Therma-Wave, Inc. Form 10-Q Period End 12/29/02

-----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, ISN7iqjx86oYjo17ufUP55UM3av7sTdmOH9kw0T3S5J6g/5KCUIj8KIgWfjwFtSj /gZD3aCpXu4j6LJWBKhX7A== 0000891618-03-002296.txt : 20030505 0000891618-03-002296.hdr.sgml : 20030505 20030505172759 ACCESSION NUMBER: 0000891618-03-002296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20021229 FILED AS OF DATE: 20030505 FILER: 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26911 FILM NUMBER: 03682752 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 10-Q 1 f89571e10vq.htm FORM 10-Q Therma-Wave, Inc. Form 10-Q Period End 12/29/02

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended December 29, 2002

or


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 000-26911

THERMA-WAVE, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		94-3000561
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
1250 Reliance Way Fremont, California 94539 (Address of Principal Executive Offices Including Zip Code)

(510) 668-2200

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

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


Class		Outstanding as of April 30, 2003

Common stock, $.01 par value		29,359,413

TABLE OF CONTENTS


PART I -- FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure about Market Risk
	Item 4. Controls and Procedures
PART II. -- OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT 10.42
EXHIBIT 10.43
EXHIBIT 10.44
EXHIBIT 10.45
EXHIBIT 10.46
EXHIBIT 99.2

THERMA-WAVE, INC.

TABLE OF CONTENTS


		Page No.

PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements		1
	Condensed Consolidated Balance Sheets as of December 31, 2002 and March 31, 2002		1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2002 and 2001		2
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2002 and 2001		3
	Notes to Condensed Consolidated Financial Statements		4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		14
ITEM 4.	Controls and Procedures		14
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings		16
ITEM 2.	Changes in Securities and Use of Proceeds		16
ITEM 3.	Defaults Upon Senior Securities		16
ITEM 4.	Submission of Matters to a Vote of Security Holders		16
ITEM 5.	Other Information		16
ITEM 6.	Exhibits and Reports on Form 8-K		16
SIGNATURES			17
CERTIFICATIONS			18

Explanatory note regarding the late filing of this Form 10-Q

This quarterly report on Form 10-Q is being filed late as a result of the restatement of our condensed consolidated financial statements for the quarterly periods ended September 30, 2001, December 31, 2001, June 30, 2002 and September 30, 2002 and the year ended March 31, 2002.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

THERMA-WAVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


			December 31,			March 31,
			2002			2002

ASSETS
Current assets:
	Cash and cash equivalents		$	22,016		$	46,484
	Short-term investments			4,572			12,575
	Accounts receivable, net			9,712			15,635
	Inventories			28,059			34,677
	Other current assets			1,290			3,415

		Total current assets		65,649			112,786
Property and equipment, net				10,859			14,041
Goodwill and intangible assets, net				2,390			70,096
Other assets				4,869			4,723

		Total assets	$	83,767		$	201,646


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	3,372		$	6,297
	Accrued warranty costs			732			1,777
	Deferred revenue			9,352			9,493
	Income tax payable			4,892			4,903
	Other current liabilities			8,242			9,303

		Total current liabilities		26,590			31,773
Long term debt				—			16
Other liabilities				2,058			2,358

		Total liabilities		28,648			34,147

Stockholders’ equity:
	Common stock			293			291
	Treasury stock			(848	)		—
	Additional paid-in capital			322,352			321,466
	Notes receivable from stockholders			(196	)		(200	)
	Accumulated deficit			(263,804	)		(149,325	)
	Accumulated other comprehensive loss			(1,305	)		(1,790	)
	Deferred stock-based compensation			(1,373	)		(2,943	)

		Total stockholders’ equity		55,119			167,499

		Total liabilities and stockholders’ equity	$	83,767		$	201,646

See accompanying notes to condensed consolidated financial statements.

THERMA-WAVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



			Three Months Ended						Nine Months Ended
			December 31,						December 31,

			2002			2001			2002			2001

Net revenues
	Product		$	4,789		$	6,401		$	20,188		$	56,461
	Service and parts			5,460			4,653			15,956			13,074

		Total net revenues		10,249			11,054			36,144			69,535
Cost of revenues				10,233			9,522			40,074			42,410

Gross profit (loss)				16			1,532			(3,930	)		27,125

Operating expenses:
	Research and development			6,872			7,643			22,975			21,157
	Selling, general and administrative			6,097			5,213			18,877			15,841
	Impairment of goodwill and other intangible assets			—			—			66,977			—
	Severance charge			35			30			1,200			407
	Stock-based compensation			359			—			1,411			—

		Total operating expenses		13,363			12,886			111,440			37,405

Operating loss				(13,347	)		(11,354	)		(115,370	)		(10,280	)

Other income (expense):
	Interest expense			(52	)		(70	)		(154	)		(177	)
	Interest income			118			449			883			2,032
	Other, net			(9	)		8			162			36

		Total other income		57			387			891			1,891

Loss before income tax benefit				(13,290	)		(10,967	)		(114,479	)		(8,389	)
Income tax benefit				—			—			—			—

Net loss			$	(13,290	)	$	(10,967	)	$	(114,479	)	$	(8,389	)

Net loss per share:
	Basic		$	(0.47	)	$	(0.45	)	$	(4.02	)	$	(0.35	)

	Diluted		$	(0.47	)	$	(0.45	)	$	(4.02	)	$	(0.35	)

Weighted average common shares outstanding:
	Basic			28,404			24,114			28,485			23,995
	Diluted			28,404			24,114			28,485			23,995

See accompanying notes to condensed consolidated financial statements.

THERMA-WAVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



				Nine Months Ended
				December 31,

				2002			2001

Operating activities:
	Net loss			$	(114,479	)	$	(8,389	)
	Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation and amortization			4,499			3,836
		Amortization of intangible assets			1,315			—
		Amortization of deferred stock-based compensation			1,449			—
		Impairment of goodwill and other intangible assets			66,977			—
		Inventory charge			7,425			—
		Loss on disposal of fixed assets			55			—
		Issuance of treasury stock in connection with payment of consulting services			50			—
	Changes in assets and liabilities:
		Accounts receivable			5,923			25,984
		Inventories			(807	)		1,834
		Other assets			2,243			(379	)
		Liabilities			(5,499	)		(27,833	)

			Net cash used by operating activities		(30,849	)		(4,947	)

Investing activities:
	Purchases of property and equipment				(1,372	)		(2,034	)
	(Purchase) sale of short-term investments				8,003			1,525
	Other				(850	)		(619	)

			Net cash provided (used) by investing activities		5,781			(1,128	)

Financing activities:
	Proceeds from issuance of common stock				1,049			2,291
	Proceeds from note receivable from stockholders				4			—
	Purchase of treasury stock				(938	)		—
	Principal payments under capital lease obligations				—			(65	)

			Net cash provided by financing activities		115			2,226

Effect of exchange rates on cash					485			(153	)

Net decrease in cash and cash equivalents					(24,468	)		(4,002	)
Cash and cash equivalents at beginning of period					46,484			55,725

Cash and cash equivalents at end of period				$	22,016		$	51,723

Supplementary disclosures:
	Cash paid for interest			$	42		$	77

	Cash paid for taxes			$	130		$	2,466

See accompanying notes to condensed consolidated financial statements.

THERMA-WAVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Therma-Wave, Inc. and its wholly-owned subsidiaries. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. In our opinion, the financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position at December 31, 2002, and the operating results and cash flows for the three and nine months ended December 31, 2002 and 2001. These financial statements and notes should be read in conjunction with our audited financial statements and notes thereto for the year ended March 31, 2002.

The Company has sustained significant losses for the last four quarters. The Company expects to limit its capital spending to essential items and to make further operating expense reductions, as discussed in Note 11, Subsequent Events. The Company believes that its existing capital will be sufficient to fund its operations and its capital investments for at least the next twelve months. No assurance can be given, however, that this will be the case. The Company may require additional equity or debt financing to meet its working capital requirements or to fund its research and development activities. The financing activities may involve substantial dilution to the Company’s stockholders, restrictive covenants, or high interest costs. There can be no assurance that additional financing will be available when required or, if available, will be on terms satisfactory to the Company.

The results of operations for the interim periods are not necessarily indicative of the results of operations that may be expected for any other period or for the fiscal year, which ends on March 30, 2003. Certain costs and expenses in the three and nine months ended December 31, 2001 have been reclassified to conform to the presentation in the three months ended December 29, 2002.

The third quarters of fiscal years 2003 and 2002 and the entire fiscal year 2002 ended on December 29, 2002, December 30, 2001 and March 31, 2002, respectively. For presentation purposes, the accompanying financial statements have been shown as ending on the last day of the calendar quarter closest to each of these dates.

2. Inventories

Inventories are summarized as follows (in thousands):


	December 31,		March 31,
	2002		2002

Purchased materials	$	3,148	$	11,172
Systems in process		15,144		12,657
Finished systems		9,767		10,848

	$	28,059	$	34,677

3. Comprehensive Loss

Comprehensive loss consists of net loss for the period and the change in accumulated foreign currency translation adjustments during the period. For the quarters ended December 31, 2002 and 2001, comprehensive loss amounted to approximately $13.1 million and $11.4 million, respectively. For the nine months ended December 31, 2002 and 2001, comprehensive loss amounted to approximately $114.0 million and $8.6 million, respectively.

THERMA-WAVE, INC.

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Change in Accounting Principle

In accordance with guidance provided in SAB 101, we recorded a $6.3 million charge (net of income tax benefit of $0.4 million), or $0.25 per diluted share charge, as the cumulative effect of the change in accounting principle as of April 1, 2000. All periods presented are consistent with the guidance provided in SAB 101. During the three months ended December 31, 2002 and 2001, we recognized $423,000 and $69,000, respectively, out of the $9.4 million revenue that was included in the cumulative effect adjustment as of April 1, 2000. During the nine months ended December 31, 2002 and 2001, we recognized $665,000 and $1.6 million, respectively, out of the $9.4 million revenue that was included in the original cumulative effect adjustment as of April 1, 2000. As of December 31, 2002, there was $240,000 revenue pending recognition out of the $9.4 million revenue.

5. Net Income (Loss) Per Share

Basic net income (loss) per share is based on the weighted-average number of common shares outstanding excluding contingently issuable or returnable shares such as unvested common stock or shares that contingently convert into common stock upon certain events. Diluted net income (loss) per share is based on the weighted average number of common shares outstanding and the potential dilution of securities, by including stock options in the weighted average number of common shares outstanding for a period if dilutive.

The following table summarizes securities outstanding (in thousands) as of each period end which were not included in the calculation of diluted net income (loss) per share since their inclusion would be anti-dilutive.



	December 31,

	2002		2001

Common stock subject to repurchase (unvested)		—		150
Common stock held in escrow account		541		—
Stock options		4,928		2,561
Warrants		79		—

		5,548		2,711

For the three months ended December 31, 2002 and 2001, anti-dilutive stock options have a weighted average exercise price of $10.54 and $17.04, respectively. The warrants outstanding at December 31, 2002 that we excluded from the above calculation had a weighted average exercise price of $3.68.

6. Recently Issued Accounting Statements

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets.” SFAS No. 142 supersedes Accounting Principles Board Opinion No. 17, “Intangible Assets,” and discontinues the amortization of goodwill. In addition, SFAS No. 142 includes provisions regarding: 1) reclassification of amounts between goodwill and identifiable intangible assets in accordance with the new definition of identifiable intangible assets set forth in Statement of Financial Accounting Standards No. 141, “Business Combinations;” 2) reassessment of the useful lives of existing recognized intangibles; and 3) testing for impairment of existing goodwill and other intangibles using the discounted cash flows method. Our adoption of SFAS No. 142 did not result in reclassifications between goodwill and intangible assets, impairment charges or changes in the useful lives of amortizable intangible assets. Intangible assets include developed technology, development contract and trade name and are being amortized on a straight-line basis over the original estimated useful lives of two to five years.

THERMA-WAVE, INC.

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair market value of intangible assets after the impairment adjustments (see Note 7) is being amortized on a straight-line basis over the remaining estimated useful lives of 16 to 52 months. Components of intangible assets were as follows (in thousands):



			December 31, 2002					March 31, 2002

			Gross Carrying		Accumulated			Gross Carrying		Accumulated
			Amount		Amortization			Amount		Amortization

Goodwill and intangible assets, net
		Developed technology	$	314	$	(314	)	$	890	$	(92	)
		Development contract		2,416		(485	)		2,590		(107	)
		Trade name		628		(169	)		990		(40	)

	Intangible assets, net		$	3,358	$	(968	)	$	4,470	$	(239	)

	Goodwill		$	—	$	—		$	65,865	$	—

Total goodwill and intangible assets, net			$	3,358	$	(968	)	$	70,335	$	(239	)

Amortization of intangible assets was $150,000 and $729,000 for the three and nine months ended December 31, 2002. Amortization expense is expected to be $150,000 for the fourth quarter of fiscal 2003 (a total of $0.9 million for fiscal 2003). Amortization expense for fiscal 2004, 2005, 2006 and 2007 is expected to be $0.6 million, $0.6 million, $0.6 million, and $0.5 million, respectively.

In December 2002, SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” was issued. This statement provides guidance on the recognition and measurement of liabilities associated with exit or disposal activities and requires that such liabilities be recognized when incurred. This statement is effective for exit or disposal activities initiated on or after January 1, 2003 and does not impact the recognition of costs under our existing programs. Adoption of this standard is expected to impact the timing of recognition of costs associated with future exit and disposal activities.

In December 2002, SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” was issued. This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The annual disclosures required by this statement were proposed to be effective for financial statements for fiscal years ending after December 15, 2002. The disclosure provisions for interim financial information would be effective for all periods presented in financial reports containing condensed financial statements for interim periods beginning after December 15, 2002.

7. Impairment of Goodwill and Intangible Assets

Due to current operating losses, the absence of positive cash flows, recent significant declines in our common stock price and uncertainties resulting from the duration and severity of the industry downturn, we assessed the recoverability of the intangible assets related to the Sensys acquisition subject to amortization in accordance of SFAS No. 144 and tested goodwill related to the Sensys acquisition for impairment in accordance with SFAS No. 142 during the quarter ended September 30, 2002. Based upon our projection of significantly reduced future cash flows related to Sensys products, an impairment expense of $576,000 was recognized for developed technology, $174,000 for development contract and $362,000 for trade name

THERMA-WAVE, INC.

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

intangible assets in the quarter ended September 30, 2002. The impairment test under SFAS No. 142 was based on a two-step process involving; 1) comparing the estimated fair value of the related reporting unit to its net book value, and 2) comparing the estimated implied fair value of goodwill to its carrying value. As a result of the test, we wrote down goodwill assets by $65.9 million in the quarter ended September 30, 2002. There was no impairment charge in the quarter ended December 31, 2002.

8. Commitments and Contingencies

On April 22, 2002, we filed a patent infringement suit against Boxer Cross Inc. in the United States District Court, Northern District of California. The suit alleges that Boxer Cross’ BX-10 product infringes certain patents held by Therma-Wave related to ion implant monitoring. Two of the asserted patents were previously found to be valid and infringed in a suit filed against Jenoptik, AG, in 1994. The earlier court rulings led to Jenoptik’s withdrawal from the U.S. market. On June 7, 2002, Boxer Cross filed its amended answer and counterclaims to Therma-Wave’s complaint and asserted various affirmative defenses to Therma-Wave’s claims of patent infringement. The pleading also contained various counterclaims including allegations that Therma-Wave’s Therma-Probe product infringed upon certain patents owned by Boxer Cross and also raised claims of misappropriation of trade secrets, tortious interference with contract, unfair competition and unfair business practices. We replied to Boxer Cross’s counterclaims, denying the material allegations and asserting declaratory judgment counterclaims. On December 9, 2002, the Court held a Markman claim construction hearing on our patents-in-suit. The Court has not yet issued its ruling. No discovery deadline or trial date has been set. On April 29, 2003, Applied Materials announced that it had acquired all of the outstanding stock of Boxer-Cross. We believe that the outcome from this matter, even if adverse to us, would not have a material adverse effect on our financial condition or results of operations.

9. Severance Charge

During the second fiscal quarter of 2003, we announced and implemented reduction in force programs aimed at bringing operating expenses closer to being in line with our operating environment for the fiscal year 2003. All terminated employees were notified of their severance and related benefits at the time the programs were announced. The programs resulted in a reduction of approximately 21% or 115 employees of our work force across all functional areas.

All expenses were paid out or are expected to be paid out in cash with the remaining balance expected to be paid out by March 31, 2003. Changes in the accrued expenses relating to reductions in force are summarized in thousands as follows:


	Balance							Balance
	March 31, 2002		Additions		Utilized			December 31, 2002

Severance	$	301	$	1,200	$	(1,403	)	$	98

10. Treasury Stock

On August 1, 2002, the Company’s Board of Directors announced a stock repurchase program for the repurchase of up to one million shares of Therma-Wave’s common stock. As of December 31, 2002, the Company has repurchased 447,500 shares of common stock at an average price of $2.06 per share and has 416,825 shares in treasury stock outstanding. These shares are to be used for various purposes, including, without limitation, satisfying stock option exercises and employee stock purchase plan requirements. The repurchase program may be suspended at any time and from time to time without prior notice.

THERMA-WAVE, INC.

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. Warranty Accrual

At the time of revenue recognition, we provide an accrual for estimated costs to be incurred pursuant to our warranty obligation. Our estimate is based primarily on historical experience. Changes in the warranty accrual during the year are summarized in thousands as follows:


			Provision for		Settlement of
	Balance		Warranty Issued		Pre-Existing			Balance
	March 31, 2002		During the Period		Warranties			December 31, 2002

Warranty Accrual	$	1,777	$	470	$	(1,515	)	$	732

12. Subsequent Events

The Company also announced reduction in force programs aimed at bringing operating expenses closer in line with our current operating environment. The programs implemented resulted in a reduction of approximately 29% of our work force from two separate actions taken, one in early February 2003 and one in early April 2003, affecting all functional areas. The Company also scheduled one shut-down week each quarter until revenues improve to acceptable levels. Furthermore, the Company has restructured and moved its Sensys Instruments operations from two buildings located in Santa Clara, California into its Fremont, California facility. The Company completed the closing of the Santa Clara facilities during March 2003, and is in the process of attempting to sublet both buildings. The Company also completed relocating personnel out of a second small facility in Fremont, California, and will use portions of that facility for storage purposes until the facility can be sublet. There can be no assurances that any of the facility space no longer in use can be sublet.


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

This quarterly report on Form 10-Q contains forward-looking statements as that term is defined in the Private Securities Reform Act of 1995, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The words “believe,” “expect,” “anticipate,” “intend” and other similar expressions generally identify forward-looking statements. Potential investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. Statements relating to our ability to manage our costs and reduce operating expenses, sustain our operations and cash position in an extended global economic downturn, continue the successful development and introduction of new products and improvement of current products and trends in our financial performance are all based on current expectations. Such statements are subject to risks, uncertainties, and changes in conditions, particularly those related to our possible de-listing from the Nasdaq National Market due to the late filing of this report, industry performance in the current severe industry and economic downturn, political unrest, foreign currency exchange rates, activities and potential successes of competitors and competing products and other risks, some of which are detailed in documents filed with the Securities and Exchange Commission, including specifically Exhibit 99.1 to our amended annual report on Form 10-K/A for the year ended March 31, 2002. See also the discussion of forward-looking statements related to market risk in the first paragraph of Item 3 below. We undertake no obligation to update the information in this quarterly report on Form 10-Q.

General

We are a worldwide leader in the development, manufacture, marketing and service of process control metrology systems for use in the manufacture of semiconductors. Process control metrology is used to monitor process parameters in order to enable semiconductor manufacturers to maintain high yields on the production lines, reduce feature size, increase wafer size, increase equipment productivity and improve device performance. Our metrology systems are used in all sections of the semiconductor fabrication plant, or fab, to control

the wafer fabrication processes. Examples of wafer fab processes, in which our metrology systems supply key information, are photoresist processing to support lithography, deposition of insulator and conductor films, patterned removal, or “etching”, of insulator and conductor films, ion implantation and chemical mechanical planarization. We currently sell four product families of process control metrology systems: Therma-Probe® systems, Opti-Probe® systems, Opti-Probe Real-Time/Critical Dimensions™ systems, and Integra™ and Sensys integrated metrology systems.

Therma-Probe Product Family. Therma-Probe systems utilize our proprietary thermal wave technology and are the predominant non-destructive process control metrology systems used to measure the critical ion implantation process on product wafers in the fabrication of semiconductors.

Opti-Probe Product Family. Opti-Probe Film Metrology systems provide the industry’s most powerful capability to control and diagnose non-opaque films for semiconductor production. This unsurpassed metrology power is achieved by successfully integrating different measurement technologies, including optical technologies that are proprietary to Therma-Wave, into each Opti-Probe system.

Opti-Probe Real-Time/Critical Dimensions™ Product Family. Opti-Probe Real-Time/Critical Dimension systems measure the lateral dimensions, or “critical dimensions”, or CD, using our real time critical dimensions software and a revolutionary, nondestructive technique based on spectroscopic ellipsometry. These systems are capable of providing CD metrology for the smallest features of the next several generations of integrated circuits, or IC’s.

Sensys and Integra Product Family. The Sensys and Integra lines of integrated metrology products are a broad-based families of compact metrology “modules” which are installed and function inside an IC process system, such as an etching system or CVD deposition system, to provide metrology on each wafer before it exits the process tool.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, goodwill and intangible assets, inventories and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

During the quarter ended December 31, 2002, our critical accounting policies have not changed from those disclosed in our amended annual report on Form 10-K/A for the year ended March 31, 2002.

Results of Operations

The following table summarizes our unaudited historical results of operations as a percentage of net revenues for the periods indicated. The historical financial data for the three and nine months ended December 31, 2002 and 2001 were derived from our unaudited consolidated financial statements which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the financial condition and results of operations for such periods.



			Three Months						Nine Months
			Ended						Ended
			December 31,						December 31,

			2002			2001			2002			2001

Net revenues
	Product			46.7	%		57.9	%		55.9	%		81.2	%
	Service and parts			53.3			42.1			44.1			18.8

Total net revenues				100.0			100.0			100.0			100.0
Cost of revenues				99.8			86.1			(110.9	)		61.0

Gross profit				0.2			13.9			(10.9	)		39.0

Operating expenses:
	Research and development			67.1			69.1			63.6			30.4
	Selling, general and administrative			59.5			47.2			52.2			22.8
	Impairment of goodwill and other intangible assets			—			—			185.3			—
	Severance charge			0.3			0.3			3.3			0.6
	Stock-based compensation			3.5			—			3.9			—

		Total operating expenses		130.4			116.6			308.3			53.8

Operating loss				(130.2	)		(102.7	)		(319.2	)		(14.8	)

Other income (expense):
	Interest expense			(0.5	)		(0.6	)		(0.4	)		(0.3	)
	Interest income			1.1			4.1			2.4			2.9
	Other, net			(0.1	)		—			0.5			0.1

		Total other income		0.5			3.5			2.5			2.7

Loss before income tax benefit				(129.7	)		(99.2	)		(316.7	)		(12.1	)
Income tax benefit				—			—			—			—

Net loss				(129.7	)%		(99.2	)%		(316.7	)%		(12.1	)%

Net Revenues. Net revenues for the fiscal quarter ended December 31, 2002 were $10.2 million. Compared to the second quarter of fiscal 2003, net revenues decreased $0.7 million, or 6.4%, from $10.9 million. Net revenues decreased $0.8 million, or 7.3%, from $11.1 million in the same fiscal quarter of the prior year. For the nine months ended December 31, 2002, net revenues were $36.1 million, a decrease of $33.4 million, or 48.0%, from $69.5 million in the comparable period of the prior year. The decrease in revenues was primarily the result of capital spending reductions by our customers due to the downturn of the semiconductor industry and the weakness of the global economy.

The following table summarizes our revenues in different categories as a percentage of total net revenues for the periods indicated.



		Three Months						Nine Months
		Ended						Ended
		December 31,						December 31,

		2002			2001			2002			2001

Net revenues
	System		46.7	%		57.9	%		55.9	%		81.2	%
	Service and parts		53.3			42.1			44.1			18.8

	Total net revenues		100.0	%		100.0	%		100.0	%		100.0	%

International sales accounted for approximately 71% and 52% of our total net revenues for the three months ended December 31, 2002 and 2001, respectively. For the nine months ended December 31, 2002 and 2001, respectively, international sales accounted for approximately 72% and 57% of our total net revenues. We anticipate that international sales will continue to account for a significant portion of our net revenues in the foreseeable future. A substantial portion of our international sales are denominated in U.S. dollars. As a result, changes in the values of foreign currencies relative to the value of the U.S. dollar can render our products comparatively more expensive. Although we have not been negatively impacted in the past by foreign currency changes in Taiwan, Japan, China, Korea, and Europe, such conditions could negatively impact our international sales in future periods. Also, political instability, war or disease epidemics may affect our international sales.

Gross Profit (Loss). Gross profit for the third quarter of fiscal 2003 was $16,000, compared with a gross loss of $(7.0) million in the previous fiscal quarter. Compared to the same quarter of fiscal 2002, gross profit decreased $1.5 million. As a percentage of net revenues, gross margin for the current quarter was 0.0%, compared to (64.2)% for last fiscal quarter and 13.9% for the same quarter of last fiscal year. For the nine months ended December 31, 2002, gross loss was $(3.9) million, a decrease of $31.1 million, or 114.5%, from $27.1 million gross profit in the comparable period of the prior year. As a percentage of net revenues, gross margin for the current nine months was (10.9)%, compared to 39.0% in the comparable period of the prior year. The increase in gross profit in the current quarter from the second fiscal quarter of 2003 was primarily due to a $7.4 million charge associated with additional reserves for obsolete and excess inventory in the second fiscal quarter of 2003 offset by a loss contract reserve in the third fiscal quarter of 2003. Based upon direct discussions with a customer on the status of a development project, the Company reassessed the remaining costs to complete the project and determined that a loss existed. As a result, during the quarter ended December 31, 2002, a loss of $613,000 was recognized on a development contract being accounted for under the percentage-of-completion method. The decrease of gross profit in the current quarter from the same quarter of fiscal 2002 was primarily due to our lower net revenues and production volume. The change of gross profit from the nine months ended December 31, 2002 to the nine months ended December 30, 2001 was primarily due to lower net revenues and production volume and the above mentioned $7.4 million inventory charge.

Research and Development, or R&D, Expenses. R&D expenses for the third quarter of fiscal 2003 were $6.9 million, a decrease of 15.2% from the prior quarter and a decrease of 10.1% from the same quarter of last fiscal year. For the nine months ended December 31, 2002, R&D expenses were $23.0 million, an increase of $1.8 million, or 8.6%, from $21.2 million in the comparable period of the prior year. The decrease of R&D expenses from the prior quarter and the same quarter of last fiscal year was primarily due to reduced headcount in R&D functions resulting from our reduction in force programs during the fourth quarter of fiscal 2002 and the second quarter of fiscal 2003. We expect to continue to commit significant resources to the development of new advanced metrology products of precision performance at higher wafer throughputs.

Selling, General and Administrative, or SG&A, Expenses. SG&A expenses for the third quarter of fiscal 2003 were $6.1 million, a decrease of 8.4% from SG&A expenses of $6.7 million in the prior fiscal quarter. Compared to the same quarter of last fiscal year, SG&A expenses increased by 17.0%. For the nine months ended December 31, 2002, SG&A expenses were $18.9 million, an increase of $3.0 million, or 19.2%, from

$15.8 million in the comparable period of the prior year. The decrease of SG&A expense from the prior fiscal quarter was primarily due to reduced headcount in SG&A functions resulting from our reduction in force programs during the fourth quarter of fiscal 2002 and the second quarter of fiscal 2003. The increase from same periods of the prior year was primarily due to the addition of SG&A expenses incurred by Sensys which we acquired in January 2002.

Impairment of Goodwill and Other Intangible Assets. During the second fiscal quarter of 2003, we completed a goodwill impairment test, and the results of that test indicated that our goodwill and intangible assets were impaired by $67.0 million. The impairment test under SFAS No. 144 and No. 142 was based on a two-step process involving: 1) comparing the estimated fair value of the related reporting unit to its net book value, and 2) comparing the estimated implied fair value of goodwill to its carrying value. The circumstances leading to the impairment of goodwill and intangible assets primarily relate to current operating losses, market capitalization decreased below tangible book value, the absence of positive cash flows and uncertainties resulting from the duration and severity of the industry downturn. We wrote down goodwill and intangible assets by $67.0 million in the second fiscal quarter of 2003.

Severance Charge. During the second quarter of fiscal 2003, we announced and implemented reduction in force programs aimed at bringing operating expenses closer to being in line with our operating environment for the fiscal year 2003. We reduced approximately 21% of our work force across all functional areas. We recorded a $35,000 severance charge for the three months ended December 31, 2002, an increase of $5,000, from $30,000 in the same period of fiscal 2002. For the nine months ended December 31, 2002, severance charges were $1.2 million, an increase of $0.8 million, from $0.4 million in the same period of fiscal 2002. All terminated employees were notified of their severance and related benefits at the time the programs were announced.

Stock-Based Compensation. As part of the acquisition of Sensys, we recorded $3.5 million of stock-based compensation to be amortized over the vesting period of the options granted to Sensys employees. The amortization expense was $0.4 million, or 3.5% of revenue, for the quarter ended December 31, 2002. For the nine months ended December 31, 2002, the amortization expense was $1.4 million, or 3.9% of revenue. We had no similar expenses for the same periods of last fiscal year.

Other Income. Other income for the third quarter of fiscal 2003 was $57,000, which was 88.9% lower than other income in the prior fiscal quarter. Compared to the same quarter of the prior fiscal year, other income decreased 85.3%. For the nine months ended December 31, 2002, other income was $0.9 million, a decrease of $1.0 million, or 52.9%, from $1.9 million in the comparable period of the prior year. We derive other income primarily from the investment of our cash on hand. The decrease of other income was primarily due to reduced cash balance invested during the third quarter of fiscal 2003.

Provision for Income Taxes. For the nine months ended December 31, 2002, no tax provision was recorded based upon our projected tax loss for fiscal 2003.

Net Loss. The combination of all the factors discussed above contributed to a net loss of $13.3 million for the third quarter of fiscal 2003, compared with net loss of $89.9 million in the prior fiscal quarter and net loss of $11.0 million in the same quarter of last fiscal year. For the nine months ended December 31, 2002, net loss was $114.5 million, a decrease of $106.1 million, from net loss of $8.4 million in the comparable period of the prior year.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital. Over the last three fiscal years, we have funded our operating activities principally from funds generated from operations and net proceeds from an initial public offering.

Cash flows used by operating activities were $30.8 million and $4.9 million for the first nine months of fiscal 2003 and 2002, respectively. The decrease in cash flows provided by operating activities from fiscal year 2002 to 2003 was mainly due to our net loss, exclusive of non-cash charges, in the first nine months of fiscal

year 2003. Our net loss in the period was primarily due to lower net revenues and production volume in the industry downturn, while our expense reductions did not match the decrease in revenue.

Cash flows provided (used) by investing activities were $5.8 million and $(1.1) million for the first nine months of fiscal 2003 and 2002, respectively. The increase in cash flows provided by investing activities was primarily due to an increase in the sale of short-term investments in the first nine months of fiscal year 2003. Purchases of property and equipment were $1.4 million and $2.0 million for the first nine months of fiscal 2003 and 2002, respectively.

Cash flows provided by financing activities were $0.1 million and $2.2 million for the first nine months of fiscal 2003 and 2002, respectively. Cash was generated from the exercise of stock options and warrants and the issuance of common stock under our employee stock purchase plan. In the first nine months of fiscal 2003, proceeds from issuance of common stock had been largely offset by the use of cash to repurchase stock pursuant to the stock repurchase program discussed in Note 10 of the financial statements entitled “Treasury Stock.”

In June 2001, we entered into a $10.0 million loan and security agreement with Comerica Bank. In December 2001, we amended this bank credit facility and as a result of this amendment, the credit extension limit was changed to $13.5 million. In November 2002, we further amended the bank credit facility to allow for the loss that was expected to be incurred during the quarter ended December 31, 2002 and amend certain other covenants and conditions going forward. As a result of the amendment, the credit extension limit was changed to $10.0 million. The amended bank credit facility allowed us to borrow money bearing interest either at a floating rate per annum equal to the prime rate plus one quarter percent or at a rate per annum equal to LIBOR plus two percent under the amended agreement. We could request advances in an aggregate outstanding amount not to exceed the lesser of $10.0 million or the borrowing base, in each case minus the aggregate face amount of outstanding letters of credit, including any drawn but un-reimbursed letters of credit. Any borrowings under the Comerica Bank credit facility would be secured by substantially all of our assets. We currently have a $3.5 million standby letter of credit as required by the lessor of our building. The existing amended Comerica Bank credit facility matures on September 30, 2003.

We continue negotiations to secure sufficient access to credit going forward. Subsequent to the quarter ended December 31, 2002, we violated covenants in the bank credit facility under the December 2001 amendment by the late filing of this Form 10-Q as well as by violating the quarter loss covenant. Comerica bank has verbally agreed to continue to extend the line to the extent necessary to cover the $3.5 million standby letter of credit on our building until the facility matures. However, the remaining balance of the credit line will likely no longer be available to us under the amended agreement. We will continue discussions with Comerica bank, and, if necessary, with other banks, in an attempt to re-establish the full line of credit. However, there can be no assurances that we will be successful in obtaining additional credit.

Our other contractual obligations at December 31, 2002 and the effect such obligations are expected to have on our liquidity and cash flow in future periods, have not changed materially since March 31, 2002 as described in our Form 10-K/A.

Our principal sources of funds for at least the next three to four quarters, are anticipated to be cash and short-term investments on hand ($26.6 million as of December 31, 2002). We expect to limit our capital spending to essential items and have made further operating expense reductions as discussed in Note 11, Subsequent Event. We believe that these funds will provide us with sufficient liquidity and capital resources for us to meet our current and future financial obligations for at least the next twelve months. No assurance can be given, however, that this will be the case. We may require additional equity or debt financing to meet our working capital requirements or to fund our research and development activities. There can be no assurance that additional financing will be available when required or, if available, will be on terms satisfactory to us.

Inflation

The impact of inflation on our business has not been material for the fiscal quarter ended December 31, 2002.


Item 3.	*Quantitative and Qualitative Disclosure about Market Risk*

Market Risk Disclosures

The following discussion about market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risks related to changes in interest rates and foreign currency exchange rates. We do not have any derivative financial instruments. See also the discussion of forward-looking statements in the first paragraph of Item 2 above.

Interest Rate Risk

As of December 31, 2002, our cash and cash equivalents included money market securities and investment grade commercial paper. Due to the short-term duration of such an investment portfolio, an immediate 10% change in interest rates would not have a material effect on the fair market value of such a portfolio, therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio.

Foreign Currency Exchange Risk

A substantial portion of our sales are denominated in U.S. dollars and, as a result, we have relatively little exposure to foreign currency exchange risk with respect to sales made. We do not use forward exchange contracts to hedge exposures denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. The effect of an immediate 10% change in exchange rates would not have a material impact on our future operating results or cash flows.


Item 4.	*Controls and Procedures*

During the 90-day period prior to the filing date of this report, management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the company’s disclosure controls and procedures. In late January 2003, management became aware of a possible revenue recognition issue associated with the sale of one tool through one of our foreign branches. Our Audit Committee launched an investigation and engaged outside legal counsel and independent forensic accountants to assist it. The investigation was conducted to (i) identify additional potential revenue recognition issues, if any; (ii) to review the business expense practices of certain of our employees at that foreign branch. As a result of this matter, management conducted a detailed review of revenue recognition. Based upon the investigation and management’s revenue recognition review, a material weakness has been identified relating to controls surrounding evaluating and reporting revenue transactions, particularly in the Asia/Pacific region. As a result, we have implemented or are in the process of implementing the following changes or additions to our internal controls and procedures, among others:

• Changing our internal reporting structure to require branch accounting personnel to report directly to our finance department in the United States;

• Establishing audit and review procedures for each foreign branch consistent with each branch’s exposure, including, as appropriate, outside auditors;

• Requiring managers of foreign operations to attest in writing that final acceptance documents for any given period are valid acceptances that justify revenue recognition and that will result in customer payment;

• Requiring corporate financial management personnel to investigate transactions where revenue has been recognized but the customer has not paid according to terms;

• Re-training employees and developing an ongoing training program with particular focus on company policies and procedures related to revenue recognition, expense reimbursements and bank account reconciliations;

• Establishing yearly or twice-yearly (for larger branches) reviews with both internal and external accounting personnel and local management, to be coordinated with quarterly business reviews; and

• Establishing controls to closely monitor the credit status of certain customers, with emphasis on distributors.

Management is considering additional controls as a result of the special investigation and development is ongoing.

PART II. — OTHER INFORMATION

Item 1. Legal Proceedings

On April 22, 2002, we filed a patent infringement suit against Boxer Cross Inc. in the United States District Court, Northern District of California. The suit alleges that Boxer Cross’ BX-10 product infringes certain patents held by Therma-Wave related to ion implant monitoring. Two of the asserted patents were previously found to be valid and infringed in a suit filed against Jenoptik, AG, in 1994. The earlier court rulings led to Jenoptik’s withdrawal from the U.S. market. On June 7, 2002, Boxer Cross filed its amended answer and counterclaims to Therma-Wave’s complaint and asserted various affirmative defenses to Therma-Wave’s claims of patent infringement. The pleading also contained various counterclaims including allegations that Therma-Wave’s Therma-Probe product infringed upon certain patents owned by Boxer Cross and also raised claims of misappropriation of trade secrets, tortious interference with contract, unfair competition and unfair business practices. We replied to Boxer Cross’s counterclaims, denying the material allegations and asserting declaratory judgment counterclaims. On December 9, 2002, the Court held a Markman claim construction hearing on our patents-in-suit. The Court has not yet issued its ruling. No discovery deadline or trial date has been set. On April 29, 2003, Applied Materials announced that it had acquired all of the outstanding stock of Boxer Cross. We believe that the outcome from this matter, even if adverse to us, would not have a material adverse effect on our financial condition or results of operations.


Item 2.	*Changes in Securities and Use of Proceeds*

None.


Item 3.	*Defaults Upon Senior Securities*

None.


Item 4.	*Submission of Matters to a Vote of Security Holders*

None


Item 5.	*Other Information*

None.


Item 6.	*Exhibits and Reports on Form 8-K*

(a) The following exhibits are included herein:


Exhibit
Number		Description

	10.42	Amendment No. 2 to Loan And Security Agreement, dated as of November 18, 2002, between Therma-Wave, Inc. and Comerica Bank-California.
	10.43	Employment Agreement dated as of February 5, 2003, by and between Therma-Wave, Inc. and Boris Lipkin.
	10.44	Stock Option Agreement dated as of February 5, 2003, by and between Therma-Wave, Inc. and Boris Lipkin.
	10.45	Offer letter, Board Services, dated as of March 12, 2003, from Therma-Wave, Inc. to Papken S. Der Torossian.
	10.46	Stock Option Agreement, dated as of March 15, 2003, by and between Therma-Wave, Inc. and Papken Der Torossian.
	99.1	Risk Factors.(1)
	99.2	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the same numbered exhibit in the Company’s amended Annual Report on Form 10-K/A for the period ended March 31, 2002 (File No. 000-26911).

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THERMA-WAVE, INC.

(Registrant)

/s/ L. RAY CHRISTIE

L. Ray Christie

Chief Financial Officer

(as Registrant and as Principal Accounting Officer)

May 5, 2003

THERMA-WAVE, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Boris Lipkin, certify that:

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

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

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

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

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

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

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

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

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

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

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

/s/ BORIS LIPKIN

Boris Lipkin

President and Chief Executive Officer

May 5, 2003

THERMA-WAVE, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, L. Ray Christie, certify that:

/s/ L. RAY CHRISTIE

L. Ray Christie

Chief Financial Officer

May 5, 2003

EXHIBIT INDEX


Exhibit
Number		Description

	10.42	Amendment No. 2 to Loan And Security Agreement, dated as of November 18, 2002, between Therma-Wave, Inc. and Comerica Bank-California.
	10.43	Employment Agreement dated as of February 5, 2003, by and between Therma-Wave, Inc. and Boris Lipkin.
	10.44	Stock Option Agreement dated as of February 5, 2003, by and between Therma-Wave, Inc. and Boris Lipkin.
	10.45	Offer letter, Board Services, dated as of March 12, 2003, from Therma-Wave, Inc. to Papken S. Der Torossian.
	10.46	Stock Option Agreement dated as of March 12, 2003, by and between Therma-Wave, Inc. and Papken S. Der Torossian.
	99.1	Risk Factors.(1)
	99.2	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the same numbered exhibit in the Company’s amended Annual Report on Form 10-K/A for the period ended March 31, 2002 (File No. 000-26911)

EX-10.42 3 f89571exv10w42.htm EXHIBIT 10.42 Therma-Wave, Inc Exhibit 10.42

Exhibit 10.42

SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

This Second Amendment to Loan and Security Agreement is entered into as of November 19, 2002 (the “Amendment”), by and between COMERICA BANK-CALIFORNIA (“Bank”) and THERMA-WAVE, INC. (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of March 28, 2001, as amended by an Amendment to Loan and Security Agreement dated as of December 21, 2001 (as amended, the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Certain definitions in Section 1.1 are amended to read as follows:

“Interest Period” means for each LIBOR Rate Advance, a period thirty (30), sixty (60) and ninety (90) day, as Borrower may elect, provided that the last day of an Interest Period for a LIBOR Rate Advance shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, provided, further, in all cases such period shall expire not later than the applicable Revolving Maturity Date.

“Revolving Line” means Ten Million Dollars ($10,000,000).

“Revolving Maturity Date” means September 30, 2003.

2. The reference to “Four Million Dollars ($4,000,000)“in clause (c) of the defined term “Permitted Investment” in Section 1.1 is amended to read “Two Million Dollars ($2,000,000)”.

3. The introductory paragraph of the definition of “Eligible Accounts” in Section 1.1 of the Agreement is hereby amended to read as follows: “’Eligible Accounts’ means those Accounts that arise in the ordinary course of Borrower’s business that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.4; provided, that standards of eligibility may be fixed and revised from time to time by Bank. Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:”.

4. Clause (i) of the defined term “Eligible Accounts” in Section 1.1 is amended to read: “(i) Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty percent (20%) of all Accounts, to the extent such obligations exceed the aforementioned percentage (the ‘Concentration Limit’), provided that the Concentration Limit for Intel shall be twenty five percent (25%).”

5. The reference to “Twenty Million Dollars ($20,000,000)” in clause (c) of the definition of “Permitted Indebtedness” in Section 1.1 of the Agreement is hereby amended to read “Five Million Dollars ($5,000,000)”.

6. The following sentence is hereby added to the end of Section 2.1.1(a): “If the aggregate amount of the outstanding Advances plus the aggregate face amount of all outstanding Letters of Credit exceeds the lesser of

the Revolving Line or the Borrowing Base at any time, Borrower shall immediately cash secure, in an account at Bank, such excess to the satisfaction of Bank.”

7. The first sentence of Section 2.1.1(c) is amended to read as follows: “The outstanding principal balance of each Prime Rate Advance shall bear interest until principal is due (computed daily on the basis of a 360 day year and actual days elapsed) at a floating rate per annum equal to the Prime Rate plus one quarter percent (0.25%).”

8. The reference in Section 2.1.2(a) to “Seven Million Five Hundred Thousand Dollars ($7,500,000)” is amended to read “Four Million Five Hundred Thousand Dollars ($4,500,000)”.

9. The text in clause (a) of Section 6.3 is amended to read “(a) as soon as available, but in any event within forty-five (45) days after the end of each quarter, Borrower’s report on Form 10-Q and consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, and certified by a Responsible Officer.”

10. The last paragraph of Section 6.3 is hereby amended to read as follows:

Within fifteen (15) days of the last day of each month in which any Credit Extensions are outstanding, Borrower shall deliver to Bank a Borrowing Base Certificate in substantially the form of Exhibit D attached hereto, together with an aged listing in form and substance satisfactory to Bank of Borrower’s accounts payable and accounts receivable and an acceptance accounts receivable report. Within fifteen (15) days of the last day of each quarter in which no Credit Extensions are outstanding, Borrower shall deliver to Bank an aged listing in form and substance satisfactory to Bank of Borrower’s accounts payable and accounts receivable and an acceptance accounts receivable report.

11. Sections 6.7 and 6.13 are amended to read as follows:

6.7 Quick Ratio. Borrower shall maintain, as of the last day of each calendar quarter, a ratio of Quick Assets to Current Liabilities of at least 1.25 to 1.00.

6.13. Loss. Borrower shall not suffer a loss in any quarter in excess of the following: $18,000,000 for the quarter ending September 30, 2002; $13,500,000 for the quarter ending December 31, 2002; $11,000,000 for the quarter ending March 31, 2003; $5,000,000 for the quarter ending June 30, 2003; or $2,500,000 for the quarter ending September 30, 2003; provided that, for the quarter ending September 30, 2002, Borrower may take a non-cash writedown of not more than $75,000,000, consisting of $67,400,000 of goodwill and $7,500,000 of Inventory reserves which shall be excluded from the calculation of this covenant.

12. Section 6.9 is deleted from the Agreement.

13. Section 7.3 is amended to read as follows:

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person.

14. Section 7.13 is amended to read as follows:

7.13 Capital Expenditures. Make or become committed to make capital expenditures in excess of Five Million Dollars ($5,000,000) in the aggregate during any fiscal year.

15. The Compliance Certificate to be delivered after the date of this Amendment shall be in substantially the form of Exhibit C hereto.

16. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all promissory notes, guaranties, security agreements, mortgages, deeds of trust, environmental agreements, and all other instruments, documents and agreements entered into in connection with the Agreement.

17. Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

18. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

19. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

(a) this Amendment, duly executed by Borrower;

(b) an amount equal to all Bank Expenses incurred through the date of this Amendment

(d) a certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment; and

(e) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.


		THERMA-WAVE, INC.

		By:	/s/: L.Ray Christie


		Title: Vice President, CFO and Secretary

		COMERICA BANK-CALIFORNIA

		By:	/s/: Benjamin Yu


		Title: Corporate Banking Officer

EXHIBIT C
COMPLIANCE CERTIFICATE

TO: COMERICA BANK-CALIFORNIA

FROM: THERMA-WAVE, INC.

The undersigned authorized officer of THERMA-WAVE, INC. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for the period ending with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes. All days and periods specified relate to fiscal period end

Please indicate compliance status by circling Yes/No under “Complies” column.


Reporting Covenant	Required	Complies

10Q Report, Quarterly financials	Quarterly within 45 days (consolidated and consolidating)	Yes	No

Annual (CPA Audited)	FYE within 90 days (consolidated and consolidating)	Yes	No

10-K Report	FYE within 90 days	Yes	No

A/P and A/R Agings and Acceptance A/R Report	Quarterly within 25 days (when no Credit Extensions are outstanding)	Yes	No

BBC, A/P and A/R Agings and Acceptance A/R Report	Monthly within 15 days (when Credit Extensions exceed $0)	Yes	No

Financial Covenant

Required

Actual

Complies

Maintain on a Quarterly Basis:

Minimum Quick Ratio

1.25:1.00

____:1.00

Yes

Maximum Debt-TNW

1.00:1.00

____:1.00

Yes

Maximum Quarterly Loss

______

Yes

Minimum Unrestricted Cash

10,000,000

______

Yes

Minimum Domestic Assets

______

Yes

Maximum Capital Expenditures

5,000,000

______

Yes


	Comments Regarding Exceptions:	Lender USE ONLY

	See Attached.

Sincerely,
		Received By:

SIGNATURE
		Date:


TITLE		Reviewed By:


DATE		Compliance Status: Yes / No

¹ Loss < $18,000,000 for 9/30/02; Loss < $13,500,000 for 12/31/02; Loss < $11,000,000 for 03/31/03; Loss < $5,000,000 for 6/30/03; Loss <$2,500,000 for 9/30/02. For 9/30/02, non-cash writedown of up to $75,000,000 permitted, consisting of $67,400,000 of goodwill and $7,500,000 of Inventory reserves.

CORPORATE RESOLUTIONS TO BORROW

Borrower: THERMA-WAVE, INC.

I, the undersigned Secretary or Assistant Secretary of THERMA-WAVE, INC. (the “Corporation”), HEREBY CERTIFY that the Corporation is organized and existing under and by virtue of the laws of the state of Delaware.

I FURTHER CERTIFY that at a meeting of the Directors of the Corporation duly called and held, at which a quorum was present and voting, (or by other duly authorized corporate action in lieu of a meeting), the following resolutions were adopted.

BE IT RESOLVED, that any one (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below:


NAMES	POSITIONS	ACTUAL SIGNATURES

acting for and on behalf of this Corporation and as its act and deed be, and they hereby are, authorized and empowered:

Borrow Money. To borrow from time to time from Comerica Bank-California (“Bank”), on such terms as may be agreed upon between the officers, employees, or agents of the Corporation and Bank, such sum or sums of money as in their judgment should be borrowed, without limitation.

Execute Amendment. To execute and deliver to Bank that certain Second Amendment to Loan and Security Agreement dated as of November , 2002 (the “Amendment”) and related documents, and also to execute and deliver to Bank one or more renewals, extensions, modifications, consolidations, or substitutions therefor.

Grant Security. To grant a security interest to Bank in the Collateral described in the Amendment, which security interest shall secure all of the Corporation’s Obligations, as described in the Amendment.

Letters of Credit. To execute letter of credit applications and other related documents pertaining to Bank’s issuance of letters of credit.

Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable.

Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions.

BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.

I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever.

I FURTHER CERTIFY that attached hereto are true and correct copies of the Certificate of Incorporation and Bylaws of the Corporation.

IN WITNESS WHEREOF, I have hereunto set my hand on November , 2002 and attest that the signatures set opposite the names listed above are their genuine signatures.

CERTIFIED TO AND ATTESTED BY:

X

LOGO OF COMERICA


TECHNOLOGY & LIFE SCIENCES DIVISION		SECURITIES ACCOUNT CONTROL AGREEMENT

November 19, 2003

Attn: Account Officer

Re: Comerica Bank–California /Security Interest in Securities Account of THERMA-WAVE, INC.

Dear Madam:

This agreement (“Control Agreement”) is entered by and among Comerica Bank-California (Technology and Life Sciences Division) (“Secured Party”), Therma-Wave, Inc. (“Pledgor”) and Comerica Bank-California (Institutional Trust Department) (“Securities Intermediary”).

1. This Control Agreement concerns securities account No. and any other account (collectively, the “Securities Account”) established with Securities Intermediary. Pursuant to that certain Loan and Security Agreement dated as of March 28, 2001, as amended from time to time, including, but not limited to, by that certain Amendment to Loan and Security Agreement dated as of December 21, 2001, and that certain Second Amendment to Loan and Security Agreement dated of even date herewith (collectively, as amended from time to time, the “Security Agreement”), Secured Party has a security interest in all of Pledgor’s present and future right, title and interest in, to and under the Securities Account maintained with Securities Intermediary in connection with the securities, securities entitlements or other investment property, instruments and financial assets contained in the Securities Account, and all investment property, instruments and financial assets at any time held or maintained in the Securities Account, together with all investment property, instruments and financial assets substituted therefore or for any part thereof, all interest, dividends, increases, profits, new financial assets or other increments, distributions or rights of any kind received on account of any of the foregoing, and all other income received in connection therewith and all products or proceeds thereof (whether cash or non-cash proceeds)(collectively, the “Securities Entitlement”). Secured Party, Pledgor and Securities Intermediary are entering into this Control Agreement to perfect Secured Party’s security interest in the Securities Account.

2. The Security Entitlement is to be held in the Securities Account and is and will remain subject to a first priority security interest in favor of Secured Party. The Securities Account is not a margin account or subject to check writing privileges. All rights of Securities Intermediary in the Securities Account except for Permitted Liens as defined below shall be subordinated and postponed in favor of Secured Party’s rights and interests therein under and pursuant to the Security Agreement.

3. Until Securities Intermediary is notified to the contrary by Secured Party in any entitlement order or other notice (“Notice”), Securities Intermediary is authorized to act upon the instruction of Pledgor, or its authorized representatives, and comply with Pledgor’s (or its authorized representatives) instructions for the following purposes [applicable boxes should be checked]:

[x] make trades of any and all of the financial assets held in the Securities Account &/or

[x] receiving any distributions relating to the Securities Entitlement &/or

[x] making any withdrawals of any and all of the financial assets held in the Securities Account or the proceeds thereof.

Upon and following receipt of Notice, (i) Securities Intermediary shall immediately cease complying with instructions concerning the Securities Account and the Security Entitlement originated by the Pledgor, or its representatives, and thereafter shall comply with the instructions of Secured Party without further consent by Pledgor; (ii) Securities Intermediary is not authorized to release any of the Security Entitlement or any proceeds thereof or make any distribution from the Securities Account to any party other than Secured Party, until otherwise instructed by Secured Party in writing; (iii) Securities Intermediary is instructed to hold the Securities Account and Security Entitlement for the benefit of Secured Party; and (iv) Secured Party is the only person authorized to make any withdrawals of and/or to authorize or receive any distribution of or relating to the Securities Entitlement.

4. By its execution hereof, Securities Intermediary acknowledges and agrees to the terms set forth herein, and that this Control Agreement constitutes written notice to Securities Intermediary and acknowledgment by Securities Intermediary of Secured Party’s security interest in the Securities Account. Said security interest shall be noted by the Securities Intermediary on its books and records.

5. Securities Intermediary has established the Securities Account in Pledgor’s name. A true and complete copy of the account agreement entered into between Pledgor and Securities Intermediary with respect to the Securities Account (the “Account Agreement”)is attached as Exhibit A. Exhibit B is a complete and accurate statement of the investment property, financial assets and credit balances credited to the Securities Account as of the date(s) set forth in the statement. Except for the claims and interest of Secured Party and Pledgor in the Securities Account and liens to secure fees owed to Securities Intermediary by Pledgor with respect to the operation of the Securities Account (“Permitted Liens”), Securities Intermediary does not know of any claim to or interest in the Securities Account.

6. Securities Intermediary shall send copies of all statements and confirmations regarding the Securities Account simultaneously to Pledgor and to Secured Party. Securities Intermediary shall promptly notify Secured Party and Pledgor if a person asserts a lien, encumbrance or adverse claim against the Securities Account.

7. Securities Intermediary shall not agree with any third party that Securities Intermediary will comply with entitlement orders from the third party. Securities Intermediary shall not amend the Account Agreement, including its choice of law clause and the provision providing for treatment of property held in the securities account as a financial asset, without Secured Party’s written consent. Securities Intermediary shall not permit Pledgor to terminate the Securities Account.

8. The rights and powers granted herein to Secured Party have been granted in order to perfect its security interest in the Securities Account, are powers coupled with an interest and will neither be affected by the death or bankruptcy of the Pledgor nor by the lapse of time. Securities Intermediary’s obligations under this Control Agreement shall continue in effect until the security interest of Secured Party in the Securities Account has been terminated pursuant to the terms of the Security Agreement and Secured Party has notified you of such termination in writing. Upon receipt of such notice Securities Intermediary’s obligations under this Control Agreement with respect to the operation and maintenance of the Securities Account after the receipt of such notice shall terminate, Secured Party shall have no further right to originate entitlement orders concerning the Securities Account and Securities Intermediary may take such steps as the Pledgor may request to vest full ownership and control of the Securities Account in the Pledgor, including, but not limited to, removing the name of Secured Party from the Securities Account or transferring all of the financial assets and credit balances in the Securities Account to another securities account in the name of the Pledgor or its designee.

9. This Control Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto, and shall be governed by, and in accordance with, the laws of the State of California without regard to conflict of laws principles.

10. This Control Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.

11. Pledgor acknowledges that this Control Agreement supplements Pledgor’s existing agreements with Securities Intermediary. This Control Agreement does not create any obligation or duty of Securities Intermediary other than those expressly set forth herein. If this Control Agreement conflicts with any other agreement between Securities Intermediary and Pledgor, the terms of this Control Agreement shall prevail.

12. This Control Agreement is an integrated agreement and supplements all negotiations and agreement with respect to the subject matter hereof. Any amendments hereto shall be in writing and signed by all parties.

13. Unless otherwise provided in this Control Agreement, all notices or demands relating to this Control Agreement shall be in writing and (except for account statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered, sent by certified mail or by facsimile to Secured Party, Pledgor or Securities Intermediary, as the case may be, at the address set forth below:


If to Secured Party:		Comerica Bank-California (Technology and Life Sciences Division) 9920 S. La Cienega Blvd., Suite 1401 Inglewood, CA 90301 Facsimile: (310) 338-6110 Attention: Manager

with a copy to:		Comerica Bank-California 226 Airport Parkway 1st Floor, M/C 4120 San Jose, CA 95110 Telephone: (408) 451-8592 Facsimile: (408) 451-8568 Attention: Robert Shutt

If to Pledgor:		Therma-Wave, Inc. 1250 Reliance Way Freemont, CA 94539 Facsimile: (510) 226-6834 Attention.: Ray Christie

If to Securities Intermediary:		Comerica Bank-California (Institutional Trust Department) MC 4195 P.O. Box 2249 San Jose, CA 95109-2249 Telephone: (650) 462-6165 Facsimile:(650) 328-9317 Attention: Account Officer

14. WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.

Please sign where indicated below to reflect your acknowledgment of and agreement to the foregoing terms and conditions.

Very truly yours,


	COMERICA BANK-CALIFORNIA (TECHNOLOGY AND LIFE SCIENCES DIVISION) Secured Party

	By:	/s/ Benjamin Yu


	Title: Corporate Banking Officer

	THERMA-WAVE, INC. Pledgor

	By:	/s/ L. Ray Christie


	Title: Vice President, CFO & Secretary

	By:


	Title:

	COMERICA BANK-CALIFORNIA (INSTITUTIONAL TRUST DEPARTMENT) Securities Intermediary

	By:	/s/ Robert H. Gajewski


	Title: Senior Vice President

Exhibit A
Account Agreement

Exhibit B
Statement

INTELLECTUAL PROPERTY SECURITY AGREEMENT

This Intellectual Property Security Agreement (the “Agreement”) is made as of November 19, 2002, by and between THERMAWAVE, INC. (“Grantor”), and COMERICA BANK-CALIFORNIA (“Secured Party”).

RECITALS

A. Secured Party has agreed to make certain advances of money and to extend certain financial accommodations to Grantor (the “Loans”) in the amounts and manner set forth in that certain Loan and Security Agreement, dated as of March 28, 2001, as amended by an Amendment to Loan and Security Agreement dated as of December 21, 2001, as amended by that Second Amendment to Loan and Security Agreement dated as of even date herewith, as may be further amended (the “Loan Agreement;” all capitalized terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement).

B. Secured Party is willing to make the Loans to Grantor, but only upon the condition, among others, that Grantor shall grant to Secured Party a security interest in all of Grantor’s right title, and interest in, to and under all of the Collateral, as defined in this Agreement.

NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:

1. Grant of Security Interest. As collateral security for the prompt and complete payment and performance of all of Grantor’s present or future indebtedness, obligations and liabilities to Secured Party, Grantor hereby grants a security interest and mortgage to Secured Party, as security, in and to Grantor’s entire right, title and interest in, to and under all of its intellectual property, including without limitation the following (all of which shall collectively be called the “Collateral”):

(a) Any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, including without limitation those set forth on Exhibit A attached hereto (collectively, the “Copyrights”);

(b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

(d) All patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on Exhibit B attached hereto (collectively, the “Patents”);

(e) Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Grantor connected with and symbolized by such trademarks, including without limitation those set forth on Exhibit C attached hereto (collectively, the “Trademarks”);

(f) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;

(g) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;

(h) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and

(i) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

2. Covenants and Warranties. Grantor represents, warrants, covenants and agrees as follows:

(a) Grantor is now the sole owner of the Collateral, except for licenses granted by Grantor to its customers in the ordinary course of business;

(b) Except as set forth in the Schedule, Grantor’s rights as a licensee of intellectual property do not give rise to more than five percent (5%) of its gross revenue in any given month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service;

(c) Performance of this Agreement does not conflict with or result in a breach of any agreement to which Grantor is party or by which Grantor is bound;

(d) During the term of this Agreement, unless disclosed to the Bank in writing, Grantor will not transfer or otherwise encumber any interest in the Collateral, except for licenses granted by Grantor in the ordinary course of business or as set forth in this Agreement;

(e) Except as disclosed in writing to Bank, to its knowledge, each of the Patents is valid and enforceable, and no part of the Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Collateral violates the rights of any third party;

(f) Grantor shall promptly advise Secured Party of any material change in the composition of the Collateral, including but not limited to any subsequent ownership right of the Grantor in or to any Trademark, Patent or Copyright not specified in this Agreement;

(g) Borrower shall register or cause to be registered (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as the case may be, those registerable intellectual property rights now owned or hereafter developed or acquired by Borrower, to the extent that Borrower, in its reasonable business judgment, deems it appropriate to so protect such intellectual property rights. Borrower shall promptly give Bank written notice of any applications or registrations of intellectual property rights filed with the United States Patent and Trademark Office, including the date of such filing and the registration or application numbers, if any. Borrower shall (i) give Bank not less than 30 days prior written notice of the filing of any applications or registrations with the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed, and (ii) prior to the filing of any such applications or registrations, shall execute such documents as Bank may reasonably request for Bank to maintain its perfection in such intellectual property rights to be registered by Borrower, and upon the request of Bank, shall file such documents simultaneously with the filing of any such applications or registrations. Upon filing any such applications or registrations with the United States Copyright Office, Borrower shall promptly provide Bank with (i) a copy of such applications or registrations, without the exhibits, if any, thereto, (ii) evidence of the filing of any documents requested by Bank to be filed for Bank to maintain the perfection and priority of its security interest in such intellectual property rights, and (iii) the date of such filing;

(h) This Agreement creates, and in the case of after acquired Collateral, this Agreement will create at the time Grantor first has rights in such after acquired Collateral, in favor of Secured Party a valid and perfected first priority security interest in the Collateral in the United States securing the payment and performance of the obligations evidenced by the Loan Documents;

(i) All information heretofore, herein or hereafter supplied to Secured Party by or on behalf of Grantor with respect to the Collateral is accurate and complete in all material respects;

(j) Grantor shall not enter into any agreement that would materially impair or conflict with Grantor’s obligations hereunder without Secured Party’s prior written consent, which consent shall not be unreasonably withheld. Grantor shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Grantor’s rights and interests in any property included within the definition of the Collateral acquired under such contracts; and

(k) Upon any executive officer of Grantor obtaining actual knowledge thereof, Grantor will promptly notify Secured Party in writing of any event that materially adversely affects the value of any Collateral, the ability of Grantor to dispose of any Collateral or the rights and remedies of Secured Party in relation thereto, including the levy of any legal process against any of the Collateral.

3. Secured Party’s Rights. Secured Party shall have the right, but not the obligation, to take, at Grantor’s sole expense, any actions that Grantor is required under this Agreement to take but which Grantor fails to take, after fifteen (15) days’ notice to Grantor. Grantor shall reimburse and indemnify Secured Party for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this section 3.

4. Inspection Rights. Grantor hereby grants to Secured Party and its employees, representatives and agents the right to visit, during reasonable hours upon prior reasonable written notice to Grantor, any of Grantor’s plants and facilities that manufacture, install or store products (or that have done so during the prior six-month period) that are sold utilizing any of the Collateral, and to inspect the products and quality control records relating thereto upon reasonable written notice to Grantor and as often as may be reasonably requested.

5. Further Assurances; Attorney in Fact.

(a) On a continuing basis, Grantor will make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including appropriate financing and continuation statements and collateral agreements and filings with the United States Patent and Trademark Office and the Register of Copyrights, and take all such action as may reasonably be deemed necessary or advisable, or as requested by Secured Party, to perfect Secured Party’s security interest in all Copyrights, Patents and Trademarks and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to Secured Party the grant or perfection of a security interest in all Collateral.

(b) Grantor hereby irrevocably appoints Secured Party as Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, from time to time in Secured Party’s discretion, to take any action and to execute any instrument which Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including (i) to modify, in its sole discretion, this Agreement without first obtaining Grantor’s approval of or signature to such modification by amending Exhibit A, Exhibit B and Exhibit C, hereof, as appropriate, to include reference to any right, title or interest in any Copyrights, Patents or Trademarks acquired by Grantor after the execution hereof or to delete any reference to any right, title or interest in any Copyrights, Patents or Trademarks in which Grantor no longer has or claims any right, title or interest, (ii) to file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Grantor where permitted by law and (iii) after the occurrence of an Event of Default, to transfer the Collateral into the name of Secured Party or a third party to the extent permitted under the California Uniform Commercial Code.

6. Events of Default. The occurrence of any of the following shall constitute an Event of Default under the Agreement:

(a) An Event of Default occurs under the Loan Documents; or

(b) Grantor breaches any warranty or agreement made by Grantor in this Agreement and, as to any breach that is capable of cure, Grantor fails to cure such breach within five (5) days of the occurrence of such breach.

7. Remedies. Upon the occurrence and continuance of an Event of Default, Secured Party shall have the right to exercise all the remedies of a secured party under the California Uniform Commercial Code, including without limitation the right to require Grantor to assemble the Collateral and any tangible property in which Secured Party has a security interest and to make it available to Secured Party at a place designated by Secured Party. Secured Party shall have a nonexclusive, royalty free license to use the Copyrights, Patents and Trademarks to the extent reasonably necessary to permit Secured Party to exercise its rights and remedies upon the occurrence of an Event of Default. Grantor will pay any expenses (including reasonable attorneys’ fees) incurred by Secured Party in connection with the exercise of any of Secured Party’s rights hereunder, including without limitation any expense incurred in disposing of the Collateral. All of Secured Party’s rights and remedies with respect to the Collateral shall be cumulative.

8. Indemnity. Grantor agrees to defend, indemnify and hold harmless Secured Party and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement, and (b) all losses or expenses in any way suffered, incurred, or paid by Secured Party as a result of or in any way arising out of, following or consequential to transactions between Secured Party and Grantor, whether under this Agreement or otherwise (including without limitation reasonable attorneys’ fees and reasonable expenses), except for losses arising from or out of Secured Party’s gross negligence or willful misconduct.

9. Course of Dealing. No course of dealing, nor any failure to exercise, nor any delay in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

10. Attorneys’ Fees. If any action relating to this Agreement is brought by either party hereto against the other party, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements.

11. Amendments. This Agreement may be amended only by a written instrument signed by both parties hereto.

12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument.

13. California Law and Jurisdiction; Jury Waiver. This Agreement shall be governed by the laws of the State of California, without regard for choice of law provisions. Grantor and Secured Party consent to the exclusive jurisdiction of any state or federal court located in Santa Clara County, California. GRANTOR AND SECURED PARTY EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LOAN DOCUMENTS, THIS AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.


		GRANTOR:

Address of Grantor:		THERMA-WAVE, INC.

1250 Reliance Way Fremont, CA 94539		By: /s/ L. Ray Christie

		Its: Vice President, CFO & Secretary

Attn: Ray Christie

		SECURED PARTY

Address of Secured Party:		COMERICA BANK-CALIFORNIA

333 West Santa Clara Street San Jose, CA 95113		By: /s/ Benjamin Yu

		Its: Corporate Banking Officer

Attn: Corporate Banking Center

EXHIBIT A

Copyrights


Description	Registration Number	Registration Date

EXHIBIT B

Patents


Description	Patent Number		Issue Date

A method for evaluating the quality of the bond between two members utilizing thermoacoustic microscopy		4,484,820	11/27/84

Thermoacoustic microscopy		4,255,971	03/17/81

A method for detection of thermal waves with a laser probe		4,521,118	06/04/85

Thin film thickness measurements and depth profiling utilizing a thermal wave detection system		4,513,384	04/23/85

Thin film thickness measurement with thermal waves		4,522,510	06/11/85

Method and apparatus for evaluation surface conditions of a sample (more-thermaprobe)		4,636,088	01/13/87

Method and apparatus for evaluation surface and subsurface features in a semiconductor (plasma waves)		4,952,063	08/28/90

Method and apparatus for evaluation surface and subsurface features in a semiconductor (plasma waves)		5,042,952	08/27/91

Evaluation of surface and subsurface characteristics of a sample (scattering)		4,532,561	12/30/86

Method and apparatus for optically detecting surface states in materials		4,750,822	06/14/88

Method and apparatus for identifying and locating area of interest on a work piece (line flight scan)		4,795,260	01/03/89

Method and apparatus for measuring thickness of thin films (multi-angle interferometry)		4,999,014	03/12/91

High resolution ellipsometric apparatus (multiple angle)		5,042,951	08/27/91

High resolution ellipsometric apparatus (reissue)


Description	Patent Number		Issue Date

Method and apparatus for evaluating ion implant dosage levels in semiconductors		5,074,669	12/24/91

Apparatus for measuring grain sizes in metalized layers		5,149,978	09/22/92

Optical measurement device with enhanced sensitivity (spatial filter)		5,159,412	10/27/92

Method and apparatus for evaluating the thickness of thin films (optiprobe-integrated microellipsometer)		5,181,080	01/19/93

Apparatus for evaluating thermal and electrical characteristics in a sample		5,228,776	07/20/93

Multiple angle spectroscopic analyzer utilizing interferometric and ellipsometric devices		5,412,473	05/02/95

Multiple angle spectroscopic analyzer		5,596,406	01/21/97

Integrated spectroscopic ellipsometer		5,596,411	01/21/97

Broadband spectroscopic rotating compensator ellipsometer		5,877,859	03/02/99

Broadband spectroscopic rotating compensator ellipsometer		5,973,787	10/26/99

Broadband spectroscopic rotating compensator ellipsometer		6,134,012	10/17/00

Broadband spectroscopic rotating compensator ellipsometer		09/619,456	07/19/00

Broadband spectroscopic rotating compensator ellipsometer		Need serial number	08/31/01

Method and apparatus for optical data analysis		5,864,633	01/26/99

Method and apparatus for optical data analysis		5,953,446	09/14/99

A thin film optical measurement system and method with calibrating ellipsometer		5,798,837	08/25/98


Description	Patent Number		Issue Date

A thin film optical measurement system and method with calibrating ellipsometer		5,900,939	05/04/99

A thin film optical measurement system and method with calibrating ellipsometer		09/247,121	02/08/99

Thin film optical measurement system and method with calibrating ellipsometer		09/886,514	06/21/01

An apparatus for analyzing multi-layer thin film stacks on semiconductors		6,278,519	08/21/01

An apparatus for analyzing multi-layer thin film stacks on semiconductors		09/563,152	05/02/00

Apparatus for analyzing multi-layer thin film stacks on semiconductors		5,978,074	11/02/99

Apparatus for analyzing multi-layer thin film stacks on semiconductors		6,191,846	02/20/01

Apparatus for analyzing multi-layer thin film stacks on semiconductors		09/688,562	10/16/00

Precision alignment of unpatterned wafers		09/384,476	08/27/99

Combination thin-film stress and thickness measurement device		09/384,474	08/27/99

Optical inspection equipment for semiconductor wafers with precleaning		09/294,869	04/20/99

Optical inspection equipment for semiconductor wafers with precleaning		09/499/478	02/07/00

Method and apparatus for preparing semiconductor wafers for measurement		09/859,917	05/17/01

Combination optical and electrical metrology apparatus		09/519,051	03/03/00

Ellipsometer and polarimeter with zero-order plate		6,181,421	01/30/01

X-ray thickness gauge		5,619,548	04/08/97


Description	Patent Number		Issue Date

Measurement of thin films and barrier layers on patterned wafers with x-ray reflectometry		09/629,407	08/01/00

Spatial averaging technique for ellipsometry		6,281,027	08/28/01

Spatial averaging technique for ellipsometry		09/871,220	05/31/01

Apparatus for analyzing samples using combined thermal wave and x-ray reflectance measurements		09/761,132	01/16/01

Multi-domain optimization		09/542,724	04/04/00

Combination thermal wave and optical measurement system		09/499,974	02/08/00

Fiber filtered laser system for use in measuring thin film thickness		09/494,730	01/31/00

Evaluation of etching processes in semiconductors		09/500,744	02/09/00

XRR commercial improvements		09/527,389	03/16/00

“AE” temperature and thickness measurement		09/575,295	05/19/00

Critical dimension analysis with simultaneous multiple angle of incidence measurement		09/818,703	03/27/01

Analysis of interface layer characteristics		09/804,765	03/13/01

Refractive focusing SE		09/848,733	05/03/01

Method for determining ion concentration and energy level of shallow junction implants		09/884,262	06/19/01

Method of monitoring the fabrication of thin film layers forming a DWDM filter		09/939,817	08/27/01

X-ray detector shield			(provisional application expired 10/10/01)

Ellipsometer w/gradium lens		09/779,761	08/08/01

XRR w/adjustable take-off angle			(provisional application expired 01/11/02)


Description	Patent Number		Issue Date

Thin films nitration monitoring method		09/864,981	05/24/01

Purge system for optical measurement			(provisional application expired 04/11/02)

Coaxial imaging light source (coil)		09/927,068	08/09/01

Optics for broadband measurements		Pending serial number	08/30/01

Double ellipsometer			(provisional application expired 08/09/02)

Chuck integrated reference sample			(provisional application expired 04/30/02)

Separating specular & diffuse scatter in XRR			(provisional application expired 04/30/02)

Real time analysis of periodic structures on semiconductor		09/906,290	07/06/01

Compact imaging spectrometer		Pending serial number	09/06/01

Stage rotation edge measurements			(provisional application expired 06/15/02)

Diffractive optical elements & grid polarizer			(provisional application expired 06/18/02)

R-theta stage rotation center algorithm			(provisional application expired 07/16/02)

CD metrology using Green’s function			(provisional application expired 08/10/02)

Detection configuration for optical metrology			(provisional application expired 08/28/02)

EXHIBIT C

Trademarks


	Registration/Application		Registration/Application
Description	Number		Date

Therma-probe		1,715,145		09/15/92

Opti-probe		1,661,280		10/15/91

(design)		1,636,760		03/05/91

Metaprobe		75/255,334		03/11/97

Metaprobex		76/219,720		03/05/01

Therma-wave		2,165,847		06/16/98

BPR		2,271,440		08/24/99

Beam Profile Reflectrometry		75/342,802		08/18/97

Beam Profile Ellipsometry		75/344,868		08/18/97

BPE		2,268,211		08/10/99

AE		2,290,866		11/09/99

Microae		75/601,345		12/08/98

MAE		75/601,342		12/08/98

FAB Productivity Enhancement		75/653,220		03/04/99

FPE		2,403,438		11/14/00

Absolute Ellipsometer		2,364,232		07/04/00

Desorber		2,420,246		01/09/01

Environmental Film Desorber		76/026,659		04/14/00

EFD		76/025,683		04/141/00

Integra		76/074,286		06/20/00

WBWS		76/272,994		06/18/01

Coils		76/274,897		07/16/01

RT-CD		76/313,612		09/12/01

CD-Probe		76/315,694		09/21/01

14 EX-10.43 4 f89571exv10w43.htm EXHIBIT 10.43 Therma-Wave, Inc. Exhibit 10.43

EXHIBIT 10.43

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of February 5, 2003, between Therma-Wave, Inc., a Delaware corporation (the “Company”), and Boris Lipkin (“Executive”).

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Employment. The Company shall employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in Section 5 hereof (the “Employment Period”).

2. Position and Duties.

(a) During the Employment Period, Executive shall serve as the President and Chief Executive Officer of the Company and shall have the normal duties, responsibilities, functions and authority of the President and Chief Executive Officer, subject to the power and authority of the Board to expand or limit such duties, responsibilities, functions and authority and to overrule actions of officers of the Company. During the Employment Period, Executive shall render such administrative, financial and other executive and managerial services to the Company and its Subsidiaries, which are consistent with Executive’s position as the Board may from time to time direct.

(b) During the Employment Period, Executive shall report to the Board and shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Subsidiaries. Executive shall perform his duties, responsibilities and functions to the Company and its Subsidiaries hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company’s and its Subsidiaries’ policies and procedures in all material respects.

(c) For purposes of this Agreement, “Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by the Company, directly or through one of more Subsidiaries.

3. Compensation and Benefits.

(a) During the Employment Period, Executive’s base salary shall be $320,000 per annum or such other rate as the Board may determine from time to time (as adjusted from time to time, the “Base Salary”), which salary shall be payable by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time). In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which senior executive employees of the

Company and its Subsidiaries are generally eligible (together with the COBRA Benefits defined below, the “Benefits”).

(b) During the Employment Period, the Company shall reimburse Executive for all reasonable business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

(c) In addition to the Base Salary, for each of the Company’s fiscal years beginning with the 2004 fiscal year, Executive will be eligible to earn a bonus of up to 50% of his Base Salary (the “Bonus”) based on the Company achieving certain corporate performance goals and Executive achieving certain individual goals. Each of the target amount of the Bonus, the corporate performance goals and the individual goals shall be set annually by the Board.

(d) During the Employment period, the Company shall provide Executive with an automobile allowance in amount of $1000 per month (the “Automobile Allowance”) to be used as Executive determines is necessary for the use and maintenance of an automobile (including but not limited to lease payments, licenses, insurance, gasoline and repairs).

(e) All amounts payable to Executive as compensation hereunder shall be subject to all required and customary withholding by the Company.

4. Stock Options. Executive shall be granted options for the purchase of 500,000 shares of common stock of the Company at a price equal to the closing price of such common stock on the Nasdaq National Market on the business day preceding the meeting of the Board of Directors at which this Agreement is approved and authorized. The term, vesting and other provisions relating to such options shall be set forth in and governed by a stock option agreement and the Company’s stock option plan.

5. Termination.

(a) The Employment Period (i) shall terminate upon Executive’s resignation (other than for Good Reason) or death, (ii) shall terminate upon Executive’s Disability, (iii) may be terminated by the Company at any time for Cause (as defined below) or without Cause and (iv) may be terminated by Executive for Good Reason.

(b) If the Employment Period is terminated by the Company without Cause or by Executive for Good Reason, Executive shall be entitled to receive the Base Salary, the Automobile Allowance and those certain benefits to which Executive shall be entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985 upon timely Executive’s timely submission of an appropriate application to the applicable insurance carrier and such insurance carrier’s acceptance of such application (the “COBRA Benefits”) to be paid for by the Company (collectively, the “Severance Payment”), in each case until the date which is six (6) months after the date of such termination (the “Severance Period”); provided that the portion of the Bonus that Executive would have been entitled to receive for the fiscal year in which the Severance Period

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terminates shall be reduced proportionately by the ratio of the number of days of such fiscal year not included in the Severance Period to the total number of days in such fiscal year. The Severance Payment will be payable at such times as such payments would have been payable had Executive not been terminated. Notwithstanding this provision, Executive shall be entitled to receive the COBRA Benefits following the Severance Period for the maximum time allowed under applicable law to the extent Executive pays for such COBRA Benefits. Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to pay any part or all of the Severance Payment if at any time during the Severance Period Executive is in breach of Sections 6 through 9 hereof. If the Employment Period is terminated for any of the foregoing reasons, the Severance Payment shall be reduced by fifty percent (50%) of the amount of any compensation Executive receives in respect of any other employment during the Severance Period. Upon request from time to time, Executive shall furnish the Company with a true and complete certificate specifying any such compensation due to or received by him. As a condition to the Company’s obligations (if any) to make the Severance Payment pursuant to this Section 5(b), Executive will execute and deliver a general release substantially in the form of Exhibit A attached hereto.

(c) If the Employment Period is terminated as a result of Executive’s Disability, Executive shall be entitled to receive the Severance Payment until the date, which is twelve (12) months after the date of such termination (the “Disability Severance Period”). Notwithstanding this provision, Executive shall be entitled to receive the COBRA Benefits following the Disability Severance Period for the maximum time allowed under applicable law to the extent Executive pays for such COBRA Benefits.

(d) If the Employment Period is terminated by the Company for Cause or is terminated upon Executive’s resignation (other than for Good Reason) or death, Executive shall be entitled to receive the Base Salary through the date of termination. If the Employment Period is terminated by Executive’s death, the Board may, in its good faith determination, grant Executive the pro rata portion of Executive’s Bonus that Executive would have received if Executive had remained living until such Bonus had been granted.

(e) Except as specifically provided herein, all of Executive’s rights to Benefits and bonuses which accrue or become payable after the termination of the Employment Period shall cease upon such termination.

(f) For purposes of this Agreement, “Disability” shall mean any physical or mental illness or incapacity of Executive if, as reasonably determined by the Board in good faith, such illness or incapacity results in Executive’s inability to perform his full-time duties and responsibility for the Company (i) for a period of three consecutive months, (ii) for a period of six (6) months in any twelve (12) month period, or (iii) at such time when satisfactory medical evidence exists that Executive has a physical or mental illness or incapacity that will likely prevent him from returning to the performance of his work duties for six (6) months or longer.

(g) For purposes of this Agreement, “Cause” shall mean (i) the commission of a felony or any other act or omission involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to

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bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute, (iii) substantial and repeated failure to perform duties as reasonably direct by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries, or (v) any other material breach of this Agreement.

(h) For purposes of this Agreement, “Good Reason” shall mean the occurrence (without Executive’s consent) of any one of the following acts by the Company, or failure by the Company to act: (i) the assignment to Executive of duties that represent a substantial adverse alteration in the nature or status of his responsibilities as a senior executive officer of the Company, except in the event Executive is unable to or fails to perform his normal full-time duties and responsibility with the Company as a result of incapacity due to physical or mental illness or incapacity; (ii) a reduction in the Base Salary as in effect on the date hereof if there is not also a reduction in the base salaries of a majority of the Company’s other senior executives; (iii) the relocation of the Company’s principal executive offices to a location outside the San Francisco Area (which includes the counties of San Francisco, Alameda, Santa Clara, Contra Costa, San Mateo and Marin) or the Company’s requiring Executive to be based anywhere other than the Company’s principal executive offices (but not including required travel on the Company’s business); (iv) the Company experiences a Change of Control (as defined below) and Executive is not subsequently offered a comparable position to that of President and Chief Executive Officer with comparable Base Salary, Bonus or Benefits; or (v) the wrongful failure by the Company to pay to Executive any portion of the Base Salary, Bonus, Automobile Allowance or Benefits, or to pay to Executive any portion of an installment of deferred compensation or Benefits under any deferred compensation or benefits program of the Company, within 45 days of the date such Base Salary, Bonus, Automobile Allowance, compensation or Benefit is due.

(i) For purposes of this Agreement, “Change of Control” shall mean any transaction involving the Company and an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) a majority of the outstanding shares of capital stock of the Company entitled to vote in the election of the Board (whether by merger, consolidation or sale or transfer of the Company’s capital stock) or (ii) all or substantially all of the Company’s assets determined on a consolidated basis.

(j) For purposes of this Agreement, “Independent Third Party” means any person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the capital stock on a fully diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the capital stock and who is not the spouse or descendant (by birth or adoption) of any such 5% owner of the capital stock).

6. Confidential Information and Right to Company Materials.

(a) Executive acknowledges that the information, observations and data (including Trade Secrets as defined below) obtained by him while employed by the Company and its Subsidiaries concerning the business or affairs of the Company, Sensys Instruments Corporation or any other Subsidiary (“Confidential Information”) are the property of the Company or such Subsidiary. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own purposes any Confidential Information without the prior

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written consent of the Board, unless and to the extent that the Confidential Information becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions. Executive shall deliver to the Company at the termination or expiration of the Employment Period, or at any other time the Company may reasonably request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) embodying or relating to the Confidential Information, Work Product (as defined below) or the business of the Company, Sensys Instruments Corporation or any other Subsidiaries which he may then possess or have under his control.

(b) Executive agrees that all styles, designs, lists, materials, books, files, reports, correspondence, data, records, and other documents pertaining to his employment or to any confidential information referred to above (“Company Material”) used or prepared by, or made available to, Executive, shall be and shall remain the property of the Company or its designees. Upon the termination of Executive’s employment or the expiration of this Agreement, all Company Materials shall be returned immediately to the Company, and Executive shall not make or retain any copies or excerpts thereof.

(c) Executive represents and warrants to the Company that Executive took nothing with him which belonged to any former employer when Executive left his prior position and that Executive has nothing that contains any information, which belongs to any former employer. If at any time Executive discovers this is incorrect, Executive shall promptly return any such materials to Executive’s former employer. The Company does not want any such materials, and Executive shall not be permitted to use or refer to any such materials in the performance of Executive’s duties hereunder.

7. Intellectual Property, Inventions and Patents. Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Company’s or any of its Subsidiaries’ actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive (whether above or jointly with others) while employed by the Company or its predecessor and its Subsidiaries, whether before or after the date of this Agreement (“Work Product”), belong to the Company or such Subsidiary. Executive shall promptly disclose such Work Product to the Board and, at the Company’s expense, perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

8. Protection of Trade Secrets. Executive acknowledges and agrees with the Company that Executive’s services to the Company require the use of information including a formula, pattern, compilation, program, device, method, technique, or process that the Company has made reasonable efforts to keep confidential and that derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use (“Trade Secrets”). Executive further

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acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide similar services requiring the use of such Trade Secrets to any person or entity competing with the Company or engaged in a similar business. Executive accordingly covenants and agrees with the Company that during the period commencing with the date of this Agreement and ending on the second anniversary of the date of the termination of Executive’s employment with the Company (the “Protection Period”), Executive shall not, directly or indirectly, either for himself or for any other individual, corporation, partnership, joint venture or other entity, participate in any business in the United States, Europe, China, Japan, Korea, Singapore and Taiwan in which he would be required to employ, reveal, or otherwise utilize Trade Secrets used hereafter by the Company but prior to the Executive’s termination. For purposes of this Agreement, the term “participate in” shall include, without limitation, having any direct or indirect interest in any corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner, stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect service or assistance to any individual, corporation, partnership, joint venture and other business entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise).

9. Nonsolicitation. During the Protection Period, Executive shall not (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, or (ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company (including, without limitation, making any negative statements or communications concerning the Company).

10. Executive’s Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

11. Survival. Sections 5 through 19 shall survive and continue in full force in accordance with their terms notwithstanding the expiration or termination of the Employment Period.

12. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

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	Notices to Executive:

	Boris Lipkin 412 Sand Hill Circle Menlo Park, CA 94025

	Notices to the Company:

	Therma-Wave, Inc. 1250 Reliance Way Fremont, California 94539

	With a copy to:

	Kirkland & Ellis 777 S. Figueroa Street Los Angeles, California 90017 Attn: Eva H. Davis

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.

13. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

14. Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

15. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

16. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

17. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs, successors

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and assigns, except that Executive may not assign his rights or delegate his duties or obligations hereunder without the prior written consent of the Company.

18. Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of California, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

19. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Board) and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate the Employment Period for Cause) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.


	THERMA-WAVE, INC.

	By:	/s/ L. RAY. CHRISTIE

	Its:	Chief Financial Officer

		/s/ Boris Lipkin

	Boris Lipkin

Exhibit A

GENERAL RELEASE

I, Boris Lipkin, in consideration of and subject to the performance by Therma-Wave, Inc., a Delaware corporation (together with its subsidiaries, the “Company”), of its obligations under the Employment Agreement, dated as of the date as of February 5, 2003 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its affiliates and all present and former directors, officers, agents, representatives, employees, successors and assigns of the Company and its affiliates and the Company’s direct or indirect owners (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under paragraph 5(b) of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive the payments and benefits specified in paragraph 5(b) of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter or breach this General Release. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates. I also acknowledge and represent that I have received all payments and benefits that I am entitled to receive (as of the date hereof) by virtue of any employment by the Company.

2. Except as provided in paragraph 4 below and except for the provisions of my Employment Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common

A-1

law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.

4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims. I further agree that I am not aware of any pending charge or complaint of the type described in paragraph 2 as of the execution of this General Release.

6. I represent that I am not aware of any claim by me other than the claims that are released by this Agreement. I acknowledge that I am familiar with the provisions of California Civil Code Section 1542, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

Being aware of such provisions of law, I agree to expressly waive any rights I may have thereunder, as well as under any other statute or common law principles of similar effect.

7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

A-2

8. I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release. I also agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees, and return all payments received by me pursuant to the Agreement.

9. I agree that this General Release is confidential and agree not to disclose any information regarding the terms of this General Release, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

10. Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. (NASD), any other self-regulatory organization or governmental entity.

11. I agree to reasonably cooperate with the Company in any internal investigation or administrative, regulatory, or judicial proceeding. I understand and agree that my cooperation may include, but not be limited to, making myself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are or may come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. I understand that in the event the Company asks for my cooperation in accordance with this provision, the Company will reimburse me solely for reasonable travel expenses, including lodging and meals, upon my submission of receipts.

12. I agree not to disparage the Company, its past and present investors, officers, directors or employees or its affiliates and to keep all confidential and proprietary information about the past or present business affairs of the Company and its affiliates confidential unless a prior written release from the Company is obtained. I further agree that as of the date hereof, I have returned to the Company any and all property, tangible or intangible, relating to its business, which I possessed or had control over at any time (including, but not limited to, company-provided credit cards, building or office access cards, keys, computer equipment, manuals, files, documents, records, software, customer data base and other data) and that I shall not retain any copies, compilations, extracts, excerpts, summaries or other notes of any such manuals, files, documents, records, software, customer data base or other data.

13. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof.

A-3

14. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

(a) I HAVE READ IT CAREFULLY;

(b) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

(c) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(d) I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

(e) I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON , TO CONSIDER IT AND THE CHANGES MADE SINCE THE , VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;

(f) THE CHANGES TO THE AGREEMENT SINCE , EITHER ARE NOT MATERIAL OR WERE MADE AT MY REQUEST.

(g) I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(h) I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(i) I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT

A-4

IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.


DATE:		February 5, 2003		/s/ Boris Lipkin Boris Lipkin

A-5 EX-10.44 5 f89571exv10w44.htm EXHIBIT 10.44 Therma-Wave, Inc. Exhibit 10.44

Exhibit 10.44

THERMA-WAVE, INC.

STOCK OPTION AGREEMENT
(Nonqualified Stock Option)

THIS STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of February 5, 2003 by and between Therma-Wave, Inc., a Delaware corporation (the “Company”), and the employee of the Company listed on the signature page hereto (“Optionee”).

Pursuant to the Company’s 2000 Equity Incentive Plan (the “Plan”), the Company and the Optionee desire to enter into an agreement to evidence the grant by the Company to the Optionee of an option (the “Option”) to acquire that number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) listed on the signature page hereto (the “Option Shares”). Capitalized terms used herein and not otherwise defined are defined in Section 6 hereof.

The parties hereto agree as follows:

1. Option Grant. The Company hereby grants to the Optionee, pursuant to the Plan, an Option to purchase the Option Shares at a price per share equal to that amount listed on the signature page hereto (the “Exercise Price”). The Exercise Price and the number of Option Shares will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of this Agreement. The Option is not intended to be an “incentive stock option” within the meaning of Section 422A of the Code.

2. Exercise of Option.

(1) Normal Vesting. The Option granted hereunder may be exercised only to the extent it has become vested. The Option shall vest and become exercisable with respect to the following number of Option Shares (set forth on a cumulative basis): (i) 25% of the Option Shares on the first year anniversary of the Grant Date; (ii) 2.083% of the Option Shares each month on the thirteenth (13^th) through the forty eighth (48^th) monthly anniversary of the Grant Date (each a “Vesting Date”), if and only if the Optionee is, and has been, continuously employed by the Company from the Grant Date through the applicable Vesting Date.

(2) No Vesting After Termination Date. The Option shall cease to vest after the Termination Date. Any portion of the Option which has vested and become exercisable prior to the Termination Date shall remain exercisable for the period set forth in Section 3.

(3) Procedure for Exercise. At any time prior to the Expiration Date, Optionee may exercise all or a portion of the Option (to the extent vested), which has not expired pursuant to subsection 3(b) below by delivering written notice of exercise to the Company, together with (i) a written acknowledgment that Optionee has read and has been afforded an opportunity to ask questions of members of the Company’s management regarding all financial and other information provided to Optionee regarding the Company and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of payment in cash, check, other shares of capital stock of the Company or any combination of the foregoing. As a condition to any exercise of the Option, Optionee will permit the Company to deliver to him all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable Optionee to make an informed investment decision. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse.

3. Expiration of Option.

(1) Normal Expiration. In no event shall any part of the Option be exercisable after the Expiration Date.

(2) Expiration Upon Termination of Employment. Any portion of the Option that was not vested and exercisable on the Termination Date shall expire on such date and may not be exercised thereafter under any circumstance. Any portion of the Option that was vested and exercisable on the Termination Date shall expire on the earlier of (i) three months after the Termination Date (or 12 months after the Termination Date if the termination was caused by Optionee’s death, disability or retirement) and (ii) the Expiration Date and may not be exercised thereafter under any circumstance.

(3) Non-Transferability of Option. The Option is personal to Optionee and is not transferable by Optionee except pursuant to the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

4. Adjustments upon Dissolution, Merger or Asset Sale.

(1) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Board shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

(2) Merger or Asset Sale. In the event of a Change of Control, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Option Shares, including Shares as to which it would not otherwise be vested or exercisable.

5. Definition of Option Shares. For all purposes of this Agreement, Option Shares will continue to be Option Shares in the hands of any holder other than Optionee (except

for the Company, purchasers pursuant to an offering registered under the 1933 Act and subsequent transferees), and each such other holder of Option Shares will succeed to all rights and obligations attributable to Optionee as a holder of Option Shares hereunder. Option Shares will also include shares of the Company’s capital stock issued with respect to Option Shares by way of a stock split, stock dividend or other recapitalization.

6. Definitions. The following terms are defined as follows:

“1933 Act” means the Securities Act of 1933, as amended from time to time.

“Affiliate” means, with respect to any Person, any other Person who is controlling, controlled by, or under common control with such Person and, in the case of a Person which is a partnership, any partner of such Person.

“Board” means the Company’s Board of Directors.

“Change of Control” means any transaction involving the Company and an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) a majority of the outstanding shares of capital stock of the Company entitled to vote in the election of the Board of Directors of the Company (whether by merger, consolidation or sale or transfer of the Company’s capital stock) or (ii) all or substantially all of the Company’s assets determined on a consolidated basis.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Common Stock” means, collectively, the Company’s common stock, par value $0.01 per share.

“Expiration Date” means, with respect to any Option, the date which is the tenth anniversary of the date hereof.

“Grant Date” means the date the Board approves the grant by the Company to the Optionee of the Option governed by this Agreement.

“Independent Third Party” means any person or entity who, immediately prior to the contemplated transaction, does not own in excess of 5% of the capital stock on a fully diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the capital stock and who is not the spouse or descendant (by birth or adoption) of any such 5% owner of the capital stock).

“Option Shares” means (i) all shares of Common Stock purchased pursuant to the Options granted pursuant to this Agreement and (ii) all shares of Common Stock issued with respect to Common Stock referred to in clause (i) by way of stock dividend or stock split or in connection with a recapitalization or other reorganization affecting the Common Stock.

“Person” means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

“Plan” has the meaning set forth in the preamble.

“Subsidiary” means any corporation of which shares of stock having a majority of the general voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Company either directly or through its Subsidiaries.

“Termination Date” means the date that Optionee ceases to be employed by the Company or any of its Subsidiaries for any reason.

7. Notices. Any notice provided for in this Agreement must be in writing and must be personally delivered, received by certified mail, return receipt requested, or sent by guaranteed overnight delivery service, to the Optionee at the address appearing on the signature page hereto and to the other recipients at the address indicated below:

To the Company:


	Therma-Wave, Inc.
	1250 Reliance Way
	Fremont, California 94539
	Attn: President

and


	Kirkland & Ellis
	777 South Figueroa Street
	Los Angeles, CA 90017
	Attn: Eva Davis

or such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or mailed.

8. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other

jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

9. Complete Agreement. This Agreement and the Plan embody the complete agreement and understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Without limiting the foregoing, all existing stock option agreements between the Company and/or the Company’s existing stockholders and Optionee are hereby cancelled and terminated.

10. Counterparts. This Agreement may be executed in separate counterparts, each of which will be deemed to be an original and all of which taken together will constitute one and the same agreement.

11. Successors and Assigns; Transfer. This Agreement is intended to bind and inure to the benefit of and be enforceable by Optionee, the Company, and their respective successors and assigns, provided that Optionee may not assign any of his or her rights or obligations, except as expressly provided by the terms of this Agreement.

12. Governing Law. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its stockholders. All other issues concerning the enforceability, validity and binding effect of this Agreement will be governed by and construed in accordance with the laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of California.

13. Remedies. The parties hereto acknowledge and agree that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto will have the right to injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Agreement.

14. Effect of Transfers in Violation of Agreement. The Company will not be required (a) to transfer on its books any Option Shares which have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such Option Shares, to accord the right to vote as such owner or to pay dividends to any transferee to whom such Option Shares have been transferred in violation of this Agreement.

15. Amendments and Waivers. The Board may at any time amend, alter, suspend or terminate the Plan without the consent of any Optionee; provided, however, that no amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee.

16. Therma-Wave, Inc. 2000 Equity Incentive Plan. The grant of any Option hereunder is pursuant to and subject to all of the terms and conditions of the Plan.

IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement on the day and year first above written.


		THERMA-WAVE, INC.

		/s/ L. RAY CHRISTIE By: L. RAY CHRISTIE Its: Vice President Finance & CFO

		OPTIONEE:

		/s/ Boris Lipkin Name: Boris Lipkin

		Address (please print):

		1250 Reliance Way, Fremont, CA 94539

		Number of Option Shares: 500,000

		Exercise Price: $0.66/share

		[insert closing price on trading date immediately preceding date of Board authorization of this agreement]

EX-10.45 6 f89571exv10w45.htm EXHIBIT 10.45 Therma-Wave, Inc. Exhibit 10.45

(THERMA-WAVE LOGO)

Exhibit 10.45

[Therma-Wave Letterhead]

March 12, 2003

Mr. Papken S. Der Torossian

Dear Papken:

As you are aware, the Board of Directors (the “Board”) of Therma-Wave, Inc. (the “Company”) has nominated you to serve as a director of the Company and has further nominated you to serve as Chairman of the Board.

If you consent to serve as a director of the Company and as Chairman of the Board, you will receive director fees in the amount of $10,000 per month. [You will not receive any additional fees for your attendance at Board or Board committee meetings.] Since you are not an employee of the Company, you will not be eligible to receive employee benefits. However, the Company will reimburse you for all out-of-pocket expenses you incur in your service as a director and as Chairman of the Board. You will also receive an option to purchase 400,000 shares of the Company’s common stock under the Company’s 2000 Equity Incentive Plan at an exercise price of $0.42 per share. Your option will vest automatically upon a merger or sale of all the assets of the Company.

Sincerely,

/s/ Boris Lipkin

Boris Lipkin
President and Chief Executive Officer

EX-10.46 7 f89571exv10w46.htm EXHIBIT 10.46 Therma-Wave, Inc. Exhibit 10.46

Exhibit 10.46

THERMA-WAVE, INC.

STOCK OPTION AGREEMENT

(Nonqualified Stock Option)

THIS STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of March 12, 2003 by and between Therma-Wave, Inc., a Delaware corporation (the “Company”), and Papken S. Der Torossian (the “Optionee”).

Pursuant to the Company’s 2000 Equity Incentive Plan (the “Plan”), the Company and the Optionee desire to enter into an agreement to evidence the grant by the Company to the Optionee of an option (the “Option”) to acquire that number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) listed on the signature page hereto (the “Option Shares”) as an incentive for the Optionee serving as the Chairman of the Company’s Board. Capitalized terms used herein and not otherwise defined are defined in Section 6 hereof.

The parties hereto agree as follows:

2. Exercise of Option.

(1) Normal Vesting. The Option granted hereunder may be exercised only to the extent it has become vested. The Option shall vest and become exercisable with respect to the following number of Option Shares (set forth on a cumulative basis): (i) 25% of the Option Shares on the first year anniversary of the Grant Date; (ii) 2.083% of the Option Shares each month on the thirteenth (13^th) through the forty eighth (48^th) monthly anniversary of the Grant Date (each a “Vesting Date”), if and only if the Optionee is, and has been, continuously serving as a director of the Company from the Grant Date through the applicable Vesting Date.

(3) Procedure for Exercise. At any time prior to the Expiration Date, Optionee may exercise all or a portion of the Option (to the extent vested), which has not expired

pursuant to subsection 3(b) below by delivering written notice of exercise to the Company, together with (i) a written acknowledgment that Optionee has read and has been afforded an opportunity to ask questions of members of the Company’s management regarding all financial and other information provided to Optionee regarding the Company and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of payment in cash, check, other shares of capital stock of the Company or any combination of the foregoing. As a condition to any exercise of the Option, Optionee will permit the Company to deliver to him all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable Optionee to make an informed investment decision. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse.

3. Expiration of Option.

(1) Normal Expiration. In no event shall any part of the Option be exercisable after the Expiration Date.

(2) Expiration Upon Termination of Service as a Director. Any portion of the Option that was not vested and exercisable on the Termination Date shall expire on such date and may not be exercised thereafter under any circumstance. Any portion of the Option that was vested and exercisable on the Termination Date shall expire on the earlier of (i) three months after the Termination Date (or 12 months after the Termination Date if the termination was caused by Optionee’s death, disability or retirement) and (ii) the Expiration Date and may not be exercised thereafter under any circumstance.

4. Adjustments upon Dissolution, Merger or Asset Sale.

(2) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Option Shares, including Shares which would not otherwise be vested or exercisable.

5. Definition of Option Shares. For all purposes of this Agreement, Option Shares will continue to be Option Shares in the hands of any holder other than Optionee (except for the Company, purchasers pursuant to an offering registered under the 1933 Act and

subsequent transferees), and each such other holder of Option Shares will succeed to all rights and obligations attributable to Optionee as a holder of Option Shares hereunder. Option Shares will also include shares of the Company’s capital stock issued with respect to Option Shares by way of a stock split, stock dividend or other recapitalization.

6. Definitions. The following terms are defined as follows:

“1933 Act” means the Securities Act of 1933, as amended from time to time.

“Board” means the Company’s Board of Directors.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Common Stock” means, collectively, the Company’s common stock, par value $0.01 per share.

“Expiration Date” means, with respect to any Option, the date which is the tenth anniversary of the date hereof.

“Grant Date” means the date the Board approves the grant by the Company to the Optionee of the Option governed by this Agreement.

“Person” means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

“Plan” has the meaning set forth in the preamble.

“Termination Date” means the date that Optionee ceases to serve as a director of the Company for any reason.

7. Notices. Any notice provided for in this Agreement must be in writing and must be personally delivered, received by certified mail, return receipt requested, or sent by

guaranteed overnight delivery service, to the Optionee at the address appearing on the signature page hereto and to the other recipients at the address indicated below:

To the Company:

Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attn: President

and

Kirkland & Ellis
777 South Figueroa Street
Los Angeles, CA 90017
Attn: Eva Davis

9. Complete Agreement. This Agreement and the Plan embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Without limiting the foregoing, all existing stock option agreements between the Company and/or the Company’s existing stockholders and Optionee are hereby cancelled and terminated.

10. Counterparts. This Agreement may be executed in separate counterparts, each of which will be deemed to be an original and all of which taken together will constitute one and the same agreement.

16. Therma-Wave, Inc. 2000 Equity Incentive Plan. The grant of any Option hereunder is pursuant to and subject to all of the terms and conditions of the Plan.

IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement on the day and year first above written.

THERMA-WAVE, INC.


		/s/ L. Ray Christie

		By: L. RAY CHRISTIE Its: Vice President Finance & CFO

		OPTIONEE:

		/s/ Papken S. Der Torossian

		Name: Papken S. Der Torossian


		Number of Option Shares: 400,000

		Exercise Price: $0.42

		[insert closing price on trading date immediately preceding date of Board authorization of this Agreement]

EX-99.2 8 f89571exv99w2.htm EXHIBIT 99.2 Therma-Wave, Inc Exhibit 99.2

Exhibit 99.2

THERMA-WAVE, INC.

CERTIFICATION PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Boris Lipkin in my capacity as Chief Executive Officer of Therma-Wave, Inc., a Delaware corporation (“Therma-Wave”), and in connection with the Quarterly Report of Therma-Wave on Form 10-Q for the period ended December 29, 2002 as filed with the Securities and Exchange Commission (the “Report”), hereby certify that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Therma-Wave.

/s/ BORIS LIPKIN

Boris Lipkin

President and Chief Executive Officer

May 5, 2003

THERMA-WAVE, INC.

CERTIFICATION PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, L. Ray Christie, in my capacity as Chief Financial Officer of Therma-Wave, Inc., a Delaware corporation (“Therma-Wave”), and in connection with the Quarterly Report of Therma-Wave on Form 10-Q for the period ended December 29, 2002 as filed with the Securities and Exchange Commission (the “Report”), hereby certify that:

/s/ L. RAY CHRISTIE

L. Ray Christie

Chief Financial Officer

May 5, 2003

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	•	Changing our internal reporting structure to require branch accounting personnel to report directly to our finance department in the United States;

	•	Establishing audit and review procedures for each foreign branch consistent with each branch’s exposure, including, as appropriate, outside auditors;

	•	Requiring managers of foreign operations to attest in writing that final acceptance documents for any given period are valid acceptances that justify revenue recognition and that will result in customer payment;

	•	Requiring corporate financial management personnel to investigate transactions where revenue has been recognized but the customer has not paid according to terms;


	•	Re-training employees and developing an ongoing training program with particular focus on company policies and procedures related to revenue recognition, expense reimbursements and bank account reconciliations;

	•	Establishing yearly or twice-yearly (for larger branches) reviews with both internal and external accounting personnel and local management, to be coordinated with quarterly business reviews; and

	•	Establishing controls to closely monitor the credit status of certain customers, with emphasis on distributors.


(1)	Incorporated by reference to the same numbered exhibit in the Company’s amended Annual Report on Form 10-K/A for the period ended March 31, 2002 (File No. 000-26911).


	THERMA-WAVE, INC.
	(Registrant)

	/s/ L. RAY CHRISTIE

	L. Ray Christie
	Chief Financial Officer
	(as Registrant and as Principal Accounting Officer)


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

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

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

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


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

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

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


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

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


	/s/ BORIS LIPKIN

	Boris Lipkin
	President and Chief Executive Officer


	“Revolving Line” means Ten Million Dollars ($10,000,000).

	“Revolving Maturity Date” means September 30, 2003.


	6.7 Quick Ratio. Borrower shall maintain, as of the last day of each calendar quarter, a ratio of Quick Assets to Current Liabilities of at least 1.25 to 1.00.

	6.13. Loss. Borrower shall not suffer a loss in any quarter in excess of the following: $18,000,000 for the quarter ending September 30, 2002; $13,500,000 for the quarter ending December 31, 2002; $11,000,000 for the quarter ending March 31, 2003; $5,000,000 for the quarter ending June 30, 2003; or $2,500,000 for the quarter ending September 30, 2003; provided that, for the quarter ending September 30, 2002, Borrower may take a non-cash writedown of not more than $75,000,000, consisting of $67,400,000 of goodwill and $7,500,000 of Inventory reserves which shall be excluded from the calculation of this covenant.


	[x] make trades of any and all of the financial assets held in the Securities Account &/or

	[x] receiving any distributions relating to the Securities Entitlement &/or

1.		I understand that any payments or benefits paid or granted to me under paragraph 5(b) of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive the payments and benefits specified in paragraph 5(b) of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter or breach this General Release. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates. I also acknowledge and represent that I have received all payments and benefits that I am entitled to receive (as of the date hereof) by virtue of any employment by the Company.

2.		Except as provided in paragraph 4 below and except for the provisions of my Employment Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common

		law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).

3.		I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.

4.		I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5.		In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims. I further agree that I am not aware of any pending charge or complaint of the type described in paragraph 2 as of the execution of this General Release.

6.		I represent that I am not aware of any claim by me other than the claims that are released by this Agreement. I acknowledge that I am familiar with the provisions of California Civil Code Section 1542, which provides as follows:

		“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

		Being aware of such provisions of law, I agree to expressly waive any rights I may have thereunder, as well as under any other statute or common law principles of similar effect.

7.		I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

8.		I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release. I also agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees, and return all payments received by me pursuant to the Agreement.

9.		I agree that this General Release is confidential and agree not to disclose any information regarding the terms of this General Release, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

10.		Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. (NASD), any other self-regulatory organization or governmental entity.

11.		I agree to reasonably cooperate with the Company in any internal investigation or administrative, regulatory, or judicial proceeding. I understand and agree that my cooperation may include, but not be limited to, making myself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are or may come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. I understand that in the event the Company asks for my cooperation in accordance with this provision, the Company will reimburse me solely for reasonable travel expenses, including lodging and meals, upon my submission of receipts.

12.		I agree not to disparage the Company, its past and present investors, officers, directors or employees or its affiliates and to keep all confidential and proprietary information about the past or present business affairs of the Company and its affiliates confidential unless a prior written release from the Company is obtained. I further agree that as of the date hereof, I have returned to the Company any and all property, tangible or intangible, relating to its business, which I possessed or had control over at any time (including, but not limited to, company-provided credit cards, building or office access cards, keys, computer equipment, manuals, files, documents, records, software, customer data base and other data) and that I shall not retain any copies, compilations, extracts, excerpts, summaries or other notes of any such manuals, files, documents, records, software, customer data base or other data.

13.		Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof.

(a)		I HAVE READ IT CAREFULLY;

(b)		I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

(c)		I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(d)		I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

(e)		I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON , TO CONSIDER IT AND THE CHANGES MADE SINCE THE , VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;

(f)		THE CHANGES TO THE AGREEMENT SINCE , EITHER ARE NOT MATERIAL OR WERE MADE AT MY REQUEST.

(g)		I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(h)		I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(i)		I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT


	1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

	2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Therma-Wave.