-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L77BEhh8ozTIY/uKQ89C5pVCNFLxnG85a8niHq+VidJUcEGNow1FhfsaV/4j4GSe cHFA/OPBCepQw9WLkOnL+A== 0001140223-05-000056.txt : 20051228 0001140223-05-000056.hdr.sgml : 20051228 20051228113917 ACCESSION NUMBER: 0001140223-05-000056 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20051228 DATE AS OF CHANGE: 20051228 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DEEPHAVEN CAPITAL MANAGEMENT LLC CENTRAL INDEX KEY: 0001140223 IRS NUMBER: 411908497 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 130 CHESHIRE LANE SUITE 102 CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 9522495500 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: THERMA WAVE INC CENTRAL INDEX KEY: 0000828119 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 943000561 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-60517 FILM NUMBER: 051288190 BUSINESS ADDRESS: STREET 1: 1250 RELIANCE WAY CITY: FREMONT STATE: CA ZIP: 94539 BUSINESS PHONE: 5104903663 MAIL ADDRESS: STREET 1: 1250 RELIANCE WAY CITY: FREMONT STATE: CA ZIP: 94539 SC 13D 1 form13dthermawave.txt THERMA-WAVE, INC SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. __________ )(1) Therma-Wave, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.001 PAR Value Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 88343A108 - -------------------------------------------------------------------------------- (CUSIP Number) Deephaven Capital Management LLC Attn: Thomas Wagner 130 Cheshire Lane, Suite 102 Minnetonka, MN 55305 952-249-5657 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 22, 2005 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of Pages) - ---------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No._______ 13D Page___ of __ Pages ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Deephaven Capital Management LLC 41-1908497 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS* AF ________________________________________________________________________________ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER NUMBER OF 3,614,077 SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY _________________________________________________________________ EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,614,077 PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH 0 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,614,077 ________________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.8% ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON* 00 ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No.88343A108 13D Page___ of __ Pages Note to 13D This Schedule 13D is being filed by Deephaven Capital Management LLC ("Deephaven") on behalf of Deephaven Long/Short Equity Trading Ltd. (the "LS Fund") and Deephaven Relative Value Equity Trading Ltd. (the "RV Fund") (the LS Fund and the RV Fund are collectively referred to hereinafter as the"Funds".) Deephaven is the investment manager to the Funds, and has the authority to cause the Funds to purchase securities issued by Therma-Wave, Inc. (the "Issuer"), and to exercise any and all voting right associated with such securities. Deephaven formerly filed a Schedule 13G, and one or more amendments thereto, to disclose the purchase, by one or more funds of which it is investment manager, of 3,614,077 shares of the common stock, par value $0.001 per share (the "Common Ctock"), of the Issuer. References to "Deephaven" in this Schedule 13D are to the Funds, acting through Deephaven Capital Managment LLC, their investment manager. ________________________________________________________________________________ Item 1. Security and Issuer. Security: Shares of Common Stock, Par Value $0.001 Per Share Issuer: Therma-Wave, Inc. 1250 Reliance Way Fremont, California 94539 ________________________________________________________________________________ Item 2. Identity and Background. (a) This statement is filed on behalf of Deephaven Capital Management LLC, a Delaware limited liability company. (b) The principal business address of Deephaven Capital Management LLC is 130 Cheshire Lane, Suite 102, Minnetonka, MN 55305 (c) The principal business of Deephaven Capital Management LLC is an unregistered investment advisor. (d) During the last 5 years, Deephaven Capital Management LLC has not been convicted in a criminal proceeding. (e) During the last 5 years, Deephaven Capital Management LLC, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction. (f) Deephaven Capital Management LLC is a Delaware limited liability company. ________________________________________________________________________________ Item 3. Source and Amount of Funds or Other Consideration. Deephaven did not acquire beneficial ownership of any shares of Common Stock in the transaction described herein ________________________________________________________________________________ Item 4. Purpose of Transaction. Shares of Common Stock reported in Item 5 of this Statement as held by Deephaven were acquired in the ordinary course of its business and were not acquired for the purpose of changing or influencing control of the Issuer. Additionally, Deephaven entered into a purchase transaction with the Issuer to acquire 5,200 Shares of Convertible Series B Preferred Stock (Preferred Stock) and 780,000 Warrants to purchase Common Stock (Warrants). The purpose of the transaction was to increase Deephaven's equity interest in the Issuer, which Deephaven believes is an attractive investment. The Preferred Stock was acquired in the ordinary course of its business and not for the purpose of changing or influencing control of the Issuer. Depending on their evaluation of the Issuer's business and prospects, and upon future developments (including but not limited to, performance of the Common Stock in the market, availability of funds, alternative uses of funds, and money, stock market and general economic conditions), Deephaven may from time to time dispose of all or a portion of the Common Stock held, purchase Common Stock or cease buying or selling Common Stock. Any such additional purchases or sales of the Common Stock may be in open market or privately-negotiated transactions or otherwise. Pursuant to the Stockholders' Agreement, dated as of November 22, 2005 between Deephaven and Therma-Wave, Inc. ("Stockholders' Agreement") Deephaven is entitled to nominate one representative to the Issuer's Board of Directors. In the event that the Issuer's cash and cash equivalents fall below a specified amount at the end of a fiscal quarter as reported in the Issuer's balance sheet included inform 10-Q or 10-K for such quarter, the holders of a majority of Preferred Stock are entitled to designate an additional director. In the event that the Purchasers hold less than 20% of the number of shares of Preferred Stock originally held by them, the Purchasers shall cease to have the right to elect any directors. ________________________________________________________________________________ Item 5. Interest in Securities of the Issuer. (a) As of November 30, 2005, Deephaven beneficially owns 3,614,077 shares of Common Stock of the Issuer, which represents 9.8% of the Issuer's outstanding shares of Common Stock, which percentage was calculated by dividing (i) the 3,614,077 shares of Common Stock beneficially owned by Deephaven as of the date hereof, by (ii) 36,867,751 shares of Common Stock outstanding as of November 7, 2005, based upon the Issuer's Current Report on Form 10-Q filed with the Securities and Exchange Commission pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934, on November 10, 2005. (b) Deephaven has the sole power to vote and dispose of the 3,614,077 shares of Common Stock held by Deephaven. The filing of this statement on Schedule 13D shall not be construed as an admission that Deephaven, is for the purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, the beneficial owner of any of the 3,614,077 shares of Common Stock held by Deephaven. Pursuant to Rule 13d-4, Deephaven disclaims all such beneficial ownership. (c) Not Applicable. (d) Not Applicable. (e) Not Applicable. ________________________________________________________________________________ Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. On November 18, Deephaven entered into a purchase agreement with the Issuer to acquire shares of Preferred Stock and Warrants. The Purchase Agreement, dated November 18, 2005 between Deephaven and Therma-Wave Inc., ("Purchase Agreement") is qualified in its entirety by reference to Exhibit 1. In connection with the purchase of Preferred Stock, Deephaven entered into the Stockholders' Agreement which contains certain provisions relating to the right of Deephaven to designate a director as discussed in Item 4. The Stockholders' Agreement also contains transfer restrictions upon the Purchasers in regards to their holdings of Preferred Stock. The foregoing summary of the Stockholder's Agreement is qualified in its entirety by reference to Exhibit 2. In connection with Deephaven's purchase of Preferred Stock and Warrants, Deephaven entered into a Registration Rights Agreement, dated as of November 22, 2005 between Deephaven and Therma-Wave Inc.("Registration Rights Agreement") which provides that the Issuer, within sixty days of closing, is required to register for resale, under the U.S. Securities Act of 1933, as amended, the common Stock issuable upon conversion of the Preferred Stock as well as the Common Stock issuable upon the exercise of the warrants. The Registration Rights Agreement also provides that the Issuer is subject to certain continuing registration obligations. The foregoing summary of the Registration Rights Agreement is qualified in its entirety by reference to Exhibit 3. In connection with Deephaven's purchase of Warrants, the Issuer provided a warrant which sets forth the rights of warrant holders. The foregoing summary of the Warrant is qualified in its entirety by reference to Exhibit 4 and Exhibit 5. The Issuer filed a Certificate of Designation to the Issuer's Certificate of Incorporation. The Certificate of Designation, dated November 22, 2005 ("Certificate of Designation") specifies the rights, preferences and privileges of the Series B Preferred Stock. The foregoing summary of the Certificate of Designation is qualified in its entirety by reference to Exhibit 5. ________________________________________________________________________________ Item 7. Material to be Filed as Exhibits. Exhibit 1 Purchase Agreement dated November 18, 2005 between Deephaven and Therma-Wave Inc. Exhibit 2 Stockholders' Agreement dated November 22, 2005 between Deephaven and Therma-Wave Inc. Exhibit 3 Registration Rights Agreement dated November 22, 2005 between Deephaven and Therma-Wave Inc. Exhibit 4 Warrant to purchase common stock of Therma-Wave Inc. -LS Fund Exhibit 5 Warrant to purchase common stock of Therma-Wave Inc. -RV Fund Exhibit 6 Certificate of Designation filed by Therma-Wave Inc. on November 22, 2005 ________________________________________________________________________________ SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. December 2, 2005 (Date) /s/ Thomas Wagner (Signature) Thomas Wagner, Chief Compliance Officer (Name/Title) Attention. Intentional misstatements or omissions of fact constitute federal criminal violations (see 18 U.S.C. 1001). EX-99.1 2 purchaseagrmt.txt PURCHASE AGREEMENT THERMA-WAVE, INC. PURCHASE AGREEMENT This Purchase Agreement (this "Agreement") is made and entered into as of November 18, 2005, by and between Therma-Wave, Inc., a Delaware corporation (the "Company"), and each of the purchasers listed on Exhibit A attached hereto (collectively, the "Purchasers" and individually, a "Purchaser"). RECITALS WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers desire to purchase from the Company, an aggregate of ten thousand four hundred (10,400) units (each, a "Unit" and collectively, the "Units"), with each Unit being comprised of (i) one share of Series B Preferred Stock, par value $0.01 per share (the "Preferred Stock") and (ii) one hundred fifty (150) warrants to purchase common stock of the Company, par value $0.01 per share ("Common Stock"), (each a "Warrant" and, together with the Preferred Stock, the "Securities") of Common Stock, on the terms and conditions set forth in this Agreement; and NOW, THEREFORE, in consideration of the foregoing, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AGREEMENT TO PURCHASE AND SELL STOCK. (a) Authorization. The Company's Board of Directors has authorized the issuance, pursuant to the terms and conditions of this Agreement, of up to ten thousand four hundred (10,400) Units. (b) Agreement to Purchase and Sell Securities. Subject to the terms and conditions of this Agreement, each Purchaser severally agrees to purchase, and the Company agrees to sell and issue to each Purchaser, at the Closing (as defined below), that number of Units set forth opposite the appropriate Purchaser's name on Exhibit A attached hereto. The purchase price of each Unit (the "Per Unit Price") shall be $1,000. (c) Use of Proceeds. The Company intends to apply the net proceeds from the sale of the Units for general corporate purposes. 2. CLOSING. Subject to the satisfaction of closing conditions, the purchase and sale of the Units shall take place within two (2) business days after the satisfaction of closing conditions at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California, at 10:00 a.m. California time, on November 22, 2005, or at such other time and place as the Company and the Purchasers mutually agree upon (which time and place are referred to in this Agreement as the "Closing"). At the Closing, the Company shall authorize its transfer agent to issue to each Purchaser, against delivery of payment for the Units, one or more stock certificates (the "Certificates") registered in the name of each Purchaser, representing the number of shares of Preferred Stock set forth opposite such Purchaser's name on Exhibit A hereto, and bearing the legend set forth in Section 4(k) herein and one or more warrant certificates representing the number of Warrants set forth opposite such person's name on Exhibit A hereto. Closing documents may be delivered by facsimile with original signature pages sent by overnight courier. The date of the Closing is referred to herein as the "Closing Date". 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Purchaser that the statements in this Section 3 are true and correct as of the date hereof and as of the Closing Date, except as set forth in the disclosure letter delivered to the Purchasers concurrently herewith (the "Disclosure Letter"): (a) Organization Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all corporate power and authority required to (a) carry on its business as presently conducted and (b) enter into this Agreement, the Stockholder Agreement dated as of the date hereof (the "Stockholder Agreement"), the Registration Rights Agreement, dated as of the date hereof (the "Registration Rights Agreement") and the Warrants (collectively, the "Operative Documents"), and to consummate the transactions contemplated hereby and thereby. The Company is qualified to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means a material adverse effect on, or a material adverse change in, or a group of such effects on or changes in, the business, operations, financial condition, results of operations, assets or liabilities of the applicable party and its subsidiaries, taken as a whole. (b) Capitalization. The capitalization of the Company, without giving effect to the transactions contemplated by this Agreement, is as follows. The authorized stock of the Company consists of (i) 75,000,000 shares of Common Stock; and (ii) 1,000,000 shares of Series A Convertible Preferred Stock, and (iii) 5,000,000 shares of undesignated Preferred Stock. As of October 28, 2005, the Company consists of 36,867,751 shares of Common Stock issued and outstanding and no shares issued and outstanding of Series A Convertible Preferred Stock or undesignated Preferred Stock. All such shares of Common Stock and Preferred Stock have been duly authorized, and all such issued and outstanding shares of Common Stock have been validly issued, are fully paid and nonassessable. No such outstanding shares of Common Stock were issued in violation of any pre-emptive rights. The Company has also reserved: (i) 3,500,000 shares of Common Stock for issuance upon exercise of options granted under the Company's 2000 Employee Stock Purchase Plan; and (ii) 8,387,429 shares of Common Stock for issuance to employees of the Company under the Company's 2000 Equity Incentive Plan. All shares of Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Except as provided in this Agreement and set forth in the Disclosure Letter, and except for the (i) shares of Common Stock subject to outstanding options issued under any of the Company's stock plans referenced in this paragraph, and (ii) 162,006 shares of Common Stock subject to outstanding warrants, there are no other equity securities, options, warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such equity security, option, warrant, call, right, commitment or agreement. (c) Due Authorization. All corporate actions on the part of the Company necessary for the authorization, execution, delivery of, and the performance of all obligations of the Company under the Operative Documents and the authorization, issuance, reservation for issuance and delivery of all of the Securities being sold under the Operative Documents have been taken, and the Operative Documents constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (a) as may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies and (b) as rights to indemnity or contribution may be limited under federal or state securities laws or by principles of public policy thereunder. (d) Valid Issuance of Stock. (i) Valid Issuance. The Securities to be issued pursuant to this Agreement will be, upon payment therefor by the Purchasers in accordance with this Agreement, duly authorized, validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof. The issuance of the shares of Common Stock issued or issuable from time to time upon the conversion of the Preferred Stock will be, and at all times prior to such conversion, will have been, duly authorized, duly reserved for issuance upon such conversion, and will be, upon such conversion, validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof. The issuance of the shares of Common Stock issued or issuable from time to time upon the exercise of the Warrants will be, and at all times prior to such exercise, will have been, duly authorized, duly reserved for issuance upon such exercise and payment of the exercise price of the Warrants, and will be, upon such exercise and payment, validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof. (ii) Compliance with Securities Laws. Subject to the accuracy of the representations made by the Purchasers in Section 4 hereof, the Securities will be issued to the Purchasers in compliance with applicable exemptions from (i) the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Securities Act") and (ii) the registration and qualification requirements of all applicable securities laws of the states of the United States. (e) Governmental Consents. Except as set forth in the Disclosure Letter, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, or notice to, any federal, state or local governmental authority on the part of the Company is required in connection with the issuance of the Securities to the Purchasers, or the consummation of the other transactions contemplated by this Agreement, except (i) such filings as have been made prior to the date hereof, (ii) the filing of a notification form with The Nasdaq Stock Market, Inc. ("Nasdaq") and (iii) the filing of the notice required by Section 25102(f) or 25102.1 of the California Corporations Code and (b) the filing of a notice on Form D with the Securities and Exchange Commission. (f) Non-Contravention. Except as set forth in the Disclosure Letter, the execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby (including issuance of the Securities), do not (i) contravene or conflict with the Certificate of Incorporation, as amended, or Bylaws of the Company; (ii) constitute a violation of any provision of any federal, state, local or foreign law binding upon or applicable to the Company or its assets, etc.; or (iii) constitute a default or require any consent under, give rise to any right of termination, cancellation or acceleration of, or to a loss of any material benefit to which the Company is entitled under, or result in the creation or imposition of any lien, claim or encumbrance on any assets of the Company under, any Material Contract (as defined below) to which the Company is a party or any material permit, license or similar right relating to the Company or by which the Company may be bound or affected. (g) Litigation. There is no material action, suit, proceeding, claim, arbitration or investigation ("Action") pending or, to the Company's knowledge, threatened: (a) against the Company, its activities, properties or assets, or any officer, director or employee of the Company in connection with such officer's, director's or employee's relationship with, or actions taken on behalf of, the Company, or (b) that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement (including issuance of the Securities). The Company is not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. The Company does not intend to initiate any Action that is reasonably likely to have a Material Adverse Effect on the Company. (h) Compliance with Law and Charter Documents. The Company is not in violation or default of any provisions of its Certificate of Incorporation, as amended, or Bylaws. The Company has complied in all material respects and is in compliance in all material respects with all applicable statutes, laws, rules, regulations and orders of the United States of America and all states thereof, foreign countries and other governmental bodies and agencies having jurisdiction over the Company's business or properties. (i) SEC Documents. (1) Reports. The Company has filed in a timely manner all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, except for where the failure to do so would not be reasonably likely to have a Material Adverse Effect. The Company has made available to the Purchasers prior to the date hereof copies of its Annual Report on Form 10-K for the fiscal year ended April 3, 2005, its quarterly report on Form 10-Q for the fiscal quarters ended July 3, 2005 and October 2, 2005, its current reports on Form 8-K filed on August 23, 2005, October 6, 2005 and October 27, 2005 and its Proxy Statement for its 2005 Annual Meeting of Stockholders filed by the Company with the Securities and Exchange Commission ("SEC") (the Form 10-K, Form 10-Q and Proxy Statement are collectively referred to herein as the "SEC Documents"). Each of the SEC Documents, as of the respective date thereof (or if amended or superseded by a filing prior to the date hereof, then on the date of such filing), did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company has filed all material contracts that are required to be filed as exhibits to the SEC Documents (the "Material Contracts"). (2) Financial Statements. The financial statements of the Company in the SEC Documents present fairly, in accordance with United States generally accepted accounting principles ("GAAP"), the financial position of the Company as of the dates indicated, and the results of its operations and cash flows for the period therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments. (3) Sarbanes-Oxley. The Chief Executive Officer and the acting Chief Financial Officer of the Company have signed, and the Company has furnished to the SEC, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications. The Company is otherwise in compliance with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations issued thereunder by the SEC, except where such non-compliance would not be reasonably likely to have a Material Adverse Effect (j) Absence of Certain Changes. Since June 27, 2005, and the date hereof, and except as set forth in the Disclosure Letter or in the SEC Documents, the business and operations of the Company have been conducted in the ordinary course consistent with past practice. Since June 27, 2005, and the date hereof, and except as set forth in the Disclosure Letter, there has not been (i) any change, circumstance or event that is reasonably likely to have a Material Adverse Effect, (ii) any declaration, setting aside or payment of any dividend or other distribution of the assets of the Company with respect to any shares of capital stock of the Company or any repurchase, redemption or other acquisition by the Company of any outstanding shares of the Company's capital stock, (iii) any damage, destruction or loss, whether or not covered by insurance, except for such occurrences, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect, (iv) any waiver by the Company of a valuable right or of a material debt owed to it, except for such waivers, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect, (v) any material change by the Company in its accounting principles, methods or practices or in the manner in which it keeps its accounting books and records, except any such change required by a change in GAAP or by the SEC, and (vi) any entry into, amendment of, termination or non-renewal by the Company of any material contract, license, lease, transaction, commitment or other right or obligation. (k) Registration Rights. Except as provided in Section 5 herein and the Disclosure Letter, effective upon the Closing, the Company is not currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of the Company registered with the SEC or registered or qualified with any other governmental authority. (l) Taxes. The Company has filed all necessary federal, state, and foreign income and franchise tax returns due prior to the date hereof and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of any material tax deficiency which has been or might be asserted or threatened against it. (m) General Solicitation. Neither the Company nor any other person or entity authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Securities. (n) S-3 Eligibility. The Company meets the eligibility requirements for use of a Form S-3 Registration Statement. (o) Intellectual Property. The Company owns or possesses sufficient rights to use all inventions, trade secrets, know-how, trademarks, service marks, trade names, copyrights or other intellectual property and, to its knowledge, all patent and patent rights (collectively, "Intellectual Property"), which are necessary to conduct its businesses as currently conducted, except where the failure to currently own or possess would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. The Company has not received any written notice of, and has no actual knowledge of, any infringement of or conflict with asserted rights of others with respect to any Intellectual Property, and to the Company's knowledge, none of the patent rights owned or licensed by the Company are unenforceable or invalid. (p) Internal Accounting Controls. Except as expressly set forth under Item 9A of the Company's Annual Report on Form for the fiscal year ended on April 3, 2005, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (q) No Undisclosed Liabilities. Except as disclosed, reflected or reserved against in the financial statements and supporting schedules included in the Company's Quarterly Report on Form 10-Q for fiscal quarter ended July 3, 2005, to the Company's knowledge there are no material liabilities of the Company or any subsidiary, other than liabilities incurred in the ordinary course of business consistent with past practice since July 3, 2005 or which in the aggregate would not reasonably be expected to result in a Material Adverse Effect. (r) Related Party Transactions. Except as expressly disclosed in the SEC Documents, the Company has not entered into any agreements, understandings, or proposed transactions between the Company or any subsidiary, on the one hand, and any of its officers, affiliates or directors, or any of their affiliates on the other hand that would be required to be disclosed pursuant to Regulation SK, Item 404, as promulgated by the Securities and Exchange Commission. 4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASER. Each Purchaser hereby represents and warrants to the Company severally and not jointly, and agrees that: (a) Organization Good Standing and Qualification. The Purchaser has all corporate, membership or partnership power and authority required to enter into this Agreement and the other Operative Documents, and to consummate the transactions contemplated hereby and thereby. (b) Authorization. The execution of this Agreement has been duly authorized by all necessary corporate, membership or partnership action on the part of the Purchaser. This Agreement constitutes the Purchaser's legal, valid and binding obligation, enforceable in accordance with its terms, except (a) as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies and (b) as rights to indemnity or contribution may be limited under federal or state securities laws or by principles of public policy thereunder. (c) Litigation. There is no Action pending against the Purchaser that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. (d) Purchase for Own Account. The Securities are being acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, without prejudice, however, to such Purchaser's right at all times to sell or otherwise dispose of all or any part of such securities in compliance with applicable federal and state securities laws and as otherwise contemplated by this Agreement. The Purchaser also represents that it has not been formed for the specific purpose of acquiring the Securities. (e) Investment Experience. The Purchaser understands that the purchase of the Securities involves substantial risk. The Purchaser has experience as an investor in securities of companies and acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Securities and protecting its own interests in connection with this investment. (f) Accredited Purchaser Status. The Purchaser is an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act. (g) Reliance Upon Purchaser's Representations. The Purchaser understands that the issuance and sale of the Securities to it will not be registered under the Securities Act on the ground that such issuance and sale will be exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company's reliance on such exemption is based on each Purchaser's representations set forth herein. (h) Receipt of Information. The Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance and sale of the Securities and the business, properties, prospects and financial condition of the Company and to obtain any additional information requested and has received and considered all information it deems relevant to make an informed decision to purchase the Securities. (i) Restricted Securities. The Purchaser will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless (i) pursuant to an effective registration statement under the Securities Act, (ii) such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the Securities Act, or (iii) such holder provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144 under the Securities Act without any restriction as to the number of securities acquired as of a particular date that can be immediately sold. Notwithstanding anything to the contrary contained in the Agreement, the Purchaser may transfer (without restriction and without the need for an opinion of counsel) the Securities to its affiliates provided that such affiliate is an "accredited investor" under Regulation D and such affiliate agrees to be bound by the terms and conditions of the Agreement. (j) No Affiliation. The Purchaser represents and warrants that it is not affiliated with any other Purchaser, that it has not been identified as a party to any group with any other Investor in any filing with the Securities and Exchange Commission, and that it not otherwise a member of an identified group that includes any other Investor. (k) Legends. The Purchaser agrees that the certificates for the Preferred Stock and the Common Stock issuable upon exercise of the Warrants shall bear the following legend: "The securities represented by this certificate have not been registered under the Securities Act of 1933 or with any state securities commission, and may not be transferred or disposed of by the holder in the absence of a registration statement which is effective under the Securities Act of 1933 and applicable state laws and rules, or, unless, immediately prior to the time set for transfer, such transfer may be effected without violation of the Securities Act of 1933 and other applicable state laws and rules." In addition, the Purchaser agrees that the Company may place stop transfer orders with its transfer agents with respect to such certificates. The legend set forth above shall be removed from the certificates for the Preferred Stock and the Common Stock issuable upon exercise of the Warrants, (i) following any sale of such Preferred Stock or Common Stock pursuant to Rule 144 or any effective registration statement, or (ii) if such Preferred Stock or Common Stock is eligible for sale under Rule 144(k) (and the holder of such Preferred Stock or Common Stock has submitted a written request for removal of the legend indicating that the holder has complied with the applicable provisions of Rule 144), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the SEC) (and the holder of such Preferred Stock or Common Stock has submitted a written request for removal of the legend indicating that the holder has complied with such judicial interpretation or pronouncement). Subject to receipt of appropriate certifications, the Company shall cause its counsel to issue a legal opinion to the Company's transfer agent promptly upon the occurrence of any of the events in clauses (i), (ii) or (iii) above to effect the removal of the legend on certificates for the Preferred Stock or Common Stock. The Company agrees that at such time as such legend is no longer required under this Section 4(k), it will, no later than three (3) business days following the delivery by a Purchaser to the Company (attention: Chief Financial Officer) or the Company's transfer agent (with a copy to the Company or the transfer agent, as applicable) of a certificate representing the Preferred Stock or Common Stock issued with a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such Preferred Stock or Common Stock that is free from all restrictive and other legends; provided that in the case of removal of the legend for reasons set forth in clause (ii) above, the holder of such Preferred Stock or Common Stock has submitted a written request for removal of the legend indicating that the holder has complied with the applicable provisions of Rule 144. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section 4(k). (l) HSR Compliance. (i) Each Purchaser is its own "ultimate parent entity" as defined in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended or the rules and regulations promulgated thereto (together, the "HSR Act"). (ii) Each Investor will hold less than $50,000,000 in voting securities of the Company following execution of this Agreement, as valued under the HSR Act. 5. COMPANY COVENANTS. (a) Reporting for Income Tax. The Preferred Stock is intended to be Common Stock for tax purposes, and the Company intends to report the Preferred Stock for purposes of Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"). ( b) Covenant Regarding Dividends. Until the third anniversary of the date on which no Preferred Stock is outstanding, the Company shall not make any payment or declaration of any dividend or making of any other distribution on any share of capital stock or other security or interest in the Corporation other than the Preferred Stock if the effect of such dividend or distribution could reasonably be expected to (i) cause the right to receive the Liquidation Value (as defined in the Certificate of Designation) to result in, (ii) cause an increase in the Liquidation Value to be, (iii) cause the conversion of the Preferred Stock into Common Stock to be or (iv) make an adjustment of the Conversion Rate (as defined in the Certificate of Designation) a taxable event to the holders of the Preferred Stock. (c) Covenant Regarding Stock Issuance. Until the Closing Date, Company shall not issue any shares of Common Stock, Series A Convertible Preferred Stock, undesignated Preferred Stock or securities convertible into or exchangeable or exercisable for equity securities of the Company, except those shares of Common Stock issued pursuant to the Company's employee stock purchase plan and equity incentive plan and shares of Common Stock issued upon the exercise or conversion of options or convertible securities outstanding as of the date hereof. 6. PURCHASER COVENANT REGARDING SHORT SALE. (a) Short Sale Restrictions. Prior to the earlier of (i) the second anniversary of the issuance of the Preferred Stock and (ii) the time at which all shares of Preferred Stock have converted into shares of Common Stock, each Purchaser, severally and not jointly, agrees it will not engage in any short sale transactions (or transactions, including transactions in derivative securities, having the effect of a short sale) of the Common Stock, as defined in Rule 200(a) of Regulation SHO under the Exchange Act. For the avoidance of doubt, the parties agree that nothing herein shall be interpreted to (i) prevent a sale by a Purchaser of the Common Stock now owned or herein after acquired that does not involve a short sale (including a short sale "against the box") or (ii) limit the ability to receive the transaction consideration paid by another person or entity in connection with an acquisition of the Company by means of any transaction or series of transactions (including any reorganization, merger, consolidation or share transfer), where the shareholders of the Company immediately preceding such transaction own, following such transaction, less than 50% of the voting securities of the Company (a "Change of Control"). 7. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations of the Purchasers under Section 2(a) of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions: (a) Representations and Warranties True. Each of the representations and warranties of the Company contained in Section 3 shall be true and correct in all material respects on and as of the date of the date hereof and on and as of the date of the Closing, with the same effect as though such representations and warranties had been made as of the Closing. (b) Performance. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein. (c) Compliance Certificate. The Company will have delivered to the Purchasers at the Closing a certificate signed on its behalf by its Chief Executive Officer or Chief Financial Officer certifying that the conditions specified in Sections 7(a) and 7(b) hereof have been fulfilled. (d) Securities Exemptions. The offer and sale of the Securities to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (e) Opinion of Company Counsel. The Purchasers will have received an opinion on behalf of the Company, dated as of the date of the Closing, from Wilson, Sonsini, Goodrich & Rosati, PC, counsel to the Company, in the form attached as Exhibit B. (f) No Suspension of Trading or Listing of Common Stock. The Common Stock of the Company (i) shall be designated for quotation or listed on Nasdaq and (ii) shall not have been suspended from trading on Nasdaq. g) Good Standing Certificates. The Company shall have delivered to the Purchasers a certificate of the Secretary of State of the State of Delaware, dated as of a date within five days of the date of the Closing, with respect to the good standing of the Company. (h) Secretary's Certificate. The Company shall have delivered to the Purchasers a certificate of the Company executed by the Company's Secretary attaching and certifying to the truth and correctness of (1) the Certificate of Incorporation, (2) the Bylaws and (3) the resolutions adopted by the Company's Board of Directors in connection with the transactions contemplated by the Operative Documents. (i) No Statute or Rule Challenging Transaction. No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation by a court, regulatory body, self-regulatory organization or governmental authority of competent jurisdiction shall have been enacted, entered, promulgated, or adopted by any court, regulatory body, self-regulatory organization or governmental authority of competent jurisdiction or the staff of any of the foregoing, having authority over the matters contemplated hereby which questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement. (j) Closing. The Closing shall occur by no later than November 30, 2005. (k) Other Actions. The Company shall have executed such certificates, agreements, instruments and other documents, and taken such other actions as shall be customary or reasonably requested by the Purchasers in connection with the transactions contemplated hereby. 8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the Company to the Purchasers under this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions: (a) Representations and Warranties True. The representations and warranties of the Purchasers contained in Section 4 shall be true and correct in all material respects on and as of the date hereof and on and as of the date of the Closing with the same effect as though such representations and warranties had been made as of the Closing. (b) Performance. The Purchasers shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. (c) Securities Exemptions. The offer and sale of the Securities to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (d) Payment of Purchase Price. The Purchasers shall have delivered to the Company same day funds in full payment of the purchase price as specified in Section 1(b). (e) Other Actions. The Purchasers shall have executed such certificates, agreements, instruments and other documents, and taken such other actions as shall be customary or reasonably requested by the Company in connection with the transactions contemplated hereby. 9. MISCELLANEOUS. (a) Successors and Assigns. The terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser; provided, however, that upon any Change of Control, this Agreement and all rights or obligations hereunder may be assigned by the Company only to the surviving entity without the prior written consent of the other party or parties. Each Purchaser may assign or transfer any or all of its rights under this Agreement to an affiliate or an entity advised by the same management company that advises such Purchaser, provided that such assignee or transferee agrees in writing to be bound, with respect to the transferred Securities, by Section 6 hereof; whereupon such assignee or transferee shall be deemed to be a "Purchaser" for all purposes of this Agreement (b) Governing Law. This Agreement will be governed by and construed under the internal laws of the State of Delaware, without reference to principles of conflict of laws or choice of laws. (c) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. (d) Headings. The headings and captionsused in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules will, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference. (e) Notices. Any notice required or permitted under this Agreement shall be given in writing, shall be effective when received, and shall in any event be deemed received and effectively given upon personal delivery to the party to be notified or three (3) business days after deposit with the United States Post Office, by registered or certified mail, postage prepaid, or one (1) business day after deposit with a nationally recognized courier service such as Federal Express for next business day delivery under circumstances in which such service guarantees next business day delivery, or one (1) business day after facsimile with copy delivered by registered or certified mail, in any case, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof or at such other address as the Purchaser or the Company may designate by giving at least ten (10) days advance written notice pursuant to this Section 10(e). (f) Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of Preferred Stock representing at least a majority of the total aggregate number of Preferred Stock then outstanding. Any amendment or waiver effected in accordance with this Section 10(f) will be binding upon the Purchasers, the Company and their respective successors and assigns. (g) Severability. If any provision of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms. (h) Entire Agreement. This Agreement, together with all exhibits and schedules hereto and thereto constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof. (i) Further Assurances. From and after the date of this Agreement upon the request of the Company or the Purchasers, the Company and the Purchasers will execute and deliver such instruments, documents or other writings, and take such other actions, as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. (j) Meaning of Include and Including. Whenever in this Agreement the word "include" or "including" is used, it shall be deemed to mean "include, without limitation" or "including, without limitation," as the case may be, and the language following "include" or "including" shall not be deemed to set forth an exhaustive list. (k) Fees, Costs and Expenses. The Company and each Purchaser shall each pay their own expenses in connection with the transactions contemplated by this Agreement; provided, however, that if the Closing is effected, the Company shall pay Purchasers' reasonable and out-of-pocket expenses, including fees of counsel, consultants and accountants, incurred in connection with the purchase of the Securities and the negotiation, execution and delivery under the Operative Documents, such expenses not to exceed two hundred thousand dollars ($200,000) in the aggregate. (l) Survival. The representations and warranties of the Company and the Purchasers contained in Sections 3 and 4 of this Agreement shall survive until eighteen (18) months after the Closing Date. (m) No Third Party Rights. This Agreement is intended solely for the benefit of the parties hereto and their respective successors and permitted assigns and is not intended to confer any benefits upon, or create any rights in favor of, any person (including, without limitation, any stockholder or debt holder of the Company) other than the parties hereto. (o) Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each Purchaser and the Company will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [The balance of this page is intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. THERMA-WAVE, INC. By: ------------------------------------- Name: Boris Lipkin ---------------------------------- Title: Chief Executive Officer --------------------------------- [PURCHASER SIGNATURE PAGES TO FOLLOW] SIGNATURE PAGE TO PURCHASE AGREEMENT DATED AS OF NOVEMBER __, 2005 BY AND AMONG THERMA-WAVE, INC. AND EACH PURCHASER NAMED THEREIN The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the "Agreement") to which this Signature Page is attached effective as of the date of the Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and signature pages of the other Purchasers named in such Agreement, shall constitute one and the same document in accordance with the terms of such Agreement. Number of Units: ---------------------------- North Run Master Fund, LP By: North Run GP, LP, its General Partner By: North Run Advisors, LLC, its General Partner By:_________________________________________ Thomas B. Ellis, Member By:_________________________________________ Todd B. Hammer, Member Address: One International Place, Suite 2401 Boston, MA 02110 SIGNATURE PAGE TO PURCHASE AGREEMENT DATED AS OF NOVEMBER __, 2005 BY AND AMONG THERMA-WAVE, INC. AND EACH PURCHASER NAMED THEREIN The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the "Agreement") to which this Signature Page is attached effective as of the date of the Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and signature pages of the other Purchasers named in such Agreement, shall constitute one and the same document in accordance with the terms of such Agreement. Number of Units: ------------------------------ Deephaven Relative Value Equity Trading Ltd. By: /s/ Colin Smith Name: Colin Smith Title: CEO Address: 130 Cheshire Lane, Suite 102 Minnetonka, MN 55305 SIGNATURE PAGE TO PURCHASE AGREEMENT DATED AS OF NOVEMBER __, 2005 BY AND AMONG THERMA-WAVE, INC. AND EACH PURCHASER NAMED THEREIN The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the "Agreement") to which this Signature Page is attached effective as of the date of the Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and signature pages of the other Purchasers named in such Agreement, shall constitute one and the same document in accordance with the terms of such Agreement. Number of Units: --------------------------- Deephaven Long Short Equity Trading Ltd. By: /s/ Colin Smith Name: Colin Smith Title: CEO Address: 130 Cheshire Lane, Suite 102 Minnetonka, MN 55305 Exhibit A Schedule of Purchasers Shares of Series B Number of Convertible Preferred Number of Name of Purchaser Units Stock Warrants North Run Master Fund, LP 5,200 5,200 780,000 One International Place, Suite 2401 Boston, MA 02110 Deephaven Relative Value Equity Trading Ltd. 130 Cheshire Lane, Suite 102 4,200 4,200 630,000 Minnetonka, MN 55305 Deephaven Long Short Equity Trading Ltd. 130 Cheshire Lane, Suite 102 1,000 1,000 150,000 Minnetonka, MN 55305 TOTAL 10,400 10,400 1,560,000 Exhibit B Form of Legal Opinion EX-99.2 3 stockholdersagrmt.txt STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT This Stockholders' Agreement ("Agreement") is entered into as of November 22, 2005, by and among Therma-Wave, Inc., a Delaware corporation (the "Company"), and the parties set forth on Exhibit A hereto (each a "Purchaser" and collectively, the "Purchasers"). Recitals WHEREAS, it is a condition to the closing of the sale of the Company's Series B Convertible Preferred Stock to the Purchasers pursuant to the Stock Purchase Agreement of even date herewith (the "Purchase Agreement") that the parties hereto enter into this Agreement to make certain provisions with respect to the Company's organization and governance. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1. Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Affiliate" has the meaning set forth in Regulation D under the Securities Act of 1933. "Board" means the Board of Directors of the Company. "Change of Control" means any of the events described below: (1) The occurrence of any event that would, if known to the Company's management, be required to be reported by the Company under Item 5.01(a) of Form 8-K pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); or (2) The acquisition or receipt, in any manner, by any person (as defined for purposes of the Exchange Act) or any group of persons acting in concert, of direct or indirect beneficial ownership (as defined for purposes of the Exchange Act) of fifty percent (50%) or more of the combined voting securities ordinarily having the right to vote for the election of directors of the Company; provided that the following shall not constitute a Change in Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company or any of its affiliates, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates; or (3) A change in the constituency of the Board with the result that individuals (the "Incumbent Directors") who are members of the Board as of the date of this Agreement cease for any reason to constitute at least a majority of the Board; provided that any individual who is elected to the Board after the date of this Agreement and whose nomination for election was unanimously approved by the Incumbent Directors shall be considered an Incumbent Director beginning on the date of his or her election to the Board; or (4) Consummation of a merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or parent thereof) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger, consolidation or reorganization; or (5) A complete liquidation or dissolution of the Company; (6) A sale, exchange or other disposition or transfer of all or substantially all of the Company's business or assets, other than pursuant to a spin-off or comparable transaction in which the transferee is controlled by the Company or its existing stockholders immediately prior to such transfer; or (7) execution of a binding agreement with respect to a transaction that, if completed, would constitute or result in a Change in Control. "Common Stock" means the common stock, $0.01 par value per share, of the Company. "GAAP" means United States generally accepted accounting principles. "Holders" means the Purchasers and their respective Affiliates. "Person" means an individual, partnership, corporation, limited liability company, association, trust, joint venture, unincorporated organization and any government, governmental department or agency or political subdivision thereof. "Permitted Transferee" means (i) any affiliate of a Purchaser, (ii) any successor entity that succeeds to all or substantially all of the assets of transferor,(iii) any limited partner, general partner or limited liability company member who receives a distribution from a Purchaser, (iv) any Person with at least $25.0 million in assets whose primary purpose is to invest in other entities or securities, including registered and unregistered investment companies and investment funds, financial institutions and other investment or financial entities (a "Financial Entity"), and (v) any Person following such time as the Purchasers are entitled to an additional director pursuant to Section 2.1(a)(iii) hereof, but without giving effect to any limitation imposed by the proviso in Section 2.1(a)(iii). "Preferred Stock" means the Series B Convertible Preferred Stock, par value $0.01 per share, of the Company. "Purchaser" has the meaning set forth in the introductory paragraph of this Agreement. SECTION 2 BOARD OF DIRECTORS 2.1. Board Composition. (a) Effective at the closing of the sale of the Company's Series B Convertible Preferred Stock to the Purchasers pursuant to the Purchase Agreement, the Purchasers shall be entitled to designate members to the Board (the "Purchaser Designees"), as follows: (i) one individual designated by North Run Master Fund, LP (the "North Run Designee"), (ii) one individual designated collectively by Deephaven Relative Value Equity Trading Ltd and Deephaven Long Short Equity Trading Ltd (the "Deephaven Designee"); and (iii) in the event the Company's cash and cash equivalents, determined in accordance with GAAP applied consistently with the Company's past practice, are less than $15.0 million as of the end of a fiscal quarter as reported on the Company's balance sheet included in Form 10-Q or Form 10-K for such quarter, the holders of a majority of Preferred Stock shall be entitled to designate one additional director (or such greater number as may be required such that the aggregate number of directors designated pursuant to this Section 2.1 equals the minimum number of directors necessary such that the aggregate number of directors equals at least thirty percent (30%) of the then sitting board members); provided, however, that notwithstanding the foregoing, in no event shall the percentage of board seats that holders of Preferred Stock are entitled to elect exceed their proportion of ownership of voting securities of the Company. Notwithstanding the foregoing, any individual (or individuals) to be nominated or elected to the Board pursuant to this Agreement that is designated by an initial Purchaser or a Permitted Transferee (pursuant to sections (i) - (iv) of the Permitted Transferee definition) shall be appointed only after reasonable consultation, review and discussion with the Company's board of directors and its nominating committee. The Company agrees that its review process for the initial designees shall be completed no later than December 9, 2005. Any individual or individuals to be nominated or elected to the Board pursuant to this Agreement by a Permitted Transferee pursuant solely to section (v) of the Permitted Transferee definition must first be reasonably acceptable to a majority of the existing directors (excluding the North Run Designee and the Deephaven Designee), who shall not unreasonably withhold or delay their approval of such individual. (b) Notwithstanding the foregoing, (i) in the event the Purchasers together hold less than 50% of the number of shares of Preferred Stock originally purchased by them pursuant to the Purchase Agreement, the holders of a majority in interest of the Preferred Stock shall be entitled to elect a single director (and the Purchasers shall cause any director nominated pursuant to Section 2.1(a) and not reelected pursuant to this section to promptly tender his or her resignation from the Board) and (ii) in the event the Purchasers together hold less than 20% of the number of shares of Preferred Stock originally purchased by them pursuant to the Purchase Agreement, the rights set forth in this Section 2.1 shall terminate and Purchasers shall cause any director elected pursuant to Section 2.1(a) to promptly tender his or her resignation from the Board. In the event that any Purchaser Designee fails to deliver his or her resignation as may be required by this Section 2.1(b), the Company and the Purchasers shall be entitled to take all necessary and appropriate action to cause such Purchaser Designee to be removed. (c) The Company shall take all actions reasonably necessary and requested by any other stockholder within its control (including, without limitation, calling special board and stockholders' meetings) so that the Purchaser Designees shall be elected to or removed from the Board as provided in this Section 2.1. The Company shall cause its Board of Directors to take all action necessary to appoint directors designated pursuant to this Section 2.1 to the Compensation Committee and Audit Committee and each other committee as such directors may reasonably request, so that the directors will have representation on each such committee proportional to their representation on the Board, unless outside counsel has provided written advice that such membership is prohibited by applicable law or the rules of the Nasdaq Stock Market. The Company shall pay the reasonable out-of-pocket travel, lodging and other related expenses of all directors elected pursuant to this Section 2.1 incurred in connection with attendance at meetings of the Board or any committee thereof. (d) If a vacancy of a position held by a Purchaser Designee occurs or exists on the Board at any time and for any reason, including but not limited to a vacancy because of the death, disability, retirement, resignation or removal of any director for cause or otherwise, then the Purchaser who originally designated such director pursuant to this Section 2.1 shall have the sole right to designate an individual to fill such vacancy (provided such Purchaser is still entitled to designate a member to the Board thereunder), and the Company shall take all reasonable steps to elect such nominee to fill such vacancy. (e) At the request of the entity designating a Purchaser Designee and only if such Purchaser is still entitled to designate a Board member pursuant to Section 2.1 hereof, the Company shall (x) use all reasonable efforts to (i) seek action by written consent as promptly as practicable following such request to remove such Purchaser Designee, or (ii) if action by written consent of stockholders is not then permitted by the certificate of incorporation and bylaws of the Company, the Company may, in its sole discretion, cause a special meeting of stockholders to be held proposing the removal of such Purchaser Designee and (y) to the extent permitted by law and to the extent an action by written consent is sought or a special meeting of stockholders is called pursuant to this paragraph, use all reasonable efforts to solicit from stockholders of the Company eligible to vote for the election of directors proxies to remove such Purchaser Designee. SECTION 3 TRANSFER RESTRICTIONS 3.1. Transfer Restrictions. Prior to the second anniversary of the date of the original issuance of Preferred Stock to the Stockholders, except as approved by the Board (excluding the directors nominated pursuant to Section 2.1 above), each Purchaser and each Permitted Transferees agrees that it shall not sell or otherwise transfer or agree to sell or otherwise transfer (a "Transfer") any shares of Preferred Stock except to a Permitted Transferee; provided, however, that the foregoing restrictions shall not restrict the Purchaser from transferring at anytime and without consent, any or all of its shares of Common Stock. 3.2. Certain Transferees to Become Parties. Any transferee receiving Preferred Stock in a Transfer pursuant to Section 3.1 shall sign and delivery to the Secretary of the Company a counterpart to this Agreement in substantially the form attached hereto as Exhibit B. SECTION 4 MISCELLANEOUS 4.1. Waivers and Amendments, Termination. The rights and obligations of the Company and the Purchasers hereunder may only be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) or amended with the written consent of the Company and Purchasers. This Agreement shall terminate at such time all Preferred Stock is converted into Common Stock or earlier if following the effectiveness of a Change of Control the Stockholders, in aggregate, own ten percent (10%) or less of the outstanding capital stock of the surviving entity, assuming the conversion of all convertible securities and exercise of all options and warrants whose exercise price equals or exceeds the fair market value of the underlying securities immediately following the effectiveness of such Change of Control. 4.2. Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware (without giving effect to any conflicts or choice of laws provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction). 4.3. Successors and Assigns. This Agreement shall be binding on each party hereto with respect to all shares of Preferred Stock now or hereafter held by each Holder. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. Neither this Agreement nor any right or obligation hereunder is assignable by any party except with the prior written consent of the other party or parties; provided, however, each Holder may assign or transfer any or all of its rights under this Agreement to a Permitted Transferee in connection with a transfer of Preferred Stock pursuant to Section 3; and provided further that upon a Change of Control, this Agreement and all rights or obligations hereunder may be assigned by the Company only to the surviving entity without the prior written consent of the other party or parties. 4.4. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. This Agreement supersedes all prior and inconsistent agreements and understandings between and among any of the parties hereto. 4.5. Notices. All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in this Section), commercial (including Federal Express) or U.S. Postal Service overnight delivery service, or deposited in the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as set forth below: If to the Company, addressed to: Therma-Wave, Inc. 1250 Reliance Way Fremont, CA 94539 Attn: Chief Financial Officer Telecopier: 510-656-3852 with a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304 Attn: Matthew Sonsini Telecopier: 650-493-6811 If to any Holder, at the address set forth on Exhibit A with a copy to: Ropes & Gray LLP One International Place Boston, MA 02110 Attn: Julie H. Jones Telecopier: 617-951-7050 Notices shall be deemed given upon the earlier to occur of (i) receipt by the party to whom such notice is directed; (ii) if sent by facsimile machine, on the date (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent, if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. Pacific Standard Time and, if sent after 5:00 p.m. Pacific Standard Time, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent; (iii) on the first business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the commercial carrier if sent by commercial overnight delivery service; or (iv) the fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice duly given in accordance therewith may specify a different address for the giving of any notice hereunder. 4.6. Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 4.7. Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 4.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute one instrument. 4.9. Remedies. (a) The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its rights to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have at law or in equity. (b) Without limitation of the foregoing, the parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or were otherwise breached, and that money damages are an inadequate remedy for breach of the Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically such terms and provisions of this Agreement, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity. (c) Except where a time period is otherwise specified, no delay on the part of any party in the exercise of any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any exercise or partial exercise of any such right, power, privilege or remedy preclude any further exercise thereof or the exercise of any right, power, privilege or remedy. 4.10. Legends. The Purchaser agrees that the certificates for the Preferred Stock shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY, AS SET FORTH IN A SHAREHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. The legend set forth above shall be removed from the certificates for the Preferred Stock following the second anniversary of the date of the original issuance of Preferred Stock to the Stockholders. 4.11. No Grant of Proxy, Not a Voting Trust. This Agreement does not grant any proxy and should not be interpreted as doing so. Nevertheless, should the provisions of this Agreement be construed to constitute the granting of proxies, such proxies shall be deemed coupled with an interest and are irrevocable for the term of this Agreement. This Agreement is not a voting trust governed by Section 218 of the Delaware General Corporation Law and should not be interpreted as such. 4.12. No Third Party Beneficiary. There are no third party beneficiaries of this Agreement. IN WITNESS WHEREOF, the Company and the Purchasers have executed this Agreement as of the date first set forth above. "Company" Therma-Wave, Inc. By: ____________________________ Name: Boris Lipkin Title: Chief Executive Officer "Purchasers" North Run Master Fund, L.P. By: North Run GP, LP, its General Partner By: North Run Advisors, LLC, its General Partner By: ________________________ Thomas B. Ellis, Member By: ________________________ Todd B. Hammer, Member Deephaven Relative Value Equity Trading Ltd. By: /s/ Colin Smith Name: Colin Smith Title: CEO Deephaven Long Short Equity Trading Ltd. By: /s/ Colin Smith Name: Colin Smith Title: CEO EXHIBIT A NAME AND ADDRESS OF PURCHASERS Name North Run Master Fund, L.P. One International Place - Suite 2401 Boston, MA 02110 Deephaven Relative Value Equity Trading Ltd 130 Cheshire Parkway, Suite 102 Minnetonka, MN 55305 Deephaven Long Short Equity Trading Ltd 130 Cheshire Parkway, Suite 102 Minnetonka, MN 55305 EXHIBIT B COUNTERPART TO STOCKHOLDERS AGREEMENT Reference is made to that certain Stockholders' Agreement dated as of November ___, 2005, by and among Therma-Wave, Inc. and the Stockholders party thereto (as amended from time to time, the "Agreement"). As a proposed recipient of shares of stock covered by the Agreement, the undersigned hereby acknowledges and agrees that such shares upon receipt shall remain subject to all of the terms and provisions of the Agreement and all rights and obligations thereunder arising prior to such receipt, and the undersigned hereby agrees to be bound by all of the terms and provisions of the Agreement. The undersigned hereby joins and executes said Agreement, hereby authorizing this Counterpart to be attached thereto. Dated this ______ day of _____________, 20___. Signature: ---------------------------- Print Name: ---------------------------- Address for Notice: ---------------------------- EX-99.3 4 registrationrightsagmt.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of this November 22, 2005, by and between Therma-Wave, Inc., a Delaware corporation (the "Company"), and persons signatory hereto (each, a "Stockholder" and collectively, the "Stockholders"). WHEREAS, the Company and the Stockholders have entered into a Stock Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company will issue to the Stockholders an aggregate of ten thousand four hundred (10,400) units, each consisting of (i) one share of the Company's Series B Convertible Preferred Stock (the "Shares") and (ii) one hundred fifty (150) warrants to purchase of the Company's common stock (the "Warrants"); and WHEREAS, the Purchase Agreement provides that the Shares and the shares of the Company's common stock issuable upon exercise of the Warrants (the "Warrant Shares") are entitled to registration rights. NOW, THEREFORE, in consideration of the premises in the Purchase Agreement, as an inducement to the Stockholders to consummate the transactions contemplated by the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Stockholders hereby covenant and agree with each other as follows: 1. Required Registrations of the Shares. 1.1 (a) Request for Registration. Subject to the conditions set forth in thisSection 1.1, if the Company shall receive from any Stockholder a written requestsigned by such Stockholder that the Company effect any registration with respectto all or a part of the Registrable Securities (such request shall state thenumber of shares of Registrable Securities (as defined below) to be disposed of and the intended methods of disposition of such shares by such Stockholders), the Company will: (i) promptly give written notice of the proposed registration to all other Stockholders; and (ii) as soon as practicable, file and use its commercially reasonable efforts to effect such registration on Form S-3 (or any successor form), except if the Company is not then eligible for to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on Form S-1 (or any successor form), (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act of 1933 (the "Securities Act")) and to permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Stockholder or Stockholders joining in such request as are specified in a written request received by the Company within ten (10) days after such written notice from the Company is mailed or delivered. (b) Mandatory Registration Statement. Subject to the conditions set forth in this Section 1.1, the Company shall be obligated to file prior to the later of (x) sixty (60) days after the date of this Agreement or (y) December 31, 2005 and use its commercially reasonable efforts to effect a registration on Form S-3 (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and to permit or facilitate the resale of all Registrable Securities. Such registration statement shall be a Shelf Registration Statement (as defined below) pursuant to Section 1.1(g). The Company shall be obligated to prepare and file additional Shelf Registration Statements every three years as necessary to allow a shelf registration statement to continue to be available for the use as required by applicable rules and regulations of the SEC until the date on which all Shareholders have consummated the sale of all such Shareholder's Registrable Securities registered under the Shelf Registration Statement. (c) Limitations on Requested Registration. The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 1.1: (i) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (ii) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effective date of, a Company-initiated registration; provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (iii) During such time as the Company has an effective Shelf Registration Statement (as defined below) available for use by the stockholders; or (iv) Within six (6) months of the filing of another registration statement pursuant to this Section 1.1. For purposes of this Agreement, "Registrable Securities" shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares and the Warrant Shares, and (ii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; provided, however, that Registrable Securities shall not include any shares of Common Stock described in clause (i) or (ii) above that have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act ("Rule 144"), or that have been sold in a private transaction in which the transferor's rights under this Agreement are not validly assigned in accordance with this Agreement. (d) Deferral. If (i) in the good faith judgment of the Board of Directors of the Company, the filing of a registration statement covering the Registrable Securities (other than a registration statement filed pursuant to Section 1.1(b)) would be materially detrimental to the Company, because such action would (1) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (2) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (3) render the Company unable to comply with requirements under the Securities Act or the Exchange Act of 1934 (the "Exchange Act"), and the Board of Directors of the Company concludes, as a result, that it is in the best interests of the Company to defer the filing of such registration statement at such time, and (ii) the Company shall promptly furnish to such Stockholders a certificate signed by the President and General Counsel, if any, of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, in the best interests of the Company to defer the filing of such registration statement, then (in addition to the limitations set forth in Section 1.1(c) above) the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Stockholders; provided, however, that the Company shall not defer its obligation in this manner more than once in any twelve-month period; provided further that the determination of the Company to defer such filing or effectiveness shall be further confirmed by the Board of Directors at its next meeting, or, it is not so confirmed, such deferral, if still in effect, shall immediately terminate; provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period other than pursuant to a registration relating solely to employee benefit plans, a registration relating to the offer and sale of debt securities, a registration relating to a corporate reorganization or other Rule 145 transaction, or a registration on any registration form that does not permit secondary sales. The Company shall promptly notify the Stockholders of the expiration of any period during which it exercised its rights under this Section 1.1(d). The Company agrees that, in the event it exercises its rights under this Section 1.1(d), it shall, prior to the expiration of the applicable deferral period, file or update and use its reasonable best efforts to cause the effectiveness of, as applicable, the applicable deferred registration statement. (e) Other Shares. The registration statement filed pursuant to the request of the Stockholders may, subject to the provisions of Section 1.1(f), include other shares with respect to which registration rights have been granted, and may include securities of the Company being sold for the account of the Company. (f) Underwriting. In the event the request to effect a registration specifies such registration is to be underwritten (including a Shelf Underwritten Offering (defined below)), the right of any Stockholder to include all or any portion of its Registrable Securities such registration shall be conditioned upon such Stockholder's participation in such underwriting and the inclusion of such Stockholder's Registrable Securities to the extent provided herein; provided, however that Stockholders will have the right to initiate only two (2) such underwritten offerings (including any Shelf Underwritten Offerings). If the Company shall request inclusion in any registration pursuant to Section 1.1 of securities being sold for its own account, the Stockholders shall, on behalf of all holders of the Company's securities, offer to include such securities in the underwriting and such offer shall be conditioned upon the participation of the Company or such other persons in such underwriting and the inclusion of the Company's and such person's other securities of the Company and their acceptance of the further applicable provisions of this Agreement. The Company shall (together with all persons proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters. The underwriter or underwriters shall be mutually designated by the Company and a majority in interest of the selling Stockholders. The selling Stockholders on whose behalf the Registrable Securities are to be distributed by such underwriters shall be parties to any such underwriting agreement and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of such selling Stockholders. Such underwriting agreement shall also contain such representations and warranties by such selling Stockholders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, when relevant. The Company shall not require any Holder in any such underwriting agreement or related documents to make any representations or warranties to or agreements with the Company or the underwriters other than customary representations, warranties or agreements regarding such Stockholder's title to Registrable Securities and any written information provided by the Stockholder to the Company expressly for inclusion in the related registration statement. In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act pursuant to this Section 1.1(f), the Company shall make available upon reasonable notice at reasonable times and for reasonable periods for inspection by each selling Stockholders, by any managing underwriter or underwriters participating in any disposition to be effected pursuant to such registration statement, and by any attorney, accountant or other agent retained by any selling Stockholders or any managing underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees and the independent public accountants who have certified the Company's financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such selling Stockholders, managing underwriters, attorneys, accountants or agents in connection with such registration statement as shall be necessary to enable them to exercise their due diligence responsibility (subject to entry by each such person into customary confidentiality agreements in a form reasonably acceptable to the Company). Notwithstanding any other provision of this Section 1.1, if the underwriters advise the Company or the selling stockholders that marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine will not jeopardize the success of the offering. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated, as follows: (i) first, to the Stockholders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Stockholders, assuming conversion, (ii) second, to the Company for securities being sold for its own account and (iii) third, to the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting based on the pro rata percentage of securities held by such other holders, assuming conversion. If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the Company or the underwriter. The Registrable Securities or other securities so excluded shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors pursuant to Section 1.1(c), the Company may then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion, in the manner set forth above. (g) Shelf Registration. Subject to any applicable limitations set forth in this Section 1.1, any Stockholder shall have the right at any time, and from time to time, to request, that any registration requested or required under this Section 1.1 (including an underwritten offering) be a "shelf" registration statement (the "Shelf Registration Statement"), and that the Company prepare and file with the SEC a Shelf Registration Statement on the appropriate form for an offering to be made, covering the Registrable Securities requested to be included therein, on a continuous or delayed basis pursuant to Rule 415 under the Securities Act (or any successor rule or similar provision then in effect) in the manner or manners designated by the requesting Stockholders . The Company shall use its reasonable best efforts to have the Shelf Registration declared effective by the SEC as soon as practicable and to keep such Shelf Registration Statement continuously effective and free of material misstatements or omissions (including the preparation and filing of additional Shelf Registration Statements every three years as necessary to allow a shelf registration statement to continue to be available for the use as required by applicable rules and regulations of the SEC) until the date on which all Shareholders have consummated the sale of all such Shareholder's Registrable Securities registered under the Shelf Registration Statement. The Company agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or as otherwise required by this Agreement, and shall use its reasonable best efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing. (h) Shelf Underwritten Offering. At any time that a Shelf Registration Statement is effective, if any Shareholder delivers a notice to the Company stating that it intends to effect an underwritten offering of Registrable Securities pursuant a take-down from a Shelf Registration Statement of all or part of its Registrable Securities included by it on the Shelf Registration Statement (the "Shelf Underwritten Offering") and stating the aggregate offering price and/or number of the Registrable Securities to be included in the Shelf Underwritten Offering, then the Company shall amend or supplement the Shelf Registration Statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Underwritten Offering (taking into account the inclusion of Registrable Securities by any other holders of the Company's securities pursuant to Section 1.1(f)). 1.2 Company Registration. (a) Company Registration. If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders, other than a registration pursuant to Sections 1.1, a registration relating solely to employee benefit plans, a registration relating to the offer and sale of non-convertible debt securities, a registration relating to a corporate reorganization or other Rule 145 transaction, the Company will: (i) promptly give written notice of the proposed registration to all Stockholders; and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 1.2(b) below, and in any underwriting involved therein, all of such Registrable Securities as are specified in a written request or requests made by any Stockholder or Stockholders received by the Company within ten (10) days after such written notice from the Company is mailed or delivered. Such written request may specify all or a part of a Stockholder's Registrable Securities. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Stockholders as a part of the written notice given pursuant to Section 1.2(a)(i). In such event, the right of any Stockholder to registration pursuant to this Section 1.2 shall be conditioned upon such Stockholder's participation in such underwriting and the inclusion of such Stockholder's Registrable Securities in the underwriting to the extent provided herein. All Stockholders proposing to distribute their securities through such underwriting shall (together with the Company and other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company with customary limitations of liability and indemnity provisions. The selling Stockholders on whose behalf the Registrable Securities are to be distributed by such underwriters shall be parties to any such underwriting agreement. Such underwriting agreement shall also contain such representations and warranties by such selling Stockholders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, when relevant. The Company shall not require, nor request or require the applicable underwriters to require any Holder in any such underwriting agreement or related documents to make any representations or warranties to or agreements with the Company or the underwriters other than customary representations, warranties or agreements regarding such Stockholder's title to Registrable Securities and any written information provided by the Stockholder to the Company expressly for inclusion in the related registration statement. In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act pursuant to this Section 1.2(b), the Company shall make available upon reasonable notice at reasonable times and for reasonable periods for inspection by each selling Stockholders, by any managing underwriter or underwriters participating in any disposition to be effected pursuant to such registration statement, and by any attorney, accountant or other agent retained by any selling Stockholders or any managing underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees and the independent public accountants who have certified the Company's financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such selling Stockholders, managing underwriters, attorneys, accountants or agents in connection with such registration statement as shall be necessary to enable them to exercise their due diligence responsibility (subject to entry by each such person into customary confidentiality agreements in a form reasonably acceptable to the Company). Notwithstanding any other provision of this Section 1.2, if the underwriters advise the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated, as follows: (i) first, to the Company for securities being sold for its own account, (ii) second, to the Stockholders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Stockholders, assuming conversion and (iii) third, to the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting based on the pro rata percentage of securities held by such other holders, assuming conversion. If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the Company or the underwriter. The Registrable Securities or other securities so excluded shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors pursuant to Section 1.2(b), the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion, in the manner set forth above. (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.2 prior to the effectiveness of such registration whether or not any Stockholder has elected to include securities in such registration. 1.3 Market Standoff. If requested in connection with an underwritten offering by the Company and an underwriter of Common Stock (or other securities) of the Company, if any, each selling Stockholder shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Common Stock (or other securities) of the Company held by such Stockholder (other than those included in the registration) during the ninety (90) day period following the effective date of a registration statement of the Company filed under the Securities Act; provided that each such Stockholder shall only be bound so long as each director and executive officer of the Company is similarly bound. The obligations described in this Section 1.3 shall not apply to a registration relating solely to employee benefit plans on Form S-l or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp each such certificate with an appropriate legend with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such one hundred eighty (180) day period. Each Stockholder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 1.3. 1.4 Provision of Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 that the Stockholders furnish to the Company such information regarding the Stockholders, the Registrable Securities to be sold by the Stockholders, and the intended method of disposition of the Registrable Securities as shall be required to effect the registration of the Registrable Securities. 2. Registration Procedures. In the case of each registration affected by the Company pursuant to Section 1, the Company will keep each Stockholder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will as promptly as possible: (a) prepare and file with the Securities and Exchange Commission ("SEC") such amendments and supplements to each registration statement and the prospectus used in connection therewith as may be necessary to keep the registration statement current and effective for a period of time ending on the earlier of (i) the date on which each Stockholder may sell all the Registrable Securities then held by the Stockholder without restriction by the volume limitations of Rule 144(e) of the Securities Act or (ii) such time as all the Registrable Securities included in the registration statement have been sold by the Stockholders; use its commercially reasonable efforts to furnish to the lead underwriter or underwriters, if any, and to the Stockholders that have requested that Registrable Securities be covered by such registration statement, prior to the filing thereof with the SEC, a copy of the registration statement, and each amendment thereof, and a copy of any prospectus, and each amendment or supplement thereto (excluding amendments caused by the filing of a report under the Exchange Act) and shall in good faith consider for inclusion in each such document all comments as such Stockholders may on a timely basis propose; (b) use its commercially reasonable efforts to furnish to the Stockholders such number of copies of the registration statement, prospectuses and preliminary prospectuses and such other documents related to the registration statement as the Stockholder may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the Stockholder, provided, however, that the obligation of the Company to deliver copies of prospectuses or preliminary prospectuses to the Stockholder shall be subject to the receipt by the Company of reasonable assurances from the Stockholder that the Stockholder will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses or preliminary prospectuses; cause authorized officers of the Company to execute customary certificates as may be reasonably requested by any selling Stockholder or any underwriter of such Registrable Securities; (c) use its commercially reasonable efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as the Stockholders may reasonably request in writing within twenty (20) days following the original filing of such registration statement, provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; (d) notify the Stockholders and any underwriter of such Registrable Securities in writing (i) after it receives notice of the time when the registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed, (ii) of the occurrence of any event as a result of which the registration statement or the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (iii) of any request by the SEC or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to such offering, (iv) any request by the SEC that the Company amend or supplement such registration statement or prospectus, and (v) if for any other reason it shall be necessary to amend or supplement such registration statement or prospectus in order to comply with the Securities Act and, in any such case as promptly as reasonably practicable thereafter, prepare and file with the SEC an amendment or supplement to such registration statement or prospectus which will correct such statement or omission or effect such compliance; (e) advise the Stockholders promptly after it receives notice or obtains knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the registration statement or of the initiation or threat of any proceeding in any jurisdiction for that purpose; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; (f) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter of such offering; (g) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed; (h) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; (i) promptly make available for inspection by the selling Stockholders, any underwriter participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Stockholders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company's officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent in connection with any such registration statement, provided the disclosure of such information shall be pursuant to a reasonable confidentiality agreement in customary form; (j) use all reasonable efforts to furnish to each Stockholder and to the managing underwriter, if any, a signed counterpart, addressed to the managing underwriter, if any, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as each such Stockholders and the managing underwriter, if any, reasonably requests; (k) to the extent reasonably requested by the lead or managing underwriters in connection with an underwritten offering, send appropriate officers of the Company to attend "road shows" scheduled in reasonable number and at reasonable times in connection with any such underwritten offering with all out-of-pocket costs and expenses incurred by the Company or such officers in connection with such attendance to be paid by the Company; (l) cooperate with each selling Stockholder and each underwriter or agent, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc; and (m) comply with all applicable rules and regulations of the SEC in all material respects. 3. Expenses of Registration. All reasonable expenses incurred in effecting the registration of a registration statement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions, and the reasonable fees and expenses of one special counsel to the Stockholders (such fees and expenses of the special counsel not to exceed $50,000) shall be paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun if the registration request is subsequently withdrawn at the request of the holders of a majority of the Registrable Securities to be registered (in which case all participating holders shall bear such expenses pro rata among each other based on the number of Registrable Securities requested to be so registered); provided further that if, at the time of such withdrawal, such participating holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to such participating holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then such participating holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 1.1(f). 4. Transfer of Registrable Securities; Suspension. The Stockholders agree that they will not offer to sell or make any sale, assignment, pledge, hypothecation or other transfer with respect to the Registrable Securities that would constitute a sale within the meaning of the Securities Act except pursuant to either (i) a registration statement, (ii) Rule 144 or (iii) another exemption from registration that may be then available, and that they will promptly notify the Company of any changes in the information set forth in any registration statement after it is prepared regarding the Stockholder or its plan of distribution to the extent required by applicable law. (a) If (i) in the good faith judgment of the Board of Directors of the Company, upon the happening of an event that renders it advisable to suspend use of the prospectus, because use of the prospectus would (1) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (2) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (3) render the Company unable to comply with requirements under the Securities Act or the Exchange Act, and the Board of Directors of the Company concludes, as a result, that it is in the best interests of the Company to suspend use of the prospectus at such time, and (ii) the Company shall promptly furnish to such Stockholders a certificate signed by the President and General Counsel, if any, of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company for the prospectus to be used and that it is, therefore, in the best interests of the Company to suspend use of the prospectus (which certificate will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended suspension, if known), then the Company shall have the right to suspend use of the prospectus for not greater than thirty (30) consecutive days and not more than twice in any twelve (12) month period of time, in which case each Stockholder shall discontinue disposition of Registrable Securities covered by the registration statement or prospectus until copies of a supplemented or amended prospectus are distributed to the Stockholders or until the Stockholders are advised in writing by the Company that the use of the applicable prospectus may be resumed. The suspension and certificate thereof described in this Section 4(a) shall be held in strictest confidence and not disclosed by the Stockholders. (b) Subject to paragraph (c) below, in the event of: (i) any request by the SEC or any other federal or state governmental authority during the period of effectiveness of any registration statement for amendments or supplements to a registration statement or related prospectus or for additional information, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (iv) any event or circumstance which necessitates the making of any changes in the registration statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the registration statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, then the Company shall deliver a certificate in writing signed by the President and General Counsel, if any, of the Company to the Stockholders (the "Suspension Notice") to the effect of the foregoing (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended suspension, if known), then the Company shall have the right to suspend use of the prospectus and, upon receipt of such Suspension Notice, the Stockholders will refrain from selling any Registrable Securities pursuant to the registration statement (a "Suspension") until the Stockholders' receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus; provided that in the event of any such Suspension, the Company will as promptly as reasonably practicable cause the use of the prospectus so suspended to be resumed as soon as possible and, if necessary, prepare and file with the SEC an amendment or supplement to the registration statement or prospectus to correct any such untrue statement of material fact or omission. The Suspension and Suspension Notice described in this Section 4(b) shall be held in strictest confidence and not disclosed by the Stockholders. The Company agrees that, in the event of any Suspension under this Section 4(b), it shall, prior to the expiration of the applicable suspension period, update the suspended Shelf registration statement as may be necessary to permit the Shareholders to resume use thereof in connection with the offer and sale of their Registrable Securities in accordance with applicable law. (c) Provided that a Suspension is not then in effect, the Stockholders may sell Registrable Securities under the registration statement, provided that the selling Stockholder arranges for delivery of a current prospectus to the transferee of such Registrable Securities. (d) In the event of a sale of Registrable Securities by a Stockholder, such Stockholder must also deliver to the Company's transfer agent, with a copy to the Company, a certificate of subsequent sale reasonably satisfactory to the Company, so that ownership of the Registrable Securities may be properly transferred. 5. Indemnification. (a) The Company will indemnify and hold harmless each holder of Registrable Securities that are included in a registration statement pursuant to the provisions of Section 2 hereof, its directors, officers, agents, investment advisors, partners, members and employees, and any underwriter (as defined in the Securities Act) for such holder and each person, if any, who controls such holder and the directors, officers, agents, investment advisors, partners, members and employees of such controlling person or such underwriter within the meaning of the Securities Act, from and against, and will reimburse such holder and each such underwriter and controlling person with respect to, any and all loss, damage, liability, cost and expense to which such holder or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, liability, cost or expenses arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by or on behalf of such holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof. (b) Each holder of Registrable Securities included in a registration statement pursuant to the provisions of Section 1 hereof will indemnify and hold harmless the Company, its directors and officers, any controlling person and any underwriter from and against, and will reimburse the Company, its directors and officers, any controlling person and any underwriter with respect to, any and all loss, damage, liability, cost or expense to which the Company or any controlling person and/or any underwriter may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon information furnished by or on behalf of such holder specifically for use in the preparation thereof. Notwithstanding the foregoing, the liability of the Stockholders with respect to losses referred to in this Section 5(b) shall not exceed the gross proceeds received by the holder from the sale of the Shares and the Warrant Shares. (c) Promptly after receipt by an indemnified party pursuant to the provisions of Sections 5(a) or 5(b) of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of said Sections 5(a) or 5(b), promptly notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability that it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, with counsel satisfactory to such indemnified party, provided, however, if counsel for the indemnifying party concludes that a single counsel cannot under applicable legal and ethical considerations represent both the indemnifying party and the indemnified party, the indemnified party or parties have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has, in its sole discretion, authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. 6. Limitations on Subsequent Registration Rights. If the Company at any time grants to any person or entity any rights to request the Company to effect the registration (whether on demand or by "piggyback" rights or otherwise) under the Securities Act of any equity securities of the Company, or securities convertible into or exchangeable for such equity securities on any terms more favorable to such persons than the rights granted to the Stockholders hereunder, the Stockholders shall be deemed to be granted such more favorable rights and benefits and this Agreement shall be deemed amended or supplemented to the extent necessary to grant the Stockholders such more favorable rights and benefits. 7. Right of First Refusal to Significant Holders. The Company hereby grants to each Stockholder, the right of first refusal to purchase its pro rata share of New Securities (as defined in Section 7(a)) that the Company may, from time to time, propose to sell and issue after the date of this Agreement. A Stockholder's pro rata share, for purposes of this right of first refusal, is equal to the ratio of (a) the number of shares of Common Stock owned by such Stockholder immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise of all outstanding convertible securities, rights, options and warrants, directly or indirectly, into Common Stock held by said Stockholder) to (b) the total number of shares of Common Stock outstanding immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise of all outstanding convertible securities, rights, options and warrants, directly or indirectly, held by all of the Stockholders). (a) "New Securities" shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, exercisable or convertible into capital stock; provided that the term "New Securities" does not include: (i) the Shares, Warrant Shares and the Common Stock into which such Registrable Securities are convertible or exercisable into; (ii) shares of Common Stock and options, warrants or other rights to purchase Common Stock issued to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary pursuant to restricted stock purchase agreements, stock option plans or similar arrangements; (iii) shares of Common Stock issued upon the exercise or conversion of options or convertible securities outstanding as of the date of the filing the Certificate of Designation or upon the exercise or conversion of options or convertible securities referenced in the paragraph above; (iv) shares of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to the Certificate of Designation; (v) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board of Directors; (vi) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or commercial leasing transaction approved by the Board of Directors; (vii) shares of Common Stock issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors; (viii) shares of Common Stock issued or issuable in connection with sponsored research, collaboration, technology license, development, original equipment manufacturers, marketing or other similar agreements or strategic partnerships approved by the Board of Directors; (ix) shares of Common Stock issued or issuable to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors; provided, however, that the aggregate shares of Common Stock issued pursuant to subsections (vi)-(ix) shall not exceed three hundred thousand (300,000) shares (as adjusted for any stock dividends, combinations or splits with respect to such shares); and (x) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (x) above. (b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Stockholder written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Stockholder shall have ten (10) days after any such notice is mailed or delivered to agree to purchase such Stockholder's pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. (c) In the event the Stockholders fail to exercise fully the right of first refusal within said ten (10) day period (the "Election Period"), the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) to sell that portion of the New Securities with respect to which the Stockholder's right of first refusal option set forth in this Section 7 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company's notice to Stockholders delivered pursuant to Section 7(b). In the event the Company has not sold within such ninety (90) day period following the Election Period, or such ninety (90) day period following the date of said agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Stockholders in the manner provided in this Section 7. (d) The right of first refusal granted under this Agreement shall expire upon, and shall not be applicable at such time all Shares are converted into Common Stock. 8. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (A) if within domestic United States by nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one (1) business day after so mailed, (iii) if delivered by International Federal Express, two (2) business days after so mailed, (iv) if delivered by facsimile, upon electric confirmation of receipt and shall be delivered as addressed as follows: (a) if to the Company, to: Therma-Wave, Inc. 1250 Reliance Way Fremont, CA 94539 Attn: Chief Executive Officer Phone: 510-668-2200 Telecopy: 510-656-3852 (b) with a copy mailed to: Wilson Sonsini Goodrich & Rosati, PC 650 Page Mill Road Palo Alto, CA 94304 Attn: Matthew Sonsini Phone: 650-493-9300 Telecopy: 650-493-6811 (c) if to the Stockholder, at the Stockholder's address on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing. 9. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and Stockholders owning at least a majority of the Shares. 10. Reports Under the Exchange Act. With a view to making available to the Stockholders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Stockholder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall use all reasonable efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to any Stockholder, so long as the Stockholder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act, and the Exchange Act; (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; (iii) such other information as may be reasonably requested in availing any Stockholder of any rule or regulation of the SEC that permits the selling of any such securities without registration and (iv) undertake any additional actions reasonably necessary to maintain the availability of a registration statement, including any successor or substitute forms, or the use of Rule 144. 11. Transfer of Registration Rights. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Stockholder; provided that upon a Change of Control, this Agreement and all rights or obligations hereunder may be assigned by the Company only to the surviving entity without the prior written consent of the other party or parties. A Stockholder may assign and transfer its rights and obligations hereunder in connection with a transfer of Shares or Registrable Securities to any affiliate of such Stockholder, any entity advised by the same management company that advises such Stockholder, any entity that succeeds to all or substantially all of the asset of the Stockholder or any other party that purchases not less than five hundred thousand dollars ($500,000) of Shares or Registrable Securities (as valued as of the closing price immediately preceding the execution of a definitive purchase agreement with respect to such Shares or Registrable Securities), such assignment to be effective upon receipt by the Company of a written notice from the transferring Stockholder stating the name and address of any transferee and identifying the number of Shares or Registrable Securities with respect to which the rights under this Agreement are being transferred and the nature of the rights so transferred; provided such assignee or transferee agrees in writing to be bound by the provisions hereof that apply to such assigning or transferring Stockholder. Upon any such, and each successive, assignment or transfer to any permitted assignee or transferee in accordance with the terms of this Section 11, such permitted assignee or transferee shall be deemed to be a "Stockholder" for all purposes of this Agreement. 12. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 13. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without giving effect to the principles of conflicts of law. 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. [Signature Page Follows] [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first set forth above. THERMA-WAVE, INC. By:/s/Boris Lipkin ---------------------------------------- Name: Boris Lipkin Title: Chief Executive Officer STOCKHOLDERS: North Run Master Fund, LP By: North Run GP, LP, its General Partner By: North Run Advisors, LLC, its General Partner By: /s/ Thomas B. Ellis ----------------------------------------- Thomas B. Ellis, Member By: /s/ Todd B. Hammer ----------------------------------------- Todd B. Hammer, Member Address: North Run Capital, LP One International Place, Suite 2401 Boston, MA 02110 Deephaven Relative Value Equity Trading Ltd. By: /s/ Colin Smith --------------------------------------- Name: Colin Smith Title: CEO Deephaven Long Short Equity Trading Ltd. By: /s/ Colin Smith ---------------------------------------- Name: Colin Smith Title: CEO Address: Deephaven Capital Management LLC 130 Cheshire Lane, Suite 102 Minnetonka, MN 55305 EX-99.4 5 warranttopurchasedls.txt WARRANT TO PURCHASE - LS FUND THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR WITH ANY STATE SECURITY COMMISSION, AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE ABSENSE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER THE ACT AND APPLICABLE STATE LAWS AND RULES, OR, UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION OF THE ACT AND OTHER APPLICABLE STATE LAWS AND RULES. WARRANT TO PURCHASE COMMON STOCK OF THERMA-WAVE, INC. November 22, 2005 This is to certify that, FOR VALUE RECEIVED, Deephaven Long Short Equity Trading Ltd. or assigns ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from Therma-Wave, Inc., a Delaware corporation ("Company"), One Hundred Fifty Thousand (150,000) fully paid, validly issued and nonassessable shares of Common Stock of the Company ("Common Stock") at a price of $1.55 per share (as adjusted from time to time in accordance with the terms hereof, the "Exercise Price") at any time or from time to time during the period from May 22, 2006 through November 22, 2010, provided, however, if either such day is a day on which banking institutions in the State of California are authorized by law to close, then on the next succeeding day which shall not be such a day (the "Exercise Period") upon 61 days prior written notice or upon a Change of Control (as defined below) occurring during the Exercise Period. This Warrant is one of a series of warrants (collectively, the "Warrants") originally issued in connection with a private placement of the Company's common stock pursuant to a Stock Purchase Agreement dated November 18, 2005 (the "Purchase Agreement"). The number of shares of Common Stock to be received upon the exercise of the Warrants and the Exercise Price may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares". (a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time during the Exercise Period by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form, and the date such items are received by the Company is an "Exercise Date." The Holder shall pay the Exercise Price (i) in cash, by certified bank check payable to the order of the Company or by wire transfer of immediately available funds in accordance with the Company's instructions or (ii) if the Current Market Value (as defined below) exceeds the Exercise Price, by means of a "cashless exercise", by presenting and surrendering to the Company this Warrant, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y [(A-B)/A] where: X = the number of Warrant Shares to be issued to the Holder upon such cashless exercise; Y = the number of Warrant Shares with respect to which this Warrant is being exercised; A = the Current Market Value on the Exercise Date; and B = the Exercise Price. As soon as practicable after each such exercise of the warrants, and in any event within three (3) business days thereafter, the Company shall issue and deliver to the Holder a certificate or certificate for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (b) RESERVATION OF SHARES. The Company shall at all times reserve, and keep available, solely for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. (c) PAYMENT OF TAXES AND EXPENSES. The Company and Holder shall each pay one-half of any recording, filing, stamp or similar tax which may be payable in respect of any transfer involved in the issuance of, and the preparation and delivery of certificates (if applicable) representing, (i) any Warrant Shares purchased upon exercise of this Warrant and/or (ii) new or replacement warrants in the Holder's name or the name of any transferee of all or any portion of this Warrant. (d) FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the "Current Market Value" of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the Current Market Value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or market; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the Current Market Value shall be the closing price for such day on such market and if the Common Stock is not so traded, the Current Market Value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the Current Market Value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company (the "Board"). (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ADJUSTMENT PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (3) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) and (2) above. (4) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (5) The Exercise Price may be adjusted from time to time in the same manner in which adjustments are made to the Conversion Price (as defined in the Certificate of Designation) in accordance with Section 6C of the Certificate of Designation of Rights, Preferences and Privileges of the Series B Convertible Preferred Stock (the "Certificate of Designation"); provided, however, that in no event shall the Exercise Price be reduced below $1.40 (as adjusted for any stock dividends, combinations, reclassifications or splits). (6) Upon the occurrence of each adjustment pursuant to this Section (f), the Company will promptly deliver to the Holder a certificate executed by the Company's Chief Financial Officer setting forth, in reasonable detail, the event requiring such adjustment and the method by which such adjustment was calculated, the adjusted Exercise Price and the adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable). The Company will retain at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of the Warrant designated by the Holder. (g) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (g) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (h) REGISTRATION RIGHTS. The holders of the Warrants and the Warrant shares or their transferees shall have the registration rights set forth in the Registration Rights Agreement dated November 22, 2005 between the Company and each of the signatories to the Purchase Agreement. (i) REDEMPTION. In the event of a Change of Control (as defined below) during the period between the date of issuance of this Warrant and the expiration of the Exercise Period, prior to such Change of Control, the Company shall give fifteen (15) days prior written notice of such Change of Control describing in reasonable detail the material terms and anticipated date of consummation thereof to the Holder. The Holder may, upon five (5) days prior written notice at any time thereafter but prior to the Change of Control, at his or her option, require the Company to repurchase for cash this Warrant, at the election of the Holder (i) for the amount the Holder would have received in a complete liquidation occurring immediately prior to the Change of Control of the Company pursuant to the terms of the Company's Certificate of Incorporation, had this Warrant been exercised by means of a "cashless exercise" pursuant to Section (a) immediately prior to such liquidation or (ii) the amount the Holder would have received if the Holder was permitted to exercise the Warrant by means of a "cashless exercise" pursuant to Section ( a) immediately prior to the Change of Control. If the Change of Control is a transaction in which the Common Stock of the Company is being sold for stock or securities of another entity, the Holder may elect to receive such stock or securities in lieu of cash; provided, however, under no circumstances may such Holder elect to receive voting securities in the Company Any payment of consideration under this Section (i) shall be contingent upon the actual closing of the Change of Control transaction. For purposes of this Section (i) and Section (j), "Change of Control" shall mean any of the events described below: (1) The occurrence of any event that would, if known to the Company's management, be required to be reported by the Company under Item 5.01(a) of Form 8-K pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); or (2) The acquisition or receipt, in any manner, by any person (as defined for purposes of the Exchange Act) or any group of persons acting in concert, of direct or indirect beneficial ownership (as defined for purposes of the Exchange Act) of fifty percent (50%) or more of the combined voting securities ordinarily having the right to vote for the election of directors of the Company; provided that the following shall not constitute a Change of Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company or any of its affiliates, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates; or (3) A change in the constituency of the Board with the result that individuals (the "Incumbent Directors") who are members of the Board as of the date of this Warrant cease for any reason to constitute at least a majority of the Board; provided that any individual who is elected to the Board after the date of this Warrant and whose nomination for election was unanimously approved by the Incumbent Directors shall be considered an Incumbent Director beginning on the date of his or her election to the Board; or (4) Consummation of a merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or parent thereof) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger, consolidation or reorganization; or (5) A complete liquidation or dissolution of the Company; (6) A sale, exchange or other disposition or transfer of all or substantially all of the Company's business or assets, other than pursuant to a spin-off or comparable transaction in which the transferee is controlled by the Company or its existing stockholders immediately prior to such transfer; or (7) execution of a binding agreement with respect to a transaction that, if completed, would constitute or result in a Change of Control. (j) TERMINATION OF WARRANT. In addition to the termination of this Warrant pursuant to the second paragraph of Section (i) hereof, this Warrant shall expire and shall no longer be exercisable on 5:00 p.m., California local time, on November 22, 2010; provided, however, if either such day is a day on which banking institutions in the State of California are authorized by law to close, then on the next succeeding day which shall not be such a day. (k) MODIFICATIONS AND WAIVERS. The provisions of this Warrant may from time to time be amended, modified or waived, if such amendment, modification or waiver is applicable to all of the Warrants and is in writing and consented to by the Company and the holders of at least a majority of the outstanding Warrants and Warrant Shares. Any such amendment, modification or waiver shall be binding upon the holder of this Warrant (and any assignee thereof) regardless of whether the Holder consented to such amendment, modification or waiver; provided that nothing shall prevent the Company and a registered holder from consenting to amendments and modifications to this Warrant which affect or are applicable to such registered holder only. (l) ASSIGNMENT. Holder may sell, transfer or assign this Warrant without the prior written consent of the Company. (m) GOVERNING LAW. This Warrant shall be governed by and construed under the laws of the State of Delaware (without giving effect to any conflicts or choice of law provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction). (n) NOTICES. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be mailed by a nationally recognized courier service or delivered (in person or by facsimile), against receipt to the party to whom such notice or other communication is to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement entered into by the Holder and the Company. Any notice or other communication given by means permitted by this Section (n) shall be deemed given at the time of receipt thereof. (o) NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, sale or other transfer of any of its assets or properties, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder hereunder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor on such exercise, (b) will take all action that may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) will not close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. (p) SEVERABILITY. In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. (q) SECURITIES LAWS. Upon any issuance of Warrant Shares upon exercise of this Warrant, the Company will be required to comply with the requirements of (1) the Securities Act, (2) the Exchange Act, as amended, (3) any applicable listing requirements of any national securities exchange, (4) any state securities regulation or "Blue Sky" laws, and (5) requirements under any other law or regulation applicable to the issuance or transfer of such shares. If required by the Company, in connection with each issuance of Warrant Shares upon exercise of this Warrant, the Holder will give (x) assurances in writing, satisfactory to the Company, that such shares are not being purchased with a view to the distribution thereof in violation of applicable laws, (y) sufficient representations, warranties and information, in writing, to enable the Company to rely on exemptions from the registration or qualification requirements of applicable laws, if available, with respect to such exercise, and (z) the Holder's cooperation to the Company in connection with such compliance. THERMA-WAVE, INC. By: ------------------------------------------ Name: Joseph Passarello Title: Chief Financial Officer and Secretary [SIGNATURE PAGE TO WARRANT FOR DEEPHAVEN LONG SHORT EQUITY TRADING] PURCHASE FORM Dated -------------------------------------- The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of $ in payment of the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name ------------------------------------------------ (Please typewrite or print in block letters) Address ------------------------------------ Signature ------------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, ----------------------------------------- hereby sells, assigns and transfers unto Name ------------------------------------------------ (Please typewrite or print in block letters) Address ------------------------------------ the right to purchase Common Stock represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date ------------------------------------------------ Signature -------------------------------------------- EX-99.5 6 warranttopurchasedrv.txt WARRANT TO PURCHASE - RV FUND THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR WITH ANY STATE SECURITY COMMISSION, AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE ABSENSE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER THE ACT AND APPLICABLE STATE LAWS AND RULES, OR, UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION OF THE ACT AND OTHER APPLICABLE STATE LAWS AND RULES. WARRANT TO PURCHASE COMMON STOCK OF THERMA-WAVE, INC. November 22, 2005 This is to certify that, FOR VALUE RECEIVED, Deephaven Relative Value Equity Trading Ltd. or assigns ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from Therma-Wave, Inc., a Delaware corporation ("Company"), Six Hundred Thirty Thousand (630,000) fully paid, validly issued and nonassessable shares of Common Stock of the Company ("Common Stock") at a price of $1.55 per share (as adjusted from time to time in accordance with the terms hereof, the "Exercise Price") at any time or from time to time during the period from May 22, 2006 through November 22, 2010, provided, however, if either such day is a day on which banking institutions in the State of California are authorized by law to close, then on the next succeeding day which shall not be such a day (the "Exercise Period") upon 61 days prior written notice or upon a Change of Control (as defined below) occurring during the Exercise Period. This Warrant is one of a series of warrants (collectively, the "Warrants") originally issued in connection with a private placement of the Company's common stock pursuant to a Stock Purchase Agreement dated November 18, 2005 (the "Purchase Agreement"). The number of shares of Common Stock to be received upon the exercise of the Warrants and the Exercise Price may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares". (a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time during the Exercise Period by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form, and the date such items are received by the Company is an "Exercise Date." The Holder shall pay the Exercise Price (i) in cash, by certified bank check payable to the order of the Company or by wire transfer of immediately available funds in accordance with the Company's instructions or (ii) if the Current Market Value (as defined below) exceeds the Exercise Price, by means of a "cashless exercise", by presenting and surrendering to the Company this Warrant, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y [(A-B)/A] where: X = the number of Warrant Shares to be issued to the Holder upon such cashless exercise; Y = the number of Warrant Shares with respect to which this Warrant is being exercised; A = the Current Market Value on the Exercise Date; and B = the Exercise Price. As soon as practicable after each such exercise of the warrants, and in any event within three (3) business days thereafter, the Company shall issue and deliver to the Holder a certificate or certificate for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (b) RESERVATION OF SHARES. The Company shall at all times reserve, and keep available, solely for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. (c) PAYMENT OF TAXES AND EXPENSES. The Company and Holder shall each pay one-half of any recording, filing, stamp or similar tax which may be payable in respect of any transfer involved in the issuance of, and the preparation and delivery of certificates (if applicable) representing, (i) any Warrant Shares purchased upon exercise of this Warrant and/or (ii) new or replacement warrants in the Holder's name or the name of any transferee of all or any portion of this Warrant. (d) FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the "Current Market Value" of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the Current Market Value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or market; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market, the Current Market Value shall be the closing price for such day on such market and if the Common Stock is not so traded, the Current Market Value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the Current Market Value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company (the "Board"). (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ADJUSTMENT PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (3) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) and (2) above. (4) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (5) The Exercise Price may be adjusted from time to time in the same manner in which adjustments are made to the Conversion Price (as defined in the Certificate of Designation) in accordance with Section 6C of the Certificate of Designation of Rights, Preferences and Privileges of the Series B Convertible Preferred Stock (the "Certificate of Designation"); provided, however, that in no event shall the Exercise Price be reduced below $1.40 (as adjusted for any stock dividends, combinations, reclassifications or splits). (6) Upon the occurrence of each adjustment pursuant to this Section (f), the Company will promptly deliver to the Holder a certificate executed by the Company's Chief Financial Officer setting forth, in reasonable detail, the event requiring such adjustment and the method by which such adjustment was calculated, the adjusted Exercise Price and the adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable). The Company will retain at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of the Warrant designated by the Holder. (g) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (g) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (h) REGISTRATION RIGHTS. The holders of the Warrants and the Warrant Shares or their transferees shall have the registration rights set forth in the Registration Rights Agreement dated November 22, 2005 between the Company and each of the signatories to the Purchase Agreement. (i) REDEMPTION. In the event of a Change of Control (as defined below) during the period between the date of issuance of this Warrant and the expiration of the Exercise Period, prior to such Change of Control, the Company shall give fifteen (15) days prior written notice of such Change of Control describing in reasonable detail the material terms and anticipated date of consummation thereof to the Holder. The Holder may, upon five (5) days prior written notice at any time thereafter but prior to the Change of Control, at his or her option, require the Company to repurchase for cash this Warrant, at the election of the Holder (i) for the amount the Holder would have received in a complete liquidation occurring immediately prior to the Change of Control of the Company pursuant to the terms of the Company's Certificate of Incorporation, had this Warrant been exercised by means of a "cashless exercise" pursuant to Section (a) immediately prior to such liquidation or (ii) the amount the Holder would have received if the Holder was permitted to exercise the Warrant by means of a "cashless exercise" pursuant to Section (a) immediately prior to the Change of Control. If the Change of Control is a transaction in which the Common Stock of the Company is being sold for stock or securities of another entity, the Holder may elect to receive such stock or securities in lieu of cash; provided, however, under no circumstances may such Holder elect to receive voting securities in the Company Any payment of consideration under this Section (i) shall be contingent upon the actual closing of the Change of Control transaction. For purposes of this Section (i) and Section (j), "Change of Control" shall mean any of the events described below: (1) The occurrence of any event that would, if known to the Company's management, be required to be reported by the Company under Item 5.01(a) of Form 8-K pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); or (2) The acquisition or receipt, in any manner, by any person (as defined for purposes of the Exchange Act) or any group of persons acting in concert, of direct or indirect beneficial ownership (as defined for purposes of the Exchange Act) of fifty percent (50%) or more of the combined voting securities ordinarily having the right to vote for the election of directors of the Company; provided that the following shall not constitute a Change of Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company or any of its affiliates, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates; or (3) A change in the constituency of the Board with the result that individuals (the "Incumbent Directors") who are members of the Board as of the date of this Warrant cease for any reason to constitute at least a majority of the Board; provided that any individual who is elected to the Board after the date of this Warrant and whose nomination for election was unanimously approved by the Incumbent Directors shall be considered an Incumbent Director beginning on the date of his or her election to the Board; or (4) Consummation of a merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or parent thereof) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger, consolidation or reorganization; or (5) A complete liquidation or dissolution of the Company; (6) A sale, exchange or other disposition or transfer of all or substantially all of the Company's business or assets, other than pursuant to a spin-off or comparable transaction in which the transferee is controlled by the Company or its existing stockholders immediately prior to such transfer; or (7) execution of a binding agreement with respect to a transaction that, if completed, would constitute or result in a Change of Control. (j) TERMINATION OF WARRANT. In addition to the termination of this Warrant pursuant to the second paragraph of Section (i) hereof, this Warrant shall expire and shall no longer be exercisable on 5:00 p.m., California local time, on November 22, 2010; provided, however, if either such day is a day on which banking institutions in the State of California are authorized by law to close, then on the next succeeding day which shall not be such a day. (k) MODIFICATIONS AND WAIVERS. The provisions of this Warrant may from time to time be amended, modified or waived, if such amendment, modification or waiver is applicable to all of the Warrants and is in writing and consented to by the Company and the holders of at least a majority of the outstanding Warrants and Warrant Shares. Any such amendment, modification or waiver shall be binding upon the holder of this Warrant (and any assignee thereof) regardless of whether the Holder consented to such amendment, modification or waiver; provided that nothing shall prevent the Company and a registered holder from consenting to amendments and modifications to this Warrant which affect or are applicable to such registered holder only. (l) ASSIGNMENT. Holder may sell, transfer or assign this Warrant without the prior written consent of the Company. (m) GOVERNING LAW. This Warrant shall be governed by and construed under the laws of the State of Delaware (without giving effect to any conflicts or choice of law provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction). (n) NOTICES. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be mailed by a nationally recognized courier service or delivered (in person or by facsimile), against receipt to the party to whom such notice or other communication is to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement entered into by the Holder and the Company. Any notice or other communication given by means permitted by this Section (n) shall be deemed given at the time of receipt thereof. (o) NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, sale or other transfer of any of its assets or properties, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder hereunder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor on such exercise, (b) will take all action that may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) will not close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. (p) SEVERABILITY. In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. (q) SECURITIES LAWS. Upon any issuance of Warrant Shares upon exercise of this Warrant, the Company will be required to comply with the requirements of (1) the Securities Act, (2) the Exchange Act, as amended, (3) any applicable listing requirements of any national securities exchange, (4) any state securities regulation or "Blue Sky" laws, and (5) requirements under any other law or regulation applicable to the issuance or transfer of such shares. If required by the Company, in connection with each issuance of Warrant Shares upon exercise of this Warrant, the Holder will give (x) assurances in writing, satisfactory to the Company, that such shares are not being purchased with a view to the distribution thereof in violation of applicable laws, (y) sufficient representations, warranties and information, in writing, to enable the Company to rely on exemptions from the registration or qualification requirements of applicable laws, if available, with respect to such exercise, and (z) the Holder's cooperation to the Company in connection with such compliance. THERMA-WAVE, INC. By: ---------------------------------------- Name: Joseph Passarello ---------------------------------------- Title: Chief Financial Officer and Secretary ---------------------------------------- [SIGNATURE PAGE TO WARRANT FOR DEEPHAVEN RELATIVE VALUE EQUITY TRADING] PURCHASE FORM Dated -------------------------------------- The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of $ in payment of the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name ------------------------------------------------ (Please typewrite or print in block letters) Address ------------------------------------ Signature ------------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, -------------------------------------------------- hereby sells, assigns and transfers unto Name ------------------------------------------------ (Please typewrite or print in block letters) Address ------------------------------------ the right to purchase Common Stock represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date ------------------------------------------------ Signature -------------------------------------------- EX-99.6 7 certofdesignation.txt CERTIFICATE OF DESIGNATION CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES B CONVERTIBLE PREFERRED STOCK OF THERMA-WAVE, INC. The undersigned, Boris Lipkin and Joseph Passarello, do hereby certify: 1. That they are the duly elected and acting Chief Executive Officer and Secretary, respectively, of Therma-Wave, Inc., a Delaware corporation (the "Corporation"). 2. That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors on November 18, 2005 adopted the following resolution creating a series of ten thousand four hundred (10,400) shares of Preferred Stock designated as "Series B Convertible Preferred Stock": "RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock of the Corporation and does hereby fix and herein state and express the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of such series of Preferred Stock as follows: 1. Designation and Amount. The shares of such series shall be designated as "Series B Convertible Preferred Stock." The Series B Convertible Preferred Stock (the "Series B Preferred") shall have a par value of $0.01 per share, and the number of authorized shares constituting such series shall be ten thousand four hundred (10,400). 2. Dividends and Distributions. 2A. The holders of shares of Series B Preferred, prior and in preference to the Series A Convertible Preferred Stock (the "Series A Preferred") and to the Common Stock, shall be entitled to receive, out of funds legally available for the purpose, quarterly dividends (whether or not earned or declared) payable in cash on the fifth business day following the end of each fiscal quarter of the Corporation (each such date being referred to herein as a "Quarterly Dividend Payment Date") at a rate of six percent (6%) per annum (the "Dividend Rate") of the Liquidation Value (as defined below) thereof. 2B. Dividends shall accrue daily on outstanding shares of Series B Preferred beginning from the date of the original issuance of such Series B Preferred. Dividends shall not compound; provided, that if the Corporation fails to pay such dividends as required, then accrued but unpaid dividends shall bear interest at a rate of six percent (6%) per annum compounding daily. Dividends paid on the shares of Series B Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors shall fix a record date for the determination of holders of shares of Series B Preferred entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof. Such dividends shall accrue on a daily basis whether or not they have been declared. 2C. In the event dividends are paid on any shares of Common Stock, the Corporation shall pay an additional dividend on all outstanding shares of Series B Preferred in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock. 3. Voting Rights. 3A. Except as otherwise provided in Section 3B, Section 3C or as required by law, each holder of shares of Series B Preferred shall be entitled to one vote per share for each share of Common Stock into which such shares of Series B Preferred could be converted pursuant to Section 6 hereof (rounded to the nearest whole share) immediately prior to the close of business on the record date fixed for such meeting or the effective date of such written consent and shall have full voting rights and powers equal (except as described previously in this sentence) to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders' meeting (the "Stockholders' Meeting Notice") in accordance with the Bylaws of the Corporation. Notwithstanding the foregoing, in no event shall a share of Series B Preferred be entitled to more than that number of votes per share of Series B Preferred that is equal to the Liquidation Value (as defined below) divided by one dollar forty cents ($1.40)(as adjusted for any stock dividends, combinations or splits). Except as otherwise provided in Section 3B, or as required by law, the Series B Preferred shall vote together with the Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the Common Stock. The voting rights specified in this Section 3 are in addition to, and are not intended to limit in any respect, the voting rights of holders of shares of the Series B Preferred under the General Corporation Law of the State of Delaware. 3B. For so long as any shares of Series B Preferred remain outstanding, in addition to any other vote or consent required herein, the Certificate of Incorporation or by law, the vote or written consent of the holders of a majority of the outstanding shares of Series B Preferred shall be necessary for effecting or validating the following actions taken by either the Corporation or any subsidiary: (i) Any authorization or any designation, whether by reclassification, merger, consolidation, reorganization or otherwise, of any new class or series of stock or any other securities convertible into or exchangeable or exercisable for equity securities of the Corporation ranking on a parity with or senior to the Series B Preferred; (ii) Any issuance of shares of Series A Preferred, additional shares of Series B Preferred or any other series of preferred stock, including securities convertible into or exchangeable or exercisable for Series A Preferred, Series B Preferred, or any other series of preferred stock; (iii) Any alteration, amendment or repeal of any provision of the Certificate of Incorporation, this Certificate of Designation or the Bylaws of the Corporation (including amendment effected by merger, consolidation, reorganization or otherwise), that alters or changes the voting or other powers, preferences, or other special rights, privileges or restrictions of the Series B Preferred or otherwise adversely effects the holders of Series B Preferred; (iv) Any declaration of dividends or other distributions with respect to the Series A Preferred, Common Stock, or any other security ranking junior to the Series B Preferred; (v) Any redemption, repurchase or other acquisition of any shares of capital stock if such redemption, repurchase or acquisition would constitute receipt of cash or property for purposes of Section 305(b)(2) of the Internal Revenue Code; (except for acquisitions of Common Stock by the Corporation (i) pursuant to agreements with service providers (including employees) that permit the Corporation to repurchase such shares upon termination of the provision of services to the Corporation; (ii) in exercise of the Corporation's repurchase option or right of first refusal on such shares; or (iii) approved by the Corporation's Board of Directors, including the approval of each of the representatives of the Series B Preferred); (vi) Any issuance of debt convertible into Common Stock or issuance of any Preferred Stock (other than Preferred Stock that constitutes Common Stock for the purposes of United States federal income taxes); (vii) Any incurrence, directly or indirectly through any of its subsidiaries, of indebtedness or capital lease financing in excess of $5,000,000 in aggregate principal amount at any time outstanding, other than accounts payable to suppliers or other liabilities incurred in the ordinary course of business; and (vi) Any payment or declaration of any dividend or making of any other distribution on any share of capital stock or other security or interest in the Corporation other than the Series B Preferred if the effect of such dividend or distribution could reasonably be expected to (i) cause the right to receive the Liquidation Value to result in, (ii) cause an increase in the Liquidation Value to be, (iii) cause the conversion of the Series B Preferred into Common Stock to be or (iv) make an adjustment of the Conversion Rate a taxable event to the holders of the Series B Preferred. 3C. For so long as at least one thousand eighty (1,080) shares of Series B Preferred remain outstanding (as adjusted for any stock dividends, combinations or splits with respect to such shares) and prior to the second anniversary of the initial issuance of the Series B Preferred, in addition to any other vote or consent required herein, the Certificate of Incorporation or by law, the vote or written consent of the holders of a majority of the outstanding shares of Series B Preferred shall be necessary for effecting or validating the following actions taken by either the Corporation or any subsidiary: (i) Any Dilutive Issuance (as defined below) that will have the effect of adjusting the Conversion Price (as defined below) below one dollar forty cents ($1.40)(as adjusted for any stock dividends, combinations or splits) pursuant to the provisions of Section 6D hereof but without giving effect to any limitation on conversion price adjustment contained in Section 6D hereof. 4. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation (whether voluntary or involuntary), each holder of Series B Preferred shall be entitled to be paid, before any distribution or payment is made upon, and in preference to, any Common Stock and Series A Preferred, but after the payment of outstanding debt, an amount in cash equal to the greater of (a) the aggregate Liquidation Value of all Shares held by such holder (plus all accrued and unpaid dividends thereon, which for all purposes hereof shall include dividends that have accrued since the last Quarterly Dividend Payment Date up to and including the date of all payment of such preferential amount that shall be tendered with respect to such shares of Series B Preferred in connection with such liquidation, dissolution or winding up) and (b) the amount that such holder would have received had such holder converted such Series B Preferred into shares of Common Stock immediately prior to such liquidation, dissolution or winding up, and upon timely payment in full of such amount the holders of Series B Preferred shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation the Corporation's assets to be distributed among the holders of the Series B Preferred are insufficient to permit payment to such holders of the aggregate amount that they are entitled to be paid under this Section 4, then the entire assets available to be distributed to the Corporation's stockholders shall be distributed pro rata among such holders based upon the aggregate liquidation preference of the Series B Preferred held by each such holder. Not less than ten (10) days prior to the payment date stated therein, the Corporation shall mail written notice of any such liquidation, dissolution or winding up to each record holder of Series B Preferred, setting forth in reasonable detail the amount of proceeds to be paid with respect to each share of Series B Preferred. A sale of all or substantially all of the assets of the Corporation shall be deemed a liquidation for the purposes of this section. An acquisition of the Corporation by another person or entity by means of any transaction or series of transactions (including any reorganization, merger, consolidation or share transfer), whether or not the Corporation is a party thereto, where the stockholders of the Corporation immediately preceding such transaction own, following such transaction, securities representing less than 50% of the voting power of the surviving or acquiring corporation (a "Change of Control") shall not be deemed a liquidation but shall give rise to the right of redemption set forth under Section 5C herein. 5. Redemptions. 5A. Scheduled Redemption. On the earlier of (x) the fifth anniversary of the date of the initial issuance of the Series B Preferred and (y) receipt of an Investor Redemption Notice (as defined in Section 6D), the Corporation shall redeem any and all outstanding shares of Series B Preferred at a price per hare equal to the Liquidation Value thereof (plus accrued and unpaid dividends thereon, which for all purposes hereof shall include dividends that have accrued since the last Quarterly Dividend Payment Date up to and including the Redemption Date (as defined below) (the "Redemption Price"). The number of shares of Series B Preferred to be redeemed from each holder thereof in redemptions hereunder shall be the number of shares determined by multiplying the total number of shares of Series B Preferred to be redeemed times a fraction, the numerator of which shall be the total number of shares of Series B Preferred then held by such holder and the denominator of which shall be the total number of shares of Series B Preferred then outstanding. 5B. Optional Redemption. Beginning on the twenty-four (24)-month anniversary of the date of the initial issuance of the Series B Preferred, if the Trading Price (as defined below) equals or exceeds the price that is equal to two hundred percent (200%) of the then current Conversion Price (as defined herein) for a period of twenty (20) consecutive trading days (the "Optional Redemption Triggering Event"), the Corporation may within ten (10) days of the Optional Redemption Triggering Event, at its election, provide each holder of Series B Preferred written notice ("Optional Redemption Notice") of its intention to redeem for cash all shares of Series B Preferred for an amount equal to the Redemption Price, with such notice specifying a redemption date ("Optional Redemption Date") that is not less twenty (20) days but not more than thirty (30) days after the date of mailing of the Option Redemption Notice. Each holder of Series B Preferred to be so redeemed may, in lieu of redemption, convert such holder's shares of Series B Preferred in whole or in part into shares of Common Stock (without regard to the written notice provisions of Section 6A) upon furnishing written notice to the Corporation not less than five (5) days prior to the Optional Redemption Date. For purposes of this Section 5B, "Trading Price" shall mean the closing price of the Corporation's shares quoted on the Nasdaq Stock Market or, if such shares are not traded on the Nasdaq Stock Market, the closing price quoted on any exchange on which the shares are listed, as published in the Western Edition of The Wall Street Journal. The number of shares of Series B Preferred to be redeemed from each holder thereof in redemptions hereunder shall be the number of shares determined by multiplying the total number of shares of Series B Preferred to be redeemed times a fraction, the numerator of which shall be the total number of shares of Series B Preferred then held by such holder and the denominator of which shall be the total number of shares of Series B Preferred then outstanding. 5C. Special Redemptions. For so long as any share of Series B Preferred remains outstanding, the Corporation shall give written notice (the "Change of Control Notice") to each holder of Series B Preferred at least ten (10) days prior to a Change of Control which notice shall describe in reasonable detail the material terms and anticipated date of consummation thereof. Each holder of Series B Preferred then outstanding may require the Corporation to redeem such holder's outstanding shares of Series B Preferred at a price per share equal to the greater of (a) Redemption Price and (b) the amount such holder of Series B Preferred would have received in a liquidation of the Corporation had they converted such shares into shares of Common Stock immediately prior to such liquidation by giving written notice to the Corporation of such election within five days of such holder's or holders' receipt of the Change of Control Notice (the "Expiration Date"). Upon receipt of such election, the Corporation shall be obligated to redeem the outstanding shares of Series B Preferred immediately prior to the Change of Control. If any proposed Change of Control does not occur within sixty (60) days of the date of the Change in Control Notice, all requests for redemption in connection therewith shall be automatically rescinded. 5D. Redemption Payments. For each share of Series B Preferred that is to be redeemed hereunder, the Corporation shall be obligated on the Redemption Date (as defined below) to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such share of Series B Preferred) an amount in cash equal to the Redemption Price. If the funds of the Corporation legally available for redemption of shares of Series B Preferred on any Redemption Date are insufficient to redeem the total number of shares to be redeemed on such date, those funds that are legally available shall be used to redeem the maximum possible number of shares pro rata among the holders of the shares to be redeemed based upon the aggregate Redemption Price of such shares held by each such holder. At any time thereafter when additional funds of the Corporation are legally available for the redemption of the shares of Series B Preferred, such funds shall be used, as soon as practicable thereafter (and in any event within five business days), to redeem the balance of the shares that the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. In addition, any redemption of Series B Preferred shall be made out of any surplus or any capital whether or not a reduction of capital is thereby involved, and the Corporation shall take all necessary action to effect a reduction of capital if such reduction is necessary to provide funds legally available for any required redemption of Series B Preferred. The term "Redemption Date" shall mean the date specified in the notice of any redemption at the Corporation's option or at the holder's option or the applicable date specified herein in the case of any other redemption; provided, however, that no such date shall be a Redemption Date unless the Redemption Price of such share of Series B Preferred is actually paid in full on such date, and if not so paid in full, the Redemption Date shall be the date on which such amount is fully paid. 5E. Notice of Redemption. Except as otherwise provided herein, the Corporation shall deliver written notice (by a nationally recognized courier service such as Federal Express for next business day delivery) of each redemption of any Series B Preferred (other than a redemption at the request of a holder or holders of Series B Preferred) to each record holder thereof not more than sixty (60) nor less than thirty (30) days prior to the date on which such redemption is to be made. In case fewer than the total number of shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed shares shall be issued to the holder thereof without cost to such holder within five business days after surrender of the certificate representing the redeemed Shares. 5F. Dividends After Redemption Date. No share of Series B Preferred shall be entitled to any dividends accruing after the date on which the Redemption Price is paid to the holder of such share. On such date, all rights of the holder of such share of Series B Preferred shall cease, and such share shall no longer be deemed to be issued and outstanding. 5G. Redeemed or Otherwise Acquired Shares. Any shares of Series B Preferred that are redeemed or otherwise acquired by the Corporation shall be canceled and retired to authorized but unissued shares and shall not be reissued, sold or transferred. 5H. Partial Redemptions. Notwithstanding anything to the contrary contained herein, any redemption by the Corporation of less then all of the shares of Series B Preferred then held by each holder must be a number of shares of Series B Preferred sufficient, in the good faith opinion of counsel to the holder, to be treated as a distribution in exchange for stock (and not as a dividend) under Section 302 of the Internal Revenue Code of 1986, as amended (or any comparable successor provision), as to such holder. 6. Conversion. The holders of Series B Preferred shall be convertible into Common Stock as follows: Right to Convert. Each share of Series B Preferred shall be convertible, at the option of the holder thereof, upon sixty-one (61) days prior written notice or upon five (5) days prior written notice following receipt of a Change of Control Notice, Optional Redemption Notice, or Stockholders' Meeting Notice of any meeting to approve a Change of Control (which notice shall be provided at least ten (10) days prior to the record date to be established for such Meeting), into that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Liquidation Value by the Conversion Price for the Series B Preferred; provided, however, a holder of shares of Series B Preferred who called for a special meeting of the stockholders shall not be entitled to convert their shares of Series B Preferred upon receipt of a Stockholders' Meeting Notice. The number of shares of Common Stock into which each share of Series B Preferred may be converted is hereinafter referred to as the "Conversion Rate." Upon any decrease or increase in the Conversion Price, as described in this Section 6, the Conversion Rate for such series shall be appropriately increased or decreased. The initial "Conversion Price" of any shares of Series B Preferred shall be one dollar fifty-five cents ($1.55). The initial "Liquidation Value" of any share of Series B Preferred will be equal to $1,000. Liquidation Value for the purposes of this paragraph and Section 3 shall include accrued and unpaid dividends to the extent doing so will not (x) result in more than seven million three hundred seventy-three thousand five hundred (7,373,500) shares of Common Stock being issued in aggregate upon conversion of the Series B Preferred and (y) with respect to any holder, result in such holder owning, solely as a result of such dividend amount (together with its affiliates and assuming the exercise or conversion of all derivative securities held by such holder and its affiliates) more than twenty percent (20%) of the Corporation's outstanding voting securities. 6A. Mechanics of Conversion. Any dividends excluded by operation of Section 0 above shall remain payable by the Corporation in cash as required by Section 2B and shall be paid prior to any other cash distribution or dividend on the capital stock of the Corporation. No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock. For such purpose, all shares of Series B Preferred held by each holder of Series B Preferred Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. Before any holder of Series B Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, he shall either (A) surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series B Preferred or (B) notify the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written notice to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable after such delivery, issue and deliver at such office to such holder of Series B Preferred, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Series B Preferred. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date; provided, however, that if the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act of 1933 or a merger, sale, financing, or liquidation of the Corporation or other event, the conversion may, at the option of any holder tendering Series B Preferred for conversion, be conditioned upon the closing of such transaction or upon the occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the Series B Preferred shall not be deemed to have converted such Series B Preferred until immediately prior to the closing of such transaction or the occurrence of such event. The Corporation covenants that it will at all times reserve and keep available, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of the Series B Preferred as herein provided, free from preemptive rights or any other actual or contingent purchase rights of persons other than the holders of shares of the Series B Preferred, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of the Series B Preferred. The Company covenants that all shares of Common Stock that shall be so issuable shall upon issuance as provided herein be duly and validly issued and fully paid and nonassessable. 6B. Adjustments to Conversion Price for Diluting Issues. (i) Special Definition. For purposes of this paragraph 6B, "Additional Shares of Common" shall mean all shares of Common Stock issued (or, pursuant to paragraph 6B(iii)deemed to be issued) by the Corporation after the filing of this Certificate of Designation, other than issuances or deemed issuances of: (1) shares of Common Stock issued pursuant to the Corporation's employee stock purchase plan and equity incentive plan (2) Common Stock and options, warrants or other rights exercisable at or above fair market value (as determined by the Corporation's board of directors) to purchase Common Stock issued to employees, officers or directors of, or consultants or advisors to the Corporation or any subsidiary pursuant to restricted stock purchase agreements, stock option plans or similar arrangements; (3) shares of Common Stock issued upon the exercise or conversion of options or convertible securities outstanding as of the date of the filing of this Certificate of Designation or upon the exercise or conversion of options or convertible securities referenced in the paragraph above; (4) shares of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to paragraph 6D, 6E or 6F hereof; (5) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board of Directors; (6) shares of Common Stock issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors; (7) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or commercial leasing transaction approved by the Board of Directors; (8) shares of Common Stock issued or issuable in connection with sponsored research, collaboration, technology license, development, original equipment manufacturer, marketing or other similar agreements or strategic partnerships approved by the Board of Directors; and (9) shares of Common Stock issued or issuable to vendors, suppliers or third -party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors; provided, however, that the aggregate shares of Common Stock issued pursuant to subsections (6)-(9) shall not exceed three hundred thousand (300,000) shares (as adjusted for any stock dividends, combinations or splits with respect to such shares). (ii) No Adjustment of Conversion Price. No adjustment in the Conversion Price of the Series B Preferred shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share (as determined pursuant to paragraph 6D(i)) on an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Conversion Price in effect on the date of, and immediately prior to such issue, for the Series B Preferred. (iii) Deemed Issue of Additional Shares of Common Stock. In the event the Corporation at any time or from time to time after the date of issuance of the Series B Preferred shall issue any options or convertible securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such options or convertible securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such options or, in the case of convertible securities, the conversion or exchange of such convertible securities or, in the case of options for convertible securities, the exercise of such options and the conversion or exchange of the underlying securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which shares are deemed to be issued: (1) no further adjustment in the Conversion Price of the Series B Preferred shall be made upon the subsequent issue of convertible securities or shares of Common Stock in connection with the exercise of such options or conversion or exchange of such convertible securities; (2) if such options or convertible securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Corporation or in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof (other than a change pursuant to the anti-dilution provisions of such options or convertible Securities such as this Section 6C or pursuant to recapitalization provisions of such Options or convertible securities such as Sections 6D, 6E and 6F hereof), the Conversion Price of the Series B Preferred and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto); (3) no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of the Series B Preferred to an amount that exceeds the lower (i) the Conversion Price on the original adjustment date or (ii) the Conversion Price that would have resulted from any other issuances of Additional Shares of Common and any other adjustments provided for herein between the original adjustment date and such readjustment date; (4) upon the expiration of any such options or any rights of conversion or exchange under such convertible securities which shall not have been exercised, converted or exchanged, the Conversion Price of the Series B Preferred computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if: (a) in the case of convertible securities or options for Common Stock, the only Additional Shares of Common issued were the shares of Common Stock, if any, actually issued upon the exercise of such options or the conversion or exchange of such convertible securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of such exercised options plus the consideration actually received by the Corporation upon such exercise or for the issue of all such convertible securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and (b) in the case of options for convertible securities, only the convertible securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such options, and the consideration received by the Corporation for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the Corporation for the issue of such exercised options, plus the consideration deemed to have been received by the Corporation (determined pursuant to paragraph 6B(i)) upon the issue of the convertible securities with respect to which such options were actually exercised; and (5) if such record date shall have been fixed and such options or convertible securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this paragraph 6C(iii) as of the actual date of their issuance. 6C. Adjustment of Conversion Price Upon Issuance of Additional Shares of Common. In the event this Corporation shall issue Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to paragraph 6B(iii)) without consideration or for a consideration per share less than the applicable Conversion Price of the Series B Preferred in effect on the date of and immediately prior to such issue or deemed issue (a "Dilutive Issuance"), then, the Corporation shall provide written notice of such issuance to the holders of the Series B Preferred, and (subject to the ultimate sentence of this Section 6D) the Conversion Price of the Series B Preferred shall be reduced, concurrently with such issue or deemed issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue plus the number of shares which the aggregate consideration received or deemed received by the Corporation for the total number of Additional Shares of Common so issued or deemed issued would purchase at such Conversion Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue plus the number of such Additional Shares of Common so issued or deemed issued. Notwithstanding the foregoing, the Conversion Price shall not be reduced at such time if the amount of such reduction would be less than $0.01, but any such amount shall be carried forward, and a reduction will be made with respect to such amount at the time of, and together with, any subsequent reduction which, together with such amount and any other amounts so carried forward, equal $0.01 or more in the aggregate. Provided further, that notwithstanding the foregoing, the Conversion Price shall not be reduced if such reduction would (x) result in more than seven million three hundred seventy-three thousand five hundred (7,373,500) shares of Common Stock being issuable in aggregate upon conversion of the Series B Preferred and (y) with respect to any holder, result in such holder owning, solely as a result of such adjustment conversion (together with its affiliates and assuming the exercise or conversion of all derivative securities held by such holder and its affiliates) more than twenty percent (20%) of the Corporation's outstanding voting securities. Any reduction in the Conversion Price excluded by operation of the prior sentence shall require the Company, upon the request of an Investor, to repurchase for cash (at the then current Conversion Price) the lowest number of shares of Preferred Stock that would be convertible into the number of shares of Common Stock that causes violation of the prior sentence. Immediately upon such repurchase, the Conversion Price will be adjusted in accordance with this paragraph 6D. For the purposes of this paragraph 6C, all shares of Common Stock issuable upon conversion of all outstanding shares of the Series B Preferred and the exercise and/or conversion of any other outstanding convertible securities and all outstanding options shall be deemed to be outstanding. In the event of a Dilutive Issuance, in lieu of the adjustment provided in this Section 6D, each holder of Series B Preferred then outstanding may require the Corporation to redeem such holder's outstanding shares of Series B Preferred pursuant to Section 5A by delivering a notice (an "Investor Redemption Notice") requesting such redemption within ten (10) business days of receipt of notice of the dilutive issuance. (i) Determination of Consideration. For purposes of this subsection 6C, the consideration received by the Corporation for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows: (1) Cash and Property. Such consideration shall: (a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation before deducting any reasonable discounts or commissions allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with such issuance; (b) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue or deemed issue, as determined in good faith by the Board of Directors; and (c) in the event Additional Shares of Common are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as reasonably determined in good faith by the Board of Directors. (2) Options and Convertible Securities. The consideration per share deemed received by the Corporation for Additional Shares of Common deemed to have been issued pursuant to paragraph 6B(iii) shall be determined by dividing: (a) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such options or convertible securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such options or the conversion or exchange of such convertible securities, or in the case of options for convertible securities, the exercise of such options for convertible securities and the conversion or exchange of such convertible securities by (b) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such options or the conversion or exchange of such convertible securities. 6D. Adjustments for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price of the Series B Preferred in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased. 6E. Adjustments for Subdivisions or Combinations of Preferred Stock. In the event the outstanding shares Series B Preferred shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Series B Preferred, Conversion Price and/or Liquidation Value of the Series B Preferred in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be appropriately adjusted. In the event the outstanding shares of Series B Preferred shall be combined (by reclassification or otherwise) into a lesser number of shares of Series B Preferred, the Conversion Price and/or Liquidation Value of the Series B Preferred in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be appropriately adjusted. 6F. Adjustments for Reclassification, Exchange and Substitution. Subject to Section 4 above ("Liquidation Rights"), if the Common Stock issuable upon conversion of the Series B Preferred shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each holder of such Series B Preferred shall have the right thereafter to convert such shares of Series B Preferred into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such Series B Preferred immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares. 6G. Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series B Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of Series B Preferred. 6H. Waiver of Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of the Series B Preferred may be waived by the consent or vote of the holders of the majority of the outstanding shares of such series either before or after the issuance causing the adjustment. 6I. Withdrawal of Conversion or Redemption Notice. Notwithstanding anything herein to the contrary, at any time following the delivery of a written notice by a holder of Series B Preferred and subsequent to surrender of the shares of Series B Preferred for conversion or redemption but prior to the effective date of such conversion or redemption, such holder of Series B Preferred may by prior written notice withdraw their written notice of conversion or redemption 6J. No Impairment. The Corporation will not amend its certificate of incorporation or participate in any reorganization, transfer of assets, merger, consolidation, dissolution, issue or sale of securities or any other voluntary action for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of Section 5 and 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion and redemption rights of the holders of Series B Preferred against impairment. 7. Amendment. This Certificate of Designation of the Corporation shall not be further amended in any manner which would alter or change the powers, preference or special rights of the Series B Preferred so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred, voting separately as a series. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of this Corporation be, and they hereby are, authorized and directed to prepare and file a Certificate of Designation of Rights, Preferences and Privileges of the Series B Convertible Preferred Stock in accordance with the foregoing resolution and the provisions of Delaware law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution." We further declare under penalty of perjury that the matters set forth in the foregoing Certificate of Designation are true and correct of our own knowledge. Executed at Fremont, California on November __, 2005. _____________________________________ Boris Lipkin, Chief Executive Officer _____________________________________ Joseph Passarello, Secretary -----END PRIVACY-ENHANCED MESSAGE-----