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Exhibit 10.40

August 13, 2002

VIA HAND DELIVERY

Robert G. Ozarski
13894 Lake Poway Road
San Diego
California 92064

Re: Separation Agreement and
General Release of All Claims

Bob:

Pursuant to our discussion, I am handing you a document entitled
Separation Agreement and General Release of All Claims. You have forty-five
(45) days in which to decide whether to sign the document. Should you sign the
agreement, you then have an additional seven days to revoke your approval of
the documents. The release will not become final until after this seven-day
revocation period has lapsed. You are reminded of your continued obligations
under the Proprietary Information Agreement. A copy of this agreement is
enclosed for your records. Because the proposed Separation Agreement affects
your legal rights, we suggest that you consult with an attorney before signing
it.

If you have any questions, please let me know.

| |                                    
| | -----------------------------------
| | Sincerely,                         
| | /s/ Martin M. Schwartz             
| | Martin M. SchwartzPresident and CEO





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SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS

1.     This Separation Agreement and General Release of Claims (Agreement) is
entered into between Robert G. Ozarski (herein EMPLOYEE) and Therma-Wave,
Inc. (THERMA-WAVE or the Company).

WHEREAS, THERMA-WAVE has notified EMPLOYEE of his release and that his
last day of employment will be August 16, 2002; and

WHEREAS, the parties wish to amicably and finally resolve all issues
arising out of their employment relationship, including the termination
thereof;

NOW THEREFORE, in consideration for the mutual promises and undertakings
of the parties as set forth below, THERMA-WAVE and EMPLOYEE hereby enter into
this Agreement.

2.     THERMA-WAVE Consideration for Agreement. THERMA-WAVE will provide the
following:



|a. |  | Severance Pay. THERMA-WAVE will pay EMPLOYEE the gross sum of One
Hundred Two Thousand Dollars ($102,000.00) less payroll deductions, as
severance pay. The parties acknowledge that this amount is not already
owed to EMPLOYEE and constitutes independent consideration for this
Agreement.                                                                                                                                                                                                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | Benefits Continuation. Through February 28, 2003, Therma-Wave will
continue: EMPLOYEEs existing employee benefits subject to the terms of
Therma-Waves benefit plans. In order to continue EMPLOYEEs health
coverage, EMPLOYEE will make a timely, written COBRA election to
continue health coverage. Thereafter, Therma-Wave will pay EMPLOYEEs
COBRA premiums for the period through February 28, 2003. Ozarski will
also be allowed to participate in one of the career transition programs
with Right Management Consultants.

3.     General Release Of Claims. EMPLOYEE, individually and on behalf of his/her
representatives, successors, and assigns, generally releases THERMA-WAVE, its
parent, affiliated and subsidiary corporations, and its and their shareholders,
officers and all other representatives, agents, directors, employees,
successors and assigns, from all claims, known or unknown, which EMPLOYEE may
now have, or has ever had, against them arising from or in any way connected
with the employment relationship, or the termination thereof. This release
covers all statutory, common law, constitutional and other claims, including
but not limited to, all claims for wrongful discharge in violation of public
policy, breach of contract, any tort, or violation of statute including but not
limited to Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the California Fair
Employment and Housing Act, attorneys fees, costs, reinstatement, and/or other
equitable relief.





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4.     Waiver
Of Unknown Claims. EMPLOYEE has read Section 1542 of the California
Civil Code, 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.

EMPLOYEE understands that Section 1542 gives him/her the right not to release
existing claims of which s/he is not now aware, unless s/he voluntarily chooses
to waive this right. EMPLOYEE voluntarily elects to waive the rights described
in Section 1542 and to waive all claims that now exist in his/her favor, known
or unknown.

5.     Covenant
Not To Sue. To the fullest extent permitted by law, at no time
subsequent to the execution of this Release will EMPLOYEE pursue, or knowingly
permit the prosecution, in any court or tribunal any claim which is released by
this Agreement.

6.     Confidentiality
Agreement. EMPLOYEE agrees that the terms and conditions of
this Agreement are strictly confidential and will not be disclosed to any other
persons except his/her counsel, immediate family, financial advisors in order
to comply with income tax filing requirements, or as required by legal process
or applicable law, provided however, that EMPLOYEE will notify THERMA-WAVE if
such disclosure is sought, allowing THERMA-WAVE the opportunity to object to
such disclosure.

7.     Proprietary
Information Agreement. Employee acknowledges that s/he
previously signed the Proprietary Information and Inventions Assignment
Agreement (the Proprietary Information Agreement) with the Company and
understands that s/he has continuing obligations toward THERMA-WAVE.

8.     Return
of Company Property. EMPLOYEE agrees to return to THERMA-WAVE
all Company property, including but not limited to files and documents, whether
in electronic or hardcopy form, in EMPLOYEEs possession or under his/her
control.

9.     Arbitration. Except for claims by either party for injunctive relief arising
out the parties Proprietary Information Agreement, the parties agree to
arbitrate any and all disputes or claims arising out of or related to this
Agreement. The arbitrators decision shall be final and binding.

10.     Savings
Clause. Should any of the provisions of this Agreement be
determined to be invalid, such determination will not affect the enforceability
of the other provisions.





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11.     Complete
And Voluntary Agreement. The Proprietary Information Agreement and
this Agreement constitute the entire understanding of the parties on the
subjects covered. EMPLOYEE expressly warrants that: s/he has read and fully
understands this Agreement; THERMA-WAVE has advised EMPLOYEE to consult with an
attorney prior to executing this Agreement; s/he is not executing this Release
in reliance on any promises, representations or inducements other than those
contained herein; and s/he is executing this Release voluntarily, free of any
duress or coercion.

12.     Revocation
Period. EMPLOYEE understands that he has forty-five (45) days in
which to consider whether s/he should sign this Agreement; and that if s/he
signs this Agreement, s/he will be given seven (7) days following the date s/he
signs this Agreement to revoke it, and that this Agreement will not be
effective until after this seven-day period has lapsed.

13.     Effective Date. This Agreement shall become effective on the eighth (8th)
day following the date in which it is signed by EMPLOYEE.

|                                                                                          |  |                          
|----------------------------------------------------------------------------------------- |  | -------------------------
|/s/ Martin M. Schwartz                                                                    |  | Dated: August 13, 2002   
|Martin M. Schwartz
Chairman of the Board, President,
Chief Executive Officer and Director
|                                                                                         
|/s/ Robert G. Ozarski                                                                     |  | Dated: September 23, 2002
|Robert G. Ozarski                                                                         |