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                                                                    Exhibit 99.1

                                  RISK FACTORS

      You should carefully consider the following factors in addition to the
other information set forth in this annual report in analyzing an investment in
our common stock. The risks and uncertainties described below are not the only
ones facing us. Additional risks and uncertainties that we do not presently know
about or that we currently believe are immaterial may also adversely impact our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. In such case,
the trading price of our common stock could fall, and you may lose all or part
of the money you paid to buy our common stock. This annual report contains
forward-looking statements that involve risks and uncertainties. Actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those identified
below as well as those discussed elsewhere in this annual report.

WE HAD A NET LOSS FOR FISCAL YEARS 2003 AND 2004 AND MAY INCUR FURTHER LOSSES IN
THE FUTURE.

      We reported $18.1 million of net loss for fiscal year 2004 and $133.6
million of net loss for fiscal 2003. Due to the recent downturn in the
semiconductor industry and the related downturn in the semiconductor capital
equipment industry, weak economic conditions worldwide, and other factors, we
cannot predict how long we will incur further losses or whether we will become
profitable again. Moreover, in part due to these downturns, for the year ended
March 31, 2003, we recorded $81.3 million for the write off of goodwill and
other intangible assets, inventory charge, restructuring, severance and other
costs related to reductions in work force. We cannot assure you that our
business will not continue to decline or that our performance will improve.


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WE NEED TO HAVE SUFFICIENT CASH TO OPERATE IF OUR BUSINESS IS TO SUCCEED.

      Our principal sources of funds have been and are anticipated to be cash on
hand ($23.9 million unrestricted as of March 28, 2004), cash flows from
operating activities (if any), borrowings under our bank credit facility and the
sale of common stock. We have implemented various cost reduction programs during
fiscal 2003 and 2004 to bring operating expenses in line with revenue
projections. We believe that with these cost reduction programs in place, we
will reduce operating expenses significantly enough so that we will have
adequate liquidity and capital resources to meet our current and future
financial obligations for 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 if required or, if available, will be on terms satisfactory to us.

OUR PERFORMANCE IS AFFECTED BY THE CYCLICALITY OF THE SEMICONDUCTOR DEVICE
INDUSTRY, WHICH MAY, FROM TIME TO TIME, LEAD TO DECREASED DEMAND FOR OUR
PRODUCTS.

      The semiconductor industry is cyclical and has historically experienced
periodic downturns, which have often resulted in a decrease in the semiconductor
industry's demand for capital equipment, including process control metrology
systems. Our business depends upon the capital expenditures of semiconductor
manufacturers, which, in turn, depend upon the current and anticipated market
demand for semiconductors and products utilizing semiconductors. There is
typically a six to twelve month lag between changes in the semiconductor
industry and the related impact on the level of capital expenditures. In most
cases, the resulting decrease in capital expenditures has been more pronounced
than the precipitating downturn in semiconductor industry revenues. Although our
operating results have improved in recent quarters, including increased new
orders and revenues and lower operating losses, we cannot be sure that this
favorable trend will continue, or if it does not continue then:

      o     when the semiconductor industry will recover; or

      o     whether the recovery will result in increased demand for our capital
            equipment by the semiconductor industry.

OUR QUARTERLY OPERATING RESULTS HAVE HISTORICALLY AND MAY, IN THE FUTURE, VARY
SIGNIFICANTLY. THIS MAY RESULT IN VOLATILITY IN THE MARKET PRICE FOR OUR SHARES.

      Our quarterly operating results have historically and may, in the future,
vary significantly. Some of the factors that may influence our operating results
and that could cause trading in our shares to be subject to extreme price and
volume fluctuations in a given quarter include:

      o     customer demand, which is influenced by economic conditions in the
            semiconductor industry, demand for products that use semiconductors,
            market acceptance of our products and those of our customers,
            seasonality, changes in product mix, and the timing, cancellation or
            delay of customer orders and shipments;

      o     competition, such as competitive pressures on prices of our
            products, the introduction or announcement of new products by us or
            our competitors and discounts that may be granted to customers;

      o     fluctuations in the availability and cost of components,
            subassemblies and production capacity;

      o     expenses incurred in connection with litigation;

      o     product development costs, such as increased research, development,
            engineering and marketing expenses associated with new products or
            product enhancements, and the effect of transitioning to new or
            enhanced products; and

      o     levels of fixed expenses relative to revenue levels, including
            research and development costs associated with product development.



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      During a given quarter, a significant portion of our revenues may be
derived from the sale of a relatively small number of systems. Accordingly, a
small change in the number of systems actually shipped may cause significant
changes in operating results. In addition, because of the significantly
different gross margins attributable to our Therma-Probe and Opti-Probe product
lines, changes in product mix may cause fluctuations in operating results. In
addition, we cannot assure you that the market price of our common stock will
not experience significant fluctuations in the future, including fluctuations
that are material, adverse and unrelated to our performance.

WE CANNOT ASSURE YOU THAT OUR INTERNAL CONTROLS ARE SUFFICIENT TO TIMELY ALERT
US TO MATERIAL INFORMATION THAT IS REQUIRED TO BE INCLUDED IN OUR PERIODIC
REPORTS WITH THE SEC OR TO PROVIDE REASONABLE ASSURANCE THAT OUR FINANCIAL
STATEMENTS ARE FAIRLY PRESENTED IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.

      In designing and evaluating our disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures. The design of any
disclosure controls and procedures also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions.

      During fiscal year 2003, we identified two material weaknesses related to
controls surrounding evaluating and reporting revenue transactions, particularly
in the Asia/Pacific region, and our processes relating to account analysis and
reconciliations, including lack of timely management review. As a result, in
fiscal 2004, we implemented several changes and additions to our internal
controls and procedures. We have not identified similar material weaknesses or
any other material weaknesses during fiscal year 2004.
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OUR LARGEST CUSTOMERS HAVE HISTORICALLY ACCOUNTED FOR A SIGNIFICANT PORTION OF
OUR REVENUES. ACCORDINGLY, OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE LOSS
OF, OR REDUCED PURCHASES BY, ONE OR MORE OF OUR LARGE CUSTOMERS.

      If, for any reason, any of our key customers were to purchase
significantly less of our products in the future, such decreased level of
purchases could have a material adverse effect on our business, financial
condition and results of operations. During the year ended March 31, 2004, four
customers represented approximately 16%, 14%, 12% and 10% of our net revenues.
During the year ended March 31, 2003, one customer represented 13% of our net
revenues. During the year ended March 31, 2002, three customers represented 24%,
13% and 12% of our net revenues. As customers seek to establish closer
relationships with their suppliers, we expect that our customer base will
continue to become more concentrated with a limited number of customers
accounting for a significant portion of our revenues.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
PROPRIETARY TECHNOLOGY OR IF WE INFRINGE ON THE PROPRIETARY TECHNOLOGY OF
OTHERS.

      Our future success and competitive position depend in part upon our
ability to obtain and maintain proprietary technology used in our principal
product families, and we rely, in part, on patent, trade secret and trademark
law to protect that technology. We have obtained a number of patents relating to
our two key product families, the Opti-Probe and Therma-Probe, as well as our
newer integrated real time critical dimension products and have filed
applications for additional patents. There can be no assurance that any of our
pending patent applications will be approved, that we will develop additional
proprietary technology that is patentable, that any patents owned by or issued
to us will provide us with competitive advantages or that these patents will not
be challenged by any third parties. Furthermore, there can be no assurance that
third parties will not design around our patents. Any of the foregoing results
could have a material adverse effect on our business, financial condition,
results of operations or cash flows.

      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 alleged that Boxer Cross' BX-10 product infringed certain patents held by
Therma-Wave related to ion implant monitoring. On June 7, 2002, Boxer Cross
filed its amended answer and counterclaims to our complaint and asserted various
affirmative defenses to our 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 April 29, 2003, Applied Materials
announced that it had acquired all of the outstanding stock of Boxer Cross. We
settled this lawsuit with Boxer Cross and Applied Materials on July 17, 2003.
Pursuant to the settlement, Therma-Wave dismissed its pending patent
infringement claims with prejudice. Boxer Cross dismissed its pending patent
infringement claims without prejudice and dismissed its pending state law claims
with prejudice.

IN ADDITION TO PATENT PROTECTION, WE RELY UPON TRADE SECRET PROTECTION FOR OUR
CONFIDENTIAL AND PROPRIETARY INFORMATION AND TECHNOLOGY. WE ROUTINELY ENTER INTO
CONFIDENTIALITY AGREEMENTS WITH OUR EMPLOYEES. HOWEVER, THERE CAN BE NO
ASSURANCE THAT THESE AGREEMENTS WILL NOT BE BREACHED, THAT WE WILL HAVE ADEQUATE
REMEDIES FOR ANY BREACH OR THAT OUR CONFIDENTIAL AND PROPRIETARY INFORMATION AND
TECHNOLOGY WILL NOT BE INDEPENDENTLY DEVELOPED BY OR BECOME OTHERWISE KNOWN TO
THIRD PARTIES.

      We license and will continue to license certain technology used in our
products from third parties. Our inability to acquire any third-party licenses,
or integrate the related third-party technologies into our products, could
result in delays in our product developments and enhancements until equivalent
technologies can be identified, licensed or integrated. We may also require new
licenses in the future as our business grows and technology evolves. We cannot
assure you that these licenses will be available to us on commercially
reasonable terms, if at all.



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      Our commercial success will also depend, in part, on our ability to avoid
infringing or misappropriating any patents or other proprietary rights owned by
third parties. If we are found to infringe or misappropriate a third party's
patent or other proprietary rights, we could be required to pay damages to such
third party, alter our products or processes, obtain a license from the third
party or cease activities utilizing such proprietary rights, including making or
selling products utilizing such proprietary rights. If we are required to do any
of the foregoing, there can be no assurance that we will be able to do so on
commercially favorable terms, if at all. Our inability to do any of the
foregoing on commercially favorable terms could have a material adverse impact
on our business, financial condition, results of operations or cash flows.

PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS, OR THIRD PARTIES SEEKING TO
ENFORCE THEIR OWN INTELLECTUAL PROPERTY RIGHTS AGAINST US, MAY RESULT IN
LITIGATION, THE COST OF WHICH COULD BE SUBSTANTIAL.

      There are currently no material legal proceedings pending against us. We
may be required to initiate additional litigation in order to enforce any
patents issued to or licensed to us or to determine the scope and/or validity of
a third party's patent or other proprietary rights. From time to time, the
Company receives letters from third parties threatening to file lawsuits to
enforce such third parties' intellectual property rights. We may be subject to
additional lawsuits by third parties seeking to enforce their own intellectual
property rights. Any such litigation, regardless of outcome, could be expensive
and time consuming and, as discussed above in the prior risk factor, could
subject us to significant liabilities or require us to cease using proprietary
third party technology and, consequently, could have a material adverse effect
on our business, financial condition, results of operations or cash flows.

WE OPERATE IN THE HIGHLY COMPETITIVE SEMICONDUCTOR CAPITAL EQUIPMENT INDUSTRY
AND COMPETE AGAINST LARGER COMPANIES.

      We operate in the highly competitive semiconductor capital equipment
industry and face competition from a number of competitors, some of which have
greater financial, engineering, manufacturing and marketing resources and
broader product offerings than Therma-Wave. We cannot assure you that our
products will be able to compete successfully with the products of our
competitors. Many of our competitors are investing heavily in the development of
new products aimed at applications we currently serve. Our competitors in each
product area can be expected to continue to improve the design and performance
of their products and to introduce new products with competitive prices and
performance characteristics. In addition, we believe that our competitors
sometimes provide demonstration systems to semiconductor manufacturers at no
cost. We could be required to employ similar promotions in order to remain
competitive if this practice becomes more pervasive in the industry.

COMPETITIVE CONDITIONS IN OUR INDUSTRY MAY REQUIRE US TO REDUCE OUR PRICES.

      Due to competitive conditions in our industry, we have selectively reduced
prices on our products in order to maintain our market share. These reductions
are not necessarily permanent nor do they affect all of our products. There can
be no assurance that competitive pressures will not necessitate further price
reductions. Maintaining technological advantages to mitigate the adverse effect
of pricing pressures will require a continued high level of investment by us in
research and development and sales and marketing. There can be no assurance that
we will have sufficient resources to continue to make such investments or that
we will be able to make the technological advances necessary to maintain such
competitive advantages. To the extent our products do not provide technological
advantages over products offered by our competitors, we are likely to experience
increased price competition or loss of market share with respect to such
products.

WE ENCOUNTER DIFFICULTIES IN SOLICITING CUSTOMERS OF OUR COMPETITORS BECAUSE OF
HIGH SWITCHING COSTS IN THE MARKETS IN WHICH WE OPERATE.

      We believe that once a device manufacturer has selected a particular
vendor's capital equipment, that manufacturer generally relies upon that
vendor's equipment for that specific production line application and, to the
extent possible, subsequent generations of that vendor's systems. Accordingly,
it may be difficult to achieve



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significant sales to a particular customer once another vendor's capital
equipment has been selected by that customer unless there are compelling reasons
to do so, such as significant performance or cost advantages.

WE MAY INCUR INDEBTEDNESS IN THE FUTURE UNDER OUR BANK CREDIT FACILITY, WHICH
COULD REQUIRE THE USE OF A PORTION OF OUR EXCESS CASH FLOW AND MAY LIMIT OUR
ACCESS TO ADDITIONAL CAPITAL.

      As of March 28, 2004, we had $4.6 million in outstanding letters of credit
under our credit facility with Silicon Valley Bank. We may incur further
indebtedness to finance acquisitions, capital expenditures and working capital
or for other purposes.

      The level of our indebtedness could have important consequences for us.
The following summarizes the material consequences:

      o     a substantial portion of our cash flow from operations would be
            required to be dedicated to the repayment of indebtedness and will
            not be available for other purposes;

      o     our future ability to obtain additional debt financing for working
            capital, capital expenditures, acquisitions or other purposes may be
            limited; and

      o     our level of indebtedness has in the past, and could in the future,
            limit our flexibility in reacting to changes in the industry,
            general economic conditions and our ability to withstand a prolonged
            downturn in the semiconductor and/or semiconductor capital equipment
            industries.

OUR FUTURE GROWTH DEPENDS ON OUR ABILITY TO DEVELOP NEW AND ENHANCED PRODUCTS
FOR THE SEMICONDUCTOR INDUSTRY. WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL
IN OUR PRODUCT DEVELOPMENT EFFORTS OR THAT OUR NEW PRODUCTS WILL GAIN GENERAL
MARKET ACCEPTANCE.

      Our future growth will depend, in part, on our ability to design, develop,
manufacture, assemble, test, market and support new products and enhancements on
a timely and cost-effective basis. Our failure to successfully identify new
product opportunities or to develop, manufacture, assemble or introduce new
products could have a material adverse effect on our growth prospects. For
example, we expect our product development efforts to include continuing to
combine separate metrology systems into one tool, implementing integrated
systems and networking these systems together. Integrated systems allow us to
measure product wafers and monitor process equipment during the semiconductor
fabrication process. We cannot assure you that we will not experience
difficulties or delays in our development efforts with respect to these products
or that we will be successful in developing these products. In addition, we
cannot assure you that these products will gain market acceptance or that we
will not experience reliability or quality problems.

RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY WILL REQUIRE US TO CONTINUALLY
DEVELOP NEW AND ENHANCED PRODUCTS.

      Any failure by us to anticipate or respond adequately to technological
developments and customer requirements, or any significant delays in product
development or introduction could result in a loss of competitiveness and could
materially adversely affect our operating results. There can be no assurance
that we will successfully develop and bring new products to market in a timely
and cost-effective manner, that any product enhancement or new product developed
by us will gain market acceptance, or that products or technologies developed by
others will not render our products or technologies obsolete or noncompetitive.
A fundamental shift in technology in our product markets could have a material
adverse effect on us, particularly in light of the fact that we currently derive
a major portion of our revenues from sales of our two major product families,
the Opti-Probe and Therma-Probe.

WE WILL NEED TO BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL WITH KNOWLEDGE OF
INSTRUMENTS USED IN SEMICONDUCTOR MANUFACTURING PROCESSES TO HELP SUPPORT OUR
FUTURE GROWTH. COMPETITION FOR SUCH PERSONNEL IN OUR INDUSTRY IS HIGH.

      Our success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, customer
support, finance and manufacturing personnel. The loss of the



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services of key personnel, who would be extremely difficult to replace, could
have a material adverse effect on us. There can be no assurance that the
services of such personnel will continue to be available to us. We have
employment agreements with key members of our senior management team, including
Messrs. Lipkin, Christie and Smedt. To support our future growth, we will need
to attract and retain additional qualified employees. Competition for such
personnel in our industry is high, and we cannot assure you that we will be
successful in attracting and retaining such personnel.

OUR OPERATIONS ARE CHARACTERIZED BY THE NEED FOR CONTINUED INVESTMENT IN
RESEARCH AND DEVELOPMENT AND, AS A RESULT, OUR ABILITY TO REDUCE COSTS IS
LIMITED.

      Our operations are characterized by the need for continued investment in
research and development and extensive ongoing customer service and support
capability. As a result, our operating results could be materially adversely
affected if our level of revenues is below expectations. In addition, because of
our emphasis on research and development and technological innovation, there can
be no assurance that our operating costs will not increase in the future.

WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM
A SINGLE SOURCE OR LIMITED GROUP OF SUPPLIERS, THE PARTIAL OR COMPLETE LOSS OF
WHICH COULD HAVE AT LEAST A TEMPORARY ADVERSE EFFECT ON OUR OPERATIONS.

      Some of the components and subassemblies included in our systems are
obtained from a single source or a limited group of suppliers. From time to
time, we have experienced temporary difficulties in receiving orders from some
of these suppliers. Although we seek to reduce dependence on these sole and
limited source suppliers, the partial or complete loss of these sources could
have at least a temporary adverse effect on our results of operations and damage
customer relationships. Further, a significant increase in the price of one or
more of these components or subassemblies could materially adversely affect our
results of operations.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH MANUFACTURING ALL OF OUR PRODUCTS AT A
SINGLE FACILITY. ANY PROLONGED DISRUPTION IN THE OPERATIONS OF THAT FACILITY
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

      We produce all of our products in our manufacturing facility located in
Fremont, California. Our manufacturing processes are highly complex, requiring
sophisticated and costly equipment and a specially designed facility. As a
result, any prolonged disruption in the operations of our manufacturing
facility, whether due to technical or labor difficulties, destruction of or
damage to this facility as a result of an earthquake, fire or any other reason,
could have a material adverse effect on our business, financial condition,
results of operations or cash flows.

WE RELY UPON MANUFACTURERS' SALES REPRESENTATIVES FOR A SIGNIFICANT PORTION OF
OUR SALES. A DISRUPTION IN OUR RELATIONSHIP WITH ANY SALES REPRESENTATIVE COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

      A significant portion of our sales have historically been made through
manufacturers' sales representatives. The activities of these representatives
are not within our control, and they may sell products manufactured by other
manufacturers. In addition, in some locations our manufacturing sales
representatives also provide field service to our customers. A reduction in the
sales efforts or financial viability of such manufacturers' sales
representatives, or a termination of our relationship with such representatives,
could have a material adverse effect on our sales, financial results and ability
to support our customers. Although we believe that we maintain good relations
with our sales representatives, there can be no assurance that such
relationships will continue.

OUR NET SALES AND RESULTS OF OPERATIONS CAN BE ADVERSELY AFFECTED BY THE
INSTABILITY OF ASIAN ECONOMIES, FROM WHICH WE DERIVE A SIGNIFICANT PORTION OF
OUR REVENUES.

      Our sales to customers in Asian markets represented approximately 59%, 58%
and 45% of total net revenues for fiscal 2004, 2003 and 2002, respectively.
Companies in the Asia Pacific region, including Japan and Taiwan, each of which
accounts



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for a significant portion of our business in that region, are currently
experiencing weaknesses in their currency, banking and equity markets. These
weaknesses may adversely affect our sales to semiconductor device and capital
equipment manufacturers located in these regions in the coming quarters.

WE ARE SUBJECT TO OPERATIONAL, FINANCIAL, POLITICAL AND FOREIGN EXCHANGE RISKS
DUE TO OUR SIGNIFICANT LEVEL OF INTERNATIONAL SALES.

      International sales accounted for approximately 72%, 72% and 62% of our
total revenues for fiscal 2004, 2003 and 2002, respectively. We anticipate that
international sales will continue to account for a significant portion of our
revenues in the foreseeable future. Due to the significant level of our
international sales, we are subject to material risks, which include:

      o     unexpected changes in regulatory requirements;

      o     tariffs and other market barriers;

      o     political and economic instability;

      o     potentially adverse tax consequences;

      o     outbreaks of hostilities;

      o     difficulties in accounts receivable collection;

      o     extended payment terms;

      o     difficulties in managing foreign sales representatives; and

      o     difficulties in staffing and managing foreign branch operations.

      In addition, the laws of countries in which our products are or may be
sold may not provide our products and intellectual property rights with the same
degree of protection as the laws of the United States.

      A substantial portion of our international sales is 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. Such conditions could negatively impact our international sales.



<PAGE>
ACQUISITIONS COULD RESULT IN DILUTION, OPERATING DIFFICULTIES AND OTHER HARMFUL
CONSEQUENCES.

      From time to time, we may acquire or make significant investments in
complementary companies, products and technologies. The following risks are
common to the integration of two companies, and may be associated with recent or
future acquisitions:

      o     the difficulty of incorporating new operations, technology and
            personnel into one company;

      o     the potential disruption of our ongoing business;

      o     the additional expense associated with amortization of acquired
            intangible assets;

      o     the maintenance of uniform standards, controls, procedures and
            policies; and

      o     the impairment of relationships with employees and customers.

      Prior to the acquisition of Sensys in January 2002, we had no experience
in managing this integration process. Moreover, the anticipated benefits of the
Sensys acquisition or any future acquisitions or mergers may not be realized.
Future acquisitions or mergers could result in potentially dilutive issuances of
equity securities, the incurrence of debt, contingent liabilities or
amortization expenses related to goodwill and other tangible assets, any of
which could be harmful to our business. Future acquisitions or mergers may
require us to obtain additional equity or debt financing, which may not be on
favorable terms or at all. Even if available, this financing may be dilutive. We
cannot assure you that we will successfully overcome these risks or any other
problem that we encounter in connection with any future acquisitions.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE POTENTIAL
ACQUISITION PROPOSALS AND COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL.

      Provisions of our certificate of incorporation and by-laws may inhibit
changes in control of Therma-Wave not approved by our board of directors and
would limit the circumstances in which a premium may be paid for the common
stock in proposed transactions, or a proxy contest for control of the board may
be initiated. These provisions provide for:

      o     a classified board of directors;

      o     a prohibition on stockholder action through written consents;

      o     a requirement that special meetings of stockholders be called only
            by our chief executive officer or the board of directors;

      o     advance notice requirements for stockholder proposals and
            nominations;

      o     limitations on the ability of stockholders to amend, alter or repeal
            the by-laws; and

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

      We will also be afforded the protections of Section 203 of the Delaware
General Corporation Law, which could have similar effects.