S-1/A

As filed with the Securities and Exchange Commission on February 17, 2004

Registration No. 333-111904

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

to

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Ultra Clean Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	3674	61-1430858
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

150 Independence Drive

Menlo Park, California 94025

(650) 323-4100

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

Incorporating Services Inc.

15 East North Street

Dover, Delaware 19901

(800) 346-4646

(Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent For Service)

Copies to:

Alan F. Denenberg, Esq.
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
(650) 752-2000 John A. Fore, Esq.
Michael A. Occhiolini, Esq.
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, California
(650) 493-9300

      Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

      If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.     o

      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o     

      If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o     

      If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o     

      If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.     o

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 17, 2004

                                 Shares

Ultra Clean Holdings, Inc.

Common Stock

     Prior to the offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $          and $          per share. We have applied to have our common stock listed for quotation on The Nasdaq National Market under the symbol “UCTT.”

     The underwriters have an option to purchase a maximum of                additional shares from the selling stockholder to cover over-allotments of shares.

     Investing in our common stock involves risks. See “Risk Factors” on page 7.

		Underwriting
		Discounts and	Proceeds to
	Price to Public	Commissions	Ultra Clean
Per Share	$	$	$
Total	$	$	$

     Delivery of the shares of common stock will be made on or about                     , 2004.

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse First Boston JPMorgan             

Banc of America Securities LLC Piper Jaffray

The date of this prospectus is                     , 2004.

We manufacture gas delivery systems in our ISO 9001:2000 certified clean room facilities.

TABLE OF CONTENTS

EXHIBIT 4.2

EXHIBIT 4.5

EXHIBIT 10.7

EXHIBIT 21.1

EXHIBIT 23.1

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
THE OFFERING		4
SUMMARY CONSOLIDATED FINANCIAL INFORMATION		5
RISK FACTORS		7
FORWARD-LOOKING STATEMENTS		18
USE OF PROCEEDS		19
DIVIDEND POLICY		19
CAPITALIZATION		20
DILUTION		21
SELECTED CONSOLIDATED FINANCIAL DATA		22
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		24
BUSINESS		38
MANAGEMENT		48
PRINCIPAL AND SELLING STOCKHOLDERS		55
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		57
SHARES ELIGIBLE FOR FUTURE SALE		60
DESCRIPTION OF CAPITAL STOCK		62
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK		64
UNDERWRITING		66
NOTICE TO CANADIAN RESIDENTS		69
LEGAL MATTERS		70
EXPERTS		70
WHERE YOU CAN FIND ADDITIONAL INFORMATION		70
INDEX TO FINANCIAL STATEMENTS		F-1

      You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate as of the date of this document.

Dealer Prospectus Delivery Obligation

      Until                     , 2004 (25 days after the commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

      This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read this entire prospectus, including the section entitled “Risk Factors” and our consolidated financial data and related notes, before making an investment decision. References in this prospectus to “Ultra Clean,” “we,” “us,” “our” and “our company” refer to Ultra Clean Holdings, Inc. and Ultra Clean Technology Systems and Service, Inc. unless otherwise specified. The Ultra Clean Technology logo is our registered trademark. In addition, this prospectus contains trademarks, service marks and trade names of companies and organizations other than Ultra Clean Holdings, Inc.

Ultra Clean Holdings, Inc.

      We are a developer and supplier of critical subsystems for the semiconductor capital equipment industry, focusing on gas delivery systems. We develop, design, prototype, engineer, manufacture and test gas delivery systems that enable the precise delivery of numerous specialty gases used in a majority of the key steps in the semiconductor manufacturing process. Our products control the flow, pressure, sequencing and mixing of specialty gases into and out of the process chambers of semiconductor manufacturing tools. Our customers are primarily original equipment manufacturers, or OEMs, of semiconductor capital equipment. These OEMs outsource the manufacturing of their gas delivery systems in order to improve the efficiency and reduce the costs of their design and manufacturing processes. Our system designs are reconfigurable and can accommodate different components and additional functionality with each new generation of semiconductor devices. We do not sell standard systems but design and develop each product in collaboration with our customers. We had sales of $84.3 million and $77.5 million for the years ended December 31, 2002 and 2003.

Our Solution

      We offer our customers:

      A complete outsourced solution for gas delivery systems. We provide our OEM customers with a complete outsourced solution for the development, design, prototyping, engineering, manufacturing and testing of advanced gas delivery systems. Our engineers work with our customers to customize and improve the design and performance of their gas delivery systems, in addition to ensuring that our products comply with applicable safety and environmental regulations and industry standards. We also manage supply chain logistics and perform comprehensive testing and qualification of final gas delivery systems to help our customers improve their manufacturing efficiencies, design-to-delivery cycle times, capital utilization and product operating characteristics.

      Improved design-to-delivery cycle times. Our strong relationships with our customers and familiarity with their products and requirements help us to reduce design-to-delivery cycle times. We have optimized our supply chain management, coordination of design and manufacturing stages of production, logistics expertise and manufacturing controls to reduce design-to-delivery cycle times, allowing us to rapidly respond to order requests and quickly reconfigure product designs to meet end-users’ constantly changing requirements.

      Component neutral design and manufacturing. We do not manufacture any of the components used in gas delivery systems and are therefore component neutral. This enables us to optimize overall designs for our customers by recommending the best available components on the basis of technology, performance and cost for incorporation into their gas delivery systems. Our component neutral position also enables us to maintain close relationships with a wide range of component suppliers who view us solely as a customer rather than as a competitor.

      Component testing capabilities. We have made significant investments in advanced analytic and automated test equipment and utilize our engineering expertise to test key components that we incorporate into our gas delivery systems. With our component testing capabilities, we can perform diagnostic tests,

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design verification and failure analysis. Our component test capabilities provide us with insight into future technological trends and our customers with an important value-added service.

Our Strategy

      Our objective is to be the leading supplier of advanced gas delivery systems that are critical to the semiconductor manufacturing process. Our strategy is comprised of the following key elements:

      Increase our market share at existing customers. We believe that a significant market opportunity exists to grow our business with sales to our existing customers by gaining market share from our competitors and by obtaining new business in different product families as our customers continue to outsource their gas delivery system requirements.

      Broaden our customer base by expanding our resources and geographical presence. We plan to continue to attract new customers by promoting both the merits of outsourcing by leading OEMs and our own proven ability to meet the demands of OEMs. As we grow our business, we plan to increase our design, engineering and manufacturing capabilities. We believe significant growth opportunities exist in Europe and Asia.

      Drive profitable growth with our flexible cost structure. In response to changes in demand for our products, we undertake cost containment initiatives and benefit from our supply chain efficiencies. We believe that we are well positioned to respond to an upturn in our business without significant new capital investment. In addition, we believe we can quickly and easily add additional manufacturing personnel and test equipment to meet increased demand.

      Expand into new product markets using our existing expertise. We are committed to expanding beyond gas delivery systems into new product markets such as liquid delivery systems, catalytic steam generation systems and frame assemblies.

      Selectively pursue strategic acquisitions. We plan to accelerate the growth of our business by selectively pursuing strategic acquisitions that will enable us to expand our geographic reach, secure new customers, diversify into complementary product markets and broaden our technological capabilities and product offerings.

Risks Associated With Our Business

      Our business is subject to numerous risks, which are highlighted in the section entitled “Risk Factors” immediately following this prospectus summary. In particular, the semiconductor capital equipment industry is highly cyclical, with recurring periods of over-supply of semiconductor products that have caused customer orders for our products to fluctuate significantly from period to period. We are dependent on a small number of customers for a significant portion of our sales such that any impairment to our customer relationships would adversely affect our business. If these or other customers do not continue to outsource gas delivery systems for their capital equipment, our revenue would be reduced. We do not have long-term purchase contracts with any of our customers and, as a result, our sales are difficult to forecast. Any significant reductions, cancellations or delays in customer orders could cause our sales to decline and our operating results suffer. We are also dependent on a number of single source and sole source suppliers for many of the components we use in our products. We do not have long-term commitments from any of our suppliers and the loss of any of our key suppliers could negatively affect our operations. Our industry is highly competitive and rapidly evolving and we must keep pace with technological changes. Finally, we are controlled by Francisco Partners, L.P. such that our other stockholders will be unable to affect the outcome of stockholder voting. In addition, for so long as Francisco Partners owns at least 25% of our outstanding common stock, it will be able to nominate a majority of the members of our board of directors.

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Our History

      Our business dates back to 1991 when Mitsubishi Corporation founded Ultra Clean Technology Systems and Service, Inc. Our business was operated as a subsidiary of Mitsubishi until November 2002. It was then acquired by Ultra Clean Holdings, Inc., which we refer to as the Ultra Clean acquisition. Ultra Clean Holdings, Inc. is owned by FP-Ultra Clean LLC (95.2%), a wholly-owned subsidiary of Francisco Partners, L.P., and by some of our key employees (4.8%). After completion of this offering, FP-Ultra Clean, LLC will own approximately           % of our outstanding common stock, assuming no exercise of the underwriters’ over-allotment option. We conduct our operating activities primarily through Ultra Clean Technology Systems and Service, Inc., our wholly-owned subsidiary.

      Our principal executive offices are located at 150 Independence Drive, Menlo Park, California 94025 and our telephone number is (650) 323-4100. We maintain a web site at www.uct.com. The information on our web site is not part of this prospectus.

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THE OFFERING

Common stock offered by us	shares
Common stock to be outstanding after the offering	shares
Over-allotment option granted by the selling stockholder	shares
Use of proceeds	We estimate that our net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses, including a $2.0 million advisory fee payable to Francisco Partners, will be approximately $           million. We expect to use approximately $29.3 million of the net proceeds to repurchase our 5% Series A Senior Notes due 2009, which we refer to as our Series A Senior Notes, held by FP-Ultra Clean, LLC, our principal stockholder, and approximately $1.3 million to repurchase our Series A Senior Notes held by some of our key employees. We intend to use the remainder of the net proceeds for working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire complementary businesses or technologies, although we have no current agreements or commitments with respect to any specific acquisition. We will not receive proceeds from any exercise of the underwriters’ over-allotment option. See “Use of Proceeds.”
Proposed Nasdaq National Market symbol	UCTT

      The common stock outstanding immediately after the offering is based on                      shares outstanding as of December 31, 2003, and excludes:

•  4,221,000 shares subject to options outstanding as of December 31, 2003, at a weighted average exercise price of $0.25 per share;

•                       additional shares to be reserved for issuance under our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering; and

•                       additional shares to be reserved for issuance under our Employee Stock Purchase Plan to be implemented immediately prior to the completion of this offering.

      Except as otherwise indicated, all information in this prospectus assumes:

•  a                     for                     reverse stock split that was effected on                     , 2004;

•  the repurchase of approximately $30.6 million aggregate principal amount of our Series A Senior Notes with a portion of the net proceeds of this offering;

•  no exercise of the underwriters’ over-allotment option; and

•  the filing of our amended and restated certificate of incorporation immediately prior to the completion of this offering.

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION

      The following table presents our summary consolidated financial information. You should read this information together with the “Selected Consolidated Financial Information,” our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Ultra Clean Holdings, Inc. (Ultra Clean) was incorporated in October 2002 for the purpose of acquiring Ultra Clean Technology Systems and Service, Inc. (Predecessor) from Mitsubishi and did not have any significant operations prior to the Ultra Clean acquisition on November 15, 2002. Summary financial data for the periods prior to the Ultra Clean acquisition on November 15, 2002 are derived from the financial statements of Predecessor. The following financial information may not be indicative of our future performance.

			Predecessor
												Jan. 1,			Nov. 16,
												2002			2002
			Years Ended December 31,									through			through			Year Ended
												Nov. 15,			Dec. 31,			Dec. 31,
			1999			2000			2001			2002			2002			2003
			(amounts in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Sales			$	39,574		$	83,001		$	76,486		$	76,338		$	7,916		$	77,520
Cost of goods sold				32,878			68,242			66,129			66,986			7,972			67,313
Gross profit (loss)				6,696			14,759			10,357			9,352			(56	)		10,207
Operating expenses
	Research and development			399			518			613			634			99			1,155
	Sales and marketing			1,054			1,241			1,302			1,586			332			2,276
	General and administrative			2,600			3,746			3,127			6,626			962			4,978
	In-process research and development			—			—			—			—			889			—
		Total operating expenses		4,053			5,505			5,042			8,846			2,282			8,409
Income (loss) from operations				2,643			9,254			5,315			506			(2,338	)		1,798
Other income (expense)
	Interest expense, net			(708	)		(687	)		(436	)		(170	)		(182	)		(1,458	)
	Other income (expense), net			—			—			(4	)		(6	)		(4	)		—
		Total other expense		(708	)		(687	)		(440	)		(176	)		(178	)		(1,458	)
Income (loss) before income taxes				1,935			8,567			4,875			330			(2,516	)		340
Income tax (provision) benefit				(172	)		136			(1,981	)		(642	)		667			(232	)
Net income (loss)			$	1,763		$	8,703		$	2,894		$	(312	)	$	(1,849	)	$	108
Net income (loss) per share
	Basic		$	0.48		$	2.36		$	0.79		$	(0.08	)	$	(0.05	)	$	0.00
	Diluted		$	0.40		$	1.95		$	0.64		$	(0.08	)	$	(0.05	)	$	0.00
Shares used in computing net income (loss) per share:
	Basic			3,680			3,680			3,680			3,680			34,674			39,904
	Diluted			4,421			4,467			4,535			3,680			34,674			42,843

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	December 31, 2003
	Actual		As Adjusted
	(unaudited)
	(amounts in thousands)
Consolidated Balance Sheet Data:
Cash	$	6,035
Working capital		17,519
Total assets		50,155
Short- and long-term capital lease and other obligations		558
Debt to related parties		30,013
Total stockholders’ equity		8,320

      The preceding table presents a summary of our balance sheet data as of December 31, 2003:

•  on an actual basis; and

•  on an as adjusted basis to give effect to the sale of                      shares of common stock in this offering at an assumed initial public offering price of $          per share, after deducting the underwriting discount and estimated offering expenses payable by us.

See note 1 of our consolidated financial statements for an explanation of the determination of the number of shares used in computing per share data.

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RISK FACTORS

      You should carefully consider the risks and uncertainties described below before making an investment decision. These risks and uncertainties may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the events or circumstances described below actually occur, our business, financial condition and results of operations could suffer, the trading price of our common stock could decline and you may lose part or all of your investment.

Risks Related to Our Business

The highly cyclical nature of the semiconductor industry and general economic slowdowns could harm our operating results.

      Our business and operating results depend in significant part upon capital expenditures by manufacturers of semiconductors, which in turn depend upon the current and anticipated market demand for semiconductors. Historically, the semiconductor industry has been highly cyclical, with recurring periods of over-supply of semiconductor products that have had a severe negative effect on the demand for capital equipment used to manufacture semiconductors. During these periods, we have experienced significant fluctuations in customer orders for our products. Our sales were $76.5 million in 2001, $84.3 million in 2002 and $77.5 million in 2003. Historically, semiconductor industry slowdowns have had, and future slowdowns may have, a material adverse effect on our operating results.

      In addition, the uncertainty regarding the growth rate of economies throughout the world has caused companies to reduce capital investment and may cause further reduction of such investments. These reductions have been particularly severe in the semiconductor capital equipment industry. A potential rebound in the worldwide economy in the near future will not necessarily mean that our business will experience similar effects. Moreover, if the worldwide economy does not rebound in the near future, our business may be further harmed.

Our quarterly revenue and operating results fluctuate significantly from period to period and this may cause volatility in our common stock price.

      Our quarterly revenue and operating results have fluctuated significantly in the past and we expect them to continue to fluctuate in the future for a variety of reasons, including:

•  demand for and market acceptance of our products as a result of the cyclical nature of the semiconductor industry or otherwise, often resulting in reduced sales during industry downturns and increased sales during periods of industry recovery;

•  changes in the timing and size of orders by our customers;

•  cancellations of previously placed orders;

•  pricing pressure from either our competitors or our customers, resulting in the reduction of our product prices;

•  disruptions or delays in the manufacturing of our products or in the supply of components that we incorporate into our products, thereby causing us to delay the shipment of our products;

•  changes in design-to-delivery cycle times;

•  our inability to quickly reduce our costs in response to decreased demand for our products, as our costs are relatively fixed in the short-term;

•  changes in our mix of products sold;

•  write-offs of excess or obsolete inventory; and

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•  announcements by our competitors of new products, services or technological innovations, which may, among other things, render our products less competitive.

      As a result of the foregoing, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance. Changes in the timing or terms of a small number of transactions could disproportionately affect our operating results in any particular quarter. Moreover, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we would expect to experience an immediate and significant decline in the trading price of our common stock.

We rely on a small number of customers for a significant portion of our sales, and any impairment of our relationships with these customers would adversely affect our business.

      A relatively small number of OEM customers have historically accounted for a significant portion of our sales, and we expect this trend to continue. Applied Materials, Inc. and Novellus Systems, Inc. together accounted for 91% of our sales in 2001. Applied Materials, Inc., Novellus Systems, Inc. and Lam Research Corporation as a group accounted for 98% of our sales in 2002 and 92% of our sales in 2003. Because of the small number of OEMs in our industry, most of whom are already our customers, it would be difficult to replace lost revenue resulting from the loss of, or the reduction, cancellation or delay in purchase orders by, any one of these customers. Consolidation among our customers may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a small number of customers. In addition, any significant pricing pressure exerted by a key customer could adversely effect our operating results.

      We have had to qualify, and are required to maintain our status, as a supplier for each of our customers. This is a lengthy process that involves the inspection and approval by a customer of our engineering, documentation, manufacturing and quality control procedures before that customer will place volume orders. Attempts to lessen the adverse effect of any loss of or reduction in sales to an existing customer through the rapid addition of one or more new customers would be difficult because of these qualification requirements. Consequently, our business, operating results and financial condition would be adversely affected by the loss of, or any reduction in orders by, any of our significant customers.

Because we are subject to order and shipment uncertainties, any significant reductions, cancellations or delays in customer orders could cause our revenue to decline and our operating results to suffer.

      Our revenue is difficult to forecast because we generally do not have a material backlog of unfilled orders and because of the short time frame within which we are often required to design, produce and deliver products to our customers. Most of our revenue in any quarter depends on customer orders for our products that we receive and fulfill in the same quarter. We do not have long-term purchase orders or contracts that contain minimum purchase commitments from our customers. Instead, we receive non-binding forecasts of the future volume of orders from our customers. At times, we order and build component inventory in advance of the receipt of actual customer orders. Customers may cancel order forecasts, change production quantities from forecasted volumes or delay production for reasons beyond our control. Furthermore, reductions, cancellations or delays in customer order forecasts occur without penalty to or compensation from the customer. Reductions, cancellations or delays in forecasted orders could cause us to hold inventory for longer than anticipated, which could reduce our gross profit, restrict our ability to fund our operations and cause us to incur unanticipated reductions or delays in revenue. If we do not obtain orders as we anticipate, we could have excess component inventory for a specific product that we would not be able to sell to another customer, likely resulting in inventory write-offs, which could have a material adverse affect on our business, financial condition and operating results. In addition, because many of our costs are fixed in the short-term, we could experience deterioration in our gross profit when our production volumes decline.

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The manufacturing of our products is highly complex, and if we are not able to effectively manage our manufacturing and procurement process, our business and operating results would suffer.

      The manufacturing of our products is a highly complex process that involves the integration of multiple components and requires effective management of our supply chain while meeting our customers’ design-to-delivery cycle time requirements. Through the course of the manufacturing process, our customers may modify design and system configurations in response to changes in their own customers’ requirements. In order to rapidly respond to these modifications and deliver our products to our customers in a timely manner, we must effectively manage our manufacturing and procurement process. If we fail to effectively manage this process, we risk losing customers and damaging our reputation which could limit our growth and have a material adverse affect on our business, financial condition and operating results.

OEMs may not continue to outsource subsystem manufacturing for their capital equipment which could adversely impact our operating results.

      The success of our business depends on OEMs continuing to outsource the manufacturing of gas delivery systems for their semiconductor capital equipment. Most of the largest OEMs have already outsourced a significant portion of their gas delivery systems. If OEMs do not continue to outsource gas delivery systems for their capital equipment, our revenue would be reduced, which could have a material adverse affect on our business, financial condition and operating results. In addition, if we are unable to obtain additional business as OEMs outsource their production of gas delivery systems, our business, financial condition and operating results could be adversely affected.

We may experience a variety of difficulties and incur a variety of costs as a result of acquisitions of companies or technologies, and the anticipated benefits of any such acquisitions may never be realized.

      We may make acquisitions of, or significant investments in, complementary companies or technologies, although no acquisitions or investments are currently pending. Any future acquisitions would be accompanied by risks such as:

•  difficulties in assimilating the operations and personnel of acquired companies;

•  difficulties in integrating information systems of acquired companies;

•  diversion of our management’s attention from ongoing business concerns;

•  our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology into our products;

•  additional expense associated with amortization of depreciation of acquired assets;

•  maintenance of uniform standards, controls, procedures and policies;

•  impairment of existing relationships with employees, suppliers and customers as a result of the integration of new personnel;

•  dilution to our stockholders in the event we issue stock as consideration to finance an acquisition; and

•  increased leverage if we incur debt to finance an acquisition.

      We may not be able to successfully integrate any business, products, technologies or personnel that we might acquire in the future, and our failure to do so could have a material adverse affect on our business, financial condition and operating results.

If we do not keep pace with developments in the semiconductor industry, and with technological innovation generally, our products may not be competitive.

      Rapid technological innovation in semiconductor manufacturing processes requires the semiconductor capital equipment industry to anticipate and respond quickly to evolving customer requirements and could

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render our current product offerings and technology obsolete. Technological innovations are inherently complex. We must devote resources to technology development in order to keep pace with the rapidly evolving technologies used in the semiconductor manufacturing process. We believe that our future success will depend upon our ability to design, engineer and manufacture products that meet the changing needs of our customers. This requires that we successfully anticipate and respond to technological changes in design, engineering and manufacturing processes in a cost-effective and timely manner. If we are unable to integrate new technical specifications into competitive product designs, develop the technical capabilities necessary to manufacture new products or make necessary modifications or enhancements to existing products, our business prospects could be harmed.

      The timely development of new or enhanced products is a complex and uncertain process which requires that we:

•  design innovative and performance-enhancing features that differentiate our products from those of our competitors;

•  identify emerging technological trends in the semiconductor industry, including new standards for our products;

•  accurately identify and design new products to meet market needs;

•  collaborate with OEMs to design and develop products on a timely and cost-effective basis;

•  successfully manage development production cycles; and

•  respond effectively to technological changes or product announcements by others.

The industry in which we participate is highly competitive and rapidly evolving, and if we are unable to compete effectively, our operating results would be harmed.

      Our industry is highly competitive and rapidly evolving. Our competitors are primarily companies that design and manufacture gas delivery systems for semiconductor capital equipment. Although we have not faced competition in the past from the largest subsystem and component manufacturers in the semiconductor capital equipment industry, these suppliers could compete with us in the future. Increased competition has in the past resulted, and could in the future result, in price reductions, reduced gross margins or loss of market share, any of which would harm our operating results. Competitors may introduce new products for the markets currently served by our products. These products may have better performance, lower prices and achieve broader market acceptance than our products. Further, OEMs typically own the design rights to their products and may provide these designs to subsystem manufacturers. If our competitors obtain proprietary rights to these designs such that we are unable to obtain the designs necessary to manufacture products for our OEM customers, our business, financial condition and operating results could be adversely affected.

      Our competitors may have greater financial, technical, manufacturing and marketing resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the development, promotion, sale and support of their products, and reduce prices to increase market share. Moreover, there may be merger and acquisition activity among our competitors and potential competitors that may provide our competitors and potential competitors with an advantage over us by enabling them to expand their product offerings and service capabilities to meet a broader range of customer needs. Further, if one of our customers develops or acquires the internal capability to develop and produce gas delivery systems, the loss of that customer could have a material adverse affect on our business, financial condition and operating results. The introduction of new technologies and new market entrants may also increase competitive pressures.

We must achieve design wins to retain our existing customers and to obtain new customers.

      New semiconductor capital equipment typically has a lifespan of several years, and OEMs frequently specify which systems, subassemblies, components and instruments are to be used in their equipment.

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Once a specific system, subassembly, component or instrument is incorporated into a piece of semiconductor capital equipment, it will likely continue to be incorporated into that piece of equipment for a period of at least several months before the OEM uses the product of another supplier. Accordingly, it is important that our products are designed into the new semiconductor capital equipment of OEMs, which we refer to as a design win, in order to retain our competitive position with existing customers and to obtain new customers.

      We incur technology development and sales expenses with no assurance that our products will ultimately be designed into an OEM’s semiconductor capital equipment. Further, developing new customer relationships, as well as increasing our market share at existing customers, requires a substantial investment of our sales, engineering and management resources without any assurance from prospective customers that they will place significant orders. We believe that OEMs often select their suppliers and place orders based on long-term relationships. Accordingly, we may have difficulty achieving design wins from OEMs that are not currently our customers. Our operating results and potential growth could be adversely affected if we fail to achieve design wins with leading OEMs.

We have experienced significant growth in our business in recent periods, and we may not be able to manage our future growth successfully.

      Our ability to successfully execute our business plan in a rapidly evolving market requires an effective planning and management process. We have increased, and plan to continue to increase, the scope of our operations. Due to the cyclical nature of the semiconductor industry, however, future growth is difficult to predict. Future expansion efforts could be expensive and may strain our managerial and other resources. To manage future growth effectively, we must maintain and enhance our financial and operating systems and controls and manage expanded operations. The number of people we employ has grown and we expect this number to continue to grow in the near term. As of December 31, 2001, we had a total of 130 employees. As of December 31, 2003, we had a total of 229 employees. As we grow our business, we will also need to effectively integrate and train these additional employees in order to increase our production while maintaining our product quality. If we do not manage growth properly, our business, operating results and financial condition would be adversely affected.

We will incur increased costs as a result of being a public company.

      We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, the Public Company Accounting Oversight Board and The Nasdaq National Market, have required changes in the corporate governance practices of public companies. We expect these new rules and regulations to increase our legal and financial compliance costs and to make legal, accounting and administrative activities more time-consuming and costly. For example, as a result of becoming a public company, we plan to add two additional independent directors, create additional committees of our board of directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect to incur substantially higher costs to obtain directors and officers insurance. We cannot estimate the amount of additional costs we may incur or the timing of such costs.

We may not be able to respond quickly enough to increases in demand for our products.

      Demand shifts in the semiconductor industry are rapid and difficult to predict, and we may not be able to respond quickly enough to an increase in demand. Our ability to increase sales of our products depends, in part, upon our ability to:

•  mobilize our supply chain in order to maintain component supply;

•  optimize the use of our design, engineering and manufacturing capacity in a timely manner;

•  deliver our products to our customers in a timely fashion;

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•  expand, if necessary, our manufacturing capacity; and

•  maintain our product quality as we increase production.

      If we are unable to respond to rapid increases in demand for our products on a timely basis or to manage any corresponding expansion of our manufacturing capacity effectively, our customers could increase their purchases from our competitors, which would adversely affect our business.

Our dependence on our suppliers may prevent us from delivering an acceptable product on a timely basis.

      We rely on both single source and sole source suppliers, some of whom are relatively small in size, for many of the components we use in our products. In addition, our customers often specify components made by particular suppliers that we must incorporate into their products. Our suppliers are under no obligation to provide us with components. As a result, the loss of or failure to perform by any of these providers could adversely affect our business and operating results. In addition, the manufacturing of certain components and subassemblies is an extremely complex process. Therefore, if a supplier was unable to provide the volume of components we require on a timely basis and at acceptable prices, we would have to identify and qualify replacements from alternative sources of supply. The process of qualifying new suppliers for these complex components is lengthy and could delay our production and adversely affect our business, operating results and financial condition. In addition, one of our competitors manufactures mass flow controllers that may be specified by one or more of our customers. If we are unable to obtain these particular mass flow controllers from our competitor or convince a customer to select alternative mass flow controllers, we may be unable to meet that customer’s requirements.

The technology labor market is very competitive, and our business will suffer if we are unable to hire and retain key personnel.

      Our future success depends in part on the continued service of our key executive officers, as well as our research, engineering, sales, manufacturing and administrative personnel, most of whom are not subject to employment or non-competition agreements. In addition, competition for qualified personnel in the technology industry is intense, and we operate in geographic locations in which labor markets are particularly competitive. Our business is particularly dependent on expertise which only a very limited number of engineers possess. The loss of any of our key employees, including Clarence L. Granger, our Chief Executive Officer, Bruce Wier, our Vice President of Engineering, Deborah Hayward, our Vice President of Sales, and Sowmya Krishnan, our Vice President of Technology, or the failure to attract and retain new qualified employees, would adversely affect our business, operating results and financial condition.

Defects in our products could damage our reputation, decrease market acceptance of our products, cause the unintended release of hazardous materials and result in potentially costly litigation.

      A number of factors, including design flaws, material and component failures, contamination in the manufacturing environment, impurities in the materials used and unknown sensitivities to process conditions, such as temperature and humidity, as well as equipment failures, may cause our products to contain undetected errors or defects. Problems with our products may:

•  cause delays in product introductions and shipments;

•  result in increased costs and diversion of development resources;

•  cause us to incur increased charges due to unusable inventory;

•  require design modifications;

•  decrease market acceptance of, or customer satisfaction with, our products, which could result in decreased sales and product returns; or

•  result in lower yields for semiconductor manufacturers.

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      If any of our products contain defects or have reliability, quality or compatibility problems, our reputation might be damaged and customers might be reluctant to buy our products. We may also face a higher rate of product defects as we increase our production levels. Product defects could result in the loss of, or impair our ability to attract, customers. In addition, we may not find defects or failures in our products until after they are installed in a semiconductor manufacturer’s fabrication facility. We may have to invest significant capital and other resources to correct these problems. Our current or potential customers also might seek to recover from us any losses resulting from defects or failures in our products. Hazardous materials flow through and are controlled by our products and an unintended release of these materials could result in serious injury or death. Liability claims could require us to spend significant time and money in litigation or pay significant damages.

Our business is largely dependent on the know-how of our employees, and we generally do not have a protected intellectual property position.

      Our business is largely dependent upon our design, engineering, manufacturing and testing know-how. We rely on a combination of trade secrets and contractual confidentiality provisions, and to a much lesser extent, patents, copyrights and trademarks, to protect our proprietary rights. Accordingly, our intellectual property position is more vulnerable than it otherwise would be if it were protected by issued patents. If we fail to successfully protect our proprietary rights, our competitive position could suffer, which could harm our operating results. We may be required to spend significant resources to monitor and protect our proprietary rights. In addition, we may not be able to detect infringement of our proprietary rights and may lose our competitive position in the market if any such infringement occurs. In addition, competitors may design around our technology or develop competing technologies and know-how.

Third parties may claim we are infringing their intellectual property which could subject us to litigation or licensing expenses, and we may be prevented from selling our products if any such claims prove successful.

      While we are not aware of any claims by third parties that we are infringing their intellectual property rights, we may be subject to such claims in the future. In addition, we may be unaware of intellectual property rights of others that may be applicable to our products. Any litigation regarding patents or other intellectual property could be costly and time-consuming and divert our management and key personnel from our business operations. The complexity of the technology involved in our products and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement may also require us to enter into costly license agreements. However, we may not be able to obtain licenses on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against the development and sale of certain of our products if any such claims prove successful.

Our historical financial information may not be representative of our results as a stand-alone entity.

      From 1991 through 2002, we operated as a subsidiary of Mitsubishi Corporation. During that period, Mitsubishi provided us with financing and limited administrative services. Accordingly, the historical financial information included in this prospectus does not necessarily reflect what our financial position, operating results and cash flows will be in the future or what they would have been had we been a separate, stand-alone entity during the periods in which we were owned by Mitsubishi. Furthermore, as a stand-alone entity, we will need to obtain any required funding from third parties.

We may not be able to fund our future capital requirements from our operations, and financing from other sources may not be available on favorable terms or at all.

      We made capital expenditures of $0.6 million in 2001, $1.8 million in 2002 and $0.5 million in 2003. The amount of our future capital requirements will depend on many factors, including:

•  the cost required to ensure access to adequate manufacturing capacity;

•  the timing and extent of spending to support product development efforts;

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•  the timing of introductions of new products and enhancements to existing products;

•  changing manufacturing capabilities to meet new customer requirements; and

•  market acceptance of our products.

      To the extent that existing cash, together with any cash from operations, are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Future equity financings could be dilutive to holders of our common stock, and debt financings could involve covenants that restrict our business operations. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products, take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated requirements, any of which could adversely affect our business, operating results and financial condition.

If environmental contamination were to occur in one of our manufacturing facilities, we could be subject to substantial liabilities.

      We use substances regulated under various federal, state and local environmental laws in our manufacturing facilities. Our failure or inability to comply with existing or future environmental laws could result in significant remediation liabilities, the imposition of fines or the suspension or termination of the production of our products. In addition, we may not be aware of all environmental laws or regulations that could subject us to liability.

If our facilities were to experience catastrophic loss due to natural disasters, our operations would be seriously harmed.

      Our facilities could be subject to a catastrophic loss caused by natural disasters, including fires and earthquakes. We have facilities in areas with above average seismic activity, such as our manufacturing and headquarters facilities in Menlo Park, California. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, reduce revenue and result in large expenses to repair or replace the facility. In addition, we have in the past experienced, and may in the future experience, extended power outages at our Menlo Park, California facilities. We do not carry insurance policies which cover potential losses caused by earthquakes or other natural disasters or power loss.

Threatened or actual terrorist attacks may negatively impact our business and cause our stock price to decline.

      Future threatened or actual terrorist attacks against United States targets or military or trade disruptions impacting our component suppliers may cause delays or loss of customer orders. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in United States and worldwide financial markets. These events could also result in further economic recession in the United States or abroad. Any of these occurrences would have an adverse impact on our business, operating results and financial condition.

Risks Related to Our Ownership by Francisco Partners

We will be controlled by FP-Ultra Clean, LLC as long as it owns a significant percentage of our common stock, and our other stockholders will be unable to affect the outcome of stockholder voting during such time.

      After the completion of this offering, Francisco Partners, through its membership interests in FP-Ultra Clean, LLC, will beneficially own approximately           % of our outstanding common stock, or approximately           % if the underwriters exercise in full their over-allotment option to purchase additional shares. Because we are a controlled company in accordance with the rules of The Nasdaq National Market, we are not required to comply with regulations that would otherwise require a majority of our board of directors to be comprised of independent directors under rule 4350(c)(5) of The Nasdaq

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National Market. As long as FP-Ultra Clean, LLC owns at least 25% of our outstanding common stock, it will continue to be able to nominate a majority of our board of directors in accordance with the terms of our stockholder’s agreement with FP-Ultra Clean, LLC. Furthermore, investors in this offering will not be able to affect the outcome of any stockholder vote prior to the time that FP-Ultra Clean, LLC owns less than a majority of our outstanding common stock. As a result, FP-Ultra Clean, LLC will control all matters affecting us, including:

•  the composition of our board of directors and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers;

•  any determinations with respect to mergers or other business combinations;

•  our acquisition or disposition of assets; and

•  our financing.

      In addition, pursuant to our stockholder’s agreement with FP-Ultra Clean, LLC, to the extent that FP-Ultra Clean, LLC continues to beneficially own a significant portion of our outstanding common stock, although less than a majority, it will continue to have significant influence over all matters submitted to our stockholders and to exercise significant control over our business policies and affairs. In particular, for so long as FP-Ultra Clean, LLC holds at least 25% of our common stock, our board of directors is prohibited from taking many significant corporate actions without the consent of FP-Ultra Clean, LLC, including mergers, acquisitions or sales of assets outside of the ordinary course of business, the issuance of securities and the incurrence or refinancing of indebtedness in excess of $10 million. Such power could have the effect of delaying, deterring or preventing a change of control, business combination or other transaction that might otherwise be beneficial to our stockholders. FP-Ultra Clean, LLC also is not prohibited from selling a controlling interest in us to a third party or a participant in our industry. For additional information regarding our relationship with FP-Ultra Clean, LLC, you should read the section of this prospectus entitled “Certain Relationships and Related Party Transactions.”

FP-Ultra Clean, LLC and its designees on our board of directors may have interests that conflict with our interests and the interests of our other stockholders.

      FP-Ultra Clean, LLC and its designees on our board of directors may have interests that conflict with, or are different from, our own and those of our other stockholders. Francisco Partners, which will be the beneficial holder of           % of our outstanding common stock after completion of this offering through its membership interests in FP-Ultra Clean, LLC, has invested in or acquired other businesses that are involved in the semiconductor industry and may invest in or acquire others in the future. Conflicts of interest between FP-Ultra Clean, LLC and us or our other stockholders may arise. Our amended and restated certificate of incorporation to be effective upon the completion of this offering does not contain any provisions designed to facilitate resolution of actual or potential conflicts of interest, or to ensure that potential business opportunities that may become available to both FP-Ultra Clean, LLC and us will be reserved for or made available to us. If an actual or potential conflict of interest develops involving one of our directors, our corporate governance guidelines provide that the director must report the matter immediately to our board of directors and audit committee for evaluation and appropriate resolution. Further, such director must recuse himself or herself from participation in the related discussion and abstain from voting on the matter. Nonetheless, conflicts of interest may not be resolved in a manner favorable to us or our other stockholders. In addition, FP-Ultra Clean, LLC and its director designees could delay or prevent an acquisition, merger or other transaction even if the transaction would benefit our other stockholders. In addition, FP-Ultra Clean, LLC’s significant concentration of share ownership may adversely affect the trading price of our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. Please see “Principal and Selling Stockholders” for a more detailed description of our share ownership.

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Risks Related to the Securities Markets and Ownership of Our Common Stock

Future sales of our common stock by existing stockholders could depress our stock price.

      Sales of substantial amounts of our common stock by FP-Ultra Clean, LLC, or the perception that these sales might occur, may depress prevailing market prices of our common stock. All of our outstanding shares are subject to lock-up agreements with the underwriters as described in “Underwriting” that prohibit the resale of these shares for 180 days from the date of this prospectus, although the underwriters may release all or a portion of the shares subject to lock-up agreements at any time without notice. The shares owned by FP-Ultra Clean, LLC have the benefit of an agreement with us that provides for customary demand and piggyback registration rights. Upon expiration of the 180-day lock-up period, in addition to the shares owned by FP-Ultra Clean, LLC that may be sold under a registration statement, shares underlying exercisable options to purchase our common stock will be available for resale without restriction or further registration under the Securities Act.

Our securities have no prior trading history, and we cannot assure you that our stock price will not decline after the offering.

      Prior to this offering, there was no public market for our common stock, and an active public market for our common stock may not develop or be sustained after this offering. The market price of our common stock could be subject to significant fluctuations after this offering. Among the factors that could affect our stock price are:

•  quarterly variations in our operating results;

•  our ability to successfully introduce new products and manage new product transitions;

•  changes in revenue or earnings estimates or publication of research reports by analysts;

•  speculation in the press or investment community;

•  strategic actions by us or our competitors, such as acquisitions or restructurings;

•  announcements relating to any of our key customers, significant suppliers or the semiconductor manufacturing and capital equipment industry generally;

•  general market conditions; and

•  domestic and international economic factors unrelated to our performance.

      The stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In particular, we cannot assure you that you will be able to resell your shares at or above the initial public offering price, which will be determined by negotiations between the representatives of the underwriters and us.

We have broad discretion in how we use a portion of the net proceeds of this offering, and we may not use these proceeds in a manner desired by our stockholders.

      We do not currently have a specific plan with respect to the use of a significant portion of the net proceeds of this offering and have not committed these proceeds to any particular purpose. We expect to use approximately $29.3 million of the net proceeds from this offering to repurchase our Series A Senior Notes held by FP-Ultra Clean LLC, our principal stockholder, and approximately $1.3 million to repurchase our Series A Senior Notes held by some of our key employees. In addition, subject to the completion of this offering, we have agreed to pay Francisco Partners a one-time fee of $2.0 million for advisory services performed in connection with our initial public offering. We plan to use the balance of the net proceeds of this offering primarily for working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire complementary businesses or technologies, although we have no current agreements or commitments with respect to any specific acquisition. Our management will have

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broad discretion with respect to the use of the net proceeds and investors will be relying on the judgment of our management regarding the application of these proceeds. Our management could spend these proceeds in ways which our stockholders may not desire or that do not yield a favorable return. You will not have the opportunity, as part of your investment in our common stock, to influence the manner in which the net proceeds of this offering are used.

Provisions of our charter documents could discourage potential acquisition proposals and could delay, deter or prevent a change in control.

      In addition to the provisions of our stockholder’s agreement with FP-Ultra Clean, LLC described above, the provisions of our amended and restated certificate of incorporation and by-laws to be effective on the completion of this offering could deter, delay or prevent a third party from acquiring us, even if doing so would benefit our stockholders. These provisions include:

•  a requirement that special meetings of stockholders may be called only by our board of directors, the chairman of our board of directors, our president or our secretary;

•  advance notice requirements for stockholder proposals and director nominations; and

•  the authority of our board of directors to issue, without stockholder approval, preferred stock with such terms as our board of directors board may determine.

You will incur immediate and substantial dilution.

      The initial public offering price is substantially higher than the net book value per share of our outstanding common stock. As a result, if you purchase shares in this offering, you will incur immediate and substantial dilution, which would have been $          per share as of December 31, 2003. In addition, as of December 31, 2003 we had options outstanding to acquire 4,221,000 shares of common stock with a weighted average exercise price of $0.25 per share. To the extent these options are exercised, you will incur further dilution. See “Dilution” for a more complete description of the dilution that you will incur.

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FORWARD-LOOKING STATEMENTS

      This prospectus contains forward-looking statements which reflect our current views with respect to future events and financial performance. In this prospectus, we use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue” and similar expressions to identify these forward-looking statements. This prospectus also contains forward-looking statements attributed to third parties relating to their estimates regarding the growth of our markets. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, you should not rely on forward-looking statements in this prospectus, as there are or will be important factors that could cause our actual results, as well as those of the markets we serve, levels of activity, performance, achievements and prospects to differ materially from the results predicted or implied by these forward-looking statements. These risks, uncertainties and other factors include, among others, those identified in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

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USE OF PROCEEDS

      We estimate that our net proceeds from this offering will be approximately $           million after deducting the underwriting discount and estimated offering expenses payable by us, based on an assumed initial public offering price of $          per share. Included in these expenses is a one-time fee of $2.0 million payable to Francisco Partners for advisory services performed in connection with our initial public offering. We expect to use approximately $29.3 million of the net proceeds to repurchase our Series A Senior Notes held by FP-Ultra Clean, LLC, our principal stockholder, and approximately $1.3 million to repurchase our Series A Senior Notes held by some of our key employees. Our Series A Senior Notes bear interest at a rate of 5% per annum and mature on November 15, 2009. We intend to use the remainder of the net proceeds for working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire complementary businesses or technologies, although we have no current agreements or commitments with respect to any specific acquisition. We will have discretion in the use of a significant portion of the net proceeds we receive from this offering. Investors will be relying on the judgment of our management regarding the application of those net proceeds. In addition, any investments, capital expenditures, cash acquisitions or other application of our proceeds may not produce the anticipated results. Pending use of these proceeds as discussed above, we intend to invest these funds in short-term, interest-bearing investment-grade obligations. We will not receive any proceeds from the exercise of the underwriters’ over-allotment option.

DIVIDEND POLICY

      We have not paid any cash dividends on our common stock since the Ultra Clean acquisition. We intend to retain any future earnings to fund the development and growth of our business and do not anticipate paying any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and, under the terms of our stockholder’s agreement, will require the approval of FP-Ultra Clean, LLC for as long as it holds at least 25% of our common stock. In addition, our revolving credit facility prohibits us from paying cash dividends on our common stock.

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CAPITALIZATION

      The following table sets forth our long-term debt and capitalization as of December 31, 2003.

      Our capitalization is presented:

•  on an actual basis; and

•  on an as adjusted basis to reflect:

•  the sale by us of                      shares of common stock in this offering at an assumed initial public offering price of $          per share;

•  the application of the net proceeds from the sale of the shares of common stock by us in this offering, after deducting the underwriting discount and estimated offering expenses, including a $2.0 million advisory fee payable to Francisco Partners, to repurchase approximately $30.6 million aggregate principal amount of our outstanding Series A Senior Notes as described in “Use of Proceeds;”

•  the      for      reverse stock split that was effected on                     , 2004; and

•  the filing of our amended and restated certificate of incorporation immediately prior to the completion of this offering.

      You should read the information set forth below together with the “Selected Consolidated Financial Information,” our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

				December 31, 2003
				Actual			As Adjusted
							(unaudited)
				(in thousands, except
				share and per share data)
Long-term debt:
	5% Series A Senior Notes due 2009			$	30,013
Stockholders’ equity:
	Preferred stock, par value $0.001 per share, no shares authorized, actual;            shares authorized, no shares issued and outstanding, as adjusted				—
	Common stock, par value $0.001 per share, 60,000,000 shares authorized, 40,981,580 shares issued and outstanding, actual;            shares authorized,            shares issued and outstanding, as adjusted				10,377
	Deferred stock-based compensation				(316	)
	Accumulated deficit				(1,741	)
		Total stockholders’ equity			8,320
			Total capitalization	$	38,333

      The number of shares of common stock outstanding after this offering excludes 4,221,000 shares subject to options outstanding as of December 31, 2003 at a weighted average exercise price of $0.25 per share,                     shares to be reserved for issuance under our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering, and                      shares to be reserved for issuance under our Employee Stock Purchase Plan, to be implemented immediately prior to the completion of this offering.

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DILUTION

      If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the amount you pay per share for our common stock in this offering and the net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share is determined by dividing our tangible net worth, which is equal to our total tangible assets less total liabilities, by the aggregate number of shares of common stock outstanding. Our net tangible book value as of December 31, 2003 was approximately $          , or $           per share of common stock. After giving effect to the sale of the                      shares of common stock in this offering at an assumed initial public offering price of $           per share and after deducting the underwriting discount and estimated offering expenses payable by us and the receipt and application of a portion of the net proceeds to repurchase our outstanding Series A Senior Notes as described under “Use of Proceeds,” our net tangible book value at December 31, 2003 would have been $          , or $           per share. This represents an immediate increase in net tangible book value to existing stockholders of $           per share and an immediate dilution to new investors of $           per share. The following table illustrates this per share dilution:

Assumed initial public offering price			$
	Net tangible book value per share as of December 31, 2003.	$
	Increase in net tangible book value per share attributable to new investors
Adjusted net tangible book value per share after offering
Dilution in net tangible book value per share to new investors			$

      Assuming the initial public offering had occurred on December 31, 2003, the following tables set forth, as of December 31, 2003, the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by the new investors, at an assumed initial public offering price of $           per share before deducting the underwriting discount and estimated offering expenses payable by us.

					Total
	Shares Purchased				Consideration				Average
									Price Per
	Number	Percent			Amount	Percent			Share
Existing stockholders				%	$			%	$
New investors
Total			100	%	$		100	%	$

      The foregoing table assumes no exercise of the underwriters’ over-allotment option or outstanding stock options after December 31, 2003, no issuance of shares reserved under our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering, and no issuance of shares under our Employee Stock Purchase Plan, to be implemented immediately prior to the completion of this offering. At December 31, 2003, 4,221,000 shares of common stock were subject to outstanding options, at a weighted average exercise price of $0.25 per share. To the extent these options are exercised, there will be further dilution to new investors as follows:

					Total
	Shares Purchased				Consideration				Average
									Price Per
	Number	Percent			Amount	Percent			Share
Existing stockholders				%	$			%	$
Shares subject to options
New investors
Total			100	%	$		100	%	$

      If the underwriters’ over-allotment option is exercised in full, the number of shares held by existing stockholders will be reduced to                     , or approximately           % of the total shares of common stock outstanding after the offering, and will increase the number of shares to be purchased by new investors to                     , or approximately           % of the total shares of common stock outstanding after the offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

      The following selected consolidated financial data should be read together with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. This financial data includes the accounts of Ultra Clean Technology Systems and Service, Inc. (Predecessor) for the period from January 1, 2002 through November 15, 2002 and for the years ended December 31, 2001, 2000 and 1999 and the accounts of Ultra Clean Holdings, Inc. (Ultra Clean) for the period from November 16, 2002 through December 31, 2002 and for the year ended December 31, 2003. See note 1 of the consolidated financial statements for a description of the Ultra Clean acquisition. The selected consolidated balance sheet data as of December 31, 2002 and 2003 and the selected consolidated statements of operations data for the year ended December 31, 2003, the periods from January 1, 2002 through November 15, 2002 and November 16, 2002 through December 31, 2002 and the year ended December 31, 2001 have been derived from our audited consolidated financial statements which are included elsewhere in this prospectus. The selected consolidated balance sheet data as of December 31, 1999, 2000 and 2001 and the selected consolidated statements of operations data for the years ended December 31, 1999 and 2000 have been derived from our audited consolidated financial statements not included in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future.

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			Predecessor
												Jan. 1, 2002			Nov. 16,
			Years Ended Dec. 31,									through			2002 through			Year Ended
												Nov. 15,			Dec. 31,			Dec. 31,
			1999			2000			2001			2002			2002			2003
			(amounts in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Sales			$	39,574		$	83,001		$	76,486		$	76,338		$	7,916		$	77,520
Cost of goods sold				32,878			68,242			66,129			66,986			7,972			67,313
Gross profit (loss)				6,696			14,759			10,357			9,352			(56	)		10,207
Operating expenses:
	Research and development			399			518			613			634			99			1,155
	Sales and marketing			1,054			1,241			1,302			1,586			332			2,276
	General and administrative			2,600			3,746			3,127			6,626			962			4,978
	In-process research and development			—			—			—			—			889			—
		Total operating expenses		4,053			5,505			5,042			8,846			2,282			8,409
Income (loss) from operations				2,643			9,254			5,315			506			(2,338	)		1,798
Other income (expense):
	Interest expense, net			(708	)		(687	)		(436	)		(170	)		(182	)		(1,458	)
	Other income (expense), net			—			—			(4	)		(6	)		4			—
		Total other expense		(708	)		(687	)		(440	)		(176	)		(178	)		(1,458	)
Income (loss) before income taxes				1,935			8,567			4,875			330			(2,516	)		340
Income tax (provision) benefit				(172	)		136			(1,981	)		(642	)		667			(232	)
Net income (loss)			$	1,763		$	8,703		$	2,894		$	(312	)	$	(1,849	)	$	108
Net income (loss) per share:
	Basic		$	0.48		$	2.36		$	0.79		$	(0.08	)	$	(0.05	)	$	0.00
	Diluted		$	0.40		$	1.95		$	0.64		$	(0.08	)	$	(0.05	)	$	0.00
Shares used in computing net income (loss) per share:
	Basic			3,680			3,680			3,680			3,680			34,674			39,904
	Diluted			4,421			4,467			4,535			3,680			34,674			42,843

	Predecessor
	Dec. 31,								Dec. 31,
	1999			2000			2001		2002		2003
Consolidated Balance Sheet Data:
Cash	$	851		$	3,722		$	760	$	6,237	$	6,035
Working capital (deficit)		(7,705	)		(924	)		2,519		16,067		17,519
Total assets		13,296			34,918			20,652		48,836		50,155
Short-and long-term capital lease and other obligations		260			344			554		662		558
Debt to related parties		12,500			9,800			8,400		29,812		30,013
Total stockholders’ equity (deficit)		(2,927	)		5,776			8,670		8,089		8,320

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with and is qualified in its entirety by reference to our audited financial statements included elsewhere in this prospectus. Except for the historical information contained herein, the discussions in this section contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below. See “Risk Factors” and “Forward-Looking Statements” for a discussion of these risks and uncertainties.

Overview

General

      We are a developer and supplier of critical subsystems for the semiconductor capital equipment industry, focusing on gas delivery systems. Our gas delivery systems enable the precise delivery of specialty gases used in a majority of the key steps in the semiconductor manufacturing process. Our customers are primarily OEMs of semiconductor capital equipment. These OEMs outsource the manufacturing of their gas delivery systems in order to improve the efficiency and reduce the costs of their design and manufacturing processes. We provide our customers with a full range of services for the development, design, prototyping, engineering, manufacturing and testing of gas delivery systems.

      Our business dates back to 1991 when Mitsubishi Corporation founded Ultra Clean Technology Systems and Service, Inc. Our business was operated as a subsidiary of Mitsubishi until November 2002. It was then acquired by Ultra Clean Holdings, Inc., which we refer to as the Ultra Clean acquisition. Ultra Clean Holdings, Inc. is owned by FP-Ultra Clean LLC (95.2%), a wholly-owned subsidiary of Francisco Partners, and by members of our management (4.8%). After completion of this offering, FP-Ultra Clean, LLC will beneficially own approximately           % of our outstanding common stock, assuming no exercise of the underwriters’ over-allotment option. We conduct our operating activities primarily through Ultra Clean Technology Systems and Service, Inc., our wholly-owned subsidiary.

      We have entered into a stockholder’s agreement with FP-Ultra Clean, LLC which provides that our board of directors may not take certain significant actions without the approval of FP-Ultra Clean, LLC as long as it owns at least 25% of our outstanding common stock, including mergers, acquisitions or sales of assets outside the ordinary course of business, the issuance of securities and the incurrence or refinancing of indebtedness in excess of $10 million. See “Certain Relationships and Related Party Transactions — Relationship with Francisco Partners — Stockholder’s Agreement.”

Cyclical Business

      Our business and operating results depend in significant part upon capital expenditures by manufacturers of semiconductors, which in turn depend upon the current and anticipated market demand for semiconductors. Historically, the semiconductor industry has been highly cyclical, with recurring periods of over-supply of semiconductor products that have had a severe negative effect on the demand for capital equipment used to manufacture semiconductors. In periods where supply exceeds demand for semiconductor capital equipment, we generally experience significant reductions in customer orders for our products. For example, in 2003 our sales decreased to $77.5 million from $84.3 million in 2002. Sharp decreases in demand for semiconductor capital equipment may lead our customers to cancel order forecasts, change production quantities from forecasted volumes or delay production, which may negatively impact our gross profit, as we may be unable to quickly reduce costs and may be required to hold inventory longer than anticipated. In periods where demand for semiconductor capital equipment exceeds supply, we generally need to quickly increase our production of gas delivery systems, requiring us to order additional inventory, effectively manage our component supply chain, hire additional employees and expand, if necessary, our manufacturing capacity. If we are unable to respond to rapid increases in demand for our products on a timely basis or to manage any corresponding expansion of our manufacturing capacity effectively, we could lose business to our competitors and our business could be adversely affected.

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Outsourcing Trend

      We generate revenue from the sale of gas delivery systems. The success of our business and our ability to generate future sales depends on OEMs continuing to outsource the manufacturing of gas delivery systems for their semiconductor capital equipment. Most of the largest OEMs have already outsourced a significant portion of their gas delivery systems. If OEMs do not continue to outsource gas delivery systems for their capital equipment, our revenue would be reduced, which could have a material adverse affect on our business, financial condition and operating results. In addition, if we are unable to obtain additional business as OEMs outsource their production of gas delivery systems, our business, financial condition and operating results could be adversely affected.

Customer Concentration

      A relatively small number of OEM customers have historically accounted for a significant portion of our revenue, and we expect this trend to continue. Applied Materials, Inc. and Novellus Systems, Inc. together accounted for 91% of our sales in 2001. Applied Materials, Inc., Novellus Systems, Inc. and Lam Research Corporation as a group accounted for 98% of our sales in 2002 and 92% of our sales in 2003. Because of the small number of OEMs in our industry, most of whom are already our customers, it would be difficult to replace lost revenue resulting from the loss of, or the reduction, cancellation or delay in purchase orders by, any one of these customers. Consolidation among our customers may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a small number of customers. In addition, any significant pricing pressure exerted by a key customer could adversely effect our operating results.

Anticipated Increased General and Administrative Costs

      We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, the Public Company Accounting Oversight Board and The Nasdaq National Market, have required changes in the corporate governance practices of public companies. We expect these new rules and regulations to increase our legal and financial compliance costs and to make legal, accounting and administrative activities more time-consuming and costly. For example, as a result of becoming a public company, we plan to add two additional independent directors, create additional committees of our board of directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect to incur substantially higher costs to obtain directors and officers insurance. We cannot estimate the amount of additional costs we may incur or the timing of such costs.

Deferred Compensation

      We recorded deferred compensation with respect to the unvested portion of our Series A Senior Notes and common stock granted to some of our key employees in connection with the Ultra Clean acquisition. In addition, we record deferred stock-based compensation resulting from the grant of stock options to employees at exercise prices less than the estimated fair value of the underlying common stock on the grant date. We determined the estimated fair value of our common stock based on several factors, including our historical and projected operating performance. We recorded total deferred compensation of $1.1 million and $0.1 million for the years ended December 31, 2002 and 2003, respectively. We amortized $33,000 and $0.3 million for the years ended December 31, 2002 and 2003, respectively. We expect to record amortization expense of $0.7 million in 2004, $0.1 million in 2005 and $0.1 million in 2006.

Basis of Presentation

      Our financial statements include the accounts of the predecessor company, Ultra Clean Technology Service and Systems, Inc. for the year ended December 31, 2001 and for the period from January 1, 2002

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to November 15, 2002 and the accounts of the successor company, Ultra Clean Holdings, Inc. and its subsidiary, since inception, including the period from November 16, 2002 through December 31, 2002 and for the year ended December 31, 2003.

      In the discussion of our financial statements for the year ended December 31, 2002 in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to the financial statements for 2002 as “combined” for comparative purposes. These combined financial results for 2002 represent the sum of the financial data for Ultra Clean Technology Systems and Service, Inc. (Predecessor) for the period from January 1, 2002 through November 15, 2002 and the financial data for Ultra Clean Holdings, Inc. (Ultra Clean) for the period from its inception to December 31, 2002. We further refer to the period from our inception through December 31, 2002 as the November 16, 2002 through December 31, 2002 period, because we had no operations in the period from October 28, 2002, our date of incorporation, to November 15, 2002, the closing date of the Ultra Clean acquisition. These combined financial results are for informational purposes only and do not purport to represent what our financial position would have actually been in such periods had the Ultra Clean acquisition occurred prior to November 15, 2002.

Critical Accounting Policies, Significant Judgments and Estimates

      Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our financial statements. On an on-going basis, we evaluate our estimates and judgments, including those related to sales, inventories, intangible assets, stock compensation and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to the Ultra Clean acquisition, revenue recognition, inventory valuation, accounting for income taxes, valuation of intangible assets and goodwill and stock options to employees to be critical policies due to the estimates and judgments involved in each.

Ultra Clean Acquisition

      In connection with the Ultra Clean acquisition, we allocated the purchase price associated with the acquisition to the tangible and intangible assets acquired, liabilities assumed and in-process research and development based on their estimated fair values. We engaged a third-party appraisal firm to assist us in determining the fair values of the assets acquired and the liabilities assumed. Such valuations required us to make significant estimates and assumptions, especially with respect to intangible assets. Estimates associated with the accounting for the Ultra Clean acquisition may change as additional information becomes available regarding the assets acquired and liabilities assumed. In particular, a claim by us for a refund of approximately $470,000 of the purchase price remains unresolved. Any payment of this unresolved amount will reduce recorded goodwill.

      The critical estimates we used in allocating the purchase price and valuing certain intangible assets include but were not limited to: future expected cash flows from customer contracts, customer lists, distribution agreements, acquired developed technologies and patents; expected costs to develop in-process research and development into commercially viable products and brand awareness and market position of acquired products and assumptions about the period of time the brand will continue to be used in the combined product portfolio. Our estimates of fair value at the time when they were made are based upon assumptions that we believed to be reasonable, but which are inherently uncertain and unpredictable.

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Revenue Recognition

      Our revenue is concentrated in a few OEM customers in the semiconductor capital equipment industry in the United States. Our standard arrangement for our customers includes a signed purchase order or contract and no right of return of delivered products. Revenue from sales of products is recognized when:

•  we enter into a legally binding arrangement with a customer;

•  we ship the products;

•  customer payment is deemed fixed or determinable and free of contingencies or significant uncertainties; and

•  collection is probable.

Revenue is generally recognized upon shipment of the product. In certain circumstances, revenue is not recognized until the product is delivered. In addition, if we have not substantially completed or fulfilled the terms of the agreement at the time of shipment, revenue recognition is deferred until completion. Determination of criteria in the third and fourth bullet points above is based on our judgment regarding the fixed nature of the amounts charged for the products delivered and the collectability of those amounts.

      We assess collectability based on the credit worthiness of the customer and past transaction history. We perform on-going credit evaluations of, and do not require collateral from, our customers. We have not experienced collection losses in the past. A significant change in the liquidity or financial position of any one customer could make it more difficult for us to assess collectability.

Inventory Valuation

      We value our inventories at the lesser of standard cost, determined on a first-in, first-out basis, or market. We assess the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of our estimated usage is written-down to its estimated market value less costs to sell, if less than its cost. The inventory write-downs are recorded as an inventory valuation allowance established on the basis of obsolete inventory or specific identified inventory in excess of established usage. Inherent in our estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for our products and technological obsolescence of our products. If actual market conditions are less favorable than our projections, additional inventory write-downs may be required. If the inventory value is written down to its net realizable value, and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory is not realized until the inventory is sold either as a component of a gas delivery system or as separate inventory. During the year ended December 31, 2002, we charged $0.3 million to cost of goods sold to write down excess and obsolete inventory. During the year ended December 31, 2003, we recorded an immaterial charge for excess and obsolete inventory.

Accounting for Income Taxes

      The determination of our tax provision is subject to judgments and estimates. The carrying value of our net deferred tax assets, which is made up primarily of tax deductions, assumes we will be able to generate sufficient future income to fully realize these deductions. In determining whether the realization of these deferred tax assets may be impaired, we make judgments with respect to whether we are likely to generate sufficient future taxable income to realize these assets. We have not recorded any valuation allowance to impair our tax assets because, based on the available evidence, we believe it is more likely than not that we will be able to utilize all of our deferred tax assets in the future. If we do not generate sufficient future income, the realization of these deferred tax assets may be impaired, resulting in an additional income tax expense.

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Valuation of Intangible Assets and Goodwill

      We periodically evaluate our intangible assets and goodwill in accordance with Statement of Financial Accounting Standards, or SFAS No. 142, Goodwill and Other Intangible Assets, for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Intangible assets include goodwill, purchased technology and tradename. Factors we consider important that could trigger an impairment review include significant under-performance relative to historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, or significant negative industry or economic trends. The provisions of SFAS No. 142 also require an annual goodwill impairment test or more frequently if impairment indicators arise. In testing for a potential impairment of goodwill, the provisions of SFAS No. 142 require the application of a fair value based test at the reporting unit level. We operate in one segment and have one reporting unit. Therefore, all goodwill is considered enterprise goodwill and the first step of the impairment test prescribed by SFAS No. 142 requires a comparison of our fair value to our book value. If our estimated fair value is less than the our book value, SFAS No. 142 requires an estimate of the fair value of all identifiable assets and liabilities of the business, in a manner similar to a purchase price allocation for an acquired business. This estimate requires valuations of certain internally generated and unrecognized intangible assets such as in-process research and development and developed technology. Potential goodwill impairment is measured based upon this two-step process. We performed the annual goodwill impairment test as of December 31, 2002 and 2003 and determined that goodwill was not impaired.

Stock Options to Employees

      We have elected to follow the intrinsic value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, and the related interpretations in accounting for employee stock options rather than adopting the alternative fair value accounting provided under SFAS No. 123, Accounting for Stock Based Compensation. Therefore, we do not record any compensation expense for stock options we grant to our employees where the exercise price equals the fair market value of the stock options on the date of grant and the exercise price, number of shares eligible for issuance under the options and vesting period are fixed. We comply with the disclosure provisions of SFAS No. 123 and SFAS No. 148, which require that we disclose our pro forma net income or loss and net income or loss per common share as if we had expensed the fair value of the options. In calculating such fair values, we use assumptions of estimated option life, dividend policy and interest rates.

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Results of Operations

      The following table sets forth statements of operations data for the periods indicated as a percentage of revenue.

			Years Ended December 31,
						Combined(1)
			2001			2002			2003
Sales				100.0	%		100.0	%		100.0	%
Cost of goods sold				86.5	%		89.0	%		86.8	%
Gross profit				13.5	%		11.0	%		13.2	%
Operating expenses:
	Research and development			0.8	%		0.9	%		1.5	%
	Sales and marketing			1.7	%		2.3	%		2.9	%
	General and administrative			4.1	%		9.0	%		6.4	%
	In-process research and development			—			1.1	%		—
		Total operating expenses		6.6	%		13.2	%		10.8	%
Income (loss) from operations				6.9	%		(2.2	)%		2.4	%
Other income (expense):
	Interest expense, net			(0.6	)%		(0.4	)%		(1.9	)%
	Other income (expense), net			—			—			—
		Total other expense		(0.6	)%		(0.4	)%		(1.9	)%
Income (loss) before income taxes				6.4	%		(2.6	)%		0.5	%
Income tax (provision) benefit				(2.6	)%		0.0	%		(0.3	)%
Net income (loss)				3.8	%		(2.6	)%		0.2	%

(1)  The combined financial results for 2002 represent the sum of the financial data for Ultra Clean Technology Systems and Service, Inc. (Predecessor) for the period from January 1, 2002 through November 15, 2002 and the financial data for Ultra Clean Holdings, Inc. for the period from November 16, 2002 (inception) to December 31, 2002. The combined financial data for 2002 is presented to facilitate comparison with other annual periods.

Year Ended December 31, 2003 Compared With Year Ended December 31, 2002

Sales

      We generate revenue from the sale of gas delivery systems. Sales for the year ended December 31, 2003 decreased 8.1% to $77.5 million from $84.3 million for the year ended December 31, 2002, a decrease of $6.8 million. This decrease in sales was due to the continued downturn in the semiconductor capital equipment industry during the first three quarters of 2003, which resulted in decreased demand for, and therefore reduced sales of, our gas delivery systems.

Gross Profit

      Cost of goods sold consists primarily of purchased materials, labor and overhead, including depreciation, associated with the design and manufacture of products sold. Gross profit for the year ended December 31, 2003 increased 9.7% to $10.2 million from $9.3 million for the year ended December 31, 2002, an increase of $0.9 million. Gross profit as a percentage of sales increased to 13.2% for the year ended December 31, 2003 compared to 11.0% for the year ended December 31, 2002. The increase in gross profit for the year ended December 31, 2003 was primarily attributable to sharply higher sales of gas

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delivery systems in the fourth quarter, during which time we were able to increase production without substantially increasing the number of our employees. We recorded an immaterial charge for excess and obsolete inventory for the year ended December 31, 2003, compared to a charge of $0.3 million for the year ended December 31, 2002. We implemented several cost containment measures during the fourth quarter of 2002 and the first three quarters of 2003, including workforce reductions and mandatory time-off.

Research and Development Expense

      Research and development expense consists primarily of activities related to new component testing and evaluation, test equipment, design and implementation, new product design and testing and other product development activities. Research and development expense for the year ended December 31, 2003 increased 71.4% to $1.2 million from $0.7 million for the year ended December 31, 2002, an increase of $0.5 million. Research and development expense as a percentage of sales increased to 1.5% for the year ended December 31, 2003 compared to 0.9% for the year ended December 31, 2002. This increase in research and development expense was primarily attributable to the development of additional test fixtures for a wider range of products and to additional design activity required by two of our major customers.

Sales and Marketing Expense

      Sales and marketing expense consists primarily of salaries and commissions paid to our sales and service employees and salaries paid to our engineers who work with our sales and service employees to help determine the components and configuration requirements for new products. Sales and marketing expense for the year ended December 31, 2003 increased 21.1% to $2.3 million from $1.9 million for the year ended December 31, 2002, an increase of $0.4 million. Sales and marketing expense as a percentage of sales increased to 2.9% for the year ended December 31, 2003 compared to 2.3% for the year ended December 31, 2002. This increase in sales and marketing expense was primarily attributable to our expansion into new product lines at one of our major customers.

General and Administrative Expense

      General and administrative expense consists primarily of salaries and overhead of our administrative staff. General and administrative expense for the year ended December 31, 2003 decreased 34.2% to $5.0 million from $7.6 million for the year ended December 31, 2002, a decrease of $2.6 million. General and administrative expense as a percentage of sales decreased to 6.4% for the year ended December 31, 2003 compared to 9.0% for the year ended December 31, 2002. We experienced higher general and administrative expense in 2002, primarily due to costs of $4.6 million associated with the Ultra Clean acquisition. General and administrative expense for the year ended December 31, 2003 included $1.1 million in professional fees paid to third party financial advisors for services they performed for us, approximately $0.2 million in bonus accrual associated with our management bonus and profit sharing plans and approximately $0.3 million associated with deferred compensation amortization resulting from restricted stock and employee debt which originated at the time of the Ultra Clean acquisition. We expect our general and administrative expense to increase in 2004 as we incur additional expenses as a public company.

In-Process Research and Development Expense

      In-process research and development expense for the year ended December 31, 2002 was $0.9 million, resulting from one project related to the development of technology and a related product that simplified the generation of steam for use in the semiconductor manufacturing process — the catalytic steam generator. Our development efforts were completed in December 2003. Actual costs incurred to complete this project were not significantly different from the initial estimate. Value ascribed to the project was based on the cost method and represented the cost of personnel, material, equipment and finance charges that would have been incurred to replicate the project to its development stage at the date of acquisition. We had no in process research and development expenses for the year ended December 31, 2003.

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Interest Expense

      Interest expense for the year ended December 31, 2003 increased to $1.5 million from $0.4 million for the year ended December 31, 2002, an increase of $1.1 million. This increase in interest expense was attributable to interest payable on our Series A Senior Notes held by FP-Ultra Clean, LLC and some of our key employees which were issued in the fourth quarter of 2002 in connection with the Ultra Clean acquisition.

Provision for Income Taxes

      Provision for income taxes for the year ended December 31, 2003 was $0.2 million compared to $0.03 million income tax benefit for the year ended December 31, 2002. This increase in provision for income taxes was primarily attributable to the increase in taxable income for the year ended December 31, 2003. For the year ended December 31, 2003, the state tax rate was higher than the statutory rate due the mix of taxable income and losses in Texas combined with a consolidated net income approximating break even.

Year Ended December 31, 2002 Compared With Year Ended December 31, 2001

      In the discussion of our financial statements for the year ended December 31, 2002 in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to financial statements for 2002 as “combined” for comparative purposes. These combined financial results for 2002 represent the sum of the financial data for Ultra Clean Technology Systems and Service, Inc. (Predecessor) for the period from January 1, 2002 through November 15, 2002 and the financial data for Ultra Clean Holdings, Inc. (Ultra Clean) for the period from its inception to December 31, 2002. We further refer to the period from our inception through December 31, 2002 as the November 16, 2002 through December 31, 2002 period, because we had no operations in the period from October 28, 2002, our date of incorporation, to November 15, 2002, the closing date of the Ultra Clean acquisition. These combined financial results are for informational purposes only and do not purport to represent what our financial position would have actually been in such periods had the Ultra Clean acquisition occurred prior to November 15, 2002.

Sales

      Sales for the year ended December 31, 2002 increased 10.2% to $84.3 million from $76.5 million for the year ended December 31, 2001, an increase of $7.8 million. This increase in sales was primarily attributable to the addition of a significant new customer. Sales to our other significant customers for the year ended December 31, 2002 decreased due to the downturn in the semiconductor capital equipment industry, which resulted in decreased demand for, and therefore reduced sales of, our gas delivery systems.

Gross Profit

      Gross profit for the year ended December 31, 2002 decreased 10.6% to $9.3 million from $10.4 million for the year ended December 31, 2001, a decrease of $1.1 million. Gross profit as a percentage of sales decreased to 11.0% for the year ended December 31, 2002 compared to 13.5% for the year ended December 31, 2001. This decrease in gross profit was primarily attributable to a sharp decrease in sales in the fourth quarter of 2002 resulting in a lower absorption of our fixed costs. We also recorded $0.3 million in charges for excess and obsolete inventory for the year ended December 31, 2002, compared to $0.02 million for the year ended December 31, 2001. In addition, we opened a new manufacturing facility in Tualatin, Oregon in October 2002 which increased manufacturing expenses in the fourth quarter of 2002 and did not generate significant sales. We also recorded a charge of $0.1 million to step up inventory associated with the Ultra Clean acquisition.

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Research and Development Expense

      Research and development expense for the year ended December 31, 2002 increased 16.7% to $0.7 million from $0.6 million for the year ended December 31, 2001, an increase of $0.1 million. Research and development expense as a percentage of sales increased to 0.9% for the year ended December 31, 2002 compared to 0.8% for year ended December 31, 2001.

Sales and Marketing Expense

      Sales and marketing expense for the year ended December 31, 2002 increased 46.2% to $1.9 million from $1.3 million for the year ended December 31, 2001, an increase of $0.6 million. Sales and marketing expense as a percentage of sales increased to 2.3% for the year ended December 31, 2002 compared to 1.7% for the year ended December 31, 2001. This increase in sales and marketing expense was primarily attributable to an increase in commissions paid to our sales force as a result of sales made to a significant new customer during 2002. In addition, we increased the size of our sales force during 2002 in order to increase our sales efforts with our significant customers.

General and Administrative Expense

      General and administrative expense for the year ended December 31, 2002 increased 145.2% to $7.6 million from $3.1 million for the year ended December 31, 2001, an increase of $4.5 million. General and administrative expense as a percentage of sales increased to 9.0% for the year ended December 31, 2002 compared to 4.1% for the year ended December 31, 2001. This increase in general and administrative expense was primarily attributable to the buyout of stock options of $2.5 million from, and one-time bonus payments of $0.7 million to, some of our key employees in connection with the Ultra Clean acquisition and a $1.3 million charge related to the expiration of unexercised stock options held by a former executive officer at the time of the Ultra Clean acquisition.

In-Process Research and Development Expense

      In-process research and development expense for the year ended December 31, 2002 was $0.9 million for purchased in-process research and development that had not yet reached technological feasibility and had no alternative future use.

Interest Expense

      Interest expense for the year ended December 31, 2002 decreased to $0.4 million from $0.5 million for the year ended December 31, 2001, a decrease of $0.1 million. This decrease in interest expense was primarily attributable to our lower average short-term borrowing balance during 2002.

Provision for Income Taxes

      Provision for income taxes for the year ended December 31, 2002 was negligible compared to an expense of $2.0 million for the year ended December 31, 2001. This decrease in provision for income taxes was attributable to the decrease in taxable income for the year ended December 31, 2002.

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Unaudited Quarterly Financial Results

      The following tables set forth statement of operations data for the periods indicated in dollars and as a percentage of sales. The information for each of these periods is unaudited and has been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our unaudited operations data for the periods presented. Historical results are not necessarily indicative of the results to be expected in the future.

			Predecessor
												Oct. 1,			Nov. 16
			Quarter Ended									2002			2002			Quarter Ended
												through			through
			Mar.			Jun.			Sept.			Nov. 15,			Dec. 31,			Mar.			Jun.			Sept.			Dec.
			31, 2002			30, 2002			30, 2002			2002			2002			31, 2003			30, 2003			30, 2003			31, 2003
			(In thousands)
Sales			$	13,262		$	27,440		$	26,916		$	8,720		$	7,916		$	17,626		$	17,410		$	16,726		$	25,758
Cost of goods sold				12,067			23,469			22,993			8,457			7,972			16,245			14,768			14,605			21,695
Gross profit (loss)				1,195			3,971			3,923			263			(56	)		1,381			2,642			2,121			4,063
Operating expenses:
	Research and development			135			187			202			110			99			259			268			290			338
	Sales and marketing			273			488			619			206			332			471			553			595			657
	General and administrative			611			812			856			4,346			962			821			2,051			802			1,304
	In-process research and development			—			—			—			—			889			—			—			—			—
		Total operating expenses		1,019			1,487			1,677			4,662			2,282			1,551			2,872			1,687			2,299
Income (loss) from operations				176			2,484			2,246			(4,399	)		(2,338	)		(171	)		(230	)		434			1,765
Other income (expense)
	Interest expense, net			(50	)		(43	)		(53	)		(24	)		(182	)		(403	)		(333	)		(371	)		(351	)
	Other income (expense), net			—			—			—			(6	)		4			(2	)		(3	)		(4	)		9
		Total other expense		(50	)		(43	)		(53	)		(30	)		(178	)		(405	)		(336	)		(375	)		(342	)
Income (loss) before income taxes				126			2,441			2,193			(4,429	)		(2,516	)		(576	)		(566	)		59			1,423
Income tax (provision) benefit				(35	)		(1,103	)		(910	)		1,406			667			132			411			(38	)		(737	)
Net income (loss)			$	91		$	1,338		$	1,283		$	(3,023	)	$	(1,849	)	$	(444	)	$	(155	)	$	21		$	686

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			Predecessor
			Quarter Ended												Nov.			Quarter Ended
												Oct. 1,			16,
			Mar.			Jun.			Sept.			through			through			Mar.			Jun.			Sept.			Dec.
			31,			30,			30,			Nov. 15,			Dec. 31,			31,			30,			30,			31,
			2002			2002			2002			2002			2002			2003			2003			2003			2003
Sales				100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold				91.0	%		85.5	%		85.4	%		97.0	%		100.7	%		92.2	%		84.8	%		87.3	%		84.2	%
Gross profit (loss)				9.0	%		14.5	%		14.6	%		3.0	%		(0.7	)%		7.8	%		15.2	%		12.7	%		15.8	%
Operating expenses:
	Research and development			1.0	%		0.7	%		0.8	%		1.3	%		1.3	%		1.5	%		1.5	%		1.7	%		1.3	%
	Sales and marketing			2.1	%		1.8	%		2.3	%		2.4	%		4.2	%		2.7	%		3.2	%		3.6	%		2.6	%
	General and administrative			4.6	%		3.0	%		3.2	%		49.8	%		12.2	%		4.7	%		11.8	%		4.8	%		5.1	%
	In-process research and development			—			—			—			—			11.2	%		—			—			—			—
		Total operating expenses		7.7	%		5.4	%		6.2	%		53.5	%		28.8	%		8.8	%		16.5	%		10.1	%		8.9	%
Income (loss) from operations				1.3	%		9.1	%		8.3	%		(50.4	)%		(29.5	)%		(1.0	)%		(1.3	)%		2.6	%		6.9	%
Other income (expense):
	Interest expense, net			(0.4	)%		(0.2	)%		(0.2	)%		(0.3	)%		(2.3	)%		(2.3	)%		(1.9	)%		(2.2	)%		(1.4	)%
	Other income (expense), net			0.0	%		0.0	%		0.0	%		(0.1	)%		0.1	%		(0.0	)%		(0.0	)%		(0.0	)%		0.0	%
		Total other expense		(0.4	)%		(0.2	)%		(0.2	)%		(0.4	)%		(2.2	)%		(2.3	)%		(1.9	)%		(2.2	)%		(1.3	)%
Income (loss) before income tax				1.0	%		8.9	%		8.1	%		(50.8	)%		(31.8	)%		(3.3	)%		(3.3	)%		0.4	%		5.5	%
Income tax (provision) benefit				(0.3	)%		(4.0	)%		(3.4	)%		16.1	%		8.4	%		0.7	%		2.4	%		(0.2	)%		(2.9	)%
Net income (loss)				0.7	%		4.9	%		4.8	%		(34.7	)%		(23.4	)%		(2.5	)%		(0.9	)%		0.1	%		2.7	%

Liquidity and Capital Resources

      Historically, we have required capital principally to fund our working capital needs, satisfy our debt obligations, maintain our equipment and purchase new capital equipment. We anticipate that our operating cash flow, together with the net proceeds of this offering and available borrowings under our revolving credit facility, will be sufficient to meet our working capital requirements, capital lease obligations, expansion plans and technology development projects for at least the next twelve months. The adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth, the cyclical expansion or contraction of the semiconductor capital equipment industry and capital expenditures required to meet possible increased demand for our products. Prior to the Ultra Clean acquisition, we relied on capital contributions and borrowings from Mitsubishi to fund our liquidity needs. As of December 31, 2003, we had cash of $6.0 million as compared to $6.2 million as of December 31, 2002. We estimate that our net proceeds from this offering will be approximately $           million after deducting the underwriting discount and estimated offering expenses payable by us, based on an assumed initial public offering price of $           per share. We expect to use approximately $29.3 million of the net proceeds to repurchase our Series A Senior Notes held by FP-Ultra Clean, LLC, our principal stockholder, and approximately $1.3 million to repurchase our Series A Senior Notes held by some of our key employees. In addition, we have agreed to pay Francisco Partners a one-time fee of $2.0 million for advisory services performed in connection with our initial public offering. See “Use of Proceeds.”

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      For the year ended December 31, 2003, we generated cash from operating activities of $0.4 million, primarily attributable to generating net income from operations and carrying a higher level of payables compared with the year ended December 31, 2002. These increases were offset by funding an increase in accounts receivable and inventories. For the year ended December 31, 2002, we generated cash from operating activities of $2.7 million, primarily attributable to increases in accounts payable and other liabilities and from lower inventory requirements associated with the downturn in the semiconductor capital equipment industry which resulted in a decreased demand for our gas delivery systems. For the year ended December 31, 2001, we had a net use of $0.6 million in cash from operating activities.

      For the year ended December 31, 2003, we used net cash from investing activities of $0.5 million, primarily for the purchase of computer hardware and an engineering software application. For the year ended December 31, 2002, we used net cash from investing activities of $26.3 million in connection with the Ultra Clean acquisition and $1.7 million to construct and equip a new manufacturing facility in Tualatin, Oregon. For the year ended December 31, 2001, we used net cash from investing activities of $0.6 million, primarily to construct and equip a new manufacturing facility in Austin, Texas.

      For the year ended December 31, 2003, we used cash in financing activities of $0.1 million for principal payments on our capital lease obligations. For the year ended December 31, 2002, cash provided by financing activities was $31.0 million, primarily from the issuance of our Series A Senior Notes and common stock in connection with the Ultra Clean acquisition. Of these proceeds, $9.0 million was used to repay borrowings from Mitsubishi under a revolving credit facility. For the year ended December 31, 2001, we used cash in financing activities of $1.7 million, primarily for repayment of borrowings from Mitsubishi.

Revolving Credit Facility

      In June 2003, our wholly-owned subsidiary, Ultra Clean Technology Systems and Service, Inc., entered into a revolving credit facility with Union Bank of California providing for borrowings of up to $10.0 million based upon a defined borrowing base. The proceeds of the revolving credit facility may only be used for working capital purposes. Ultra Clean Technology Systems and Service, Inc. has never utilized this revolving credit facility. We have unconditionally guaranteed all obligations under this facility. These obligations are secured by substantially all of our and their respective assets. Borrowings under the revolving credit facility bear interest, at our option, at a rate equal to 2% per annum plus LIBOR or at 0.25% per annum plus the reference rate established from time to time by the lender. Under the terms of the credit facility agreement, we are subject to customary covenants related to our business and financial condition. We will be in default under the revolving credit facility if FP-Ultra Clean, LLC ceases to hold, directly or indirectly, at least 50% of our voting interests.

Capital Expenditures

      We spent $0.5 million in capital expenditures for the year ended December 31, 2003, $1.8 million for the year ended December 31, 2002 and $0.6 million for the year ended December 31, 2001. We do not anticipate significant requirements for additional capital expenditures in the next twelve months but our requirements are subject to change depending upon industry conditions.

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Contractual Obligations and Contingent Liabilities and Commitments

      Other than operating leases for certain equipment and real estate, we have no significant off-balance sheet transactions, unconditional purchase obligations or similar instruments and, other than with respect to the revolving credit facility described above, are not a guarantor of any other entities’ debt or other financial obligations. The following table presents a summary of our future minimum lease payments:

		Capital		Operating
Year Ending December 31:		Leases		Leases*
		(in thousands)
	2004		123		773
	2005		92		362
	2006		55		293
	2007		31		133
Total		$	301	$	1,561

*  Operating lease expense reflects the fact that (1) the lease for our headquarters facility in Menlo Park, California expires on July 31, 2004 and (2) the lease for our manufacturing facility in Austin, Texas expires in 2005. We expect to be able to renew our Menlo Park lease prior to its expiration under more favorable terms. We have an option to renew the lease on our Austin facility for an additional five years, which we expect to exercise. Operating lease expense set forth in the above table will increase upon renewal of these two leases.

      At December 31, 2003, $30.0 million aggregate principal amount of our Series A Senior Notes were outstanding and an additional $0.6 million Series A Senior Notes were subject to vesting in the future. We expect to repurchase all of the vested and unvested Series A Senior Notes with a portion of the net proceeds of this offering. See “Use of Proceeds” and “Management — Restricted Securities Purchase Agreements.” As of December 31, 2003, no amount was drawn on our revolving credit facility.

Recently Adopted Accounting Standards

      In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force, or EITF Issue No. 94-3. The provisions of SFAS No. 146 are applicable for restructuring activities initiated after December 28, 2002. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost was recognized at the date of the commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The adoption of SFAS No. 146 on January 1, 2003 did not have a material effect on our consolidated financial statements.

      In November 2002, the FASB issued FASB Interpretation, or FIN, No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation specifies the disclosures to be made by a guarantor in its interim and annual financial statements concerning its obligations under certain guarantees that it has issued. FIN No. 45 also requires a guarantor to recognize a liability, at the inception of the guarantee, for the fair value of obligations it has undertaken in issuing the guarantee. The disclosure requirements of FIN No. 45 are effective for interim and annual periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN No. 45 are effective for guarantees issued or modified after December 31, 2002. The adoption of these provisions did not have a material effect on our consolidated financial statements.

      In December 2002, the EITF reached a consensus on EITF No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities, including when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. The guidance in EITF Issue No. 00-21 is effective for revenue arrangements entered into in fiscal periods

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beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 did not have a material effect on our consolidated financial statements.

      In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities and a revised interpretation of FIN 46 (FIN 46R) in December 2003 (collectively FIN 46). These address consolidation of variable interest entities. FIN 46 provides guidance for determining when a primary beneficiary should consolidate a variable interest entity or equivalent structure that functions to support the activities of the primary beneficiary. The provisions of FIN 46 are effective immediately for all variable interest entities created after January 31, 2003. For variable interest entities created prior to February 1, 2003, the provisions of FIN 46 are effective for our first quarter of fiscal 2004. We do not expect the adoption of FIN 46 to have a material effect on our consolidated financial statements.

      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material effect on our consolidated financial statements.

      In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, Revenue Recognition. SAB 104 updates portions of existing interpretative guidance in order to make this guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of SAB 104 did not have a material effect on our consolidated financial statements.

Qualitative and Quantitative Disclosure About Market Risk

      Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates. After the application of the net proceeds from this offering, we will have no indebtedness for borrowed money and therefore our exposure to market risk related to interest rates is limited. If and when we do enter into future borrowing arrangements or borrow under our existing revolving credit facility, we may seek to manage exposure to interest rate changes by using a mix of debt maturities and variable- and fixed-rate debt, together with interest rate swaps where appropriate, to fix or lower our borrowing costs. We do not make material sales or have material purchase obligations outside of the United States and therefore do not generally have exposure to foreign currency exchange risks.

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BUSINESS

Overview

      We are a developer and supplier of critical subsystems for the semiconductor capital equipment industry, focusing on gas delivery systems. Our gas delivery systems enable the precise delivery of specialty gases used in a majority of the key steps in the semiconductor manufacturing process. Our customers are primarily OEMs of semiconductor capital equipment. These OEMs outsource the manufacturing of their gas delivery systems in order to improve the efficiency and reduce the costs of their design and manufacturing processes. We provide our customers with a full range of services for the development, design, prototyping, engineering, manufacturing and testing of gas delivery systems. We use our engineering and manufacturing expertise, component neutral platform, supply chain management and comprehensive test capabilities to offer our customers high quality products at reduced design-to-delivery cycle times. For the year ended December 31, 2003, our three largest customers by revenue were Applied Materials, Inc., Novellus Systems, Inc. and Lam Research Corporation.

Industry Background

      The manufacture of semiconductors is a highly complex process. Bare silicon wafers undergo a series of chemical, mechanical and physical process steps resulting in the formation of hundreds or thousands of integrated circuits on a single wafer. During the manufacturing process, a wafer may cycle through each process step up to 30 times before manufacturing is complete and each integrated circuit is fully formed.

      Semiconductor manufacturers must frequently add new capital equipment in order to reduce manufacturing costs, add manufacturing capacity and accommodate more technologically advanced manufacturing processes for next generation semiconductor devices. For example, semiconductor manufacturers are increasingly transitioning fabrication machinery from 200mm to 300mm wafer size in order to increase the number of semiconductor devices produced on a single wafer. In addition, the introduction of new materials and advances in the manufacturing process, including smaller line width technologies, have enabled semiconductor manufacturers to significantly increase the functionality and thereby the complexity of semiconductor devices. New manufacturing techniques require absolute precision in the control of the recipes used in the semiconductor manufacturing process. The flow of gases and liquids into and out of the process chambers must be carefully monitored and controlled to ensure proper timing and duration of gas and chemical reactions within the chambers. Minor deviations from the prescribed process recipe or the introduction of contaminants in the process chambers can result in device defects and manufacturing yield loss.

      In order to achieve the required levels of precision and purity in the manufacture of semiconductor devices, gases are delivered to process chambers by delivery systems which have been integrated into a process tool. Gas delivery systems permit contamination-free handling and delivery of dangerous gases and chemicals at highly accurate flow rates, pressures and timing regimens and are used in a majority of the key semiconductor manufacturing process steps.

      A typical gas delivery system consists of one or more gas lines, comprised of several filters, mass flow controllers, regulators, pressure transducers and valves, associated interconnect tubing and an integrated electronic and/or pneumatic control system. Gas delivery systems are highly specific and are tailored to each individual step in the semiconductor manufacturing process as well as to the specific requirements of OEMs and end-users. Gas delivery systems are one of the most technologically complex subsystems incorporated into each process tool and represent a significant portion of the overall cost of each tool.

      The semiconductor capital equipment industry is highly cyclical. VLSI Research estimates that worldwide sales for semiconductor manufacturing equipment totaled $60.3 billion in 2000 and declined to $29.8 billion in 2002. VLSI estimates that this industry will grow 121% between 2002 and 2005.

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      Historically, semiconductor capital equipment manufacturers have either manufactured the components and subsystems for their equipment internally or have relied on a number of small suppliers to provide these products.

      Today, however, OEMs are increasingly outsourcing the development, design, prototyping, engineering, manufacturing, assembly and testing of components and systems to subsystem suppliers in order to:

•  reduce their investments in inventory, property, plant and equipment in the face of cyclical demands for their products;

•  reduce design-to-delivery cycle times;

•  take advantage of subsystem suppliers’ ability to quickly modify and reconfigure product designs;

•  take advantage of subsystem suppliers’ inventory management capabilities and purchasing power; and

•  focus on their core competencies in light of increasing research and development requirements and industry-wide pricing pressure.

Because gas delivery systems are among the most technologically complex subsystems, we believe that OEMs need to establish strong partner relationships with companies that possess the engineering expertise, design capabilities, quality control, financial stability and highly flexible manufacturing operations required to satisfy the cyclical and constantly changing demands of semiconductor manufacturers.

Our Solution

      We are a leading developer and supplier of critical subsystems for the semiconductor capital equipment industry, focusing on gas delivery systems. Our products enable our OEM customers to improve the efficiency and reduce the costs of their design and manufacturing processes.

      We offer our customers:

      A complete outsourced solution for gas delivery systems. We provide our OEM customers with a complete outsourced solution for the development, design, prototyping, engineering, manufacturing and testing of advanced gas delivery systems, one of the most critical and technologically complex elements of our customers’ products. Our engineers work with our customers to improve the design and performance of their gas delivery systems while reducing the system size and overall cost. We combine our highly specialized engineering capabilities and regulatory compliance expertise to produce high performance products that are customized to meet the needs of each of our customers and their respective end-users and to comply with applicable safety and environmental regulations and industry standards. In addition, we use our advanced analytical and automated equipment to perform comprehensive testing and qualification of final gas delivery systems. We provide our customers with a consolidated report of the key components utilized as well as the range of performance features for each gas delivery system we manufacture. We also manage the supply chain logistics required to manufacture gas delivery systems. This reduces the overall number of suppliers and inventory levels that our customers would otherwise have to manage. Furthermore, we believe we are often able to negotiate reduced component prices due to our large volume orders. As a result, we are able to help our customers improve their manufacturing efficiencies, design-to-delivery cycle times, capital utilization and product operating characteristics.

      Improved design-to-delivery cycle times. Our strong relationships with our customers and familiarity with their products and requirements help us to reduce design-to-delivery cycle times for gas delivery systems. Our design teams are highly integrated with the design teams of our customers and in many instances are physically located at the OEM sites. In addition, we have optimized our supply chain management, coordination of design and manufacturing stages of production, logistics expertise and manufacturing controls and can rapidly respond to order requests. This decreases the design-to-delivery cycle times for our customers and reduces the amount of inventory we must carry,

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thereby lowering our manufacturing costs. In addition, we are able to quickly modify and reconfigure product designs in order to meet end-users’ constantly changing requirements as they adjust their manufacturing processes to optimize manufacturing yields and reduce equipment down-time.

      Component neutral design and manufacturing. A typical gas delivery system consists of one or more gas lines, comprised of several filters, mass flow controllers, regulators, pressure transducers and valves, associated interconnect tubing and an integrated electronic and/or pneumatic control system. We do not manufacture any of the components ourselves and are therefore component neutral. This enables us to work with our customers to select the best available components for incorporation into their gas delivery systems. Our component neutral position allows us to recommend components on the basis of technology, performance and cost and to optimize our overall designs based on these criteria. It also enables us to maintain close relationships with a wide range of component suppliers who view us solely as a customer rather than as a competitor.

      Component testing capabilities. In addition to our system testing capabilities, we utilize our engineering expertise to test key components, including mass flow controllers, regulators, pressure transducers and valves, that we incorporate into our gas delivery systems. We have made significant investments in advanced analytic and automated equipment to test and qualify key components. With our component testing capabilities we can perform diagnostic tests, design verification and failure analysis for both our customers and suppliers. Because we are component neutral, we can objectively test and assess a wide range of components. We believe that our component testing capabilities provide us with insight into future technological trends and provide our customers with an important value-added service.

Our Strategy

      Our objective is to be the leading supplier of advanced gas delivery systems that are critical to the semiconductor manufacturing process. We plan to use our development, design, prototyping, engineering, manufacturing and testing expertise and efficiency to allow us to continue to foster strong relationships with our existing customers and penetrate more of their product lines, while concurrently engaging in joint-development projects with new customers. We believe that these efforts will allow us to grow our market share of gas delivery systems and expand into other markets.

      Our strategy is comprised of the following key elements:

      Increase our market share at existing customers. We believe that a significant market opportunity exists to grow our business with sales to our existing customers by both gaining market share from our competitors and obtaining new business in different product families as our customers continue to outsource their gas delivery system requirements. We believe that our continued focus on our technology development, design, engineering, manufacturing and testing expertise and efficiency, our design-to-delivery cycle times and ability to rapidly respond to non-forecasted demands from our customers will allow us to gain market share from our competitors and attract additional business from existing customers. In addition, we are expanding our manufacturing capacity to meet increased customer demand.

      Broaden our customer base by expanding our resources and geographical presence. We plan to continue to grow our business and attract new customers by promoting both the merits of outsourcing by leading OEMs and our own proven ability to meet the demands of OEMs. We plan to expand our geographic footprint in regions that put us in close proximity with both the manufacturing locations of new product families at existing customers as well as with new or potential customers. In addition, we believe significant growth opportunities exist in Europe and Asia. We are currently evaluating the likely cost and most suitable location to build a manufacturing facility in a low cost region, most likely in Asia. As we grow our business, we plan to increase our sales and support resources, as well as design, engineering and manufacturing capabilities.

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      Drive profitable growth with our flexible cost structure. In response to cyclical changes in the demand for semiconductor capital equipment, we undertake cost containment initiatives and benefit from our supply chain efficiencies. We recently completed the expansion of our manufacturing capacity to meet increased customer demand and believe that we are well positioned to respond to an upturn in our business with our current manufacturing capacity. In addition, we believe we can quickly and easily add additional manufacturing personnel and test equipment to meet increased demand. Historically, we have been able to train assembly technicians in two weeks and weld technicians in four weeks. Generally, new test equipment takes less than twelve weeks to design and build.

      Expand into new product markets using our existing expertise. We are committed to expanding beyond gas delivery systems into new product markets such as liquid delivery systems, catalytic steam generation systems and frame assembly design. We believe the following attributes will allow us to enter new markets:

•  our understanding of the semiconductor manufacturing process;

•  our expertise in efficient technology development, design, engineering, manufacturing and testing;

•  our supply chain management expertise; and

•  our strong relationships with existing customers.

      Selectively pursue strategic acquisitions. We may choose to accelerate the growth of our business by selectively pursuing strategic acquisitions. We will consider strategic opportunistic acquisitions that will enable us to expand our geographic reach, secure new customers, diversify into complementary product markets and broaden our technological capabilities and product offerings.

Products

      We develop, design, prototype, engineer, manufacture and test gas delivery systems that enable the precise delivery of numerous specialty gases used in a majority of the key steps in the semiconductor manufacturing process, including deposition, etch, chemical mechanical planarization (a process used to polish off high spots on wafers or films deposited on wafers), cleaning and annealing. Our products control the flow, pressure, sequencing and mixing of specialty gases into and out of the process chambers of semiconductor manufacturing tools.

      A typical gas delivery system consists of one or more gas lines, comprised of several filters, mass flow controllers, regulators, pressure transducers and valves, associated interconnect tubing and an integrated electronic and/or pneumatic control system. These systems are mounted on a pallet and are typically enclosed in a sheet metal encasing.

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      The following diagram depicts a typical gas delivery system configuration:

•  Filters prevent particle matter from entering the process chambers.

•  Mass flow controllers are devices that control the amount of gas flowing into the process chambers.

•  Regulators regulate gas pressure (usually by means of a pre-loaded spring) in order to maintain a constant level of downstream pressure.

•  Pressure transducers are pressure sensors that display and transmit an analog signal of gas pressure.

•  Valves provide positive shut-off for the gas stream, either by pneumatic control or manual operation.

      Our gas delivery systems minimize surface area and regions in the flow stream where contaminants may otherwise collect and stagnate. Our system designs are reconfigurable and can accommodate different components and additional functionality with each new generation of semiconductor devices. Our gas delivery systems are also capable of being upgraded to accommodate changes to existing processes within the lifecycle of a process tool.

      Our gas delivery system designs are developed in collaboration with our customers and are customized to meet the needs of the specific OEM. We do not sell standard systems. Our customers either specify the particular brands of components they want incorporated into a particular system or rely on our design expertise to help them select the appropriate components for their particular system. Our component neutral position allows us to recommend components to our customers on the basis of technology, performance and cost and to optimize our overall designs based on these criteria.

      In addition, we have developed a catalytic steam generator, or CSGS, which we intend to offer as a stand alone product or as an add-on feature to our gas delivery systems. Several semiconductor manufacturing process steps utilize steam to accelerate growth rates or removal rates on wafers. Our CSGS produces ultra high purity steam that is suitable for various manufacturing process steps. Our CSGS can produce steam in a wide range of concentrations to meet various process requirements in both 200 mm and 300 mm wafer applications. Our CSGS features a modular design that is scalable and can be

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engineered to meet numerous process requirements and integrated within the footprint of the process tool. During 2003, our CSGS was beta tested by two semiconductor equipment manufacturers.

Design, Engineering and Manufacturing

      We are able to produce reliable, cost-effective systems as a result of our proven design and engineering, manufacturing and testing expertise and attention to quality.

      Design and engineering. We provide our customers with design, configuration and engineering services for their gas delivery systems. As of December 31, 2003, we had a 42-person engineering department, consisting of mechanical engineers, drafters and configuration analysts. We have engineers working on-site at several of our customers’ facilities.

      We work with our customers to develop new product designs and help them to clarify and define their process tool requirements. Our component neutral position allows us to recommend components on the basis of technology, performance and cost and to optimize our overall designs based on these criteria. Our product designs address our customers’ needs in a reliable, cost-effective and highly customized manner. Our engineers work to quickly identify the appropriate components for a particular design and release the order for these components early in the development process so that material procurement can occur prior to the end of the development cycle. Our engineering design department also provides configuration services in which they define and release to our manufacturing facilities and to the customer a documentation package for each specific system. Additionally, our design expertise helps to ensure that new product designs will comply with applicable safety and environmental regulations and industry standards.

      As semiconductor manufacturers continuously adjust and modify their manufacturing processes to optimize manufacturing yields and reduce equipment down-time, our customers are required to make modifications to their process tools. We partner with our customers to rapidly develop optimal design, manufacturing and production solutions and implement appropriate modifications to gas delivery systems to meet end-users’ requirements. Our engineers are trained on our significant customers’ computer aided design systems in order to facilitate quick turnaround times.

      Manufacturing. Our manufacturing capabilities consist of precision machining, welding and assembly services. The breadth of our capabilities enables us to rapidly develop manufacturing specifications, provide precise and repeatable manufacturing and perform final assembly of complex integrated gas delivery systems. We manufacture components that adhere to strict design tolerances and specifications. We operate clean room manufacturing facilities in Menlo Park, California, Austin, Texas, and Tualatin, Oregon. We selected these manufacturing locations to permit us to be near our key customers and to allow us to interact with these customers on a regular basis. Each of our manufacturing facilities is ISO 9001:2000 certified and has been qualified by our customers with respect to the products we build for them. We generally implement new product and process technologies in our Menlo Park facility before migrating these technologies to our other facilities. In January 2004, we completed the expansion of our clean room manufacturing facility in Austin, Texas in order to accommodate possible growth in demand.

      Our manufacturing process is highly flexible, enabling our customers to make alterations to their final requirements throughout the design, engineering and manufacturing process. This results in decreased design-to-delivery cycle times for our customers. We use product data management software to automate documentation changes driven by the engineering design and redesign processes to manage customer requests. This software works directly with our manufacturing resource planning system to streamline the procurement, inventory management and manufacturing processes.

      Supply-chain management. We use a wide range of component parts and materials in the production of our gas delivery systems, including filters, mass flow controllers, regulators, pressure transducers and valves. We obtain components and other materials from a large number or sources, including single source and sole source suppliers. We use consignment material and just-in-time stocking programs to better manage our component inventories in response to changing customer requirements. These approaches

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enable us to significantly reduce our inventory levels and maintain flexibility in responding to changes in product demand. We believe our close relationships with key suppliers enable us to receive a level of supplier support that substantially strengthens our competitive position. We are able to fulfill customer requirements by pre-buying common parts from approved suppliers. Furthermore, we believe we are often able to negotiate reduced component prices due to our large volume orders. Although supplies of components and materials are currently adequate, shortages could occur due to increased industry demand or other supply interruption.

      Testing. In order to ensure reliability, key components, such as mass flow controllers, valves, regulators and pressure transducers, are qualified prior to being integrated into our systems. These key components are generally tested to verify conformance with industry standards and specifications. Mass flow controllers are tested using a primary calibration test standard prior to installation in a gas delivery system. During the manufacturing process, all functions of the system are tested to assure that the lines are secure and properly connected, components operate correctly and pneumatic logic is correct as designed and built. This testing process also serves as a secondary test on the calibration of the mass flow controllers. Prior to shipping, each gas delivery system is thoroughly tested and verified to a zero particle level. Test data is made available to customers. In addition, every system shipped from our manufacturing facilities is digitally photographed, providing a permanent inspection record of the product. We use these photographs to assist us in answering customers’ questions about configuration or revision status while equipment is in the field and unavailable for direct inspection.

      Quality control. Our quality management system allows us to access real-time corrective action reports, nonconformance reports, customer complaints and controlled documentation. In addition, our senior management conducts quarterly reviews of our quality control system to evaluate effectiveness. Our customers also complete quarterly surveys which allow us to measure satisfaction.

      As a result of our commitment to, and strict compliance with, quality standards, we have received several service and quality awards from key customers for our performance and quality business processes. We were awarded the Novellus Outstanding Services Award in 2001 and 2002, the Novellus Outstanding Quality Award in 2002 and 2003 and the Lam Research Supplier Excellence Award in 2003. In addition, our products and manufacturing processes are designed to comply with applicable safety and environmental regulations and industry standards.

Customers

      We sell our products to manufacturers of capital equipment for the production of semiconductor devices. The semiconductor capital equipment industry is highly concentrated and we are therefore highly dependent upon a small number of customers.

      The following table sets forth the percentages of our total net sales to our three largest customers in each period presented.

	Year Ended
	December 31,
	2001			2002			2003
Applied Materials, Inc.		51	%		46	%		47	%
Novellus Systems, Inc.		40	%		26	%		24	%
Lam Research Corporation		—			26	%		21	%
Three largest customers as a group		91	%		98	%		92	%

      We have successfully qualified as a supplier with each of our customers. This lengthy qualification process involves the inspection and audit of our facilities and evaluation by our customers of our engineering, documentation, manufacturing and quality control processes and procedures before that customer places orders for our products. Our customers will generally only place orders with suppliers who have met and continue to meet their qualification criteria.

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Sales and Support

      We sell our products through our direct sales force which, as of December 31, 2003, consisted of a total of 15 sales directors, account managers and sales support staff. Our sales directors are responsible for establishing sales strategy and setting the objectives for specific customer accounts. Each account manager is dedicated to a specific customer account and is responsible for the day-to-day management of that customer. Account managers work closely with customers and in many cases provide on-site support. Account managers often attend customers’ internal meetings related to production, engineering design and quality to ensure that customer expectations are interpreted and communicated properly to our operations group. Account managers also work with our customers to identify and meet their cost and design-to-delivery cycle time objectives.

      We have dedicated account managers responsible for new business development for gas delivery system products and related technologies. Our new business development account managers initiate and develop long-term, multi-level relationships with customer accounts and work closely with customers on new business opportunities throughout the design-to-delivery cycle.

      Our sales force includes technical sales support for order placement, spare parts quotes and production status updates. We have a technical sales associate located at each of our manufacturing facilities. In addition, we have developed a service and support infrastructure to provide our customers with service and support 24 hours a day, seven days a week. Our dedicated field service engineers provide customer support through the performance of on-site installation, servicing and repair of our gas delivery systems.

Technology Development

      We engage in ongoing technology development efforts in order to remain a technology leader for gas delivery systems. We have a technology development group which, as of December 31, 2003, consisted of three persons, two of whom hold doctoral degrees. In addition, our design engineering and new product engineering groups support our technology development activities.

      Our technology development group works closely with our customers to identify and anticipate changes and trends in next generation semiconductor manufacturing equipment and, in particular, gas delivery systems. Our technology development group is involved in customer technology partnership programs that focus on process application requirements for gas delivery systems. These development efforts are designed to meet specific customer requirements in the areas of gas delivery system design, materials, component selection and functionality. Our technology development group also works directly with our suppliers to help them identify new component technologies and make necessary changes in, and enhancements to, the components that we integrate into our products. Our analytic and testing capabilities enable us to evaluate multiple supplier component technologies and provide customers with a wide range of appropriate component and design choices for their gas delivery systems. Our analytic and testing capabilities also enable us to predict technological changes and the requirements in component features for next generation gas delivery systems.

      Through our technology development efforts, we are developing additional features to improve the performance and functionality of our gas delivery systems. Recently, we have also developed a proprietary catalytic steam generator product which we intend to offer as a stand alone product or as an additional feature to our gas delivery systems.

      Our self-funded technology development and new product engineering expenses were approximately $613,000, $733,000 (excluding our write-off of $889,000 of purchased in-process research and development) and $1,155,000 for 2001, 2002 and 2003. We perform our technology development activities principally at our facilities in Menlo Park, California.

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Intellectual Property

      Our success depends in part on our ability to maintain and protect our proprietary technology and to conduct our business without infringing the proprietary rights of others. Our business is largely dependent upon our design, engineering, manufacturing and testing know-how. We also rely on a combination of trade secrets and confidentiality provisions, and to a much lesser extent, patents, copyrights and trademarks, to protect our proprietary rights. As of December 31, 2003, we had four issued United States patents, all of which expire in 2018. As of December 31, 2003, we had one additional United States patent application pending. None of our patents is material to our business. Intellectual property that we develop on behalf of our customers is generally owned exclusively by those customers.

      We routinely require our employees, suppliers and potential business partners to enter into confidentiality and non-disclosure agreements before we disclose to them any sensitive or proprietary information regarding our products, technology or business plans. We require employees to assign to us proprietary information, inventions and other intellectual property they create, modify or improve.

      We may be required to spend significant resources to monitor and protect our intellectual property rights. We may not be able to detect infringement of our proprietary rights and may lose our competitive position in the market if any such infringement occurs. In addition, competitors may design around our technology or develop competing technologies and know-how.

      In addition, third parties may claim that we are infringing their intellectual property rights, and although we do not know of any infringement by our products of the valid intellectual property rights of third parties, we may be unaware of intellectual property rights of others that may cover some of our products. Any litigation regarding patents or other intellectual property rights could be costly and time-consuming and divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to obtain licenses, which we may not be able to obtain on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of certain of our products if any infringement claims against us prove successful.

Competition

      Our industry is highly fragmented, and we have numerous competitors. Our principal competitors are Celerity Group, Inc., Integrated Flow Systems, Matheson Tri-Gas, Inc. and Wolfe Engineering, Inc. When we compete for new business at OEMs, we face competition from other suppliers of gas delivery systems as well as the OEM’s internal manufacturing group. Although we have not faced competition in the past from the largest subsystem and component manufacturers in the semiconductor capital equipment industry, these suppliers could compete with us in the future. In addition, OEMs that have elected to outsource their gas delivery systems could elect in the future to develop and manufacture these subsystems internally, leading to further competition. We expect to face new competitors as we enter new markets. Some of our competitors have substantially greater financial, technical, manufacturing and marketing resources than we do. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that could adversely affect sales of our current and future products. In addition, the limited number of potential customers in our industry further intensifies competition. We anticipate that increased competitive pressures will cause intensified price-based competition and we may have to reduce the prices of our products. The primary competitive factors in our industry are price, technology, quality, design-to-delivery cycle time, reliability in meeting product demand, service and historical customer relationships.

Employees

      As of December 31, 2003, we had 229 employees, of which 179 were full-time regular employees and 50 were temporary employees. Of our total employees, 42 were in engineering, 3 in technology development, 15 in sales and support, 80 in direct manufacturing, 72 in indirect manufacturing and 17 in

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executive and administrative functions. None of our employees are represented by a labor union and we have not experienced any work stoppages.

Facilities

      Our headquarters are located in Menlo Park, California, where we lease approximately 32,000 square feet of commercial space under a term lease that expires on July 31, 2004. We expect to be able to renew this lease prior to its expiration on more favorable terms. We use this space for our principal administrative, sales and support, engineering and technology development facilities and for manufacturing purposes. Approximately 6,500 square feet at our Menlo Park facility is a clean room manufacturing facility. We also have manufacturing facilities in Austin, Texas, and Tualatin, Oregon. In Austin, we lease approximately 12,000 square feet of manufacturing space under a lease term that expires on August 1, 2005, subject to renewal for up to five years at our option. Approximately 3,500 square feet in Austin is a clean room manufacturing facility. In Tualatin, we lease approximately 15,000 square feet of manufacturing space under a term lease that expires on October 15, 2007, subject to renewal for up to five years at our option. Approximately 4,000 square feet in Tualatin is a clean room manufacturing facility.

Governmental Regulation and Environmental Matters

      Our operations are subject to federal, state and local regulatory requirements and foreign laws, relating to environmental, waste management and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and wastes, as well as practices and procedures applicable to the construction and operation of our facilities. Our past or future operations may result in exposure to injury or claims of injury by employees or the public which may result in material costs and liabilities to us. Although some risk of costs and liabilities related to these matters is inherent in our business, we believe that our business is operated in substantial compliance with applicable regulations. However, new, modified or more stringent requirements or enforcement policies could be adopted, which could adversely affect us.

Legal Proceedings

      We are not currently a party to any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

      Set forth below is information concerning our executive officers and directors as of December 31, 2003:

Name	Age		Position
Clarence L. Granger		55	President, Chief Executive Officer, Chief Operating Officer and Director
Kevin L. Griffin		49	Chief Financial Officer
Bruce Wier		55	Vice President of Engineering
Deborah Hayward		42	Vice President of Sales
Sowmya Krishnan, Ph.D.		35	Vice President of Technology and Chief Technology Officer
Dipanjan Deb		34	Director
David T. ibnAle		32	Director
Thomas M. Rohrs		53	Director

      Clarence L. Granger, has served as our Chief Executive Officer since November 2002, as our President and Chief Operating Officer since March 1999 and as a director since May 2002. Mr. Granger served as our Executive Vice President and Chief Operating Officer from January 1998 to March 1999 and as our Executive Vice President of Operations from April 1996 to January 1998. Prior to joining Ultra Clean in April 1996, he served as Vice President of Media Operations for Seagate Technology from 1994 to 1996. Prior to that, Mr. Granger worked for HMT Technology as Chief Executive Officer from 1993 to 1994, as Chief Operating Officer from 1991 to 1993 and as President from 1989 to 1994. Prior to that, Mr. Granger worked for Xidex as Vice President and General Manager, Thin Film Disk Division, from 1988 to 1989, as Vice President, Santa Clara Oxide Disk Operations, from 1987 to 1988, as Vice President, U.S. Tape Operations, from 1986 to 1987 and as Director of Engineering from 1983 to 1986. Mr. Granger holds a master of science degree in industrial engineering from Stanford University and a bachelor of science degree in industrial engineering from the University of California at Berkeley.

      Kevin L. Griffin has served as our Chief Financial Officer since February 2000. Mr. Griffin served as our controller from May 1992 to February 2000. Prior to joining Ultra Clean in May 1992, Mr. Griffin served as Manager of Accounting and Finance at Mitsubishi International Corporation from 1989 to 1991. Prior to that, Mr. Griffin was employed by Rudolf & Sletten as a project accountant from 1987 to 1988. Mr. Griffin holds a bachelor of arts degree in economics and history from the University of California at Santa Barbara.

      Bruce Wier has served as our Vice President of Engineering since February 2000. Mr. Wier served as our Director of Design Engineering from July 1997 to February 2000. Prior to joining Ultra Clean in July 1997, Mr. Wier was the Engineering Manager for the Oxide Etch Business Unit at Lam Research from April 1993 to June 1997. Prior to that, Mr. Wier was the Senior Project Engineering Manager at Genus from May 1990 to April 1993, the Mechanical Engineering Manager at Varian Associates from November 1985 to May 1990, and the Principal Engineer/ Project Manager at Eaton Corporation from February 1981 to November 1985. Mr. Wier is also on the board of directors of, and is the Chief Financial Officer for, Acorn Travel, a travel company formed by his wife in 1999. Mr. Wier holds a bachelor of science degree cum laude in mechanical engineering from Syracuse University.

      Deborah Hayward has served as our Vice President of Sales since October 2002. Ms. Hayward served as our Senior Sales Director from May 2001 to October 2002, as Sales Director from February 1998 to May 2001 and as a major account manager from October 1995 to February 1998. Prior to joining Ultra Clean in 1995, she was a customer service manager and account manager at Brooks Instruments from 1985 to 1995.

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      Sowmya Krishnan, Ph.D., has served as our Vice President of Technology since January 2004 and as our Chief Technology Officer since February 2001. Dr. Krishnan served as our Director of Technology Development from January 1998 to January 2001, as Manager of Technology Development from January 1995 to December 1997 and as manager of a joint evaluation program between Ultra Clean and VLSI Technology from February 1994 to December 1994. Dr. Krishnan holds a master of science degree in chemical engineering and a doctorate degree in chemical engineering from Clarkson University.

      Dipanjan Deb has served as a director of Ultra Clean since November 2002. Mr. Deb is a founder of Francisco Partners and has been a partner since its formation in August 1999. Prior to joining Francisco Partners, Mr. Deb was a principal with Texas Pacific Group from 1998 to 1999. Earlier in his career, Mr. Deb was director of semiconductor banking at Robertson Stephens & Company and a management consultant at McKinsey & Company. Mr. Deb is also on the board of directors of AMIS Holdings, Inc., GlobespanVirata, Inc., Legerity, Inc. and NPTest Holding Corporation. Mr. Deb holds a bachelor of science degree in electrical engineering and computer science from the University of California, Berkeley, where he was a Regents Scholar, and masters in business administration from the Stanford University Graduate School of Business.

      David T. ibnAle has served as a director of Ultra Clean since November 2002. Mr. ibnAle is a Principal of Francisco Partners and has been an investment professional with Francisco Partners since December 1999, when he joined as a Vice President. Prior to joining Francisco Partners, Mr. ibnAle was an Associate with Summit Partners from 1996 to 1998. Prior to that he worked in the Corporate Finance Department of Morgan Stanley & Co. from 1994 to 1996. Mr. ibnAle also worked in the Fixed Income Division of Goldman Sachs & Co. Mr. ibnAle holds an A.B. in public policy and an A.M. in international development policy from Stanford University and a masters in business administration from the Stanford University Graduate School of Business.

      Thomas M. Rohrs has served as a director of Ultra Clean since January 2003. Mr. Rohrs has been Vice President, Strategic Development, of Applied Global Services since October 2003. Prior to that, he was a senior advisor to Applied Materials, Inc. from May 2002 to September 2003 and Senior Vice President, Global Operations, at Applied Materials, Inc. from November 1997 to April 2002. Prior to that he was Vice President, Worldwide Operations, for Silicon Graphics from 1992 to 1997 and Senior Vice President, Manufacturing and Customer Service, at MIPS Computer Systems from 1989 to 1992. Prior to 1989, Mr. Rohrs was employed by Hewlett Packard in a number of managerial positions. Mr. Rohrs is on the board of directors of Magma Design Automation, Inc., Ion Systems, Inc. and nthOrbit, Inc. Mr. Rohrs has a bachelor of science in mechanical engineering from the University of Notre Dame and a masters in business administration from Harvard Business School. He serves on the Engineering Advisory Council for the University of Notre Dame.

Board Structure and Compensation

      Our principal stockholder, FP-Ultra Clean, LLC, which is controlled by Francisco Partners, has the right to nominate for election a majority of the members of our board of directors as long as it holds at least 25% of our common stock. However, as FP-Ultra Clean, LLC’s ownership interest in us decreases, its right to nominate directors will be reduced as follows:

	Percent of nominees for election
Percentage stock ownership	to our board of directors
25% or more	50%
Less than 25%	25%
Less than 20%	20%
Less than 10%	10%
Less than 5%	0%

      Our board of directors currently consists of four directors. All of our directors will stand for election at each annual meeting of stockholders. Non-employee directors will be paid an annual fee in an amount

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to be determined. Directors will be eligible for stock option grants under our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering. For the year ended December 31, 2003, Mr. Rohrs was granted options to purchase 130,000 shares of our common stock in connection with services performed as a director. He also earned a one-time fee of $25,000 in connection with services performed during 2003.

      Our board of directors has the following committees:

      Audit Committee. Our audit committee consists of Messrs. Deb, ibnAle and Rohrs. The audit committee reviews our financial statements and accounting practices and makes recommendations to our board of directors regarding the selection of independent auditors. In addition, any transaction in which one of our directors has a conflict of interest must be disclosed to our board of directors and reviewed by the audit committee. Under our corporate governance guidelines, if a director has a conflict of interest, the director must disclose the interest to the audit committee and our board of directors and must recuse himself or herself from participation in the discussion and must not vote on the matter. In addition, the audit committee is authorized to retain special legal, accounting or other advisors in order to seek advice or information with respect to all matters under consideration, including potential conflicts of interest.

      Compensation Committee. Our compensation committee consists of Messrs. Deb, ibnAle and Rohrs. The compensation committee makes recommendations to our board of directors concerning salaries and incentive compensation for our officers and employees and administers our employee benefit plans.

      Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Messrs. Deb, ibnAle and Rohrs. The nominating and corporate governance committee identifies and recommends nominees to our board of directors, oversees and sets compensation for our directors and oversees compliance with our corporate governance guidelines.

Compensation Committee Interlocks and Insider Participation

      No member of the compensation committee will serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Additional information concerning transactions between us and entities affiliated with members of the compensation committee is included in this prospectus under the caption “Certain Relationships and Related Party Transactions.”

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Executive Compensation

      The following table sets forth compensation information for 2003 for our executive officers.

Summary Compensation Table

		Annual Compensation
							Other
							Annual	All Other
Name And Principal Position		Salary		Bonus			Compensation	Compensation (1)
Clarence L. Granger		$	233,076	$	34,454			$	10,937
	President and Chief Executive Officer
Kevin L. Griffin			179,663		17,498				665
	Chief Financial Officer
Bruce Wier			180,838		13,707				9,404
	Vice President of Engineering
Deborah Hayward			110,298		70,415	(2)			2,956
	Vice President of Sales
Sowmya Krishnan, Ph.D.			123,654		6,124				3,700
	Vice President of Technology and Chief Technology Officer

(1)	Amounts shown under “All Other Compensation” reflect our contributions to our 401(k) plan on behalf of our executive officers. In addition, the amounts shown for Mr. Granger, Mr. Griffin and Mr. Wier also include $2,197, $665 and $1,266, respectively, for life insurance premiums.
(2)	This amount reflects commissions paid to Ms. Hayward.

Stock Option Grants in 2003

      The following table sets forth information concerning grants of options to acquire shares of our common stock granted to our executive officers for the year ended December 31, 2003. All options listed in the table become vested and exercisable over a four year period from the grant date, with the first 25% vesting on the first anniversary of the grant date and  1/48 of the shares vesting monthly thereafter. The options were granted at an exercise price equal to the fair market value of our common stock on the grant date, as determined by our board of directors.

	Individual Grants
										Potential Realizable Value at
	Number of		Percentage of							Assumed Annual Rates of
	Securities		Total Options							Stock Price Appreciation for
	Underlying		Granted to							Option Term(1)
	Options		Employees in			Exercise Price
Name	Granted		2003			($/Share)		Expiration Date		5%	10%
Clarence L. Granger		1,540,000		36.08	%	$	0.25		2/20/2013	$	$
Kevin L. Griffin		500,000		11.72			0.25		2/20/2013
Bruce Wier		355,000		8.32			0.25		2/20/2013
Deborah Hayward		185,000		4.33			0.25		2/20/2013
		65,000		1.52			0.25		7/28/2013
Sowmya Krishnan		125,000		2.93			0.25		2/20/2013

(1)  This represents hypothetical gains that would exist for the options at the end of their respective terms based on assumed annualized rates of compound stock price appreciation from the date of this prospectus of 5% and 10% based on an assumed initial public offering price of $          per share. The disclosure of 5% and 10% assumed rates is required by the rules of the Securities and Exchange Commission and does not represent our estimate or projection of future common stock prices or stock price growth.

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Aggregate Option Exercises in 2003 and Year-End Option Values

      The following table sets forth information regarding unexercised options held as of December 31, 2003 by each of our executive officers. None of our executive officers exercised any stock options in the year ended December 31, 2003.

	Number of Securities				Value of Unexercised
	Underlying Unexercised Options				In-The-Money Options at
	at December 31, 2003				December 31, 2003(1)
Name	Exercisable		Unexercisable		Exercisable		Unexercisable
Clarence L. Granger		—		1,540,000		—	$
Kevin L. Griffin		—		500,000		—
Bruce Wier		—		355,000		—
Deborah Hayward		—		250,000		—
Sowmya Krishnan		—		125,000		—

(1)  The value of unexercised in-the-money options is based on an assumed initial public offering price of $          per share, minus the exercise price of the option, multiplied by the number of shares issued upon the exercise of the option.

Employment Agreements

Employment Agreement with Clarence L. Granger

      We have entered into an employment agreement with Clarence L. Granger dated November 15, 2002, pursuant to which he agreed to serve as our President and Chief Executive Officer. His employment agreement provides for a base salary of $240,000. He received a signing bonus, of which approximately $74,000 was paid in cash, $88,000 was paid in cash but used to purchase our common stock, and $265,000 was placed in a deferred compensation arrangement payable after seven years (or earlier in the discretion of our board of directors). Under this deferred compensation arrangement, we have agreed to pay interest of 2.7% per annum on the deferred amount, payable on June 30 and December 31 of each year. In the event that Mr. Granger is terminated by us without cause at any time or Mr. Granger resigns within six months after a change of control with good reason, he is entitled to continue to receive the amount of his base salary for 12 months (offset by any income earned by him during such 12 months) and 12 months’ accelerated vesting of his options. Mr. Granger also entered into a non-compete agreement with us which expires on November 15, 2004. During the third quarter of 2003, Mr. Granger agreed to a voluntary reduction in his base salary as a result of our decreased sales stemming from the continued downturn in the semiconductor capital equipment industry.

Employment Agreement with Kevin L. Griffin

      We have entered into an employment agreement with Kevin L. Griffin dated November 15, 2002, pursuant to which he agreed to serve as our Chief Financial Officer. His employment agreement provides for a base salary of $185,000. He received a signing bonus of $314,000. In the event that Mr. Griffin is terminated by us without cause, he is entitled to continue to receive the amount of his base salary for 12 months (offset by any income earned by him during such 12 months) and 12 months’ accelerated vesting of his options. Mr. Griffin also entered into a non-compete agreement with us which expires on November 15, 2004. During the third quarter of 2003, Mr. Griffin agreed to a voluntary reduction in his base salary as a result of our decreased sales stemming from the continued downturn in the semiconductor capital equipment industry.

Restricted Securities Purchase Agreements

      In connection with the Ultra Clean acquisition, we entered into Restricted Securities Purchase Agreements, each dated as of November 26, 2002, with some of our key employees, including Messrs. Granger, Griffin and Wier and Dr. Krishnan. Pursuant to these agreements, we issued and sold an

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aggregate of 715,900 shares of our common stock at a purchase price of $0.25 per share and $536,900 aggregate principal amount of our Series A Senior Notes to these key employees. We also granted an aggregate of 1,074,100 shares of our common shares and $805,500 aggregate principal amount of our Series A Senior Notes to these same key employees, which we refer to as bonus securities. The bonus securities vest at a rate of 25% annually over a four year period, subject to continued employment, and become fully vested upon a change in control. A “change in control” will be deemed to have occurred upon the consummation of a merger or consolidation of us with or into any other entity, the sale or disposition of all or substantially all of our assets or any acquisition by any person or persons of the beneficial ownership of more than 50% of the voting power of our equity securities in a single transaction or series of related transactions; provided that an underwritten public offering of our securities shall not be considered a change in control. The first 25% of the bonus securities vested in November 2003. We expect to repurchase all of the vested and unvested Series A Senior Notes with a portion of the net proceeds of this offering. See “Use of Proceeds.” Unvested shares of our common stock will continue to vest pursuant to the terms of the Restricted Securities Purchase Agreements.

      In addition, on February 20, 2003, we entered into a second Restricted Securities Purchase Agreement with Mr. Granger pursuant to which we issued and sold to him an aggregate of 190,580 shares of our common stock at a purchase price of $0.25 per share, for a total purchase price of $47,645.

      The following table sets forth the purchase by and grant of notes and common stock to some of our key employees:

Name	Purchased Shares		Purchased Notes		Bonus Shares		Bonus Notes
Clarence L. Granger		615,380	$	318,600		637,200	$	477,900
Kevin L. Griffin		121,300		91,000		182,000		136,500
Bruce Wier		84,900		63,700		127,400		95,600
Sowmya Krishnan		30,300		22,700		45,500		34,100
Other		54,600		40,900		82,000		61,400
Total		906,480	$	536,900		1,074,100	$	805,500

Benefit Plans

Amended and Restated 2003 Stock Incentive Plan

      Our board of directors has adopted, and our stockholders have approved, our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering. The plan provides for the grant of stock options and other stock-based awards, such as restricted stock or restricted stock units. Employees, consultants and non-employee members of our board of directors of us or any of our subsidiaries are eligible to receive awards under the plan.

      As of December 31, 2003, there were outstanding options to purchase 4,221,000 shares of common stock under the plan. Upon completion of this offering, stock awards under the plan may consist of a maximum of                      shares of common stock, subject to adjustment in the event of certain corporate events such as stock splits.

      Our board of directors or a committee appointed by our board of directors administers the plan. Subject to the provisions of the plan, our board of directors or the committee, as applicable, has the authority to, among other things, make rules and regulations appropriate for the administration of the plan and determine the persons to whom awards may be granted, the number of shares to be covered by each award, the exercise or purchase price of each award, if applicable, the vesting schedule of each award, and whether a stock option will be designated as an incentive stock option or non-statutory stock option.

      Unless otherwise provided in the optionee’s option agreement, if the optionee’s employment is terminated other than due to death or disability or for cause, then the optionee has three months from the date of termination to exercise any options that are vested and exercisable on the date of termination. If

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the optionee’s termination of employment is due to the optionee’s death or disability, all vested and exercisable stock options on the date of termination will remain exercisable for 12 months following the date of termination. If the optionee’s employment is terminated for cause, any outstanding options, whether vested or unvested, will terminate immediately. Regardless of the reason for termination (including death or disability), in no event may any option be exercised following its expiration.

      Subject to certain conditions and stockholder approval as necessary, our board of directors may amend, alter or terminate the plan at any time, but no amendment may impair the rights of any optionee with respect to any outstanding option without that optionee’s consent. Unless terminated earlier by our board of directors, the plan will terminate in 2013.

Employee Stock Purchase Plan

      Our board of directors has adopted, and our stockholders have approved, our Employee Stock Purchase Plan, to be implemented immediately prior to the completion of this offering. The stock purchase plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. The stock purchase plan is designed to enable eligible employees to purchase shares of our common stock at a discount on a periodic basis (expected to be every six months) through payroll deductions.                      shares of our common stock are reserved for issuance under our stock purchase plan.

      Our employees generally will be eligible to participate in the stock purchase plan if they are employed by us or by a subsidiary of ours that we designate. Our employees are not eligible to participate in the stock purchase plan if they are 5% stockholders or would become 5% stockholders as a result of their participation in the stock purchase plan. An employee’s participation in the stock purchase plan will end automatically upon termination of employment for any reason.

401(k) Plan

      We sponsor a defined contribution plan intended to qualify under Section 401 of the Internal Revenue Code, or a 401(k) plan. Eligible employees may make pre-tax contributions to the plan of a percentage of their eligible compensation, subject to certain limits. We match between 50% and 100% of employee contributions (up to 6% of the employee’s annual eligible compensation), depending on the years of service of the employee.

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PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information with respect to the beneficial ownership of our common stock outstanding as of December 31, 2003 and on an as adjusted basis to reflect the sale of shares in this offering for:

•  each person or group known by us to beneficially own more than 5% of our common stock;

•  each of our directors and executive officers;

•  all of our directors and executive officers as a group; and

•  the selling stockholder, FP-Ultra Clean, LLC, that is offering shares in the over-allotment option granted to the underwriters.

      In accordance with the rules of the Securities and Exchange Commission, beneficial ownership includes voting or investment power with respect to securities and includes the shares issuable pursuant to stock options that are exercisable within 60 days of December 31, 2003. Shares issuable pursuant to stock options are deemed outstanding for computing the ownership percentage of the person holding such options but are not outstanding for computing the ownership percentage of any other person. The number of shares of common stock outstanding after this offering reflects the sale of                      shares of common stock in this offering. The percentage of beneficial ownership for the following table is based on 40,981,580 shares of common stock outstanding as of December 31, 2003.

      Unless otherwise indicated, the address of each of the named entities or individuals is c/o Ultra Clean Holdings, Inc., 150 Independence Drive, Menlo Park, California 94025. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.

Shares Beneficially

Shares Beneficially

Owned After the

Owned After the

Shares Beneficially

Offering Without

Offering With

Owned Before the

Exercise of Over-

Number of

Exercise of Over-

Offering

Allotment Option

Shares Offered

Allotment Option

Name and Address of

in Over-

Beneficial Owner

Number

Percent

Number

Percent

Allotment

Number

Percent

Greater than 5% Stockholders:

FP-Ultra Clean, LLC(1)

39,001,000

95.2

%

c/o Francisco Partners, L.P.

2882 Sand Hill Road, Suite 280

Menlo Park, CA 94025

Francisco Partners, L.P.(2)

39,001,000

95.2

%

c/o Francisco Partners, L.P.

2882 Sand Hill Road, Suite 280

Menlo Park, CA 94025

Executive Officers and Directors:

Clarence L. Granger(3)

1,637,580

4.0

%

1,637,580

0

1,637,580

Kevin L. Griffin(4)

428,300

1.0

%

428,300

*

0

428,300

*

Bruce Wier(5)

301,100

*

301,100

*

0

301,100

*

Deborah Hayward(6)

46,250

*

46,250

*

0

46,250

*

Sowmya Krishnan(7)

107,025

*

107,025

*

0

107,025

*

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Shares Beneficially

Shares Beneficially

Owned After the

Owned After the

Shares Beneficially

Offering Without

Offering With

Owned Before the

Exercise of Over-

Number of

Exercise of Over-

Offering

Allotment Option

Shares Offered

Allotment Option

Name and Address of

in Over-

Beneficial Owner

Number

Percent

Number

Percent

Allotment

Number

Percent

Dipanjan Deb(8)

39,001,000

95.2

%

David T. ibnAle(9)

39,001,000

95.2

%

Thomas M. Rohrs(10)

65,000

*

—

*

—

—

*

All executive officers and directors as a group (8 persons)(11)

41,586,255

99.8

%

* Less than 1% of the outstanding shares of common stock.

(1)	All of the membership interests of FP-Ultra Clean, LLC are beneficially owned by Francisco Partners, L.P. Voting and investment power belongs to a group of managing directors of Francisco Partners, L.P. Francisco Partners, L.P.’s managing directors include Dipanjan Deb, David Stanton, Benjamin Ball, Neil Garfinkel, David Golob, Sanford Robertson, Gerald Morgan and Keith Geeslin. The voting and investment power belongs to a group and not to any individual managing director. Each of these managing directors disclaims beneficial ownership of the securities held by Francisco Partners, L.P., except with respect to his pecuniary interest in Francisco Partners, L.P.
(2)	Francisco Partners, L.P.’s managing directors include Dipanjan Deb, David Stanton, Benjamin Ball, Neil Garfinkel, David Golob, Sanford Robertson, Gerald Morgan and Keith Geeslin.
(3)	Includes 477,900 unvested shares granted in connection with the Ultra Clean acquisition and options to purchase 385,000 shares of common stock exercisable within 60 days of December 31, 2003. See “Management — Restricted Securities Purchase Agreements.”
(4)	Includes 136,500 unvested shares granted in connection with the Ultra Clean acquisition and options to purchase 125,000 shares of common stock exercisable within 60 days of December 31, 2003. See “Management — Restricted Securities Purchase Agreements.”
(5)	Includes 95,588 unvested shares granted in connection with the Ultra Clean acquisition and options to purchase 88,750 shares of common stock exercisable within 60 days of December 31, 2003. See “Management — Restricted Securities Purchase Agreements.”
(6)	Includes options to purchase 46,250 shares of common stock exercisable within 60 days of December 31, 2003.
(7)	Includes 34,106 unvested shares granted in connection with the Ultra Clean acquisition and options to purchase 31,250 shares of common stock exercisable within 60 days of December 30, 2003. See “Management — Restricted Securities Purchase Agreements.”
(8)	Includes 39,001,000 shares beneficially owned by Francisco Partners, L.P. Mr. Deb is a managing director of Francisco Partners, L.P. and disclaims beneficial ownership of the shares held by Francisco Partners, L.P., except with respect to his pecuniary interest in Francisco Partners, L.P.
(9)	Includes 39,001,000 shares beneficially owned by Francisco Partners, L.P. Mr. ibnAle is a principal of Francisco Partners, L.P. and disclaims beneficial ownership of the shares held by Francisco Partners, L.P., except with respect to his pecuniary interest in Francisco Partners, L.P.

(10)	Includes options to purchase 65,000 shares of common stock exercisable within 60 days of December 31, 2003.
(11)	Includes 39,001,000 shares beneficially owned by Francisco Partners, L.P., 744,094 unvested shares granted in connection with the Ultra Clean acquisition and options to purchase 676,250 shares of common stock exercisable within 60 days of December 31, 2003.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationship with Francisco Partners

      On November 15, 2002, Ultra Clean Holdings, Inc., which is owned by FP-Ultra Clean, LLC (95.2%) and by some of our key employees (4.8%), acquired Ultra Clean Technology Systems and Service, Inc. After completion of this offering, FP-Ultra Clean, LLC will own approximately           % of our outstanding common stock, assuming no exercise of the underwriters’ over-allotment option. Two of our directors, Messrs. Deb and ibnAle, are employees of Francisco Partners. Set forth below is a brief description of the existing relationships and agreements between us and Francisco Partners.

5% Series A Senior Notes due 2009

      In connection with the Ultra Clean acquisition, we issued and sold to FP-Ultra Clean, LLC, in a series of transactions from November 15, 2002 through December 2, 2002, an aggregate of $29,250,000 of our Series A Senior Notes. The notes bear interest at a rate of 5% per annum which is payable in cash, semi-annually, on June 15 and December 15 and can be repaid, in whole or in part, without penalty. We expect to repurchase these notes with a portion of the net proceeds of this offering. See “Use of Proceeds.”

Advisory Fees

      In connection with the Ultra Clean acquisition, we paid an advisory fee of $2.0 million to Francisco Partners Management, LLC, an affiliate of Francisco Partners, L.P. In addition, we have agreed to pay Francisco Partners Management, LLC, also an affiliate of Francisco Partners, a one-time fee of $2.0 million for advisory services performed in connection with our initial public offering. We are not required to pay any additional advisory services or other similar fees to Francisco Partners or any of its affiliates.

Stockholder’s Agreement

      We and FP-Ultra Clean, LLC have entered into a stockholder’s agreement. The stockholder’s agreement covers matters of corporate governance, restrictions on transfer of our securities and information rights.

      Corporate Governance. The stockholder’s agreement provides that FP-Ultra Clean, LLC has the right to nominate for election members of our board of directors as set forth under “Management — Board Structure and Compensation.”

      The stockholder’s agreement also provides that our board of directors may not take certain significant actions without the approval of FP-Ultra Clean, LLC as long as it owns at least 25% of our outstanding common stock. These actions include:

•  mergers, acquisitions or certain sales of assets;

•  any liquidation, dissolution or bankruptcy;

•  issuances of securities;

•  determination of compensation and benefits for our chief executive officer and chief financial officer;

•  appointment or dismissal of any of the chairman of our board of directors, chief executive officer, chief financial officer or any other executive officer in any similar capacity;

•  amendments to the stockholder’s agreement or exercise or waiver of rights under the stockholders’ agreement;

•  amendments to our charter or bylaws;

•  any increase or decrease in the number of directors that comprise our board of directors;

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•  the declaration of dividends or other distributions;

•  any incurrence or refinancing of indebtedness in excess of $10 million;

•  approval of our business plan, budget and strategy; and

•  modification of our long-term business strategy.

      All of the provisions of the stockholder’s agreement are expressly subject to any requirements as to governance imposed by rules of the Securities and Exchange Commission, The Nasdaq National Market or any other exchange on which our securities are listed.

      Restrictions on Transfer. Generally, FP-Ultra Clean, LLC is prohibited from transferring its securities of Ultra Clean Holdings, Inc. without complying with restrictions relating to the timing of the transfer, the number of securities subject to the transfer and the transferee of such securities.

      Information Rights. So long as FP-Ultra Clean, LLC holds any of our securities, it has the right to receive from us financial information, monthly management reports, reports from our independent public accountants and such additional information regarding our financial position or business as it reasonably requests.

Registration Rights Agreement

      FP-Ultra Clean, LLC has registration rights with respect to our common stock pursuant to the registration rights agreement dated December 2, 2002.

      Demand Registration. The registration rights agreement provides that, after we have completed this offering and upon the expiration of the lock-up period imposed by the underwriters, we can be required to effect additional registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, LLC. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5.0 million or if we have effected a demand registration within the preceding ninety days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to FP-Ultra Clean, LLC and its permitted transferees.

      Incidental Registration. In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than a registration on Form S-8 or S-4 or successor forms to these forms, whether or not such registration is for our own account, FP-Ultra Clean LLC will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.

      If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given to us and second priority shall be given to FP-Ultra Clean, LLC and its permitted transferees. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement. FP-Ultra Clean, LLC has agreed not to exercise its registration rights without the prior written consent of Credit Suisse First Boston LLC for a period of 180 days after the date of this prospectus.

Transactions with Management

      In connection with the Ultra Clean acquisition, we entered into Restricted Securities Purchase Agreements, each dated as of November 26, 2002, with some of our key employees, including Messrs. Granger, Griffin and Wier and Dr. Krishnan. Pursuant to these agreements, we issued and sold an aggregate of 715,900 shares of our common stock at a purchase price of $0.25 per share and $536,900 aggregate principal amount of our Series A Senior Notes to these key employees. The notes were issued

58

and sold on the same terms as the notes issued and sold to FP-Ultra Clean, LLC. See “— Relationship with Francisco Partners — Series A Senior Notes.” We also granted an aggregate of 1,074,100 shares of our common stock and $805,500 aggregate principal amount of our Series A Senior Notes to these same key employees, which we refer to as bonus securities. See “Management — Restricted Securities Purchase Agreements.” The bonus securities vest at a rate of 25% annually over a four year period, subject to continued employment, and become fully vested upon a change in control. The first 25% of the bonus securities vested in November 2003. We expect to repurchase all of the vested and unvested Series A Senior Notes with a portion of the net proceeds of this offering. See “Use of Proceeds.” Unvested shares of our common stock will continue to vest pursuant to the terms of the Restricted Securities Purchase Agreements.

      In addition, on February 20, 2003, we entered into a second Restricted Securities Purchase Agreement with Mr. Granger pursuant to which we issued and sold to him an aggregate of 190,580 shares of our common stock at a purchase price of $0.25 per share, for a total purchase price of $47,645.

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SHARES ELIGIBLE FOR FUTURE SALE

      Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.

      Upon completion of this offering, we will have                      shares of common stock outstanding, assuming no exercise of any stock options outstanding as of December 31, 2003. Of these shares, the                      shares sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining shares of common stock are “restricted shares” as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act. As a result of the contractual 180-day lock-up period described below and the provisions of Rules 144 and 701, these shares will be available for sale in the public market as follows:

Number of Shares	Date
	On the date of this prospectus.
	After 90 days from the date of this prospectus.
	After 180 days from the date of this prospectus (subject, in some cases, to volume limitations).
	At various times after 180 days from the date of this prospectus (subject, in some cases, to volume limitations).

Rule 144

      In general, under Rule 144 as currently in effect, beginning 90 days after this offering, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of our then-outstanding shares of common stock, which will equal approximately                      shares immediately after this offering, or the average weekly trading volume of our common stock on The Nasdaq National Market during the four calendar weeks preceding the filing of a notice of the sale on Form 144. Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. We are unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our common stock, the personal circumstances of the stockholder and other factors.

Rule 144(k)

      Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who owns shares within the definition of “restricted securities” under Rule 144 that were purchased from us, or any affiliate, at least two years previously, would be entitled to sell shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements described above.

Rule 701

      In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell such shares 90 days after the

60

effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701.

      The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Securities Exchange Act of 1934, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than “affiliates,” as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by “affiliates” under Rule 144 without compliance with its one-year minimum holding period requirement.

Registration Rights

      Upon completion of this offering, FP-Ultra Clean, LLC, the holder of 39,001,000 shares of common stock, or its transferees, will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. For further information regarding these registration rights, see “Certain Relationships and Related Party Transactions — Relationship with Francisco Partners — Registration Rights Agreement.”

Stock Options

      As of December 31, 2003, options to purchase a total of 4,221,000 shares of common stock were outstanding. All of the shares subject to options are subject to lock-up agreements. As of December 31, 2003, an additional                      shares of common stock were available for future option grants under our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering.

      Upon completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering all shares of common stock subject to outstanding options or issuable pursuant to our Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering. Subject to Rule 144 volume limitations applicable to affiliates, shares registered under the Form S-8 registration statement will be available for sale in the open market, beginning 90 days after the date of the prospectus, except to the extent that the shares are subject to vesting restrictions with us or the contractual restrictions described below.

Lock-up Agreements

      Our officers, directors and substantially all of our security holders have entered into the lock-up agreements described in “Underwriting.”

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DESCRIPTION OF CAPITAL STOCK

      The following description summarizes the material terms of our capital stock. This information does not purport to be complete and is subject in all respects to the applicable provisions of our amended and restated certificate of incorporation and bylaws.

General Matters

      Upon completion of this offering, our authorized capital stock will consist of                      shares of common stock and                      shares of undesignated preferred stock. After giving effect to this offering and the filing of our amended and restated certificate of incorporation, we will have                      shares of common stock and no shares of preferred stock outstanding.

Common Stock

      Our amended and restated certificate of incorporation provides that we may issue                      shares of common stock, par value $0.001 per share. As of December 31, 2003, we had seven record holders of our common stock. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. All shares of our common stock are entitled to share equally in any dividends our board of directors may declare from legally available sources. We have applied to have our common stock listed for quotation on The Nasdaq National Market under the symbol “UCTT.”

Preferred Stock

      Upon the closing of this offering, our board of directors will be authorized, subject to any limitations imposed by law, without stockholder approval, from time to time to issue up to a total of                      shares of preferred stock, par value $0.001 per share, in one or more series, each series to have rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as our board of directors may determine. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our voting stock outstanding. We have no present plans to issue any shares of preferred stock.

Anti-Takeover Measures

      Delaware law and provisions of our charter documents could discourage potential acquisition proposals and could delay, deter or prevent a change in control. The anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. However, we have elected not to be governed by Section 203 of Delaware law, which means that we have elected not to take advantage of anti-takeover protection related to transactions with interested stockholders. Additionally, provisions of our amended and restated certificate of incorporation and bylaws to be effective on the completion of this offering could deter, delay or prevent a third party from acquiring us, even if doing so would benefit our stockholders. These provisions include:

•  a requirement that special meetings of stockholders may be called only by our board of directors, the chairman of our board of directors (if any), our president or our secretary;

•  advance notice requirements for stockholder proposals and nominations; and

•  the authority of our board of directors to issue, without stockholder approval, preferred stock with such terms as our board of directors may determine.

      In addition to the anti-takeover measures described above, provisions of our stockholder’s agreement with FP-Ultra Clean, LLC could deter, delay or prevent a third party from acquiring us. See “Certain

62

Relationships and Related Party Transactions — Relationship with Francisco Partners — Stockholder’s Agreement.”

Transfer Agent and Registrar

      Wells Fargo Shareowner Services will serve as the transfer agent and registrar for our common stock. The transfer agent’s address is 161 North Concord Exchange, South St. Paul, Minnesota 55075-1139 and the telephone number is (800) 468-9716.

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR

NON-U.S. HOLDERS OF COMMON STOCK

      The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock by a beneficial owner that is a “non-U.S. holder” and that does not own, and is not deemed to own, more than 5% of our common stock. A “non-U.S. holder” is a person or entity that, for U.S. federal income tax purposes, is a:

•  non-resident alien individual, other than certain former citizens and residents of the United States subject to tax as expatriates,

•  foreign corporation or

•  foreign estate or trust.

      A “non-U.S. holder” does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of common stock.

      This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions, and final and temporary Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of common stock, including the consequences under the laws of any state, local or foreign jurisdiction.

Dividends

      As discussed under “Dividend Policy” above, we do not currently expect to pay dividends. In the event that we do make distributions, however, distributions made to a non-U.S. holder of common stock out of our current or accumulated earnings and profits generally will constitute dividends for U.S. tax purposes and generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty. To the extent distributions exceed our current and accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock (but not below zero) and then will be treated as gain from the sale of common stock.

      The withholding tax does not apply to dividends paid to a non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).

Gain on Disposition of Common Stock

      A non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of common stock unless:

•  the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, subject to an applicable treaty providing otherwise, or

64

•  we are or have been a U.S. real property holding corporation, as defined in the Code, at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, whichever period is shorter, and our common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs.

We believe that we are not, and do not anticipate becoming, a U.S. real property holding corporation.

Information Reporting Requirements and Backup Withholding

      Information returns will be filed with the Internal Revenue Service in connection with payments of dividends. Unless you comply with certification procedures to establish that you are not a United States person, information returns may be filed with the Internal Revenue Service in connection with the proceeds from a sale or other disposition of common stock and you may be subject to backup withholding tax on payments of dividends or on the proceeds from a sale or other disposition of common stock. The certification procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment to you will be allowed as a credit against your United States federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service.

Federal Estate Tax

      An individual non-U.S. holder who is treated as the owner of, or has made certain lifetime transfers of, an interest in the common stock will be required to include the value of the stock in his gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

65

UNDERWRITING

      Under the terms and subject to the conditions contained in an underwriting agreement dated                     , 2004, we have agreed to sell to the underwriters named below, for whom Credit Suisse First Boston LLC, J.P. Morgan Securities Inc., Banc of America Securities LLC and Piper Jaffray & Co. are acting as representatives, the following respective numbers of shares of common stock:

		Number of
Underwriter		Shares
Credit Suisse First Boston LLC
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Piper Jaffray & Co.
	Total

      The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

      The selling stockholder has granted to the underwriters a 30-day option to purchase on a pro rata basis up to an aggregate of  additional outstanding shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

      The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $          per share. The underwriters and selling group members may allow a discount of $          per share on sales to other broker/ dealers. After the initial public offering, the representatives may change the public offering price and concession and discount to broker/ dealers.

      The following table summarizes the compensation and estimated expenses we and the selling stockholder will pay:

	Per Share		Total
	Without	With	Without	With
	Over-allotment	Over-allotment	Over-allotment	Over-allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$
Underwriting Discounts and Commissions paid by the selling stockholder	$	$	$	$

      The representatives have informed us that they do not expect discretionary sales to exceed 5% of the shares of common stock being offered.

      We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse First Boston LLC for a period of 180 days after the date of this prospectus, except for up to $15,000,000 in value of shares of common stock we may issue in connection with an acquisition provided that the recipients of such shares agree to be bound by the terms of the foregoing agreement.

66

      Our officers, directors and holders of our outstanding securities have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston LLC for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, our officers, directors and security holders subject to lock-up agreements may transfer shares of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock as a bona fide gift or to family trusts, provided that the transferee agrees to the lock-up terms applicable to the transferor.

      We and the selling stockholder have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

      We have applied to list the shares of common stock for quotation on The Nasdaq National Market under the symbol “UCTT.”

      Some of the underwriters have provided investment banking and advisory services for us from time to time for which they have received customary fees and expenses. The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business.

      Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined by negotiation between us and the underwriters and does not necessarily reflect the market price for the common stock following the offering. The principal factors that were considered in determining the public offering price included:

•  the history of and prospects for our industry and for semiconductor companies generally;

•  an assessment of our management;

•  our present operations;

•  our historical results of operations;

•  our earnings prospects;

•  the general condition of the securities markets at the time of this offering; and

•  recent market prices of, and the demand for, publicly traded common stock of generally comparable companies.

      We cannot be sure that the initial public offering price will correspond to the price at which the common stock will trade in the public market following this offering or that an active trading market for the common stock will develop and continue after this offering.

      In connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.

•  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•  Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number

67

	of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.
•	Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over- allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
•	Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.

      A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members on the same basis as other allocations.

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NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

      The distribution of our common stock in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any resale of our common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of our common stock.

Representations of Purchasers

      By purchasing our common stock in Canada and accepting a purchase confirmation a purchaser is representing to us and the dealer from whom the purchase confirmation is received that

•  the purchaser is entitled under applicable provincial securities laws to purchase our common stock without the benefit of a prospectus qualified under those securities laws,

•  where required by law, that the purchaser is purchasing as principal and not as agent, and

•  the purchaser has reviewed the text above under Resale Restrictions.

Rights of Action — Ontario Purchasers Only

      Under Ontario securities legislation, a purchaser who purchases our common stock offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the shares, for rescission against us in the event that this prospectus contains a misrepresentation. A purchaser will be deemed to have relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which our common stock was offered to the purchaser and if the purchaser is shown to have purchased our common stock with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of our common stock as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

      All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

      Canadian purchasers of our common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in our common stock in their particular circumstances

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and about the eligibility of our common stock for investment by the purchaser under relevant Canadian legislation.

LEGAL MATTERS

      The validity of the shares of common stock being offered will be passed upon for us by Davis Polk & Wardwell, Menlo Park, California. Selected legal matters in connection with this offering will be passed on for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.

EXPERTS

      The consolidated financial statements as of December 31, 2002 and 2003, and for the years ended December 31, 2001 and 2003, and the periods from January 1, 2002 through November 15, 2002 and November 16, 2002 through December 31, 2002, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

      We have filed a registration statement regarding this offering on Form S-1, including all amendments and supplements thereto, with the Securities and Exchange Commission under the Securities Act of 1933, as amended. This prospectus, which constitutes a part of the registration statement, does not contain all of the information included in the registration statement, certain items of which are contained in schedules and exhibits to the registration statement as permitted by the rules and regulations of the Securities and Exchange Commission. You should refer to the registration statement and its exhibits to read that information. Statements made in this prospectus as to any of our contracts, agreements or other documents referred to are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. You may read and copy information omitted from this prospectus but contained in the registration statement at the public reference facilities maintained by the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also request copies of all or any portion of such material from the Public Reference Section of the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference room. In addition, materials filed electronically with the Securities and Exchange Commission are available at the Securities and Exchange Commission’s web site at http://www.sec.gov. You may also request a copy of these filings, at no cost, by writing or telephoning us at: Ultra Clean Technology, 150 Independence Drive, Menlo Park, California 94025, (650) 323-4100.

      We intend to furnish to our stockholders annual reports containing audited financial statements and quarterly reports for the first three quarters of each fiscal year containing unaudited interim financial information, in each case prepared in accordance with generally accepted accounting principles.

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INDEX TO FINANCIAL STATEMENTS

ULTRA CLEAN HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors’ Report	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

F-1

INDEPENDENT AUDITORS’ REPORT

To the Stockholders of Ultra Clean

     Holdings, Inc.:

      We have audited the accompanying statements of operations, stockholders’ equity and cash flows of Ultra Clean Technology Systems and Service, Inc. (“Predecessor”) for the year ended December 31, 2001 and the period from January 1, 2002 through November 15, 2002 (date of disposition) and the accompanying consolidated balance sheets of Ultra Clean Holdings, Inc. and its subsidiary (“Ultra Clean”) (together with Predecessor, the “Company”), successor company, as of December 31, 2002 and 2003, and the related statements of operations, stockholders’ equity and cash flows for the period from November 16, 2002 (date of acquisition) through December 31, 2002 and year ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, such financial statements present fairly, in all material respects, the results of operations and cash flows of the Predecessor for the year ended December 31, 2001 and for the period from January 1, 2002 through November 15, 2002 and the consolidated financial position of Ultra Clean, as of December 31, 2002 and 2003, and the results of its operations and cash flows for the period from November 16, 2002 through December 31, 2002 and the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

February 13, 2004

San Jose, California

F-2

ULTRA CLEAN HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

				December 31,
				2002			2003
ASSETS
Current assets:
	Cash			$	6,237		$	6,035
	Accounts receivable				8,362			11,724
	Income tax receivable				1,357			—
	Inventories				8,229			9,123
	Deferred income taxes				2,004			1,802
	Prepaid expenses and other				201			210
			Total current assets		26,390			28,894
Equipment and leasehold improvements:
	Computer equipment and software				722			954
	Furniture and fixtures				175			165
	Machinery and equipment				1,410			1,514
	Leasehold improvements				2,603			2,599
					4,910			5,232
	Accumulated depreciation and amortization				(230	)		(1,659	)
		Equipment and leasehold improvements, net			4,680			3,573
Long-term assets:
	Goodwill				6,608			6,617
	Tradename				8,987			8,987
	Other assets				429			353
	Deferred income taxes				1,742			1,731
Total assets				$	48,836		$	50,155
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	7,113		$	9,805
	Accrued expenses and other liabilities				3,160			1,459
	Capital lease obligations, current portion				50			111
			Total current liabilities		10,323			11,375
	Capital lease obligations and other liabilities				612			447
	Series A Senior Notes to related parties, net of deferred compensation of $781 and $580 in 2002 and 2003, respectively				29,812			30,013
			Total liabilities		40,747			41,835
Commitments and contingencies (see Note 6)
Stockholders’ equity:
	Common stock — $0.001 par value in Ultra Clean shares; authorized 60,000,000 shares in Ultra Clean; issued and outstanding, 40,791,000 and 40,981,580 shares in 2002 and 2003, respectively				10,198			10,377
	Deferred stock-based compensation				(260	)		(316	)
	Accumulated deficit				(1,849	)		(1,741	)
			Total stockholders’ equity		8,089			8,320
Total liabilities and stockholders’ equity				$	48,836		$	50,155

See notes to consolidated financial statements.

F-3

ULTRA CLEAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

			Predecessor
						January 1,			November 16,
						2002			2002
			Year Ended			Through			Through			Year Ended
			December 31,			November 15,			December 31,			December 31,
			2001			2002			2002			2003
Sales			$	76,486		$	76,338		$	7,916		$	77,520
Cost of goods sold				66,129			66,986			7,972			67,313
Gross profit (loss)				10,357			9,352			(56	)		10,207
Operating expenses:
	Research and development			613			634			99			1,155
	Sales and marketing			1,302			1,586			332			2,276
	General and administrative			3,127			6,626			962			4,978
	In-process research and development			—			—			889			—
		Total operating expenses		5,042			8,846			2,282			8,409
Income (loss) from operations				5,315			506			(2,338	)		1,798
Other income (expense):
	Interest expense			(436	)		(170	)		(182	)		(1,458	)
	Other income (expense), net			(4	)		(6	)		4			—
		Total other expense		(440	)		(176	)		(178	)		(1,458	)
Income (loss) before income taxes				4,875			330			(2,516	)		340
Income tax (provision) benefit				(1,981	)		(642	)		667			(232	)
Net income (loss)			$	2,894		$	(312	)	$	(1,849	)	$	108
Net income (loss) per share:
	Basic		$	0.79		$	(0.08	)	$	(0.05	)	$	0.00
	Diluted		$	0.64		$	(0.08	)	$	(0.05	)	$	0.00
Shares used in computing net income (loss) per share:
	Basic			3,680			3,680			34,674			39,904
	Diluted			4,535			3,680			34,674			42,843

See notes to consolidated financial statements.

F-4

ULTRA CLEAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)

								Retained
	Common Stock				Deferred			Earnings			Total
					Stock-based			(Accumulated			Stockholders’
	Shares		Amount		Compensation			Deficit)			Equity
Balance, January 1, 2001		3,680,000	$	6,440				$	(664	)	$	5,776
Net income		—		—					2,894			2,894
Balance, December 31, 2001		3,680,000		6,440					2,230			8,670
Capital contribution		—		1,330					—			1,330
Net loss									(312	)		(312	)
Predecessor ending balance, November 15, 2002		3,680,000	$	7,770				$	1,918		$	9,688
Beginning balance, November 16, 2002		—	$	—	$	—		$	—		$	—
Issuance of common stock at $0.001 par value for formation of Ultra Clean Holdings		1,000		—		—			—			—
Issuance of common stock		39,715,900		9,930		—			—			9,930
Issuance of restricted common stock to employees and related deferred stock-based compensation		1,074,100		268		(268	)		—			—
Amortization of deferred stock-based compensation		—		—		8			—			8
Net loss		—		—		—			(1,849	)		(1,849	)
Balance, December 31, 2002		40,791,000		10,198		(260	)		(1,849	)		8,089
Issuance of common stock		190,580		47		—			—			47
Deferred stock based compensation related to stock options granted to employees		—		132		(132	)		—			—
Amortization of deferred stock-based compensation		—		—		76			—			76
Net income		—		—		—			108			108
Balance, December 31, 2003		40,981,580	$	10,377	$	(316	)	$	(1,741	)	$	8,320

See notes to consolidated financial statements.

F-5

ULTRA CLEAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

					Predecessor
								January 1,			November 16,
								2002			2002
					Year Ended			Through			Through			Year Ended
					December 31,			November 15,			December 31,			December 31,
					2001			2002			2002			2003
Cash flows from operating activities:
	Net income (loss)				$	2,894		$	(312	)	$	(1,849	)	$	108
	Adjustments to reconcile net income to net cash (used in) provided by operating activities:
		Depreciation and amortization				1,766			1,477			231			1,483
		Loss on equipment sale				3			—			—			105
		Deferred income tax				457			(543	)		(103	)		213
		Amortization of deferred compensation				—			—			33			325
		Write-off of in-process research and development				—			—			889			—
		Executive option cancellation				—			1,330			—			—
		Changes in assets and liabilities:
			Accounts receivable			5,126			(1,612	)		(2,380	)		(3,362	)
			Inventories			5,950			(1,665	)		152			(894	)
			Prepaid expenses and other			(1,044	)		767			134			(9	)
			Other assets			19			78			6			76
			Accounts payable			(12,189	)		2,789			2,502			2,568
			Income taxes payable			(1,236	)		(793	)		(565	)		1,357
			Accrued expenses and other liabilities			(2,364	)		2,752			(579	)		(1,541	)
				Net cash (used in) provided by operating activities		(618	)		4,268			(1,529	)		429
Cash flows from investing activities:
	Purchase of certificate of deposit					—			(250	)		—			—
	Acquisition of business, net of cash acquired					—			—			(26,285	)		—
	Purchases of equipment and leasehold improvements					(624	)		(1,700	)		(71	)		(491	)
				Net cash (used in) investing activities		(624	)		(1,950	)		(26,356	)		(491	)
Cash flows from financing activities:
	Principal payments on capital lease obligations					(320	)		(248	)		(24	)		(140	)
	Borrowings (repayments) of notes payable to related parties, net					(1,400	)		600			—			—
	Proceeds from issuance of common stock					—			—			9,930			—
	Principal payments on borrowings					—			—			(9,000	)		—
	Proceeds from issuance of long-term debt to related parties					—			—			29,786			—
				Net cash (used in) provided by financing activities		(1,720	)		352			30,692			(140	)
Net (decrease) increase in cash						(2,962	)		2,670			2,807			(202	)
Cash at beginning of period						3,722			760			3,430			6,237
Cash at end of period					$	760		$	3,430		$	6,237		$	6,035
Supplemental cash flow information:
	Income taxes paid				$	3,217		$	2,030		$	—		$	15
	Interest paid				$	551		$	194		$	—		$	2,092
Noncash investing and financing activities:
	Acquisition of equipment under capital lease				$	348		$	19		$	143		$	246
	Common stock issued to employees				$	—		$	—		$	268		$	47
	Accretion of Series A notes issued to employees				$	—		$	—		$	25		$	201

See notes to consolidated financial statements.

F-6

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Organization and Significant Accounting Policies

      Organization — Ultra Clean Technology Systems and Service, Inc. (the “Predecessor”) was incorporated in 1991 in California. The Predecessor was formed to manufacture and sell gas delivery systems to the U.S. semiconductor capital equipment industry. The Predecessor was acquired on November 15, 2002 in a transaction accounted for under the purchase method of accounting (see Note 2) by Ultra Clean Holdings, Inc. (“Ultra Clean”) (together with Predecessor, the “Company”). Ultra Clean was incorporated in 2002 in Delaware and is headquartered in Menlo Park, California with additional manufacturing facilities in Austin, Texas and Tualatin, Oregon. Ultra Clean had no significant operations prior to the purchase of Predecessor.

      Principles of Consolidation — The accompanying financial statements include the accounts of the predecessor company, Ultra Clean Technology Service and Systems, Inc. for the year ended December 31, 2001 and for the period from January 1, 2002 through November 15, 2002 and the accounts of the successor company, Ultra Clean Holdings, Inc. and its subsidiary, since inception including the period from November 16, 2002 through December 31, 2002 and for the year ended December 31, 2003. All intercompany accounts and transactions are eliminated in consolidation.

      Certain Significant Risks and Uncertainties — The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the highly cyclical nature of the semiconductor industry; reliance on a small number of customers; ability to obtain additional financing; regulatory changes; fundamental changes in the technology underlying semiconductor manufacturing processes or semiconductor manufacturing equipment; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors.

      Concentration of Credit Risk — Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company sells its products to semiconductor capital equipment manufacturers in the United States. The Company performs credit evaluations of its customers’ financial condition and generally requires no collateral.

      Sales to significant customers as a percentage of total sales are as follows:

		Predecessor
					January 1,			November 16,
					2002			2002
		Year Ended			Through			Through			Year Ended
		December 31,			November 15,			December 31,			December 31,
		2001			2002			2002			2003
Customer:
	Applied Materials, Inc.		51	%		46	%		50	%		47	%
	Novellus Systems, Inc.		40	%		26	%		27	%		24	%
	Lam Research Corporation		—			27	%		22	%		21	%

      When combined, these same significant customers represented 98% and 89% of trade accounts receivable at December 31, 2002 and 2003.

      Use of Accounting Estimates — The presentation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, future events

F-7

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

are subject to change and the best estimates and judgments routinely require adjustment. Actual amounts may differ from those estimates.

      Fiscal Year — Effective January 1, 2003, Ultra Clean adopted a 52-53 week fiscal year ending on the Friday nearest to December 31. This change did not have a significant effect on the Company’s consolidated financial statements. For presentation purposes, the Company presents each fiscal year as if it ended on December 31. Using the 52-53 year end, fiscal year 2003 would have ended on December 26, 2003. All references to years refer to fiscal years.

      Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market. The Company evaluates the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of management’s estimated usage is written-down to its estimated market value less costs to sell, if less than its cost. Inherent in the estimates of market value are management’s estimates related to economic trends, future demand for products, and technological obsolescence of the Company’s products.

      At December 31, 2002 and 2003, inventory balances of $8,229,000 and $9,123,000 were net of write-downs of $1,582,000 and $1,601,000. The inventory write-downs are recorded as an inventory valuation allowance established on the basis of obsolete inventory or specific identified inventory in excess of estimated usage.

      Equipment and leasehold improvements are stated at cost, or, in the case of equipment under capital leases, the present value of future minimum lease payments at inception of the related lease. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives of the assets or the terms of the leases. Useful lives range from three to seven years.

      Product Warranty — The Company provides a warranty on its products for a period of up to two years, and provides for warranty costs at the time of sale based on historical activity. The determination of such provisions requires the Company to make estimates of product return rates and expected costs to repair or replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from these estimates, adjustments to recognize additional cost of sales may be required in future periods. Components of the reserve for warranty costs consisted of the following (in thousands):

	December 31,
	2002			2003
Beginning balance	$	117		$	89
Additions related to sales		36			74
Warranty costs incurred		(64	)		(75	)
Ending balance	$	89		$	88

      Income Taxes — Income taxes are provided using an asset and liability approach which requires recognition of deferred tax liabilities and assets, net of valuation allowances, for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards.

      Stock-Based Compensation — The Company accounts for its employee stock option plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 44, Accounting for Certain Transactions Involving Stock Compensation. Accordingly, no compensation is recognized for employee stock options granted with exercise prices greater than or equal to the fair value of the underlying common stock at the date of grant. The Company complies with the disclosure provisions of FASB Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for

F-8

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure.

      The Company amortizes deferred stock-based compensation on the straight-line method over the vesting periods of the stock options, generally four years. Had compensation expense been determined based on the fair value at the grant date for all employee awards, consistent with the provisions of SFAS No. 123, the Company’s pro forma net income (loss) and net income (loss) per share would have been as follows (in thousands):

		Predecessor
					January 1,			November 16,
					2002			2002
		Year Ended			Through			Through			Year Ended
		December 31,			November 15,			December 31,			December 31,
		2001			2002			2002			2003
Net income (loss) as reported		$	2,894		$	(312	)	$	(1,849	)	$	108
	Add: stock-based employee compensation included in reported net income (loss)		—			—			8			76
	Less: total stock-based compensation determined under the fair value based method for all awards		(180	)		(161	)		(32	)		(121	)
Pro forma net income (loss)		$	2,714		$	(473	)	$	(1,873	)	$	63
Basic net income (loss) per share as reported		$	0.79		$	(0.08	)	$	(0.05	)	$	0.00
Diluted net income (loss) per share as reported		$	0.64		$	(0.08	)	$	(0.05	)	$	0.00
Pro forma basic net income (loss) per share		$	0.74		$	(0.13	)	$	(0.05	)	$	0.00
Pro forma diluted net income (loss) per share		$	0.60		$	(0.13	)	$	(0.05	)	$	0.00

      SFAS No. 123, Accounting for Stock-Based Compensation, requires the disclosure of pro forma net income as though the Company had adopted the fair value method since the inception of the Company. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from the Company’s stock option awards. These models also require the use of subjective assumptions, including expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the minimum value method with the following assumptions: expected life of five years and no dividends during the expected term. The risk free interest rate assumption used was 4.7% in 2001, 3.9% in 2002 and 2.8% in 2003. The Company’s calculations are based on a single option valuation approach, and forfeitures are recognized as they occur.

      Goodwill and Tradename — As part of the Ultra Clean acquisition in November 2002, the Company allocated the purchase price to the tangible and intangible assets acquired, liabilities assumed, and in-process research and development based on their estimated fair values (see Note 2). A third-party appraisal firm assisted management in determining the fair values of the assets acquired and the liabilities assumed. Such valuations required management to make significant estimates and assumptions, especially with respect to intangible assets. Estimates associated with accounting for the acquisition may change as

F-9

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

additional information becomes available regarding the assets acquired and liabilities assumed. In particular, a claim by the Company for a refund of approximately $470,000 of the purchase price remains unresolved. Any payment of this unresolved amount will decrease the recorded goodwill.

      Critical estimates in valuing certain intangible assets include, but are not limited to: future expected cash flows from customer contracts; acquired developed technologies and patents; expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed; the market position of the acquired products; and assumptions about the period of time the trade name will continue to be used in Ultra Clean’s product portfolio. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain.

      In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The provisions of SFAS No. 142 also require an annual goodwill impairment test or more frequently if impairment indicators arise. In testing for a potential impairment of goodwill, the provisions of SFAS 142 require the application of a fair value based test at the reporting unit level. The Company operates in one reporting segment which has one reporting unit. Therefore, all goodwill is considered enterprise goodwill and the first step of the impairment test prescribed by SFAS 142 requires a comparison of fair value to book value of the Company. If the estimated fair value of the Company is less than the book value, SFAS 142 requires an estimate of the fair value of all identifiable assets and liabilities of the business, in a manner similar to a purchase price allocation for an acquired business. This estimate requires valuations of certain internally generated and unrecognized intangible assets such as in-process research and development and developed technology. Potential goodwill impairment is measured based upon this two-step process. Management performed the annual goodwill impairment test as of December 31, 2002 and 2003 and determined that goodwill was not impaired.

      During the year ended December 31, 2003, the goodwill balance increased by $9,000 as a result of finalizing transaction costs related to the acquisition of the Predecessor.

      Long-Lived Assets — In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the impairment of long-lived assets, based on the projection of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values

      Revenue Recognition — Revenue from the sale of gas delivery systems is generally recorded upon shipment. The Company recognizes revenue when persuasive evidence of an arrangement exists, shipment has occurred, price is fixed or determinable and collectability is reasonably assured. If we have not substantially completed or fulfilled the terms of a sales agreement at the time of shipment, revenue recognition is deferred until completion. Our standard arrangement for our customers includes a signed purchase order or contract and no right of return of delivered products.

      The Company assesses collectibility based on the credit worthiness of the customer and past transaction history. The Company performs on-going credit evaluations of customers and does not require collateral from customers.

      Research and development expenses are charged to operations as incurred.

F-10

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Reclassifications — Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2003 presentation. Such reclassifications had no effect on previously reported results of operations or retained earnings.

      Net Income (Loss) per Share — Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding for the period. Diluted net income (loss) per share earnings is calculated by dividing net income (loss) by the weighted average number of common shares outstanding and common equivalent shares from dilutive stock options and restricted stock using the treasury stock method, except when antidilutive (see Note 8).

      Comprehensive Income — In accordance with SFAS No. 130, Reporting Comprehensive Income, the Company reports by major components and as a single total, the change in its net assets during the period from nonowner sources. Comprehensive income for the year ended December 31, 2001, and the period from January 1, 2002 through November 15, 2002, and the period from November 16, 2002 through December 31, 2002 and the year ended December 31, 2003 was the same as net income.

      Recently Issued Accounting Standards — In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force (“EITF”) Issue No. 94-3. The provisions of SFAS No. 146 are applicable for restructuring activities initiated after December 28, 2002. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue No. 94-3, a liability for an exit cost was recognized at the date of the commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The adoption of SFAS No. 146 on January 1, 2003 did not have a material effect on the Company’s consolidated financial statements.

      In November 2002, the FASB issued FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation specifies the disclosures to be made by a guarantor in its interim and annual financial statements concerning its obligations under certain guarantees that it has issued. FIN No. 45 also requires a guarantor to recognize a liability, at the inception of the guarantee, for the fair value of obligations it has undertaken in issuing the guarantee. The disclosure requirements of FIN No. 45 are effective for interim and annual periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN No. 45 are effective for guarantees issued or modified after December 31, 2002. The adoption of these provisions did not have a material effect on the Company’s consolidated financial statements.

      In December 2002, the EITF reached a consensus on EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. This Issue addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. This Issue addresses when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. The guidance in this Issue is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 did not have a material effect on the Company’s consolidated financial statements.

      In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, and a revised interpretation of FIN 46 (FIN 46R) in December 2003 (collectively FIN 46). These address consolidation of variable interest entities. FIN 46 provides guidance for determining when a primary beneficiary should consolidate a variable interest entity or equivalent structure that functions to support the activities of the primary beneficiary. The provisions of FIN 46 are effective immediately for all variable interest entities created after January 31, 2003. For variable interest entities created prior to February 1, 2003, the provisions of FIN 46 are effective for our first quarter of fiscal 2004. The Company does not expect the adoption of FIN 46 to have a material effect on the Company’s consolidated financial statements.

F-11

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material effect on the Company’s consolidated financial statements.

      In December 2003 the SEC issued Staff Accounting Bulletin No. 104, Revenue Recognition. SAB 104 updates portions of existing interpretative guidance in order to make this guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of SAB 104 did not have a material effect on the Company’s consolidated financial statements.

2.     Acquisition

      At the close of business on November 15, 2002, the Company acquired all of the outstanding shares of Predecessor, Ultra Clean Technology Systems and Service, Inc., in a transaction accounted for using the purchase method of accounting. Ultra Clean incurred approximately $3,121,000 in acquisition expenses, including financial advisory and legal fees and other direct transaction costs, which were included as a component of the purchase price. Approximately $2,000,000 of such acquisition costs were paid to Francisco Partners Management, LLC, a related party.

      The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as follows (in thousands):

Cash consideration		$	23,164
Buyout of stock options			2,547
Estimated transaction costs			3,121
Total purchase price		$	28,832
Tangible assets acquired		$	27,694
Intangible assets acquired:
	Tradename		8,987
	In-process research and development		889
Assumed liabilities			(15,346	)
Excess of cost over fair value (goodwill)		$	6,608

      Accounting principles generally accepted in the United States of America require purchased in-process research and development with no alternative future use to be recorded and charged to expense in the period acquired. Accordingly, the results of operations for the period from November 16, 2002 through December 31, 2002, include the write-off of $889,000 of purchased in-process research and development that had not yet reached technological feasibility and had no alternative future use. The $889,000 of purchased in-process research and development resulted from one project for the development of a catalytic steam generator. This project related to the development of technology and a related product that simplified the generation of steam for use in the semiconductor manufacturing process. The development effort was completed in December 2003. Actual costs incurred to complete this project were not significantly different from the initial estimate. Value ascribed to the project was based on the cost method and represented the cost of personnel, material, equipment and finance charges that would have been incurred to replicate the project to its development stage at the date of acquisition.

F-12

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In accordance with EITF Issue No. 85-45, Business Combinations: Settlement of Stock Options and Awards, the buyout of $2,547,000 of stock options prior to the effective date of the acquisition was recorded by Predecessor as an expense in the period from January 1, 2002 through November 15, 2002. The buyout is included within general and administrative expenses in that period. In addition, an officer of Predecessor did not exercise options with a value of $1,330,000. Accordingly, the $1,330,000 was recorded as an expense in the period from January 1, 2002 through November 15, 2002 within general and administrative expenses with a corresponding credit to contributed capital.

      Certain executives of the Predecessor signed employment agreements with Ultra Clean. Under the terms of these arrangements, Ultra Clean recorded $741,000 for executive bonuses within general and administrative expenses for the period from November 16, 2002 through December 31, 2002. Certain payments under these arrangements were deferred (see Note 9).

      In connection with the purchase accounting transaction, the Company recorded a step-up in the inventory value of $113,000.

      The operating results of the Company have been included in the statements of operations from the date of acquisition.

3.     Inventories

      Inventories consisted of the following (in thousands):

	December 31,
	2002		2003
Raw materials	$	5,693	$	5,746
Work in process		2,452		3,282
Finished goods		84		95
Total	$	8,229	$	9,123

4.     Notes Payable and Borrowing Arrangements

      Notes payable consist of the following (in thousands):

	December 31,
	2002		2003
Series A Senior Notes to related parties and employees maturing November 15, 2009, interest at 5% payable on June 15 and December 15, of each year	$	29,812	$	30,013

      The Company had two revolving line of credit arrangements with Mitsubishi International Corporation. The arrangements permitted borrowings of up to $14,000 and $1,500 and expired on December 31, 2002 and November 27, 2002, respectively. Interest is payable monthly at various rates. There were no amounts outstanding under the lines at December 31, 2002 and 2003.

      The Company issued Series A Senior Notes for the principal sums of $24,130,000, $2,730,000 and $3,733,000 on November 15, 2002, November 26, 2002 and December 2, 2002, respectively. These notes are not redeemable by the holder and can be repaid, in whole or in part, with outstanding accrued interest at any time without penalty. As of December 31, 2002 and 2003, all Series A Senior Notes were held by related parties and employees of the Company.

F-13

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Debt

      Of the Series A Senior Notes issued on November 26, 2002, $1,342,000 was granted to employees of the Company for cash received from employees of $536,000 and $806,000 in deferred compensation. The deferred compensation amount vests, in equal annual installments, over four years from the grant date. Compensation expense is recognized and the corresponding debt amounts are accreted on a straight line basis over four years from the grant date. In the period from November 16, 2002 to December 31, 2002 and the year ended December 31, 2003, $25,000 and $201,000, respectively, was charged to compensation expenses related to the accretion of such debt amounts. At December 31, 2002 and 2003, $781,000 and $580,000 of deferred compensation was recorded as a reduction of the principal amount of debt outstanding of $30,593,000. At December 31, 2003, $604,000 of the employees debt was unvested. The unvested portion of this debt instrument is subject to forfeiture.

Bank Line of Credit

      In July 2003, Ultra Clean Technology Systems and Service, Inc. entered into a secured line of credit arrangement which permits borrowing of up to $10,000,000 based upon a defined borrowing base and bearing interest, at its option, at a rate equal to 2% per annum plus LIBOR or 0.25% per annum plus the reference rate established from time to time by the lender. Interest is payable monthly and the line expires on June 15, 2004. The arrangement contains financial covenants requiring the maintenance of minimum specified working capital, no successive quarterly net losses and tangible net worth ratios as well as a restriction on payment of any cash dividends. In addition, the arrangement requires that Francisco Partners, LLP retain at least 50% ownership of Ultra Clean. The Series A Senior Notes are subordinated to any borrowings under this credit arrangement. There were no amounts outstanding under the line of credit at December 31, 2003.

5.     Income Taxes

      The benefit (provision) for taxes on income consisted of the following (in thousands):

		Predecessor
					January 1,			November 16,
					2002			2002
		Year Ended			Through			Through		Year Ended
		December 31,			November 15,			December 31,		December 31,
		2001			2002			2002		2003
Current:
	Federal	$	(1,256	)	$	(928	)	$	479	$	58
	State		(268	)		(257	)		85		(77	)
Total current			(1,524	)		(1,185	)		564		(19	)
Deferred:
	Federal		(396	)		471			32		(152	)
	State		(61	)		72			71		(61	)
Total deferred			(457	)		543			103		(213	)
Total (provision) benefit		$	(1,981	)	$	(642	)	$	667	$	(232	)

F-14

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Significant components of net deferred tax assets for federal and state income taxes were as follows (in thousands):

			December 31,
			2002			2003
Net deferred tax asset:
	Current:
		Inventory valuation allowance, basis difference and other	$	1,609		$	1,512
		Other accrued expenses		319			250
		Net operating loss carryforwards		75			—
		State taxes		1			40
				2,004			1,802
	Long-term:
		Deferred rent		87			7
		Other accrued expenses		—			130
		Depreciation		1,946			1,897
		Other		—			(33	)
		State taxes		(291	)		(270	)
				1,742			1,731
Net deferred tax assets			$	3,746		$	3,533

      The effective tax rate differs from the federal statutory tax rate as follows:

	Predecessor
				January 1,			November 16,
				2002			2002
	Year Ended			Through			Through			Year Ended
	December 31,			November 15,			December 31,			December 31,
	2001			2002			2002			2003
Federal statutory income tax (benefit) expense rate		35.0	%		35.0	%		(35.0	)%		35.0	%
State income taxes, net of federal benefit		4.4			7.7			(4.2	)		23.7
Goodwill		—			—			12.8			5.9
Other		0.7			—			—			3.6
Effective income tax rate		40.1	%		42.7	%		(26.4	)%		68.2	%

6.  Commitments

      The Company leases certain equipment under capital lease arrangements. In addition, the Company leases its corporate and regional offices as well as some of its office equipment under noncancelable

F-15

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

operating leases. The Company has a renewal option for its leased facilities in Austin, Texas and Tualatin, Oregon. Future minimum lease payments under these leases are as follows (in thousands):

		Capital		Operating
		Leases		Leases
Year ending December 31:
	2004	$	123	$	773
	2005		92		362
	2006		55		293
	2007		31		133
Total			301	$	1,561
Less interest			25
Present value of net minimum lease payments			276
Less current portion			111
Long-term portion		$	165

      The cost of equipment under the capital leases included in property and equipment at December 31, 2002 and 2003 was approximately $551,000 and $796,000, respectively. Accumulated amortization of leased equipment at December 31, 2002 and 2003 was approximately $180,000 and $407,000, respectively.

      Rental expense for the year ended December 31, 2001, the period from January 1, 2002 through November 15, 2002, the period from November 16, 2002 through December 31, 2002 and the year ended December 31, 2003 was $918,000, $840,000, $137,000 and $1,113,000, respectively. Included within capital lease obligations and other liabilities in 2002 and 2003 was $227,000 and $17,000 of deferred rent, respectively.

      In connection with letters of credit required for the leases of certain facilities, the Company held $310,000 on deposit in restricted cash accounts as of December 31, 2002 and 2003. The restricted cash balance is included in other long term assets.

      The Company had commitments to purchase inventory totaling $13,416,000 at December 31, 2003.

7.     Stockholders’ Equity

      Under the 1999 Stock Option Plan (the “1999 Option Plan”), the Predecessor had reserved 1,700,000 common shares for issuance under options granted to employees. Options were generally granted at fair value at the date of grant as determined by the Board of Directors, had terms up to ten years and generally vested over four years. At November 15, 2002, prior to the sale of Predecessor, Predecessor had 594,500 shares available for future grants under the 1999 Option Plan and options exercisable for 777,625 shares were vested at a weighted average exercise price of $2.44. Outstanding options were settled in connection with the sale of Predecessor and the 1999 Option Plan was terminated.

      On February 20, 2003, Ultra Clean adopted the 2003 Stock Incentive Plan (the “2003 Option Plan”) and reserved 5,065,139 shares of its common stock for issuance under the 2003 Option Plan. Options are generally granted at fair value at the date of grant as determined by the Board of Directors, have terms up to ten years and generally vest over four years. At December 31, 2003, 844,139 shares were available for future grants under the 2003 Option Plan.

F-16

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Option activity under the 1999 Option Plan and the 2003 Option Plan is as follows:

				Weighted
				Average
	Number of			Exercise
	Shares			Price
Outstanding, December 31, 2000		1,035,000		$	2.29
Granted (weighted average fair value of $1.98)		75,500			9.50
Cancelled		(5,000	)		9.50
Outstanding, December 31, 2001		1,105,500			2.75
Granted (weighted average fair value of $2.38)		21,500			13.40
Cancelled		(21,500	)		3.03
Plan cancellation		(1,105,500	)		2.98
Outstanding, December 31, 2002		—			—
Granted (weighted average fair value of $0.06)		4,268,000			0.25
Cancelled		(47,000	)		0.25
Outstanding, December 31, 2003 (none vested)		4,221,000		$	0.25

      During the year ended December 31, 2003, options to purchase 4,080,000 common shares of the Company were granted at an exercise price of $0.25 per share, which was equal to the estimated fair market value of the Company’s common shares on the grant date. These options had a weighted average fair value of $0.04. In addition, during the year ended December 31, 2003, options to purchase 20,000, 90,000 and 78,000 common shares of the Company were granted at an exercise price of $0.25 per share when the fair estimated market value of the Company’s common shares were $0.454, $0.809 and $1.242, respectively. These options had weighted average fair values of $0.24, $0.60 and $1.03, respectively.

Common Stock

      On November 15, 2002, all outstanding shares of Predecessor were purchased by Ultra Clean.

      In February 2003, the Company issued 190,580 shares of common stock to an employee. In connection with this grant, approximately $47,000 was recognized as compensation charge in general and administrative expenses.

Restricted Stock

      On November 26, 2002, Ultra Clean granted 1,074,100 shares of common stock to certain key employees. These shares vest, in equal installments, over a four year period from the date of grant, and any unvested shares are subject to repurchase at fair market value by Ultra Clean upon termination of the employee’s service to Ultra Clean. For the period from November 16, 2002 to December 31, 2002 and the year ended December 31, 2003, Ultra Clean charged $8,000 and $67,000, respectively, to compensation expense related to the vesting of such restricted stock. The unvested amount is subject to forfeiture, until the common stock is fully vested. At December 31, 2003, 268,525 shares were vested and 805,575 shares were subject to repurchase.

F-17

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.     Net Income (Loss) Per Share

      The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income (loss) per share (in thousands):

		Predecessor
				January 1,			November 16,
				2002			2002
		Year Ended		Through			Through			Year Ended
		December 31,		November 15,			December 31,			December 31,
		2001		2002			2002			2003
Net loss (numerator), basic and diluted		$	2,894	$	(312	)	$	(1,849	)	$	108
Shares (denominator) — basic
	Weighted average common shares outstanding		3,680		3,680			35,748			40,956
	Weighted average common shares outstanding subject to repurchase		—		—			(1,074	)		(1,052	)
	Shares used in computing basic net income (loss) per share		3,680		3,680			34,674			39,904
Shares (denominator) — diluted
	Weighted average common shares outstanding		3,680		—			—			40,956
	Dilutive effect of options outstanding		855		—			—			1,887
	Shares used in computing diluted net income per share		4,535		3,680			34,674			42,843
Net income (loss) per share — basic		$	0.79	$	(0.08	)	$	(0.05	)	$	0.00
Net income (loss) per share — diluted		$	0.64	$	(0.08	)	$	(0.05	)	$	0.00

      For the periods from January 1, 2002 through November 15, 2002 and November 16, 2002 through December 31, 2002, the Company had securities outstanding which could potentially dilute basic earnings per share in the future, but the incremental shares from the assumed exercise of these securities were excluded in the computation of diluted net loss per share, as their effect would have been anti-dilutive. Such outstanding securities consist of the following:

	Predecessor
	January 1,		November 16,
	2002		2002
	Through		Through
	November 15,		December 31,
	2002		2002
Shares of common stock subject to repurchase		—		1,074
Outstanding options		1,106		—
		1,106		1,074

Deferred Stock Compensation

      During the year ended December 31, 2003, the Company issued 4,268,000 common stock options to employees at a weighted average exercise price of $0.25 per share. The weighted average exercise price

F-18

ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

was below the weighted average deemed fair value of the Company’s common stock which ranged from $0.25 to $1.24 per share. In connection with these options, the Company recorded deferred stock based compensation of $132,000 and amortized $9,000 as an expense during the year ended December 31, 2003.

9.     Employee Benefit Plan

      The Company sponsors a 401(k) savings and profit sharing plan (the “401(k) Plan”) for all employees who meet certain eligibility requirements. Participants could elect to contribute to the 401(k) Plan, on a pre-tax basis, from 2-19% of their salary up to a maximum of $11,000. The Company may make matching contributions up to 6% of employee contributions based upon eligibility. The Company made approximately $147,000, $145,000, $23,000 and $186,000 in discretionary employer contributions to the 401(k) Plan in the year ended December 31, 2001, the period January 1, 2002 through November 15, 2002, the period from November 16, 2002 through December 31, 2002 and the year ended December 31, 2003, respectively.

10.     Related Party Transaction

      In addition to the related party transactions previously described, Ultra Clean entered into an agreement with a key executive of Ultra Clean on November 15, 2002 to defer payment of $265,000 in compensation until November 15, 2009. Under this arrangement Ultra Clean pays interest of 2.7% per annum, payable on June 30 and December 31 of each year. The amounts owed under this arrangement may be prepaid by Ultra Clean at the discretion of the board of directors. The principal amount owed under this arrangement is contained within capital lease obligations and other liabilities on the balance sheet of Ultra Clean.

F-19

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

      The following table indicates the expenses to be incurred in connection with the offering described in this registration statement. All amounts are estimates, other than the registration fee, the NASD fee, the Nasdaq National Market application fee and the Initial Public Offering advisory fee.

SEC registration fee		$	6,978
NASD filing fee			9,125
Nasdaq National Market application fee			*
Initial Public Offering advisory fee		$	2,000,000
Accounting fees and expenses			*
Legal fees and expenses			*
Printing and engraving expenses			*
Transfer agent fees and expenses			*
Blue sky fees and expenses			*
Miscellaneous fees and expenses			*
	Total	$	*

*  To be completed by amendment

Item 14. Indemnification of Directors and Officers

Delaware General Corporation Law

      Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to Ultra Clean Holdings, Inc. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

      Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or for any transaction from which the director derived an improper personal benefit.

Amended and Restated Certificate of Incorporation and Bylaws

      Article 8 of Ultra Clean Holdings, Inc.’s amended and restated certificate of incorporation, to be effective immediately prior to the closing of the offering, provides that a director of Ultra Clean Holdings, Inc. shall not be liable to Ultra Clean Holdings, Inc. or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware law. In addition, Article 8 of Ultra Clean Holdings, Inc.’s amended and restated certificate of incorporation provides that each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether

II-1

civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director of Ultra Clean Holdings, Inc. or is or was serving at the request of Ultra Clean Holdings, Inc. as a director of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by Ultra Clean Holdings, Inc. to the fullest extent permitted by Delaware law. The right to indemnification conferred in Article 8 also includes the right to be paid by Ultra Clean Holdings, Inc. the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware law.

      Article 8 of Ultra Clean Holdings, Inc.’s amended and restated certificate of incorporation provides that Ultra Clean Holdings, Inc. may, by action of its board of directors, provide indemnification to such of the officers, employees and agents of Ultra Clean Holdings, Inc. to such extent and to such effect as its board of directors shall determine to be appropriate and authorized by Delaware law. Article 8 also provides that Ultra Clean Holdings, Inc. shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of Ultra Clean Holdings, Inc. or is or was serving at the request of Ultra Clean Holdings, Inc. as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of his status as such, whether or not Ultra Clean Holdings, Inc. would have the power to indemnify him against such liability under Delaware law.

Indemnification Agreements and Directors’ and Officers’ Liability Insurance

      The Registrant also entered into indemnification agreements with its directors and officers. The indemnification agreements provide indemnification to such directors and officers under certain circumstances for acts or omissions which may not be covered by directors’ and officers’ liability insurance. The Registrant also intends to obtain directors’ and officers’ liability insurance, which insures against liabilities that its directors or officers may incur in such capacities.

Registration Rights Agreement

      Section 2.04 of the Registration Rights Agreement dated as of December 2, 2002 between Ultra Clean Holdings, Inc. and FP-Ultra Clean, LLC, the Registrant’s majority shareholder (the “Registration Rights Agreement”), provides that Ultra Clean Holdings, Inc. will indemnify and hold harmless FP-Ultra Clean, LLC and certain other persons (together, the “Shareholders”) holding securities covered by a registration statement (“Registrable Securities”), its officers, directors, employees, partners and agents, and each person, if any, who controls such Shareholder within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (“Damages”) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if Ultra Clean Holdings, Inc. shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to Ultra Clean Holdings, Inc. by such Shareholder or on such Shareholder’s behalf expressly for use therein, provided that, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, or in any prospectus, as the case may be, the indemnity agreement contained in this paragraph shall not apply to the extent that any Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was not sent or given to the person asserting any such Damages at or prior to the written confirmation of the sale of the Registrable Securities concerned to such person if it is determined that Ultra Clean Holdings, Inc. has provided such prospectus to such Shareholder and it was the responsibility of such Shareholder to provide such person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current

II-2

copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have cured the defect giving rise to such Damages. Ultra Clean Holdings, Inc. also agreed to indemnify any underwriters of the Registrable Securities, their officers and directors and each person who controls such underwriters within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended, on substantially the same basis as that of the indemnification of the Shareholders as provided above.

Item 15. Recent Sales of Unregistered Securities

      The Registrant has not issued and sold any unregistered securities other than:

      (1) On October 28, 2002, the Registrant issued to FP-Ultra Clean, LLC 1,000 shares of common stock for a purchase price of $1.00.

      (2) On November 15, 2002, the Registrant issued to FP-Ultra Clean, LLC 32,173,100 shares of common stock for a purchase price of $8,043,275 and $24,129,810 principal amount of 5.0% Series A Senior Notes for a purchase price of $24,129,810.

      (3) On November 26, 2002, the Registrant issued to FP-Ultra Clean, LLC 1,850,000 shares of common stock for a purchase price of $462,500 and $1,387,500 principal amount of 5.0% Series A Senior Notes for a purchase price of $1,387,500. Also on November 26, 2002, the Registrant issued to members of its management an aggregate of 715,900 shares of common stock for an aggregate purchase price of $178,975 and $536,900 aggregate principal amount of 5.0% Series A Senior Notes for an aggregate purchase price of $536,900.

      (4) On December 2, 2002, the Registrant issued to FP-Ultra Clean, LLC 4,976,900 shares of common stock for a purchase price of $1,244,225 and $3,732,690 principal amount of 5.0% Series A Senior Notes for a purchase price of $3,732,690.

      (5) On February 20, 2003, the Registrant issued to Clarence L. Granger, its Chief Executive Officer, 190,580 shares of common stock for a purchase price of $47,645.

      The sales of these securities were exempt from registration under the Securities Act pursuant to Section 4(2).

Stock Options and Shares Issuable Upon Exercise of Stock Options

      The Registrant has issued, and plans to continue issuing from time to time, stock options pursuant to its Amended and Restated 2003 Stock Incentive Plan, as amended immediately prior to the completion of this offering. None of these stock options have been exercised, and none of the common stock issuable upon exercise of these options has been issued to date. The options were issued in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance on Rule 701 of that Act. The Registrant’s Amended and Restated 2003 Stock Incentive Plan is a written compensatory benefit plan for the benefit of its employees and directors.

Item 16.     Exhibits and Financial Statement Schedules

Exhibit		Description
	1.1	Underwriting Agreement*
	2.1	Agreement and Plan of Merger dated October 30, 2002, among Ultra Clean Holdings, Inc., Ultra Clean Technology Systems and Service, Inc., Mitsubishi Corporation, Mitsubishi International Corporation and Clean Merger Company**
	3.1	Amended and Restated Certificate of Incorporation of Ultra Clean Holdings, Inc.**
	3.2	Form of Amended and Restated Certificate of Incorporation of Ultra Clean Holdings, Inc. to be effective upon closing of the offering*
	3.3	Bylaws of Ultra Clean Holdings, Inc.**

II-3

Exhibit		Description
	3.4	Form of Bylaws of Ultra Clean Holdings, Inc. to be effective upon closing of the offering*
	4.1	Specimen Stock Certificate*
	4.2	Form of Stockholder’s Agreement between Ultra Clean Holdings, Inc. and FP-Ultra Clean, LLC to be effective upon closing of the offering
	4.3	Form of Restricted Securities Purchase Agreement dated November 26, 2002 with Ultra Clean Holdings, Inc.**
	4.4	Registration Rights Agreement dated December 2, 2002 between Ultra Clean Holdings, Inc. and FP-Ultra Clean, LLC**
	4.5	Restricted Securities Purchase Agreement dated February 20, 2003 between Ultra Clean Holdings, Inc. and Clarence L. Granger
	5.1	Form of Opinion of Davis Polk & Wardwell*
	10.1	Employment Agreement dated November 15, 2002 between Clarence L. Granger and Ultra Clean Holdings, Inc.**
	10.2	Agreement to Preserve Corporate Opportunity dated November 15, 2002 between Clarence L. Granger and Ultra Clean Holdings, Inc.**
	10.3	Employment Agreement dated November 15, 2002 between Kevin L. Griffin and Ultra Clean Holdings, Inc.**
	10.4	Agreement to Preserve Corporate Opportunity dated November 15, 2002 between Kevin L. Griffin and Ultra Clean Holdings, Inc.**
	10.5	Form of Amended and Restated 2003 Stock Incentive Plan to be effective upon closing of the offering*
	10.6	Form of Stock Option Agreement to be effective upon closing of the offering*
	10.7	Revolving Credit Facility Agreement with Union Bank of California, N.A. dated as of July 9, 2003
	10.8	Initial Public Offering Advisory Agreement dated           , 2004 by and among Ultra Clean Holdings, Inc. and Francisco Partners Management, LLC*
	10.9	Form of Employee Stock Purchase Plan*
	10.10	Form of Indemnification Agreement between Ultra Clean Holdings, Inc. and each of its directors and executive officers*
	21.1	Subsidiaries of Ultra Clean Holdings, Inc.
	23.1	Consent of Deloitte & Touche LLP, independent auditors
	23.2	Consent of Davis Polk & Wardwell (contained in their opinion filed as Exhibit 5.1)*
	24.1	Power of Attorney (included on signature page)**

*  To be filed by subsequent amendment.

**  Previously filed.

Item 17.     Undertakings

      (a) The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

      (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under “Item 14 — Indemnification of Directors and Officers” above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action,

II-4

suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

      (c) The undersigned Registrant hereby undertakes that:

      (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

      (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-5

SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Menlo Park, State of California, on February 17, 2004.

ULTRA CLEAN HOLDINGS, INC.

By:  /s/ CLARENCE L. GRANGER

Name: Clarence L. Granger

Title:  Chief Executive Officer and Director

      Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Name		Title	Date
/s/ CLARENCE L. GRANGER Clarence L. Granger		Chief Executive Officer and Director	February 17, 2004
* Kevin L. Griffin		Chief Financial Officer (Principal Accounting Officer)	February 17, 2004
* Dipanjan Deb		Director	February 17, 2004
* David ibnAle		Director	February 17, 2004
* Thomas M. Rohrs		Director	February 17, 2004
*By:	/s/ CLARENCE L. GRANGER Clarence L. Granger Attorney-in-fact

II-6

EXHIBIT INDEX

Exhibit		Description
	1.1	Underwriting Agreement*
	2.1	Agreement and Plan of Merger dated October 30, 2002, among Ultra Clean Holdings, Inc., Ultra Clean Technology Systems and Service, Inc., Mitsubishi Corporation, Mitsubishi International Corporation and Clean Merger Company**
	3.1	Amended and Restated Certificate of Incorporation of Ultra Clean Holdings, Inc.**
	3.2	Form of Amended and Restated Certificate of Incorporation of Ultra Clean Holdings, Inc. to be effective upon closing of the offering*
	3.3	Bylaws of Ultra Clean Holdings, Inc.**
	3.4	Form of Bylaws of Ultra Clean Holdings, Inc. to be effective upon closing of the offering*
	4.1	Specimen Stock Certificate*
	4.2	Form of Stockholder’s Agreement between Ultra Clean Holdings, Inc. and FP-Ultra Clean, LLC to be effective upon closing of the offering
	4.3	Form of Restricted Securities Purchase Agreement dated November 26, 2002 with Ultra Clean Holdings, Inc.**
	4.4	Registration Rights Agreement dated December 2, 2002 between Ultra Clean Holdings, Inc. and FP-Ultra Clean, LLC**
	4.5	Restricted Securities Purchase Agreement dated February 20, 2003 between Ultra Clean Holdings, Inc. and Clarence L. Granger
	5.1	Form of Opinion of Davis Polk & Wardwell*
	10.1	Employment Agreement dated November 15, 2002 between Clarence L. Granger and Ultra Clean Holdings, Inc.**
	10.2	Agreement to Preserve Corporate Opportunity dated November 15, 2002 between Clarence L. Granger and Ultra Clean Holdings, Inc.**
	10.3	Employment Agreement dated November 15, 2002 between Kevin L. Griffin and Ultra Clean Holdings, Inc.**
	10.4	Agreement to Preserve Corporate Opportunity dated November 15, 2002 between Kevin L. Griffin and Ultra Clean Holdings, Inc.**
	10.5	Form of Amended and Restated 2003 Stock Incentive Plan to be effective upon closing of the offering*
	10.6	Form of Stock Option Agreement to be effective upon closing of the offering*
	10.7	Revolving Credit Facility Agreement with Union Bank of California, N.A. dated as of July 9, 2003
	10.8	Initial Public Offering Advisory Agreement dated        , 2004 by and among Ultra Clean Holdings, Inc. and Francisco Partners Management, LLC*
	10.9	Form of Employee Stock Purchase Plan*
	10.10	Form of Indemnification Agreement between Ultra Clean Holdings, Inc. and each of its directors and executive officers*
	21.1	Subsidiaries of Ultra Clean Holdings, Inc.
	23.1	Consent of Deloitte & Touche LLP, independent auditors
	23.2	Consent of Davis Polk & Wardwell (contained in their opinion filed as Exhibit 5.1)*
	24.1	Power of Attorney (included on signature page)**

*  To be filed by amendment

**  Previously filed.

EX-4.2

                                                                     EXHIBIT 4.2


                             STOCKHOLDERS' AGREEMENT

                                   dated as of

                           _____________________, 2004

                                      among

                           ULTRA CLEAN HOLDINGS, INC.,

                               FP-ULTRA CLEAN, LLC

                                       and

                       CERTAIN OTHER PERSONS NAMED HEREIN



                               TABLE OF CONTENTS



                                                                                                 PAGE
                                                                                                 ----
                                                                                              

                                                  ARTICLE 1
                                                 DEFINITIONS

Section 1.01.  Definitions.....................................................................    1

                                                  ARTICLE 2
                                             CORPORATE GOVERNANCE

Section 2.01.  Composition of the Board........................................................    4
Section 2.02.  Removal.........................................................................    5
Section 2.03.  Vacancies.......................................................................    6
Section 2.04.  Action by the Board.............................................................    6
Section 2.05.  Conflicting Charter or Bylaw Provisions.........................................    8
Section 2.06.  Subsidiary Governance...........................................................    9

                                                  ARTICLE 3
                                           RESTRICTIONS ON TRANSFER

Section 3.01.  General.........................................................................    9
Section 3.02.  Legends.........................................................................    9
Section 3.03.  Restrictions on Transfer........................................................   10
Section 3.04.  Permitted Transferees...........................................................   10

                                                  ARTICLE 4
                                       CERTAIN COVENANTS AND AGREEMENTS

Section 4.01.  Information.....................................................................   10
Section 4.02.  Reports.........................................................................   11
Section 4.03.  Cooperation in Refinancing......................................................   12
Section 4.04.  Appointment of Stockholder Representative.......................................   12

                                                  ARTICLE 5
                                                MISCELLANEOUS

Section 5.01.  Entire Agreement................................................................   12
Section 5.02.  Binding Effect; Benefit.........................................................   12
Section 5.03.  Assignability...................................................................   13
Section 5.04.  Waiver; Amendment; Termination..................................................   13
Section 5.05.  Notices.........................................................................   13
Section 5.06.  Fees and Expenses...............................................................   14
Section 5.07.  Headings........................................................................   14
Section 5.08.  Counterparts....................................................................   14
Section 5.09.  Applicable Law..................................................................   15


                                       i


                                                                                               
Section 5.10.  Waiver of Jury Trial............................................................   15
Section 5.11.  Specific Enforcement............................................................   15
Section 5.12.  Consent to Jurisdiction.........................................................   15
Section 5.13.  Severability....................................................................   15
Section 5.14.  Recapitalization................................................................   16
Section 5.15.  No Inconsistent Agreements......................................................   16



                                       ii

                            STOCKHOLDERS' AGREEMENT

         AGREEMENT dated as of _____________, 2004 (the "AGREEMENT") among Ultra
Clean Holdings, Inc., a Delaware corporation (the "COMPANY"), FP-Ultra Clean,
LLC, a Delaware limited liability company ("FP"), and such additional persons as
may sign joinder agreements to this Agreement.

                              W I T N E S S E T H :

         WHEREAS, FP is currently the owner of a majority of the Common Stock of
the Company;

         WHEREAS, the parties hereto desire to enter into this Agreement to
govern certain of their rights, duties and obligations;

         NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         Section 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:

         "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, provided that no securityholder of the Company shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "CONTROL" (including with
correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

         "AGGREGATE OWNERSHIP" means, with respect to any Stockholder or group
of Stockholders, and with respect to any class of Company Securities, the total
amount of such class of Company Securities "BENEFICIALLY OWNED" (as such term is
defined in Rule 13d-3 of the Exchange Act) (without duplication) by such
Stockholder or group of Stockholders as of the date of such calculation,
calculated on a Fully Diluted basis.

         "AGGREGATE OWNERSHIP PERCENTAGE" means, with respect to any Stockholder
(or group of Stockholders), and with respect to any class of Company



Securities, the percentage equal to such Stockholder's (or group of
Stockholders') Aggregate Ownership of such class of Company Securities divided
by all outstanding Common Shares, calculated on a Fully Diluted basis.

         "BOARD" means the board of directors of the Company.

         "BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco or New York City are authorized by law
to close.

         "BYLAWS" means the bylaws of the Company, as amended from time to time.

         "CHARTER" means the certificate of incorporation of the Company, as the
same may be amended from time to time.

         "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.

         "COMMON STOCK" means the Common Stock, par value $0.001 per share, of
the Company. "COMMON SHARES" means shares of Common Stock.

         "COMPANY SECURITIES" means (i) the Common Stock, (ii) securities
convertible into or exchangeable for Common Stock, and (iii) options, warrants
or other rights to acquire Common Stock or any other equity or equity-linked
security issued by the Company.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FIVE PERCENT STOCKHOLDER" means a Stockholder whose Aggregate
Ownership Percentage is 5% or more.

         "FOREIGN SUBSIDIARY" means, with respect to the Company, any entity
organized under the laws of a jurisdiction other than a State of the United
States of America of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by the Company.

         "FULLY DILUTED" means, with respect to any class of Company Securities,
all outstanding shares and all shares issuable in respect of securities
convertible into or exchangeable for such shares, all stock appreciation rights,
options, warrants and other rights to purchase or subscribe for such Company
Securities or securities convertible into or exchangeable for such Company
Securities; provided that if any of the foregoing stock appreciation rights,
options, warrants or other rights to purchase or subscribe for such Company
Securities are subject

                                       2


to vesting, the Company Securities subject to vesting shall be included in the
definition of "FULLY DILUTED" only upon and to the extent of such vesting.

         "INSIGNIFICANT SUBSIDIARY" means a subsidiary of the Company that does
not meet any of the conditions contained in the definition of "significant
subsidiary" as defined in Rule 1-02(w) of Regulation S-X promulgated under the
Securities Act.

         "INVESTMENT" means, with respect to any Person, (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including any partnership,
limited liability and joint venture interest) of any other Person and (ii) any
capital contribution by such Person to any other Person.

         "PERMITTED TRANSFEREE" means any Person so designated by FP in its sole
discretion.

         "PERSON" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

         "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 2, 2002 between the Company and FP.

         "SEC" means the Securities and Exchange Commission.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "STOCKHOLDER" means at any time, any Person (other than the Company)
who shall then be a party to or bound by this Agreement, so long as such Person
shall "beneficially own" (as such term is defined in Rule 13d-3 of the Exchange
Act) any Company Securities.

         "SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.

         "THIRD PARTY" means a prospective purchaser(s) (other than a Permitted
Transferee or other Affiliate of such Stockholder) of Company Securities in an
arm's-length transaction from a Stockholder.

         "TRANSFER" means, with respect to any Company Security, (i) when used
as a verb, to sell, assign, dispose of, exchange, pledge, encumber, hypothecate
or otherwise transfer such security or any participation or interest therein,
whether directly or indirectly, or agree or commit to do any of the foregoing
and (ii) when

                                       3


used as a noun, a direct or indirect sale, assignment, disposition, exchange,
pledge, encumbrance, hypothecation or other transfer of such security or any
participation or interest therein or any agreement or commitment to do any of
the foregoing.

         (b)      The term "FP," to the extent FP shall have transferred any of
its Company Securities, shall mean FP and such transferee or transferees, taken
together.

         (c)      Each of the following terms is defined in the Section set
forth opposite such term:



          Term                                      Section
          ----                                      -------
                                                 
Additional Directors                                2.01
Agreement                                           Preamble
Cause                                               2.02
Company                                             Preamble
FP                                                  Preamble
FP Stockholder Representative                       4.04
Replacement Nominee                                 2.03(a)
Stockholder                                         5.03


                                   ARTICLE 2
                              CORPORATE GOVERNANCE

         Section 2.01. Composition of the Board. (a) The Board shall consist of
nine directors, a majority of whom will be nominated by FP. One director will be
the Chief Executive Officer of the Company for so long as he or she is employed
by the Company. Three directors will be nominated by the Chief Executive Officer
and FP, provided that each such director (i) shall not be an "Affiliate" or an
"Associate" (as such terms are used within the meaning of Rule 12b-2 under the
Exchange Act) of FP and (ii) shall be an "independent director," as such term is
defined by the rules of the securities exchange or quotation system on which the
Common Stock is traded. If the number of directors that comprise the entire
Board is increased in accordance with Section 2.04 hereof, the number of
directors added to the Board (the "ADDITIONAL DIRECTORS") must be a multiple of
two, and FP shall continue to be entitled to nominate a majority of the Board as
provided in this Section 2.01.

         (b)      Each Stockholder entitled to vote for the election of
directors to the Board agrees that it will vote its Common Shares or execute a
proxy or written consent, as the case may be, and take all other necessary
action (including causing

                                       4


the Company to call a special meeting of Stockholders) in order to ensure that
the composition of the Board is as set forth in this Section 2.01.

         (c)      The right of FP to nominate a majority of the members of the
Board pursuant to this Article 2 shall:

                  (i)      at such time as FP's Aggregate Ownership Percentage
         is less than 25%, be reduced to the right to nominate one-fourth of the
         members of the Board, rounded up to the nearest whole number of members
         of the Board if such fraction is not a whole number;

                  (ii)     at such time as FP's Aggregate Ownership Percentage
         is less than 20%, be reduced to the right to nominate one-fifth of the
         members of the Board, rounded up to the nearest whole number of members
         of the Board if such fraction is not a whole number;

                  (iii)    at such time as FP's Aggregate Ownership Percentage
         is less than 10%, be reduced to the right to nominate one-tenth of the
         members of the Board, rounded up to the nearest whole number of members
         of the Board if such fraction is not a whole number; and

                  (iv)     terminate at such time as FP's Aggregate Ownership
         Percentage is less than 5%.

         The obligations imposed on the Stockholders to give effect to the
rights to nominate directors set forth in this Section 2.01 shall terminate as
to any Person when such Person's right to nominate a director is terminated.

         (d)      The Company agrees to take all other necessary actions
(including calling a special meeting of the Board and/or Stockholders) to ensure
that the composition of the Board is as set forth in this Section 2.01.

         Section 2.02. Removal. Each Stockholder agrees that if at any time it
is then entitled to vote for the removal of directors from the Board, it will
not vote any of its Common Shares in favor of the removal of any director who
shall have been nominated in accordance with Section 2.01 hereof, unless such
removal shall be for Cause or the Person or Persons entitled to nominate such
director shall have consented to such removal in writing; provided that if the
Person or Persons entitled to nominate any director pursuant to Section 2.01
hereof shall request in writing the removal, with or without Cause, of such
director, such Stockholder shall vote its Common Shares in favor of such
removal. Removal for "CAUSE" shall mean removal of a director because of such
director's (a) willful and continued failure substantially to perform his or her
statutory or fiduciary duties to the Company in his or her established position,
(b) participation in a fraud, act of dishonesty or other misconduct that is
injurious, monetarily or otherwise, to the

                                       5


Company or any of its Subsidiaries, (c) having been charged with or pleading
guilty to a felony or a crime involving fraud or dishonesty, (d) violation of
any state or federal law that has an adverse effect on the Company or (e) abuse
of illegal drugs or other controlled substances or habitual intoxication.

         Section 2.03. Vacancies. If, as a result of death, disability,
retirement, resignation, removal (with or without Cause) or otherwise, there
shall exist or occur any vacancy on the Board:

         (a)      the Person or Persons entitled under Section 2.01 hereof to
nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy may, subject to the provisions of Section 2.01
hereof, nominate another individual (the "REPLACEMENT NOMINEE") to fill such
vacancy and serve as a director on the Board; and

         (b)      subject to Section 2.01 hereof, each Stockholder then entitled
to vote for the election of the Replacement Nominee as a director of the Company
agrees that it will vote its Common Shares, or execute a proxy or written
consent, as the case may be, in order to ensure that the Replacement Nominee be
elected to the Board.

         Section 2.04. Action by the Board. (a) A quorum of the Board shall
consist of a majority of the total number of directors, which such majority
shall include a majority of the nominees of FP; provided that if FP has not
nominated its independent directors pursuant to Section 2.01(a), such majority
will include all directors nominated by FP.

         (b)      All actions of the Board shall require (i) the affirmative
vote of at least a majority of the directors present at a duly convened meeting
of the Board at which a quorum is present or (ii) the unanimous written consent
of the Board; provided that if there is a vacancy on the Board and an individual
has been nominated to fill such vacancy, the first order of business shall be to
fill such vacancy.

         (c)      The Board may create executive, compensation, audit,
nominating and corporate governance and such other committees as it may
determine. During such time as FP's Aggregate Ownership Percentage is greater
than or equal to 25%, FP shall be entitled to majority representation on any
committee created by the Board, which majority representation shall consist of
any director or directors designated by FP to serve on such committee; provided
that if the rules or regulations of the SEC or the securities exchange or
quotation system on which the Common Stock is traded require any committee to
consist of one or more "independent directors," as such term is defined by the
rules of the securities exchange or quotation system on which the Common Stock
is traded, the directors designated to serve on such committee by FP shall be
"independent directors."

                                       6


FP's entitlement to majority representation on any committee created by the
Board shall:

                  (i)      at such time as FP's Aggregate Ownership Percentage
         is less than 25%, be reduced to an entitlement to designate one-fourth
         of the members of each such committee, rounded up to the nearest whole
         number of members if such fraction is not a whole number;

                  (ii)     at such time as FP's Aggregate Ownership Percentage
         is less than 20%, be reduced to an entitlement to designate one-fifth
         of the members of each such committee, rounded up to the nearest whole
         number of members if such fraction is not a whole number;

                  (iii)    at such time as FP's Aggregate Ownership Percentage
         is less than 10%, be reduced to an entitlement to designate one-tenth
         of the members of each such committee, rounded up to the nearest whole
         number of members if such fraction is not a whole number; and

                  (iv)     terminate at such time as FP's Aggregate Ownership
         Percentage is less than 5%.

         (d)      At such time as FP's Aggregate Ownership Percentage is greater
than or equal to 25%, no action by the Company (including but not limited to any
action by the Board or any committee thereof) shall be taken with respect to any
of the following matters without the prior written consent of FP and the
affirmative approval of the Board:

                  (i)      the declaration of any dividend on or the making of
         any distribution with respect to, or the recapitalization,
         reclassification, redemption, repurchase or other acquisition of, any
         securities of the Company or any Subsidiary, except as expressly
         permitted by this Agreement;

                  (ii)     any incurrence, refinancing, alteration of material
         terms or prepayment by the Company or any Subsidiary of indebtedness
         for borrowed money in excess of $10,000,000 in the aggregate (or the
         guaranty by the Company or any Subsidiary of any such indebtedness);

                  (iii)    any approval of the annual business plan, budget and
         long-term strategic plan of the Company or any Subsidiary;

                  (iv)     any modification of the long-term business strategy
         or scope of the business of the Company or any Subsidiary or any
         material customer relationships thereof;

                                       7


                  (v)      (A) any merger or consolidation of the Company with
         or into any Person, other than a wholly owned Subsidiary, or of any
         Subsidiary with or into any Person other than the Company or any other
         wholly owned Subsidiary, or (B) any sale of the Company or any
         Subsidiary or any significant operations of the Company or any
         Subsidiary or any joint venture transaction, acquisition or disposition
         of assets, business, operations or securities by the Company or any
         Subsidiary (in a single transaction or a series of related
         transactions) having a value in each case in this clause (B) in excess
         of $10,000,000;

                  (vi)     any liquidation, dissolution, commencement of
         bankruptcy, liquidation or similar proceedings with respect to the
         Company or any Subsidiary;

                  (vii)    the issuance of any security by the Company or any
         Subsidiary (not including issuances of such securities in connection
         with employee or stock option plans previously approved by the Board),
         other than as specifically contemplated by this Agreement;

                  (viii)   any determination of compensation, benefits,
         perquisites and other incentives for the Chief Executive Officer or the
         Chief Financial Officer of the Company or its Subsidiaries and the
         approval or amendment of any plans or contracts in connection
         therewith, and any approval or amendment to any equity or other
         compensation or benefit plans for employees of the Company or its
         Subsidiaries;

                  (ix)     any appointment or dismissal of any of the Chairman
         of the Board, Chief Executive Officer, Chief Financial Officer or any
         other executive officer in any similar capacity of the Company or any
         Subsidiary;

                  (x)      any amendment to this Agreement, any exercise or
         waiver of the Company's rights under this Agreement, any amendment to
         the Charter or Bylaws or any adoption of or amendment to the
         certificate of incorporation or bylaws of any Subsidiary; or

                  (xi)     any increase or decrease to the number of Directors
         that comprise the entire Board of the Company or any Subsidiary.

         Section 2.05 . Conflicting Charter or Bylaw Provisions. Each
Stockholder shall vote its Common Shares or execute proxies or written consents,
as the case may be, and shall take all other actions necessary to ensure that
the Company's Charter and Bylaws (i) facilitate, and do not at any time conflict
with, any provision of this Agreement and (ii) permit each Stockholder to
receive the benefits to which each such Stockholder is entitled under this
Agreement.

                                       8


         Section 2.06. Subsidiary Governance. The Company and each Stockholder
agree that (i) the board of directors or other persons performing similar
functions of each Subsidiary of the Company (other than any Foreign Subsidiary
and any Insignificant Subsidiary) shall be comprised of the individuals who are
serving as directors on the Board in accordance with Section 2.01 hereof and
(ii) the board of directors or other persons performing similar functions of any
Subsidiary of the Company shall be subject to all the provisions of this Article
2, including paragraph Section 2.04(d) of Section 2.04 hereof. Each Stockholder
agrees to vote its Common Shares and to cause its representatives on the Board,
subject to their fiduciary duties, to vote and take other appropriate action to
effectuate the agreements in this Section 2.06 in respect of any Subsidiary of
the Company.

                                   ARTICLE 3
                            RESTRICTIONS ON TRANSFER

         Section 3.01. General. (a) Each Stockholder understands and agrees that
the Company Securities acquired prior to the date of this Agreement have not
been registered under the Securities Act and are restricted securities under
such Act and the rules and regulations promulgated thereunder. Each Stockholder
agrees that it will not Transfer any Company Securities (or solicit any offers
in respect of any Transfer of any Company Securities), except in compliance with
the Securities Act, any applicable foreign or state securities or "blue sky"
laws, and the terms and conditions of this Agreement.

         (b)      Any attempt to Transfer any Company Securities not in
compliance with this Agreement shall be null and void and the Company shall not,
and shall cause any transfer agent not to, give any effect in the Company's
stock records to such attempted Transfer.

         Section 3.02. Legends. (a) In addition to any other legend that may be
required, each certificate for Company Securities that is issued to any
Stockholder shall bear a legend in substantially the following form:

         "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY FOREIGN OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS' AGREEMENT
DATED AS OF _______________, 2004, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST
FROM ULTRA CLEAN HOLDINGS, INC. OR ANY SUCCESSOR THERETO."

                                       9


         (b)      If any Company Securities shall cease to be Registrable
Securities (as defined in the Registration Rights Agreement) under clause (i) or
clause (ii) of the definition thereof, the Company, upon the written request of
the holder thereof, shall issue to such holder a new certificate evidencing such
shares without the first sentence of the legend required by Section 3.02(a)
hereof endorsed thereon. If any Company Securities cease to be subject to any
and all restrictions on Transfer set forth in this Agreement, the Company, upon
the written request of the holder thereof, shall issue to such holder a new
certificate evidencing such Company Securities without the second sentence of
the legend required by Section 3.02(a) hereof endorsed thereon.

         Section 3.03. Restrictions on Transfer. Except with the prior written
consent of the Company and FP, no Stockholder shall Transfer any of its Company
Securities.

         Section 3.04. Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, FP may at any time Transfer any or all of its Company
Securities to one or more Permitted Transferees without the consent of the
Company or any other Stockholder or group of Stockholders; provided that (a)
such Permitted Transferee shall, if so required by FP, agree in writing to be
bound by the terms of this Agreement in the form of Exhibit A attached hereto,
and (b) the Transfer to such Permitted Transferee is in compliance with the
Securities Act and any other applicable securities or "blue sky" laws.

                                   ARTICLE 4
                        CERTAIN COVENANTS AND AGREEMENTS

         Section 4.01. Information. The Company agrees to furnish FP, for so
long as FP owns any Company Securities:

         (a)      as soon as practicable and in any event no later than 20 days
after the end of each fiscal month, a management report for such month covering
the items set forth in Exhibit B hereto;

         (b)      as soon as practicable and, in any event, within 45 days after
the end of each of the first three fiscal quarters, the unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of such quarter
and the related unaudited statement of operations and cash flow for such quarter
and for the portion of the fiscal year then ended, in each case prepared in
accordance with GAAP;

         (c)      as soon as practicable and, in any event, within 90 days after
the end of each fiscal year, (i) the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such fiscal year and the related
audited statement

                                       10


of operations and cash flow for such fiscal year, and for the portion of the
fiscal year then ended, in each case prepared in accordance with GAAP and
certified by Deloitte & Touche or another firm of independent public accountants
of nationally recognized standing, together with a comparison of the figures in
such financial statements with the figures for the previous fiscal year and the
figures in the Company's annual operating budget, (ii) any management letters or
other correspondence from such accountants and (iii) the Company's annual
operating budget for the coming fiscal year,

         (d)      promptly following the preparation thereof, a copy of any
revisions to the annual operating budget delivered pursuant to clause (c) above,

         (e)      promptly upon their becoming available, copies of (i) all
financial statements, reports, notices and proxy statements sent or made
generally available by the Company to any of its security holders, (ii) all
regular and periodic reports and all registration statements and prospectuses
filed by the Company with any securities exchange or with the SEC and (iii) all
press releases and other statements made generally available by the Company to
the public,

         (f)      as soon as practicable and, in any event, within five Business
Days after any officer of the Company obtains knowledge thereof, notice (with a
description in reasonable detail, and stating the action that the Company is
taking or proposes to take with respect thereto) of (i) the commencement of any
material litigation, investigation or other proceeding to which the Company or
any of its Subsidiaries is a party before any court or arbitrator or any
governmental body, agency or official or (ii) the existence of any material
default or breach under this Agreement or any other material contract or
agreement to which the Company or any of its Subsidiaries is a party, and

         (g)      as promptly as reasonably practicable, such other information
with respect to the Company or any of its Subsidiaries as may reasonably be
requested by FP.

         The Company's obligation to provide information pursuant to Section
4.01(a) and (b) and Section 4.02 shall be deemed satisfied upon the timely
filing of such information with the SEC.

         Section 4.02. Reports. The Company will furnish the Stockholders with
the quarterly and annual financial reports that the Company is required to file
with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act or, in
the event the Company is not required to file such reports, quarterly and annual
reports containing the same information as would otherwise be required in such
reports. The Company's obligation to provide information pursuant to this
Section 4.01 shall be deemed satisfied upon the timely filing of such
information with the SEC.

                                       11


         Section 4.03. Cooperation in Refinancing. Each Stockholder agrees to
cooperate to the extent commercially reasonable with the Company and take such
steps as the Board reasonably deems appropriate in any financing of debt of the
Company and any of its Subsidiaries, including executing such documents as the
Board reasonably determines should be filed with any governmental agency and
conducting presentations to potential investors and rating agencies. This
Section 4.03 shall not be construed to require any Stockholder to contribute any
additional capital to the Company.

         Section 4.04. Appointment of Stockholder Representative. FP and its
Permitted Transferees, if any, irrevocably appoint the FP Stockholder
Representative its agent and true and lawful attorney-in-fact, with full power
of substitution, to take the actions, receive notices and exercise the powers
delegated to the FP Stockholder Representative under this Agreement in the name
of each such Stockholder, together with such actions and powers as are
reasonably incidental thereto. Notwithstanding the foregoing, the FP Stockholder
Representative shall not take any action or exercise any power to the extent
that the holders of the majority of the Fully Diluted Common Shares held by FP
and its Permitted Transferees shall have voted to prevent the Stockholder
Representative from taking such action or exercising such power. "FP STOCKHOLDER
REPRESENTATIVE" means FP, as agent for FP and its Permitted Transferees. The
entity appointed as the FP Stockholder Representative may be replaced at any
time and from time to time by the vote of a majority of the Fully Diluted Common
Shares held by FP and its Permitted Transferees. FP shall notify the Company of
such appointment as promptly as practicable after such appointment.

                                    ARTICLE 5
                                  MISCELLANEOUS

         Section 5.01. Entire Agreement. This Agreement, the Registration Rights
Agreement, the Charter and the Bylaws constitute the entire agreement among the
parties hereto and supersede all prior and contemporaneous agreements and
understandings, both oral and written, among the parties hereto with respect to
the subject matter hereof and thereof.

         Section 5.02. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

                                       12


         Section 5.03. Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by any party hereto pursuant to any Transfer of Company Securities or
otherwise, except that, subject to Section 3.04 hereof, any Permitted Transferee
acquiring Company Securities and any Person acquiring Company Securities who is
required by the terms of this Agreement or any employment agreement or stock
purchase, option, stock option or other compensation plan of the Company or any
Subsidiary to become a party hereto shall (unless already bound hereby) execute
and deliver to the Company an agreement to be bound by this Agreement in the
form of Exhibit A hereto and shall thenceforth be a "STOCKHOLDER." Any
Stockholder who ceases to own beneficially any Company Securities shall cease to
be bound by the terms hereof (other than Sections 5.09, 5.10, 5.11 and 5.12).

         Section 5.04. Waiver; Amendment; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the party
against whom the waiver is to be effective. No provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by
the Company with approval of the Board and Stockholders (including FP) holding
at least 50% of the outstanding Common Shares held by the parties hereto at the
time of such proposed amendment or modification.

         (b)      Any amendment or modification of any provision of this
Agreement that would adversely affect FP may be effected only with the consent
of FP.

         Section 5.05. Notices. All notices, requests and other communications
to any party shall be in writing (including facsimile transmissions) and shall
be given,

         if to the Company to:

                           Ultra Clean Holdings, Inc.
                           150 Independence Drive
                           Menlo Park, CA 94025
                           Attention: Chief Executive Officer
                           Fax: (650) 326-0929

         with a copy to FP at the address listed below.

                                       13


         if to FP, to:

                           FP-Ultra Clean, LLC
                           c/o Francisco Partners, L.P.
                           2882 Sand Hill Road, Suite 280
                           Menlo Park, CA 94025
                           Attention: Dipanjan Deb
                           Fax: (650) 233-2999

         with a copy to:

                           Davis Polk & Wardwell
                           1600 El Camino Real
                           Menlo Park, CA 94025
                           Attention: Alan F. Denenberg, Esq.
                           Fax: (650) 752-2111

         All notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5:00 p.m.
in the place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
Any notice, request or other written communication sent by facsimile
transmission shall be confirmed by certified mail, return receipt requested,
posted within one Business Day, or by personal delivery, whether courier or
otherwise, made within two Business Days after the date of such facsimile
transmissions.

         Any Person who becomes a Stockholder shall provide its address and fax
number to the Company, which shall promptly provide such information to each
other Stockholder.

         Section 5.06. Fees and Expenses. The Company shall pay all
out-of-pocket costs and expenses of the Stockholders, including the fees and
expenses of counsel, incurred in connection with the preparation of this
Agreement, or any amendment or waiver hereof, and the transactions contemplated
hereby and all matters related hereto.

         Section 5.07. Headings. The headings contained in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.

         Section 5.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.

                                       14


         Section 5.09. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflicts of laws rules of such state.

         Section 5.10. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

         Section 5.11. Specific Enforcement. Each party hereto acknowledges that
the remedies at law of the other parties for a breach or threatened breach of
this Agreement would be inadequate and, in recognition of this fact, any party
to this Agreement, without posting any bond, and in addition to all other
remedies that may be available, shall be entitled to obtain equitable relief in
the form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy that may then be available.

         Section 5.12. Consent to Jurisdiction. The parties hereby agree that
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in the United States District
Court for the District of Delaware or any Delaware State court sitting in
Delaware, so long as one of such courts shall have subject matter jurisdiction
over such suit, action or proceeding, and that any cause of action arising out
of this Agreement shall be deemed to have arisen from a transaction of business
in the State of Delaware, and each of the parties hereby irrevocably consents to
the nonexclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient form. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 5.05 shall be deemed effective service of process on such
party.

         Section 5.13. Severability. If one or more provisions of this Agreement
are held to be unenforceable to any extent under applicable law, such provision
shall be interpreted as if it were written so as to be enforceable to the
maximum possible extent so as to effectuate the parties' intent to the maximum
possible extent, and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the maximum extent permitted by law.

                                       15


         Section 5.14. Recapitalization. If any capital stock or other
securities are issued in respect of, in exchange for, or in substitution of, any
Company Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Company Securities or any other change in
capital structure of the Company, appropriate adjustments shall be made with
respect to the relevant provisions of this Agreement so as fairly and equitably
to preserve, as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.

         Section 5.15. No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities that is
inconsistent with, or grants rights superior to the rights granted to the
Stockholders pursuant to, this Agreement. The Company represents and warrants to
each Stockholder that it has not previously entered into any agreement with
respect to any of its securities granting any registration rights to any Person.

                                       16


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

ULTRA CLEAN HOLDINGS, INC.

By:__________________________
     Name:
     Title:

FP-ULTRA CLEAN, LLC

     By: FRANCISCO PARTNERS, L.P.,
         Managing Member
By:___________________________
   Name: Dipanjan Deb
   Title: Partner



                                                                       EXHIBIT A

                       JOINDER TO STOCKHOLDERS' AGREEMENT

         This Joinder Agreement (this "JOINDER AGREEMENT") is made as of the
date written below by the undersigned (the "JOINING PARTY") in accordance with
the Stockholders' Agreement dated as of _______________, 2004 (the
"STOCKHOLDERS' AGREEMENT") between Ultra Clean Holdings, Inc. and FP-Ultra
Clean, LLC, as the same may be amended from time to time. Capitalized terms
used, but not defined, herein shall have the meaning ascribed to such terms in
the Stockholders' Agreement.

         The Joining Party hereby acknowledges, agrees and confirms that, by its
execution of this Joinder Agreement, the Joining Party shall be deemed to be a
party to the Stockholders' Agreement as of the date hereof and shall have all of
the rights and obligations of a "Stockholder" thereunder as if it had executed
the Stockholders' Agreement. The Joining Party hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
contained in the Stockholders' Agreement.

         The Joining Party's Aggregate Ownership is __________ Common Shares as
of the date written below.

         IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement
as of the date written below.

Date: ___________ ___, 20___

                                                  [NAME OF JOINING PARTY]

                                                  By: __________________________
                                                      Name:
                                                      Title:

                                                      Address for Notices:



                                                                       EXHIBIT B

                     MATTERS TO BE INCLUDED IN THE COMPANY'S
                            MONTHLY MANAGEMENT REPORT

1.    The unaudited consolidated balance sheet of the Company and its
      Subsidiaries as at the end of such month and the related unaudited
      statement of operations and cash flow for such month, and for the portion
      of the fiscal year then ended, in each case prepared in accordance with
      GAAP, setting forth in comparative form the figures for the corresponding
      month and portion of the previous fiscal year, and the figures for the
      corresponding month and portion of the then current fiscal year as in the
      Company's annual operating budget.

2.    Projected monthly income statements prepared on the same basis as those
      specified in Item 1, including revenue forecasts by customer and expense
      budget by major expense category, for periods extending through a minimum
      of one year from the date of the report.

3.    A summary of realized and projected sales bookings for the most recent
      month and for periods extending through a minimum of one year from the
      date of the report, including probability-weighted "pipeline" projections
      of new bookings to the extent that the Company compiles such data for
      internal purposes.

EX-4.5

                                                                     EXHIBIT 4.5

                       RESTRICTED STOCK PURCHASE AGREEMENT

      This Restricted Stock Purchase Agreement (this "AGREEMENT") dated as of
February 20, 2003 (the "PURCHASE DATE") is made by and between Ultra Clean
Holdings, Inc., a Delaware corporation (the "COMPANY"), and Clarence L. Granger
("PURCHASER").

      SECTION 1. Purchase and Grant. (a) Pursuant to the Employment Agreement
dated as of November 15, 2002 between Purchaser, the Company and Ultra Clean
Technology Systems and Service, Inc., a California corporation (the "EMPLOYMENT
AGREEMENT"), Purchaser hereby elects to purchase 190,580 shares of common stock,
$0.001 par value, of the Company (the "COMMON STOCK"), at a purchase price of
$0.25 per share, subject to the terms and conditions of this Agreement.

      (b)   Purchaser herewith delivers to the Company $47,645.00, the aggregate
purchase price for the Common Stock.

      SECTION 2. Acknowledgment Of Company's Rights. Purchaser acknowledges and
agrees that his acquisition and ownership of, and other rights with respect to,
the Common Stock purchased hereunder shall be subject to the terms of that
certain Securityholders' Agreement dated as of November 26, 2002 among the
Company, FP-Ultra Clean, L.L.C., Purchaser and certain other Management
Shareholders (as defined therein) (the "SECURITYHOLDERS' AGREEMENT"), which is
incorporated herein by reference, to the same extent as if Purchaser had
purchased the Common Stock pursuant to that certain Restricted Securities
Purchase Agreement dated as of November 26, 2002 between Purchaser and the
Company. Purchaser understands and agrees that the Common Stock acquired
hereunder is subject to the restrictions on transfer, the rights of repurchase
by the Company and the other restrictions set forth herein and in the
Securityholders' Agreement.

      SECTION 3. Tax Consequences. (a) Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Common Stock. Purchaser represents that Purchaser has
consulted with any tax consultants Purchaser deems advisable in connection with
the purchase or disposition of the Common Stock and that Purchaser is not
relying on the Company or any of its affiliates for any tax advice.

      (b) By purchasing the Common Stock, Purchaser hereby authorizes
withholding from payroll and any other amounts payable to Purchaser at any time
as requested by the Company, any sums required to satisfy the federal, state,
local and foreign tax withholding obligations of the Company, if any, which
arise in connection with the Common Stock.

      SECTION 4. Repurchase Of Securities by the Company. (a) If Purchaser's
employment with the Company or any of its subsidiaries terminates for any
reason, the Company shall have the right (the "REPURCHASE RIGHT"), at its
option, to repurchase all shares of Common Stock purchased pursuant to this
Agreement which are held by Purchaser or his or her permitted transferees, as
applicable, at a purchase price equal to

the fair market value thereof (the "FAIR MARKET VALUE"), as conclusively
determined in good faith by the Board of Directors of the Company (the "BOARD").

      (b)   If the Company elects to exercise its Repurchase Right, the Company
shall deliver written notice to Purchaser or his or her permitted transferee, as
applicable, setting forth the number of shares of the Common Stock proposed to
be purchased and the then Fair Market Value. Upon the consummation of any such
purchase, Purchaser shall deliver certificates or other documents satisfactory
to the Company in its sole discretion evidencing such shares of the Common Stock
duly endorsed, or accompanied by written instruments of transfer, free and clear
of any encumbrances against delivery of payment for such shares of the Common
Stock. If the Board determines that the Company is unable to repurchase all or
some portion of such shares of the Common Stock for cash without breaching the
terms of any debt instruments or other agreement to which the Company or any of
its subsidiaries is a party, or the Board determines that such repurchase would
otherwise have a material adverse effect on the financial condition of the
Company, the Company will pay in cash the maximum amount permitted under such
debt instruments, or that would not result in such a material adverse effect,
and deliver to Purchaser a promissory note for the balance, payable as soon as
(and in the maximum amounts that) the terms of such debt instruments or other
agreements will permit or that will not have such a material adverse effect and
bearing interest at a rate no less than the applicable federal rate.

      (c)   The Repurchase Right shall lapse and be of no further force and
effect upon the date that is 12 months after termination of Purchaser's
employment; provided, however, that the Repurchase Right shall lapse with
respect to the Common Stock acquired pursuant to this Agreement upon a Qualified
Initial Public Offering (as defined below), if earlier.

      SECTION 5. Restrictions On Transfer. (a) Prior to a Qualified Initial
Public Offering, the Common Stock issued hereunder may not be sold, given,
transferred, assigned, or otherwise hypothecated by Purchaser, except to such
Purchaser's Allowable Transferees (as defined below). Any attempted transfer in
violation of this Section will be void ab initio. Any and all shares of the
Common Stock held by Allowable Transferees who receive such shares of the Common
Stock in accordance with this Section shall be subject to the restrictions in
this Agreement and the Securityholders' Agreement as if such Allowable
Transferee were the original holder of such shares of the Common Stock
transferred to the Allowable Transferee and will be required to execute an
acknowledgment to such effect prior to the transfer.

      (b)   For purposes of this Agreement, the following terms have the
following meanings:

            (i)   "ALLOWABLE TRANSFEREES", with respect to Purchaser, are
      limited to (i) those persons who acquire shares of the Common Stock
      pursuant to such Purchaser's will or the laws of descent and distribution
      or as a result of other donative transfers to Family Members and (ii) the
      Company.

                                       2

            (ii)  "FAMILY MEMBER" means, with respect to Purchaser, any child,
      stepchild, grandchild, parent, stepparent, grandparent, spouse, former
      spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
      daughter-in-law, brother-in-law, or sister-in-law, including adoptive
      relationships, any person sharing Purchaser's household (other than a
      tenant or employee), or a trust for the exclusive benefit of these persons
      (or Purchaser).

            (iii) "QUALIFIED INITIAL PUBLIC OFFERING" means the date that is 180
      days following the date of the final prospectus in connection with an
      underwritten public offering of any class of the Company's equity
      securities with gross proceeds of at least $25,000,000.

      SECTION 6. Right Of First Refusal. Prior to a Qualified Initial Public
Offering, in the event that the restrictions on transfer in Section 5 above are
no longer in effect, the Company shall have the following right of first refusal
with respect to all shares of the Common Stock:

            (i)   If Purchaser proposes to sell, pledge or otherwise transfer to
      a third party (other than an Allowable Transferee) any shares of the
      Common Stock acquired under this Agreement, the Company shall have a right
      of first refusal with respect to such shares of the Common Stock ("RIGHT
      OF FIRST REFUSAL"). Purchaser shall give a written notice to the Company
      describing fully the proposed transfer ("TRANSFER NOTICE"), including the
      number of shares of the Common Stock proposed to be transferred, the
      proposed transfer price, the name and address of the proposed transferee
      and proof satisfactory to the Company that the proposed sale or transfer
      will not violate any applicable federal or state securities laws. The
      Transfer Notice shall be signed both by Purchaser and by the proposed
      transferee and must constitute a binding commitment of both parties to the
      transfer of the applicable shares of the Common Stock. The Company shall
      have the right to purchase such shares of the Common Stock on the terms of
      the proposal described in the Transfer Notice by delivery of a notice of
      exercise of the Right of First Refusal within 30 days after the date when
      the Transfer Notice is received by the Company. The Company's rights under
      this Section shall be freely assignable, in whole or in part.

            (ii)  If the Company fails to exercise its Right of First Refusal
      within 30 days after the date when it received the Transfer Notice, and
      subject to Section 5 above, Purchaser may, not later than 90 days
      following receipt of the Transfer Notice by the Company, conclude a
      transfer of such shares of the Common Stock as were subject to the
      Transfer Notice on the terms and conditions described in the Transfer
      Notice, provided that any such sale is made in compliance with applicable
      federal and state securities laws and not in violation of any other
      contractual restrictions to which Purchaser is bound. Any proposed
      transfer on terms and conditions different from those described in the
      Transfer Notice, as well as any subsequent proposed transfer by Purchaser,
      shall again be subject to the Right of First Refusal and shall require
      compliance with the procedure described in clause (i) above. If the
      Company exercises its Right of First Refusal,


                                       3

      the parties shall consummate the sale of such shares of the Common Stock
      on the terms set forth in the Transfer Notice within 60 days after the
      date when the Company received the Transfer Notice (or within such longer
      period as may have been specified in the Transfer Notice); provided,
      however, that in the event the Transfer Notice provided that payment for
      such shares of the Common Stock was to be made in a form other than cash
      or cash equivalents paid at the time of transfer, the Company shall have
      the option of paying for such shares of the Common Stock with cash or cash
      equivalents reasonably equal to the present value of the consideration
      described in the Transfer Notice.

            (iii) If Purchaser transfers any shares of the Common Stock acquired
      under this Agreement pursuant to this Section, then this Agreement and the
      Securityholders' Agreement shall apply to the transferee to the same
      extent as to Purchaser, and Purchaser shall ensure that the transferee
      signs an acknowledgment to such effect.

      SECTION 7. Restrictive Legends And Stop Transfer Orders. (a) Purchaser
understands and agrees that the Company shall cause the legends set forth below
or legends substantially equivalent thereto, to be placed upon any
certificate(s) evidencing ownership of shares of the Common Stock, together with
any other legends that may be required by the Company or by state or federal
securities laws:

            THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
            SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
            OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
            UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
            COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
            SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

            THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
            RESTRICTIONS ON TRANSFER AS SET FORTH IN THE RESTRICTED STOCK
            PURCHASE AGREEMENT DATED AS OF FEBRUARY 20, 2003 BETWEEN THE ISSUER
            AND THE ORIGINAL HOLDER OF THESE SECURITIES, AND THE
            SECURITYHOLDERS' AGREEMENT DATED AS OF NOVEMBER 26, 2002, BETWEEN
            THE ISSUER, THE ORIGINAL HOLDER OF THESE SECURITIES AND THE OTHER
            PARTIES NAMED THEREIN, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST
            FROM THE ISSUER OF THESE SECURITIES OR ANY SUCCESSOR THERETO. SUCH
            TRANSFER RESTRICTIONS ARE BINDING ON ALLOWABLE TRANSFEREES (AS
            SPECIFIED THEREIN) OF THESE SECURITIES.

      (b)   Purchaser agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate "stop
transfer" instructions to its


                                       4

transfer agent, if any, and that, if the Company acts as transfer agent for its
own securities, it may make appropriate notations to the same effect in its own
records.

      (c)   The Company shall not be required (i) to transfer on its books any
shares of the Common Stock that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
or holder of such shares of the Common Stock or to accord the right to vote or
pay dividends or interest, as applicable, to any purchaser or other transferee
to whom such shares of the Common Stock shall have been so transferred.

      SECTION 8. Lock-up Period. Purchaser hereby agrees that, if so requested
by the Company or any representative of the underwriters (the "MANAGING
UNDERWRITER") in connection with any registration of the offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), Purchaser shall not sell or otherwise transfer any shares of
the Common Stock or other securities of the Company during the 180-day period
(or such lesser period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "MARKET STANDOFF
PERIOD") following the date of the final prospectus in connection an
underwritten offering of the Company's securities. Purchaser further agrees to
enter into an agreement with the Managing Underwriter in respect of the
preceding sentence if so requested by the Company and/or the Managing
Underwriter. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market
Standoff Period.

      SECTION 9 . Representations And Warranties Of Purchaser. Purchaser
understands that the Common Stock has not been registered under the Securities
Act. Purchaser also understands that the Common Stock is being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in this Agreement. Purchaser
hereby represents and warrants to the Company as follows:

            (i)   Purchaser has had an opportunity to obtain the advice of
      counsel prior to executing this Agreement. Purchaser has reviewed this
      Agreement and fully understands all of the provisions hereof. Purchaser
      has been given the opportunity to examine all documents and to ask
      questions of, and to receive answers from, the Company and its
      representatives concerning the terms and conditions of the acquisition of
      the Common Stock and related matters and to obtain all additional
      information regarding the Company and the Common Stock which Purchaser
      deems necessary.

            (ii)  Purchaser is acquiring the Common Stock for Purchaser's own
      account, for investment only, and not with a view towards, or for sale in
      connection with, a distribution. Purchaser is aware of no publication of
      any advertisement in connection with the transactions contemplated in this
      Agreement.

                                       5

            (iii) Purchaser represents that he is an accredited investor within
      the meaning of Regulation D under the Securities Act.

            (iv)  Purchaser is an "executive officer" (as defined in Regulation
      D under the Securities Act) of the Company or one of its subsidiaries.

            (v)   Purchaser understands that an investment in the Common Stock
      is very risky and that Purchaser may lose some or all of his investment.

            (vi)  Purchaser has substantial experience in evaluating and
      investing in private placement transactions of securities in companies
      similar to the Company so that he is capable of evaluating the merits and
      risks of his investment in the Company and has the capacity to protect his
      own interests. Purchaser understands he must, and is able to without
      impairing his financial condition, bear the economic risk of this
      investment indefinitely and to suffer a complete loss of the value of the
      Common Stock.

            (vii) Purchaser represents that by reason of his business or
      financial experience, Purchaser has the capacity to protect his own
      interests in connection with the transactions contemplated in this
      Agreement.

            (viii) Purchaser acknowledges and agrees that the Common Stock has
      not been registered under the Securities Act and that the Common Stock
      must be held indefinitely. Purchaser understands that the Company has no
      present intention and is under no obligation to register any of the shares
      of the Common Stock. Purchaser also understands that there is no assurance
      that any exemption from registration under the Securities Act will be
      available to permit the resale of the Common Stock and that, even if
      available, such exemption may not allow Purchaser to transfer all or any
      portion of the Common Stock under the circumstances, in the amounts or at
      the times Purchaser might propose.

            (ix)  In addition to the restrictions on transfer set forth herein,
      Purchaser agrees not to sell, transfer or otherwise dispose of any shares
      of the Common Stock in violation of the Securities Act, the Securities
      Exchange Act of 1934, as amended, or the rules promulgated thereunder,
      including Rule 144 under the Securities Act.

      SECTION 10. Spousal Consent. As a condition to the Company's obligations
under this Agreement, the spouse of Purchaser, if any, shall execute and deliver
to the Company the Consent of Spouse attached hereto as Schedule I.

      SECTION 11. Adjustment For Stock Split. All references to the number of
shares of the Common Stock and the purchase price of the Common Stock in this
Agreement shall be appropriately adjusted to reflect any stock split (forward or
reverse), stock dividend or other change in the shares of common stock effected
without receipt of consideration by the Company after the date of this
Agreement, and all restrictions on the Common Stock set forth herein shall apply
to any additional shares acquired by Purchaser pursuant to such stock split,
stock dividend or other change in the common stock of the Company.

                                       6

      SECTION 12. No Employment Rights. This Agreement does not confer on
Purchaser any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or any of its
subsidiaries to determine the terms of Purchaser's employment.

      SECTION 13. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be promptly submitted by Purchaser or by the Company to the
Board, which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Board shall be binding, conclusive and final
on all parties.

      SECTION 14. Notices. All notices, requests and other communications to
any party shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by facsimile
transmission,

      if to the Company to:

            Ultra Clean Holdings, Inc.
            2882 Sand Hill Road, Suite 280
            Menlo Park, CA  94025
            Attention: Dipanjan Deb
            Fax:  650-233-2999

      if to Purchaser, to the address set forth on the signature page hereof; or
in each case, to such other address as such party may hereafter specify for such
purpose by written notice to the other party hereto.

      All notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5:00 p.m. in
the place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
Any notice, request or other written communication sent by facsimile
transmission shall be confirmed by certified or registered mail, return receipt
requested, posted within one business day, or by personal delivery, whether
courier or otherwise, made within two business days after the date of such
facsimile transmissions.

      SECTION 15. Survival Of Terms. This Agreement shall apply to and bind
Purchaser and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.

      SECTION 16. Governing Law. This Agreement shall be governed by the
internal substantive laws, but not the choice of law rules, of the State of
California.

      SECTION 17. Jurisdiction. The parties hereby agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with this Agreement or the transactions
contemplated hereby shall be brought in the United States District Court for the
Northern District of California or any California State court sitting in San
Jose, California, so long as one of such courts shall


                                       7

have subject matter jurisdiction over such suit, action or proceeding, and that
any case of action arising out of this Agreement shall be deemed to have arisen
from a transaction of business in the State of California, and each of the
parties hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 14 shall be deemed
effective service of process on such party.

      SECTION 18. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

      SECTION 19. Counterparts; Effectiveness. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.

      SECTION 20. Entire Agreement. This Agreement, together with the
Securityholders' Agreement, constitutes the entire agreement among the parties
hereto and supersedes all prior and contemporaneous agreements and
understandings, both oral and written, among the parties hereto with respect to
the subject matter hereof and thereof.

      SECTION 21. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

                                       8

      IN WITNESS WHEREOF, this Agreement is deemed made as of the date set forth
above.

                                            ULTRA CLEAN HOLDINGS, INC.


                                            By:
                                                --------------------------
                                                Kevin L. Griffin
                                                Chief Financial Officer


                                            PURCHASER:


                                            -----------------------
                                            Clarence L. Granger
                                            Address: 2925 Chateau Way
                                                     Livermore, CA  94550


                                       9

                                   SCHEDULE I
                     TO RESTRICTED STOCK PURCHASE AGREEMENT

                                CONSENT OF SPOUSE

      I, ____________________, spouse of Clarence L. Granger, have read and
approve the foregoing Agreement. In consideration of granting of the right to my
spouse to purchase securities of Ultra Clean Holdings, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement (including the provisions of the agreements
incorporated therein by reference) insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.

Dated:  February __, 2003

EX-10.7

                                                                    EXHIBIT 10.7

                                 LOAN AGREEMENT

THIS LOAN AGREEMENT ("Agreement") is made and entered into as of July 9, 2003 by
and between ULTRA CLEAN TECHNOLOGY SYSTEMS AND SERVICE, INC., a California
corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A., a national banking
association ("Bank").

                              SECTION 1. THE CREDIT

1.1      CREDIT FACILITY

1.1.1    THE REVOLVING LOAN. Bank will loan to Borrower an amount not to exceed
Ten Million Dollars ($10,000,000) outstanding in aggregate principal amount at
any one time (the "Revolving Loan"). The proceeds of the Revolving Loan shall be
used for Borrower's general working capital purposes. Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in accordance with the terms of
the Revolving Note (defined below); provided, however, that if the Loan is
subject to the Out of Debt Provision under Section 1.3 then for at least thirty
(30) consecutive days during each twelve (12) month period, the outstanding
principal balance of the Revolving Loan shall be zero ($0) (the "Out of Debt
Provision"). All borrowings of the Revolving Loan must be made before June 15,
2004, at which time all unpaid principal and interest of the Revolving Loan
shall be due and payable. The Revolving Loan shall be evidenced by Bank's
standard form of commercial promissory note (the "Revolving Note"). Bank shall
enter each amount borrowed and repaid in Bank's records and such entries shall
be prima facie evidence. Omission of Bank to make any such entries shall not
discharge Borrower of its obligation to repay in full with interest all amounts
borrowed.

1.2      TERMINOLOGY. The following words and phrases, whether used in their
singular or plural form, shall have the meanings set forth below:

         (a)      "Affiliate" means any person which directly or indirectly
         controls, is controlled by, or is under common control with, the
         Borrower. "Control" means direct or indirect possession of the power to
         direct or cause the direction of management or policies (whether
         through ownership of voting securities, by contract or otherwise);
         provided that control shall be conclusively presumed when any person or
         affiliated group directly or indirectly owns five percent or more of
         the securities having ordinary voting power for the election of
         directors of a corporation. "Controlled by" and "under common control
         with" have meanings correlative thereto.

         (b)      "GAAP" means generally accepted accounting principles and
         practices consistently applied. Accounting terms used in this Agreement
         but not otherwise expressly defined have the meanings given them by
         GAAP.

         (c)      "Lien" means any voluntary or involuntary security interest,
         mortgage, pledge, charge, encumbrance or title retention agreement,
         covering all or any part of the property of Borrower.

         (d)      "Loan" means all the credit facilities described above.

         (e)      "Loan Documents" means this Agreement, the Note, and all other
         documents, instruments and agreements required by Bank and executed in
         connection with this Agreement, the Note or the Loans.

                                     Page 1


         (f)      "Note" means all the promissory notes described above.

         (g)      "Obligor" means individually and collectively, Borrower and
         Guarantor (as defined in Section 2.3).

         (h)      "Potential Default" means a condition, event or act which, but
         for the passage of time, would constitute an Event of Default.

         (i)      "Subordinated Debt" is defined in Section 2.4.

1.3      BORROWING BASE. Notwithstanding any other provision of this Agreement,
if the Loan is subject to the Borrowing Base, Bank shall not be obligated to
advance funds under the Revolving Loan, at any time that Borrower's aggregate
obligations in respect of principal to Bank thereunder exceed seventy-five
percent (75%) of the book value of Borrower's Eligible Accounts for all account
debtors, except eighty percent (80%) for (a) Applied Materials, Inc., a Delaware
corporation ("Applied"); (b) Lam Research Corporation, a Delaware corporation
("Lam"); and (c) Novellus Systems, Inc., a California corporation, ("Novellus"),
as determined by reference to the most recent Borrowing Base Certificate
theretofore delivered to Bank ("Borrowing Base"); provided, however that for
each financial reporting quarter if the outstanding principal balance of the
Revolving Loan was Two Million Five Hundred Thousand Dollars ($2,500,000) or
less at all times during the previous financial reporting quarter, Borrower may
elect to be subject to (a) the Out of Debt Provision; or (b) the Borrowing Base
and the monthly reporting requirements of Section 4.5(f). If at any time that
the Loan is subject to the Borrowing Base, the Borrower's obligations in respect
of principal to Bank under the referenced facilities exceed the sum so
permitted, Borrower shall immediately repay to Bank such excess.

         1.3.1    ACCOUNTS AND ELIGIBLE ACCOUNTS. The term "Accounts" means all
         presently existing and hereafter arising accounts receivable, contract
         rights, chattel paper, and all other forms of obligations owing to
         Borrower, payable in United States dollars, arising out of the sale or
         lease of goods, or the rendition of services by Borrower, whether or
         not earned by performance, and any and all credit insurance, guaranties
         and other security therefor, as well as all merchandise returned to or
         reclaimed by Borrower, and Borrower's books and records relating to any
         of the foregoing.

         The term "Eligible Accounts" means those Accounts, net of finance
         charges, which have been validly assigned to Bank as collateral and
         strictly comply with all Borrower's representations and warranties to
         Bank, but Eligible Accounts shall not include any Account:

                  (a)      With respect to which the account debtor is an
                  officer, shareholder, director, or employee of Borrower;

                  (b)      With respect to which the account debtor is a
                  subsidiary or Affiliate of Borrower;

                  (c)      Relating to goods placed on consignment, guaranteed
                  sale or other terms by reason of which payment by the account
                  debtor may be conditional;

                  (d)      With respect to which the account debtor is not a
                  resident of the United States or Canada;

                                     Page 2


                  (e)      With respect to which the account debtor is a
                  Federal, state or local governmental entity or agency, unless
                  Bank, in its sole discretion, has agreed to the contrary in
                  writing and Borrower, if necessary or desirable, has complied
                  with the Federal Assignment of Claims Act of 1940 or any
                  applicable state statute or municipal ordinance of similar
                  purpose and effect with respect thereto;

                  (f)      With respect to which Borrower is liable to the
                  account debtor for goods sold or services rendered by the
                  account debtor to Borrower but only to the extent of the
                  potential offset;

                  (g)      With respect to which there is asserted, but only to
                  the extent so asserted, a defense, counterclaim, discount or
                  setoff, whether well-founded or otherwise, except for those
                  discounts, allowances and returns arising in the ordinary
                  course of Borrower's business;

                  (h)      With respect to which the account debtor becomes
                  insolvent, fails to pay its debts as they mature or goes out
                  of business, or which is owed by an account debtor which has
                  become the subject of a proceeding under any provision of the
                  United States Bankruptcy Code, as amended, or under any other
                  bankruptcy or insolvency law, including but not limited to
                  assignments for the benefit of creditors, formal or informal
                  moratoriums, compositions or extensions with all or
                  substantially all of its creditors;

                  (i)      Owed by any account debtor with respect to which
                  twenty-five percent (25%) or more of the aggregate dollar
                  amount of its Accounts are not paid within ninety (90) days of
                  the invoice date;

                  (j)      That is not paid by the account debtor within ninety
                  (90) days of the invoice date;

                  (k)      That portion of the Accounts owed by any single
                  account debtor which exceeds fifteen percent (15%) of all
                  Borrower's Accounts except: (A) fifty percent (50%) for
                  Applied, and (B) twenty-five percent (25%) for Lam and
                  Novellus; and

                  (l)      Which Bank, upon notice to Borrower, deems ineligible
                  in its reasonable credit judgment.

1.4      PREPAYMENT. The Loan may be prepaid in full or in part but only in
accordance with the terms of the Note, and any such prepayment shall be subject
to any prepayment fee provided for therein.

1.5      INTEREST. The unpaid principal balance of the Loan shall bear interest
at the rate or rates provided in the Note.

1.6      UPFRONT COMMITMENT FEE. On or before the date of execution of this
Agreement, Borrower shall pay to Bank a nonrefundable commitment fee of Two
Thousand Five Hundred Dollars ($2,500).

1.7      COMMITMENT FEE; REDUCTION OR TERMINATION OF COMMITMENT. On the last day
of each calendar quarter commencing with the first such day to occur following
the execution of

                                     Page 3


this Agreement Borrower shall pay to Bank a non-refundable fee ("Commitment
Fee") of one quarter of one percent (0.25%) per year on the average daily unused
portion of the Revolving Loan for such quarter, computed on the basis of a 360
day year for actual days elapsed. Borrower may at any time terminate, or from
time to time reduce, the commitment of Bank to make loans hereunder by giving
Bank five (5) days prior written notice. Any such reduction or termination shall
affect the calculation of the Commitment Fee for the calendar quarter in which
such notice is given.

1.8      LEGAL FEE. Borrower shall have reimbursed Bank for Bank's costs and
expenses, including, without limitation, reasonable attorneys' fees and expenses
(including the fees of Bank's in-house legal counsel and staff) in the amount of
$1,200, incurred in connection with the negotiation and drafting of this
Agreement and the transactions contemplated hereby.

1.9      BALANCES. Borrower shall maintain its major depository accounts with
Bank until all obligations of Borrower to Bank under the Loan Documents have
been paid in full.

1.10     DISBURSEMENT. Bank shall disburse the proceeds of the Loan as provided
in Bank's standard form Authorization(s) to Disburse executed by Borrower.

1.11     SECURITY. Prior to any Loan disbursement, Borrower shall execute one or
more security agreements on Bank's standard form, and deliver one or more
financing statements suitable for filing in the official records of the
appropriate state government and/or any other location required by Bank,
granting to Bank a first priority security interest in such of Borrower's
property as is described in said security agreement(s). Any exceptions to Bank's
first priority Lien are permitted only as provided in this Agreement (including
pursuant to Section 5.1). At Bank's reasonable request, Borrower will use its
commercially reasonable efforts to obtain executed landlord's and mortgagee's
waivers, each on Bank's form or any other form reasonably acceptable to the
Bank, covering all of Borrower's property located on leased or encumbered real
property.

                        SECTION 2. CONDITIONS PRECEDENT

Bank shall not be obligated to disburse all or any portion of the Loans unless
at or prior to the time of each such disbursement, the following conditions have
been fulfilled to Bank's reasonable satisfaction:

2.1      COMPLIANCE. Borrower shall have performed and complied with all terms
and conditions required by this Agreement to be performed or complied with, and
shall have executed and delivered to Bank the Note and all other Loan Documents
to which it is a party.

2.2      FINANCIAL STATEMENTS. Borrower shall have provided Bank the finalized
copies of Borrower's audited financial statements for fiscal year end December
31, 2002.

2.3      GUARANTIES. Ultra Clean Holdings, Inc., a California corporation
("Guarantor"), shall have executed and delivered to Bank a continuing guaranty
(the "Guaranty") in form and amount satisfactory to Bank.

2.4      SUBORDINATION AGREEMENTS. FP-Ultra Clean, L.L.C., a Delaware limited
liability company ("FP"), Clarence Granger, Kevin Griffin, and Bruce Wier [KG]
shall have executed and delivered to Bank their respective agreements, in form
satisfactory to Bank, subordinating all of

                                     Page 4


Guarantor's indebtedness now or hereafter owing to said persons or entities, to
all obligations of Guarantor under the Guaranty ("Subordinated Debt").

2.5      AUTHORIZATION TO OBTAIN CREDIT. Borrower shall have provided Bank with
an executed copy of Bank's form Authorization to Obtain Credit with certified
copies of resolutions duly adopted by Borrower's board of directors and in form
satisfactory to Bank, authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents to which it is a party. Such
resolutions shall also designate the persons who are authorized to act on
Borrower's behalf in connection with this Agreement to do the things required of
Borrower pursuant to this Agreement.

2.6      TERMINATION STATEMENTS. Borrower shall have provided Bank with
termination statements executed by such secured creditors as may be required by
Bank, suitable for filing with the Secretary of State in each state designated
by Bank.

2.7      CONTINUING COMPLIANCE. At the time any disbursement is to be made and
immediately thereafter, there shall not exist any Event of Default (as
hereinafter defined) or any Potential Default.

                    SECTION 3. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants the following. The following representations
and warranties shall be considered to have been made again at and as of the date
of each and every Loan disbursement and shall be true and correct as of each
such date.

3.1      BUSINESS ACTIVITY. Borrower's principal business is the design,
engineering, and manufacture of subassemblies and components, primarily gas
delivery systems, for semiconductor process equipment manufacturers and device
makers and other businesses reasonably related thereto.

3.2      AFFILIATES AND SUBSIDIARIES. Borrower's Affiliates and subsidiaries
(those entities in which Borrower has either a controlling interest or a
twenty-five percent (25%) or more ownership interest) and their addresses, and
the names of the persons or entities directly owning five percent (5%) or more
of the equity interests in Borrower, in each case, as of the date of this
Agreement, are as provided on a schedule delivered to Bank on or before the date
of this Agreement.

3.3      ORGANIZATION AND QUALIFICATION. Borrower is duly organized and existing
under the laws of the state of its organization, is duly qualified and in good
standing in any jurisdiction where such qualification is required, and has the
power and authority to carry on the business in which it is engaged and/or
proposes to engage.

3.4      POWER AND AUTHORIZATION. Borrower has the power and authority to enter
into this Agreement and to execute and deliver the Note and all other Loan
Documents to which it is a party. This Agreement and all things required by this
Agreement and the other Loan Documents to which it is a party have been duly
authorized by all requisite action of Borrower.

3.5      AUTHORITY TO BORROW. The execution, delivery and performance of this
Agreement, the Note and all other Loan Documents to which it is a party are not
in contravention of any of the terms of any material indenture, agreement or
undertaking to which Borrower is a party or by which it or any of its property
is bound or affected.

                                     Page 5


3.6      COMPLIANCE WITH LAWS. Borrower is in compliance with all applicable
laws, rules, ordinances or regulations which materially affect the operations or
financial condition of Borrower.

3.7      TITLE. Borrower has good title to, or valid leasehold interests in, all
real and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or Liens in compliance with Section 5.1.

3.8      FINANCIAL STATEMENTS. Borrower's financial statements, including both a
balance sheet at December 31, 2002, together with supporting schedules, and an
income statement for the three (3) months ended March 31, 2003 (the "March 31
Statement"), have heretofore been furnished to Bank, are true and complete, in
all material respects, and fairly represent, in all material respects,
Borrower's financial condition for the period covered thereby, subject, in the
case of the March 31 Statement, to normal year end adjustments and the absence
of footnotes. Since June 6, 2003, there has been no material adverse change in
Borrower's financial condition or operations.

3.9      LITIGATION. There is no litigation or proceeding pending or, to the
knowledge of Borrower, threatened against Borrower or any of its property which
is reasonably likely to affect the financial condition, property or business of
Borrower in a materially adverse manner or result in liability in excess of
Borrower's insurance coverage.

3.10     ERISA. Borrower does not have any defined benefit pension plans (as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")).

3.11     REGULATION U. No action has been taken or is currently planned by
Borrower, or any agent acting on its behalf, which would cause this Agreement or
the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System, or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and, except as may be expressly agreed to and documented between
Borrower and Bank, none of the proceeds of the Loan will be used directly or
indirectly for such purpose.

3.12     NO EVENT OF DEFAULT. There exists no Event of Default, unless cured to
Bank's satisfaction or waived, or Potential Default.

                        SECTION 4. AFFIRMATIVE COVENANTS

Until all sums payable pursuant to this Agreement, the Note and the other Loan
Documents have been paid in full, unless Bank otherwise consents in writing,
Borrower agrees that:

4.1      USE OF PROCEEDS. Borrower will use the proceeds of the Loan only as
provided in Section 1 above.

4.2      PAYMENT OF OBLIGATIONS. Borrower will pay and discharge promptly all
taxes, assessments and other governmental charges and claims levied or imposed
upon it or its property, or any part thereof; PROVIDED, HOWEVER, that Borrower
shall have the right in good faith to contest any such taxes, assessments,
charges or claims and, pending the outcome of

                                     Page 6


such contest, to delay or refuse payment thereof provided that adequately funded
reserves are established by it to pay and discharge any such taxes, assessments,
charges and claims.

4.3      MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve its
existence, and all rights, franchises, licenses and other authority necessary
for the conduct of its business, and will maintain and preserve its property,
equipment and facilities necessary for the conduct of its business in good
order, condition and repair, ordinary wear and tear excepted. Bank may, at
reasonable times and upon reasonable notice, visit and inspect any of Borrower's
properties.

4.4      RECORDS. Borrower will keep and maintain full and accurate accounts and
records of its operations in accordance with GAAP and will permit Bank, at
Borrower's expense, to have access thereto, to make examination and photocopies
thereof, and to make audits of Borrower's accounts and records and Bank's
collateral during regular business hours and upon reasonable notice.

4.5      INFORMATION FURNISHED. Borrower will furnish to Bank:

         (a)      Within forty-five (45) days after the close of each fiscal
         quarter, except for the final quarter of each fiscal year, its
         unaudited balance sheet as of the close of such fiscal quarter, its
         unaudited income and expense statement with year-to-date totals and
         supportive schedules, and its unaudited statement of retained earnings
         for that fiscal quarter, all prepared in accordance with GAAP, subject
         to normal year-end adjustments and the absence of footnotes.

         (b)      Within one hundred twenty (120) days after the close of each
         fiscal year, a copy of its statement of financial condition including
         at least its balance sheet as of the close of such fiscal year and its
         income and expense statement, and its retained earnings statement for
         such fiscal year, examined and prepared on an audited basis by
         independent certified public accountants selected by Borrower and
         reasonably satisfactory to Bank, in accordance with GAAP along with any
         management letter provided by such accountants. Borrower shall not
         change its fiscal year end from the current December 31st without
         thirty (30) days prior written notice to Bank.

         (c)      Prompt written notice to Bank of any Event of Default or
         Potential Default under any of the terms or provisions of this
         Agreement or any other Loan Document, any litigation which would
         reasonably be expected to have a material adverse effect on Borrower's
         financial condition, and any other matter which has resulted in, or
         could reasonably be expected to result in, a material adverse change in
         Borrower's financial condition or operations.

         (d)      Prompt written notice to Bank of any change in Borrower's
         officers and other senior management and prior written notice to Bank
         of any change in Borrower's name or state of organization.

         (e)      Such other financial statements and information as Bank may
         reasonably request from time to time.

         (f)      Within forty-five (45) days after the close of each calendar
         quarter, a copy of Borrower's quarterly accounts receivable aging and
         accounts payable aging and a Borrowing Base Certificate, executed by
         Borrower's chief financial officer or other duly authorized officer of
         Borrower, in form acceptable to Bank, accurately reporting the

                                     Page 7


         amounts of Borrower's Accounts and Eligible Accounts as of the close of
         such quarter, as the Borrowing Base may require. If the Loan is subject
         to a Borrowing Base under Section 1.3, then within twenty (20) days
         after the close of each month, a copy of Borrower's monthly accounts
         receivable aging and accounts payable aging and a Borrowing Base
         Certificate, executed by Borrower's chief financial officer or other
         duly authorized officer of Borrower, in form acceptable to Bank,
         accurately reporting the amounts of Borrower's Accounts and Eligible
         Accounts as of the close of such month, as the Borrowing Base may
         require.

4.6      WORKING CAPITAL. Borrower will at all times maintain Working Capital of
not less than Thirteen Million Dollars ($13,000,000). "Working Capital" means
the excess of current assets over current liabilities of Borrower.

4.7      TANGIBLE NET WORTH. Borrower will at all times maintain Tangible Net
Worth of not less than Twenty Million Dollars ($20,000,000). "Tangible Net
Worth" means the consolidated stockholders' equity of the Guarantor and Borrower
increased by indebtedness subordinated to Bank (including Subordinated Debt) and
decreased by (to the extent reflected in determining such consolidated
stockholders' equity) patents, licenses, trademarks, trade names, goodwill and
other similar intangible assets, organizational expenses, security deposits,
prepaid costs and expenses and monies due from Affiliates (including officers,
shareholders and directors).

4.8      DEBT TO TANGIBLE NET WORTH. Borrower will at all times maintain a ratio
of total liabilities to Tangible Net Worth of not greater than 0.76:1.0.

4.9      PROFITABILITY. Borrower shall not at any time suffer two consecutive
quarterly losses, except losses solely due to accrued but unpaid interest on
Subordinated Debt; provided, Borrower may make a one-time payment to Morgan
Stanley in connection with advisory services not to exceed $1,000,000 in the
aggregate.

4.10     INSURANCE. Borrower will keep all of its insurable property, whether
real, personal or mixed, insured by financially sound and reputable insurance
companies, against fire and such other risks, and in such amounts as is
customarily obtained by companies conducting similar business with respect to
like properties. Borrower will furnish to Bank statements of its insurance
coverage, will promptly upon Bank's request furnish other or additional
insurance reasonably deemed necessary by Bank to the extent that such insurance
may be available on commercially reasonable terms, and hereby assigns to Bank,
as security for Borrower's obligations to Bank, the proceeds of any such
insurance. Prior to any Loan disbursement, Bank will be named loss payee under
all policies insuring the collateral. Borrower will maintain worker's
compensation insurance and insurance against liability for damage to persons or
property. All policies shall require at least ten (10) days' written notice to
Bank before alteration or cancellation.

4.11     ADDITIONAL REQUIREMENTS. Upon Bank's demand, Borrower will promptly
take such further action and execute all such additional documents and
instruments in connection with this Agreement and the other Loan Documents as
Bank in its reasonable discretion deems necessary, and promptly supply Bank with
such other information concerning its affairs as Bank may reasonably request
from time to time.

4.12     LITIGATION AND ATTORNEYS' FEES. Upon Bank's demand, Borrower will
promptly pay to Bank reasonable attorneys' fees, including the reasonable
estimate of the allocated costs and expenses of in-house legal counsel and
staff, and all costs and other expenses paid or incurred

                                     Page 8


by Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement and the other Loan Documents. If any judicial action, arbitration
or other proceeding is commenced, only the prevailing party shall be entitled to
attorneys' fees and court costs.

4.13     BANK EXPENSES. Upon Bank's request, Borrower will pay or reimburse Bank
for all reasonable costs, expenses and fees incurred by Bank in preparing and
documenting all amendments and modifications to any Loan Documents, including
but not limited to all filing and recording fees, and reasonable attorneys'
fees, including the reasonable estimate of the allocated costs and expenses of
in-house legal counsel and staff.

                         SECTION 5. NEGATIVE COVENANTS

Until all sums payable pursuant to this Agreement, the Note and the other Loan
Documents have been paid in full, unless Bank otherwise consents in writing,
Borrower agrees that:

5.1      LIENS. Borrower will not create, assume or suffer to exist any Lien on
any of its property, whether real, personal or mixed, now owned or hereafter
acquired, or upon the income or profits thereof, except (a) Liens in favor of
Bank, (b) Liens for taxes not delinquent and taxes and other items that are not
overdue by more than thirty (30) days or are being contested in good faith, (c)
minor encumbrances and easements on real property which do not materially and
adversely affect its market value, (d) existing Liens on Borrower's property and
extensions, renewals or replacements thereof, (e) purchase money security
interests encumbering only the personal property purchased, (f) Liens on fixed
and capital assets subject to capital lease obligations, and (g) other Liens
securing obligations in an aggregate amount not exceeding $1,000,000.

5.2      BORROWINGS. Borrower will not sell, discount or otherwise transfer any
account receivable or any note, draft or other evidence of indebtedness, except
to Bank or except to a financial institution at face value for deposit or
collection purposes only, and without any fees other than the financial
institution's normal fees for such services. Borrower will not borrow any money,
become contingently liable to borrow money, or enter any agreement to directly
or indirectly obtain borrowed money, except pursuant to agreements with Bank.

5.3      SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will not liquidate,
dissolve or enter into any consolidation, merger, partnership or other
combination, or convey, sell or lease all or substantially all of its assets or
business, or purchase or lease all or substantially all of the assets or
business of another.

5.4      LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or advances,
become a guarantor or surety, or pledge its credit or properties, except
pursuant to agreements with Bank and except as otherwise permitted under Section
5.1.

5.5      INVESTMENTS. Borrower will not purchase the debt or equity of another
except for savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations, overnight euro investments with Bank, and commercial
paper issued by corporations with the top ratings of Moody's or Standard &
Poor's, provided that all such permitted investments shall mature within one
year of purchase.

                                     Page 9


5.6      PAYMENT OF DIVIDENDS. Borrower will not declare or pay any dividends,
other than dividends payable solely in its own common stock, or authorize or
make any other distribution with respect to any of its stock now or hereafter
outstanding.

5.7      REDEMPTION OF STOCK. Borrower will not redeem or retire any share of
its capital stock for value.

5.8      AFFILIATE TRANSACTIONS. Borrower will not transfer any property to any
Affiliate, except for value received in the normal course of business and for an
amount, including any management or service fee(s), as would be conducted and
charged with an unrelated or unaffiliated entity. Except as permitted in the
previous sentence, Borrower will not pay any management fee or fee for services
to any Affiliate without Bank's prior written consent.

                          SECTION 6. EVENTS OF DEFAULT

The occurrence of any of the following events ("Events of Default") shall
automatically under Sections 6.1(a), 6.5, 6.6, 6.7, and 6.8, and upon five (5)
days prior written notice from Bank to Borrower under all other provisions of
Section 6, make all sums of interest and principal and any other amounts owing
under the Loan immediately due and payable and shall terminate any obligation of
Bank to make or continue the Loan without, except as otherwise expressly
provided herein, notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or any other notices or demands:

6.1      Borrower shall default in the due and punctual payment of (a) the
principal of or (b) the interest on , in each case the Note or any other amounts
owing under any of the Loan Documents.

6.2      Borrower shall fail to perform or observe any term, covenant or
agreement contained in Sections 4.1, 4.3 (with respect to existence), 4.6, 4.7,
4.8, 4.9, or 5 on its part to be performed or observed, or a material adverse
change has occurred in Borrower's financial condition or operations.

6.3      Any representation or warranty made by Borrower herein or by Borrower
(or any of its officers) in connection with this Agreement, shall prove to have
been incorrect in any material respect when made.

6.4      The Guaranty or any subordination agreement relating to Subordinated
Debt shall be breached or become ineffective, or the Guarantor or any
subordinating creditor shall disavow or attempt to revoke or terminate such
guaranty or subordination agreement.

6.5      The insolvency of any Obligor or the failure of any Obligor generally
to pay such Obligor's debts as such debts become due.

6.6      The commencement as to any Obligor of any voluntary proceeding under
any laws relating to bankruptcy, insolvency, reorganization, arrangement, debt
adjustment or debtor relief.

6.7      The general assignment by any Obligor for the benefit of such Obligor's
creditors.

6.8      The termination of existence of any Obligor.

                                    Page 10


6.9      FP ceases to hold, directly or indirectly, at least fifty percent (50%)
of the voting interests in Borrower and Guarantor.

6.10     The failure of any Obligor to comply with any non-monetary order,
judgment, injunction, decree, writ or demand of any court or other public
authority, if such failure would have a material adverse affect on Borrower's
financial condition or business.

6.11     Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement or any other Loan Document other than
those referred to in Sections 6.1 through 6.10 above on its part to be performed
or observed and any such failure shall remain unremedied or uncured in the
judgment of Bank for five (5) days after the Borrower knows of such failure.

6.12     The commencement as to any Obligor of any involuntary proceeding under
any laws relating to bankruptcy, insolvency, reorganization, arrangement, debt
adjustment or debtor relief.

6.13     The appointment, or commencement of any proceeding for the appointment
of, a receiver, trustee, custodian or similar official for all or substantially
all of any Obligor's property.

6.14     The commencement of any proceeding for the dissolution or liquidation
of any Obligor.

6.15     One or more judgments for the payment of money in an aggregate amount
exceeding $2,000,000 shall be imposed upon or rendered against one or more
Obligors.

6.16     The default of any Obligor personally liable for amounts owed hereunder
on any obligation concerning the borrowing of money (other than under the Loan
Documents or in respect of the Subordinated Debt) in excess of $ 2,000,000.

                          SECTION 7. GENERAL PROVISIONS

7.1      ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person or entity including but not limited to Bank's rights of setoff and
banker's lien.

7.2      NONWAIVER. Any forbearance or failure or delay by Bank in exercising
any right, power or remedy hereunder shall not be deemed a waiver thereof and
any single or partial exercise of any right, power or remedy shall not preclude
the further exercise thereof. No waiver shall be effective unless it is in
writing and signed by an officer of Bank.

7.3      INUREMENT. The benefits of this Agreement and the other Loan Documents
shall inure to the successors and assigns of Bank and the permitted successors
and assigns of Borrower, but any attempted assignment by Borrower without Bank's
prior written consent shall be null and void.

7.4      APPLICABLE LAW. This Agreement and the other Loan Documents shall be
governed by and construed according to the laws of the State of California.

                                    Page 11


7.5      SEVERABILITY. Should any one or more provisions of this Agreement or
any other Loan Document be determined to be illegal or unenforceable, all other
provisions of such document shall nevertheless be effective.

7.6      CONSTRUCTION. The section and subsection headings herein are for
convenient reference only and shall not limit or otherwise affect the
interpretation of this Agreement.

7.7      AMENDMENTS. This Agreement may be amended only in writing signed by all
parties hereto.

7.8      COUNTERPARTS. Borrower and Bank may execute one or more counterparts to
this Agreement, each of which shall be deemed an original, but all such
counterparts when taken together, shall constitute one and the same agreement.

7.9      NOTICES. Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the parties at their respective addresses and shall be considered
to have been validly given (a) upon delivery, if delivered personally, (b) upon
receipt, if mailed, first class postage prepaid, with the United States Postal
Service, (c) on the next business day, if sent by overnight courier service of
recognized standing, or (d) upon telephoned confirmation of receipt, if
telecopied or e-mailed. The addresses to which notices or demands are to be
given may be changed from time to time by notice delivered as provided above.

7.10     INTEGRATION CLAUSE. Except for the other Loan Documents, this Agreement
constitutes the entire agreement between Bank and Borrower regarding the Loan,
and all prior oral or written communications between Borrower and Bank shall be
of no further effect or evidentiary value.

THIS AGREEMENT is executed on behalf of the parties by their duly authorized
representative(s) as of the date first above written.

ULTRA CLEAN TECHNOLOGY SYSTEMS             UNION BANK OF CALIFORNIA, N.A.
AND SERVICE, INC.

By: ________________________________       By: ____________________________
                                               Timothy Reilly
Title: _____________________________           Vice President

Address for Notices:                       Address for Notices:
150 Independence Drive                     Santa Clara Valley Commercial Banking
Menlo Park, California 94025               39305 Paseo Padre Parkway
Telephone No. (650) 323-4100               Fremont, California 94564
FAX No. (650) 326-0929                     Telephone No. (510) 494-5792
                                           FAX No. (510) 790-6516

                                    Page 12


                               CONTINUING GUARANTY

1.       OBLIGATIONS GUARANTIED. For consideration, the adequacy and sufficiency
of which is acknowledged, the undersigned ("Guarantor") unconditionally
guaranties and promises (a) to pay to UNION BANK OF CALIFORNIA, N.A. ("Bank") on
demand, in lawful United States money, all Obligations to Bank of ULTRA CLEAN
TECHNOLOGY SYSTEMS AND SERVICE, INC., a California corporation ("Borrower") and
(b) to perform all undertakings of Borrower in connection with the Obligations.
"Obligations" means all indebtedness and obligations of Borrower to Bank under
or in connection with that certain Loan Agreement dated as of July 9, 2003,
between Borrower and Bank, as amended, extended, renewed, or replaced from time
to time ("Loan Agreement"), whether made, incurred or created previously,
concurrently or in the future, whether voluntary or involuntary and however
arising, whether incurred directly or acquired by Bank by assignment or
succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, legal or equitable, whether Borrower is liable individually or
jointly or with others, whether incurred before, during or after any bankruptcy,
reorganization, insolvency, receivership or similar proceeding ("Insolvency
Proceeding"), and whether recovery thereof is or becomes barred by a statute of
limitations or is or becomes otherwise unenforceable, together with all expenses
of, for and incidental to collection, including reasonable attorneys' fees.

2.       LIMITATION ON GUARANTOR'S LIABILITY. Although this Guaranty covers all
Obligations, Guarantor's aggregate liability under this Guaranty for Borrower's
Obligations shall not exceed the sum of the following (the "Guarantied Liability
Amount"): (a) Ten Million Dollars ($10,000,000) for Obligations representing
principal and/or rent ("Principal Amount"), (b) all interest, fees like charges
owing and allocable to the Principal Amount as determined by Bank, and (c)
without allocation in respect of the Principal Amount all costs, attorneys'
fees, and expenses of Bank relating to or arising out of the enforcement of the
Obligations and all indemnity liabilities of Guarantor under this Guaranty. The
foregoing limitation applies only to Guarantor's liability under this particular
Guaranty. Unless Bank otherwise agrees in writing, every other guaranty of any
Obligations previously, concurrently, or hereafter given to Bank by Guarantor is
independent of this Guaranty and of every other such guaranty. Without notice to
Guarantor, Bank may permit the Obligations to exceed the Principal Amount and
may apply or reapply any amounts received in respect of the Obligations from any
source other than from Guarantor to that portion of the Obligations not included
within the Guarantied Liability Amount.

3.       CONTINUING NATURE/REVOCATION/REINSTATEMENT. This Guaranty is in
addition to any other guaranties of the Obligations, is continuing and covers
all Obligations, including those arising under successive transactions which
continue or increase the Obligations from time to time, renew all or part of the
Obligations after they have been satisfied, or create new Obligations.
Revocation by one or more signers of this Guaranty or any other guarantors of
the Obligations shall not (a) affect the obligations under this Guaranty of a
non-revoking Guarantor, (b) apply to Obligations outstanding when Bank receives
written notice of revocation, or to any extensions, renewals, readvances,
modifications, amendments or replacements of such Obligations, or (c) apply to
Obligations, arising after Bank receives such notice of revocation, which are
created pursuant to a commitment existing at the time of the revocation, whether
or not there exists an unsatisfied condition to such commitment or Bank has
another defense to its performance. All of Bank's rights pursuant to this
Guaranty continue with respect to amounts previously paid to Bank on account of
any Obligations which are thereafter restored or returned by Bank, whether in an
Insolvency Proceeding of Borrower or for any other reason, all as though such
amounts had not been paid to Bank; and Guarantor's liability under this Guaranty
(and all its terms and provisions) shall be reinstated and revived,
notwithstanding any surrender or cancellation of this Guaranty. Bank, at its
sole discretion, may determine whether any amount paid to it must be restored or
returned; provided, however, that if Bank elects to contest any claim for return
or restoration, Guarantor agrees to indemnify and hold Bank harmless from and
against all costs and expenses, including reasonable attorneys' fees, expended
or incurred by Bank in connection with such contest. No payment by Guarantor
shall reduce the Guarantied Liability Amount hereunder unless, at or prior to
the time of such payment, Bank receives Guarantor's written notice to

                                     Page 1


that effect. If any Insolvency Proceeding is commenced by or against Borrower or
Guarantor, at Bank's election, Guarantor's obligations under this Guaranty shall
immediately and without notice or demand become due and payable, whether or not
then otherwise due and payable.

4.       AUTHORIZATION. Guarantor authorizes Bank, without notice and without
affecting Guarantor's liability under this Guaranty, from time to time, whether
before or after any revocation of this Guaranty, to (a) renew, compromise,
extend, accelerate, release, subordinate, waive, amend and restate, or otherwise
amend or change, the interest rate, time or place for payment or any other terms
of all or any part of the Obligations; (b) accept delinquent or partial payments
on the Obligations; (c) take or not take security or other credit support for
this Guaranty or for all or any part of the Obligations, and exchange, enforce,
waive, release, subordinate, fail to enforce or perfect, sell, or otherwise
dispose of any such security or credit support; (d) apply proceeds of any such
security or credit support and direct the order or manner of its sale or
enforcement as Bank, at its sole discretion, may determine; and (e) release or
substitute Borrower or any guarantor or other person or entity liable on the
Obligations.

5.       WAIVERS. To the maximum extent permitted by law, Guarantor waives (a)
all rights to require Bank to proceed against Borrower, or any other guarantor,
or proceed against, enforce or exhaust any security for the Obligations or to
marshal assets or to pursue any other remedy in Bank's power whatsoever; (b) all
defenses arising by reason of any disability or other defense of Borrower, the
cessation for any reason of the liability of Borrower, any defense that any
other indemnity, guaranty or security was to be obtained, any claim that Bank
has made Guarantor's obligations more burdensome or more burdensome than
Borrower's obligations, and the use of any proceeds of the Obligations other
than as intended or understood by Bank or Guarantor; (c) all presentments,
demands for performance, notices of nonperformance, protests, notices of
dishonor, notices of acceptance of this Guaranty and of the existence or
creation of new or additional Obligations, and all other notices or demands to
which Guarantor might otherwise be entitled; (d) all conditions precedent to the
effectiveness of this Guaranty; (e) all rights to file a claim in connection
with the Obligations in an Insolvency Proceeding filed by or against Borrower;
(f) all rights to require Bank to enforce any of its remedies; and (g) until the
Obligations are satisfied or fully paid with such payment not subject to return:
(i) all rights of subrogation, contribution, indemnification or reimbursement,
(ii) all rights of recourse to any assets or property of Borrower, or to any
collateral or credit support for the Obligations, (iii) all rights to
participate in or benefit from any security or credit support Bank may have or
acquire, and (iv) all rights, remedies and defenses Guarantor may have or
acquire against Borrower. Guarantor understands that if Bank forecloses by
trustee's sale on a deed of trust securing any of the Obligations, Guarantor
would then have a defense preventing Bank from thereafter enforcing Guarantor's
liability for the unpaid balance of the secured Obligations. This defense arises
because the trustee's sale would eliminate Guarantor's right of subrogation, and
therefore Guarantor would be unable to obtain reimbursement from Borrower.
Guarantor specifically waives this defense and all rights and defenses that
Guarantor may have because the Obligations are secured by real property. This
means, among other things: (a) Bank may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by Borrower; and
(b) if Bank forecloses on any real property collateral pledged by Borrower: (i)
the amount of the Obligations may be reduced only by the price for which the
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price; and (ii) Bank may collect from Guarantor even if Bank, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower. This is an unconditional and irrevocable
waiver of any rights and defenses Guarantor may have because the Obligations are
secured by real property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure or similar laws in other states.

6.       GUARANTOR TO KEEP INFORMED. Guarantor warrants having established with
Borrower adequate means of obtaining, on an ongoing basis, such information as
Guarantor may require concerning all matters bearing on the risk of nonpayment
or nonperformance of the Obligations. Guarantor assumes sole, continuing
responsibility for obtaining such information from sources other

                                     Page 2


than from Bank. Bank has no duty to provide any information to Guarantor until
Bank receives Guarantor's written request for specific information in Bank's
possession and Borrower has authorized Bank to disclose such information to
Guarantor.

7.       SUBORDINATION. All obligations of Borrower to Guarantor which presently
or in the future may exist ("Guarantor's Claims") are hereby subordinated to the
Obligations. At Bank's request, Guarantor's Claims will be enforced and
performance thereon received by Guarantor only as a trustee for Bank, and
Guarantor will promptly pay over to Bank all proceeds recovered for application
to the Obligations without reducing or affecting Guarantor's liability under
other provisions of this Guaranty.

8.       SECURITY. To secure Guarantor's obligations under this Guaranty, other
than for payment of Obligations which are subject to the disclosure requirements
of the United States Truth in Lending Act, Guarantor grants Bank a security
interest in all moneys, general and special deposits, instruments and other
property of Guarantor at any time maintained with or held by Bank, and all
proceeds of the foregoing.

9.       AUTHORIZATION. Where Borrower is a corporation, partnership or other
entity, Bank need not inquire into or verify the powers of Borrower or authority
of those acting or purporting to act on behalf of Borrower, and this Guaranty
shall be enforceable with respect to any Obligations Bank grants or creates in
reliance on the purported exercise of such powers or authority.

10.      ASSIGNMENTS. Without notice to Guarantor, Bank may assign the
Obligations and this Guaranty, in whole or in part, and may disclose to any
prospective or actual purchaser of all or part of the Obligations any and all
information Bank has or acquires concerning Guarantor, this Guaranty and any
security for this Guaranty.

11.      COUNSEL FEES AND COSTS. The prevailing party shall be entitled to
attorneys' fees (including a reasonable allocation for Bank's internal counsel)
and all other costs and expenses which it may incur in connection with the
enforcement or preservation of its rights under, or defense of, this Guaranty or
in connection with any other dispute or proceeding relating to this Guaranty,
whether or not incurred in any Insolvency Proceeding, arbitration, litigation or
other proceeding.

12.      MARRIED GUARANTORS. By executing this Guaranty, a Guarantor who is
married agrees that recourse may be had against his or her separate and
community property for all his or her obligations under this Guaranty.

13.      MULTIPLE GUARANTORS/BORROWERS. When there is more than one Borrower
named herein or when this Guaranty is executed by more than one Guarantor, then
the words "Borrower" and "Guarantor", respectively, shall mean all and any one
or more of them, and their respective successors and assigns, including
debtors-in-possession and bankruptcy trustees; words used herein in the singular
shall be considered to have been used in the plural where the context and
construction so requires in order to refer to more than one Borrower or
Guarantor, as the case may be.

14.      INTEGRATION/SEVERABILITY/AMENDMENTS. This Guaranty is intended by
Guarantor and Bank as the complete, final expression of their agreement
concerning its subject matter. It supersedes all prior understandings or
agreements with respect thereto and may be changed only by a writing signed by
Guarantor and Bank. No course of dealing, or parole or extrinsic evidence shall
be used to modify or supplement the express terms of this Guaranty. If any
provision of this Guaranty is found to be illegal, invalid or unenforceable,
such provision shall be enforced to the maximum extent permitted, but if fully
unenforceable, such provision shall be severable, and this Guaranty shall be
construed as if such provision had never been a part of this Guaranty, and the
remaining provisions shall continue in full force and effect.

15.      JOINT AND SEVERAL. If more than one Guarantor signs this Guaranty, the
obligations of each under this Guaranty are joint and several, and independent
of the Obligations and of the obligations of

                                     Page 3


any other person or entity. A separate action or actions may be brought and
prosecuted against any one or more guarantors, whether action is brought against
Borrower or other guarantors of the Obligations, and whether Borrower or others
are joined in any such action.

16.      NOTICE. Any notice, including notice of revocation, given by any party
under this Guaranty shall be effective only upon its receipt by the other party
and only if (a) given in writing and (b) personally delivered or sent by United
States mail, postage prepaid, and addressed to Bank or Guarantor at their
respective addresses for notices indicated below. Guarantor and Bank may change
the place to which notices, requests, and other communications are to be sent to
them by giving written notice of such change to the other.

17.      GOVERNING LAW. This Guaranty shall be governed by and construed
according to the laws of California, and, except as provided in any addendum
hereto, Guarantor submits to the non-exclusive jurisdiction of the state or
federal courts in said state.

18.      DISPUTE RESOLUTION. This Guaranty hereby incorporates any alternative
dispute resolution agreement previously, concurrently or hereafter executed
between Guarantor and Bank.

Executed as of July 9, 2003. Guarantor acknowledges having received a copy of
this Guaranty and having made each waiver contained in this Guaranty with full
knowledge of its consequences.

ULTRA CLEAN HOLDINGS, INC.

By: _________________________________

Title: ______________________________

UNION BANK OF CALIFORNIA, N.A.

By: _________________________________
          Timothy Reilly
          Vice President

Address for notices to Bank:                   Address for notices to Guarantor:
39305 Paseo Padre Parkway                      _________________________________
Fremont, California 94538                      _________________________________

                                     Page 4


 UNION
    BANK OF
 CALIFORNIA

                               SECURITY AGREEMENT

This Security Agreement is executed at San Jose, California on July 9, 2003 by
Ultra Clean Technology Systems and Service, Inc., a California corporation
(herein called "Debtor")

As security for the payment and performance of all of Debtor's obligations under
the Loan Documents to UNION BANK OF CALIFORNIA, N.A., (herein called "Bank"),
irrespective of the manner in which or the time at which such obligations arose
or shall arise, and whether direct or indirect, alone or with others, absolute
or contingent, Debtor does hereby grant a continuing security interest in, and
assign and transfer to Bank, the following personal property, whether now or
hereafter owned or in existence and all proceeds thereof (hereinafter called
"Collateral"):

All present and hereafter acquired accounts, chattel paper, instruments,
contract rights, general intangibles, goods, equipment, inventory, documents,
certificates of title, deposit accounts, returned or repossessed goods,
fixtures, farm products, poultry, livestock, crops, timber, minerals (including
oil and gas) and mineral rights, insurance claims, rights and policies, letter
of credit rights, investment property, supporting obligations, and the proceeds,
products, parts, accessories, attachments, accessions, replacements,
substitutions, additions, and improvements of or to each of the foregoing.

Entities executing this Security Agreement as Debtor agree not to change their
state of organization, principal place of business (if general partnership or
other nonregistered entity) or name, as identified below, without Bank's prior
written consent:

LEGAL NAME OF DEBTOR  STATE OF ORGANIZATION/PRINCIPAL PLACE OF BUSINESS
Ultra Clean Technology Systems and Service, Inc. State of California

                                    AGREEMENT

1.       The term "credit" or "indebtedness" is used in this Agreement in its
broadest and most comprehensive sense. Credit may be granted at the request of
any one Debtor without further authorization by or notice to any other Debtor.
Collateral shall be security for all nonconsumer indebtedness of Debtor to Bank
under the Loan Documents in accordance with the terms and conditions herein.

2.       Debtor will: (a) pay when due all indebtedness to Bank; (b) execute
such other documents and do such other acts as Bank may from time to time
require to establish and maintain a valid security interest in Collateral,
including payment of all costs and fees in connection with any of the foregoing
when deemed necessary by Bank; (c) keep Collateral separate and identifiable at
the locations where such Collateral is located; (d) protect, defend and maintain
the Collateral and the security interest of Bank and, unless Debtor determines
that such action would be of negligible value, economic or otherwise, initiate,
commence and maintain any action or proceeding to protect the Collateral and
upon Debtor's failure to do so Bank may pay any such charge as it deems
necessary and add the amount paid to the indebtedness of Debtor hereunder; and
(e) not use Collateral for any unlawful purpose. Debtor hereby appoints Bank



the true and lawful attorney of Debtor and authorizes Bank, during the
continuance of a default, to perform any and all acts which Bank in good faith
deems necessary for the protection and preservation of Collateral or its value
or Bank's security interest therein, including transferring any Collateral into
its own name and receiving the income thereon as additional security hereunder.
Bank does not assume any of the obligations arising under the Collateral.

3.       Debtor warrants: (a) it has the capacity to grant a security interest
in Collateral to Bank; (b) all information furnished by Debtor to Bank
heretofore or hereafter, whether oral or written, is and will be correct and
true in all material respects as of the date given; and (c) if Debtor is an
entity, the execution, delivery and performance hereof are within its powers and
have been duly authorized.

4.       The occurrence of an Event of Default under that certain Loan Agreement
dated as of July 9, 2003, as amended, extended, renewed or replaced from time to
time ("Loan Agreement"), shall constitute a default under this Agreement. All
terms not otherwise defined in this Agreement shall have the meanings set forth
in the Loan Agreement.

5.       Whenever a default exists, Bank, at its option, may: (a) without notice
except as otherwise provided in the Loan Agreement accelerate the maturity of
any part or all of the indebtedness and terminate any agreement for the granting
of further credit to Debtor; (b) sell, lease or otherwise dispose of Collateral
at public or private sale; (c) transfer any Collateral into its own name or that
of its nominee; (d) retain Collateral in satisfaction of obligations secured
hereby, with notice of such retention sent to Debtor as required by law; (e)
notify any parties obligated on any Collateral consisting of accounts,
instruments, chattel paper, choses in action or the like to make payment to Bank
and enforce collection of any Collateral; (f) file any action or proceeding
which Bank deems necessary or appropriate to protect and preserve the right,
title and interest of Bank in the Collateral; (g) require Debtor to assemble and
deliver any Collateral to Bank at a reasonably convenient place designated by
Bank; (h) apply all sums received or collected from or on account of Collateral,
including the proceeds of any sales thereof, to the payment of the costs and
expenses incurred in preserving and enforcing rights of Bank (including but not
limited to reasonable attorneys' fees), and indebtedness secured hereby in such
order and manner as Bank in its sole discretion determines; Bank shall account
to Debtor for any surplus remaining thereafter, and shall pay such surplus to
the party entitled thereto, including any second secured party who has made a
proper demand upon Bank and has furnished proof to Bank as requested in the
manner provided by law; in like manner, Debtor agrees to pay to Bank without
demand any deficiency after any Collateral has been disposed of and proceeds
applied as aforesaid; and (i) exercise its banker's lien or right of setoff in
the same manner as though the credit were unsecured. Bank shall have all the
rights and remedies of a secured party under the Uniform Commercial Code of
California in any jurisdiction where enforcement is sought, whether in said
state or elsewhere. All rights, powers and remedies of Bank hereunder shall be
cumulative and not alternative. No delay on the part of Bank in the exercise of
any right or remedy shall constitute a waiver thereof and no exercise by Bank of
any right or remedy shall preclude the exercise of any other right or remedy or
further exercise of the same remedy.

6.       Debtor waives during the continuance of a default: (a) all right to
require Bank to proceed against any other person including any other Debtor
hereunder or to apply any Collateral Bank may hold at any time or to pursue any
other remedy. Collateral, endorsers or guarantors may be released, substituted
or added without affecting the liability of Debtor hereunder; (b) the defense of
the Statute of Limitations in any action upon any obligations of Debtor secured
hereby; (c) any right of subrogation and any right to participate in Collateral
until all obligations

                                     Page 2


secured hereby have been paid in full, and (d) to the fullest extent permitted
by law, any right to oppose the appointment of a receiver or similar official to
operate Debtor's business.

7.       The right of Bank to have recourse against Collateral shall not be
affected in any way by the fact that the credit is secured by a mortgage, deed
of trust or other lien upon real property.

8.       The security interest granted herein is irrevocable and shall remain in
full force and effect until there is payment in full of the indebtedness or the
security interest is released in writing by Bank.

9.       Debtor shall be obligated to request the release, reassignment or
return of Collateral after payment in full of existing obligations. Bank shall
be under no duty or obligation to release, reassign or return any Collateral
except upon the express written request of Debtor and then only where all of
Debtor's obligations hereunder have been paid in full.

10.      Debtor will not sell, lease or otherwise dispose of any of the
Collateral, provided that Debtor may do any of the foregoing unless (a) doing so
would violate a covenant in the Loan Agreement, or (b) a default shall have
occurred and be continuing and Bank shall have notified Debtor that its right to
do so is terminated or otherwise limited. Concurrently with any sale, lease or
other disposition permitted by the foregoing proviso, the Liens on the assets
sold or disposed (but not in proceeds) will cease immediately without any action
by Bank.

11.      If more than one Debtor executes this Agreement, the obligations
hereunder are joint and several. All words used herein in the singular shall be
deemed to have been used in the plural when the context and construction so
require. Any married person who signs this Agreement expressly agrees that
recourse may be had against his/her separate property for all of his/her
obligations to Bank.

12.      This Agreement shall be for the benefit of and bind Bank, its
successors and assigns and each of the undersigned, their respective heirs,
executors, administrators and successors in interest. Upon transfer by Bank of
any part of the obligations secured hereby, Bank shall be fully discharged from
any liability with respect to Collateral transferred therewith.

13.      Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Agreement shall be prohibited or invalid under
applicable law, such provisions shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such or the
remaining provisions of this Agreement.

14.      The grant of a security interest in proceeds does not imply the right
of Debtor to sell or dispose of any Collateral without the express consent in
writing by Bank other than inventory or other Collateral in the ordinary course
of business as presently conducted.

ULTRA CLEAN TECHNOLOGY SYSTEMS AND SERVICE, INC.

By: ______________________________________________
        Kevin Griffin, Chief Financial Officer

                                     Page 3

EX-21.1

                                                                    EXHIBIT 21.1


SUBSIDIARIES OF ULTRA CLEAN HOLDINGS, INC.:

      Ultra Clean Technologies Systems & Service, Inc.

EX-23.1

                                                                    EXHIBIT 23.1

             CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS

We consent to the use in this Amendment No. 1 to Registration Statement No.
333-111904 of Ultra Clean Holdings, Inc. on Form S-1 of our report dated
February 13, 2004 appearing in the Prospectus, which is part of this
Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP

San Jose, California
February 17, 2004