Document:

<PAGE>

                                    Portions denoted with asterisks (****)
                                    have been omitted and filed separately with
                                    the Securities and Exchange Commission
                                    pursuant to a request for confidential
                                    treatment.

                          TECHNOLOGY ESCROW AGREEMENT

     This Technology Escrow Agreement ("Escrow Agreement") is between Applied
Materials, Inc., having a place of business in Santa Clara, California
("Applied"); and Therma-Wave, Inc., having a place of business in Fremont,
California ("Therma-Wave"); and ****, a Delaware corporation, having a place of
business at **** ("Escrow Agent").

                                   RECITALS

     A.  Applied and Therma-Wave have entered into a Development and Cooperation
Agreement (the "Development Agreement") dated as of July 24, 2000 pursuant to
which Therma-Wave will develop certain metrology tool applications, and Applied
and Therma-Wave have entered into a Global Supply Agreement (the "Supply
Agreement") dated as of July 24, 2000 pursuant to which Therma-Wave has agreed
to manufacture and supply certain products (the "Products") to Applied, and
Applied has agreed to designate Therma-Wave as a Preferred Partner for the
Products.

     B.  The Supply Agreement requires Therma-Wave and Applied to enter into an
escrow agreement that provides for Therma-Wave's deposit of all materials
required to manufacture the Products with an escrow agent for release to Applied
in certain circumstances.

     Now, Therefore, the parties agree as follows:

                                   AGREEMENT

     1.  Escrow Materials.  "Escrow Materials" means all materials required to
         ----------------
manufacture the Products, in form and content sufficient to enable Applied (or
persons contracting with Applied) to assume manufacturing of Products without
any material delay, including but not limited to the materials identified in
Schedule 1 (Escrow Materials) to this Agreement.  All Escrow Materials must be
----------
in English.

     2.  Deposits.  Within ten (10) days after the acceptance by Applied of each
         --------
Product for manufacturing pursuant to the terms and conditions in each
applicable Development Plan, Therma-Wave will deliver to the Escrow Agent a copy
of the Escrow Materials in existence as of the date of execution of this
Agreement (the "Initial Deposit").  In addition, within thirty (30) days after
Therma-Wave completes any substantial modification to any Product or to the
methods of manufacturing any Product or any update, enhancement, or revision of
the information or materials comprising the Escrow Materials, Therma-Wave will
deliver a complete set of updated Escrow Materials for such Product (a
"Subsequent Deposit") to the Escrow Agent.  Notwithstanding the foregoing,
Therma-Wave will make a Subsequent Deposit containing the then-current set of
Escrow Materials for all Products at least once every six (6) months and at such
other times as Applied may reasonably request, including upon the addition of
each new Product under the Supply Agreement.  Once deposited with the Escrow
Agent, no Escrow Materials will be destroyed or released except as provided in
Paragraph 6 (Term) or Paragraph 8 (Delivery of Escrow Materials to Applied).
-----------           -----------
<PAGE>

     3.  Receipt by Escrow Agent.  Therma-Wave will furnish to the Escrow Agent
         -----------------------
a packing list in triplicate describing the Initial Deposit and each Subsequent
Deposit.  The Escrow Agent will issue a receipt for all Escrow Materials
received and forward copies of such receipts and packing lists to both Applied
and Therma-Wave.

     4.  Storage of Materials; Inspection.  The Escrow Agent will establish
         --------------------------------
under its control a receptacle for the purpose of storing the Escrow Materials
in safekeeping in an appropriate physical facility and will allow the inspection
of the Escrow Materials by Applied to confirm that each Deposit is complete or,
at Applied's request and expense, will perform such inspection itself.  Any
inspection by Applied will be done in the presence of an authorized
representative of the Escrow Agent.  Applied will notify Therma-Wave at least
ten (10) days before any requested inspection and Therma-Wave will have the
right to attend the inspection.  Authorized representatives of the Escrow Agent
will have access to the Escrow Materials to the extent necessary for the Escrow
Agent to perform its obligations under this Escrow Agreement.

     5.  Records.  The Escrow Agent will keep complete written records of the
         -------
activities undertaken and the materials prepared and delivered to the Escrow
Agent pursuant to this Escrow Agreement.  Therma-Wave or Applied will be
entitled at reasonable times during normal business hours, and upon reasonable
notice to the Escrow Agent, to inspect the records of the Escrow Agent with
respect to the Escrow Materials.

     6.  Term.  This Escrow Agreement will be effective upon execution by all
         ----
three parties and will terminate only if and when (a) (i) all of the Escrow
Materials are delivered to Applied pursuant to Paragraph 8 (Delivery of Escrow
                                               -----------
Materials to Applied) and (ii) any arbitration initiated under Paragraph 13.1
                                                               --------------
(Escrow Release Arbitration) has been completed (unless the result of such
arbitration is that the Escrow Materials are to be returned to the Escrow Agent,
in which case this Escrow Agreement will remain in effect), (b) if no Release
Notice has then been delivered, upon the expiration of the last warranty period
for the last Product delivered under the Supply Agreement, (c) Applied and
Therma-Wave deliver to the Escrow Agent a joint notice of termination, directing
the Escrow Agent to deliver the Escrow Materials to one or the other of them, or
(d) any arbitration instituted under Paragraph 13.2 (Competition Arbitration)
                                     --------------
has been completed with a finding in favor of Therma-Wave, and Therma-Wave
notifies the Escrow Agent that it wishes to terminate this Escrow Agreement and
directs the Escrow Agent to return the Escrow Materials to Therma-Wave.  Upon
the expiration or termination of this Agreement for an event that does not
result in the delivery of the Escrow Materials to Applied, the Escrow Materials
will be promptly returned to Therma-Wave.

     7.  Release Events.  The following events ("Release Events") will give
         --------------
Applied the right to receive a single copy of the Escrow Materials from the
Escrow Agent pursuant to Paragraph 8 (Delivery of Escrow Materials to Applied):
                         -----------

         (a)   Discontinue Supply or Support.  Therma-Wave notifies Applied that
               Therma-Wave will no longer manufacture or supply any Product to
               Applied, or Therma-Wave otherwise ceases to manufacture any
               Product (in which case Applied will receive only the Escrow
               Materials related to the affected Product or Products);

                                       2
<PAGE>

                                                     **** CONFIDENTIAL TREATMENT

          (b)  Insolvency or Bankruptcy.  Therma-Wave dissolves, liquidates, or
               ceases to function as a going concern or conduct business in the
               ordinary course or becomes insolvent, admits in writing its
               inability to pay its debts as they become due, files for any form
               of bankruptcy, has an involuntary bankruptcy petition filed
               against it which is not discharged within sixty (60) days, makes
               an assignment for the benefit of creditors, or becomes the
               subject of a petition for reorganization or receivership;

          (c)  Termination.  Any termination by Applied of the Supply Agreement
               for Default (as defined therein);

          (d)  Breach of Obligations.  Any breach by Therma-Wave of its
               obligations under the Supply Agreement (including without
               limitation any failure to provide warranty support) that remains
               uncured after the specific cure period defined in the Supply
               Agreement (or thirty (30) days after written notice of breach
               from Applied if no cure period is specified therein), or Therma-
               Wave's failure or inability to meet committed delivery dates set
               forth in the Supply Agreement resulting from any force majeure
               event (even if such event would otherwise excuse Therma-Wave from
               performance of delivery obligations);

          (e)  Change in Control with Listed ****.  Therma-Wave's entering into
               a Change in Control (as defined in Paragraph 22) transaction
                                                  ------------
               with a Listed **** (as defined in Paragraph 22);
                                                 ------------

          (f)  Change in Control Generally.  Therma-Wave's entering into a
               Change in Control transaction with any party (other than a Listed
               ****) if within thirty (30) days after such Change in Control
               transaction the acquiror or successor does not give written
               assurance to Applied, which assurance is reasonably satisfactory
               to Applied, that it will (i) guarantee an uninterrupted supply of
               Integrated Metrology Tools (as defined in the Supply Agreement)
               to fill all of Applied's orders in accordance with the terms of
               the Supply Agreement for the following two (2) years and (ii)
               comply with the exclusivity terms set forth in the Development
               Agreement; or

          (g)  Repeated Failure.  Without limiting the foregoing, Therma-Wave
               fails consistently to deliver Products to Applied meeting the
               applicable warranty and quality standards in the quantities
               required in accordance with the capacity requirements agreed upon
               pursuant to the Supply Agreement.

                                       3
<PAGE>

                                                    **** CONFIDENTIAL TREATMENT

     8.   Delivery of Escrow Materials to Applied.
          ---------------------------------------

          (a)  The Escrow Agent agrees, and is hereby specifically authorized,
     to provide the Escrow Materials to Applied immediately upon written notice
     by Applied (a "Release Notice") that one or more of the Release Events
     described in Paragraphs 7(a)-(f) has occurred, and to provide Therma-Wave
                  -------------------
     with a copy of the Release Notice.  The Release Notice must identify which
     Release Event or Release Events have occurred.

          (b)  Upon the occurrence of a Release Event described in Paragraph
                                                                   ---------
     7(g), if no other Release Events have occurred, Applied shall deliver a
     ----
     Release Notice to the Escrow Agent and Therma-Wave stating that such
     Release Event has occurred.  If Therma-Wave provides contrary instructions
     in writing to the Escrow Agent within ten (10) days after delivery of the
     Release Notice is effective under Paragraph 19, the Escrow Agent shall not
     deliver a copy of the Escrow Materials to Applied.  Upon receipt of
     contrary instructions from Therma-Wave, the Escrow Agent shall continue to
     store the Escrow Materials until the earlier of receipt of joint
     instructions signed by Applied and Therma-Wave, resolution pursuant to
     Paragraph 13 (Arbitration), termination of this Agreement, or the Escrow
     ------------
     Agent's receipt of a Release Notice under Paragraph 8(a).  If the Escrow
                                               --------------
     Agent does not receive contrary instructions from Therma-Wave within this
     ten (10) day period, the Escrow Agent agrees and is authorized to release
     the Escrow Materials to Applied immediately upon expiration of such ten
     (10) day period.

     9.   Bankruptcy.  Therma-Wave and Applied acknowledge that this Escrow
          ----------
Agreement is an "agreement supplementary to" the Supply Agreement as provided in
Section 365(n) of Title 11, United States Code (the "Bankruptcy Code").  Therma-
Wave acknowledges that if Therma-Wave, as a debtor in possession or a trustee in
bankruptcy in a case under the Bankruptcy Code, rejects the Supply Agreement or
this Escrow Agreement, Applied may elect to retain its rights under the Supply
Agreement and this Escrow Agreement as provided in Section 365(n) of the
Bankruptcy Code.  Upon written request of Applied to Therma-Wave or the
Bankruptcy Trustee, Therma-Wave or such Bankruptcy Trustee will not interfere
with the rights of Applied as provided in the Supply Agreement and this Escrow
Agreement, including the right to obtain the Escrow Materials.

     10.  License Grant.  Therma-Wave hereby grants to Applied and its
          -------------
Affiliates a non-exclusive, perpetual and irrevocable, worldwide,
nontransferable (except as provided below in this Paragraph), fully paid-up,
royalty-free license (including the right to sublicense), under all of Therma-
Wave's applicable intellectual property rights, to use, reproduce, modify,
improve, and distribute the Escrow Materials and to use, make, have made (by any
party other than a ****, except as provided below), offer for sale, sell,
service, and import the Products.  Applied agrees that it will refrain from
exercising its rights under the foregoing license unless and until a Release
Event has occurred.  Without limiting the foregoing, Applied will have the
right to transfer or sublicense any and all of its rights under the foregoing
license to its Affiliates or in connection with a sale of all or a part of
Applied's business, except that Applied will not have the right to transfer or
sublicense such rights without Therma-Wave's (or Therma-Wave's successor's)
consent to a **** (except as provided below). With respect to any third party
that becomes a **** after the effective date of the Development Agreement, if
Applied has a supply agreement with such third party as of the date that such
third party

                                       4
<PAGE>

                                                    **** CONFIDENTIAL TREATMENT

becomes a ****, the foregoing restrictions on Applied's engaging **** to make
Products for Applied and on Applied's sublicensing the foregoing rights to ****
shall not apply to such third party.

     11.  Delivery Site; Title.  Delivery of the Escrow Materials to Applied, or
          --------------------
return of the Escrow Materials to Therma-Wave, will be at the offices of the
Escrow Agent ****, unless special delivery instructions concerning delivery
elsewhere are furnished to the Escrow Agent by the party authorized hereunder to
receive the Escrow Materials. Title to copies of the Escrow Materials will pass
(a) to the Escrow Agent, upon delivery thereof to the Escrow Agent when deposits
are made pursuant to Paragraph 2 (Deposits), and (b) to Applied, upon delivery
                     -----------
thereof to Applied pursuant to Paragraph 8 (Delivery of Escrow Materials to
                               -----------
Applied).

     12.  Obligations of Escrow Agent.  The Escrow Agent acknowledges that the
          ---------------------------
Escrow Materials contain confidential and proprietary information of Therma-Wave
and Applied.  Accordingly, except as otherwise expressly provided in this
Agreement, the Escrow Agent will not disclose, provide, or otherwise make
available to any third party the Escrow Materials without the prior written
consent of Therma-Wave and Applied.  The Escrow Agent will be responsible for
the acceptance, storage, and delivery of the Escrow Materials in accordance with
the terms of this Escrow Agreement and for the exercise of due diligence in
accordance with the high level of care accorded fiduciary obligations.  Except
as provided in Paragraph 4 (Storage of Materials; Inspection), the Escrow Agent
               -----------
will have no obligation or responsibility (a) to verify that the Escrow
Materials deposited with the Escrow Agent by Therma-Wave do, in fact, consist of
those items that Therma-Wave is obligated to deliver under this Escrow Agreement
or (b) to verify the existence, relevance, completeness, currency, or accuracy
of the Escrow Materials.  The Escrow Agent will be entitled to act in good faith
reliance upon any written instruction, instrument, or signature believed in good
faith to be genuine and to assume in good faith that any person purporting to
give any writing, notice, advice, or written instruction in connection with, or
relating to, this Escrow Agreement has been duly authorized to do so.

     If the Escrow Agent is, for any reason, uncertain of its obligation to
deliver the Escrow Materials to Applied pursuant to Paragraph 8(a), it will
                                                    --------------
deliver such materials to Applied and initiate a binding arbitration pursuant to
Paragraph 13.1 (Arbitration) to resolve the uncertainty.  If the arbitrator
--------------
determines that the Escrow Materials should not have been delivered to Applied,
Applied will return the original Escrow Materials to the Escrow Agent and
certify in writing that it has destroyed any copies it made of such Escrow
Materials.  Except as expressly provided in this Escrow Agreement, the Escrow
Agent agrees that it will not divulge or disclose or otherwise make available to
any third party, or make any use whatsoever, of the Escrow Materials, or any
information deposited with it by Therma-Wave in connection with this Escrow
Agreement, without the express prior written consent of Therma-Wave.

     13.  Arbitration.
          ------------

          13.1  Escrow Release Arbitration.  If (a) after the Escrow Agent's
     delivery of the Escrow Materials to Applied pursuant to Paragraph 8(a)
                                                             --------------
     (Delivery of Escrow Materials to Applied), any dispute arises concerning
     the delivery of the Escrow Materials to Applied by the Escrow Agent, or (b)
     Escrow Agent receives contrary instructions from Therma-Wave within the
     time period set forth in Paragraph 8(b) with respect to the Release Event
                              --------------

                                       5
<PAGE>

     specified in Paragraph 7(g), such dispute will be settled by binding
                  --------------
     arbitration before a single arbitrator selected in accordance with the
     rules of the American Arbitration Association ("AAA"), to take place in
     Santa Clara County, California, within thirty (30) days following Applied's
     delivery of a Release Notice to the Escrow Agent pursuant to Paragraph 8
                                                                  -----------
     (Delivery of Escrow Materials to Applied), in accordance with the rules of
     commercial arbitration of the AAA.  The arbitrator will be instructed to
     determine solely whether or not a Release Event has occurred and to render
     a determination within fifteen (15) days after the end of the hearing.
     Judgment upon the determination rendered by the arbitrator may be entered
     in any court having jurisdiction.

          13.2  Direct Competition Arbitration.  If (a) a dispute arises under
     Section 4.4 of the Development Agreement regarding whether or not Applied's
     activities specified in the notice delivered by Therma-Wave under such
     Section 4.4 constitute the direct competition with Therma-Wave described in
     such Section 4.4, and (b) the thirty (30) day period described in Section
     4.4(a) of the Development Agreement elapses and at the end of such period
     the parties have not resolved such dispute and Applied has not cured the
     problem by ceasing the activities described in such Therma-Wave notice,
     then Therma-Wave may institute a binding arbitration hereunder to resolve
     such dispute.  Such dispute will be settled by binding arbitration before a
     single arbitrator selected in accordance with the rules of the American
     Arbitration Association ("AAA"), to take place in Santa Clara County,
     California, within thirty (30) days following the expiration of the initial
     thirty (30) day period described in Section 4.4(a) of the Development
     Agreement, in accordance with the rules of commercial arbitration of the
     AAA.  The arbitrator will be instructed to determine solely whether or not
     the activities specified in Therma-Wave's notice delivered under Section
     4.4 of the Development Agreement constitute the direct competition
     described in such Section 4.4 and to render a determination within fifteen
     (15) days after the end of the hearing.  Judgment upon the determination
     rendered by the arbitrator may be entered in any court having jurisdiction.

     14.  Indemnity.  Applied and Therma-Wave jointly and severally agree to
          ---------
defend and indemnify the Escrow Agent and to hold the Escrow Agent harmless from
and against any and all claims, actions, and suits, whether groundless or
otherwise, and from and against any and all liabilities, losses, damages, costs,
charges, penalties, counsel fees, and any other expense of any other nature
including, without limitation, settlement costs incurred by the Escrow Agent on
account of any good faith act or omission of the Escrow Agent, in respect of, or
with regard to, this Escrow Agreement except as to the Escrow Agent's breach of
its obligations specified in Paragraphs 4 (Storage of Materials; Inspection) and
                             ------------
12 (Obligations of Escrow Agent).
--

     15.  Compensation.  The Escrow Agent will be compensated as set forth on
          ------------
Schedule 2 (Fee Schedule) attached hereto.  The fees set forth in Schedule 2
----------                                                        ----------
(Fee Schedule) are for Escrow Agent's ordinary services as escrow holder.  If
the Escrow Agent is required to perform any additional or extraordinary services
as a result of being escrow holder, including intervention in any litigation or
proceeding, the Escrow Agent will receive, upon prior written approval of the
parties responsible for payment of Escrow Agent's fees and expenses, reasonable
compensation for such services and will be reimbursed for such costs incurred,
including reasonable attorneys' fees.  All costs and expenses for establishing
and maintaining the escrow, including the Escrow Agent's fees and expenses, will
be borne by Applied.

                                       6
<PAGE>

                                                   **** CONFIDENTIAL TREATEMENT

     16.  Discharge of Escrow Agent.  The Escrow Agent may resign and be
          -------------------------
discharged from its duties or obligations hereunder by giving notice in writing
of such resignation to Therma-Wave and Applied specifying a date when such
resignation will take effect, which date must be at least sixty (60) days after
the date of receipt of such notice.  Prior to the effective date of such
resignation, Therma-Wave will arrange for the services of a new escrow agent
selected by Applied, and Therma-Wave and Applied agree to execute and deliver
another escrow agreement with the new escrow agent having substantially the same
terms as this Escrow Agreement.  When Therma-Wave notifies the Escrow Agent of
the name and address of the new escrow agent, the Escrow Agent will forward the
Escrow Materials to the new escrow agent.

     17.  Modification.  These escrow instructions are irrevocable except as
          ------------
they may be revoked or modified by written consent of Applied, Therma-Wave and
the Escrow Agent, jointly.

     18.  Governing Law.  This Escrow Agreement will be governed by the laws of
          -------------
the State of California as such laws apply to agreements entered into and to be
performed entirely within California by California residents.

     19.  Notice.  All notices required by this Escrow Agreement will be
          ------
sufficiently given:

     (a)  upon delivery, if given in person with a signed receipt;

     (b)  if given by facsimile transmission, upon acknowledgment of receipt of
          electronic transmission; or

     (c)  if given by a nationally recognized overnight courier service, one (1)
          business day after deposit with such service.

     All such notices will be addressed as follows:

     If to Applied:     ****
                        Vice President and General Manager,
                        Factory Efficiency Technologies
                        Applied Materials, Inc.
                        3535 Garret Drive m/s 10071
                        Santa Clara, Ca.  95054
                        Phone: (408) 748-****
                        Fax: (408) 563-****
     With a copy to:
                        ****, Managing Director
                        Applied Materials, Inc.
                        3050 Bowers Avenue, m/s 0105
                        Santa Clara, CA  95054
                        Telephone:  (408) 235-****
                        Telecopy:  (408) 986-****

                                       7
<PAGE>

     If to Therma-Wave:  Therma-Wave, Inc.
                         1250 Reliance Way
                         Fremont, CA 94539
                         Tel. No.: (510) 668-2215
                         Fax:  (510) 226-6834
                         Attention:  L. Ray Christie

     With a copy to:
                         Therma-Wave, Inc.
                         1250 Reliance Way
                         Fremont, CA 94539
                         Tel. No.: (510) 668-2228
                         Fax:  (510) 226-6834
                         Attention:  Martin A. Schwartz

     If to Escrow Agent:
                         ****

or to such other person or address as the parties may from time to time
designate in a writing delivered pursuant to this Paragraph 19 (Notice).
                                                  ------------

          20.  Severability.  If any provision of this Escrow Agreement is
               ------------
unenforceable or invalid under any applicable law, such unenforceability or
invalidity will not render this Agreement unenforceable or invalid as a whole,
and such unenforceable or invalid provision will be changed and interpreted so
as to best accomplish the objectives of such provision within the limits of
applicable law or applicable court decisions.

          21.  Waiver.  The failure of any party to require performance by
               ------
another party of any provision will not affect the full right to require such
performance at any time thereafter, nor will the waiver by any party of a breach
of any provision of this Escrow Agreement by any other party be taken or held to
be a waiver of the provision itself.

          22.  Definitions.
               -----------

          (a)  All capitalized terms not expressly defined in this Agreement
that are expressly defined in the Supply Agreement have the meanings stated in
the Supply Agreement.

          (b)  For purposes of this Agreement, "Change in Control" of Therma-
Wave means the occurrence of any of the following:

                                       8
<PAGE>

                                                     **** CONFIDENTIAL TREATMENT

          (i)      a sale of assets representing more than fifty percent (50%)
     of the net book value or of the fair market value of Therma-Wave's
     consolidated assets (in a single transaction or in a series of related
     transactions);

          (ii)     a merger or consolidation involving Therma-Wave or any
     subsidiary of Therma-Wave after the completion of which: (i) in the case of
     a merger (other than a triangular merger) or a consolidation involving
     Therma-Wave, the shareholders of Therma-Wave immediately prior to the
     completion of such merger or consolidation beneficially own (within the
     meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
     1934, as amended (the "Exchange Act"), or comparable successor rules),
     directly or indirectly, outstanding voting securities representing less
     than fifty percent (50%) of the combined voting power of the surviving
     entity in such merger or consolidation, and (ii) in the case of a
     triangular merger involving Therma-Wave or a subsidiary of Therma-Wave, the
     shareholders of Therma-Wave immediately prior to the completion of such
     merger beneficially own (within the meaning of Rule 13d-3 promulgated under
     the Exchange Act, or comparable successor rules), directly or indirectly,
     outstanding voting securities representing less than fifty percent (50%) of
     the combined voting power of the surviving entity in such merger and less
     than fifty percent (50%) of the combined voting power of the parent of the
     surviving entity in such merger;

          (iii)    an acquisition by any person, entity or "group" (within the
     meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable
     successor provisions), other than any employee benefit plan, or related
     trust, sponsored or maintained by Therma-Wave or an Affiliate of Therma-
     Wave and other than in a merger or consolidation of the type referred to in
     clause "(ii)" of this sentence, of beneficial ownership (within the meaning
     of Rule 13d-3 promulgated under the Exchange Act, or comparable successor
     rules) of outstanding voting securities of Therma-Wave representing at
     least fifty percent (50%) of the combined voting power of Therma-Wave (in a
     single transaction or series of related transactions); or

          (iv)     in the event that the individuals who, as of the effective
     date of the Supply Agreement, are members of Therma-Wave's Board of
     Directors (the "Incumbent Board"), cease for any reason to constitute at
     least fifty percent (50%) of Therma-Wave's Board of Directors and are
     replaced by members proposed or supported by any of the Listed **** (as
     such term is defined below). (If the election, or nomination for election
     by Therma-Wave's shareholders, of any new member of the Board of Directors
     is approved by a vote of at least fifty percent (50%) of the Incumbent
     Board, such new member of the Board of Directors will be considered as a
     member of the Incumbent Board.)

     (c)  For purposes of this Agreement "Listed ****" means, collectively, the
entities listed on Schedule 3.1, and their respective successors and
                   ------------
Affiliates.  Applied may in its sole discretion from time to time by notice to
Therma-Wave add or remove entities from the list of Listed **** on
Schedule 3.1; provided that the number of Listed **** listed on Schedule 3.1
                                                                ------------
shall never exceed ****.

     (d)  For purposes of this Agreement "****" means, collectively, the
entities listed on Schedule 3.2, and their respective successors and
Affiliates.  Therma-Wave

                                       9
<PAGE>

                                                     **** CONFIDENTIAL TREATMENT

may in its sole discretion from time to time by notice to Applied add or remove
entities from the list of **** on Schedule 3.2; provided that the number of
                                  ------------
**** listed on Schedule 3.2 shall never exceed ****.
               ------------

     23.  Counterparts.  This Escrow Agreement may be executed in counterparts
          ------------
each of which will be deemed an original, but all of which will constitute one
and the same instrument.

     24.  Survival.  The following provisions will survive any termination of
          --------
this Agreement or partial termination of this Agreement with respect to a
portion of the Escrow Materials delivered pursuant to Paragraph 8 (Delivery of
                                                      -----------
Escrow Materials to Applied): Paragraphs 10 (License Grant), 13 (Arbitration),
                              -------------                  --
14 (Indemnity), 18 (Governing Law), 19 (Notice), 20 (Severability), 21 (Waiver),
--              --                  --           --                 --
23 (Counterparts) and 25 (Entire Agreement).
--                    --

     25.  Entire Agreement.  This Escrow Agreement, together with any schedule
          ----------------
hereto, and the Development Agreement and Supply Agreement, constitute the
entire agreement between the parties with respect to the subject matter hereof.
This Escrow Agreement supersedes oral, written, or other communications
concerning the subject matter of this Escrow Agreement. The terms of this Escrow
Agreement may not be altered, amended, or modified except in a writing signed by
a duly authorized representative of each party, except that Applied and Therma-
Wave may agree in writing to modify the Release Events or the Escrow Materials
required to be placed and held in escrow hereunder, and the Escrow Agent's
consent to any such amendment will not be required provided that a copy of any
such amendment is furnished to the Escrow Agent.

     In Witness Whereof, the parties have caused this Escrow Agreement to be
executed as of the last date written below.

THERMA-WAVE, INC.                          APPLIED MATERIALS, INC.

By: _________________________              By: ________________________

Title:_______________________              Title:______________________

Date: _______________________              Date:_______________________

ESCROW AGENT: ****

                                       10
<PAGE>

                                   SCHEDULE 1
                                ESCROW MATERIALS

 1.  Best known methods for making and using Integrated Metrology Tools,
     including, without limitation, related processes and their characterization

 2.  Drawings

 3.  Schematics

 4.  Specifications, including, without limitations, OEM procurement
     specifications

 5.  Design data, including documents, reports, etc. and decisions on design
     changes and components selection, through product release and continuous
     improvements

 6.  Source code owned by Therma-Wave (excluding third party source code) and
     related documentation for software, including, without limitation,
     algorithms, control and communications architecture, design specifications,
     variable lists and definitions, descriptions of the compiler used and
     specifics of the coding language

 7.  Operating, diagnostic and reference manuals

 8.  Testing suites for manufacturing and field installation

 9.  Testing programs

10.  Specialized test equipment and specialized manufacturing equipment and
     tooling

11.  Manufacturing documents complying with appropriate standards

12.  Safety, maintenance and troubleshooting information, including, without
     limitation, incident histories and known workarounds

13.  Results of tests

14.  Production and supplier qualification data

15.  Technical papers (published and unpublished) and internal studies and
     memoranda relating to Therma-Wave's Integrated Metrology Tools

16.  Comprehensive bills of materials, identifying all qualified suppliers for
     each respective part or process and current pricing for all piece parts and
     procured parts from existing suppliers

17.  Standards for manufacturing all components

18.  Facilitization manuals, spare parts lists and other service data and
     procedures relating to Integrated Metrology Tools

19.  CE mark, Underwriters Laboratories and Semi S2-93 compliance documentation

20.  All other appropriate information relevant to the use of Therma-Wave's
     Integrated Metrology Tools, including, without limitation, information
     relevant to the performance of any process or to the performance or
     manufacturing of equipment.

                                       11
<PAGE>

                                   SCHEDULE 2
                                  FEE SCHEDULE

Escrow Agent:        ****

Re:   Escrow Agreement # _______, dated __________________________

1.    Initial Acceptance Fee (One Time Only)              $ 1,125.00
          Due Upon Execution of the Escrow Agreement

      2.  Custom Escrow Agreements                        Priced by Proposal

      Amend Existing Agreement                            Priced by Proposal

3.    Annual Storage Fee
          Safe Deposit Box Storage                        $   525.00
               (Volume up to 10" X 10" X 24")

          Larger Units Available

          (Total First Year's Fees = $1,650.00)

4.    Account Administration/Maintenance
          Clerical (One hour minimum per year)            $    30.00/Hr.
          Officer Level (As required)                     $    75.00/Hr.
          Termination Fee (per Deposit Account)           $   150.00
               Shipping additional
          Bi-Annual Account Status Report (as Requested)  $    50.00/ea.
          Verification Services (Variable Depth)          Ask for quote

5.    Registration of Additional Licensees To Multiple Licensee Escrow
          First Licensee                                  No Charge
          Additional Licensees - Initial Registration     $   125.00 ea.
          Annual Fee Per Licensee Thereafter              $    25.00 ea.
          Licensee Termination                            $    25.00 ea.

6.    Bonded Courier Service - Pick-up/Delivery
          Quote based on Location

7.    Outside Costs
          Cost Plus 10%, as Incurred

Prices subject to change without notice.                      Effective 10/01/99

                                       12
<PAGE>

                                                    **** CONFIDENTIAL TREATMENT

                                   SCHEDULE 3
                                  ***********

Schedule 3.1 -- Listed ****

****

Schedule 3.2 - ****

****

                                       13<PAGE>

                                                                    EXHIBIT 10.3

                           LEAVE & LICENCE AGREEMENT
                           -------------------------

THIS LEAVE & LICENCE AGREEMENT is made here at the Pearl Continental Hotel,
Lahore, on this day of January 26th, 2000.

                                    BETWEEN

MESSRS. PAKISTAN SERVICES LIMITED, through its Director having its registered
office at Pearl Continental hotel Building, Club Road, Karachi, (hereinafter
referred to as " the Licensor"), of the One Part,

                                      AND

M/S. Align Technology Pakistan through its Country Manager, Ioannis Demetriades,
having its registered office at Pavillion #44, Pearl Continental Hotel,
(hereinafter referred to as "the Licensee") of the Other Part.

WHEREAS the Licensor is the owner of Pearl Continental Hotel, Lahore,
(hereinafter referred to as "the Hotel") situated on plat of land, bearing City
Survey No. S-19-R-122, Shahrah-e-Quaid-e-Azam, Lahore.

AND WHEREAS the said Licensor for the benefit, comfort and convenience of its
guests, passengers and visitors has decided to grant licence to the Licensee for
the use and occupation of Shop No. 37-38-39-40-41-42-43-44-45-46-47-58-59-60-61-
62 & 63 measuring approx. 5413.35 square feet at Pearl Continental Hotel,
Lahore, within the hotel premises on such terms and subject to such conditions
as are given hereunder.

AND WHEREAS the Licensee is desirous of and has agreed to avail of the licence
and to being allowed the privilege of using Shop No. 37-38-39-40-41-42-43-44-45-
46-47-58-59-60-61-62 & 63 measuring approx. 5413.35 square feet on the terms and
conditions appearing here in below.

AND WHEREAS the Licensee has also expressly stated and does hereby expressly
state that Licensee in its turn has no intention, whatsoever, to become a tenant
of the said premises.

NOW, THEREFORE, THIS AGREEMENT WITNESSETH as follows:

1.   Period of Agreement:

     The Licensee, under this Agreement, shall have the leave and license to use
     Shop No. 37-38-39-40-41-42-43-44-45-46-47-58-59-60-61-62 & 63 measuring
     5413.35 square feet, belonging to and in the possession of the Licensor,
     for a period of Three (3) years i.e. from 01.01.2000 to 31.12.2002. This
     agreement will further be extended for two years subject to revision of the
     terms.

2.   Licence fee plus amenities charges:

     i)    Licence Fee

           The licence fee shall be at the rate of Rs. 5/= per sq. ft. per month
           amounting to Rs. 27067(Rupees Twenty seven thousand sixty seven only)
           per month plus Central, Provincial and local Government duties
           thereon which at present is 22.5% amounting to Rs. 6090 (Rupees six
           thousand & ninty only) per month for the LEAVE & LICENCE to use the
           said premises. This license fee is payable in advance every month
           during the validity of this agreement,

     ii)   Amenities Charges:

           a)  The amenities, being air-conditioning, heating ventilation,
               electric supply and installations, chemically treated cold water
               supply for drinking purposes, sanitation and telephone
               installation, being in the exclusive control of the Hotel
               Management, may be used by the Licensee subject to the permission
               for use thereof being given the Licensor and further subject to
               such terms and conditions as may be proposed by the Licensor in
               this regard.
<PAGE>

           b)  For the amenities provided as referred to (ii) (a) above, the
               Licensee shall pay Rs. 243601 (Rupees Two Lakh forty three
               thousand six hundred and one only) per month @ Rs. 45/- per sq.
               ft. per month PLUS Central, Provincial & Local government duties
               which at present is 22.5% amounting to Rs. 54810/= (Rupees Fifty
               four thousand eight hundred and ten only) thereon. These charges
               are payable in advance every month during the validity of this
               agreement.

           c)  The telephone calls charges and electricity consumption charges
               shall be paid separately by the Licensee which are not included
               in 2(i) and 2(ii)(b) above. However, telephone calls from the
               Hotel/s Exchange would be paid at the Hotel's prescribed rate on
               daily basis while the electricity consumption charges shall be
               paid in accordance with the sub-meter reading on monthly basis.

     iii)  Undertaking:

           The Licensee hereby undertakes to pay to the Licensor in advance the
           monthly licence fee as well as the monthly payment for amenities
           together with Government Duties thereon referred to as 2(i) and
           2(ii)(b) above respectively amounting to Rs. 3,31,568/= (Rupees Three
           lakh thirty one thousand five hundred sixty eight only) for the
           period of Agreement through post dated cheques.

3.   Cost escalation on account of rates. duties and taxes:

That if, during the period of continuance of this Agreement, there is any
further cost escalation on account of any additional levy of the rates, duties
and taxes on the premises/arcade and /or on the utilities and amenities by the
Government-Federal/Provincial and /or the Local Bodies, the Licensee shall pay
the same to the Licensor in proportion to the area of the premises licensed to
the Licensee.

4.   Validity of Licence Agreement:

This Agreement shall cease to be of any legal force or effect on 31.12.2002.
Should the Licensee desire a renewal of this Licence Agreement, a written
request to that effect may be made by the Licensee to the Licensor at least 30
days prior to the said date of 31.12.2002 whereafter the parties hereto may
agree to such renewal terms and conditions by or before the said date of expiry.
A fresh Licence Agreement shall be signed between the parties for any renewed
period *of Leave and Licence to occupy and use the said premises, which may be
granted by the Licensor to the Licensee.

5.   Expiry of Licence:

In case no request for renewal is received under clause A above and/or no
Agreement is reached regarding the terms and conditions of such renewal by or
before the date of expiry of this Agreement, the Licensee shall, on the day
after the said date of expiry, or such further period as may be allowed by the
Licensor for this purpose, remove his employees and property belonging to him
and hand over the said premises to the Licensor in the same good condition in
which it was at the time of signing of this Agreement, reasonable wear and tear
expected.

6.   Licensor rights and liabilities:

     i)    Licensor may from time to time appoint any of its officers and
           employees or any other person to exercise proper control or take
           necessary action for compliance of any or all the terms and
           conditions of these presents and until otherwise communicated in
           writing by the Licensor, the General Manager of the Hotel shall be
           such person.

     ii)   Repair and rectification:

           The Licensor shall carry out normal repairs including replacement of
           electrical fittings and shall remedy any defect or leakage within a
           month of the notice given by the Licensee. If the Licensor fails to
           provide remedy for defects or leakage within a month, the Licensee
           can utilize, at its own initiative, third party services

                                       2
<PAGE>

           to carry out the required job. The licensee needs to notify the
           Licensor prior to the utilization of third-party services. If the
           Licensor fails to provide remedy for defects or leakage within a
           month, the Licensee does not require the approval of the Licensor to
           invite the utilization of third-party services. However, the third-
           party service needs to co-ordinate with the Hotel Maintenance staff
           prior to the utilization of the third-party services, The Licensor
           will be responsible for bearing the cost of the third-party services.

     iii)  Licensor's rights and liabilities:
           ---------------------------------

           The Licensor may carry out any work to maintain, repair, alter,
           reduce or extend the common areas of the center without any prior
           approval/notice to the Licensor. In the event that the business
           operations of the Licensee are directly adjacent to and affected by
           the work to maintain, repair, alter reduce or extend the common areas
           of the center, prior notice should be given to the Licensee. The
           Licensor and Licensee should then co-ordinate as to how and when the
           work is going to be carried out.

     iv)   Notice of proposed works:
           ------------------------

           If the Licensor proposes to refurbish, redevelop or extend the center
           or any part of it, and work cannot be carried out practically without
           vacant possession of the premises, the Licensor may give not less
           than two months' notice ("relocation notice") to the Licensee giving
           details of proposed work and requiring him to move to alternative
           premises in the center.

     v)    Offer of alternative premises:
           -----------------------------

           In the relocation notice, the Licensor must offer the Licensee a new
           licence agreement of the alternative premises at the same licence fee
           on the same terms and conditions as this, licence agreement except
           that the terms of new licence, agreement will be for the remainder of
           the terms of this agreement.

     vi)   Acceptance of termination:
           -------------------------

           Within one month after relocation notice is given to him, the
           Licensee may give a written notice to the Licensor (Termination
           Notice) in which case this agreement ends three months after the
           relocation was given unless the parties agree that it is to end at
           some other time. If the Licensee does not give a termination notice,
           the Licensee will be taken to have accepted the offer of new licence
           agreement or alternative premises unless the parties ,have agreed on
           same other conditions.

     vii)  Lock and key:
           ------------

           The premises shall remain in possession of the Licensor who will
           always be entitled to put its own lock in the said premises but shall
           give a duplicate key to the Licensee for the use of the premises by
           the Licensee. The Licensor shall in no case held responsible for any
           theft committed in the premises in any view of the matter whatsoever.

     viii) Lien
           ----

           The Licensor shall have a lien on all belongings and properties of
           the Licensee for the time being, in or upon the premises of the
           Licensor.

     ix)   Rights of revoking licence:
           --------------------------

           The Licensor reserves the rights to revoke the licence agreement in
           the event of any breach of the terms and conditions of the licence
           agreements by the Licensee. The Licensee will be given three-months
           notice to vacate the said premises.

                                       3
<PAGE>

7.   Licensee's rights and liabilities:

     i)    Scope of business:
           -----------------

           The Licensee hereby undertakes to utilize the said premises for
           carrying on the business of Computer Software Development and
           Computer Image Processing in the name and style of "Align Technology
           Pakistan" and/or such other business as the Licensor may, upon a
           written request to that effect being made from the Licensee's side,
           allow the later in writing to carry on at the said premises
           considering the decorum of the Hotel.

     ii)   Prohibition for use of premises other than the business allowed:
           ---------------------------------------------------------------

           The Licensee shall not use the said premises for any purpose other
           than that for which the licence is granted, as aforesaid, nor shall
           the Licensee use the said premises in a manner as to cause damage to
           the structure or any internal or external part thereof and/or
           inconvenience, annoyance or nuisance to the guests, passengers and
           visitors as well as Licensor and his employees.

     iii)  Trading hours.
           -------------

           The Licensee shall observe and carry on its business on timing as
           determined from time to time by the Licensor.

           The Licensee must:

           a)  Keep the premises open for the care taking of the house.

           b)  Obtain the Licensor's consent before opening the premises outside
               those hours.

           c)  Pay its share of Licensor's costs of opening and operating the
               center outside those hours: and

           d)  Pay to the Licensor's liquidated damages of Rs. 1,000/-(Rupees
               one thousand only) per working hour.

     iv)   Discipline:
           ----------

           The Licensee must not do anything, which is or may cause a nuisance,
           inconvenience or annoyance to the guests, passengers, visitors,
           landlord and other people on the center.

           The Licensee must not use any sound or light equipment which may be
           hard or seen outside the premises and which, in the Licensor's
           opinion, may cause a nuisance. Should the question arise as to
           whether the Licensee is causing such inconvenience, annoyance or
           nuisance, the matter shall be referred to the General Manager of the
           Hotel whose decision shall be final and binding on the Licensee.

     v)    Use of common areas:
           -------------------

           a)  The Licensee may use the common areas along with other Licensees
               in the center.

           b)  The Licensee, his employees and staff must not use the common
               areas designated for the Hotel staff.

     vi)   Rules:
           -----

           The Licensee must comply with rules. The Licensor may vary the rules
           at any time, so long as they are not inconsistent with the licence
           agreement.

                                       4
<PAGE>

     vii)  Insurance:
           ---------

           The Licensor shall not be liable for any accidental damage or injury
           inside the said premises which may happen by reason of breakage or
           want of repair of any part of the said Premises or any cause
           whatsoever except if it is caused by the negligence or willful
           misconduct of the Licensor, its employees or agents. The Licensee
           shall indemnify the Licensor against all claims or liabilities in
           respect of personal injury which may at any time or times during the
           continuance of this licence, be caused in the said premises to any
           guest, passenger, visitor, customer, guest & employee of the hotel,
           Licensor, and / or costs incurred for defending any action or
           proceedings and/or contesting, defending or securing such claims
           except if it is caused by the negligence or willful misconduct of the
           Licensor, -its employees or its agents. The Licensee shall produce
           immediately on signing of this agreement a copy of insurance coverage
           under Third Party Legal Liability Policy obtained by the Licensee. A
           certificate be given by the Licensee to the Licensor in this respect.
           Non submission of insurance coverage and certificate there of will
           tantamount to Licensee's consent to cancel the Licence.

     viii) Alteration:
           ----------

           The Licensee shall not make any alteration in the said premises
           without first obtaining the permission of the Licensor in writing.

     ix)   Sub-Licensing:
           -------------

           The Licensee shall not sub-licence the said premises or any part
           thereof to anybody else under any circumstances.

     x)    Government dues to be paid within due date:
           ------------------------------------------

           The Licensee shall pay in time and within due date to the appropriate
           person or authority all cusses, rates, charges, fees, duties and
           taxes in respect of the business conducted by the Licensee in the
           said premises.

     xi)   Binding on Licensee's employees:
           -------------------------------

           Employees that are hired by the Licensee shall conform to the rules
           and regulations governing the conduct of the staff of the Hotel.

     xii)  Prohibition for cooking and heating:
           -----------------------------------

           The Licensee shall not do any cooking or heating through the use of
           electrical appliances, gas or oil stoves or otherwise, without the
           consent of the Licensor.

     xiii) Decoration:
           ----------

           The Licensee shall decorate the premises according to the standard
           and designs laid down by the Licensor, and such decoration shall not
           be beyond 10% of the total wall and ceiling areas if inflammable
           material like wood, straw matting polystyrene, etc. are used in
           decorating the premises. All such plans to be submitted to the
           Licensor for its approval.

     xiv)  Indemnity:
           ---------

           The Licensee does, hereby agree to indemnify the Licensor and save it
           harmless from all claims, demands, damages, costs, actions and
           charges to which the Licensor may become subject or it may have to
           pay or be held liable, therefore by reason of any injury to person,
           reputation or property suffered or sustained by any agent, employee,
           guest and passenger or visitor of the Licensor arising out of any
           activity or negligence or omission of the Licensee, its agent or
           employees.

                                       5
<PAGE>

     xv)   Notice period for terminating the agreement:
           -------------------------------------------

           This agreement may be terminated by the Licensee at any time during
           its validity and subsistence by giving the Licensor three month's
           written notice of his intention to that effect. The provisions of
           paragraph 5 above shall mutates mutandis apply to such termination of
           this agreement by the Licensee. The Licensor shall refund the
           unutilised portion of advance licence fee and amenities charges
           received under clause 2 of this agreement after deducting three
           months' notice period Licence fee, amenities charges, duties and
           taxes etc. and any other amount due to Licensor under this agreement.

     xvi)  Compliance of legal requirements:
           --------------------------------

           The Licensee shall do nothing to injure the reputation of the hotel
           and offend against any law, statute, rules, regulations and bye-laws
           issued by the Federal, Provincial, Local, Municipal or any other
           competent authority in any way or to permit or suffer to be done any
           act or thing which may in any way impair the business or reputation
           of the Hotel Licensor or Licensee.

     xvii) Compliance of Licensor's guidelines:
           -----------------------------------

           The Licensee shall observe all necessary guidelines and directions
           issued by the Licensor from time to time in respect of usage of the
           premises and the business transacted.

8.   Security Deposit:  -   Rs. 6,400,000/=

     The Licensor may retain the security deposit up to three months after the
     expiry of licence date or until the Licensee has paid all moneys due to the
     Licensor and performed all his obligations under this agreement.

     The Licensee agrees to and permits the Licensor to utilise the security
     deposit as it may deem fit and proper for its business purposes and need
     not to keep the same in a special accounts as required under Section 226 of
     the Companies Ordinance, 1984.

9.   Liquidated damages:

     Without prejudice to any other provision of this Agreement, the Licensee
     shall be liable to pay by way of liquidated damages a sum of Rs. 2,000/=
     per day per shop for delay in payment of each monthly licence fee and a sum
     of Rs. 400,000/= (Rupees Four Hundred Thousand only) for each month or any
     part thereof for which he over stays at the said premises after the date on
     which he is obliged to vacate and hand over the said premises to the
     Licensor under any provision of this agreement.

     The sum referred to above may be recovered by the Licensor from money(s)
     due and payable to the Licensee or by encashing any performance bond/
     guarantee which the Licensee may have furnished or otherwise as provided by
     law.

10.  Notice:

     All notices required by this agreement must be in writing.

11.  Method of service:

     i)    The Licensor may serve a notice on the Licensee:

           a)  Giving it to the Licensee personally.

           b)  Leaving it at the premises - or

           c)  Delivering, posting or faxing it to the Licensee business address
               last known to the Licensor or, if the Licensee is a company, to
               its registered office

                                       6
<PAGE>

     ii)   The Licensee may serve a notice on the Licensor by delivering,
           posting or faxing it to the address of the Licensor notified to the
           Licensee.

12.  Validity of Licensor's notice:

     Any notice by the Licensor will be valid if it is: -

     i)    Executed under seal of the Licensor; or

     ii)   Signed on behalf of the Licensor by Pakistan Services Limited (the
           owner of the premises).

13.  Arbitration:

     i)    All disputes, claims, differences, etc. as to the true meaning, scope
           import and/or interpretation of any provision of this Agreement and
           all other matters related therewith and/or incidental thereto shall
           be resolved through arbitration to be conducted in accordance with
           the provisions of the Arbitration Act. 1940 as amended or its
           subsequent statutory replacement.

     ii)   Either party desirous of invoking clause (a) above shall give written
           notices to that effect to the other party and shall also state
           therein the Precise issue being sought to be referred to arbitration.
           The parties shall, thereafter agree upon a sole Arbitrator within a
           maximum period of thirty days from the date of service of the said
           notice, failing which, either party may approach a court of competent
           jurisdiction for the same purpose.

                                       7
<PAGE>

IN WITNESS WHEREOF the parties have signed this Agreement on the day and place
herein above mentioned.

LICENSOR
--------

Signed and delivered by the within named
Licensor M/s. Pakistan Services Limited      ________________________________
through its Director

LICENSEE
--------

Signed and delivered by the within named
Licensor M/s. ALIGN TECHNOLOGY PAKISTAN      ________________________________
through its Country Manager, Mr. Ioannis
Demetriades, Passport Number  BB004116

WITNESSES:

1. ________________________________          2. _______________________________

                                       8
<PAGE>

                           ALIGN TECHNOLOGY PAKISTAN

                           [FLOWCHART OF OPERATIONS]

                                       9
<PAGE>

         SQUARE FOOTAGE MEASUREMENTS FOR ALIGN FACILITIES IN PAKISTAN

<TABLE>
<CAPTION>
PC Facility
-----------
----------------------------------------------------------------------------------------------------------------------------------
                      Square Feet On Lease   Area Of Corridor that Align Occupies        Total      Effective Space For Office Use
----------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                    <C>                                         <C>        <C>
----------------------------------------------------------------------------------------------------------------------------------
                                     5,413                                               8,063                               8,063
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
Bhallah House
-------------
----------------------------------------------------------------------------------------------------------------------------------
                         Covered Space     Additional Space (Garden, Lawn, Driveways)    Total      Effective Space For Office Use
----------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>               <C>                                          <C>         <C>
----------------------------------------------------------------------------------------------------------------------------------
                                10,500                                         24,500   35,000                              10,500
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>

Facility Wise Personnel Distribution
------------------------------------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
             Align     Clinical     Operations    Director of     Information       Chinese     Pakistani    Software   Director,
           Graphics    Assistant     Managers    Orthodontics   Systems Manager     Software     Software     Quality     Human
           Designers   Directors                                                  Instructors   Engineers    Assurance  Resources
---------------------------------------------------------------------------------------------------------------------------------
<S>        <C>         <C>          <C>          <C>            <C>               <C>           <C>          <C>        <C>
Bhallah          229          18             1              0                 0             0           0          0          0
House
---------------------------------------------------------------------------------------------------------------------------------
PC               239          25             1              1                 1             3           7          1          1
---------------------------------------------------------------------------------------------------------------------------------
Total            468          43             2              1                 1             3           7          1          1
---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
               Supply        Production         Systems           Shift         Clinical       Support     Country     Total
               Manager         Manager/       Administrator      Managers        Quality        Staff                 Manager
                             Coordinator                                        Assurance
-----------------------------------------------------------------------------------------------------------------------------
<S>            <C>           <C>              <C>                <C>            <C>            <C>         <C>        <C>
Bhallah              1                 0                  0             2                0          20           0        271
House
-----------------------------------------------------------------------------------------------------------------------------
PC                   0                 1                  1             2                1          11           1        296
-----------------------------------------------------------------------------------------------------------------------------
Total                1                 1                  1             4                1          31           1        567
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       11

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