Document:

exv10w1

 

Exhibit 10.1

STOCKHOLDERS’ AGREEMENT

          This Stockholders’ Agreement (“Agreement”) is entered into as of November 22, 2005, by
and among Therma-Wave, Inc., a Delaware corporation (the “Company”), and the parties set
forth on Exhibit A hereto (each a “Purchaser” and collectively, the
“Purchasers”).

Recitals

          WHEREAS, it is a condition to the closing of the sale of the Company’s Series B Convertible
Preferred Stock to the Purchasers pursuant to the Stock Purchase Agreement of even date herewith
(the “Purchase Agreement”) that the parties hereto enter into this Agreement to make certain
provisions with respect to the Company’s organization and governance.

          NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth,
the parties hereto agree as follows:

SECTION 1

DEFINITIONS

          1.1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

          “Affiliate” has the meaning set forth in Regulation D under the Securities Act of
1933.

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

          “Change of Control” means any of the events described below:

          (1) The occurrence of any event that would, if known to the Company’s management, be required
to be reported by the Company under Item 5.01(a) of Form 8-K pursuant to the Securities Exchange
Act of 1934 (the “Exchange Act”); or

          (2) The acquisition or receipt, in any manner, by any person (as defined for purposes of the
Exchange Act) or any group of persons acting in concert, of direct or indirect beneficial ownership
(as defined for purposes of the Exchange Act) of fifty percent (50%) or more of the combined voting
securities ordinarily having the right to vote for the election of directors of the Company;
provided that the following shall not constitute a Change in Control: (i) any acquisition directly
from the Company; (ii) any acquisition by the Company or any of its affiliates, or (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its affiliates; or

          (3) A change in the constituency of the Board with the result that individuals (the
“Incumbent Directors”) who are members of the Board as of the date of this Agreement cease
for any reason to constitute at least a majority of the Board; provided that any individual

 

 

who is elected to the Board after the date of this Agreement and whose nomination for election
was unanimously approved by the Incumbent Directors shall be considered an Incumbent Director
beginning on the date of his or her election to the Board; or

          (4) Consummation of a merger, consolidation or reorganization involving the Company, unless
such merger, consolidation or reorganization results in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or parent thereof) more than
fifty percent (50%) of the total voting power represented by the voting securities of the Company
or such surviving entity or parent thereof outstanding immediately after such merger, consolidation
or reorganization; or

          (5) A complete liquidation or dissolution of the Company;

          (6) A sale, exchange or other disposition or transfer of all or substantially all of the
Company’s business or assets, other than pursuant to a spin-off or comparable transaction in which
the transferee is controlled by the Company or its existing stockholders immediately prior to such
transfer; or

          (7) execution of a binding agreement with respect to a transaction that, if completed, would
constitute or result in a Change in Control.

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

          “GAAP” means United States generally accepted accounting principles.

          “Holders” means the Purchasers and their respective Affiliates.

          “Person” means an individual, partnership, corporation, limited liability company,
association, trust, joint venture, unincorporated organization and any government, governmental
department or agency or political subdivision thereof.

          “Permitted Transferee” means (i) any affiliate of a Purchaser, (ii) any successor
entity that succeeds to all or substantially all of the assets of transferor,(iii) any limited
partner, general partner or limited liability company member who receives a distribution from a
Purchaser, (iv) any Person with at least $25.0 million in assets whose primary purpose is to invest
in other entities or securities, including registered and unregistered investment companies and
investment funds, financial institutions and other investment or financial entities (a
“Financial Entity”), and (v) any Person following such time as the Purchasers are entitled
to an additional director pursuant to Section 2.1(a)(iii) hereof, but without giving effect to any
limitation imposed by the proviso in Section 2.1(a)(iii).

          “Preferred Stock” means the Series B Convertible Preferred Stock, par value $0.01 per
share, of the Company.

          “Purchaser” has the meaning set forth in the introductory paragraph of this Agreement.

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SECTION 2

BOARD OF DIRECTORS

          2.1. Board Composition.

               (a) Effective at the closing of the sale of the Company’s Series B Convertible Preferred Stock
to the Purchasers pursuant to the Purchase Agreement, the Purchasers shall be entitled to designate
members to the Board (the “Purchaser Designees”), as follows: (i) one individual designated
by North Run Master Fund, LP (the “North Run Designee”), (ii) one individual designated
collectively by Deephaven Relative Value Equity Trading Ltd and Deephaven Long Short Equity Trading
Ltd (the “Deephaven Designee”); and (iii) in the event the Company’s cash and cash
equivalents, determined in accordance with GAAP applied consistently with the Company’s past
practice, are less than $15.0 million as of the end of a fiscal quarter as reported on the
Company’s balance sheet included in Form 10-Q or Form 10-K for such quarter, the holders of a
majority of Preferred Stock shall be entitled to designate one additional director (or such greater
number as may be required such that the aggregate number of directors designated pursuant to this
Section 2.1 equals the minimum number of directors necessary such that the aggregate number of
directors equals at least thirty percent (30%) of the then sitting board members); provided,
however, that notwithstanding the foregoing, in no event shall the percentage of board seats that
holders of Preferred Stock are entitled to elect exceed their proportion of ownership of voting
securities of the Company. Notwithstanding the foregoing, any individual (or individuals) to be
nominated or elected to the Board pursuant to this Agreement that is designated by an initial
Purchaser or a Permitted Transferee (pursuant to sections (i) – (iv) of the Permitted Transferee
definition) shall be appointed only after reasonable consultation, review and discussion with the
Company’s board of directors and its nominating committee. The Company agrees that its review
process for the initial designees shall be completed no later than December 9, 2005. Any
individual or individuals to be nominated or elected to the Board pursuant to this Agreement by a
Permitted Transferee pursuant solely to section (v) of the Permitted Transferee definition must
first be reasonably acceptable to a majority of the existing directors (excluding the North Run
Designee and the Deephaven Designee), who shall not unreasonably withhold or delay their approval
of such individual.

               (b) Notwithstanding the foregoing, (i) in the event the Purchasers together hold less than 50%
of the number of shares of Preferred Stock originally purchased by them pursuant to the Purchase
Agreement, the holders of a majority in interest of the Preferred Stock shall be entitled to elect
a single director (and the Purchasers shall cause any director nominated pursuant to Section 2.1(a)
and not reelected pursuant to this section to promptly tender his or her resignation from the
Board) and (ii) in the event the Purchasers together hold less than 20% of the number of shares of
Preferred Stock originally purchased by them pursuant to the Purchase Agreement, the rights set
forth in this Section 2.1 shall terminate and Purchasers shall cause any director elected pursuant
to Section 2.1(a) to promptly tender his or her resignation from the Board. In the event that any
Purchaser Designee fails to deliver his or her resignation as may be required by this Section
2.1(b), the Company and the Purchasers shall be

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entitled to take all necessary and appropriate action to cause such Purchaser Designee to be
removed.

               (c) The Company shall take all actions reasonably necessary and requested by any other
stockholder within its control (including, without limitation, calling special board and
stockholders’ meetings) so that the Purchaser Designees shall be elected to or removed from the
Board as provided in this Section 2.1. The Company shall cause its Board of Directors to take all
action necessary to appoint directors designated pursuant to this Section 2.1 to the Compensation
Committee and Audit Committee and each other committee as such directors may reasonably request, so
that the directors will have representation on each such committee proportional to their
representation on the Board, unless outside counsel has provided written advice that such
membership is prohibited by applicable law or the rules of the Nasdaq Stock Market. The Company
shall pay the reasonable out-of-pocket travel, lodging and other related expenses of all directors
elected pursuant to this Section 2.1 incurred in connection with attendance at meetings of the
Board or any committee thereof.

               (d) If a vacancy of a position held by a Purchaser Designee occurs or exists on the Board at
any time and for any reason, including but not limited to a vacancy because of the death,
disability, retirement, resignation or removal of any director for cause or otherwise, then the
Purchaser who originally designated such director pursuant to this Section 2.1 shall have the sole
right to designate an individual to fill such vacancy (provided such Purchaser is still entitled to
designate a member to the Board thereunder), and the Company shall take all reasonable steps to
elect such nominee to fill such vacancy.

               (e) At the request of the entity designating a Purchaser Designee and only if such Purchaser
is still entitled to designate a Board member pursuant to Section 2.1 hereof, the Company shall (x)
use all reasonable efforts to (i) seek action by written consent as promptly as practicable
following such request to remove such Purchaser Designee, or (ii) if action by written consent of
stockholders is not then permitted by the certificate of incorporation and bylaws of the Company,
the Company may, in its sole discretion, cause a special meeting of stockholders to be held
proposing the removal of such Purchaser Designee and (y) to the extent permitted by law and to the
extent an action by written consent is sought or a special meeting of stockholders is called
pursuant to this paragraph, use all reasonable efforts to solicit from stockholders of the Company
eligible to vote for the election of directors proxies to remove such Purchaser Designee.

SECTION 3

TRANSFER RESTRICTIONS

          3.1. Transfer Restrictions. Prior to the second anniversary of the date of the
original issuance of Preferred Stock to the Stockholders, except as approved by the Board
(excluding the directors nominated pursuant to Section 2.1 above), each Purchaser and each
Permitted Transferees agrees that it shall not sell or otherwise transfer or agree to sell or
otherwise transfer (a “Transfer”) any shares of Preferred Stock except to a Permitted
Transferee; provided, however, that the foregoing restrictions shall not restrict the Purchaser
from transferring at anytime and without consent, any or all of its shares of Common Stock.

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          3.2. Certain Transferees to Become Parties. Any transferee receiving Preferred Stock
in a Transfer pursuant to Section 3.1 shall sign and delivery to the Secretary of the Company a
counterpart to this Agreement in substantially the form attached hereto as Exhibit B.

SECTION 4

MISCELLANEOUS

          4.1. Waivers and Amendments, Termination. The rights and obligations of the Company
and the Purchasers hereunder may only be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time or indefinitely)
or amended with the written consent of the Company and Purchasers. This Agreement shall terminate
at such time all Preferred Stock is converted into Common Stock or earlier if following the
effectiveness of a Change of Control the Stockholders, in aggregate, own ten percent (10%) or less
of the outstanding capital stock of the surviving entity, assuming the conversion of all
convertible securities and exercise of all options and warrants whose exercise price equals or
exceeds the fair market value of the underlying securities immediately following the effectiveness
of such Change of Control.

          4.2. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Delaware (without giving effect to any conflicts or choice of laws provisions
thereof that would cause the application of the domestic substantive laws of any other
jurisdiction).

          4.3. Successors and Assigns. This Agreement shall be binding on each party hereto
with respect to all shares of Preferred Stock now or hereafter held by each Holder. Except as
otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
Neither this Agreement nor any right or obligation hereunder is assignable by any party except with
the prior written consent of the other party or parties; provided, however, each Holder may assign
or transfer any or all of its rights under this Agreement to a Permitted Transferee in connection
with a transfer of Preferred Stock pursuant to Section 3; and provided further that upon a Change
of Control, this Agreement and all rights or obligations hereunder may be assigned by the Company
only to the surviving entity without the prior written consent of the other party or parties.

          4.4. Entire Agreement. This Agreement constitutes the full and entire understanding
and agreement between the parties with regard to the subjects hereof and thereof. This Agreement
supersedes all prior and inconsistent agreements and understandings between and among any of the
parties hereto.

          4.5. Notices. All demands, notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be personally delivered or
sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in
this Section), commercial (including Federal Express) or U.S. Postal Service overnight delivery
service, or deposited in the U.S. Postal Service mailed first class, registered or certified mail,
postage prepaid, as set forth below:

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	 	 	If to the Company, addressed to:
	 
	 	 	 	 
	 

	 	 	 	Therma-Wave, Inc.

1250 Reliance Way

Fremont, CA 94539

Attn: Chief Financial Officer

Telecopier: 510-656-3852
	 
	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Attn: Matthew Sonsini

Telecopier: 650-493-6811
	 
	 	 	 	 
	 	 	If to any Holder, at the address set forth on Exhibit A
	 
	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Ropes & Gray LLP

One International Place

Boston, MA 02110

Attn: Julie H. Jones

Telecopier: 617-951-7050

          Notices shall be deemed given upon the earlier to occur of (i) receipt by the party to whom
such notice is directed; (ii) if sent by facsimile machine, on the date (other than a Saturday,
Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent,
if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. Pacific Standard Time
and, if sent after 5:00 p.m. Pacific Standard Time, on the day (other than a Saturday, Sunday or
legal holiday in the jurisdiction to which such notice is directed) after which such notice is
sent; (iii) on the first business day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following the day the same is deposited with the
commercial carrier if sent by commercial overnight delivery service; or (iv) the fifth day (other
than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed)
following deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice duly
given in accordance therewith may specify a different address for the giving of any notice
hereunder.

          4.6. Severability. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.

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          4.7. Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in construing this
Agreement.

          4.8. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together constitute one instrument.

          4.9.  Remedies.

               (a) The rights and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive its rights to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the parties may have
at law or in equity.

               (b) Without limitation of the foregoing, the parties hereto agree that irreparable harm would
occur in the event that any of the agreements and provisions of this Agreement were not performed
fully by the parties hereto in accordance with their specific terms or were otherwise breached, and
that money damages are an inadequate remedy for breach of the Agreement because of the difficulty
of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in
the event that this Agreement is not performed in accordance with its terms or is otherwise
breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other
parties and to enforce specifically such terms and provisions of this Agreement, such remedy being
in addition to and not in lieu of, any other rights and remedies to which the other parties are
entitled to at law or in equity.

               (c) Except where a time period is otherwise specified, no delay on the part of any party in
the exercise of any right, power, privilege or remedy hereunder shall operate as a waiver thereof,
nor shall any exercise or partial exercise of any such right, power, privilege or remedy preclude
any further exercise thereof or the exercise of any right, power, privilege or remedy.

          4.10. Legends. The Purchaser agrees that the certificates for the Preferred Stock
shall bear the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY, AS SET FORTH IN A SHAREHOLDERS AGREEMENT, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.

The legend set forth above shall be removed from the certificates for the Preferred Stock following
the second anniversary of the date of the original issuance of Preferred Stock to the Stockholders.

          4.11. No Grant of Proxy, Not a Voting Trust. This Agreement does not grant any proxy
and should not be interpreted as doing so. Nevertheless, should the provisions of this Agreement
be construed to constitute the granting of proxies, such proxies shall be deemed

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coupled with an interest and are irrevocable for the term of this Agreement. This Agreement
is not a voting trust governed by Section 218 of the Delaware General Corporation Law and should
not be interpreted as such.

          4.12. No Third Party Beneficiary. There are no third party beneficiaries of this
Agreement.

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     IN WITNESS WHEREOF, the Company and the Purchasers have executed this Agreement as of the date
first set forth above.

	 	 	 	 	 	 	 
	 	 	“Company”
	 
	 	 	 	 	 	 
	 	 	 	 	Therma-Wave, Inc.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Boris Lipkin
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Boris Lipkin
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	Chief Executive Officer
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	“Purchasers”
	 
	 	 	 	 	 	 
	 	 	 	 	North Run Master Fund, L.P.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	North Run GP, LP,
	 

	 	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By: 	 	North Run Advisors, LLC,
	 

	 	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By: 	 	/s/ Thomas B. Ellis
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Thomas B. Ellis, Member
	 
	 	 	 	 	 	 
	 

	 	 	 	By: 	 	/s/ Todd B. Hammer
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Todd B. Hammer, Member
	 
	 	 	 	 	 	 
	 	 	 	 	Deephaven Relative Value Equity Trading Ltd.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Colin Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Colin Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	Chief Executive Officer
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Deephaven Long Short Equity Trading Ltd.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Colin Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Colin Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	Chief Executive Officer
	 

	 	 	 	 	 	 

[SIGNATURE PAGE TO STOCKHOLDERS’ AGREEMENT]

 

 

EXHIBIT A

NAME AND ADDRESS OF PURCHASERS

Name

North Run Master Fund, L.P.

One International Place — Suite 2401

Boston, MA 02110

Deephaven Relative Value Equity

Trading Ltd

130 Cheshire Parkway, Suite 102

Minnetonka, MN 55305

Deephaven Long Short Equity

Trading Ltd

130 Cheshire Parkway, Suite 102

Minnetonka, MN 55305

 

 

EXHIBIT B

COUNTERPART TO STOCKHOLDERS AGREEMENT

     Reference is made to that certain Stockholders’ Agreement dated as of November ___, 2005, by
and among Therma-Wave, Inc. and the Stockholders party thereto (as amended from time to time, the
“Agreement”). As a proposed recipient of shares of stock covered by the Agreement, the
undersigned hereby acknowledges and agrees that such shares upon receipt shall remain subject to
all of the terms and provisions of the Agreement and all rights and obligations thereunder arising
prior to such receipt, and the undersigned hereby agrees to be bound by all of the terms and
provisions of the Agreement. The undersigned hereby joins and executes said Agreement, hereby
authorizing this Counterpart to be attached thereto.

     Dated this                      day of                     , 20                    .

	 	 	 	 	 
	 

	 	Signature:
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Print Name:	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address for Notice:exv10w2

 

Exhibit 10.2

THERMA-WAVE, INC.

PURCHASE AGREEMENT

     This Purchase Agreement (this “Agreement”) is made and entered into as of November 18,
2005, by and between Therma-Wave, Inc., a Delaware corporation (the “Company”), and each of
the purchasers listed on Exhibit A attached hereto (collectively, the “Purchasers”
and individually, a “Purchaser”).

RECITALS

     WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers desire to purchase
from the Company, an aggregate of ten thousand four hundred (10,400) units (each, a “Unit”
and collectively, the “Units”), with each Unit being comprised of (i) one share of Series B
Preferred Stock, par value $0.01 per share (the “Preferred Stock”) and (ii) one hundred
fifty (150) warrants to purchase common stock of the Company, par value $0.01 per share
(“Common Stock”), (each a “Warrant” and, together with the Preferred Stock, the
“Securities”) of Common Stock, on the terms and conditions set forth in this Agreement; and

     NOW, THEREFORE, in consideration of the foregoing, the mutual promises hereinafter set forth,
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1. AGREEMENT TO PURCHASE AND SELL STOCK.

          (a) Authorization. The Company’s Board of Directors has authorized the issuance,
pursuant to the terms and conditions of this Agreement, of up to ten thousand four hundred (10,400)
Units.

          (b) Agreement to Purchase and Sell Securities. Subject to the terms and conditions of
this Agreement, each Purchaser severally agrees to purchase, and the Company agrees to sell and
issue to each Purchaser, at the Closing (as defined below), that number of Units set forth opposite
the appropriate Purchaser’s name on Exhibit A attached hereto. The purchase price of each
Unit (the “Per Unit Price”) shall be $1,000.

          (c) Use of Proceeds. The Company intends to apply the net proceeds from the sale of
the Units for general corporate purposes.

     2. CLOSING. Subject to the satisfaction of closing conditions, the purchase and sale
of the Units shall take place within two (2) business days after the satisfaction of closing
conditions at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page
Mill Road, Palo Alto, California, at 10:00 a.m. California time, on November 22, 2005, or at such
other time and place as the Company and the Purchasers mutually agree upon (which time and place
are referred to in this Agreement as the “Closing”). At the Closing, the Company shall
authorize its transfer agent

 

 

to issue to each Purchaser, against delivery of payment for the Units, one or more stock
certificates (the “Certificates”) registered in the name of each Purchaser, representing
the number of shares of Preferred Stock set forth opposite such Purchaser’s name on Exhibit
A hereto, and bearing the legend set forth in Section 4(k) herein and one or more warrant
certificates representing the number of Warrants set forth opposite such person’s name on
Exhibit A hereto. Closing documents may be delivered by facsimile with original signature
pages sent by overnight courier. The date of the Closing is referred to herein as the “Closing
Date”.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and
warrants to each Purchaser that the statements in this Section 3 are true and correct as of the
date hereof and as of the Closing Date, except as set forth in the disclosure letter delivered to
the Purchasers concurrently herewith (the “Disclosure Letter”):

          (a) Organization Good Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has
all corporate power and authority required to (a) carry on its business as presently conducted and
(b) enter into this Agreement, the Stockholder Agreement dated as of the date hereof (the
“Stockholder Agreement”), the Registration Rights Agreement, dated as of the date hereof
(the “Registration Rights Agreement”) and the Warrants (collectively, the “Operative
Documents”), and to consummate the transactions contemplated hereby and thereby. The Company
is qualified to do business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect. As used in this Agreement, “Material Adverse
Effect” means a material adverse effect on, or a material adverse change in, or a group of such
effects on or changes in, the business, operations, financial condition, results of operations,
assets or liabilities of the applicable party and its subsidiaries, taken as a whole.

          (b) Capitalization. The capitalization of the Company, without giving effect to the
transactions contemplated by this Agreement, is as follows. The authorized stock of the Company
consists of (i) 75,000,000 shares of Common Stock; and (ii) 1,000,000 shares of Series A
Convertible Preferred Stock, and (iii) 5,000,000 shares of undesignated Preferred Stock. As of
October 28, 2005, the Company consists of 36,867,751 shares of Common Stock issued and outstanding
and no shares issued and outstanding of Series A Convertible Preferred Stock or undesignated
Preferred Stock. All such shares of Common Stock and Preferred Stock have been duly authorized, and
all such issued and outstanding shares of Common Stock have been validly issued, are fully paid and
nonassessable. No such outstanding shares of Common Stock were issued in violation of any
pre-emptive rights.

          The Company has also reserved: (i) 3,500,000 shares of Common Stock for issuance upon exercise
of options granted under the Company’s 2000 Employee Stock Purchase Plan; and (ii) 8,387,429 shares
of Common Stock for issuance to employees of the Company under the Company’s 2000 Equity Incentive
Plan. All shares of Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except as provided in this Agreement and
set forth in the Disclosure Letter, and except for the (i) shares of Common Stock subject to
outstanding options issued under any of the Company’s stock plans referenced in this paragraph, and
(ii) 162,006 shares of Common Stock subject to outstanding

-2-

 

warrants, there are no other equity securities, options, warrants, calls, rights, commitments
or agreements of any character to which the Company is a party or by which it is bound obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company
to grant, extend or enter into any such equity security, option, warrant, call, right, commitment
or agreement.

          (c) Due Authorization. All corporate actions on the part of the Company necessary for
the authorization, execution, delivery of, and the performance of all obligations of the Company
under the Operative Documents and the authorization, issuance, reservation for issuance and
delivery of all of the Securities being sold under the Operative Documents have been taken, and the
Operative Documents constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except (a) as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or others laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law
governing the availability of equitable remedies and (b) as rights to indemnity or contribution may
be limited under federal or state securities laws or by principles of public policy thereunder.

          (d) Valid Issuance of Stock.

               (i) Valid Issuance. The Securities to be issued pursuant to this Agreement will be,
upon payment therefor by the Purchasers in accordance with this Agreement, duly authorized, validly
issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the
issue thereof. The issuance of the shares of Common Stock issued or issuable from time to time
upon the conversion of the Preferred Stock will be, and at all times prior to such conversion, will
have been, duly authorized, duly reserved for issuance upon such conversion, and will be, upon such
conversion, validly issued, fully paid and non-assessable, free from all taxes, liens and charges
with respect to the issue thereof. The issuance of the shares of Common Stock issued or issuable
from time to time upon the exercise of the Warrants will be, and at all times prior to such
exercise, will have been, duly authorized, duly reserved for issuance upon such exercise and
payment of the exercise price of the Warrants, and will be, upon such exercise and payment, validly
issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the
issue thereof.

               (ii) Compliance with Securities Laws. Subject to the accuracy of the representations
made by the Purchasers in Section 4 hereof, the Securities will be issued to the Purchasers in
compliance with applicable exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the “Securities Act”) and (ii) the
registration and qualification requirements of all applicable securities laws of the states of the
United States.

          (e) Governmental Consents. Except as set forth in the Disclosure Letter, no consent,
approval, order or authorization of, or registration, qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority on the part of the
Company is required in connection with the issuance of the Securities to the Purchasers, or the
consummation of the other transactions contemplated by this Agreement, except (i) such filings as

-3-

 

have been made prior to the date hereof, (ii) the filing of a notification form with The
Nasdaq Stock Market, Inc. (“Nasdaq”) and (iii) the filing of the notice required by Section
25102(f) or 25102.1 of the California Corporations Code and (b) the filing of a notice on Form D
with the Securities and Exchange Commission.

          (f) Non-Contravention. Except as set forth in the Disclosure Letter, the execution,
delivery and performance of this Agreement by the Company, and the consummation by the Company of
the transactions contemplated hereby (including issuance of the Securities), do not (i) contravene
or conflict with the Certificate of Incorporation, as amended, or Bylaws of the Company; (ii)
constitute a violation of any provision of any federal, state, local or foreign law binding upon or
applicable to the Company or its assets, etc.; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of, or to a loss of any
material benefit to which the Company is entitled under, or result in the creation or imposition of
any lien, claim or encumbrance on any assets of the Company under, any Material Contract (as
defined below) to which the Company is a party or any material permit, license or similar right
relating to the Company or by which the Company may be bound or affected.

          (g) Litigation. There is no material action, suit, proceeding, claim, arbitration or
investigation (“Action”) pending or, to the Company’s knowledge, threatened: (a) against
the Company, its activities, properties or assets, or any officer, director or employee of the
Company in connection with such officer’s, director’s or employee’s relationship with, or actions
taken on behalf of, the Company, or (b) that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement (including issuance of the Securities). The Company is
not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. The Company does not intend to initiate any
Action that is reasonably likely to have a Material Adverse Effect on the Company.

          (h) Compliance with Law and Charter Documents. The Company is not in violation or
default of any provisions of its Certificate of Incorporation, as amended, or Bylaws. The Company
has complied in all material respects and is in compliance in all material respects with all
applicable statutes, laws, rules, regulations and orders of the United States of America and all
states thereof, foreign countries and other governmental bodies and agencies having jurisdiction
over the Company’s business or properties.

          (i) SEC Documents.

               (1) Reports. The Company has filed in a timely manner all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules
and regulations promulgated thereunder, except for where the failure to do so would not be
reasonably likely to have a Material Adverse Effect. The Company has made available to the
Purchasers prior to the date hereof copies of its Annual Report on Form 10-K for the fiscal year
ended April 3, 2005, its quarterly report on Form 10-Q for the fiscal quarters ended July 3, 2005
and October 2, 2005, its current reports on Form 8-K filed on August 23, 2005, October 6, 2005 and
October 27, 2005 and its Proxy Statement for its 2005 Annual Meeting of Stockholders filed by the
Company with the Securities and Exchange Commission (“SEC”) (the Form 10-K, Form 10-Q and

-4-

 

Proxy Statement are collectively referred to herein as the “SEC Documents”). Each of
the SEC Documents, as of the respective date thereof (or if amended or superseded by a filing prior
to the date hereof, then on the date of such filing), did not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The Company has
filed all material contracts that are required to be filed as exhibits to the SEC Documents (the
“Material Contracts”).

               (2) Financial Statements. The financial statements of the Company in the SEC
Documents present fairly, in accordance with United States generally accepted accounting principles
(“GAAP”), the financial position of the Company as of the dates indicated, and the results
of its operations and cash flows for the period therein specified, subject, in the case of
unaudited financial statements for interim periods, to normal year-end audit adjustments.

               (3) Sarbanes-Oxley. The Chief Executive Officer and the acting Chief Financial
Officer of the Company have signed, and the Company has furnished to the SEC, all certifications
required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Such certifications contain no
qualifications or exceptions to the matters certified therein and have not been modified or
withdrawn; and neither the Company nor any of its officers has received notice from any
governmental entity questioning or challenging the accuracy, completeness, form or manner of filing
or submission of such certifications. The Company is otherwise in compliance with all applicable
effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations issued
thereunder by the SEC, except where such non-compliance would not be reasonably likely to have a
Material Adverse Effect

          (j) Absence of Certain Changes. Since June 27, 2005, and the date hereof, and except
as set forth in the Disclosure Letter or in the SEC Documents, the business and operations of the
Company have been conducted in the ordinary course consistent with past practice. Since June 27,
2005, and the date hereof, and except as set forth in the Disclosure Letter, there has not been (i)
any change, circumstance or event that is reasonably likely to have a Material Adverse Effect, (ii)
any declaration, setting aside or payment of any dividend or other distribution of the assets of
the Company with respect to any shares of capital stock of the Company or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of the Company’s capital
stock, (iii) any damage, destruction or loss, whether or not covered by insurance, except for such
occurrences, individually and collectively, that have not had, and would not reasonably be expected
to have, a Material Adverse Effect, (iv) any waiver by the Company of a valuable right or of a
material debt owed to it, except for such waivers, individually and collectively, that have not
had, and would not reasonably be expected to have, a Material Adverse Effect, (v) any material
change by the Company in its accounting principles, methods or practices or in the manner in which
it keeps its accounting books and records, except any such change required by a change in GAAP or
by the SEC, and (vi) any entry into, amendment of, termination or non-renewal by the Company of any
material contract, license, lease, transaction, commitment or other right or obligation.

          (k) Registration Rights. Except as provided in Section 5 herein and the Disclosure
Letter, effective upon the Closing, the Company is not currently subject to any agreement providing
any person or entity any rights (including piggyback registration rights) to have any securities of
the Company registered with the SEC or registered or qualified with any other governmental
authority.

-5-

 

          (l) Taxes. The Company has filed all necessary federal, state, and foreign income and
franchise tax returns due prior to the date hereof and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of any material tax deficiency which has been or might be
asserted or threatened against it.

          (m) General Solicitation. Neither the Company nor any other person or entity
authorized by the Company to act on its behalf has engaged in a general solicitation or general
advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to
offers or sales of the Securities.

          (n) S-3 Eligibility. The Company meets the eligibility requirements for use of a Form
S-3 Registration Statement.

          (o) Intellectual Property. The Company owns or possesses sufficient rights to use all
inventions, trade secrets, know-how, trademarks, service marks, trade names, copyrights or other
intellectual property and, to its knowledge, all patent and patent rights (collectively,
“Intellectual Property”), which are necessary to conduct its businesses as currently
conducted, except where the failure to currently own or possess would not reasonably be expected to
result, either individually or in the aggregate, in a Material Adverse Effect. The Company has not
received any written notice of, and has no actual knowledge of, any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property, and to the Company’s
knowledge, none of the patent rights owned or licensed by the Company are unenforceable or invalid.

          (p) Internal Accounting Controls. Except as expressly set forth under Item 9A of the
Company’s Annual Report on Form for the fiscal year ended on April 3, 2005, the Company maintains a
system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

          (q) No Undisclosed Liabilities. Except as disclosed, reflected or reserved against in
the financial statements and supporting schedules included in the Company’s Quarterly Report on
Form 10-Q for fiscal quarter ended July 3, 2005, to the Company’s knowledge there are no material
liabilities of the Company or any subsidiary, other than liabilities incurred in the ordinary
course of business consistent with past practice since July 3, 2005 or which in the aggregate would
not reasonably be expected to result in a Material Adverse Effect.

          (r) Related Party Transactions. Except as expressly disclosed in the SEC Documents,
the Company has not entered into any agreements, understandings, or proposed transactions between
the Company or any subsidiary, on the one hand, and any of its officers, affiliates or directors,
or any of their affiliates on the other hand that would be required to be

-6-

 

disclosed pursuant to Regulation SK, Item 404, as promulgated by the Securities and Exchange
Commission.

     4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASER. Each
Purchaser hereby represents and warrants to the Company severally and not jointly, and agrees that:

          (a) Organization Good Standing and Qualification. The Purchaser has all corporate,
membership or partnership power and authority required to enter into this Agreement and the other
Operative Documents, and to consummate the transactions contemplated hereby and thereby.

          (b) Authorization. The execution of this Agreement has been duly authorized by all
necessary corporate, membership or partnership action on the part of the Purchaser. This Agreement
constitutes the Purchaser’s legal, valid and binding obligation, enforceable in accordance with its
terms, except (a) as may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of creditors’ rights
generally and (ii) the effect of rules of law governing the availability of equitable remedies and
(b) as rights to indemnity or contribution may be limited under federal or state securities laws or
by principles of public policy thereunder.

          (c) Litigation. There is no Action pending against the Purchaser that seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.

          (d) Purchase for Own Account. The Securities are being acquired for investment for
the Purchaser’s own account, not as a nominee or agent, and not with a view to the public resale or
distribution thereof within the meaning of the Securities Act, without prejudice, however, to such
Purchaser’s right at all times to sell or otherwise dispose of all or any part of such securities
in compliance with applicable federal and state securities laws and as otherwise contemplated by
this Agreement. The Purchaser also represents that it has not been formed for the specific purpose
of acquiring the Securities.

          (e) Investment Experience. The Purchaser understands that the purchase of the
Securities involves substantial risk. The Purchaser has experience as an investor in securities of
companies and acknowledges that it is able to fend for itself, can bear the economic risk of its
investment in the Securities and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the Securities and
protecting its own interests in connection with this investment.

          (f) Accredited Purchaser Status. The Purchaser is an “accredited investor” within the
meaning of Regulation D promulgated under the Securities Act.

          (g) Reliance Upon Purchaser’s Representations. The Purchaser understands that the
issuance and sale of the Securities to it will not be registered under the Securities Act on the
ground that such issuance and sale will be exempt from registration under the Securities Act

-7-

 

pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is based
on each Purchaser’s representations set forth herein.

          (h) Receipt of Information. The Purchaser has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the issuance and sale of the
Securities and the business, properties, prospects and financial condition of the Company and to
obtain any additional information requested and has received and considered all information it
deems relevant to make an informed decision to purchase the Securities.

          (i) Restricted Securities. The Purchaser will not sell, offer to sell, assign,
pledge, hypothecate or otherwise transfer any of the Securities unless (i) pursuant to an effective
registration statement under the Securities Act, (ii) such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the Securities Act, or (iii) such
holder provides the Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 under the Securities Act without any restriction as to the number of securities acquired
as of a particular date that can be immediately sold. Notwithstanding anything to the contrary
contained in the Agreement, the Purchaser may transfer (without restriction and without the need
for an opinion of counsel) the Securities to its affiliates provided that such affiliate is an
“accredited investor” under Regulation D and such affiliate agrees to be bound by the terms and
conditions of the Agreement.

          (j) No Affiliation. The Purchaser represents and warrants that it is not affiliated
with any other Purchaser, that it has not been identified as a party to any group with any other
Investor in any filing with the Securities and Exchange Commission, and that it not otherwise a
member of an identified group that includes any other Investor.

          (k) Legends. The Purchaser agrees that the certificates for the Preferred Stock and
the Common Stock issuable upon exercise of the Warrants shall bear the following legend:

“The securities represented by this certificate have not been registered
under the Securities Act of 1933 or with any state securities commission, and
may not be transferred or disposed of by the holder in the absence of a
registration statement which is effective under the Securities Act of 1933
and applicable state laws and rules, or, unless, immediately prior to the
time set for transfer, such transfer may be effected without violation of the
Securities Act of 1933 and other applicable state laws and rules.”

     In addition, the Purchaser agrees that the Company may place stop transfer orders with its
transfer agents with respect to such certificates. The legend set forth above shall be removed
from the certificates for the Preferred Stock and the Common Stock issuable upon exercise of the
Warrants, (i) following any sale of such Preferred Stock or Common Stock pursuant to Rule 144 or
any effective registration statement, or (ii) if such Preferred Stock or Common Stock is eligible
for sale under Rule 144(k) (and the holder of such Preferred Stock or Common Stock has submitted a
written request for removal of the legend indicating that the holder has complied with the
applicable provisions of Rule 144), or (iii) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the SEC)

-8-

 

(and the holder of such Preferred Stock or Common Stock has submitted a written request for
removal of the legend indicating that the holder has complied with such judicial interpretation or
pronouncement). Subject to receipt of appropriate certifications, the Company shall cause its
counsel to issue a legal opinion to the Company’s transfer agent promptly upon the occurrence of
any of the events in clauses (i), (ii) or (iii) above to effect the removal of the legend on
certificates for the Preferred Stock or Common Stock. The Company agrees that at such time as such
legend is no longer required under this Section 4(k), it will, no later than three (3) business
days following the delivery by a Purchaser to the Company (attention: Chief Financial Officer) or
the Company’s transfer agent (with a copy to the Company or the transfer agent, as applicable) of a
certificate representing the Preferred Stock or Common Stock issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser a certificate representing such Preferred Stock
or Common Stock that is free from all restrictive and other legends; provided that in the
case of removal of the legend for reasons set forth in clause (ii) above, the holder of such
Preferred Stock or Common Stock has submitted a written request for removal of the legend
indicating that the holder has complied with the applicable provisions of Rule 144. The Company may
not make any notation on its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section 4(k).

          (l) HSR Compliance.

               (i) Each Purchaser is its own “ultimate parent entity” as defined in the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended or the rules and regulations promulgated thereto
(together, the “HSR Act”).

               (ii) Each Investor will hold less than $50,000,000 in voting securities of the Company
following execution of this Agreement, as valued under the HSR Act.

     5. COMPANY COVENANTS.

          (a) Reporting for Income Tax. The Preferred Stock is intended to be Common Stock for
tax purposes, and the Company intends to report the Preferred Stock for purposes of Section 305 of
the Internal Revenue Code of 1986, as amended (the “Code”).

          (b) Covenant Regarding Dividends. Until the third anniversary of the date on which no
Preferred Stock is outstanding, the Company shall not make any payment or declaration of any
dividend or making of any other distribution on any share of capital stock or other security or
interest in the Corporation other than the Preferred Stock if the effect of such dividend or
distribution could reasonably be expected to (i) cause the right to receive the Liquidation Value
(as defined in the Certificate of Designation) to result in, (ii) cause an increase in the
Liquidation Value to be, (iii) cause the conversion of the Preferred Stock into Common Stock to be
or (iv) make an adjustment of the Conversion Rate (as defined in the Certificate of Designation) a
taxable event to the holders of the Preferred Stock.

          (c) Covenant Regarding Stock Issuance. Until the Closing Date, Company shall not
issue any shares of Common Stock, Series A Convertible Preferred Stock, undesignated Preferred
Stock or securities convertible into or exchangeable or exercisable for equity securities of the

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Company, except those shares of Common Stock issued pursuant to the Company’s employee stock
purchase plan and equity incentive plan and shares of Common Stock issued upon the exercise or
conversion of options or convertible securities outstanding as of the date hereof.

     6. PURCHASER COVENANT REGARDING SHORT SALE.

          (a) Short Sale Restrictions. Prior to the earlier of (i) the second anniversary of
the issuance of the Preferred Stock and (ii) the time at which all shares of Preferred Stock have
converted into shares of Common Stock, each Purchaser, severally and not jointly, agrees it will
not engage in any short sale transactions (or transactions, including transactions in derivative
securities, having the effect of a short sale) of the Common Stock, as defined in Rule 200(a) of
Regulation SHO under the Exchange Act. For the avoidance of doubt, the parties agree that nothing
herein shall be interpreted to (i) prevent a sale by a Purchaser of the Common Stock now owned or
herein after acquired that does not involve a short sale (including a short sale “against the box”)
or (ii) limit the ability to receive the transaction consideration paid by another person or entity
in connection with an acquisition of the Company by means of any transaction or series of
transactions (including any reorganization, merger, consolidation or share transfer), where the
shareholders of the Company immediately preceding such transaction own, following such transaction,
less than 50% of the voting securities of the Company (a “Change of Control”).

     7. CONDITIONS TO THE PURCHASERS’ OBLIGATIONS AT CLOSING. The obligations of the
Purchasers under Section 2(a) of this Agreement are subject to the fulfillment or waiver, on or
before the Closing, of each of the following conditions:

          (a) Representations and Warranties True. Each of the representations and warranties
of the Company contained in Section 3 shall be true and correct in all material respects on and as
of the date of the date hereof and on and as of the date of the Closing, with the same effect as
though such representations and warranties had been made as of the Closing.

          (b) Performance. The Company shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and shall have obtained
all approvals, consents and qualifications necessary to complete the purchase and sale described
herein.

          (c) Compliance Certificate. The Company will have delivered to the Purchasers at the
Closing a certificate signed on its behalf by its Chief Executive Officer or Chief Financial
Officer certifying that the conditions specified in Sections 7(a) and 7(b) hereof have been
fulfilled.

          (d) Securities Exemptions. The offer and sale of the Securities to the Purchasers
pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act
and the registration and/or qualification requirements of all applicable state securities laws.

          (e) Opinion of Company Counsel. The Purchasers will have received an opinion on
behalf of the Company, dated as of the date of the Closing, from Wilson, Sonsini, Goodrich &
Rosati, PC, counsel to the Company, in the form attached as Exhibit B.

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          (f) No Suspension of Trading or Listing of Common Stock. The Common Stock of the
Company (i) shall be designated for quotation or listed on Nasdaq and (ii) shall not have been
suspended from trading on Nasdaq.

          (g) Good Standing Certificates. The Company shall have delivered to the Purchasers a
certificate of the Secretary of State of the State of Delaware, dated as of a date within five days
of the date of the Closing, with respect to the good standing of the Company.

          (h) Secretary’s Certificate. The Company shall have delivered to the Purchasers a
certificate of the Company executed by the Company’s Secretary attaching and certifying to the
truth and correctness of (1) the Certificate of Incorporation, (2) the Bylaws and (3) the
resolutions adopted by the Company’s Board of Directors in connection with the transactions
contemplated by the Operative Documents.

          (i) No Statute or Rule Challenging Transaction. No statute, rule, regulation,
executive order, decree, ruling, injunction, action, proceeding or interpretation by a court,
regulatory body, self-regulatory organization or governmental authority of competent jurisdiction
shall have been enacted, entered, promulgated, or adopted by any court, regulatory body,
self-regulatory organization or governmental authority of competent jurisdiction or the staff of
any of the foregoing, having authority over the matters contemplated hereby which questions the
validity of, or challenges or prohibits the consummation of, any of the transactions contemplated
by this Agreement.

          (j) Closing. The Closing shall occur by no later than November 30, 2005.

          (k) Other Actions. The Company shall have executed such certificates, agreements,
instruments and other documents, and taken such other actions as shall be customary or reasonably
requested by the Purchasers in connection with the transactions contemplated hereby.

     8. CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING. The obligations of the Company
to the Purchasers under this Agreement are subject to the fulfillment or waiver, on or before the
Closing, of each of the following conditions:

          (a) Representations and Warranties True. The representations and warranties of the
Purchasers contained in Section 4 shall be true and correct in all material respects on and as of
the date hereof and on and as of the date of the Closing with the same effect as though such
representations and warranties had been made as of the Closing.

          (b) Performance. The Purchasers shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

          (c) Securities Exemptions. The offer and sale of the Securities to the Purchasers
pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act
and the registration and/or qualification requirements of all applicable state securities laws.

          (d) Payment of Purchase Price. The Purchasers shall have delivered to the Company
same day funds in full payment of the purchase price as specified in Section 1(b).

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          (e) Other Actions. The Purchasers shall have executed such certificates, agreements,
instruments and other documents, and taken such other actions as shall be customary or reasonably
requested by the Company in connection with the transactions contemplated hereby.

     9. MISCELLANEOUS.

          (a) Successors and Assigns. The terms and conditions of this Agreement will inure to
the benefit of and be binding upon the respective successors and permitted assigns of the parties.
The Company may not assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser; provided, however, that upon any Change of Control, this
Agreement and all rights or obligations hereunder may be assigned by the Company only to the
surviving entity without the prior written consent of the other party or parties. Each Purchaser
may assign or transfer any or all of its rights under this Agreement to an affiliate or an entity
advised by the same management company that advises such Purchaser, provided that such assignee or
transferee agrees in writing to be bound, with respect to the transferred Securities, by Section 6
hereof; whereupon such assignee or transferee shall be deemed to be a “Purchaser” for all purposes
of this Agreement

          (b) Governing Law. This Agreement will be governed by and construed under the
internal laws of the State of Delaware, without reference to principles of conflict of laws or
choice of laws.

          (c) Counterparts. This Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one and the same
instrument.

          (d) Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits and schedules will, unless otherwise
provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.

          (e) Notices. Any notice required or permitted under this Agreement shall be given in
writing, shall be effective when received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be notified or three (3) business days
after deposit with the United States Post Office, by registered or certified mail, postage prepaid,
or one (1) business day after deposit with a nationally recognized courier service such as Federal
Express for next business day delivery under circumstances in which such service guarantees next
business day delivery, or one (1) business day after facsimile with copy delivered by registered or
certified mail, in any case, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof or at such other address as the
Purchaser or the Company may designate by giving at least ten (10) days advance written notice
pursuant to this Section 10(e).

          (f) Amendments and Waivers. This Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the

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holders of Preferred Stock representing at least a majority of the total aggregate number of
Preferred Stock then outstanding. Any amendment or waiver effected in accordance with this Section
10(f) will be binding upon the Purchasers, the Company and their respective successors and assigns.

          (g) Severability. If any provision of this Agreement is held to be unenforceable
under applicable law, such provision will be excluded from this Agreement and the balance of the
Agreement will be interpreted as if such provision were so excluded and will be enforceable in
accordance with its terms.

          (h) Entire Agreement. This Agreement, together with all exhibits and schedules hereto
and thereto constitutes the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties with respect to the subject matter
hereof.

          (i) Further Assurances. From and after the date of this Agreement upon the request of
the Company or the Purchasers, the Company and the Purchasers will execute and deliver such
instruments, documents or other writings, and take such other actions, as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of
this Agreement.

          (j) Meaning of Include and Including. Whenever in this Agreement the word “include”
or “including” is used, it shall be deemed to mean “include, without limitation” or “including,
without limitation,” as the case may be, and the language following “include” or “including” shall
not be deemed to set forth an exhaustive list.

          (k) Fees, Costs and Expenses. The Company and each Purchaser shall each pay their own
expenses in connection with the transactions contemplated by this Agreement; provided, however,
that if the Closing is effected, the Company shall pay Purchasers’ reasonable and out-of-pocket
expenses, including fees of counsel, consultants and accountants, incurred in connection with the
purchase of the Securities and the negotiation, execution and delivery under the Operative
Documents, such expenses not to exceed two hundred thousand dollars ($200,000) in the aggregate.

          (l) Survival. The representations and warranties of the Company and the Purchasers
contained in Sections 3 and 4 of this Agreement shall survive until eighteen (18) months after the
Closing Date.

          (m) No Third Party Rights. This Agreement is intended solely for the benefit of the
parties hereto and their respective successors and permitted assigns and is not intended to confer
any benefits upon, or create any rights in favor of, any person (including, without limitation, any
stockholder or debt holder of the Company) other than the parties hereto.

          (o) Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each Purchaser and the Company will be entitled to
specific performance under this Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of obligations described in the

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foregoing sentence and hereby agrees to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.

[The balance of this page is intentionally left blank.]

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

	 	 	 	 	 
	 	 	THERMA-WAVE, INC.
	 
	 	 	 	 
	 	 	By: /s/ Boris Lipkin
	 

	 	 	 	 
	 	 	Name: Boris Lipkin
	 	 	Title: Chief Executive Officer
	 
	 	 	 	 
	 	 	By: /s/ Joseph Passarello
	 

	 	 	 	 
	 	 	Name: Joseph Passarello
	 	 	Title: Chief Financial Officer and Secretary

[PURCHASER SIGNATURE PAGES TO FOLLOW]

[SIGNATURE
PAGE TO COMMON STOCK PURCHASE AGREEMENT]

 

 

SIGNATURE PAGE TO

PURCHASE AGREEMENT

DATED AS OF NOVEMBER __, 2005

BY AND AMONG

THERMA-WAVE, INC.

AND EACH PURCHASER NAMED THEREIN

     The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the
“Agreement”) to which this Signature Page is attached effective as of the date of the
Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and
signature pages of the other Purchasers named in such Agreement, shall constitute one and the same
document in accordance with the terms of such Agreement.

	 	 	 	 	 	 	 
	 	 	Number of Units:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	North Run Master Fund, LP
	 
	 	 	 	 	 	 
	 	 	By: North Run GP, LP, its General Partner
	 	 	By: North Run Advisors, LLC, its General Partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Thomas B. Ellis, Member
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Todd B. Hammer, Member
	 
	 	 	 	 	 	 
	 	 	Address: One International Place, Suite 2401
	 	 	 	 	       Boston, MA 02110

[SIGNATURE
PAGE TO COMMON STOCK PURCHASE AGREEMENT]

 

 

SIGNATURE PAGE TO

PURCHASE AGREEMENT

DATED AS OF NOVEMBER __, 2005

BY AND AMONG

THERMA-WAVE, INC.

AND EACH PURCHASER NAMED THEREIN

     The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the
“Agreement”) to which this Signature Page is attached effective as of the date of the
Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and
signature pages of the other Purchasers named in such Agreement, shall constitute one and the same
document in accordance with the terms of such Agreement.

	 	 	 	 	 	 	 	 	 
	 	 	Number of Units: 4,200
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Deephaven Relative Value Equity Trading Ltd.
	 
	 	 	 	 	 	 	 	 
	 	 	By:	/s/ Colin Smith
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name:  Colin Smith
	 
	 	 	 	 	 	 	 	 
	 	 	Title:	 CEO
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	130 Cheshire Parkway, Suite 102
	 	 	 	 	Minnetonka, MN 55305

[SIGNATURE
PAGE TO COMMON STOCK PURCHASE AGREEMENT]

 

 

SIGNATURE PAGE TO

PURCHASE AGREEMENT

DATED AS OF NOVEMBER __, 2005

BY AND AMONG

THERMA-WAVE, INC.

AND EACH PURCHASER NAMED THEREIN

     The undersigned hereby executes and delivers to Therma-Wave, Inc. the Purchase Agreement (the
“Agreement”) to which this Signature Page is attached effective as of the date of the
Agreement, which Agreement and Signature Page, together with all counterparts of such Agreement and
signature pages of the other Purchasers named in such Agreement, shall constitute one and the same
document in accordance with the terms of such Agreement.

	 	 	 	 	 	 	 	 	 
	 	 	Number of Units: 1,000
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Deephaven Long Short Equity Trading Ltd.
	 
	 	 	 	 	 	 	 	 
	 	 	By:	/s/ Colin Smith
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name: Colin Smith
	 
	 	 	 	 	 	 	 	 
	 	 	Title: CEO
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	 130 Cheshire Parkway, Suite 102
	 	 	 	 	  Minnetonka, MN 55305

[SIGNATURE
PAGE TO COMMON STOCK PURCHASE AGREEMENT]

 

 

Exhibit A

Schedule of Purchasers

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Shares of	 	 
	 	 	 	 	 	 	Series B	 	 
	 	 	Number	 	Convertible	 	Number of
	Name of Purchaser	 	of Units	 	Preferred Stock	 	Warrants
	North Run
Master Fund, LP

One International Place, Suite 2401

Boston, MA 02110
	 	 	5,200	 	 	 	5,200	 	 	 	780,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Deephaven Relative Value Equity Trading Ltd.

130 Cheshire Parkway, Suite 102

Minnetonka, MN 55305
	 	 	4,200	 	 	 	4,200	 	 	 	630,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Deephaven Long Short Equity Trading Ltd.

130 Cheshire Parkway, Suite 102

Minnetonka, MN 55305
	 	 	1,000	 	 	 	1,000	 	 	 	150,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL
	 	 	10,400	 	 	 	10,400	 	 	 	1,560,000	 

 

 

Exhibit B

Form of Legal Opinion

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