Document:

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                                                                     EXHIBIT 4.3

                         FIRST SUPPLEMENTAL INDENTURE
                         ----------------------------

     This FIRST SUPPLEMENTAL INDENTURE, dated as of February 23, 2000 (this
"Supplemental Indenture"), between Therma-Wave, Inc., a Delaware corporation, as
issuer (the "Company"), and The Bank of New York, as trustee (the "Trustee").

                              W I T N E S S E T H

     WHEREAS, the Company and the Trustee have entered into an indenture, dated
as of May 15, 1997 (the "Indenture"), pursuant to which the Company has issued
$115,000,000 aggregate principal amount of its 10.625 % Senior Notes due 2004
(the "Notes");

     WHEREAS, Section 9.02 of the Indenture provides that under certain
circumstances the Company may amend the Indenture with the written consent of
Holders (as defined in the Indenture) of at least a majority in aggregate
principal amount of the Notes then outstanding;

     WHEREAS, the Company desires to amend certain provisions of the Indenture
affecting the Notes, as set forth below;

     WHEREAS, the Holders of at least a majority in aggregate principal amount
of the Notes outstanding have consented to the amendments to be affected by this
Supplemental Indenture; and

     WHEREAS, all things necessary to make this Supplemental Indenture a valid
agreement, in accordance with its terms, have been done.

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree, for the equal and proportionate benefit of all
Holders of the Notes as follows:

     1.   Capitalized Terms. Capitalized terms used herein and not otherwise
          -----------------
defined herein have the meanings assigned to them in the Indenture. The words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.

     2.   Amendments to Article 4. Effective upon the date the Company accepts
          -----------------------
the Notes for purchase and payment pursuant to the Offer to Purchase and Consent
Solicitation Statement and accompanying Consent and Letter of Transmittal for
the Notes, dated January , 2000, the following sections under Article 4 are
hereby amended by deleting all such sections and all references thereto
throughout the Indenture in their entirety:

          a.   Section 4.03.  Corporate Existence.
                              --------------------

          1.   Section 4.04.  Payment of Taxes and Other Claims.
                              ----------------------------------

          2.   Section 4.08.  SEC Reports.
                              ------------

          3.   Section 4.10.  Limitation on Restriction Payments.
                              ----------------------------------

          4.   Section 4.11.  Limitation on Transactions with Affiliates.
                              -------------------------------------------

          5.   Section 4.12.  Limitation on Incurrrence of Additional
                              ---------------------------------------
                              Indebtedness.
                              -------------

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          6.   Section 4.13.  Limitation on Dividend and Other Payment
                              ----------------------------------------
                              Restrictions Affecting Subsidiaries.
                              ------------------------------------

          7.   Section 4.15.  Change of Control.
                              ------------------

          8.   Section 4.16.  Limitation on Asset Sales.
                              --------------------------

          9.   Section 4.17.  Limitation on Preferred Stock of Subsidiaries.
                              ----------------------------------------------

          10.  Section 4.18.  Limitation on Liens.
                                   --------------------

          11.  Section 4.19.  Limitation on Guarantees by Subsidiaries.
                              -----------------------------------------

          12.  Section 4.20.  Conduct of Business.
                              --------------------

     3.   Amendment to Article 5. Effective upon the date the Company accepts
          ----------------------
the Notes for purchase and payment pursuant to the Offer to Purchase and Consent
Solicitation Statement and accompanying Consent and Letter of Transmittal for
the Notes, dated February 9, 2000, Article 5 is hereby amended by deleting
Article 5 and all references thereto and to Sections 5.01 and 5.02 throughout
the Indenture in their entirety.

     4.   Amendment to Article 6. Effective upon the date the Company accepts
          ----------------------
the Notes for purchase and payment pursuant to the Offer to Purchase and Consent
Solicitation Statement and accompanying Consent and Letter of Transmittal for
the Notes, dated February 9, 2000, subsections (3), (4), (5), (6), and (7) under
Section 6.01 are hereby amended by deleting all such subsections and all
references thereto in their entirety.

     5.   Amendments to Article 1. Effective upon the date the Company accepts
          -----------------------
the Notes for purchase and payment pursuant to the Offer to Purchase and Consent
Solicitation Statement and accompanying Consent and Letter of Transmittal for
the Notes, dated February 9, 2000, certain definitions under Section 1.01 shall
be deleted when references to such definitions would be eliminated as a result
of the foregoing amendments.

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     6.   Time Amendments Become Operative. Upon execution and delivery of this
          --------------------------------
Supplemental Indenture, the terms and conditions of this Supplemental Indenture
shall be part of the terms and conditions of the Indenture for any and all
purposes, and all the terms and conditions of both shall be read together as
though they constitute one and the same instrument, except that in the case of
conflict, the provisions of this Supplemental Indenture will control.
Notwithstanding an earlier execution date, the provisions of this Supplemental
Indenture shall not become operative until the date upon which the Company
accepts the Notes for purchase and payment pursuant to the Offer to Purchase and
Consent Solicitation Statement and accompanying Consent and Letter of
Transmittal, dated February 9, 2000. The Company shall promptly notify the
Trustee that this Supplemental Indenture has become operative.

     7.   Full Force and Effect. Except as they have been modified by this
          ---------------------
Supplemental Indenture, each and every provision of the Indenture shall continue
in full force and effect, and all references to the Indenture shall be deemed to
mean the Indenture as amended pursuant hereto.

     8.   Counterparts. This Supplemental Indenture may be executed in any
          ------------
number of counterparts and in separate counterparts, each of which when so
executed shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.

     9.   Governing Law. This Supplemental Indenture shall be governed by, and
          -------------
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflict of laws to the extent that the
application of the laws of another jurisdiction would be required thereby.

     10.  Headings. The headings of this Supplemental Indenture have been
          --------
inserted for convenience of reference only, and are not to be considered a part
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.

                                  *    *    *

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, as of the date first above written.

                                                  THERMA-WAVE, INC.

                                                  By:  _________________________
                                                       Name:
                                                       Title:

                                                  THE BANK OF NEW YORK

                                                  By:  _________________________
                                                       Name:
                                                       Title:

                                      77<PAGE>

                                                                   EXHIBIT 10.22

                               THERMA-WAVE, INC.

                          2000 EQUITY INCENTIVE PLAN

     11.  Purposes of the Plan. The purposes of this Equity Incentive Plan are:
          --------------------

          .    to attract and retain the best available personnel for positions
               of substantial responsibility,

          .    to provide additional incentive to Employees, Directors and
               Consultants, and

          .    to promote the success of the Company's business.

     Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.

     12.  Definitions.  As used herein, the following definitions shall apply:
          -----------

          1.   "Administrator" means the Board or any of its Committees as shall
               be administering the Plan, in accordance with Section 4 of the
               Plan.

          2.   "Applicable Laws" means the requirements relating to the
               administration of stock option plans under U. S. state corporate
               laws, U.S. federal and state securities laws, the Code, any stock
               exchange or quotation system on which the Common Stock is listed
               or quoted and the applicable laws of any foreign country or
               jurisdiction where Options are, or will be, granted under the
               Plan.

          3.   "Board" means the Board of Directors of the Company.

          4.   "Change in Control" means the occurrence of any of the following:

               (1)  When any "person" as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) of the Exchange Act but excluding the
Company and any Subsidiary and any employee benefit plan sponsored or maintained
by the Company or any Subsidiary (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, as amended from time to time), after the
effective date of the Plan, of securities of the Company representing 50 percent
or more of the combined voting power of the Company's then outstanding
securities;

               (2)  When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
                           -------------------
death to constitute at least a majority thereof, provided, however, that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of this provision; or

               (3)  The approval by the stockholders of the Company of a
transaction involving the acquisition of the Company by an entity other than the
Company or a Subsidiary through purchase of assets, by merger, or otherwise.

          5.   "Code" means the Internal Revenue Code of 1986, as amended.

                                      78
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          6.   "Committee" means a committee of Directors appointed by the Board
               in accordance with Section 4 of the Plan.

          7.   "Common Stock" means the Common Stock, par value $0.01 per share,
               of the Company.

          8.   "Company" means Therma-Wave, Inc., a Delaware corporation.

          9.   "Consultant" means any person, including an advisor, engaged by
               the Company or a Parent or Subsidiary to render services to such
               entity.

          10.  "Director" means a member of the Board.

          11.  "Disability" means total and permanent disability as defined in
               Section 22(e)(3) of the Code.

          12.  "Employee" means any person, including Officers and Directors,
               employed by the Company or any Parent or Subsidiary of the
               Company. A Service Provider shall not cease to be an Employee in
               the case of (i) any leave of absence approved by the Company or
               (ii) transfers between locations of the Company or between the
               Company, its Parent, any Subsidiary, or any successor. For
               purposes of Incentive Stock Options, no such leave may exceed
               ninety days, unless reemployment upon expiration of such leave is
               guaranteed by statute or contract. If reemployment upon
               expiration of a leave of absence approved by the Company is not
               so guaranteed, on the 181st day of such leave any Incentive Stock
               Option held by the Optionee shall cease to be treated as an
               Incentive Stock Option and shall be treated for tax purposes as a
               Nonstatutory Stock Option. Neither service as a Director nor
               payment of a Director's fee by the Company shall be sufficient to
               constitute "employment" by the Company.

          13.  "Exchange Act" means the Securities Exchange Act of 1934, as
               amended.

          14.  "Fair Market Value" means, as of any date, the value of Common
               Stock determined as follows:

               (1)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

               (2)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

               (3)  In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          15.  "Incentive Stock Option" means an Option intended to qualify as
               an incentive stock option within the meaning of Section 422 of
               the Code and the regulations promulgated thereunder.

          16.  "Nonstatutory Stock Option" means an Option not intended to
               qualify as an Incentive Stock Option.

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          17.  "Notice of Grant" means a written or electronic notice evidencing
               certain terms and conditions of an individual Option. The Notice
               of Grant is part of the Option Agreement.

          18.  "Officer" means a person who is an officer of the Company within
               the meaning of Section 16 of the Exchange Act and the rules and
               regulations promulgated thereunder.

          19.  "Option" means a stock option granted pursuant to the Plan.

          20.  "Option Agreement" means an agreement between the Company and an
               Optionee evidencing the terms and conditions of an individual
               Option grant. The Option Agreement is subject to the terms and
               conditions of the Plan.

          21.  "Option Exchange Program" means a program whereby outstanding
               Options are surrendered in exchange for Options with a lower
               exercise price.

          22.  "Optioned Stock" means the Common Stock subject to an Option.

          23.  "Optionee" means the holder of an outstanding Option granted
               under the Plan.

          24.  "Parent" means a "parent corporation," whether now or hereafter
               existing, as defined in Section 424(e) of the Code.

          25.  "Plan" means this 2000 Equity Incentive Plan.

          26.  "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
               successor to Rule 16b-3, as in effect when discretion is being
               exercised with respect to the Plan.

          27.  "Section 16(b)" means Section 16(b) of the Exchange Act.

          28.  "Service Provider" means an Employee, Director or Consultant.

          29.  "Share" means a share of the Common Stock, as adjusted in
               accordance with Section 12 of the Plan.

          30.  "Subsidiary" means a "subsidiary corporation," whether now or
               hereafter existing, as defined in Section 424(f) of the Code.

     13.  Shares Subject to the Plan. Subject to the provisions of Section 12 of
          --------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is (a) 300,000 Shares, plus (b) any Shares returned to the
Company's existing stock option plans (the "Existing Plans") as a result of
termination of options under the Existing Plans, plus (c) an annual increase to
be added on the date of each annual meeting of the stockholders of the Company,
beginning with the 2000 annual meeting of the stockholders, equal to one percent
(1.0%) of the outstanding Shares on such date or such lesser amount determined
by the Board. The Shares may be authorized, but unissued, or reacquired Common
Stock.

          If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan, whether upon
exercise of an Option shall not be returned to the Plan and shall not become
available for future distribution under the Plan.

     14.  Administration of the Plan.
          --------------------------

          1.   Procedure.
               ---------

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               (1)  Multiple Administrative Bodies. The Plan may be administered
                    ------------------------------
by different Committees with respect to different groups of Service Providers.

               (2)  Section 162(m). To the extent that the Administrator
                    --------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

               (3)  Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

               (4)  Other Administration. Other than as provided above, the Plan
                    --------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.

          2.   Powers of the Administrator. Subject to the provisions of the
               ---------------------------
               Plan, and in the case of a Committee, subject to the specific
               duties delegated by the Board to such Committee, the
               Administrator shall have the authority, in its discretion:

               (1)  to determine the Fair Market Value;

               (2)  to select the Service Providers to whom Options may be
granted hereunder;

               (3)  to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;

               (4)  to approve forms of agreement for use under the Plan;

               (5)  to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

               (6)  to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

               (7)  to institute an Option Exchange Program;

               (8)  to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

               (9)  to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

               (10) to modify or amend each Option (subject to Section 14(c) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

               (11) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;

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               (12) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator; and

               (13) to make all other determinations deemed necessary or
advisable for administering the Plan.

          3.   Effect of Administrator's Decision. The Administrator's
               ----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

     15.  Eligibility.  Nonstatutory Stock Options and may be granted to Service
          -----------
Providers. Incentive Stock Options may be granted only to Employees.

     16.  Limitations.
          -----------

          1.   Each Option shall be designated in the Option Agreement as either
               an Incentive Stock Option or a Nonstatutory Stock Option.
               However, notwithstanding such designation, to the extent that the
               aggregate Fair Market Value of the Shares with respect to which
               Incentive Stock Options are exercisable for the first time by the
               Optionee during any calendar year (under all plans of the Company
               and any Parent or Subsidiary) exceeds $100,000, such Options
               shall be treated as Nonstatutory Stock Options. For purposes of
               this Section 6(a), Incentive Stock Options shall be taken into
               account in the order in which they were granted. The Fair Market
               Value of the Shares shall be determined as of the time the Option
               with respect to such Shares is granted.

          2.   Neither the Plan nor any Option shall confer upon an Optionee any
               right with respect to continuing the Optionee's relationship as a
               Service Provider with the Company, nor shall they interfere in
               any way with the Optionee's right or the Company's right to
               terminate such relationship at any time, with or without cause.

          3.   The following limitations shall apply to grants of Options:

               (1)  No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares.

               (2)  In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.

               (3)  The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.

               (4)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 12), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.

     17.  Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
          ------------
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 14 of the Plan.

     18.  Term of Option. The term of each Option shall be stated in the Option
          --------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive
<PAGE>

Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.

     19.  Option Exercise Price and Consideration.
          ---------------------------------------

          1.   Exercise Price. The per share exercise price for the Shares to be
               --------------
               issued pursuant to exercise of an Option shall be determined by
               the Administrator, subject to the following:

               (1)  In the case of an Incentive Stock Option

                    (1)  granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                    (2)  granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

               (2)  In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

               (3)  Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.

          2.   Waiting Period and Exercise Dates. At the time an Option is
               ---------------------------------
               granted, the Administrator shall fix the period within which the
               Option may be exercised and shall determine any conditions which
               must be satisfied before the Option may be exercised.

          3.   Form of Consideration. The Administrator shall determine the
               ---------------------
               acceptable form of consideration for exercising an Option,
               including the method of payment. In the case of an Incentive
               Stock Option, the Administrator shall determine the acceptable
               form of consideration at the time of grant. Such consideration
               may consist entirely of:

               (1)  cash;

               (2)  check;

               (3)  promissory note;

               (4)  other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

               (5)  consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

               (6)  a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

               (7)  any combination of the foregoing methods of payment; or

                                      83
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               (8)  such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

     20.  Exercise of Option.
          ------------------

          1.   Procedure for Exercise; Rights as a Stockholder. Any Option
               -----------------------------------------------
               granted hereunder shall be exercisable according to the terms of
               the Plan and at such times and under such conditions as
               determined by the Administrator and set forth in the Option
               Agreement. Unless the Administrator provides otherwise, vesting
               of Options granted hereunder shall be tolled during any unpaid
               leave of absence. An Option may not be exercised for a fraction
               of a Share.

               An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

          2.   Termination of Relationship as a Service Provider. If an Optionee
               -------------------------------------------------
               ceases to be a Service Provider, other than upon the Optionee's
               death, Disability or retirement, the Optionee may exercise his or
               her Option within such period of time as is specified in the
               Option Agreement to the extent that the Option is vested on the
               date of termination (but in no event later than the expiration of
               the term of such Option as set forth in the Option Agreement). In
               the absence of a specified time in the Option Agreement, the
               Option shall remain exercisable for three (3) months following
               the Optionee's termination. If, on the date of termination, the
               Optionee is not vested as to his or her entire Option, the Shares
               covered by the unvested portion of the Option shall revert to the
               Plan. If, after termination, the Optionee does not exercise his
               or her Option within the time specified by the Administrator, the
               Option shall terminate, and the Shares covered by such Option
               shall revert to the Plan.

          3.   Disability of Optionee. If an Optionee ceases to be a Service
               ----------------------
               Provider as a result of the Optionee's Disability, the Optionee
               may exercise his or her Option within such period of time as is
               specified in the Option Agreement to the extent the Option is
               vested on the date of termination (but in no event later than the
               expiration of the term of such Option as set forth in the Option
               Agreement). In the absence of a specified time in the Option
               Agreement, the Option shall remain exercisable for twelve (12)
               months following the Optionee's termination. If, on the date of
               termination, the Optionee is not vested as to his or her entire
               Option, the Shares covered by the unvested portion of the Option
               shall revert to the Plan. If, after termination, the Optionee
               does not exercise his or her Option within the time specified
               herein, the Option shall terminate, and the Shares covered by
               such Option shall revert to the Plan.

          4.   Death of Optionee. If an Optionee dies while a Service Provider,
               -----------------
               the Option may be exercised within such period of time as is
               specified in the Option Agreement (but in no event later than the
               expiration of the term of such Option as set forth in

                                      84
<PAGE>

               the Notice of Grant), by the Optionee's estate or by a person who
               acquires the right to exercise the Option by bequest or
               inheritance, but only to the extent that the Option is vested on
               the date of death. In the absence of a specified time in the
               Option Agreement, the Option shall remain exercisable for twelve
               (12) months following the Optionee's termination. If, at the time
               of death, the Optionee is not vested as to his or her entire
               Option, the Shares covered by the unvested portion of the Option
               shall immediately revert to the Plan. The Option may be exercised
               by the executor or administrator of the Optionee's estate or, if
               none, by the person(s) entitled to exercise the Option under the
               Optionee's will or the laws of descent or distribution. If the
               Option is not so exercised within the time specified herein, the
               Option shall terminate, and the Shares covered by such Option
               shall revert to the Plan.

          5.   Retirement of Optionee. If an Optionee ceases to be a Service
               ----------------------
               Provider as a result of the Optionee's voluntary retirement, the
               Optionee may exercise his or her Option within such period of
               time as is specified in the Option Agreement to the extent the
               Option is vested on the date of retirement (but in no event later
               than the expiration of the term of such Option as set forth in
               the Option Agreement). In the absence of a specified time in the
               Option Agreement, the Option shall remain exercisable for twelve
               (12) months following the Optionee's retirement. If, on the date
               of retirement, the Optionee is not vested as to his or her entire
               Option, the Shares covered by the unvested portion of the Option
               shall revert to the Plan. If, after retirement, the Optionee does
               not exercise his or her Option within the time specified herein,
               the Option shall terminate, and the Shares covered by such Option
               shall revert to the Plan. This Section 10(e) shall only apply to
               an Optionee who voluntarily retires from the Company or a
               Subsidiary on or after the date on which such Optionee has
               attained the age of 59 1/2. Notwithstanding anything in this
               Section 10(e) or an Option Agreement to the contrary, if the
               Committee determines in the good faith exercise of its judgment
               that any Optionee who has retired engages in any conduct
               detrimental to the Company, upon such determination by the
               Committee, such Option shall immediately and without further
               action on the part of the Company, expire and become
               unexercisable. No notice of such determination need to be given
               to any Optionee in such circumstance.

          6.   Change in Control. In the event of a Change in Control, only if
               -----------------
               provided in the Option Agreement, any Option awarded under this
               Plan to the extent not previously exercisable shall immediately
               become fully exercisable. The Administrator in its sole
               discretion may direct the Company to cash out all outstanding
               Options as of the date a Change in Control occurs or such other
               date as the Administrator may determine prior to the Change in
               Control.

          7.   Buyout Provisions. The Administrator may at any time offer to buy
               -----------------
               out for a payment in cash or Shares an Option previously granted
               based on such terms and conditions as the Administrator shall
               establish and communicate to the Optionee at the time that such
               offer is made.

     21.  Non-Transferability of Options. Unless determined otherwise by the
          ------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
decent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

     22.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or
          -------------------------------------------------------------------
          Asset Sale.
          ----------

          1.   Changes in Capitalization. Subject to any required action by the
               -------------------------
               stockholders of the Company, the number of shares of Common Stock
               covered by each outstanding Option, and the number of shares of
               Common Stock which have been authorized for issuance under the
               Plan but as to which no Options have yet been granted or

                                      85
<PAGE>

               which have been returned to the Plan upon cancellation or
               expiration of an Option, as well as the price per share of Common
               Stock covered by each such outstanding Option , shall be
               proportionately adjusted for any increase or decrease in the
               number of issued shares of Common Stock resulting from a stock
               split, reverse stock split, stock dividend, combination or
               reclassification of the Common Stock, or any other increase or
               decrease in the number of issued shares of Common Stock effected
               without receipt of consideration by the Company; provided,
               however, that conversion of any convertible securities of the
               Company shall not be deemed to have been "effected without
               receipt of consideration." Such adjustment shall be made by the
               Board, whose determination in that respect shall be final,
               binding and conclusive. Except as expressly provided herein, no
               issuance by the Company of shares of stock of any class, or
               securities convertible into shares of stock of any class, shall
               affect, and no adjustment by reason thereof shall be made with
               respect to, the number or price of shares of Common Stock subject
               to an Option.

          2.   Dissolution or Liquidation. In the event of the proposed
               --------------------------
               dissolution or liquidation of the Company, the Administrator
               shall notify each Optionee as soon as practicable prior to the
               effective date of such proposed transaction. The Administrator in
               its discretion may provide for an Optionee to have the right to
               exercise his or her Option until ten (10) days prior to such
               transaction as to all of the Optioned Stock covered thereby,
               including Shares as to which the Option would not otherwise be
               exercisable. In addition, the Administrator may provide that any
               Company repurchase option applicable to any Shares purchased upon
               exercise of an Option shall lapse as to all such Shares, provided
               the proposed dissolution or liquidation takes place at the time
               and in the manner contemplated. To the extent it has not been
               previously exercised, an Option will terminate immediately prior
               to the consummation of such proposed action.

          3.   Merger or Asset Sale. In the event of a merger of the Company
               --------------------
               with or into another corporation, or the sale of substantially
               all of the assets of the Company, each outstanding Option and
               shall be assumed or an equivalent option or right substituted by
               the successor corporation or a Parent or Subsidiary of the
               successor corporation. In the event that the successor
               corporation refuses to assume or substitute for the Option, the
               Optionee shall fully vest in and have the right to exercise the
               Option as to all of the Optioned Stock, including Shares as to
               which it would not otherwise be vested or exercisable. If an
               Option becomes fully vested and exercisable in lieu of assumption
               or substitution in the event of a merger or sale of assets, the
               Administrator shall notify the Optionee in writing or
               electronically that the Option shall be fully vested and
               exercisable for a period of fifteen (15) days from the date of
               such notice, and the Option shall terminate upon the expiration
               of such period. For the purposes of this paragraph, the Option
               shall be considered assumed if, following the merger or sale of
               assets, the option or right confers the right to purchase or
               receive, for each Share of Optioned Stock subject to the Option
               immediately prior to the merger or sale of assets, the
               consideration (whether stock, cash, or other securities or
               property) received in the merger or sale of assets by holders of
               Common Stock for each Share held on the effective date of the
               transaction (and if holders were offered a choice of
               consideration, the type of consideration chosen by the holders of
               a majority of the outstanding Shares); provided, however, that if
               such consideration received in the merger or sale of assets is
               not solely common stock of the successor corporation or its
               Parent, the Administrator may, with the consent of the successor
               corporation, provide for the consideration to be received upon
               the exercise of the Option, for each Share of Optioned Stock
               subject to the Option, to be solely common stock of the successor
               corporation or its Parent equal in fair market value to the per
               share consideration received by holders of Common Stock in the
               merger or sale of assets.

     23.  Date of Grant. The date of grant of an Option shall be, for all
          -------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the

                                      86
<PAGE>

Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.

     24.  Amendment and Termination of the Plan.
          -------------------------------------

          1.   Amendment and Termination.  The Board may at any time amend,
               -------------------------
               alter, suspend or terminate the Plan.

          2.   Stockholder Approval. The Company shall obtain stockholder
               --------------------
               approval of any Plan amendment to the extent necessary and
               desirable to comply with Applicable Laws.

          3.   Effect of Amendment or Termination. No amendment, alteration,
               ----------------------------------
               suspension or termination of the Plan shall impair the rights of
               any Optionee, unless mutually agreed otherwise between the
               Optionee and the Administrator, which agreement must be in
               writing and signed by the Optionee and the Company. Termination
               of the Plan shall not affect the Administrator's ability to
               exercise the powers granted to it hereunder with respect to
               Options granted under the Plan prior to the date of such
               termination.

     25.  Conditions Upon Issuance of Shares.
          ----------------------------------

          1.   Legal Compliance. Shares shall not be issued pursuant to the
               ----------------
               exercise of an Option unless the exercise of such Option and the
               issuance and delivery of such Shares shall comply with Applicable
               Laws and shall be further subject to the approval of counsel for
               the Company with respect to such compliance.

          2.   Investment Representations. As a condition to the exercise of an
               --------------------------
               Option, the Company may require the person exercising such Option
               to represent and warrant at the time of any such exercise that
               the Shares are being purchased only for investment and without
               any present intention to sell or distribute such Shares if, in
               the opinion of counsel for the Company, such a representation is
               required.

     26.  Inability to Obtain Authority. The inability of the Company to obtain
          -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

     27.  Reservation of Shares. The Company, during the term of this Plan, will
          ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     28.  Stockholder Approval. The Plan shall be subject to approval by the
          --------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted by the Board. Such stockholder approval shall be obtained in the manner
and to the degree required under Applicable Laws. The Plan shall terminate in
the event that it is not approved by the stockholders of the Company within the
time period set forth herein. In addition, all of the Options granted under this
Plan prior to its approval by the stockholders of the Company shall be granted
subject to, and conditioned upon, such approval and shall automatically
terminate in the event that the Plan has not been approved by the stockholders
within the time period set forth herein.

                                      87
<PAGE>

                                   EXHIBIT A

                          2000 Equity Incentive Plan

                                EXERCISE NOTICE

Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539

Attention: Chief Financial Officer

     29.  Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Therma-Wave, Inc. (the "Company") under
and pursuant to the 2000 Equity Incentive Plan (the "Plan") and the Stock Option
Agreement dated _____________, _____ (the "Option Agreement"). The purchase
price for the Shares shall be $_____________, as required by the Option
Agreement.

     30.  Delivery of Payment. Purchaser herewith delivers to the Company the
          -------------------
full purchase price for the Shares.

     31.  Representations of Purchaser. Purchaser acknowledges that Purchaser
          ----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.

     32.  Rights as Stockholder. Until the issuance (as evidenced by the
          ---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.

     33.  Tax Consultation. Purchaser understands that Purchaser may suffer
          ----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

                                      88
<PAGE>

     34.  Entire Agreement; Governing Law. The Plan and Option Agreement are
          -------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

Submitted by:                                Accepted by:

PURCHASER:                                   THERMA-WAVE, INC.

                                             ___________________________________
Signature                                    By

                                             ___________________________________
Print Name                                   Its

Address:                                Address:

                                             1250 Reliance Way
                                             Fremont, California 94539

                                                  Date Received

                                      89

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