Exhibit 10.38

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of July24, 2003, by and between  Therma-Wave, Inc., a Delaware corporation (the"Borrower") and Silicon Valley Bank ("Bank").

DESCRIPTION OF EXISTING INDEBTEDNESS
: Among otherindebtedness which may be owing by Borrower to Bank, Borrower is indebted toBank pursuant to, among other documents, a Loan and Security Agreement, datedJune 13, 2003, as may be amended from time to time (the "LoanAgreement").  The Loan Agreement provides for, among other things, aCommitted Revolving Line in the original principal amount of Fifteen MillionDollars ($15,000,000).  Defined terms used but not otherwise defined hereinshall have the same meanings as in the Loan Agreement.  

Hereinafter, all indebtedness owing by Borrower to Bank shallbe referred to as the "Indebtedness."

DESCRIPTION OF COLLATERAL
.  Repayment of theIndebtedness is secured by the Collateral as described in the Loan Agreement.

Hereinafter, the above-described security document, togetherwith all other documents securing repayment of the Indebtedness shall bereferred to as the "Security Documents".  Hereinafter, the SecurityDocuments, together with all other documents evidencing or securing theIndebtedness shall be referred to as the "Existing LoanDocuments".

DESCRIPTION OF CHANGE IN TERMS
.

Modification(s) to Loan Agreement
.

Sub-section (i) of Section 6.7 entitled "Quick Ratio(Adjusted)" is amended to read as follows:

"(i)	**Quick Ratio (Adjusted)**.  As of the lastday of each month, a ratio of Quick Assets to Current Liabilities minus currentportions of Deferred Revenue of at least 1.20 to 1.00.
Sub-section (ii) of Section 6.7 entitled"Profitability" is amended in part to change the Applicable Amount forthe quarter-ended 06/30/03 from a negative <$8,500,000> to a negative<$9,500,000>.  

Sections 7 (Negative Covenants) and 7.2 (Changes inBusiness, Ownership, Management or Business Locations) are amended to read asfollows:

 
"7.	Negative Covenants
	Borrower will not do any of the following withoutBank's and Exim Bank's prior written consent, which will not be unreasonablywithheld:"

"7.2	Changes in Business, Ownership, Management orBusiness Locations.

Suffer a Change of Control, or engage in or permit any of itsSubsidiaries to engage in any business other than the businesses currentlyengaged in by Borrower and its Subsidiaries or reasonably related thereto.Borrower will not, without at least 30 days prior written notice, relocate itschief executive office or add any new offices or business locations in whichBorrower maintains more than $1,500,000 in Collateral.  Neither Borrower nor anyof its Subsidiaries shall be under any restriction with respect to the offer,sale or issuance of equity securities in a public or private offering so long asno Event of Default exists or will result from such public or private offering.This modification is subject to Silicon Valley Bank maintaining at all times afirst priority secured interest in the Export-Related Collateral as required bythe Working Capital Guarantee Program."

The definition of "Revolving Maturity Date" setforth in Section 13.1 is amended to June 11, 2004.

The Exim Borrowing Base Certificate, which comprisesExhibit E, is amended in part to change Line 19 thereof to read asfollows:

"19.	Accounts with 50% over 60 days past invoice duedate  $_______"

CONSISTENT CHANGES
.  The Existing Loan Documentsare hereby amended wherever necessary to reflect the changes describedabove.

PAYMENT OF LOAN MODIFICATION EXPENSES
.  Borrowershall pay Bank its reasonable out-of-pocket expenses incurred for preparation ofthis Loan Modification Agreement.

NO DEFENSES OF BORROWER
.  Borrower agrees that, asof the date hereof, it has no defenses against the obligations to pay anyamounts under the Indebtedness.

CONTINUING VALIDITY
.  Borrower understands andagrees that in modifying the existing Indebtedness, Bank is relying uponBorrower's representations, warranties, and agreements, as set forth in theExisting Loan Documents.  Except as expressly modified pursuant to this LoanModification Agreement, the terms of the Existing Loan Documents remainunchanged and in full force and effect.  Bank's agreement to modifications tothe existing Indebtedness pursuant to this Loan Modification Agreement in no wayshall obligate Bank to make any future modifications to the Indebtedness.Nothing in this Loan Modification Agreement shall constitute a satisfaction ofthe Indebtedness.  It is the intention of Bank and Borrower to retain as liableparties all makers and endorsers of Existing Loan Documents, unless the party isexpressly released by Bank in writing.  No maker, endorser, or guarantor will bereleased by virtue of this Loan Modification Agreement.  The terms of thisparagraph apply not only to this Loan Modification Agreement, but also to allsubsequent loan modification agreements.

CONDITIONS
.  The effectiveness of this LoanModification Agreement is conditioned upon receipt by Bank of a fully executedcopy of this Loan Modification Agreement, together with payment of its out-of-pocket expenses incurred for preparation of this Loan ModificationAgreement.

This Loan Modification Agreement is executed as of the datefirst written above.
**BORROWER:

THERMA-WAVE, INC.**
By:	/s:/ L. Ray Christie			
Name:	L. Ray Christie			
Title:	V.P., CFO & Secretary		
**BANK:

SILICON VALLEY BANK**
By:	/s:/ Kevin Walsh			
Name:	  Kevin Walsh				
Title:	  VP