are in our control. We manage our expense levels based in part on our expectations offuture revenues, and a certain amount of those expenses are relatively fixed. As a result, a change in the timing ofrecognition of revenue or a change in margins can have a significant impact on our operating results in anyparticular quarter. Factors that may cause our results of operations to fluctuate include, but are not limited to:

• market conditions in the electronics and semiconductor industries;

• failure of suppliers to perform in a manner consistent with our expectations;

• manufacturing difficulties or delays;

• customer cancellations or delays in shipments, installations and/or system acceptances;

• competitive factors, including customers selecting competitors’ products, the introduction of newproducts by our competitors or any failure of our products to gain or maintain market acceptance; and

• changes in selling prices and product mix.

Our sales cycle is typically lengthy and involves a significant commitment of capital by our customers,which has subjected us, and is likely to continue to subject us, to delays in system acceptances of ourproducts and other risks, any of which could adversely impact our results of operations by, among otherthings, delaying recognition of revenue with respect to those orders and resulting in increased installation,qualification and similar costs.

Sales of our systems depend, in significant part, upon the decision of a prospective customer to increasemanufacturing capacity, replace older equipment or to restructure current manufacturing facilities, any of which

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typically involves a significant commitment of capital. Many of our customers in the past have canceled orpostponed the development of new manufacturing facilities and have substantially reduced their capitalequipment budgets. Many of our largest customers currently face uncertainty in the markets they serve, resultingin the push out of orders to us and uncertainty in our business. In view of the significant investment involved in asystem purchase, we have experienced and may continue to experience delays following initial qualification ofour systems as a result of delays in a customer’s approval process. Additionally, we are presently receivingorders for systems that have lengthy delivery schedules, which may be due to longer production lead times or aresult of customers’ capacity scheduling requirements. For these and other reasons, our systems typically have alengthy sales cycle during which we may expend substantial funds and management effort in securing a sale.Lengthy sales cycles subject us to a number of significant risks, including inventory obsolescence andfluctuations in operating results, over which we have little or no control. In order to maintain or exceed ourpresent level of net sales, we are dependent upon obtaining orders for systems that will ship and be accepted inthe current period. We may not be able to obtain those orders. Other important factors that could cause demandfor our products to fluctuate include:

• competitive pressures, including pricing pressures, from companies that have competing products;

• changes in customer product needs or product preferences; and

• strategic actions taken by our competitors.

We currently spend, and expect to continue to spend, significant resources to develop, introduce andcommercialize our offered products and future generations of, and enhancements to these products. Wemay not be successful in the timely introduction of these products which may cause sales of these productsto decrease or not increase as expected.

Currently, we are devoting significant resources to the development, introduction and commercialization ofour laser thermal processing systems, and other products, and future generations of, and enhancements to thoseproducts. We intend to continue to develop these products and technologies, and will continue to incur significantoperating expenses in the areas of research, development and engineering, manufacturing and general andadministrative costs in order to develop, produce and support these new products and enhancements.Additionally, gross profit margins and inventory levels may be further adversely impacted in the future by costsassociated with the initial production of new products. Introduction of new products generally involves higherinstallation costs and product performance uncertainties that could delay system acceptance of our systems,resulting in a delay in recognizing revenue associated with those systems and a reduction in gross margins. Thesecosts include, but are not limited to, additional manufacturing overhead, additional inventory write-downs, costsof demonstration systems and facilities and costs associated with the establishment of additional after-salessupport organizations. Additionally, operating expenses may increase, relative to sales, as a result of addingadditional marketing and administrative personnel, among other costs, to support our new products. If we areunable to achieve significantly increased net sales or if our sales fall below expectations, our operating resultscould be materially adversely affected.

Our ability to commercialize our laser thermal processing technologies depends on our ability todemonstrate a manufacturing-worthy tool. We do not presently have in-house capability to fabricate devices. Asa result, we must rely on partnering with semiconductor companies to develop the anneal process. Thedevelopment of new process technologies is largely dependent upon our ability to interest potential customers inworking on joint process development. Our ability to deliver timely solutions is also limited by wafer turnaroundat the potential customer’s fabrication facility.

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Our stock price has experienced significant volatility in the past and we expect this to continue in thefuture as a result of many factors, some of which could be unrelated to our operating performance, andsuch volatility can have a major impact on the number of shares subject to outstanding stock options andrestricted stock units that are included in calculating our earnings per share.

We believe that factors such as announcements of developments related to our business, fluctuations in ouroperating results, a shortfall in revenue or earnings, changes in our or analysts’ expectations, general conditionsin the semiconductor and nanotechnology industries or the worldwide or regional economies, sales of oursecurities into the marketplace, an outbreak or escalation of hostilities, announcements of technologicalinnovations or new products or enhancements by us or our competitors, developments in patents or otherintellectual property rights and developments in our relationships with our customers and suppliers could causethe price of our Common Stock to fluctuate, perhaps substantially. The market price of our Common Stock hasfluctuated significantly in the past and we expect it to continue to experience significant fluctuations in thefuture, including fluctuations that may be unrelated to our performance.

As of December 31, 2013, we had outstanding options to purchase and outstanding restricted stock units fora total of 4.1 million shares of our Common Stock. Among other determinants, the market price of our stock hasa major impact on the number of shares subject to outstanding stock options and restricted stock units that areincluded in the weighted-average shares used in determining our net income per share. During periods of extremevolatility, the impact of higher stock prices can have a materially dilutive effect on our net income per share.Additionally, shares subject to outstanding options and restricted stock units are excluded from the calculation ofnet income per share when we have a net loss or when the exercise price and the average unrecognizedcompensation cost of the stock option or restricted stock unit is greater than the average market price of ourCommon Stock, as the impact of the stock options or restricted stock units would be anti-dilutive.

We sell our products primarily to a limited number of customers and to customers in a limited number ofindustries, which subjects us to increased risks related to the business performance of our customers, andtherefore their need for our products, and the business cycles of the markets into which we sell.

Historically, we have sold a substantial portion of our systems to a limited number of customers. In the yearended December 31, 2013, Siliconware Precision Industries (“SPIL”) accounted for 16% of our system sales. Inthe year ended December 31, 2012, Global Foundries (“GFI”), Intel Corporation and Taiwan SemiconductorCorporation (“TSMC”) accounted for 25%, 21% and 11% of our system sales, respectively. We expect that salesto a relatively few customers will continue to account for a high percentage of our net sales in the foreseeablefuture and believe that our financial results depend in significant part upon the success of these major customersand our ability to meet their future capital equipment needs. Although the composition of the group comprisingour largest customers may vary from period to period, the loss of a significant customer or any reduction inorders by a significant customer, including reductions due to market, economic or competitive conditions in thesemiconductor, semiconductor packaging, semiconductor inspection or nanotechnology industries or in theindustries that manufacture products utilizing integrated circuits, thin film heads or other nanotechnologycomponents, would likely have a material adverse effect on our business, financial condition and results ofoperations. Our ability to maintain or increase our sales in the future depends, in part, on our ability to obtainorders from new customers as well as the financial condition and success of our existing customers, thesemiconductor and nanotechnology industries and the economy in general.

In addition to the business risks associated with dependence on a few major customers, these significantcustomer concentrations have in the past resulted in significant concentrations of accounts receivable. Thesesignificant and concentrated receivables expose us to additional risks, including the risk of default by one ormore customers representing a significant portion of our total receivables. If we were required to take additionalaccounts receivable reserves, our business, financial condition and results of operations would be materiallyadversely affected.

On a market application basis, sales to the semiconductor industry, primarily for advanced packagingapplications and laser thermal processing applications, accounted for 83% and 84% of our systems revenue for

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the year ended December 31, 2013 and 2012, respectively. We sold $20.3 million of systems to nanotechnologymanufacturers, including micro systems, thin film head, ALD and optical device manufacturers for the yearended December 31, 2013, as compared to $30.6 million in sales for the year ended December 31, 2012. Systemsrevenue from the nanotechnology sector accounted for 17% of systems revenue for the year ended December 31,2013, as compared to 16% revenue in the year ended December 31, 2012. Our future operating results andfinancial condition would be materially adversely impacted by a downturn in any of these industries, or by lossof market share in any of these industries. A growing percentage of our backlog of system orders is comprised oflaser thermal processing tools. As our laser thermal processing tools are used for the continuation of reduceddevice geometries and customers seldom provide us with their future technical requirements, these tools may notmeet all customers’ requirements upon initial delivery and installation at the customer’s facility. As a result,system acceptance of the tool could be delayed while we perform testing and attempt to meet their requirements,or the order could be cancelled if we are unable to meet those requirements. Should significant demand notmaterialize, due to technical, production, market or other factors, our business, financial position and results ofoperations would be materially adversely impacted.

We rely on a limited number of outside suppliers and subcontractors to manufacture certain componentsand subassemblies, and on single or a limited group of outside suppliers for certain materials for ourproducts, which could result in a potential inability to obtain an adequate supply of required componentsdue to the suppliers’ failure or inability to provide such components in a timely manner, or at all, andreduced control over pricing and timely delivery of components and materials, any of which couldadversely affect our results of operations.

Our manufacturing activities consist of assembling and testing components and subassemblies, which arethen integrated into finished systems. We rely on a limited number of outside suppliers and subcontractors tomanufacture certain components and subassemblies. We order one of the most critical components of ourtechnology, the glass for our 1X lenses, from external suppliers. We design the 1X lenses and provide the lensspecifications and the glass to other suppliers, who then grind and polish the lens elements. We then assembleand test the optical 1X lenses.

We procure some of our other critical systems’ components, subassemblies and services from single outsidesuppliers 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, we have been ableto obtain adequate services and supplies of components and subassemblies for our systems in a timely manner.However, disruption or termination of certain of these sources could have a significant adverse impact on ourability to manufacture our systems. In addition, our failure to timely use components in our manufacturingprocesses due to delays or cancellation of orders may lead to write downs of inventory. A disruption in supply orinventory window would, in turn, have a material adverse effect on our business, financial condition and resultsof operations. Our reliance on a sole supplier or a limited group of suppliers and our reliance on subcontractorsinvolve several risks, including a potential inability to obtain an adequate supply of required components due tothe suppliers’ failure or inability to provide such components in a timely manner, or at all, and reduced controlover pricing and timely delivery of components. Although the timeliness, yield and quality of deliveries to datefrom our subcontractors have been acceptable, manufacture of certain of these components and subassemblies isan extremely complex process, and long lead-times are required. Any inability to obtain adequate deliveries orany other circumstance that would require us to seek alternative sources of supply or to manufacture suchcomponents internally could delay our ability to ship our products, which could damage relationships withcurrent and prospective customers and have a material adverse effect on our business, financial condition andresults of operations.

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Our industry is subject to rapid technological change and product innovation, which could result in ourtechnologies and products being replaced by those of our competitors, which would adversely affect ourbusiness and results of operations.

The semiconductor and nanotechnology manufacturing industries are subject to rapid technological change,evolving industry standards and new product introductions and enhancements. Our ability to be competitive inthese and other markets will depend, in part, upon our ability to develop new and enhanced systems and relatedapplications, and to introduce these systems and related applications at competitive prices and on a timely andcost-effective basis to enable customers to integrate them into their operations either prior to or as they beginvolume product manufacturing. We will also be required to enhance the performance of our existing systems andrelated applications. Our success in developing new and enhanced systems and related applications depends upona variety of factors, including product selection, timely and efficient completion of product design, timely andefficient implementation of manufacturing and assembly processes, product performance in the field andeffective sales and marketing. Because new product development commitments must be made well in advance ofsales, new product decisions must anticipate both future customer requirements and the technology that will beavailable to meet those requirements. We may not be successful in selecting, developing, manufacturing ormarketing new products and related applications or enhancing our existing products and related applications. Anysuch failure would materially adversely affect our business, financial condition and results of operations. Further,we may make substantial investments in new products before we know whether they are technically feasible orcommercially viable, and as a result may incur significant product development expenses that do not result innew products or revenues.

Because of the large number of components in our systems, significant delays can occur between a system’sintroduction and our commencement of volume production of such systems. We have experienced delays fromtime to time in the introduction of, and technical and manufacturing difficulties with, certain of our systems andenhancements and related application tools features and options, and may experience delays and technical andmanufacturing difficulties in future introductions or volume production of new systems or enhancements andrelated application tools features and options.

We may encounter additional technical, manufacturing or other difficulties that could further delay futureintroductions or volume production of systems or enhancements. Our inability to complete the development ormeet the technical specifications of any of our systems or enhancements and related applications, or our inabilityto manufacture and ship these systems or enhancements and related tools in volume and in time to meet therequirements for manufacturing the future generation of semiconductor or nanotechnology devices wouldmaterially adversely affect our business, financial condition and results of operations. In addition, we may incursubstantial unanticipated costs to ensure the functionality and reliability of our products early in the products’ lifecycles. If new products have reliability or quality problems, reduced orders or higher manufacturing costs, delaysin system acceptance, revenue recognition and collecting accounts receivable and additional service and warrantyexpenses may result. Any of such events may materially adversely affect our business, financial condition andresults of operations.

We are dependent on our key personnel, especially Mr. Zafiropoulo, our Chief Executive Officer, and ourbusiness and results of operations would be adversely affected if we were to lose our key employees.

Our future operating results depend, in significant part, upon the continued contributions of key personnel,many of whom would be difficult to replace. We have entered into employment agreements only with our ChiefExecutive Officer and Chief Financial Officer, and our employees are employed “at will.” The agreements withour Chief Executive Officer and Chief Financial Officer contain vesting acceleration and severance paymentprovisions that could result in significant costs or charges to us should the employee be terminated without cause,die or become disabled. We do not maintain any life insurance on any of our key employees. The loss of keypersonnel could have a material adverse effect on our business, financial condition and results of operations. Inaddition, our future operating results depend in significant part upon our ability to attract and retain otherqualified management, manufacturing, technical, sales and support personnel for our operations. There are only a

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limited number of persons with the requisite skills to serve in these positions and it may become increasinglydifficult for us to hire such personnel over time. At times, competition for such personnel has been intense,particularly in the San Francisco Bay Area where we maintain our headquarters and principal operations, and wemay not be successful in attracting or retaining such personnel. The failure to attract or retain such persons wouldmaterially adversely affect our business, financial condition and results of operations.

If we acquire companies, products, or technologies, we may face risks associated with those acquisitions.

We may not realize the anticipated benefits of any acquisition or investment. Acquisitions involve numerousrisks, including difficulties in the assimilation of the operations, technologies, personnel and products of theacquired companies; the diversion of management’s attention from other business concerns; risks of enteringmarkets in which we have limited or no direct experience; and the potential loss of key employees of theacquired company. In the event we acquire product lines, technologies or businesses which do not complementour business, or which otherwise do not enhance our sales or operating results, we may incur substantial write-offs and higher recurring operating costs, which could have a material adverse effect on our business, financialcondition and results of operations. We may, in the future, pursue additional acquisitions of complementaryproduct lines, technologies or businesses. Future acquisitions may result in potentially dilutive issuances ofequity securities, the incurrence of debt and contingent liabilities and amortization expenses and impairmentcharges related to goodwill and other intangible assets, which could materially adversely affect our financialcondition and results of operations. In the event that any such acquisition does occur, there can be no assuranceas to the effect thereof on our business or operating results.

We continue to expand our manufacturing and service operations in Singapore and customer supportoperations in other parts of the world, which will continue to result in exposure to risks inherent in doingbusiness outside the United States, any of which risks could harm our business, financial condition andoperating results.

Foreign operations subject us to risks related to the political, economic, legal and other conditions of foreignjurisdictions. These risks include risks related to:

• foreign exchange rate fluctuations;

• the need to comply with foreign government laws and regulations, including the imposition ofregulatory requirements, tariffs, and import and export restrictions;

• general geopolitical risks such as political and economic instability and changes in diplomatic and traderelationships;

• the need for effective management of dispersed operations far from our headquarters in California;

• the potential for strain on management resources;

• difficulty in hiring and retaining local personnel for the successful operation of our business in eachlocation;

• the need to effectively manage personnel in different languages and under different cultural and legalexpectations and requirements in certain locations;

• meeting growth objectives and employment projections;

• potentially less protection of intellectual property under the laws of foreign jurisdictions in certainlocations; and

• public safety or health concerns or natural disasters in foreign countries.

These risks could, among other things, result in product shipment delays, increased costs, unexpectedshutdowns or other business disruptions, or loss of benefits expected to be achieved by conducting operations inaffected jurisdictions. Any of the above risks, should they occur, could have a material adverse effect on ourbusiness, financial condition and results of operations.

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The continuing global or regional financial crises and any uncertainty created thereby, could result in thecancellation, deferral or rescheduling of orders by our customers as well as changes in projection of newbusiness.

Orders in backlog are subject to cancellation, deferral or rescheduling by a customer with limited or nopenalties. Sales of our systems depend, in significant part, upon the decision of a prospective customer toincrease manufacturing capacity or to restructure current manufacturing facilities, either of which typicallyinvolves a significant commitment of capital. Further, the purchase of our products involves a significantcommitment of capital on the part of our customers. If the markets for our customers’ products experience aperiod of declining demand or if our customers’ ability to raise capital is limited, they may choose to cancel,delay or reschedule purchases of our products. Any global financial economic crisis and the uncertainty createdthereby could result in such a decline in demand or limited ability to raise capital, or could otherwise affect ourcustomers’ markets, financial condition or willingness to incur expenses. As a result, we could experience thecancellation, delay or rescheduling of orders in our current backlog or of orders we currently expect to receive.Any such decision by our customers or potential customers would adversely affect our net sales and results ofoperations.

We may not be successful in protecting our intellectual property rights or we could be found to haveinfringed the intellectual property rights of others, either of which could weaken our competitive positionand adversely affect our results of operations.

Although we attempt to protect our intellectual property rights through patents, copyrights, trade secrets andother measures, we believe that our success will depend more upon the innovation, technological expertise andmarketing abilities of our employees. Nevertheless, we have a policy of seeking patents when appropriate oninventions resulting from our ongoing research and development and manufacturing activities. Our intellectualproperty portfolio has 953 patents and patent applications with expiration dates ranging from January 2014 toMay 2030. In addition, we have various registered trademarks and copyright registrations covering mainlyapplications used in the operation of our systems. We also rely upon trade secret protection for our confidentialand proprietary information. We may not be able to protect our technology adequately and competitors may beable to develop similar technology independently. Our pending patent applications may not be issued or U.S. orforeign intellectual property laws may not protect our intellectual property rights. In addition, litigation may benecessary to enforce our patents, copyrights or other intellectual property rights, to protect our trade secrets, todetermine the validity and scope of the proprietary rights of others or to defend against claims of infringement.Such litigation has resulted in, and in the future could result in, substantial costs and diversion of resources andcould have a material adverse effect on our business, financial condition and results of operations, regardless ofthe outcome of the litigation. Patents issued to us may be challenged, invalidated or circumvented and the rightsgranted thereunder may not provide competitive advantages to us. Furthermore, others may independentlydevelop similar technology or products, or, if patents are issued to us, design around the patents issued to us.Invalidation of our patents related to those technologies, or the expiration of patents covering our keytechnologies, could allow our competitors to more effectively compete against us, which could result in lessrevenue for us.

We have from time to time been notified of claims that we may be infringing intellectual property rightspossessed by third parties. We believe that the outcome of these matters will not be material to our business,results of operations or financial condition. Infringement claims by third parties or claims for indemnificationresulting from infringement claims may be asserted in the future and such assertions could materially adverselyaffect our business, financial condition and results of operations, regardless of the outcome of any litigation.With respect to any such future claims, we may seek to obtain a license under the third party’s intellectualproperty rights. However, a license may not be available on reasonable terms or at all. We could decide, in thealternative, to resort to litigation to challenge such claims. Such challenges could be expensive and timeconsuming and could materially adversely affect our business, financial condition and results of operations,regardless of the outcome of any litigation.

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A substantial portion of our sales are outside of the United States, which subjects us to risks related tocustomer service, installation, foreign economic and political stability, uncertain regulatory and tax rules,and foreign exchange rate fluctuations, all of which make it more difficult to operate our business.

International sales accounted for approximately 72% of total net sales for the year ended December 31,2013, as compared to 65% in the year ended December 31, 2012. We anticipate that international sales willcontinue to account for a significant portion of total net sales. As a result, a significant portion of our net saleswill continue to be subject to certain risks, including unexpected changes in regulatory requirements; difficulty insatisfying existing regulatory requirements; exchange rate fluctuations; tariffs and other barriers; political andeconomic instability; difficulties in accounts receivable collections; reduced protection of intellectual property;natural disasters; difficulties in staffing and managing foreign subsidiary and branch operations; and potentiallyadverse tax consequences.

Although we generally transact our international sales in U.S. dollars, international sales expose us to anumber 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 our products and may further impact thepurchasing ability of our international customers. We have direct sales operations in Japan and orders are oftendenominated in Japanese yen. This may subject us to a higher degree of risk from currency fluctuations. Weattempt to mitigate this exposure through foreign currency hedging. We are also subject to the risks associatedwith the imposition of legislation and regulations relating to the import or export of semiconductors andnanotechnology products. We cannot predict whether the United States or any other country will implementchanges to quotas, duties, taxes or other charges or restrictions upon the importation or exportation of ourproducts. These factors, or the adoption of restrictive policies, may have a material adverse effect on ourbusiness, financial condition and results of operations.

To better align with the increasingly international nature of our business, we transitioned certainmanufacturing processes to Singapore, thereby bringing these activities closer to our Asian customers. Thismovement is somewhat recent and our experience in international manufacturing operations is limited. If we areunable to successfully operate the site to efficiently manufacture systems, our business, financial condition andresults of operations could be materially adversely impacted.

Our results of operations and business could be adversely affected by natural disasters, public healthissues, political instability, wars, and other military action, as well as terrorist attacks and threats andgovernment responses thereto, especially if any such actions were directed at us or our facilities orcustomers.

Public health issues, political instability, natural disasters, terrorist attacks in the United States andelsewhere, government responses thereto, may disrupt our operations or those of our customers and suppliers andmay affect the availability of materials needed to manufacture our products or the means to transport thosematerials to manufacturing facilities and finished products to customers. In addition, such events could disruptthe semiconductor market, resulting in the cancellation or delay of product orders. Significant public healthissues could cause damage or disruption to international commerce by creating economic and politicaluncertainties that may have a significant negative impact on the global economy, us and our customers orsuppliers. Should such incidents increase or other public health issues arise, we could be negatively impacted bythe need for more stringent employee travel restrictions, additional limitations in the availability of freightservices, governmental actions limiting the movement of products between various regions and disruptions in theoperations of our customers or suppliers. Similarly, political instability could affect the ability of our suppliers toprovide the materials needed in our operations or the cost of acquiring such materials. Any public health issues,political instability, natural disasters, any terrorist attacks, or the ongoing war on terrorism or other wars couldincrease volatility in the United States and world financial markets which may depress the price of our CommonStock and may limit the capital resources available to us or our customers or suppliers, which could result indecreased orders from customers, less favorable financing terms from suppliers, and scarcity or increased costs

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of materials and components of our products. Additionally, if any of these events were to directly affect or bespecifically directed at us, or occur in a country where we or our suppliers or our customers operate, our ability toconduct our business could be significantly disrupted. Any of these occurrences could have a significant impacton our operating results, revenues and costs and may result in increased volatility of the market price of ourCommon Stock.

We currently perform a significant amount of our manufacturing activities in cleanroom environments inSan Jose, California, an area known for seismic activity. Performing manufacturing operations in Californiaexposes us to a higher risk of natural disasters, including earthquakes. In addition, in the past California hasexperienced power shortages, which have interrupted our operations. Such shortages could occur in the future.Further, our suppliers and/or customers may operate in areas subject to natural disasters, the occurrence of whichcould affect their ability to continue to do business with us as expected or at all. An earthquake, other naturaldisaster, power shortage or other similar events could interrupt or otherwise limit our operations or those of oursuppliers or customers resulting in product shipment delays, supply problems, cancellations or deferrals ofproduct orders, increased costs and other problems, any of which could have a material adverse effect on ourbusiness, customer relationships and results of operations.

We use hazardous substances in the operation of our business, and any failure on our part to comply withapplicable regulations or to appropriately control the use, disposal or storage of such substances couldsubject us to significant liabilities.

We are subject to a variety of governmental regulations relating to environment protection and workplacesafety, including the use, storage, discharge, handling, emission, generation, manufacture and disposal of toxic orother hazardous substances. The failure to comply with current or future regulations could result in substantialfines being imposed on us, suspension of production, alteration of the manufacturing process or cessation ofoperations. Such regulations could require us to acquire expensive remediation equipment or to incur substantialexpenses to comply with environmental regulations. Any failure by us to comply with these regulations,including any failure to control the use, disposal or storage of, or adequately restrict the discharge of, hazardousor toxic substances, could subject us to significant liabilities.

Our investment portfolio may suffer losses from changes in market interest rates and changes in marketconditions, which could materially and adversely affect our financial condition, results of operations orliquidity.

As of December 31, 2013, we had $297.0 million in cash, cash equivalents and short-term investments. Wemaintain an investment portfolio of cash equivalents and short-term investments in commercial paper and U.S.government-backed securities. These investments are subject to general credit, liquidity, and market and interestrate risks. Substantially all of these securities are subject to interest rate and credit risk and will decline in value ifinterest rates increase or one or more of the issuers’ credit ratings is reduced. As a result of any of the foregoing,we may experience a reduction in value or loss of liquidity of our investments, which may have a negativeadverse effect on our results of operations, liquidity and financial condition.

Our investment portfolio may become impaired by further deterioration of the capital markets.

Our cash equivalent and short-term investment portfolio as of December 31, 2013 consisted of securitiesand obligations of U.S. government agencies, money market funds and commercial paper. We follow anestablished investment policy and set of guidelines to monitor, manage and limit our exposure to interest rate andcredit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as ourmaximum exposure to various asset classes.

As a result of current financial market conditions, investments in some financial instruments, such asstructured investment vehicles, sub-prime mortgage-backed securities and collateralized debt obligations, maylose some or all of their value due to liquidity and credit concerns. As of December 31, 2013, we had no holdings

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in these categories of investments and no impairment charge associated with our short-term investment portfolio.Although we believe our current investment portfolio has little risk of impairment, we cannot predict futuremarket conditions or market liquidity and our investment portfolio could become impaired.

Changes in our effective tax rate may harm our results of operations.

A number of factors may negatively impact our future effective tax rates including, but not limited to:

• the jurisdictions in which profits are determined to be earned and taxed;

• changes in valuation of our deferred tax assets and liabilities;

• increases in expenses not deductible for tax purposes;

• changes in available tax credits;

• changes in stock-based compensation; and

• changes in tax laws or the interpretation of such tax laws and changes in generally accepted accountingprinciples in the United States or other countries in which we operate.

We are eligible for tax incentives that provide that certain income earned in Singapore would be subject to atax holiday and/or reduced tax rates for a limited period of time under the laws of Singapore. Our ability torealize benefits from these initiatives could be materially affected if, among other things, applicable requirementsare not met, the incentives are substantially modified, or if we incur losses for which we cannot take a deduction.

Changes in financial accounting standards or policies in the past have affected, and in the future mayaffect, our reported results of operations.

We prepare our financial statements in conformity with U.S. GAAP. These principles are subject tointerpretation by the FASB, the American Institute of Certified Public Accountants AICPA, the SEC and variousbodies formed to interpret and create appropriate accounting policies. A change in those policies can have asignificant effect on our reported results and may affect our reporting of transactions which are completed beforea change is announced.

Accounting policies affecting many other aspects of our business, including rules relating to revenuerecognition, off-balance sheet transactions, employee stock options and other equity awards, restructuring, assetdisposals and asset retirement obligations, derivative and other financial instruments are regularly under reviewand subject to revision. Changes to those rules or the questioning of how we interpret or implement those rulesmay have a material adverse effect on our reported financial results or on the way we conduct business. Inaddition, our preparation of financial statements in accordance with U.S. GAAP requires that we make estimatesand assumptions that affect the recorded amounts of assets and liabilities, disclosure of those assets and liabilitiesat the date of the financial statements and the recorded amounts of expenses during the reporting period. Achange in the facts and circumstances surrounding those estimates could result in a change to our estimates andcould impact our future operating results.

Our equity incentive plans, certain provisions of our Certificate of Incorporation and Bylaws, and certainaspects of Delaware law may discourage third parties from pursuing a change of control transaction withus.

Certain provisions of our Certificate of Incorporation, equity incentive plans, licensing agreements, Bylawsand Delaware law may discourage certain transactions involving a change in control of our company. In additionto the foregoing, the shareholdings of our officers, directors and persons or entities that may be deemed affiliatesand the ability of the Board of Directors to issue “blank check” preferred stock without further stockholderapproval could have the effect of delaying, deferring or inhibiting us from experiencing a change in control andmay adversely affect the voting and other rights of holders of our Common Stock.

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We are subject to laws, regulations and similar requirements, changes to which may adversely affect ourbusiness and operations.

We are subject to laws, regulations and similar requirements that affect our business and operations,including, but not limited to, the areas of commerce, import and export control, intellectual property, income andother taxes, anti-trust, anti-corruption, labor, environmental, health and safety. Our compliance in these areasmay be costly, especially in areas where there are inconsistencies between the various jurisdictions in which weoperate. While we have implemented policies and procedures to comply with laws and regulations, there can beno assurance that our employees, contractors, suppliers or agents will not violate such laws and regulations or ourpolicies. Any such violation or alleged violation could materially and adversely affect our business. Any changesor potential changes to laws, regulations or similar requirements, or our ability to respond to these changes, maysignificantly increase our costs to maintain compliance or result in our decision to limit our business, products orjurisdictions in which we operate, any of which could materially and adversely affect our business andoperations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act includes provisions regarding certainminerals and metals, known as conflict minerals, mined from the Democratic Republic of Congo and adjoiningcountries. These provisions require companies to undertake due diligence procedures and reports on the use ofconflict minerals in its products, including products manufactured by third parties. Compliance with theseprovisions will cause us to incur costs to certify that our supply chain is conflict free and we may face difficultiesin complying with the law if our suppliers are unwilling or unable to verify the source of their materials. Ourability to source parts containing these metals and minerals may be adversely impacted. In addition, ourcustomers may require that we provide them with a certification and our inability to do so may disqualify us as asupplier.

We hold cash and cash equivalents at various foreign subsidiaries that may not be readily available tomeet domestic cash requirements.

Our various foreign subsidiaries hold cash and cash equivalents and as we intend to reinvest certain foreignearnings indefinitely, these balances held outside the United States may not be readily available to meet ourdomestic cash requirements. We require a substantial amount of cash in the United States for operatingrequirements, purchases of property and equipment, and potentially for future acquisitions. If we are unable tomeet our domestic cash requirements using domestic cash flows from operations, or domestic cash and cashequivalents, it may be necessary for us to consider repatriation of earnings that we have designated aspermanently reinvested. This may require us to record additional income tax expense and remit additional taxes,which could have a material adverse effect on our results of operations, cash flows and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have no unresolved staff comments.

ITEM 2. PROPERTIES

We maintain our headquarters and manufacturing operations in San Jose, California in a leased facility,totaling approximately 100,000 square feet, which contain general administration and finance, marketing and sales,customer service and support, manufacturing and research, development and engineering. The lease for this facilityexpires in January 2016. We also rent sales and support offices in the United States and outside the U.S. in Taiwan,the Philippines, Japan, Korea, Thailand, Germany, and China, with varying terms and expiration dates. During 2013and 2012, we either extended our leases in several of these sales facilities or negotiated new terms.

In March 2010, we entered into an operating lease agreement for facilities in preparation for the expansionof our manufacturing operations in Singapore. The initial term of this lease was three years. On August 15, 2012,we renegotiated this lease and entered into a new operating lease that expires in June 2018. The leased facility isapproximately 23,000 square feet.

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In March 2013, we entered into an operating lease agreement for facilities in Waltham, Massachusetts,totaling approximately 19,000 square feet, for sales, research and development activities. The lease for thisfacility expires in February 2018.

We believe that our existing facilities will be adequate to meet our currently anticipated requirements andthat suitable additional or substitute space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

We are subject to claims and litigation arising in the ordinary course of business. We do not believe anyliability from any reasonably foreseeable disposition of such claims and litigation, individually or in theaggregate, would have a material adverse effect on our consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Market under the symbol UTEK. The following tablesets forth, for the periods indicated, the range of high and low reported sale prices of our common stock.

Fiscal 2013—Fiscal Quarter Ended 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Market Price: High $42.23 $38.79 $38.09 $31.12Low $35.46 $29.13 $27.53 $23.79

Fiscal 2012—Fiscal Quarter Ended 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Market Price: High $29.96 $33.05 $34.66 $37.30Low $24.53 $27.50 $29.02 $28.19

Our fiscal quarters in 2013 ended on March 30, 2013, June 29, 2013, September 28, 2013 and December 31,2013. Our fiscal quarters in 2012 ended on March 31, 2012, June 30, 2012, September 29, 2012 andDecember 31, 2012.

As of January 31, 2014, we had approximately 204 stockholders of record.

We have not paid cash dividends on our common stock since inception, and our Board of Directorspresently plans to reinvest our earnings in our business. Accordingly, it is anticipated that no cash dividends willbe paid to holders of common stock in the foreseeable future.

In each of July 2013 and July 2012, we issued 1,000 shares of our common stock in an unregistered, privateplacement under Section 4(2) of the Securities Act of 1933 to SEMI Foundation, a non-profit organization, tosupport its efforts to educate youth interested in science and math about career opportunities in thesemiconductor industry.

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Stock Performance Graph

The graph depicted below reflects a comparison of the cumulative total return (i.e., change in stock priceplus reinvestment of dividends) of our common stock assuming $100 invested as of December 31, 2008 with thecumulative total returns of the NASDAQ Composite Index and the Philadelphia Semiconductor Index.

Comparison of Cumulative Total Returns(1)(2)(3)

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013

UTEK Philadelphia Semiconductor Sector Index Nasdaq Composite Index

(1) The graph covers the period from December 31, 2008 to December 31, 2013.(2) No cash dividends have been declared on our common stock.(3) Stockholder returns over the indicated period should not be considered indicative of future stockholder

returns.

Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of1933, as amended, or the Securities Exchange Act of 1934, as amended, which might incorporate our futurefilings under those statutes, the preceding Stock Performance Graph will not be incorporated by reference intoany of those prior filings, nor will such report or graph be incorporated by reference into any of our futurefilings under those statutes.

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ITEM 6. SELECTED FINANCIAL DATA

In thousands, except per share data and percentageinformation 2013(e) 2012(d) 2011(c) 2010(b) 2009(a)

Operations:Net sales $157,272 $234,825 $212,333 $140,603 $ 95,813Gross profit $ 67,382 $131,810 $110,325 $ 71,641 $ 44,990Gross profit as a percentage of net sales 43% 56% 52% 51% 47%Operating income (loss) $ (15,058) $ 56,398 $ 44,020 $ 17,541 $ (1,102)Income (loss) before income taxes and cumulative

effect of a change in accounting principle $ (14,916) $ 56,969 $ 44,160 $ 17,951 $ 2,059Pre-tax income (loss) as a percentage of net sales (9.5)% 24.3% 20.8% 12.8% 2.1%Provision (benefit) for income taxes $ (1,147) $ 9,782 $ 4,930 $ 1,170 $ (70)Net income (loss) $ (13,769) $ 47,187 $ 39,230 $ 16,781 $ 2,129Income (loss) before cumulative effect of a change

in accounting principle per share—basic $ (0.49) $ 1.76 $ 1.51 $ 0.69 $ 0.09Net income (loss) per share—basic $ (0.49) $ 1.76 $ 1.51 $ 0.69 $ 0.09Number of shares used in per share computation—

basic 28,106 26,881 25,915 24,468 23,690Income (loss) before cumulative effect of a change

in accounting principle per share—diluted $ (0.49) $ 1.70 $ 1.47 $ 0.67 $ 0.09Net income (loss) per share—diluted $ (0.49) $ 1.70 $ 1.47 $ 0.67 $ 0.09Number of shares used in per share computation—

diluted 28,106 27,705 26,778 25,043 23,852

Balance sheet:Cash, cash equivalents and short-term investments $297,035 $302,508 $227,947 $184,290 $160,341Working capital $349,055 $349,506 $283,280 $217,157 $193,133Total assets $434,164 $436,986 $353,448 $281,294 $234,581Long-term obligations $ 11,923 $ 11,235 $ 8,113 $ 5,344 $ 5,935Stockholders’ equity $386,538 $375,186 $296,029 $231,649 $199,968

(a) Operating loss in 2009 includes $2.9 million of stock-based compensation expenses and a charge of$0.6 million related to certain exit activities.

(b) Operating income in 2010 includes $4.8 million of stock-based compensation expenses.(c) Operating income in 2011 includes $9.0 million of stock-based compensation expenses.(d) Operating income in 2012 includes $12.5 million of stock-based compensation expenses.(e) Operating loss in 2013 includes $15.4 million of stock-based compensation expenses.

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Quarterly Data

Unaudited, in thousands, except per share data 1st 2nd 3rd 4th

2013Net sales $60,646 $42,866 $29,732 $ 24,028Gross profit $33,293 $20,277 $11,790 $ 2,022Operating income (loss) $13,076 $ 1,113 $ (8,707) $(20,540)Net income (loss) $13,692 $ 856 $ (7,750) $(20,567)Net income (loss) per share—basic $ 0.50 $ 0.03 $ (0.28) $ (0.73)Number of shares used in per share computation—

basic 27,571 27,945 28,079 28,222Net income (loss) per share—diluted $ 0.48 $ 0.03 $ (0.28) $ (0.73)Number of shares used in per share computation—

diluted 28,563 28,653 28,079 28,222

Unaudited, in thousands, except per share data 1st 2nd 3rd 4th

2012Net sales $49,575 $59,112 $60,547 $ 65,591Gross profit $28,399 $32,040 $34,169 $ 37,202Operating income $11,255 $13,180 $14,955 $ 17,008Net income $10,200 $11,171 $12,442 $ 13,374Net income per share—basic $ 0.39 $ 0.42 $ 0.46 $ 0.49Number of shares used in per share computation—

basic 26,201 26,530 27,047 27,343Net income per share—diluted $ 0.38 $ 0.41 $ 0.45 $ 0.48Number of shares used in per share computation—

diluted 27,023 27,387 27,777 27,989

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

Certain of the statements contained herein, which are not historical facts and which can generally beidentified by words such as “anticipates,” “expects,” “thinks,” “remains,” “intends,” “will,” “could,” “believes,”“poised,” “estimates,” “continues,” and similar expressions, are forward-looking statements under Section 27Aof 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 risks related to timing, delays, deferrals and cancellations of ordersby customers, including as a result of semiconductor manufacturing capacity as well as our customers’ financialcondition and demand for semiconductors; demand for consumer devices; industry growth within our servedmarkets; continued delivery of financial performance and value; cyclicality in the semiconductor andnanotechnology industries; our dependence on new product introductions and market acceptance of new productsand enhanced versions of our existing products; reliability and technical acceptance of our products lengthy salescycles, including the timing of system installations and acceptances; quarterly revenue fluctuations; lengthy andcostly development cycles for laser-processing and lithography technologies and applications; integration,development and associated expenses of the laser processing operation; general economic and financial marketconditions including impact on capital spending, as well as difficulty in predicting changes in such conditions;rapid technological change and the importance of timely product introductions; customer concentration; pricingpressures and product discounts; high degree of industry competition; intellectual property matters; changes inpricing by us, our competitors or suppliers; international sales and operations; timing of new productannouncements and releases by us or our competitors; improvements, including in cost and technical features, ofcompetitors’ products ability to volume produce systems and meet customer requirements; sole or limitedsources of supply; effect of capital market fluctuations on our investment portfolio; ability and resulting costs toattract or retain key personnel; dilutive effect of employee stock option grants on net income per share, which islargely dependent upon our achieving and maintaining profitability and the market price of our stock; mix ofproducts sold; outcome of litigation; manufacturing variances and production levels; timing and degree ofsuccess of technologies licensed to outside parties; product concentration and lack of product revenuediversification; inventory obsolescence; asset impairment; changes to financial accounting standards; effects ofcertain anti-takeover provisions; future acquisitions; volatility of stock price; foreign government regulations andrestrictions; business interruptions due to natural disasters or utility failures; environmental regulations; and anyadverse effects of terrorist attacks in the United States or elsewhere, or government responses thereto, or militaryactions, on the economy, in general, or on our business in particular. Due to these and additional factors, thestatements, historical results and percentage relationships set forth below are not necessarily indicative of theresults of operations for any future period. These forward-looking statements are based on management’s currentbeliefs and expectations, some or all of which may prove to be inaccurate, and which may change. We undertakeno obligation to revise or update any forward-looking statements to reflect any event or circumstance that mayarise after the date of this report.

OVERVIEW

Ultratech, Inc. develops, manufactures and markets photolithography, laser thermal processing andinspection equipment for manufacturers of semiconductor devices, including advanced packaging processes andvarious nanotechnology components such as thin film head magnetic recording devices, laser diodes, high-brightness light emitting diodes (“HBLEDS”) and atomic layer deposition (“ALD”) for customers locatedthroughout North America, Europe, Singapore, Japan, Taiwan, Korea and the rest of Asia.

We supply step-and-repeat photolithography systems based on one-to-one imaging technology. Within thesemiconductor industry, we target the market for advanced packaging applications. Our laser thermal processingequipment is targeted at advanced annealing applications within the semiconductor industry. Within thenanotechnology industry, our target markets include thin film head magnetic recording devices, ink jet printheads, HBLEDs and atomic layer deposition for the nanotechnology portion of our defined served market.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon ourconsolidated financial statements, which have been prepared in accordance with accounting principles generallyaccepted in the United States. The preparation of these consolidated financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and relateddisclosure 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, we evaluateour estimates, including those related to revenues, inventories, warranty obligations, purchase ordercommitments, bad debts, deferred income taxes, restructuring liabilities, asset retirement obligations,restructuring, stock based-compensation and contingencies and litigation. Management bases its estimates andjudgments on historical experience and on various other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions.

We believe the following critical accounting policies are affected by our more significant judgments andestimates used in the preparation of our consolidated financial statements. We have reviewed these policies withour Audit Committee.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or serviceshave been rendered, the arrangement consideration is fixed or determinable, and collectability is reasonablyassured. We derive revenue from four sources: system sales, spare parts sales, service contracts and license fees.

Provided all other criteria are met, we recognize revenues on system sales when system acceptanceprovisions have been met in accordance with the terms and conditions of the arrangement. In the event that termsof the sale provide for a lapsing system acceptance period, we recognize revenue upon the expiration of thelapsing acceptance period or system acceptance, whichever occurs first. In these instances, which are infrequent,revenue is recorded only if the product has met product specifications prior to shipment and management deemsthat no significant uncertainties as to product performance exist.

Our transactions frequently include the sale of systems and services under multiple element arrangements.In transactions with multiple deliverables, revenue is recognized upon the delivery of the separate elements andwhen system acceptance has occurred or we are otherwise released from our system acceptance obligations.

For multiple element arrangements, the total consideration for an arrangement is allocated among theseparate elements in the arrangement based on a selling price hierarchy. The selling price hierarchy for adeliverable is based on (i) vendor specific objective evidence (VSOE); if available; (ii) third party evidence ofselling price if VSOE is not available; or (iii) an estimated selling price, if neither VSOE nor third party evidenceis available. If we have not established VSOE and cannot obtain third party evidence of selling price, wedetermine our estimate of the relative selling price by considering our production costs and historical margins ofsimilar products or services. We believe this best represents the price at which we would transact a sale if theproduct or service were sold on a stand-alone basis. We regularly review the method used to determine ourrelative selling price and update any estimates accordingly. We limit the amount of revenue recognized fordelivered elements to the amount that is not contingent on the future delivery of products or services or otherfuture performance obligations.

We generally recognize revenue from spare parts sales upon shipment, as our products are generally sold on termsthat transfer title and risk of ownership when it leaves our site. We sell service contracts for which revenue is deferredand recognized ratably over the contract period (for time-based service contracts) or as service hours are delivered (forcontracts based on a purchased quantity of hours). We recognize license revenue from transactions in which oursystems are re-sold by our customers to third parties, as well as from royalty arrangements.

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Costs related to deferred product revenues are capitalized (deferred) and recognized at the time of revenuerecognition. Deferred product revenue and costs are netted on our balance sheet, under the caption “deferredproduct and services income.” The gross amount of deferred revenues and deferred costs at December 31, 2013were $8.7 million and $2.2 million, respectively, as compared to $24.6 million and $7.6 million, respectively, atDecember 31, 2012.

Costs incurred for shipping and handling are included in cost of sales.

Inventories and Purchase Order Commitments

Inventories are stated at the lower of cost or market using standard costs that generally approximate actualcosts on a first-in, first-out basis. We maintain a perpetual inventory system and continuously record the quantityon-hand and standard cost for each product, including purchased components, subassemblies, and finished goods.We maintain the integrity of perpetual inventory records through periodic physical counts of quantities on hand.

The semiconductor industry is characterized by rapid technological change, changes in customerrequirements and evolving industry standards. We perform a detailed assessment of inventory at each balancesheet date, which includes a review of, among other factors, demand requirements and market conditions. Basedon this analysis, we may record adjustments to the value of our inventory. Although we make every effort toensure the accuracy of our forecasts of product demand, any significant unanticipated changes in demand,product mix or technological developments would significantly impact the value of our inventory and ourreported operating results. In the future, if we find that our estimates are too optimistic and we determine that ourinventory needs to be reserved, we will be required to recognize such costs in our cost of sales at the time of suchdetermination.

Warranty Obligations

We recognize the estimated cost of our product warranties at the time revenue is recognized. Our warrantyobligation is affected by product failure rates, material usage rates and the efficiency by which the product failureis corrected. Should actual product failure rates, material usage rates and labor efficiencies differ from ourestimates, revisions to the estimated warranty liability would be required which could result in future charges orcredits to our gross margins. We believe our warranty accrual, as of December 31, 2013, will be sufficient tosatisfy outstanding obligations as of that date.

Allowance for Bad Debts

We maintain an allowance for estimated losses resulting from the inability of our customers to makerequired payments. This reserve is established based upon historical trends, current economic conditions,delinquency status based on contractual terms and an analysis of specific exposures. If the financial conditions ofour customers were to deteriorate, or even a single customer was otherwise unable to make payments, additionalallowances may be required. The typical selling price of our systems is between $0.2 million and $6.0 million.Accordingly, a single customer default could have a material adverse effect on our results of operations. Our baddebt reserve for accounts receivable was $0.5 million at December 31, 2013 and 2012.

Intangible Assets

Purchased technology, patents and other intangible assets are presented at cost, net of accumulatedamortization, and are amortized over their estimated useful lives using the straight-line method. We review forimpairment whenever events or changes in circumstances indicate that the carrying amount of the intangibleasset may not be recoverable and the carrying amount exceeds its fair value.

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Stock-Based Compensation

Under the fair value recognition provisions of ASC Topic 718, Compensation—Stock Compensation (“ASC718”), share-based compensation cost is measured at the grant date based on the value of the award and isrecognized as expense over the vesting period. Determining the fair value of share-based awards at the grant daterequires judgment, including estimating our stock price volatility, employee stock option exercise behaviors andemployee option forfeiture rates. If actual results differ significantly from these estimates, stock-basedcompensation expense recognized in our results of operations could be materially affected. As stock-basedcompensation expense recognized in the Consolidated Statement of Operations is based on awards that ultimatelyare expected to vest, the amount of the expense has been reduced for estimated forfeitures. ASC 718 requiresforfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeituresdiffer from those estimates. Forfeitures were estimated based on historical experience. If factors change and weemploy different assumptions in the application of ASC 718, the compensation expense that we record in futureperiods may differ significantly from what we have recorded in the current period.

Deferred Income Taxes

Deferred income taxes are provided for the tax effect of temporary differences between the tax basis ofassets and liabilities and their reported amounts in the financial statements. ASC Topic 740, Income Taxes(“ASC 740”), provides for recognition of deferred tax assets if the realization of such deferred tax assets is morelikely than not to occur. Realization of our net deferred tax assets is dependent upon the generation of sufficienttaxable income in future years in appropriate tax jurisdictions to obtain the benefit of the reversal of temporarydifferences, net operating loss carry-forwards, and tax credit carry-forwards. Each quarter we assess thelikelihood that we will be able to recover our deferred tax assets. We consider available evidence, both positiveand negative, including historical levels of income, expectations and risks associated with estimates of futuretaxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuationallowance. As a result of our analysis, we concluded that it is more likely than not that, as of December 31, 2013,our net deferred tax assets will not be realized, with the exception of those in Japan and Taiwan. Therefore, wecontinue to provide a full valuation allowance against net deferred tax assets outside of Japan and Taiwan. Wecontinue to monitor the relative weight of positive and negative evidence of future profitability in relevantjurisdictions. Even after the net loss recorded in 2013, we have experienced cumulative profitability. However, asof December 31, 2013, we have determined that the following negative evidence outweighs the positive evidencesuch that it is not more likely than not we will generate sufficient taxable income in the relevant jurisdictions toutilize our deferred tax assets and release the associated valuation allowance:

• Movement of certain product manufacturing to Singapore, resulting in reduced U.S. taxable income,

• Current U.S. taxable loss

• Inherent earnings volatility of our industry resulting in our inability to forecast long term earnings, and

• Usage limitations resulting in a longer period being required to realize our deferred tax assets.

As of December 31, 2013, we had recorded a valuation allowance of approximately $47.9 million againstour net deferred tax assets except for those in Japan and Taiwan. As of December 31, 2013, we had recordedapproximately $0.4 million of net foreign deferred tax assets related to our operations in Japan and Taiwan.Based on projected future pre-tax income in Japan and Taiwan, these assets were not subject to a valuationallowance as it is more likely than not that they will be realized in the future.

RESULTS OF OPERATIONS

We derive a substantial portion of our total net sales from sales of a relatively small number of newlymanufactured systems, which typically range in price from $0.2 million to $6.0 million. As a result of the largersale prices, the timing and recognition of revenue from a single transaction has had and most likely will continueto have a significant impact on our net sales and operating results for any particular period.

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Our backlog at the beginning of a period typically does not include all of the sales needed to achieve oursales objectives for that period. In addition, orders in backlog are subject to cancellation, shipment or systemacceptance delays, and deferral or rescheduling by a customer with limited or no penalties. Consequently, our netsales and operating results for a period have been and will continue to be dependent upon our obtaining orders forsystems to be shipped and accepted in the same period in which the order is received. Our business and financialresults for a particular period could be materially adversely affected if an anticipated order for even one system isnot received in time to permit shipment and system acceptance during that period. Furthermore, a substantialportion of our shipments has historically occurred near the end of each quarter. Delays in installation and systemacceptance due, for example, to our inability to successfully demonstrate the agreed-upon specifications orcriteria at the customer’s facility, or to the failure of the customer to permit installation of the system in theagreed upon time, may cause net sales in a particular period to fall significantly below our expectations, whichmay materially adversely affect our operating results for that period. This risk is especially applicable inconnection with the introduction and initial sales of a new product line or as a result of industry trends impactingour foundry customers, including a shift toward semiconductors utilizing new technology transistor architecture.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 unexpectedmanufacturing difficulties or delays in deliveries by suppliers due to their long production lead times orotherwise, have caused and may continue to cause net sales in a particular period to fall significantly below ourexpectations and for our operating results to vary from period to period, materially adversely affecting ouroperating results for that period. In particular, the long manufacturing and acceptance cycles of our advancedpackaging family of wafer steppers, laser thermal processing and inspection systems and the long lead time forlenses and other materials, could cause shipments and acceptances of such products to be delayed from onequarter to the next, which could materially adversely affect our financial condition and results of operations for aparticular quarter.

Additionally, the need for continued expenditures for research and development, capital equipment, ongoingtraining and worldwide customer service and support, among other factors, will make it difficult for us to reduceour operating expenses in a particular period if we fail to achieve our net sales goals for the period.

Sales Summary

2013 2012 2011

International sales 72% 65% 60%Domestic sales 28% 35% 40%

Total sales 100% 100% 100%

Semiconductor systems sales 83% 84% 86%Nanotechnology systems sales 17% 16% 14%

Total systems sales 100% 100% 100%

Net Sales

In millions 2013 2012 2011 2013 vs 2012 2012 vs 2011

Sales of:Systems $116.6 $191.8 $174.7 (39)% 10%Spare parts 23.8 23.9 16.9 — % 41%Services 16.4 17.8 19.6 (8)% (9)%Licenses 0.5 1.3 1.1 (62)% 18%

Total net sales $157.3 $234.8 $212.3 (33)% 11%

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2013 vs. 2012

Net sales consist of revenues from systems sales, spare parts sales, services and licensing of technologies.For the year ended December 31, 2013, systems revenue accounted for approximately 74% of total net sales, andservices, licenses and spare parts accounted for the remaining 26%.

System sales decreased 39% to $116.6 million primarily attributable to a fewer number of all of our systemsbeing sold in 2013 as compared to 2012.

On a product market application basis, system sales to the semiconductor industry were $96.3 million forthe year ended December 31, 2013, a decrease of 40% as compared to $161.2 million in 2012. This decrease wasprimarily due to fewer system units sold. Semiconductor industry sales consist of sales to the advancedpackaging market, semiconductor and semiconductor inspection market. System sales to the semiconductorindustry is highly dependent on customer capacity demand.

System sales to the nanotechnology market were $20.3 million for the year ended December 31, 2013, a34% decrease as compared with sales of $30.7 million in 2012. The decrease in sales in the nanotechnologymarket was primarily due to the lesser number of all systems sold. System sales to the nanotechnology marketare highly dependent on capacity demand in the industries we serve, including HBLEDs, ALD, thin film heads,automotive MEMS, LED/laser diodes, and ink jet print heads, and therefore, expect to experience significantvariations in sales to this market from period to period.

Sales of spare parts in 2013 remained relatively flat to $23.8 million, as compared to $23.9 million in 2012.Sales from services decreased 8% to $16.4 million for the year ended December 31, 2013 as compared to $17.8million in 2012. The decrease in service revenue was the result of a decrease in service contract sales.

Revenues from licensing activities decreased to $0.5 million in 2013 as compared with $1.3 million in 2012,primarily due to fewer systems being sold under a royalty arrangement. Pursuant to our license arrangements,such transactions are subject to a license fee based on units sold. Future revenues from licensing activities, if any,will be contingent upon existing and future licensing arrangements. We may not be successful in generatinglicensing revenues and do not anticipate the recognition of significant levels of licensing income in the future.

For the year ended December 31, 2013, international net sales were $113.9 million, or 72% of total netsales, as compared with $153.2 million, or 65% of total net sales in 2012. For the year ended December 31, 2013as compared to the corresponding 2012 period, (i) sales to Europe decreased by $31.1 million, (ii) sales to therest of world decreased by $23.4 million, and (iii) sales to Korea decreased by $5.5 million, partially offset byincreased sales to Taiwan of $12.6 million and sales to Japan of $8.2 million. We expect sales to internationalcustomers to continue to represent a significant amount of our future revenues as our customer base in Asiacontinues to expand its capacity.

Our revenue derived from sales in foreign countries is not generally subject to significant exchange ratefluctuations, principally because sales contracts for our systems are generally denominated in U.S. dollars.However, we do sell systems and spare parts into Japan and this subjects us to the risk of currency exchange ratefluctuations since the orders are often denominated in Japanese yen. We attempt to mitigate this risk by enteringinto monthly foreign currency forward exchange contracts, as balance sheet hedges, which includes ourreceivables from parts sales. We had approximately 36.3 million of Japanese yen-denominated receivables atDecember 31, 2013. International sales expose us to a number of additional risks, including fluctuations in thevalue of local currencies relative to the U.S. dollar, which impact the relative cost of ownership of our productsand, thus, the customer’s willingness to purchase our product. (See “Risk Factors: International Sales”).

2012 vs. 2011

Net sales consist of revenues from systems sales, spare parts sales, services and licensing of technologies.For the year ended December 31, 2012, systems revenue accounted for approximately 82% of total net sales, andservices, licenses and spare parts accounted for the remaining 18%.

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System sales increased 10% to $191.8 million primarily attributable to an increase in the number of laserthermal processing and nanotechnology systems sold partially offset by a decrease in the number of ourlithography systems in 2012 as compared to 2011.

On a product market application basis, system sales to the semiconductor industry were $161.2 million forthe year ended December 31, 2012, an increase of 8% as compared to $150.0 million in 2011. This increase wasprimarily due to an increase in laser thermal processing units sold and an increase in average selling prices.Offsetting this improved performance was a decrease in the number of advanced packaging units sold partiallyoffset by an increase in upgrades to our advanced packaging systems. System sales to the nanotechnology marketwere $30.6 million for the year ended December 31, 2012, a 24% increase as compared with sales of $24.7million in 2011. The increase in sales was primarily due to an increase in average selling prices.

Sales of spare parts in 2012 increased 41% to $23.9 million, as compared to $16.9 million in 2011. Thisincrease in sales is primarily due to an increase of $5.9 million in repair parts sold for advanced packagingsystems. The remaining $1.1 million increase in parts sales was the result of an increase in demand due to thegrowing install base of our systems. Sales from services decreased 9% to $17.8 million for the year endedDecember 31, 2012 as compared to $19.6 million in 2011. The decrease in service revenue was primarily due to(i) a decrease of $1.3 million in service contract revenue, (ii) $0.3 million in decreased non-contract revenueservices, and (iii) a $0.2 million decrease in training revenue.

Revenues from licensing activities increased to $1.3 million in 2012 as compared with $1.1 million in 2011,primarily due to more systems being sold under a royalty arrangement.

For the year ended December 31, 2012, international net sales were $153.2 million, or 65% of total netsales, as compared with $127.8 million, or 60% of total net sales in 2011. The increase as a percentage of totalsales was primarily due to increased sales to European customers of $24.4 million. For the year endedDecember 31, 2012, we recorded no system sales in Japan.

Gross Profit

2013 vs. 2012

Gross margins were 43% and 56% for 2013 and 2012, respectively. The 13% decrease in gross margin wasdue to (i) a 4% decrease resulting from costs associated with manufacturing inefficiencies due to lowerproduction volume, (ii) a 3% decrease related to a $5.2 million increase in reserves for excess and obsoleteinventory and open purchase order commitments, (iii) a 3% decrease resulting from higher material costs due toproduct mix, (iv) a 2% decrease related to lower service cost utilization and (v) a 1% decrease related toincreases in other manufacturing costs.

Our gross profit as a percentage of sales has been and most likely will continue to be significantly affectedby a variety of factors, including the following: the introduction of new products, which typically have highermanufacturing costs until manufacturing efficiencies are realized and which are typically discounted more thanexisting products until the products gain market acceptance; the mix of products sold; the rate of capacityutilization; write-down of inventory and open purchase commitments; product discounts, pricing and competitionin our targeted markets; and non-linearity of shipments during the period that can result in manufacturinginefficiencies.

2012 vs. 2011

Gross margins were 56% and 52% for 2012 and 2011, respectively. The 4% point increase in gross marginwas due to a 4% increase resulting from improved manufacturing efficiencies and a 1% increase related to lowerservice costs, partially offset by a 1% decrease resulting from higher material costs due to product mix.

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Research, Development and Engineering Expenses

In millions 2013 2012 2011 2013 vs 2012 2012 vs 2011

Research, development and engineering expenses $33.6 $30.1 $23.6 12% 28%% of revenue 21% 13% 11%

An inherent delay exists between the time product development activities and expenditures occur and whenresultant product revenue is ultimately realized. We expect current year research, development and engineeringprogram investments to contribute to revenue in future years.

2013 vs. 2012

Research, development and engineering expenses in 2013 increased 12% to $33.6 million as compared to$30.1 million in 2012. The $3.5 million increase was primarily due to (i) a $2.3 million increase in expensesrelated to the ALD product group, (ii) a $0.7 million increase in stock-based compensation expense, (iii) a $0.6million increase in patent related expenses, (iv) a $0.4 million increase in manufacturing support expenses, (v) a$0.3 million increase in depreciation expense, (vi) a $0.3 million increase in employee benefit related expenseand (vii) a $0.2 million increase in other research, development and engineering expenses, partially offset by a$1.0 million decrease in bonus plan expense and a $0.2 million reduction in 401(k) match expense. As apercentage of net sales, engineering expenses for the year ended December 31, 2013 were 21% compared to 13%for 2012. The percentage increase was due primarily to the decrease in net sales as compared to 2012.

2012 vs. 2011

Research, development and engineering expenses in 2012 increased 28% to $30.1 million as compared to$23.6 million in 2011. The $6.5 million increase was primarily due to (i) a $3.4 million in additional research anddevelopment related activities, (ii) a $0.7 million increase in manufacturing support expenses, (iii) a $0.6 millionincrease in salaries and compensation related expenses, (iv) a $0.4 million increase in stock-based compensationexpense, (v) a $0.3 million increase in depreciation expense, (vi) a $0.1 million in travel related expense and(vii) a $0.1 million in materials expense. As a percentage of net sales, engineering expenses for the year endedDecember 31, 2012 were 13% compared to 11% for 2011. The percentage increase was due primarily to a greaterincrease in engineering expenses than net sales from 2011.

Selling, General and Administrative Expenses

In millions 2013 2012 2011 2013 vs 2012 2012 vs 2011

Selling, general and administrative expenses $48.9 $45.3 $42.7 8% 6%% of revenue 31% 19% 20%

2013 vs. 2012

Selling, general and administrative expenses increased by $3.6 million, or 8%, to $48.9 million in 2013, ascompared to $45.3 million in 2012. The $3.6 million increase was primarily due to (i) a $2.2 million increase instock-based compensation expense, (ii) a $2.1 million increase in expenses related to the ALD product group,(iii) a $2.1 million increase in field services costs, (iv) a $0.6 million increase in selling costs, and (v) a $0.2million increase in other administrative cost, partially offset by (a) a $2.3 million decrease in bonus plan expense,(b) a $1.1 million decrease in legal expenses, and (c) a $0.2 million reduction in 401(k) match expense. As apercentage of net sales, selling, general and administrative expenses for the year ended December 31, 2013 were31% compared to 19% for 2012. This increase was due primarily to the decrease in net sales as compared to2012.

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2012 vs. 2011

Selling, general and administrative expenses increased by $2.6 million, or 6%, to $45.3 million in 2012, ascompared to $42.7 million in 2011. The $2.6 million increase was primarily due to (i) a $2.9 million of stock-based compensation expense, (ii) a $1.1 million increase in bonus expense, (iii) a $0.3 million increase of outsideservices costs, (iv) a $0.2 million increase in facility move costs, and (v) a $0.1 million increase in property taxexpense, partially offset by (i) $1.3 million in allocation of administrative costs to engineering, (ii) a $0.5 millionreduction in international administrative costs and (iii) a $0.2 million reduction in other administrative costs. Asa percentage of net sales, selling, general and administrative expenses for the year ended December 31, 2012were 19% compared to 20% for 2011. This decrease was due primarily to the increase in net sales as compared to2011.

Interest and Other Income, Net

In millions 2013 2012 2011

Interest income $ 0.6 $0.4 $ 0.3Other income (expense), net (0.4) 0.2 (0.1)

Interest and other income, net $ 0.2 $0.6 $ 0.2

Interest and other income, net, was $0.2 million for the year ended December 31, 2013, as compared with$0.6 million and $0.2 million for 2012 and 2011, respectively. We recorded $0.6 million of interest incomeduring the year ended December 31, 2013. The $0.2 million increase was primarily due to the higher averageshort-term investments balance during the year ended December 31, 2013, as compared to 2012. We presentlymaintain an investment portfolio with a weighted-average maturity of less than one year. Consequently, changesin short-term interest rates have a significant impact on our interest income. Future changes in short-term interestrates are expected to continue to have a significant impact on our interest income.

Other expense, net of $0.4 million for the year ended December 31, 2013 was the result of losses fromforeign currency exchange. In 2012, other income, net of $0.2 million was primarily due to other income of $0.5million resulting from the expiration of statutes in certain countries of individually insignificant items that waspartially offset by unrealized losses on foreign currency transactions of $0.3 million. In 2011, other expense, netof $0.1 million was the result of losses from foreign currency exchange.

Provision for Income Taxes

For the year ended December 31, 2013, we recorded income tax benefit of $1.1 million as compared toincome tax expense of $9.8 million and $4.9 million, respectively, in 2012 and 2011. The income tax benefitrecorded in 2013 resulted primarily from tax benefits due to return to provision adjustments associated with thefiling of our 2012 tax return and the extension of the federal research and development tax credits under theAmerican Taxpayer Relief Act of 2012, partially offset by state taxes and foreign taxes of $0.5 million. Theincome tax expense recorded in 2012 and 2011 was comprised primarily of federal tax expense. The actualexpense or benefit recorded for the years ended 2013, 2012, and 2011 differs from the federal tax expense orbenefit at 35% primarily due to current tax expense in foreign jurisdictions and the fact that in 2013 current yearthe U.S. taxable loss was not utilized, in 2012 prior year U.S. credits were utilized, and in 2011 prior year U.S.losses were utilized, respectively.

We are eligible for tax incentives that provide that certain income earned in Singapore would be subject to atax holiday and/or reduced tax rates for a limited period of time under the laws of Singapore. To realize thesebenefits, we must meet certain requirements relating to employment and investment activities. This exemption isexpected to expire within 7 years. In 2013 the tax benefit attributable to the tax holiday was approximately $0.5million with a $0.02 impact on earnings per share. In 2012, the tax benefit attributable to the tax holiday was

39

approximately $5.0 million with an $0.18 impact on diluted earnings per share. In 2011, the tax benefitattributable to the tax holiday was approximately $0.3 million with a $0.01 impact on diluted earnings per share.Our ability to realize benefits from these initiatives could be materially adversely affected if, among other things,applicable requirements are not met, the incentives are substantially modified, or if we incur losses for which wecannot take a deduction.

Income taxes can be affected by estimates of whether, and within which jurisdictions, future earnings willoccur and how, when and if cash is repatriated to the United States, combined with other aspects of an overallincome tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment ofcertain items, and some historical transactions have income tax effects going forward. Accounting rules requirethese future effects to be evaluated using current laws, rules and regulations, each of which can change at anytime and in an unpredictable manner. We believe we have adequately provided for any reasonably foreseeableoutcome related to these matters and we do not anticipate any material earnings impact from their ultimateresolutions.

In accordance with ASC 740, we had unrecognized benefits of $6.9 million as of December 31, 2013 due touncertain tax positions. We continue to recognize interest and penalties as a component of income tax provisionand accrued an insignificant amount for these items for the year. During the year ended December 31, 2013, thebalance related to uncertain tax positions increased by $0.1 million, net. Over the next twelve months, we expectan insignificant decline in the estimated amount of liabilities associated with our uncertain tax positions whicharose prior to December 31, 2013 as a result of expiring statutes of limitations. If we are able to eventuallyrecognize these uncertain tax positions, $6.8 million of the unrecognized benefit on January 1, 2013 and $6.9million of the unrecognized benefit on December 31, 2013, would reduce our effective tax rate. We currentlyhave a full valuation allowance against our U.S. net deferred tax asset which would impact the timing of theeffective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.

Each quarter we assess the likelihood that we will be able to recover our deferred tax assets. We consideravailable evidence, both positive and negative, including historical levels of income, expectations and risksassociated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies inassessing the need for the valuation allowance. As a result of our analysis, and as further described in the CriticalAccounting Policies and Estimates section, deferred income taxes, we concluded that it is more likely than notthat, as of December 31, 2013, our net deferred tax assets will not be realized, with the exception of those inJapan and Taiwan. Therefore, we continue to provide a full valuation allowance against net deferred tax assetsoutside of Japan and Taiwan. It is possible that sometime in the next 12 months the positive evidence will besufficient to release a material amount of our valuation allowance; however there is no assurance that this willoccur.

We are subject to federal and state tax examination for years 1999 forward and 1997 forward, respectively,by virtue of the tax attributes carrying forward from those years. We are also subject to audits in the foreignjurisdictions in which we operate for years 2003 and forward. There are no material income tax examinationscurrently in progress.

Outlook

The anticipated timing of orders, shipments and system acceptances usually requires that we fill a number ofproduction slots in any given period in order to meet our sales targets. If we are unsuccessful in our efforts tosecure those production orders, or if existing production orders are delayed or cancelled, our results of operationswill be materially adversely impacted. Additionally, we may not exceed or even maintain our current or priorlevels of net sales for any period in the future for the reasons enumerated in this report. We believe that themarket acceptance and volume production of our advanced packaging systems, laser processing systems,inspection systems and our 1000 Platform steppers are of critical importance to our future financial results. AtDecember 31, 2013, these systems represented approximately 90% of our backlog. We presently expect net salesin 2014 to increase by approximately 25% to 30% from 2013 net sales of $157.3 million.

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LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $6.8 million for the year ended December 31, 2013, as comparedwith net cash provided by operating activities of $77.1 million for the comparable period in 2012. Net cash usedin operating activities during the year ended December 31, 2013 was attributable to $21.3 million of cash used bychanges in our working capital, partially offset by $14.4 million of cash generated from operations afteradjustments for non-cash charges such as stock-based compensation, provision for inventory reserves and openpurchase order commitments and depreciation.

Working capital uses of cash of $21.3 million were due to (i) a $12.2 million increase in inventorypurchases, (ii) a $10.4 million decrease in deferred income, (iii) a $8.8 million decrease in accounts payable, and(iv) a $0.7 million decrease in accrued expenses, partially offset by a $8.0 million decrease in accounts receivableand a $2.8 million decrease in prepaid expenses and other current assets.

We believe that because of the relatively long manufacturing cycle of certain systems, particularly newerproducts, our inventories will continue to represent a significant portion of working capital. Currently, we aredevoting significant resources to the development, introduction and commercialization of our laser thermalprocessing systems and inspection systems and to the development of our next generation 1X lithographytechnologies. We currently intend to continue to incur significant operating expenses in the areas of research,development and engineering, manufacturing, and selling, general and administrative costs in order to furtherdevelop, produce and support these new products. Additionally, gross profit margins, inventory and capitalequipment levels may be adversely impacted in the future by costs associated with the initial production of thelaser thermal processing systems, inspection systems and by future generations of our 1X wafer steppers. Thesecosts include, but are not limited to, additional manufacturing overhead, costs of demonstration systems andfacilities and the establishment of additional after-sales support organizations. Additionally, there can be noassurance that operating expenses will not increase, relative to sales, as a result of adding technical, marketingand administrative personnel, among other costs, to support our new products. If we are unable to achievesignificantly increased net sales or if our sales fall below expectations, our cash flow and operating results will bematerially adversely affected until, among other factors, costs and expenses can be reduced. Our failure toachieve our sales targets for these new products could result in additional inventory write-offs and assetimpairment charges, either of which could materially adversely impact our results of operations.

During the year ended December 31, 2013, net cash used in investing activities was $10.5 million, ascompared with net cash used by investing activities of $58.3 million for the comparable period in 2012. Net cashused in investing activities during the year ended December 31, 2013 was attributable to capital expenditures of$7.9 million and purchases of intangible assets for $5.0 million, partially offset by maturities of available-for-saleinvestment securities of $2.4 million, net of purchases.

Net cash provided by financing activities was $13.9 million during the year ended December 31, 2013, ascompared with $19.3 million for the comparable period in 2012. Net cash provided by financing activities duringthe year ended December 31, 2013 was primarily attributable to proceeds received from the issuance of commonstock under our employee stock option plans of $9.8 million, net and proceeds of notes payable of $4.1 million,net of repayments.

Historically, our principal source of liquidity has been cash provided by our operations. At December 31,2013, we had working capital of $349.1 million. At December 31, 2013, our cash, cash equivalents and short-term investments, net of related borrowings under our line of credit, consisted of $291.9 million.

As of December 31, 2013, $36.2 million of our cash, cash equivalents, and investments were held by foreignsubsidiaries. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriationto the United States. We currently have no plans to repatriate any foreign earnings back to the United States aswe believe our cash flows provided by our U.S. operations will meet our future U.S. liquidity needs.

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In December 2004, we entered into a line of credit agreement with a brokerage firm replacing a similararrangement that we had with a different firm. Under the terms of this agreement, we may borrow funds at a costequal to the current Federal funds rate plus 125 basis points (i.e. 1.3% as of December 31, 2013). Certain of ourcash, cash equivalents and short-term investments secure outstanding borrowings under this facility. We mayborrow up to 75% of our total cash, cash equivalents and investments balance in this brokerage account. Fundsare advanced to us under this facility based on pre-determined advance rates on the cash and securities held by usin this brokerage account. This agreement has no set expiration date and there are no loan covenants. As ofDecember 31, 2013 and 2012, balances of $5.1 million and $1.0 million, respectively, were outstanding underthis facility, with a related collateral requirement of approximately $6.8 million and $1.3 million, respectively, ofour cash, cash equivalents and investments.

The following summarizes our contractual obligations at December 31, 2013, and the effect such obligationsare expected to have on our liquidity and cash flows in future periods:

In millions TotalLess than

1 year 1-3 years 3-5 yearsAfter

5 years

Notes payable obligations $ 5.1 $ 5.1 $— $— $—Non-cancelable operating lease obligations 9.1 3.7 4.1 1.3 —Long-term payables 9.7 — 1.9 0.2 7.6Asset retirement obligations 2.2 — 1.8 0.4 —Open purchase order commitments 54.6 54.6 — — —

Total contractual cash obligations $80.7 $63.4 $ 7.8 $ 1.9 $ 7.6

The amounts shown in the table above for open purchase order commitments are primarily related to thepurchase of inventories, equipment and leasehold improvements. We record charges to operations for purchaseorder commitments we deem in excess of normal operating requirements (see “Critical Accounting Policies andEstimates”).

The development and manufacture of new systems and enhancements are highly capital-intensive. In orderto be competitive, we believe we must continue to make significant expenditures for capital equipment; sales,service, training and support capabilities; systems, procedures and controls; and expansion of operations andresearch and development, among many other items. We expect that cash generated from operations and ourcash, cash equivalents and short-term investments will be sufficient to meet our cash requirements for at least thenext twelve months. However, in the near-term, we may continue to utilize existing and future lines of credit, andother sources of financing, in order to maintain our present levels of cash, cash equivalents and short-terminvestments. Beyond the next twelve months, we may require additional equity or debt financing to address ourworking capital or capital equipment needs. In addition, we may seek to raise equity or debt capital at any timethat we deem market conditions to be favorable. Additional financing, if needed, may not be available onreasonable terms, or at all.

We have in the past, and may in the future, pursue acquisitions of complementary product lines, technologiesor businesses. Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence ofdebt and contingent liabilities and amortization expenses and impairment charges related to goodwill and otherintangible assets, which could materially adversely affect our financial condition and results of operations. Inaddition, 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 fromother business concerns; risks of entering markets in which we have limited or no direct experience; and thepotential loss of key employees of the acquired company. In the event we acquire product lines, technologies orbusinesses which do not complement our business, or which otherwise do not enhance our sales or operating results,we may incur substantial write-offs and higher recurring operating costs, which could have a material adverse effecton our 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 our business or operating results.

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Off-Balance Sheet Transactions

Our off-balance sheet transactions consist of certain financial guarantees, both expressed and implied,related to indemnification for product liability, patent infringement and latent product defects. Other thanliabilities recorded pursuant to known product defects, at December 31, 2013, we did not record a liabilityassociated with these guarantees, as we have little or no history of costs associated with such indemnificationrequirements. See Note 16 to our Consolidated Financial Statements for additional information.

Foreign Currency

As part of our overall strategy to manage the level of exposure to the risk of foreign currency exchange ratefluctuations, we attempt to hedge most of our Japanese yen denominated foreign currency exposures. We useforeign currency forward contracts to hedge the risk that outstanding Japanese yen denominated receipts fromcustomers, for actual or forecasted sales of equipment after receipt of customer orders, may be adversely affectedby changes in foreign currency exchange rates. We use foreign currency forward exchange contracts and naturalhedges to offset substantial portions of the potential gains or losses associated with our Japanese yendenominated assets and liabilities due to exchange rate fluctuations. We enter into foreign currency forwardcontracts that generally have maturities of nine months or less.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to market risk due to potential changes in interest rates, relates primarily to our investmentportfolio, which consisted primarily of fixed interest rate instruments as of December 31, 2013 and 2012. Wemaintain an investment policy designed to ensure the safety and preservation of our invested funds by limitingmarket risk and the risk of default.

Certain of our cash, cash equivalents and investments serve as collateral for a line of credit we maintainwith a brokerage firm. The line of credit is used for liquidity purposes, mitigating the need to liquidateinvestments in order to meet our current operating cash requirements.

The following table presents the hypothetical changes in fair values in the financial instruments held by usat December 31, 2013 that are sensitive to changes in interest rates. These instruments are comprised of cashequivalents and investments. These instruments are held for purposes other than trading. The modelingtechniques used to measure the change in fair values arising from selected hypothetical changes in interest rates.Assumed market value changes to our portfolio reflect immediate hypothetical parallel shifts in the yield curve ofplus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS:

Cash equivalents andavailable-for-saleinvestments,in thousands

Valuation of securitiesgiven an interest rate

decrease of X basis pointsNo change ininterest rate

Valuation of securitiesgiven an interest rate

increase of X basis points

(150 BPS) (100 BPS) (50 BPS) 0 BPS 50 BPS 100 BPS 150 BPS

Commercial paper $ 3,207 $ 3,205 $ 3,202 $ 3,199 $ 3,197 $ 3,194 $ 3,191Money market funds 42,996 42,995 42,994 42,994 42,993 42,993 42,992U.S. treasury bills and notes 6,149 6,123 6,097 6,072 6,047 6,021 5,997Securities and obligations of

U.S. government agencies 195,887 195,325 194,768 194,216 193,668 193,125 192,587

Total investments $248,239 $247,648 $247,061 $246,481 $245,905 $245,333 $244,767

During 2013, we did not materially alter our investment objectives or criteria and believe that, although thecomposition of our portfolio has changed from the preceding year, the portfolio’s sensitivity to changes ininterest rates is materially the same.

Credit Risk

We mitigate credit default risk by attempting to invest in high credit quality securities and by positioningour portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer orguarantor. Our portfolio includes only marketable securities with active secondary or resale markets to ensureportfolio liquidity and is diversified in accordance with our investment policy. To date, we have not experiencedsignificant liquidity problems with our portfolio. Our single largest holding at December 31, 2013, excluding theU.S. government and its agencies, was an $34.0 million money market fund.

As of December 31, 2013, we did not have any investments in mortgage backed or auction rate securities orany security investments in the financial service sector. However, we intend to closely monitor developments inthe credit markets and make appropriate changes to our investment policy as deemed necessary or advisable.Based on our ability to liquidate our investment portfolio and our expected operating cash flows, we do notanticipate any liquidity constraints as a result of the current credit environment.

Foreign Exchange Risk

The majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars.However, we do enter into these transactions in other currencies, primarily Japanese yen. To protect againstreductions in value and the volatility of future cash flows caused by changes in currency exchange rates, we haveestablished cash flow and balance sheet hedging programs.

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We use foreign currency forward contracts to hedge the risk that outstanding Japanese yen denominatedreceipts from customers for actual or forecasted sales of equipment may be adversely affected by changes inforeign currency exchange rates. Our hedging programs reduce, but do not always entirely eliminate, the impactof currency movements. See “Derivative instruments and hedging” in Note 4 of Notes to Consolidated FinancialStatements for additional disclosures.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Selected Financial Data information contained in Item 6 of Part II hereof is hereby incorporated byreference into this Item 8 of Part II of this Form 10-K.

ULTRATECH, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements included in Item 8:

Page Number

Reports of Independent Registered Public Accounting Firm 47Consolidated Balance Sheets—December 31, 2013 and 2012 49Consolidated Statements of Operations—Years ended December 31, 2013, 2012 and 2011 50Consolidated Statements of Comprehensive Income (Loss)—Years ended December 31,

2013, 2012 and 2011 51Consolidated Statements of Cash Flows—Years ended December 31, 2013, 2012 and 2011 52Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2013, 2012 and

2011 53Notes to Consolidated Financial Statements 54

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Ultratech, Inc.

We have audited the accompanying consolidated balance sheets of Ultratech, Inc. as of December 31, 2013and 2012, and the related consolidated statements of operations, comprehensive income (loss), stockholders’equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits alsoincluded the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements andschedule are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements and schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Ultratech, Inc. at December 31, 2013 and 2012, and the consolidated results ofits operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformitywith U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,when considered in relation to the basic financial statements taken as a whole, presents fairly in all materialrespects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), Ultratech, Inc.’s internal control over financial reporting as of December 31, 2013, based oncriteria established in Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (1992 Framework) and our report dated February 28, 2014expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Jose, CaliforniaFebruary 28, 2014

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Ultratech, Inc.

We have audited Ultratech, Inc.’s internal control over financial reporting as of December 31, 2013, basedon criteria established in Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (1992 Framework) (the COSO criteria). Ultratech, Inc.’smanagement is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanyingManagement’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express anopinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether effective internal control over financial reporting was maintained in all material respects. Ouraudit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control basedon the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

In our opinion, Ultratech, Inc. maintained, in all material respects, effective internal control over financialreporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated balance sheets of Ultratech, Inc. as of December 31, 2013 and 2012, and therelated consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flowsfor each of the three years in the period ended December 31, 2013 of Ultratech, Inc. and our report datedFebruary 28, 2014 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Jose, CaliforniaFebruary 28, 2014

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ULTRATECH, INC.

CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share amountsDecember 31,

2013December 31,

2012

AssetsCurrent assets:

Cash and cash equivalents $ 93,550 $ 96,968Short-term investments 203,485 205,540Accounts receivable, net of allowance for doubtful accounts of $498 and $498

at December 31, 2013 and 2012, respectively 34,441 42,464Inventories, net 47,784 46,794Prepaid expenses and other current assets 5,498 8,305

Total current assets 384,758 400,071Property, plant, and equipment, net 21,811 19,801Intangible assets, net 15,735 12,282Other assets 11,860 4,832

Total assets $434,164 $436,986

Liabilities and Stockholders’ EquityCurrent liabilities:

Notes payable $ 5,120 $ 1,000Accounts payable 8,914 17,741Accrued expenses 15,095 14,860Deferred product and services income 6,574 16,964

Total current liabilities 35,703 50,565Other liabilities 11,923 11,235Commitments and contingenciesStockholders’ equity:

Preferred Stock, $0.001 par value: 2,000,000 shares authorized; none issued — —Common Stock, $0.001 par value: 80,000,000 shares authorized; 29,690,354

and 28,929,043 shares issued at December 31, 2013 and 2012, respectively;and 27,854,553 and 27,092,242 outstanding at December 31, 2013 and 2012,respectively 29 28

Additional paid-in capital 335,232 310,017Treasury stock: 1,835,801 and 1,836,801 shares at December 31, 2013 and

2012, respectively (26,497) (26,512)Accumulated other comprehensive income (loss), net (67) 43Retained earnings 77,841 91,610

Total stockholders’ equity 386,538 375,186

Total liabilities and stockholders’ equity $434,164 $436,986

See accompanying notes to consolidated financial statements.

49

ULTRATECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

In thousands, except per share amounts 2013 2012 2011

Net salesProducts $140,340 $215,711 $191,538Services 16,432 17,811 19,660Licenses 500 1,303 1,135

Total net sales 157,272 234,825 212,333Cost of sales

Cost of products sold 77,740 89,750 86,967Cost of services 12,150 13,265 15,041

Gross profit 67,382 131,810 110,325Research, development and engineering 33,582 30,085 23,616General and administrative 48,858 45,327 42,689

Operating income (loss) (15,058) 56,398 44,020Interest expense (48) 5 (21)Interest and other income, net 190 566 161

Income (loss) before income taxes (14,916) 56,969 44,160Provision (benefit) for income taxes (1,147) 9,782 4,930

Net income (loss) $ (13,769) $ 47,187 $ 39,230

Net income (loss) per share—basicNet income (loss) per share $ (0.49) $ 1.76 $ 1.51Number of shares used in per share computations—basic 28,106 26,881 25,915Net income (loss) per share—dilutedNet income (loss) per share $ (0.49) $ 1.70 $ 1.47Number of shares used in per share computations—diluted 28,106 27,705 26,778


50

ULTRATECH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


(In thousands) 2013 2012 2011

Net income (loss) $(13,769) $47,187 $39,230Other comprehensive income (loss), net of tax:

Change in unrealized gain (loss) on investments (60) 55 32Change in minimum postretirement medical obligation (1) (2) (13)Change in unrealized gain (loss) on hedge contracts (49) 89 —

Other comprehensive income (loss) (110) 142 19

Total comprehensive income (loss) $(13,879) $47,329 $39,249


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ULTRATECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


In thousands 2013 2012 2011

Cash flows from operating activities:Net income (loss) $ (13,769) $ 47,187 $ 39,230Adjustments to reconcile net income to net cash provided by (used in)

operating activities:Depreciation 5,642 4,643 3,991Amortization of securities discount (393) 344 124Amortization of intangible assets 1,547 496 99Amortization of other 426 334 266Accretion of asset retirement obligations 126 117 109(Gain) loss on disposal of equipment 139 5 (2)Provision for inventory reserves and purchase order

commitments 5,606 456 425Stock-based compensation 15,473 12,512 9,017Excess tax benefit from share-based arrangements (384) (6,961) (3,023)Changes in operating assets and liabilities:

Accounts receivable 8,023 14,042 (23,681)Inventories (12,230) (5,316) (4,622)Prepaid expenses and other current assets 2,758 (1,368) 924Other assets (673) (585) (632)Accounts payable (8,827) 6,761 (2,174)Accrued expenses (647) (7,513) 12,866Deferred product and services income (10,390) 2,011 1,312Other liabilities 822 9,966 3,162

Net cash provided by (used in) operating activities (6,751) 77,131 37,391

Cash flows from investing activities:Capital expenditures (7,933) (9,271) (5,284)Purchase of patents and intangible assets (5,000) (12,327) —Purchase of investments in securities (229,740) (281,854) (225,104)Proceeds from maturities of investments 232,128 245,193 176,508

Net cash used in investing activities (10,545) (58,259) (53,880)

Cash flows from financing activities:Proceeds from notes payable 8,120 4,000 11,000Repayment of notes payable (4,000) (4,000) (16,000)Proceeds from issuance of common stock for stock option exercises 12,808 16,677 14,886Tax payments for restricted stock unit releases (3,434) (4,322) (1,266)Excess tax benefit from exercise of stock options 384 6,961 3,023

Net cash provided by financing activities 13,878 19,316 11,643

Net increase (decrease) in cash and cash equivalents (3,418) 38,188 (4,846)Cash and cash equivalents at beginning of period 96,968 58,780 63,626Cash and cash equivalents at end of period $ 93,550 $ 96,968 $ 58,780Supplemental disclosures of cash flow information:Cash paid during the period for income taxes $ 343 $ 615 $ 334Other non-cash changes:

Systems transferred from inventory to equipment and other assets, net $ 6,641 $ 736 $ 34


52

ULTRATECH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Stockholders’ Equity

Common Stock AdditionalPaid-inCapital

TreasuryStock

AccumulatedOther

ComprehensiveIncome (Loss)

RetainedEarnings

(AccumulatedDeficit)

TotalStockholders’

EquityIn thousands, except share data Shares Amount

Balance at December 31, 2010 24,739,040 $ 27 $252,565 $(26,540) $(118) $ 5,193 $231,127Net issuance of common stock under

stock option plans 1,098,954 — 13,599 14 — — 13,613Stock-based compensation — — 9,017 — — — 9,017Excess tax benefit related to stock

options 3,023 3,023Other comprehensive income — — — — 19 — 19Net income — — — — — 39,230 39,230

Total comprehensive income 39,249

Balance at December 31, 2011 25,837,994 27 278,204 (26,526) (99) 44,423 296,029Net issuance of common stock under

stock option plans 1,254,248 1 12,340 14 — — 12,355Stock-based compensation — — 12,512 — — — 12,512Excess tax benefit related to stock

options 6,961 6,961Other comprehensive income — — — — 142 — 142Net income — — — — — 47,187 47,187

Total comprehensive income 47,329

Balance at December 31, 2012 27,092,242 28 310,017 (26,512) 43 91,610 375,186Net issuance of common stock under

stock option plans 762,311 1 9,358 15 9,374Stock-based compensation — 15,473 — — — 15,473Excess tax benefit related to stock

options — — 384 — — — 384Other comprehensive loss — — — — (110) — (110)Net loss — — — — — (13,769) (13,769)

Total comprehensive loss (13,879)

Balance at December 31, 2013 27,854,553 $ 29 $335,232 $(26,497) $ (67) $ 77,841 $386,538


53

ULTRATECH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY AND INDUSTRY INFORMATION

Nature of Operations

Ultratech, Inc. develops, manufactures and markets photolithography, laser thermal processing andinspection equipment for manufacturers of integrated circuits and nanotechnology components locatedthroughout North America, Europe, Singapore, Japan, Taiwan, Korea and the rest of Asia.

We supply step-and-repeat photolithography systems based on one-to-one imaging technology. Within theintegrated circuit industry, we target the market for advanced packaging applications. Within the nanotechnologyindustry, our target markets include thin film head magnetic recording devices, laser diodes, high-brightness lightemitting diodes (“HBLEDs”) and atomic layer deposition (“ALD”). Our laser thermal processing equipment istargeted at advanced annealing applications within the semiconductor industry.

Major Customers

In 2013, Siliconware Precision Industries Co. Ltd. (“SPIL”) accounted for 16% of our total system sales. In2012, Global Foundries Incorporated (“GFI”), Intel Corporation (“Intel”) and Taiwan SemiconductorManufacturing Co. Ltd. (“TSMC”) accounted for 25%, 21% and 11% of our total system sales, respectively. In2011, Intel, Samsung and TSMC accounted for 24%, 18%, and 12% of our total systems sales, respectively.

At December 31, 2013, GFI and Semiconductor Manufacturing International Corporation (“SMIC”)accounted for 37% and 17% of our accounts receivable, respectively. At December 31, 2012, Intel, GFI andTSMC accounted for 31%, 17% and 15%, of our accounts receivable, respectively.

Business Segments

In evaluating our business, we give consideration to the Chief Executive Officer’s review of financialinformation and the organizational structure of our management. Based on this review, we concluded that, at thepresent time, resources are allocated and other financial decisions are made based on consolidated financialinformation. Accordingly, we have determined that we operate in one business segment, which is themanufacture and distribution of capital equipment to manufacturers of integrated circuits and nanotechnologycomponents.

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Enterprise-Wide Disclosures

Our products are manufactured in the United States and Singapore, and are sold worldwide. We market ourproducts internationally through domestic and foreign-based sales and service offices. The following tablepresents enterprise-wide sales to external customers and long-lived assets by geographic region:


Net sales:United States $ 43,383 $ 81,724 $ 84,467International:

Taiwan 61,460 48,843 51,098Rest of the world 19,871 43,227 33,725Europe 13,660 44,804 20,452Japan 11,482 3,311 8,661Korea 7,416 12,916 13,930

subtotal 113,889 153,101 127,866

Total $157,272 $234,825 $212,333

Long-lived assets:United States $ 40,347 $ 27,118 $ 12,475Singapore 7,913 5,610 5,142Rest of the world 1,146 777 421

Total $ 49,406 $ 33,505 $ 18,038

The rest of the world is comprised of sales to customers and long-lived assets in countries that areindividually insignificant.

With the exception of Japan, our operations in foreign countries are not currently subject to significantcurrency exchange rate fluctuations, principally because sales contracts for our systems are generallydenominated in U.S. dollars. In Japan, we sell our products in both U.S. dollars and Japanese yen. However, weattempt to mitigate our currency exchange rate exposure through the use of currency forward contracts. (See“Derivative Instruments and Hedging” in Note 4.)

2. CONCENTRATIONS OF RISKS

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cashequivalents, short-term investments and trade receivables. These credit risks include the potential inability of anissuer or customer to honor their obligations under the terms of the instrument or the sales agreement. We placeour cash equivalents and investments with high credit-quality financial institutions. We invest our excess cash incommercial paper, readily marketable debt instruments and collateralized funds of United States and stategovernment entities. We have established guidelines relative to credit ratings, diversification and maturities thatseek to maintain principal balance and liquidity.

A majority of our trade receivables are derived from sales in various geographic areas, principally theUnited States, Europe, Japan, Taiwan and the rest of Asia, to large companies within the integrated circuit andnanotechnology industries. We perform ongoing credit evaluations of our customers’ financial condition andrequire collateral, whenever deemed necessary. As of December 31, 2013 and 2012, the recorded value of ouraccounts receivable approximated fair value due to the short-term nature of our accounts receivable.

Sole-source and single-source suppliers provide critical components and services for the manufacture of ourproducts. The reliance on sole or limited groups of suppliers may subject us from time to time to quality,allocation and pricing constraints.

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3. BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of Ultratech and our subsidiaries,all of which are wholly owned. Intercompany balances and transactions have been eliminated.

The U.S. dollar is the functional currency for all foreign operations. Foreign exchange gains and losseswhich result from the process of remeasuring foreign currency financial statements into U.S. dollars or fromforeign currency exchange transactions during the period, are included in interest and other income, net. Netforeign exchange losses in 2013 were $0.3 million, in 2012 were $0.3 million, and in 2011 were $0.1 million.

Our fiscal quarters in 2013 ended on March 30, 2013, June 29, 2013, September 28, 2013 and December 31,2013. Our fiscal quarters in 2012 ended on March 31, 2012, June 30, 2012, September 29, 2012 andDecember 31, 2012.

We have evaluated subsequent events, as defined by Accounting Standard Codification (“ASC”) Topic 855,through February 28, 2014, which is the issuance date of our financial statements.

Use of Estimates

The preparation of the financial statements and related disclosures in conformity with accounting principlesgenerally accepted in the United States requires management to make estimates and judgments that affect thereported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets andliabilities at the date of the consolidated financial statements. By their nature, these estimates and judgments aresubject to an inherent degree of uncertainty. On an ongoing basis, management evaluates its estimates, includingthose related to inventories and purchase order commitments, warranty obligations, asset retirement obligations,bad debts, estimated useful lives of fixed assets, intangible assets, asset impairment, income taxes, deferredincome tax valuation allowance, stock-based compensation, and contingencies and litigation. Management basesits estimates on historical experience and on various other analyses and assumptions that are believed to bereasonable under the circumstances, the results of which form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity date at acquisition of threemonths or less. The carrying value of cash equivalents approximates fair value.

Investments

Management determines the appropriate classification of its investments at the time of purchase and re-evaluates the classification at each balance sheet date. At December 31, 2013 and 2012, all investments and cashequivalents in our portfolio were classified as “available-for-sale” and are stated at fair value, with the unrealizedgains and losses, net of tax, reported in accumulated other comprehensive income (loss), as a separate componentof stockholders’ equity. The fair value of short-term investments are estimated based on quoted prices in activemarkets or significant other observable inputs as of December 31, 2013 and 2012.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts tomaturity. Such amortization, as well as interest, dividends, realized gains and losses and declines in value judgedto be other than temporary are included in interest and other income, net. The cost of securities sold is based onthe specific identification method.

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Allowance for Bad Debts

We maintain an allowance for uncollectible accounts receivable based upon expected collectability. Thisreserve is established based upon historical trends, current economic conditions, delinquency status based oncontractual terms and an analysis of specific exposures.

Inventories

Inventories are stated at the lower of cost or market using standard costs that generally approximate actualcosts on a first-in, first-out basis. We maintain a perpetual inventory system and continuously record the quantityon-hand and standard cost for each product, including purchased components, subassemblies, and finished goods.We maintain the integrity of perpetual inventory records through periodic physical counts of quantities on hand.The semiconductor industry is characterized by rapid technological change, changes in customer requirementsand evolving industry standards. We perform a detailed assessment of inventory at each balance sheet date,which includes a review of, among other factors, demand requirements and market conditions. Based on thisanalysis, we may record adjustments to the value of our inventory. During the years ended December 31, 2013and 2012 we have recorded $5.6 million and $0.5 million, respectively, in reserves for excess and obsoleteinventories and open purchase order commitments.

Other Assets

Restricted cash included in other assets at December 31, 2013 and 2012 was insignificant and $0.2 million,respectively. The restricted cash is in the form of an interest bearing account against a letter of credit with acustomer and will be released after the warranty period for the related tool expires.

Long-lived Assets

Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization.Equipment is depreciated on a straight-line basis over the estimated useful lives (i.e. three to nine years).Leasehold improvements are amortized on a straight-line basis over the life of the related assets or the lease term,whichever is shorter. Depreciation and amortization expense for the years ended December 31, 2013, 2012 and2011 was $5.6 million, $4.6 million and $4.0 million, respectively.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that thecarrying amount of these assets may not be recoverable. We assess these assets for impairment based onestimated future cash flows from these assets. No asset impairment charges have been recorded during the threeyears ended December 31, 2013.

Intangible Assets

Purchased technology, patents and other intangible assets are presented at cost, net of accumulatedamortization, and are amortized over their estimated useful lives using the straight-line method. Amortizationexpense for the years ended December 31, 2013, 2012 and 2011 was $1.5 million, $0.5 million and $0.1 million,respectively.

We review for impairment whenever events or changes in circumstances indicate that the carrying amountof the intangible asset may not be recoverable and the carrying amount exceeds its fair value. No intangibleassets impairment charges have been recorded during the three years ended December 31, 2013.

Related-Party Transactions

From time to time, we make loans to our employees. All currently outstanding employee notes accrueinterest and have terms ranging from two to six years. Certain notes are secured by deeds of trust for theemployees’ personal residences.

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During the years ended December 31, 2013 and 2012, we made no new loans to employees. As ofDecember 31, 2013 and 2012 the aggregate outstanding principal balance of all notes was $0.2 million for eachof the years.

Derivative Instruments and Hedging

The majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars.However, we also enter into these transactions in other currencies, primarily Japanese yen. Our policy is tominimize foreign currency denominated transaction and remeasurement exposures with derivative instruments,mainly forward contracts. The gains and losses on these derivatives are intended to at least partially offset thetransaction and remeasurement gains and losses recognized in earnings. We do not enter into foreign exchangeforward contracts for speculative purposes. Under ASC Topic 815, Derivatives and Hedging (“ASC 815”) allderivatives are recorded on the balance sheet at fair value. The gains and losses resulting from changes in fairvalue are accounted for depending on the use of the derivative and whether it is designated and qualifies forhedge accounting. The fair value of derivative instruments recorded in our Consolidated Balance Sheets is asfollows:

Derivatives as of December 31, 2013

In thousands Balance Sheet Location Fair Value

Foreign exchange contracts Other current assets $ 12Other current liabilities $(19)

Total derivatives $ (7)

Derivatives as of December 31, 2012

In thousands Balance Sheet Location Fair Value

Foreign exchange contracts Other current assets $ 28Other current liabilities $(31)

Total derivatives $ (3)

Our derivative financial instruments are subject to both credit and market risk. Credit risk is the risk of lossdue to failure of a counter-party to perform its obligations in accordance with contractual terms. Market risk isthe potential change in an investment’s value caused by fluctuations in interest and currency exchange rates,credit spreads or other variables. We monitor the credit-worthiness of the financial institutions that are counter-parties to our derivative financial instruments and do not consider the risks of counter-party nonperformance tobe material. Credit and market risks, as a result of an offset by the underlying cash flow being hedged, related toderivative instruments were not considered material at December 31, 2013 and 2012.

Cash Flow Hedging

We designate and document as cash flow hedges foreign exchange forward contracts that are used by us tohedge the risk that forecasted revenue may be adversely affected by changes in foreign currency exchange rates.The effective portion of the contracts’ gains or losses is included in accumulated other comprehensive income(loss) (“OCI”) until the period in which the forecasted sale being hedged is recognized, at which time the amountin OCI is reclassified to earnings as a component of revenue. To the extent that any of these contracts are notconsidered to be effective in offsetting the change in the value of the forecasted sales being hedged, theineffective portion of these contracts is immediately recognized in income as a component of interest and otherincome, net. For the year ended December 31, 2012, there was one cash flow hedge with $0.1 million excludedfrom effectiveness testing. This hedge was for 179.0 million Japanese yen with a U.S. dollar value of $2.2million. There was no hedge ineffectiveness for the year ended December 31, 2013. We calculate hedgeeffectiveness at a minimum each fiscal quarter. We measure hedge effectiveness by comparing the cumulative

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change in the spot rate of the derivative with the cumulative change in the spot rate of the anticipated salestransactions. The maturity of these instruments is generally nine months or less. We record any excludedcomponents of the hedge in interest and other income, net.

In the event the underlying forecasted transaction does not occur within the designated hedge period or itbecomes probable that the forecasted transaction will not occur, the related gains and losses on the cash flowhedge are reclassified from OCI to interest and other income, net on the consolidated statement of operations.

At December 31, 2013 and 2012, we had currency forward contracts for the sale of Japanese yen of263.8 million and 179.0 million, respectively. We recorded an accumulated gain as a component of othercomprehensive income (loss) at December 31, 2013 and 2012 in an insignificant amount and $0.1 million,respectively.

Balance Sheet Derivatives

We manage the foreign currency risk associated with yen-denominated assets and liabilities using foreignexchange forward contracts with maturities of less than nine months. The change in fair value of thesederivatives is recognized as a component of interest and other income, net and is intended to offset theremeasurement gains and losses associated with the non-functional currency denominated assets and liabilities.

At December 31, 2013 and 2012, we had currency sell-forward contracts classified as fair value hedges forthe sale of Japanese yen of $0.4 million and $0.8 million, respectively. At December 31, 2013 and 2012, we hadbuy-forward contracts for the purchase of Japanese yen of $0.6 million and $0.9 million, respectively. The fairvalue of derivatives at December 31, 2013 and 2012 was insignificant.

The following sets forth the effect of the derivative instruments on our Consolidated Statements ofOperations (in thousands):

DerivativesLocation of Loss Recognized

in Income on Derivatives

Amount of Loss Recognized in Incomeon Derivatives for the

Year Ended December 31, 2013

Foreign exchange contracts Interest and other income (expense),net

($107)

DerivativesLocation of Loss Recognized

in Income on Derivatives

Amount of Loss Recognized in Incomeon Derivatives for the

Year Ended December 31, 2012

Foreign exchange contracts Interest and other income (expense),net

($5)

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or serviceshave been rendered, the arrangement consideration is fixed or determinable, and collectability is reasonablyassured. We derive revenue from four sources: system sales, spare parts sales, service contracts and license fees.

Provided all other criteria are met, we recognize revenues on system sales when system acceptanceprovisions have been met in accordance with the terms and conditions of the arrangement. In the event that termsof the sale provide for a lapsing system acceptance period, we recognize revenue upon the expiration of thelapsing acceptance period or system acceptance, whichever occurs first. In these instances, which are infrequent,revenue is recorded only if the product has met product specifications prior to shipment and management deemsthat no significant uncertainties as to product performance exist.

Our transactions frequently include the sale of systems and services under multiple element arrangements.In transactions with multiple deliverables, revenue is recognized upon the delivery of the separate elements andwhen system acceptance has occurred or we are otherwise released from our system acceptance obligations.

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For multiple element arrangements, the total consideration for an arrangement is allocated among theseparate elements in the arrangement based on a selling price hierarchy. The selling price hierarchy for adeliverable is based on (i) vendor specific objective evidence (VSOE); if available; (ii) third party evidence ofselling price if VSOE is not available; or (iii) an estimated selling price, if neither VSOE nor third party evidenceis available. If we have not established VSOE and cannot obtain third party evidence of selling price, wedetermine our estimate of the relative selling price by considering our production costs and historical margins ofsimilar products or services. We believe this best represents the price at which we would transact a sale if theproduct or service were sold on a stand-alone basis. We regularly review the method used to determine ourrelative selling price and update any estimates accordingly. We limit the amount of revenue recognized fordelivered elements to the amount that is not contingent on the future delivery of products or services or otherfuture performance obligations.

We generally recognize revenue from spare parts sales upon shipment, as our products are generally sold onterms that transfer title and risk of ownership when it leaves our site. We sell service contracts for which revenueis deferred and recognized ratably over the contract period (for time-based service contracts) or as service hoursare delivered (for contracts based on a purchased quantity of hours). We recognize license revenue fromtransactions in which our systems are re-sold by our customers to third parties, as well as from royaltyarrangements.

Costs related to deferred product revenues are capitalized (deferred) and recognized at the time of revenuerecognition. Deferred product revenue and costs are netted on our balance sheet, under the caption “deferredproduct and services income.” The gross amount of deferred revenues and deferred costs at December 31, 2013were $8.7 million and $2.2 million, respectively. The gross amount of deferred revenues and deferred costs atDecember 31, 2012 were $24.6 million and $7.6 million, respectively.

Costs incurred for shipping and handling are included in cost of sales.

Warranty Accrual

We generally warrant our products for material and labor to repair the product for a period of 12 months fornew products, or three months for refurbished products, from the date of system acceptance. Accordingly, anaccrual for the estimated cost of the warranty is recorded at the time the product is shipped and the related chargeis recorded in the statement of operations at the time revenue is recognized.

Research, Development and Engineering Expenses

We are actively engaged in basic technology and applied research programs designed to develop newproducts and product applications. In addition, substantial ongoing product and process improvement engineeringand support programs relating to existing products are conducted within engineering departments and elsewhere.Research, development and engineering costs are charged to operations as incurred.

Stock-Based Compensation

Under the fair value recognition provisions of ASC Topic 718, Compensation—Stock Compensation (“ASC718”), share-based compensation cost is measured at the grant date based on the value of the award and isrecognized as expense over the vesting period. Determining the fair value of share-based awards at the grant daterequires judgment, including estimating our stock price volatility, employee stock option exercise behaviors andemployee option forfeiture rates. As stock-based compensation expense recognized in the ConsolidatedStatement of Operations is based on awards that ultimately are expected to vest, the amount of the expense hasbeen reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures wereestimated based on historical experience.

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Deferred Income Taxes

Deferred income taxes are provided for the tax effect of temporary differences between the tax basis ofassets and liabilities and their reported amounts in the financial statements. ASC Topic 740, Income Taxes (“ASC740”) provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likelythan not to occur. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxableincome in future years in appropriate tax jurisdictions to obtain the benefit of the reversal of temporarydifferences, net operating loss carry-forwards, and tax credit carry-forwards. The amount of deferred tax assetsconsidered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.With the exception of certain international jurisdictions (i.e. Japan and Taiwan), we have determined that at thistime it is more likely than not that deferred tax assets attributable to the remaining jurisdictions will not berealized, primarily due to uncertainties related to our ability to utilize the net operating loss and tax credit carry-forwards before they expire based on the fact that it is more likely than not we will not generate sufficient taxableincome in the relevant jurisdictions. Accordingly, we have established a valuation allowance for such deferredtax assets. Management continues to monitor the relative weight of positive and negative evidence of futureprofitability in relevant jurisdictions. It is possible that sometime in the next 12 months the positive evidence willbe sufficient to release a material amount of our valuation allowance; however, there is no assurance this willoccur. See Note 13 Income Taxes for further details.

Taxes Collected from Customers

We collect taxes from our customers for sales transactions as assessed by respective governmentalauthorities. On our consolidated statements of operations these taxes are presented on a net basis and areexcluded from revenues and expenses.

Impact of Recently Issued Accounting Standards

In June 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on the financialstatement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss,or a tax credit carryforward exists, with the purpose of reducing diversity in practice. This new standard requiresthe netting of unrecognized tax benefits against a deferred tax asset for a loss or other carryforward that wouldapply in settlement of the uncertain tax positions. The new guidance is effective for us beginning January 1,2014. Early adoption is permitted. We are currently in the process of determining the impact on our financialposition.

In February 2013, the FASB issued guidance on disclosure requirements for items reclassified out ofAccumulated Other Comprehensive Income (“AOCI”). This new guidance requires entities to present (either onthe face of the income statement or in the notes) the effects on the line items of the income statement for amountsreclassified out of AOCI. The new guidance is effective for us beginning January 1, 2013. We adopted theguidance during the first quarter of 2013 and there was no material impact on our consolidated financialstatements.

In July 2012, the FASB issued amendments to the indefinite-lived intangible asset impairment guidancewhich provides an option for companies to use a qualitative approach to test indefinite-lived intangible assets forimpairment if certain conditions are met. The amendments are effective for annual and interim indefinite-livedintangible asset impairment tests performed for fiscal years beginning after September 15, 2012. We adopted theamended accounting guidance during the first quarter of 2013 and there was no material impact on ourconsolidated financial statements.

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5. STOCK-BASED COMPENSATION

The following table shows total stock-based compensation expense recognized under ASC Topic 718,Compensation—Stock Compensation (“ASC 718”), for employees and directors and the effect on theaccompanying Consolidated Statement of Operations for the years ended December 31:


Cost of sales $ 782 $ 653 $ 458Research, development, and engineering 2,523 1,860 1,482Selling, general and administrative expenses 12,168 9,999 7,077

Total stock-based compensation expense $15,473 $12,512 $9,017

Compensation cost capitalized as part of inventory was $0.5 million, $0.3 million and $0.3 million duringthe years ended December 31, 2013, 2012 and 2011, respectively.

The estimated fair value of our stock-based awards, less expected forfeitures, is amortized over the awards’vesting period using a single grant approach on a ratable basis for awards granted after the adoption of ASC 718and using a multiple grant approach on an accelerated basis for awards granted prior to the adoption of ASC 718.

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuationmodel and the assumptions noted in the following table. The expected life of options is based on observedhistorical exercise patterns. Groups of employees that have similar historical exercise patterns have beenconsidered separately for valuation purposes. The Black-Scholes valuation input for expected volatility used forour stock options for all years presented was based on the historical volatility of our common stock. The risk freeinterest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal tothe expected term of the option. The dividend yield reflects that we have not paid any cash dividends sinceinception and do not intend to pay any cash dividends in the foreseeable future.

We used the following weighted-average assumptions to estimate the fair value of stock options at the dateof grant using the Black-Scholes option-pricing model for the years ended December 31:

2013 2012 2011

Expected life (in years) 5.9 8.0 8.2Risk-free interest rate 1.1% 1.5% 2.8%Volatility factor 47% 48% 48%Dividend yield — — —

The weighted-average fair value per share of stock options granted during 2013, 2012 and 2011 was $14.09,$16.03, and $14.61 respectively.

1993 Stock Option Plan/Stock Issuance Plan

On July 19, 2011, our stockholders approved amendments to our 1993 Stock Option/Stock Issuance Planwhich increased the number of shares available for issuance pursuant to the 1993 Plan by 3.3 million shares. Theamendments, which were adopted by our Board of Directors on May 31, 2011, effective as of their approval byour stockholders, increased the share reserve, altered share-counting procedures, made changes to the non-employee director automatic grant program and enabled the granting of performance-based awards under theplan. These plans provide for the grant of stock-based awards to our eligible employees, consultants and advisersand non-employee directors.

Under our 1993 Stock Option Plan/Stock Issuance Plan, as amended and restated as of May 31, 2011,officers and other key employees, non-employee Board members and consultants may receive equity incentiveawards in the form of stock options to purchase shares of common stock at no less than 100% of fair value at the

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grant date or restricted stock or restricted stock units. Options historically have vested in equal monthlyinstallments over a fifty-month period or one hundred-month period, with a minimum vesting period of twelvemonths from the grant date, and generally expire ten years from the date of grant or upon the expiration of alimited period following any earlier termination of employment. The plan was amended in January 2006 to allowthe issuance of shares pursuant to restricted stock unit awards, and during the years ended December 31, 2012,2011 and 2010, restricted stock unit awards were made which generally vest in equal annual installments over athree-year period measured from the award date but which defer the issuance of the vested shares until the end ofthe vesting period, subject to earlier issuance upon termination of employment under certain circumstances or achange in control. Awards under the plan may be subject to accelerated vesting under certain circumstancesshould a change in control occur. The plan terminates on the earlier of June 6, 2020 or the date on which allshares available for issuance under the plan have been issued. Under the plan, approximately 1.2 million,1.8 million and 3.2 million shares were available for issuance at December 31, 2013, 2012 and 2011,respectively.

1998 Supplemental Stock Option/Stock Issuance Plan

Under our 1998 Supplemental Stock Option/Stock Issuance Plan, as amended, eligible employees (i.e. otherthan executive officers and employees holding the title of Vice President or General Manager) were able toreceive options to purchase shares of common stock at not less than 100% of fair value on the grant date. Theseoptions generally vest in equal monthly installments over a fifty-month period, with a minimum vesting period oftwelve months from grant date, and generally expire ten years from date of grant, subject to earlier terminationfollowing the optionee’s cessation of employee status. Direct stock issuances may also be made under the plan,subject to similar vesting provisions. The plan was amended in January 2008 to allow the issuance of sharespursuant to restricted stock unit awards. Since the plan terminated on October 19, 2008, there were no optionsavailable for issuance under the plan at December 31, 2013, 2012 and 2011.

Stock Option Activity

The following table is a summary of our stock option activity and related information for the year endedDecember 31, 2013:

Options

Weighted-Average

Exercise Price

WeightedAverage

RemainingContractual

Term (Years)

AggregateIntrinsic

Value as ofDecember 31,

2013

Outstanding at January 1, 2013 3,195,573 $23.33Granted 61,000 $31.38Exercised (560,808) $22.78Forfeited and expired (35,881) $32.58

Outstanding at December 31, 2013 2,659,884 $23.51 6.7 $16,096

Exercisable at December 31, 2013 1,010,123 $19.92 4.9 $ 9,472Vested and expected to vest as of December 31, 2013, net

of anticipated forfeitures 2,549,061 $23.37 6.6 $15,763

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the differencebetween our closing stock price on the last trading day of the year ended December 31, 2013 and the exerciseprice, multiplied by the number of in-the-money options) that would have been received by the option holdershad all option holders exercised their options on December 31, 2013. Total intrinsic value of options exercised(selling price of the exercised stock less the option strike price multiplied by the share amount) in the year endedDecember 31, 2013 was $9.6 million as compared to $14.0 million and $11.6 million in each of 2012 and 2011,respectively. Cash received from option exercises in the years ended December 31, 2013 and 2012 was $12.8million and $16.7 million, respectively.

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The following table is a summary of our option activity for the years ended December 31:

2012 2011

Options

Weighted-Average

Exercise Price Options

Weighted-Average

Exercise Price

Outstanding at January 1 3,259,142 $19.44 3,269,147 $16.35Granted 951,500 $30.09 1,091,500 $25.97Exercised (983,998) $16.92 (960,818) $15.47Forfeited and expired (31,071) $24.59 (140,687) $25.68

Outstanding at December 31 3,195,573 $23.33 3,259,142 $19.44

The following table shows the related information for options outstanding and options exercisable as ofDecember 31, 2013:

Options Outstanding Options Exercisable

Range of Exercise Prices Options

Weighted-Average

RemainingContractual Life

(Years)

Weighted-Average

Exercise Price Options

Weighted-Average

Exercise Price

$9.66 - $15.65 491,382 4.3 $13.25 333,122 $12.89$16.01 - $18.92 455,268 4.7 $17.72 267,378 $17.01$19.79 - $27.75 654,612 7.3 $24.11 171,547 $23.78$28.92 - $30.12 582,440 8.4 $29.52 133,958 $29.54$30.91 - $31.91 455,962 7.9 $31.12 103,698 $31.11$31.94 - $39.92 20,220 9.0 $39.04 420 $31.94

Outstanding at December 31 2,659,884 6.7 $23.51 1,010,123 $19.92

As of December 31, 2013, $23.7 million of total unrecognized compensation cost related to stock options isexpected to be recognized over a weighted-average period of 4.7 years.

Restricted Stock Unit Activity

The following table is a summary of our restricted stock unit activity and related information as ofDecember 31:

2013 2012 2011

Shares

Weighted-Average

Grant DateFair Value Shares

Weighted-Average

Grant DateFair Value Shares

Weighted-Average

Grant DateFair Value

Nonvested stock at January 1 874,370 $26.04 663,504 $22.60 431,866 $15.64Granted 599,500 $29.79 496,875 $30.02 521,875 $25.98Vested (368,076) $26.78 (276,969) $25.15 (271,651) $18.23Forfeited (16,440) $32.55 (9,040) $20.02 (18,586) $19.68

Nonvested stock at December 31 1,089,354 $27.75 874,370 $26.04 663,504 $22.60

A total of 384,320 shares of our common stock subject to restricted stock units was vested but not yetdistributed as of December 31, 2013. Stock-based compensation expense related to our restricted stock units forthe year ended December 31, 2013 was $10.1 million. As of December 31, 2013, $29.4 million of totalunrecognized compensation cost related to unvested restricted stock units is expected to be recognized over aweighted-average period of 4.3 years. Total fair value of vested shares in the year ended December 31, 2013 was$9.9 million compared to $7.0 million and $5.0 million in 2012 and 2011, respectively.

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6. BASIC AND DILUTED NET INCOME PER SHARE

The following sets forth the computation of basic and diluted net income (loss) per share:


In thousands, except per share amounts 2013 2012 2011

Numerator:Net income (loss) $(13,769) $47,187 $39,230

Denominator:Basic weighted-average shares outstanding 28,106 26,881 25,915Effect of dilutive employee stock options and restricted stock units — 824 863

Diluted weighted-average shares outstanding 28,106 27,705 26,778

Net income (loss) per share—basic $ (0.49) $ 1.76 $ 1.51

Net income (loss) per share—diluted $ (0.49) $ 1.70 $ 1.47

The dilutive effect of outstanding options and restricted stock units is reflected in diluted net income pershare, but not diluted net loss per share, by application of the treasury stock method, which includesconsideration of stock-based compensation required by U.S. GAAP. As the Company reported a net loss for theyear ended December 31, 2013, both basic and diluted net loss per share are the same.

For the year ended December 31, 2013, a total of 2.3 million shares of common stock subject to options andrestricted stock units was excluded from the computation of diluted net income (loss) per share as the resultingeffect would have been anti-dilutive, compared to 1.4 million shares and 1.1 million shares for the years endedDecember 31, 2012 and 2011, respectively. Options and restricted stock units are anti-dilutive when we have anet loss or when the exercise price of the stock option and the average unrecognized compensation cost of thestock option or restricted stock unit are greater than the average market price of our common stock.

7. FAIR VALUE MEASUREMENTS

On January 1, 2008, we adopted ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”)for financial assets and liabilities recognized at fair value on a recurring basis. On January 1, 2009, we adoptedASC 820 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed atfair value in the financial statements on a recurring basis. These nonfinancial items include assets and liabilitiessuch as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired andliabilities assumed in a business combination. The adoption of this deferred portion of ASC 820 did not have anyimpact on our results of operations or financial position.

Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid totransfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in anorderly transaction between market participants on the measurement date. Valuation techniques used to measurefair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservableinputs. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two areconsidered observable and the last unobservable, that may be used to measure fair value which are the following:

• Level 1—Quoted prices for identical assets or liabilities in active markets.

• Level 2—Quoted prices for similar assets or liabilities in active markets; quoted prices for identical orsimilar instruments in markets that are not active; and model-derived valuations in which all significantinputs and significant value drivers are observable in active markets.

• Level 3—Model derived valuations in which one or more significant inputs or significant value driversare unobservable.

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We measure certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale securities and foreign currency derivatives. There were no movements between levels one and two for anyyears presented.

The fair value of these certain financial assets and liabilities was determined at December 31, 2013 and2012:

Fair Value Measurements at December 31, 2013 Using

In thousands Total

Quoted Prices inActive Markets

for IdenticalAssets (Level 1)

Significant OtherObservable

Inputs (Level 2)

SignificantUnobservable

Inputs(Level 3)

Available-for-sale securities(1)Commercial paper $ 3,199 $ — $ 3,199 $—Money market funds 42,994 42,994 — —U.S. corporate debt securities — — — —U.S. treasury bills and notes 6,072 6,072 — —Securities and obligations of U.S. government

agencies 194,216 — 194,216 —

246,481 49,066 197,415 —Foreign currency derivatives(2) 12 — 12 —Foreign currency derivatives(3) (19) — (19) —

$246,474 $49,066 $197,408 $—

Fair Value Measurements at December 31, 2012 Using

In thousands Total

Quoted Prices inActive Markets

for IdenticalAssets (Level 1)

Significant OtherObservable

Inputs (Level 2)

SignificantUnobservable

Inputs(Level 3)

Available-for-sale securities(1)Commercial paper $ 19,996 $ — $ 19,996 $—Money market funds 15,107 15,107 — —U.S. corporate debt securities — — — —U.S. treasury bills and notes 6,045 6,045 — —Securities and obligations of U.S. government

agencies 210,730 — 210,730 —

251,878 21,152 230,726 —Foreign currency derivatives(2) 28 — 28 —Foreign currency derivatives(3) (31) — (31) —

$251,875 $21,152 $230,723 $—

(1) Included in cash and cash equivalents and short-term investments on our consolidated balance sheet. Cashequivalents at December 31, 2013 and 2012 were $43.0 million and $46.3 million, respectively.

(2) Included in current assets on our consolidated balance sheet. Consisted of forward foreign exchangecontracts for the Japanese yen. See Note 4—Derivative Instruments and Hedging.

(3) Included in current liabilities on our consolidated balance sheet. Consisted of forward foreign exchangecontracts for the Japanese yen. See Note 4—Derivative Instruments and Hedging.

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8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) is comprised of the following items, net of tax:

In thousandsDecember 31,

2013December 31,

2012

Unrealized gain (loss) on:Available-for-sale investments $(35) $ 25Postretirement benefit obligation (72) (71)Unrealized gain in hedge contracts 40 89

Accumulated other comprehensive gain (loss) at end of period $(67) $ 43

The amount of gain on foreign exchange contracts reclassified to earnings was $0.1 million and zero for theyears ended December 31, 2013, and 2012, respectively. Unrealized gains and losses on investments affect theshort-term investment line on our consolidated balance sheet. Amounts in other comprehensive income forchanges in the minimum post-retirement obligation are expensed to our consolidated statement of operations inthe selling, general, and administrative expense line.

9. INVESTMENTS

We classified all of our investments as “available-for-sale” as of December 31, 2013 and 2012.Accordingly, we state our investments at estimated fair value. Fair values are determined based on quoted marketprices or pricing models using current market rates. We deem all investments to be available to meet currentworking capital requirements.

The following is a summary of our investments:

December 31, 2013 December 31, 2012

Cash equivalents and available-for-sale investments, in thousands

AmortizedCost

AccumulatedOther

ComprehensiveIncome Estimated

Fair ValueAmortized

Cost

AccumulatedOther

ComprehensiveIncome Estimated

Fair ValueGains Losses Gains Losses

Commercial paper $ 3,199 $— $— $ 3,199 $ 19,996 $— $— $ 19,996Money market funds 42,994 — — 42,994 15,107 — — 15,107U.S. treasury bills and notes 6,067 5 — 6,072 6,040 5 — 6,045Securities and obligations of U.S.

government agencies 194,254 30 70 194,214 210,710 77 57 210,730

Total $246,514 $ 35 $ 70 $246,479 $251,853 $ 82 $ 57 $251,878

The following is a reconciliation of our investments to the balance sheet classifications at December 31,2013 and 2012:

In thousands 2013 2012

Cash equivalents $ 42,994 $ 46,338Short-term investments 203,485 205,540

Investments, at estimated fair value $246,479 $251,878

Gross realized gains and losses on sales of investments were insignificant in each of the years endedDecember 31, 2013, 2012 and 2011.

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The gross amortized cost and estimated fair value of our investments at December 31, 2013, by contractualmaturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of thesecurities may have the right to prepay obligations without prepayment penalties.

In thousands

GrossAmortized

Cost Fair Value

Due in one year or less $223,456 $223,413Due after one year to two years 23,059 23,066

Total $246,515 $246,479

The following table provides the breakdown of the cash equivalents and investments with unrealized lossesat December 31, 2013:

In Loss Position forLess Than 12 Months

In Loss Position forMore Than 12 Months Total

Investments, in thousandsFair

Value

GrossUnrealized

LossesFair

Value

GrossUnrealized

LossesFair

Value

GrossUnrealized

Losses

Securities and obligations of U.S. governmentagencies 71,979 70 — — 71,979 70

Total $71,979 $70 $— $— $71,979 $70

The following table provides the breakdown of the cash equivalents and investments with unrealized lossesat December 31, 2012:

In Loss Position forLess Than 12 Months

In Loss Position forMore Than 12 Months Total

Investments, in thousandsFair

Value

GrossUnrealized

LossesFair

Value

GrossUnrealized

LossesFair

Value

GrossUnrealized

Losses

Securities and obligations of U.S. governmentagencies $15,896 $57 $— $— $15,896 $57

Total $15,896 $57 $— $— $15,896 $57

We review our investment portfolio regularly for impairment. A security is considered impaired when itsfair value is less than its cost basis. If we intend to sell an impaired debt security or it is more likely than not thatwe will be required to sell it prior to recovery of its amortized cost basis, an other-than-temporary-impairment(“OTTI”) is deemed to have occurred. In these instances, the OTTI loss is recognized in earnings equal to theentire difference between the debt security’s amortized cost basis and its fair value at the balance sheet date.

If we do not intend to sell an impaired debt security and it is not more likely than not that we will berequired to sell it prior to recovery of its amortized cost basis, we must determine whether it will recover itsamortized cost basis. If we conclude it will not, a credit loss exists and the resulting OTTI is separated into:

• The amount representing the credit loss, which is recognized in earnings, and

• The amount related to all other factors, which is recognized in other comprehensive income.

As part of this assessment we will consider the various characteristics of each security, including, but notlimited to the following: the length of time and the extent to which the fair value has been less than the amortizedcost basis; adverse conditions specifically related to the security, an industry, or a geographic area; the paymentstructure of the debt security; failure of the issuer of the security to make scheduled interest or principalpayments; any changes to the rating of the security by a rating agency and related outlook or status; recoveries or

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additional declines in fair value subsequent to the balance sheet date. The relative importance of this informationvaries based on the facts and circumstances surrounding each security, as well as the economic environment atthe time of assessment.

We have not recorded any OTTI on our investments for the years ended December 31, 2013, 2012 and2011.

10. BALANCE SHEET DETAIL


2013December 31,

2012

Inventories, net:Raw materials $ 19,800 $ 19,597Work-in-process 9,435 9,708Finished products 18,549 17,489

Total (net of reserves) $ 47,784 $ 46,794

Property, plant, and equipment, netMachinery and equipment $ 42,035 $ 37,598Leasehold improvements 15,434 14,141Office equipment and furniture 15,229 13,458

72,698 65,197Accumulated depreciation and amortization (50,887) (45,396)

Total $ 21,811 $ 19,801

Other assets:Deferred compensation plan assets 3,242 2,070Demonstration and laboratory equipment 7,777 1,422Other 841 1,340

Total $ 11,860 $ 4,832

Accrued expenses:Accrued payroll-related liabilities $ 8,771 $ 10,359Advanced billings 2,522 29Warranty accrual 1,142 2,273Capital lease, current portion — 15Other 2,660 2,184

Total $ 15,095 $ 14,860

Other Liabilities:Deferred compensation plan liabilities $ 3,874 $ 2,477Asset retirement obligations 2,248 2,123Deferred service income—long term 1,460 1,631Postretirement benefits obligation 1,032 967Income tax payable—long term 2,574 3,710Deferred income tax liabilities—long term 125 —Other 610 327

Total $ 11,923 $ 11,235

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Warranty Accrual

We generally warrant our products for a period of 12 months for new products, or three months forrefurbished products, from the date of system acceptance for material and labor to repair the product;accordingly, an accrual for the estimated cost of the warranty is recorded at the time the product is shipped.Extended warranty terms, if granted, result in deferral of revenue equating to our standard pricing for similarservice contracts. Recognition of the related warranty cost is deferred until product revenue is recognized.Factors that affect our warranty liability include the number of installed units, historical and anticipated rates ofwarranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liabilities andadjust the amounts as necessary.

Changes in our product liability are as follows:


2013December 31,

2012

Balance, beginning of year $ 2,273 $ 2,398Liabilities accrued for warranties issued 1,394 3,606Warranty claims paid and utilized (2,665) (2,525)Changes in accrued warranty liabilities 140 (1,206)

Balance, end of year $ 1,142 $ 2,273

Deferred Service Income

We sell service contracts for which revenue is deferred and recognized ratably over the contract period (fortime based service contracts) or as service hours are delivered (for contracts based on a purchased quantity ofhours). Changes in our deferred service revenue are as follows:


2013December 31,

2012

Balance, beginning of year $ 6,062 $ 4,991Service contracts billed during year 5,849 6,914Service contract revenue recognized during year (6,412) (5,843)


Balance sheet classificationService contracts classified as short-term $ 4,039 $ 4,431Service contracts classified as long-term 1,460 1,631


Asset Retirement Obligations

In accordance with ASC 410, Asset Retirement and Environmental Obligations, an entity is required torecognize a liability for the fair value of a conditional asset retirement obligation (“ARO”) if the fair value of theliability can be reasonably estimated, even if conditional on a future event. The ARO liability is principally forestimable retirement obligations related to remediation costs, which we estimate will be incurred upon theexpiration of certain operating leases.

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The following table sets forth an analysis of the ARO activity for the years ended December 31, 2013 and2012:


Balance as of January 1 $2,123 $1,925Accretion expense 125 117Liabilities incurred — 81

Balance as of December 31 $2,248 $2,123

Advanced Billings

On occasion, we require, or our customers pay, a deposit in advance of order shipment. These amounts areclassified as advanced billings until the related order ships. At December 31, 2013, we have received $2.5 millionin advanced billings from our customers and an insignificant amount at December 31, 2012.

11. NOTES PAYABLE

In December 2004, we entered into a line of credit agreement with a brokerage firm. Under the terms of thisagreement, we may borrow funds at a cost equal to the current federal funds rate plus 1.25 basis points (1.32% asof December 31, 2013). Certain of our cash, cash equivalents and short-term investments secure borrowingsoutstanding under this facility, but we are not restricted in the use of those assets. Funds are advanced to us underthis facility based on pre-determined advance rates on the cash and securities held by us in this brokerageaccount. This agreement has no set expiration date and there are no loan covenants, other than theaforementioned collateral requirement which does not legally restrict the cash and securities. As of each ofDecember 31, 2013 and 2012, $5.1 million and $1.0 million, respectively, were outstanding under this facility,with a related collateral requirement of approximately of $6.8 million and $1.3 million, respectively, of our cash,cash equivalents and short-term investments.

12. EMPLOYEE BENEFIT PLANS

Employee bonus plans

We currently sponsor an executive incentive bonus plan that distributes employee awards based on theachievement of predetermined targets. We recorded charges of $2.0 million, $5.5 million, and $3.8 million underthis bonus plan for the years ended December 31, 2013, 2012, and 2011, respectively.

Employee Savings and Retirement Plans

We sponsor a 401(k) employee salary deferral plan that allows voluntary contributions by all full-timeemployees up to the Internal Revenue Service limits of their pretax earnings. We may also make matchingcontributions to this plan at our discretion. Employees are eligible for the matching plan if they contribute at least2% of their compensation. Our contributions, when made, are limited to a maximum of 3% of the employee’scompensation if the company exceeds certain income levels. During the years ended December 31, 2013, 2012,and 2011, we made $0.2 million, $0.7 million and $0.7 million contributions to the plan, respectively.

We also sponsor an executive non-qualified deferred compensation plan (the “Plan”) that allows qualifyingexecutives to defer current cash compensation. At December 31, 2013 Plan assets of $3.2 million, representingthe cash surrender value of life insurance policies held by us, and liabilities of $3.9 million are included in ourconsolidated balance sheets under the captions “other assets” and “other liabilities,” respectively.

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Postretirement Benefits

We have committed to providing lifetime postretirement medical and dental benefits to our Chief ExecutiveOfficer and Chief Financial Officer and their spouses, commencing after retirement. These medical and dentalbenefits are similar to the benefits provided to all full-time employees while employed by us, except that we arepaying the entire cost of these benefits.

During the first quarter of 2007, we amended and restated the employment agreement with our ChiefFinancial Officer to provide him and his spouse retirement health benefits in the event of a change of control orsale of the Company or in the event that he retires when he is at least 62 years old and has served as an executiveofficer for 10 consecutive years.

The following table sets forth the amounts of unrecognized prior service cost and unrecognized actuarialloss included in accumulated other comprehensive loss:


2013December 31,

2012

Prior service cost $— $—Net actuarial loss 72 71

Amount included in accumulated other comprehensive income $ 72 $ 71

The reconciliation of the beginning and ending balance of the accumulated postretirement benefit obligationand the fair value of plan assets is as follows:


2013December 31,

2012

Benefit obligation at beginning of year $ 967 $ 909Interest cost 37 38Actuarial loss 28 20

Benefit obligation at end of year 1,032 967Fair value of plan assets at end of year — —

Funded status at end of year $(1,032) $(967)

Amounts recognized in the statement of financial position are included in noncurrent liabilities.

Weighted-average discount rates as of December 31, 2013 were 4.6% and 4.8% for each of the ChiefExecutive Officer’s plan and the Chief Financial Officer’s plan, respectively, as compared to 3.7% and 3.9%, asof December 31, 2012.

For measurement purposes, a 6% annual rate of increase in the per capita cost of covered health carebenefits was assumed for the year ended December 31, 2013 and the rate was assumed to remain at 6%thereafter.

Components of net periodic benefit cost and other amounts are recognized in selling, general, andadministrative expense on our Consolidated Statements of Operations are as follows:


2013December 31,

2012

Interest cost $ 37 $ 38Amortization of prior service cost — —Amortization of net loss 28 17

Net periodic benefit cost $ 65 $ 55

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Other changes in plan benefit obligations recognized from other comprehensive loss are as follows:


2013December 31,

2012

Net actuarial loss $ 1 $ 2

Total recognized from other comprehensive loss $ 1 $ 2

Total recognized net periodic benefit cost and changes in plan benefit obligations $66 $57

The expected benefit payments are as follows:

In thousands

2014 $ —2015 —2016 —2017 59Thereafter 973

Total expected benefit payments $1,032

Assumed health care cost trend rates have a significant effect on the amounts reported for the health careplan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

December 31, 2013

In thousands1-Percentage-Point Increase

1-Percentage-Point Decrease

Effect on total of service and interest cost components $ 10 $ (10)Effect on postretirement benefit obligation $152 $(128)

13. INCOME TAXES

The domestic and foreign components of income before income taxes is as follows:



Domestic $(27,201) $34,227 $42,021Foreign 12,285 22,742 2,139

Income (loss) before income taxes $(14,916) $56,969 $44,160

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The components of the provision (benefit) for income taxes were as follows:



Federal:Current $(1,616) $8,899 $4,152Deferred — — —

(1,616) 8,899 4,152State:

Current 58 459 427Deferred — — —

58 459 427Foreign:

Current 289 372 485Deferred 122 52 (134)

411 424 351

Total income tax provision (benefit) $(1,147) $9,782 $4,930

The difference between the provision (benefit) for income taxes and the amount computed by applying theU.S. federal statutory rate of 35 percent to income (loss) before income taxes is explained below:



Tax computed at statutory rate $(5,220) $19,939 $15,456Foreign taxes (3,890) (7,536) (398)Credits (525) (4,654) (587)Change in valuation allowance 8,488 2,033 (9,541)

Income tax provision $(1,147) $ 9,782 $ 4,930

To better align with the international nature of our business, we transitioned certain manufacturingprocesses to Singapore, thereby bringing these activities closer to our Asia-based customers. We have qualifiedfor tax incentives that provide that certain income earned in Singapore would be subject to a tax holiday and/orreduced tax rates for a limited period of time under the laws of Singapore. To realize these benefits, we mustmeet certain requirements relating to employment and investment activities. This exemption is expected to expirewithin 7 years. In 2013, the tax benefit attributable to tax holidays was approximately $0.5 million with a $0.02impact on earnings per share. In 2012, the tax benefit attributable to tax holidays was approximately $5.0 millionwith a $0.18 impact on diluted earnings per share. In 2011, the tax benefit attributable to tax holidays wasapproximately $0.3 million with a $0.01 impact on diluted earnings per share. Our ability to realize benefits fromthese initiatives could be materially adversely affected if, among other things, applicable requirements are notmet, the incentives are substantially modified, or if we incur losses for which we cannot take a deduction.

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Significant components of deferred income tax assets and liabilities are as follows:


Deferred tax assets:Net operating loss carry-forwards $ 18,061 $ 11,564 $ 11,826Inventory valuation 4,744 3,201 3,092Bad debt reserve 185 180 181Basis difference in assets 276 2,023 2,653Tax credit carry-forwards 15,394 14,413 19,188Warranty reserves 302 547 735Deferred product and services income 312 — —Other non-deductible accruals and reserves 5,382 4,405 3,586Stock compensation 5,290 4,091 3,640

Total deferred tax assets 49,946 40,424 44,901Valuation allowance (47,877) (37,006) (42,736)

Net deferred tax assets $ 2,069 $ 3,418 $ 2,165

Deferred tax liabilities:Unremitted earnings of foreign subsidiaries $ — $ — $ —Other (1,695) (2,923) (1,617)

Total deferred tax liabilities (1,695) (2,923) (1,617)

Net deferred tax assets $ 374 $ 495 $ 548

We have not provided for U.S. income taxes and foreign withholding taxes on the undistributed earnings offoreign subsidiaries as of December 31, 2013 because we intend to permanently reinvest such earnings outsidethe United States given that we have moved certain manufacturing processes to Singapore and that our futureU.S. cash flows are expected to meet our future U.S. cash needs. As of December 31, 2013, the cumulativeamount of earnings for which U.S. income taxes have not been provided is approximately $45.1 million.Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

We currently have a full valuation allowance against our U.S. net deferred tax asset. Each quarter we assess thelikelihood that we will be able to recover our deferred tax assets. As a result of our analysis, we concluded that it ismore likely than not that, as of December 31, 2013, our net deferred tax assets will not be realized, with the exceptionof those in Japan and Taiwan. Therefore, we continue to provide a full valuation allowance against net deferred taxassets outside of Japan and Taiwan. Management continues to monitor the relative weight of positive and negativeevidence of future profitability in relevant jurisdictions. Even after the net loss recorded in 2013, we have experiencedcumulative profitability. However, as of December 31, 2013, we have determined that the following negative evidenceoutweighs the positive evidence such that it is not more likely than not we will generate sufficient taxable income inthe relevant jurisdictions to utilize our deferred tax assets and release the associated valuation allowance:

• Movement of certain product manufacturing to Singapore, resulting in reduced U.S. taxable income,

• Current U.S. taxable loss,

• Inherent earnings volatility of our industry resulting in our inability to forecast long term earnings, and

• Usage limitations resulting in a longer period being required to realize our deferred tax assets.

The net valuation allowance increased by $10.9 million during the year ended December 31, 2013, anddecreased by $5.7 million and $16.0 million during the years ended December 31, 2012 and 2011, respectively.The increase in valuation allowance in 2013 was primarily due to an increase in net operating loss carry-forwardsand inventory reserves.

75

Approximately $13.1 million of the valuation allowance as of December 31, 2013 is attributable to pre-2006windfall stock option deductions, the benefit of which will be credited to paid-in capital if and when realizedthrough a reduction in income taxes payable. Beginning in 2006, we are tracking the windfall stock optiondeductions off balance sheet, as required by ASC 718. As of December 31, 2013, we have a previously recordedbalance of $38.9 million of windfall stock option deductions that are being tracked off balance sheet. If and whenrealized, a tax benefit of $14.4 million associated with those deductions will be credited to additional paid-incapital. In 2013, no entry to paid-in capital for was made to reflect the benefit from windfall stock optiondeductions, which is the excess of federal income tax liabilities expected on the tax return without windfall stockoption deductions over federal income tax liabilities expected on the tax return with windfall stock optiondeductions, because we are in a loss position in this year. Prior to 2013, a tax benefit of $9.9 million associatedwith those deductions had been credited to additional paid-in capital.

As of December 31, 2013, we had net operating loss carry-forwards for federal and state tax purposes of$45.9 million and $23.3 million, respectively. We also had federal and California research and development taxcredit carry-forwards of approximately $5.3 million and $12.8 million, respectively. The federal and state netoperating loss carry-forwards will expire at various dates beginning in 2020 through 2034, if not utilized. Thefederal tax credit carry-forwards will expire at various dates beginning in 2021 through 2034, if not utilized. TheCalifornia tax credit carry-forwards have no expiration date.

Utilization of our net operating loss and tax credit carry-forwards is subject to an annual limitation due to anownership change, as defined by the IRS code section 382 that occurred in 2007. None of the net operating lossor tax credit carry-forwards is anticipated to expire as a result of the ownership change. Any future changes ofownership could result in the expiration of net operating losses or credits before utilization.

During the year ended December 31, 2013, our reserve for uncertain tax positions increased by $0.1 million,net. Interest and penalties related to the reserve for uncertain tax positions were insignificant in 2013 and 2012.Over the next twelve months, we expect an insignificant decline in the estimated amount of liabilities associatedwith our uncertain tax positions which arose prior to December 31, 2013 as a result of expiring statutes oflimitations in certain foreign jurisdictions.

If we are able to eventually recognize these uncertain tax positions, $6.8 million of the unrecognized benefiton January 1, 2013 and $6.9 million of the unrecognized benefit on December 31, 2013, would reduce oureffective tax rate. We currently have a full valuation allowance against our U.S. net deferred tax asset whichwould impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorablysettled in the future.

We are subject to federal and state tax examination for years 1999 forward and 1997 forward, respectively,by virtue of the tax attributes carrying forward from those years. We are also subject to audits in the foreignjurisdictions in which we operate for years 2003 and forward. There are no income tax examinations currently inprogress.

A reconciliation of the change in the uncertain income tax benefits from January 1, 2012 to December 31,2013 is as follows:


Balance at January 1 $ 6,792 $5,531Tax positions related to the current year:

Additions 1,290 1,247Tax positions related to the prior years:

Additions 291 32Reductions (1,386) —Lapses in statutes of limitations (39) (18)

Balance at December 31 $ 6,948 $6,792

76

14. COMMITMENTS AND CONTINGENCIES

Commitments

We lease our facilities and certain equipment under operating leases. During 2011, we renewed our leasesfor our sales offices in China, Taiwan and the Philippines. None of these renewed leases were significantcommitments for us. During 2012, we extended our leases in Japan, Germany and Korea. The leases for ourheadquarters and manufacturing operations contain a five-year renewal option subject to a fair market valuepricing adjustment. Certain of our leasing arrangements subject us to letter of credit requirements to provide a$2.4 million bank letter of credit as security to the landlord. In addition, certain of our leases require us to restorethe facilities back to the original condition at the end of lease terms. As such, we recorded asset retirementobligations related to remediation costs as disclosed in Note 10 herein.

In July 2007, we capitalized a five-year lease agreement for a new phone system recorded as officeequipment. The implied interest rate for this capital lease is 6.4%. This lease expired on December 31, 2012.

In August 2008 and December 2009, we entered into agreements with a leasing company for the sale andleaseback of certain assets over initial terms of four years. The sales price of the assets was $6.8 million and $5.4million for the transactions in 2008 and 2009, respectively. There was no gain or loss from these transactions.Under the sale-leaseback arrangement, we have an option to purchase the assets back at the future current fairmarket value upon the expiration of the leases in 2012 and 2013, respectively. On May 10, 2012, we entered intoa lease extension for the August 2008 transaction. The twenty-seven month extension is valued at $2.0 millionand will expire on August 14, 2014. On October 28, 2013, we entered into a lease extension for the December2009 transaction. The twenty-four month extension is valued at $0.9 million and will expire on December14,2015. The leases are classified as operating leases in accordance with ASC Topic 840, Leases. As ofDecember 31, 2013, the minimum future lease payments to be made were $1.4 million.

In October 2009, we entered into a lease amendment for our facilities in San Jose, California. The leaseamendment is to extend the building lease for five years. This lease extension will expire in January 2016. Weaccount for this lease as an operating lease; any improvements to the leased property are capitalized andclassified as leasehold improvements.

In March 2010, we entered into an operating lease agreement for facilities in preparation for the expansionof our manufacturing operations in Singapore. The initial term of this lease was three years. On August 15, 2012,we renegotiated this lease and entered into a new lease that will expire in June 2018.

In March 2013, we entered into an operating lease agreement for facilities in Waltham, Massachusetts, forsales, research and development activities. The lease for this facility expires in February 2018.

As of December 31, 2013, future minimum lease payments were as follows:

In thousandsOperating

Leases

For the years:2014 $3,7032015 3,0932016 1,0592017 9372018 335Thereafter —

Total minimum lease payments $9,127

77

Rent expense was approximately $2.8 million, $1.7 million and $2.4 million for the years endedDecember 31, 2013, 2012 and 2011, respectively.

Our open purchase order commitments, which primarily relate to purchases of inventories and equipmentwere approximately $54.6 million as of December 31, 2013.

Legal Proceedings

We are subject to claims and litigation arising in the ordinary course of business. We do not believe anyliability from any reasonably foreseeable disposition of such claims and litigation, individually or in theaggregate, would have a material adverse effect on our consolidated financial statements. At December 31, 2013,there were no significant outstanding legal matters to disclose.

15. INTANGIBLE ASSETS, NET

During the years ended December 31, 2013 and 2012, we entered into two patent assignment agreementsand acquired the rights to collections of patents and patent applications.

On December 14, 2012, we acquired from Cambridge NanoTech, intangible assets of $4.3 million and othertangible assets of an insignificant amount in a cash transaction. We accounted for this transaction using theacquisition method.

As of December 31, 2013, the gross carrying amount of all our intangible assets was $18.1 million andaccumulated amortization was $2.4 million. The weighted average life of all our intangible assets was 11 years asof December 31, 2013. During the years ended December 31, 2013, 2012 and 2011, our amortization expense forour intangibles was $1.5 million, $0.5 million and $0.1 million, respectively.

The following table summarizes the balances and activity of our intangibles:

(In thousands) At December 31, 2013 At December 31, 2012

Category

WeightedAverage

Years

GrossCarryingAmount

AccumulatedAmortization

Net BookValue

GrossCarryingAmount

AccumulatedAmortization

Net BookValue

Developed technology 9 Years $ 1,080 $ (108) $ 972 $ 1,080 $ — $ 1,080Patents 11 Years 15,946 (2,103) 13,843 10,946 (831) 10,115Trade names 9 Years 209 (21) 188 209 — 209Customer relationships 5 Years 878 (146) 732 878 — 878

Total $18,113 $(2,378) $15,735 $13,113 $(831) $12,282

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset or asset group may not be recoverable. Based on the intangible assets recorded as ofDecember 31, 2013, and assuming no subsequent additions to or impairment of the underlying assets, theremaining estimated annual amortization expense is expected to be as follows:

Year (In thousands)

2014 $ 1,7402015 1,7072016 1,6572017 1,6022018 1,479Thereafter 7,550

Total $15,735

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16. FINANCIAL GUARANTEES

Our off-balance sheet transactions consist of certain financial guarantees, both express and implied, relatedto indemnification for product liability, patent infringement and latent product defects. Other than liabilitiesrecorded pursuant to known product defects, at December 31, 2013, we did not record a liability associated withthese guarantees, as we have little or no history of costs associated with such indemnification requirements.Contingent liabilities associated with product liability may be mitigated by insurance coverage we maintain.

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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended(the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based upon theevaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date thatour disclosure controls and procedures were effective to ensure that information required to be disclosed by us inreports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within thetime periods specified in Securities and Exchange Commission (“SEC”) rules and forms.

Disclosure controls and procedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed in our reports filed or submitted under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that informationrequired to be disclosed in our reports filed or submitted under the Exchange Act is accumulated andcommunicated to management to allow timely decisions regarding required disclosure. In designing andevaluating the disclosure controls and procedures, our management recognizes that any controls and procedures,no matter how well designed and operated, can provide only reasonable assurance of achieving the desiredcontrol objectives. Management is further required to apply judgment in evaluating the cost-benefit relationshipof possible controls and procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financialreporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.Our internal control over financial reporting is designed to provide reasonable assurance to our management andboard of directors regarding the preparation and fair presentation of published financial statements. Because of itsinherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,even those systems determined to be effective can provide only reasonable assurance with respect to financialstatement preparation and presentation.

Management, including our principal executive officer and principal financial officer, assessed theeffectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment,management used the criteria set forth by the committee of Sponsoring Organizations of the TreadwayCommission (“COSO”) in Internal Control—Integrated Framework (1992 framework). Based on thisassessment, our management has concluded that, as of December 31, 2013, our internal control over financialreporting is effective based on those criteria. Our management has also concluded that our disclosure controlsand procedures were effective to ensure that information required to be disclosed in the reports that we file orsubmit under the Exchange Act is accumulated and communicated to our management, including our principalexecutive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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Ernst & Young, LLP, the independent registered public accounting firm who also audited our consolidatedfinancial statements, has issued an attestation report on our internal control over financial reporting. Thisattestation report appears elsewhere herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter endedDecember 31, 2013 that have materially affected, or are reasonably likely to materially affect our internal controlover financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

The information required by Part III is omitted from this Report and is incorporated herein by referencefrom our definitive proxy statement to be filed within 120 days after the end of our fiscal year pursuant toRegulation 14A for our 2014 Annual Meeting of Stockholders currently scheduled to be held on July 15, 2014.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning our directors required by this Item is incorporated by reference from the Itemcaptioned “Election of Directors” in our Proxy Statement for the 2014 Annual Meeting of Stockholders (the“Proxy Statement”). Other information required by this Item is incorporated herein by reference from the Itemcaptioned “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.

Executive Officers of the Registrant

As of December 31, 2013, the executive officers of Ultratech, who are appointed by and serve at thediscretion of the Board of Directors, were as follows:

Name Age Position with the Company

Arthur W. Zafiropoulo 74 Chairman of the Board of Directors, Chief Executive Officer and PresidentBruce R. Wright 65 Senior Vice President, Finance, Chief Financial Officer and Secretary

Mr. Zafiropoulo founded Ultratech in September 1992 to acquire certain assets and liabilities of theUltratech Stepper Division (the “Predecessor”) of General Signal Technology Corporation (“General Signal”)and, since March 1993, has served as Chief Executive Officer and Chairman of the Board. Additionally,Mr. Zafiropoulo served as President of Ultratech from March 1993 to March 1996, from May 1997 untilApril 1999 and from April 2001 to January 2004. In October 2006, he resumed the responsibilities of Presidentand Chief Operating Officer. Between September 1990 and March 1993, he was President of the Predecessor.From February 1989 to September 1990, Mr. Zafiropoulo was President of General Signal’s SemiconductorEquipment Group International, a semiconductor equipment company. From August 1980 to February 1989,Mr. Zafiropoulo was President and Chief Executive Officer of Drytek, Inc., a plasma dry-etch company that hefounded in August 1980, and which was later sold to General Signal in 1986. From July 1987 to September 1989,Mr. Zafiropoulo was also President of Kayex, a semiconductor equipment manufacturer, which was a unit ofGeneral Signal. From July 2001 to July 2002, Mr. Zafiropoulo served as Vice Chairman of SemiconductorEquipment and Materials International (“SEMI”), an international trade association representing thesemiconductor, flat panel display equipment and materials industry. From July 2002 to June 2003,Mr. Zafiropoulo served as Chairman of SEMI, and Mr. Zafiropoulo has been on the Board of Directors of SEMIsince July 1995. In December 2007, Mr. Zafiropoulo was elected as Director Emeritus of SEMI. BeginningJanuary 1, 2013, Mr. Zafiropoulo is a member of the Board of Trustees at Northeastern University.

Mr. Wright has served as Senior Vice President, Finance, Chief Financial Officer and Secretary sincejoining Ultratech in June 1999. From May 1997 to May 1999, Mr. Wright served as Executive Vice President,Finance and Chief Financial Officer of Spectrian Corporation, a radio frequency amplifier company. FromNovember 1994 through May 1997, Mr. Wright was Senior Vice President of Finance and Administration, andChief Financial Officer of Tencor Instruments until its acquisition by KLA Instruments Corporation in 1997,which formed KLA-Tencor Corporation, and from December 1991 through October 1994, Mr. Wright was VicePresident and Chief Financial Officer of Tencor Instruments. Mr. Wright serves on the Board of Directors ofLTX-Credence Corporation, a global provider of automated test equipment solutions for the testing ofsemiconductor integrated circuits.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from the Item captioned “ExecutiveCompensation” in the Proxy Statement.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference from the Items captioned “Election ofDirectors,” “Ownership of Securities” and “Equity Compensation Information for Plans or IndividualArrangements with Employees and Non-Employees” in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE

The information required by this Item is incorporated by reference from the items captioned “Election ofDirectors” and “Certain Relationships and Related Transactions” in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from the item captioned “Fees billed toUltratech by Ernst & Young LLP during fiscal year 2013” in the Proxy Statement.

82

PART IV

ITEM 15. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, AND EXHIBITS

(a) The following documents are filed as part of this Report on Form 10-K

(1) Financial Statements

The financial statements (including the notes thereto) listed in the Index to Consolidated FinancialStatement Schedule (set forth in Item 8 of Part II of this Form 10-K) are filed within this Annual Report onForm 10-K.

(2) Financial Statement Schedules

The following consolidated financial statement schedule is included herein:

Page Number

Schedule II Valuation and Qualifying Accounts 89

Schedules other than those listed above have been omitted since they are either not required, are notapplicable, or the required information is shown in the financial statements or related notes.

(3) Exhibits

Except as indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated in referenceinto this Annual Report on Form 10-K:

Exhibit Description

3.1(1) Amended and Restated Certificate of Incorporation of the Registrant, filed October 6, 1993.

3.1.1(1) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of theRegistrant, filed May 17, 1995.

3.1.2(1) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of theRegistrant, filed June 17, 1998.


3.1.4(8) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of theRegistrant, filed August 31, 2009.

3.2(2) Amended and Restated Bylaws of Registrant.

4.1(3) Specimen Common Stock Certificate of Registrant.

10.1(16) 1993 Stock Option/Stock Issuance Plan (amended and restated as of May 31, 2011).

10.2(3) Form of Indemnification Agreement entered into between the Registrant and certain of its officersand directors.

10.3(4) Form of Indemnification Agreement entered into between the Registrant and certain officers.

10.4(3) Standard Industrial Lease—Single Tenant, Full Net between The Equitable Life Assurance Societyof the United States, as Landlord, and Registrant, as Tenant, dated August 27, 1993.

10.4.1(4) First Amendment to Lease between The Equitable Life Assurance Society of the United States, asLandlord, and Registrant, as Tenant, dated November 1999.

10.5(5) Profit Sharing Plan.

10.6(6) 1998 Supplemental Stock Option/ Stock Issuance Plan (amended and restated effective January 29,2008).

83

Exhibit Description

10.7(7) Private Wealth Management Client Agreement with Morgan Stanley, dated December 16, 2004.

10.8(9) Amended and Restated Employment Agreement between Registrant and Mr. Arthur Zafiropoulo,Chief Executive Officer, dated as of October 14, 2008

10.9(9) Amended and Restated Employment Agreement between Registrant and Mr. Bruce Wright, ChiefFinancial Officer, dated as of October 14, 2008.

10.10(9) Form of Restricted Stock Unit Issuance Agreement for Executive Officers with EmploymentAgreements.

10.11(17) New Form of Restricted Stock Unit Issuance Agreement for Executive Officers with EmploymentAgreements.

10.12(9) Amended and Restated Non-Qualified Supplemental Deferred Compensation Plan.

10.13(9) Adoption Agreement Related to Amended and Restated Non-Qualified Supplemental DeferredCompensation Plan.

10.14(9) Amendment No. 1 to Amended and Restated Non-Qualified Supplemental Deferred CompensationPlan.

10.15(9) Special Form of Stock Option Agreement for Executive Officers with Employment Agreements.

10.16(9) Special Form of Stock Option Agreement for Executive Officers without Employment Agreements.

10.17(9) Regular Form of Stock Option Agreement.

10.18(10) Description of 2012 Management Incentive Compensation Plan.

10.19(11) New Form of Indemnification Agreement entered into between the Registrant and each of its officersand directors.

10.20(12) Second Amendment to Lease (3050 Zanker), entered into on October 30, 2009, by and betweenLaSalle Montague, Inc. and the Registrant.

10.21(13) Letter Amendment to Employment Agreement—Arthur W. Zafiropoulo.

10.22(13) Letter Amendment to Employment Agreement—Bruce R. Wright.

10.23(14) Singapore Lease Agreement dated February 17, 2010.

10.24(15) Ultratech, Inc. Long-Term Incentive Compensation Plan as Amended and Restated January 24,2011.

10.25(15) Amendment No. 2 to Ultratech, Inc. Non-Qualified Supplemental Deferred Compensation Plan, asamended and restated and subsequently amended effective as of January 1, 2005.


10.27(18) Form of Restricted Stock Unit Issuance Agreement for Chief Executive Officer Grants.

10.28(18) Form of Restricted Stock Unit Issuance Agreement for Chief Financial Officer Grants.

10.29(19) Patent Assignment Agreement, between the Registrant and International Business MachinesCorporation, dated June 26, 2012.

10.30(20) New Singapore Lease (1Kaki Bukit View, Singapore), among the Registrant, Ascendas, Inc., andSingapore SE, dated August 15, 2012.

21 Subsidiaries of Registrant.

84

Exhibit Description

23 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

24 Power of Attorney (contained in Signature page hereto).

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

32.1* 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.

* Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 ofthe Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of thatsection, nor shall such exhibit be deemed to be incorporated by reference in any registrationstatement or other document filed under the Securities Act of 1933, as amended, or the SecuritiesExchange Act, except as otherwise stated in such filing.

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 28, 2003(Commission File No. 0-22248).

(2) Incorporated by reference to our Current Report on Form 8-K filed on April 17, 2012 (CommissionFile No. 0-22248).

(3) Incorporated by reference to our Registration Statement on Form S-1 declared effective with the Securitiesand Exchange Commission on September 28, 1993. (Commission File No. 33-66522).

(4) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2002(Commission File No. 0-22248).

(5) Incorporated by reference to our 1993 Annual Report on Form 10-K (Commission File No. 0-22248).(6) Incorporated by reference to our Current Report on Form 8-K filed on February 1, 2008 (Commission

File No. 0-22248).(7) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2004

(Commission File No. 0-22248).(8) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended October 3, 2009

(Commission File No. 0-22248).(9) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2008

(Commission File No. 0-22248).(10) Incorporated herein by reference to our Current Report on Form 8-K filed on January 27, 2012 (Commission

File No. 0-22248).(11) Incorporated by reference to our Current Report on Form 8-K filed on January 30, 2009 (Commission

File No. 0-22248).(12) Incorporated by reference to our Current Report on Form 8-K filed on November 5, 2009 (Commission

File No. 0-22248).(13) Incorporated by reference to our Current Report on Form 8-K filed on April 23, 2010 (Commission

File No. 0-22248).(14) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended July 3, 2010

(Commission File No. 0-22248).

85

(15) Incorporated herein by reference to our Current Report on Form 8-K filed on January 28, 2011 (CommissionFile No. 0-22248).

(16) Incorporated herein by reference to our Current Report on Form 8-K filed on July 25, 2011 (CommissionFile No. 0-22248).

(17) Incorporated herein by reference to our Annual Report on Form 10-K for the year ended December 31, 2010(Commission File No. 0-22248).

(18) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012(Commission File No. 0-22248).

(19) Incorporated by reference to our Current Report on Form 8-K filed on June 28, 2012 (Commission FileNo. 0-22248).

(20) Incorporated by reference to our Current Report on Form 8-K filed on August 21, 2012 (Commission FileNo. 0-22248).

(b) Exhibits. See list of exhibits under (a)(3) above.(c) Financial Statement Schedules. See list of schedules under (a)(2) above.

86

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this Report to be signed on its behalf by the undersigned, thereunder duly authorized.

ULTRATECH, INC.

Date: February 28, 2014 By: /s/ ARTHUR ZAFIROPOULO

Arthur ZafiropouloChairman of the Board of Directors and Chief

Executive Officer

The undersigned directors and officers of Ultratech, Inc. (the “Company”), a Delaware corporation, herebyconstitute and appoint Arthur W. Zafiropoulo and Bruce R. Wright, and each of them with full power to actwithout the other, the undersigned’s true and lawful attorney-in-fact, with full power of substitution and re-substitution, for the undersigned and in the undersigned’s name, place and stead in the undersigned’s capacity asan officer and/or director of the Company, to execute in the name and on behalf of the undersigned this Reportand to file such Report, with exhibits thereto and other documents in connection therewith and any and allamendments thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, andeach of them, full power and authority to do and perform each and every act and thing necessary or desirable tobe done and to take any other action of any type whatsoever in connection with the foregoing which, in theopinion of such attorney-in-fact, may be of benefit to, in the best interest of, or legally required of, theundersigned, it being understood that the documents executed by such attorney-in-fact on behalf of theundersigned pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditionsas such attorney-in-fact may approve in such attorney-in-fact’s discretion.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below(and the above Powers of Attorney granted) by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

Signature Title Date

/s/ ARTHUR ZAFIROPOULO Chairman of the Board of Directors and ChiefExecutive Officer (Principal Executive Officer)

February 28, 2014

Arthur Zafiropoulo

/s/ BRUCE WRIGHTSenior Vice President, Finance, ChiefFinancial Officer and Secretary (PrincipalFinancial and Accounting Officer)

February 28, 2014

Bruce Wright

/s/ DENNIS RANEY Director February 28, 2014

Dennis Raney

/s/ RICK TIMMINS Director February 28, 2014

Rick Timmins

/s/ HENRI RICHARD Director February 28, 2014

Henri P Richard

/s/ JOEL GEMUNDER Director February 28, 2014

Joel Gemunder

87


/s/ NICHOLAS KONIDARIS Director February 28, 2014

Nicholas Konidaris

/s/ MICHAEL CHILD Director February 28, 2014

Michael Child

88

SCHEDULE II

ULTRATECH, INC.

VALUATION AND QUALIFYING ACCOUNTS(in thousands)

Description

Balance atBeginning

of Year

Charged(Credited)

to Costsand

Expenses

Balance atEnd ofYear

Allowance for doubtful accounts:2011 $345 $153 $4982012 $498 $— $4982013 $498 $— $498

89

EXHIBIT INDEX

Exhibit Description

3.1(1) Amended and Restated Certificate of Incorporation of the Registrant, filed October 6, 1993.

3.1.1(1) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of theRegistrant, filed May 17, 1995.



3.1.4(8) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of theRegistrant, filed August 31, 2009.

3.2(2) Amended and Restated Bylaws of Registrant.

4.1(3) Specimen Common Stock Certificate of Registrant.

10.1(16) 1993 Stock Option/Stock Issuance Plan (amended and restated as of May 31, 2011).

10.2(3) Form of Indemnification Agreement entered into between the Registrant and certain of its officersand directors.

10.3(4) Form of Indemnification Agreement entered into between the Registrant and certain officers.

10.4(3) Standard Industrial Lease—Single Tenant, Full Net between The Equitable Life Assurance Societyof the United States, as Landlord, and Registrant, as Tenant, dated August 27, 1993.

10.4.1(4) First Amendment to Lease between The Equitable Life Assurance Society of the United States, asLandlord, and Registrant, as Tenant, dated November 1999.

10.5(5) Profit Sharing Plan.

10.6(6) 1998 Supplemental Stock Option/ Stock Issuance Plan (amended and restated effective January 29,2008).

10.7(7) Private Wealth Management Client Agreement with Morgan Stanley, dated December 16, 2004.

10.8(9) Amended and Restated Employment Agreement between Registrant and Mr. Arthur Zafiropoulo,Chief Executive Officer, dated as of October 14, 2008

10.9(9) Amended and Restated Employment Agreement between Registrant and Mr. Bruce Wright, ChiefFinancial Officer, dated as of October 14, 2008.

10.10(9) Form of Restricted Stock Unit Issuance Agreement for Executive Officers with EmploymentAgreements.

10.11(17) New Form of Restricted Stock Unit Issuance Agreement for Executive Officers with EmploymentAgreements.

10.12(9) Amended and Restated Non-Qualified Supplemental Deferred Compensation Plan.

10.13(9) Adoption Agreement Related to Amended and Restated Non-Qualified Supplemental DeferredCompensation Plan.

10.14(9) Amendment No. 1 to Amended and Restated Non-Qualified Supplemental Deferred CompensationPlan.

10.15(9) Special Form of Stock Option Agreement for Executive Officers with Employment Agreements.

90

Exhibit Description

10.16(9) Special Form of Stock Option Agreement for Executive Officers without EmploymentAgreements.

10.17(9) Regular Form of Stock Option Agreement.


10.19(11) New Form of Indemnification Agreement entered into between the Registrant and each of itsofficers and directors.

10.20(12) Second Amendment to Lease (3050 Zanker), entered into on October 30, 2009, by and betweenLaSalle Montague, Inc. and the Registrant.

10.21(13) Letter Amendment to Employment Agreement—Arthur W. Zafiropoulo.

10.22(13) Letter Amendment to Employment Agreement—Bruce R. Wright.

10.23(14) Singapore Lease Agreement dated February 17, 2010.

10.24(15) Ultratech, Inc. Long-Term Incentive Compensation Plan as Amended and Restated January 24,2011.

10.25(15) Amendment No. 2 to Ultratech, Inc. Non-Qualified Supplemental Deferred Compensation Plan, asamended and restated and subsequently amended effective as of January 1, 2005.


10.27(18) Form of Restricted Stock Unit Issuance Agreement for Chief Executive Officer Grants.

10.28(18) Form of Restricted Stock Unit Issuance Agreement for Chief Financial Officer Grants.

10.29(19) Patent Assignment Agreement, between the Registrant and International Business MachinesCorporation, dated June 26, 2012.

10.30(20) New Singapore Lease (1Kaki Bukit View, Singapore), among the Registrant, Ascendas, Inc., andSingapore SE, dated August 15, 2012.

21 Subsidiaries of Registrant.

23 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

24 Power of Attorney (contained in Signature page hereto).

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

32.1* 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.

* Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 ofthe Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of thatsection, nor shall such exhibit be deemed to be incorporated by reference in any registrationstatement or other document filed under the Securities Act of 1933, as amended, or the SecuritiesExchange Act, except as otherwise stated in such filing.

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

91

Exhibit Description

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 28, 2003(Commission File No. 0-22248).

(2) Incorporated by reference to our Current Report on Form 8-K filed on April 17, 2012 (CommissionFile No. 0-22248).

(3) Incorporated by reference to our Registration Statement on Form S-1 declared effective with the Securitiesand Exchange Commission on September 28, 1993. (Commission File No. 33-66522).

(4) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2002(Commission File No. 0-22248).

(5) Incorporated by reference to our 1993 Annual Report on Form 10-K (Commission File No. 0-22248).(6) Incorporated by reference to our Current Report on Form 8-K filed on February 1, 2008 (Commission

File No. 0-22248).(7) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2004

(Commission File No. 0-22248).(8) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended October 3, 2009

(Commission File No. 0-22248).(9) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2008


File No. 0-22248).(11) Incorporated by reference to our Current Report on Form 8-K filed on January 30, 2009 (Commission

File No. 0-22248).(12) Incorporated by reference to our Current Report on Form 8-K filed on November 5, 2009 (Commission

File No. 0-22248).(13) Incorporated by reference to our Current Report on Form 8-K filed on April 23, 2010 (Commission

File No. 0-22248).(14) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended July 3, 2010


File No. 0-22248).(16) Incorporated herein by reference to our Current Report on Form 8-K filed on July 25, 2011 (Commission

File No. 0-22248).(17) Incorporated herein by reference to our Annual Report on Form 10-K for the year ended December 31, 2010

(Commission File No. 0-22248).(18) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012

(Commission File No. 0-22248)(19) Incorporated by reference to our Current Report on Form 8-K filed on June 28, 2012 (Commission

File No. 0-22248).(20) Incorporated by reference to our Current Report on Form 8-K filed on August 21, 2012 (Commission

File No. 0-22248).

92

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A(Amendment No. 1)

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

For the fiscal year ended December 31, 2013OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934

For the transition period from toCommission 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)

(408) 321-8835(Registrant’s telephone number, including area code)

Not Applicable(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registered

Common Stock, $0.001 par value per share NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes ‘ No È

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the ExchangeAct. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (orfor such shorter period that the registrant was required to submit and post such files). Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by referencein Part III of this Form 10-K or any amendment to this Form 10-K. È

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ‘ Accelerated filer È

Non-accelerated filer ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes ‘ No È

The aggregate market value of voting stock held by non-affiliates of the registrant, as of June 29, 2013, was approximately$668,573,378 (based upon the closing price for shares of the registrant’s common stock as reported by the NASDAQ Global SelectMarket on that date, the last trading date of the registrant’s most recently completed second quarter). Shares of common stock heldby each officer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may bedeemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 31, 2014, the Registrant had 28,052,112 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filedwith the Securities and Exchange Commission on February 28, 2014 are incorporated by reference into Part III ofthis Annual Report on Form 10-K.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Registrant’s Annual Report onForm 10-K for the fiscal year ended December 31, 2013, originally filed on February 28, 2014 (the “OriginalFiling”). The Registrant is refiling Part III to include the information required by Items 10, 11, 12, 13 and 14 ofPart III within the period required by General Instruction G(3) to Form 10-K. In addition, in connection with thefiling of this Amendment and pursuant to the rules of the Securities and Exchange Commission, the Registrant isincluding with this Amendment certain currently dated certifications. Except as described above, no otherchanges have been made to the Original Filing.

TABLE OF CONTENTS

PART III 1

Item 10. Directors, Executive Officers and Corporate Governance 1

Item 11. Executive Compensation 4

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 31

Item 13. Certain Relationships and Related Transactions, and Director Independence 34

Item 14. Principal Accounting Fees and Services 35

PART IV 36

Item 15. Exhibits, Financial Statement Schedules 36

SIGNATURES 37

EXHIBIT INDEX 38

EXHIBIT 31.1EXHIBIT 31.2

PART III

Item 10. Directors, Executive Officers and Corporate Governance

As of December 31, 2013, the directors of Ultratech were as follows (ages and board committee assignments areas of April 15, 2014):

Name Age Position with the Company

Arthur W. Zafiropoulo 75 Chairman of the Board of Directors, Chief Executive Officer and PresidentMichael Child (3) 59 DirectorJoel F. Gemunder (3) 74 DirectorNicholas Konidaris (1)(2) 69 DirectorDennis R. Raney (1)(2) 71 DirectorHenri Richard (2)(3) 55 DirectorRick Timmins (1)(3) 61 Director

(1) Member of the Audit Committee(2) Member of the Nominating and Corporate Governance Committee(3) Member of the Compensation Committee

Each director was elected to a one year term at the Company’s 2013 annual meeting of stockholders.

Arthur W. Zafiropoulo founded Ultratech in September 1992 to acquire certain assets and liabilities of theUltratech Stepper Division (the “Predecessor”) of General Signal Technology Corporation (“General Signal”)and, since March 1993, has served as Chief Executive Officer and Chairman of the Board of Directors.Additionally, Mr. Zafiropoulo served as President of Ultratech from March 1993 to March 1996, from May 1997until April 1999 and from April 2001 to January 2004. Since October 2006, he resumed the responsibilities ofPresident and Chief Operating Officer. Between September 1990 and March 1993, he was President of thePredecessor. From February 1989 to September 1990, Mr. Zafiropoulo was President of General Signal’sSemiconductor Equipment Group International, a semiconductor equipment company. From August 1980 toFebruary 1989, Mr. Zafiropoulo was President and Chief Executive Officer of Drytek, Inc., a plasma dry-etchcompany that he founded in August 1980, and which was later sold to General Signal in 1986. From July 1987 toSeptember 1989, Mr. Zafiropoulo was also President of Kayex, a semiconductor equipment manufacturer, whichwas a unit of General Signal. From July 2001 to July 2002, Mr. Zafiropoulo served as Vice Chairman ofSemiconductor Equipment and Materials International (“SEMI”), an international trade association representingthe semiconductor, flat panel display equipment and materials industry. From July 2002 to June 2003,Mr. Zafiropoulo served as Chairman of SEMI, and Mr. Zafiropoulo has been on the board of directors of SEMIsince July 1995. In December 2007, Mr. Zafiropoulo was elected as Director Emeritus of SEMI. On January 1,2013, Mr. Zafiropoulo began serving as a member of the Board of Trustees at Northeastern University. Amongother qualifications, Mr. Zafiropoulo brings extensive knowledge of and experience in the semiconductor andsemiconductor capital equipment industries and businesses and his deep personal knowledge and commitment tothe Company as the Company’s founder and Chief Executive Officer, as well as his personal leadership andmanagement skills, to the Company’s Board of Directors.

Michael Child was appointed to the Company’s Board of Directors in April 2012. Mr. Child has beenemployed by TA Associates, Inc., a private equity firm, since 1982 where he currently serves as a SeniorAdvisor. Mr. Child served as a Managing Director of TA Associates from 1987 through 2010. Since September2000, Mr. Child has served on the board of directors of IPG Photonics, which designs and manufactures highperformance fiber lasers and amplifiers, and he currently serves as a member of its audit committee and aschairman of its nominating and corporate governance committee. Since June 2010, Mr. Child has served on theboard of directors of Finisar Corporation, a computer network equipment company, and he has served on theaudit committee of Finisar since August 2010 and the compensation committee since June 2010. He also servedon the board of directors of Eagle Test Systems, a manufacturer of high performance automated test equipmentfor the semiconductor industry, from 2003 until November 2008 when it was acquired by Teradyne, Inc.

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Mr. Child holds a B.S. in Electrical Engineering from the University of California at Davis and an M.B.A. fromthe Stanford Graduate School of Business. Mr. Child has more than 25 years’ experience investing in andacquiring technology and technology-related companies and has served on the boards of directors of numerouspublic and private companies, including companies in the semiconductor industries. This broad financial andindustry experience enables Mr. Child to make a valuable contribution to the board. He also brings significantknowledge regarding the Company and its operations from his previous years of service on the Company’s Boardof Directors between 1993 and 1997.

Joel F. Gemunder has been a director of the Company since October 1997. Mr. Gemunder was Presidentand a member of the board of directors of Omnicare, Inc., a pharmacy services provider, between 1981 and July2010, and was Chief Executive Officer of Omnicare between 2001 and July 2010. Mr. Gemunder has also servedas a member of the board of directors of Chemed Corporation since 1997, a company operating in two segments:VITAS Group and the Roto-Rooter Group. VITAS offers hospice services for patients with severe and life-limiting illnesses. Roto-Rooter operates in the sewer, drain and pipe cleaning, HVAC services and plumbingrepair business and the HVAC and appliance repair and maintenance business. Among other things,Mr. Gemunder brings extensive experience as a public company chief executive officer and board member, aswell as a valuable and different perspective due to his experience outside high-technology industries, to theCompany’s Board of Directors.

Nicholas Konidaris has served as a director of the Company since July 2000. Mr. Konidaris has served asPresident, Chief Executive Officer and as a director of Electro Scientific Industries, Inc., a global supplier ofmanufacturing equipment to increase productivity for customers in the consumer electronics, semiconductor,passive components and LED markets, from January 2004 until February 2014. From July 1999 to January 2004,Mr. Konidaris served as President and Chief Executive Officer of Advantest America, Corp., a holding companyof Advantest America, Inc., which is a manufacturer of testers and handlers. From July 1997 to January 2004,Mr. Konidaris also served as Chairman of the Board, President and Chief Executive Officer of AdvantestAmerica, Inc. Mr. Konidaris has served on the board of directors of Omniguide, Inc., a privately held companysince 2006, and served as a member of its audit committee until March 2014. Mr. Konidaris also served as amember of the board of directors of AISI, Inc., a privately held company, from 2008 to 2010. Mr. Konidarisserves as the Vice Chairman of the Advisory Board of Healthedge Partners, a private equity firm. Mr. Konidarisholds a diploma in EE from the National Technical University of Athens and a Master of Science in Managementfrom MIT Sloan. Since 2011, Mr. Konidaris has served on the MIT Sloan North American Executive Board.Among other things, Mr. Konidaris brings his extensive experience as a public company chief executive officerand board member in the semiconductor industry to the Company’s Board of Directors.

Dennis R. Raney has served as a director of the Company since April 2003. Mr. Raney has served asManaging Director of PrimeMark Advisors, a real estate consulting firm, since November 2008. Mr. Raneyserved as Principal of Liberty-Greenfield, LLP, a company that advised clients on real estate issues that havesignificant financial or operational consequences to their business, from May 2005 until the company was woundup in November 2008. Mr. Raney served as Chief Financial Officer of eONE Global, LP, a company thatidentifies, develops and operates emerging electronic payment systems and related technologies that address e-commerce challenges, from July 2001 to June 2003. From March 1998 to July 2001, Mr. Raney served as ChiefFinancial Officer and Executive Vice President of Novell, Inc., a producer of network software. FromJanuary 1997 to December 1997, Mr. Raney served as Chief Financial Officer and Executive Vice President ofQAD, Inc., a provider of enterprise resource planning software. Mr. Raney served as the chief financial officer ofBristol Myers Squibb Pharmaceutical Group from October 1993 to January 1996. Mr. Raney also served as adirector of EasyLink Services Corporation (“EasyLink”), a provider of information exchange services, fromMarch 2003 until August 2007, and served as chair of the audit committee of EasyLink’s board of directors fromJune 2004 until August 2007. In addition, between February 2004 and October 2008 when it was acquired by DGFast Channel, Mr. Raney served as a director of Enliven Corporation (formerly ViewPoint Corporation), aprovider of visual application development, content assembly and delivery technology, and as chair of the auditcommittee of Enliven’s board of directors. Mr. Raney served as a director, and as chair of the audit committee of

2

the board of directors, of Infiniti Solutions, a provider of semiconductor testing, assembly and prototypingservices, between July 2004 and September 2008. Mr. Raney served as a director of Equinix, a provider of datacenter and internet exchange services from April 2003 to June 2005, and served as chair of the audit committeeof Equinix’s board of directors during that time. From July 2002 to June 2003, Mr. Raney served as a director ofProBusiness Services, Inc., which was acquired by Automatic Data Processing, Inc. in June 2003. Mr. Raney alsoserved as a director and audit committee member of Redleaf, Inc., a technology operating company that providesservices and capital for pre-seed state technology companies, from April 1999 to June 2003. Mr. Raneypreviously served as a director and audit committee member of W.R. Hambrecht & Company, an investmentbanking firm, from March 1999 to July 2001 and served as a director and audit committee member of ADACLaboratories, a company that designs, develops, manufactures, sells and services electronic medical imaging andinformation systems, from March 1999 to March 2001. Mr. Raney holds a B.S. degree in chemical engineeringfrom the South Dakota School of Mines & Technology and an MBA from the University of Chicago. Amongother things, Mr. Raney brings extensive finance experience in both high-technology and other industries as wellas related international experience, including extensive board and audit committee service and service as a publiccompany chief financial officer, to the Company’s Board of Directors.

Henri Richard has served as a director of the Company since April 2006. Since April 2013, Mr. Richard hasserved as Senior Vice President of Worldwide OEM and Enterprise Sales at SanDisk Corporation. FromSeptember 2007 until March 2013, Mr. Richard has served as Senior Vice President, Chief Sales and MarketingOfficer at Freescale Semiconductor, Inc. (“Freescale”). Prior to joining Freescale in September 2007,Mr. Richard was Executive Vice President, Chief Sales and Marketing Officer at Advanced Micro Devices, Inc.(“AMD”), where his duties included oversight of the company’s global field sales and support organization,corporate marketing, and go-to-market activities for all AMD customer segments, including commercial,consumer and innovative solutions groups, and the company’s 50x15 digital inclusion initiative. Mr. Richardjoined AMD in April 2002 as Group Vice President, Worldwide Sales. He was promoted to Senior VicePresident in May 2003 and was appointed as Executive Vice President and Chief Sales and Marketing Officer inFebruary 2004. Prior to joining AMD, Mr. Richard was Executive Vice President of Worldwide Field Operationsat WebGain, Inc., a privately held provider of Java software for Fortune 500 companies. Before WebGain, hewas vice president of Worldwide Sales and Support for IBM’s Technology Group. Mr. Richard has also heldsenior executive positions with several notable companies in the United States and Europe, including tenures asPresident of the Computer Products Group at Bell Microproducts, Executive Vice President at KarmaInternational, and Vice President at Seagate Technology/Conner Peripherals. Among other things, Mr. Richardbrings extensive experience as an executive officer in the semiconductor industry, in particular in the areas ofsales and marketing and market analysis, to the Company’s Board of Directors.

Rick Timmins has served as a director of the Company since August 2000. Since April 2009, Mr. Timmins hasserved as a Venture Partner and investor with G-51 Capital, a seed-stage venture capital firm that invests in thesoftware, hardware, internet, and clean technology sectors. From January 1996 until April 2008, Mr. Timminsserved as Vice-President of Finance for Cisco Systems, Inc. From January 2011 to November 2012, Mr. Timminsserved as a member of the board of directors of IRIS International, Inc., a company that designs, develops,manufactures and markets in-vitro diagnostic products, consumables and supplies for urinalysis and body fluids.Mr. Timmins serves as a member of the audit committee of IRIS International. Since April, 2010 Mr. Timmins hasserved as a member of the board of directors of privately held company Socialware, a company that provides asocial middleware platform. In January, 2011 Mr. Timmins joined the board of directors of the privately heldcompany, Nexersys, which provides personal fitness exercise equipment. Mr. Timmins served as a member of theboard of directors of Transmeta Corporation, a developer of computing, microprocessing and semiconductortechnologies, from May 2003 until January 2009, and was the chairman of the audit committee of Transmeta’sboard of directors between May 2003 and January 2009. He also served as a member of the board of directors ofTreaty Oak Bancorp, Inc., a local community bank in Austin, Texas from December 2008 to February 2011.Mr. Timmins holds a B.S. degree in accounting and finance from the University of Arizona and an M.B.A. degreefrom St. Edward’s University. Among other things, Mr. Timmins brings extensive finance experience as well astechnology industry experience to the Company’s Board of Directors.

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Information concerning our executive officers is incorporated by reference from Part I of our Annual Reporton Form 10-K for the fiscal year ended December 31, 2013 filed with the Securities and Exchange Commissionon February 28, 2014.

There are no family relationships between any directors or executive officers.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officersand any persons who are the beneficial owners of more than ten percent (10%) of the Company’s common stockto file reports of ownership and changes in ownership with the SEC. Such directors, officers and greater than tenpercent (10%) beneficial stockholders are required by Securities and Exchange Commission regulations tofurnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it and written representations fromreporting persons for the 2013 fiscal year, the Company believes that all of the Company’s executive officers,directors and greater than ten percent (10%) beneficial stockholders complied with all applicable Section 16(a)filing requirements for the 2013 fiscal year.

CODE OF ETHICS

We have adopted a Code of Ethics for our principal executive officer, principal financial officer, principalaccounting officer or controller, or persons performing similar functions. We have posted this Code of Ethics onour website located at www.ultratech.com. Any future amendments to and waivers of this Code of Ethics willalso be posted on our website.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors (the “Audit Committee”) currently consists of three(3) directors, Messrs. Konidaris, Raney and Timmins. The Audit Committee is responsible for overseeing theintegrity of the Company’s financial statements and the appointment, compensation, qualifications, independenceand performance of the Company’s independent auditors, as well as compliance with related legal and regulatoryrequirements and performance of the Company’s accounting practices and internal controls. The Board ofDirectors has determined that each current member of the Audit Committee is “independent” as that term isdefined in Rule 10A-3 under the Securities Exchange Act of 1934 and an “independent director” as that term isdefined in Rule 5605 of The NASDAQ Stock Market’s Marketplace Rules. In addition, the Board of Directorshas determined that each of Messrs. Konidaris, Raney, and Timmins is an “Audit Committee Financial Expert”as that term is defined by Item 407 of Securities and Exchange Commission Regulation S-K.

Item 11. Executive Compensation

Compensation Discussion and Analysis

Introduction. This Compensation Discussion and Analysis addresses the policies and objectives underlyingthe compensation programs in effect for the Company’s executive officers. The discussion begins with anexecutive summary of the principal elements of the Company’s executive compensation programs. Thoseprograms reflect the fact that the Company is engaged in a very competitive industry, and its success dependsupon its ability to attract and retain qualified executives through competitive compensation packages.

The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”)administers the compensation programs for the Company’s executive officers with this competitive environmentin mind. However, the Company believes that the compensation paid to its executive officers should also be

4

substantially dependent on the Company’s financial performance and the value created for its stockholders. Forthis reason, the Compensation Committee also utilizes the Company’s compensation programs to providemeaningful incentives for the attainment of the Company’s short-term and long-term strategic objectives andthereby reward those executive officers who make a substantial contribution to the attainment of those objectives.

Executive Summary

The Company’s overarching compensation goal is to reward executive officers in a manner that supports astrong pay-for-performance philosophy while maintaining an overall level of compensation that the Companybelieves is fair, reasonable and responsible. The Company believes this objective is accomplished through thefollowing principles and processes that underlie the executive compensation programs:

1. The Compensation Committee works with its own independent consultants to obtain the advice andmarket data input needed to structure compensation programs for the executive officers that arecompetitive and designed to accomplish the Company’s pay-for performance objectives. With theassistance of such consultants, the Compensation Committee may periodically perform a benchmarkingprocess in which the Compensation Committee will compare executive officer compensation against aset peer group of companies selected on the basis of relevant industry, size and complexity.

2. In setting the total direct compensation (defined as base salary plus annual target bonus plus the grant-date value of the long-term equity incentive awards) of the Company’s executive officers, theCompensation Committee takes into account the Company’s financial performance and the duties andresponsibilities of each executive officer. For a particular year, the Compensation Committee may alsoengage in a peer group benchmarking process when it believes that the economic circumstanceswarrant the process. However, the Compensation Committee will typically only use the benchmarkingdata for purposes of comparing the compensation of its executive officers against comparable positionsat specific compensation levels and financial peer groups of companies to determine whether theCompany’s executive compensation programs are generally competitive relative to its peers. TheCompensation Committee does not typically target a specific percentile to be achieved for eachexecutive officer as compared with their counterparts at the peer group companies. For the 2013 fiscalyear, the Compensation Committee did engage in a benchmarking process and determined that bothtarget cash and equity compensation awarded during fiscal 2012 were highly competitive relative to thepeer group companies selected by the Compensation Committee during fiscal 2012. Given the fact thatMessrs. Zafiropoulo and Wright continued to have duties and responsibilities that extended beyondthose of their counterparts at the peer group, the Compensation Committee determined in January of2013 that it was appropriate to maintain target compensation amounts for fiscal 2013 that werematerially comparable to the compensation amounts provided during fiscal 2012.

3. Through the annual Management Incentive Plan, the Compensation Committee structures a substantialportion of each executive officer’s total direct compensation in the form of long-term equity incentiveawards and variable, performance-based annual cash compensation. This structure is designed toachieve an appropriate balance between the Company’s long-term and short-term performance goals,with the objective of establishing a positive relationship between the Company’s operationalperformance and stockholder return.

4. The Company’s financial performance in terms of the operating income goal taken into account forpurposes of the short-term cash incentive component of the 2013 Management Incentive Plan did notmeet the minimum level. For the purpose of calculating the payout under this plan, the Company andits consolidated subsidiaries experienced an operating loss of $15,058,000 for the 2013 fiscal year. Forthe purpose of calculating the payout under this plan, revenue for the 2013 fiscal year on a consolidatedbasis was approximately $157,272,000. Based on these financial results for the 2013 fiscal year, neitherof the Company’s executive officers earned a cash bonus for that year. The various tier levels ofperformance goal attainment that the Compensation Committee established for the 2013 fiscal year aredescribed in more detail below under the heading “Annual Incentive Compensation.”

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5. For the five fiscal-year period ending with the 2013 fiscal year, the Company’s financial performancein terms of consolidated revenue, consolidated operating income and other key financial metrics maybe summarized as follows:

FISCAL YEARS

Dollar Amounts(in thousands) 2013 2012 2011 2010 2009

Revenue 157,272 234,825 212,333 140,603 95,813Gross Profit 67,382 131,810 110,325 71,641 44,990Operating Income (loss) (15,058) 56,398 44,020 17,541 (1,102)Net Income (loss) (13,769) 47,187 39,230 16,781 2,129Net Cash Provided by (Used In) Operating Activities (6,751) 77,131 37,391 22,879 3,226

6. The average closing price per share of the Company’s common stock for the first fifteen trading daysof the 2013 fiscal year was $37.02, and the average closing price for the last fifteen trading days of thatfiscal year was $27.87. Accordingly, for that one-year period, the total shareholder return based onsuch calculation was negative (approximately -25%). The average closing price per share of theCompany’s common stock for the first fifteen days of the 2009 fiscal year was $10.95, and the averageclosing price per share for the last fifteen days of the five fiscal-year period ending with the close of the2013 fiscal year was, as indicated, $27.87, resulting in an annual shareholder return for that periodbased on such calculation of approximately 21% on a compounded annual basis.

7. The Company does not believe that the performance-based nature of the executive compensationprogram encourages excessive risk-taking by its executive officers that would threaten the economicviability of the Company. First, the predominant component of each executive officer’s total directcompensation is in the form of long-term equity awards tied to the value of the Company’s commonstock, and those awards accordingly promote a commonality of interest between the executive officersand the Company’s stockholders in sustaining and increasing stockholder value. Because the equityawards are typically made on an annual basis to the executive officers, those officers always haveunvested awards outstanding that could decrease significantly in value if the Company’s business is notmanaged to achieve its long term goals. Secondly, under the annual cash incentive bonus programs, anindividual target bonus amount is established for each executive officer, and the performance measuresupon which the actual bonus amounts are determined are tied to the attainment of objectives intendedto sustain stockholder value, such as revenue growth and targeted levels of operating income. However,at all levels of performance goal attainment, there are limits in place that tie the potential bonus amountto either a fraction or multiple of the target bonus amount. Third, the Compensation Committee may,from time to time, consider granting supplemental bonuses earned based on achievement of differentperformance measures. Finally, the overall compensation structure is not overly-weighted towardshort-term incentives, and the Company has taken what it believes are reasonable steps to protectagainst the potential of disproportionately large short-term incentives that might encourage excessiverisk taking.

8. The Company does not offer guaranteed retirement or pension benefits. Instead, the Company providesits executive officers with the opportunity to accumulate retirement income primarily through theirlong-term equity awards that increase in value as stockholder value is created and sustained.

9. Messrs. Zafiropoulo and Wright each have employment agreements that provide severance benefits inthe event their employment is terminated under certain circumstances, including an involuntarytermination of employment without cause or a resignation for good reason. The level of severancebenefits is enhanced if the termination event occurs in connection with a change-in-control. TheCompany believes that the severance benefits provided under those employment agreements areconsistent with both peer company and broader market practices and are fair and reasonable in light ofthe many years of service Messrs. Zafiropoulo and Wright have rendered the Company and the level ofdedication and commitment they have shown over those years.

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Compensation Policy for Executive Officers. The Compensation Committee has designed the variouselements comprising the compensation packages of the Company’s executive officers to achieve the followingobjectives:

• attract, retain, motivate and engage executives with superior leadership and management capabilities,

• provide an overall level of compensation to each executive officer which is externally competitive,internally equitable and performance-driven, and

• ensure that total compensation levels are reflective of the Company’s financial performance andprovide the executive officer with the opportunity to earn above-market total compensation forexceptional business performance.

Each executive officer’s compensation package typically consists of three elements: (i) a base salary, (ii) anannual cash bonus opportunity tied solely to the Company’s attainment of pre-established financial objectives,and (iii) long-term, stock-based incentive awards, typically in the form of stock option grants and restricted stockunit awards, designed to align and strengthen the mutuality of interests between the Company’s executiveofficers and its stockholders. In determining the appropriate level for each element of such compensation, theCompensation Committee takes into account the Company’s financial performance and operating results and theexecutive officer’s duties and responsibilities, and for a particular year, the Compensation Committee may alsoengage in a peer group benchmarking process. However, the Compensation Committee may not perform such apeer group benchmarking process for a particular year when it concludes that there have not been any significantchanges in the market data for the prior year or years or when the economic circumstances do not otherwisewarrant the process. When such a benchmarking process is done, the Compensation Committee will typicallyonly use the benchmarking data for purposes of comparing the compensation of its executive officers againstcomparable positions at specific compensation levels and financial peer groups of companies to determinewhether the Company’s executive compensation programs are generally competitive relative to its peers. TheCompensation Committee does not typically target a specific percentile to be achieved for each executive officeras compared with their counterparts at the peer group companies. For the 2013 fiscal year, the CompensationCommittee did engage in a benchmarking process and determined that both target cash and equity compensationawarded during fiscal 2012 were highly competitive relative to the peer group companies selected by theCompensation Committee during fiscal 2012. In setting the compensation levels for Messrs. Zafiropoulo andWright for fiscal 2013, the Compensation Committee did not target a specific percentile to be achieved for eachexecutive officer as compared with their counterparts at the peer group companies but took into account the factthat Messrs. Zafiropoulo and Wright continued to have duties and responsibilities that extended beyond those oftheir counterparts at the peer group. Such extended duties and responsibilities were due to the fact that Companyhas had only two named executive officers for the last few years, whereas the number of named executiveofficers at each peer group company has been typically higher. As a result, the Compensation Committeedetermined in January of 2013 that it was appropriate to maintain target compensation amounts for fiscal 2013that were materially comparable to the compensation amounts provided during fiscal 2012.

Impact of 2013 Say-on-Pay Vote. The most recent stockholder advisory vote on executive officercompensation required under the federal securities laws was held on July 16, 2013, after the CompensationCommittee had approved the 2013 compensation of the named executive officers. Approximately 96 percent ofthe total votes cast on such proposal (including abstentions) were in favor of the compensation of the namedexecutive officers, as that compensation was disclosed in the Compensation Discussion and Analysis and thevarious compensation tables and narrative that appeared in the Company’s proxy statement dated June 3, 2013.Based on that level of stockholder approval, the Compensation Committee decided not to make any materialchanges to the Company’s compensation philosophies, policies and practices for the remainder of the 2013 fiscalyear. Based on the voting preference of the Company’s stockholders, advisory votes on executive officercompensation will be conducted every year, and the Compensation Committee will continue to take into accounteach such annual advisory vote in order to determine whether any subsequent changes to the Company’sexecutive compensation programs and policies would be warranted to reflect any stockholder concerns reflectedin those advisory votes.

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Comparative Framework. For purposes of determining whether the various elements of the Company’sexecutive officer compensation package remain competitive at their targeted levels, the CompensationCommittee historically has engaged an independent compensation consulting firm to provide competitive marketdata and advice from time to time on the Company’s executive compensation programs and policies. TheCompensation Committee uses such data to conduct periodic reviews of the compensation levels in effect forexecutive officer positions at a peer group of comparable companies that the Compensation Committeeidentified, with the assistance of its compensation consultant, in the high-tech and precision manufacturingindustries. However, such comparative compensation reviews do not occur on a regularly-scheduled basis, butonly at such times as the Compensation Committee believes that economic circumstances warrant the process.The companies which have historically comprised the comparative peer group are as follows:

Advanced Energy Industries, Inc.ATMI, Inc.

Axcelis Technologies, Inc.Brooks Automation, Inc.

Coherent, Inc.Cymer, Inc.

Gerber Scientific, Inc. (1)

GSI Group Inc.Kulicke & Soffa Industries, Inc.

Mattson Technology, Inc.MKS Instruments, Inc.

Novellus Systems, Inc. (2)Varian Semiconductor Equipment Associates, Inc. (1)

Veeco Instruments Inc.

(1) Removed in December 2011(2) Removed in August 2012

With the assistance of its independent compensation consultant, the Compensation Committee reviewed thepeer group in December 2011 for purposes of benchmarking the 2012 fiscal year total direct compensation of theexecutive officers, and as a result of that review, the following companies were removed as a result ofacquisitions: Gerber Scientific, Inc. and Varian Semiconductor Equipment Associates, Inc.

In August 2012, the Compensation Committee did another review of the peer group (as revised in December2011) to prepare for the 2012 compensation market study, and as a result of that review, one company wasremoved as a result of an acquisition: Novellus Systems, Inc.

In addition to the peer group of companies listed above, the Compensation Committee may also reviewcompetitive market data related to executive officer positions at a group of companies against which theCompany compares its financial performance. This group includes a subset of the companies listed above(Advanced Energy Industries, Inc., Brooks Automation, Inc., Mattson Technology, Inc., MKS Instruments, Inc.,Veeco Instruments Inc.) as well as two additional companies: FEI Company and Rudolph Technologies.

Compensation Consultants. In setting executive officer compensation for the 2013 fiscal year, theCompensation Committee used Compensia to prepare a benchmarking analysis of the compensationarrangements then provided to Messrs. Zafiropoulo and Wright. For compensation decisions made in 2013 withrespect to the compensation of the Company’s non-employee Board members and in setting executive officercompensation for the 2014 fiscal year, the Compensation Committee continued to utilize Compensia as itsindependent consulting firm. Compensia reports directly to the Compensation Committee and not tomanagement. Compensia is independent from the Company, has not provided any services to the Company otherthan to the Compensation Committee, and receives compensation from the Company only for services providedto the Compensation Committee. The Compensation Committee assessed the independence of Compensiapursuant to SEC rules and concluded that the work of Compensia has not raised any conflict of interest.

Elements of Compensation. Each of the three major elements comprising the compensation package forexecutive officers (salary, target annual bonus and long-term equity awards) for the 2013 fiscal year wasdesigned to achieve one or more of the Company’s overall objectives of setting a competitive level ofcompensation, tying compensation to the attainment of one or more of the Company’s strategic business

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objectives and subjecting a substantial portion of the executive officer’s compensation to the Company’sfinancial success as measured in terms of the Company’s stock price performance. The manner in which theCompensation Committee structured each element of compensation may be explained as follows.

Salary. The Compensation Committee reviews the base salary level of each executive officer in Januaryeach year, with any salary adjustments for the year to be effective as of January 1 of that year. The base salary foreach executive officer named in the Summary Compensation Table is determined on the basis of his level ofresponsibility and experience. The Compensation Committee believes that this component of compensationshould provide a level of economic security and stability from year to year and not be dependent to any materialextent on the Company’s financial performance. In addition, Messrs. Zafiropoulo and Wright have existingemployment agreements with the Company which set a minimum level of annual base salary, subject to periodicupward adjustment at the discretion of the Compensation Committee. For the 2013 fiscal year, no adjustmentswere initially made to the base salary levels of Messrs. Zafiropoulo and Wright and their base salary levelsremained at $575,000 and $350,000, respectively, which the Compensation Committee determined wascompetitive based on current market data for their positions in the industry. However, in April 2013, due to theconditions at that time, the Board of Directors approved temporary decreases in the salary levels of theCompany’s management team, including with respect to Messrs. Zafiropoulo and Wright. With the agreement ofeach executive, Mr. Zafiropoulo’s base salary was decreased by 25% to $431,250 and Mr. Wright’s base salarywas decreased by 20% to $280,000 for the second and third fiscal quarters of 2013.

Annual Cash Bonus. On January 28, 2013, the Compensation Committee established the ManagementIncentive Program (the “MIP”) for the 2013 fiscal year for the executive officers. As was the case for the 2012MIP, the cash bonus opportunity under the 2013 MIP was tied solely to the Company’s operating income andrevenue levels for the 2013 fiscal year. The target bonuses set under the 2013 MIP for the Company’s executiveofficers were as follows: $862,500 for Mr. Zafiropoulo (150% of 2013 fiscal year base salary) and $350,000 forMr. Wright (100% of 2013 fiscal year base salary).

Half of the potential bonus opportunity for each executive officer was tied to an operating income target,and the other half tied to a revenue target. Four performance levels were established for each goal, and the actuallevel at which each goal was attained determined the bonus amount payable to the executive officer with respectto that goal. No qualitative performance factors, whether in the terms of company or individual performance,were established as a condition to the bonus potential set for each executive officer. The potential bonus withrespect to each goal, as a multiple or fraction of the fifty percent (50%) component of the target bonus allocatedto that goal is set forth below for each specified level of goal attainment. Goal attainment is measured on aconsolidated basis with the Company’s consolidated subsidiaries for financial reporting purposes.

LEVEL OF ATTAINMENT FOR REVENUE GOAL

MULTIPLE/FRACTIONOF

TARGET BONUS AMOUNT

MINIMUM: $174,000,000 .25xTIER I: $248,000,000 .50xTIER II: $285,000,000 .75xTIER III: $322,000,000 1.0x

LEVEL OF ATTAINMENT FOR OPERATING INCOME GOAL

MULTIPLE/FRACTIONOF

TARGET BONUS AMOUNT

MINIMUM: $41,400,000 .25xTIER I: $59,200,000 .50xTIER II: $68,100,000 .75xTIER III: $77,000,000 1.0x

If both performance goals were attained at the Tier III target level, then each executive officer would havebeen awarded his target bonus under the MIP. If the actual level of attainment for either goal had been between

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any two designated levels up to that target Tier III level, then the bonus potential for that goal would be in adollar amount interpolated on a straight line basis between those two levels. If the Company’s operating incomeor revenue goal for the 2013 fiscal year exceeded the target Tier III level, then the bonus potential for that goalwould have increased on an extrapolated basis in accordance with the same slope that applies to the interpolationbetween Tier II and Tier III level performance.

For example, the differential between the Tier II and Tier III revenue levels for 2013 is $37 million ($322million - $285 million), and there are 25 basis points of target bonus assigned to that differential (1.0 - .75). Ifactual revenue for the 2013 fiscal year had been at the $303.5 million mid-point level ($285 million plus anadditional $18.5 million), then the bonus factor for that component would have been .875x –the midpointbetween the two tiers, and that factor would have accordingly been applied to the portion of the target bonus tiedto the revenue metric. The same process would have been applied for revenue in excess of the $322 million TierIII level. For the next $37 million of revenue in excess of the $322 million Tier III level, an additional 25 basispoint of target bonus could have been earned on an extrapolated basis between $322 million and $359 million.Accordingly, if actual revenue for 2013 fiscal year had been at the $340.5 million mid-point level ($322 millionplus an additional $18.5 million of revenue), the bonus multiple assigned to that excess would have been be1.125x—the midpoint between 1x and 1.25x, and that factor would have been applied to the portion of the targetbonus tied to 2013 fiscal year revenue. The same process would have been repeated for each additional $37million of revenue in excess of the Tier III level.

In determining the levels at which the net operating income and revenue objectives were met for the 2013fiscal year, the Compensation Committee primarily relied on the reported financial results in the Company’saudited consolidated financial statements for the 2013 fiscal year, prepared in accordance with U.S. generallyaccepted accounting principles. Based on the reported financial results, the Compensation Committee determinedin January 2014 that the Company’s operating income for the 2013 fiscal year on a consolidated basis with itssubsidiaries was less than the Minimum level established for that performance metric and that the Company’srevenue for such fiscal year on a consolidated basis was less than the Minimum level established for thatparticular goal.

As a result, Messrs. Zafiropoulo and Wright did not earn a bonus amount for the 2013 fiscal year. Had theyearned a bonus amount for the 2013 fiscal year, one third of the bonus amount would have been paid followingthe close of the 2013 fiscal year, and the remainder would have been deferred and subject to an annualinstallment vesting schedule tied to the executive officer’s continued service with the Company over anadditional two-year period. The deferred portion would have been paid as it vested and would have earnedinterest at a designated rate until paid. The deferred portions would have immediately vested and become payablein the event the executive officer’s employment terminated under certain defined circumstances during thedeferral period. Accelerated payouts would have also occurred in the event of certain changes in control orownership of the Company. The 2013 MIP also provided for pro-ration of the non-deferred portion of the bonusin the event the executive officer terminated employment under certain defined circumstances during the 2013fiscal year performance period.

Additional Bonus Opportunity. On January 28, 2013, the Compensation Committee approved an additionalbonus opportunity for Messrs. Zafiropoulo and Wright for the 2013 fiscal year. The additional bonus would onlybe earned if the ratio of the Company’s operating income to its revenue (the “Operating Income Percentage”) for2013 ranked in the top three relative to the Operating Income Percentage for a peer group of ten companiesselected by the Compensation Committee, and the executive continued in the Company’s employ through the endof the 2013 fiscal year (subject in each case to certain exceptions related to certain terminations of employment).For this purpose, the peer group companies consisted of each of the companies listed above under the sectionentitled “Comparative Framework” other than: (i) the companies that had previously been removed for thereasons set forth above; and (ii) Cymer, Inc., which was subsequently acquired by another company. If theCompany’s Operating Income Percentage ranked in the top three, the bonus amount for each executive officerwould be: for Mr. Zafiropoulo, $500,000, $200,000 or $100,000 if the Company ranked first, second or third,

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respectively; and for Mr. Wright, $400,000, $200,000 or $100,000 if the Company ranked first, second or third,respectively. Any bonus earned would be paid following the close of the 2013 fiscal year. If the goal were notachieved, no bonus would be payable. As the Company’s Operating Income Percentage for 2013 did not rank inthe top three among the ten peer group companies, no bonus was payable to Messrs. Zafiropoulo and Wright.

Long-Term Equity Incentives. The Company has structured its long-term incentive program for executiveofficers in the form of equity awards under its 1993 Stock Option/Stock Issuance Plan (the “1993 Plan”). Formany years, stock option grants were the Company’s sole form of equity award. However, in January 2006, theCompensation Committee began to award restricted stock units (“RSUs”) as part of the Company’s long-termincentive program. The Company believes that RSUs are a valuable addition to its long-term incentive programfor several reasons, including ongoing concerns over the dilutive effect of option grants on the Company’soutstanding shares (RSU awards cover a smaller number of shares that an option grant with the same grant-datevalue), the Company’s desire to have a more direct correlation between the compensation expense it must recordfor financial accounting purposes and the actual value delivered to executive officers and other employees, andthe fact that the incentive and retention value of an RSU award is less affected by market volatility than stockoptions. As a result, the Company has typically used a combination of stock option grants and RSUs under the1993 Plan to provide long-term incentives to its executive officers and other key personnel. For fiscal 2013,however, the Compensation Committee decided to grant only RSUs to both of Messrs. Zafiropoulo and Wrightas doing so would reduce the dilutive impact of additional grants given that a smaller number of shares would begranted.

Each equity award is designed to align the interests of the executive officer with those of the stockholdersand to provide each individual with a significant incentive to manage the Company from the perspective of anowner with an equity stake in the business. In determining the size of the individual equity awards made to eachexecutive officer, the Compensation Committee does not take into account the attainment of any specificCompany performance goals or the achievement of any individual goals. Accordingly, no performance metrics orindividual goals are established by the Compensation Committee to serve as the measure for sizing the individualequity awards made to the executive officers. Instead, the Compensation Committee works with its independentconsultant each year in compiling relevant market data to determine the appropriate sizing of the awards. TheCompensation Committee retains complete discretion to size each individual equity award as it thinksappropriate and may depart from the market data percentiles as individual circumstances warrant.

As part of the 2013 MIP, the Compensation Committee authorized RSU awards for Messrs. Zafiropoulo andWright. The number of shares of the Company’s common stock covered by such awards is indicated below. Eachaward was initially intended to be made in a series of three successive equal quarterly grants over the course ofthe 2013 fiscal year. However, in April 2013, the Board of Directors revised the grant schedule for theCompany’s management team, including Messrs. Zafiropoulo and Wright, so that awards would be made in twoequal installments, with the first installment to be granted on the second business day following the Company’searnings release for its second fiscal quarter of 2013 and the second installment to be granted on the secondbusiness day following the Company’s earnings release for its third fiscal quarter of 2013. Accordingly, awardswith respect to one-half of the total number of shares of the Company’s common stock indicated in the tablebelow for each executive officer were made on July 22, 2013 and October 21, 2013.

NameTotal Number of Shares Subject

to Restricted Stock Units (#)

Mr. Zafiropoulo 100,000Mr. Wright 50,000

Each restricted stock unit granted under the 2013 MIP represents the right to receive one share of theCompany’s common stock on the designated issuance date following the vesting of that unit. Each installment ofan award will vest incrementally over a fifty (50)-month period of service with the Company measured fromJanuary 1, 2013, and the shares of the Company’s common stock underlying the units that so vest will be issuedon a periodic basis over the vesting schedule. Accelerated vesting of all the units will occur upon a change in

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control of the Company or upon the individual’s cessation of employment under certain defined circumstances inthe absence of a change in control. The shares underlying any units that vest on such an accelerated basis will, ingeneral, be issued concurrently with the vesting acceleration event, subject to any holdback requirements underapplicable tax laws.

The Compensation Committee believes that the equity awards made in the 2013 fiscal year and in prioryears under its long-term incentive program provide the Company’s executive officers with a competitive equitycompensation package based on market data compiled by its independent consultant and are also in line with theCompensation Committee’s pay-for-performance objectives.

2013 TARGET TOTAL DIRECT COMPENSATION IN RELATION TO PEER GROUP

The chart below sets forth the target total direct compensation of each of the two named executive officers for the2013 fiscal year and indicates the percentile level at which their target total direct compensation fell in relation totheir comparable positions at the identified peer group companies (as revised in accordance with the August 2012peer group review), in each case, as of the date the Compensation Committee set the 2013 target total directcompensation for Messrs. Zafiropoulo and Wright and, for purposes of the equity awards, assuming a per sharevalue of $35.00.

TargetAnnual

BaseSalary

TargetAnnualBonus

MaximumSupplemental

Bonus

TargetValue ofEquityAward

Target TotalDirect

Compensation

PeerGroup

PercentileLevel

Mr. Zafiropoulo $575,000 $862,500 $500,000 $3,500,000 $5,437,500 Above 90thMr. Wright $350,000 $350,000 $400,000 $1,750,000 $2,850,000 Above 90th

Risk Assessment of Executive Officer Compensation

The Company believes the various components of the total compensation package of the executive officers,as discussed above, are appropriately balanced so as to avoid any excessive risk taking by such individuals. First,the long-term equity awards tied to the market price of the Company’s common stock represent the predominantcomponent of executive officer compensation and promote a commonality of interest between the executiveofficers and the Company’s stockholders in sustaining and increasing stockholder value. In addition, a substantialportion of the equity component is in the form of restricted stock units. The use of such restricted stock unitsmitigates the potential risk that stock options pose in encouraging risk taking in the short term. Restricted stockunits provide varying levels of compensation as the market price of the Company’s common stock fluctuatesover time and are less likely to contribute to excessive risk taking. The restricted stock unit awards will also vestover a period of years, and that vesting element encourages the award recipients to focus on sustaining theCompany’s long-term performance. Because equity awards, whether in the form of stock options or restrictedstock units, are typically made on an annual basis, the executive officers always have unvested awardsoutstanding that could decrease significantly in value if the Company’s business is not managed to achieve itslong term goals.

Secondly, under the Company’s standard annual cash incentive bonus program, an individual target bonusamount is established for each executive officer, and the performance measures upon which the actual bonusamounts are determined are tied to strategic objectives intended to sustain stockholder value. At all levels ofperformance goal attainment, there are limits in place that tie the potential bonus amount to either a fraction ormultiple of the target bonus. If both goals are attained at the Tier I level, the bonus payable to an executiveofficer will equal half of his target bonus for the year, and for attainment of both goals at the Tier III level, thebonus will be limited to one times his target bonus. For goal attainment above the Tier III level, the actual bonuswill continue to be tied to the target bonus amount but will be increased to reflect the higher level of attainmenton the same straight-line interpolated basis that applies to the span between Tier II and Tier III levels. For the lastthree fiscal years, the bonuses earned by Messrs. Zafiropoulo and Wright as a percentage of their target bonushave been as follows: for the 2011 fiscal year, the actual bonus level of each of them was at approximately 95%

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of target; for the 2012 fiscal year, the actual bonus level of each of them was at approximately 141% of target;and for the 2013 fiscal year, no bonuses were earned as the minimum level required for any bonus payment wasnot achieved. Additionally, payments based on performance goal attainment under the annual cash incentivebonus program are subject to an additional service vesting schedule so that a participant must remain with theCompany for at least three years from the start of the one-year performance measurement period in order to earnhis or her full payment for that performance period, thereby further encouraging long-term focus.

The Compensation Committee may, from time to time, consider granting supplemental bonuses based onachievement of different performance measures. In 2013, the Compensation Committee approved the grant ofsupplemental bonuses to Messrs. Zafiropoulo and Wright subject to achievement of an operating incomepercentage for 2013 that ranked in the top three operating income percentages among a peer group of tencompanies selected by the Compensation Committee. No supplemental bonuses were paid for 2013 as theCompany’s Operating Income Percentage for 2013 did not rank in the top three.

The overall compensation structure is not overly-weighted toward short-term incentives, and theCompensation Committee has taken what it believes are reasonable steps to protect against the potential ofdisproportionately large short-term incentives that might encourage excessive risk taking.

Market Timing of Equity Awards. The Compensation Committee does not engage in any market timing ofthe equity awards made to the executive officers or other award recipients. The awards for existing executiveofficers and employees are typically authorized in connection with the annual performance review process, whichgenerally occurs in the first quarter of the succeeding fiscal year. The authorized RSU and stock option awardsare then typically made in equal installments on designated dates during the year in accordance with theestablished policy of tying the award dates to the second full trading date following the earnings release for theprior quarter.

Officer Employment Agreements. The Company has entered into employment agreements withMessrs. Zafiropoulo and Wright. A summary of the material terms of those employment agreements, togetherwith a quantification of the severance benefits payable under those agreements under various definedcircumstances, may be found below in the section of this Proxy Statement entitled “Employment Contracts,Termination of Employment and Change in Control Arrangements.”

The severance benefits payable under each employment agreement are primarily in the form of (i) salarycontinuation payments, (ii) accelerated vesting and payout of the deferred portion of any outstanding cash bonusawards under the Management Incentive Plan for one or more prior fiscal years, (iii) any pro-rata bonus to whichsuch individual may become entitled under the Management Incentive Plan in effect for the year of terminationbased on actual performance goal attainment for that year, (iv) accelerated vesting of certain outstanding equityawards, (v) reimbursement of the costs such individual incurs to obtain lifetime retiree health care coverage forhimself and his spouse and, (vi) for Mr. Zafiropoulo, the continued use of a Company-provided automobile.

The severance benefits will be provided under two basic scenarios: (i) an involuntary termination orresignation for good reason in the absence of a change in control and (ii) a termination for any reason following achange in control of the Company. In the change in control scenario, the level of severance benefits is higher inthat:

(a) All outstanding equity awards made to Messrs. Zafiropoulo and Wright will immediately vest upon achange in control (whether or not their employment terminates), whereas in a non-change-in-controlsituation, vesting acceleration will occur only upon an actual termination of employment.

(b) The salary continuation period would be twice as long in a change in control termination.

(c) Mr. Zafiropoulo will be entitled to a full tax gross-up with respect to any excise tax he may incur underSection 4999 of the Internal Revenue Code should any of the severance benefits he receives in achange in control situation be deemed to be a parachute payment under Section 280G of the InternalRevenue Code.

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Messrs. Zafiropoulo and Wright are entitled to reimbursement of the costs they incur to obtain lifetimeretiree health care coverage for themselves and their spouses, whether or not such involuntary termination orresignation for good reason occurs in connection with a change-in-control event. Mr. Zafiropoulo will also beentitled to reimbursement of such lifetime retiree health coverage upon the termination of his employment withthe Company for any reason.

The Company believes the severance benefits payable under the employment agreement are fair andreasonable in light of the many years of service Messrs. Zafiropoulo and Wright have rendered the Company andthe level of dedication and commitment they have shown over those years. The Company also believes that thehigher level of severance benefits payable in connection with a change in control termination event is warranted.The severance benefits payable in that instance offer financial protection against any potential loss ofemployment that might otherwise occur as a result of an acquisition of the Company and will allow Messrs.Zafiropoulo and Wright to focus their attention on acquisition proposals that are in the best interests of thestockholders, without undue concern as to their own financial situation. The Company also believes the singletrigger vesting acceleration of their equity awards upon a change in control is justified because those awards aredesigned to serve as the primary vehicle for wealth creation and the accumulation of financial resources for theirretirement years, and a change in control event is an appropriate liquidation point for awards intended for suchpurpose. The Company does not provide the executive officers with any defined benefit pension plan orsupplemental executive retirement plan, and the only other opportunities for wealth accumulation and retirementfunds is through the limited deferral opportunities provided under the Company’s 401(k) savings plan and thenon-qualified deferred compensation plan. Mr. Zafiropoulo has not to date participated in the non-qualifieddeferred compensation plan, and Mr. Wright has participated only to a modest extent.

Executive Officer Perquisites. It is not the Company’s practice to provide its executive officers with anysignificant perquisites. The Company does, however, provide Mr. Zafiropoulo with a company automobile forwhich the Company pays all expenses (including, without limitation, all lease payments or the full purchase priceof the vehicle) and which he uses from time to time for personal matters. The dollar value of the perquisitereported in the Summary Compensation Table below was determined based on the Company’s cost for the 2013fiscal year allocable to such personal use. The Company believes that the provision of a company automobile is acommon perquisite for executive officers at Mr. Zafiropoulo’s level and is appropriate in light of his long yearsof tenure with the Company.

Other Programs. The Company’s executive officers are eligible to participate in the Company’s 401(k) planon the same basis as all other regular U.S. employees.

Deferred Compensation Programs. In addition to the bonus component subject to mandatory deferral underthe Company’s annual Management Incentive Plan described above under the heading “Annual Cash Bonus,” theCompany maintains a non-qualified deferred compensation program for its executive officers and other keyexecutives. Under that program, participants may elect to defer all or a portion of their salary or bonus each year,and the deferred sums will be credited with notional earnings (or losses) based on their investment elections.Such deferred compensation (as adjusted for such notional earnings or losses) will become payable following theparticipant’s termination of employment and may be paid in a lump sum or in installments based on thecircumstances under which the termination event occurs and the prior distribution election made by theparticipant. The program is described in more detail below in the section of this Proxy Statement entitled“Nonqualified Deferred Compensation.” However, as indicated above, the Company believes that the equityaward component of each executive officer’s total direct compensation package should serve as his or her majorsource of wealth creation, including the accumulation of substantial resources to fund the executive officer’sretirement years.

Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the Internal Revenue Codedisallows a tax deduction to publicly held companies for compensation paid to certain of their executive officersto the extent such compensation exceeds $1.0 million per covered officer in any year. The limitation applies only

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to compensation that is not considered to be performance-based under the terms of Section 162(m). The stockoptions granted to the Company’s executives have been structured with the objective of qualifying those awards asperformance-based compensation. Compensation recognized as a result of bonus payments under the annualmanagement incentive plans for the fiscal years completed to date and the issuance of vested shares of theCompany’s common stock under service-vesting RSU awards will not qualify as such performance-basedcompensation.

The non-performance-based compensation paid to Mr. Zafiropoulo for the 2013 fiscal year exceeded the $1.0million limit for the 2013 fiscal year by approximately $4 million. Mr. Wright in his capacity as the Company’sChief Financial Officer was not a covered individual subject to the Section 162(m) limitation.

The Company believes that in establishing the cash and equity incentive compensation programs for itsexecutive officers, the potential deductibility of the compensation payable under those programs should be onlyone of a number of relevant factors taken into consideration, and not the sole governing factor. For that reason, theCompany may deem it appropriate to provide one or more executive officers with the opportunity to earnincentive compensation, whether through cash bonus programs tied to its financial performance or through RSUstied to the executive officer’s continued service, which may, together with other non-performance basedcompensation paid to those individuals, exceed in the aggregate the amount deductible by reason ofSection 162(m) or other provisions of the Internal Revenue Code. The Company believes it is important tomaintain cash and equity incentive compensation at the levels needed to attract and retain the executive officersessential to its success, even if all or part of that compensation may not be deductible by reason of theSection 162(m) limitation.

Summary Compensation Information

The following table provides certain summary information concerning the compensation earned for servicesrendered in all capacities to the Company and its subsidiaries for the years ended December 31, 2013, 2012, and2011, respectively, by the Company’s Chief Executive Officer and Chief Financial Officer. Each of the listedindividuals shall be hereinafter referred to as a “named executive officer.” There were no other executive officersof the Company during the 2013 fiscal year.

Name andPrincipalPosition Year

Salary($)(1)

Bonus($)

StockAwards

($)(2)

OptionAwards

($)(3)

Non-EquityIncentive PlanCompensation

($)(4)

Change inPensionValueand

NonqualifiedDeferred

CompensationEarnings ($)

All OtherCompensation

($) Total ($)

Arthur W.Zafiropoulo,Chairman ofthe Board,ChiefExecutiveOfficer andPresident

201320122011

518,053575,000574,231

———

2,707,0003,611,2003,869,625

———

—1,316,000

815,000

———

122,108(5)79,173(6)88,736(7)

3,346,1615,581,3735,347,592

Bruce R. Wright,Senior VicePresident,Finance, ChiefFinancialOfficer andSecretary

201320122011

322,269350,000349,039

———

1,353,5001,203,7321,289,875

—1,092,6351,122,961

—543,000331,000

8,302(8)3,162(10)

119(12)

34,487(9)37,213(11)33,619(13)

1,718,5583,229,7423,126,613

(1) Includes amounts deferred under the Company’s 401(k) Plan, a qualified deferred compensation plan undersection 401(k) of the Internal Revenue Code, and the Company’s Executive Deferred Compensation Plan, anon-qualified deferred compensation program.

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(2) The amount indicated in the column for each fiscal year represents the aggregate grant-date fair value ofthe restricted stock unit awards made in that year. The grant-date fair value is in each instance calculated inaccordance with Accounting Standards Codification (“ASC”) Topic 718, Compensation-StockCompensation (“ASC Topic 718”), on the basis of the closing price of the Company’s common stock onthe award date and does not take into account any estimated forfeitures related to service-vesting orperformance-vesting conditions. For further information concerning such grant-date fair value, please seefootnote 5 to the Company’s audited financial statements for the fiscal year ended December 31, 2013included in the Company’s Annual Report on Form 10-K filed with the Securities and ExchangeCommission on February 28, 2014.

(3) The amount indicated in the column for each fiscal year represents the aggregate grant-date fair value ofthe stock option grants made in that year, as calculated in accordance with ASC Topic 718, and does nottake into account any estimated forfeitures related to service-vesting or performance-vesting conditions.The assumptions used in the calculation of such grant-date fair value are set forth in footnote 5 to theCompany’s audited financial statements for the year ended December 31, 2013 included in the Company’sAnnual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2014.

(4) The amount shown for each fiscal year reflects (i) the actual bonuses earned under the ManagementIncentive Plan (the “MIP”) in effect for that fiscal year and (ii) for the 2012 and 2013 fiscal years, anysupplemental bonus earned for such fiscal year due to achievement of the applicable performance goal. Forthe 2013 fiscal year, no bonuses were earned under the Management Incentive Plan and no supplementalbonuses were earned as, in each case, the applicable performance goals were not achieved. For the 2012fiscal year, a supplemental bonus was earned and such bonus was paid in full to the named executiveofficer following the close of the 2012 fiscal year, and one-third of the reported bonus amount for the 2012MIP was paid to the named executive officer following the close of the 2012 fiscal year. The remainingportion of the reported bonus amount for the 2012 MIP was deferred and is subject to an annual installmentvesting schedule tied to the named executive officer’s continued service with the Company over anadditional two-year period that will end on December 31, 2014. The deferred portion of the 2012 fiscalyear bonus awards will immediately vest and become payable in the event the named executive officer’semployment terminates under certain defined circumstances during the deferral period. Acceleratedpayouts will also occur in the event of certain changes in control or ownership of the Company. One-thirdof the reported bonus amount for the 2011 MIP was paid to the named executive officer following theclose of the 2011 fiscal year. The remaining portion was deferred and subject to an annual installmentvesting schedule tied to the named executive officer’s continued service with the Company over anadditional two-year period that ended on December 31, 2013.

(5) Represents (i) $76,200 attributable to the costs to the Company for the non-business use of a Company carprovided to Mr. Zafiropoulo, (ii) $38,258 attributable to the amount accrued by the Company for the 2013fiscal year with respect to the lifetime retiree health care coverage to which Mr. Zafiropoulo is entitledfollowing his termination of employment, and (iii) $7,650 attributable to the matching contribution madeby the Company to Mr. Zafiropoulo’s account in the Company’s 401(k) plan. For further informationregarding such benefit, please see the section entitled “Employment Contracts, Termination ofEmployment Agreements and Change in Control” below.

(6) Represents (i) $43,250 attributable to the costs to the Company for the non-business use of a Company carprovided to Mr. Zafiropoulo, (ii) $28,423 attributable to the amount accrued by the Company for the 2012fiscal year with respect to the lifetime retiree health care coverage to which Mr. Zafiropoulo is entitledfollowing his termination of employment, and (iii) $7,500 attributable to the matching contribution madeby the Company to Mr. Zafiropoulo’s account in the Company’s 401(k) plan.

(7) Represents (i) $42,191 attributable to the costs to the Company for the non-business use of a Company carprovided to Mr. Zafiropoulo, (ii) $39,195 attributable to the amount accrued by the Company for the 2011fiscal year with respect to the lifetime retiree health care coverage to which Mr. Zafiropoulo is entitledfollowing his termination of employment, and (iii) $7,350 attributable to the matching contribution madeby the Company to Mr. Zafiropoulo’s account in the Company’s 401(k) plan.

(8) Represents the notional gain for the 2013 fiscal year with respect to the compensation deferred by thenamed executive officer under the Executive Deferred Compensation Plan. For further information

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regarding the Executive Deferred Compensation Plan and Mr. Wright’s contributions, please see thesection entitled “Nonqualified Deferred Compensation” below.

(9) Represents (i) $26,837 attributable to the amount accrued by the Company for the 2013 fiscal year withrespect to the lifetime retiree health care coverage to which Mr. Wright may become entitled following histermination of employment under certain defined circumstances, and (ii) $7,650 attributable to thematching contribution made by the Company to Mr. Wright’s account in the Company’s 401(k) plan. Forfurther information regarding such health care coverage, please see the section entitled “EmploymentContracts, Termination of Employment Agreements and Change in Control” below.

(10) Represents the notional gain for the 2012 fiscal year with respect to the compensation deferred by thenamed executive officer under the Executive Deferred Compensation Plan.

(11) Represents (i) $29,713 attributable to the amount accrued by the Company for the 2012 fiscal year withrespect to the lifetime retiree health care coverage to which Mr. Wright may become entitled following histermination of employment under certain defined circumstances, and (ii) $7,500 attributable to thematching contribution made by the Company to Mr. Wright’s account in the Company’s 401(k) plan.

(12) Represents the notional gain for the 2011 fiscal year with respect to the compensation deferred by thenamed executive officer under the Executive Deferred Compensation Plan.

(13) Represents (i) $26,269 attributable to the amount accrued by the Company for the 2011 fiscal year withrespect to the lifetime retiree health care coverage to which Mr. Wright may become entitled following histermination of employment under certain defined circumstances, and (ii) $7,350 attributable to thematching contribution made by the Company to Mr. Wright’s account in the Company’s 401(k) plan.

Grants of Plan-Based Awards

The following table provides certain summary information concerning each grant of an award made to anamed executive officer in the 2013 fiscal year under a compensation plan.

NameGrantDate

Potential PayoutsUnder Non-Equity Incentive

Plan Awards (1)

All OtherStock

Awards:Numberof Sharesof Stockor Units

(#)(2)

GrantDateFair

Value ofEquityAwards

(3)($)

(a) (b)Threshold

($)(c)Target($)(d)

Maximum($)(e) (f) (i)

Arthur W. Zafiropoulo 1/28/2013 215,625 862,500 (1)7/22/2013 50,000 1,478,500

10/21/2013 50,000 1,228,500

Bruce R. Wright 1/28/2013 87,500 350,000 (1)7/22/2013 25,000 739,250

10/21/2013 25,000 614,250

(1) Reflects the potential amounts payable under the Company’s 2013 Management Incentive Plan based on theCompany’s attainment of revenue and operating income goals set at various levels for that year, namely,Minimum (threshold), Tier I, Tier II and Tier III (target) levels. Fifty percent (50%) of the target bonusamount for each named executive officer was allocated to each of the two applicable performance goals, andthe actual bonus payable with respect to each goal was accordingly tied to the level at which that goal wasattained. If the Company’s operating income or revenue goal for the 2013 fiscal year exceeds the Tier III(target) level, then the bonus potential for that goal would be increased on an extrapolated basis inaccordance with the same slope that applies to the interpolation between Tier II and Tier III levelperformance. For purposes of the table, the potential bonus indicated for each level assumes that bothperformance goals were attained at the same level. For further information concerning such potential bonusamounts, please see the description of the 2013 Management Incentive Plan that follows.

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(2) Reflects RSU awards made at two intervals during the 2013 fiscal year. The two award dates were July 22,2013 and October 21, 2013. Each award will vest in a series of fifty successive equal monthly installmentsupon the named executive officer’s completion of each month of continued employment over the 50-monthperiod measured from January 1, 2013, subject to full vesting acceleration in the event his employmentterminates under certain circumstances or upon certain changes in control or ownership of the Company.The shares underlying the vested units will be issued at designated intervals over the 50-month vestingperiod or (if earlier) upon the occurrence of any of the vesting acceleration events.

(3) The dollar value reported with respect to the restricted stock unit awards reflects the grant-date fair value ofeach restricted stock unit award, calculated in accordance with ASC Topic 718. Such grant date fair value isaccordingly based on the closing price of the Company’s common stock on the applicable award date anddoes not take into account any estimated forfeitures related to service-vesting or performance-vestingconditions.

2013 Management Incentive Plan. The performance objectives established under the 2013 ManagementIncentive Plan for the 2013 fiscal year were tied to separate revenue and operating income goals set at fourspecified levels. Fifty percent (50%) of the target bonus for each named executive officer was allocated to therevenue performance goal, and the remaining fifty percent (50%) was allocated to the operating incomeperformance goal. For each specified level of performance goal attainment, a designated dollar amount wasestablished as the potential bonus payable with respect to that goal. If the actual level of attainment for aparticular performance goal were below the threshold level, then no bonus amount would have been payable withrespect to that goal. If the actual level of goal attainment were between any two designated levels up to the TierIII target level, the potential bonus with respect to that goal would be interpolated on a straight line basis betweenthose two levels. If the actual level of goal attainment were above the Tier III target level, then the bonuspotential with respect to that goal would increase based on the same slope that existed between that Tier III targetlevel and the immediately preceding level. Following the close of the 2013 fiscal year, the CompensationCommittee reviewed the Company’s financial results for such year and determined that neither the Company’soperating income nor the Company’s revenue for the 2013 fiscal year met the threshold levels for each goal. As aresult, Messrs. Zafiropoulo and Wright did not earn a bonus for the 2013 fiscal year. For more informationregarding the 2013 Management Incentive Plan, please see the section entitled “Incentive Compensation” in theCompany’s Compensation Discussion and Analysis.

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Outstanding Equity Awards at Fiscal Year-End

The following table provides certain summary information concerning outstanding equity awards held bythe named executive officers as of December 31, 2013.

Name

Number ofSecurities

UnderlyingUnexercisedOptions (#)Exercisable

Number ofSecurities

UnderlyingUnexercisedOptions (#)

Unexercisable

OptionExercisePrice($)

OptionExpiration

Date

Number ofShares orUnits of

Stock ThatHave NotVested(#)

Market Valueof Shares or

Units of StockThat Have NotVested ($)(1)

Arthur W. Zafiropoulo 76,000(2) 2,204,00062,400(3) 1,809,60042,000(4) 1,218,0004,000(5) 116,000

75,000 9.66 2/3/201865,000 16.16 12/16/201580,000 14.12 1/22/201580,000 16.01 10/19/2014

Bruce R. Wright 38,000(2) 1,102,00020,800(3) 603,20014,000(4) 406,0002,000(5) 58,000

12,800 28.92 10/22/202213,866(6) 28.92 10/22/2022

12,801 30.12 7/23/202213,866(6) 30.12 7/23/2022

12,801 31.24 4/23/202213,866(6) 31.24 4/23/2022

18,000 22.00 10/24/20217,000(7) 22.00 10/24/2021

18,000 27.75 7/25/20217,000(7) 27.75 7/25/2021

18,000 30.91 4/26/20217,000(7) 30.91 4/26/2021

18,000 22.53 1/31/20217,000(7) 22.53 1/31/2021

24,000 18.65 10/26/20201,000(8) 18.65 10/26/2020

24,000 18.92 7/26/20201,000(8) 18.92 7/26/2020

24,000 15.65 4/26/20201,000(8) 15.65 4/26/2020

18,528 12.25 2/8/20201,000(8) 12.25 2/8/2020

4,800 9.66 2/4/201830,000 16.16 12/16/201532,918 14.12 1/22/2015

(1) Based on the $29.00 closing price per share of the Company’s common stock on December 31, 2013.(2) Reflects the unvested portion of RSU awards covering an aggregate of 100,000 shares of the Company’s

common stock that were made to Mr. Zafiropoulo in two equal installments during the 2013 fiscal year andthe unvested portion of RSU awards covering an aggregate of 50,000 shares of the Company’s commonstock that were made to Mr. Wright on a similar basis during the 2013 fiscal year. Each installment of theRSU award will vest in a series of 50 successive equal monthly installments upon the named executiveofficer’s completion of each month of continued employment over the 50-month period measured fromJanuary 1, 2013, subject to full vesting acceleration in the event his employment terminates under certain

19

circumstances or upon certain changes in control or ownership of the Company. The shares underlying thevested units will be issued at designated intervals over the 50-month vesting period or (if earlier) upon theoccurrence of any of the vesting acceleration events.

(3) Reflects the unvested portion of RSU awards covering an aggregate of 120,000 shares of the Company’scommon stock that were made to Mr. Zafiropoulo in three equal quarterly installments during the 2012fiscal year and the unvested portion of RSU awards covering an aggregate of 40,000 shares of theCompany’s common stock that were made to Mr. Wright on a similar quarterly basis during the 2012 fiscalyear. Each quarterly RSU award will vest in a series of 50 successive equal monthly installments upon thenamed executive officer’s completion of each month of continued employment over the 50-month periodmeasured from January 1, 2012, subject to full vesting acceleration in the event his employment terminatesunder certain circumstances or upon certain changes in control or ownership of the Company. The sharesunderlying the vested units will be issued at designated intervals over the 50-month vesting period or (ifearlier) upon the occurrence of any of the vesting acceleration events.

(4) Reflects the unvested portion of RSU awards covering an aggregate of 150,000 shares of the Company’scommon stock that were made to Mr. Zafiropoulo in four equal quarterly installments during the 2011 fiscalyear and the unvested portion of RSU awards covering an aggregate of 50,000 shares of the Company’scommon stock that were made to Mr. Wright on a similar quarterly basis during the 2011 fiscal year. Eachquarterly RSU award will vest in a series of 50 successive equal monthly installments upon the namedexecutive officer’s completion of each month of continued employment over the 50-month period measuredfrom January 1, 2011, subject to full vesting acceleration in the event his employment terminates undercertain circumstances or upon certain changes in control or ownership of the Company. The sharesunderlying the vested units will be issued at designated intervals over the 50-month vesting period or (ifearlier) upon the occurrence of any of the vesting acceleration events.

(5) Reflects the unvested portion of RSU awards covering an aggregate of 100,000 shares of the Company’scommon stock that were made to Mr. Zafiropoulo in four equal quarterly installments during the 2010 fiscalyear and the unvested portion of RSU awards covering an aggregate of 50,000 shares of the Company’scommon stock that were made to Mr. Wright on a similar quarterly basis during the 2010 fiscal year. Eachquarterly RSU award will vest in a series of 50 successive equal monthly installments upon the namedexecutive officer’s completion of each month of continued employment over the 50-month period measuredfrom January 1, 2010, subject to full vesting acceleration in the event his employment terminates undercertain circumstances or upon certain changes in control or ownership of the Company. The sharesunderlying the vested units will be issued at designated intervals over the 50-month vesting period or (ifearlier) upon the occurrence of any of the vesting acceleration events.

(6) Reflects the unvested portion of the stock option grants covering an aggregate of 80,000 shares of theCompany’s common stock made to Mr. Wright in three equal quarterly installments during the 2012 fiscalyear. Each quarterly option grant will vest and become exercisable for twenty-four percent (24%) of thecovered shares of the Company’s common stock upon Mr. Wright’s continuation in the Company’s employthrough December 31, 2012 and will vest and become exercisable for the balance of the shares in a series ofthirty-eight (38) successive equal monthly installments upon Mr. Wright’s completion of each of the nextthirty-eight (38) months of continued employment thereafter. However, each such option will vest in fulland become exercisable for all the shares of the Company’s common stock subject to that option on anaccelerated basis in the event the named executive officer’s employment terminates under certaincircumstances or upon certain changes in control or ownership of the Company.

(7) Reflects the unvested portion of the stock option grants covering an aggregate of 100,000 shares of theCompany’s common stock made to Mr. Wright in four equal quarterly installments during the 2011 fiscalyear. Each quarterly option grant will vest and become exercisable for twenty-four percent (24%) of thecovered shares of the Company’s common stock upon Mr. Wright’s continuation in the Company’s employthrough December 31, 2011 and will vest and become exercisable for the balance of the shares in a series ofthirty-eight (38) successive equal monthly installments upon Mr. Wright’s completion of each of the nextthirty-eight (38) months of continued employment thereafter. However, each such option will vest in fulland become exercisable for all the shares of the Company’s common stock subject to that option on anaccelerated basis in the event the named executive officer’s employment terminates under certaincircumstances or upon certain changes in control or ownership of the Company.

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(8) Reflects the unvested portion of the stock option grants covering an aggregate of 100,000 shares of theCompany’s common stock made to Mr. Wright in four equal quarterly installments during the 2010 fiscalyear. Each quarterly option grant will vest and become exercisable for twenty-four percent (24%) of thecovered shares of the Company’s common stock upon Mr. Wright’s continuation in the Company’s employthrough December 31, 2010 and will vest and become exercisable for the balance of the shares in a series ofthirty-eight (38) successive equal monthly installments upon Mr. Wright’s completion of each of the nextthirty-eight (38) months of continued employment thereafter. However, each such option will vest in fulland become exercisable for all the shares of the Company’s common stock subject to that option on anaccelerated basis in the event the named executive officer’s employment terminates under certaincircumstances or upon certain changes in control or ownership of the Company.

Option Exercises and Stock Vested

The following table sets forth for each of the named executive officers, the number of shares of theCompany’s common stock acquired and the value realized on each exercise of stock options during the yearended December 31, 2013, and the number and value of shares of the Company’s common stock subject to eachrestricted stock unit award that vested during the year ended December 31, 2013. No stock appreciation rightswere exercised by the named executive officers during the 2013 fiscal year, and none of those officers held anystock appreciation rights as of December 31, 2013.

Option Awards Stock Awards

Name

Number ofShares Acquiredon Exercise (#)

Value Realizedon Exercise ($)(1)

Number ofShares Acquired

on Vesting (#)Value Realized

on Vesting ($)(2)

Arthur W. Zafiropoulo 200,000 3,792,968 88,800 3,617,712Bruce R. Wright — — 33,600 1,368,864

(1) Value realized is determined by multiplying (i) the amount by which the market price of the common stockon the date of exercise exceeded the exercise price by (ii) the number of shares for which the options wereexercised.

(2) Value realized is determined by multiplying (i) the market price of the common stock on the applicablevesting date by (ii) the number of shares as to which each award vested on such date.

Nonqualified Deferred Compensation

Deferred Cash Compensation

The following table shows the deferred compensation activity for each named executive officer during the2013 fiscal year. The column labeled “Executive Contributions in Last FY” indicates the amount ofcompensation voluntarily deferred by the named executive officer under the Company’s Executive DeferredCompensation Plan. The column entitled “Registrant Contributions in Last FY” reflects the portion of the bonusearned by each named executive officer under the 2013 MIP that was deferred pursuant to the terms of that plan.

Name

ExecutiveContributions

in Last FY($)

RegistrantContributions

in Last FY($)

AggregateEarnings

in Last FY($)

AggregateWithdrawals/Distributions

($)(4)

AggregateBalance

at Last FYE($)(5)

Arthur W. Zafiropoulo — — 43,987(1) 1,146,197 1,125,886Bruce R. Wright — — 20,808(1)(2)(3) 506,443 287,117

(1) Represents the interest accrued for the 2013 fiscal year on the deferred portion of the named executiveofficer’s bonus awards under the 2010, 2011 and 2012 Management Incentive Plans. For Mr. Wright, suchaccrued interest was in the amount of $12,506.

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(2) Includes a notional gain in the amount of $8,302 for the 2013 fiscal year with respect to the compensationdeferred by the named executive officer under the Executive Deferred Compensation Plan. The amountrepresents the net notional rate of return for the 2013 fiscal year based on the actual market earnings realizedby the single investment fund selected by the named executive officer from the group of investment fundsavailable to track notional investment returns on the account balances maintained under the ExecutiveDeferred Compensation Plan. The investment fund so selected by the named executive officer for the 2013fiscal year and the rate of return for such fund for such year was as follows: Vanguard Var Ins Fund TotalStock Market with a rate of return of 33.28%.

(3) $8,302 of the amount reported in the column entitled “Aggregate Earnings in Last FY” for Mr. Wright isalso included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” columnof the Summary Compensation Table and is also included in the column entitled “Aggregate Balance ofLast FYE” of this table.

(4) Represents the vested amounts paid to Messrs. Zafiropoulo and Wright during the 2013 fiscal year pursuantto the deferred portion of the bonuses awarded them under the Management Incentive Plan for the 2011 and2012 fiscal years.

(5) Includes the following amounts reported for the named executive officer in the Summary CompensationTables for the 2013 fiscal year and prior fiscal years: for Mr. Zafiropoulo, $405,180 of the $1,215,541 Non-Equity Incentive Plan bonus amount reported for the 2012 fiscal year; and for Mr. Wright (i) the $3,500 ofsalary deferred for the 2012 fiscal year under the Executive Deferred Compensation Plan, (ii) $164,421 ofthe $493,263 Non-Equity Incentive Plan bonus amount reported for the 2012 fiscal year, (iii) $3,790 ofdeferred salary for the 2011 fiscal year and $3,500 of deferred salary for the 2009 fiscal year, (iv) $8,302 ofnotional earnings reported for the 2013 fiscal year with respect to deferred compensation under theExecutive Deferred Compensation Plan, (v) $3,162 of notional earnings reported for the 2012 fiscal yearwith respect to deferred compensation under the Executive Deferred Compensation Plan, (vi) $119 ofnotional earnings reported for the 2011 fiscal year with respect to deferred compensation under theExecutive Deferred Compensation Plan, (vii) $1,975 of notional earnings reported for the 2010 fiscal yearwith respect to deferred compensation under the Executive Deferred Compensation Plan, (viii) $1,902 ofnotional earnings reported for the 2009 fiscal year with respect to deferred compensation under theExecutive Deferred Compensation Plan, (ix) $3,181 of deferred salary for the 2008 fiscal year, (x) $2,492 ofdeferred salary for the 2007 fiscal year, and (xi) $8 of notional earnings reported for the 2007 fiscal yearunder the Executive Deferred Compensation Plan. For the 2008 fiscal year, there was a notional loss of$1,763 with respect to Mr. Wright’s deferred compensation under the Executive Deferred CompensationPlan.

Executive Deferred Compensation Plan. The Company has established the Executive DeferredCompensation Plan in order to provide its executive officers and other key employees with the opportunity todefer all or a portion of their cash compensation each year. Pursuant to the plan, each participant can elect todefer between one percent (1%) and one hundred percent (100%) of his or her salary, commissions, bonuses andother awards. Each participant’s contributions to the plan are credited to an account maintained in his or hername on the Company’s books in which the participant is fully vested at all times. The account is credited withnotional earnings (or losses) based on the participant’s investment elections among a select group of investmentfunds utilized to track the notional investment return on the account balance. A total of 28 investment funds areavailable for election, and the participant may change his or her investment choices daily. Upon the participant’stermination of employment for reasons other than retirement or disability, he or she will receive a lump sumdistribution of his or her account balance within 60 days following the termination date, subject to any furtherdelay required under applicable tax laws. Upon the participant’s disability or retirement, his or her accountbalance will be distributed in a lump sum, or in 12 or more monthly installments (but not more than 180),pursuant to the participant’s prior election. In the event a participant dies prior to receiving his or her entireaccount balance under the plan, his or her beneficiary will receive a lump-sum distribution of the remainingbalance.

Deferred Portion of the 2011 and 2012 MIP Bonus. One-third of the bonus amount earned under the 2011MIP was paid to the named executive officer following the close of the 2011 fiscal year. The remaining portion

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was deferred and subject to an annual installment vesting schedule tied to the named executive officer’scontinued service with the Company over an additional two-year period that ended on December 31, 2013. One-third of the bonus amount earned under the 2012 MIP was paid to the named executive officer following theclose of the 2012 fiscal year. The remaining portion has been deferred and is subject to an annual installmentvesting schedule tied to the named executive officer’s continued service with the Company over an additionaltwo-year period ending December 31, 2014. The deferred portions are paid as they vest and will earn interest at adesignated rate until paid. The deferred portions will immediately vest and become payable in the event thenamed executive officer’s employment terminates under certain defined circumstances during the deferral period.Accelerated payouts will also occur in the event of certain changes in control or ownership of the Company.

Deferred Equity Compensation

The following table shows the deferred compensation activity for each named executive officer for the 2013fiscal year attributable to the shares of the Company’s common stock that were vested as of December 31, 2013under his outstanding RSU awards but that are subject to a deferred issuance date:

Name

ExecutiveContributionsin Last FY ($)

RegistrantContributionsin Last FY ($)

AggregateEarnings in

Last FY ($)(1)

AggregateWithdrawals/

Distributions ($)(2)

AggregateBalance at

Last FYE ($)

Arthur W. Zafiropoulo — — 305,472 3,617,712 3,271,200(3)Bruce R. Wright — — 115,584 1,368,864 1,322,400(4)

(1) Represents, with respect to the shares of the Company’s common stock in which Mr. Zafiropoulo (88,000shares) and Mr. Wright (33,600 shares) were vested on January 1, 2013 under their outstanding RSU awardswith deferred issuance dates, the amount (if any) by which the fair market value of those shares onDecember 31, 2013 (or, if earlier, the date of their actual issuance in the 2013 fiscal year) exceeded their fairmarket value as of January 1, 2013. Since no dividends were paid on the Company’s outstanding commonstock during the 2013 fiscal year, no amounts were credited to the named executive officer’s deferred shareaccount pursuant to the dividend equivalent rights provided under his outstanding RSUs.

(2) Represents, with respect to the previously-deferred shares of the Company’s common stock that were issuedto the named executive officer during the 2013 fiscal year, the dollar amount determined by multiplying thenumber of shares so issued by the closing price per share on the issuance date.

(3) Represents the fair market value on December 31, 2013 of the shares of the Company’s common stock inwhich Mr. Zafiropoulo was vested on that date under his outstanding RSU awards with deferred issuancedates beyond December 31, 2013. The amount reported was calculated by multiplying those vested deferredshares by the $29.00 per share closing price of the common stock on December 31, 2013. Mr. Zafiropoulowas credited with 112,800 vested deferred shares as of December 31, 2013.

(4) Represents the fair market value on December 31, 2013 of the shares of the Company’s common stock inwhich Mr. Wright was vested on that date under his outstanding RSU awards but which are subject todeferred issuance dates beyond December 31, 2013. The amount reported was calculated by multiplyingthose vested deferred shares by the $29.00 per share closing price of the common stock on December 31,2013. Mr. Wright was credited with 45,600 vested deferred shares as of December 31, 2013.

Risk Assessment of Compensation Policies and Practices

The Company’s compensation programs throughout the organization are designed to maintain anappropriate balance between long-term and short-term incentives by utilizing a combination of compensationcomponents, including base salary, annual cash incentive awards, and long-term equity incentives. Although notall employees in the organization have compensation comprised of all three of those components, thecompensation programs are generally structured so that any short-term cash incentives are not likely to constitutethe predominant element of an employee’s total compensation package and the other components will serve tobalance the package. For a discussion of the primary components of the compensation packages for theCompany’s executive officers, please see the section above entitled “Executive Compensation—CompensationDiscussion and Analysis.”

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While a number of employees do participate in performance-based cash incentive plans, the Companybelieves that those plans are structured in a manner that encourages the participating employees to remainfocused on both the short- and long-term operational and financial goals of the Company. For example, paymentsunder the Management Incentive Plan in which the Company’s executive officers and other members of themanagement team participate (as discussed earlier in this section on Executive Compensation) are tied to bothrevenue and operating income metrics that are strategic to the Company’s long-term objectives of sustainedrevenue generation and continued expense management. In addition, the actual bonus amount is in all instancestied to a fraction or a multiple of the target bonus set for each participant and, for 2013, the maximum bonuspotential was limited to five million dollars in accordance with the dollar limitation on the amount ofperformance-based awards payable in cash per participant per fiscal year that has been approved by theCompany’s stockholders under the Company’s Amended and Restated 1993 Stock Option/Stock Issuance Plan.Finally, payments based on performance goal attainment under the Management Incentive Plan are subject to anadditional service vesting schedule so that a participant must remain with the Company for at least three yearsfrom the start of the one-year performance measurement period in order to earn his or her full payment for thatperformance period, thereby further encouraging long-term focus.

A significant portion of the compensation provided to executive officers and other senior employees of theCompany is in the form of long-term equity awards that are important to help further align the interests of therecipient with those of the Company’s stockholders. The Company believes that these awards do not encourageunnecessary or excessive risk taking because the ultimate value of the awards is tied to the Company’s stockprice. The Company’s equity awards, whether in the form of stock options or restricted stock units, vest over aperiod of years, and that vesting element encourages award recipients to focus on sustaining the Company’s long-term performance. In addition, because equity awards are typically made on an annual basis, the executiveofficers and other senior employees of the Company always have unvested awards outstanding that coulddecrease significantly in value if the Company’s business is not managed to achieve its long term goals.

The Company’s sales employees participate in short-term sales commission incentive plans that are subjectto multiple levels of review during both the design stage and the incentive calculation and payment process.Payments are made at quarterly intervals over the year and are based upon the achievement of current quarterqualified bookings and revenue numbers against established targets. In order to insure that payments are madeonly on qualified transactions, the quarterly payment amount is net of any customer returns of previously bookedorders.

Based on these considerations, the Company has concluded that it is not reasonably likely that itscompensation programs would have a material adverse effect on the Company.

Compensation of Directors

The following table sets forth certain information regarding the compensation of each non-employeedirector for service on the Board of Directors during the 2013 fiscal year.

Name

Fees Earned orPaid in Cash

($)(1)Option Awards

($)(2)

StockAwards($)(3)(4)

All otherCompensation Total ($)

Joel F. Gemunder 52,000 — 267,525 — 319,525Nicholas Konidaris 54,000 — 267,525 — 321,525Rick Timmins 96,000 — 267,525 — 363,525Dennis R. Raney 73,500 — 267,525 — 341,025Henri Richard 75,500 — 267,525 — 343,025Michael Child 62,750 — 267,525 — 330,275

(1) Represents cash retainer fees for serving on our Board of Directors and Board committees and fees forattending meetings of the Board of Directors or Board committees. For further information concerning thecash retainer fees, see the section below entitled “Director Annual Meeting and Retainer Fees”.

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(2) As of December 31, 2013, the following non-employee directors held options to purchase the followingnumber of shares of the Company’s common stock: Mr. Gemunder, 24,000 shares; Mr. Konidaris, noshares; Mr. Timmins, 24,000 shares; Mr. Raney, 8,000 shares; Mr. Richard, no shares; and Mr. Child, noshares.

(3) Pursuant to the automatic grant program in effect under the Company’s 1993 Stock Option/Stock IssuancePlan, Messrs. Gemunder, Konidaris, Timmins, Raney, Richard, and Child each received an RSU awardcovering 7,500 shares of the Company’s common stock at the 2013 Annual Meeting. Each such RSU awardhad a grant-date fair value of $35.67 per unit. Such grant-date fair value was, in accordance with ASC Topic718, based on the closing price per share of the Company’s common stock on the grant date and was notadjusted for estimated forfeitures related to service-vesting conditions. For further information concerningthe grant of RSUs to non-employee directors under the automatic grant program of the Company’s 1993Plan, see the section below entitled “1993 Stock Option/Stock Issuance Plan”.

(4) As of December 31, 2013, the following non-employee directors held RSU awards covering the followingnumber of shares of the Company’s common stock: Mr. Gemunder, 7,500 shares; Mr. Konidaris, 7,500shares; Mr. Timmins, 7,500 shares; Mr. Raney, 7,500 shares; Mr. Richard, 7,500 shares, and Mr. Child,12,500 shares.

Director Annual Retainer and Meeting Fees. For the fiscal year ended December 31, 2013, the cashcompensation paid to the non-employee Board members was as follows: (i) an annual cash retainer fee of$30,000, (ii) an additional cash fee of $20,000 to the Board member serving as “lead director”, (iii) an additionalcash fee of $20,000 to the Board member serving as Chair of the Audit Committee, (iv) an additional cash fee of$17,500 to each Board member serving as the Chair of any standing Board committee other than the AuditCommittee, (v) a cash fee of $2,000 per Board meeting attended, (vi) a cash fee of $2,000 per standing Boardcommittee meeting attended (except that no fee is paid for any Board committee meeting held on the same day asa Board meeting), and (vii) a cash fee of $1,000 per standing Board committee meeting held on the day before orafter a Board meeting at the Company’s headquarters.

1993 Stock Option/Stock Issuance Plan. Pursuant to the amendment to the automatic grant program in effectunder the 1993 Stock Option/Stock Issuance Plan that was approved by the stockholders at the 2011 AnnualMeeting, each non-employee director will, upon his or her initial election or appointment to the Board ofDirectors, receive a one-time automatic RSU award covering 10,000 shares of the Company’s common stock,provided such individual has not previously been in the Company’s employ. On the date of each AnnualStockholders Meeting, beginning with the 2011 Annual Stockholders Meeting, each non-employee Boardmember who is to continue to serve on the Board of Directors, whether or not he or she has been in the prioremploy of the Company, will automatically receive an RSU award covering 7,500 shares of the Company’scommon stock. There is no limit on the number of such annual RSU awards any one individual may receive overhis or her period of continued Board service, but no individual will receive a 7,500-share RSU award for aparticular year under the automatic grant program if he or she has received his or her initial RSU award under theautomatic grant program within the immediately preceding six (6) months.

Each RSU award granted under the automatic grant program is subject to the following terms andconditions:

• The shares subject to the initial 10,000-share RSU award will vest as follows: (i) fifty percent(50%) of the shares will vest upon the director’s completion of one (1) year of Board servicemeasured from the grant date, and the remaining shares will vest in three (3) successive equalannual installments upon such director’s completion of each of the next three (3) years of Boardservice thereafter. The shares subject to each annual 7,500-share RSU award will vest upon theearlier of (i) the director’s completion of one (1) year of Board service measured from the grantdate or the (ii) the director’s continuation in Board service through the day immediately prior tothe Annual Stockholders Meeting immediately following the Annual Stockholders Meeting atwhich the RSU award was made.

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• Should the director die or become permanently disabled while serving as a Board member, thenthe shares at the time subject to each RSU award made to that individual under the automatic grantprogram will immediately vest.

• The shares at the time subject to each outstanding RSU award under the automatic grant programwill immediately vest in the event of a change in control of the Company.

• The shares which vest under each RSU award will be issued at the time of vesting or as soon asadministratively practicable thereafter, but in no event later than the later of the close of thecalendar year in which the vesting date occurs or the fifteenth day of the third calendar monthfollowing such vesting date. However, one or more awards may be structured so that the issuanceof the shares which vest under those awards will be deferred until the director ceases Boardservice or the occurrence of any earlier event such as a change in control or a designated date.

• Should any dividend or other distribution payable other than in shares of the Company’s commonstock be declared and paid on our outstanding common stock while an initial or annual RSUaward under the automatic grant program is outstanding, then a special book account will beestablished for the non-employee director holding the award and will be credited with a dividendequivalent to the actual dividend or distribution which would have been paid on the shares subjectto the RSU award had they been issued and outstanding and entitled to that dividend ordistribution. The amount attributable to such dividend equivalents will be distributed to the non-employee director concurrently with the issuance of the vested shares to which those dividendequivalents relate.

Each of the following non-employee Board members received at the 2013 Annual Stockholders Meeting anautomatic RSU award covering 7,500 shares of the Company’s common stock: Messrs. Raney, Richard,Gemunder, Konidaris, Timmins and Child.

Employment Contracts, Termination of Employment Agreements and Change of Control

1993 Stock Option/Stock Issuance Plan

All outstanding options and RSUs under the Company’s 1993 Stock Option/Stock Issuance Plan (the “1993Plan”) will immediately vest upon a change in control, to the extent not assumed or continued in effect by thesuccessor entity or replaced with an incentive compensation program which preserves the intrinsic value of theaward at that time and provides for the subsequent vesting and concurrent payout of that value in accordancewith the pre-existing vesting schedules for those awards. The Compensation Committee also has the authority asthe administrator of the 1993 Plan to provide for the accelerated vesting of any shares of the Company’s commonstock subject to outstanding equity awards held by one or more participants whether or not those awards areassumed or continued in effect by the successor entity in the event of (i) an acquisition of the Company bymerger or asset sale, (ii) a change in control of the Company effected through the acquisition of more than fiftypercent (50%) of the Company’s outstanding common stock or through a change in the majority of the Board ofDirectors as a result of one or more contested elections for Board membership or (iii) a termination ofemployment (whether involuntarily or through a resignation for good reason) following such acquisition orchange in control. The Compensation Committee has structured the stock options granted to Messrs. Zafiropouloand Wright and the RSU awards made to them so that those equity awards will vest in full on an accelerated basisupon such an acquisition or change in control of the Company. In addition, as explained below, the Company’sexisting employment agreements with Messrs. Zafiropoulo and Wright provide for accelerated vesting shouldtheir employment terminate under certain circumstances in the absence of a change in control.

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Employment, Termination of Employment and Change in Control Agreements

The Company has existing employment agreements with Messrs. Zafiropoulo and Wright that provide foraccelerated vesting and severance benefits under certain circumstances. Those agreements may be summarized asfollows:

Mr. Zafiropoulo

The employment agreement with Mr. Zafiropoulo provides that he will serve as the Chief Executive Officerof the Company and that the Company will use its reasonable best efforts to have him elected as a member of theBoard of Directors and as Chairman of the Board of Directors for so long as he remains so employed by theCompany. Pursuant to the employment agreement, Mr. Zafiropoulo was paid at an annual base salary rate of$575,000 for each of the 2011 and 2012 fiscal years and was paid at an base salary rate of $575,000 for the firstand last quarters of the 2013 fiscal year and $431,250 for the second and third quarters of the 2013 fiscal yearand is entitled to a target bonus of up to sixty percent (60%) of base salary (which can be periodically increasedby the Compensation Committee and which was set at one hundred fifty percent (150%) for the 2013 fiscal year).He may also receive stock options or restricted stock unit awards from time to time at the discretion of theCompensation Committee. Mr. Zafiropoulo is also entitled to reimbursement from the Company for the costsincurred to obtain lifetime retiree health care coverage (medical and dental) for himself and his spouse. To theextent such reimbursements become taxable to Mr. Zafiropoulo or his spouse, he or she will be entitled to a fulltax gross-up from the Company to cover the taxes attributable to such reimbursements and any taxes that apply tothe gross-up payment.

Mr. Zafiropoulo’s employment may be terminated by him or by the Company at any time, with orwithout cause. If the Company terminates his employment other than for cause, or in the event of his death,disability or resignation for good reason, Mr. Zafiropoulo (or his beneficiary) will be entitled to receive (i) theoutstanding deferred balance of the bonuses earned for prior years, (ii) 12 months of continued base salary at therate then in effect for him, (iii) accelerated vesting of twenty-five percent (25%) of his outstanding stock optionsand restricted stock units (or such greater acceleration as set forth in an award agreement which, based on theoutstanding award agreements as of December 31, 2013, results in one hundred percent (100%) acceleratedvesting), (iv) an extension of the time to exercise his outstanding vested stock options for a period of up to oneyear and 90 days measured from the termination date of his employment and (v) continued use of a Company carfor 12 months with reimbursement from the Company of all related expenses.

If, however, Mr. Zafiropoulo’s employment terminates for any reason in connection with a change ofcontrol of the Company, then he will, instead, receive (i) the outstanding deferred balance of the bonuses earnedfor prior years, (ii) 24 months of continued base salary at the rate then in effect for him (or, if greater, in effectimmediately prior to the change of control) and (iii) continued use of a Company car for 24 months withreimbursement from the Company of all related expenses. In addition, regardless of whether Mr. Zafiropoulo’semployment is terminated in connection with a change of control of the Company, all of his outstanding stockoptions and restricted stock unit awards will automatically vest in full upon a change of control, and the time forexercising his outstanding options will be extended for a period of up to one year and 90 days measured from thetermination date of his employment following the change in control.

Should Mr. Zafiropoulo incur an excise tax under Section 4999 of the Internal Revenue Code with respect toany payments he receives from the Company that constitute a parachute payment under the federal tax laws, thenthe Company will make a full tax gross-up payment to him to cover such excise tax and any income andemployment taxes that apply to the gross-up payment.

For purposes of the employment agreement, a change of control generally includes:

• Acquisition of more than fifty percent (50%) of the Company’s voting stock by any person orgroup of related persons;

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• Change in the composition of the Board of Directors such that a majority of the directors who arecurrently on the Board, together with those subsequently nominated by such directors, no longerconstitute a majority of the Board;

• Consummation of a merger or consolidation in which the Company is not the surviving entity;

• Sale, transfer or other disposition of all or substantially all of the Company’s assets; or

• A reverse merger in which the Company is the surviving entity but in which the Company’sstockholders before the merger do not own at least fifty percent (50%) of the voting stock after themerger.

Mr. Wright

The employment agreement with Mr. Wright provides that he will serve as the Senior Vice President,Finance, Chief Financial Officer, and Secretary of the Company. Pursuant to the employment agreement,Mr. Wright was paid a base salary of $350,000 for each of the 2011 and 2012 fiscal years and was paid at an basesalary rate of $350,000 for the first and last quarters of the 2013 fiscal year and $280,000 for the second and thirdquarters of the 2013 fiscal year and is entitled to a target bonus of up to forty percent (40%) of base salary (whichcan be increased periodically by the Compensation Committee and which was set at one hundred percent(100%) for the 2013 fiscal year). In addition, he may also receive stock options or restricted stock unit awardsfrom time to time at the discretion of the Compensation Committee.

Mr. Wright’s employment may be terminated by him or by the Company at any time, with or without cause.If the Company terminates his employment other than for cause, or in the event of his death, disability orresignation for good reason, Mr. Wright (or his beneficiary) will be entitled to receive (i) the outstandingdeferred balance of the bonuses earned for prior years, (ii) 12 months of continued base salary at the rate then ineffect for him, (iii) ) accelerated vesting of twenty-five percent (25%) of his outstanding stock options andrestricted stock units (or such greater acceleration as set forth in an award agreement which, based on theoutstanding award agreements as of December 31, 2013, results in one hundred percent (100%) acceleratedvesting), (iv) an extension of the time to exercise his outstanding vested stock options for a period of up to oneyear and 90 days measured from the termination date of his employment, and (v) reimbursement from theCompany for the costs incurred to obtain lifetime retiree health care coverage (medical and dental) for himselfand his spouse, to the extent those costs exceed the amount charged an active employee of the Company forcomparable health care coverage.

If, however, Mr. Wright’s employment terminates for any reason in connection with a change of control ofthe Company, then he will, instead, receive (i) the outstanding deferred balance of the bonuses earned for prioryears, (ii) 24 months of continued base salary at the rate then in effect (or, if greater, in effect immediately priorto the change of control) and (iii) reimbursement of the costs incurred by him to obtain lifetime retiree healthcare coverage for himself and his spouse to the extent those costs exceed the amount charged an active employeeof the Company for comparable health care coverage. In addition, regardless of whether Mr. Wright’semployment is terminated in connection with a change of control of the Company, all of his outstanding stockoptions and restricted stock unit awards will automatically vest in full upon a change of control, and the time forexercising his outstanding vested options will be extended for a period of up to one year and 90 days measuredfrom the termination date of his employment following the change in control. A change of control for purposesof Mr. Wright’s employment agreement has the same meaning as in Mr. Zafiropoulo’s employment agreementdescribed above.

Quantification of Benefits

The charts below quantify the potential payments Messrs. Zafiropoulo and Wright would receive basedupon the following assumptions:

(i) the executive’s employment terminated on December 31, 2013 under circumstances entitling him toseverance benefits under his employment agreement or equity award agreements,

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(ii) as to any benefits tied to the executive’s rate of base salary, the rate of base salary is assumed to bethe executive’s rate of base salary that was in effect for Messrs. Zafiropoulo and Wright on December 31,2013 which is $575,000 and $350,000, respectively, and

(iii) with respect to benefits tied to a change in control, the change in control is assumed to haveoccurred on December 31, 2013 and the change in control consideration paid per share of the Company’soutstanding common stock is assumed to be equal to the closing selling price of such common stock onDecember 31, 2013, which was $29.00 per share.

Benefits Received Upon a Change in Control (No Termination of Employment)

The outstanding equity awards held by Messrs. Zafiropoulo and Wright will vest in full upon a change in controltransaction, whether or not these awards are assumed or otherwise continued in effect.

Name

AcceleratedVesting of

Equity Awards($)(1)

Excise TaxGross Up

Mr. Zafiropoulo 5,347,600 —Mr. Wright 2,323,880 —

(1) Represents the intrinsic value of the accelerated vesting of all of the named executive officer’s stock optionsand unvested RSU awards, based on the $29.00 closing price per share of the Company’s common stock onDecember 31, 2013.

Benefits Received Upon Qualifying Termination in Connection with a Change in Control

Executive

SalaryContinuation

($)

AcceleratedVesting ofDeferred

Compensation($)

Lifetime RetireeMedical

CoverageReimbursement

(includingGross-up for

Mr. Zafiropoulo)($)

AcceleratedVestingEquity

Awards /Extensionof StockOptionTerm

ContinuedUse of

CorporateAutomobile

($)

Excise TaxGross-Up

($)

Mr. Zafiropoulo 1,150,000 836,697(1) 558,979(2) 5,517,206(3) 152,400 —Mr. Wright 700,000 169,765(1) 472,915 2,606,305(3) — —

(1) Represents the payment of the deferred and unvested portion of the bonus awards made under the 2012Management Incentive Plan. No bonus awards were made under the 2013 Management Incentive Plan.

(2) Includes a gross-up payment to Mr. Zafiropoulo to cover the taxes attributable to such coverage and anytaxes that apply to such gross-up payment.

(3) Represents (i) the intrinsic value of the accelerated vesting of all of the named executive officer’s unvestedstock options and RSUs, based on the $29.00 closing price per share of the Company’s common stock onDecember 31, 2013 plus (ii) the value of the extension of the post-employment exercise period for alloutstanding options held by the named executive officer on December 31, 2013 from 90 days to 455 days,estimated by using the Black-Scholes option pricing model, in accordance with the provisions of ASCTopic 718.

Benefits Received Upon Qualifying Termination Not in Connection with a Change in Control

Executive

SalaryContinuation

($)

AcceleratedVesting

of DeferredCompensation

Lifetime RetireeMedical CoverageReimbursement(including taxgross-up) ($)

AcceleratedVesting of

Stock Optionsand Other

EquityAwards ($)

Continued Useof Corporate

Automobile ($)

Mr. Zafiropoulo 575,000 836,697(1) 558,979(2) 5,517,206(3) 76,200Mr. Wright 350,000 169,765(1) 472,915 2,606,305(3) —

(1) Represents the payment of the deferred and unvested portion of the bonus awards made under the 2012Management Incentive Plan. No bonus awards were made under the 2013 Management Incentive Plan.

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(2) Includes a gross-up payment to Mr. Zafiropoulo to cover the taxes attributable to such coverage and anytaxes that apply to such gross-up payment.

(3) Represents (i) the intrinsic value of the accelerated vesting of 100% of Messrs. Zafiropoulo’s and Wrightunvested stock options and 100% of the value of Mr. Zafiropoulo’s and 100% of the value of Mr. Wright’sunvested RSUs, based on the $29.00 closing price per share of the underlying common stock onDecember 31, 2013 plus (ii) the value of the extension of the post-employment exercise period for alloutstanding options held by the named executive officer on December 31, 2013 from 90 days to 455 days,estimated by using the Black-Scholes option pricing model, in accordance with the provisions of ASC Topic718.

Mr. Zafiropoulo will also be entitled to the Company reimbursement of the cost incurred to obtain lifetimeretiree health care coverage for himself and his spouse upon the termination of his employment for any otherreason. In addition, Messrs. Zafiropoulo and Wright will each be entitled, upon their termination of employmentfor any reason, to exercise their outstanding vested stock options and to receive any deferred shares of theCompany’s common stock subject to their vested RSU awards.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Gemunder, Richard, Timmins and Child served as members of the Compensation Committee duringthe fiscal year completed December 31, 2013. No member of the Compensation Committee is a former or currentofficer or employee of the Company or any of its subsidiaries. No executive officer of the Company serves as amember of the board of directors or compensation committee of any entity which has one or more of itsexecutive officers serving as a member of the Board of Directors or Compensation Committee.

ANNUAL REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysiscontained in this annual report with management, and based on such review and such discussions, theCompensation Committee recommended to the Board of Directors that the Compensation Discussion andAnalysis, as contained herein, be included in this annual report.

Compensation CommitteeJoel F. GemunderHenri RichardRick TimminsMichael Child

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters

Equity Compensation Information for Plans or Individual Arrangements with Employees and Non-Employees

The following table provides information as of December 31, 2013 with respect to the shares of theCompany’s common stock that may be issued under the Company’s existing equity compensation plans. Thereare no outstanding options assumed by the Company in connection with its acquisitions of other companies, andthere are no assumed plans under which options can currently be granted.

A B C

Plan Category

Number ofSecurities to

be Issuedupon

Exercise ofOutstanding

Options,Restricted

Stock Unitsand Other

Rights (#)(3)

WeightedAverageExercisePrice of

OutstandingOptions (4)

Number ofSecurities

RemainingAvailable for

Future IssuanceUnder EquityCompensation

Plans(ExcludingSecurities

Reflected inColumn A) (#)

(5)

Equity Compensation Plans Approved byStockholders (1) 4,113,699 $23.59 1,164,159

Equity Compensation Plans Not Approved byStockholders (2) 19,860 $12.42 —

Total 4,133,559 $23.51 1,164,159

(1) Consists solely of the 1993 Plan.(2) Consists solely of the Company’s 1998 Supplemental Stock Option/Stock Issuance Plan.(3) Includes 1,473,675 shares subject to RSUs that will entitle each holder to one share of common stock for

each unit that vest over the holder’s period of continued service with the Company.(4) Calculated without taking into account the 1,473,675 shares of common stock subject to outstanding RSUs

that will become issuable following the vesting of those units, without any cash consideration or otherpayment required for those shares.

(5) As of December 31, 2013, 1,164,159 shares of common stock were available for issuance under the 1993Plan. Such shares may be issued under the 1993 Plan upon the exercise of stock options or stockappreciation rights granted under such plan, or the shares may be issued under the stock issuance program ineffect under such plan through direct stock bonuses or pursuant to restricted stock issuances or RSU awardswhich vest upon the attainment of prescribed performance milestones or the completion of designatedservice periods. The term of the 1998 Supplemental Stock Option/Stock Issuance Plan expired in 2008, andno further awards may be made under that plan.

The 1998 Supplemental Stock Option/Stock Issuance Plan

The 1998 Supplemental Stock Option/Stock Issuance Plan (the “Supplemental Plan”) was implemented bythe Board of Directors in October 1998 as a non-stockholder approved plan under which option grants or directstock issuances could be made to employees who at the time of the grant were neither executive officers norBoard members nor held the title of Vice President or General Manager. The Supplemental Plan expired inOctober 2008. The Board of Directors authorized 1,950,000 shares of the Company’s common stock for issuanceunder the Supplemental Plan. All option grants have an exercise price per share not less than the fair marketvalue per share of the common stock on the grant date. Such options have a maximum term of ten years, subjectto earlier termination within a specified period following the optionee’s cessation of service with the Company.Each granted option will vest in one or more installments over the optionee’s period of service with the

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Company. However, all outstanding options under the Supplemental Plan will vest on an accelerated basis in theevent the Company is acquired and those options are not assumed, replaced or otherwise continued in effect bythe acquiring entity. Restricted stock or restricted stock units awarded under the Supplemental Plan have similarvesting conditions. All options granted under the Supplemental Plan were non-statutory stock options under theFederal tax laws. As of December 31, 2013, options covering 19,860 shares of common stock were outstandingunder the Supplemental Plan, there were no other outstanding awards under the Supplemental Plan and no sharesremained available for future awards.

The 1993 Stock Option/Stock Issuance Plan

On July 19, 2011, our stockholders approved certain amendments to our 1993 Stock Option/Stock IssuancePlan. One of those amendments increased the number of shares of the Company’s common stock available forissuance pursuant to the 1993 Plan by 3.3 million shares.

Share issuances under the 1993 Plan did not reduce or otherwise affect the number of shares of theCompany’s common stock available for issuance under the Supplemental Plan, and share issuances under theSupplemental Plan did not reduce or otherwise affect the number of shares of the Company’s common stockavailable for issuance under the 1993 Plan.

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OWNERSHIP OF SECURITIES

The following table sets forth certain information known to the Company with respect to the beneficialownership of the Company’s common stock as of March 31, 2014 (unless otherwise stated in the footnotes) by(i) all persons known to the Company who are or who may be deemed beneficial owners of five percent (5%) ormore of the Company’s common stock based solely on a review of Form 4, Schedule 13G and Schedule 13Dfilings with the Securities and Exchange Commission since January 1, 2013, (ii) each director of the Company,(iii) the named executive officers and (iv) all current directors and executive officers as a group. Unlessotherwise indicated, the principal address of each of the stockholders below is c/o Ultratech, Inc., 3050 ZankerRoad, San Jose, CA, 95134. Unless otherwise indicated, each of the security holders has sole voting andinvestment power with respect to the shares beneficially owned, subject to community property laws, whereapplicable. Except as otherwise indicated in the footnotes to the table or for shares of common stock held inbrokerage accounts, which may from time to time, together with other securities held in those accounts, serve ascollateral for margin loans made from such accounts, none of the shares reported as beneficially owned arecurrently pledged as securities for any outstanding loan or indebtedness.

Name and Address of Beneficial Owner (1)

Shares of CommonStock

Beneficially Owned

Percentage ofShares

BeneficiallyOwned (1)

Artisan Partners Limited Partnership (2) 3,642,356 12.98%Artisan Partners Holdings LPArtisan Partners Asset Management Inc.Artisan Investment CorporationArtisan Investments GP LLCZFIC, Inc.Andrew A. ZieglerCarlene M. ZieglerArtisan Partners Funds, Inc.875 East Wisconsin Avenue, Suite 800Milwaukee, WI 53202BlackRock, Inc. (3) 2,403,502 8.57%40 East 52nd StreetNew York, NY 10022Frontier Capital Management Co. LLC (4) 1,448,710 5.16%99 Summer StreetBoston, MA 02110Massachusetts Financial Services Company (5) 2,507,090 8.94%111 Huntington AvenueBoston, MA 02199The Vanguard Group, Inc. (6) 1,705,438 6.08%100 Vanguard Blvd.Malvern, PA 19355Arthur W. Zafiropoulo (7) 1,012,763 3.61%Bruce R. Wright (8) 375,763 1.34%Michael Child (9) 7,847 *Joel F. Gemunder (10) 60,000 *Nicholas Konidaris 35,000 *Dennis R. Raney (11) 42,500 *Henri Richard 22,000 *Rick Timmins (12) 66,500 *All current directors and executive officers as a group (8 persons) 1,622,373 5.78%

* Less than one percent (1%) of the outstanding common stock.

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(1) Percentage of ownership is based on 28,052,112 shares of common stock issued and outstanding onMarch 31, 2014. This percentage also takes into account the common stock to which such individual orentity has the right to acquire beneficial ownership within sixty (60) days after March 31, 2014, including,but not limited to, through the exercise of options or pursuant to outstanding RSUs; however, suchcommon stock will not be deemed outstanding for the purpose of computing the percentage owned by anyother individual or entity. Such calculation is required by Rule 13d-3(d)(1)(i) under the SecuritiesExchange Act of 1934, as amended.

(2) Information regarding Artisan Partners Limited Partnership, Artisan Partners Holdings LP, ArtisanPartners Asset Management Inc., Artisan Investment Corporation, Artisan Investments GP LLC, ZFIC,Inc., Andrew A. Ziegler, Carlene M. Ziegler and Artisan Partners Funds, Inc. is based on theirSchedule 13G/A filed with the Securities and Exchange Commission on January 30, 2014. According tothe Schedule 13G/A, Artisan Partners Limited Partnership has beneficial ownership over 2,317,180 shares,and the remaining investors have beneficial ownership over 3,642,356 shares, including the shares held byArtisan Partners Limited Partnership.

(3) Information regarding BlackRock, Inc. is based on its Schedule 13G/A filed with the Securities andExchange Commission on January 31, 2014.

(4) Information regarding Frontier Capital Management Co. LLC is based on its Schedule 13G/A filed withthe Securities and Exchange Commission on February 14, 2014.

(5) Information regarding Massachusetts Financial Services Company is based on its Schedule 13G/A filedwith the Securities and Exchange Commission on February 10, 2014.

(6) Information regarding the Vanguard group is based on its Schedule 13G/A filed with the Securities andExchange Commission on February 12, 2014.

(7) Consists of (i) 317,475 shares held in the name of Arthur W. Zafiropoulo, trustee of the Separate PropertyTrust, dated July 20, 1998, for the benefit of Arthur W. Zafiropoulo, (ii) 88,000 shares held in the name ofthe Zafiropoulo Family Foundation, (iii) 307,288 shares held in the name of Arthur W. Zafiropoulo for thebenefit of Arthur W. Zafiropoulo and Lisa Zafiropoulo Joint Account and (iv) 300,000 shares of theCompany’s common stock subject to options which are currently exercisable or which will becomeexercisable within 60 days after March 31, 2014.

(8) Includes 290,648 shares of the Company’s common stock subject to options which are currentlyexercisable or which will become exercisable within 60 days after March 31, 2014.

(9) Includes 590 shares held in a retirement plan trust and 1,667 shares of the Company’s common stocksubject to RSUs which have been or will be distributed within 60 days after March 31, 2014.

(10) Includes 24,000 shares of the Company’s common stock subject to options which are currently exercisableor which will become exercisable within 60 days after March 31, 2014.



Item 13. Certain Relationships and Related Transactions, and Director Independence

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company’s Amended and Restated Certificate of Incorporation and Bylaws provide for indemnificationof all directors and officers. In addition, each director and executive officer of the Company has entered into aseparate indemnification agreement with the Company.

Scott Zafiropoulo, the son of Arthur Zafiropoulo, the Company’s Chairman of the Board of Directors andChief Executive Officer, is an employee of the Company. In fiscal year 2013, Mr. S. Zafiropoulo earnedapproximately $210,000 in salary. In addition, as part of the 2013 MIP, Mr. S. Zafiropoulo received restricted

34

stock units covering 12,000 shares of the Company’s common stock with an aggregate grant-date fair value of$325,000. The restricted stock units will vest, and the underlying shares of common stock will be issued in aseries of 100 successive equal monthly installments upon his completion of each month of service over the 100-month period measured from January 1, 2013.

The Board of Directors has adopted a written policy that all material transactions with affiliates will be onterms no more or less favorable to the Company than those available from unaffiliated third parties and will beapproved by the Audit Committee and the Board of Directors.

DIRECTOR INDEPENDENCE

The Board of Directors has determined that each of Messrs. Child, Gemunder, Konidaris, Raney, Richard,and Timmins is an “independent director” as that term is defined in Rule 5605 of The NASDAQ Stock Market’sMarketplace Rules.

Item 14. Principal Accounting Fees and Services

Audit Fees

Audit fees billed to the Company by Ernst & Young LLP for professional services rendered for the audit ofthe Company’s 2013 annual financial statements, review of quarterly financial statements, audit services inconnection with statutory filings, consents, review of documents filed with the SEC, Section 404 review ofinternal control over financial reporting, and accounting and financial reporting consultation totaled $1,698,000.Audit fees billed to the Company by Ernst & Young LLP for professional services rendered for the audit of theCompany’s 2012 annual financial statements, review of quarterly financial statements, audit services inconnection with statutory filings, consents, review of documents filed with the SEC, Section 404 review ofinternal control over financial reporting, and accounting and financial reporting consultation totaled $1,743,000.

Audit-Related Fees

There were no audit-related fees billed to the Company by Ernst & Young LLP during the Company’s 2013and 2012 fiscal years.

Tax Fees

There were no tax fees billed to the Company by Ernst & Young LLP during the Company’s 2013 and 2012fiscal years.

All Other Fees

Other than as set forth above, there were no other fees billed to the Company by Ernst & Young LLP duringthe Company’s 2013 and 2012 fiscal years.

All of the 2013 and 2012 audit fees, audit-related fees and tax fees, and all other fees, were pre-approved bythe Audit Committee. The Audit Committee has delegated to Mr. Timmins the ability to approve, on behalf ofthe Audit Committee and in accordance with Section 10A under the Securities Exchange Act of 1934, services tobe performed by the Company’s independent auditors.

The Audit Committee considered whether the provision of audit-related services, tax services, financialinformation systems design and implementation services and other non-audit services is compatible with theprincipal accountants’ independence.

35

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this Report on Form 10-K/A

(3) Exhibits

The following exhibits are referenced or included in this report:

Exhibit Description

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this Report to be signed on its behalf by the undersigned, thereunder duly authorized.

ULTRATECH, INC.

Date: April 24, 2014 By: /s/ ARTHUR ZAFIROPOULO

Arthur ZafiropouloChairman of the Board of Directors, Chief

Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below bythe following persons on behalf of the Registrant and in the capacities and on the dates indicated.


/s/ ARTHUR ZAFIROPOULO Chairman of the Board of Directors, ChiefExecutive Officer and President (PrincipalExecutive Officer)

April 24, 2014Arthur Zafiropoulo

/s/ BRUCE WRIGHT Senior Vice President, Finance, Chief FinancialOfficer and Secretary (Principal Financialand Accounting Officer)

April 24, 2014Bruce Wright

* Director April 24, 2014Dennis R. Raney

* Director April 24, 2014Rick Timmins

* Director April 24, 2014Henri Richard

* Director April 24, 2014Joel F. Gemunder

* Director April 24, 2014Nicholas Konidaris

* Director April 24, 2014Michael Child

* Arthur Zafiropoulo, by signing his name hereto, does sign this document on behalf of the above notedindividuals, pursuant to powers of attorney duly executed by such individuals, which have been filed with theoriginal Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28,2014.

By:

/s/ ARTHUR ZAFIROPOULO Chairman of the Board of Directors, ChiefExecutive Officer and President (PrincipalExecutive Officer)

April 24, 2014Arthur Zafiropoulo Attorney-in-Fact

37

EXHIBIT INDEX

Exhibit Description

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

38

Exhibit 31.1

I, Arthur Zafiropoulo, certify that:

1. I have reviewed this annual report on Form 10-K/A of Ultratech, Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internalcontrol over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant, includingits consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case ofan annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s boardof directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: April 24, 2014

/s/ Arthur Zafiropoulo

Arthur ZafiropouloChief Executive Officer

Exhibit 31.2

I, Bruce Wright, certify that:

1. I have reviewed this annual report on Form 10-K/A of Ultratech, Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internalcontrol over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant, includingits consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case ofan annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s boardof directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: April 24, 2014

/s/ Bruce Wright

Bruce WrightChief Financial Officer

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Exchange: NASDAQSymbol: UTEKClosing Price (12/31/13): $29.00Dividend Yield: NilMarket capitalization at 12/31/13: $807,778,847

Industry: Semiconductor Capital Equipment

Market Segments: integrated circuits, including advanced packaging processes, laser processing and High Brightness LEDs (HB-LEDs)

As of May 20, 2014, the Company had approximately 7,166 beneficial holders and 204 stockholders of record.

Inquiries Concerning the Company: Ultratech welcomes inquiries from its stockholders and other interested investors. For additional copies of this report, the Annual Report on Form 10-K, the Amended Annual Report on Form 10-K/A or other information, please contact:

Ultratech, Inc.Investor Relations3050 Zanker RoadSan Jose, CA 95134Phone: 408-321-8835

Background on the Company and its products, financial information and our online Annual report, as well as other useful information which may be of interest to investors, including the Corporate Governance Policies adopted by Ultratech’s Board of Directors and the charters of the Audit, Nominating and Corporate Governance, and Compensation Committees of the Board of Directors, can be found on the Company’s website at www.ultratech.com on the “Investors” page under the “Corporate Governance” link.

Transfer Agent and RegistrarQuestions regarding misplaced stock certificates, change of address or the consideration of accounts should be addressed to the Company’s transfer agent:

Computershare Trust Company, NAP. O. Box 43070Providence, RI 02940-3070Phone: 800-962-4284www.computershare.com

Annual MeetingThe Ultratech, Inc. annual meeting of stockholders will be held at 2:00 p.m. PT on July 15, 2014 at the Hyatt Regency Santa Clara, 5101 Great America Parkway, Santa Clara, California.

Independent AuditorsErnst & Young, LLPSan Jose, California

General CounselO’Melveny & Myers LLPMenlo Park, California

Investor InformatIon

safe Harbor Language

This Annual Report includes statements that are forward-looking statements, which can be identified by words such as “anticipates,” “expects,” “intends,” “will,” “could,” “believes,” “estimates,” “continue” and similar expressions. These forward-looking statements are based on Ultratech’s current beliefs, expectations and assumptions. These forward-looking statements are subject to risks and uncertainties that could cause our actual results or future conditions to differ materially and adversely from those expressed in these statements. These risks and other important risk factors that could affect our business, results of operations and financial condition include those discussed in our Annual Report on Form 10-K and our Amended Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the Securities and Exchange Commission and attached to this Annual Report.

3050 Zanker RoadSan Jose, CA 95134www.ultratech.com

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